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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-15775
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 21, 1996)
$250,000,000
MANOR CARE, INC.
MEDIUM-TERM NOTES, SERIES A
DUE FROM NINE MONTHS TO 30 YEARS
FROM DATE OF ISSUE
---------------------------
Manor Care, Inc. (the "Company") may offer from time to time its Medium-Term
Notes, Series A (the "Notes"), having an aggregate initial offering price not to
exceed $250,000,000 (or the equivalent thereof in foreign currencies or currency
units), subject to reduction under certain circumstances as a result of the sale
of other Securities of the Company under the Prospectus to which this Prospectus
Supplement relates. The Notes will constitute senior unsecured obligations of
the Company and rank pari passu in right of payment with all present and future
senior indebtedness of the Company. The Notes will be effectively subordinated
to all existing and future claims of creditors of the Company's subsidiaries.
See "Description of Debt Securities--General" in the Prospectus. At August 31,
1996, the Company and its subsidiaries had approximately $537,455,000 of
outstanding indebtedness, approximately $110,922,000 of which would have been
effectively senior to the Notes.
(Continued on next page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<S> <C> <C> <C>
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AGENTS' COMMISSION OR
PRICE TO PUBLIC(1) DISCOUNT(2) PROCEEDS TO COMPANY(2)(3)
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Per Note........ 100% .125% -- .750% 99.250% -- 99.875%
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Total........... $250,000,000 $312,500 -- $1,875,000 $248,125,000 -- $249,687,500
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</TABLE>
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(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes will
be sold at 100% of their principal amounts.
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc., Chase
Securities Inc., Deutsche Morgan Grenfell Inc., Dillon, Read & Co. Inc. and
NationsBanc Capital Markets, Inc. (each an "Agent," and, collectively, the
"Agents") a commission ranging from .125% to .750% of the principal amount
of any Note, depending on its Stated Maturity, sold through such Agent. Any
Agent, acting as principal, may also purchase Notes at a discount for
resale to one or more investors or one or more broker-dealers (acting as
principal for purposes of resale) at varying prices related to prevailing
market prices at the time of resale, as determined by such Agent, or, if so
agreed, at a fixed public offering price. The Company has agreed to
reimburse the Agents for certain expenses. The Company has agreed to
indemnify the Agents against certain liabilities, including liabilities
under applicable federal and state securities laws.
(3) Before deducting offering expenses payable by the Company estimated at
$505,758.
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The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit offers
to purchase the Notes. The Company has reserved the right to sell Notes directly
to investors on its own behalf, and on such sales no commissions will be paid.
The Notes will not be listed on any securities exchange, and there can be no
assurance that the Notes will be sold or that there will be a secondary market
for the Notes. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or the Agent that solicits an
offer to purchase may reject any such offer to purchase Notes in whole or in
part. See "Supplemental Plan of Distribution."
LEHMAN BROTHERS
CHASE SECURITIES INC.
DEUTSCHE MORGAN GRENFELL
DILLON, READ & CO. INC.
NATIONSBANC CAPITAL MARKETS, INC.
November 22, 1996
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(from preceding page)
The Notes will be offered in varying maturities from nine months to 30
years from their dates of issue and may be subject to redemption at the option
of the Company or repayment at the option of the Holder, in each case, in whole
or in part prior to the maturity date thereof (as further defined below, the
"Stated Maturity") as set forth in a Pricing Supplement to this Prospectus
Supplement (a "Pricing Supplement"). Each Note will be denominated in U.S.
dollars unless other currencies or currency units (the "Specified Currency") are
designated in the applicable Pricing Supplement (the "Multi-Currency Notes").
See "Special Provisions Relating to Multi-Currency Notes" and "Risk
Factors--Foreign Currency Risks." The Notes may be issued as "Amortizing Notes,"
"Original Issue Discount Notes," "Reset Notes," "Currency Indexed Notes" or
"Commodity Indexed Notes." See "Description of Notes."
Each Note will bear interest at a fixed rate (a "Fixed Rate Note"), which
may be zero in the case of certain Notes issued at a price representing a
discount from the principal amount payable at maturity (a "Zero-Coupon Note"),
or at a variable rate (a "Floating Rate Note") determined by reference to the
Commercial Paper Rate, CD Rate, Federal Funds Rate, CMT Rate, 11th District Cost
of Funds Rate, Kenny Rate, LIBOR, Prime Rate or Treasury Rate or such other
interest rate formula (the "Interest Rate Basis") as may be indicated in the
applicable Pricing Supplement, as adjusted by a Spread or Spread Multiplier, if
any, applicable to such Notes. See "Description of Notes." Unless otherwise
specified in the applicable Pricing Supplement, interest on Fixed Rate Notes
will be payable semi-annually on each June 15 and December 15 (each an "Interest
Payment Date" with respect to such Fixed Rate Notes) and at Stated Maturity.
Interest on Floating Rate Notes will be payable on the dates indicated in the
applicable Pricing Supplement (each an "Interest Payment Date" with respect to
such Floating Rate Notes).
Each Note will be represented by either a global Security (a "Global
Security" or "Book-Entry Note") registered in the name of a nominee of The
Depository Trust Company ("DTC") or another depositary (DTC or such other
depositary as is indicated in the applicable Pricing Supplement is referred to
herein as the "U.S. Depositary"), unless the applicable Pricing Supplement
indicates that certificates will be issued in definitive form (a "Certificated
Note"). Beneficial interests in Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the U.S. Depositary
and its participants. Owners of beneficial interests in Book-Entry Notes will be
entitled to physical delivery of Certificated Notes only under the limited
circumstances described herein. See "Description of Notes--Book-Entry System."
Unless otherwise indicated in the applicable Pricing Supplement, Notes
denominated in U.S. dollars will be issued in denominations of $1,000 and any
integral multiple thereof. If the Notes are to be issued in a foreign currency
or units of a foreign composite currency, the authorized denominations and
currency exchange rate information will be set forth in the applicable Pricing
Supplement.
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IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Pricing Supplement, the
Company intends to use the net proceeds from the sale of the Notes for general
corporate purposes, which may include capital expenditures, possible
acquisitions, repurchase of the Company's stock, payment of other debt and such
other purposes as may be stated in any Pricing Supplement.
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY SUPPLEMENTS AND, TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE
DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES (AS
DEFINED IN THE ACCOMPANYING PROSPECTUS) SET FORTH UNDER THE HEADING "DESCRIPTION
OF DEBT SECURITIES" IN THE ACCOMPANYING PROSPECTUS, TO WHICH DESCRIPTION
REFERENCE IS HEREBY MADE. THE PROVISIONS OF THE NOTES SUMMARIZED HEREIN WILL
APPLY TO EACH NOTE UNLESS OTHERWISE INDICATED IN THE APPLICABLE PRICING
SUPPLEMENT. CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS
SPECIFIED IN THE INDENTURE AND/OR THE NOTES.
GENERAL
The Notes offered hereby will be issued under the Indenture referred to in
the accompanying Prospectus. The summary contained herein of certain provisions
of the Notes does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Indenture and the forms of Notes, each of
which has been filed as an exhibit to the Registration Statement (the
"Registration Statement"), of which the accompanying Prospectus is a part, to
which exhibits reference is hereby made.
The Notes constitute a single series for purposes of the Indenture and are
limited to an aggregate initial offering price of U.S. $250,000,000 (or the
equivalent thereof in the Specified Currency, calculated on the applicable trade
date). Unless otherwise indicated in the applicable Pricing Supplement, currency
amounts in this Prospectus Supplement, the accompanying Prospectus and any
Pricing Supplement are stated in United States dollars ("$", "dollars" or "U.S.
$").
The Notes will constitute unsecured and unsubordinated indebtedness of the
Company and will rank on a parity with the Company's other unsecured and
unsubordinated indebtedness.
The Notes are offered on a continuing basis and will mature on a Business
Day (as defined below) from nine months to 30 years from their date of issue, as
selected by the initial purchaser and agreed to by the Company, and may be
subject to redemption at the option of the Company or repayment at the option of
the Holder prior to Maturity. See "Redemption and Repayment" below. Floating
Rate Notes will mature on an Interest Payment Date specified in the Pricing
Supplement applicable thereto.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars, and payments of principal of, premium, if
any, and any interest on the Notes will be made in U.S. dollars. If any of the
Notes are to be denominated other than in U.S. dollars, or if the principal of,
or premium, if any, or any interest on any of the Notes is to be payable at the
option of the Holder or the Company in a currency or composite currency unit
other than that in which such Notes are denominated, the applicable Pricing
Supplement will provide additional information, including authorized
denominations and applicable exchange rate information pertaining to the terms
of such Notes and certain other matters of interest to the Holders thereof. See
"Special Provisions Relating to Multi-Currency Notes."
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Each Note will be issued initially as a Book-Entry Note unless the
applicable Pricing Supplement indicates such issuance as a Certificated Note.
Except as set forth under "Book-Entry System" below, Book-Entry Notes will not
be issuable in certificated form. Unless otherwise specified in the applicable
Pricing Supplement or as provided below with respect to Multi-Currency Notes,
Notes will be issued in denominations of $1,000 and any integral multiple
thereof.
Payments of interest and principal (and premium, if any) to Beneficial
Owners (as defined below) of Book-Entry Notes are expected to be made in
accordance with the U.S. Depositary's and its participants' procedures in effect
from time to time as described below under "Book-Entry System."
Unless otherwise specified in the applicable Pricing Supplement, payments
of interest and, in the case of Amortizing Notes, principal, with respect to any
Certificated Note (other than interest and, in the case of Amortizing Notes,
principal payable at Stated Maturity) will be made by mailing a check to the
Holder at the address of such Holder appearing on the Security Register for the
Notes on the applicable Regular Record Date (as defined below). Notwithstanding
the foregoing, at the option of the Company, all payments of interest and, in
the case of Amortizing Notes, principal on the Notes may be made by wire
transfer of immediately available funds to an account at a bank located within
the United States as designated by each Holder not less than 15 calendar days
prior to the applicable Interest Payment Date. In the event that payment is so
made in accordance with instructions of the Holder, such wire transfer shall be
deemed to constitute full and complete payment of such interest and principal on
the Notes. Payment of the principal of (and premium, if any) and interest due
with respect to any Certificated Note at Maturity will be made in immediately
available funds upon surrender of such Note at the principal office of the
Trustee in the Borough of Manhattan, The City of New York accompanied by wire
transfer instructions, provided that the Certificated Note is presented to the
Trustee in time for the Trustee to make such payments in such funds in
accordance with its normal procedures.
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is an
Original Issue Discount Note, the amount payable on such Note in the event the
principal thereof is declared to be due and payable immediately as described in
the accompanying Prospectus under "Description of Debt Securities--Events of
Default, Notice and Waiver" or in the event of the redemption or repayment
thereof prior to its Stated Maturity shall be the Amortized Face Amount of such
Note as of the date of declaration, redemption or repayment, as the case may be.
The "Amortized Face Amount" of an Original Issue Discount Note shall be the
amount equal to (i) the principal amount of such Note multiplied by the Issue
Price set forth in the applicable Pricing Supplement plus (ii) the portion of
the difference between the dollar amount determined pursuant to the preceding
clause (i) and the principal amount of such Note that has accreted at the yield
to maturity set forth in the Pricing Supplement (computed in accordance with
generally accepted United States bond yield computation principles) to such date
of declaration, redemption or repayment, but in no event shall the Amortized
Face Amount of an Original Issue Discount Note exceed its principal amount.
The Pricing Supplement relating to each Note will describe, among other
things, the following items: (i) the Specified Currency with respect to such
Note (and, if such Specified Currency is other than U.S. dollars, certain other
terms relating to such Note, including the authorized denominations); (ii) the
price (expressed as a percentage of the aggregate principal amount thereof) at
which such Note will be issued (the "Issue Price"); (iii) the date on which such
Note will be issued (the "Original Issue Date"); (iv) the date on which such
Note will mature (the "Stated Maturity") and whether the Stated Maturity may be
extended by the Company, and if so, the Extension Periods and the Final Maturity
Date (each as defined below); (v) whether such Note is a Fixed Rate Note or a
Floating Rate Note; (vi) if such Note is a Fixed Rate Note, the rate per annum
at which such Note will bear interest, if any, the Interest Payment Date or
Dates, if different from those set forth below under "Fixed Rate Notes" and
whether such rate may be changed by the Company prior to Stated Maturity; (vii)
if such Note is a Floating Rate Note, the Initial Interest Rate, the Interest
Rate Basis, the Interest Reset Dates, the Interest Payment Dates, the Index
Maturity, the maximum interest rate, if any, the minimum interest rate, if any,
the Spread, if any, the Spread Multiplier, if any (all as defined herein), and
any other terms relating to the particular method of calculating the interest
rate for such Note, and whether any such Spread and/or Spread Multiplier may be
changed by the
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Company prior to Stated Maturity; (viii) whether such Note is an Original Issue
Discount Note, and if so, the yield to maturity; (ix) whether such Note is a
Currency Indexed Note or a Commodity Indexed Note and if so, the specific terms
thereof; (x) whether such Note is an Amortizing Note (as defined below), and if
so, the basis or formula for the amortization of principal and/or interest and
the payment dates for such periodic principal payments; (xi) the regular record
date or dates (each a "Regular Record Date") if other than as set forth below;
(xii) whether such Note may be redeemed at the option of the Company, or repaid
at the option of the Holder, prior to Stated Maturity and, if so, the provisions
relating to such redemption or repayment; (xiii) whether such Note will be
issued initially as a Book-Entry Note or a Certificated Note; and (xiv) any
other terms of such Note not inconsistent with the provisions of the Indenture.
Certificated Notes may be presented for registration of transfer or
exchange at the Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York.
All percentages resulting from any calculation with respect to any Notes will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation on any Notes will be
rounded to the nearest cent with one half cent being rounded upward.
As used herein, "Business Day" means, unless otherwise specified in the
applicable Pricing Supplement, any Monday, Tuesday, Wednesday, Thursday or
Friday that in The City of New York is not a day on which banking institutions
are authorized or required by law, regulation or executive order to close and,
with respect to Notes as to which LIBOR (as defined below) is the applicable
Interest Rate Basis (as defined below), is also a London Business Day, provided,
however, that with respect to any Specified Currency, such day is also not a day
on which banking institutions are authorized or required by law, regulation or
executive order to close in the principal financial center of the country of
such Specified Currency (or, in the case of ECUs, is not a day designated as an
ECU Non-Settlement Day by the ECU Banking Association in Paris or otherwise
generally regarded in the ECU interbank market as a day on which payments on
ECUs shall not be made). As used herein, "London Business Day" means any day (a)
if the Designated LIBOR Currency is other than the ECU, on which dealings in
deposits in such Designated LIBOR Currency are transacted in the London
interbank market or (b) if the Designated LIBOR Currency is the ECU, that is not
designated as an ECU Non-Settlement Day by the ECU Banking Association in Paris
or otherwise generally regarded in the ECU interbank market as a day on which
payments on ECUs shall not be made.
The Notes are referred to in the accompanying Prospectus as a series of
"Debt Securities." For a description of the rights attaching to different series
of Debt Securities under the Indenture, see "Description of Debt Securities" in
the Prospectus. Unless otherwise indicated in the applicable Pricing Supplement,
the Notes will have the terms described below.
INTEREST AND INTEREST RATES
Each Note (other than certain Original Issue Discount Notes) will bear
interest from and including its Original Issue Date or from and including the
most recent Interest Payment Date with respect to which interest on such Note
has been paid or duly provided for, at a fixed rate per annum or at a rate per
annum determined pursuant to an Interest Rate Basis, stated therein and in the
applicable Pricing Supplement, that may be adjusted by a Spread and/or Spread
Multiplier, until the principal thereof is paid or made available for payment.
Unless otherwise set forth in the applicable Pricing Supplement, interest shall
accrue on any overdue principal and on any overdue installment of interest (to
the extent that the payment of such interest is legally enforceable) at the rate
set forth on the face of the Note. Unless otherwise set forth in the applicable
Pricing Supplement, interest will be payable on each Interest Payment Date and
at Maturity. "Maturity" means the date on which the principal of a Note becomes
due and payable in full in accordance with its terms and the terms of the
Indenture, whether at Stated Maturity, upon acceleration, redemption, repayment
or otherwise. Interest (other than defaulted interest which may be paid on a
special record date) will be payable to the Holder at the close of business on
the Regular Record Date next preceding such Interest Payment Date; provided,
however, that the first payment of interest on any Note originally issued
between a Regular Record
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Date and the next Interest Payment Date will be made on the Interest Payment
Date following the next succeeding Regular Record Date to the Holder of record
as of such next succeeding Regular Record Date. Notwithstanding the foregoing,
interest payable at Maturity will be payable to the person to whom principal
shall be payable.
Interest rates, interest rate formulae and other variable terms of the
Notes are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has been
accepted by the Company. Unless otherwise indicated in the applicable Pricing
Supplement, the Interest Payment Dates and the Regular Record Dates for Fixed
Rate Notes shall be as described below under "Fixed Rate Notes." The Interest
Payment Dates for Floating Rate Notes shall be as indicated in the applicable
Pricing Supplement, and unless otherwise indicated in the applicable Pricing
Supplement, each Regular Record Date for a Floating Rate Note will be the
fifteenth day (whether or not a Business Day) preceding each Interest Payment
Date.
Each Note (other than a Zero-Coupon Note) will bear interest at either (a)
a fixed rate or (b) a floating rate determined by reference to an Interest Rate
Basis which may be adjusted by a Spread and/or Spread Multiplier. Any Floating
Rate Note may also have either or both of the following: (i) a maximum numerical
interest rate limitation, or ceiling, on the rate of interest which may accrue
during any interest period, and (ii) a minimum numerical interest rate
limitation, or floor, on the rate of interest which may accrue during any
interest period. The applicable Pricing Supplement relating to each Note will
designate either a fixed rate of interest per annum on the applicable Fixed Rate
Note or one or more of the following Interest Rate Bases as applicable to the
relevant Floating Rate Note: (a) the CD Rate, in which case such Note will be a
"CD Rate Note," (b) the Commercial Paper Rate, in which case such Note will be a
"Commercial Paper Rate Note," (c) the Federal Funds Rate, in which case such
Note will be a "Federal Funds Rate Note," (d) LIBOR, in which case such Note
will be a "LIBOR Note," (e) the Treasury Rate, in which case such Note will be a
"Treasury Rate Note," (f) the Prime Rate, in which case such Note will be a
"Prime Rate Note," (g) the CMT Rate, in which case such Note will be a "CMT Rate
Note," (h) the 11th District Cost of Funds Rate, in which case such Note will be
an "11th District Cost of Funds Rate Note," (i) the Kenny Rate, in which case
such Note will be a "Kenny Rate Note," or (j) such other Interest Rate Basis as
is set forth in such Pricing Supplement.
Notwithstanding the determination of the interest rate as provided below,
the interest rate on the Notes for any interest period shall not be greater than
the maximum interest rate, if any, or less than the minimum interest rate, if
any, specified in the applicable Pricing Supplement. The interest rate on the
Notes will in no event be higher than the maximum rate permitted by New York or
other applicable law, as the same may be modified by United States law of
general application. Under present New York law, the maximum rate of interest is
25% per annum on a simple interest basis. This limit may not apply to Notes in
which $2,500,000 or more has been invested.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note (other than certain Original Issue Discount Notes) will bear interest
from its date of issue at the annual rate stated on the face thereof, as
specified in the applicable Pricing Supplement. Payments of interest on any
Fixed Rate Note with respect to any Interest Payment Date will include interest
accrued from and including the Original Issue Date, or from and including the
next preceding Interest Payment Date, to but excluding the applicable Interest
Payment Date or Maturity. Fixed Rate Notes may bear one or more annual rates of
interest during the periods or under the circumstances specified therein and in
the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed and paid on
the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Payment Dates for Fixed Rate Notes (other than Amortizing Notes) will
be semi-annual on each June 15 and December 15 and at Maturity, and the Regular
Record Dates will be each June 1 and December 1 (whether or not a Business Day).
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal and interest on
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Fixed Rate Amortizing Notes will be made either quarterly on each March 15, June
15, September 15 and December 15, or semi-annually on each June 15 and December
15, as set forth in the applicable Pricing Supplement, and at Maturity. Unless
otherwise specified in the applicable Pricing Supplement, Regular Record Dates
with respect to Fixed Rate Amortizing Notes will be the 15th day (whether or not
a Business Day) next preceding each Interest Payment Date. If any Interest
Payment Date or the Maturity for any Fixed Rate Note is a day that is not a
Business Day, all payments to be made on such day will be made on the next
succeeding Business Day with the same force and effect as if made on the due
date, and no additional interest shall be payable as a result of such delayed
payment.
Payments with respect to Fixed Rate Amortizing Notes will be applied first
to interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in respect
of each Fixed Rate Amortizing Note will be provided to the original purchaser
thereof and will be available, upon request, to subsequent Holders.
FLOATING RATE NOTES
The interest rate on each Floating Rate Note will be equal to either (i)
the interest rate calculated by reference to the specified Interest Rate Basis
plus or minus the Spread, if any, or (ii) the interest rate calculated by
reference to the specified Interest Rate Basis multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points (one basis point
equals one-hundredth of a percentage point) specified in the applicable Pricing
Supplement as being applicable to such Note, and the "Spread Multiplier" is the
percentage specified in the applicable Pricing Supplement as being applicable to
such Note. The applicable Pricing Supplement will specify the Interest Rate
Basis and the Spread or Spread Multiplier, if any, and the maximum or minimum
interest rate limitation, if any, applicable to each Floating Rate Note. In
addition, such Pricing Supplement will contain particulars as to the Calculation
Agent (unless otherwise specified in the applicable Pricing Supplement, the
Trustee (in such capacity, the "Calculation Agent")), Index Maturity, Original
Issue Date, interest rate in effect for the period from the Original Issue Date
to the first Interest Reset Date set forth in the applicable Pricing Supplement
(the "Initial Interest Rate"), Interest Determination Dates, Interest Payment
Dates, Regular Record Dates and Interest Reset Dates with respect to such Note.
Except as provided below or in the applicable Pricing Supplement, interest
on Floating Rate Notes, including Floating Rate Amortizing Notes, will be
payable, (i) 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 on the face
thereof and in the applicable Pricing Supplement; (ii) in the case of Floating
Rate Notes, including Floating Rate Amortizing Notes, that reset quarterly, on
the third Wednesday of March, June, September and December of each year; (iii)
in the case of Floating Rate Notes, including Floating Rate Amortizing Notes,
that reset semi-annually, on the third Wednesday of each of two months of each
year specified on the face thereof and in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes, including Floating Rate Amortizing
Notes, that reset annually, on the third Wednesday of one month of each year
specified on the face thereof and in the applicable Pricing Supplement (each
such day being an "Interest Payment Date") and, in each case, at Maturity. If
any Interest Payment Date, other than Maturity, for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Payment Date shall
be postponed to the next day that is a Business Day, except that in the case of
a LIBOR Note, if such Business Day is in the next succeeding calendar month,
such Interest Payment Date shall be the immediately preceding London Business
Day. If the Maturity for any Floating Rate Note falls on a day that is not a
Business Day, payment of principal, premium, if any, and interest with respect
to such Note will be made on the next succeeding Business Day with the same
force and effect as if made on the due date, and no additional interest shall be
payable as a result of such delayed payment.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (such period being the "Reset
Period" for such Note, and the first day of each Reset Period being an "Interest
Reset Date"), as specified in the applicable Pricing Supplement. The Interest
Reset Dates will be, in the case of Floating Rate Notes which reset daily, each
Business Day; in the case of
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Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Tuesday of each week, except as provided below; in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month (with the exception
of monthly reset 11th District Cost of Funds Rate Notes, which will reset on the
first calendar day of the month); in the case of Floating Rate Notes which reset
quarterly, the third Wednesday of each March, June, September and December; in
the case of Floating Rate Notes which reset semi-annually, the third Wednesday
of the two months of each year specified in the applicable Pricing Supplement;
and in the case of Floating Rate Notes which reset annually, the third Wednesday
of one month of each year specified in the applicable Pricing Supplement;
provided, however, that the interest rate in effect from and including the date
of issue to but excluding the first Interest Reset Date with respect to a
Floating Rate Note will be the Initial Interest Rate (as set forth in the
applicable Pricing Supplement). If any Interest Reset Date for any Floating Rate
Note would otherwise be a day that is not a Business Day for such Floating Rate
Note, the Interest Reset Date for such Floating Rate Note shall be postponed to
the next day that is a Business Day for such Floating Rate Note, except that in
the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Reset Date shall be the immediately preceding
London Business Day. Each adjusted rate shall be applicable on and after the
Interest Reset Date to which it relates, to, but not including, the next
succeeding Interest Reset Date or until the Stated Maturity or the date of
redemption, as the case may be.
The interest rate for each Reset Period will be the rate determined by the
Calculation Agent on the Calculation Date (as defined below) pertaining to the
Interest Determination Date pertaining to the Interest Reset Date for such Reset
Period. Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for (a) a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
(b) a Federal Funds Rate Note (the "Federal Funds Interest Determination Date"),
(c) a CD Rate Note (the "CD Interest Determination Date"), (d) a Prime Rate Note
(the "Prime Interest Determination Date"), (e) a CMT Rate Note (the "CMT
Interest Determination Date"), or (f) a Kenny Rate Note (the "Kenny Rate
Interest Determination Date") will be the second Business Day prior to such
Interest Reset Date. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset Date
for an 11th District Cost of Funds Rate Note (the "11th District Interest
Determination Date") will be the last Business Day of the month immediately
preceding such Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined below).
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the
"LIBOR Interest Determination Date") will be the second London Business Day
immediately preceding such Interest Reset Date. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Determination Date pertaining to
an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as a result of
a legal holiday, an auction is so held on the preceding Friday, such Friday will
be the Treasury Interest Determination Date pertaining to the Reset Period
commencing in the next succeeding week. If an auction date shall fall on any
Interest Reset Date for a Treasury Rate Note, then such Interest Reset Date
shall instead be the first Business Day immediately following such auction date.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date" pertaining to any Interest Determination Date shall be the
earlier of (i) the tenth calendar day after the Interest Determination Date or,
if such day is not a Business Day, the next succeeding Business Day, or (ii) the
Business Day preceding the applicable Interest Payment Date or Maturity, as the
case may be.
"Index Maturity" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, payments
with respect to Floating Rate Amortizing Notes will be applied first to interest
due and payable thereon and then to the reduction of the unpaid principal amount
thereof. A table setting forth repayment information in respect of each Floating
Rate
S-8
<PAGE> 9
Amortizing Note will be provided to the original purchaser thereof and will be
available, upon request, to subsequent Holders.
Unless otherwise indicated in the applicable Pricing Supplement, interest
on Floating Rate Notes will accrue from and including the date of issue or from
and including the immediately preceding Interest Payment Date in respect of
which interest has been paid or duly provided for, as the case may be, to but
excluding the Interest Payment Date or Maturity, as the case may be. With
respect to Floating Rate Notes, accrued interest is calculated by multiplying
the face amount of a Note by an accrued interest factor. This accrued interest
factor is computed by adding the interest factors calculated for each day from
and including the date of issue, or from and including the last date to which
interest has been paid or duly provided for, to but excluding the date for which
accrued interest is being calculated. The interest factor for each such day
(unless otherwise specified) is computed by dividing the interest rate
applicable to such day by 360, in the case of Commercial Paper Rate Notes, CD
Rate Notes, 11th District Cost of Funds Rate Notes, Federal Funds Rate Notes,
LIBOR Notes and Prime Rate Notes or by the actual number of days in the year, in
the case of Treasury Rate Notes or CMT Rate Notes, or by 365 days in the case of
Kenny Rate Notes.
The Calculation Agent shall calculate the interest rate on the Floating
Rate Notes, as provided below. The Calculation Agent will, upon the request of
the Holder of any Floating Rate Note, provide the interest rate then in effect
and, if then determined, the interest rate which will become effective as a
result of a determination made with respect to the most recent Interest
Determination Date with respect to such Note. The Trustee shall act as the
initial Calculation Agent for the Notes. For purposes of calculating the rate of
interest payable on Floating Rate Notes, the Company will enter into an
agreement with the Calculation Agent. The Calculation Agent's determination of
any interest rate shall be final and binding in the absence of manifest error.
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate on such date for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" or any successor publication of the Board of Governors ("H.15(519)")
under the heading "Commercial Paper." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Commercial Paper Interest Determination Date, then the
Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date shall be the Money Market Yield of the rate on such
Commercial Paper Interest Determination Date for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" or any successor
publication ("Composite Quotations") under the heading "Commercial Paper." If by
3:00 P.M., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the Commercial Paper
Rate for such Commercial Paper Interest Determination Date shall be calculated
by the Calculation Agent and shall be the Money Market Yield of the arithmetic
mean of the offered rates as of 11:00 A.M., New York City time, on such
Commercial Paper Interest Determination Date of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized securities rating agency; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the Commercial Paper Rate with
respect to such Commercial Paper Interest Determination Date will be the
Commercial Paper Rate in effect immediately prior to such Commercial Paper
Interest Determination Date.
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<PAGE> 10
"Money Market Yield" shall be a yield (expressed as a percentage rounded,
if necessary, to the nearest one hundred-thousandth of a percent) calculated in
accordance with the following formula:
<TABLE>
<CAPTION>
<S> <C> <C>
Money Market Yield = D X 360 X 100
360 - (D X M )
</TABLE>
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which accrued interest is being calculated.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity specified in
the applicable Pricing Supplement as published in H.15(519) under the heading
"Cds (Secondary Market)." In the event that such rate is not published prior to
9:00 A.M., New York City time, on the Calculation Date pertaining to such CD
Interest Determination Date, then the CD Rate with respect to such CD Interest
Determination Date shall be the rate on such CD Interest Determination Date for
negotiable certificates of deposit having the Index Maturity specified in the
applicable Pricing Supplement as published in Composite Quotations under the
heading "Certificates of Deposit." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, then the CD Rate on such CD Interest Determination Date shall be
calculated by the Calculation Agent and shall be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such CD
Interest Determination Date of three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money market banks (in the market for negotiable certificates of deposit) with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement in a denomination of $5,000,000; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the CD Rate with respect to such CD Interest
Determination Date will be the CD Rate in effect immediately prior to such CD
Interest Determination Date.
CMT Rate Notes
Each CMT Rate Note will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the rate displayed
on the Designated CMT Telerate Page (as defined below) under the caption "...
Treasury Constant Maturities... Federal Reserve Board Release H.15... Mondays
Approximately 3:45 P.M.," under the column for the Designated CMT Maturity Index
(as defined below) for (i) if the Designated CMT Telerate Page is 7055, the rate
on such CMT Interest Determination Date and (ii) if the Designated CMT Telerate
Page is 7052, the week, or the month, as applicable, ended immediately preceding
the week in which the applicable CMT Interest Determination Date occurs. If such
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 pertaining to such CMT
Interest Determination Date, then the CMT Rate for such CMT 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 such
rate is no longer published, or if not published by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CMT Interest Determination
Date, then the CMT Rate for such CMT 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
S-10
<PAGE> 11
Index) for the CMT 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 pertaining to such CMT Interest Determination Date, then the
CMT Rate for the CMT Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30 P.M.,
New York City time, on the CMT Interest Determination Date reported, according
to their written records, by three leading primary United States government
securities dealers (each, a "Reference Dealer") in The City of New York selected
by the Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for 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
CMT Rate for such CMT Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 P.M., New
York City time, on the CMT Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for 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; provided, however,
that 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
immediately prior to such CMT Interest Determination Date. If two Treasury Notes
with an original maturity as described in the third preceding sentence have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the Treasury Note with the shorter remaining term to maturity
will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as published in H.15(519)), for the purpose of
displaying Treasury Constant Maturities as published in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the Treasury Notes (either one, two, three, five, seven, ten, twenty or thirty
years) specified in the applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds as published in H.15(519) under
the heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Federal Funds Interest Determination Date, then the Federal
Funds Rate with respect to such Federal Funds Interest Determination Date shall
be the rate on such Federal Funds Interest Determination Date as published in
S-11
<PAGE> 12
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 P.M., New York City time, on such Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate with respect to such Federal Funds Interest Determination Date shall be
calculated by the Calculation Agent and shall be the arithmetic mean (each as
rounded, if necessary, to the nearest one hundred-thousandth of a percent) of
the rates as of 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date for the last transaction in overnight Federal Funds arranged
by three leading brokers of Federal Funds transactions in The City of New York
selected by the Calculation Agent; provided, however, that if the brokers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Federal Funds Rate with respect to such Federal Funds
Interest Determination Date will be the Federal Funds Rate in effect immediately
prior to such Federal Funds Interest Determination Date.
11th District Cost of Funds Rate Notes
Each 11th District Cost of Funds Rate Note will bear interest at the
interest rate (calculated with reference to the 11th District Cost of Funds Rate
and the Spread and/or Spread Multiplier, if any) specified in the 11th District
Cost of Funds Rate Note and in the Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any 11th District Interest
Determination Date, the rate equal to the monthly weighted average cost of funds
for the calendar month preceding such 11th District Interest Determination Date
as set forth under the caption "11th District" on Telerate Page 7058 as of 11:00
A.M., San Francisco time, on such 11th District Interest Determination Date. If
such rate does not appear on Telerate Page 7058 on any related 11th District
Interest Determination Date, the 11th District Cost of Funds Rate for such 11th
District Interest Determination Date shall be the monthly weighted average cost
of funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month preceding the date of
such announcement. If the FHLB of San Francisco fails to announce such rate for
the calendar month next preceding such 11th District Interest Determination
Date, then the 11th District Cost of Funds Rate for such 11th District Interest
Determination Date will be the 11th District Cost of Funds Rate in effect
immediately prior to such 11th District Interest Determination Date.
Kenny Rate Notes
Each Kenny Rate Note will bear interest at the interest rate (calculated
with reference to the Kenny Rate and the Spread and/or Spread Multiplier, if
any) specified in the applicable Kenny Rate Note and in the Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Kenny
Rate" means, with respect to any Kenny Rate Interest Determination Date, the
high grade weekly index (the "Weekly Index") on such date made available by
Kenny Information Systems ("Kenny") to the Calculation Agent. The Weekly Index
is, and shall be, based upon 30 day yield evaluations at par of bonds, the
interest on which is exempt from Federal income taxation under the Internal
Revenue Code of 1986, as amended (the "Code"), of not less than five high grade
component issuers selected by Kenny which shall include, without limitation,
issuers of general obligation bonds. The specific issuers included among the
component issuers may be changed from time to time by Kenny in its discretion.
The bonds on which the Weekly Index is based shall not include any bonds on
which the interest is subject to a minimum tax or similar tax under the Code,
unless all tax-exempt bonds are subject to such tax. In the event Kenny ceases
to make available such Weekly Index, a successor indexing agent will be selected
by the Calculation Agent, such index to reflect the prevailing rate for bonds
rated in the highest short-term rating category by Moody's Investors Service,
Inc. and Standard & Poor's Corporation in respect of issuers most closely
resembling the high grade component issuers selected by Kenny for its Weekly
Index, the interest on which is (A) variable on a weekly basis, (B) exempt from
Federal income taxation under the Code, and (C) not subject to a minimum tax or
similar tax under the Code, unless all tax-exempt bonds are subject to such tax.
If such successor indexing agent is not available, the rate for any Kenny Rate
Interest Determination Date shall be 67% of the rate determined if the Treasury
Rate option had been originally selected.
S-12
<PAGE> 13
LIBOR Notes
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
the LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
means, with respect to any LIBOR Interest Determination Date, the rate
determined in accordance with the following provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the Note and the
applicable Pricing Supplement, the arithmetic mean of the offered rates
(unless the specified 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 Designated LIBOR Currency (as defined below)
having the Index Maturity designated in the Note and the applicable Pricing
Supplement, commencing on the second London Business Day immediately
following the LIBOR Interest Determination Date, which appear on the
Designated LIBOR Page specified in the Note and the applicable Pricing
Supplement as of 11:00 A.M., London time, on that LIBOR Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the Note and the applicable
Pricing Supplement, the rate for deposits in the Designated LIBOR Currency
(as defined below) having the Index Maturity designated in the Note and the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, which appears
on the Designated LIBOR Page specified in the Note and the applicable
Pricing Supplement as of 11:00 A.M. London time on that LIBOR Interest
Determination Date. Notwithstanding the foregoing, if fewer than two
offered rates appear on the Designated LIBOR Page with respect to LIBOR
Reuters (unless the specified Designated LIBOR Page with respect to LIBOR
Reuters by its terms provides only for a single rate, in which case such
single rate shall be used), or if no rate appears on the Designated LIBOR
Page with respect to LIBOR Telerate, whichever may be applicable, LIBOR in
respect of the related LIBOR Interest Determination Date will be determined
as if the parties had specified the rate described in clause (ii) below.
(ii) With respect to any LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Designated LIBOR Page with
respect to LIBOR Reuters (unless the Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate shall be
used), or if no rate appears on the Designated LIBOR Page with respect to
LIBOR Telerate, as the case may be, the Calculation Agent will request the
principal London office of each of four major banks in the London interbank
market selected by the Calculation Agent to provide the Calculation Agent
with its offered rate quotation for deposits in the Designated LIBOR
Currency (as defined below) for the period of the Index Maturity designated
in the Note and the applicable Pricing Supplement, commencing on the second
London Business Day immediately following such LIBOR Interest Determination
Date, to prime banks in the London interbank market as of 11:00 A.M.,
London time, on such LIBOR Interest Determination Date and in a principal
amount that is representative for a single transaction in such Designated
LIBOR Currency in such market at such time. If at least two such quotations
are provided, LIBOR determined on such LIBOR Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted as of
11:00 A.M. in the applicable Principal Financial Center (as defined below),
on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Designated LIBOR Currency to leading banks, commencing on the second
London Business Day immediately following such LIBOR Interest Determination
Date, having the Index Maturity designated in the Note and the applicable
Pricing Supplement in a principal amount that is representative for a
single transaction in such Designated LIBOR Currency in such market at such
time; provided, however, that if the banks so selected by the Calculation
Agent are not quoting as mentioned in this sentence, LIBOR determined on
such LIBOR Interest Determination Date will be LIBOR in effect immediately
prior to such LIBOR Interest Determination Date.
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<PAGE> 14
"Designated LIBOR Currency" means, with respect to any LIBOR Note, the
currency (including a composite currency), if any, designated in the Note and
the applicable Pricing Supplement as the Designated LIBOR Currency. If no such
currency is designated in the Note and the applicable Pricing Supplement, the
Designated LIBOR Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) the display on the Reuters Monitor
Money Rates Service for the purpose of displaying the London interbank rates of
major banks for the applicable Designated LIBOR Currency (if "LIBOR Reuters" is
designated in the Note and the applicable Pricing Supplement), or (b) the
display on the Dow Jones Telerate Service for the purpose of displaying the
London interbank rates of major banks for the applicable Designated LIBOR
Currency (if "LIBOR Telerate" is designated in the Note and the applicable
Pricing Supplement). If neither LIBOR Reuters nor LIBOR Telerate is specified in
the Note and applicable Pricing Supplement, LIBOR for the applicable Designated
LIBOR Currency will be determined as if LIBOR Telerate (and, if the U.S. dollar
is the Designated LIBOR Currency, page 3750) had been chosen.
"Principal Financial Center" means, with respect to any LIBOR Note, unless
otherwise specified in the Note and the applicable Pricing Supplement, the
capital city of the country that issues as its legal tender the Designated LIBOR
Currency of such Note, except that with respect to U.S. dollars and ECUs, the
Principal Financial Center shall be The City of New York and Brussels,
respectively.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in the Prime Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Interest Determination Date, the rate set
forth on such date in H.15(519) under the heading "Bank Prime Loan." In the
event that such rate is not published prior to 9:00 A.M., New York City time, on
the Calculation Date pertaining to such Prime Interest Determination Date, then
the Prime Rate with respect to such Prime Interest Determination Date shall be
the arithmetic mean of the rates of interest publicly announced by each bank
that appears on the Reuters Screen USPRIME 1 Page as such bank's prime rate or
base lending rate as in effect for that Prime Interest Determination Date. If
fewer than four such rates appear on the Reuters Screen USPRIME 1 Page for the
Prime Interest Determination Date, the Prime Rate with respect to such Prime
Interest Determination Date shall be the arithmetic mean of the prime rates
quoted on the basis of the actual number of days in the year divided by 360 as
of the close of business on such Prime Interest Determination Date by at least
two of the three major money center banks in The City of New York selected by
the Calculation Agent. If fewer than two quotations are provided, the Prime Rate
with respect to such Prime Interest Determination Date shall be determined on
the basis of the rates furnished in The City of New York by the appropriate
number of substitute banks or trust companies organized and doing business under
the laws of the United States, or any state thereof, having total equity capital
of at least U.S. $500 million and being subject to supervision or examination by
Federal or state authority, selected by the Calculation Agent to provide such
rate or rates; provided, however, that if the appropriate number of substitute
banks or trust companies selected as aforesaid are not quoting as mentioned in
this sentence, the Prime Rate with respect to such Prime Interest Determination
Date will be the Prime Rate in effect immediately prior to such Prime Interest
Determination Date. "Reuters Screen USPRIME 1 Page" means the display designated
as page "USPRIME 1" on the Reuters Monitor Money Rate Service (or such other
page as may replace the USPRIME 1 page on the service for the purpose of
displaying the prime rate or base lending rate of major banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any) specified in the Treasury Rate Note and in the applicable Pricing
Supplement.
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<PAGE> 15
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading, "Treasury bills--auction
average (investment)" or, if not so published by 3:00 P.M., New York City time,
on the Calculation Date pertaining to such Treasury Interest Determination Date,
the average auction rate (expressed as a bond equivalent, on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that
such rate is not available by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such Treasury Interest Determination Date, or if no such
auction is held in a particular week, then the Treasury Rate with respect to
such Treasury Interest Determination Date shall be calculated by the Calculation
Agent and shall be a yield to maturity (expressed as a bond equivalent, on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Treasury Interest Determination Date, of
three leading primary U.S. government securities dealers selected by the
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Treasury Rate with
respect to such Treasury Interest Determination Date will be the Treasury Rate
in effect immediately prior to such Treasury Interest Determination Date.
CURRENCY INDEXED NOTES
General
The Company may from time to time offer Notes, the principal amount payable
at Maturity and/or the interest rate of which is determined by a formula which
makes reference to the rate of exchange between one currency ("Currency I") and
another currency ("Currency II;" together with Currency I, the "Selected
Currencies," both as specified in the applicable Pricing Supplement), neither of
which need be the Specified Currency of such Notes (the "Currency Indexed
Notes"). Unless otherwise specified in the applicable Pricing Supplement,
Holders of Currency Indexed Notes will be entitled to receive (i) an amount in
respect of principal equal to the principal amount of the Currency Indexed Notes
plus an adjustment, which may be negative or positive, based on the change in
the relationship between Selected Currencies or (ii) an amount of interest
calculated at the stated rate of interest on the Currency Indexed Notes plus an
adjustment, which may be negative or positive, based on the change in the
relationship between the Selected Currencies, in each case determined as
described below under "Payment of Principal and Interest." As specified in the
applicable Pricing Supplement, the exchange rate designated as the base exchange
rate (the "Base Exchange Rate") will be the initial rate at which Currency I can
be exchanged for Currency II and from which the change in such exchange rate
will be measured.
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, the
payment of principal at Maturity and interest on each Interest Payment Date
(until the payment thereof is paid or made available for payment) will be
payable in the Specified Currency in amounts calculated in the manner described
below.
Unless otherwise specified in the applicable Pricing Supplement, principal
at Maturity, if indexed, will be payable in an amount equal to the principal
amount of the Currency Indexed Note, plus or minus an amount determined by
reference to the difference between the Base Exchange Rate specified in the
applicable Pricing Supplement and the rate at which Currency I can be exchanged
for Currency II on the second Business Day prior to the Maturity (the
"Determination Date") of such Currency Indexed Note, as determined by the
determination agent specified in the applicable Pricing Supplement (the
"Determination Agent"). Unless otherwise specified in the applicable Pricing
Supplement, the interest payable on any Interest Payment Date, if indexed, will
be payable in an amount equal to the stated interest rate of the Currency
Indexed Note, plus or minus a rate adjustment determined by reference to the
difference between the Base Exchange Rate specified in the applicable Pricing
Supplement and the rate at which Currency I can be exchanged for Currency II on
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the second Business Day prior to the Interest Payment Date (the "Indexed
Interest Determination Date") of such Currency Indexed Note, as determined by
the Determination Agent, applied to the average principal amount outstanding of
such Note for the period being measured. For the purpose of this section, such
rate of exchange on the Determination Date or the Indexed Interest Determination
Date, as the case may be, will be the average of quotations for settlement on
the Maturity Date or the relevant Interest Payment Date, as the case may be,
obtained by the Determination Agent from three Reference Dealers in The City of
New York at approximately 11:00 A.M., New York City time, on either the
Determination Date or the relevant Indexed Interest Determination Date, as the
case may be.
The formulas to be used by the Determination Agent to determine the
principal amount and/or the stated interest rate of a Currency Indexed Note
payable at Maturity or on any Interest Payment Date will be specified in the
applicable Pricing Supplement by reference to the appropriate formula and will
be as follows:
Principal
A. If principal is to increase when the Spot Rate exceeds the Base
Exchange Rate, and if principal is to decrease when the Spot Rate is less than
the Base Exchange Rate, the formula to determine the principal amount of a
Currency Indexed Note payable at Maturity shall equal:
Principal Amount + (Principal Amount X F X [Spot Rate -- Base Exchange Rate])
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will sell
Currency I in exchange for a single unit of Currency II.
B. If principal is to increase when the Base Exchange Rate exceeds the
Spot Rate, and if principal is to decrease when the Base Exchange Rate is less
than the Spot Rate, the formula to determine the principal amount of a Currency
Indexed Note payable at Maturity shall equal:
Principal Amount + (Principal Amount X F X [Base Exchange Rate -- Spot Rate])
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will purchase
Currency I in exchange for a single unit of Currency II.
Interest
A. If interest is to increase when the Spot Rate exceeds the Base Exchange
Rate, and if interest is to decrease when the Spot Rate is less than the Base
Exchange Rate, the formula to determine the interest rate payable on any
Interest Payment Date on a Currency Indexed Note shall equal:
Stated Interest Rate + F X (Spot Rate -- Base Exchange Rate)
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will sell
Currency I in exchange for a single unit of Currency II.
B. If interest is to increase when the Base Exchange Rate exceeds the Spot
Rate, and if interest is to decrease when the Base Exchange Rate is less than
the Spot Rate, the formula to determine the interest rate payable on any
Interest Payment Date on a Currency Indexed Note shall equal:
Stated Interest Rate + F X (Base Exchange Rate -- Spot Rate)
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will purchase
Currency I in exchange for a single unit of Currency II.
In each of the above formulas "F" will be the leverage factor, if any, used
in such formula.
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AN INVESTMENT IN NOTES INDEXED, AS TO PRINCIPAL OR INTEREST OR BOTH, TO ONE
OR MORE VALUES OF CURRENCY INDICES (INCLUDING EXCHANGE RATES BETWEEN CURRENCIES)
ENTAILS SIGNIFICANT RISKS THAT ARE NOT ASSOCIATED WITH SIMILAR INVESTMENTS IN A
CONVENTIONAL FIXED-RATE DEBT SECURITY. IF THE INTEREST RATE OF SUCH A NOTE IS SO
INDEXED, IT MAY RESULT IN AN INTEREST RATE THAT IS LESS THAN THAT PAYABLE ON A
CONVENTIONAL FIXED-RATE DEBT SECURITY ISSUED AT THE SAME TIME, INCLUDING THE
POSSIBILITY THAT NO INTEREST WILL BE PAID, AND, IF THE PRINCIPAL AMOUNT OF SUCH
A NOTE IS SO INDEXED, THE PRINCIPAL AMOUNT PAYABLE AT MATURITY MAY BE LESS THAN
THE ORIGINAL PURCHASE PRICE OF SUCH NOTE IF ALLOWED PURSUANT TO THE TERMS OF
SUCH NOTE, INCLUDING THE POSSIBILITY THAT NO PRINCIPAL WILL BE PAID. THE
SECONDARY MARKET FOR SUCH NOTES WILL BE AFFECTED BY A NUMBER OF FACTORS,
INDEPENDENT OF THE CREDITWORTHINESS OF THE COMPANY AND THE VALUE OF THE
APPLICABLE CURRENCY INDEX, INCLUDING THE VOLATILITY OF THE APPLICABLE CURRENCY
INDEX, THE TIME REMAINING TO THE MATURITY OF SUCH NOTES, THE AMOUNT OUTSTANDING
OF SUCH NOTES AND MARKET INTEREST RATES. THE VALUE OF THE APPLICABLE CURRENCY
INDEX DEPENDS ON A NUMBER OF INTERRELATED FACTORS, INCLUDING ECONOMIC, FINANCIAL
AND POLITICAL EVENTS, OVER WHICH THE COMPANY HAS NO CONTROL. ADDITIONALLY, IF
THE FORMULA USED TO DETERMINE THE PRINCIPAL AMOUNT OR INTEREST PAYABLE WITH
RESPECT TO SUCH NOTES CONTAINS A MULTIPLE OR LEVERAGE FACTOR, THE EFFECT OF ANY
CHANGE IN THE APPLICABLE CURRENCY INDEX MAY BE INCREASED. THE HISTORICAL
EXPERIENCE OF THE RELEVANT CURRENCY INDICES SHOULD NOT BE TAKEN AS AN INDICATION
OF FUTURE PERFORMANCE OF SUCH CURRENCY INDICES DURING THE TERM OF ANY NOTE.
ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH NOTES AND THE
SUITABILITY OF SUCH NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
COMMODITY INDEXED NOTES
The Pricing Supplement relating to a Commodity Indexed Note will set forth
the method by which the amount of interest payable and the amount payable at
Stated Maturity in respect of such Commodity Indexed Note will be determined,
the tax consequences to holders of Commodity Indexed Notes, a description of
certain risks associated with investments in Commodity Indexed Notes and other
information relating to such Commodity Indexed Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may from time to time offer Original Issue Discount Notes. The
Pricing Supplement applicable to certain Original Issue Discount Notes may
provide that Holders of such Notes will not receive periodic payments of
interest. For purposes of determining whether Holders of the requisite principal
amount of Notes outstanding under the Indenture have made a demand or given a
notice or waiver or taken any other action, the outstanding principal amount of
Original Issue Discount Notes shall be deemed to be the amount of the principal
that would be due and payable upon declaration of acceleration of the Stated
Maturity thereof as of the date of such determination. See "General."
"Original Issue Discount Note" means, (i) a Note that has a stated
redemption price at Maturity that exceeds its issue price by at least 0.25% of
its stated redemption price at maturity multiplied by the number of full years
from the Original Issue Date to the Stated Maturity for such Notes and (ii) any
other Note designated by the Company as issued with original issue discount for
U.S. Federal income tax purposes.
AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Note
("Amortizing Notes"). Interest on each Amortizing Note will be computed as set
forth in the applicable Pricing Supplement or in the Book-Entry Note
representing such Amortizing Note. Unless otherwise provided in such Pricing
Supplement or in such Book-Entry Note, payments with respect to Amortizing Notes
will be applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. A table setting forth
repayment information with respect to each Amortizing Note will be provided to
the original purchaser of such Note and will be available upon request to the
subsequent Holders thereof.
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RESET NOTES
The Pricing Supplement relating to each Note as to which the Company has
the option with respect to such Note 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 (in each case, a "Reset Note"), will indicate (i) the
date or dates on which such interest rate or such Spread and/or Spread
Multiplier, as the case may be, may be reset (each an "Optional Interest Reset
Date") and (ii) the basis or formula, if any, for such resetting.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 calendar days
prior to an Optional Interest Reset Date for such Note. If the Company so
notifies the Trustee of such exercise, the Trustee will send, not later than 40
calendar days prior to such Optional Interest Reset Date, by telegram, telex,
facsimile transmission, hand delivery or letter (first class, postage prepaid)
to the Holder of such Note a notice (the "Reset Notice") indicating (i) that the
Company has elected 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, (ii) such new interest rate or such new Spread and/or Spread Multiplier,
as the case may be, and (iii) the provisions, if any, for redemption during the
period from such Optional Interest Reset Date to the next Optional Interest
Reset Date or, if there is no such next Optional Interest Reset Date, to the
Stated Maturity of such Note (each such period a "Subsequent Interest Period"),
including the date or dates on which or the period or periods during which and
the price or prices at which such redemption may occur during such Subsequent
Interest Period.
Notwithstanding the foregoing, not later than 20 calendar days prior to an
Optional Interest Reset Date for a Note, the Company may, at its option, 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, in the case of a Fixed Rate Note,
or a Spread and/or Spread Multiplier resulting in a higher interest rate, in the
case of a Floating Rate Note, for the Subsequent Interest Period commencing on
such Optional Interest Reset Date by causing the Trustee to send by telegram,
telex, facsimile transmission, hand delivery or letter (first class, postage
prepaid) notice of such higher interest rate or Spread and/or Spread Multiplier
resulting in a higher interest rate, as the case may be, to the Holder of such
Note. Such notice shall be irrevocable. All Notes with respect to which the
interest rate or Spread and/or Spread Multiplier is reset on an Optional
Interest Reset Date will bear such higher interest rate, in the case of a Fixed
Rate Note, or Spread and/or Spread Multiplier resulting in a higher interest
rate, in the case of a Floating Rate Note, whether or not tendered for repayment
as provided in the next paragraph.
If the Company elects prior to an Optional Interest Reset Date to reset the
interest rate or the Spread and/or Spread Multiplier of a Note, the Holder of
such Note will have the option to elect repayment of such Note by the Company on
such Optional Interest Reset Date at a price equal to the principal amount
thereof plus any accrued interest to such Optional Interest Reset Date. In order
for a Note to be so repaid on an Optional Interest Reset Date, the Holder
thereof must follow the procedures set forth below under "Redemption and
Repayment" for optional repayment, except that the period for delivery of such
Note or notification to the Trustee shall be at least 25 but not more than 35
calendar days prior to such Optional Interest Reset Date. A Holder who has
tendered a Note for repayment following receipt of a Reset Notice may revoke
such tender for repayment by written notice to the Trustee received prior to
5:00 P.M., New York City time, on the tenth calendar day prior to such Optional
Interest Reset Date.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note as to which the Company has
the option to extend the Stated Maturity of such Note for one or more periods of
from one to five whole years (each an "Extension Period") up to but not beyond a
specified date (the "Final Maturity Date"), will set forth each applicable
Extension Period and the Final Maturity Date.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 calendar days
prior to the Stated Maturity of such Note in effect prior to the exercise of
such option (the "Original Stated Maturity Date"). If the Company so notifies
the Trustee of such exercise, the Trustee will send, not later than 40 calendar
days prior to the Original Stated Maturity Date, by
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telegram, telex, facsimile transmission, hand delivery or letter (first class,
postage prepaid), to the Holder of such Note a notice (the "Extension Notice")
relating to such Extension Period, indicating (i) that the Company has elected
to extend the Stated Maturity of such Note, (ii) the new Stated Maturity,
(iii) 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 (iv) the provisions,
if any, for redemption 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
such redemption may occur during the Extension Period. Upon the sending by the
Trustee of an Extension Notice to the Holder of a Note, the Stated Maturity of
such Note shall be extended automatically, and, except as modified by the
Extension Notice and as described in the next two paragraphs, such Note will
have the same terms as prior to the sending of such Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior to the
Original Stated Maturity Date of a Note, the Company may, at its option, 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 Extension
Notice and establish a higher interest rate, in the case of a Fixed Rate Note,
or a Spread and/or Spread Multiplier resulting in a higher interest rate, in the
case of a Floating Rate Note, for the Extension Period by causing the Trustee to
send by telegram, telex, facsimile transmission, hand delivery or letter (first
class, postage prepaid) notice of such higher interest rate or Spread and/or
Spread Multiplier resulting in a higher interest rate, as the case may be, to
the Holder of such Note. Such notice shall be irrevocable. All Notes with
respect to which the Stated Maturity is extended will bear such higher interest
rate, in the case of a Fixed Rate Note, or Spread and/or Spread Multiplier
resulting in a higher interest rate, in the case of a Floating Rate Note, for
the Extension Period, whether or not tendered for repayment as provided in the
next paragraph.
If the Company elects to extend the Stated Maturity of a Note, the Holder
of such Note will have the option to elect repayment of such Note by the Company
on the Original Stated Maturity Date at a price equal to the principal amount
thereof plus any accrued and unpaid interest to such date. In order for a Note
to be so repaid on the Original Stated Maturity Date, the Holder thereof must
follow the procedures set forth below under "Redemption and Repayment" for
optional repayment, except that the period for delivery of such Note or
notification to the Trustee shall be at least 25 but not more than 35 calendar
days prior to the Original Stated Maturity Date. A Holder who has tendered a
Note for repayment following receipt of an Extension Notice may revoke such
tender for repayment by written notice to the Trustee received prior to 5:00
P.M., New York City time, on the tenth calendar day prior to the Original Stated
Maturity Date.
RENEWABLE NOTES
The applicable Pricing Supplement will indicate that a Note (other than an
Amortizing Note) will mature at its Original Stated Maturity Date unless the
term of all or any portion of any such Note is renewed by the Holder in
accordance with the procedures, if any, described in such Pricing Supplement.
COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "Reset Notes," "Extension of Maturity" and "Renewable
Notes."
REDEMPTION AND REPAYMENT
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity only if an Initial Redemption
Date is specified in the applicable Pricing Supplement ("Initial Redemption
Date"). If so specified, the Notes will be subject to redemption at the option
of the Company on any date on and after the applicable Initial Redemption Date
in whole or from time to time in part in increments of $1,000 or the minimum
denomination specified in such Pricing Supplement (provided that any remaining
principal amount thereof shall be an authorized denomination), at the applicable
Redemption Price (as defined below) on notice given not more than 60 nor less
than 30 days prior to the date of redemption and in accordance with the
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provisions of the Indenture. "Redemption Price," with respect to a Note, means
an amount equal to the sum of (i) the Initial Redemption Percentage specified in
such Pricing Supplement (as adjusted by the Annual Redemption Percentage
Reduction, if applicable (as specified in such Pricing Supplement)) multiplied
by the unpaid principal amount or the portion to be redeemed plus (ii) accrued
interest to the date of redemption. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial Redemption
Date by an amount equal to the applicable Annual Redemption Percentage
Reduction, if any, until the Redemption Price is equal to 100% of the unpaid
principal amount thereof or the portion thereof to be redeemed.
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to Stated Maturity or that such Note will be
repayable at the option of the Holder on a date or dates specified prior to
Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
In order for a Note that is repayable at the option of the Holder to be
repaid prior to Stated Maturity, the Paying Agent (initially, the Company has
appointed the Trustee as Paying Agent) must receive at least 30 but not more
than 45 calendar days prior to the repayment date (i) the Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed
or (ii) a telegram, telex, facsimile transmission, hand delivery or letter
(first class, postage prepaid) from a member of a national securities exchange
or the National Association of Securities Dealers, Inc. or a commercial bank or
trust company in the United States setting forth the name of the Holder of the
Note, the principal amount of the Note, the principal amount of the Note to be
repaid, the certificate number or a description of the tenor and terms of the
Note, a statement that the option to elect repayment is being exercised thereby
and a guarantee that the Note to be repaid with the form entitled "Option to
Elect Repayment" on the reverse of the Note duly completed will be received by
the Trustee not later than five Business Days after the date of such telegram,
telex, facsimile transmission, hand delivery or letter (first class, postage
prepaid). If the procedure described in clause (ii) of the preceding sentence is
followed, such Note and form duly completed must be received by the Trustee by
such fifth Business Day. Exercise of the repayment option by the Holder of a
Note shall be irrevocable, except that a Holder who has tendered a Note for
repayment may revoke such tender for repayment by written notice to the Paying
Agent received prior to the close of business on the tenth calendar day prior to
the repayment date. The repayment option may be exercised by the Holder of a
Note for less than the entire principal amount of the Note provided that the
principal amount of the Note remaining outstanding after such repayment is an
authorized denomination.
While the Book-Entry Notes are represented by the Global Security or
Securities held by or on behalf of the U.S. Depositary, and registered in the
name of the U.S. Depositary or the U.S. Depositary's nominee, the option for
repayment may be exercised by the applicable Participant (as defined herein)
that has an account with the U.S. Depositary, on behalf of the beneficial owners
of the Global Security or Securities representing such Book-Entry Notes, by
delivering a written notice substantially similar to the above mentioned form to
the Trustee at its Corporate Trust Office (or such other address of which the
Company shall from time to time notify the Holders), not more than 60 nor less
than 30 days prior to the date of repayment. Notices of elections from
Participants on behalf of beneficial owners of the Global Security or Securities
representing such Book-Entry Notes to exercise their option to have such
Book-Entry Notes repaid must be received by the Trustee by 5:00 P.M., New York
City time, on the last day for giving such notice. In order to ensure that a
notice is received by the Trustee on a particular day, the beneficial owner of
the Global Security or Securities representing such Book-Entry Notes must so
direct the applicable Participant before such Participant's deadline for
accepting instructions for that day. Different firms may have different
deadlines for accepting instructions from their customers. Accordingly,
beneficial owners of the Global Security or Securities representing Book-Entry
Notes should consult the Participants through which they own their interest
therein for the respective deadlines for such Participants. All notices shall be
executed by a duly authorized officer of such Participant (with signatures
guaranteed) and shall be irrevocable. In addition, beneficial owners of the
Global Security or Securities representing Book-Entry Notes shall effect
delivery at the time such notices of election are given to the U.S. Depositary
by causing the applicable Participant to
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transfer such beneficial owner's interest in the Global Security or Securities
representing such Book-Entry Notes, on the U.S. Depositary's records, to the
Trustee. See "Book-Entry System."
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, surrendered to the Trustee for
cancellation.
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended, and any other securities
laws or regulations in connection with any purchase or payment of Notes.
OTHER PROVISIONS
Any provisions with respect to the determination of an Interest Rate Basis,
the specifications of Interest Rate Basis, calculation of the interest rate
applicable to, or the principal payable at Maturity on, any Note, its Interest
Payment Dates or any other matter relating thereto may be modified by the terms
as specified under "Other Provisions" on the face of such Note, or in an Annex
relating thereto if so specified on the face thereof, and in the applicable
Pricing Supplement.
BOOK-ENTRY SYSTEM
DTC will act as securities depositary for the Book-Entry Notes. The
Book-Entry Notes will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One fully-registered Global Security will be
issued for each issue of the Notes, in the aggregate principal amount of such
issue, and will be deposited with DTC. If, however, the aggregate principal
amount of any issue exceeds the maximum principal amount authorized by DTC, one
Global Security will be issued with respect to such maximum principal amount and
an additional Global Security will be issued with respect to any remaining
principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants ("Direct Participants") include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to DTC's system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under DTC's system must be made by or through
Direct Participants, which will receive a credit for the Book-Entry Notes on
DTC's records. The ownership interest of each actual purchaser of each
Book-Entry Note (the "Beneficial Owner") is in turn to be recorded on the Direct
and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Book-Entry Notes are to be accomplished by entries
made on the books of Participants acting on behalf of the Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Book-Entry
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Notes, except in the event that use of the book-entry system for one or more
Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Global Securities with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Book-Entry Notes; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Book-Entry Notes are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, DTC's current practice is
to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Book-Entry
Notes. Under its usual procedures, DTC will mail an "Omnibus Proxy" to the
Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Principal and interest payments on the Book-Entry Notes will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payable
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case of securities held for the
accounts of customers in bearer form or registered in "street name," and will be
the responsibility of such Participant and not of DTC or the Company, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the Company,
disbursement of such payments to Direct Participants shall be the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry Notes
purchased or tendered, through its Participant, to the Paying Agent, and shall
effect delivery of such Book-Entry Notes by causing the Direct Participant to
transfer the Participant's interest in the Book-Entry Notes, on DTC's records,
to the Paying Agent. The requirement for physical delivery of Book-Entry Notes
in connection with a demand for purchase or a mandatory purchase will be deemed
satisfied when the ownership rights in the Book-Entry Notes are transferred by a
Direct Participant on DTC's records.
DTC may discontinue providing its services as securities depositary with
respect to the Book-Entry Notes at any time by giving reasonable notice to the
Company or the Agents. Under such circumstances, in the event that a successor
securities depositary is not obtained, Certificated Notes will be printed and
delivered in exchange for the Book-Entry Notes represented by the Global
Securities held by DTC.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Certificated Notes will be printed and delivered in exchange for the Book-Entry
Notes represented by the Global Securities held by DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Neither the Company, the Trustee, any Paying Agent nor the registrar for
the Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial
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ownership interests in a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCHARGE AND DEFEASANCE
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be subject to discharge and defeasance as described under "Description of
Debt Securities-Satisfaction and Discharge of Indenture" in the Prospectus.
SPECIAL PROVISIONS RELATING TO MULTI-CURRENCY NOTES
GENERAL
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium (if
any) and interest on the Notes will be made in U.S. dollars. If any of the Notes
are to be denominated in a currency or currency unit other than U.S. dollars,
the following provisions shall apply, which are in addition to, and to the
extent inconsistent therewith replace, the description of general terms and
provisions of Notes set forth in the accompanying Prospectus and elsewhere in
this Prospectus Supplement.
Multi-Currency Notes are issuable in registered form only, without coupons.
The authorized denominations for Multi-Currency Notes will be specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, payment of the purchase price of Multi-Currency Notes will
be made in immediately available funds.
CURRENCIES
Unless otherwise indicated in the applicable Pricing Supplement, purchasers
are to pay for Multi-Currency Notes in the Specified Currency in immediately
available funds. At the present time there are limited facilities in the United
States for converting U.S. dollars into the Specified Currencies and vice versa,
and banks do not offer non-U.S. dollar checking or savings account facilities in
the United States. However, if requested by a prospective purchaser of a
Multi-Currency Note on or prior to the fifth Business Day preceding the date of
delivery of the Multi-Currency Note, or by such other day as determined by the
Agent who presented such offer to purchase the Multi-Currency Note to the
Company, such Agent is prepared to arrange for the conversion of U.S. dollars
into the applicable Specified Currency to enable such purchaser to pay for the
Multi-Currency Notes. Each such conversion will be made by the Agent on such
terms and subject to such conditions, limitations and charges as the Agent may
from time to time establish in accordance with its regular foreign exchange
practices. All costs of exchange will be borne by the purchasers of the Multi-
Currency Notes.
Specific information about the foreign currency or currency unit in which a
particular Multi-Currency Note is denominated, including historical exchange
rates and a description of the currency and any exchange controls, will be set
forth in the applicable Pricing Supplement. See "Foreign Currency Risks."
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, payments
of interest and principal (and premium, if any) with respect to any
Multi-Currency Note will be made by wire transfer to such account with a bank
located in the country issuing the Specified Currency (or, with respect to
Multi-Currency Notes denominated in ECUs, Brussels) or other jurisdiction
acceptable to the Company and the Trustee as shall have been designated at least
15 days prior to the Interest Payment Date or Maturity, as the case may be, by
the Holder of such Multi-Currency Note on the relevant Regular Record Date or at
Maturity, provided that, in the case of payment of principal of (and premium, if
any) and any interest due at Maturity, the Multi-Currency Note is presented to
the Paying Agent in time for the Paying Agent to make such payments in such
funds in accordance with its normal procedures. Such designation shall be made
by filing the appropriate
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information with the Trustee at its Corporate Trust Office, and, unless revoked,
any such designation made with respect to any Multi-Currency Note by a Holder
will remain in effect with respect to any further payments with respect to such
Multi-Currency Note payable to such Holder. If a payment with respect to any
such Multi-Currency Note cannot be made by wire transfer because the required
designation has not been received by the Trustee on or before the requisite date
or for any other reason, a notice will be mailed to the Holder at its registered
address requesting a designation pursuant to which such wire transfer can be
made and, upon the Trustee's receipt of such a designation, such payment will be
made within 15 days of such receipt. The Company will pay any administrative
costs imposed by banks in connection with making payments by wire transfer, but
any tax, assessment or governmental charge imposed upon payments will be borne
by the Holders of the Multi-Currency Notes in respect of which such payments are
made.
If so specified in the applicable Pricing Supplement, except as provided
below, payments of interest and principal (and premium, if any) with respect to
any Multi-Currency Note will be made in U.S. dollars if the Holder of such
Multi-Currency Note on the relevant Regular Record Date or at Maturity, as the
case may be, has transmitted a written request for such payment in U.S. dollars
to the Paying Agent at its principal office on or prior to such Regular Record
Date or the date 15 days prior to Maturity, as the case may be. Such request may
be delivered by mail, by hand or by cable, telex or any other form of facsimile
transmission.
Any such request made with respect to any Multi-Currency Note by a Holder
will remain in effect with respect to any further payments of interest and
principal (and premium, if any) with respect to such Multi-Currency Note payable
to such Holder, unless such request is revoked by written notice received by the
Paying Agent on or prior to the relevant Regular Record Date or the date 15 days
prior to Maturity, as the case may be (but no such revocation may be made with
respect to payments made on any such Multi-Currency Note if an Event of Default
has occurred with respect thereto or upon the giving of a notice of redemption).
Holders of Multi-Currency Notes whose Multi-Currency Notes are registered in the
name of a broker or nominee should contact such broker or nominee to determine
whether and how an election to receive payments in U.S. dollars may be made.
The U.S. dollar amount to be received by a Holder of a Multi-Currency Note
who elects to receive payments in U.S. dollars will be based on the highest
indicated bid quotation for the purchase of U.S. dollars in exchange for the
Specified Currency obtained by the Currency Determination Agent (as defined
below) at approximately 11:00 A.M., New York City time, on the second Business
Day next preceding the applicable payment date (the "Conversion Date") from the
bank composite or multicontributor pages of the Quoting Source for three (or two
if three are not available) major banks in The City of New York. The first three
(or two) such banks selected by the Currency Determination Agent which are
offering quotes on the Quoting Source will be used. If fewer than two such bid
quotations are available at 11:00 A.M., New York City time, on the second
Business Day next preceding the applicable payment date, such payment will be
based on the Market Exchange Rate as of the second Business Day next preceding
the applicable payment date. If the Market Exchange Rate for such date is not
then available, such payment will be made in the Specified Currency. As used
herein, the "Quoting Source" means Reuters Monitor Foreign Exchange Service, or
if the Currency Determination Agent determines that such service is not
available, Telerate Monitor Foreign Exchange Service, or if the Currency
Determination Agent determines that neither service is available, such
comparable display or other comparable manner of obtaining quotations as shall
be agreed between the Company and the Currency Determination Agent. All currency
exchange costs associated with any payment in U.S. dollars on any such
Multi-Currency Note will be borne by the Holder thereof by deductions from such
payment. The currency determination agent (the "Currency Determination Agent")
with respect to any Multi-Currency Notes will be specified in the applicable
Pricing Supplement for such Multi-Currency Notes.
If payment in respect of a Multi-Currency Note is required to be made in
any currency unit (e.g. ECUs) and such currency unit is unavailable, in the good
faith judgment of the Company, due to the imposition of exchange controls or
other circumstances beyond the Company's control, then all payments in respect
of such Multi-Currency Note shall be made in U.S. dollars until such currency
unit is again available. The amount of each payment of U.S. dollars shall be
computed on the basis of the equivalent of the currency unit in U.S. dollars,
which shall be determined by the Currency Determination Agent on the following
basis. The component currencies of the currency unit for this purpose (the
"Component Currencies") shall be the
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currency amounts that were components of the currency unit as of the Conversion
Date. The equivalent of the currency unit in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Component Currencies. The U.S.
dollar equivalent of each of the Component Currencies shall be determined by the
Currency Determination Agent on the basis of the Market Exchange Rate for each
such Component Currency as of the Conversion Date. "Market Exchange Rate" means
the noon buying rate in The City of New York for cable transfers of such
Specified Currency as certified for customs purposes by the Federal Reserve Bank
of New York.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by the Currency Determination
Agent shall be at its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and binding on Holders of Multi-Currency
Notes.
OUTSTANDING MULTI-CURRENCY NOTES
For purposes of calculating the principal amount of any Multi-Currency Note
payable in a Specified Currency for any purpose under the Indenture, the
principal amount of such Multi-Currency Note at any time outstanding shall be
deemed to be the U.S. dollar equivalent, at the Market Exchange Rate determined
as of the date of the original issuance of such Multi-Currency Note, of the
principal amount of such Multi-Currency Note.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Multi-Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
changes in the rate of exchange between the U.S. dollar and the Specified
Currency and the possibility of the imposition or modification of foreign
exchange controls by either the United States or foreign governments. Such risks
generally depend on economic and political events over which the Company has no
control. In recent years, rates of exchange between the U.S. dollar and certain
foreign currencies have been highly volatile and such volatility may be expected
in the future. The exchange rate between the U.S. dollar and a foreign currency
or currency unit is at any moment a result of the supply of and demand for such
currencies, and changes in the rate result over time from the interaction of
many factors, among which are rates of inflation, interest rate levels, balances
of payments and the extent of governmental surpluses or deficits in the
countries of such currencies. These factors are in turn sensitive to the
monetary, fiscal and trade policies pursued by such governments and those of
other countries important to international trade and finance. Fluctuations in
any particular exchange rate that have occurred in the past are not necessarily
indicative, however, of fluctuations in the rate that may occur during the term
of any Multi-Currency Note. Depreciation of the Specified Currency applicable to
a Multi-Currency Note against the U.S. dollar would result in a decrease in the
U.S. dollar-equivalent yield of such Note, in the U.S. dollar-equivalent value
of the principal repayable at Maturity of such Note and, generally, in the U.S.
dollar-equivalent market value of such Note.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed noncommunist nations are
permitted to fluctuate in value relative to the U.S. dollar. Sovereign
governments, however, rarely voluntarily allow their currencies to float freely
in response to economic forces. In fact, such governments use a variety of
techniques, such as intervention by a country's
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central bank or imposition of regulatory controls or taxes, to affect the
exchange rate of their currencies. Governments may also issue a new currency to
replace an existing currency or alter the exchange rate or relative exchange
characteristics by devaluation or revaluation of a currency. Thus, a special
risk in purchasing Notes that are denominated in a foreign currency or currency
unit is that their U.S. dollar-equivalent yields could be affected by
governmental actions which could change or interfere with a theretofore freely
determined currency valuation, by fluctuations in response to other market
forces and by the movement of currencies across borders. There will be no
adjustment or change in the terms of the Multi-Currency Notes in the event that
exchange rates should become fixed, or in the event of any devaluation or
revaluation or imposition of exchange or other regulatory controls or taxes, or
in the event of other developments, affecting the U.S. dollar or any applicable
currency or currency unit.
THE PROSPECTUS, INCLUDING THIS PROSPECTUS SUPPLEMENT, DOES NOT DESCRIBE ALL
RISKS OF AN INVESTMENT IN MULTI-CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING
DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY UNIT EITHER AS SUCH RISKS EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN MULTI-CURRENCY NOTES.
MULTI-CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise indicated in the applicable Pricing Supplement,
Multi-Currency Notes will not be sold in, or to residents of, the country of the
Specified Currency in which particular Multi-Currency Notes are denominated. The
information set forth in this Prospectus Supplement is directed to prospective
purchasers who are United States residents, and the Company disclaims 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 of, premium, if any, and
interest on Multi-Currency Notes. Such persons should contact their own legal
advisors with regard to such matters.
JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. A judgment for money damages by courts in the United
States, including money damages based on an obligation expressed in a foreign
currency, will ordinarily be rendered only in U.S. dollars. New York statutory
law provides that in an action based on an obligation expressed in a currency
other than U.S. dollars 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 the exchange rate prevailing on the date of entry
of the judgment or decree.
EXCHANGE CONTROLS, ETC.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to a Note's Maturity. Even
if there are no exchange controls, it is possible that the Specified Currency
for any particular Multi-Currency Note would not be available at such Note's
Maturity. In that event, the Company will pay in U.S. dollars on the basis of
the Market Exchange Rate on the second day prior to such payment, or if such
Market Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate. See "Special Provisions Relating to
Multi-Currency Notes--Payment of Principal and Interest."
An applicable Pricing Supplement with respect to the applicable Specified
Currency (which includes information with respect to applicable current foreign
exchange controls, if any) will be delivered and will become part of this
Prospectus and Prospectus Supplement. The information concerning exchange rates
is furnished as a matter of information only and should not be regarded as
indicative of the range of or trends in fluctuations in currency exchange rates
that may occur in the future.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership of the Notes as of the date hereof. Except where
noted, it deals only with Notes held as capital assets and does not deal with
special situations, such as those of dealers in securities or currencies,
financial institutions, life insurance companies, persons holding Notes as a
part of a hedging or conversion transaction or a straddle or holders of Notes
whose "functional currency" is not the U.S. dollar. Furthermore, the discussion
below is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations, rulings and judicial decisions thereunder
as of the date hereof, and such authorities may be repealed, revoked or modified
so as to result in United States federal income tax consequences different from
those discussed below. Subject to the foregoing limitations, any special United
States federal income tax considerations relevant to a particular issue of the
Notes will be provided in the applicable Pricing Supplement. PERSONS CONSIDERING
THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT
OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
As used herein, a "United States Holder" of a Note means a holder that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. For
taxable years beginning after December 31, 1996, a trust will be a "United
States Holder" of a Note only if a court within the United States is able to
exercise primary supervision over the administration of the trust and the trust
is subject to the control of a United States fiduciary within the meaning of
section 7701(a)(30) of the Code. A "Non-United States Holder" is a holder that
is not a United States Holder.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Payments of Interest
Except as set forth below, interest on a Note will generally be taxable to
a United States Holder as ordinary income from domestic sources at the time it
is paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes.
Original Issue Discount
United States Holders of Notes issued with original issue discount ("OID")
will be subject to special tax accounting rules, as described in greater detail
below. United States Holders of such Notes should be aware that they generally
must include OID in gross income in advance of the receipt of cash attributable
to that income. However, United States Holders of such Notes generally will not
be required to include separately in income cash payments received on the Notes,
even if denominated as interest, to the extent such payments do not constitute
qualified stated interest (as defined below). Notes issued with OID will be
referred to as "Original Issue Discount Notes." Notice will be given in the
applicable Pricing Supplement when the Company determines that a particular Note
will be an Original Issue Discount Note.
This summary is based upon final Treasury regulations addressing debt
instruments issued with OID (the "OID Regulations"). Additional rules applicable
to Original Issue Discount Notes which are denominated in or determined by
reference to a Specified Currency other than the U.S. dollar are described under
"Multi-Currency Notes" below. The following discussion does not address Notes
providing for contingent payments other than Notes that bear qualified stated
interest.
A Note with an "issue price" that is less than its stated redemption price
at maturity (the sum of all payments to be made on the Note other than
"qualified stated interest") will be issued with OID if such difference is at
least 0.25 percent of the stated redemption price at maturity multiplied by the
number of complete years to maturity or, in the case of an Amortizing Note, the
weighted average maturity. The "issue price" of each Note in a particular
offering will be the first price at which a substantial amount of that
particular offering is sold (other than to an underwriter, placement agent or
wholesaler). The term "qualified
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stated interest" means stated interest that is unconditionally payable in cash
or in property (other than debt instruments of the issuer) at least annually at
a single fixed rate or, subject to certain conditions, based on one or more
interest indices. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
Notice will be given in the applicable Pricing Supplement when the Company
determines that a particular Note will bear interest that is not qualified
stated interest.
In the case of a Note issued with de minimis OID (i.e., discount that is
not OID because it is less than 0.25 percent of the stated redemption price at
maturity multiplied by the number of complete years to maturity), the United
States Holder generally must include such de minimis OID (other than de minimis
OID that constitutes stated interest) in income as principal payments on the
Notes are made in proportion to the stated principal amount of the Note. Any
amount of de minimis OID that has been included in income (other than de minimis
OID that constitutes stated interest) shall be treated as capital gain.
Certain of the Notes may be redeemed prior to their Stated Maturity at the
option of the Company and/or at the option of the holder. Original Issue
Discount Notes containing such features may be subject to rules that differ from
the general rules discussed herein. Persons considering the purchase of Original
Issue Discount Notes with such features should carefully examine the applicable
Pricing Supplement and should consult their own tax advisors with respect to
such features since the tax consequences with respect to OID will depend, in
part, on the particular terms and features of the Notes.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income by the initial United States Holder of an Original
Issue Discount Note is the sum of the "daily portions" of OID with respect to
the Note for each day during the taxable year or portion of the taxable year in
which such United States Holder held such Note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The "accrual period"
for an Original Issue Discount Note may be of any length and may vary in length
over the term of the Note, provided that each accrual period is no longer than
one year and each scheduled payment of principal or interest occurs on the first
day or the final day of an accrual period. The amount of OID allocable to any
accrual period is an amount equal to the excess, if any, of (a) the product of
the 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 properly adjusted for the length of the accrual period) over
(b) the sum of any qualified stated interest allocable to the accrual period.
OID allocable to a final accrual period is the difference between the amount
payable at maturity (other than a payment of qualified stated interest) and the
adjusted issue price at the beginning of the final accrual period. Special rules
will apply for calculating OID for an initial short accrual period. The
"adjusted issue price" of a Note at the beginning of any accrual period is equal
to its issue price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any acquisition or bond
premium, as described below) and reduced by any payments made on such Note
(other than qualified stated interest) on or before the first day of the accrual
period. Under these rules, a United States Holder will have to include in income
increasingly greater amounts of OID in successive accrual periods. The Company
is required to provide information returns stating the amount of OID accrued on
Notes held of record by persons other than corporations and other exempt
holders.
In the case of an Original Issue Discount Note that is a Floating Rate
Note, both the "yield to maturity" and "qualified stated interest" will be
determined solely for purposes of calculating the accrual of OID as though the
Note will bear interest in all periods at a fixed rate generally equal to the
rate that would be applicable to interest payments on the Note on its date of
issue or, in the case of certain Floating Rate Notes, the rate that reflects the
yield to maturity that is reasonably expected for the Note. Additional rules may
apply if interest on a Floating Rate Note is based on more than one interest
index. Persons considering the purchase of Floating Rate Notes should carefully
examine the applicable Pricing Supplement and should consult their own tax
advisors regarding the United States federal income tax consequences of the
holding and disposition of such Notes.
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United States Holders may elect to treat all interest on any Note as OID
and calculate the amount includible in gross income under the constant yield
method described above. For the purposes of this election, interest includes
stated interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium. The election is to be made for the taxable
year in which the United States Holder acquired the Note, and may not be revoked
without the consent of the Internal Revenue Service (the "IRS"). United States
Holders should consult with their own tax advisors about this election.
Short-Term Notes
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Notes"), under the OID Regulations all payments (including all
stated interest) will be included in the stated redemption price at maturity
and, thus, United States Holders will generally be taxable on the discount in
lieu of stated interest. The discount will be equal to the excess of the stated
redemption price at maturity over the issue price of a Short-Term Note, unless
the United States Holder elects to compute this discount using tax basis instead
of issue price. However, individuals and certain other cash method United States
Holders of a Short-Term Note generally are not required to include accrued
discount in their income currently unless they elect to do so. United States
Holders that report income for United States federal income tax purposes on the
accrual method and certain other United States Holders are required to accrue
discount on such (as ordinary income) on a straight-line basis, unless an
election is made to accrue the discount according to a constant yield method
based on daily compounding. In the case of a United States Holder that is not
required, and does not elect, to include discount in income currently, any gain
realized on the sale, exchange or retirement of the Short-Term Note will be
ordinary income to the extent of the discount accrued through the date of sale,
exchange or retirement. In addition, a United States Holder that does not elect
to currently include accrued discount in income may be required to defer
deductions for a portion of the United States Holder's interest expense with
respect to any indebtedness incurred or continued to purchase or carry such
Notes.
Market Discount
If a United States Holder purchases a Note (other than a Short-Term Note)
for an amount that is less than its stated redemption price at maturity or, in
the case of an Original Issue Discount Note, its adjusted issue price, the
amount of the difference will be treated as "market discount" for United States
federal income tax purposes, unless such difference is less than a specified de
minimis amount. Under the market discount rules, a United States Holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. In addition, the United States Holder may be required to defer,
until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder of a Note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired 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.
Acquisition Premium; Amortizable Bond Premium
A United States Holder that purchases a Note for an amount that is greater
than its adjusted issue price but equal to or less than the sum of all amounts
payable on the Note after the purchase date other than payments of qualified
stated interest will be considered to have purchased such Note at an
"acquisition premium." Under the acquisition premium rules, the amount of OID
which such holder must include in its
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gross income with respect to such Note for any taxable year will be reduced by
the portion of such acquisition premium properly allocable to such year.
A United States Holder that purchases a Note for an amount in excess of the
sum of all amounts payable on the Note after the purchase date other than
qualified stated interest will be considered to have purchased the Note at a
"premium" and will not be required to include any OID in income. A United States
Holder generally may elect to amortize the premium over the remaining term of
the Note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the United States Holder's interest income from the
Note. Bond premium on a Note held by a United States Holder that does not make
such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Note. The election to amortize premium on a
constant yield method once made applies to all debt obligations held or
subsequently acquired by the electing United States 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.
Proposed Treasury regulations issued on June 27, 1996 would, if adopted,
clarify the treatment of bond premium. Among the provisions contained in the
proposed regulations is a provision that generally provides that premium may be
amortized to offset interest income only as a United States Holder takes the
qualified stated interest into account under the holder's regular accounting
method. Moreover, the proposed Treasury regulations generally provide that in
the case of instruments that provide for alternative payment schedules, bond
premium is calculated by assuming that both the issuer and the holder will
exercise or not exercise options in a manner that maximizes the holder's yield.
If adopted, the regulations would be effective for debt instruments acquired on
or after the date 60 days after the date final regulations are published in the
Federal Register. However, if a United States Holder elects to amortize bond
premium for the taxable year containing such effective date, the proposed
Treasury regulations would apply to all the United States Holder's debt
instruments held on or after the first day of that taxable year.
Sale, Exchange or Retirement of Notes
A United States Holder's tax basis in a Note will, in general, be the
United States Holder's cost therefor, increased by OID, market discount or any
discount with respect to a Short-Term Note previously included in income by the
United States Holder and reduced by any amortized premium and any cash payments
on the Note other than qualified stated interest. Upon the sale, exchange,
retirement or other disposition of a Note, a United States Holder will recognize
gain or loss equal to the difference between the amount realized upon the sale,
exchange, retirement or other disposition (less any accrued qualified stated
interest, which will be taxable as such) and the adjusted tax basis of the Note.
Except as described above with respect to certain , with respect to gain or loss
attributable to changes in exchange rates as described below with respect to
certain Multi-Currency Notes or with respect to market discount, such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
at the time of sale, exchange, retirement or other disposition the Note has been
held for more than one year. Under current law, net capital gains of individuals
are, under certain circumstances, taxed at lower rates than items of ordinary
income. The deductibility of capital losses is subject to limitations.
Tax Consequences of Satisfaction and Discharge
The Company may discharge its obligations under the Notes as more fully
described under "Description of Notes--Satisfaction and Discharge" above. In
that event, the IRS may take the view that such a discharge constitutes the
retirement of the Notes and the issuance of new obligations with the result that
United States Holders of the Notes would recognize any gain or loss realized on
such a retirement, although any such gain would generally not be taxable to
Non-United States Holders under the circumstances outlined below. Furthermore,
following discharge, the Notes might be subject to withholding, backup
withholding and/or information reporting.
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Extendible Notes, Reset Notes and Renewable Notes
If so specified in an applicable Pricing Supplement relating to a Note, the
Company or a holder may have the option to extend the maturity of a Note. See
"Description of Notes--Renewable Notes" and "Description of Notes--Extension of
Maturity." In addition, the Company may have the option to reset the interest
rate, the Spread or the Spread Multiplier. See "Description of Notes--Reset
Notes." The treatment of a United States Holder of Notes with respect to which
such an option has been exercised may depend, in part, on the terms established
for such Notes by the Company pursuant to the exercise of such option (the
"Revised Terms"). Such United States Holder may be treated for United States
federal income tax purposes as having exchanged such Notes (the "Old Notes") for
new Notes with the Revised Terms (the "New Notes"). If the exercise of the
option by the Company is not treated as an exchange of Old Notes for New Notes,
no gain or loss will be recognized by a United States Holder as a result
thereof. If the exercise of the option is treated as a taxable exchange of Old
Notes for New Notes, a United States Holder would generally recognize gain or
loss equal to the difference between the issue price of the New Notes and the
holder's tax basis in the Old Notes.
The presence of such options may also affect the calculation of OID, among
other things. The OID Regulations provide that, solely for purposes of the
accrual of OID, an issuer of a debt instrument having an option or combination
of options to extend the term of the debt instrument will be presumed to
exercise such option or options in a manner that minimizes the yield on the debt
instrument. Conversely, a holder having a put option, an option to extend the
term of the debt instrument or a combination of such options will be presumed to
exercise such option or options in a manner that maximizes the yield on the debt
instrument. If the exercise of such option or options to extend the term of the
debt instrument actually occurs or exercise of the option to put does not occur,
contrary to the presumption made under the OID Regulations (a "change in
circumstances"), then, solely for purposes of the accrual of OID, the debt
instrument is treated as reissued on the date of the change in circumstances for
an amount equal to its adjusted issue price on that date. Persons considering
the purchase of Extendible Notes, Reset Notes or Renewable Notes should
carefully examine the applicable Pricing Supplement and should consult their own
tax advisors regarding the United States federal income tax consequences of the
holding and disposition of such Notes.
Multi-Currency Notes
The following is a summary of the principal United States federal income
tax consequences to a United States Holder of the ownership of a Note
denominated in a Specified Currency other than the U.S. dollar (such Specified
Currency, a "Foreign Currency"). If interest payments are made in a Foreign
Currency to a United States Holder that is not required to accrue such interest
prior to its receipt, such holder will be required to include in income the U.S.
dollar value of the amount received (determined by translating the Foreign
Currency received at the "spot rate" for such Foreign Currency on the date such
payment is received), regardless of whether the payment is in fact converted
into U.S. dollars. No exchange gain or loss is recognized with respect to the
receipt of such payment.
A United States Holder that is required to accrue interest on a
Multi-Currency Note prior to receipt of such interest will be required to
include in income for each taxable year the U.S. dollar value of the interest
that has accrued during such year, determined by translating such interest at
the average rate of exchange for the period or periods during which such
interest accrued. The average rate of exchange for an interest accrual period is
the simple average of the exchange rates for each business day of such period
(or such other average that is reasonably derived and consistently applied by
the holder). An accrual basis holder may elect to translate interest income at
the spot rate on the last day of the accrual period (or last day of the taxable
year in the case of an accrual period that straddles the holder's taxable year)
or on the date the interest payment is received if such date is within five days
of the end of the accrual period. Upon receipt of an interest payment on such
Note, such holder will recognize ordinary income or loss in an amount equal to
the difference between the U.S. dollar value of such payment (determined by
translating any Foreign Currency received at the "spot rate" for such Foreign
Currency on the date received) and the U.S. dollar value of the interest income
that such holder has previously included in income with respect to such payment.
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<PAGE> 32
OID on a Note that is also a Multi-Currency Note will be determined for any
accrual period in the applicable Foreign Currency and then translated into U.S.
dollars in the same manner as interest income accrued by a holder on the accrual
basis, as described above. Likewise, a United States Holder will recognize
exchange gain or loss when the OID is paid to the extent of the difference
between the U.S. dollar value of the accrued OID (determined in the same manner
as for accrued interest) and the U.S. dollar value of such payment (determined
by translating any Foreign Currency received at the spot rate for such Foreign
Currency on the date of payment). For this purpose, all receipts on a Note will
be viewed first as the receipt of any stated interest payments called for under
the terms of the Note, second as receipts of previously accrued OID (to the
extent thereof), with payments considered made for the earliest accrual periods
first, and thereafter as the receipt of principal.
The amount of market discount on Multi-Currency Notes includible in income
will generally be determined by translating the market discount determined in
the Foreign Currency into U.S. dollars at the spot rate on the date the
Multi-Currency Note is retired or otherwise disposed of. If the United States
Holder has elected to accrue market discount currently, then the amount which
accrues is determined in the Foreign Currency and then translated into U.S.
dollars on the basis of the average exchange rate in effect during such accrual
period. A United States Holder will recognize exchange gain or loss with respect
to market discount which is accrued currently using the approach applicable to
the accrual of interest income as described above.
Bond premium on a Multi-Currency Note will be computed in the applicable
Foreign Currency. With respect to a United States Holder that elects to amortize
the premium, the amortizable bond premium will reduce interest income in the
applicable Foreign Currency. At the time bond premium is amortized, exchange
gain or loss (which is generally ordinary income or loss) will be realized based
on the difference between spot rates at such time and at the time of acquisition
of the Multi-Currency Note. A United States Holder that does not elect to
amortize bond premium will translate the bond premium, computed in the
applicable Foreign Currency, into U.S. dollars at the spot rate on the maturity
date and such bond premium will constitute a capital loss which may be offset or
eliminated by exchange gain.
A United States Holder's tax basis in a Multi-Currency Note will be the
U.S. dollar value of the Multi-Currency amount paid for such Multi-Currency Note
determined at the time of such purchase. A United States Holder that purchases a
Note with previously owned Foreign Currency will recognize exchange gain or loss
at the time of purchase attributable to the difference at the time of purchase,
if any, between his tax basis in such Foreign Currency and the fair market value
of the Note in U.S. dollars on the date of purchase. Such gain or loss will be
ordinary income or loss.
For purposes of determining the amount of any gain or loss recognized by a
United States Holder on the sale, exchange, retirement or other disposition of a
Multi-Currency Note, the amount realized upon such sale, exchange, retirement or
other disposition will be the U.S. dollar value of the amount realized in
Foreign Currency (other than amounts attributable to accrued but unpaid interest
not previously included in the holder's income), determined at the time of the
sale, exchange, retirement or other disposition.
A United States Holder will recognize exchange gain or loss attributable to
the movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange, retirement or other disposition) of a
Multi-Currency Note. Such gain or loss will be treated as ordinary income or
loss. The realization of such gain or loss will be limited to the amount of
overall gain or loss realized on the disposition of a Multi-Currency Note. Under
proposed Treasury Regulations issued on March 17, 1992, if a Multi-Currency Note
is denominated in one of certain hyperinflationary currencies, generally (i)
exchange gain or loss would be realized with respect to movements in the
exchange rate between the beginning and end of each taxable year (or such
shorter period) that such Note was held and (ii) such exchange gain or loss
would be treated as an addition or offset, respectively, to the accrued interest
income on (and an adjustment to the holder's tax basis in) the Multi-Currency
Note.
A United States Holder's tax basis in Foreign Currency received as interest
on (or OID with respect to), or received on the sale, exchange, retirement or
other disposition of, a Multi-Currency Note will be the U.S. dollar value
thereof at the spot rate at the time the holder received such Foreign Currency.
Any gain or loss recognized by a United States Holder on a sale, exchange,
retirement or other disposition of Foreign Currency
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<PAGE> 33
will be ordinary income or loss and will not be treated as interest income or
expense, except to the extent provided in Treasury Regulations or administrative
pronouncements of the IRS.
Indexed Notes
The tax treatment of a United States Holder of Currency Indexed Notes and
Commodity Indexed Notes will depend on factors including the specific index or
indices used to determine indexed payments on the Note and the amount and timing
of any contingent payments of principal and interest. Persons considering the
purchase of Currency Indexed Notes or Commodity Indexed Notes should carefully
examine the applicable Pricing Supplement and should consult their own tax
advisors regarding the United States federal income tax consequences of the
holding and disposition of such Notes.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any paying agent of
principal or interest (which for purposes of this discussion includes OID)
on a Note owned by a Non-United States Holder, provided (i) that the
beneficial owner does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote within the meaning of section 871(h)(3) of the Code and the
regulations thereunder, (ii) the beneficial owner is not a controlled
foreign corporation that is related to the Company through stock ownership,
(iii) the beneficial owner is not a bank whose receipt of interest on a
Note is described in section 881(c)(3)(A) of the Code and (iv) the
beneficial owner satisfies the statement requirement (described generally
below) set forth in section 871(h) and section 881(c) of the Code and the
regulations thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange, retirement or other disposition of a Note;
and
(c) a Note beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the company entitled
to vote within the meaning of section 871(h)(3) of the Code and provided
that the interest payments with respect to such Note would not have been,
if received at the time of such individual's death, effectively connected
with the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner is
not a United States person. Pursuant to current temporary Treasury regulations,
these requirements will be met if (1) the beneficial owner provides his name and
address, and certifies, under penalties of perjury, that he is not a United
States person (which certification may be made on an Internal Revenue Service
Form W-8 (or successor form)) or (2) a financial institution holding the Note on
behalf of the beneficial owner certifies, under penalties of perjury, that such
statement has been received by it and furnishes a paying agent with a copy
thereof.
If a non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of premium, if
any, and interest (including OID) made to such non-United States Holder will be
subject to a 30% withholding tax unless the beneficial owner of the Note
provides the Company or its paying agent, as the case may be, with a properly
executed (1) Internal Revenue Service Form 1001 (or successor form) claiming an
exemption from withholding under the benefit of a tax treaty or (2) Internal
Revenue Service Form 4224 (or successor form) stating that interest paid on the
Note is not
S-33
<PAGE> 34
subject to withholding tax because it is effectively connected with the
beneficial owner's conduct of a trade or business in the United States.
If a non-United States Holder is engaged in a trade or business in the
United States and premium, if any, or interest (including OID) on the Note is
effectively connected with the conduct of such trade or business, the non-United
States Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest and OID on a net
income basis in the same manner as if it were a United States Holder. In
addition, if such holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its effectively connected earnings and profits for
the taxable year, subject to adjustments. For this purpose, such premium, if
any, and interest (including OID) on a Note will be included in such foreign
corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with a trade
or business in the United States of the Non-United States Holder, or (ii) in the
case of a Non-United States Holder who is an individual, such individual is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on Notes and to the
proceeds of sale of a Note made to United States Holders other than certain
exempt recipients (such as corporations). A 31 percent backup withholding tax
will apply to such payments if the United States Holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-United States
Holders if a statement described in (a)(iv) under "Tax Consequences to
Non-United States Holders" has been received and the payor does not have actual
knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, OID or premium on a Note are paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such Note, or if a foreign office of a broker
(as defined in applicable Treasury regulations) pays the proceeds of the sale of
a Note to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for United States federal income tax purposes, a United States
person, a controlled foreign corporation or a foreign person that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner is not a United States person and certain other conditions
are met or (2) the beneficial owner otherwise establishes an exemption.
Temporary Treasury regulations provide that the Treasury is considering whether
backup withholding will apply with respect to such payments of principal,
interest or the proceeds of a sale that are not subject to backup withholding
under the current regulations.
Payments of principal, interest, OID and premium on a Note paid to the
beneficial owner of a Note by a United States office of a custodian, nominee or
agent, or the payment by the United States office of a broker of the proceeds of
sale of a Note, will be subject to both backup withholding and information
reporting unless the beneficial owner provides the statement referred to in
(a)(iv) above and the payor does not have actual knowledge that the beneficial
owner is a United States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability, provided that the required information is furnished to the IRS.
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<PAGE> 35
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
purchases of the Notes. The Company will pay each Agent a commission of from
.125% to .750% of the principal amount of each Note, depending upon its Stated
Maturity, sold through such Agent. The Company will have the sole right to
accept offers to purchase Notes and may reject any such offer in whole or in
part. Each Agent 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.
The Company also may sell Notes to any Agent, acting as principal, at a discount
to be agreed upon at the time of sale, for resale to one or more investors or to
one or more broker-dealers (acting as principal for purposes of resale) at
varying prices related to prevailing market prices at the time of resale, as
determined by such Agent, or, if so agreed, at a fixed public offering price.
Unless otherwise indicated in the applicable Pricing Supplement, if any Note is
resold by an Agent to any broker-dealer at a discount, such discount will not be
in excess of the discount or commission received by such Agent from the Company.
In addition, unless otherwise indicated in the applicable 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 applicable to
an agency sale of a Note having an identical Stated Maturity. After the initial
public offering of the Notes, the public offering price (in the case of Notes to
be resold on a fixed public offering price basis), the concession and the
discount may be changed. The Company also reserves the right to sell the Notes
directly to investors on its own behalf in those jurisdictions where it is
authorized to do so or as otherwise provided in the applicable Pricing
Supplement. In such circumstances, the Company will have the sole right to
accept offers to purchase Notes and may reject any proposed purchase of Notes in
whole or in part. In the case of sales made directly by the Company, no
commission will be payable.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Act, or to contribute to the Agents such payments as each Agent may be
required to make in respect thereof. The Company has agreed to reimburse the
Agents for certain of the Agents' expenses, including, but not limited to, the
reasonable fees and expenses of counsel to the Agents.
The Company has been advised by each Agent that such Agent may from time to
time purchase and sell Notes in the secondary market, but that it is not
obligated to do so. There can be no assurance that there will be a secondary
market for the Notes or liquidity in such secondary market if one develops. From
time to time, each Agent may make a market in the Notes, but no Agent is
obligated to do so, and an Agent may discontinue any market making at any time.
Certain of the Agents and/or certain of their affiliates perform investment
banking and/or commercial banking services for, and/or engage in general
financing and banking transactions with, the Company and certain of its
affiliates from time to time in the ordinary course of their business, and may
provide such services and engage in such transactions with the Company and its
affiliates in the future.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Cahill Gordon
& Reindel, a partnership including a professional corporation, New York, New
York, and for the Agents by Simpson Thacher & Bartlett (a partnership which
includes professional corporations), New York, New York.
S-35
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PROSPECTUS
MANOR CARE, INC.
DEBT SECURITIES
---------------------------
Manor Care, Inc. ("Manor Care" or the "Company") may offer from time to
time unsecured debt securities ("Debt Securities") consisting of debentures,
notes and/or other evidences of unsecured indebtedness in one or more series, or
any combination of the foregoing, at an aggregate principal amount not to
exceed $250,000,000, or its equivalent if some or all of the Debt Securities are
denominated in one or more foreign currencies, at prices and on terms to be
determined at or prior to the time of sale in light of market conditions at the
time of sale.
Specific terms of the particular Debt Securities in respect of which this
Prospectus is being delivered will be set forth in one or more accompanying
Prospectus Supplements (each a "Prospectus Supplement"), together with the terms
of the offering of the Debt Securities and the initial price and the net
proceeds to the Company from the sale thereof. The Prospectus Supplement will
set forth with regard to the particular Debt Securities, without limitation, the
following: the specific designation, aggregate principal amount, authorized
denomination, maturity, rate or method of calculation of interest and dates for
payment thereof, any exchangeability, conversion, redemption, prepayment or
sinking fund provisions, the currency or currencies or currency unit or currency
units in which principal, premium, if any, or interest, if any, is payable, any
modifications of or additions to the covenants described in this Prospectus and
any other specific terms thereof. The amounts payable by Manor Care in respect
of Debt Securities may be calculated by reference to the value, rate or price of
one or more specified commodities, currencies or indices to the extent set forth
in the Prospectus Supplement. The Prospectus Supplement will also contain
information, where applicable, about certain United States federal income tax
considerations relating to the Debt Securities covered by the Prospectus
Supplement.
The Company may sell the Debt Securities directly, through agents
designated from time to time or through underwriters or dealers. If any agents
of the Company or any underwriters or dealers are involved in the sale of the
Debt Securities, the names of such agents, underwriters or dealers, any
applicable commissions and discounts, and the net proceeds to the Company will
be set forth in the applicable Prospectus Supplement. See "Plan of Distribution"
for possible indemnification arrangements for agents, underwriters and dealers.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
This Prospectus may not be used to consummate sales of
Debt Securities unless accompanied by a Prospectus Supplement.
---------------------------
The date of this Prospectus is November 21, 1996
<PAGE> 37
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (which term shall include all
amendments, exhibits and schedules thereto) under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities. This Prospectus
does not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission, and to which reference is hereby made. Statements made in
this Prospectus as to the contents of any document referred to are not
necessarily complete. With respect to each such document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement may be
inspected, without charge, at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Reports,
proxy and information statements and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the following Regional Offices of the Commission: New York Regional Office,
Seven World Trade Center, New York, New York 10048; and Chicago Regional Office,
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549. Certain of the Company's securities are listed on the New York Stock
Exchange. Reports, proxy and information statements and other information can be
inspected and copied at the Library of the New York Stock Exchange at 20 Broad
Street, New York, New York 10005. Such reports and other information can be
reviewed through the Commission's Electronic Data Gathering Analysis and
Retrieval System, which is publicly available through the Commission's web site
(http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Manor Care hereby incorporates by reference in this Prospectus its Annual
Report on Form 10-K for the fiscal year ended May 31, 1996; its Quarterly
Reports on Form 10-Q for the quarterly period ended August 31, 1996; and its
Current Report on Form 8-K dated November 5, 1996.
All documents filed by Manor Care pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Manor Care undertakes to provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (not
including exhibits to such documents unless exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Manor Care, Inc., at its principal executive offices at 11555 Darnestown Road,
Gaithersburg, Maryland 20878, Attention: Secretary; telephone: (301) 979-4000.
The terms "Manor Care" and the "Company," unless the context otherwise
requires, as used herein, refer to Manor Care, Inc., and all its subsidiaries.
2
<PAGE> 38
THE COMPANY
Manor Care and its subsidiaries have been engaged since October 1968 in the
business of developing, owning and managing nursing centers that provide skilled
nursing and convalescent care principally to residents over the age of 65. With
176 skilled nursing and rehabilitation facilities and 24 assisted living
facilities in 28 states, the Company is one of the largest providers of
long-term care in the country. The Company provides quality long-term care,
targeting upper income, service sensitive, private paying patients. In the
Company's latest quarter, private pay patients accounted for approximately 59%
of healthcare revenues.
The Company's nursing centers provide, in general, five types of services:
(1) High acuity services -- for persons who require complex medical and
physical rehabilitation services (patients who would otherwise be
treated in an acute care hospital setting);
(2) Skilled nursing care -- for persons who require 24-hour-a-day
professional services of a registered nurse or a licensed practical
nurse;
(3) Intermediate care -- for persons needing less intensive nursing care
than that provided to those requiring skilled care;
(4) Custodial care -- for persons needing a minimum level of care; and
(5) Assisted living -- for persons needing some supervision and assistance
with personal care.
The Company may also provide certain additional services to its patients,
including nursing care as required; room and board; special diets; occupational,
speech, physical and recreational therapy; and other services that may be
specified by the patient's physician, who directs the admission, treatment and
discharge of that patient.
The Company currently operates 23 dedicated high acuity units and with over
a decade of experience in providing complex medical and physical rehabilitation
is an industry leader in serving high acuity patients. The Company also operates
17 assisted living facilities that serve the needs of the general assisted
living population, in addition to seven facilities designed to meet the
specialized needs of individuals in the early to middle stages of Alzheimer's
disease.
In October 1995, the Company entered into a strategic partnership with In
Home Health, Inc., a leading provider of home health care services.
Vitalink Pharmacy Services, Inc. ("Vitalink"), an 82%-owned subsidiary of
the Company, provides institutional pharmacy services to nursing facilities and
other institutions in 19 markets around the country. On September 3, 1996,
Vitalink entered into an agreement to acquire (the "Acquisition") the TeamCare
pharmaceutical unit of GranCare, Inc. ("GranCare") for approximately 11,600,000
shares of its common stock and the assumption of $107 million in debt. As a
result of this transaction, the Company's ownership in Vitalink will be reduced
to approximately 45% of the outstanding Vitalink common stock. The Acquisition
remains subject to the approval of the shareholders of GranCare and the
satisfaction or waiver of certain other conditions. There can be no assurance
the Acquisition will be completed.
On November 1, 1996, the Company completed a tax-free spin-off of its
lodging business to its shareholders.
USE OF PROCEEDS
Unless otherwise indicated in an applicable Prospectus Supplement, the net
proceeds from the sale of the Debt Securities will be used for general corporate
purposes, which may include capital expenditures, possible acquisitions,
repurchase of the Company's stock, payment of other debt and such other purposes
as may be stated in any Pricing Supplement.
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<PAGE> 39
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED AUGUST 31, YEARS ENDED MAY 31,
---------------- -----------------------------------------
1996 1996 1995 1994 1993 1992
---------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(a)... 3.90x 4.00x 5.89x 5.01x 3.32x 2.92x
</TABLE>
- ------------------
(a) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before provision for
income taxes, before fixed charges, plus dividends from less than 50%-owned
companies carried at equity and the Company's share of pre-tax income of
50%-owned companies carried at equity, less capitalized interest and
preferred stock dividend requirements of consolidated subsidiaries. Fixed
charges comprise interest on long-term and short-term debt, capitalized
interest, the portion of rentals representative of an interest factor and
the Company's share of fixed charges of 50%-owned companies carried at
equity.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (the "Indenture")
to be entered into between the Company and The Chase Manhattan Bank, as Trustee
(the "Trustee"), the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Debt Securities may be issued
from time to time in one or more series. The particular terms of each series, or
of Debt Securities forming a part of a series, which are offered by a Prospectus
Supplement, will be described in such Prospectus Supplement. The following
statements are subject to the detailed provisions of the Indenture; whenever
particular provisions of the Indenture are referred to, such provisions are
incorporated by reference as a part of the statement made, and the statement is
qualified in its entirety by such reference. Whenever a defined term is referred
to and not defined under "Description of Debt Securities", the definition
thereof is contained in the Indenture.
GENERAL
The Indenture provides for the issuance from time to time of Debt
Securities in an unlimited aggregate principal amount and an unlimited number of
series.
The Debt Securities are unsecured and will rank pari passu with all other
unsecured and nonsubordinated debt of the Company.
Reference is made to the applicable Prospectus Supplement for the following
terms of the series of Debt Securities offered thereby: (i) the title of the
Debt Securities of such series; (ii) any limit upon the aggregate principal
amount of such Debt Securities; (iii) the person to whom the interest on a Debt
Security of any series will be payable if not the person in whose name that Debt
Security is registered on the regular record date; (iv) the date or dates on
which such Debt Securities will mature or the method of determination of such
date or dates; (v) the rate or rates, or the method of determination thereof, at
which such Debt Securities will bear interest, if any, the date or dates from
which such interest will accrue, the date or dates such interest will be payable
and, for Registered Debt Securities (as defined below), the Regular Record
Dates; (vi) the place or places where the principal of, premium, if any, and
interest, if any, on, such Debt Securities will be payable; (vii) the periods,
prices and terms and conditions upon which any such Debt Security may be
redeemed, in whole or in part, at the option of the Company; (viii) any terms
for redemption or repurchase pursuant to any sinking fund or analogous provision
or at the option of a Holder; (ix) any terms for conversion of the Debt
Securities into other securities of the Company or any other corporation at the
option of a holder; (x) any terms for the attachment to such Debt Securities of
warrants, options or other rights to purchase or sell stock or other securities
of the Company; (xi) if other than the principal amount thereof, the portion of
the principal amount of such Debt Securities that will be payable upon
acceleration of maturity; (xii) any deletions or
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<PAGE> 40
modifications of, or additions to, the Events of Default or covenants of the
Company under the Indenture with respect to such Debt Securities (including
whether the covenants described below under "Certain Covenants of the Company"
will not apply to such Debt Securities); (xiii) if other than U.S. dollars, the
currency, currencies or currency unit or units in which such Debt Securities
will be denominated and in which the principal of, premium, if any, and
interest, if any, on, such Debt Securities will be payable; (xiv) whether, and
the terms and conditions on which, the Company or a Holder may elect that, or
the other circumstances under which, payment of principal of, premium, if any,
or interest, if any, on, such Debt Securities is to be made in a currency or
currencies or currency unit or units other than that in which such Debt
Securities are denominated; (xv) any manner of determining the amount of
principal of, premium, if any, or interest, if any, on, any such Debt Securities
to be determined with reference to an index based on a currency or currency unit
or units other than that in which such Debt Securities are stated to be payable
or an index based on any other method; (xvi) whether such Debt Securities will
be issued in fully registered form without coupons ("Registered Debt
Securities") or in bearer form with or without coupons ("Bearer Debt
Securities"), or any combination thereof, whether such Debt Securities will be
issued in the form of one or more global securities (each a "Global Debt
Security") and whether such Debt Securities are to be issuable in temporary
global form or definitive global form; (xvii) if such Debt Securities are to be
issued upon the exercise of warrants, the time, manner and place for such Debt
Securities to be authenticated and delivered; (xviii) whether and under what
circumstances the Company will pay additional amounts to any holder of such Debt
Securities who is not a United States person (as defined below under "Temporary
Global Securities") in respect of any tax, assessment or governmental charge
withheld or deducted and, if so, whether and on what terms the Company will have
the option to redeem such Debt Securities rather than pay any additional
amounts; and (xix) any other terms of any of such Debt Securities not
inconsistent with the Indenture.
Unless otherwise specified in the applicable Prospectus Supplement, (x) the
Debt Securities will be Registered Debt Securities and (y) Debt Securities
denominated in U.S. dollars will be issued, in the case of Registered Debt
Securities, in denominations of $1,000 or an integral multiple thereof and, in
the case of Bearer Debt Securities, in denominations of $5,000. Debt Securities
may bear legends required by United States Federal tax law and regulations.
If any of the Debt Securities are sold for any foreign currency or currency
unit or if the principal of, premium, if any, or interest, if any, on, any of
the Debt Securities is payable in any foreign currency or currency unit, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such Debt Securities and such foreign currency or currency unit
will be set forth in the Prospectus Supplement relating thereto.
CERTAIN COVENANTS OF THE COMPANY
Certain Definitions Applicable to Covenants
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Percentage" means (i) 15%, if the aggregate principal amount of
Debt Securities then Outstanding exceeds $100,000,000, (ii) 20%, if the
aggregate principal amount of Debt Securities then Outstanding
exceeds $50,000,000 but is less than or equal to $100,000,000 or (iii) 25%, if
the aggregate principal amount of Debt Securities Outstanding is less than or
equal to $50,000,000.
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable and at any date as of which the amount thereof is
to be determined, the lesser of (i) the fair value of the property subject to
such lease (as determined in good faith by the chief financial or accounting
officer of the Company) and (ii) the total net amount of rent required to be
paid by such Person under such lease during the remaining primary term thereof,
discounted from the respective due dates thereof to such date at the weighted
average interest borne by the particular series of Debt Securities compounded
annually. The net amount of rent
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<PAGE> 41
required to be paid under any such lease for any such period shall be the
aggregate amount of the rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, water rates and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated.
"Consolidated Net Assets" means, with respect to any Person as of any date
of determination, the total assets of such person and its Subsidiaries on a
consolidated basis, less current liabilities of such Person and its Subsidiaries
on a consolidated basis as of such date, all computed in accordance with
generally accepted accounting principles.
"Existing Mortgages" means, with respect to any series of Debt Securities,
Mortgages on property or assets of the Company or any Subsidiary of the Company
existing on, or provided for in agreements existing on, the Issue Date for such
series.
"Foreign Subsidiary" means a Subsidiary of the Company which is
incorporated or organized in a jurisdiction outside the United States and any
Subsidiary of such a Subsidiary.
"Issue Date" means, with respect to any series of Debt Securities, the
first date on which Debt Securities of such series are issued under this
Indenture.
"Non-Recourse Debt" means Debt or that portion of Debt (i) as to which
neither the Company nor its Subsidiaries (other than a Non-Recourse Subsidiary)
(A) provide credit support (including any undertaking, agreement or instrument
which would constitute Debt), (B) are directly or indirectly liable or (C)
constitute the lender and (ii) in respect of which a default (including any
rights which the holders thereof may have to take enforcement action against a
Non-Recourse Subsidiary) would not permit (upon notice, lapse of time or both)
any holder of any other Debt of the Company or its Subsidiaries (including any
Non-Recourse Subsidiary) to declare a default on such other Debt or cause a
payment thereof to be accelerated or payable prior to its Stated Maturity.
"Non-Recourse Subsidiary" means a Subsidiary of the Company which (i) has
not acquired any assets (other than cash) directly or indirectly from the
Company or any Subsidiary of the Company, (ii) only owns assets acquired after
the Issue Date and on or prior to the date such entity becomes a Subsidiary of
the Company and (iii) has no Debt other than Non-Recourse Debt.
"Principal Property" means any real estate or warehouse owned or leased by
the Company or any Restricted Subsidiary of the Company which is located within
the United States of America and the gross book value (including related land
and improvements thereon and all machinery and equipment included therein
without deduction of any depreciation reserves) of which on the date as of which
the determination is being made exceeds 2% of Consolidated Net Assets, other
than (a) any property which in the opinion of the Board of Directors is not of
material importance to the total business conducted by the Company as an
entirety or (b) any portion of a particular property which is found by the Board
of Directors not to be of material importance to the use or operation of such
property.
"Restricted Subsidiary" means a Subsidiary of the Company (a) substantially
all the property of which is located, or substantially all the business of which
is carried on, within the United States of America and (b) which owns a
Principal Property.
"Subsidiary" of any specified corporation means (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by the specified corporation or by one or more of its
Subsidiaries, or both or (ii) any other person (other than a corporation) in
which the specified corporation or one or more of its Subsidiaries, or both,
shall at the time, directly or indirectly, have greater than a 50% ownership
interest.
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<PAGE> 42
Restrictions on Secured Debt
If the Company or any Restricted Subsidiary shall incur or guarantee any
indebtedness for money borrowed ("Debt") secured by a mortgage, pledge or lien
("Mortgage") on any Principal Property of the Company or of any Restricted
Subsidiary, or on any shares of stock or Debt of any Restricted Subsidiary, the
Company will secure or cause such Restricted Subsidiary to secure the Debt
Securities equally and ratably with (or, at the Company's option, prior to) such
secured Debt, unless the aggregate amount of all such secured Debt would not
exceed the Applicable Percentage of Consolidated Net Assets.
The above restrictions will not apply to, and there will be excluded from
secured Debt in any computation under such restrictions, Debt secured by (a) any
Mortgage if an amount of cash equal to the net proceeds of the Debt secured by
such Mortgage is used within 12 months of the creation, incurrence or assumption
of such Mortgage to (i) acquire additional property or assets (or to make
investments in persons who, after giving effect to such investments, will become
Subsidiaries of the Company), (ii) retire debt which is pari passu with the Debt
Securities (provided that in connection with any such retirement, any related
loan commitment or the like shall be reduced in an amount equal to the principal
amount so retired) or (iii) make an offer to purchase the Debt Securities at
100% of the principal amount thereof, plus accrued interest, if any, to the date
of purchase; (b) Existing Mortgages; (c) Mortgages on property or assets of any
person existing at the time such person becomes a Restricted Subsidiary or
merges into or consolidates with the Company or a Restricted Subsidiary; (d)
Mortgages on property or assets or shares of stock or debt existing at the time
of acquisition thereof by the Company or any Restricted Subsidiary; (e)
Mortgages or property or assets or shares of stock or debt to secure the
financing of the acquisition, construction, alteration or improvement of
property or assets of the Company or any Restricted Subsidiary of the Company
(or of persons who, after giving effect to such financing, will become
Restricted Subsidiaries), provided that such Mortgages are created not later
than 18 months after such acquisition or, in the case of construction,
alteration or improvement of property or assets, the later of the completion
thereof or the commencement of the commercial operation of such property or
assets; (f) Mortgages in favor of the Company or any Restricted Subsidiary; (g)
Mortgages in favor of or required by federal, state or local governmental
authorities or political subdivisions thereof, including any department or
instrumentality thereof, and any other Mortgages incurred or assumed in
connection with the issuance of any industrial revenue or similar bonds; (h)
Mortgages on property or assets of, or on any shares of stock or other equity
interest in, a Foreign Subsidiary to secure Debt of a Foreign Subsidiary, or a
Non-Recourse Subsidiary to secure Non-Recourse Debt; (i) Mortgages to secure
Debt of joint ventures in which the Company or a Subsidiary of the Company has
an interest, to the extent such Mortgages are on property or assets of or equity
interests in such joint ventures; (j) Mortgages on current assets to secure Debt
incurred for working capital purposes, provided that such Debt matures no later
than 18 months from the date of incurrence; (k) Mortgages securing judgments or
appeal bonds with respect to amounts being contested in good faith; and (l) any
extension, renewal or replacement, as a whole or in part, of any Mortgage
referred to in the foregoing clauses (a) to (k), provided, however, that (i)
such extension, renewal or replacement Mortgage shall be limited to all or a
part of the same property or assets that secured the Mortgage being extended,
renewed or replaced and (ii) the principal amount (or, if such Debt provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration or maturity thereof, such lesser amount) of the Debt
secured by such extended, renewed or replaced Mortgage does not exceed the
principal amount (or, if such Debt provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount) of Debt which was secured by the
Mortgage being extended, renewed or replaced (plus the premiums and reasonable
expenses incurred in connection therewith).
Restrictions on Sales and Leasebacks
Neither the Company nor any Restricted Subsidiary may enter into any sale
and leaseback transaction involving any Principal Property (a "Sale and
Leaseback Transaction") unless (a) the Company or such Restricted Subsidiary
would, at the time of entering into the Sale and Leaseback Transaction, be
entitled to incur Debt secured by a Mortgage on the Principal Property to be
leased in an amount at least equal to the Attributable Debt in respect of such
transaction without equally and ratably securing the Debt Securities as
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<PAGE> 43
described under "Restrictions on Secured Debt" above; or (b) the proceeds of the
sale of the Principal Property to be leased are at least equal to the fair value
of such Principal Property (the amount of such proceeds, if other than in cash,
to be determined by the chief financial or accounting officer of the Company,
whose determination shall be conclusive) and an amount in cash equal to the net
proceeds are applied, within 12 months of the effective date of such
transaction, to (i) acquire additional assets (or to make investments in
entities which, after giving effect to such investment, will become
Subsidiaries), (ii) retire Debt which is pari passu with the Debt Securities
(provided that in connection with any such retirement, any related loan
commitment or the like shall be reduced in an amount equal to the principal
amount so retired) or (iii) offer to purchase the Debt Securities at 100% of the
principal amount thereof, plus accrued interest, if any, to the date of
purchase; or (c) the lease in such Sale and Leaseback Transaction is for a
period, including renewal rights, of not in excess of 36 months; or (d) the
lease in such Sale and Leaseback Transaction is a lease of Principal Property
entered into within 18 months from the acquisition of such Principal Property or
the transaction by which the person owning such Principal Property became a
Restricted Subsidiary, or in the case of the construction, alteration or
improvement of Principal Property, the later of the completion of the
construction, alteration or improvement of such Principal Property or the
commencement of commercial operation of the Principal Property; or (e) such Sale
and Leaseback Transaction is entered into between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries.
Event Risk
The Indenture does not contain provisions permitting the Holders of Debt
Securities to require prepayment in the event of a change in the management or
control of the Company or in the event the Company enters into one or more
highly leveraged transactions, nor are any such events deemed to be Events of
Default under the terms of the Indenture. Should the terms of any Note
representing any Debt Securities contain such provisions, such provisions will
be described in the applicable Prospectus Supplement.
Limitation on Affiliate Transactions
The Indenture will provide that neither the Company nor any of its
Subsidiaries will sell, lease, transfer or otherwise dispose of any of its
properties or assets to or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or guaranty with, or for
the benefit of, an Affiliate of the Company (other than a Subsidiary) (an
"Affiliate Transaction") having a value, or for consideration having a value, in
excess of $20,000,000 individually or in the aggregate unless the Board of
Directors of the Company shall determine that the terms of such Affiliate
Transaction are no less favorable to the Company or such Subsidiary than those
which might be obtained at the time of such Affiliate Transaction from persons
who are not Affiliates. The restrictions of this "Limitation on Affiliate
Transactions" covenant are not applicable to the payment of reasonable and
customary fees to directors of the Company who are not employees, the payment of
compensation to officers of the Company and any transaction between or among any
of the Company and its Subsidiaries.
Limitation on Merger, Consolidation and Certain Sales of Assets
The Company will covenant that it will not merge into or consolidate with
any other corporation, or convey or transfer its properties and assets
substantially as an entirety, to, any person unless (a) the successor is a U.S.
corporation, (b) the successor assumes on the same terms and conditions all the
obligations under the Debt Securities and the Indenture and (c) immediately
after giving effect to the transaction, there is no default under the Indenture.
Upon any such merger, consolidation, conveyance or transfer, the successor will
succeed to, and will be substituted in lieu of, the Company.
EXCHANGE, REGISTRATION AND TRANSFER
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. If Debt Securities of
any series are issuable as both Registered Debt Securities and Bearer Debt
Securities, the Bearer Debt Securities of such series (with all unmatured
coupons, except as provided below, and all matured
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<PAGE> 44
coupons in default) will be exchangeable for Registered Debt Securities of the
same series of any authorized denominations and of a like aggregate principal
amount and tenor. If a Bearer Debt Security with coupons appertaining thereto is
surrendered in exchange for a Registered Debt Security after a Regular Record
Date or Special Record Date and before the relevant date for payment of
interest, such Bearer Debt Security shall be surrendered without the coupon
relating to such date for payment of interest and interest will not be payable
on such date in respect of the Registered Debt Security issued in exchange for
such Bearer Debt Security, but will be payable only to the holder of such coupon
when due in accordance with the terms thereof and of the Indenture. Bearer Debt
Securities will not be issued in exchange for Registered Debt Securities (unless
otherwise specified in the applicable Prospectus Supplement and permitted by
applicable rules and regulations). No service charge will be made for any
transfer or exchange of the Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge in connection
therewith.
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities (other than U.S. Book-Entry Debt Securities (as
defined below under "Definitive Global Securities--U.S. Book-Entry Securities"))
may be presented for registration of transfer (with the form of transfer
endorsed thereon duly executed), at the office of the Security Registrar or at
the office of any additional transfer agent designated by the Company for such
purpose with respect to any series of Debt Securities and referred to in the
applicable Prospectus Supplement. The Chase Manhattan Bank, currently located at
450 W. 33rd Street, New York, New York 10001-2697, will be the initial Security
Registrar under the Indenture. The Company may at any time designate, or rescind
the designation of, the Security Registrar or any additional transfer agent or
approve a change in the location through which the Security Registrar or any
such transfer agent acts, except that, if Debt Securities of a series are
issuable solely as Registered Debt Securities, the Company will be required to
maintain a transfer agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as both Registered Debt Securities and
Bearer Debt Securities or solely as Bearer Debt Securities, the Company will be
required to maintain (in addition to the Security Registrar) a transfer agent in
a Place of Payment for such series located outside of the United States. The
Company may at any time designate additional transfer agents with respect to any
series of Debt Securities.
In the event of any redemption in part of any series of Debt Securities,
the Company will not be required to: (i) issue, register the transfer of, or
exchange, Debt Securities of any series during a period beginning at the opening
of business 15 Business Days before any selection of Debt Securities of that
series to be redeemed and ending at the close of business on (a) if Debt
Securities of the series are issuable only as Registered Debt Securities, the
day of mailing of the relevant notice of redemption and (b) if Debt Securities
of the series are issuable as Bearer Debt Securities, the day of the first
publication of the relevant notice of redemption or, if Debt Securities of the
series are also issuable as Registered Debt Securities and there is no
publication, the day of mailing of the relevant notice of redemption; (ii)
register the transfer of, or exchange, any Registered Debt Security selected for
redemption, in whole or in part, except the unredeemed portion of any Registered
Debt Security being redeemed in part; or (iii) exchange any Bearer Debt Security
selected for redemption, except to exchange such Bearer Debt Security for a
Registered Debt Security of that series and of like tenor which is
simultaneously surrendered for redemption.
For a discussion of restrictions on the exchange, registration and transfer
of Global Debt Securities, see "Global Securities" below.
PAYMENT AND PAYING AGENTS
Payment of principal of, premium, if any, and interest, if any, on,
Registered Debt Securities will be made in the designated currency or currency
unit at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time. At the option of the Company, payment of any
interest on Registered Debt Securities may be made by check mailed to the
address of the person entitled thereto as such address shall appear in the
Security Register. Payment of any installment of interest on any Registered Debt
Security will be made to the person in whose name such Registered Debt Security
is registered at the close of business on the Regular Record Date for such
interest.
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<PAGE> 45
Payment of principal of, premium, if any, and interest, if any, on, Bearer
Debt Securities will be made in the designated currency unit at the offices of
such Paying Agents outside the United States as the Company may designate
(subject to any applicable laws) from time to time. On the applicable payment
date therefor, payments of principal of, and premium, if any, on, Bearer Debt
Securities will be made against surrender of such Debt Securities, and payment
of interest on Bearer Debt Securities with coupons appertaining thereto on any
Interest Payment Date will be made only against surrender of the coupon relating
to such Interest Payment Date. No payment with respect to any Bearer Debt
Security will be made at any office or agency of the Company in the United
States or by check mailed to any address in the United States or by transfer to
any account maintained with a bank located in the United States. Notwithstanding
the foregoing, payments of principal of, premium, if any, and interest, if any,
on, Bearer Debt Securities denominated and payable in U.S. dollars will be made
at the office of the Company's Paying Agent in the Borough of Manhattan, The
City of New York, if (but only if) payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
Unless otherwise indicated in the applicable Prospectus Supplement, The
Chase Manhattan Bank will be designated as the Company's Paying Agent for
payments with respect to Debt Securities that are issuable solely as Registered
Debt Securities and as the Company's Paying Agent in the Borough of Manhattan,
The City of New York for payments with respect to Debt Securities (subject to
the limitations described above in the case of Bearer Debt Securities) that are
issuable solely as Bearer Debt Securities or as both Registered Debt Securities
and Bearer Debt Securities. Any Paying Agents outside the United States and any
other Paying Agents in the United States initially designated by the Company for
the Debt Securities of a series will be named in the applicable Prospectus
Supplement. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Debt Securities of a series
are issuable solely as Registered Debt Securities, the Company will be required
to maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as both Registered Debt Securities and
Bearer Debt Securities or solely as Bearer Debt Securities, the Company will be
required to maintain (i) a Paying Agent in the Borough of Manhattan, The City of
New York for payments with respect to any Registered Debt Securities of the
series (and for payments with respect to Bearer Debt Securities of the series in
the circumstances described above, but not otherwise), and (ii) a Paying Agent
in a Place of Payment (subject to any laws or regulations applicable thereto)
located outside the United States where Debt Securities of such series and any
coupons appertaining thereto may be presented and surrendered for payment;
provided that if the Debt Securities of such series are listed on any stock
exchange located outside the United States and such stock exchange shall so
require, the Company will maintain a Paying Agent in any required city located
outside the United States for the Debt Securities of such series.
All moneys deposited with the Trustee or a Paying Agent, or then held by
the Company, in trust for the payment of principal of, and premium and interest,
if any, on, any Debt Security or coupon that remains unclaimed at the end of two
years after such principal, premium or interest shall have become due and
payable will be repaid to the Company, or, if then held by the Company,
discharged from such trust, and the holder of such Debt Security or coupon will
thereafter look only to the Company for payment thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part as one or
more Global Debt Securities in either registered or bearer form and in either
temporary or definitive form. The Global Debt Security or Securities of a series
will be deposited with, or on behalf of, a depositary located in the United
States (a "U.S. Depositary") or a common depositary located outside the United
States (a "Common Depositary") identified in the Prospectus Supplement relating
to such series for the benefit of Euro-clear and CEDEL (as defined below) for
credit to the respective accounts of such beneficial owners of interests in such
Debt Securities. All temporary or definitive Global Debt Securities in bearer
form will be deposited with a Common Depositary.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series issued in global form will be described in the Prospectus
Supplement relating to such series. If so specified in the Prospectus Supplement
with respect to the Debt Securities of any series, for purposes other than
making
10
<PAGE> 46
payments on a definitive Global Debt Security, the Company may treat a person
having a beneficial interest in such definitive Global Debt Security as the
holder of such principal amount of Outstanding Debt Securities represented by
such definitive Global Debt Security as shall be specified in a written
statement of the holder of such definitive Global Debt Security, or, in the case
of a definitive Global Debt Security in bearer form, of Euro-clear or CEDEL (as
defined below), which is delivered to the Trustee by such person. None of the
Company, the Trustee, any Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Debt
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. The Company anticipates that the following
provisions will apply to all depositary arrangements with a U.S. Depositary or
Common Depositary.
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series that are issuable as Bearer Debt Securities
initially will be represented by one or more temporary Global Debt Securities,
without interest coupons, to be deposited with a Common Depositary in London for
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euro-clear System ("Euro-clear"), and CEDEL S.A. ("CEDEL") for credit to the
respective accounts of the beneficial owners of such Debt Securities (or to such
other accounts as they may direct). On or after the exchange date determined as
provided in any such temporary Global Debt Security and described in the
applicable Prospectus Supplement, each such temporary Global Debt Security will
be exchangeable, in whole or from time to time in part, for definitive Debt
Securities in bearer form, registered form, definitive global bearer form of any
combination thereof, as specified in the applicable Prospectus Supplement. No
Bearer Debt Security (including a Debt Security in definitive global bearer
form) delivered in exchange for a portion of a temporary Global Debt Security
will be mailed or otherwise delivered to any location in the United States in
connection with such exchange.
Unless otherwise specified in the applicable Prospectus Supplement,
interest on any portion of a temporary Global Debt Security payable in respect
of an Interest Payment Date occurring prior to the issuance of definitive Debt
Securities will be paid to each of Euro-clear and CEDEL with respect to the
portion of the temporary Global Debt Security held for its account upon delivery
to the Trustee of a certificate signed by Euro-clear or CEDEL, as the case may
be, in the form required by the Indenture dated no earlier than such Interest
Payment Date, which certificate must be based on statements provided to it by
its account holders who are beneficial owners of interests in such temporary
Global Debt Security in the form set forth in the Indenture that such portion is
not beneficially owned by a United States person, and has not been acquired by
or on behalf of a United States person or for offer to resell or for resale to a
United States person or any person inside the United States or, if a beneficial
interest in such portion has been acquired by a United States person, (i) that
such person is a financial institution, as defined in applicable regulations
promulgated under the Internal Revenue Code of 1986, as amended (the "Code"),
purchasing for its own account or has acquired such Debt Security through a
financial institution and (ii) that such Debt Securities are held by a financial
institution that has agreed in writing to comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Code and the regulations thereunder and
that it did not purchase for offer to resell or for resale inside the United
States. Each of Euro-clear and CEDEL will in such circumstances credit the
interest received by it in respect of such temporary Global Debt Security to the
accounts of the beneficial owners thereof (or to such other accounts as they may
direct).
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or an estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
11
<PAGE> 47
DEFINITIVE GLOBAL SECURITIES
Bearer Securities
If any Debt Securities of a series are issuable in definitive global bearer
form, the applicable Prospectus Supplement will describe the circumstances, if
any, under which beneficial owners of interests in any such definitive global
Bearer Debt Security may exchange such interests for Debt Securities of such
series and of like tenor and principal amount in any authorized form and
denomination. No Bearer Debt Security delivered in exchange for a portion of a
definitive Global Debt Security will be mailed or otherwise delivered to any
location in the United States in connection with such exchange. Principal of,
premium, if any, and interest, if any, on, a definitive global Bearer Debt
Security will be payable in the manner described in the applicable Prospectus
Supplement.
U.S. Book-Entry Securities
If Debt Securities of a series are to be represented by a definitive global
Registered Debt Security to be deposited with or on behalf of a U.S. Depositary,
such Debt Securities ("U.S. Book-Entry Debt Securities") will be represented by
a definitive Global Debt Security registered in the name of the U.S. Depositary
or its nominee. Upon the issuance of a definitive Global Debt Security
registered in the name of the U.S. Depositary, the U.S. Depositary will credit,
on its book-entry registration and transfer system, the respective principal
amounts of the U.S. Book-Entry Debt Securities represented by such Global Debt
Security to the accounts of institutions that have accounts with such depositary
or its nominee ("participants"). The accounts to be credited shall be designated
by the underwriters or agents for the sale of such U.S. Book-Entry Debt
Securities or by the Company, if such Debt Securities are offered and sold
directly by the Company. Ownership of U.S. Book-Entry Debt Securities will be
limited to participants or persons that may hold interests through participants.
Ownership of U.S. Book-Entry Debt Securities will be shown on, and the transfer
of that ownership will be effected only through, records maintained by the U.S.
Depositary or its nominee for the applicable definitive Global Debt Security or
by participants or persons that hold through participants. So long as the U.S.
Depositary, or its nominee, is the registered owner of such global Debt
Security, such depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the U.S. Book-Entry Debt Securities
represented by such Global Debt Security for all purposes under the Indenture.
Payment of principal of, and premium and interest, if any, on, U.S. Book-Entry
Debt Securities will be made to the U.S. Depositary or its nominee, as the case
may be, as the registered owner or the holder of the Global Debt Security
representing such U.S. Book-Entry Debt Securities. Owners of U.S. Book-Entry
Debt Securities will not be entitled to have such Debt Securities registered in
their names in the Security Register, will not receive or be entitled to receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws impair
the ability to purchase or transfer U.S. Book-Entry Debt Securities.
The Company expects that the U.S. Depositary for U.S. Book-Entry Debt
Securities of a series, upon receipt of any payment of principal of, premium, if
any, or interest, if any, on, the related definitive Global Debt Security, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Debt Security as shown on the records of such U.S. Depositary. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Debt Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such participants.
SATISFACTION AND DISCHARGE OF INDENTURE
The Company may terminate as to a series all of its obligations under the
Debt Securities and the Indenture either upon delivery for cancellation to the
Trustee of all the Debt Securities of the series or (a)(i) within one year of
maturity or redemption of the series or (ii) at any time if the Holders will not
recognize income, gain or loss for Federal income tax purposes, (b) upon deposit
with the Trustee of funds or
12
<PAGE> 48
U.S. Government Obligations (as defined in the Indenture) sufficient for payment
of principal of and interest on, or redemption of, the series and (c) upon
delivery to the Trustee of an officers' certificate and opinion of counsel
stating that all conditions precedent to discharge have been satisfied.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein with
respect to any series of Debt Securities occurs and is continuing, either the
Trustee or the holders of at least 25% in aggregate principal amount of the
outstanding Debt Securities of such series, or in the case of certain Events of
Default specified in clauses (v) and (vi) below, of all series (voting as a
class), may declare the principal (and premium, if any) of all the Debt
Securities of such series, together with accrued interest thereon, if any, to be
immediately due and payable by notice in writing to the Company (and to the
Trustee if given by the holders).
Events of Default in respect of any series are defined in the Indenture as
being (i) default for 30 days in payment of any interest installment when due;
(ii) default in payment of principal of, or premium, if any, on any of the Debt
Securities of such series when due (other than any sinking fund payments) at
their stated maturity, by declaration, when called for redemption or otherwise;
(iii) default for 30 days in the making of any sinking fund payment when due;
(iv) default for 60 days after notice to the Company by the Trustee or by
holders of 25% in aggregate principal amount of the outstanding Debt Securities
of such series in the performance of any covenant in the Debt Securities of such
series or in the Indenture or any supplemental indenture with respect to Debt
Securities of such series; (v) acceleration of in excess of an aggregate
of $20,000,000 of indebtedness for borrowed money of the Company or any
Subsidiary (other than Non-Recourse Debt of a Non-Recourse Subsidiary) under the
terms of the instrument under which such indebtedness is or may be outstanding
if such acceleration is not rescinded or annulled within 10 days after written
notice from the Trustee or the holders of at least 25% in principal amount of
the Debt Securities then outstanding has been received; (vi) a final judgment
for the payment of $20,000,000 or more rendered against the Company or any
Subsidiary in any court of competent jurisdiction and not fully covered by
insurance or not discharged or stayed within 90 days after the date all rights
to appeal have expired or been extinguished; (vii) certain events of bankruptcy,
insolvency and reorganization; and (viii) any other Event of Default provided
with respect to Debt Securities of such series. No Event of Default with respect
to a single series of indebtedness issued under the Indenture (or any
supplemental indenture) necessarily constitutes an Event of Default with respect
to any other series of indebtedness issued thereunder.
The Indenture provides that the trustee will, within 90 days after the
occurrence of a default with respect to the Debt Securities of any series, give
to the holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it, provided that, except in the case of default in
the payment of principal of, or premium or interest, if any, on, or a sinking
fund installment, if any, with respect to any of the Debt Securities of such
series, the Trustee will be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of the
holders of the Debt Securities of such series; provided further that in the case
of a default due to the failure to observe or comply with any covenant of the
Indenture, no such notice to holders shall be given until at least 30 days after
the occurrence of such default. The term "default" for the purpose of this
provision only means the happening of any of the Events of Default specified
above, except that any grace period or notice requirement is eliminated.
The Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default to act with the required standard
of care, to be indemnified by the holders of the Debt Securities before
proceeding to exercise any right or power under the Indenture at the request of
holders of the Debt Securities.
The Indenture provides that the holders of a majority in principal amount
of the outstanding Debt Securities of any series may in certain circumstances
direct the time, method and place of conducting proceedings for remedies
available to the Trustee or exercising any trust or power conferred on the
Trustee in respect of such series.
The Indenture includes a covenant that the Company will file annually with
the Trustee an Officers' Certificate stating whether any default exists and
specifying any default that exists.
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<PAGE> 49
In certain cases, the holders of a majority in principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of such series waive any past default or Event of Default with
respect to the Debt Securities of such series or compliance with certain
provisions of the Indenture, except (i) a default not theretofore cured in
payment of the principal of, premium, if any, or interest, if any, on any of the
Debt Securities of such series; or (ii) in respect of a covenant or provision of
the Indenture which cannot be modified or amended without the consent of the
holder of each outstanding Debt Security of a series affected. The holders of a
majority in principal amount of a series of outstanding Debt Securities also
have certain rights to rescind any declaration of acceleration with respect to
such series after all Events of Default with respect to such series not arising
from such declaration shall have been cured.
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee thereunder may,
without the consent of any holders of Debt Securities, enter into supplemental
indentures for the purposes, among other things, of adding to the Company's
covenants, adding additional Events of Default, establishing the form or terms
of any series of Debt Securities issued under such supplemental indentures or
curing ambiguities or inconsistencies in the Indenture or making other
provisions, provided such other provisions shall not adversely affect the
interests of the holders of any series of outstanding Debt Securities in any
material respect.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the outstanding Debt Securities of all affected series (acting as one class),
to execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or modifying in any
manner the rights of the holders of the Debt Securities of such series, except
that no such supplemental indenture may, without the consent of the holders of
all the outstanding Debt Securities affected thereby, among other things: (i)
change the Stated Maturity of the principal of, or any installment of principal
of or interest on, any Debt Security; (ii) reduce the principal amount of, the
rate of interest on, or any premium payable upon the redemption of, any Debt
Security; (iii) reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon a declaration of acceleration of the
Maturity thereof; (iv) change any Place of Payment where, or the currency,
currencies or currency unit or units in which, any Debt Security or any premium
or interest thereon is payable; (v) impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date); (vi) affect adversely
the terms, if any, of conversion of any Debt Security into stock or other
securities of the Company or of any other corporation; (vii) reduce the
percentage in principal amount of the outstanding Debt Securities of any series,
the consent of whose holders is required for any such supplemental indenture, or
the consent of whose holders is required for any waiver (of compliance with
certain provisions of the Indenture or certain defaults thereunder and their
consequences) provided for in the Indenture; (viii) change any obligation of the
Company, with respect to outstanding Debt Securities of a series, to maintain an
office or agency in the places and for the purposes specified in the Indenture
for such series; (ix) modify any of the foregoing provisions or the provisions
for the waiver of certain covenants and defaults, except to increase any
applicable percentage of the aggregate principal amount of outstanding Debt
Securities the consent of the holders of which is required, or to provide with
respect to any particular series the right to condition the effectiveness of any
supplemental indenture as to that series on the consent of the holders of a
specified percentage of the aggregate principal amount of outstanding Debt
Securities of such series, or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of each
outstanding Debt Security affected thereby.
WAIVER OF CERTAIN COVENANTS
The Indenture provides that the Company may omit to comply with certain
restrictive covenants described above under "Certain Covenants of the Company"
if the holders of not less than a majority in principal amount of all series of
outstanding Debt Securities affected thereby (acting as one class) waive
compliance with such restrictive covenants.
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<PAGE> 50
NOTICES
Except as otherwise provided in the Indenture, notices to holders of Bearer
Debt Securities will be given by publication at least once in a daily newspaper
in The City of New York and in London and in such other city or cities as may be
specified in such Bearer Debt Securities and will be mailed to such persons
whose names and addresses were previously filed with the Trustee, within the
time prescribed for the giving of such notice. Notices to holders of Registered
Debt Securities will be given by first-class mail or by overnight courier to the
addresses of such holders as they appear in the Security Register.
TITLE
Title to any Bearer Debt Securities and any coupons appertaining thereto
will pass by delivery. The Company, the Trustee and any agent of the Company or
the Trustee may treat the holder of any Bearer Debt Security or related coupon
and, prior to due presentment for registration of transfer, the registered owner
of any Registered Debt Security (including Registered Debt Securities in global
registered form), as the owner thereof (whether or not such Debt Security or
coupon shall be overdue and notwithstanding any notice to the contrary) for the
purpose of making payment of principal (and premium, if any) and interest and
for all other purposes.
REPLACEMENT OF SECURITIES COUPONS
Any mutilated Debt Security and any Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
holder upon surrender of such mutilated Debt Security or Debt Security with a
mutilated coupon to the Security Registrar. Debt Securities or coupons that
become destroyed, stolen or lost will be replaced by the Company at the expense
of the holder upon delivery to the Security Registrar of evidence of the
destruction, loss or theft thereto satisfactory to the Company and the Security
Registrar; in the case of any coupon which becomes destroyed, stolen or lost,
such coupon will be replaced (upon surrender to the Security Registrar of the
Debt Security with all appurtenant coupons not destroyed, stolen or lost) by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon, an indemnity satisfactory to the Security Registrar and the Company may
be required at the expense of the holder of such Debt Security or coupon before
a replacement Debt Security will be issued; provided that if such new Debt
Security is a Bearer Debt Security, such Debt Security shall be delivered only
outside the United States.
GOVERNING LAW
The Indenture, the Debt Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to principles of conflicts of laws.
CONCERNING THE TRUSTEE
The Company may from time to time maintain lines of credit, and have other
customary banking relationships, with The Chase Manhattan Bank, the Trustee
under the Indenture, or with its affiliates. The Chase Manhattan Bank also
serves as the indenture trustee with respect to the Company's 9 1/2% Senior
Subordinated Notes due 2002.
PLAN OF DISTRIBUTION
The Company may sell all or part of the Debt Securities from time to time
on terms determined at the time such Debt Securities are offered for sale. The
Securities may be sold (i) through underwriters or dealers; (ii) through agents;
(iii) directly to one or more purchasers; or (iv) through a combination of any
such methods of sale. The Prospectus Supplement relating to the particular
series of the Debt Securities offered thereby will set forth the terms of the
offering of such series of the Debt Securities, including the name or names of
any underwriters, dealers or agents, the purchase price of such Debt Securities,
the proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' or agents'
15
<PAGE> 51
compensation, any initial public offering price, any discounts or sales agent's
commissions or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which the Debt Securities of such series may be listed.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price, or at varying prices determined at the time of sale. The Debt
Securities may be offered to the public through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the related Prospectus Supplement, the obligations
of the underwriters to purchase Debt Securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all the
Debt Securities of a series if any are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, the Company will sell such Debt Securities
to the public at varying prices to be determined by such dealer at the time of
resale. In the case of a sale to a dealer, the Company will provide a Prospectus
Supplement stating the name of such dealer, the amount of Debt Securities
purchased and the price paid.
Offers to purchase Debt Securities may be solicited directly by the Company
or by agents designated by the Company from time to time. Any such agent, which
may be deemed to be an underwriter as that term is defined in the Securities
Act, involved in the offer or sale of the Debt Securities in respect of which
this Prospectus is delivered will be named in, and any commissions payable by
the Company to such agent will be set forth in, a Prospectus Supplement. Unless
otherwise indicated in such Prospectus Supplement, any such agent will be acting
on a best efforts basis.
Agents and underwriters may from time to time purchase and sell Debt
Securities in the secondary market, but are not obligated to do so, and there
can be no assurance that there will be a secondary market for the Debt
Securities or liquidity in the secondary market if one develops. From time to
time, agents and underwriters may make a market in the Debt Securities.
Dealers, underwriters or agents may be entitled under agreements which may
be entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act. Such
dealers, underwriters or agents may be customers of, engage in transactions
with, or perform services for, the Company in the ordinary course of business.
The place and time of delivery for the Debt Securities in respect of which
this Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
LEGAL OPINIONS
The validity of the Notes will be passed upon for Manor Care by Cahill
Gordon & Reindel (a partnership including a professional corporation), New York,
New York, and for the Agents by Simpson Thacher & Bartlett (a partnership which
includes professional corporations) New York, New York.
EXPERTS
The consolidated financial statements and schedules of Manor Care, Inc. and
subsidiaries incorporated by reference in this Prospectus and elsewhere in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
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<PAGE> 52
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No dealer, salesperson or any
other person has been authorized to
give any information or to make any
representations, other than those
contained or incorporated by
reference in this Prospectus
Supplement (including the
accompanying Pricing
Supple$250,000,000
ment) or the Prospectus in
connection with the offer made by
this Prospectus Supplement and the
Prospectus and, if given or made,
such information
MANOR CARE,
or representations must not be
relied upon as having been
authorized by the Company or any
Agent. INC.
Neither the delivery of this
Prospectus Supplement (including the
Pricing Supplement) and the
Prospectus nor any sale made
hereunder and thereunder shall under
any circumstances create an
implication that there has been no
change in the affairs of the Company
since the date hereof. This
MEDIUM -TERM NOTES, SERIES A
Prospectus Supplement (including the
Pricing Supplement) and the
Prospectus do not constitute an
offer or a solicitation by anyone in
any jurisdiction in which such offer
or solicitation is not authorized or
in which the person making such
offer or
solicita
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tion is not qualified to do so or to
any person to
PROSPECTUS SUPPLEMENT
whom it is unlawful to make such
offer or
NOVEMBER 22, 1996
solicitation.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds........................ S-3
Description of Notes................... S-3
Foreign Currency Risks................. S-25
Certain United States Federal Income
Tax Consequences..................... S-27
Supplemental Plan of Distribution...... S-35
Legal Matters.......................... S-35
PROSPECTUS
</TABLE>
LEHMAN BROTHERS
<TABLE>
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
</TABLE>
CHASE SECURITIES INC.
<TABLE>
<S> <C>
Reference............................ 2
The Company............................ 3
</TABLE>
DEUTSCHE MORGAN GRENFELL
<TABLE>
<S> <C>
Use of Proceeds........................ 3
Ratio of Earnings to Fixed Charges..... 4
</TABLE>
DILLON, READ & CO. INC.
<TABLE>
<S> <C>
Description of Debt Securities......... 4
Plan of Distribution................... 15
</TABLE>
NATIONSBANC CAPITAL
<TABLE>
<S> <C>
Legal Opinions......................... 16
Experts................................ 16
</TABLE>
MARKETS, INC.
<TABLE>
<S> <C>
------------------
</TABLE>
