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Filed Pursuant to Rule 424(b)(2)
Registration No.: 333-58647
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 20, 1998)
$300,000,000
[DELTA AIR LINES LOGO]
MEDIUM-TERM NOTES, SERIES C
The Company may use this Prospectus Supplement to offer the Notes from time
to time.
The following terms may apply to the Notes. The final terms of each Note
will be set forth in a Pricing Supplement.
- - They may have maturities of nine months or more.
- - They may be subject to redemption or repayment at the option of the Company or
the holder.
- - They will be denominated in U.S. dollars unless otherwise set forth in a
Pricing Supplement.
- - They may bear interest at a fixed or floating interest rate. Certain Notes
issued at a discount may not bear interest. Floating interest rates may be
based on any of the following formulas:
- -- Commercial Paper Rate
- -- Prime Rate
- -- LIBOR
- -- Treasury Rate
- -- CD Rate
- -- Federal Funds Effective Rate
- - They may be issued as indexed Notes.
- - They may be issued in certificated or book-entry form.
- - Interest will be paid on fixed rate Notes on March 15 and September 15 of each
year and at maturity, unless otherwise set forth in a Pricing Supplement.
- - Interest will be paid on floating rate Notes on dates determined at the time
of issuance.
- - They will be issued in minimum denominations of $1,000 and multiples of
$1,000.
- - They will have an aggregate initial offering price not greater than
$300,000,000 or such greater or lesser amount as the Company may specify from
time to time in a Pricing Supplement.
- - They will be offered from time to time on a reasonable efforts basis by the
Agents named below on behalf of the Company. In addition, the Agents may
purchase Notes from the Company for resale to investors, and the Company may
sell Notes directly to investors on its own behalf where legally permitted.
The Company will receive between $299,625,000 and $297,750,000 of the
proceeds from the sale of the Notes after paying the Agents' commissions of
between $325,000 and $2,250,000 and before deducting the expenses of the
offering of the Notes estimated by the Company at $185,000. The exact proceeds
to the Company will be set at the time of issuance. The Company does not expect
that any of the Notes will be listed on a securities exchange, and a market for
the Notes may not develop.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE RELATED PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
January 8, 1999
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TABLE OF CONTENTS
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PROSPECTUS SUPPLEMENT PAGE PROSPECTUS PAGE
--------------------- ---- ---------- ----
<S> <C> <C> <C>
Description of Notes................... S-3 Where You Can Find More Information.... 2
United States Taxation................. S-13 The Company............................ 3
Supplemental Plan of Distribution...... S-18 Use of Proceeds........................ 3
Validity of Notes...................... S-19 Ratio of Earnings to Fixed Charges..... 3
Description of Debt Securities......... 3
Plan of Distribution................... 9
Validity of the Debt Securities........ 10
Experts................................ 10
</TABLE>
You should rely only on the information contained or incorporated by reference
in this Prospectus Supplement and the accompanying Prospectus. The Company has
not authorized anyone to provide you with information different from that
contained in this Prospectus Supplement and the accompanying Prospectus. The
Company is offering to sell the Notes and seeking offers to buy the Notes only
in jurisdictions where offers and sales are permitted. The information contained
in this Prospectus Supplement and the accompanying Prospectus is accurate only
as of the date of this Prospectus Supplement and the date of the accompanying
Prospectus, regardless of the time of delivery of this Prospectus Supplement or
any sale of the Notes.
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DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as "Offered Securities")
supplements, and to the extent inconsistent therewith, replaces, the description
of the general terms and provisions of Debt Securities set forth in the
accompanying Prospectus, to which description reference is hereby made. The
Notes shall have the terms set forth below, unless otherwise specified in the
applicable Pricing Supplement.
The Notes constitute a single series of Debt Securities (as defined in the
Prospectus) and are to be issued under the indenture, dated as of May 1, 1991
(the "Indenture"), between the Company and The Bank of New York, successor to
The Citizens and Southern National Bank of Florida, as trustee (the "Trustee"),
which is more fully described in the accompanying Prospectus. The Notes are
limited to the amount as set forth on the cover page hereof or such greater or
lesser amount as the Company may specify from time to time in a Pricing
Supplement. The Notes will be unsecured obligations of the Company and will rank
on a parity with all other unsecured and unsubordinated indebtedness of the
Company. For a description of the rights attaching to different series of Debt
Securities under the Indenture, see "Description of Debt Securities" in the
Prospectus.
Unless previously redeemed, a Note will mature on a date ("Stated
Maturity") nine months or more from its date of issue that is specified in the
applicable Pricing Supplement (the "Original Issue Date").
Each Note will be denominated in U.S. dollars, unless otherwise set forth
in the applicable Pricing Supplement. The authorized denominations of any Note
will be $1,000 and integral multiples of $1,000 in excess thereof, unless
otherwise set forth in the applicable Pricing Supplement.
Each Note will be represented by either a Global Security registered in the
name of the Depositary or its nominee (each such Note being herein referred to
as a "Book-Entry Note") or a certificate issued in definitive registered form,
without coupons (a "Certificated Note"), as set forth in the applicable Pricing
Supplement. Except as set forth under "Book-Entry System" below, Book-Entry
Notes will not be issuable in certificated form. So long as the Depositary or
its nominee is the registered owner of any Book-Entry Note, the Depositary or
its nominee, as the case may be, will be considered the sole owner or Holder of
the Book-Entry Note for all purposes under the Indenture and the Book-Entry
Note. See "Book-Entry System" below.
Notes will be sold in individual issues of Notes having such interest rate
or interest rate formula, if any, Stated Maturity and Original Issue Date as
shall be selected by the initial purchasers and agreed to by the Company. Unless
otherwise indicated in the applicable Pricing Supplement, each Note will bear
interest at a fixed rate or a floating rate determined by reference to one or
more of the Commercial Paper Rate, the Prime Rate, LIBOR, the Treasury Rate, the
CD Rate or the Federal Funds Effective Rate, as adjusted by the Spread and/or
Spread Multiplier (each as defined below), if any, applicable to such Note. See
"Interest Rate" below. Zero Coupon Notes will be issued at a discount from the
principal amount payable at Stated Maturity thereof and holders of Zero Coupon
Notes will not receive periodic payments of interest thereon.
The Notes may be issued as Original Issue Discount Notes. Generally, an
Original Issue Discount Note is a Note, including any Zero Coupon Note, which is
issued at a price lower than the principal amount thereof and which provides
that upon redemption, repayment at the option of the Holder or acceleration of
the maturity thereof, an amount less than the principal thereof shall become due
and payable. In the event of redemption or acceleration of the maturity of an
Original Issue Discount Note, the amount payable to the Holder of such Note upon
such redemption or acceleration will be determined in accordance with the terms
of the Note, but will be an amount that is less than the amount payable at the
Stated Maturity of such Note. In addition, United States federal income tax
rules and regulations with respect to original issue discount notes may also
apply to certain other Notes. See "United States Taxation -- Original Issue
Discount".
The Notes will not be subject to any sinking fund and, unless a redemption
date (a "Redemption Date") is specified in the applicable Pricing Supplement,
will not be redeemable prior to their Stated Maturity. If a Redemption Date is
so specified with respect to any Note, the applicable Pricing Supplement will
also specify one or more redemption prices (expressed as a percentage of the
principal amount of such Note)
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("Redemption Prices") and the redemption period or periods ("Redemption
Periods") during which such Redemption Prices will apply. Unless otherwise
specified in the Pricing Supplement, any such Note will be redeemable at the
option of the Company at any time on or after such specified Redemption Date at
the specified Redemption Price applicable to the Redemption Period during which
such Note is to be redeemed, together with interest accrued to the Redemption
Date.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
not be repayable at the option of the Holder.
Unless otherwise specified in the applicable Pricing Supplement, Fixed Rate
Notes will be subject to defeasance as described under "Description of Debt
Securities -- Defeasance" in the Prospectus and Floating Rate Notes will not be
subject to defeasance as described under "Description of Debt Securities --
Defeasance" in the Prospectus.
Certificated Notes may be presented for registration of transfer or
exchange at the Corporate Trust Office of The Bank of New York, at 101 Barclay
St., New York, New York 10286, Attention: Fiscal Agencies Department. Book-Entry
Notes may be registered for transfer or exchange as described under "Book-Entry
System".
INTEREST RATE
Each Note will bear interest from, and including, its Original Issue Date,
or from, and including, the most recent Interest Payment Date (as defined below)
to which interest on such Note has been paid or duly provided for at the fixed
rate per annum, or at the rate per annum determined pursuant to the interest
rate formula, stated therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest will be
payable on each Interest Payment Date and at maturity and, if applicable, upon
redemption as specified below under "Payment of Principal and Interest".
Each Note will bear interest at either (a) a fixed rate (a "Fixed Rate
Note") or (b) a variable rate determined by reference to an interest rate
formula (a "Floating Rate Note"), which may be adjusted by adding or subtracting
the Spread, if any, or multiplying by the Spread Multiplier, if any. A Floating
Rate Note may also have either or both of the following: (a) a maximum numerical
interest rate limitation, or ceiling, on the rate of interest which may accrue
during any interest period (a "Maximum Rate"); and (b) a minimum numerical
interest rate limitation, or floor, on the rate of interest which may accrue
during any interest period (a "Minimum Rate"). The "Spread" is the number of
basis points (which may also be expressed as a percentage) specified in the
applicable Pricing Supplement as being applicable to the interest rate for such
Note and the "Spread Multiplier" is the percentage specified in the applicable
Pricing Supplement as being applicable to the interest rate for such Note.
"Market Day" means (a) with respect to any Note (other than any LIBOR Note), any
Business Day in the City of New York, and any other location which may be
specified in an applicable Pricing Supplement; and (b) with respect to any LIBOR
Note, any such Business Day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market. The term "Business Day", as used
herein with respect to any particular location, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in such location are authorized or obligated by law or executive order to close.
"Calculation Date", where applicable, means the date by which the Calculation
Agent is to calculate the interest rate for a Floating Rate Note which shall be
the earlier of (i) the tenth calendar day after the related Interest
Determination Date, or if any such day is not a Market Day, the next succeeding
Market Day and (ii) the Market Day preceding the applicable Interest Payment
Date or Maturity, as the case may be. "Index Maturity" means, with respect to a
Floating Rate Note, the period to maturity of the instrument or obligation on
which the interest rate formula is based, as specified in the applicable Pricing
Supplement. Unless otherwise provided in the applicable Pricing Supplement, The
Bank of New York will be the calculation agent (the "Calculation Agent") with
respect to the Floating Rate Notes.
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note.
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis (the "Interest Rate Basis") for such Floating
Rate Note. The Interest
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Rate Basis for each Floating Rate Note will be: (a) the Commercial Paper Rate,
in which case such Note will be a "Commercial Paper Rate Note"; (b) the Prime
Rate, in which case such Note will be a "Prime Rate Note"; (c) LIBOR, in which
case such Note will be a "LIBOR Note"; (d) the Treasury Rate, in which case such
Note will be a "Treasury Rate Note"; (e) the CD Rate, in which case such Note
will be a "CD Rate Note"; (f) the Federal Funds Effective Rate, in which case
such Note will be a "Federal Funds Effective Rate Note"; or (g) such other
interest rate formula as is set forth in such Pricing Supplement. The applicable
Pricing Supplement for a Floating Rate Note will specify the Interest Rate
Basis, the Original Issue Date, the Stated Maturity and, if applicable, the
Calculation Agent, the Index Maturity, the Spread or Spread Multiplier, the
Maximum Rate, the Minimum Rate, the Initial Interest Rate, Interest Payment
Period, the Interest Payment Dates, the Regular Record Dates, the Calculation
Date, the Interest Determination Dates, the Interest Reset Period and the
Interest Reset Dates (all as defined herein) with respect to such Note and any
other terms relating to the particular method of calculating the interest rate
for such Note.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semi-annually or annually (each, an "Interest Reset Date"). The
Interest Reset Date will be, in the case of Floating Rate Notes which reset
daily, each Market Day; in the case of Floating Rate Notes (other than Treasury
Rate Notes) which reset weekly, the Wednesday of each week; in the case of
Treasury Rate Notes which reset weekly, the Tuesday of each week (except as
provided in the following paragraph); in the case of Floating Rate Notes which
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semi-annually, the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset annually,
the third Wednesday of the one month of each year specified in the applicable
Pricing Supplement; provided, however, that the interest rate in effect from the
date of issue to the first Interest Reset Date with respect to a Floating Rate
Note will be the "Initial Interest Rate" (as set forth in the applicable Pricing
Supplement). If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Market Day with respect to such Floating Rate
Note, the Interest Reset Date for such Floating Rate Note will be postponed to
the next day that is a Market Day with respect to such Floating Rate Note,
except that in the case of a LIBOR Note, if such Market Day is in the next
succeeding calendar month, such Interest Reset Date will be the immediately
preceding Market Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
for a Prime Rate Note (the "Prime Rate Interest Determination Date"), for a
LIBOR Note (the "LIBOR Interest Determination Date"), for a CD Rate Note (the
"CD Interest Determination Date") and for a Federal Funds Effective Rate Note
(the "Federal Funds Rate Interest Determination Date") will be the second Market
Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury
Interest Determination Date") will be the day of the week in which such Interest
Reset Date falls on which Treasury bills would normally be auctioned. Treasury
bills are usually sold at auction on the Monday of each week, unless that day is
a legal holiday, in which case the auction is usually held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week. If an auction falls
on any Interest Reset Date for a Treasury Rate Note, then such Interest Reset
Date will instead be the first Market Day immediately following such auction
date.
All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded upwards, if necessary, to the next higher
one hundred-thousandth of a percentage point (e.g., 9.876541% (or .09876541)
being rounded to 9.87655% (or .0987655)), and all dollar amounts used in or
resulting from such calculations will be rounded to the nearest cent (with one
half cent being rounded upwards).
In addition to any Maximum Rate which may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on the Floating
Rate Notes will in no event be higher than the maximum interest rate permitted
by New York law, as the same may be modified by United States law of general
application. Under present New York law, the maximum rate of interest, subject
to certain exceptions, for any
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loan in an amount less than $250,000 is 16% and for any loan in the amount of
$250,000 or more but less than $2,500,000 is 25% per annum on a simple interest
basis. These limits do not apply to Notes of $2,500,000 or more.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect and, if determined, the
interest rate which will become effective on the next Interest Reset Date with
respect to such Floating Rate Note. The Calculation Agent's determination of any
interest rate will be final and binding in the absence of manifest error.
COMMERCIAL PAPER RATE NOTES
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate quoted on a discount basis on such date for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper -- Nonfinancial".
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
- If such rate is not published prior to 3:00 P.M., New York City
time, on the related Calculation Date, then the Commercial Paper Rate shall
be the rate set forth in the H.15 Daily Update for that day under the
heading "Commercial Paper -- Nonfinancial" in respect of commercial paper
having the Index Maturity specified in the applicable Pricing Supplement.
- If such rate is neither published in H.15(519) or in the H.15 Daily
Update by 3:00 P.M., New York City time, on the related Calculation Date,
then the Commercial Paper Rate on such Commercial Paper Interest
Determination Date will be calculated by the Calculation Agent and shall be
the Money Market Yield of the arithmetic mean of the offered rates, as of
11:00 A.M., New York City time, on that Commercial Paper Interest
Determination Date, of three leading dealers of commercial paper in the
City of New York selected by the Calculation Agent (which may include any
of the Agents and their affiliates) for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement placed for a
non-financial entity whose senior unsecured bond rating is "AA", or the
equivalent, from a nationally recognized statistical rating organization;
provided, however, that if the dealers so selected by the Calculation Agent
are not quoting as mentioned in this sentence, the Commercial Paper Rate
will be the Commercial Paper Rate in effect on such Commercial Paper
Interest Determination Date or, if such Interest Determination Date is the
first Interest Determination Date, the Initial Interest Rate.
"H.15 (519)" means the weekly statistical release entitled "Statistical
Release H.15 (519), Selected Interest Rates", or any successor publication,
published by the Board of Governors of the Federal Reserve System.
"H.15 Daily Update" means the daily update of the Board of Governors of the
Federal Reserve System at http://www.bog.frb.fed.us/release/H15/update or any
successor site or publication.
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
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D X 360
Money Market Yield = --------------------- X 100
360 - (D X M)
</TABLE>
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where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
PRIME RATE NOTES
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
rate on such date as is published in H.15(519) under the heading "Bank Prime
Loan."
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
- If the rate is not published prior to 9:00 a.m., New York City time, on
the related Calculation Date, then the Prime Rate will be the rate on
such Prime Rate Interest Determination Date as published in the H.15
Daily Update opposite the caption "Bank Prime Loan."
- If such rate is not published prior to 3:00 P.M., New York City time, on
the related Calculation Date, in either H.15(519) or the H.15 Daily
Update, then the Prime Rate shall be the arithmetic mean of the rates of
interest publicly announced by each bank that appears on the Reuters
Screen USPRIME1 Page (as defined below) as such bank's prime rate or base
lending rate as in effect for such Prime Rate Interest Determination
Date. If fewer than four such rates appear on the Reuters Screen USPRIME1
Page for such Prime Rate Interest Determination Date, then the Prime Rate
shall be the arithmetic mean of the prime rates quoted on the basis of
the actual number of days in the year divided by a 360-day year as of the
close of business on such Prime Rate Interest Determination Date by four
major money center banks in the City of New York (which may include
affiliates of the Agents) selected by the Calculation Agent.
- If fewer than four such quotations are so provided, then the Prime Rate
shall be the arithmetic mean of four prime rates quoted on the basis of
the actual number of days in the year divided by a 360-day year as of the
close of business on such Prime Rate Interest Determination Date as
furnished in the City of New York by the major money center banks, if
any, that have provided such quotations and by a reasonable number of
substitute banks or trust companies (which may include affiliates of the
Agents) to obtain four such prime rate quotations, provided such
substitute banks or trust companies are organized and doing business
under the laws of the United States, or any State thereof, each having
total equity capital of at least $500,000,000 and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that
if the banks or trust companies so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Prime Rate determined as
of such Prime Rate Interest Determination Date will be the Prime Rate in
effect on such Prime Rate Interest Determination Date or, if such
Interest Determination Date is the first Interest Determination Date, the
Initial Interest Rate.
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service (or any successor service)
or such other page as may replace the USPRIME1 Page on the Reuters Monitor Money
Rates Service (or any successor service) for the purpose of displaying prime
rates or base lending rates of major United States banks.
LIBOR NOTES
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in the
applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined in accordance with the following provisions:
With respect to any LIBOR Interest Determination Date:
- If "LIBOR Reuters" is specified in the applicable Pricing Supplement,
the arithmetic mean of the offered rates (unless the Designated LIBOR
Page by its terms provides only for a single rate, in which case such
single rate shall be used) for deposits in the Index Currency having
the Index Maturity specified in such Pricing Supplement, commencing on
the applicable Interest Reset Date, that appear (or, if only a single
rate is provided as aforesaid, appears) on the Designated LIBOR Page
as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date.
- If "LIBOR Telerate" is specified in the applicable Pricing Supplement
or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable Pricing Supplement as the method for calculating LIBOR, the
rate for deposits in the Index Currency having the Index Maturity
specified in such Pricing Supplement, commencing on such Interest
Reset Date, that appears on the Designated LIBOR Page as of 11:00
A.M., London time, on such LIBOR Interest Determination Date.
- If fewer than two such offered rates appear, or if no such rate
appears, as applicable, LIBOR on such LIBOR Interest Determination
Date will be determined in accordance with the provisions described
below.
With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as described above:
- The Calculation Agent will request the principal London offices of
each of four major reference banks in the London interbank market, as
selected by the Calculation Agent, to provide the Calculation Agent
with its offered quotation for deposits in the Index Currency for the
period of the Index Maturity specified in the applicable Pricing
Supplement, commencing on the applicable Interest Reset Date, to prime
banks in the London interbank market at approximately 11:00 A.M.,
London time, on such LIBOR Interest Determination Date and in a
principal amount that is representative for a single transaction in
such Index Currency in such market at such time.
- If at least two quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of such
quotations.
- If fewer than two such quotations are so provided, then LIBOR on such
LIBOR Interest Determination Date will be the arithmetic mean of the
rates quoted at approximately 11:00 A.M., in the applicable Principal
Financial Center, on such LIBOR Interest Determination Date by three
major banks in such Principal Financial Center selected by the
Calculation Agent (which may include affiliates of the Agents) for
loans in the Index Currency to leading European banks, having the
Index Maturity specified in the applicable Pricing Supplement and
commencing on the applicable Interest Reset Date and in a principal
amount that is representative for a single transaction in such Index
Currency in such market at such time; provided, however, that if the
banks so selected by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR determined as of such LIBOR Interest
Determination Date will be LIBOR in effect on such LIBOR Interest
Determination Date or, if such Interest Determination Date is the
first Interest Determination Date, the Initial Interest Rate.
"Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuters 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 or such service (or any
successor service)) for the purpose of displaying the London interbank rates of
major banks for the applicable
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Index Currency, or (b) 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 for calculating LIBOR, the
display on the Bridge Telerate, Inc. (or any successor service) on page 3750 if
the U.S. dollar is the Index Currency or with respect to any other Index
Currency, on the page specified in such Pricing Supplement (or any other page as
may replace such page or such service (or any successor service)) for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency.
"Principal Financial Center" means the capital city of the country to which
the Index Currency relates except that with respect to U.S. dollars, Australian
dollars, Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos,
South African rand and Swiss francs, the "Principal Financial Center" shall be
the City of New York, Sydney, Toronto, Frankfurt, Amsterdam, London,
Johannesburg, and Zurich, respectively.
TREASURY RATE NOTES
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
from the most recent auction of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable Pricing
Supplement as such rate appears on either the Telerate Page 56 or the Telerate
Page 57 under the heading "AVGE INVEST YIELD",
The following procedures will be followed if the Treasury Rate cannot be
determined as described above:
- If the above rate is not published on the Telerate Page 56 or the
Telerate Page 57 not so published by 3:00 P.M., New York City time, on
the related Calculation Date, the auction average rate of such Treasury
Bills (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury.
- If the results of the auction of Treasury Bills having the Index Maturity
specified in the applicable Pricing Supplement are not reported as
provided above by 3:00 P.M., New York City time, on such Calculation
Date, or if no such auction is held, then the Treasury Rate will be
calculated by the Calculation Agent and will be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates as of approximately 3:30 P.M., New York
City time, on such Treasury Interest Determination Date, of three leading
primary United States government securities dealers (which may include
any of the Agents or their affiliates; each, a "Reference Dealer")
selected by the Calculation Agent, for the issue of Treasury Bills with a
remaining maturity closest to the specified Index Maturity; provided,
however, that if the Reference Dealers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Treasury Rate
will be the Treasury Rate in effect on such Treasury Interest
Determination Date or, if such Interest Determination Date is the first
Interest Determination Date, the Initial Interest Rate.
CD RATE NOTES
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such date
for negotiable U.S. dollar certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "CDs (Secondary market)."
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The following procedures will be followed if the CD Rate cannot be
determined as described above:
- If such rate is not so published by 3:00 P.M., New York City time, on the
related Calculation Date, then the CD Rate will be the rate on such CD
Interest Determination Date for negotiable U.S. dollar certificates of
deposit having the Index Maturity specified in the applicable Pricing
Supplement as published in the H.15 Daily Update.
- If such rate is neither published in H.15(519) or in the H.15 Daily
Update by 3:00 P.M., New York City time, on the related Calculation Date,
the CD Rate on such CD Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the secondary
market offered rates as of 10:00 A.M., New York City time, on such CD
Interest Determination Date, of three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in the City of New York
(which may include any of the Agents or their affiliates) selected by the
Calculation Agent for negotiable U.S. dollar certificates of deposit of
major United States money center banks of the highest credit standing (in
the market for negotiable U.S. dollar certificates of deposit) with a
remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement in an amount that is representative for a
single transaction in that market at that time; provided, however, that
if the dealers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the CD Rate will be the CD Rate in effect on
such CD Interest Determination Date, or if such Interest Determination
Date is the first Interest Determination Date, the Initial Interest Rate.
FEDERAL FUNDS EFFECTIVE RATE NOTES
Each Federal Funds Effective Rate Note will bear interest at the interest
rate (calculated with reference to the Federal Funds Effective Rate and the
Spread or Spread Multiplier, if any) specified in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Effective Rate" means, with respect to any Federal Funds Interest
Determination Date, the rate on that date for Federal Funds having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Federal Funds (Effective)."
The following procedures will be followed if the Federal Funds Effective
Rate cannot be determined as described above:
- If such rate is not so published by 9:00 A.M., New York City time, on the
related Calculation Date, then the Federal Funds Effective Rate will be
the rate on such Federal Funds Interest Determination Date as published
in the H.15 Daily Update under the heading "Federal Funds (Effective)."
- If such rate is neither published in H.15(519) or in the H.15 Daily
Update by 3:00 P.M. New York City time, on the related Calculation Date,
then the Federal Funds Effective Rate on such Federal Funds Interest
Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the rates as of 9:00 A.M., New York City time,
on such Federal Funds Interest Determination Date for the last
transaction in overnight Federal Funds arranged by three leading brokers
of Federal Funds transactions in the City of New York (which may include
any of the Agents or their affiliates) selected by the Calculation Agent;
provided, however, that if the brokers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Federal Funds
Effective Rate will be the Federal Funds Effective Rate in effect on such
Federal Funds Interest Determination Date, or if such Interest
Determination Date is the first Interest Determination Date, the Initial
Interest Rate.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal of (and premium, if any) and interest on all Notes
will be made in U.S. dollars. Interest will be payable to the person in whose
name a Note is registered at the close of business on the Regular Record Date
next preceding each Interest Payment Date; provided, however, that interest
payable at maturity will be payable to the person to whom principal is payable.
The first payment of interest on any Note
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originally issued between a Regular Record Date and an Interest Payment Date
will be made on the Interest Payment Date following the next succeeding Regular
Record Date to the registered owner on such next succeeding Regular Record Date.
Unless otherwise indicated in the applicable Pricing Supplement, the "Regular
Record Date" with respect to any Floating Rate Note will be the date 15 calendar
days before each Interest Payment Date, whether or not such date is a Business
Day and the "Regular Record Date" with respect to any Fixed Rate Note shall be
the March 1 and September 1 next preceding the March 15 and September 15
Interest Payment Dates, respectively.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
which reset daily or weekly, on the third Wednesday of March, June, September
and December of each year; in the case of Floating Rate Notes which reset
monthly, on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year (as indicated in the applicable
Pricing Supplement); in the case of Floating Rate Notes which reset quarterly,
on the third Wednesday of March, June, September and December of each year; in
the case of Floating Rate Notes which reset semi-annually, on the third
Wednesday of the two months of each year specified in the applicable Pricing
Supplement; and in the case of Floating Rate Notes which reset annually, on the
third Wednesday of the month specified in the applicable Pricing Supplement
(each an "Interest Payment Date"), and, in each case, at maturity. If an
Interest Payment Date with respect to any Floating Rate Note would otherwise
fall on a day that is not a Market Day with respect to such Note, such Interest
Payment Date will be the next succeeding Market Day (or, in the case of a LIBOR
Note, if such day falls in the next calendar month, the next preceding Market
Day).
Payments of interest of any Fixed Rate Note or Floating Rate Note with
respect to any Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date.
With respect to a Floating Rate Note, accrued interest from the date of
issue or from the last date to which interest has been paid or duly provided for
is calculated by multiplying the face amount of such Floating Rate Note by an
accrued interest factor. Such accrued interest factor is computed by adding the
interest factor calculated for each day from the date of issue, or from the last
date to which interest has been paid or duly provided for, to but excluding the
date for which accrued interest is being calculated. The interest factor
(expressed as a decimal) for each such day is computed by dividing the interest
rate (expressed as a decimal) applicable to such date by 360, in the case of
Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes or
Federal Funds Effective Rate Notes, or by the actual number of days in the year,
in the case of Treasury Rate Notes. Interest on Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
Any payment of interest or principal on any Fixed Rate Note or at maturity
on a Floating Rate Note due on any day which is not a Market Day need not be
made on such day, but may be made on the next succeeding Market Day with the
same force and effect as if made on the due date, and no interest will accrue
for the period from and after such date.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the principal of (and premium, if any) and any interest due with respect to any
Certificated Note at maturity will be made in immediately available funds upon
surrender of such Note at the Corporate Trust Office of The Bank of New York, at
101 Barclay St., New York, New York 10286, attention: Bond Redemption Unit (the
"Paying Agent"), provided that the Note is presented to the Paying Agent in time
for the Paying Agent to make such payments in such funds in accordance with its
normal procedures. Unless otherwise specified in the applicable Pricing
Supplement, payments of interest on any Fixed Rate Note which is a Certificated
Note to be made other than at maturity will be made by check mailed to the
address of the Person entitled thereto as it appears in the Security Register
(as defined in the Prospectus), or by wire transfer to such account as may have
been appropriately designated by such Person to the Paying Agent if such Person
is the Holder of at least $1,000,000 aggregate principal amount of the Notes.
Beneficial owners of Book-Entry Notes will be paid in accordance with the
Depositary's and the participant's procedures in effect from time to time as
described under "Book-Entry System" below.
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BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes bearing interest at the same interest
rate or bearing interest pursuant to the same interest rate formula, having the
same date of original issuance, redemption provisions, if any, Stated Maturity
and other terms will be represented by a single Global Note. Each Global Note
representing Book-Entry Notes will be deposited with, or on behalf of, The
Depository Trust Company ("DTC") or other such depositary specified in the
applicable Pricing Supplement, and will be registered in the name of the
Depositary or a nominee of the Depositary. Unless otherwise specified in the
applicable Pricing Supplement, DTC will be the Depositary.
Payment of principal of and any premium and interest on Book-Entry Notes
represented by any permanent Global Note registered in the name of or held by
the Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner and the Holder of the permanent Global
Note representing such Book-Entry Notes. None of the Company, the Trustee or any
agent of the Company or the Trustee will have any responsibility or liability
for any aspect of the Depositary's records relating to or payments made on
account of beneficial ownership interests. The Company has been advised by the
Depositary that upon receipt of any payment of principal of or any premium or
interest in respect of such Global Note, the Depositary will immediately credit
accounts of participants (as defined in the Prospectus under "Description of
Debt Securities -- Book-Entry Debt Securities") with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Note as shown on the records of the Depositary. The Company
expects that payments by participants to owners of beneficial interests in such
permanent Global Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such participants.
A Global Note representing Book-Entry Notes is exchangeable for
Certificated Notes in registered form and of like tenor only if (x) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Note or if at any time the Depositary ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or (y) the Company, in its sole discretion, determines
that such Global Notes will be exchangeable for Certificated Notes in registered
form or (z) there shall have occurred and be continuing any Event of Default or
any event after notice or lapse of time, or both, would constitute an Event of
Default with respect to the Notes. Any Global Note that is exchangeable pursuant
to the preceding sentence will be exchangeable for Certificated Notes in
registered form and of like tenor and terms, in denominations of $1,000 and
integral multiples of $1,000 in excess thereof. Such Certificated Notes will be
registered in such names as the Depositary shall direct. It is expected that
such instructions may be based upon directions received by the Depositary from
participants with respect to ownership of beneficial interests in such Global
Note.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered under the Exchange
Act. The Company understands that DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities, through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. DTC's participants include
securities brokers and dealers (including the Agents), banks, trust companies,
clearing corporations, and certain other organizations, some of which (and/or
their representatives) own DTC. Access to DTC's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
For further information relating to permanent Global Notes to be deposited
with or on behalf of a Depositary, see "Description of Debt
Securities -- Book-Entry Debt Securities" in the Prospectus.
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UNITED STATES TAXATION
The following summary of the principal United States federal income tax
consequences of ownership of Notes is based upon the opinion of Sullivan &
Cromwell, special tax counsel to the Company. It generally deals only with Notes
held as capital assets by initial purchasers, and not with special classes of
holders, such as dealers in securities or currencies, traders in securities that
elect to mark to market, banks, tax-exempt organizations, life insurance
companies, persons that hold Notes that are a hedge or that are hedged against
currency risks or that are part of a straddle or conversion transaction, or
persons whose functional currency is not the U.S. dollar. Moreover, the summary
deals only with Notes that are due to mature 30 years or less from the date on
which they are issued. The United States federal income tax consequences of
ownership of Notes that are due to mature more than 30 years from their date of
issue will be discussed in the applicable Pricing Supplement. The summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, all as currently in effect and all subject to
change at any time, perhaps with retroactive effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of the ownership of Notes.
PAYMENTS OF INTEREST
Interest on a Note, other than interest on a "Discount Note" that is not
"qualified stated interest" (each as defined below under "Original Issue
Discount -- General"), will be taxable to a United States Holder as ordinary
income at the time it is received or accrued, depending on the holder's method
of accounting for tax purposes. A United States Holder is a beneficial owner of
a Note that is (i) a citizen or resident of the United States, (ii) a
corporation organized under the laws of the United States or any State, (iii) an
estate the income of which is subject to United States federal income tax
without regard to its source or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust.
ORIGINAL ISSUE DISCOUNT
General. A Note, other than a Note with a term of one year or less (a
"short-term Note"), will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the Note's "stated redemption price at
maturity" over its issue price is more than a "de minimis amount" (as defined
below). Generally, the issue price of a Note will be the first price at which a
substantial amount of Notes included in the issue of which the Note is a part is
sold to other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. The
stated redemption price at maturity of a Note is the total of all payments
provided by the Note that are not payments of "qualified stated interest". A
qualified stated interest payment is generally any one of a series of stated
interest payments on a Note that are unconditionally payable at least annually
at a single fixed rate (with certain exceptions for lower rates paid during some
periods) applied to the outstanding principal amount of the Note. Special rules
for "Variable Rate Notes" (as defined below under "Original Issue
Discount -- Variable Rate Notes") are described below under "Original Issue
Discount -- Variable Rate Notes".
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless the
election described below under "Election to Treat All Interest as Original Issue
Discount" is made, a United States Holder of a Note with de minimis original
issue discount must include such de minimis original issue discount in income as
stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
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United States Holders of Discount Notes having a maturity of more than one
year from their date of issue must, generally, include original issue discount
("OID") in income calculated on a constant-yield method before the receipt of
cash attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Note. The amount of OID
includible in income by a United States Holder of a Discount Note is the sum of
the daily portions of OID with respect to the Discount Note for each day during
the taxable year or portion of the taxable year on which the United States
Holder holds such Discount Note ("accrued OID"). The daily portion is determined
by allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. Accrual periods with respect to a Note may be
of any length selected by the United States Holder and may vary in length over
the term of the Note as long as (i) no accrual period is longer than one year
and (ii) each scheduled payment of interest or principal on the Note occurs on
either the final or first day of an accrual period. The amount of OID allocable
to an accrual period equals the excess of (a) the product of the Discount Note's
adjusted issue price at the beginning of the accrual period and such Note's
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum of the payments of qualified stated interest on the Note allocable
to the accrual period. The "adjusted issue price" of a Discount Note at the
beginning of any accrual period is the issue price of the Note increased by (x)
the amount of accrued OID for each prior accrual period and decreased by (y) the
amount of any payments previously made on the Note that were not qualified
stated interest payments. For purposes of determining the amount of OID
allocable to an accrual period, if an interval between payments of qualified
stated interest on the Note contains more than one accrual period, the amount of
qualified stated interest payable at the end of the interval (including any
qualified stated interest that is payable on the first day of the accrual period
immediately following the interval) is allocated pro rata on the basis of
relative lengths to each accrual period in the interval, and the adjusted issue
price at the beginning of each accrual period in the interval must be increased
by the amount of any qualified stated interest that has accrued prior to the
first day of the accrual period but that is not payable until the end of the
interval. The amount of OID allocable to an initial short accrual period may be
computed using any reasonable method if all other accrual periods other than a
final short accrual period are of equal length. The amount of OID allocable to
the final accrual period is the difference between (x) the amount payable at the
maturity of the Note (other than any payment of qualified stated interest) and
(y) the Note's adjusted issue price as of the beginning of the final accrual
period.
Acquisition Premium. A United States Holder that purchases a Note for an
amount less than or equal to the sum of all amounts payable on the Note after
the purchase date other than payments of qualified stated interest but in excess
of its adjusted issue price (as determined above under "Original Issue
Discount -- General")(any such excess being "acquisition premium") and that does
not make the election described below under "Election to Treat All Interest as
Original Issue Discount" shall reduce the daily portions of OID by a fraction,
the numerator of which is the excess of the United States Holder's adjusted
basis in the Note immediately after its purchase over the adjusted issue price
of the Note, and the denominator of which is the excess of the sum of all
amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, over the Note's adjusted issue price.
Market Discount. A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount for
which a United States Holder purchased the Note is less than the Note's issue
price (as determined above under "Original Issue Discount --General") and (ii)
the Note's stated redemption price at maturity or, in the case of a Discount
Note, the Note's "revised issue price", exceeds the amount for which the United
States Holder purchased the Note by at least 1/4 of 1 percent of such Note's
stated redemption price at maturity or revised issue price, respectively,
multiplied by the number of complete years to the Note's maturity. If such
excess is not sufficient to cause the Note to be a Market Discount Note, then
such excess constitutes "de minimis market discount" and such Note is not
subject to the rules discussed in the following paragraphs. The Code provides
that, for these purposes, the "revised issue price" of a Note generally equals
its issue price, increased by the amount of any OID that has accrued on the
Note.
Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively,
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a United States Holder of a Market Discount Note may elect to include market
discount in income currently over the life of the Note. Such an election shall
apply to all debt instruments with market discount acquired by the electing
United States Holder on or after the first day of the first taxable year to
which the election applies. This election may not be revoked without the consent
of the Internal Revenue Service ( the "Service").
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on a
constant-yield method. Such an election shall apply only to the Note with
respect to which it is made and may not be revoked. A United States Holder of a
Market Discount Note that does not elect to include market discount in income
currently generally will be required to defer deductions for interest on
borrowings allocable to such Note in an amount not exceeding the accrued market
discount on such Note until the maturity or disposition of such Note.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within one year of the Note's
issue date and (iii) the payment will equal or exceed the amount of pre-issuance
accrued interest, then the United States Holder may elect to decrease the issue
price of the Note by the amount of pre-issuance accrued interest. In that event,
a portion of the first stated interest payment will be treated as a return of
the excluded pre-issuance accrued interest and not as an amount payable on the
Note.
Notes Subject to Contingencies Including Optional Redemption. If a Note
provides for an alternative payment schedule or schedules applicable upon the
occurrence of a contingency or contingencies (other than a remote or incidental
contingency), whether such contingency relates to payments of interest or of
principal, if the timing and amount of the payments that comprise each payment
schedule are known as of the issue date and if one of such schedules is
significantly more likely than not to occur, the yield and maturity of the Note
are determined by assuming that the payments will be made according to that
payment schedule. If there is no single payment schedule that is significantly
more likely than not to occur (other than because of a mandatory sinking fund),
the Note will be subject to the general rules that govern contingent payment
obligations. These rules will be discussed in an applicable Pricing Supplement.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company or the Holder has an
unconditional option or options that, if exercised, would require payments to be
made on the Note under an alternative payment schedule or schedules, then (i) in
the case of an option or options of the Company, the Company will be deemed to
exercise or not exercise an option or combination of options in the manner that
minimizes the yield on the Note and (ii) in the case of an option or options of
the Holder, the Holder will be deemed to exercise or not exercise an option or
combination of options in the manner that maximizes the yield on the Note. If
both the Company and the Holder have options described in the preceding
sentence, those rules apply to such options in the order in which they may be
exercised. For purposes of those calculations, the yield on the Note is
determined by using any date on which the Note may be redeemed or repurchased as
the maturity date and the amount payable on such date in accordance with the
terms of the Note as the principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the Note
is repaid as a result of the change in circumstances and solely for purposes of
determining the amount and accrual of OID, the yield and maturity of the Note
are redetermined by treating the Note as having been retired and reissued on the
date of the change in circumstances for an amount equal to the Note's adjusted
issue price on that date.
Election to Treat All Interest as Original Issue Discount. A United States
Holder may elect to include in gross income all interest that accrues on a Note
using the constant-yield method described above under the heading "Original
Issue Discount -- General", with the modifications described below. For purposes
of this election, interest includes stated interest, OID, de minimis original
issue discount, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium (described below under
"Notes Purchased at a Premium") or acquisition premium.
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In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal its cost to the
electing United States Holder, the issue date of the Note will be the date of
its acquisition by the electing United States Holder, and no payments on the
Note will be treated as payments of qualified stated interest. This election
will generally apply only to the Note with respect to which it is made and may
not be revoked without the consent of the Service. If this election is made with
respect to a Note with amortizable bond premium, then the electing United States
Holder will be deemed to have elected to apply amortizable bond premium against
interest with respect to all debt instruments with amortizable bond premium
(other than debt instruments the interest on which is excludible from gross
income) held by the electing United States Holder as of the beginning of the
taxable year in which the Note with respect to which the election is made is
acquired or thereafter acquired. The deemed election with respect to amortizable
bond premium may not be revoked without the consent of the Service.
If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
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 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 0.65 but not more than 1.35, or (b) a
fixed multiple greater than 0.65 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 percentage points 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 that is not within the control of or unique to
the circumstances of the issuer or a related party. 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 cost of newly borrowed
funds.
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 have values on the issue date of the Note that do not differ
by more than 0.25 percentage points 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.
S-16
<PAGE> 17
In general, if a Variable Rate Note provides for stated interest at a
single qualified floating rate or objective rate, 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 and also does not provide for
interest payable at a 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.
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 basis United
States Holder of a short-term Note is not required to accrue OID (as specially
defined below for the purposes of this paragraph) for United States federal
income tax purposes unless it elects to do so (but may be required to include
any stated interest in income as the interest is received). Accrual basis United
States Holders and certain other United States Holders, including banks,
regulated investment companies, dealers in securities, common trust funds,
United States Holders who hold Notes as part of certain identified hedging
transactions, certain pass-through entities and cash basis United States Holders
who so elect, are required to accrue OID on short-term Notes on either a
straight-line basis or under the constant-yield method (based on daily
compounding), at the election of the United States Holder. In the case of a
United States Holder not required and not electing to include OID in income
currently, any gain realized on the sale or retirement of the short-term Note
will be ordinary income to the extent of the OID accrued on a straight-line
basis (unless an election is made to accrue the OID under the constant-yield
method) through the date of sale or retirement. United States Holders who are
not required and do not elect to accrue OID on short-term Notes will be required
to defer deductions for interest on borrowings allocable to short-term Notes in
an amount not exceeding the deferred income until the deferred income is
realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Note, including stated interest, are included
in the short-term Note's stated redemption price at maturity.
NOTES PURCHASED AT A PREMIUM
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium",
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. Any election to amortize bond premium shall apply to all
bonds (other than bonds the interest on which is excludible from gross income)
held by the United States Holder at the beginning of the first taxable year to
which the election
S-17
<PAGE> 18
applies or thereafter acquired by the United States Holder, and is irrevocable
without the consent of the Service. See also "Original Issue
Discount -- Election to Treat All Interest as Original Issue Discount".
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost, increased by the amount of any OID or market discount included in
the United States Holder's income with respect to the Note and the amount, if
any, of income attributable to de minimis original issue discount and de minimis
market discount included in the United States Holder's income with respect to
the Note, and reduced by (i) the amount of any payments that are not qualified
stated interest payments, and (ii) the amount of any amortizable bond premium
applied to reduce interest on the Note.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the Note. Except to the extent (i)
described above under "Original Issue Discount -- Short-Term Notes" or "Original
Issue Discount -- Market Discount", (ii) attributable to accrued but unpaid
interest or (iii) subject to the rules governing contingent payment obligations,
gain or loss recognized on the sale or retirement of a Note will be capital gain
or loss and will be long-term capital gain or loss if the Note was held for more
than one year.
INDEXED NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Notes that are not
subject to the rules governing Variable Rate Notes payments on which are
determined by reference to any index and other Notes that are subject to the
rules governing contingent payment obligations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of a
Note before maturity within the United States to, and to the accrual of OID on a
Discount Note with respect to, non-corporate United States Holders, and "backup
withholding" at a rate of 31% will apply to such payments and to payments of OID
if the United States Holder fails to provide an accurate taxpayer identification
number or is notified by the Service that it has failed to report all interest
and dividends required to be shown on its federal income tax returns.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution
Agreement, dated as of January 8, 1999 (the "Distribution Agreement"), the Notes
are being offered on a continuing basis by the Company through Salomon Smith
Barney Inc., Goldman, Sachs & Co., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated (the
"Agents"), who have agreed to use reasonable efforts to solicit purchases of the
Notes. The Company will have the sole right to accept offers to purchase Notes
and may reject any proposed purchase of Notes as a whole or in part. The Agents
shall have the right, in their discretion reasonably exercised, to reject any
offer to purchase Notes, as a whole or in part. The Company will pay the Agents
a commission of from 0.125% to 0.750% of the principal amount of Notes,
depending upon maturity, for sales made through them as Agents.
The Company may also sell Notes to the Agents as principals for their own
accounts at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page hereof in the case of any such principal transaction
in which no other discount is agreed. Such Notes may be resold at prevailing
market prices, or at prices related thereto, at the time of such resale, as
determined by such Agents or, if so agreed, at a fixed public offering price.
The Company reserves the right to sell Notes directly on its own behalf. No
commission will be payable by the Company on any Notes sold directly by the
Company.
S-18
<PAGE> 19
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Act"). The
Company has agreed to indemnify the Agents against certain liabilities,
including liabilities under the Act. The Company has agreed to reimburse the
Agents for certain expenses, including the fees and expenses of counsel.
The Agents or their affiliates perform various commercial and/or investment
banking services for the Company for which they receive customary fees.
Notes may also be sold by the Agents to or through dealers who may resell
to investors. The Agents may pay all or part of their discount or commission to
such dealers. Such dealers may be deemed to be "underwriters" within the meaning
of the Act.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of any secondary market for the Notes.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Robert S.
Harkey, Senior Vice President -- General Counsel of the Company, and for the
Agents by Sullivan & Cromwell, New York, New York. The opinions of Mr. Harkey
and Sullivan & Cromwell will be conditioned upon, and subject to certain
assumptions regarding, future action required to be taken by the Company and the
Trustee in connection with the issuance and sale of any particular Note, the
specific terms of Notes and other matters that may affect the validity of Notes
but which cannot be ascertained on the date of such opinions.
S-19
<PAGE> 20
PROSPECTUS
DELTA AIR LINES, INC.
DEBT SECURITIES
---------------------
This Prospectus relates to the issuance of unsecured debt securities and
other evidences of indebtedness ("Debt Securities") by Delta Air Lines, Inc.
("Delta" or the "Company").
ISSUANCE OF DEBT SECURITIES:
- - Series may be periodically offered;
- - Series may be denominated in U.S. dollars or other currencies or currency
units;
- - Prices and terms will be determined at the time of sale; and
- - The total aggregate principal amount (or, in the case of Debt Securities
issued at a discount, initial offering price) will not exceed US
$1,583,881,000 (or the equivalent in foreign currencies or currency units).
FORMS THAT DEBT SECURITIES MAY TAKE:
- - Registered form;
- - Bearer form; or
- - Global form.
This Prospectus is accompanied by a Prospectus Supplement which includes
additional information as to a particular series of Debt Securities. Sales of
Debt Securities may not be consummated without both this Prospectus and a
Prospectus Supplement.
INFORMATION FOUND IN THE PROSPECTUS SUPPLEMENT:
- - Aggregate principal amount of the series of Debt Securities
- - Denominations
- - Maturity
- - Interest rate
- - Time of interest payments
- - Any terms for redemption
- - Any terms for sinking fund payments
- - Any listing on a national securities exchange
- - Initial public offering price
- - Names of any underwriters or agents
- - Terms of any underwriting arrangements
- - Amounts to be purchased by underwriters or agents
- - Compensation of underwriters or agents
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this Prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell securities and it is not soliciting an offer to buy securities in any
state where the offer or sale is not permitted.
JULY 20, 1998
<PAGE> 21
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). You may read
and copy any documents we file at the SEC's public reference room, 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our SEC filings are also
available to the public on the SEC's web site at http://www.sec.gov and through
the New York Stock Exchange, 20 Broad Street, New York, New York 10005, on which
our common stock is listed.
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. The information incorporated by reference is
considered to be part of this Prospectus, and later information that we file
with the SEC will automatically update and supersede this information as well as
the information included in this Prospectus. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 ("Exchange
Act") until we sell all the Debt Securities. This Prospectus is part of a
registration statement we filed with the SEC.
- - Annual Report on Form 10-K for the fiscal year ended June 30, 1997;
- - Quarterly Reports on Form 10-Q for the quarters ended September 30, 1997,
December 31, 1997 and March 31, 1998; and
- - Current Report on Form 8-K dated April 30, 1998.
You may request a copy of these filings (other than any exhibits unless
specifically incorporated by reference into this Prospectus), at no cost, by
writing or telephoning us at the following address:
Delta Air Lines, Inc.
Investor Relations Department (Dept. No. 829)
P.O. Box 20706
Atlanta, Georgia 30320
(404) 715-2600
You should rely only on the information incorporated by reference or
provided in this Prospectus or any Prospectus Supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these Debt Securities in any state where the offer is not permitted.
You should not assume that the information in this Prospectus or any Prospectus
Supplement is accurate as of any date other than the date on the front of those
documents.
2
<PAGE> 22
THE COMPANY
Delta is a major airline engaged in domestic and foreign air
transportation. We are one of the largest air carriers of passengers, property
and mail in the United States. We provide scheduled air transportation over a
network of routes throughout the United States, and between the United States
and other countries in North America, Europe, the Middle East and Asia. We
operate hubs at Atlanta, Cincinnati, Dallas/Fort Worth and Salt Lake City. We
also operate an international gateway at New York's Kennedy Airport and a
Pacific gateway in Portland, Oregon.
Delta is incorporated under the laws of the State of Delaware. Our
principal executive offices are located at Hartsfield Atlanta International
Airport, Atlanta, Georgia 30320, and our telephone number is (404) 715-2600.
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement, the
net proceeds to the Company from the sale of the Debt Securities offered hereby
will be available for general corporate purposes, including, but not limited to,
repayment of short-term or long-term indebtedness, capital expenditures,
repurchases of common stock and acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges represents the number of times that
fixed charges were covered by earnings. For purposes of computing the ratio of
earnings to fixed charges, "earnings" represents net income plus the provision
for income taxes (prior to any amortization of investment tax credit) and fixed
charges, excluding capitalized interest and interest and interest offset on the
Guaranteed Serial ESOP Notes. "Fixed charges" represents gross interest (which
includes gross interest on the Guaranteed Serial ESOP Notes and capitalized
interest) plus one-third of rentals (except for the nine months ended March 31,
1998 where one half of the rentals were added into "Fixed Charges"), which is
considered representative of the interest factor.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(1) (1) 1.69 1.43 3.05 3.29 3.06
</TABLE>
(1) Earnings for the fiscal years ended June 30, 1993 and 1994 were inadequate
to cover fixed charges. Additional earnings of $728.0 million for the fiscal
year ended June 30, 1993 and $707.0 million for the fiscal year ended June
30, 1994 would have been necessary to bring the ratio to 1.0 in the
respective periods.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture, dated as of May 1,
1991 (the "Indenture"), between the Company and The Bank of New York, successor
to The Citizens and Southern National Bank of Florida, as Trustee (the
"Trustee"), a copy of which is incorporated by reference as an exhibit to the
Registration Statement. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and qualified in
their entirety by reference to, all of the provisions of the Indenture,
including the definitions therein of certain terms capitalized in this
Prospectus. Wherever particular Sections or Articles or defined terms of the
Indenture are referred to herein or in a Prospectus Supplement, such Sections or
defined terms are incorporated herein or therein by reference.
The term "Securities," as used under this caption, refers to all securities
issued under the Indenture and includes the Debt Securities.
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<PAGE> 23
The Securities may be issued from time to time in one or more series. The
particular terms of each series of Securities offered by any Prospectus
Supplement or Prospectus Supplements will be described in such Prospectus
Supplement or Prospectus Supplements relating to such series.
All references to the Securities or Debt Securities under this caption
refer to Securities or Debt Securities issued in fully registered form without
coupons. However, the Indenture permits the issuance of Securities in bearer
form with or without coupons attached. If any of the Securities are issued in
bearer form, the Prospectus Supplement relating to such Securities in bearer
form will describe the terms and provisions of, and the tax considerations
relating to, such Securities in bearer form.
GENERAL
The Indenture does not limit the aggregate amount of Securities which may
be issued thereunder, and Securities may be issued thereunder from time to time
in separate series up to the aggregate amount from time to time authorized by
the Company for each series. The Securities will be unsecured and unsubordinated
obligations of the Company and will rank equally and ratably with other
unsecured and unsubordinated indebtedness of the Company.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Debt Securities ("Offered
Securities") in respect of which this Prospectus is being delivered: (1) the
title of the Offered Securities; (2) any limit on the aggregate principal amount
of the Offered Securities; (3) whether the Offered Securities are to be issuable
in registered form or bearer form, or both; (4) whether any of the Offered
Securities are to be issuable in whole or in part initially in temporary global
form and whether any of the Offered Securities are to be issuable in permanent
global form and, if so, the terms and conditions, if any, upon which interests
in such Securities in global form may be exchanged, in whole or in part, for the
individual Securities represented thereby; (5) the person to whom any interest
on any Offered Security of the series shall be payable if other than the person
in whose name the Security is registered on the Regular Record Date; (6) the
date or dates on which the Offered Securities will mature; (7) the rate or rates
at which the Offered Securities will bear interest, if any; (8) the date or
dates from which any such interest will accrue, the Interest Payment Dates on
which any such interest on the Offered Securities will be payable and the
Regular Record Date for any Interest Payment Date; (9) each office or agency
where the principal of, or premium, if any, and interest on the Offered
Securities will be payable and each office or agency where the Offered
Securities may be presented for registration of transfer or exchange; (10) the
period or periods within which, the events upon the occurrence of which, and the
price or prices at which, the Offered Securities may, pursuant to any optional
or mandatory provisions, be redeemed or purchased, in whole or in part, by the
Company and any terms and conditions relevant thereto; (11) the obligation of
the Company, if any, to redeem or repurchase the Securities at the option of the
Holders; (12) the denominations in which any Offered Securities will be
issuable, if other than denominations of $1,000 and any integral multiple
thereof; (13) the currency or currencies, including composite currencies, of
payment of principal of and any premium and interest on the Offered Securities
if other than U.S. dollars and whether the Company or the Holders may elect to
receive payments in respect of the Securities in a coin or currency other than
that in which the Securities are stated to be payable; (14) any index or formula
used to determine the amount of payments of principal of and any premium and
interest on the Offered Securities; (15) if other than the principal amount
thereof, the portion of the principal amount of the Offered Securities of the
series which will be payable upon declaration of the acceleration of the
Maturity thereof; (16) any Events of Default with respect to the Securities of
such series, if not otherwise set forth under "Events of Default"; (17) the
applicability of the provisions described under "Defeasance"; and (18) any other
terms of the Offered Securities not inconsistent with the provisions of the
Indenture (Section 301).
Securities may be issued at a discount from their principal amount. Federal
income tax consequences and other special considerations applicable to any such
Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
If the purchase price of any of the Securities is denominated in a foreign
currency or currencies or a foreign currency unit or units or if the principal
of, premium, if any, and interest on any series of Securities is
4
<PAGE> 24
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general tax considerations, specific terms and
other information with respect to such issue of Securities and such foreign
currency or currencies or foreign currency unit or units will be set forth in
the applicable Prospectus Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will not have the benefit of any covenants that limit or
restrict the Company's business or operations, the pledging of the Company's
assets or the incurrence of indebtedness by the Company. Further, unless
otherwise indicated in the Prospectus Supplement, the Debt Securities will not
have the benefit of any covenants that afford Holders of the Debt Securities
protection in the event of a highly leveraged or other transaction involving the
Company that may adversely affect Holders of Debt Securities.
EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal, premium, if any, and interest on the Securities will be payable,
and the exchange of and the transfer of Securities will be registerable, at the
office or agency of the Company in the City of Atlanta, Georgia maintained for
such purpose and at any other office or agency maintained for such purpose,
except that, at the option of the Company, interest may be paid by mailing a
check to the address of the Person entitled thereto as it appears on the
Security Register. (Sections 301, 305 and 1002) Unless otherwise indicated in
the applicable Prospectus Supplement, the Securities will be issued in
denominations of $1,000 or integral multiples thereof. (Section 302) No service
charge will be made for any registration or transfer or exchange of the
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith. (Section 305)
All monies paid by the Company to a Paying Agent for the payment of
principal of, premium, if any, or interest on any Security which remain
unclaimed for two years after such principal, premium or interest has become due
and payable may be repaid to the Company and thereafter the Holder of such
Security may look only to the Company for payment thereof. (Section 1003)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depositary or its nominee
identified in the applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of Outstanding Debt
Securities of the series to be represented by such Global Security or
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in registered form, a Global Security may not be registered for
transfer or exchange except as a whole by the Depositary for such Global
Security to a nominee of such Depositary and except in the circumstances
described in the applicable Prospectus Supplement. (Sections 204 and 305)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement,
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Securities or by the Company, if such Securities
are offered and sold directly by the Company. Ownership of beneficial interests
in such Global Security will be limited to participants or Persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such Global Security will be shown on, and the transfer of that
ownership interest will be effected only through,
5
<PAGE> 25
records maintained by the Depositary or its nominees for such Global Security.
Ownership of beneficial interests in such Global Security by Persons that hold
through participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Securities
represented by such Global Security for all purposes under the Indenture. Unless
otherwise specified in the applicable Prospectus Supplement, owners of
beneficial interests in such Global Security will not be entitled to have
Securities of the series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of
Securities of such series in certificated form and will not be considered the
Holders thereof for any purposes under the Indenture. (Sections 204 and 305)
Accordingly, each Person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such Person is not a
participant, on the procedures of the participant through which such Person owns
its interest, to exercise any rights of a Holder under the Indenture. Payments,
transfers, exchanges and other matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depositary from time to time. None of the Company, the Trustee or any agent of
the Company or the Trustee will have any responsibility or liability for any
aspect of the Depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in a Global Security, or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Indenture provides that the Depositary may grant proxies and otherwise
authorize participants to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action which a Holder is entitled to
give or take under the Indenture. (Section 104) The Company understands that
under existing industry practices, if the Company requests any action of Holders
or an owner of a beneficial interest in such Global Security desires to give any
notice or take any action a Holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants to give such notice
or take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of, premium, if any, and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal of or premium, if
any, on any Debt Security of that series when due, continued for five Business
Days; (b) failure to pay any interest on any Debt Security of that series when
due, continued for 30 days; (c) failure to deposit any sinking fund payment,
when due, continued for five Business Days, in respect of any Debt Security of
that series; (d) failure to perform any other covenant of the Company in the
Indenture (other than a covenant included in the Indenture solely for the
benefit of a series of Debt Securities other than that series), continued for 60
days after written notice as provided in the Indenture; (e) a default under any
evidence of indebtedness for money borrowed by the Company or a Restricted
Subsidiary (including a default with respect to Debt Securities of any other
series) or under any instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness for money borrowed by the
Company or a Restricted Subsidiary (including the Indenture), whether such
indebtedness exists as of the date of the Indenture or is thereafter created,
which default (i) results from the failure by the Company or any Restricted
Subsidiary to pay the principal amount due upon the final stated maturity of
such indebtedness in an amount in excess of $75 million after the expiration of
any applicable grace period, or (ii) results in the acceleration of such
indebtedness in an amount in excess of $75 million, in either case, without such
indebtedness having been discharged, or such acceleration having been rescinded
or annulled, within 10 days, after written notice to the Company by the Trustee
or by the Holders of at least 25% in principal amount of the Outstanding
Securities of such series as provided in the Indenture; (f) certain events of
bankruptcy,
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insolvency or reorganization; and (g) any other Event of Default provided with
respect to Debt Securities of that series. (Section 501) If an Event of Default
with respect to Outstanding Debt Securities of any series shall occur and be
continuing, either the Trustee or the Holders of at least 25% in principal
amount of the Outstanding Debt Securities of that series by notice as provided
in the Indenture may declare the principal amount (or, if the Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all Debt Securities
of that series or such specified amount to be due and payable immediately.
However, at any time after a declaration of acceleration with respect to Debt
Securities of any series has been made, but before a judgment or decree based on
such acceleration has been obtained, the Holders of a majority in principal
amount of the Outstanding Debt Securities of that series may, under certain
circumstances, rescind and annul such acceleration. (Section 502) For
information as to waiver of defaults, see "Modification and Waiver" below.
"Subsidiary" is defined to mean a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. "Restricted Subsidiary" is defined to mean any Subsidiary
substantially all of the property and operations of which are located in the
United States and which owns a Principal Property, except a Subsidiary which is
primarily engaged in the business of a finance company. "Principal Property" is
defined to include any aircraft, and any aircraft engine installed in any
aircraft, that has 75 or more passenger seats, whether now owned or hereafter
acquired by the Company or any Restricted Subsidiary. (Section 101).
The Indenture provides that, subject to the duty of the Trustee during an
Event of Default to act with the required standard of care, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable security or indemnity. (Sections 601 and
603) Subject to certain provisions, including those requiring security or
indemnification of the Trustee, the Holders of a majority in principal amount of
the Outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 512)
No holder of a Security of any series will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Securities of that series, (ii) the Holders of at least 25%
in aggregate principal amount of the Outstanding Securities of that series have
made written request, and such Holder or Holders have offered reasonable
indemnity to the Trustee, to institute such proceeding as trustee and (iii) the
Trustee has failed to institute such proceeding, and has not received from the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series a direction inconsistent with such request, within 60
days after such notice, request and offer. (Section 507) However, such
limitations do not apply to a suit instituted by a Holder of a Security for the
enforcement of payment of the principal of, or premium, if any, or interest on
such Security on or after the applicable due date specified in such Security.
(Section 508)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of its obligations under the Indenture and
as to any default in such performance. (Section 1004) The Indenture provides
that the Trustee may withhold notice to the Holders of the Debt Securities of
any series of the default (except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Debt Securities of such series
or in the payment of any sinking fund installment with respect to Debt
Securities of such series) if the Trustee considers it in the interest of the
Holders of the Debt Securities to do so. (Section 602)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of each series affected
thereby; provided, however, that no such modification or amendment may, without
the consent of the Holder of each Outstanding Debt Security affected thereby:
(a) change the Stated Maturity of
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<PAGE> 27
the principal of, or any installment of principal of, or interest on, any Debt
Security; (b) (unless otherwise provided in the applicable Prospectus
Supplement) reduce the principal amount of, the rate of interest on, or the
premium, if any, payable upon the redemption of, any Debt Security; (c) reduce
the amount of principal of an Original Issue Discount Security payable upon
acceleration of the Maturity thereof; (d) change the place or currency of
payment of principal of, premium, if any, or interest on any Debt Security; (e)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security; or (f) reduce the percentage in principal amount
of Outstanding Debt Securities of any series, the consent of the Holders of
which is required for modification or amendment of the Indenture or for waiver
of compliance with certain provisions of the Indenture or for waiver of certain
defaults. (Section 902)
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Company with certain covenants of the Indenture. (Section
1006) The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may, on behalf of the Holders of all
Debt Securities of that series, waive any past default under the Indenture with
respect to that series, except a default in the payment of the principal of,
premium, if any, or interest on, any Debt Security of that series or in respect
of a provision which under the Indenture cannot be modified or amended without
the consent of the Holder of each Outstanding Debt Security of that series
affected. (Section 513)
Except in certain limited circumstances, the Company will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give or take any direction,
notice, consent, waiver or other action under the Indenture, in the manner and
subject to the limitations provided in the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of Outstanding Debt
Securities, may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate with or merge into, or transfer or lease its assets substantially as
an entirety to, the Company, provided (a) that the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
which acquires or leases the assets of the Company substantially as an entirety
is a Person organized and existing under the laws of any United States
jurisdiction and assumes the Company's obligations on the Debt Securities and
under the Indenture, (b) that after giving effect to such transaction no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing, and (c) that
certain other conditions are met. (Article Eight)
DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement with
respect to the Debt Securities of a series, the Company, at its option, (i) will
be discharged from any and all obligations in respect of the Debt Securities of
such series (except for certain obligations to register the transfer or exchange
of Debt Securities of such series, to replace stolen, lost or mutilated Debt
Securities of such series, and to maintain paying agents and hold moneys for
payment in trust) or (ii) need not comply with any covenants that are specified
in a Prospectus Supplement, and the occurrence of an event described under
clause (d) with respect to any defeased covenant and clause (e) of the "Events
of Default" shall no longer be an Event of Default if, in each case, the Company
deposits with the Trustee, in trust, money or U.S. Government Obligations that
through the payment of interest thereon and principal thereof in accordance with
their terms will provide money in an amount sufficient to pay all the principal
of (and premium, if any) and any interest on the Debt Securities of such series
on the dates such payments are due (which may include one or more redemption
dates designated by the Company) in accordance with the terms of such Debt
Securities. Such a trust may only be established if, among other things, (a) no
Event of Default or event which with the giving of notice or lapse of time, or
both, would become an Event of Default under the Indenture shall have occurred
and be continuing on the date of such deposit, (b) in the event of a defeasance
of the type described in clause (i) above, no Event of Default described under
clause (f) of "Events of Default" above or event which with the giving of notice
or lapse of time, or both, would become an Event of Default described under such
clause
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(f) shall have occurred and be continuing at any time during the period ending
on the 91st day following such date of deposit, and (c) the Company shall have
delivered an Opinion of Counsel to the effect that the Holders of the Debt
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit or defeasance and will be subject to
federal income tax in the same manner as if such defeasance had not occurred.
In the event the Company omits to comply with its remaining obligations
under the Indenture after a defeasance of the Indenture with respect to the Debt
Securities of any series as described under clause (ii) above and the Debt
Securities of such series are declared due and payable because of the occurrence
of any undefeased Event of Default, the amount of money and U.S. Government
Obligations on deposit with the Trustee may be insufficient to pay amounts due
on the Debt Securities of such series at the time of the acceleration resulting
from such Event of Default. However, the Company will remain liable in respect
of such payments. (Article Thirteen)
GOVERNING LAW
The Indenture and the Securities will be governed by, and construed in
accordance with, the laws of the State of New York. (Section 112)
REGARDING THE TRUSTEE
The Trustee and certain of its affiliates are the trustees under a number
of other indentures qualified under the Trust Indenture Act of 1939, as amended
(the "Indenture Act"), in respect of which the Company is the obligor with
respect to certain unsecured debt securities and are the trustees under a number
of indentures qualified under the Indenture Act in respect of which the Company
is the lessee of the equipment that constitutes the collateral for the debt
obligations issued pursuant to such indentures. Affiliates of the Trustee are
also the trustees under one or more indentures with the Company that have not
been qualified under the Indenture Act. Upon the occurrence of an Event of
Default, or any event of default under such other indenture, the Trustee may be
deemed to have a conflicting interest with respect to the Securities for
purposes of the Indenture Act and, accordingly, may be required to resign as
Trustee under the Indenture.
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 613) The Trustee
will be permitted to engage in certain other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict or resign.
(Section 608)
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters and also
may sell Debt Securities directly to other purchasers or through agents.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Debt Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Debt Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on the
resale of Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the applicable Prospectus Supplement.
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Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Debt Securities from the
Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Offered Securities is not at the time of delivery prohibited under the laws
of the jurisdiction to which such purchaser is subject. The underwriters and
such other agents will not have any responsibility in respect of the validity or
performance of such contracts.
Unless otherwise indicated in the applicable Prospectus Supplement, Delta
does not intend to apply for the listing of any Debt Securities on a national
securities exchange. If any Debt Securities are sold to or through underwriters,
dealers or agents, the underwriters, dealers or agents may make a market in such
Debt Securities, as permitted by applicable laws and regulations. No
underwriter, dealer or agent would be obligated, however, to make a market in
such Debt Securities, and any such market-making could be discontinued at any
time at the sole discretion of the underwriter, dealer or agent. Accordingly, no
assurance can be given as to the liquidity of, or trading markets for, such Debt
Securities.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for, the Company in the
ordinary course of business.
VALIDITY OF THE DEBT SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Debt Securities offered hereby will be passed upon for the
Company by King & Spalding, Atlanta, Georgia, and for any agents, dealers or
underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated financial statements and schedules included or
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997 and incorporated by reference in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. Reference is made to
said report, which includes an explanatory paragraph with respect to the change
in the method of accounting for postemployment benefits effective July 1, 1994
as discussed in Note 10 to the consolidated financial statements.
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$300,000,000
[DELTA AIR LINES LOGO]
MEDIUM-TERM NOTES,
SERIES C
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PROSPECTUS SUPPLEMENT
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SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
JANUARY 8, 1999
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