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Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-34149
PROSPECTUS SUPPLEMENT
JUNE 23, 1998
(TO PROSPECTUS DATED AUGUST 22, 1997)
$650,000,000
DONALDSON, LUFKIN & JENRETTE, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Donaldson, Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer its Medium-Term Notes (the "Notes"), in an aggregate principal amount (or
in the case of Notes issued at a discount from the principal amount, an
aggregate initial offering price) of up to $650,000,000 or the equivalent
thereof in one or more other currencies, composite currencies, or currency
units, subject to reduction as a result of the sale of certain other Debt
Securities. Unless otherwise indicated in the applicable Pricing Supplement,
the interest rate on each Note will be either a fixed rate established by the
Company at the date of issue of such Note, which may be zero in the case of
certain Original Issue Discount Notes (as defined herein), or a floating rate
as set forth therein and specified in the applicable Pricing Supplement. Notes
may also be issued as otherwise described under "Description of Notes."
The interest rate or rates and/or interest rate formula or formulae, if
any, issue price, stated maturity, and other variable terms of the Notes will
be established by the Company prior to the date of issuance of such Notes and
will be specified in the applicable Pricing Supplement. Interest rates and
interest rate formulae are subject to change by the Company, but no such change
will affect any Note which the Company has already issued or has agreed to
issue. Original Issue Discount Notes may provide that holders of such Notes
will not receive periodic payments of interest. See "Description of
Notes--Original Issue Discount Notes." Each Note will mature on a day nine
months or more from the date of issue, as set forth in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
the Notes may not be redeemed by the Company or repaid by the Company at the
option of the holders prior to maturity. Notes denominated in U.S. dollars will
be issued in denominations of $1,000 or any amount in excess thereof which is
an integral multiple of $1,000. The authorized denominations of Notes not
denominated in U.S. dollars and any terms relating to such Notes will be set
forth in the applicable Pricing Supplement.
Each Note will be issued only in fully registered form and will be
represented either by a global security registered in the name of a nominee of
(unless otherwise specified in the applicable Pricing Supplement) The
Depository Trust Company, as Depositary (a "Book-Entry Note"), or by a
certificate issued in definitive form (a "Certificated Note"), as set forth in
the applicable Pricing Supplement. Beneficial interests in global securities
representing Book-Entry Notes will be shown on, and transfers thereof will be
effected through, the records maintained by the Depositary (with respect to
participants' interests) and its participants. Book-Entry Notes will not be
issuable as Certificated Notes except in limited circumstances. See
"Description of Debt Securities--Book-Entry System" in the accompanying
Prospectus.
SEE "FOREIGN CURRENCY RISKS" BEGINNING ON PAGE S-21 HEREOF FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION
TO THE CONTRARY IS ACRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PRICE TO THE UNDERWRITING DISCOUNTS PROCEEDS TO THE
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note .......... 100% .125% to .875% 99.875% to 99.125%
Total (4) ......... $650,000,000 $812,500 to $5,687,500 $649,187,500 to $644,312,500
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues any
Note at a discount from or at a premium over its principal amount, the
Price to Public of such Note will be set forth in the applicable Pricing
Supplement.
(2) Unless otherwise specified in the applicable Pricing Supplement, the
commission payable to an Agent (as defined below) for each Note sold
through such Agent shall range from .125% to .875% of the principal
amount of such Note. The Company may also sell Notes to an Agent, as
principal, at negotiated discounts, for resale to one or more investors
or other purchasers at fixed offering prices or at varying prices related
to prevailing market prices at the time of resale or otherwise, as
determined by such Agent. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal shall be
purchased by such Agent at a price equal to 100% of the principal amount
thereof less a percentage equal to the commission applicable to any
agency sale of a Note of identical maturity. The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
(3) Before deducting expenses payable by the Company estimated at $400,000.
(4) Or the equivalent thereof in other currencies or currency units.
The Notes are being offered on a continuing basis by the Company through
Donaldson, Lufkin & Jenrette Securities Corporation and certain other agents
(individually, an "Agent" and, collectively, the "Agents"), each of which has
agreed to use its reasonable efforts to solicit purchases of the Notes. The
Company has reserved the right (i) to sell Notes directly to investors in those
jurisdictions in which the Company is so permitted and (ii) to accept (but not
solicit) offers to purchase Notes from time to time through one or more
additional agents or dealers, acting either as principal or agent, on
substantially the same terms as those applicable to sales of Notes to or
through the Agents. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be listed on any securities exchange, and there
can be no assurance that the Notes offered hereby will be sold or that there
will be a secondary market for the Notes. The Company reserves the right to
withdraw, cancel or modify the offer made hereby without notice. No termination
date for the offering of the Notes has been established. The Company may reject
any offer in its sole discretion, or an Agent may reject any offer it
reasonably considers to be unacceptable, in whole or in part. See "Plan of
Distribution."
DONALDSON, LUFKIN & JENRETTE
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CERTAIN PERSONS PARTICIPATING IN THE DISTRIBUTION OF THE NOTES MAY ENGAGE
IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
NOTES OR OTHER DEBT SECURITIES. SPECIFICALLY, THE AGENTS MAY OVER-ALLOT IN
CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, NOTES IN THE OPEN
MARKET.
References herein to "U.S. dollars" or "dollars" or "U.S. $" or "$" are to
the lawful currency of the United States of America.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1997, Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and
Current Reports on Form 8-K filed on April 14, 1998, March 23, 1998 and January
8, 1998, previously filed by the Company with the Commission, are incorporated
by reference in this Prospectus Supplement.
All documents filed by the Company after the date of this Prospectus
Supplement pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the termination
of the offering of the Notes offered hereby, shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Prospectus and this accompanying Prospectus Supplement to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statements as modified or
superseded shall be deemed, except as so modified or superseded, to constitute
a part of the Prospectus and this accompanying Prospectus Supplement.
The Company will provide without charge to each person to whom a copy of
the Prospectus and this accompanying Prospectus Supplement is delivered, upon
written or oral request of such person, a copy of any or all of the documents
referred to above which have been or may be incorporated by reference in the
Prospectus and this accompanying Prospectus Supplement (other than certain
exhibits to such documents). Requests for such documents should be directed to
Donaldson, Lufkin & Jenrette, Inc., 277 Park Avenue, New York, New York 10172,
Attention: Corporate Secretary (Telephone: (212) 892-3000).
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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 the "Debt Securities" or
the "Offered Securities") supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Debt
Securities set forth in the Prospectus, to which description reference is
hereby made. Unless otherwise specified in the applicable Pricing Supplement,
the Notes will have the terms described below, except that references to
interest payments and interest-related information do not apply to certain
Original Issue Discount Notes. See "--Original Issue Discount Notes."
The Notes will be issued under an Indenture dated as of September 3, 1997
(the "Indenture") between the Company and The Chase Manhattan Bank, as trustee
(the "Trustee"). The following summaries of certain provisions of the Indenture
do not purport to be complete, and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Indenture, including the
definitions therein of certain terms.
The Notes will be direct, unsecured and unsubordinated obligations of the
Company. Except as described under "Description of Debt Securities--Negative
Pledge" in the accompanying Prospectus, the Notes will not limit other
indebtedness or securities which may be incurred or issued by the Company or
any of its subsidiaries or contain financial or similar restrictions on the
Company or any of its subsidiaries. The operations of the Company are conducted
through its subsidiaries, and therefore, the Company is dependent upon the
earnings and cash flow of its subsidiaries to meet its obligations, including
obligations under the Notes. The Notes will be effectively subordinated to all
indebtedness of the Company's subsidiaries. The Company's rights and the rights
of its creditors, including holders of Notes, to participate in the
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization will be subject to prior claims of such subsidiary's creditors,
including trade creditors, except to the extent the Company may itself be a
creditor with reorganized claims against such subsidiary.
This Prospectus Supplement and any Pricing Supplement, may be used in
connection with the offer and sale from time to time of Notes in an aggregate
initial public offering price of up to U.S. $650,000,000 or the equivalent
thereof in other currencies, currency units or composite currencies (provided
that, with respect to Original Issue Discount Notes, the initial offering price
of such Notes shall be used in calculating the aggregate principal amount of
Notes offered hereunder). The aggregate principal amount of Notes authorized to
be issued hereunder may be increased by the Company from time to time. The
aggregate principal amount of Notes authorized to be issued under this
Prospectus Supplement is subject to reduction as a result of the sale by the
Company after the date of this Prospectus Supplement of other issues of Debt
Securities (as defined in the Prospectus) from time to time as described in the
accompanying Prospectus to the extent the aggregate principal amount of such
other Debt Securities exceeds $350,000,000. See "Plan of Distribution" herein
and in the accompanying Prospectus.
The Pricing Supplement relating to a Note will describe the following
terms: (i) the currency or currency unit in which such Note is denominated (the
"Specified Currency") and, if other than the Specified Currency, the currency
or currency unit in which payments of principal and interest on such Note will
be made (and, if the Specified Currency is other than U.S. dollars, certain
other terms relating to such Note (a "Foreign Currency Note") and such
Specified Currency); (ii) whether such Note bears a fixed rate of interest (a
"Fixed Rate Note") or bears a floating rate of interest (a "Floating Rate
Note") (including whether such Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note (each as defined below));
(iii) the price at which such Note will be issued (the "Issue Price"); (iv) the
date on which such Note will be issued (the "Original Issue Date"); (v) the
date on which such Note will mature; (vi) if such Note is a Fixed Rate Note,
the rate per annum at which such Note will bear interest, if any, and whether
the maturity thereof is extendible; (vii) if such Note is a Floating Rate Note,
the Interest Rate Basis, the Initial Interest Rate, the Interest Payment Dates,
the Index Maturity, the Spread and/or Spread Multiplier, if any (each as
defined below), and any other terms relating to the particular method of
calculating the interest rate for such Note; (viii) if such Note is an Indexed
Note (as defined below), the terms relating to the particular Note; (ix) if
such Note is a Dual
S-4
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Currency Note (as defined below) the terms relating to the particular Note; (x)
if such Note is an Amortizing Note (as defined below), the amortization
schedule and any other terms relating to the particular Note; (xi) whether such
Note is an Original Issue Discount Note; (xii) whether such Note may be
redeemed at the option of the Company, or repaid at the option of the holder,
prior to its stated maturity as described under "--Optional Redemption" and
"--Repayment at the Noteholders' Option; Repurchase" below and, if so, the
provisions relating to such redemption or repayment, including, in the case of
any Original Issue Discount Notes, the information necessary to determine the
amount due upon redemption or repayment; (xiii) any relevant tax consequences
associated with the terms of the Notes which have not been described under
"Certain United States Federal Income Tax Considerations" below; and (xiv) any
other terms of such Note not inconsistent with the provisions of the Indenture.
Subject to such additional restrictions as are described under "Special
Provisions Relating to Foreign Currency Notes," each Note will mature on a day
nine months or more from the date of issue, as specified in the applicable
Pricing Supplement, as selected by the initial purchaser and agreed to by the
Company. In the event that such maturity date of any Note or any date fixed for
redemption or repayment of any Note (collectively, the "Maturity Date") is not
a Business Day (as defined below), principal and interest payable at maturity
or upon such redemption or repayment will be paid on the next succeeding
Business Day with the same effect as if such Business Day were the Maturity
Date. No interest shall accrue for the period from and after the Maturity Date
to such next succeeding Business Day. Except as may be provided in the
applicable Pricing Supplement and except for Indexed Notes, all Notes will
mature at par.
The Notes will be offered on a continuing basis, and will be issued in
denominations of $1,000 and any integral multiples of $1,000 in excess thereof,
unless otherwise specified in the applicable Pricing Supplement; provided,
however, that Notes in Specified Currencies other than U.S. dollars shall be
issued in such denominations as are set forth in the applicable Pricing
Supplement. See "Special Provisions Relating to Foreign Currency Notes."
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction.
Notes will be issued in the form of (i) one or more fully registered
global securities (each, a "Global Security") deposited with or on behalf of a
depositary (the "Depositary") which unless specified otherwise on the
applicable Pricing Supplement, will be The Depository Trust Company ("DTC"),
and registered in the name of a nominee of the Depositary (a "Book-Entry Note")
or (ii) a certificate in definitive form (a "Certificated Note"), in each case
as specified in the applicable Pricing Supplement. See "Description of Debt
Securities--Book-Entry System" in the Prospectus. Certificated Notes will not
be exchangeable for Book-Entry Notes and, except under the circumstances
described in the Prospectus under the caption "Description of Debt
Securities--Book-Entry System," Book-Entry Notes will not be exchangeable for
Certificated Notes and will not otherwise be issuable as Certificated Notes.
DTC has advised the Company that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York banking law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of section 17A of the Exchange Act. DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants 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, banks, trust companies, clearing corporations, and certain
other organizations, some of whom (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.
Principal of, premium, if any, and interest, if any, on any Notes payable
in U.S. dollars will be payable in the manner described herein, the transfer of
the Notes will be registrable, and Notes will be exchangeable for Notes bearing
identical terms and provisions at the office of The Chase Manhattan Bank, the
Company's paying agent (the "Paying Agent," which term includes any successor
paying agent appointed by the Company) and registrar for the Notes (the
"Registrar," which term includes any
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successor registrar), currently located at 450 West 33rd Street, New York
10001, or such other person or persons as may be specified on the applicable
Pricing Supplement; provided, that payment of interest, other than interest at
maturity or upon redemption or repayment, may be made by check mailed to the
address of the person entitled thereto as it appears on the security register
at the close of business on the Regular Record Date (as defined herein)
corresponding to the relevant Interest Payment Date (as defined herein);
provided, further, that Book-Entry Notes will be exchangeable only in the
manner and to the extent set forth under "Description of Debt
Securities--Book-Entry System" in the accompanying Prospectus. Notwithstanding
the foregoing, (i) a depositary, as holder of Book-Entry Notes, shall be
entitled to receive payments of interest by wire transfer of immediately
available funds and (ii) a holder of $5,000,000 (or, if the Notes are
denominated in a Specified Currency other than U.S. dollars, the equivalent
thereof in such Specified Currency) or more in aggregate principal amount of
Certificated Notes having identical terms and provisions shall be entitled to
receive payments of interest, other than interest due at maturity or upon
redemption or repayment, if any, by wire transfer of immediately available
funds into an account maintained by the holder in the United States, if
appropriate wire transfer instructions have been received by the Paying Agent
not less than ten days prior to the applicable Interest Payment Date. Certain
additional payment provisions with respect to Foreign Currency Notes are
described under "Special Provisions Relating to Foreign Currency Notes" below.
The principal and interest payable in U.S. dollars on a Note at maturity
or upon redemption or repayment will be paid by wire transfer of immediately
available funds against presentation of the Note at the office of the Paying
Agent, except as provided below under "--Repayment at the Noteholders' Option;
Repurchase" and unless otherwise provided in the applicable Pricing Supplement.
INTEREST AND INTEREST RATES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest at either (a) a fixed rate or (b) a floating rate determined
by reference to an Interest Rate Basis, which may be adjusted by a Spread
and/or Spread Multiplier (each as defined below). Any Floating Rate Note may
also have either or both of the following: (i) a maximum interest rate
limitation, or ceiling, on the rate at which interest may accrue during any
interest period; and (ii) a minimum interest rate limitation, or floor, on the
rate at which interest may accrue during any interest period. The applicable
Pricing Supplement will designate (a) a fixed rate per annum, in which case
such Notes will be Fixed Rate Notes; or (b) one or more of the following
Interest Rate Bases as applicable to such Notes, in which case such Notes will
be Floating Rate Notes: (i) the CD Rate, in which case such Notes will be "--CD
Rate Notes;" (ii) the Commercial Paper Rate, in which case such Notes will be
"Commercial Paper Rate Notes;" (iii) the Federal Funds Rate, in which case such
Notes will be "Federal Funds Rate Notes;" (iv) LIBOR, in which case such Notes
will be "LIBOR Notes;" (v) the Prime Rate, in which case such Notes will be
"Prime Rate Notes;" (vi) the Treasury Rate, in which case such Notes will be
"Treasury Rate Notes;" or (vii) such other interest rate basis or formula as is
set forth in such Pricing Supplement.
Interest payments on the Notes will accrue from and including the most
recent Interest Payment Date to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for, from and including
the Original Issue Date to but excluding the related Interest Payment Date, the
Maturity Date or any date of redemption, as the case may be. Each Note will
bear interest at the annual rate or at a rate determined pursuant to an
interest rate formula, stated therein, until the principal thereof is paid or
made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, interest will be calculated by reference to each period (an
"Interest Accrual Period") beginning on the Original Issue Date and ending on
(but excluding) the first Interest Payment Date and each successive period
beginning on (and including) an Interest Payment Date and ending on (but
excluding) the next succeeding Interest Payment Date, Maturity Date or any date
of redemption of a Note. Interest will be payable on each Interest Payment Date
and at maturity or on redemption, if any.
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 the related
Interest Payment date; provided, however, that (i)
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if the Company fails to pay such interest on such Interest Payment Date, such
defaulted interest will be paid to the person in whose name such Note is
registered at the close of business on the record date to be established for
the payment of defaulted interest and (ii) interest payable at maturity,
redemption or repayment will be payable to the person to whom principal shall
be payable. The first payment of interest on any Note 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. Interest rates
and interest rate formulae are subject to change by the Company from time to
time but no such change will affect any Note theretofore issued or which the
Company has agreed to issue. Unless otherwise indicated in the applicable
Pricing Supplement, the Interest Payment Dates and the Regular Record Dates for
Fixed Rate Notes shall be as described below under "Fixed Rate Notes." The
Interest Payment Dates for Floating Rate Notes shall be as indicated in the
applicable Pricing Supplement and in such Note, and, unless otherwise specified
in the applicable Pricing Supplement, each Regular Record Date for a Floating
Rate Note will be the fifteenth calendar day (whether or not a Business Day)
next preceding each Interest Payment Date (a "Regular Record Date").
FIXED RATE NOTES
Each Fixed Rate Note will bear interest at the annual rate specified
therein and in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Payment Dates for the Fixed
Rate Notes will be on June 15 and December 15 of each year and the Regular
Record Dates will be the fifteenth calendar day (whether or not a Business Day)
next preceding each Interest Payment Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
and paid on the basis of a 360-day year of twelve 30-day months. In the event
that any Interest Payment Date or Maturity Date for any Fixed Rate Note is not
a Business Day, payment of interest, premium, if any, or principal otherwise
payable on such Fixed Rate Note will be made on the next succeeding Business
Day and no interest on such payment shall accrue for the period from and after
such Interest Payment Date or Maturity Date to such next succeeding Business
Day.
FLOATING RATE NOTES
Unless otherwise specified in an applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. Each applicable Pricing
Supplement will specify certain terms with respect to which such Floating Rate
Note is being delivered, including: whether such Floating Rate Note is a
Regular Floating Rate Note, an Inverse Floating Rate Note or a Floating
Rate/Fixed Rate Note; the Interest Rate Basis or Bases, Initial Interest Rate,
Interest Reset Dates, Interest Reset Period, Regular Record Dates, Interest
Payment Dates, Index Maturity, maximum interest rate and minimum interest rate,
if any, and the Spread and/or Spread Multiplier, if any, and if one or more of
the specified Interest Rate Bases is LIBOR, the Index Currency, if any, as
described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(a) Unless such Floating Rate Note is designated as a Floating Rate/Fixed
Rate Note or an Inverse Floating Rate Note, such Floating Rate Note will be
designated a "Regular Floating Rate Note" and, except as described below or
in an applicable Pricing Supplement, will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (i)
plus or minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any. Unless otherwise specified in the
applicable Pricing Supplement, commencing on the Initial Interest Reset
Date, the rate at which interest on such Regular Floating Rate Note shall
be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period from the Original
Issue Date to the Initial Interest Reset Date will be the Initial Interest
Rate.
(b) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in an applicable Pricing
Supplement, such Floating Rate Note will initially bear interest at the
rate determined by reference to the applicable Interest Rate Basis or Bases
(i) plus or minus the applicable Spread, if any, and/or (ii) multiplied by
the applicable Spread Multiplier, if any.
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Commencing on the Initial Interest Reset Date, the rate at which interest
on such Floating Rate/Fixed Rate Note shall be payable shall be reset as of
each Interest Reset Date; provided, however, that (x) the interest rate in
effect for the period from the Original Issue Date to the Initial Interest
Reset Date will be the Initial Interest Rate; and (y) the interest rate in
effect commencing on, and including, the Fixed Rate Commencement Date (as
defined in the applicable Pricing Supplement) to the Maturity Date shall be
the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement, or if no such Fixed Interest Rate is so specified and
the Floating Rate/Fixed Rate Note is still outstanding on such day, the
interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
(c) If such Floating Rate Note is designated as an "Inverse Floating Rate
Note," then, except as described below or in an applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the related Pricing Supplement minus the rate
determined by reference to the Interest Rate Basis or Bases (i) plus or
minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any; provided, however, unless otherwise
specified in the applicable Pricing Supplement, the interest rate thereon
will not be less than zero. Commencing on the Initial Interest Reset Date,
the rate at which interest on such Inverse Floating Rate Note is payable
shall be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the Original Issue Date to the
Initial Interest Reset Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating
Rate Note shall bear interest in accordance with the terms described in such
Addendum and the applicable Pricing Supplement. See "--Other Provisions,
Addenda" below.
Unless otherwise provided in the applicable Pricing Supplement, each
Interest Rate Basis shall be the rate determined in accordance with the
applicable provisions below. Except as set forth above or in a Pricing
Supplement, the interest rate in effect on any Interest Reset Date will be the
applicable rate as reset on such date. The interest rate applicable to any
other day is the interest rate from the immediately preceding Interest Reset
Date (or, if none, the Initial Interest Date).
Interest on Floating Rate Notes will be determined by reference to an
"Interest Rate Basis," which may be one or more of (i) the CD Rate, (ii) the
Commercial Paper 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 set in the applicable Pricing Supplement;
provided, however, that with respect to a Floating Rate/Fixed Rate Note, the
interest rate commencing on the Fixed Rate Commencement Date and continuing,
unless otherwise specified in the applicable Pricing Supplement, until the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in
the applicable Pricing Supplement, or if no such Fixed Interest Rate is so
specified, the interest rate in effect thereon on the day immediately preceding
the Fixed Rate Commencement Date. In addition, if so specified in the
applicable Pricing Supplement, a Floating Rate Note may bear interest
calculated based upon two or more Interest Rate Bases.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to maturity
of the instrument or obligation with respect to which the Interest Rate Basis
or Bases will be calculated. The Spread, Spread Multiplier, Index Maturity and
other variable terms of the Floating Rate Notes are subject to change by the
Company from time to time, but no such change will affect any Floating Rate
Note previously issued or as to which an offer has been accepted by the
Company.
Each applicable Pricing Supplement will specify whether the rate of
interest on the related Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually, annually or such other specified period
(each, an "Interest Reset Period") and the dates on which such interest rate
will be reset (each, an "Interest Reset Date"). Unless otherwise specified in
the applicable Pricing Supplement, the Interest
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Reset Date will be, in the case of Floating Rate Notes which reset: (i) daily,
each Business Day; (ii) weekly, a Business Day that occurs in each week as
specified in the applicable Pricing Supplement (with the exception of weekly
reset Treasury Rate Notes, which will reset the Tuesday of each week except as
specified below); (iii) monthly, a Business Day that occurs in each month as
specified in the applicable Pricing Supplement; (iv) quarterly, a Business Day
that occurs in each third month as specified in the applicable Pricing
Supplement; (v) semiannually, a Business Day that occurs in each of two months
of each year as specified in the applicable Pricing Supplement; and (vi)
annually, a Business Day that occurs in one month of each year as specified in
the applicable Pricing Supplement; provided, however, that, with respect to
Floating Rate/Fixed Rate Notes, the fixed rate of interest in effect for the
period from the Fixed Rate Commencement Date until the Maturity Date shall be
specified in the applicable Pricing Supplement as either the Fixed Interest
Rate or the interest rate in effect on the day immediately preceding the Fixed
Rate Commencement Date, or if no such Fixed Interest Rate is so specified, the
interest rate in effect thereon on the date immediately preceding the Fixed
Rate Commencement Date. If any Interest Reset Date for any Floating Rate Note
would otherwise be a day that is not a Business Day, such Interest Reset Date
will be postponed to the next succeeding day that is a Business Day, except
that in the case of a Floating Rate Note as to which LIBOR is an applicable
Interest Rate Basis, in which case if such Business Day falls in the next
succeeding calendar month, such Interest Reset Date will be the immediately
preceding Business Day. As used herein, "Business Day" means, unless otherwise
specified in the applicable Pricing Supplement, any day that is not a Saturday
or Sunday and that is not a day on which banking institutions are generally
authorized or obligated by law, regulation or executive order to close in The
City of New York and any other place of payment with respect to the applicable
Notes and (i) with respect to LIBOR Notes, such day is also a day on which
dealings in U.S. dollars are transacted in the London Interbank Market (a
"London Business Day"), (ii) with respect to Notes denominated in a Specified
Currency other than U.S. dollars or ECUs, such day is not a day on which
banking institutions are generally authorized or obligated by law, regulation
or executive order to close in the principal financial center of the country of
the Specified Currency, or (iii) with respect to Notes denominated in ECUs, a
day that is a non-ECU clearing day as determined by the ECU Banking Association
in Paris.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period and (ii) a minimum numerical limitation, or
floor, on the rate at which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on Floating Rate
Notes will in no event be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
Except as provided below or in an applicable Pricing Supplement, interest
will be payable in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on a Business Day that occurs in each week or each month as
applicable, as specified in the applicable Pricing Supplement, (ii) quarterly,
on a Business Day that occurs in each third month, as specified in the
applicable Pricing Supplement, (iii) semi-annually, on a Business Day that
occurs in each of two months of each year as specified in the applicable
Pricing Supplement and (iv) annually, on a Business Day that occurs in one
month of each year, as specified in the applicable Pricing Supplement (each, an
"Interest Payment Date") and, in each case, on the Maturity Date. If any
Interest Payment Date for any Floating Rate Note would otherwise be a day that
is not a Business Day, such Interest Payment Date will be the next succeeding
day that is a Business Day and no interest shall accrue for the period from and
after such Interest Payment Date, except that if such Note is a LIBOR Note and
if such Business Day falls in the next succeeding calendar month, such Interest
Payment Date will be the immediately preceding Business Day. If the Maturity
Date of a Floating Rate Note falls on a day that is not a Business Day, the
payment of principal, premium, if any, and interest, if any, will be made on
the next succeeding Business Day, and no interest shall accrue for the period
from and after such Maturity Date.
All percentages resulting from any calculation on Floating Rate Notes will
be 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 dollar amounts
used in or resulting from such calculation will be rounded to the nearest cent
(with one-half cent being rounded upward).
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With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day from and including the later of (i) the date of issue and (ii) the last day
to which interest has been paid or duly provided for to and including the last
date for which accrued interest is being calculated as described in the
immediately preceding paragraph. Unless otherwise specified in the applicable
Pricing Supplement, the interest factor for each such day will be computed by
dividing the interest rate applicable to such day by 360, in the case of Notes
for which the Interest Rate Basis is the CD Rate, the Commercial Paper Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Notes for which the Interest Rate Basis is the
Treasury Rate. The accrued interest factor for Notes for which the interest
rate may be calculated with reference to two or more Interest Rate Bases will
be calculated in each period by selecting one such Interest Rate Basis for such
period in accordance with the provisions of the applicable Pricing Supplement.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the "Interest Determination Date." Unless otherwise
specified in the applicable Pricing Supplement, the Interest Determination Date
with respect to the CD Rate, the Commercial Paper Rate, the Federal Funds Rate
and the Prime Rate will be the second Business Day preceding each Interest
Reset Date for the related Note; and the Interest Determination Date with
respect to LIBOR will be the second London Business Day preceding each Interest
Reset Date. With respect to the Treasury Rate, unless otherwise specified in an
applicable Pricing Supplement, the Interest Determination Date will be the day
in the week in which the related Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday); provided,
however, that if an auction is held on the Friday on the week preceding the
related Interest Reset Date, the related Interest Determination Date will be
such preceding Friday; and provided, further, that if an auction falls on any
Interest Reset Date then the related Interest Reset Date will instead be the
first Business Day following such auction. Unless otherwise specified in the
applicable Pricing Supplement, the Interest Determination Date pertaining to a
Floating Rate Note the interest rate of which is determined with reference to
two or more Interest Rate Bases will be the latest Business Day which is at
least two Business Days prior to each Interest Reset Date for such Floating
Rate Note. Each Interest Rate Basis will be determined and compared on such
date, and the applicable interest rate will take effect on the related Interest
Reset Date, as specified in the applicable Pricing Supplement.
Unless otherwise provided for in the applicable Pricing Supplement, The
Chase Manhattan Bank will be the Calculation Agent (the "Calculation Agent,"
which term includes any successor calculation agent appointed by the Company),
and for each Interest Reset Date will determine the interest rate with respect
to any Floating Rate Note as described below. The Calculation Agent will notify
the Company, the Paying Agent and the Trustee of each determination of the
interest rate applicable to any such Floating Rate Note promptly after such
determination is made. The Trustee will, upon the request of the holder of any
Floating Rate Note, provide the interest rate then in effect and, if
determined, the interest rate which will become effective as a result of a
determination made with respect to the most recent Interest Determination Date
relating to such Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," where applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date or, if such day is not a Business Day,
the next succeeding Business Day or (ii) the Business Day preceding the
applicable Interest Payment Date or Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Rate Basis with respect to Floating Rate Notes will be determined by
the Calculation Agent as follows:
CD Rate Notes. CD Rate Notes will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified in the CD Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note, the rate on such date for negotiable
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certificates of deposit having the Index Maturity designated in the applicable
Pricing Supplement as published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15(519), Selected Interest Rates," or
any successor publication ("H.15(519)") under the heading "CDs (Secondary
Market)," or, if not so published by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable
certificates of deposit of the Index Maturity designated in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 p.m. Quotations for U.S. Government
Securities" or any successor publication (the "Composite Quotations") under the
heading "Certificates of Deposit." If such rate is not yet published in either
H.15(519) or the Composite Quotations by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate on
such Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the secondary market offered rates as of
10:00 a.m., New York City time, on such Interest Determination Date, for
negotiable certificates of deposit of major United States money market banks
with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement in an amount that is representative for a single
transaction in that market at that time as quoted by three leading nonbank
dealers in negotiable U.S. dollar certificates of deposit in The City of New
York selected by the Calculation Agent; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as set forth
above, the CD Rate with respect to such Interest Determination Date shall be
the same as the CD Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
shall be the Initial Interest Rate).
Commercial Paper Rate Notes. Commercial Paper Rate Notes will bear
interest at the interest rate (calculated with reference to the Commercial
Paper Rate and the Spread and/or Spread Multiplier, if any) specified in the
Commercial Paper Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Note, the Money Market Yield (as defined below)
of the rate on that date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement, as such rate shall be
published in H.15(519), under the heading "Commercial Paper--Nonfinancial." In
the event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
then the Commercial Paper Rate shall be the Money Market Yield of the rate on
such Interest Determination Date for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper" (with an Index Maturity of one month or three months being deemed to be
equivalent to an Index Maturity of 30 days or 90 days, respectively). If by
3:00 p.m., New York City time, on such Calculation Date such rate is not yet
available in either H.15(519) or Composite Quotations, then the Commercial
Paper Rate on such Interest Determination Date shall be calculated by the
Calculation Agent and shall be the Money Market Yield corresponding to the
arithmetic mean of the offered rates as of approximately 11:00 a.m., New York
City time, on such Interest Determination Date for commercial paper of the
specified Index Maturity placed for an industrial issuer whose bond rating is
"AA," or the equivalent, or as otherwise specified in the applicable Pricing
Supplement, from a nationally recognized statistical rating organization as
quoted by three leading dealers of commercial paper in The City of New York
selected by the Calculation Agent; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting offered rates as
set forth above, the Commercial Paper Rate with respect to such Interest
Determination Date shall be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest shall be the Initial Interest Rate).
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = D x 360
------------- x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the period for which interest is being calculated.
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Federal Funds Rate Notes. Federal Funds Rate Notes will bear interest at
the interest rate (calculated with reference to the Federal Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the Federal Funds Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to a Federal Funds Rate Note, the rate on such date for Federal Funds
as published in H.15(519) under the heading "Federal Funds (Effective)" or, if
not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Federal Funds Rate will be
the rate on such Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If such rate is
not published in either H.15(519) or the Composite Quotations by 3:00 p.m., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate for such Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the rates for the last transaction in overnight United States dollar Federal
Funds as of 9:00 a.m., New York City time, on such Interest Determination Date
arranged by three leading brokers of Federal Funds transactions in The City of
New York selected by the Calculation Agent; provided, however, that if the
brokers selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the Federal Funds Rate with respect to such Interest Determination
Date shall be the same as the Federal Funds Rate in effect for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest shall be the Initial Interest Rate).
LIBOR Notes. LIBOR Notes will bear interest at the interest rate
(calculated with reference to LIBOR and the Spread and/or Spread Multiplier, if
any) specified in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Reset Date will be determined by the Calculation Agent as
follows:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note, LIBOR will be either: (A) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement or if such Pricing Supplement does not
specify a source for LIBOR, the rate for deposits in the London interbank
market in the Index Currency (as defined below) having the Index Maturity
designated in the applicable Pricing Supplement commencing on the second
London Business Day immediately following such Interest Determination Date
that appears on the Designated LIBOR Page (as defined below) as of 11:00
a.m., London time, on such Interest Determination Date, or (B) if "LIBOR
Reuters" is specified in the applicable Pricing Supplement, the arithmetic
mean of the offered rates (unless the specified 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 London interbank market in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement and commencing on the second London Business day immediately
following such Interest Determination Date that appear on the Designated
LIBOR Page as of 11:00 a.m., London time, on such Interest Determination
Date, if at least two such offered rates appear (unless, as aforesaid, only
a single rate is required) on such Designated LIBOR Page. If no rate
appears on the Designated LIBOR Page (or, in the case of clause (i)(B)
above, if the Designated LIBOR Page by its terms provides for more than a
single rate but fewer than two offered rates appear on such Page), LIBOR in
respect of such Interest Determination Date will be determined as if the
parties had specified the rate described in clause (ii) below.
(ii) With respect to an Interest Determination Date relating to a LIBOR
Note to which the last sentence of clause (i) above applies, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second London Business Day immediately following such Interest
Determination Date to prime banks in the London interbank market at
approximately 11:00 a.m., London time on such Interest Determination Date
and in a principal amount that is representative for a single transaction
in such
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Index Currency in such market at such time. If at least two such quotations
are provided, LIBOR determined on such Interest Determination Date will be
the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m. (or such
other time specified in the applicable Pricing Supplement), in the
applicable Principal Financial Center (as defined below), on such Interest
Determination Date for loans made in the Index Currency to leading European
banks having the Index Maturity designated in the applicable Pricing
Supplement commencing on the second London Business Day immediately
following such 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 by three major banks in such Principal Financial Center
selected by the Calculation Agent; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such Interest Determination Date will be
the same as LIBOR in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of
interest shall be the Initial Interest Rate).
"Index Currency" means the currency (including currency units and
composite currencies) specified in the applicable Pricing Supplement as the
currency with respect to which LIBOR shall be calculated. If no such currency
is specified in the applicable Pricing Supplement, the Index Currency shall be
U.S. dollars.
"Designated LIBOR Page" means the display on Page 3750 (or such other page
as is specified in the applicable Pricing Supplement) of the Dow Jones Telerate
Service for the purpose of displaying the London interbank offered rates of
major banks for the applicable Index Currency (or such other page as may
replace that page on that service for the purpose of displaying such rates),
unless "LIBOR Reuters" is designated in the applicable Pricing Supplement, in
which case the Designated LIBOR Page shall be the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
offered rates of major banks for the applicable Index Currency.
Unless provided otherwise in the applicable Pricing Supplement, "Principal
Financial Center" will be the capital city of the country of the specified
Index Currency, except that with respect to U.S. dollars and ECUs, the
Principal Financial Center shall be The City of New York and Brussels,
respectively.
Prime Rate Notes. Prime Rate Notes will bear interest at the interest rate
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified in the Prime Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set
forth in H.15(519) for such date opposite the caption "Bank Prime Loan." If
such rate is not yet published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Prime Rate
for such Interest Determination Date will be the arithmetic mean of the rates
of interest publicly announced by each bank named on the Reuters Screen NYMF
Page (as defined below) as such bank's prime rate or base lending rate as in
effect for such Interest Determination Date as quoted on the Reuters Screen
NYMF Page on such Interest Determination Date, or, if fewer than four such
rates appear on the Reuters Screen NYMF Page for such Interest Determination
Date, the rate shall be the arithmetic mean of the prime rates quoted on the
basis of the actual number of days in the year divided by 360 as of the close
of business on such Interest Determination Date by at least two of the three
major money center banks in The City of New York selected by the Calculation
Agent from which quotations are requested. If fewer than two quotations are
provided, the Prime Rate shall be calculated by the Calculation Agent and shall
be determined as the arithmetic mean on the basis of the prime rates in The
City of New York by the appropriate number of substitute banks or trust
companies organized and doing business under the laws of the United States, or
any State thereof, in each case having total equity capital of at least $500
million and being subject to supervision or examination by federal or state
authority, selected by the Calculation Agent to quote such rate or rates.
"Reuters Screen NYMF Page" means the display designated as Page "NYMF" on the
Reuters Monitor Money Rates Service (or such other page as may replace the NYMF
Page on that service for the purpose of displaying prime rates or base lending
rates of major United States banks).
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Treasury Rate Notes. Treasury Rate Notes will bear interest at the
interest rate (calculated with reference to the Treasury Rate and the Spread
and/or Spread Multiplier, if any) specified in the Treasury Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date relating
to a Treasury Rate Note, the rate applicable to the most recent auction of
direct obligations of the United States ("Treasury Bills") having the Index
Maturity designated in the applicable Pricing Supplement, as published in
H.15(519) under the heading "Treasury Bills--auction average (investment)" or,
if not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the auction average rate on
such Interest Determination Date (expressed as a bond equivalent, on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the Index
Maturity designated in the applicable Pricing Supplement are not published or
reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date or if no such auction is held in a particular week, then the
Treasury Rate shall be calculated by the Calculation Agent and shall be a yield
to maturity (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) calculated using the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Interest Determination Date, of three leading
primary United States government securities dealers (which may include one or
more of the Agents) selected by the Calculation Agent for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting bid rates as mentioned in
this sentence, the Treasury Rate with respect to such Interest Determination
Date will be the same as the Treasury Rate in effect for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest shall be the Initial Interest Rate).
INDEXED NOTES
Notes also may be issued with the principal amount payable at maturity or
interest to be paid thereon, or both, to be determined with reference to the
price or prices of specified commodities or stocks, the exchange rate of the
Specified Currency relative to one or more other currencies, currency units or
composite currencies specified in the Prospectus Supplement, or such other
price or exchange rate as may be specified in such Note ("Indexed Notes"), as
set forth in a Pricing Supplement relating to such Indexed Notes. In certain
cases, holders of such Indexed Notes may receive a principal amount on the
Maturity Date that is greater than or less than the face amount of the Indexed
Notes, or an interest rate that is greater than or less than the stated
interest rate on the Indexed Notes, or both, depending upon the structure of
the Indexed Note and the relative value on the Maturity Date or at the relevant
Interest Payment Date, as the case may be, of the specified indexed item.
Information as to the method for determining the principal amount payable on
the Maturity Date, the manner of determining the interest rate, certain
historical information with respect to the specified indexed item and tax
considerations associated with an investment in Indexed Notes will be set forth
in the applicable Pricing Supplement.
An investment in Indexed Notes entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate of an Indexed Note is indexed, it may result in an
interest rate that is less than that payable on a conventional fixed-rate debt
security issued by the Company at the same time, including the possibility that
no interest will be paid, and, if the principal amount of an Indexed Note is
indexed, the principal amount payable at maturity may be less than the original
purchase price of such Indexed Note, including the possibility that no
principal will be paid (but in no event shall the amount of interest or
principal paid with respect to an Indexed Note be less than zero).
Additionally, if the formula used to determine the principal amount or interest
payable with respect to such Indexed Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index may be increased. See "Foreign Currency Risks."
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DUAL CURRENCY NOTES
Dual Currency Notes are Notes as to which the Company has a one time
option, exercisable on a specified date (the "Option Election Date") in whole,
but not in part, with respect to all Dual Currency Notes issued on the same day
and having the same terms, of making all payments of principal, premium, if
any, and interest after the exercise of such option, whether at maturity or
otherwise (which payments would otherwise be made in the face amount currency
of such Notes specified in the applicable Pricing Supplement), in the optional
payment currency specified in the applicable Pricing Supplement ("Dual Currency
Notes"). The terms of the Dual Currency Notes together with information as to
the relative value of the face amount currency compared to the optional payment
currency and as to tax considerations associated with an investment in Dual
Currency Notes will also be set forth in the applicable Pricing Supplement.
If the Company elects on any Option Election Date specified in the
applicable Pricing Supplement to pay in the optional payment currency instead
of the face amount currency, payments of interest, premium, if any, and
principal made after such Option Election Date may be worth less, at the
then-current exchange rate, than if the Company had made such payment in the
face amount currency. See "Foreign Currency Risks."
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable Notes
("Renewable Notes") which will mature on an Interest Payment Date specified in
the applicable Prospectus Supplement unless the maturity of all or a portion of
the principal amount thereof is extended in accordance with the procedures set
forth in the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Fixed Rate Note (other than an
Amortizing Note) will indicate whether the Company has the option to extend the
maturity of such Fixed Rate Note for one or more periods of one or more whole
years up to but not beyond the final Maturity Date set forth in such Pricing
Supplement. If the Company has such option with respect to any such Fixed Rate
Note, the procedures will be as set forth in the applicable Pricing Supplement.
AMORTIZING NOTES
Amortizing Notes are Notes for which payments combining principal and
interest are made in installments over the life of the Note ("Amortizing
Notes"). Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
conditions of any issue of Amortizing Notes will be provided in the applicable
Pricing Supplement. A table setting forth repayment information in respect of
each Amortizing Note will be included in the applicable Pricing Supplement and
set forth on such Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Notes ("Original Issue Discount Notes") from time to
time at an issue price (as specified in the applicable Pricing Supplement) that
is less than 100% of the principal amount thereof (i.e., par). Original Issue
Discount Notes may not bear any interest currently or may bear interest at a
rate that is below market rates at the time of issuance. The difference between
the issue price of an Original Discount Note and par is referred to herein as
the "Discount." In the event of redemption, acceleration or acceleration of
maturity of an Original Issue Discount Note, the amount payable to the holder
of such Original Issue Discount Note will be equal to the sum of (i) the issue
price (increased by any accruals of Discount) and, in the event of any
redemption by the Company of such Original Issue Discount Note (if applicable),
multiplied by the Initial Redemption Percentage specified in the applicable
Pricing Supplement (as adjusted by the Annual Redemption Percentage Reduction,
if applicable) and (ii) any unpaid interest on such Original Issue Discount
Note accrued from the date of issue to the date of such redemption, repayment
or acceleration of maturity.
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Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for an
Original Issue Discount Note, such Discount will be accrued using a constant
yield method. The constant yield will be calculated using a 30-day month,
360-day year convention, a compounding period that, except for the Initial
Period (as defined below), corresponds to the shortest period between Interest
Payment Dates for the applicable Original Issue Discount Note (with ratable
accruals within a compounding period), a coupon rate equal to the initial
coupon rate applicable to such Original Issue Discount Note and an assumption
that the maturity of such Original Issue Discount Note will not be accelerated.
If the period from the date of issue to the initial Interest Payment Date for
an Original Issue Discount Note (the "Initial Period") is shorter than the
compounding period for such Original Issue Discount Note, a proportionate
amount of the yield for an entire compounding period will be accrued. If the
Initial Period is longer than the compounding period, then such period will be
divided into a regular compounding period and a short period with the short
period being treated as provided in the preceding sentence. The accrual of the
applicable Discount may differ from the accrual of original issue discount for
purposes of the Internal Revenue Code of 1986, as amended (the "Code").
Certain Original Issue Discount Notes may not be treated as having
original issue discount for federal income tax purposes, and Notes other than
Original Issue Discount Notes may be treated as issued with original issue
discount for federal income tax purposes. See "Certain United States Federal
Income Tax Considerations."
OPTIONAL REDEMPTION BY THE COMPANY
Unless otherwise provided in the applicable Pricing Supplement, the Notes
cannot be redeemed prior to maturity by the Company and will not be subject to
any sinking fund. The Notes will be redeemable at the option of the Company
prior to the maturity date thereof only if an "Initial Redemption Date" is
specified in the applicable Pricing Supplement. If so specified, the Notes will
be subject to redemption at the option of the Company on any date on and after
the applicable Initial Redemption Date in whole or from time to time in part in
increments of $1,000 or such other minimum denomination specified in such
Pricing Supplement (provided that any remaining principal amount thereof shall
be at least $1,000 or such minimum denomination), at the applicable Redemption
Price (as defined herein), together with unpaid interest accrued to the date of
redemption, on notice given not more than 60 nor less than 30 calendar days
prior to the date of redemption and in accordance with the provisions of the
Indenture. "Redemption Price" means, with respect to any Note, an amount equal
to the Initial Redemption Percentage specified in the applicable Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction specified
therein, if applicable) multiplied by the unpaid principal amount to be
redeemed. The Initial Redemption Percentage, if any, applicable to a Note shall
decline on each anniversary of the Initial Redemption Date by an amount equal
to the applicable Annual Redemption Percentage Reduction, if any, until the
Redemption Price is equal to 100% of the unpaid principal amount to be
redeemed. The Redemption Price of Original Issue Discount Notes is described
below under "--Original Issue Discount Notes."
Foreign Currency Notes may be subject to different restrictions on
redemption. See "Special Provisions Relating to Foreign Currency Notes--Minimum
Denominations, Restrictions on Maturities, Repayment and Redemption."
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
The Notes will be repayable by the Company at the option of the holders
thereof prior to maturity only if one or more "Optional Repayment Dates" is
specified in the applicable Pricing Supplement. If so specified, the Notes will
be subject to repayment at the option of the holders thereof on any Optional
Repayment Date in whole or in part from time to time in increments of $1,000 or
such other minimum denomination specified in the applicable Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such other minimum denomination), at a repayment price equal to 100% of the
unpaid principal amount to be repaid, together with unpaid interest accrued to
the date of repayment. For any Note to be repaid, such Note must be received,
together with the form thereon
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entitled "Option to Elect Repayment" duly completed, by the Trustee at its
corporate trust office (or such other address specified on the applicable
Pricing Supplement or of which the Company shall from time to time notify the
holders of Notes) not more than 60 nor less than 30 calendar days prior to the
date of repayment. Exercise of such repayment option by the holder will be
irrevocable. The repayment price of Original Issue Discount Notes is described
below under "--Original Issue Discount Notes." Notwithstanding the foregoing,
the Company will comply with Section 14(e) under the Exchange Act, to the
extent applicable, and any other tender offer rules under the Exchange Act
which may then be applicable, in connection with any obligation of the Company
to purchase Notes at the option of the holders thereof as described herein.
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, beneficial owners of
Global Securities that desire to have all or any portion of the Book-Entry
Notes represented by such Global Securities repaid must direct the participant
of the Depositary through which they own their interest (each, a "Participant")
to direct the Depositary to exercise the repayment option on their behalf by
delivering the related Global Security and duly completed election form to the
Trustee as aforesaid. In order to ensure that such Global Security and election
form are received by the Trustee on a particular day, the applicable beneficial
owner must so direct the Participant through which it owns its interest before
such Participant's deadline for accepting instructions for that day. Different
firms may have different deadlines for accepting instructions from their
customers. Accordingly, such beneficial owners should consult the Participants
through which they own their interest for the respective deadlines for such
Participants. All instructions given to Participants from beneficial owners of
Global Securities relating to the option to elect repayment shall be
irrevocable. In addition, at the time such instructions are given, each such
beneficial owner shall cause the Participant through which it owns its interest
to transfer such beneficial owner's interest in the Global Security or
Securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee. See "Description of Debt Securities--Book-Entry
System" in the accompanying Prospectus.
Foreign Currency Notes may be subject to different restrictions on
repayment. See "Special Provisions Relating to Foreign Currency Notes--Minimum
Denominations, Restrictions on Maturities, Repayment and Redemption."
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes purchased by the Company may, at its discretion, be held,
resold or surrendered to the Registrar for cancellation.
OTHER PROVISIONS, ADDENDA
Any provisions with respect to Notes, including the determination of an
Interest Rate Basis, the specification of Interest Rates Basis, calculation of
the interest rate applicable to a Floating Rate Note, its Interest Payment
Dates or any other matter relating thereto may be modified by the terms
specified under "Other Provisions" on the face thereof or in an Addendum
relating thereto, if so specified on the face thereof and in the applicable
Pricing Supplement.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in
accordance with the laws of the State of New York.
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SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, the
following provisions shall apply to Foreign Currency Notes which are in
addition to, and to the extent inconsistent therewith replace, the description
of general terms and provisions of the Notes set forth herein and in the
Prospectus. Notes denominated or payable in foreign currency units, including
ECU, are Foreign Currency Notes.
The ECU in which the Notes may be denominated or may be payable is the
same as the ECU that is from time to time used as the unit of account of the
European Community (the "EC"). Changes to the ECU may be made by the EC, in
which event the ECU will change accordingly.
Foreign Currency Notes may be issued as either Certificated Notes or
Book-Entry Notes. Unless otherwise indicated in the applicable Pricing
Supplement, payment of the purchase price of Foreign Currency Notes will be
made in immediately available funds in the Specified Currency, as described
below.
PAYMENT CURRENCY
Unless otherwise indicated in the applicable Pricing Supplement,
purchasers are required to pay for Foreign Currency Notes in the Specified
Currency. Currently, there are limited facilities in the United States for the
conversion of U.S. dollars into foreign currencies. Therefore, unless otherwise
indicated in the applicable Pricing Supplement, the exchange rate agent
appointed by the Company and identified in the applicable Pricing Supplement
(the "Exchange Rate Agent," which term includes any successor exchange rate
agent appointed by the Company) will arrange for the conversion of U.S. dollars
into a Specified Currency on behalf of any purchaser of a Foreign Currency Note
to enable a prospective purchaser to deliver the Specified Currency in payment
for such Foreign Currency Note. The Exchange Rate Agent must receive a request
for any such conversion on or prior to the third Business Day preceding the
date of delivery of the Foreign Currency Note. All costs of such exchange will
be borne by such purchaser.
Unless otherwise specified on the applicable Pricing Supplement or unless
the holder of such Foreign Currency Note elects to receive payments in the
Specified Currency, payments made by the Company of principal of, premium, if
any, and interest, if any, on a Foreign Currency Note will be made in U.S.
dollars. Such U.S. dollar amount to be received by a holder will be based on
the highest bid quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign
exchange dealers (one of which may be the Exchange Rate Agent) for the purchase
by the quoting dealer of such Specified Currency for U.S. dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency payable to the holders of Notes scheduled to receive U.S. dollar
payment and at which the applicable dealer commits to execute a contract. If
such bid quotations are not available, payments to holders will be made in the
Specified Currency.
Unless otherwise specified in the applicable Pricing Supplement, a holder
of a Foreign Currency Note may elect to receive payment in such Specified
Currency for all such payments and need not file a separate election for each
such payment, and such election shall remain in effect until revoked by written
notice to the Paying Agent at its corporate trust office in The City of New
York received on a date prior to the Record Date for the relevant Interest
Payment Date or at least 10 calendar days prior to the Maturity Date (or any
Redemption Date or Repayment Date), as the case may be; provided, that such
election is irrevocable as to the next succeeding payment to which it relates;
if such election is made as to full payment on this Note, such election may
thereafter be revoked so long as the Paying Agent is notified of the revocation
within the time period set forth above.
Banks in the United States offer non-U.S. dollar denominated checking or
savings account facilities in the United States only on a limited basis.
Accordingly, unless otherwise indicated in the applicable Pricing Supplement,
payments of principal of, premium, if any, and interest, if any, on, Foreign
Currency
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Notes to be made in a Specified Currency other than U.S. dollars will be made
to an account at a bank outside the United States, unless alternative
arrangements are made.
If a Specified Currency (other than the U.S. dollar) in which this Note is
denominated or payable: (i) ceases to be recognized by the government of the
country which issued such currency or for the settlement of transactions by
public institutions of or within the international banking community, (ii) is a
currency unit and such currency unit ceases to be used for the purposes for
which it was established, or (iii) is not available to the Company for making
payments thereof due to the imposition of exchange controls or other
circumstances beyond the control of the Company, in each such case as
determined in good faith by the Company, then with respect to each date for the
payment of principal of and interest, if any, on this Note denominated or
payable in such Specified Currency occurring after the last date on which such
Specified Currency was so used (the "Conversion Date"), the U.S. dollar or such
Foreign Currency or currency unit as may be specified by the Company (the
"Substitute Currency") shall become the currency of payment for use on each
such payment date (but such Specified Currency shall, at the Company's
election, resume being the currency of payment on the first such payment date
preceded by 15 Business Days during which the circumstances which gave rise to
the change of currency no longer prevail, in each case as determined in good
faith by the Company). The Substitute Currency amount to be paid by the Company
to the Trustee and by the Trustee or any Paying Agent to the Holder of this
Note with respect to such payment date shall be the Currency Equivalent or
Currency Unit Equivalent (each as defined below) of the Specified Currency as
determined by the Exchange Rate Agent (which determination shall be delivered
in writing to the Trustee not later than the fifth Business Day prior to the
applicable payment date) as of the Conversion Date or, if later, the date most
recently preceding the payment date in question on which such determination is
possible of performance, but not more than 15 days before such payment date
(such Conversion Date or date preceding a payment date as aforesaid being
called the "Valuation Date"). Any payment in a Substitute Currency under the
circumstances described above will not constitute an Event of Default.
The "Currency Equivalent" shall be determined by the Exchange Rate Agent
as of each Valuation Date and shall be obtained by converting the Specified
Currency (unless such Specified Currency is a currency unit) into the
Substitute Currency at the Market Exchange Rate (as defined below) on the
Valuation Date.
The "Currency Unit Equivalent" shall be determined by the Exchange Rate
Agent as of each Valuation Date and shall be the sum obtained by adding
together the results obtained by converting the Specified Amount of each
initial Component Currency into the Substitute Currency at the Market Exchange
Rate on the Valuation Date for such Component Currency.
As used herein:
(a) "Business Day" means any day that is not a Saturday or Sunday and
that is not a day on which banking institutions are generally authorized or
obligated by law, regulation or executive order to close in The City of New
York and (i) with respect to Notes denominated in a Specified Currency
other than U.S. dollars or ECU, such day that is not a day on which banking
institutions are generally authorized or obligated by law, regulation or
executive order to close in the principal financial center of the country
of the Specified Currency, or (ii) with respect to Notes denominated in
ECU, a day that is a non-ECU clearing day as determined by the ECU Banking
Association in Paris;
(b) "Component Currency" means any currency which, on the Conversion
Date, was a component currency of the relevant currency unit, including
without limitation ECU;
(c) "Market Exchange Rate" means, as of any date, for any currency or
currency unit the noon U.S. dollar buying rate for that currency or
currency unit, as the case may be, for cable transfers quoted in New York
City on such date as certified for customs purposes by the Federal Reserve
Bank of New York. If such rates are not available for any reason with
respect to one or more currencies or currency units for which an Exchange
Rate is required, the Exchange Rate Agent will use, in its sole discretion
and without liability on its part, such quotation of the Federal Reserve
Bank of New York as of the most recent available date, or quotations from
one or more major banks in New York
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<PAGE>
City or in the country of issue of the currency or currency unit in
question, or such other quotations as the Exchange Rate Agent shall deem
appropriate. Unless otherwise specified by the Exchange Rate Agent if there
is more than one market for dealing in any currency or currency unit by
reason of foreign exchange regulations or otherwise, the market to be used
in respect of such currency or currency unit will be that upon which a
nonresident issuer of securities designated in such currency or currency
unit would, as determined in its sole discretion and without liability on
the part of the Exchange Rate Agent, purchase such currency or currency
unit in order to make payments in respect of such securities; and
(d) "Specified Amount" of a Component Currency means the number of units
(including decimals) which such Component Currency represented in the
relevant currency unit, on the Conversion Date or, if ECU and such currency
unit is being used for settlement of transactions by public institutions of
or within the European Communities or was so used after the Conversion
Date, the Valuation Date or the last date the currency unit was so used,
whichever is later. If after such date the official unit of any Component
Currency is altered by way of combination or subdivision, the Specified
Amount of such Component Currency shall be divided or multiplied in the
same proportion. If after such date two or more Component Currencies are
consolidated into a single currency, the respective Specified Amounts of
such Component Currencies shall be replaced by an amount in such single
currency equal to the sum of the respective Specified Amounts of such
consolidated Component Currencies expressed in such single currency, and
such amount shall thereafter be a Specified Amount and such single currency
shall thereafter be a Component Currency. If after such date any Component
Currency shall be divided into two or more currencies, the Specified Amount
of such Component Currency shall be replaced by specified amounts of such
two or more currencies, the sum of which, at the Market Exchange Rate of
such two or more currencies on the date of such replacement, shall be equal
to the Specified Amount of such former Component Currency and such amounts
shall thereafter be Specified Amounts an such currencies shall thereafter
be Component Currencies.
All determinations referred to above made by the Company or its agents
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
Specific information about the currency, currency unit or composite
currency in which a particular Foreign Currency Note is denominated, including
historical exchange rates and a description of the currency and any exchange
controls, will be set forth in the applicable Pricing Supplement. The
information therein concerning exchange rates is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the future.
MINIMUM DENOMINATIONS, RESTRICTIONS ON MATURITIES, REPAYMENT AND REDEMPTION
Notes denominated in Specified Currencies other than U.S. dollars will
have such minimum denominations and be subject to such restrictions on
maturities, repayment and redemption as are set forth in the applicable Pricing
Supplement. Any other restrictions applicable to Notes denominated in Specified
Currencies other than U.S. dollars, including restrictions related to the
distribution of such Notes, will be set forth in the related Pricing
Supplement.
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FOREIGN CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS AND ANY PRICING SUPPLEMENT DO
NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES OR
INDEXED NOTES THE PAYMENT OF WHICH IS TO BE MADE IN OR RELATED TO THE VALUE OF
A FOREIGN CURRENCY OR A COMPOSITE CURRENCY AND THE COMPANY DISCLAIMS ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH NOTES. SUCH NOTES
ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY, COMPOSITE CURRENCY OR INDEXED TRANSACTIONS.
The information set forth in this Prospectus Supplement with respect to
foreign currency risks is directed to prospective purchasers who are United
States residents, and the Company disclaims any responsibility to advise
prospective purchasers of Foreign Currency Notes who are residents of countries
other than the United States with respect to any matters that may affect the
purchase, holding or receipt of payments of principal of, premium, if any, and
interest on, the Notes. Such persons should consult their own counsel with
regard to such matters.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which is
to be or may be made in, or related to the value of, a Specified Currency other
than U.S. dollars entails significant risks that are not associated with a
similar investment in a security denominated in U.S. dollars. Such risks
include the possibility of significant changes in rates of exchange between the
U.S. dollar and the various foreign currencies (or composite currencies) after
the issuance of such Note and the possibility of the imposition or modification
of foreign exchange controls by either the U.S. or foreign governments. Such
risks generally depend on economic and political events over which the Company
has no control. In recent years, rates of exchange between U.S. dollars and
certain foreign currencies have been highly volatile and such volatility may be
expected to continue in the future. Fluctuations in any particular exchange
rate that have occurred in the past are not necessarily indicative, however, of
fluctuations in such rate that may occur during the term of any Note.
Depreciation of the Specified Currency of a Foreign Currency Note against the
U.S. dollar would result in a decrease in the effective yield of such Note
below its coupon rate and, in certain circumstances, could result in a loss to
the investor on a U.S. dollar basis. In addition, depending on a specific term
of a currency-linked Indexed Note, changes in exchange rates relating to any of
the currencies involved may result in a decrease in the effective yield of such
currency-linked Indexed Note and, in certain circumstances, could result in a
loss of all or a substantial portion of the principal of a currency-linked
Indexed Note to the investor.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed nations are permitted to
fluctuate in value relative to the U.S. dollar. National governments, however,
rarely voluntarily allow their currencies to float freely in response to
economic forces. Governments in fact use a variety of techniques, such as
intervention by a country's central bank or imposition of regulatory controls
or taxes, to affect the exchange rate of their currencies. Governments may also
issue a new currency to replace an existing currency or alter the exchange rate
or relative exchange characteristics by devaluation or revaluation of a
currency. Thus, a special risk in purchasing Foreign Currency Notes or
currency-linked Indexed Notes is that their U.S. dollar-equivalent yields could
be affected by governmental actions, which could change or interfere with
theretofore freely determined currency valuation, fluctuations in response to
other market forces, and the movement of currencies across borders. There will
be no adjustment or change in the terms of such Notes in the event that
exchange rates should become fixed, or in the event of any devaluation or
revaluation or imposition of exchange or other regulatory controls or taxes, or
in the event of other developments affecting the U.S. dollar or any applicable
Specified Currency.
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Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of, and
premium, if any, or interest, if any, on a Note. Even if there are no actual
exchange controls, it is possible that the Specified Currency for any
particular Note not denominated in U.S. dollars would not be available at such
Note's maturity. In that event, the Company would make required payments in
U.S. dollars on the basis of the market exchange rate on the date of such
payment, or if such rate of exchange is not then available, on the basis of the
market exchange rate as of the
most recent practicable date. See "Special Provisions Relating to Foreign
Currency Notes--Payment Currency."
FOREIGN CURRENCY JUDGMENTS
The Indenture and Notes will be governed by and construed in accordance
with the laws of the State of New York. If an action based on Foreign Currency
Notes were commenced in a New York court, such court would render or enter a
judgment or decree in the Specified Currency. Such judgment would then be
converted into U.S. dollars at the rate of exchange prevailing on the date of
entry of the judgment or decree. In the event an action based on Foreign
Currency Notes were commenced in a court in the United States outside New York,
it is likely that the judgment currency would be U.S. dollars, but the method
of determining the applicable exchange rate may differ.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Wilmer, Cutler & Pickering, special tax counsel to the
Company, the following summary accurately describes the principal United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes to initial holders purchasing Notes at the "issue price" (as defined
below). This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), administrative pronouncements, judicial decisions and existing
and proposed Treasury regulations, changes to any of which subsequent to the
date of this Prospectus Supplement may affect the tax consequences described
herein. Wilmer, Cutler & Pickering undertakes no obligation to supplement this
opinion to reflect any changes in laws that may occur after the date hereof.
This summary discusses only Notes held as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to a holder in light of the holder's
particular circumstances or to holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities or
foreign currencies, persons holding Notes as part of a straddle or hedging
transaction, or United States Holders whose functional currency (as defined in
Code Section 985) is not the U.S. dollar. Finally, this summary does not
discuss Original Issue Discount Notes (as defined below for the purposes of
this summary) which qualify as "applicable high-yield discount obligations"
under Section 163(i) of the Code. Holders of Original Issue Discount Notes
which are "applicable high-yield discount obligations" may be subject to
special rules. Persons considering the purchase of Notes should consult their
tax advisors with regard to the application of the United States federal income
tax laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
As used in this summary, the term "U.S. Holder" means the beneficial owner
of a Note that is: (i) for United States federal income tax purposes a citizen
or resident of the United States (including certain former citizens and former
long-term residents), (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source or (iv) a trust with
respect to the administration of which a court within the United States is able
to exercise primary supervision and one or more United States persons have the
authority to control all substantial decisions of the trust.
As used in this summary, the term "Non-U.S. Holder" means an owner of a
Note that is, for United States federal income tax purposes: (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a foreign estate, (iv) a
foreign trust or (v) a foreign partnership, one or more of the members of which
is, for United States federal income tax purposes, a nonresident alien
individual, a foreign corporation or a nonresident alien fiduciary of a foreign
estate or trust.
As used in this summary under "Certain United States Federal Income Tax
Considerations," the term "Original Issue Discount Note" has the meaning
described under "--Original Issue Discount Notes" below. Certain Notes that
constitute "Original Issue Discount Notes" for purposes of other portions of
this Prospectus Supplement may not be treated as Original Issue Discount Notes
for purposes of this summary, and Notes other than those constituting "Original
Issue Discount Notes" for purposes of other portions of this Prospectus
Supplement may be treated as Original Issue Discount Notes for purposes of this
summary. See "Description of Notes--Original Issue Discount Notes" above.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest paid or accrued on Notes will be taxable to U.S. Holders as
ordinary interest income. Interest will be included in U.S. Holders' income at
the time such payments are accrued or are received in accordance with the U.S.
Holder's method of accounting for United States federal income tax purposes,
unless the Notes are classified as Original Issue Discount Notes. The time at
which interest paid or accrued with respect to Original Issue Discount Notes is
included in a U.S. Holder's income is described below.
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ORIGINAL ISSUE DISCOUNT NOTES
A Note that is issued for an issue price that is less than its stated
redemption price at maturity will generally be considered to have been issued
at an original issue discount for United States federal income tax purposes (an
"Original Issue Discount Note"). The "issue price" of a Note equals the first
price at which a substantial amount of the Notes is sold to the public for
money (not including sales to 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 equals the
sum of all payments required under the Note other than payments of qualified
stated interest.
"Qualified stated interest" generally means stated interest
unconditionally payable as a series of payments in cash or property (other than
debt instruments of the Company) at least annually during the entire term of
the Note and equal to the outstanding principal balance of the Note multiplied
by a single fixed rate of interest. For special rules concerning interest
payments on Notes with a fixed term of one year or less, see "Short-Term Notes"
below. In addition, interest unconditionally payable at least annually with
respect to Floating Rate Notes may in certain circumstances be treated as
qualified stated interest. Interest payable at least annually at a single
Interest Rate Basis that can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds, such as the CD Rate, Commercial
Paper Rate, Eleventh District Cost of Funds Rate, Federal Funds Rate, LIBOR,
Prime Rate, CMT Rate and the Treasury Rate, plus or minus a fixed Spread (or a
fixed rate minus one of the above Interest Rate Bases) will generally be
treated as qualified stated interest. See "Floating Rate and Indexed Notes"
below.
A Note will not be considered to have original issue discount if the
difference between the Note's stated redemption price at maturity and its issue
price is less than a de minimis amount, i.e., 1/4 of 1 percent of the stated
redemption price at maturity multiplied by the number of complete years to
maturity. Holders of Notes with a de minimis amount of original issue discount
will generally include such original issue discount in income, as capital gain,
on a pro rata basis as principal payments are made on the Note. Special rules
apply for determining whether a Note that bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays) has qualified
stated interest or more than a de minimis amount of original issue discount.
A U.S. Holder of Original Issue Discount Notes will be required to include
qualified stated interest payments in income as such payments are received or
accrued in accordance with the U.S. Holder's method of accounting for federal
income tax purposes. U.S. Holders of Original Issue Discount Notes (other than
Short-Term Obligations) will be required to include original issue discount in
income for federal income tax purposes as it accrues, regardless of their
accounting method, in accordance with a constant yield method based on a
compounding of interest. (The rules for including interest on Short-Term
Obligations are described below.) As a consequence, U.S. Holders will be
required to include interest on Original Issue Discount Notes in income before
receiving the corresponding interest payments.
In general, the amount of original issue discount included in income by
the initial U.S. Holder of an Original Issue Discount Note will be the sum of
the daily portions of original issue discount with respect to such Original
Issue Discount Note for each day during the taxable year (or portion of the
taxable year) on which the U.S. Holder held the Original Issue Discount Note.
The "daily portion" of original issue discount on any Original Issue Discount
Note is determined by allocating to each day in any accrual period a ratable
portion of the original issue discount allocable to that accrual period. An
"accrual period" may be of any length and the accrual periods may vary in
length over the term of the Original Issue Discount Note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or on
the first day of an accrual period. The amount of original issue discount
allocable to each accrual period is generally equal to the difference between
(i) the product of the Original Issue Discount Note's adjusted issue price at
the beginning of such accrual period and its yield to maturity (appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments
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allocable to such accrual period. The "adjusted issue price" of an Original
Issue Discount Note at the beginning of any accrual period is the sum of the
issue price of the Original Issue Discount Note plus the amount of original
issue discount allocable to all prior accrual periods minus the amount of any
prior payments on the Original Issue Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue discount in
successive accrual periods.
Short-Term Notes. Interest payments on a note with a fixed term of one
year or less ("Short-Term Notes") cannot qualify as qualified stated interest.
A cash method U.S. Holder of a Short-Term Note is not required to accrue
original issue discount with respect to such Notes on a current basis unless it
elects to do so. If a cash method U.S. Holder does not so elect, any gain
realized on the sale, exchange, or retirement of the Short-Term Note will be
ordinary income to the extent of the original issue discount which has accrued
on a straight-line basis through the date of the Note's sale, exchange or
retirement. A cash method U.S. Holder reporting on this basis will be required
to defer deductions for any interest paid on indebtedness incurred to purchase
or carry the Short-Term Note in an amount up to the amount of the interest
income deferred on the Short-Term Note until the taxable period in which the
deferred interest income is taken into account.
U.S. Holders who report income for federal income tax purposes on the
accrual method and certain other U.S. Holders, including banks and dealers in
securities, as well as cash method U.S. Holders who elect to do so, are
required to include original issue discount on Short-Term Notes in income as it
accrues on a straight-line basis. U.S. Holders may elect to accrue acquisition
discount (the difference between the U.S. Holder's basis in the Note and its
stated redemption price at maturity) rather than original issue discount on a
straight-line basis. In addition, in lieu of accruing either original issue
discount or acquisition discount on a straight-line basis, a U.S. Holder may
elect to accrue on the basis of a constant yield to maturity and daily
compounding.
U.S. Holders should consult their tax advisors concerning (i) the
desirability of any of the foregoing elections and (ii) the tax treatment of
interest paid on Short-Term Notes prior to the date of their retirement.
Aggregation of Certain Notes. The OID Regulations contain aggregation
rules which require in certain circumstances that if more than one type of Note
is issued as part of the same issuance of securities to a single holder, some
or all of such Notes may be treated together as a single debt instrument with a
single issue price, maturity date, yield to maturity and stated redemption
price at maturity for purposes of calculating and accruing any original issue
discount. Unless otherwise provided in the related Pricing Supplement, the
Company does not expect to treat any of the Notes as being subject to the
aggregation rules for purposes of computing original issue discount.
Put and Call Options. Certain of the Notes (i) may be redeemable at the
option of the Company prior to their stated maturity (a "call option") and/or
(ii) may be repayable at the option of the holder prior to their stated
maturity (a "put option"). Notes containing such features may be subject to
rules that differ from the general rules discussed above. Investors intending
to purchase Notes with such features should consult their own tax advisors,
because the original issue discount consequences will depend, in part, on the
particular terms and features of the purchased Notes.
Constant Yield Election. U.S. Holders may generally, upon election,
include in income all interest (including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to original issue
discount, subject to certain limitations and exceptions. This election may be
made separately for each debt instrument or class of debt instrument.
FLOATING RATE AND INDEXED NOTES
Floating Rate Notes and Indexed Notes (hereinafter "Variable Notes")
acquired by U.S. Holders are subject to special rules for determining qualified
stated interest or original issue discount. A Variable Note will qualify as a
"variable rate debt instrument" if (i) its issue price does not exceed the
total
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noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount and (ii) it provides for stated interest, paid or
compounded at least annually, at current values of (a) one or more qualified
floating rates, (b) a single fixed rate and one or more qualified floating
rates, (c) a single objective rate, or (d) a single fixed rate and a single
objective rate that is a qualified inverse floating rate. The specified de
minimis amount for the excess of issue price over noncontingent principal
payments is the lesser of (i) 1.5 percent times the product of the fixed
principal payments and the number of complete years to maturity from the issue
date or (ii) 15 percent of the total fixed principal payments.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but no more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, two or more qualified floating rates that can reasonably be expected
to have approximately the same values throughout the term of the Variable Note
(e.g., two or more qualified floating rates with values within 25 basis points
of each other as determined on the Variable Note's issue date) will be treated
as a single qualified floating rate. Notwithstanding the foregoing, a variable
rate that would otherwise constitute a qualified floating rate but which is
subject to one or more restrictions such as a maximum numerical limitation
(i.e., a cap), a minimum numerical limitation (i.e., a floor), or a minimum
amount of increase or decrease (i.e., a governor) may, under certain
circumstances, fail to be treated as a qualified floating rate unless such cap,
floor or governor is fixed throughout the term of the Note or is not expected,
as of the issue date, to significantly affect the expected yield on the Note
(determined without regard to the cap, floor or governor).
An "objective rate" is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and is based on objective
financial or economic information. A rate will not qualify as an objective rate
if it is based on information that is within the control of the issuer (or a
related party) or that is unique to the circumstances of the issuer (or a
related party), such as dividends, profits, or the value of the issuer's stock
(although a rate does not fail to be an objective rate merely because it is
based on the credit quality of the issuer). A "qualified inverse floating rate"
is any objective rate where such rate is equal to a fixed rate minus a
qualified floating rate, as long as variations in the rate can reasonably be
expected to inversely reflect contemporaneous variations in the qualified
floating rate.
If a Variable Note provides for stated interest at a fixed rate for an
initial period of one year or less followed by a variable rate that is either a
qualified floating rate or an objective rate and the value of the variable rate
on the issue date is intended to approximate the fixed rate (e.g., the value of
the variable rate on the issue date does not differ from the value of the fixed
rate by more than 25 basis points), the fixed rate and the variable rate
together will constitute either a single qualified floating rate or objective
rate, as the case may be.
If a Variable Note provides for stated interest at either a single
qualified floating rate or a single objective rate throughout its term and the
interest on such Note is unconditionally payable at least annually, all stated
interest on the Note will constitute qualified stated interest, and will be
taxed as described above under "Original Issue Discount Notes." Such a Variable
Note will not have original issue discount unless it is issued for an amount
that is less than its stated principal amount, and the amount of such original
issue discount is more than the de minimis amount described above under
"Original Issue Discount Notes." If such a Variable Note is issued with
original issue discount, the amount of original issue discount that accrues
during an accrual period is determined under the rules applicable to fixed rate
debt instruments by converting the variable rate into an equivalent fixed rate.
The qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds (or
is less than) the interest assumed to be paid during the accrual period
pursuant to the foregoing rules.
If a variable rate debt instrument is not described in the preceding
paragraph and does not provide for any interest payable at a fixed rate, the
amount of original issue discount and qualified stated interest
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is determined by converting the variable rate debt instrument into an
equivalent fixed rate debt instrument. In general, this is accomplished by
substituting a fixed interest rate that (i) equals the value of each qualified
floating rate or qualified inverse floating rate as of the Variable Note's
issue date or (ii) reflects the yield that is reasonably expected for an
objective rate (other than a qualified inverse floating rate). If a Variable
Note provides for stated interest at a fixed rate in addition to one or more
qualified floating rates or a qualified inverse floating rate, the fixed rate
is first converted into a qualified floating rate (or qualified inverse
floating rate) with a value on the issue date equal to that of the fixed rate.
An equivalent fixed rate is then substituted for the qualified floating rate or
qualified inverse floating rate, as described above. After the fixed rates are
determined, an equivalent fixed rate debt instrument is constructed, with terms
identical to those provided under the variable rate debt instrument except that
fixed rates are substituted for the qualified floating rates or objective
rates. The amount of qualified stated interest and original issue discount is
then determined by applying the rules described above under "Original Issue
Discount Notes." The amount of qualified stated interest or original issue
discount attributable to an accrual period will be increased (or decreased) if
the interest actually accrued or paid during an accrual period exceeds (or is
less than) the interest assumed to be accrued or paid during the accrual period
under the equivalent fixed rate debt instrument.
Contingent Debt Instruments. If a Variable Note does not qualify as a
"variable rate debt instrument," the Variable Note will be treated as a
"contingent payment debt instrument." In general, a U.S. Holder of a contingent
payment debt instrument must determine the amount of interest to take into
account during each accrual period by constructing a projected payment
schedule, as of the issue date, consisting of all noncontingent payments and
the projected amount of each contingent payment. In addition, any gain
recognized by a U.S. Holder on the sale, exchange, or retirement of a
contingent payment debt instrument will generally be treated as ordinary
interest income (and loss will be ordinary loss to the extent the amount of
interest previously included in income exceeds the amount of any noncontingent
payments and the projected amount of any contingent payments previously made or
projected to have been made on the Variable Note). U.S. Holders of Variable
Notes classified as contingent payment debt instruments should consult their
tax advisors regarding the federal income tax consequences of the ownership and
disposition of such Notes.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a U.S. Holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and such U.S. Holder's adjusted
tax basis in the Note. For these purposes, the amount realized does not include
any amount attributable to accrued interest on the Note which has not
previously been included in income. Such amounts are treated as payments of
interest. See "--Payments of Interest" above. A U.S. Holder's adjusted tax
basis in a Note will equal the U.S. Holder's cost of acquiring the Note,
increased by the amount of original issue discount the U.S. Holder previously
included in income with respect to such Note and reduced by any amortized bond
premium, principal payments, and the amount of any other payments except
payments of qualified stated interest (as defined above).
Gain or loss realized on the sale, exchange or retirement of a Note will
be capital gain or loss (except, in the case of a Short-Term Note, to the
extent of any original issue discount or acquisition discount not previously
included in the U.S. Holder's taxable income). See "--Original Issue Discount
Notes--Short Term Notes" above. For certain noncorporate U.S. Holders
(including individuals), the rate of taxation of capital gain will depend upon
(i) the U.S. Holder's holding period for the Note (with the lowest rate
available only for a Note held more than 18 months) and (ii) the U.S. Holder's
marginal tax rate for ordinary income. U.S. Holders should consult their tax
advisors with respect to applicable rates and holding periods, and netting
rules for capital losses.
PURCHASERS OF NOTES AT OTHER THAN ORIGINAL ISSUE PRICE OR DATE
The foregoing does not discuss special rules which may affect the
treatment of purchasers that acquire Notes either (a) other than at the time of
original issuance or (b) at the time of original issuance other than at the
issue price, including those provisions of United States tax law relating to
the treatment
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of "market discount," "acquisition premium," and "amortizable bond premium."
Such purchasers should consult their tax advisors as to the consequences to
them of the acquisition, ownership and disposition of the Notes.
EXTENSION OF MATURITY AND RESET OF INTEREST RATE
The reset of the interest rate on, or the extension of the maturity of, a
Note pursuant to its original terms generally should not be viewed as a taxable
exchange. U.S. Holders should consult with their own tax advisors as to the
United States federal income tax consequences of such a reset or extension.
FOREIGN CURRENCY-DENOMINATED NOTES
A U.S. Holder who uses the cash method of accounting and who receives a
payment of interest (including qualified stated interest on an Original Issue
Discount Note) in a foreign currency with respect to a Foreign
Currency-Denominated Note (other than a payment of interest includible as
original issue discount on an Original Issue Discount Note) will be required to
include the U.S. dollar value of the foreign currency payment (determined on
the date the payment is received) in income when it is received regardless of
whether the payment is in fact converted to U.S. dollars at that time, and the
U.S. dollar value will be the U.S. Holder's tax basis in the foreign currency.
If a cash method U.S. Holder receives a payment described above in U.S. dollars
pursuant to an option available under such a Foreign Currency-Denominated Note,
the U.S. Holder will be required to include the amount of the payment in income
when it is received.
Interest income (including original issue discount) that accrues on a
Foreign Currency-Denominated Note is to be determined in the relevant foreign
currency. A U.S. Holder will be required to include in income the U.S. dollar
value of the amount of foreign-denominated interest income (including original
issue discount) that has accrued and is otherwise required to be taken into
account with respect to a Foreign Currency-Denominated Note during an accrual
period (other than payments of interest to a cash method U.S. Holder described
in the preceding paragraph). The U.S. dollar value of the accrued income will
be determined by translating such income at the average rate of exchange for
the accrual period or, with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable year. The
U.S. Holder will recognize ordinary income or loss with respect to accrued
interest income on the date payment of the interest is actually received or the
date the Foreign Currency-Denominated Note is sold, exchanged or retired. The
amount of ordinary income or loss recognized will equal the difference between
(i) the U.S. dollar value of the foreign currency payment received (determined
on the date the payment is received or the Note is sold, exchanged or retired)
with respect to the accrual period (or, where a U.S. Holder receives U.S.
dollars, the amount of the payment with respect to the accrual period) and (ii)
the U.S. dollar value of the interest income that accrued during the accrual
period (as determined above). A U.S. Holder may elect to translate interest
income described in this paragraph (including original issue discount) into
U.S. dollars at the spot rate on the last day of the interest accrual period
(or, in the case of a partial accrual period, the spot rate on the last day of
the taxable year) or, if the date of receipt is within five business days of
the last day of the interest accrual period, the spot rate on the date of
receipt. A U.S. Holder that makes such an election must apply it consistently
to all debt instruments from year to year and cannot change the election
without the consent of the Internal Revenue Service.
A U.S. Holder will recognize ordinary income or loss attributable to
fluctuations in currency exchange rates with respect to the principal amount of
a Foreign Currency-Denominated Note when principal payments are received or the
Note is sold, exchanged or retired. The amount of income or loss will equal the
difference between (i) the U.S. dollar value of the relevant foreign
currency-denominated principal amount determined at the spot rate on the date
the principal payment is received or the Note is sold, exchanged or retired and
(ii) the U.S. dollar value of the relevant foreign currency-denominated
principal amount determined at the spot rate on the date the U.S. Holder
acquired the Note.
Upon the sale, exchange or retirement of a Foreign Currency-Denominated
Note, the amount of a U.S. Holder's gain or loss attributable to fluctuations
in currency exchange rates with respect to both
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principal and accrued interest will be limited to the total gain or loss
realized on the disposition of the Note. Any gain or loss realized by the U.S.
Holder in excess of that attributable to fluctuations in currency exchange
rates will be capital gain or loss (except, in the case of a Short-Term Note,
to the extent of any original issue discount or acquisition discount not
previously included in the U.S. Holder's income). A special rule for purchases
and sales of publicly traded Foreign Currency-Denominated Notes by a cash
method taxpayer requires amounts of foreign currency paid or received to be
translated into U.S. dollars at the spot rate on the settlement date of the
purchase or sale. Accordingly, no exchange gain or loss will result from
currency fluctuations between the trade date and the settlement of such a
purchase or sale. An accrual method taxpayer may elect the same treatment
required of cash-method taxpayers with respect to the purchase and sale of
publicly traded Foreign Currency-Denominated Notes provided the election is
applied consistently. Such election cannot be changed without the consent of
the Internal Revenue Service.
A U.S. Holder will have a tax basis in any foreign currency received as
payment of interest or principal or upon the sale, exchange or retirement of a
Foreign Currency-Denominated Note equal to the U.S. dollar value of such
foreign currency, determined at the time of such payment, sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of foreign currency (including its exchange for U.S. dollars or its
use to purchase Foreign Currency-Denominated Notes) will be ordinary income or
loss.
Foreign currency gains or losses described in this section will not be
considered interest income or expense, even if attributable to payments of
interest. The source of such foreign currency gains or losses will be
determined by reference to the residence of the U.S. Holder or the "qualified
business unit" of the U.S. Holder on whose books the Note is properly
reflected. The U.S. tax consequences of a U.S. Holder's investment in Notes
denominated in more than one foreign currency will be set forth in the
applicable pricing supplement with respect to such Notes.
BACKUP WITHHOLDING AND INFORMATION REPORTING FOR U.S. HOLDERS
Information reporting to the Internal Revenue Service is required for
interest payments and original issue discount accruals for certain noncorporate
U.S. Holders (including individuals). These noncorporate U.S. Holders may be
subject to backup withholding at a rate of 31 percent on payments of principal,
premium and interest (including original issue discount, if any) on, and the
proceeds of disposition of, a Note. Backup withholding will apply only if the
U.S. Holder (i) fails to furnish its Taxpayer Identification Number ("TIN")
which, for an individual, would be his Social Security Number, (ii) furnishes
an incorrect TIN, (iii) is notified by the Internal Revenue Service that it has
failed to properly report payments of interest and dividends or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report interest
and dividend payments. The application for exemption is available by providing
a properly completed Internal Revenue Service Form W-9. U.S. Holders should
consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption if
applicable.
The amount of any backup withholding from a payment to a U.S. Holder will
be allowed as a credit against such U.S. Holder's United States federal income
tax liability and may entitle such U.S. Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
INCOME AND WITHHOLDING TAX
Under present United States federal law, and subject to the discussion
below concerning Indexed Notes and backup withholding:
(a) payments of principal, interest (including original issue discount,
if any) and premium on the Notes by the Company or any paying agent to any
Non-U.S. Holder will not be subject to the 30 percent United States federal
withholding tax, provided that, in the case of interest, (i) such Non-U.S.
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Holder does not own, actually or constructively, 10 percent or more of the
total combined voting power of all classes of stock of the Company entitled
to vote, is not a controlled foreign corporation related, directly or
indirectly, to the Company through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code and (ii)
the statement requirement set forth in Section 871(h) or Section 881(c) of
the Code has been fulfilled with respect to the beneficial owner, as
discussed below;
(b) a Non-U.S. Holder of a Note will not be subject to United States
federal income tax on gain realized on the sale, exchange or other
disposition of such Note, unless (i) such Non-U.S. Holder is an individual
who is present in the United States for 183 days or more in the taxable
year of disposition, and either (a) such individual has a "tax home" (as
defined in Code Section 911(d)(3)) in the United States (unless such gain
is attributable to a fixed place of business in a foreign country
maintained by such individual and has been subject to foreign tax of at
least 10 percent) or (b) the gain is attributable to an office or other
fixed place of business maintained by such individual in the United States
or (ii) such gain is effectively connected with the conduct by such
Non-U.S. Holder of a trade or business in the United States.
Sections 871(h) and 881(c) of the Code require that, in order to obtain
the portfolio interest exemption from withholding tax described in paragraph
(a) above, either the beneficial owner of a Note, or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and that is holding the Note on behalf of such beneficial owner,
file a statement with the withholding agent that the beneficial owner of the
Note is not a U.S. Holder. The financial institution must certify under
penalties of perjury, that such statement has been received from the beneficial
owner by it or by a financial institution between it and the beneficial owner
and furnish the payor with a copy thereof. Such requirement will be fulfilled
if the beneficial owner of a Note certifies on United States Internal Revenue
Service Form W-8, under penalties of perjury, that it is not a U.S. Holder and
provides its name and address, and any Financial Institution holding the Note
on behalf of the beneficial owner files a statement with the withholding agent
to the effect that it has received such a statement (and furnishes the
withholding agent with a copy thereof). The portfolio interest exemption from
withholding tax described in paragraph (a) above will not apply to contingent
interest paid on certain Indexed Notes. Unless otherwise provided in the
applicable Pricing Supplement, the Company does not expect any interest on the
Notes to be contingent interest within the meaning of this provision.
If a Non-U.S. Holder of a Note is engaged in a trade or business in the
United States, and if interest (including original issue discount) on the Note
or gain realized on its sale, exchange or other disposition is effectively
connected with the conduct of such trade or business, the Non-U.S. Holder,
although exempt from the withholding tax discussed in the preceding paragraph,
will generally be subject to regular United States income tax on such
effectively connected income in the same manner as if it were a U.S. Holder.
See "--Tax Consequences to United States Holders" above. In lieu of the
certificate described in the preceding paragraph, such a Non-U.S. Holder will
be required to provide to the Company a properly executed United States
Internal Revenue Service Form 4224 or successor form in order to claim an
exemption from withholding tax. In addition, if such Non-U.S. Holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30
percent (or such lower rate provided by an applicable treaty) of its
effectively connected earnings and profits for the taxable year, subject to
certain adjustments. For purposes of the branch profits tax, interest
(including original issue discount) on and any gain recognized on the sale,
exchange or other disposition of a Note will be included in the effectively
connected earnings and profits of such Non-U.S. Holder if such interest or
gain, as the case may be, is effectively connected with the conduct by the
Non-U.S. Holder of a trade or business in the United States.
Under Section 2105(b) of the United States federal estate tax law, a Note
or coupon held by an individual who is not a citizen or resident of the United
States at the time of his death will not be subject to United States federal
estate tax as a result of such individual's death, provided that the individual
does not own, actually or constructively, 10 percent or more of the total
combined voting power of all classes of stock of the Company entitled to vote
and, at the time of such individual's death, payments with respect to such Note
would not have been effectively connected to the conduct by such individual of
a trade or business in the United States.
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On October 6, 1997, the United States Treasury issued final regulations
regarding the withholding and information reporting rules discussed above. The
final regulations, which affect the rules applicable to payments to foreign
persons, in general do not alter the substantive withholding and information
reporting requirements but rather unify current certification procedures and
modify reliance standards. In addition, the final regulations address certain
issues relating to intermediary certification procedures designed to simplify
compliance by withholding agents. The final regulations are generally effective
for payments made on or after January 1, 2000, subject to certain transition
rules. It is possible that the Company and other withholding agents may request
a new withholding exemption form from Non-U.S. Holders in order to qualify for
continued exemption from withholding under Treasury Regulations when they
become effective. Prospective investors should consult their own tax advisors
concerning the adoption of the Final Regulations.
Each Non-U.S. Holder of a Note should be aware that if it does not
properly provide the required Internal Revenue Service form, or if the Internal
Revenue Service form is not properly transmitted to and received by the United
States person otherwise required to withhold United States federal income tax,
interest on the Note may be subject to United States withholding tax at a 30
percent rate.
BACKUP WITHHOLDING AND INFORMATION REPORTING FOR NON-U.S. HOLDERS
Under certain circumstances, the United States Internal Revenue Service
requires information reporting and backup withholding of United States federal
income tax at a rate of 31 percent with respect to payments to certain
noncorporate Non-U.S. Holders (including individuals). Information reporting
and backup withholding will apply unless such noncorporate Non-U.S. Holders
certify to the withholding agent that the beneficial owner of the Note is not a
U.S. Holder. This certification requirement will generally be satisfied by the
certification provided to avoid the 30 percent withholding tax (described
above).
The payment of the proceeds of a disposition of a Note by a Non-U.S.
Holder to or through the United States office of a broker or through a
non-United States branch of a United States broker generally will be subject to
information reporting and backup withholding at a rate equal to 31 percent of
the gross proceeds unless the Non-U.S. Holder certifies on Internal Revenue
Service Form W-8 that the beneficial owner of the Note is not a U.S. Holder or
otherwise establishes an exemption. The payment of the proceeds of a
disposition of a note by a Non-U.S. Holder to or through a non-United States
office of a non-United States broker will not be subject to backup withholding
or information reporting unless the non-United States broker has certain United
States relationships.
Non-U.S. Holders of Notes should consult their tax advisors regarding the
application of withholding, information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available.
Any amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such Non-U.S. Holder's
United States federal income tax liability and may entitle such Non-U.S. Holder
to a refund, provided that the required information is furnished to the United
States Internal Revenue Service.
On October 6, 1997, the United States Treasury issued final regulations
regarding the withholding and information reporting rules discussed above. The
final regulations, which affect the rules applicable to payments to foreign
persons, in general do not alter the substantive withholding and information
reporting requirements but rather unify current certification procedures and
modify reliance standards. In addition, the final regulations address certain
issues relating to intermediary certification procedures designed to simplify
compliance by withholding agents. The final regulations are generally effective
for payments made on or after January 1, 2000, subject to certain transition
rules. It is possible that the Company and other withholding agents may request
a new withholding exemption form from Non-U.S. Holders in order to qualify for
continued exemption from backup withholding under Treasury Regulations when
they become effective. Prospective investors should consult their own tax
advisors concerning the adoption of the Final Regulations.
S-31
<PAGE>
THE FEDERAL INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. PROSPECTIVE U.S. HOLDERS AND NON-U.S. HOLDERS OF THE NOTES ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM
OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE TAX
CONSEQUENCES UNDER FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
EFFECTS OF CHANGES IN SUCH LAWS.
PLAN OF DISTRIBUTION
Under the terms of the Distribution Agreement dated as of September 3,
1997, as amended (the "Distribution Agreement"), the Notes are being offered on
a continuing basis by the Company through Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC"), BancAmerica Robertson Stephens, Paribas,
Chase Securities Inc., Citicorp Securities, Inc., Credit Lyonnais Securities
(USA) Inc., Deutsche Bank Securities Inc., First Chicago Capital Markets, Inc.,
NationsBanc Montgomery Securities LLC, Societe Generale Securities Corporation
and UBS Securities LLC (the "Agents"), each of which has agreed to use its
reasonable efforts to solicit purchases of the Notes. Except as otherwise
agreed by the Company and an Agent with respect to a particular Note, the
Company will pay each Agent a commission ranging from 0.125% to 0.875% of the
principal amount of each Note, depending on its maturity, sold through such
Agent. The Company will have the sole right to accept offers to purchase Notes
and may reject any such offer, in whole or in part. Each Agent shall have the
right, in its sole discretion, to reject any offer to purchase Notes received
by it, in whole or in part, that it reasonably considers to be unacceptable.
The Company also may sell Notes to any Agent, acting as principal, at a
discount or concession to be agreed upon at the time of sale, for resale to one
or more investors or other purchasers at a fixed offering price or at varying
prices related to prevailing market prices at the time of such resale or
otherwise, as determined by such Agent and specified in the applicable Pricing
Supplement. The Agents may offer the Notes they have purchased as principal to
other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
such Agent from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity, and may be resold by the Agent to investors and other
purchasers from time to time in one or more transactions, including negotiated
transactions as described above. After the initial public offering of Notes to
be resold to investors and other purchasers, the public offering price,
concession and discount may be changed.
The Notes may also be sold by the Company directly to investors (other
than broker-dealers) in those jurisdictions in which the Company is permitted
to do so. No commission will be paid on Notes sold directly by the Company.
The Company may also accept (but not solicit) offers to purchase Notes
from time to time through one or more additional agents, acting either as agent
or principal, on substantially the same terms as those applicable to sales of
Notes to or through the Agents pursuant to the Distribution Agreement. Any such
additional agent shall, with respect to such Notes, be deemed to be included in
all references to an "Agent" or the "Agents" hereunder.
The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice.
Each purchaser of a Note will arrange for payment as instructed by the
applicable Agent. The Agents are required to deliver the proceeds of the Notes
to the Company in immediately available funds, to a bank designated by the
Company in accordance with the terms of the Distribution Agreement, on the date
of settlement.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify the Agents against and contribute toward certain liabilities,
including liabilities under the Act. The Company has also agreed to reimburse
the Agents for certain expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Agents that the
Agents intend to make a market in the Notes, as permitted by applicable laws
and regulation. The Agents are not obligated to do so, however, and the Agents
may discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
S-32
<PAGE>
This Prospectus Supplement, together with the Prospectus, may also be used
by DLJSC in connection with offers and sales of Notes related to market-making
transactions by and through DLJSC, at negotiated prices related to prevailing
market prices at the time of sale or otherwise. DLJSC may act as principal or
agent in such transactions.
If DLJSC, a wholly owned subsidiary of the Company, participates in the
distribution of Notes, the offering of the Notes will be conducted in
accordance with Section 2720 of the NASD Conduct Rules.
Concurrently with the offering of the Notes through the Agents as
described herein, the Company may issue other Debt Securities from time to time
as described in the accompanying Prospectus. Other Debt Securities so issued
may reduce correspondingly the maximum aggregate principal amount of Notes that
may be offered by this Prospectus Supplement and the accompanying Prospectus.
See "Description of Notes."
Certain Agents and their affiliates have engaged and may in the future
engage in commercial banking and investment banking transactions with the
Company and its affiliates in the ordinary course of business.
As of June 1, 1998, Paribas owned approximately 23.0% of the issued shares
(representing approximately 14.0% of the voting power) of Finaxa, which, as of
March 1, 1998, directly and indirectly owned 21.3% of the issued shares
(representing 30.1% of the voting power) of AXA. In addition, as of June 1,
1998, AXA directly or indirectly owned 7.52% of the issued shares (representing
11.85% of the voting power) of Paribas. AXA also directly or indirectly owns
all of the issued shares of AXA Banque.
S-33
<PAGE>
===============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT, IN CONNECTION WITH ANY OFFERING CONTEMPLATED HEREBY, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY PRICING SUPPLEMENT NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THEREOF. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS AND ANY PRICING SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOTES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROSPECTUS SUPPLEMENT
Incorporation of Certain Information
by Reference ............................ S-3
Description of Notes ....................... S-4
Special Provisions Relating to Foreign
Currency Notes .......................... S-18
Foreign Currency Risks ..................... S-21
Certain United States Federal Income
Tax Considerations ...................... S-23
Plan of Distribution ....................... S-32
PROSPECTUS
Available Information ...................... 3
Incorporation of Certain Information
by Reference ............................ 3
Use of Proceeds ............................ 4
Ratio of Earnings to Fixed Charges ......... 4
The Company ................................ 5
Description of Capital Stock ............... 7
Description of Debt Securities ............. 8
Plan of Distribution ....................... 20
Legal Matters .............................. 21
Experts .................................... 21
</TABLE>
$650,000,000
DONALDSON, LUFKIN &
JENRETTE, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
---------------------
PROSPECTUS SUPPLEMENT
---------------------
DONALDSON, LUFKIN & JENRETTE
JUNE 23, 1998
===============================================================================
