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SUPPLEMENT TO PROSPECTUS AND PROSPECTUS SUPPLEMENT, EACH DATED OCTOBER 6, 1993
DATED AUGUST 15, 1996
THE DETROIT EDISON COMPANY
REMARKETED SECURED NOTES, 1993 SERIES B DUE 2033
The following discussion supplements and replaces the discussion under the
captions below that was contained in the Prospectus Supplement and Prospectus,
each dated October 6, 1993 (together, the "Prospectus"), relating to the initial
offering of the Remarketed Secured Notes, 1993 Series B Due 2033 (the
"Remarketed Notes") of The Detroit Edison Company (the "Company") under the
heading "Description of Notes."
The Remarketed Notes were issued as a series of debt securities under the
Indenture, dated as of June 30, 1993, as supplemented by the Second Supplemental
Indenture, dated as of September 15, 1993, and have been amended by the First
Amendment to the Second Supplemental Indenture, dated as of August 15, 1996
(together, and as further supplemented or amended, the "Indenture"), between the
Company and Bankers Trust Company, as trustee (the "Trustee"). As described
below, the amendments add the Commercial Paper Term Mode, provide for
remarketing Remarketed Notes at floating interest rates and modify the
procedures for remarketing the Remarketed Notes in accordance with the current
procedures of The Depository Trust Company ("DTC"). The description of the
Remarketed Notes set forth herein amends the description set forth in the
Prospectus and replaces such description to the extent that they are
inconsistent.
Payment of principal of and interest on the Remarketed Notes will be made
to DTC so long as DTC or its nominee is the registered owner of the Remarketed
Notes. The disbursement of such payments to beneficial owners of the Remarketed
Notes ("Beneficial Owners") will be the responsibility of the DTC Participants
and the Indirect Participants, all as defined and more fully described in the
Prospectus under the caption "DTC Book-Entry-Only System."
INTEREST
General. The Remarketed Notes will initially bear interest at a rate of
4 5/8% per annum (the "Initial Interest Rate") through August 14, 1996.
Thereafter, each Remarketed Note will bear interest at the Company's option in
either the Daily Interest Rate Mode or the Weekly Interest Rate Mode, the
Commercial Paper Term Mode, the Long Term Rate Mode or the Fixed Interest Rate
Mode. Unless otherwise indicated in the applicable Prospectus Supplement, each
Remarketed Note may bear interest in the same or a different Interest Rate Mode
from other Remarketed Notes. The interest rate for Remarketed Notes will be
established periodically as described herein by a remarketing agent selected by
the Company (the "Remarketing Agent"). The Company also may appoint one or more
standby remarketing agents for any Remarketing Agent (each, a "Standby
Remarketing Agent") on the terms described in the Prospectus.
Unless otherwise indicated in the applicable Prospectus Supplement,
interest will be payable on any Remarketed Note at maturity and (i) bearing
interest at the Initial Interest Rate, on February 15 and August 15 of each
year; (ii) for any Interest Rate Period in the Commercial Paper Term Mode, on
the Interest Rate Adjustment Date commencing the next succeeding Interest Rate
Period for such Remarketed Note and on such other dates (if any) as will be
established upon conversion of such Remarketed Note to the Commercial Paper Term
Mode or upon remarketing of the Remarketed Note in a new Interest Rate Period in
the Commercial Paper Mode; (iii) in the Daily or Weekly Interest Rate Mode, on
the first Business Day of each month (unless such day is less than 11 days after
conversion to such Interest Rate Mode, in which case interest will be payable on
the first Business Day of the next succeeding month); (iv) in the Long Term Rate
Mode or Fixed Interest Rate Mode, at least semiannually on such dates as will be
established by the Company upon conversion of such Remarketed Note to such Long
Term Rate Mode (or upon remarketing of the Note
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in a new Interest Rate Period in the Long Term Rate Mode, as the case may be) or
Fixed Interest Rate Mode and set forth in the applicable Remarketed Note in the
case of a fixed interest rate, or as described below under "Floating Interest
Rates" in the case of a floating interest rate, and on the Interest Rate
Adjustment Date commencing the next succeeding Interest Rate Period, in the case
of Remarketed Notes in the Long Term Rate Mode. Such interest will be payable to
the holder thereof as of the related Record Date, which, for any Remarketed Note
(x) in the Daily or Weekly Interest Rate Mode, is the last calendar day of the
month preceding an Interest Payment Date; (y) in the Commercial Paper Term Mode,
is the Business Day prior to the related Interest Payment Date; and (z) bearing
interest at the Initial Interest Rate or in the Long Term Rate Mode or Fixed
Interest Rate Mode, is 15 days prior to the related Interest Payment Date. If
any Interest Payment Date would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the next succeeding Business
Day, and no interest will accrue on such payment for the period from and after
such Interest Payment Date to the date of such payment on the next succeeding
Business Day. Unless otherwise indicated in the applicable Prospectus
Supplement, interest on the Remarketed Notes bearing interest in the Daily or
Weekly Interest Rate Mode, the Commercial Paper Term Mode or at a floating
interest rate during a Long Term Rate Period will be computed on the basis of
actual days elapsed over 360; provided that, if an applicable Interest Rate
Basis is the CMT Rate or Treasury Rate (each as defined below), interest will be
computed on the basis of actual days elapsed over the actual number of days in
the year. Interest on the Remarketed Notes bearing interest at a fixed rate in
the Long Term Rate Mode or Fixed Interest Rate Mode will be computed on the
basis of a year of 360 days consisting of twelve 30-day months; and interest on
the Remarketed Notes at the Initial Interest Rate will be computed on the basis
of (a) actual days elapsed over 360 if the Initial Interest Rate Period is less
than one year or (b) a year of 360 days consisting of twelve 30-day months if
the Initial Interest Rate Period is one year or more.
As used herein, "Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions located in
the State of Michigan or in the state in which the principal corporate trust
office of the Trustee is located, are authorized or obligated by or pursuant to
law or executive order to close; provided, however, that with respect to
Remarketed Notes in the Long Term Rate Mode as to which LIBOR is an applicable
Interest Rate Basis, such day is also a London Business Day (as hereinafter
defined). "London Business Day" means (i) if the Index Currency (as hereinafter
defined) is other than European Currency Units ("ECU"), any day on which
dealings in such Index Currency are transacted in the London interbank market or
(ii) if the Index Currency is ECU, any day that does not appear as an ECU
non-settlement day on the display designated as "ISDE" on the Reuter Monitor
Money Rates Service (or a day so designated by the ECU Banking Association) or,
if ECU non-settlement days do not appear on the page (and are not so
designated), is not a day on which payments in ECU cannot be settled in the
international interbank market.
Determination of Interest Rates. The interest rate and, in the case of a
floating interest rate, the Spread (if any) and the Spread Multiplier (if any)
for any Remarketed Note will be established by the applicable Remarketing Agent
in a remarketing (as described below) or otherwise not later than the first day
of each succeeding Interest Rate Period for such Remarketed Note, which must be
a Business Day (each, an "Interest Rate Adjustment Date"), and will be the
minimum rate of interest and, in the case of a floating interest rate, the
Spread (if any) and the Spread Multiplier (if any) necessary in the judgment of
such Remarketing Agent to produce a par bid in the secondary market for such
Remarketed Note on the date the interest rate is established. Such rate will be
effective for the next succeeding Interest Rate Period for such Remarketed Note
commencing on such Interest Rate Adjustment Date.
With respect to Remarketed Notes, in the event that (i) the Remarketing
Agent for such Remarketed Notes has been removed or has resigned and no
successor has been appointed, or (ii) the Remarketing Agent for such Remarketed
Notes has failed to announce the appropriate interest rate on the Interest Rate
Adjustment Date for any such Remarketed Note for whatever reason, or (iii) the
appropriate interest rate or Interest Rate Period cannot be determined for any
such Remarketed Note for whatever reason, all such Remarketed Notes shall be
automatically converted to the Commercial Paper Term Mode with an Interest Rate
Period of generally seven days, determined as provided below under "Interest
Rate Modes -- Commercial Paper Term Period," and the rate of interest thereon
shall be equal to the rate per annum
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announced by NBD Bank (or such other nationally recognized bank located in the
United States as the Company may select) as its prime lending rate (such rate of
interest being referred to herein as the "Special Interest Rate").
The interest rate on the Remarketed Notes shall not exceed the "Maximum
Rate," which, unless otherwise indicated in the applicable Prospectus
Supplement, is defined to mean that rate of interest equal to 15% per annum or
such higher rate as may be established from time to time by the Board of
Directors of the Company.
The Trustee will, upon request of any Beneficial Owner of a Remarketed
Note, advise such Beneficial Owner or the applicable Remarketing Agent of the
interest rate and, in the case of a floating interest rate, the Interest Rate
Basis or Bases, Spread (if any) and Spread Multiplier (if any), and in each case
the other terms applicable to such Beneficial Owner's Remarketed Notes for the
next Interest Rate Period. Neither the Trustee nor the Company will otherwise be
required to advise Beneficial Owners of the applicable interest rate.
The interest rate announced by the Remarketing Agent, absent manifest
error, is binding and conclusive upon the Beneficial Owners, the Company and the
Trustee.
FLOATING INTEREST RATES
While any Remarketed Note bears interest in the Long Term Rate Mode, the
Company may elect a floating interest rate by providing notice, which will be in
or promptly confirmed in writing (which includes facsimile or appropriate
electronic media), received by the Trustee and the Remarketing Agent for such
Remarketed Note (the "Floating Interest Rate Notice") not less than ten (10)
days prior to the Interest Rate Adjustment Date for such Long Term Rate Period.
The Floating Interest Rate Notice must identify by CUSIP number or otherwise the
portion of the Remarketed Note to which it relates and state the Long Term Rate
Period therefor to which it relates. Each Floating Interest Rate Notice must
also state the Interest Rate Basis or Bases, the Initial Interest Reset Date,
the Interest Reset Period and Dates, the Interest Payment Period and Dates, the
Index Maturity and the Floating Rate Maximum Interest Rate and/or Floating Rate
Minimum Interest Rate, if any. If one or more of the applicable Interest Rate
Bases is LIBOR or the CMT Rate, the Floating Interest Rate Notice will also
specify the Index Currency and Designated LIBOR Page or the Designated CMT
Maturity Index and Designated CMT Telerate Page, respectively, as such terms are
defined below.
If any Remarketed Note bears interest at a floating rate in a Long Term
Rate Period, such Remarketed Note will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or minus the
Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any, in each
case as specified by the Remarketing Agent. Commencing on the Interest Rate
Adjustment Date for such Long Term Rate Period, the rate at which interest on
such Remarketed Note will be payable will be reset as of each Interest Reset
Date during such Long Term Rate Period specified in the applicable Floating
Interest Rate Notice.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Long Term Rate
Period for such Remarketed Note. The "Spread Multiplier" is the percentage of
the related Interest Rate Basis or Bases applicable to such Long Term Rate
Period by which such Interest Rate Basis or Bases will be multiplied to
determine the applicable interest rate from time to time for such Long Term Rate
Period. The "Index Maturity" is the period to maturity of the instrument or
obligation with respect to which the related Interest Rate Basis or Bases will
be calculated.
The applicable floating interest rate on any Remarketed Note during any
Long Term Rate Period will be determined by reference to the applicable Interest
Rate Basis or Interest Rate Bases, which may include (i) the CD Rate, (ii) the
CMT Rate, (iii) the Federal Funds Rate, (iv) LIBOR, (v) the Prime Rate, (vi) the
Treasury Rate, or (vii) such other Interest Rate Basis or interest rate formula
as may be specified in the applicable Floating Interest Rate Notice.
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Unless otherwise specified in the applicable Floating Interest Rate Notice,
the interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Floating Interest Rate Notice, the interest rate in effect on
each day will be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date (as hereinafter defined)
immediately preceding such Interest Reset Date or (ii) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the most recent Interest Reset Date. If
any Interest Reset Date would otherwise be a day that is not a Business Day,
such Interest Reset Date will be postponed to the next succeeding Business Day,
unless LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, in which case such Interest Reset Date will
be the immediately preceding Business Day. In addition, if the Treasury Rate is
an applicable Interest Rate Basis and the Interest Determination Date would
otherwise fall on an Interest Reset Date, then such Interest Reset Date will be
postponed to the next succeeding Business Day.
The applicable Floating Interest Rate Notice will specify whether the rate
of interest will be reset daily, weekly, monthly, quarterly, semiannually or
annually or on such other specified basis (each, an "Interest Reset Period") and
the dates on which such rate of interest will be reset (each, an "Interest Reset
Date"). Unless otherwise specified in the applicable Floating Interest Rate
Notice, the Interest Reset Dates will be, in the case of a floating interest
rate which resets: (i) daily, each Business Day; (ii) weekly, the Wednesday of
each week (unless the Treasury Rate is an applicable Interest Rate Basis, in
which case the Tuesday of each week except as described below); (iii) monthly,
the third Wednesday of each month; (iv) quarterly, the third Wednesday of March,
June, September and December of each year, (v) semiannually, the third Wednesday
of the two months specified in the applicable Floating Interest Rate Notice; and
(vi) annually, the third Wednesday of the month specified in the applicable
Floating Interest Rate Notice.
The interest rate applicable to each Interest Reset Period commencing on
the related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date. The "Interest Determination Date" with respect to
the CD Rate, the CMT Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day immediately preceding the applicable Interest Reset Date;
and the "Interest Determination Date" with respect to LIBOR will be the second
London Business Day immediately preceding the applicable Interest Reset Date,
unless the Index Currency is British pounds sterling, in which case the
"Interest Determination Date" will be the applicable Interest Reset Date. The
"Interest Determination Date" with respect to the Treasury Rate will be the day
in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at an auction held on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the "Interest Determination Date"
will be such preceding Friday. If the interest rate of any Remarketed Note is a
floating interest rate determined with reference to two or more Interest Rate
Bases specified in the applicable Floating Interest Rate Notice, the "Interest
Determination Date" pertaining to the Remarketed Note will be the most recent
Business Day which is at least two Business Days prior to the applicable
Interest Reset Date on which each Interest Rate Basis is determinable. Each
Interest Rate Basis will be determined as of such date, and the applicable
interest rate will take effect on the related Interest Reset Date.
Either or both of the following may also apply to the floating interest
rate on any Remarketed Note for a Long Term Rate Period: (i) a Floating Rate
Maximum Interest Rate, or ceiling, that may accrue during any Interest Reset
Period and (ii) a Floating Rate Minimum Interest Rate, or floor, that may accrue
during any Interest Reset Period. In addition to any Floating Rate Maximum
Interest Rate that may apply, the interest rate on any Remarketed Note will in
no event be higher than the Maximum Rate established by the Company or the
maximum rate permitted by New York law, as the same may be modified by United
States laws of general application.
Except as provided below or in the applicable Floating Interest Rate
Notice, interest will be payable, in the case of floating interest rates which
reset: (i) daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the applicable Floating Interest Rate Notice; (ii) quarterly, on
the third Wednesday of March, June, September
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and December of each year; (iii) semiannually, on the third Wednesday of the two
months of each year specified in the applicable Floating Interest Rate Notice;
and (iv) annually, on the third Wednesday of the month of each year specified in
the applicable Floating Interest Rate Notice and, in each case, on the Business
Day immediately following the applicable Long Term Rate Period. If any Interest
Payment Date for the payment of interest at a floating rate (other than
following the end of the applicable Long Term Rate Period) would otherwise be a
day that is not a Business Day, such Interest Payment Date will be postponed to
the next succeeding Business Day, except that if LIBOR is an applicable Interest
Rate Basis and such Business Day falls in the next succeeding calendar month,
such Interest Payment Date will be the immediately preceding Business Day.
All percentages resulting from any calculation of floating interest rates
will be rounded to the nearest one hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards (e.g., 9.876545%
(or .09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation will be rounded, in the case of United
States dollars, to the nearest cent or, in the case of a foreign currency or
composite currency, to the nearest unit (with one-half cent or unit being
rounded upwards).
Accrued floating rate interest will be calculated by multiplying the
principal amount of the applicable Remarketed Note by an accrued interest
factor. Such accrued interest factor will be computed by adding the interest
factor calculated for each day in the applicable Interest Reset Period. Unless
otherwise specified in the applicable Floating Interest Rate Notice, the
interest factor for each such day will be computed by dividing the interest rate
applicable to such day by 360, if an applicable Interest Rate Basis is the CD
Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number
of days in the year if an applicable Interest Rate Basis is the CMT Rate or the
Treasury Rate. Unless otherwise specified in the applicable Floating Interest
Rate Notice, if the floating interest rate is calculated with reference to two
or more Interest Rate Bases, the interest factor will be calculated in each
period in the same manner as if only one of the applicable Interest Rate Bases
applied as specified in the applicable Floating Interest Rate Notice.
Unless otherwise specified in the applicable Floating Interest Rate Notice,
Bankers Trust Company will be the "Calculation Agent." For any Remarketed Note
bearing interest at a floating rate, the applicable Remarketing Agent will
determine the interest rate in effect from the Interest Rate Adjustment Date for
such Remarketed Note to the initial Interest Reset Date. The Calculation Agent
will determine the interest rate in effect for each Interest Reset Period
thereafter. Upon request of the Beneficial Owner of a Remarketed Note, after any
Interest Rate Adjustment Date, the Calculation Agent or the Remarketing Agent
will disclose the interest rate and, in the case of a floating interest rate,
Interest Rate Basis or Bases, Spread (if any) and Spread Multiplier (if any),
and in each case the other terms applicable to such Note then in effect and, if
determined, the interest rate that will become effective as a result of a
determination made for the next succeeding Interest Reset Date with respect to
such Note. Except as described herein with respect to a Remarketed Note earning
interest at floating rates, no notice of the applicable interest rate, Spread
(if any) or Spread Multiplier (if any) will be sent to the Beneficial Owner of
any Remarketed Note.
Unless otherwise specified in the applicable Floating Interest Rate Notice,
the "Calculation Date", if applicable, pertaining to any Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or Maturity, as the case may be.
CD Rate. If an Interest Rate Basis for any Remarketed Note is specified in
the applicable Floating Interest Rate Notice as the CD Rate, the CD Rate will be
determined as of the applicable Interest Determination Date (a "CD Rate Interest
Determination Date") as the rate on such date for negotiable United States
dollar certificates of deposit having the Index Maturity specified in the
applicable Floating Interest Rate Notice as published by the Board of Governors
of the Federal Reserve System in "Statistical Release H.15(519), Selected
Interest Rates" or any successor publication ("H.15(519)") under the heading
"CDs (Secondary Market)," or, if not published by 3:00 p.m., New York City time,
on the related Calculation Date (as defined above), the rate on such CD Rate
Interest Determination Date for negotiable
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United States dollar certificates of deposit of the Index Maturity specified in
the applicable Floating Interest Rate Notice as published by the Federal Reserve
Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for United States Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
p.m., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 a.m., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers in negotiable United States dollar certificates
of deposit in The City of New York (which may include the Remarketing Agent or
its affiliates) selected by the Calculation Agent, after consultation with the
Company, for negotiable United States dollars certificates of deposit of major
United States money market banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity specified in the applicable
Floating Interest Rate Notice 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 determined as of such CD Rate Interest Determination Date
will be the CD Rate in effect on such CD Rate Interest Determination Date.
CMT Rate. If an Interest Rate Basis for any Remarketed Note is specified in
the applicable Floating Interest Rate Notice as the CMT Rate, the CMT Rate will
be determined as of the applicable Interest Determination Date (a "CMT Rate
Interest Determination Date") as the rate displayed on the Designated CMT
Telerate Page (as defined below) under the caption "... Treasury Constant
Maturities ... Federal Reserve Board Release H.15 ... Mondays Approximately 3:45
P.M.," under the column for the Designated CMT Maturity Index (as defined below)
for (i) if the Designated CMT Telerate Page is 7055, the rate on such CMT Rate
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the weekly or monthly average, as specified in the Floating Interest Rate
Notice, for the week or the month, as applicable, ended immediately preceding
the week in which the related CMT Rate Interest Determination Date occurs. If
such rate is no longer displayed on the relevant page or is not displayed by
3:00 p.m., New York City time, on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be such treasury
constant maturity rate for the Designated CMT Maturity Index as published in
H.15(519). If such rate is no longer published or is not published by 3:00 p.m.,
New York City time, on the related Calculation Date, then the CMT Rate on such
CMT Rate Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index (or other United States Treasury rate
for the Designated CMT Maturity Index) for the CMT Rate Interest Determination
Date with respect to such Interest Reset Date as may then be published by either
the Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in H.15(519). If such information is not provided by 3:00 p.m.,
New York City time, on the related Calculation Date, then the CMT Rate on the
CMT Rate Interest Determination Date will be calculated by the Calculation Agent
and will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 p.m., New York City
time, on such CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York (which may include
the Remarketing Agent or its affiliates) selected by the Calculation Agent after
consultation with the Company (from five such Reference Dealers selected by the
Calculation Agent, after consultation with the Company, and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less than
such Designated CMT Maturity Index minus one year. If the Calculation Agent is
unable to obtain three such Treasury Note quotations, the CMT Rate on such CMT
Rate Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary market
offer side prices as of approximately 3:30 p.m., New York City time, on such CMT
Rate Interest Determination Date of three Reference Dealers in The City of New
York (from five such Reference Dealers selected by the
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Calculation Agent, after consultation with the Company, and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the next
highest to the Designated CMT Maturity Index and a remaining term to maturity
closest to the Designated CMT Maturity Index and in an amount of at least
U.S.$100 million. If three or four (and not five) of such Reference Dealers are
quoting as described above, then the CMT Rate will be based on the arithmetic
mean of the offer prices obtained and neither the highest nor the lowest of such
quotes will be eliminated; provided, however, that if fewer than three Reference
Dealers so selected by the Calculation Agent, after consultation with the
Company, are quoting as mentioned herein, the CMT Rate determined as of such CMT
Rate Interest Determination Date will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Calculation Agent, after
consultation with the Company, will obtain from five References Dealers
quotations for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Floating Interest Rate Notice
(or any other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Floating Interest Rate Notice, the
Designated CMT Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the United States Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Floating Interest Rate Notice with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Floating Interest Rate Notice, the Designated CMT Maturity Index
shall be 2 years.
Federal Funds Rate. If an Interest Rate Basis for any Remarketed Note is
specified in the applicable Floating Interest Rate Notice as the Federal Funds
Rate, the Federal Funds Rate will be determined as of the applicable Interest
Determination Date (a "Federal Funds Rate Interest Determination Date") as the
rate on such date for United States dollar federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)" or, if not published by
3:00 p.m., New York City time, on the Calculation Date, the rate on such Federal
Funds Rate Interest Determination Date as published in Composite Quotations
under the heading "Federal Funds/Effective Rate". If such rate is not published
in either H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on
the related Calculation Date, then the Federal Funds Rate on such Federal Funds
Rate Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the rates for the last transaction in overnight
United States dollar federal funds arranged by three leading brokers of federal
funds transactions in The City of New York (which may include the Remarketing
Agent or its affiliates) selected by the Calculation Agent after consultation
with the Company, prior to 9:00 a.m., New York City time, on such Federal Funds
Rate Interest Determination Date; provided, however, that if the brokers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
LIBOR. If an Interest Rate Basis for any Remarketed Note is specified in
the applicable Floating Interest Rate Notice as LIBOR, LIBOR will be determined
by the Calculation Agent as of the applicable Interest Determination Date (a
"LIBOR Interest Determination Date") in accordance with the following
provisions:
(i) if (a) "LIBOR Reuters" is specified in the applicable Floating
Interest Rate Notice, the arithmetic mean of the offered rates (unless the
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate will be used) for deposits in
the Index Currency having the Index Maturity specified in the applicable
Floating Interest Rate Notice, commencing on the applicable Interest Reset
Date, that appear (or, if only a single rate is required as aforesaid,
appears) on the Designated LIBOR Page (as defined below) as of 11:00 a.m.,
London time, on such
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LIBOR Interest Determination Date, or (b) "LIBOR Telerate" is specified in
the applicable Floating Interest Rate Notice, or if neither "LIBOR Reuters"
nor "LIBOR Telerate" is specified in the applicable Floating Interest Rate
Notice as the method for calculating LIBOR, the rate for deposits in the
Index Currency having the Index Maturity specified in the applicable
Floating Interest Rate Notice, 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 in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, after consultation with the Company, 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
Floating Interest Rate Notice, 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 such 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, after consultation with the Company, for
loans in the Index Currency to leading European banks, having the Index
Maturity specified in the applicable Floating Interest Rate Notice 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.
"Index Currency" means the currency or composite currency specified in the
applicable Floating Interest Rate Notice as to which LIBOR will be calculated.
If no such currency or composite currency is specified in the applicable
Floating Interest Rate Notice, the Index Currency will be United States dollars.
"Principal Financial Center" means the capital city of the country issuing
the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECUs, the Principal Financial Center will be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Floating Interest Rate Notice, the display on the Reuter Monitor
Money Rates Service (or any successor service) for the purpose of displaying the
London interbank rates of major banks for the Index Currency, or (b) if "LIBOR
Telerate" is specified in the applicable Floating Interest Rate Notice or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Floating Interest Rate Notice as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service (or any successor service) for the purpose of
displaying the London interbank rates of major banks for the Index Currency.
Prime Rate. If an Interest Rate Basis for any Remarketed Note is specified
in the applicable Floating Interest Rate Notice as the Prime Rate, the Prime
Rate will be determined as of the applicable Interest Determination Date (a
"Prime Rate Interest Determination Date") as the rate on such date as such rate
is published in H.15(519) under the heading "Bank Prime Loan." If such rate is
not published prior to 3:00 p.m., New York City time, on the related Calculation
Date, then the Prime Rate will be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen U.S. PRIME 1
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 U.S. PRIME 1
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Page for such Prime Rate Interest Determination Date, the Prime Rate will 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 (which
may include Bankers Trust Company) in The City of New York selected by the
Calculation Agent, after consultation with the Company. If fewer than four such
quotations are so provided, the Prime Rate will 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 as many
substitute banks or trust companies (which may include Bankers Trust Company) as
necessary in order 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, have total equity capital of at
least U.S.$500 million and are each subject to supervision or examination by
Federal or State authority, selected by the Calculation Agent, after
consultation with the Company, 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.
"Reuters Screen U.S. PRIME 1 Page" means the display designated as page
"U.S. PRIME 1" on the Reuter Monitor Money Rates Service (or such other page as
may replace the U.S. PRIME 1 Page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).
Treasury Rate. If an Interest Rate Basis for any Remarketed Note is
specified in the applicable Floating Interest Rate Notice as the Treasury Rate,
the Treasury Rate will be determined as of the applicable Interest Determination
Date (a "Treasury Rate Interest Determination Date") as the rate from the
auction held on such Treasury Rate Interest Determination Date (the "Auction")
of direct obligations of the United States ("Treasury Bills") having the Index
Maturity specified in the applicable Floating Interest Rate Notice, as such rate
is published in H.15(519) under the heading "Treasury bills-auction average
(investment)" or, if not published by 3:00 p.m., New York City time, on the
related Calculation Date, the auction average rate 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 Treasury. In the event that the results of the Auction of
Treasury Bills having the Index Maturity specified in the applicable Floating
Interest Rate Notice 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 Rate Interest Determination Date, of three leading primary
United States government securities dealers (which may include the Remarketing
Agent or its affiliates) selected by the Calculation Agent, after consultation
with the Company, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable Floating Interest Rate
Notice; provided, however, that if the dealers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Treasury Rate
determined as of such Treasury Rate Interest Determination Date will be the
Treasury Rate in effect on such Treasury Rate Interest Determination Date.
INTEREST RATE MODES
The times specified below are subject to extension pursuant to standby
remarketing arrangements, if any, as provided herein. See "Remarketing --
Interest Rate Adjustment Date; Determination of Interest Rate" below.
Commercial Paper Term Period. The Interest Rate Period for any Remarketed
Note in the Commercial Paper Term Mode will be a Commercial Paper Term Period,
which will be a period of not less than one nor more than 364 consecutive
calendar days, as determined by the Company or, if not so determined, by the
Remarketing Agent for such Remarketed Note (in its best judgment in order to
obtain the lowest interest cost for such Remarketed Note). Each Commercial Paper
Term Period will commence on the Interest Rate Adjustment Date therefor and end
on the day preceding the date specified by such Remarketing Agent as the
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first day of the next Interest Rate Period for such Remarketed Note. The
interest rate for any Commercial Paper Term Period relating to a Remarketed Note
will be determined not later than 11:00 a.m., New York City time, on the
Interest Rate Adjustment Date for such Remarketed Note which is the first day of
each Interest Rate Period for such Remarketed Note; provided, however, that if
such day is not a Business Day, the Interest Rate Adjustment Date for any
Remarketed Note in such Commercial Paper Term Mode shall be the next succeeding
day which is a Business Day.
As used herein, "Commercial Paper Term Mode" means, with respect to any
Remarketed Note, the Interest Rate Mode in which the interest rate on such
Remarketed Note is reset on a periodic basis which shall not be less than one
calendar day nor more than 364 consecutive calendar days and interest is paid as
provided for such Interest Rate Mode above under "Interest -- General".
Daily Interest Rate Period. The Interest Rate Period for any Remarketed
Note in the Daily Interest Rate -- Mode will commence at the beginning of each
Business Day and end at the end of the calendar day preceding the next Business
Day. The interest rate for such Remarketed Notes will be determined each
Business Day not later than 9:30 a.m., New York City time, on such day. The
Daily Interest Rate Mode shall occur only so long as the Remarketed Notes are
maintained in a book-entry system.
As used herein, "Daily Interest Rate Mode" means, with respect to any
Remarketed Note, the Interest Rate Mode in which the interest rate on such
Remarketed Note is reset on a daily basis and interest is paid as provided for
such Interest Rate Mode above under "Interest -- General".
Weekly Interest Rate Period. The Interest Rate Period for any Remarketed
Note in the Weekly Interest Rate Mode will be a period approximating one week
commencing on any Business Day, as determined by the Remarketing Agent for such
Remarketed Note, and ending on the day preceding the first day of the next
Interest Rate Period for such Remarketed Note. The interest rate for any
Remarketed Notes in the Weekly Interest Rate Mode will be determined not later
than 11:00 a.m., New York City time, on the Interest Rate Adjustment Date for
such Remarketed Notes, which is the first day of the Interest Rate Period for
such Remarketed Notes.
As used herein, "Weekly Interest Rate Mode" means, with respect to any
Remarketed Note, the Interest Rate Mode in which the interest rate on such
Remarketed Note is reset on a weekly basis and interest is paid as provided for
such Interest Rate Mode above under "Interest -- General".
Long Term Interest Rate Period. The Interest Rate Period for any Remarketed
Note in the Long Term Rate Mode will be established by the Company as a period
of more than 364 days and less than the Stated Maturity of such Remarketed Note;
provided, however, that such Interest Rate Period must end on the day prior to
an Interest Payment Date for such Remarketed Note; and provided further that, if
so provided in a Remarketed Note in the Long Term Rate Mode and specified at the
time of remarketing into a Long Term Rate Period, the Company may shorten the
Interest Rate Period and provide for payment of a premium in respect thereof for
any such Remarketed Note upon written notice to the Remarketing Agent and the
Trustee not less than thirty (30) days prior to the date upon which such
shortened Interest Rate Period shall expire. Promptly upon the receipt of such
notice, and, in any case, not later than the close of business on such date, the
Trustee will transmit such information to DTC in accordance with DTC's
procedures as in effect from time to time. The interest rate for any Remarketed
Notes in the Long Term Rate Mode will be determined not later than 11:00 a.m.,
New York City time, on the Interest Rate Adjustment Date for such Remarketed
Notes. The Interest Rate Adjustment Date for the Long Term Rate Mode is the
first day of the Interest Rate Period; provided, however, that if such day is
not a Business Day, the Interest Rate Adjustment Date for any Remarketed Note in
such Long Term Rate Mode shall be the next succeeding day which is a Business
Day.
If any Remarketed Note is subject to early remarketing as provided above,
the Interest Rate Period may be shortened by the Company on any date on and
after the Initial Early Remarketing Date, if any, specified in the Remarketed
Note, upon prior written notice as provided above. On and after the Initial
Early Remarketing Date, if any, on the Interest Rate Adjustment Date relating to
such shortened Interest Rate Period for such Remarketed Note, the Company will
pay a premium to the tendering Beneficial Owner of the Remarketed Note, together
with accrued interest, if any, thereon at the applicable rate payable to such
Interest Rate
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Adjustment Date. Unless otherwise specified in the Remarketed Note, the premium
shall be an amount equal to the Initial Early Remarketing Premium specified
therein (as adjusted by the Annual Early Remarketing Premium Percentage
Reduction, if applicable), multiplied by the principal amount of the Remarketed
Note subject to early remarketing. The Initial Early Remarketing Premium, if
any, shall decline at each anniversary of the Initial Early Remarketing Date by
an amount equal to the applicable Annual Early Remarketing Premium Percentage
Reduction, if any, specified in the Remarketed Note until the premium is equal
to 0.
As used herein, "Long Term Rate Mode" means, with respect to any Remarketed
Note, the Interest Rate Mode in which the interest rate on such Remarketed Note
is reset in a Long Term Rate Period and interest is paid as provided for such
Interest Rate Mode above under "Interest -- General" or "Interest -- Floating
Interest Rates".
Fixed Interest Rate Period. The Interest Rate Period for any Remarketed
Note in the Fixed Interest Rate Mode will commence on the date of conversion to
such Interest Rate Mode and continue to the Stated Maturity or date of
redemption of such Remarketed Note. The interest rate for Remarketed Notes in
the Fixed Interest Rate Mode will be determined not later than 11:00 a.m., New
York City time, on the Interest Rate Adjustment Date for such Remarketed Notes,
which is the date of conversion to the Fixed Interest Rate Mode for such
Remarketed Notes.
As used herein, "Fixed Interest Rate Mode" means, with respect to any
Remarketed Note, the Interest Rate Mode in which the interest rate on such
Remarketed Note is determined and in effect until the Stated Maturity or date of
redemption of such Remarketed Note and interest is paid as provided for such
Interest Rate Mode above under "Interest -- General".
CONVERSION
Conversion From the Daily or Weekly Interest Rate Mode. Any Remarketed Note
in the Daily or Weekly Interest Rate Mode may be converted at the option of the
Company to any Interest Rate Mode on any Interest Rate Adjustment Date for such
Remarketed Note upon receipt by the Trustee and the applicable Remarketing Agent
for such Remarketed Note of notice, confirmed in writing, from the Company (a
"Conversion Notice") not less than ten (10) days prior to such Interest Rate
Adjustment Date stating that, on such Interest Rate Adjustment Date, such
Remarketed Note will be converted to a different Interest Rate Mode and will be
subject to mandatory tender by the Beneficial Owner thereof, as described below
under "Tender of Remarketed Notes." Such notice will contain the new Interest
Rate Mode and the date of such conversion (a "Conversion Date") and will state
that such Beneficial Owner will be deemed to have tendered such Remarketed Note
as of the Conversion Date and will not be entitled to further accrual of
interest on such Remarketed Note after such date. Promptly upon the receipt of
such notice, and, in any case, not later than the close of business on such
date, the Trustee will transmit such information to DTC in accordance with DTC's
procedures as in effect from time to time.
Conversion from the Commercial Paper Term Mode or Long Term Rate Mode. Any
Remarketed Note in the Commercial Paper Term Mode or the Long Term Rate Mode may
be converted at the option of the Company to the Daily or Weekly Interest Rate
Mode or the Fixed Interest Rate Mode on any Interest Rate Adjustment Date for
such Remarketed Note upon receipt by the Trustee and the applicable Remarketing
Agent for such Remarketed Note of notice, confirmed in writing, from the Company
not less than five (5) Business Days prior to such Interest Rate Adjustment Date
stating that, on such Interest Rate Adjustment Date, such Remarketed Note will
be converted to the Daily or Weekly Interest Rate Mode or the Fixed Interest
Rate Mode, and will be subject to mandatory tender by the Beneficial Owner
thereof, as described below under "Tender of Remarketed Notes." Such notice will
contain the new Interest Rate Mode, the Conversion Date, and will state that
such Beneficial Owner will be deemed to have tendered such Remarketed Note as of
the Conversion Date and will not be entitled to further accrual of interest on
such Remarketed Note after such date. Promptly upon the receipt of such notice,
and, in any case, not later than the close of business on such date, the Trustee
will transmit such information to DTC in accordance with DTC's procedures as in
effect from time to time. The Company will give a Conversion Notice for
conversions within
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or between the Commercial Paper Term Mode and the Long Term Rate Mode to the
Trustee and the applicable Remarketing Agent not less than ten (10) days prior
to the Conversion Date.
Any Remarketed Note converted to the Fixed Interest Rate Mode will not be
subject to any further conversions between Interest Rate Modes.
Revocation or Change of Conversion Notice or Floating Interest Rate
Notice. The Company may, upon written notice received by the Trustee and the
applicable Remarketing Agent and DTC, revoke any Conversion Notice or Floating
Interest Rate Notice or change the Interest Rate Mode to which such Conversion
Notice relates or change any Floating Interest Rate Notice up to 9:30 a.m., New
York City time, on the Conversion Date.
Limitation on Conversion, Change of Conversion Notice or Floating Interest
Rate Notice and Revocation. Notwithstanding the foregoing, the Company may not,
without the consent of the applicable Remarketing Agent, convert any Remarketed
Note or revoke or change any Conversion Notice or Floating Interest Rate Notice
at or after the time at which such Remarketing Agent has determined the interest
rate, or Spread (if any) and Spread Multiplier (if any), for any Remarketed Note
being remarketed (i.e., the time at which such Remarketed Note has been
successfully remarketed, subject to settlement on the related Interest Rate
Adjustment Date). The Remarketing Agent will advise the Company of indicative
rates from time to time, or at any time upon the request of the Company, prior
to making such determination of the interest rate, Spread or Spread Multiplier,
as the case may be.
TENDER OF REMARKETED NOTES
Demand Tender Option for Remarketed Notes in the Daily or Weekly Interest
Rate Mode. Unless otherwise indicated in the applicable Prospectus Supplement,
any Remarketed Note in the Daily or Weekly Interest Rate Mode will be subject to
tender and purchase upon demand by the Beneficial Owner thereof on any Business
Day selected by such Beneficial Owner as hereinafter provided, at the purchase
price of par plus accrued interest, upon notice to the applicable Remarketing
Agent and to such Beneficial Owner's DTC Participant on a Business Day not later
than (i) one (1) Business Day prior to the specified purchase date, in the case
of any Remarketed Note in the Daily Interest Rate Mode, or (ii) seven (7) days
prior to the specified purchase date, in the case of any Remarketed Note in the
Weekly Interest Rate Mode; provided, however, that in either such case if the
date selected for purchase is not a Business Day, the purchase date shall be the
next succeeding Business Day. Such notice shall (A) state the principal amount
(or portion thereof) of such Remarketed Note to be purchased, (B) state the
purchase date on which such Remarketed Note will be purchased, and (C)
irrevocably request such purchase. Upon giving such notice, the Beneficial Owner
of such Remarketed Note will be deemed to have irrevocably tendered such
Remarketed Note for remarketing as described below. Beneficial Owners may only
tender Remarketed Notes in amounts of $100,000 and integral multiples thereof
and no Remarketed Notes will be purchased in part if such partial purchase would
result in the principal amount of any Remarketed Notes of such Beneficial Owner
outstanding being in any denomination of less than $100,000 or an integral
multiple thereof.
Mandatory Tender of Remarketed Notes at the Initial Interest Rate or in the
Long Term Rate Mode or Commercial Paper Term Mode. Unless otherwise indicated in
the applicable Prospectus Supplement, any Remarketed Note bearing interest at
the Initial Interest Rate or in the Long Term Rate Mode or in the Commercial
Paper Term Mode will be automatically tendered for purchase, or deemed tendered
for purchase, on each Interest Rate Adjustment Date relating thereto. Remarketed
Notes will be purchased on the Interest Rate Adjustment Date relating thereto as
described below. See "Remarketing" below.
REMARKETING
When any Remarketed Note is tendered for remarketing, the Remarketing Agent
therefor will use its best efforts to remarket such Remarketed Note on behalf of
the Beneficial Owner thereof at a price equal to 100% of the principal amount
thereof (plus accrued interest, if any, in the case of Remarketed Notes bearing
interest in a Daily or Weekly Interest Rate Mode). The Remarketing Agent may
purchase tendered Remarketed Notes for its own account in a remarketing, but
will not be obligated to do so. The Company may
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offer to purchase Remarketed Notes in a remarketing, provided that the interest
rate established with respect to Remarketed Notes in such remarketing is not
different from the interest rate that would have been established if the Company
had not purchased such Remarketed Notes. Any Remarketed Notes for which the
Company shall have given a notice of redemption shall not be considered in a
remarketing.
Interest Rate Adjustment Date; Determination of Interest Rate. By 11:00
a.m., New York City time (or 9:30 a.m., New York City time, in the case of any
Remarketed Note in the Daily Interest Rate Mode), on the Interest Rate
Adjustment Date for any Remarketed Note, the Remarketing Agent will determine
the interest rate for such Remarketed Note being remarketed to the nearest one
hundred-thousandth (0.00001) of one percent per annum for the next Interest Rate
Period; provided, that between 11:00 a.m., New York City time (or 9:30 a.m., New
York City time, in the case of any Note in the Daily Interest Rate Mode) and
11:50 a.m., New York City time, the Remarketing Agent and Standby Remarketing
Agent (if any) shall use their best efforts to determine the interest rate for
any Remarketed Notes not successfully remarketed as of the applicable deadline
specified in this paragraph. In determining the applicable interest rate for
such Remarketed Note and other terms, the Remarketing Agent will, after taking
into account market conditions as reflected in the prevailing yields on fixed
and variable rate taxable debt securities, (i) consider the principal amount of
all Remarketed Notes of such series tendered or to be tendered on such date and
the principal amount of such Remarketed Notes prospective purchasers are or may
be willing to purchase and (ii) contact, by telephone or otherwise, prospective
purchasers and ascertain the interest rates therefor at which they would be
willing to hold or purchase such Remarketed Notes.
Notification of Results; Settlement. By 12:30 p.m., New York City time, on
the Interest Rate Adjustment Date for any Remarketed Notes, the applicable
Remarketing Agent will notify the Company and the Trustee in writing (which may
include facsimile or other electronic transmission), of (i) the interest rate
or, in the case of a floating interest rate, the initial interest rate, the
Spread and Spread Multiplier and the Initial Interest Reset Date, applicable to
such Remarketed Notes for the next Interest Rate Period, (ii) the Interest Rate
Adjustment Date, (iii) the Interest Payment Dates, for any Remarketed Notes in
the Commercial Paper Term Mode (if other than the Interest Rate Adjustment
Date), the Long Term Rate Mode or the Fixed Interest Rate Mode, (iv) the
optional redemption terms, if any, and early remarketing terms, if any, in the
case of a remarketing into a Long Term Rate Period, (v) the aggregate principal
amount of tendered Remarketed Notes, and (vi) the aggregate principal amount of
such tendered Remarketed Notes which the Remarketing Agent and the Standby
Remarketing Agent, if any, were able to remarket, at a price equal to 100% of
the principal amount thereof plus accrued interest, if any. Immediately after
receiving such notice and, in any case, not later than 1:30 p.m., New York City
time, the Trustee will transmit such information and any other settlement
information required by DTC to DTC in accordance with DTC's procedures as in
effect from time to time.
By telephone at approximately 1:00 p.m., New York City time, on such
Interest Rate Adjustment Date, the applicable Remarketing Agent will advise each
purchaser of such Remarketed Notes (or the DTC Participant of each such
purchaser who it is expected in turn will advise such purchaser) of the
principal amount of such Remarketed Notes that such purchaser is to purchase.
Each purchaser of Remarketed Notes in a remarketing will be required to
give instructions to its DTC Participant to pay the purchase price therefor in
same day funds to the applicable Remarketing Agent against delivery of the
principal amount of such Remarketed Notes by book entry through DTC by 3:00
p.m., New York City time, on the Interest Rate Adjustment Date. Any Remarketed
Notes bearing interest in the Daily or Weekly Interest Rate Mode for the
Interest Rate Period immediately preceding a remarketing will be settled at a
price of 100% of the principal amount thereof plus accrued interest from the
most recent Interest Payment Date therefor to the date of settlement.
All tendered Remarketed Notes will be automatically delivered to the
account of the Trustee (or such other account meeting the requirements of DTC's
procedures as in effect from time to time), by book entry through DTC against
payment of the purchase price or redemption price therefor, on the Interest Rate
Adjustment Date relating thereto.
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The applicable Remarketing Agent will make, or cause the Trustee to make,
payment to the DTC Participant of each tendering Beneficial Owner of Remarketed
Notes subject to a remarketing, by book entry through DTC by the close of
business on the Interest Rate Adjustment Date against delivery through DTC of
such Beneficial Owner's tendered Remarketed Notes, of: (i) the purchase price
for tendered Remarketed Notes that have been sold in the remarketing, and (ii)
if any such Remarketed Notes were purchased pursuant to a Special Mandatory
Purchase, subject to receipt of funds from the Company or the Liquidity Provider
(if any), as the case may be, the Trustee will make such payment of the purchase
price of such Remarketed Notes plus, in each case, accrued interest, if any, to
such date.
The transactions described above for a remarketing of any Remarketed Notes
will be executed on the Interest Rate Adjustment Date for such Remarketed Notes
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and such Remarketed
Notes delivered by book entry as necessary to effect the purchases and sales
thereof, in each case as determined in the related remarketing.
Except as otherwise set forth herein under "Failed Remarketing," any
Remarketed Notes tendered in a remarketing will be purchased solely out of the
proceeds received from purchasers of such Remarketed Notes in such remarketing,
and neither the Trustee, the applicable Remarketing Agent for such Remarketed
Notes nor any Standby Remarketing Agent, if any, or the Company will be
obligated to provide funds to make payment upon any Beneficial Owner's tender in
a remarketing.
Although tendered Remarketed Notes will be subject to purchase by the
Remarketing Agent in remarketing, such Remarketing Agent and any Standby
Remarketing Agent will not be obligated to purchase any such Remarketed Notes.
The remarketing procedures set forth above will apply to all Remarketed
Notes except to the extent otherwise indicated in the applicable Prospectus
Supplement for such Remarketed Notes. The settlement and remarketing procedures
described above, including provisions for payment by purchasers of tendered
Remarketed Notes or for payment to selling Beneficial Owners of tendered
Remarketed Notes, may be modified to the extent required by DTC. In addition,
the Remarketing Agent may, in accordance with the terms of the Indenture, modify
the settlement and remarketing procedures set forth above in order to facilitate
the settlement and remarketing process.
As long as DTC's nominee holds the certificates representing any Remarketed
Notes in the book entry system of DTC, no certificates for such Remarketed Notes
will be delivered by any selling Beneficial Owner to reflect any transfer of
such Remarketed Notes effected in any remarketing.
Failed Remarketing. Unless otherwise provided in the applicable Prospectus
Supplement, Remarketed Notes not successfully remarketed will be subject to
Special Mandatory Purchase. The obligation of the Company to effect a Special
Mandatory Purchase of the Remarketed Notes (the "Special Mandatory Purchase
Right") can be satisfied either directly by the Company or through a Liquidity
Provider (as hereinafter defined). By 12:00 o'clock noon, New York City time, on
any Interest Rate Adjustment Date, the applicable Remarketing Agent for such
Remarketed Notes will notify the Liquidity Provider, if any, the Trustee and the
Company by telephone or facsimile, confirmed in writing, of the principal amount
of Remarketed Notes that such Remarketing Agent and the applicable Standby
Remarketing Agent, if any, were unable to remarket on such date. In the event
that the Company has entered into a Standby Note Purchase Agreement (as
hereinafter defined) which is in effect on such date, such notice will
constitute a demand for the benefit of the Company to the Liquidity Provider to
purchase such unremarketed Remarketed Notes at a price equal to the outstanding
principal amount thereof pursuant to the terms of such Standby Note Purchase
Agreement. If a Standby Note Purchase Agreement is not in effect on such date,
or if the Liquidity Provider fails to advance funds under the Standby Note
Purchase Agreement, the Company will be required to purchase such unremarketed
Remarketed Notes. In each case the Company will pay all accrued and unpaid
interest, if any, on unremarketed Remarketed Notes to such Interest Rate
Adjustment Date. Payment of the principal amount of unremarketed Remarketed
Notes by the Company or the Liquidity Provider, as the case may be, and payment
of accrued and unpaid interest, if any, by the Company, shall be made by deposit
of same-day funds with the Trustee (or such other account meeting the
requirements of DTC's procedures as in
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effect from time to time) irrevocably in trust for the benefit of the Beneficial
Owners of Remarketed Notes subject to Special Mandatory Purchase, by 3:00 p.m.,
New York City time, on such Interest Rate Adjustment Date. See "Purchase and
Redemption of Remarketed Notes" below.
The Remarketing Agent. The Company and the Remarketing Agent for Remarketed
Notes will enter into a Remarketing Agreement, a form of which has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part. The
summaries below are summaries of certain provisions of the form of Remarketing
Agreement and do not purport to be complete and are subject to, and qualified in
their entirety by, the provisions of the Remarketing Agreement.
For its services in determining the interest rate and remarketing
Remarketed Notes, the Remarketing Agent will receive from the Company a fee to
be determined at the time of execution of the Remarketing Agreement. The
Remarketing Agent may pay to selected broker-dealers, including any Standby
Remarketing Agent, a portion of any fees it receives from the Company for its
services as Remarketing Agent reflecting Remarketed Notes sold through such
broker-dealers to purchasers in remarketings.
The Company will agree to indemnify the Remarketing Agent and the Standby
Remarketing Agent against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act"), arising out of or in connection
with its duties under the Remarketing Agreement.
The Remarketing Agreement will provide that the Company may in its absolute
discretion replace the Remarketing Agent by giving 30 days prior notice to the
Remarketing Agent and the Trustee, such replacement to be effective upon the
Company's appointment of a successor to perform the services of the Remarketing
Agent under the Remarketing Agreement. The Remarketing Agreement will also
provide that the Company reserves the right to appoint or replace any Standby
Remarketing Agent at any time.
The Remarketing Agreement will also provide that the Remarketing Agent or
any Standby Remarketing Agent may resign at any time as Remarketing Agent, such
resignation to be effective 30 days after the delivery to the Company and the
Trustee of notice of such resignation. In such case, it shall be the sole
obligation of the Company to appoint a successor Remarketing Agent.
PURCHASE AND REDEMPTION OF REMARKETED NOTES
Special Mandatory Purchase. Unless otherwise provided in the applicable
Prospectus Supplement, Remarketed Notes which have not been remarketed by 12
o'clock noon, New York City time, on an Interest Rate Adjustment Date for such
Remarketed Notes will be purchased by the Company directly or through a
Liquidity Provider pursuant to the Special Mandatory Purchase Right. In such
event, either the Company or, subject to the terms and conditions of a Standby
Note Purchase Agreement, if any, which may be in effect on such date, the
Liquidity Provider, will deposit same-day funds in the account of the Trustee
(or such other account meeting the requirements of DTC's procedures as in effect
from time to time) irrevocably in trust for the benefit of the Beneficial Owners
of the Remarketed Notes subject to Special Mandatory Purchase in trust for the
benefit of the Beneficial Owners of Remarketed Notes subject to Special
Mandatory Purchase by 3:00 p.m., New York City time, on such Interest Rate
Adjustment Date. Such funds shall be in an amount sufficient to pay the
aggregate purchase price of such unremarketed Remarketed Notes, equal to 100% of
the principal amount thereof. In the event a Standby Note Purchase Agreement is
in effect but the Liquidity Provider shall fail to advance funds for whatever
reason thereunder, the Company will be obligated to purchase such unremarketed
Remarketed Notes on such Interest Rate Adjustment Date. The Company will be
responsible for paying the accrued interest, if any, on such Remarketed Notes by
depositing sufficient same-day funds therefor with the Trustee (or such other
account meeting the requirements of DTC's procedures as in effect from time to
time) by 3:00 p.m., New York City time, on such Interest Rate Adjustment Date.
See "The Standby Note Purchase Agreement" in the Prospectus.
Remarketed Notes purchased by the Liquidity Provider ("Purchased Notes")
shall bear interest at the rates and be payable on the dates as may be agreed
upon by the Company and the Liquidity Provider, but in no event shall such rate
be more than the Maximum Rate. Upon purchase of any Remarketed Note by the
Liquidity Provider, all interest accruing thereon from the last date for which
interest was paid shall accrue for
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the benefit of and be payable to the Liquidity Provider. Unless an event of
default under the Standby Note Purchase Agreement occurs, the Remarketing Agent
for such Remarketed Notes shall, subject to compliance with applicable
securities laws, continue its remarketing efforts with respect to Purchased
Notes until the earlier to occur of a successful remarketing of such Purchased
Notes or the expiration of the Standby Note Purchase Agreement. All Purchased
Notes that have been remarketed will be subject to Special Mandatory Purchase
Rights when held by subsequent purchasers. In the event the Liquidity Provider
holds Purchased Notes on the date the Standby Note Purchase Agreement expires,
the Company will be required to purchase such Remarketed Notes on such date at a
purchase price equal to the principal amount thereof plus accrued interest
thereon to the purchase date. Such Remarketed Notes will remain outstanding and
enjoy the benefits of the Indenture until such time as the Company delivers
certificates for the Remarketed Notes to the Trustee for cancellation.
Optional Redemption While Remarketed Notes are in the Daily or Weekly
Interest Rate Mode or Commercial Paper Term Mode. Unless otherwise provided in
the applicable Prospectus Supplement, any Remarketed Notes in the Daily or
Weekly Interest Rate Mode or in the Commercial Paper Term Mode are subject to
redemption at the option of the Company in whole or in part on any Interest Rate
Adjustment Date relating thereto, upon 30 days notice to the holders thereof at
a redemption price equal to the aggregate principal amount of such Remarketed
Notes to be redeemed plus accrued interest thereon to the redemption date.
Redemption While Remarketed Notes are in the Long Term Rate Mode. Unless
otherwise provided in the applicable Prospectus Supplement, any Remarketed Notes
in the Long Term Rate Mode are subject to redemption at the option of the
Company at the times and upon the terms specified at the time of conversion to
or within such Long Term Rate Mode and as set forth in the Remarketed Note
relating thereto.
Redemption While Remarketed Notes are in the Fixed Interest Rate
Mode. Unless otherwise provided in the applicable Prospectus Supplement, any
Remarketed Notes in the Fixed Interest Rate Mode will be subject to redemption
at the option of the Company or pursuant to a sinking fund at the times and upon
the terms specified at the time of conversion to such Fixed Interest Rate Mode.
Allocation. Except in the case of a Special Mandatory Purchase, if the
Remarketed Notes are to be redeemed in part, DTC, after receiving notice of
redemption specifying the aggregate principal amount of Remarketed Notes to be
so redeemed, will determine by lot (or otherwise in accordance with the
procedures of DTC) the principal amount of such Remarketed Notes to be redeemed
from the account of each DTC Participant. After making its determination as
described above, DTC will give notice of such determination to each DTC
Participant from whose account such Remarketed Notes are to be redeemed. Each
such DTC Participant, upon receipt of such notice, will in turn determine the
principal amount of Remarketed Notes to be redeemed from the accounts of the
Beneficial Owners of such Remarketed Notes for which it serves as DTC
Participant, and give notice of such determination to the Remarketing Agent.
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