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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-76021
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED JULY 30, 1999)
U.S. $2,500,000,000
XEROX CREDIT CORPORATION
MEDIUM-TERM NOTES, SERIES G
------------------------
Xerox Credit Corporation ("Xerox Credit" or "we") may use this prospectus
supplement to offer from time to time its Medium-Term Notes, Series G (the
"Notes").
The following terms may apply to the Notes. We will provide the final terms
of each Note in a pricing supplement. The Notes:
- may have maturities of nine months or more.
- may be subject to redemption or repayment at our option or at the option
of the holder.
- will be denominated in U.S. dollars, a foreign currency or a foreign
currency unit.
- may bear interest at a fixed or floating interest rate. Certain Notes
issued at a discount may not bear interest. Floating interest rates may
be based on any of the following formulas:
-- CD Rate
-- CMT Rate
-- Commercial Paper Rate
-- Federal Funds Effective Rate
-- LIBOR
-- Prime Rate
-- Treasury Rate
-- Another interest rate index specified
in the pricing supplement
- may be issued as indexed Notes.
- may be issued in certificated or book-entry form.
- will have interest payable on dates determined at the time of issuance.
- will be issued in minimum denominations of $1,000 and multiples of $1,000
(or their equivalents in foreign currencies or foreign currency units).
- will have an aggregate initial offering price not greater than
$2,500,000,000, less the amount of any other debt securities sold by us
under the attached prospectus after the date of this prospectus
supplement. The aggregate initial offering price includes the U.S. dollar
equivalent of any Notes denominated in a foreign currency or foreign
currency units.
- will be offered from time to time on a reasonable best efforts basis by
the agents named below on our behalf. The Agents may also purchase Notes
from us for resale to investors. In addition, we may appoint additional
agents for the purpose of soliciting offers to purchase the Notes, and we
may sell Notes directly to investors on their behalf where legally
permitted.
INVESTING IN THE NOTES INVOLVES RISKS - SEE "CERTAIN RISK FACTORS" ON PAGE
S-3 OF THIS PROSPECTUS SUPPLEMENT.
We expect to receive between $2,496,875,000 and $2,481,250,000 of the
proceeds from the sale of the Notes after paying the Agents' commissions of
between $3,125,000 and $18,750,000 and before deducting the expenses of the
offering of the Notes which we estimate to be $1,615,000. The net proceeds to us
will be set at the time of each issuance. We do not expect that any of the Notes
will be listed on a securities exchange, and a market for the Notes may not
develop.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE RELATED PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
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August 13, 1999
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT PAGE
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Certain Risk Factors................ S-3
Description of Notes................ S-6
United States Taxation.............. S-26
Plan of Distribution................ S-35
PROSPECTUS PAGE
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About This Prospectus............... 2
Where You Can Find More Information. 2
Xerox Credit Corporation............ 3
Ratio of Earnings to Fixed
Charges........................... 3
Information Concerning Xerox
Corporation....................... 3
Ratio of Earnings to Fixed Charges
of Xerox.......................... 4
Use of Proceeds..................... 5
The Securities We May Offer......... 5
Description of the Debt
Securities........................ 5
Plan of Distribution................ 13
Legal Opinions...................... 14
Experts............................. 15
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus,
including the information incorporated by reference. We have not authorized
anyone to provide you with different information. We are not offering the Notes
in any state where the offer is not permitted. You should not assume that the
information in this prospectus supplement and the accompanying prospectus is
accurate at any date other than the date indicated on the cover page of the
documents.
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CERTAIN RISK FACTORS
This prospectus supplement and the attached prospectus contain or
incorporate by reference statements and information which are deemed to be
"forward-looking" within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements and information relating to the
Issuers are based on the beliefs of management as well as assumptions made by
and information currently available to management. The words "anticipate,"
"believe," "estimate," "expect," "intend," "will," and similar expressions, as
they relate to us or our management, are intended to identify forward-looking
statements. These statements reflect our current views with respect to future
events and are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described in this prospectus supplement, the attached prospectus or the
documents incorporated in this prospectus supplement and the attached prospectus
by reference. We do not intend to update these forward-looking statements.
Your investment in the Notes includes certain risks. You should consult
with your own financial and legal advisers and should carefully consider, among
other matters, the following discussion of risks before deciding whether you
should invest in any Note. The Notes are not an appropriate investment for you
if you are unsophisticated with respect to the significant components of the
Notes and/or financial matters.
REDEMPTION
If your Notes are redeemable at our option or are subject to mandatory
redemption, we may elect to redeem (in the case of optional redemption) or may
be required to redeem (in the case of mandatory redemption) the Notes at times
when prevailing interest rates may be relatively low. Accordingly, you generally
will not be able to reinvest the redemption proceeds in a comparable security at
an effective interest rate as high as that of the Notes.
INDEXED NOTES
If you invest in Notes indexed to one or more interest rates, currencies or
other indices or formulas (the "Indexed Notes"), there will be significant risks
not associated with conventional fixed rate or floating rate debt securities.
These risks include fluctuation of the indices or formulas and the possibility
that you will receive a lower (or no) amount of principal, premium or interest
and at different times than you expected. The existence, magnitude and longevity
of such risks and their results depend on a number of matters, including
economic, financial and political events that are outside our control. In
addition, if an index or formula used to determine any amounts payable in
respect of the Notes contains a multiplier or leverage factor, the effect of any
change in such index or formula will be magnified. In recent years, values of
certain indices and formulas have been volatile, and volatility in those and
other indices and formulas may be expected in the future. However, past
experience is not necessarily indicative of what may occur in the future.
CREDIT RATINGS
The credit ratings of our medium-term note program may not reflect the
potential impact of all risks related to structure and other factors relating to
your Notes. In addition, real or anticipated changes in our credit ratings will
generally affect the market value of your Notes.
UNCERTAIN TRADING MARKETS
We cannot assure you that a trading market for your Notes will ever develop
or be maintained. Many factors independent of our creditworthiness affect the
trading market. These factors include:
- complexity and volatility of the index or formula applicable to the
Notes,
- method of calculating the principal, premium and interest in respect of
the Notes,
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- time remaining to the maturity of the Notes,
- outstanding amount of the Notes,
- redemption features of the Notes,
- amount of other debt securities linked to the index or formula applicable
to the Notes, and
- level, direction and volatility of market interest rates generally.
In addition, certain Notes have a more limited trading market and
experience more price volatility because they were designed for specific
investment objectives or strategies. There may be a limited number of buyers
when you decide to sell the Notes. This may affect the price you receive for the
Notes or your ability to sell the Notes at all. You should not purchase Notes
unless you understand and know you can bear the foregoing investment risks.
FOREIGN CURRENCY RISKS
Governing Law and Judgments
The Notes will be construed in accordance with and governed by the laws of
the State of New York, without giving effect to the principles thereof relating
to conflicts of law (other than Section 5-1401 of the General Obligations Law of
the State of New York, and any successor statute or statutes).
Courts in the United States have not customarily rendered judgments for
money damages denominated in a currency other than the U.S. dollar. New York
statutory law provides, however, that a court shall render a judgment or decree
in the foreign currency of the underlying obligation and that the judgment or
decree shall be converted into U.S. dollars at a rate of exchange prevailing on
the date of the entry of the judgment or decree.
Exchange Rates and Exchange Controls
An investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency (as defined in "Description of
Notes -- General" below) other than U.S. dollars ("Foreign Currency" and
"Foreign Currency Notes") entails significant risks that are not associated with
a similar investment in a security denominated in U.S. dollars. Similarly, an
investment in a Note where the principal amount payable at maturity or the
interest thereon, or both, may be determined by reference to the relationship
between two or more Specified Currencies (a "Currency Indexed Note"), entails
significant risks that are not associated with a similar investment in
non-indexed Notes. These risks include, without limitation:
- the possibility of significant market changes in rates of exchange
between the U.S. dollar and the various foreign currencies or composite
currencies (and, in the case of Currency Indexed Notes, the rate of
exchange between the Specified Currency and the Indexed Currency),
- the possibility of significant changes in rates of exchange between the
U.S. dollar and the various foreign currencies resulting from official
redenomination with respect to a Specified Currency, and
- the possibility of the imposition or modification of foreign exchange
controls by either the United States or foreign governments.
These risks generally depend on factors over which we have no control, such as
economic and political events and on the supply of and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been volatile and this volatility may continue
in the future. Fluctuations in any particular exchange rate that have occurred
in the past are not necessarily indicative of fluctuations in the rate that may
occur during the term of any Foreign Currency Note.
Depreciation of the Foreign Currency of a Foreign Currency Note against the
U.S. dollar would result in a decrease in the effective yield of that Note below
its coupon rate, and in certain circumstances could
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result in a loss to the investor on a U.S. dollar basis. Depreciation of the
currency in which a Currency Indexed Note is issued against the currency to
which it is indexed would result in the principal amount payable at the Maturity
Date being less than the Face Amount of that Note. This would decrease the
effective yield of that Currency Indexed Note below its applicable interest rate
and could also result in a loss to the investor. See "Description of
Notes -- Currency Indexed Notes".
If there is an official redenomination of a foreign currency or currency
unit, our obligations with respect to payments on Foreign Currency Notes
denominated in that foreign currency or currency unit shall be deemed
immediately following such redenomination to provide for the payment of
equivalent amounts in the redenominated currency or currency unit. In no event
shall any adjustment be made to any amount payable under the Notes as a result
of:
- any change in the value of a foreign currency or currency unit relative
to any other currency due solely to fluctuations in exchange rates, or
- any redenomination of any component currency of any foreign currency
unit, unless such foreign currency unit is itself officially
redenominated.
Governments have imposed and may in the future impose exchange controls
that could affect exchange rates as well as the availability of a Specified
Currency. Exchange controls could restrict or prohibit payments of principal,
premium and interest in any Foreign Currency. Even if there are no actual
exchange controls, it is possible that at an Interest Payment Date or at
Maturity of any particular Foreign Currency Note, the Foreign Currency for that
Note would not be available to us. When the Foreign Currency is not available,
we will make required payments in U.S. dollars on the basis described under the
heading "Payment Currency".
Currently, there are limited facilities in the United States for converting
U.S. dollars into foreign currencies, and vice versa. In addition, banks
currently do not generally offer non-U.S. dollar denominated checking or savings
account facilities in the United States. Accordingly, payments on Foreign
Currency Notes made in a Foreign Currency will be made from an account with a
bank located outside the United States. See "Payment Currency".
Notes denominated in a Specified Currency other than U.S. dollars or euro
generally will not be sold in or to residents of the country issuing the
Specified Currency. The information in this prospectus supplement is directed to
prospective purchasers who are United States residents, and we disclaim any
responsibility to advise prospective purchasers who are residents of countries
other than the United States with respect to any matters that may affect the
purchase, holding or receipt of payments of principal, premium and interest on
the Notes. You should consult your own counsel with regard to these matters.
Pricing supplements relating to Foreign Currency Notes or Currency Indexed
Notes will contain information concerning historical exchange rates for the
applicable Specified Currency against the U.S. dollar or other relevant currency
and a description of the currency or currencies and any exchange controls
affecting such currency or currencies.
Payment Currency
If payment on a Foreign Currency Note is required to be made in a Foreign
Currency and that Foreign Currency is unavailable due to:
- the imposition of exchange controls or other circumstances beyond our
control, or
- it no longer being used by the government of the country issuing that
Foreign Currency or for the settlement of transactions by public
institutions of or within the international banking community,
then all payments due on that due date with respect to that Foreign Currency
Note shall be made in U.S. dollars. The Exchange Rate Agent (as defined in
"Description of Notes -- Payment of Principal and Interest" below) shall
calculate the amount payable on any date in U.S. dollars at a rate determined on
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the basis of the noon buying rate in The City of New York for cable transfers in
that Foreign Currency as certified for customs purposes by the Federal Reserve
Bank of New York (the "Market Exchange Rate"). The rate will be determined on
the second Business Day prior to the payment date. If the Market Exchange Rate
is not then available, we will be entitled to make payments in U.S. dollars:
- if the Foreign Currency is not a composite currency, on the basis of the
most recently available Market Exchange Rate for that Foreign Currency,
or
- if the Foreign Currency is a composite currency, in an amount determined
by the Exchange Rate Agent to be the sum of the results obtained by
multiplying the number of units of each component currency of such
composite currency, as of the most recent date on which such composite
currency was used, by the Market Exchange Rate for such component
currency on the second Business Day prior to such payment date (or, if
such Market Exchange Rate is not then available, by the most recently
available Market Exchange Rate for such component currency).
All determinations made by the Exchange Rate Agent shall be at its sole
discretion, except to the extent expressly provided in this prospectus
supplement that any determination is subject to our approval. In the absence of
manifest error, all determinations of the Exchange Rate Agent shall be
conclusive for all purposes and binding on holders of the Notes and the Exchange
Rate Agent shall have no liability for its determinations.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of Debt Securities in the accompanying prospectus.
Capitalized terms used but not defined herein have the meanings assigned to such
terms in the accompanying prospectus and the Indenture (as defined below). The
following description of the Notes will apply to all Notes, unless otherwise
specified in an accompanying pricing supplement (a "Pricing Supplement").
GENERAL
The Notes will be issued under the Indenture, dated as of April 1, 1999 (as
amended, supplemented or modified from time to time, the "Indenture"), between
us and Citibank, N.A., as Trustee (the "Trustee"). The Indenture does not limit
the amount of other debt that we may incur under the Indenture or otherwise.
The Notes will be issued as a single series of Debt Securities under the
Indenture and are currently limited to U.S. $2,500,000,000 aggregate principal
amount (or if any Notes are to be issued as Discount Notes (as defined below) or
Indexed Notes, aggregate initial offering price), or the equivalent in foreign
currencies or currency units. We may increase the foregoing limit if we
determine in the future that we wish to sell additional Notes. The U.S. dollar
equivalent of Notes denominated in a Foreign Currency will be determined upon
issuance by the Exchange Rate Agent, on the basis of the Market Exchange Rate
for that Foreign Currency on the applicable trade dates. The statements in this
prospectus supplement concerning the Notes and the Indenture do not purport to
be complete. They are qualified in their entirety by reference to the provisions
of the Indenture, including the definitions of certain terms used in this
prospectus supplement without definition.
The Notes will be offered on a continuous basis and will mature on any day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by us. Notes may be subject to redemption and/or repayment prior to
their Maturity Date. See "Redemption" and "Repayment and Repurchases" below.
Each Note will bear interest from the Original Issue Date (as defined below) at
either (a) a fixed rate, which may be zero in the case of a Note issued at an
Issue Price (as defined below) representing a substantial discount from the
principal amount payable upon the Maturity Date (a "Zero-Coupon Note"), or (b) a
floating rate or rates determined by reference to one or more Base Rates which
may be adjusted by a Spread and/or Spread Multiplier (each as defined below).
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The Notes will be issued initially as either Book-Entry Notes or
Certificated Notes in fully registered form without coupons. Except as set forth
in the prospectus under "Description of the Debt Securities and
Guaranties -- Global Securities" and under "Global Securities and Book-Entry
System" below, Book-Entry Notes will not be issuable as Certificated Notes.
The Notes may be denominated in U.S. dollars or in foreign currencies or
currency units (the "Specified Currency") which will be described in the Pricing
Supplement. If a Specified Currency is not described in the Pricing Supplement,
the Notes will be denominated in U.S. dollars and payments of principal, premium
and interest will be made in U.S. dollars in the manner described in this
prospectus supplement. If any of the Notes are to be denominated in a Foreign
Currency, additional information about the terms of these Notes and other
matters of interest to the holders of these Notes, including any risk factors,
will be described in the Pricing Supplement. The authorized denominations of
Notes denominated in U.S. dollars will generally be U.S. $1,000 and any integral
multiple of U.S. $1,000. The authorized denominations of Notes denominated in a
Foreign Currency will be set forth in the Pricing Supplement.
The Notes will be unsecured obligations, and will rank pari passu with all
of our other unsecured and unsubordinated debt.
Unless otherwise specified in the applicable Pricing Supplement, as used
herein:
- "Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close in
The City of New York; provided, however, that, with respect to Foreign
Currency Notes, such day is also not a day on which commercial banks are
authorized or required by law, regulation or executive order to close in
the Principal Financial Center (as defined below) of the country issuing
the Specified Currency (or, if the Specified Currency is euro, such day
is also a day on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer (TARGET) System is open); provided, further,
that, with respect to Notes as to which LIBOR is a Base Rate, such day is
also a London Banking Day (as defined below).
- "London Banking Day" means a day on which commercial banks are open for
business (including dealings in the Index Currency (as defined below)) in
London;
- "Discount Note" means (a) a Note, including any Zero-Coupon Note, that
has been issued at an issue price lower than the principal amount thereof
and which provides that upon redemption, repayment or acceleration of the
maturity thereof an amount less than the principal amount thereof will
become due and payable and (b) any other Note that for United States
Federal income tax purposes would be considered an original issue
discount note;
- "Maturity Date" with respect to any Note means the date on which such
Note will mature, as specified therein; and
- "Maturity" means the date on which the principal of a Note becomes due
and payable in accordance with its terms, whether at its Maturity Date or
by declaration of acceleration, or upon earlier redemption or repayment
or otherwise.
The Pricing Supplement relating to each Note will describe the following
terms:
- the Specified Currency with respect to the Note (and, if the Specified
Currency is Foreign Currency, certain other terms relating to the Note);
- whether the Note is a Fixed Rate Note, an Amortizing Note, a Floating
Rate Note, a Discount Note or a Zero-Coupon Note;
- whether the Note is a Currency Indexed Note or other Indexed Note, and if
so the special terms relating to the Note;
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- if other than 100%, the price (expressed as a percentage of the aggregate
principal amount of the Note) at which the Note will be issued (the
"Issue Price");
- the date on which the Note will be issued (the "Original Issue Date");
- the Maturity Date of the Note and whether the Maturity Date may be
extended by us;
- if the Note is a Fixed Rate Note, the rate per annum at which the Note
will bear any interest;
- if the Note is a Floating Rate Note, the Base Rate, the Initial Interest
Rate, the Interest Reset Period, the Interest Reset Dates, the Interest
Payment Dates, the Index Maturity, any Maximum Interest Rate or Minimum
Interest Rate, and any Spread and/or Spread Multiplier (all as defined
herein), and any other terms relating to the particular method of
calculating the interest rate for the Note;
- if the Note is an Amortizing Note, whether payments of principal and
interest will be made quarterly or semi-annually, and the repayment
information in respect thereof;
- whether the Note may be redeemed or repaid prior to its Maturity Date,
and if so, the provisions relating to the redemption or repayment;
- whether the Note will be issued initially as a Book-Entry Note or a
Certificated Note;
- any original issue discount provisions; and
- any other terms of the Note not inconsistent with the provisions of the
Indenture.
PAYMENT OF PRINCIPAL AND INTEREST
The principal, premium and interest on the Notes will generally be paid in
U.S. dollars in the manner described in the following paragraphs, even if a Note
is denominated in a Foreign Currency. The holder of a Note may, if the Note is
denominated in a Foreign Currency and if we permit, elect to receive all
payments in that Foreign Currency. This right is subject to certain conditions,
which are described under the heading "Foreign Currency Risks -- Payment
Currency". To obtain payments in a Foreign Currency, the holder must deliver a
written request to our paying agent (the "Paying Agent") in The City of New
York, and that written request must be received by the Paying Agent on or prior
to the applicable record date or at least fifteen calendar days prior to
Maturity, as the case may be. Such election shall remain in effect until changed
by written notice to the Paying Agent. The Paying Agent must receive written
notice of any change on or prior to the applicable record date or at least
fifteen calendar days prior to Maturity, as the case may be. Until the Notes are
paid or payment thereof is provided for, we will at all times maintain a Paying
Agent in The City of New York. We have initially appointed Citibank, N.A., New
York, New York as Paying Agent. We will notify the holders of Notes in
accordance with the Indenture of any change in the Paying Agent or its address.
We will bear all currency exchange costs unless any holder of a Note has
made an election to receive payment in a Foreign Currency. In that case, each
electing holder shall bear its pro-rata portion of any currency exchange costs
by deductions from payments otherwise due to the holder.
The amount of any U.S. dollar payments to be made on Notes denominated in a
Foreign Currency will be determined by our agent (the "Exchange Rate Agent"). We
have initially appointed Citibank, N.A., New York, New York as Exchange Rate
Agent. The Exchange Rate Agent will base its determination on the highest firm
bid quotation received 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 selected by the Exchange Rate Agent and approved by
Xerox (one of which may be the Exchange Rate Agent) for the purchase by the
quoting dealer, for settlement on such payment date, of the aggregate amount of
the Foreign Currency payable on such payment date in respect of all Notes
denominated in that Foreign Currency on which payments are to be made in U.S.
dollars. If three such bid quotations are not available, payments will be made
in that Foreign Currency. Quotations will be selected from among the quotations
appearing in the display "page" within the Reuters or Bridge Telerate, Inc., as
agreed to
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by us and the Exchange Rate Agent, used to determine the U.S. dollar equivalent
of the Currency (the "Exchange Rate"). If the display "page" is not available or
that Foreign Currency is a composite currency for which separate current
composite currency quotations are not available, another comparable display or
another comparable manner of obtaining quotations will be agreed to by us and
the Exchange Rate Agent. If no such indicative quotations are available,
payments will be made in that Foreign Currency unless that Foreign Currency is
unavailable due to the imposition of exchange controls or to other circumstances
beyond our control, in which case we will be entitled to make payments as
described under "Currency-Related Risk Factors -- Foreign Currency
Risks -- Payment Currency".
In the event of an official redenomination of a Specified Currency, our
obligations with respect to payments on Notes denominated in that Specified
Currency shall be deemed immediately following such redenomination to provide
for payment of equivalent amounts of redenominated currency. In no event shall
any adjustment be made to any amount payable under the Notes as a result of any
change in the value of a Specified Currency relative to any other currency due
solely to fluctuations in exchange rates. See "Currency-Related Risk
Factors -- Foreign Currency Risks -- Exchange Rates and Exchange Controls".
Interest on Certificated Notes and principal of Amortizing Notes (as
defined in "Description of Notes -- Fixed Rate Notes" below), issued in
certificated form (in each case, other than interest or, in the case of
Amortizing Notes, principal paid at Maturity), will generally be paid by mailing
a check (from an account at a bank outside the United States if the interest is
payable in a Foreign Currency) to the holder at the address appearing on the
Issuer's security register on the applicable record date (which, in the case of
Global Securities representing Book-Entry Notes, will be a nominee of the
Depositary). In the case of a Note issued between a Regular Record Date and the
initial Interest Payment Date relating to that Regular Record Date, interest for
the period beginning on the Original Issue Date and ending on that initial
Interest Payment Date shall be paid on the next succeeding Interest Payment Date
to the registered holder on the related Regular Record Date. A holder of U.S.
$10,000,000 or more in aggregate principal amount of Notes of like tenor and
terms (or a holder of the equivalent thereof in a Foreign Currency) shall be
entitled to receive such interest payments by wire transfer in immediately
available funds, but only if appropriate instructions have been received in
writing by the Paying Agent on or prior to the applicable Record Date.
Simultaneously with the election by any holder to receive payments in a Foreign
Currency as provided above, the holder may, if applicable, provide appropriate
instructions to the Paying Agent, and all such payments will be made in
immediately available funds to an account maintained by the payee with a bank
located outside the United States. Payments of principal, premium and interest
at Maturity will be made to the holder on the date of Maturity in immediately
available funds (payable to an account maintained by the payee with a bank
located outside of the United States if payable in a Foreign Currency) upon
surrender of the Notes at the Corporate Trust Office of Citibank, N.A. in the
Borough of Manhattan, The City of New York (or at such other location as may be
specified in the Pricing Supplement). A Note must be presented to the Paying
Agent in time for the Paying Agent to make payments in accordance with its
customary procedures. See "Important Currency Exchange Information" below. We
will pay any administrative costs imposed by banks in connection with making
payments in immediately available funds, but any tax, assessment or governmental
charge imposed upon payments will be borne by the holders of the Notes in
respect of which such payments are made.
Each date on which interest is payable on a Note (other than at Maturity)
is referred to as an "Interest Payment Date". 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 Pricing Supplement. Each "Regular Record Date" for a
Floating Rate Note will generally be the fifteenth day (whether or not a
Business Day) next preceding each Interest Payment Date.
All percentages resulting from any calculation of the rate of interest on a
Note will generally be rounded, if necessary, to the nearest one
one-hundred-thousandth of a percent (with five one-millionths of a percentage
point being rounded upwards). All currency amounts used in or resulting from any
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calculation on a Note will generally be rounded to the nearest one one-hundredth
of a unit (with five one-thousandths of a unit being rounded upwards).
Interest rates we offer with respect to the Notes may differ depending
upon, among other things, the aggregate principal amount of Notes purchased in
any single transaction. We may from time to time change interest rates, interest
rate formulas and other variable terms of the Notes. No change will however
affect any Note already issued or as to which an offer to purchase has been
accepted by us.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum set forth in the Note and in the Pricing Supplement until the
principal amount of the Note is paid or made available for payment. The rate may
change as described below under "Subsequent Interest Periods" and "Extension of
Maturity Date". Interest on Fixed Rate Notes will generally be computed on the
basis of a 360-day year of twelve 30-day months. Interest on each Fixed Rate
Note (other than a Zero-Coupon Note or an Amortizing Note) will generally be
payable at Maturity and semi-annually in arrears each April 15 and October 15.
The "Regular Record Dates" will be March 31 and September 30 (whether or not a
Business Day).
Principal of and interest on a Fixed Rate Note which pays a level amount in
respect of both interest and principal amortized over the life of such Note (an
"Amortizing Note") will be payable at Maturity and either semi-annually each
April 15 and October 15, or quarterly each January 15, April 15, July 15 and
October 15. The "Regular Record Dates" will generally be March 31 and September
30 (whether or not a Business Day), in the case where the principal and interest
are payable semi-annually, and December 31, March 31, June 30 and September 30
(whether or not a Business Day), in the case where the principal and interest
are payable quarterly. Payments will be applied first to interest due and
payable thereon and then to the reduction of the unpaid principal amount. A
table setting forth repayment information will be set forth in the Pricing
Supplement.
The Pricing Supplement relating to each Fixed Rate Note that is not an
Amortizing Note will specify whether the date on which interest is payable
(whether on an Interest Payment Date or at Maturity) will be subject to
adjustment in accordance with:
- the Following Business Day Convention, in which case, in the event that
any Interest Payment Date or the date of Maturity for such Note falls on
a day that is not a Business Day, the payment of principal, premium and
interest will be postponed to the first following day that is a Business
Day or
- another business day convention specified in the Pricing Supplement, in
which case, the Pricing Supplement will specify when payments may be made
in the event that any Interest Payment Date or the date of Maturity falls
on a day that is not a Business Day.
Each payment of interest on a Fixed Rate Note that is not an Amortizing
Note will generally include interest accrued through the day before the Fixed
Rate Period End Date. The "Fixed Rate Period End Date" means, in respect of a
Fixed Rate Note that is not an Amortizing Note, each Interest Payment Date or
the date of Maturity. The Pricing Supplement will specify whether each Fixed
Rate Period End Date will be subject to:
- adjustment in accordance with the Following Business Day Convention; in
which case, in the event that any Fixed Rate Period End Date falls on a
day that is not a Business Day, the Fixed Rate Period End Date will be
postponed to the first following day that is a Business Day;
- adjustment in accordance with another business day convention specified
in the Pricing Supplement, in which case, the Pricing Supplement will
specify the method of adjusting any Fixed Rate Period End Date that would
otherwise fall on a day that is not a Business Day; or
- no adjustment, in which case, no adjustment will be made, notwithstanding
that the Fixed Rate Period End Date occurs on a day that is not a
Business Day.
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FLOATING RATE NOTES
From the Original Issue Date to the first Interest Reset Date set forth in
the Pricing Supplement, each Floating Rate Note will bear interest at the
Initial Interest Rate set forth in the Pricing Supplement. Thereafter, until the
principal amount is paid or made available for payment, each Floating Rate Note
will bear interest at a rate determined by reference to an interest rate base
(the "Base Rate"), which may be adjusted by a Spread and/or Spread Multiplier.
The Pricing Supplement will designate one of the following Base Rates as
applicable to each Floating Rate Note:
- the CD Rate (a "CD Rate Note"),
- the CMT Rate (a "CMT Rate Note"),
- the Commercial Paper Rate (a "Commercial Paper Rate Note"),
- the Federal Funds Rate (a "Federal Funds Rate Note"),
- LIBOR (a "LIBOR Note"),
- the Treasury Rate (a "Treasury Rate Note"),
- the Prime Rate (a "Prime Rate Note"), or
- another Base Rate set forth in the Pricing Supplement and in the Floating
Rate Note.
The "Index Maturity" for any Floating Rate Note is the designated maturity
of the investment or obligation from which the Base Rate is calculated as
specified in the Pricing Supplement. The "Spread" is the number of basis points
specified in the Pricing Supplement to be added to or subtracted from the Base
Rate in order to calculate the interest rate for a Floating Rate Note. The
"Spread Multiplier" is the percentage specified in the Pricing Supplement by
which the Base Rate is to be multiplied to calculate the interest rate for a
Floating Rate Note.
A Floating Rate Note may also have either or both of the following: (i) a
maximum limitation, or ceiling, on the rate at which interest may accrue during
any interest period ("Maximum Interest Rate"); and (ii) a minimum limitation, or
floor, on the rate at which interest may accrue during any interest period
("Minimum Interest Rate"). In addition to any Maximum Interest Rate that may be
applicable to any Floating Rate Note pursuant to the above provisions, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by applicable law, as the same may be modified by United
States law of general application. The Notes will be governed by the law of the
State of New York and, under present New York law, the maximum rate of interest,
with certain exceptions, for any loan in an amount less than $250,000 is 16% and
for any loan in an amount of $250,000 or more but less than $2,500,000 is 25%
per annum on a simple interest basis. These limits do not apply to loans of
$2,500,000 or more.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually, annually or otherwise (the "Interest
Reset Period"), as specified in the Pricing Supplement. The date or dates on
which interest will be reset (each an "Interest Reset Date") will generally be:
- in the case of Floating Rate Notes that reset daily, each Business Day,
- in the case of Floating Rate Notes (other than Treasury Rate Notes) that
reset weekly, the Wednesday of each week,
- in the case of Treasury Rate Notes that reset weekly, the Tuesday of each
week (except as provided below),
- in the case of Floating Rate Notes that reset monthly, the third
Wednesday of each month,
- in the case of Floating Rate Notes that reset quarterly, the third
Wednesday of March, June, September and December,
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- in the case of Floating Rate Notes that reset semi-annually, the third
Wednesday of the two months specified in the Pricing Supplement, and
- in the case of Floating Rate Notes that reset annually, the third
Wednesday of the month specified in the Pricing Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a
day that is not a Business Day, that Interest Reset Date shall be postponed to
the succeeding Business Day. In the case of a LIBOR Note, if the next Business
Day is in the next succeeding calendar month, that Interest Reset Date shall be
the immediately preceding Business Day. If an auction for Treasury bills falls
on a day that is an Interest Reset Date for Treasury Rate Notes, the Interest
Reset Date shall be the next succeeding Business Day.
With respect to a Floating Rate Note, accrued interest will be calculated
by multiplying the principal amount of that Note by an accrued interest factor.
The accrued interest factor will be computed by adding the interest factors
calculated for each day in the Interest Period (as defined below) or from the
last date from which accrued interest is being calculated. The interest factor
for each such day is generally computed by dividing the interest rate applicable
on that day by:
- 360, in the cases of CD Rate Notes, Commercial Paper Rate Notes, Federal
Funds Rate Notes, LIBOR Notes and Prime Rate Notes, or
- the actual number of days in the year, in the case of Treasury Rate Notes
and CMT Rate Notes.
The interest rate in effect on each day will generally be:
- if that day is an Interest Reset Date, the interest rate as determined in
accordance with the procedures set forth below with respect to the
Interest Determination Date (as defined below) pertaining to that
Interest Reset Date, or
- if that day is not an Interest Reset Date, the interest rate for the
immediately preceding Interest Reset Date (or, if none, the Initial
Interest Rate).
Interest will generally be payable:
- in the case of Floating Rate Notes that reset daily, weekly or monthly,
on the third Wednesday of each month or on the third Wednesday of March,
June, September and December of each year, as specified in the Pricing
Supplement;
- in the case of Floating Rate Notes that reset quarterly, on the third
Wednesday of March, June, September and December of each year;
- in the case of Floating Rate Notes that reset semi-annually, on the third
Wednesday of the two months specified in the Pricing Supplement;
- in the case of Floating Rate Notes that reset annually, on the third
Wednesday of the month specified in the Pricing Supplement; and
- in each case, at Maturity.
The Pricing Supplement relating to each Floating Rate Note will specify
whether the date on which interest is payable (whether on an Interest Payment
Date or at Maturity) will be subject to adjustment in accordance with:
- the Following Business Day Convention, in which case, in the event that
any Interest Payment Date or the date of Maturity falls on a day that is
not a Business Day, the payment of principal, premium and interest will
be postponed to the first following day that is a Business Day;
- the Modified Following Business Day Convention, in which case, in the
event that any Interest Payment Date or the date of Maturity for such
Note falls on a day that is not a Business Day, the payment of principal,
premium and interest will be postponed to the first following day that is
a
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Business Day unless that day falls in the next calendar month, in which
case that date will be the first preceding day that is a Business Day; or
- another business day convention as specified in the Pricing Supplement,
in which case, the Pricing Supplement will specify when payments may be
made in the event that any Interest Payment Date or the date of Maturity
falls on a day that is not a Business Day.
Each payment of interest on a Floating Rate Note shall generally include
interest accrued from and including the Original Issue Date or from and
including the last Floating Rate Period End Date to which interest has been paid
to, but excluding, such Floating Rate Period End Date (such period, an "Interest
Period"). The "Floating Rate Period End Date" means, in respect of a Floating
Rate Note, each Interest Payment Date or the date of Maturity. The Pricing
Supplement relating to each Floating Rate Note will specify whether each
Floating Rate Period End Date will be subject to:
- adjustment in accordance with the Following Business Day Convention, in
which case, in the event that any Floating Rate Period End Date falls on
a day that is not a Business Day, that Floating Rate Period End Date will
be postponed to the first following day that is a Business Day;
- adjustment in accordance with the Modified Following Business Day
Convention, in which case, in the event that any Floating Rate Period End
Date falls on a day that is not a Business Day, that Floating Rate Period
End Date will be postponed to the first following day that is a Business
Day unless that day falls in the next calendar month, in which case that
date will be the first preceding day that is a Business Day;
- adjustment in accordance with another business day convention as
specified in the Pricing Supplement, in which case, the Pricing
Supplement will specify the method of adjusting any Floating Rate Period
End Date that would otherwise fall on a day that is not a Business Day;
or
- no adjustment, in which case, no adjustment will be made, notwithstanding
that the Floating Rate Period End Date occurs on a day that is not a
Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to that Interest Reset Period will be the
rate determined as of the applicable Interest Determination Date on or prior to
the Calculation Date (as defined below). The "Interest Determination Date"
pertaining to an Interest Reset Date generally will be:
- the second Business Day next preceding each Interest Reset Date, in the
case of CD Rate Notes, CMT Rate Notes, Commercial Paper Rate Notes,
Federal Funds Rate Notes and Prime Rate Notes,
- the second London Banking Day next preceding each Interest Reset Date, in
the case of LIBOR Notes, and
- the day of the week in which each Interest Reset Date falls on which
Treasury bills of the applicable Index Maturity are auctioned, in the
case of Treasury Rate Notes. Treasury bills are normally sold at auction
on Monday of each week, unless that day is a legal holiday. When Monday
is a legal holiday, the auction is normally held on the following
Tuesday, but may be held on the preceding Friday. If, as the result of a
legal holiday, an auction is held on the preceding Friday, that Friday
will generally be the Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week.
The "Calculation Date", if applicable, pertaining to an Interest
Determination Date will generally be the earlier of (i) the tenth calendar day
after that Interest Determination Date or, if any such day is not a Business
Day, the next succeeding Business Day and (ii) the Business Day preceding the
applicable Interest Payment Date or Maturity, as the case may be.
Citibank, N.A. will be the calculation agent (the "Calculation Agent") with
respect to the Floating Rate Notes, unless the Pricing Supplement specifies
another calculation agent. Upon the request of the holder of any Floating Rate
Note, the Calculation Agent will provide the interest rate then in effect and,
if
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<PAGE> 14
determined, the interest rate that will become effective on the next Interest
Reset Date with respect to such Floating Rate Note.
CD Rate Notes
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and any Spread and/or Spread Multiplier) specified in
the CD Rate Notes and in the Pricing Supplement.
The "CD Rate" generally means, with respect to any Interest Determination
Date, the rate on that date for negotiable certificates of deposit having the
applicable Index Maturity, as published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15(519), Selected Interest Rates", or
any successor publication of the Board of Governors of the Federal Reserve
System ("H.15(519)") under the heading "CDs (Secondary Market)".
The following procedures will be followed if the CD Rate cannot be
determined as described above:
- If the above rate is not published by 9:00 a.m., New York City time, on
the Calculation Date, the CD Rate will be the rate on that Interest
Determination Date set forth in H.15 Daily Update (as defined below) for
that day in respect of certificates of deposit having the Index Maturity
specified in the Pricing Supplement under the caption "CDs (secondary
market)". "H.15 Daily Update" means the daily update of H.15(519),
available through the world wide web site of the Board of Governors of
the Federal Reserve System at
http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
- If the rate is not yet published in either H.15(519) or the H.15 Daily
Update by 3:00 p.m., New York City time, on the Calculation Date, then
the Calculation Agent will determine the CD Rate to be the arithmetic
mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on that Interest Determination Date, of three leading nonbank
dealers in negotiable U.S. dollar certificates of deposit in New York
City selected by the Calculation Agent (after consultation with us) for
negotiable certificates of deposit of major United States money center
banks of the highest credit standing in the market for negotiable
certificates of deposit with a remaining maturity closest to the Index
Maturity specified in the Pricing Supplement in the denomination of
$5,000,000.
- If the dealers selected by the Calculation Agent are not quoting as set
forth above, the CD Rate will remain the CD Rate then in effect on that
Interest Determination Date.
CD Rate Notes, like other Notes, are not deposit obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation.
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and any Spread and/or Spread Multiplier) specified in
the CMT Rate Notes and in the Pricing Supplement.
The "CMT Rate" generally means, with respect to any Interest Determination
Date relating to a CMT Rate Note, the rate displayed on the Designated CMT
Telerate Page (as defined below) under the caption "...Treasury Constant
Maturities...Federal Reserve Board Release H.15...Mondays Approximately 3:45
p.m.", under the column for the Designated CMT Maturity Index (as defined below)
for:
- if the Designated CMT Telerate Page is 7051, the rate on that Interest
Determination Date; and
- if the Designated CMT Telerate Page is 7052, the week or the month, as
applicable, ended immediately preceding the week in which that Interest
Determination Date occurs.
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The following procedures will be followed if the CMT Rate cannot be
determined as described above:
- If the rate is no longer displayed on the relevant page, or if not
displayed by 3:00 p.m., New York City time, on the Calculation Date, then
the CMT Rate for that Interest Determination Date will be such Treasury
Constant Maturity rate for the Designated CMT Maturity Index as published
in the relevant H.15(519).
- If the rate is no longer published, or if not published by 3:00 p.m., New
York City time, on the Calculation Date, then the CMT Rate for that
Interest Determination Date will be such Treasury Constant Maturity rate
for the Designated CMT Maturity Index (or other United States Treasury
rate for the Designated CMT Maturity Index) for the Interest
Determination Date with respect to such Interest Reset Date as may then
be published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that the
Calculation Agent determines to be comparable to the rate formerly
displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519).
- If such information is not provided by 3:00 p.m., New York City time, on
the Calculation Date, then the Calculation Agent will determine the CMT
Rate for that Interest Determination Date to be a yield to maturity,
based on the arithmetic mean of the secondary market closing offer side
prices as of approximately 3:30 p.m., New York City time, on the Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a
"Reference Dealer") in New York City selected by the Calculation Agent as
described in the following sentence. The Calculation Agent will select
five Reference Dealers and will eliminate the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest), for the most recently
issued direct noncallable fixed rate obligations of the United States
("Treasury notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not
less than such Designated CMT Maturity Index minus one year.
- If the Calculation Agent cannot obtain three such Treasury note
quotations, the Calculation Agent will determine the CMT Rate for such
Interest Determination Date to be a yield to maturity based on the
arithmetic mean of the secondary market offer side prices as of
approximately 3:30 p.m., New York City time, on the Interest
Determination Date of three Reference Dealers in New York City (selected
using the same method described above), for Treasury notes with an
original maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest to
the Designated CMT Maturity Index and in an amount of at least
$100,000,000.
- If three or four (and not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean
of the offer prices obtained and neither the highest nor the lowest of
such quotes will be eliminated.
- If fewer than three Reference Dealers selected by the Calculation Agent
are quoting as described herein, the CMT Rate will be the CMT Rate in
effect on that Interest Determination Date.
If two Treasury Notes with an original maturity as described above have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the CMT Rate Note with the shorter remaining term to maturity
will be used.
"Designated CMT Telerate Page" means the display on the Bridge Telerate,
Inc. (or any successor service) on the page designated in the Pricing Supplement
(or any other page as may replace such page on that service for the purposes of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the Pricing Supplement, the Designated CMT Telerate
Page shall be 7052, for the most recent week.
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"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in the Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the Pricing Supplement, the
Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and any Spread and/or
Spread Multiplier) specified in the Commercial Paper Rate Notes and in the
Pricing Supplement.
The "Commercial Paper Rate" generally means, with respect to any Interest
Determination Date relating to a Commercial Paper Rate Note, the Money Market
Yield (as defined below) on that date of the rate for commercial paper having
the Index Maturity specified in the Pricing Supplement, as that rate is
published in H.15(519) under the heading "Commercial Paper -- Nonfinancial".
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
- If the above rate is not published by 9:00 a.m., New York City time, on
the Calculation Date, then the Commercial Paper Rate will be the Money
Market Yield on that Interest Determination Date of the rate for
commercial paper of the Index Maturity specified in the applicable
Pricing Supplement as published in H.15 Daily Update under the heading
"Commercial Paper -- Nonfinancial".
- If by 3:00 p.m., New York City time, on the Calculation Date the rate is
not yet published in either H.15(519) or H.15 Daily Update, then the
Calculation Agent will determine the Commercial Paper Rate to be the
Money Market Yield of the arithmetic mean of the offered rates as of
11:00 a.m., New York City time, on that Interest Determination Date of
three leading dealers of commercial paper in New York City selected by
the Calculation Agent (after consultation with us) for commercial paper
of the Index Maturity specified in the Pricing Supplement placed for an
industrial issuer whose bond rating is "AA", or the equivalent, from a
nationally recognized rating agency.
- If the dealers selected by the Calculation Agent are not quoting as
mentioned above, the Commercial Paper Rate with respect to that Interest
Determination Date will remain the Commercial Paper Rate then in effect
on that Interest Determination Date.
"Money Market Yield" means a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C>
D X 360 X 100
Money Market Yield = ---------------
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the period for which interest is being calculated.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and any Spread and/or
Spread Multiplier) specified in the Federal Funds Rate Notes and in the Pricing
Supplement.
The "Federal Funds Rate" generally 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)".
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The following procedures will be followed if the Federal Funds Rate cannot
be determined as described above:
- If the above rate is not published by 9:00 a.m., New York City time, on
the Calculation Date, the Federal Funds Rate will be the rate on that
Interest Determination Date as published in H.15 Daily Update under the
heading "Federal Funds/(Effective)".
- If such rate is not yet published in either H.15(519) or H.15 Daily
Update by 3:00 p.m., New York City time, on the Calculation Date, the
Calculation Agent will determine the Federal Funds Rate to be the
arithmetic mean of the rates for the last transaction in overnight
Federal Funds arranged by three leading brokers of Federal Funds
transactions in New York City selected by the Calculation Agent (after
consultation with us) as of 9:00 a.m., New York City time, on that
Interest Determination Date.
- If the brokers selected by the Calculation Agent are not quoting as
mentioned above, the Federal Funds Rate with respect to that Interest
Determination Date will remain the Federal Funds Rate then in effect on
that Interest Determination Date.
LIBOR Notes
LIBOR Notes will bear interest at the rates (calculated with reference to
LIBOR and any Spread and/or Spread Multiplier) specified in such LIBOR Notes and
in any Pricing Supplement.
LIBOR with respect to any Interest Determination Date will generally be
determined by the Calculation Agent in accordance with the following provisions:
With respect to an Interest Determination Date relating to a LIBOR Note:
- If "LIBOR Reuters" is specified in the Pricing Supplement as the method
for calculating LIBOR, LIBOR will be the arithmetic mean of the offered
rates (unless the Designated LIBOR Page (as defined below) by its terms
provides only for a single rate, in which case such single rate shall be
used) for deposits in the Index Currency having the Index Maturity
designated in the Pricing Supplement, commencing on the applicable
Interest Reset Date, that appear (or, if only a single rate is required
as aforesaid, appears) on the Designated LIBOR Page as of 11:00 a.m.,
London time, on that Interest Determination Date.
- If "LIBOR Telerate" is specified in the Pricing Supplement as the method
for calculating LIBOR, LIBOR will be the rate for deposits in the Index
Currency having the Index Maturity designated in the Pricing Supplement,
commencing on such Interest Reset Date, that appears on the Designated
LIBOR Page as of 11:00 a.m., London time, on that Interest Determination
Date.
- If neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
Pricing Supplement as the method for calculating LIBOR, LIBOR will be
calculated as if "LIBOR Telerate" had been specified.
If fewer than two such offered rates appear or if no such rate appears, as
applicable, LIBOR in respect of the related Interest Determination Date will be
determined as follows:
- The Calculation Agent will request the principal London offices of each
of four major reference banks in the London interbank market, as selected
by the Calculation Agent (after consultation with us) 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 Pricing
Supplement, commencing on the Interest Reset Date to prime banks in the
London interbank market at approximately 11:00 a.m., London time, on that
Interest Determination Date and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time. If at least two such quotations are provided, LIBOR
determined on that Interest Determination Date will be the arithmetic
mean of such quotations.
- If fewer than two quotations are provided, LIBOR determined on that
Interest Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 a.m., or such other time
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specified in the Pricing Supplement, in the Principal Financial Center
for the Index Currency, on that Interest Determination Date by three
major banks in such Principal Financial Center selected by the
Calculation Agent (after consultation with us) for loans in the Index
Currency to leading European banks, having the Index Maturity designated
in the Pricing Supplement and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time.
- If the banks so selected by the Calculation Agent are not quoting as
mentioned above, LIBOR determined as of that Interest Determination Date
will be LIBOR in effect on that Interest Determination Date.
"Designated LIBOR Page" means:
- if "LIBOR Reuters" is specified in the Pricing Supplement as the method
for calculating LIBOR, the display on the Reuters Monitor Money Rates
Service (or any successor service) for the purpose of displaying the
London interbank rates of major banks for the applicable Index Currency,
or
- if "LIBOR Telerate" is specified in the Pricing Supplement, or if neither
LIBOR Reuters nor LIBOR Telerate is specified in the Pricing Supplement,
as the method for calculating LIBOR, the display on the Bridge Telerate,
Inc. (or any successor service) for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency.
"Index Currency" means the currency (including composite currencies)
specified in the Pricing Supplement as the currency for which LIBOR shall be
calculated. If no Index Currency is specified in the Pricing Supplement, the
Index Currency shall be U.S. dollars.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency or (ii) the capital city of the country to which
the Index Currency relates, as applicable, except, in the case of (i) or (ii)
above, that with respect to U.S. dollars, Australian dollars, Canadian dollars,
Deutsche marks, Dutch guilders, Portuguese escudos, South African rand and Swiss
francs, the Principal Financial Center shall be The City of New York, Sydney and
(solely in the case of the Specified Currency) Melbourne, Toronto, Frankfurt,
Amsterdam, London (solely in the case of the LIBOR Index Currency), Johannesburg
and Zurich, respectively.
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and any Spread and/or Spread Multiplier)
specified in the Treasury Rate Notes and in the Pricing Supplement.
The "Treasury Rate" generally means, with respect to any Interest
Determination Date relating to a Treasury Rate Note, the rate for the auction
held on that Interest Determination Date of direct obligations of the United
States ("Treasury bills") having the Index Maturity specified in the Pricing
Supplement as that rate appears on either Telerate Page 56 or Page 57 under the
heading "AVGE INVEST YIELD".
"Telerate Page 56" and "Telerate Page 57" mean the displays designated on
Bridge Telerate, Inc. as Page 56 or Page 57, or any page that replaces either
Page 56 or Page 57 on that service, or another service that is nominated as the
information vendor, for the purpose of displaying Treasury bill auction rates.
The following procedures will be followed if the Treasury Rate cannot be
determined as described above:
- If the above rate is not published by 9:00 a.m., New York City time, on
the Calculation Date, the Treasury Rate will be the auction average rate
on the 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. Treasury bills
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are usually sold at auction on Monday of each week unless that day is a
legal holiday. If Monday is a legal holiday, the auction is usually held
on the following Tuesday, but the auction may be held on the preceding
Friday.
- In the event that the results of the auction of Treasury bills having the
Index Maturity specified in the Pricing Supplement are not published or
reported as provided above by 3:00 p.m., New York City time, on the
Calculation Date, or if no such auction is held on that Interest
Determination Date, the Treasury Rate will be the Bond Equivalent Yield
of the rate set forth in H.15(519) for that day opposite the Index
Maturity under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market".
- If the above rate is not published in H.15(519) on the Calculation Date,
the rate for that day will be the rate set forth in H.15 Daily Update, or
another recognized electronic source used for the purpose of displaying
such rate, for that day in respect of the Index Maturity under the
caption "U.S. Government Securities/Treasury Bills/Secondary Market".
- If the above rate is not published in H.15(519), H.15 Daily Update or
another recognized source, then the Calculation Agent will determine the
Treasury Rate to be a yield to maturity (expressed as a bond equivalent
on the basis of a year of 365 or 366 days, as applicable, and applied on
a daily basis) of the arithmetic mean of the secondary market bid rates,
as of approximately 3:30 p.m., New York City time, on that Interest
Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent (after consultation
with us) for the issue of Treasury bills with a remaining maturity
closest to the applicable Index Maturity specified in the Pricing
Supplement.
- If the dealers selected by the Calculation Agent are not quoting as
mentioned above, the Treasury Rate with respect to that Interest
Determination Date will remain the Treasury Rate then in effect on that
Interest Determination Date.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and any Spread and/or Spread Multiplier) specified
in the Prime Rate Notes and in the Pricing Supplement.
"Prime Rate" generally means, with respect to any Interest Determination
Date relating to a Prime Rate Note, the rate on such date as published in
H.15(519) under the heading "Bank Prime Loan".
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
- If the rate is not published by 9:00 a.m., New York City time, on the
Calculation Date, the Prime Rate will be the rate on that Interest
Determination Date as published in H.15 Daily Update opposite the caption
"Bank Prime Loan".
- If the rate is not published prior to 3:00 p.m., New York City time, on
the Calculation Date, in either H.15 (519) or H.15 Daily Update, then the
Calculation Agent will determine the Prime Rate to be the arithmetic mean
of the rates of interest publicly announced by each bank named on the
"Reuters Screen USPRIME1 Page" (as defined below) as that bank's prime
rate or base lending rate as in effect for that Interest Determination
Date.
- If fewer than four rates but more than one rate appear on the Reuters
Screen USPRIME1 Page for that Interest Determination Date, the
Calculation Agent will determine the Prime Rate to 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 that Interest
Determination Date by at least two major money center banks in New York
City selected by the Calculation Agent (after consultation with us).
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- If fewer than two such rates appear on the Reuters Screen USPRIME1 Page,
the Calculation Agent will determine the Prime Rate on the basis of the
rates furnished in New York City by three 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 $500,000,000 and being subject to supervision or examination by
Federal or State authority, selected by the Calculation Agent (after
consultation with us) to provide a rate or rates.
- If the banks selected are not quoting as mentioned above, the Prime Rate
will remain the Prime Rate then in effect on that Interest Determination
Date.
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service (or another page that may
replace the USPRIME1 page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
CURRENCY INDEXED NOTES
General
We may from time to time offer Currency Indexed Notes. The principal amount
of these Notes payable at the Maturity Date is generally determined by reference
to the rate of exchange between the currency or composite currency in which the
Notes are denominated (the "Denominated Currency") and the other currency or
currencies or composite currency or composite currencies specified as the
Indexed Currency (the "Indexed Currency") in the Pricing Supplement. Holders of
Currency Indexed Notes will generally be entitled to receive a principal amount
exceeding the amount designated as the face amount of the Notes in the Pricing
Supplement (the "Face Amount") if, at Maturity, the rate at which the
Denominated Currency can be exchanged for the Indexed Currency is greater than
the rate of such exchange designated as the Base Exchange Rate, expressed in
units of the Indexed Currency per one unit of the Denominated Currency, in the
Pricing Supplement (the "Base Exchange Rate"). Holders of Notes will be entitled
to receive a principal amount less than the Face Amount of these Notes if, at
Maturity, the rate at which the Denominated Currency can be exchanged for the
Indexed Currency is less than the Base Exchange Rate. The Base Exchange Rate is
determined as described below under "Payment of Principal and Interest".
Information as to the relative historical value (which information is not
necessarily indicative of relative future value) of the applicable Denominated
Currency against the applicable Indexed Currency, any exchange controls
applicable to the Denominated Currency or Indexed Currency and certain tax
consequences to holders will be set forth in the Pricing Supplement. See
"Currency-Related Risk Factors -- Foreign Currency Risks".
"Exchange Rate Day" generally means any day:
- which is a Business Day in The City of New York, and
- (i) if the Denominated Currency or Indexed Currency is any currency or
composite currency other than the U.S. dollar or the euro, a Business Day
in the principal financial center of the country of such Denominated
Currency or Indexed Currency or (ii) if the Denominated Currency or
Indexed Currency is the euro, a Business Day with respect to the euro.
Payment of Principal and Interest
Any interest on the Notes will generally be payable by the Issuer in the
Denominated Currency based on the Face Amount of the Currency Indexed Notes and
at the rate and times and in the manner set forth in this prospectus supplement
and in the Pricing Supplement.
Principal of a Currency Indexed Note will generally be payable in the
Denominated Currency at Maturity in an amount equal to the Face Amount of the
Note, plus or minus an amount of the Denominated Currency determined by the
Exchange Rate Agent by reference to the difference between the Base Exchange
Rate and the rate at which the Denominated Currency can be exchanged for the
Indexed Currency on the second Exchange Rate Day (the "Exchange Rate Date")
prior to Maturity by the
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Exchange Rate Agent based upon the indicative quotation, selected by the
Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the
Exchange Rate Date, for the Indexed Currency (spot bid quotation for the
Denominated Currency) which will yield the largest number of units of the
Indexed Currency per one unit of the Denominated Currency, for an amount of
Indexed Currency equal to the Face Amount of the Note multiplied by the Base
Exchange Rate with the Denominated Currency for settlement at Maturity (such
rate of exchange, as so determined and expressed in units of the Indexed
Currency per one unit of the Denominated Currency, is hereafter referred to as
the "Spot Rate"). The selection shall be made from among the quotations
appearing on the display "page" within the Reuters or Telerate Monitor Foreign
Exchange Service, as agreed to by us and the Exchange Rate Agent used to
determine the Spot Rate. If the display "page" is not available or the Indexed
Currency or Denominated Currency is a composite currency for which separate
current composite currency quotations are not available, another comparable
display or another comparable manner of obtaining quotations will be agreed to
by us and the Exchange Rate Agent. The principal amount of the Currency Indexed
Notes determined by the Exchange Rate Agent to be payable at Maturity will be
payable to the holders in the manner set forth in this prospectus supplement and
in the Pricing Supplement. In the absence of manifest error, the determination
by the Exchange Rate Agent of the Spot Rate and the principal amount of Currency
Indexed Notes payable at Maturity shall be final and binding on us and the
holders.
The formula to be used by the Exchange Rate Agent to determine the
principal amount of a Currency Indexed Note payable at Maturity will be
specified in the Pricing Supplement.
In the event of any redemption or repayment of a Currency Indexed Note
prior to its scheduled Maturity Date, the term "Maturity" used above would refer
to the redemption or repayment date of the Currency Indexed Note.
OTHER INDEXED NOTES
The principal amount payable at Maturity, the amount of any premium or
interest, or both, on certain Notes may be determined by reference to the price
of one or more specified securities or commodities, to one or more securities or
commodities exchange indices or other indices or by other similar methods or
formulas. The Pricing Supplement will describe, as applicable, the method by
which the amount of interest payable and the amount of principal payable at
Maturity will be determined, certain special tax consequences to holders,
certain risks associated with an investment in these Notes and other information
relating to these Notes.
For the purpose of determining whether holders of the requisite principal
amount of Securities outstanding under the Indenture have made a demand or given
a notice or waiver or taken any other action, the outstanding principal amount
of Indexed Notes will be deemed to be the face amount of the Indexed Notes. In
the event of an acceleration of the Maturity of an Indexed Note, the principal
amount payable to the holder of that Note upon acceleration will be the
principal amount determined by reference to the formula by which the principal
amount of the Note would be determined on the Maturity Date, as if the date of
acceleration were the Maturity Date.
SUBSEQUENT INTEREST PERIODS
The Pricing Supplement relating to each Note will indicate whether we have
the option to reset the interest rate, in the case of a Fixed Rate Note, or to
reset the Spread and/or Spread Multiplier, in the case of a Floating Rate Note,
and, if so, the date or dates on which the interest rate or the Spread and/or
Spread Multiplier may be reset (each an "Optional Reset Date"). If we have this
option with respect to any Note, the following procedures shall generally apply.
We may from time to time exercise our option with respect to a Note by
notifying the Trustee at least 50 but not more than 60 days prior to an Optional
Reset Date for the Note. Not later than 10 days after
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receipt of the notice from us but in any event not later than 40 days prior to
such Optional Reset Date, the Trustee will mail to the holder of the Note a
notice (the "Reset Notice") setting forth:
- our election to reset the interest rate, in the case of a Fixed Rate
Note, or the Spread and/or Spread Multiplier, in the case of a Floating
Rate Note,
- the new interest rate or the new Spread and/or Spread Multiplier, as the
case may be, and
- any provisions for redemption or repayment during the period from the
Optional Reset Date to the next Optional Reset Date or, if there is no
subsequent Optional Reset Date, to Maturity of the Note (each such period
a "Subsequent Interest Period"), including the date or dates on which or
the period or periods during which the price or prices at which
redemption may occur during the Subsequent Interest Period.
We may, by not later than 20 days prior to an Optional Reset Date for a
Note, revoke the interest rate, in the case of a Fixed Rate Note, or the Spread
and/or Spread Multiplier, in the case of a Floating Rate Note, provided for in
the Reset Notice and establish a higher interest rate or a higher Spread and/or
Spread Multiplier, as applicable, for the Subsequent Interest Period commencing
on the Optional Reset Date. In order to exercise this right, we must cause the
Trustee to transmit an irrevocable notice of the higher interest rate or higher
Spread and/or Spread Multiplier, as the case may be, to the holders of the Note.
All Notes with respect to which the interest rate or Spread and/or Spread
Multiplier is reset on an Optional Reset Date and with respect to which the
holders of such Notes have not tendered their Notes for repayment (or have
validly revoked any tender pursuant to the next succeeding paragraph) will bear
the higher interest rate or higher Spread and/or Spread Multiplier, as
applicable, whether or not tendered for repayment.
If we elect to reset the interest rate or the Spread and/or Spread
Multiplier of a Note, the holders will have the option to elect repayment of
their Note on any Optional Reset Date at a price equal to the aggregate
principal amount thereof outstanding on, plus any accrued interest to, such
Optional Reset Date. In order for a Note to be so repaid on an Optional Reset
Date, the Trustee or any other person designated by us for such purpose must
receive at least 25 days but not more than 35 days prior to the Optional Reset
Date (i) if the Note is a Certificated Note, the Note with the form entitled
"Option to Elect Repayment" on the reverse side of the Note duly completed or
(ii) if the Note is a Book-Entry Note, the notices set forth in the Pricing
Supplement. The repayment option may be exercised by the holder of a Note for
less than the aggregate principal amount of the Note then outstanding so long as
the principal amount remaining outstanding after repayment is an authorized
denomination. A holder who has tendered a Note for repayment pursuant to a Reset
Notice may, by delivery by the close of business on the tenth day prior to the
Optional Reset Date of written notice to the Trustee, revoke the tender for
repayment.
If a Note is represented by a Global Security, the Depositary's nominee
will be the holder of that Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will exercise timely a right to repayment with respect to a particular Note, the
beneficial owner of the Note must instruct the broker or other direct or
indirect participant through which it holds an interest in the Note to notify
the Depositary of its desire to exercise a right of repayment. Different firms
have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which instructions must be given in order
for timely notice to be delivered to the Depositary.
EXTENSION OF MATURITY
The Pricing Supplement will indicate whether the Maturity Date of a Note
(other than an Amortizing Note) may be extended, and if so, whether its Maturity
Date may be extended at our option or at the option of its holder, or both, for
one or more periods (each an "Extension Period") up to but not beyond the date
(the "Final Maturity Date") set forth in the Pricing Supplement.
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If we have the option to extend the Maturity Date, then the following
procedures shall apply. We may from time to time exercise this option by
notifying the Trustee at least 50 but not more than 60 days prior to the
Maturity Date of the Note in effect immediately prior to the exercise of the
option (the "Prior Maturity Date"). Not later than 10 days after receipt of
Notice from us but in any event not later than 40 days prior to the Prior
Maturity Date, the Trustee will mail to the holder of the Note a notice (the
"Extension Notice") regarding the Extension Period, setting forth:
- our election to extend the Prior Maturity Date,
- the new Maturity Date,
- in the case of a Fixed Rate Note, the interest rate applicable to the
Extension Period or, in the case of a Floating Rate Note, the Spread
and/or Spread Multiplier applicable to the Extension Period, and
- any provisions for redemption by us or repayment to the holder, or both,
during the Extension Period, including the date or dates on which or the
period or periods during which and the price or prices at which
redemption or repayment may occur during the Extension Period.
Upon the transmittal by the Trustee of an Extension Notice to the holder of a
Note, the Prior Maturity Date shall be extended automatically and, except as
modified by the Extension Notice and as described in the next paragraph, the
Note will have the same terms that it had prior to the transmittal of the
Extension Notice.
Not later than 20 days prior to the Prior Maturity Date for a Note, we may
elect to revoke the interest rate or the Spread and/or Spread Multiplier
provided for in the Extension Notice and establish a higher interest rate or a
Spread and/or Spread Multiplier that is higher than the interest rate, Spread
and/or Spread Multiplier provided for in the Extension Notice, for the Extension
Period commencing on the Prior Maturity Date by causing the Trustee to transmit
an irrevocable notice of the higher interest rate or higher Spread and/or Spread
Multiplier to the holders of the Note. All Notes with respect to which the
Maturity Date is extended and with respect to which the holders have not
tendered their Notes for repayment (or have validly revoked any such tender
pursuant to the next succeeding paragraph) will bear the higher interest rate or
higher Spread and/or Spread Multiplier for the Extension Period.
If we elect to extend the Maturity Date of a Note, the holders will have
the option to elect repayment of their Note by us on the immediately Prior
Maturity Date at a price equal to the principal amount thereof outstanding on,
plus any accrued interest to, the Prior Maturity Date. In order for a Note to be
so repaid on the Prior Maturity Date, the Trustee or any other person designated
by us for such purpose must receive at least 25 days but not more than 35 days
prior to the Prior Maturity Date (i) if the Note is a Certificated Note, the
Note with the form entitled "Option to Elect Repayment" on the reverse of the
Note duly completed or (ii) if the Note is a Book-Entry Note, the notices set
forth in the Pricing Supplement. The repayment option may be exercised by the
holder of a Note for less than the aggregate principal amount then outstanding
so long as the principal amount remaining outstanding after repayment is an
authorized denomination. A holder who has tendered a Note for repayment pursuant
to an Extension Notice may, by delivery of written notice by the close of
business on the tenth day prior to the Prior Maturity date to the Trustee,
revoke the tender for repayment.
If a Note is represented by a Global Security, see "Description of
Notes -- Subsequent Interest Periods" above for the manner by which a right to
repayment may be exercised.
If the holder of a Note (other than an Amortizing Note) has the option to
extend the Maturity Date for one or more Extension Periods up to but not beyond
the Final Maturity Date set forth in the Pricing Supplement, then the following
provisions shall apply. The holder may, at the time or times as set forth in the
Pricing Supplement, exercise the extension option by delivery to the Trustee by
the date set forth in the Pricing Supplement of a written notice of such
election (the "Holder's Extension Notice"). The Holder's Extension Notice will
be irrevocable and will specify the new Maturity Date. Upon the transmittal by
the holder of the Holder's Extension Notice to the Trustee, the applicable Prior
Maturity Date shall be
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extended automatically and, except as modified pursuant to this paragraph, the
Note will have the same terms as prior to the transmittal of the Holder's
Extension Notice.
REDEMPTION
The Pricing Supplement will indicate either that a Note cannot be redeemed
prior to its Maturity Date or it will be redeemable prior to its Maturity Date
at our option on the date or dates and at the price or prices set forth in the
Pricing Supplement, together with accrued interest to the date of redemption. We
may redeem any of the Notes that are redeemable, either in whole or from time to
time in part, upon not less than 30 nor more than 60 days' notice to each holder
of the affected Notes. If Notes of different tenor and terms are to be redeemed,
we shall select the Notes to be redeemed. If less than all of the Notes with
like tenor and terms are to be redeemed, the Trustee will select the Notes to be
redeemed by any method that it shall deem fair and appropriate. The Notes will
generally not be subject to any sinking fund.
REPAYMENT AND REPURCHASE
The Pricing Supplement will indicate that a Note cannot be repaid prior to
its Maturity Date or that it will be repayable at the option of the holder on a
date or dates specified prior to its Maturity Date at the price or prices set
forth in the Pricing Supplement, together with accrued interest to the date of
repayment. In order for a Note to be repaid at the option of the holder, the
Trustee or any other person designated by us must receive at least 15 days but
not more than 30 days prior to the repayment date, (i) if the Note is a
Certificated Note, the Note with the form entitled "Option to Elect Repayment"
on the reverse side of the Note duly completed or (ii) if the Note is a
Book-Entry Note, the notices set forth in the Pricing Supplement. The repayment
option may be exercised by the holder of a Note for less than the aggregate
principal amount of the Note then outstanding so long as the principal amount
remaining outstanding after repayment is an authorized denomination. Exercise of
the repayment option by the holder of a Note will be irrevocable.
If a Note is represented by a Global Security, see "Description of
Notes -- Subsequent Interest Periods" above for the manner by which a right to
repayment may be exercised.
We may at any time purchase Notes at any price in the open market or
otherwise. Notes so purchased by us may, at our discretion, be held, resold or
surrendered to the Trustee for cancellation.
GLOBAL SECURITIES AND BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes having the same terms will be
represented by a single Global Security. Each Global Security representing
Book-Entry Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depositary") or such other depositary as is
specified in the applicable Pricing Supplement, and registered in the name of a
nominee of the Depositary. Book-Entry Notes may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
nominee of the Depositary or any nominee to a successor of nominee of the
Depositary or a nominee of successor, and will not be exchangeable for
Certificated Notes and, except under the circumstances described in the
Prospectus under "Description of the Debt Securities and Guaranties -- Global
Securities" and as described below, will not otherwise be issuable in definitive
form.
The Depositary has advised us and the Agents as follows: The Depositary is
a limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of its participants and to facilitate
the clearance and settlement of securities transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (including the Agents), banks, trust
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companies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary'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.
Upon the issuance of a Global Security, the Depositary for that Global
Security, or its nominee, will credit the accounts of persons held with it with
the respective amount of the Book-Entry Notes represented by that Global
Security. Those accounts shall be designated by the Agent or Agents with respect
to those Book-Entry Notes or by us if those Book-Entry Notes are offered and
sold directly by the Issuer. Ownership of beneficial interests in that Global
Security will be limited to persons that have accounts with the Depositary for
that Global Security or its nominee ("participants") or persons that may hold
interests through participants. Ownership of beneficial interests in that Global
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the Depositary or its nominee (with respect
to interests of participants) for that Global Security and on the records of
participants (with respect to interests of persons other than participants). The
laws of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of that Global Security, the Depositary or the nominee, as the
case may be, will be considered the sole owner or Holder of the Book-Entry Notes
represented by that Global Security for all purposes under the Indenture
governing those Book-Entry Notes. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have Book-Entry Notes
represented by that Global Security registered in their names, will not receive
or be entitled to receive Certificated Notes in exchange for the Global Security
representing those Book-Entry Notes and will not be considered the owners or
holders thereof under the Indenture.
Principal, premium and interest payments on Book-Entry Notes registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security
representing Book-Entry Notes. Neither we, the Trustee, any Paying Agent nor the
Security Registrar for Book-Entry Notes will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Global Security for Book-Entry Notes or
for maintaining, supervising or reviewing any records relating to beneficial
ownership interests.
We expect that the Depositary for Book-Entry Notes or its nominee, upon
receipt of any payment of principal, premium or interest will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Security
for those Book-Entry Notes as shown on the records of such Depositary or its
nominee. We also expect that payments by participants to owners of beneficial
interests in the Global Security held through participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers which are registered in "street
name", and will be the responsibility of the participants.
If the Depositary for Book-Entry Notes is at any time unwilling or unable
to continue as depositary and a successor depositary is not appointed by us
within 90 days, we will issue Certificated Notes in exchange for the Global
Security representing those Book-Entry Notes. In addition, we may at any time
and in our sole discretion determine not to have Book-Entry Notes represented by
Global Securities and, in such event, will issue Certificated Notes in exchange
for all Global Securities representing the Book-Entry Notes. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery of Certificated Notes represented by the Global
Security equal in principal amount to such beneficial interest and to have those
Certificated Notes registered in its name. Certificated Notes will be so issued
in denominations of U.S. $1,000 and any integral multiple in excess thereof (or
the equivalent thereof in a Foreign Currency).
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UNITED STATES TAXATION
In the opinion of Ivins, Phillips & Barker, Chartered, our special U.S. tax
counsel, the following summary correctly describes certain United States Federal
income tax consequences resulting from the purchase, ownership or disposition of
Notes by an initial holder (unless otherwise indicated) subject to United States
income taxation. It does not purport to consider all the possible tax
consequences of the purchase, ownership or disposition of the Notes, and it is
not intended to reflect the individual tax position of any holder. It deals only
with Notes and Foreign Currencies held as capital assets. It does not deal with
special tax situations, such as dealers in securities or currencies, Notes (or
Foreign Currency) held as a hedge against currency risks or as part of a
straddle with other investments or as part of a "synthetic security" or other
integrated investment (including a "conversion transaction") comprised of a Note
and one or more other investments, or (except for the discussion of "Non-United
States Persons" below) situations in which the functional currency of the holder
is not the U.S. dollar. It is based upon the United States Federal tax laws and
regulations as now in effect and as currently interpreted, and does not take
into account possible changes in such tax laws or such interpretations. It does
not include any description of the tax laws of any state or local governments,
or of any foreign government, that may be applicable to the Notes or holders
thereof. Persons considering the purchase of Notes should consult their own tax
advisers concerning the application of the United States Federal tax laws to
their particular situations as well as any consequences arising under the laws
of any other taxing jurisdiction. The following discussion applies only to Notes
under which all payments are denominated in, or determined with reference to, a
single currency, either a single Foreign Currency or the U.S. dollar. If Notes
are issued with payments denominated in, or determined with reference to, more
than one currency, their tax treatment will be discussed in the Pricing
Supplement relating to the issuance of such Notes.
The Tax Reform Act of 1986 made major changes in the United States Federal
tax laws that affect the treatment of currency gains and losses. Final
regulations and proposed regulations dealing with currency gains and losses were
issued by the Internal Revenue Service ("IRS") on March 17, 1992 (the "Foreign
Currency Regulations"). The following summary reflects the terms of the Foreign
Currency Regulations. Under the proposed Foreign Currency Regulations, however,
for taxable years ending on or after the date on which the proposed Foreign
Currency Regulations become final, certain holders may elect to mark to market
foreign currency transactions based on the holder's method of financial
accounting. Moreover, the Foreign Currency Regulations do not cover all issues,
and subsequent versions of such regulations (including the final form of the
proposed Foreign Currency Regulations) may adopt positions that would apply to
the Notes and that may be contrary to the positions discussed below.
UNITED STATES PERSONS
The following addresses the principal United States Federal income tax
consequences resulting from the ownership of a Note by a holder who is a United
States person.
For purposes of the following discussion, the term "United States person"
means
- a citizen or resident of the United States,
- a corporation, partnership or other entity created or organized under the
laws of the United States, or any State or the District of Columbia,
- an estate the income of which is subject to United States Federal income
taxation regardless of its source, or
- a trust as to which a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
United States persons have the authority to control all substantial
decisions of the trust.
"United States" means the United States of America (including the States and the
District of Columbia).
A holder that is a nonresident alien individual as to the United States and
a bona fide resident of Puerto Rico, Guam, American Samoa or the Northern
Mariana Islands during the entire taxable year is also subject to the rules
described in this section as if such holder were a United States person. Such a
holder
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may also be subject to United States Federal withholding tax under the rules
described in the first paragraph under "Non-United States Persons" below.
If a partnership holds a Note, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding Notes should consult their own tax
advisors.
Certain persons may be subject to United States Federal income tax on
certain income of foreign trusts (i.e., trusts other than those described above
as a "United States person"). Such persons may include, in certain
circumstances,
- a United States person who transfers property to (A) a foreign trust with
a United States beneficiary or (B) a trust that subsequently becomes a
foreign trust while such individual is alive,
- persons who are not United States persons who transfer property to
foreign trusts and subsequently become United States persons, and
- certain United States persons who are beneficiaries of foreign trusts.
Accordingly, in certain circumstances the United States Federal income tax
treatment set forth below, regarding Notes owned by United States persons, may
apply to Notes owned by foreign trusts.
If an individual who is a United States person loses United States
citizenship or ceases to be a long-term resident of the United States, with a
principal purpose of avoiding United States Federal income, estate or gift tax,
such individual may be subject to United States Federal income, estate or gift
tax for 10 years thereafter (or longer in some circumstances), as set forth
below regarding Notes owned by United States persons. In addition, such an
individual may be subject to United States Federal income tax upon a transfer of
a Note to certain foreign corporations.
Payments of Interest
Except as described below under "Original Issue Discount", interest on a
Note (whether payable in a Foreign Currency or in U.S. dollars) will be taxable
to a holder as ordinary income at the time it accrues or is received in
accordance with the holder's method of accounting for tax purposes.
If payment of interest is denominated in or determined with reference to
the value of a Foreign Currency, then in the case of a cash method holder who is
not required to accrue such interest prior to its receipt, the amount of
interest income is determined by translating the Foreign Currency into U.S.
dollars at the "spot rate" on the date of receipt. In the case of an accrual
method holder or in the case of interest that must be accrued prior to receipt
or payment (such as original issue discount) the amount of interest income that
is taken into income for any interest accrual period is determined by
translating the Foreign Currency into U.S. dollars at the "average rate" for the
interest accrual period, or, with respect to an interest accrual period that
spans two taxable years, at the "average rate" for the partial period within the
taxable year. At the time the interest so accrued in a prior accrual period is
received, the holder will realize exchange gain or loss equal to the difference,
if any, between the "spot rate" of the Foreign Currency received by the holder
with respect to such accrual period on the date the interest is received and the
amount of interest income previously accrued for such period. A holder may elect
to use, instead of such "average rate", the "spot rate" on the last day of the
accrual period (or, if the accrual period spans two of the holder's taxable
years, the last day of the first taxable year). In addition, if the interest is
actually received within five Business Days of the end of such accrual period or
taxable year, an accrual method holder making the election may instead use the
spot rate on the date the interest is received for purposes of translating
accrued interest income into U.S. dollars (in which case no exchange gain or
loss will be taken into account upon receipt). The election applies to all debt
instruments held by the holder and cannot be changed without the consent of the
IRS.
The exchange gain or loss described in the immediately preceding paragraph
will be ordinary income or loss and will generally not be considered additional
interest income or expense. The IRS has authority to issue regulations
recharacterizing interest as principal, or principal as interest, for
obligations
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denominated in a hyperinflationary currency. Under the proposed Foreign Currency
Regulations, which would become effective for transactions entered into after
such regulations are finalized, if a holder acquires a Note denominated in a
Foreign Currency that is a hyperinflationary currency at the time of such
acquisition, the holder would be required to realize exchange gain or loss on
the Note each year that the holder holds the Note based (in general) on the
change in exchange rates between the Foreign Currency and the U.S. dollar from
the beginning to the end of the year. Such exchange gain or loss would generally
be treated, respectively, as additional interest income or as an offset to
interest income.
For purposes of this discussion, the "spot rate" generally means a rate
that reflects a fair market rate of exchange available to the public for
currency under a "spot contract" in a free market and involving representative
amounts. A "spot contract" is a contract to buy or sell a nonfunctional
currency, which in the case of an individual United States person generally is
any Foreign Currency, on or before two Business Days following the date of the
execution of the contract. If such a spot rate cannot be demonstrated, the
District Director of the IRS has the authority to determine the spot rate. The
"average rate" for an accrual period (or partial period) is the simple average
of the spot exchange rates for each Business Day of such period, or other
average exchange rate for the period reasonably derived and consistently applied
by the holder.
Purchase, Sale, Exchange and Retirement of Notes
A purchaser of a Note using Foreign Currency as the consideration for such
Note will generally be treated for Federal income tax purposes as though the
Foreign Currency used to purchase the Note were instead exchanged for U.S.
dollars, and the U.S. dollars received in such exchange were used to purchase
the Note. Thus, such a purchaser generally will be required to recognize
ordinary income or loss equal to the difference, if any, between the U.S. dollar
spot rate of the Foreign Currency used to purchase the Note on the date of
purchase, and the purchaser's U.S. dollar tax basis in the Foreign Currency.
Upon the sale, exchange or retirement of a Note, a holder will recognize
gain or loss equal to the difference between the amount realized (less any
accrued but unpaid qualified stated interest which will be taxable as such) and
the holder's tax basis in the Note. If the amount received on the sale, exchange
or retirement is not in U.S. dollars, the amount realized will be based on the
spot rate of the Foreign Currency on the date of disposition. In the case of a
Note denominated in Foreign Currency, to the extent such recognized gain or loss
is attributable to changes in Foreign Currency exchange rates between the date
of acquisition and disposition of the Note, such gain or loss ("exchange gain or
loss") will be treated as ordinary income or loss (but will generally not be
treated as interest income or expense). However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction. Except as provided below, any gain or loss in excess of such
exchange gain or loss will be capital gain or loss, and will be long-term
capital gain or loss if the Note had been held for more than one year at the
time of such exchange.
If a holder has a tax basis in a Note, other than a Note with a fixed
Maturity Date of one year or less from the date of issue, that is less than its
principal amount (or, in the case of an Original Issue Discount Note, less than
its original issue price plus original issue discount includable, without regard
to adjustments for acquisition premium discussed below under "Original Issue
Discount", in gross income by the prior holder or holders), the Note may be
considered to have "market discount". As a general matter, gain on a Note is
treated as ordinary income rather than capital gain to the extent of market
discount accrued while the holder held the Note, although holders may elect to
accrue market discount into income on a current basis. Such an election applies
to all debt instruments with market discount acquired by the electing holder on
or after the first day of the first taxable year to which the election applies
and may not be revoked without the consent of the IRS. Market discount will be
treated as accruing on a ratable basis or, at the election of the holder, based
on a constant interest method. Furthermore, unless a holder elects to include
market discount into income on a current basis as described above, a holder of a
Note having market discount may be required to defer the deduction of all or a
portion of the interest expense on any indebtedness incurred or maintained to
purchase or carry such Note until the Maturity Date of the Note or its earlier
disposition in a taxable transaction. In the case of a
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Note payable in a Foreign Currency, (1) market discount is determined in units
of the Foreign Currency, (2) accrued market discount required to be taken into
account on the Maturity or earlier disposition of a Note is translated into U.S.
dollars at the spot rate on the Maturity or disposition date (and no part is
treated as exchange gain or loss), and (3) accrued market discount currently
includible in income by a holder is translated into U.S. dollars at the average
exchange rate for the accrual period, and exchange gain or loss is determined on
the Maturity or disposition of the Note in the manner described in "Payments of
Interest" above, with respect to computation of exchange gain or loss on the
receipt of accrued interest.
If a holder has a tax basis for a Note that is greater than its principal
amount, the Note may be considered to have "bond premium". The holder may elect
to amortize such premium as offsets to interest income over the remaining life
of the Note under a constant interest method. (The treatment of Original Issue
Discount Notes purchased at a premium is discussed below. See "Original Issue
Discount".) Such an election generally applies to all Notes held by the holder
at the beginning of the taxable year to which the election applies or thereafter
acquired by the holder and is irrevocable without the consent of the IRS.
However, if such Note may be optionally redeemed after the holder acquires it at
a price in excess of its principal amount, special rules would apply that could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. In the case of a Note denominated in Foreign Currency, bond
premium is computed in units of Foreign Currency and amortizable bond premium
reduces interest income in units of the Foreign Currency. At the time amortized
bond premium offsets interest income, foreign currency exchange gain or loss
(taxable as ordinary income or loss, but not generally as interest income or
expense) is realized based on the difference between spot rates at that time and
at the time of the acquisition of the Note. With respect to a holder that does
not elect to amortize bond premium, the amount of bond premium constitutes a
capital loss when the bond matures. In the case of a Note denominated in Foreign
Currency, foreign currency exchange gain or loss with respect to the premium is
realized based on the difference between the spot rates on the Maturity Date and
at the time of the acquisition of the Note. In such case, the amount of capital
loss relating to the premium may be offset or eliminated by exchange gain.
Receipt of Foreign Currency
The tax basis of Foreign Currency received by a holder generally will equal
the U.S. dollar equivalent of such Foreign Currency at the spot rate on the date
it is received. Upon the subsequent exchange of such Foreign Currency for U.S.
dollars, another currency, or property, a holder will generally recognize
exchange gain or loss equal to the difference between the holder's tax basis for
the Foreign Currency and the U.S. dollars received (or, if another currency is
received, the U.S. dollar value of the other currency at the spot rate on the
date of the exchange) or, if property is received, the U.S. dollar value of the
Foreign Currency based on the spot rate on the date of purchase. Such gain or
loss will be ordinary in character.
Indexed Notes
The specific treatment of any Indexed Notes issued will be discussed in the
Pricing Supplement relating to the issuance of such Notes and would generally be
subject to different rules from those set forth in this discussion.
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to holders who are United States persons of Notes issued
with original issue discount ("Original Issue Discount Notes"). It is based in
part upon income tax regulations (the "OID Regulations") that were published in
the Federal Register on April 4, 1994. Additionally, the summary includes a
discussion of final regulations published in the Federal Register on June 14,
1996, relating primarily to contingent payment debt instruments with original
issue discount (the "Contingent Payment Debt Regulations"). The discussion
assumes that the Notes will not qualify as "applicable high-yield discount
obligations" under the Code.
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For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of an Original Issue
Discount Note over its "issue price" (defined as the first price at which a
substantial amount of the Original Issue Discount Notes have been sold) unless,
in most circumstances, such excess is less than 0.25% of the Original Issue
Discount Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity. The stated redemption price at maturity of an
Original Issue Discount Note is the total of all payments to be made under the
Original Issue Discount Note other than "qualified stated interest." The term
"qualified stated interest" means, in general, stated interest that is
unconditionally payable in cash or property at least annually at a single fixed
rate (or at certain floating rates) that appropriately takes into account the
length of the interval between stated interest payments.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to bear original issue discount for Federal income tax purposes, with
the result that the inclusion of interest in income for Federal income tax
purposes may vary from the actual cash payments of interest made on such Notes,
generally accelerating income for cash method taxpayers. Under the OID
Regulations, a Note may be an Original Issue Discount Note where, among other
things,
- a Floating Rate Note provides for a maximum interest rate that is
reasonably expected as of the issue date to cause the yield on the debt
instrument to be significantly less than the expected yield determined
without the maximum rate;
- a Floating Rate Note provides for a minimum interest rate that is
reasonably expected as of the issue date to cause the yield on the debt
instrument to be significantly more than the expected yield determined
without the minimum rate;
- a Floating Rate Note provides for a significant front-loading or
back-loading of interest; or
- a Note bears interest at a floating rate in combination with one or more
other floating or fixed rates.
Notice will be given in the Pricing Supplement if we determine that a
particular Note will be an Original Issue Discount Note. Unless specified in the
applicable Pricing Supplement, Floating Rate Notes will not be Original Issue
Discount Notes.
Persons holding Original Issue Discount Notes having maturities in excess
of one year are required to include original issue discount in income before the
receipt of cash attributable to such income. The amount of original issue
discount includible in income by the initial holder of such Original Issue
Discount Notes and, subject to an adjustment, by any subsequent holder, is the
sum of the daily portions of the original issue discount with respect to the
Original Issue Discount Note for each day during the taxable year in which such
holder held the Original Issue Discount Note ("accrued original issue
discount"). The daily portion of the 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. The term "accrual period" generally means the period between
interest payment dates (or shorter period from the date of issue to the first
interest payment date and from the last interest payment date prior to maturity
to the date of maturity), but an accrual period may not be longer than one year.
For any accrual period, the original issue discount allocable to the
accrual period is an amount equal to the excess, if any, of (a) the product of
the Original Issue Discount Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of compounding
at the close of each accrual period and adjusted for the length of the accrual
period) over (b) the sum of the qualified stated interest, if any, allocable to
such accrual period. The "adjusted issue price" of an Original Issue Discount
Note at the beginning of the first accrual period is the issue price and at the
beginning of any accrual period thereafter is (x) the sum of the issue price of
such Original Issue Discount Note, the accrued original issue discount for each
prior accrual period (determined without regard to the amortization of any
acquisition premium, as discussed below, or bond premium, as discussed above),
and the amount of any qualified stated interest on the Note that has accrued
prior to the beginning of the accrual period but is not payable until a later
date, less (y) any prior payments on
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the Original Issue Discount Note that were not qualified stated interest. If a
payment (other than a payment of qualified stated interest) is made on the first
day of an accrual period, then the adjusted issue price at the beginning of such
accrual period is reduced by the amount of the payment.
Under the above rules, persons holding Original Issue Discount Notes will
be required to include in income increasingly greater amounts of original issue
discount in successive accrual periods, assuming that no payments other than
qualified stated interest are made prior to the maturity of the Note.
If we have the option to redeem a Note, or the holder has an option to
cause a Note to be repurchased, prior to the Note's stated maturity, such option
will be presumed to be exercised if, by utilizing any date on which such Note
may be redeemed or repurchased as the maturity date and the amount payable on
such date in accordance with the terms of such Note (the "redemption price") as
the stated redemption price at maturity, the yield on the Note would be (i) in
the case of our option, lower than its yield to stated maturity, or (ii) in the
case of an option of the holder, higher than its yield to stated maturity. If
such option is not in fact exercised when presumed to be exercised, the Note
would be treated solely for original issue discount purposes as if it were
redeemed or repurchased, and a new Note were issued on the presumed exercise
date for an amount equal to the Note's adjusted issue price on that date.
Original issue discount on an Original Issue Discount Note denominated in,
or under which all payments are determined with reference to, a single Foreign
Currency will be determined for any accrual period in that Foreign Currency and
then translated into U.S. dollars in the same manner as other interest income
accrued by an accrual method holder before receipt, as described above under
"Payments of Interest". Likewise, as described therein, exchange gain or loss
will be recognized when the original issue discount is paid. For this purpose,
all payments (other than qualified stated interest) on a Note will first be
viewed as payments of previously accrued original issue discount (to the extent
thereof), with payments considered made for the earliest accrual periods first.
The Contingent Payment Debt Regulations address, among other things, the
accrual of original issue discount on, and the character of gain recognized on
the sale, exchange, or retirement of debt instruments providing for contingent
payments. Prospective holders of Notes with contingent payments should refer to
the discussion regarding taxation in the Pricing Supplement.
Different rules apply to Original Issue Discount Notes having maturities of
not more than one year ("Short-Term Discount Notes"). A holder of a Short-Term
Discount Note who uses the cash method of tax accounting will generally not be
required to include original issue discount in income on a current basis (but
may be required to defer a deduction for a portion or all of the interest paid
or accrued on any indebtedness incurred to purchase or carry such Short-Term
Discount Note). Rather, such a holder will be required to treat any gain
realized on a sale, exchange or retirement of the Short-Term Discount Note as
ordinary income to the extent such gain does not exceed the original issue
discount accrued with respect to the Short-Term Discount Note during the period
the holder held the Short-Term Discount Note. Holders using the accrual method
of tax accounting, and certain cash method holders (including banks, securities
dealers and regulated investment companies) will generally be required to
include original issue discount on the Short-Term Discount Note in income on a
current basis. Notwithstanding the foregoing, a cash method holder of a
Short-Term Discount Note may elect to accrue original issue discount into income
on a current basis (in which case the limitation on the deductibility of
interest described above will not apply). Original issue discount will be
treated as accruing for these purposes on a ratable basis or, at the election of
the holder, on a constant yield basis. Furthermore, any holder (whether cash or
accrual method) of a Short-Term Discount Note can elect to accrue the
"acquisition discount", if any, with respect to the Short-Term Discount Note on
a current basis in lieu of original issue discount. Acquisition discount is the
excess of the stated redemption price at maturity of the Short-Term Discount
Note over the holder's tax basis in the Note at the time of acquisition.
Acquisition discount will be treated as accruing on a ratable basis or, at the
election of the holder, using a constant yield method. The market discount rules
do not apply with respect to Short-Term Discount Notes.
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For purposes of determining the amount of original issue discount subject
to these rules, the OID Regulations provide that no interest payments on Notes
with maturities of one year or less are qualified stated interest, but instead
such interest payments are included in such Note's stated redemption price at
maturity.
In the event that a person purchases an Original Issue Discount Note
(including a Short-Term Discount Note) at an acquisition premium, i.e., at a
price that is (i) less than or equal to the sum of all amounts payable on the
Note (other than qualified stated interest) after the date of purchase by the
holder and (ii) in excess of the issue price plus the original issue discount
accrued prior to acquisition and minus any payments (other than payments of
qualified stated interest) made with respect to such Note prior to acquisition
(such amount, the Note's "revised issue price"), the amount includible in income
in each taxable year as original issue discount will be reduced by that portion
of the acquisition premium properly allocable to such year or, alternatively, a
holder may elect to treat its purchase price as the Note's issue price.
The market discount and bond premium rules discussed above under "Purchase,
Sale and Retirement of Notes" may apply to an Original Issue Discount Note
purchased at a price that is less than such Note's revised issue price (in the
case of market discount) or that is greater than such Note's remaining stated
redemption price at maturity (in the case of bond premium), respectively. In
such case, the amount of market discount will generally equal the excess of the
Original Issue Discount Note's revised issue price over the holder's purchase
price for the Note, and the amount of bond premium will equal the excess of the
holder's purchase price over the Original Issue Discount Note's remaining stated
redemption price at maturity. A holder of an Original Issue Discount Note with
bond premium will not be subject to the original issue discount rules described
above.
A holder's tax basis in an Original Issue Discount Note generally will be
the holder's cost increased by any original issue discount included in income
(and market discount, if any, if the holder has elected to include accrued
market discount in income on an annual basis) and decreased by the amount of any
payment (other than qualified stated interest) received with respect to the
Original Issue Discount Note. Gain or loss on the sale, exchange or redemption
of an Original Issue Discount Note generally will be long-term capital gain or
loss if the Original Issue Discount Note has been held for more than a year
except to the extent that gain represents market discount not previously
included in the holder's income.
The original issue discount rules will not be applied to treat Notes as
having original issue discount solely by virtue of the contingent U.S. dollar
values of payments on Notes denominated in a Foreign Currency.
A holder may elect to treat all interest that accrues on a Note as original
issue discount applying the constant yield method described above to accrue such
interest, with the modifications described below. For purposes of this election,
interest includes stated interest, original issue discount, de minimis original
issue discount, market discount, acquisition discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium
(described above) or acquisition premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
holder's adjusted basis in the Note immediately after its acquisition, the issue
date of the Note will be the date of its acquisition by the electing holder, and
no payments on the Note will be treated as payments of qualified stated
interest. This election will generally apply only to the Note with respect to
which it is made and may not be revoked without the consent of the IRS. If this
election is made with respect to a Note with amortizable bond premium, then the
electing holder will be deemed to have elected to apply amortizable bond premium
against interest with respect to all debt instruments with amortizable bond
premium (other than debt instruments the interest on which is excludable from
gross income) held by such electing holder as of the beginning of the taxable
year in which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the IRS.
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If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Note that has market discount, as
described above, then the electing holder will be treated as having made the
election discussed above under "Purchase, Sale, and Retirement of Notes" to
include market discount in income currently over the life of all debt
instruments held or thereafter acquired by such holder.
Subsequent Interest Periods and Extensions of Maturity
If a reset of the interest rate, Spread and/or Spread Multiplier of a Note
(either alone or in conjunction with each other) by us or extension of the
maturity of a Note is treated as an exchange of such Note for a new Note, then a
United States person who is a holder of such Note may recognize taxable gain or
loss (subject to characterization as capital gain or loss or ordinary income or
loss depending on the effect of the original issue discount, foreign currency,
or other rules described herein) equal to the difference between the fair market
value of such Note and the holder's adjusted tax basis in such Note at the time
of the reset or extension. In such case, the holder will have a tax basis in a
new Note equal to such fair market value. The tax consequences described above
with respect to the timing and character of income, gain or loss would apply to
the holding of the new Note. If, on the other hand, the interest reset or
maturity extension is not treated as an exchange, then a United States person
who is a holder will not recognize gain or loss upon the reset or extension, but
the reset or extension may affect the timing, character, and amount of income,
gain or loss with respect to the subsequent holding period of the Note. On June
26, 1996, final regulations were published in the Federal Register which govern
the resolution of whether an interest reset or maturity extension would or would
not result in an exchange.
NON-UNITED STATES PERSONS
Under the United States Federal tax laws as in effect on the date of this
prospectus supplement and subject to the discussion of backup withholding below,
payments of principal (and premium, if any) and interest, including original
issue discount, by us or any of our agents to any holder of a Note who is not a
United States person will not be subject to United States Federal withholding
tax, provided, in the case of interest, including original issue discount, that
- the holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to vote,
- the holder is not a controlled foreign corporation for United States tax
purposes that is related to us through stock ownership,
- the holder is not receiving interest ineligible for exemption from
withholding by reason of the application of Section 881(c)(3)(A) of the
Code,
- the holder is not a foreign private foundation and
- either (A) the beneficial owner of the Note certifies to the last United
States person (the "Withholding Agent") in the chain of payment, under
penalties of perjury, that it is a non-United States person and provides
its name and address, or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution") and
holds such Note certifies to the Withholding Agent, under penalties of
perjury, that such statement has been received from the beneficial owner
by it or by another financial institution and furnishes the payor with a
copy thereof.
Applicable regulations contain certain other requirements regarding the
timing, form, and maintenance by the Withholding Agent of the certification
described in the preceding sentence. Recently finalized regulations would modify
the certification requirements for payments of interest made after December 31,
2000.
Payments of certain types of contingent interest to a person who is not a
United States person may be subject to United States withholding tax equal to
30% of each such payment (or such lower amount
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as provided by treaty). The Pricing Supplement will state whether any Notes
having contingent payments will be subject to any U.S. withholding taxes.
If a holder of a Note who is not a United States person is engaged in a
trade or business in the United States and interest, including original issue
discount, on the Note is effectively connected with the conduct of such trade or
business, such holder may be subject to United States Federal income tax on such
interest, and original issue discount, in the same manner as if such holder were
a United States person. In addition, if such a holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30% of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments. For purposes of the branch profits tax, interest (including
original issue discount) on a Note will be included in the earnings and profits
of such holder if such interest (or original issue discount) is effectively
connected with the conduct by such holder of a trade or business in the United
States. Such a holder will be exempt from United States Federal withholding tax
discussed above, provided that such holder provides the payor with the
certification described above. In addition, such a holder may be required to
provide the same certification in order to obtain an exemption from "backup"
withholding, discussed below.
Any capital gain or market discount realized upon retirement or disposition
of a Note by a holder who is not a United States person will not be subject to
United States Federal income or withholding taxes if
- such gain is not effectively connected with a United States trade or
business of the holder, and
- in the case of an individual, such holder is either (A) not present in
the United States for 183 days or more in the taxable year of the
retirement or disposition or (B) such individual does not have a "tax
home" (as defined in the Code) in the United States and the gain is not
attributable to an office or other fixed place of business maintained by
such individual in the United States.
Notes held by an individual who is neither a citizen nor a resident of the
United States for United States Federal income tax purposes at the time of such
individual's death will not be subject to United States Federal estate tax
provided that
- the income from such Notes was not or would not have been effectively
connected with a United States trade or business of such individual;
- such individual qualified for the exemption from United States Federal
withholding tax (without regard to the certification requirements) that
is described above; and
- such individual did not, within the 10-year period ending with the date
of death, relinquish United States citizenship or cease to be a long-term
resident of the United States with a principal purpose of avoiding United
States Federal estate tax.
A holder who is not a United States person and is a qualified resident of a
jurisdiction that has entered into a bilateral income, estate or gift tax treaty
with the United States may be able to obtain benefits under the applicable
treaty in connection with the United States Federal taxation relating to the
Notes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
For each calendar year in which the Notes are outstanding, the payor of
interest (including original issue discount, if any), principal, premium, or the
proceeds of disposition to a holder is required to provide the IRS with certain
information, including the holder's name, address and taxpayer identification
number ("TIN") (either the holder's Social Security number or its employer
identification number, as the case may be), the aggregate amount of principal,
interest (including any original issue discount), premium, or the proceeds of
disposition paid to that holder during the calendar year and the amount of any
tax withheld. This information reporting obligation, however, does not apply
with respect to certain United States persons who are holders, including
corporations, tax-exempt organizations, qualified pension and profit sharing
trusts and individual retirement accounts, but such entities may be required to
establish their status as such.
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A "backup withholding" tax equal to 31% of each payment on the Notes will
apply to a United States person who is a holder subject to the reporting
requirements described above if such holder
- fails to furnish his TIN, or
- under certain circumstances, fails to certify, under penalty of perjury,
that he has both furnished a correct TIN and not been notified by the IRS
that he is subject to backup withholding for failure to report interest
and dividend payments. Backup withholding will also apply if the payor is
notified by the IRS that the payee has failed to report properly a
correct TIN or interest and dividends earned by the payee.
Backup withholding tax is not an additional tax and may be credited against
the United States person's United States Federal income tax liability.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments made by us or any of our agents to a holder
of a Note who is not a United States person if the holder has provided required
certification that it is not a United States person as set forth in clause (A)
in the first paragraph under "Non-United States Persons", or has otherwise
established an exemption (provided that neither we nor any of our agents has
actual knowledge that the holder is a United States person or that the
conditions of any exemption are not in fact satisfied).
If such principal or interest is collected outside the United States by the
non-United States office of a foreign custodian, foreign nominee or other
foreign agent of the beneficial owner of a Note and is paid by such office
outside the United States to such owner, or if the non-United States office of a
foreign "broker" (as defined in the Treasury regulations) pays the proceeds of
the sale or exchange of a Note outside the United States to the seller thereof,
backup withholding and information reporting will not apply to such payment.
Principal and interest so paid by the non-United States office of other
custodians, nominees or agents, or the payment by the foreign office of other
brokers of the proceeds of the sale or exchange of a Note will not be subject to
backup withholding, but will be subject to information reporting unless the
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner or seller is not or was not, as the case may be, a United
States person who is a holder and certain conditions are met or the beneficial
owner or seller otherwise establishes an exemption. Principal and interest on
any Note paid by the United States office of a custodian, nominee or agent, or
the payment by the United States office of a broker of the proceeds of a sale or
exchange of a Note is subject to both backup withholding and information
reporting unless the beneficial owner or seller certifies its non-United States
person status under penalties of perjury or otherwise establishes an exemption.
Recently finalized regulations, which are generally effective for payments
of interest made after December 31, 2000, would modify the application of
information reporting requirements and the backup withholding tax to non-United
States persons. However, compliance with the certification procedures described
in the preceding section would generally continue the exemption (from
information reporting requirements and the backup withholding tax) for
non-United States persons who are exempt recipients.
PLAN OF DISTRIBUTION
We are offering the Notes on a continuous basis through the Agents, each of
which has agreed to use its reasonable best efforts to solicit purchases of the
Notes. Unless otherwise specified in the Pricing Supplement, with respect to
Notes with Maturity Dates of 30 years or less from the date of issue, we will
pay each Agent a commission (or grant a discount) which is expected to range
from .125% to .750% of the principal amount of each Note, depending upon the
Maturity Date, sold through such Agent. With respect to Notes with a Maturity
Date that is longer than 30 years from the date of issue sold through any Agent,
the rate of commission (or discount) will be negotiated at the time of sale and
will be specified in the Pricing Supplement.
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We may also sell the Notes to any Agent, acting as principal, at a discount
for resale to one or more purchasers at varying prices related to prevailing
market prices at the time of resale, or, if set forth in the Pricing Supplement,
the Agent may also resell such Notes at a fixed public offering price, as
determined by the Agent. In connection with any resale of Notes purchased as
principal, an Agent may use a selling or dealer group and may reallow any
portion of the discount or commission payable pursuant thereto to dealers or
purchasers. After any initial public offering of Notes to be resold to investors
and other purchasers, the public offering price (in the case of Notes to be
resold at a fixed public offering price), the commission and discount may be
changed. Unless otherwise specified in the Pricing Supplement, any Note
purchased by an Agent as principal will be purchased at 100% of the principal
amount thereof less a percentage equal to the commission (or discount)
applicable to an agency sale of a Note of identical Maturity Date.
We may appoint additional agents for the purpose of soliciting offers to
purchase the Notes. Each additional agent will solicit purchasers of the Notes
on a reasonable best efforts basis. We may also sell the Notes directly to, and
may accept offers to purchase the Notes from, investors on our own behalf in
those jurisdictions where we are authorized to do so. In the case of sales made
directly by us, no commission will be payable and no discount will be granted.
We have agreed to reimburse the Agents for certain of the Agents' expenses, and
we contemplate that we will enter into similar arrangements with any additional
agents that we subsequently appoint.
We will have the sole right to accept offers to purchase Notes and may
reject any proposed purchase of Notes in whole or in part. Each Agent (and each
additional agent subsequently appointed) will have the right, in its discretion
reasonably exercised, to reject in whole or in part any offer to purchase Notes
received by such Agent.
Each Agent, as an agent or principal, and each additional agent we
subsequently appoint, may be deemed to be an "underwriter" within the meaning of
the Securities Act of 1933. We have agreed to indemnify each Agent (and will
agree to indemnify each additional agent that we subsequently appoint) against
certain liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments each Agent (or additional agent) may be required to
make in respect thereof.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each Agent and each subsequently
appointed agent may make a market in the Notes, but they are not obligated to do
so and may discontinue any marketmaking at any time without notice. There can be
no assurance of a secondary market for any Notes or that the Notes will be sold.
The Agents may purchase and sell Notes in the open market. These
transactions may include overallotment and stabilizing transactions and
purchases to cover short positions created by the Agents in connection with the
offering. The Agents also may impose a penalty bid, whereby selling concessions
allowed to broker-dealers in respect of the securities sold in the offering may
be reclaimed by the Agents if such Notes are repurchased by the Agents in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Notes, which may be higher than the
price that might otherwise prevail in the open market, and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
in the over-the-counter market or otherwise.
In the ordinary course of their respective businesses, Goldman, Sachs & Co.
and affiliates, Lehman Brothers Inc. and affiliates, Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and affiliates, and Morgan
Stanley & Co. Incorporated and affiliates have engaged, and may in the future
engage, in investment banking transactions with us and our affiliates. In the
ordinary course of its business, Chase Securities Inc. and affiliates, J.P.
Morgan Securities Inc. and affiliates and Salomon Smith Barney Inc. and
affiliates, have engaged, and may in the future engage, in investment banking
and commercial banking transactions with us and our affiliates.
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