<PAGE>
Filed pursuant to Rule 424(B)(5)
SEC File No. 333-32731
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 29, 1998)
$600,000,000
HALLIBURTON COMPANY
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE, SERIES B
---------------
Halliburton Company (the "Company") may offer from time to time, at an
aggregate initial offering price of up to $600,000,000, its Medium-Term Notes
Due Nine Months or More From Date of Issue, Series B (the "Notes"). Such
aggregate initial offering price is subject to reduction as a result of the
sale by the Company of other Debt Securities described in the accompanying
Prospectus. Each Note will mature on any day nine months or more from the date
of issue, as specified in the applicable pricing supplement hereto (each, a
"Pricing Supplement"), and may be subject to redemption at the option of the
Company or repayment at the option of the Holder thereof, in each case, in
whole or in part, prior to its Stated Maturity Date, if specified in the
applicable Pricing Supplement. Each Note will be denominated and payable in
United States dollars or other currency or currency unit specified in the
applicable Pricing Supplement.
The Company may issue Notes that bear interest at fixed rates ("Fixed Rate
Notes") or at floating rates ("Floating Rate Notes"). The applicable Pricing
Supplement will specify whether a Floating Rate Note is a Regular Floating
Rate Note, a Floating Rate/Fixed Rate Note or an Inverse Floating Rate Note
and whether the rate of interest thereon is determined by reference to one or
more of the CD Rate, the CMT Rate, the Commercial Paper Rate, the Eleventh
District Cost of Funds Rate, the Federal Funds Rate, LIBOR, the Prime Rate and
the Treasury Rate (each, an "Interest Rate Basis"), or any other interest rate
basis or formula, as adjusted by any Spread and any Spread Multiplier.
Interest on each Floating Rate Note will accrue from its date of issue and,
unless otherwise specified in the applicable Pricing Supplement, will be
payable monthly, quarterly, semiannually or annually in arrears, as specified
in the applicable Pricing Supplement, and on the Maturity Date. Unless
otherwise specified in the applicable Pricing Supplement, the rate of interest
on each Floating Rate Note will be reset daily, weekly, monthly, quarterly,
semiannually or annually, as specified in the applicable Pricing Supplement.
Interest on each Fixed Rate Note will accrue from its date of issue and,
unless otherwise specified in the applicable Pricing Supplement, will be
payable semiannually in arrears on March 31 and September 30 of each year and
on the Maturity Date. The Company may also issue Discount Notes, Indexed Notes
and Amortizing Notes.
The interest rate, or formula for the determination of the interest rate, if
any, applicable to each Note and the other variable terms thereof will be
established by the Company on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulas and
other terms of Notes are subject to change by the Company, but no such change
will affect any Note previously issued or as to which an offer to purchase has
been accepted by the Company.
Each Note will be issued in book-entry form (a "Book-Entry Note") or in
fully registered certificated form (a "Certificated Note"), as specified in
the applicable Pricing Supplement. Each Book-Entry Note will be represented by
one or more fully registered global securities (the "Global Securities")
deposited with or on behalf of The Depository Trust Company (or such other
depositary identified in the applicable Pricing Supplement) (the "Depositary")
and registered in the name of the Depositary or its nominee. Interests in the
Global Securities will be shown on, and transfers thereof will be effected
only through, records maintained by the Depositary (with respect to its
participants) and the Depositary's participants (with respect to beneficial
owners). Except in limited circumstances, Book-Entry Notes will not be
exchangeable for Certificated Notes.
SEE "RISK FACTORS" COMMENCING ON PAGE S-2 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES
OFFERED HEREBY.
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,
THE PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGENTS' DISCOUNTS
PRICE TO AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1)(2) COMPANY (1)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........... 100% .125%-.750% 99.875%-99.250%
- -------------------------------------------------------------------------------
Total.............. $600,000,000 $912,000-$4,500,000 $599,088,000-$595,500,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount.
(2) The Company will pay a commission to an Agent (as defined below) not to
exceed .750% of the Price to Public of any Note when such Agent places the
Note. The commission on any Note with a maturity of more than 30 years
from the date of issue will be negotiated at the time of sale. The Company
may also sell Notes to any Agent, as principal, at negotiated discounts
not in excess of such commission, for resale to investors and other
purchasers. The Company has agreed to indemnify the Agents against, and to
provide contribution with respect to, certain liabilities, including
liabilities under the Securities Act. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company estimated at $480,000.
---------------
The Notes are being offered on a continuing basis by the Company to or
through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Chase Securities Inc., Lehman Brothers Inc. and, Morgan Stanley
& Co. Incorporated (the "Agents"). Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be listed on any securities
exchange. There is no assurance that the Notes offered hereby will be sold or,
if sold, that there will be a secondary market for the Notes or liquidity in
the secondary market if one develops. The Company reserves the right to cancel
or modify the offer made hereby without notice. The Company or an Agent, if it
solicits the offer on an agency basis, may reject any offer to purchase Notes
in whole or in part. See "Plan of Distribution."
---------------
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
---------------
The date of this Prospectus Supplement is September 29, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MADE HEREBY MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING STABILIZING BIDS, SYNDICATE COVERAGE TRANSACTIONS OR THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN
OF DISTRIBUTION."
----------------
Capitalized terms used but not defined in this Prospectus Supplement are
defined in the accompanying Prospectus or the Indenture (as hereinafter
defined) and are used herein with the same meanings as ascribed to them
therein.
----------------
RISK FACTORS
This Prospectus Supplement, the accompanying Prospectus and any Pricing
Supplement do not describe all the risks of an investment in Notes that may be
subject to one or more interest rates or other indices or formulas. Neither do
they describe all the risks of an investment in Notes denominated in a foreign
currency or a composite currency. The Company and the Agents disclaim any
responsibility to advise prospective investors of the risks peculiar to an
investment in such Notes. 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 investing in such Notes in light of their
particular circumstances. Such Notes are not appropriate investments for
investors who are unsophisticated with respect to transactions involving the
applicable interest rate or other indices or formulas or who are
unsophisticated with respect to foreign currency transactions. Prospective
investors should carefully consider, among other factors, the matters
described below.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, or
interest, if any, to one or more interest rates or other indices or formulas,
either directly or inversely, entails significant risks that are not
associated with similar investments in a conventional fixed rate or floating
rate debt security. Such risks include, without limitation, the possibility
that such indices or formulas may be subject to significant changes, that no
interest will be payable in respect of such Notes or will be payable at a rate
lower than one applicable to a conventional fixed rate or floating rate debt
security issued by the Company at the same time, that repayment of the
principal or premium, if any, in respect of such Notes may occur at times
other than as expected by the holders of the Notes registered in the
securities register maintained by or on behalf of the Company (the "Holders"),
and that the Holders could lose all or a substantial portion of principal or
premium, if any, payable with respect to such Notes on the Maturity Date (as
defined under "Description of Notes--General"). Such risks depend 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 amount of principal, premium, if any, or interest, if any,
payable with respect to such Notes contains a multiplier or leverage factor,
the effect of any change in the applicable index or indices or formula or
formulas will be magnified. In recent years, values of certain indices and
formulas have been highly volatile and such volatility may continue in the
future. Fluctuations in the value of any particular index or formula that have
occurred in the past are not necessarily indicative, however, of fluctuations
that may occur in the future.
Any optional redemption feature of Notes may affect the market value of such
Notes. Since the Company may be expected to redeem such Notes when prevailing
interest rates are relatively low, Holders generally will not be able to
reinvest the redemption proceeds in a comparable security at an effective
interest rate as high as the then current interest rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the liquidity of
the secondary market if one develops. See "Plan of Distribution."
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The secondary market, if any, for Notes will be affected by a number of
factors independent of the creditworthiness of the Company and the value
attributed to the applicable index or indices or formula or formulas. Such
factors include the complexity and volatility of each such index or formula,
the method of calculating the principal, premium, if any, or interest, if any,
in respect of such Notes, the time remaining to the maturity of such Notes,
the outstanding amount of such Notes, any redemption features of such Notes,
the amount of other debt securities linked to such index or formula and the
level, direction and volatility of market interest rates generally. Such
factors will affect both the liquidity of any such secondary market and the
value attributed by the market to such Notes. In addition, certain Notes may
be designed for specific investment objectives or strategies and, therefore,
may have a more limited secondary market and experience more price volatility
than conventional debt securities. Holders may not be able to sell such Notes
readily or at prices that will enable them to realize their anticipated yield.
No investor should purchase Notes unless such investor understands and is able
to bear the risk that such Notes may not be readily saleable, that the value
of such Notes will fluctuate over time and that such fluctuations may be
significant.
STRUCTURAL SUBORDINATION
Holding Company Reorganization. As more fully described under "The Company
- -- Holding Company Reorganization" in the accompanying Prospectus, the Company
reorganized its corporate structure on December 12, 1996 to establish a
holding company as the parent corporation for its operating subsidiaries. In
connection with the Reorganization (as such term is defined in the
Prospectus), the new holding company changed its name to "Halliburton
Company", and the predecessor company (the "Predecessor") became a wholly
owned, indirect subsidiary of the holding company. As part of the
Reorganization, the holding company assumed certain obligations of the
Predecessor, including the $200 million in aggregate principal amount of its
outstanding 8.75% Debentures Due February 15, 2021.
As a result of the Reorganization, Halliburton Company is now a holding
company, all of the operations of which are conducted through subsidiaries.
Any Notes issued and sold hereunder will be obligations of the holding company
exclusively. The Company's cash flow and its ability to service debt,
including the Notes, are substantially dependent on the free cash flow and
earnings of its subsidiaries and the payment of funds by those subsidiaries to
the Company in the form of loans, dividends or otherwise. The subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make any funds
available for such purpose. Moreover, the payment of dividends and the making
of loans and advances to the Company by its subsidiaries are, in the case of
certain foreign subsidiaries, subject to statutory and regulatory
restrictions, and, in the case of all subsidiaries, are generally contingent
upon the earnings of those subsidiaries and subject to various business
considerations.
Structural Subordination. At June 30, 1998, the Company's subsidiaries had
approximately $2.6 billion of outstanding liabilities (including among others
liabilities such as trade and other accounts payable, advance billings on
uncompleted contracts and long-term debt, but excluding intercompany
indebtedness). At the same date, after giving pro forma effect to the
acquisition of Dresser Industries, Inc. ("Dresser"), the Company's
subsidiaries, including Dresser, had $5.9 billion of outstanding liabilities
(determined on the same basis). See "Recent Development." Any right of the
Company to receive assets of any of its subsidiaries upon their liquidation or
reorganization (and the consequent right of the holders of Notes to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors, except to the extent that the Company is
recognized as a creditor of such subsidiary. In such case, the claims of the
Company will be subordinate to the claims of the creditors secured by the
assets of such subsidiary and any claims of creditors of such subsidiary
senior to those held by the Company.
There are no restrictions in the Indenture on the creation of additional
indebtedness, including indebtedness of the Company's subsidiaries, and the
incurrence of additional indebtedness could have an adverse impact on the
Company's ability to service its indebtedness, including the Notes.
S-3
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CHANGE OF CONTROL AND HIGHLY LEVERAGED TRANSACTIONS
The Notes will not contain any provisions that may afford Holders thereof
protection in the event of a change of control of the Company or in the event
of a highly leveraged transaction (whether or not such transaction results in
a change of control of the Company).
CREDIT RATINGS
The credit ratings assigned to the Company's medium-term note program may
not reflect the potential impact of all risks related to structure and other
factors on the value of the Notes. Accordingly, prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in the Notes and the suitability of investing in such Notes in
light of their particular circumstances.
FOREIGN CURRENCY RISKS
Exchange Rates and Exchange Controls. Any investment in Notes that are
denominated in, or the payment of which is related to the value of, a
Specified Currency (as defined below) other than U.S. dollars ("Foreign
Currency Notes") entails significant risks that are not associated with a
similar investment in a security denominated in U.S. dollars. Such risks
include the possibility of significant changes in rates of exchange between
the U.S. dollar and the various foreign currencies (or composite currencies)
and the possibility of the imposition or modification of 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 U.S. dollars and certain foreign
currencies have been highly volatile and such volatility may be expected to
continue in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations
in such rate that may occur during the term of any Foreign Currency Note.
Depreciation against the U.S. dollar of the currency in which a Foreign
Currency Note is payable would result in a decrease in the effective yield of
such Foreign Currency Note, could result in a reduction of the yield below the
stated interest rate and, in certain circumstances, could result in a loss to
the investor on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of,
premium, if any, or interest on a Note. Even if there are no actual exchange
controls, it is possible that the Specified Currency for any particular
Foreign Currency Note would not be available when payments on such Foreign
Currency Note are due. In that event, the Company would make required payments
in U.S. dollars on the basis of the Market Exchange Rate on the date of such
payment, or if such rate of exchange is not then available, on the basis of
the Market Exchange Rate as of the most recent practicable date.
With respect to any Note denominated in a foreign currency or currency unit,
the applicable Pricing Supplement will include information with respect to
applicable currency exchange controls, if any, and historical exchange rate
information on such currency or currency unit. The information contained
therein shall constitute a part of this Prospectus Supplement and 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.
Governing Law and Judgments. The Notes will be governed by and construed in
accordance with the laws of the State of New York. Under current New York law,
a state court in the State of New York rendering a judgment in respect of a
Foreign Currency Note would be required to render such judgment in the
Specified Currency, and such foreign currency judgment would be converted into
United States dollars at the exchange rate prevailing on the date of entry of
such judgment. Accordingly, the Holder of such Foreign Currency Note would be
subject to exchange rate fluctuations between the date of entry of such
foreign currency judgment and the time the amount of such foreign currency
judgment is paid to such Holder in United States dollars and converted by such
Holder into the Specified Currency. It is not certain, however, whether a non-
New York state court would follow the same rules and procedures with respect
to conversions of foreign currency judgments.
S-4
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The Company will indemnify the Holder of any Note against any loss incurred
by such Holder as a result of any judgment or order being given or made for
any amount due under such Note and such judgment or order requiring payment in
a currency or composite currency (the "Judgment Currency") other than the
Specified Currency, and as a result of any variation between (i) the rate of
exchange at which the Specified Currency amount is converted into the Judgment
Currency for the purpose of such judgment or order, and (ii) the rate of
exchange at which the Holder of such Note, on the date of payment of such
judgment or order, is able to purchase the Specified Currency with the amount
of the Judgment Currency actually received by such Holder, as the case may be.
RECENT DEVELOPMENT
On February 25, 1998, the Company entered into an agreement and plan of
merger with Dresser pursuant to which a wholly owned subsidiary of the Company
would merge with Dresser and Dresser would become a wholly owned subsidiary of
the Company. The consideration payable by the Company in the merger is Common
Stock. The merger was consummated on September 29, 1998.
Dresser is a supplier of highly engineered products, technical services and
project management for hydrocarbon energy-related activities that are
primarily utilized in oil and gas drilling, production and transmission; gas
distribution; power generation; gas processing; petroleum refining and
marketing; and petrochemical production. At July 31, 1998, Dresser had
consolidated total assets of approximately $5.10 billion, consolidated long
term debt of $0.76 billion and consolidated stockholders' equity of
approximately $1.85 billion and employed approximately 31,300 persons
worldwide.
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities under a Second
Senior Indenture, dated as of December 1, 1996, between the Predecessor and
Chase Bank of Texas, National Association (formerly Texas Commerce Bank
National Association), as Trustee (the "Trustee"), as heretofore and hereafter
supplemented and amended (the "Indenture"). The Indenture is subject to, and
governed by, the Trust Indenture Act of 1939, as amended. The following
summary of certain provisions of the Notes and the Indenture does not purport
to be complete and is qualified in its entirety by reference to the actual
provisions of the Notes and the Indenture. The term "Debt Securities," as used
in this Prospectus Supplement, refers to all debt securities, including the
Notes, issued and issuable from time to time under the Indenture. The
following description of Notes will apply to each Note offered hereby unless
otherwise specified in the applicable Pricing Supplement.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of the Company and will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding. For information regarding the
structural subordination of the Debt Securities, including the Notes, to
indebtedness of the subsidiaries of the Company, see "Risk Factors--Structural
Subordination" and, in the Prospectus, "Description of Debt Securities--
Provisions Applicable to Senior Debt Securities--Structural Subordination."
The Indenture does not limit the aggregate initial offering price of Debt
Securities that may be issued thereunder and Debt Securities may be issued
thereunder from time to time in one or more series up to the aggregate initial
offering price from time to time authorized by the Company for each series.
The Company may, from time to time, without the consent of the Holders of the
Notes, provide for the issuance of other Debt Securities under the Indenture
in addition to the Notes offered hereby.
The aggregate initial offering price of the Notes is limited to $600,000,000
or the equivalent thereof in foreign currencies or currency units (each, a
"Specified Currency"). Such aggregate initial offering price is
S-5
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subject to reduction as a result of the sale by the Company of other Debt
Securities described in the Prospectus. Each Note will mature on any day nine
months or more from its date of issue (the "Stated Maturity Date"), as
specified in the applicable Pricing Supplement, unless the principal thereof
(or any installment of principal thereof) becomes due and payable prior to the
Stated Maturity Date, whether by the declaration of acceleration of maturity,
notice of redemption at the option of the Company, notice of the Holder's
election of repayment or otherwise (the Stated Maturity Date or such prior
date, as the case may be, is herein referred to as the "Maturity Date" with
respect to the principal of such Note repayable on such date). Each Note will
be denominated in U.S. dollars or in such other Specified Currency as is
indicated in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, interest-bearing Notes will either be Fixed
Rate Notes or Floating Rate Notes, as specified in the applicable Pricing
Supplement. The Company may also issue Discount Notes, Indexed Notes and
Amortizing Notes (as such terms are hereinafter defined).
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal, premium, if any, and interest on all Notes will be made in U.S.
dollars, except that payments of principal of, premium, if any, and interest
on Notes denominated in other than U.S. dollars will be made in the Specified
Currency at the option of the Holders thereof under the procedures described
below unless the Specified Currency is not available due to the imposition of
exchange controls or other circumstances beyond the control of the Company, as
described below. References herein to "United States dollars," "U.S. dollars"
or "$" are to the lawful currency of the United States of America (the "United
States"). Purchasers are required to pay for the Notes in United States
dollars.
Unless otherwise specified in an applicable Pricing Supplement, Notes
denominated in U.S. dollars ("U.S. Currency Notes") will be issuable in
denominations of $1,000 and integral multiples thereof. Notes denominated in a
Specified Currency other than U.S. dollars ("Foreign Currency Notes") will be
issued in authorized denominations that are equivalent, at the Market Exchange
Rate (as defined below) on the first Business Day in the City of New York and
the country issuing such currency next preceding the date on which the Company
accepts the offer to purchase such Foreign Currency Note, to $100,000 (rounded
down to an integral multiple of 10,000 units of such Specified Currency) and
integral multiples of 10,000 units of such Specified Currency in excess
thereof. The "Market Exchange Rate" for a Specified Currency other than United
States dollars means the noon dollar buying rate in The City of New York for
cable transfers for such Specified Currency as certified for customs purposes
(or, if not so certified, as otherwise determined) by the Federal Reserve Bank
of New York. The applicable Pricing Supplement will provide additional
information regarding Foreign Currency Notes, including applicable exchange
rate information, pertaining to the terms of such Foreign Currency Notes and
other matters of interest to the Holders thereof.
Each Note will be issued as a Book-Entry Note represented by one or more
fully registered Global Securities or as a fully registered Certificated Note.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other factors, the aggregate principal amount of Notes
purchased in any single transaction. Notes with different variable terms other
than interest rates may also be offered concurrently to different investors.
Interest rates or formulas and other terms of Notes are subject to change by
the Company from time to time, but no such change will affect any Note
previously issued or as to which an offer to purchase has been accepted by the
Company.
In the case of Book-Entry Notes, payments of principal of, and premium, if
any, and interest, if any, will be made by the Company through The Chase
Manhattan Bank, an affiliate of the Trustee (the "Paying Agent"), to the
Depositary. See "--Book-Entry Notes." In the case of Certificated Notes,
payments of principal and premium, if any, due on any Maturity Date will be
made in immediately available funds upon presentation and surrender thereof
(and, in the case of any repayment on an Optional Repayment Date, upon
submission of a duly completed election form in accordance with the provisions
described below) at the office or agency maintained by the Company for such
purpose in the Borough of Manhattan, The City of New York (the "Corporate
Trust Office"), currently the corporate trust office of the Paying Agent,
located at 450 West 33rd Street, 15th Floor, New York, New York 10001. Payment
of interest, if any, due on the Maturity Date of a Certificated Note will
S-6
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be made to the person to whom payment of the principal thereof and premium, if
any, thereon shall be made. Payment of interest, if any, due on a Certificated
Note on any Interest Payment Date (as hereinafter defined) other than the
Maturity Date will be made by check mailed to the address of the Holder
entitled thereto as such address shall appear in the Security Register of the
Company. A Holder of at least $10,000,000 (or, if the Specified Currency is
other than U.S. dollars, the equivalent thereof in such Specified Currency) in
aggregate principal amount of Certificated Notes (whether having identical or
different terms and provisions) will, however, be entitled to receive interest
payments, if any, on any Interest Payment Date other than the Maturity Date by
wire transfer of immediately available funds if appropriate wire transfer
instructions have been received in writing by the Paying Agent not less than
15 days prior to such Interest Payment Date. Any such wire transfer
instructions received by the Paying Agent will remain in effect until revoked
by such Holder.
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law, regulation or executive order
to close in The City of New York; provided, however, that, with respect to
Foreign Currency Notes, such day is also not a day on which banking
institutions are authorized or required by law, regulation or executive order
to close in the Principal Financial Center (as hereinafter defined) of the
country issuing the Specified Currency (unless the Specified Currency is
European Currency Units ("ECU"), in which case such day is also not a day that
appears as an ECU non-settlement day on the display designated as "ISDE" on
the Reuter Monitor Money Rates Service (or is not a day designated as an ECU
non-settlement day by the ECU Banking Association) or, if ECU non-settlement
days do not appear on that page (and are not so designated), a day that is not
a day on which payments in ECU cannot be settled in the international
interbank market); provided, further, that, with respect to Notes as to which
LIBOR is an applicable Interest Rate Basis, such day is also a London Business
Day (as hereinafter defined). "London Business Day" means a day on which
dealings in the Designated LIBOR Currency (as hereinafter defined) are
transacted in the London interbank market.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency (except as described in the immediately
preceding paragraph with respect to ECU) or (ii) the capital city of the
country to which the Designated LIBOR Currency relates (or, in the case of
ECU, Luxembourg), as applicable, except, in the case of (i) or (ii) above,
that with respect to United States dollars, Australian dollars, Canadian
dollars, Deutsche marks, Dutch guilders, Italian lire and Swiss francs, the
"Principal Financial Center" shall be the City of New York, Sydney, Toronto,
Frankfurt, Amsterdam, Milan (solely in the case of the Specified Currency) and
Zurich, respectively.
The Pricing Supplement relating to each Note will describe the following
terms: (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 authorized denominations); (ii) the price (expressed as a
percentage of the aggregate principal amount thereof) at which such Note will
be issued and sold (the "Issue Price"); (iii) the date on which the Note will
be issued (the "Original Issue Date"); (iv) the date on which such Note will
mature (the "Stated Maturity"); (v) whether such Note is a Fixed Rate Note or
a Floating Rate Note; (vi) if such Note is a Fixed Rate Note, whether such
Note is an Amortizing Note (as defined below); (vii) if such Note is a Fixed
Rate Note, the rate per annum at which such Note will bear interest, if any,
any Interest Payment Date or Dates (as defined below); (viii) if such Note is
a Floating Rate Note, the Base Rate, the initial interest rate, the Reset
Period (as defined below), the Interest Payment Dates, the maximum interest
rate, if any, the minimum interest rate, if any, the Spread, if any, the
Spread Multiplier, if any (all as defined below) and any other terms relating
to the particular method of calculating the interest rate for such Note; (ix)
whether such Note is an Original Issue Discount Note and, if so, the yield to
Stated Maturity; (x) 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; (xi) whether such
Note will be issued initially as a Book-Entry Note or a Certificated Note; and
(xii) any other term of such Note not inconsistent with the provisions of the
Indenture.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "--Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the Corporate Trust Office.
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No service charge will be made by the Company or the Paying Agent for any such
registration of transfer or exchange of Notes, but the Company or any paying
agent may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith (other than
exchanges pursuant to the Indenture not involving any transfer).
The defeasance and covenant defeasance provisions contained in the Indenture
will apply to the Notes. See "Description of Debt Securities" in the
Prospectus.
REDEMPTION AT THE OPTION OF THE COMPANY
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 Date only if an Initial
Redemption Date is specified in the applicable Pricing Supplement. If so
specified, each Note 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 any other
integral multiple of an authorized denomination specified in the Pricing
Supplement (provided that any remaining principal amount thereof shall be at
least $1,000 or the minimum denomination applicable thereto), at the
applicable Redemption Price (as hereinafter defined), together with unpaid
interest accrued thereon to the date of redemption, on written notice given to
the Holders thereof not more than 60 nor less than 30 calendar days prior to
the date of redemption and in accordance with the provisions of the Indenture.
For this purpose, "Redemption Price" means an amount equal to the Initial
Redemption Percentage specified in the applicable Pricing Supplement (as
adjusted by the Annual Redemption Percentage Reduction, if applicable)
multiplied by the unpaid principal amount to be redeemed. 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 to be
redeemed. For a discussion of the redemption of Discount Notes, see "--
Discount Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Company at the option of the Holders
thereof prior to the Stated Maturity Date only if one or more Optional
Repayment Dates are specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to repayment at the option of the Holders
thereof on any such Optional Repayment Date in whole or in part in increments
of $1,000 or any other integral multiple of an authorized denomination
specified in the Pricing Supplement (provided that any remaining principal
amount thereof shall be at least $1,000 or the minimum denomination applicable
thereto), at a repayment price equal to 100% of the unpaid principal amount to
be repaid on such Optional Repayment Date, together with unpaid interest
accrued thereon to the date of repayment. For any Note to be repaid on an
Optional Repayment Date, such Note must be received, together with the form
thereon entitled "Option to Elect Repayment" duly completed, by the Company at
the Corporate Trust Office not more than 60 nor less than 30 calendar days
prior to the date of repayment. Exercise of such repayment option by the
Holder will be irrevocable. For a discussion of the repayment of Discount
Notes, see "--Discount Notes."
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, any Beneficial Owner
(as hereinafter defined) of Global Securities that desires to have all or any
portion of the Book-Entry Notes represented by such Global Securities repaid
must instruct the Participant (as hereinafter defined) through which it owns
its interest to direct the Depositary to exercise the repayment option on its
behalf by delivering the related Global Security and duly completed election
form to the Paying Agent as aforesaid. In order to ensure that such Global
Security and election form are received by the Paying Agent on a particular
day, such Beneficial Owner must so instruct the Participant through which it
owns its interest before such Participant's deadline for accepting
instructions for that day. Participants may have different deadlines for
accepting instructions from their customers. Accordingly, Beneficial Owners
should consult the Participants through which they own their interest for the
respective deadlines for such Participants.
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All instructions given to Participants from Beneficial Owners of Global
Securities relating to the option to elect repayment shall be irrevocable. In
addition, at the time such instructions are given, each such Beneficial Owner
shall cause the Participant through which it owns its interest to transfer
such Beneficial Owner's interest in the Global Security or Securities
representing the related Book-Entry Notes, on the Depositary's records, to the
Paying Agent. See "--Book-Entry Notes."
If applicable, the Company will comply with the requirements of Section
14(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules promulgated thereunder, and any other securities laws or
regulations in connection with any such repayment.
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, at the
discretion of the Company, be held, resold or surrendered to the Paying Agent
for cancellation.
FOREIGN CURRENCY NOTES
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing
the applicable currency. The information set forth in this Prospectus
Supplement is directed to prospective purchasers who are United States
residents and, with respect to Foreign Currency Notes, is by necessity
incomplete. The Company and the Agents disclaim any responsibility to advise
prospective purchasers who are residents of countries other than the United
States with respect to any matters that may affect the purchase, holding or
receipt of payments of principal of, and premium, if any, and interest, if
any, on, Foreign Currency Notes. Such persons should consult their own
financial and legal advisors with regard to such matters. See "Risk Factors--
Foreign Currency Risks."
In the case of a Foreign Currency Note, the Company will (unless otherwise
specified in the applicable Pricing Supplement) appoint an agent (the
"Exchange Rate Agent") to determine the exchange rate for converting all
payments in respect of such Foreign Currency Note into U.S. dollars in the
manner described in the following paragraph. Notwithstanding the foregoing,
the Holder of a Foreign Currency Note may (if the applicable Pricing
Supplement and the Note so indicate) elect to receive all such payments in the
Specified Currency by delivery of a written request to the Trustee at its
Corporate Trust Office not later than 15 calendar days prior to the applicable
payment date. Such election will remain in effect until revoked by written
notice to the Trustee received not later than 15 calendar days prior to the
applicable date.
In the case of a Foreign Currency Note, unless the Holder has elected
otherwise, payment in respect of such a Foreign Currency Note will be made in
U.S. dollars on the basis of the exchange rate as determined by the Exchange
Rate Agent. The exchange rate will be based on the highest bid quotation for
U.S. dollars received by the Exchange Rate Agent at approximately 11:00 A.M.,
New York City time, on the second Business Day preceding the applicable
payment date (or, if no such rate is quoted on such date, the last date on
which such rate was quoted), from three recognized foreign exchange dealers in
the City of New York selected by the Exchange Rate Agent and approved by the
Company (one of which may be the Exchange Rate Agent). Each such bid quotation
will relate to the purchase by the quoting dealer, for settlement on such
payment date, of the aggregate amount of the Specified Currency payable on
such payment date in respect of all Foreign Currency Notes denominated in such
Specified Currency and will include a commitment by the dealer to execute a
contract on that basis. All currency exchange costs will be borne by the
Holders of such Foreign Currency Notes by deductions from such payments. If
three such bid quotations are not available on the second Business Day
preceding the applicable payment date, payments will be made in the Specified
Currency, unless such Specified Currency is unavailable due to the imposition
of exchange controls or other circumstances beyond the Company's control, in
which case payment will be made as described below.
Unless otherwise specified in the applicable Pricing Supplement, a Holder of
a Foreign Currency Note may subsequent to the issuance thereof request that
future payments be converted or not be converted, as the case may be, to U.S.
dollars by transmitting a written request for such payments to the Corporate
Trust Office of the
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Trustee on or prior to the Regular Record Date or at least 15 calendar days
prior to the Maturity Date. Such request shall include appropriate payment
instructions and shall be in writing (mailed or hand delivered) or by cable,
telex or facsimile transmission. A Holder of a Foreign Currency Note may elect
to receive all future payments of principal, premium, if any, and interest in
either the Specified Currency or in U.S. dollars, as specified in the written
request, and need not file a separate election for each payment. Such election
will remain in effect until revoked by written notice to the Trustee, but
written notice of any such revocation must be received by the Trustee on or
prior to the Regular Record Date or at least 15 calendar days prior to the
Maturity Date. Holders whose Foreign Currency Notes are to be held in the name
of broker or nominee should contact such broker or nominee to determine
whether and how an election to receive payments in the Specified Currency may
be made.
Unless otherwise specified in the applicable Pricing Supplement, if the
Specified Currency is other than United States dollars, a Beneficial Owner of
the related Global Security or Securities which elects to receive payments of
principal, premium, if any, and/or interest, if any, in the Specified Currency
must notify the Participant through which it owns its interest on or prior to
the applicable Regular Record Date or at least fifteen calendar days prior to
the Maturity Date, as the case may be, of such Beneficial Owner's election.
Such Participant must notify the Depositary of such election on or prior to
the third Business Day after such Record Date or at least twelve calendar days
prior to the Maturity Date, as the case may be, and the Depositary will notify
the Trustee of such election on or prior to the fifth Business Day after such
Record Date or at least ten calendar days prior to the Maturity Date, as the
case may be. If complete instructions are received by the Participant from the
Beneficial Owner and forwarded by the Participant to the Depositary, and by
the Depositary to the Trustee, on or prior to such dates, then such Beneficial
Owner will receive payments in the Specified Currency.
In order for a Holder of a Foreign Currency Note, either by the terms of the
Note or pursuant to an election of such Holder, to receive payments of
principal, premium, if any, and interest in a Specified Currency other than
U.S. dollars by wire transfer, such Holder must designate an appropriate
account with a bank located in the country of the Specified Currency or other
jurisdiction acceptable to the Company and the Trustee. Such designation shall
be made by filing the appropriate information with the Corporate Trust Office
of the Trustee on or prior to the Regular Record Date or at least 15 calendar
days prior to the Maturity Date. The Trustee will, subject to applicable laws
and regulations and until it receives notice to the contrary, make such
payment and all succeeding payments to such Holder of Foreign Currency Notes
by wire transfer to the designated account. In the case of payment of
principal, premium, if any, and interest due on the Maturity Date, however,
the Foreign Currency Note must be presented to the Trustee in time for the
Trustee to make such payments in such funds in accordance with its normal
procedures. If a payment cannot be made by wire transfer because the required
information has not been received by such Trustee on or before the requisite
date or for any other reason, the Trustee will mail a notice to the Holder at
its registered address requesting a designation pursuant to which such wire
transfer can be made and such payment will be made within 15 calendar days
after receipt of such designation by the Trustee. Any tax, assessment or
governmental charge imposed upon such payments will be borne by the Beneficial
Owners of Book-Entry Notes in respect of which such payments are made.
If the Specified Currency for a Foreign Currency Note is not available at
the time of any payment due thereunder as a result of the imposition of
exchange controls or other circumstances beyond the control of the Company,
the Company will be entitled, but not required, to satisfy its obligations to
Holders of such Foreign Currency Notes by making such payment in U.S. dollars
on the basis of the Market Exchange Rate on the last date such Specified
Currency was available (the "Conversion Date"). Any payment made under such
circumstances in U.S. dollars where the required payment is in other than U.S.
dollars will not constitute an Event of Default under the Indenture.
If payment in respect of a Foreign Currency Note is required to be made in
any currency unit and such currency unit is unavailable due to the imposition
of exchange controls or other circumstances beyond the Company's control, then
the Company will be entitled, but not required, to make all payments in
respect of such Foreign Currency Note in U.S. dollars until such currency unit
is again available. The amount of each payment in
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U.S. dollars will be computed on the basis of the equivalent of the currency
unit in U.S. dollars, which shall be determined by the Company or its agent on
the following basis. The component currencies of the currency unit for this
purpose (the "Component Currencies" or, individually, a "Component Currency")
shall be the currency amounts that were components of the currency unit as of
the Conversion Date for such currency unit. The equivalent of the currency
unit in U.S. dollars will be calculated by aggregating the U.S. dollar
equivalents of the Component Currencies. The U.S. dollar equivalent of each of
the Component Currencies will be determined by the Company or such agent on
the basis of the Market Exchange Rate for each such Component Currency that is
available as of the third Business Day prior to the date on which the relevant
payment is due and for each such Component Currency that is unavailable, if
any, as of the Conversion Date for such Component Currency.
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 will be replaced by the amounts of such two or
more currencies, the sum of which will be equal to the amount of the original
Component Currency.
All determinations referenced above made by the Company or its agent
(including the Exchange Rate Agent) will be at its sole discretion and will,
in the absence of manifest error, be conclusive for all purposes and binding
on the Holders of Foreign Currency Notes.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate
per annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly
made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, interest payments in respect of Fixed Rate Notes and
Floating Rate Notes will be made in an amount equal to the interest accrued
from and including the immediately preceding Interest Payment Date in respect
of which interest has been paid or duly made available for payment (or from
and including the date of issue, if no interest has been paid or duly made
available for payment) to but excluding the applicable Interest Payment Date
or the Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless
otherwise specified in the applicable Pricing Supplement, however, the first
payment of interest on any such Note originally issued between a Record Date
(as hereinafter defined) and the related Interest Payment Date will be made on
the Interest Payment Date immediately following the next succeeding Record
Date to the Holder on such next succeeding Record Date. Unless otherwise
specified in the applicable Pricing Supplement, a "Record Date" shall be the
fifteenth calendar day (whether or not a Business Day) immediately preceding
the related Interest Payment Date.
Fixed Rate Notes
Interest on Fixed Rate Notes will be payable on March 31 and September 30 of
each year or on such other date(s) specified in the applicable Pricing
Supplement (each, an "Interest Payment Date" with respect to Fixed Rate Notes)
and on the Maturity Date with respect to all or part of the principal thereof.
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-
day months.
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If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal,
premium, if any, or interest will be made on the next succeeding Business Day
as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after such Interest Payment Date or the
Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
Floating Rate Notes
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds
Rate, (vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such
other Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement. The applicable Pricing Supplement will specify
whether such Floating Rate Note is a "Regular Floating Rate Note," a "Floating
Rate/Fixed Rate Note" or an "Inverse Floating Rate Note," and, to the extent
applicable, certain terms with respect to each Floating Rate Note, including
the Fixed Rate Commencement Date, Fixed Interest Rate, Interest Rate Basis or
Bases, Initial Interest Rate, Initial Interest Reset Date, Interest Reset
Dates, Interest Payment Dates, Index Maturity, Maximum Interest Rate, Minimum
Interest Rate, and Spread and Spread Multiplier, as such terms are defined
below. If one or more of the applicable Interest Rate Bases is LIBOR or the
CMT Rate, the applicable Pricing Supplement will also specify the Designated
LIBOR Page or the Designated CMT Maturity Index and Designated CMT Telerate
Page, respectively, as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note" or an "Inverse Floating Rate Note," or as having an
Addendum attached or having "Other/Additional Provisions" apply, in each
case relating to a different interest rate formula, such Floating Rate Note
will be designated as a "Regular Floating Rate Note" and, except as
described below or in the applicable Pricing Supplement, will bear interest
at the rate determined by reference to the applicable Interest Rate Basis
or Bases (a) plus or minus the applicable Spread, if any, and (b)
multiplied by the applicable Spread Multiplier, if any. Commencing on the
initial Interest Reset Date for such Note (the "Initial Interest Reset
Date"), the rate at which interest on such Regular Floating Rate Note shall
be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period, if any, from the
date of issue to the Initial Interest Reset Date will be the initial
interest rate on such Note (the "Initial Interest Rate").
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the period, if
any, from the date of issue to the Initial Interest Reset Date will be the
Initial Interest Rate and (z) the interest rate in effect for the period
commencing on the date specified in the applicable Pricing Supplement as
the Fixed Rate Commencement Date (the "Fixed Rate Commencement Date") to
the Maturity Date shall be the Fixed Interest Rate, if such rate is
specified in the applicable Pricing Supplement or, if no such Fixed
Interest Rate is specified, the interest rate in effect thereon on the day
immediately preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed
Interest Rate minus the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if
any, and (b) multiplied by the applicable Spread Multiplier, if any;
provided, however, that, unless otherwise specified in the applicable
Pricing Supplement, the interest
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rate thereon will not be less than zero. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Inverse Floating Rate Note
shall be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period, if any, from the
date of issue to the Initial Interest Reset Date will be the Initial
Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to
maturity of the instrument or obligation with respect to which the related
Interest Rate Basis or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Floating Rate Note will be determined in
accordance with the applicable provisions below. Except as set forth above or
in the applicable Pricing Supplement, the interest rate in effect on each day
will be the interest rate determined as of the most recent Interest
Determination Date (as hereinafter defined).
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on another specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case
of Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly,
the Wednesday of each week (with the exception of weekly reset Floating Rate
Notes as to which the Treasury Rate is an applicable Interest Rate Basis,
which will reset on Tuesday of each week, except as described below); (iii)
monthly, the third Wednesday of each month (with the exception of monthly
reset Floating Rate Notes as to which the Eleventh District Cost of Funds Rate
is an applicable Interest Rate Basis, which will reset on the first calendar
day of the month); (iv) quarterly, the third Wednesday of March, June,
September and December of each year; (v) semiannually, the third Wednesday of
the two months specified in the applicable Pricing Supplement; and (vi)
annually, the third Wednesday of the month specified in the applicable Pricing
Supplement. The rate of interest on Floating Rate/Fixed Rate Notes will not
reset after the applicable Fixed Rate Commencement Date. If any Interest Reset
Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls
in the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined by the Calculation
Agent as of the applicable Interest Determination Date and calculated on or
prior to the Calculation Date (as hereinafter defined), except with respect to
LIBOR and the Eleventh District Cost of Funds Rate, which will be calculated
on such Interest Determination Date. The "Interest Determination Date" with
respect to the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal
Funds Rate and the Prime Rate will be the second Business Day immediately
preceding the applicable Interest Reset Date; the "Interest Determination
Date" with respect to the Eleventh District Cost of Funds Rate will be the
last working day of the month immediately preceding the applicable Interest
Reset Date on which the Federal Home Loan Bank of San Francisco (the "FHLB of
San Francisco") publishes the Index (as hereinafter defined); and the
"Interest Determination Date" with respect to LIBOR will be the second London
Business Day (i.e., a day on which dealings in United States dollars are
transacted in the London interbank market) immediately preceding the
applicable Interest Reset Date. With respect to the Treasury Rate, the
"Interest Determination Date" will be, with respect to the week in which the
Interest Reset Date occurs, the day in the week on which Treasury Bills (as
hereinafter defined) are normally auctioned. (Treasury Bills are normally sold
at an auction held on Monday of each week, unless that day is a legal holiday,
in which case the auction is normally held on the following Tuesday, except
that such auction may be held on the preceding Friday.) If an auction is held
on the Friday of the week preceding the applicable Interest Reset Date,
however, the "Interest
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Determination Date" will be such preceding Friday, but, if the Interest
Determination Date would otherwise fall on an Interest Reset Date, then such
Interest Reset Date will be postponed to the next succeeding Business Day. The
"Interest Determination Date" pertaining to a Floating Rate Note the interest
rate of which is determined by reference to two or more Interest Rate Bases
will be the second Business Day next preceding the Interest Reset Date for
such Floating Rate Note on which each Interest Rate Basis is determinable.
Each Interest Rate Basis will be determined as of such date, and the
applicable interest rate will take effect on the applicable Interest Reset
Date.
Notwithstanding the foregoing, a Floating Rate Note may also have either or
both of the following: (i) a maximum interest rate, or ceiling, that may
accrue during any Interest Period (a "Maximum Interest Rate") and (ii) a
minimum interest rate, or floor, that may accrue during any Interest Period (a
"Minimum Interest Rate"). In addition to any Maximum Interest Rate that may
apply to any Floating Rate Note, the interest rate on Floating Rate Notes will
in no event be higher than the maximum rate permitted by New York law, as the
same may be modified by United States law.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, on the third Wednesday of the month of
each year specified in the applicable Pricing Supplement (each, an "Interest
Payment Date" with respect to Floating Rate Notes) and, in each case, on the
Maturity Date. If any Interest Payment Date other than the Maturity Date for
any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the next succeeding Business
Day, except that, in the case of a Floating Rate Note as to which LIBOR is an
applicable Interest Rate Basis and such Business Day falls in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding Business Day. If the Maturity Date of a Floating Rate Note falls on
a day that is not a Business Day, the required payment of principal, premium,
if any, and interest will be made on the next succeeding Business Day as if
made on the date such payment was due, and no interest will accrue on such
payment for the period from and after the Maturity Date to the date of such
payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation on Floating Rate Notes will be rounded
to the nearest cent (with one-half cent being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by multiplying the interest factor calculated for
each day in the applicable Interest Period by the number of days in the
applicable Interest Period. Unless otherwise specified in the applicable
Pricing Supplement, the interest factor for each such day will be computed by
dividing the interest rate applicable to such day by 360, in the case of
Floating Rate Notes for which an applicable Interest Rate Basis is the CD
Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the
Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year, in the case of Floating Rate Notes for which an applicable
Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise
specified in the applicable Pricing Supplement, the interest factor for
Floating Rate Notes for which the interest rate is calculated with reference
to two or more Interest Rate Bases will be calculated in each period in the
same manner as if only the applicable Interest Rate Basis specified in the
applicable Pricing Supplement applied.
Unless otherwise specified in the applicable Pricing Supplement, an
affiliate of the Trustee will be the "Calculation Agent." Upon request of the
Holder of any Floating Rate Note, the Calculation Agent will disclose
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the interest rate then in effect and, if determined, the interest rate that
will become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to such Floating Rate Note. Unless
otherwise specified in the applicable Pricing Supplement, the "Calculation
Date," if applicable, pertaining to any Interest Determination Date will be
the earlier of (i) the tenth calendar day after such Interest Determination
Date or, if such day is not a Business Day, the next succeeding Business Day
or (ii) the Business Day immediately preceding the applicable Interest Payment
Date or the Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CD Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate, the rate on such Interest Payment Date for negotiable United
States dollar certificates of deposit 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 ("Statistical Release H.15")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such Interest
Determination Date for negotiable United States dollar certificates of deposit
of 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 "Certificates
of Deposit." If such rate is not yet published in either Statistical Release
H.15 or Composite Quotations by 3:00 P.M., New York City time, on the related
Calculation Date, then the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent as the arithmetic mean of the secondary
market offered rates as of 10:00 A.M., New York City time, on such Interest
Determination Date of three leading nonbank dealers in negotiable United
States dollar certificates of deposit in The City of New York (which may
include the Agents or their affiliates) selected by the Calculation Agent for
negotiable United States dollar certificates of deposit of major United States
money center banks with a remaining maturity closest to the Index Maturity
specified in the applicable Pricing Supplement in an amount that is
representative for a single transaction in that market at that time; provided,
however, that, if the dealers so selected by the Calculation Agent are not
then quoting such securities, the CD Rate determined as of such Interest
Determination Date will be the CD Rate in effect immediately prior to such
Interest Determination Date.
CMT RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to
a Floating Rate Note for which the interest rate is determined with reference
to the CMT Rate, the rate displayed on the Designated CMT Telerate Page 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 Index Maturity for (i), if the Designated CMT Telerate Page is
7055, the rate on such Interest Determination Date and (ii), if the Designated
CMT Telerate Page is 7052, the weekly or monthly average, as specified in the
applicable Pricing Supplement, for the week or the month, as applicable, ended
immediately preceding the week or the month, as applicable, in which the
related Interest Determination Date falls. If such rate is no longer displayed
on the relevant page or is not displayed by 3:00 P.M., New York City time, on
the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Index Maturity for such Interest Determination Date as
published in Statistical Release H.15. If such rate is no longer published or
is not published by 3:00 P.M., New York City time, on the related Calculation
Date, then the CMT Rate for such Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Index Maturity (or such
other United States Treasury rate for the Designated CMT Index Maturity) for
such Interest Determination 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 and as the Calculation Agent determines to be comparable to the
rate formerly displayed on the Designated CMT Telerate Page and published in
Statistical Release H.15. If such information is not provided by 3:00 P.M.,
New York City time, on the related Calculation Date, then the CMT Rate on such
Rate Interest Determination Date will be calculated by the Calculation Agent
as a yield to
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maturity, based on the arithmetic mean of the secondary market closing offer
prices as of approximately 3:30 P.M., New York City time, on such Interest
Determination Date reported, according to their written records, by three
leading United States government securities dealers in The City of New York
(which may include the Agents or their affiliates) (each, a "Reference
Dealer") 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 Index
Maturity and a remaining term to maturity of not less than such Designated CMT
Index Maturity minus one year. If the Calculation Agent is unable to obtain
three such Treasury Note quotations, the CMT Rate on such Interest
Determination Date will be calculated by the Calculation Agent as a yield to
maturity based on the arithmetic mean of the secondary market offered rates as
of approximately 3:30 P.M., New York City time, on such 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 Index Maturity and a remaining term to
maturity closest to the Designated CMT Index Maturity and in an amount of at
least $100 million. If only three or four (and not five) of such Reference
Dealers are then quoting such securities, then the CMT Rate will be based on
the arithmetic mean of the offered rates obtained and neither the highest nor
the lowest of such quotes will be eliminated; provided, however, that, if
fewer than three Reference Dealers so selected by the Calculation Agent are
then quoting such securities, the CMT Rate determined as of such Interest
Determination Date will be the CMT Rate in effect on such Interest
Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Index Maturity, the Calculation Agent will
obtain quotations for the Treasury Note with the shorter remaining term to
maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on such
service) for the purpose of displaying Treasury Constant Maturities as
reported in Statistical Release H.15. 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 Index Maturity" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will
be calculated or, if no such maturity is specified in the applicable Pricing
Supplement, 2 years.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest
rate is determined with reference to the Commercial Paper Rate, the Money
Market Yield (as hereinafter defined) on such date of the rate for commercial
paper having the Index Maturity specified in the applicable Pricing Supplement
as published in Statistical Release H.15 under the heading "Commercial Paper--
Nonfinancial." If such rate is not published by 3:00 P.M., New York City time,
on the related Calculation Date, then the Commercial Paper Rate on such
Interest Determination Date will be the Money Market Yield of the rate for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published in Composite Quotations under the heading "Commercial
Paper" (with an Index Maturity of one month or three months being deemed to be
equivalent to an Index Maturity of 30 days or 90 days, respectively). If such
rate is not yet published in either H.15 or Composite Quotations by 3:00 P.M.,
New York City time, on the related Calculation Date, then the Commercial Paper
Rate on such Interest Determination Date will be calculated by the Calculation
Agent as the Money Market Yield of the arithmetic mean of the offered rates at
approximately 11:00 A.M., New York City time, on such Interest Determination
Date of three leading dealers of commercial paper in The City of New York
(which may include the Agents or their affiliates) selected by the Calculation
Agent for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement placed for an industrial issuer whose bond
rating is "Aa", or the equivalent, from a nationally recognized statistical
rating
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organization; provided, however, that, if the dealers so selected by the
Calculation Agent are not then quoting such securities, the Commercial Paper
Rate determined as of such Interest Determination Date will be the Commercial
Paper Rate in effect immediately prior to such Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
D X 360
----------------
Money Market Yield = X 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the applicable Interest Reset Period.
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate
Note for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate, the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Interest Determination Date falls, as set forth under the caption "11th
District" on Telerate Page 7058 as of 11:00 A.M., San Francisco time, on such
Interest Determination Date. If such rate does not appear on Telerate Page
7058 on such Interest Determination Date, then the Eleventh District Cost of
Funds Rate on such 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
Federal Home Loan Bank ("FHLB") of San Francisco as such cost of funds for the
calendar month immediately preceding such Interest Determination Date. If the
FHLB of San Francisco fails, on or prior to such Interest Determination Date,
to announce the Index for the immediately preceding calendar month, the
Eleventh District Cost of Funds Rate determined as of such Interest
Determination Date will be the Eleventh District Cost of Funds Rate in effect
immediately prior to such Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest
rate is determined with reference to the Federal Funds Rate, the rate on such
date for United States dollar federal funds as published in Statistical
Release H.15 under the heading "Federal Funds (Effective)" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date,
the rate on such Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If such rate is
not published in either Statistical Release H.15 or Composite Quotations by
3:00 P.M., New York City time, on the related Calculation Date, then the
Federal Funds Rate on such Interest Determination Date will be calculated by
the Calculation Agent as the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged by three
leading brokers of federal funds transactions in The City of New York (which
may include the Agents or their affiliates) selected by the Calculation Agent
prior to 9:00 A.M., New York City time, on such Interest Determination Date;
provided, however, that, if the brokers so selected by the Calculation Agent
are not then quoting such securities, the Federal Funds Rate determined as of
such Interest Determination Date will be the Federal Funds Rate in effect
immediately prior to such Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference
to LIBOR, LIBOR will be either: (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the arithmetic mean of the offered rates
(unless the Designated LIBOR Page by its terms provides only for a single
rate, in which case such single rate shall be
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used) for deposits in United States dollars having the Index Maturity
specified in such Pricing Supplement, commencing on the applicable Interest
Reset Date, that appear on the Designated LIBOR Page as of 11:00 A.M.,
London time, on such Interest Determination Date, or (b) if "LIBOR
Telerate" is specified in the applicable Pricing Supplement or if neither
"LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable Pricing
Supplement as the method for calculating LIBOR, the rate for deposits in
United States dollars having the Index Maturity specified in such Pricing
Supplement, commencing on such Interest Reset Date, that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on such Interest
Determination Date. If fewer than two such offered rates so appear, LIBOR
on such Interest Determination Date will be determined in accordance with
the provisions described in clause (ii) below.
(ii) With respect to a Interest Determination Date on which fewer than
two offered rates appear on the Designated LIBOR Page as specified in
clause (i) above, LIBOR will be the arithmetic mean of the quotations for
deposits in United States dollars for the period of the Index Maturity
specified in the applicable Pricing Supplement, commencing on the
applicable Interest Reset Date, offered to prime banks in the London
interbank market by the principal London offices of four major reference
banks (which may include affiliates of the Agents) in the London interbank
market, as selected by the Calculation Agent, at approximately 11:00 A.M.,
London time, on such Interest Determination Date and in a principal amount
that is representative for a single transaction in United States dollars in
such market at such time. If fewer than two such quotations are so
provided, then LIBOR on such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M., in London,
England, on such Interest Determination Date by three major banks (which
may include affiliates of the Agents) in London, England, selected by the
Calculation Agent for loans in United States dollars to leading European
banks, having the Index Maturity specified in the applicable Pricing
Supplement and in a principal amount that is representative for a single
transaction in United States dollars in such market at such time; provided,
however, that, if the banks so selected by the Calculation Agent are not
then quoting such securities, LIBOR determined as of such Interest
Determination Date will be LIBOR in effect immediately prior to such
Interest Determination Date.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page that may replace such page in such service) for
the purpose of displaying the London interbank rates of major banks for United
States dollars, or (b) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the display on the Dow Jones Telerate Service (or any successor
service) on the page specified in such Pricing Supplement (or any other page
that may replace such page in such service) for the purpose of displaying the
London interbank rates of major banks for United States dollars.
PRIME RATE. Unless otherwise specified in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating
to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate, the rate on such date as such rate is published
in Statistical Release H.15 under the heading "Bank Prime Loan." If such rate
is not published prior to 3:00 P.M., New York City time, on the related
Calculation Date, then the Prime Rate shall be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the Reuters
Screen USPRIME1 Page (as hereinafter defined) as such bank's prime rate or
base lending rate as in effect for such Interest Determination Date. If fewer
than four such rates appear on the Reuters Screen USPRIME1 Page for such
Interest Determination Date, then the Prime Rate on such Interest
Determination Date shall be the arithmetic mean of the prime rates or base
lending rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Interest
Determination Date by four major money center banks (which may include
affiliates of the Agents) in The City of New York selected by the Calculation
Agent. If fewer than four such quotations are so provided, then the Prime Rate
on such Interest Determination Date shall be the arithmetic mean of four prime
rates quoted on the basis of the actual number of days in the year divided by
a 360-day year as of the close of
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business on such Interest Determination Date as furnished in The City of New
York by the major money center banks, if any, that have provided such
quotations and by a reasonable number of substitute banks or trust companies
(which may include affiliates of the Agents) selected by the Calculation Agent
to provide such rate or rates in order to obtain four such prime rate
quotations, provided such substitute banks or trust companies are organized
and doing business under the laws of the United States, or any State thereof,
each having total equity capital of at least $500 million and being subject to
supervision or examination by Federal or State authority; provided, however,
that, if the banks or trust companies so selected by the Calculation Agent are
not then quoting such securities, the Prime Rate determined as of such
Interest Determination Date will be the Prime Rate in effect immediately prior
to such Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor Money
Rates Service (or any successor service) on the "USPRIME1" page (or such other
page that may replace the USPRIME1 page in such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate, the rate from the auction held
on such Interest Determination Date (the "Auction") of direct obligations of
the United States ("Treasury Bills") having the Index Maturity specified in
the applicable Pricing Supplement, as such rate is published in Statistical
Release H.15 under the heading "Treasury Bills-auction average (investment)"
or, if not published by 3:00 P.M., New York City time, on the related
Calculation Date, the auction average rate of such Treasury Bills (expressed
as a bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) as otherwise announced by the United States
Department of the Treasury. If the results of the Auction of Treasury Bills
having the Index Maturity specified in the applicable Pricing Supplement are
not reported as provided by 3:00 P.M., New York City time, on the related
Calculation Date or if no such Auction is held, then the Treasury Rate will be
calculated by the Calculation Agent as 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 Interest
Determination Date, of three leading United States government securities
dealers (which may include the Agents or their affiliates) selected by the
Calculation Agent, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable Pricing Supplement;
provided, however, that, if the dealers so selected by the Calculation Agent
are not then quoting such securities, the Treasury Rate determined as of such
Interest Determination Date will be the Treasury Rate in effect immediately
prior to such Interest Determination Date.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Stated Maturity Date, any redemption or repayment provisions or any other
term relating thereto, may be modified and/or supplemented as specified under
"Other/Additional Provisions" on the face thereof or in an Addendum relating
thereto, if so specified on the face thereof and described in the applicable
Pricing Supplement.
DISCOUNT NOTES
The Company may offer Notes ("Discount Notes") from time to time that have
an Issue Price (as specified in the applicable Pricing Supplement) that is
less than 100% of the principal amount thereof (i.e., par) by more than a
percentage equal to the product of 0.25% and the number of full years to the
Stated Maturity Date. Discount Notes may not bear any interest currently or
may bear interest at a rate that is below market rates at the time of
issuance. The difference between the Issue Price of a Discount Note and par is
referred to herein as the "Discount." In the event of redemption, repayment or
acceleration of maturity of a Discount Note, the amount payable to the Holder
of such Discount Note will be equal to the sum of (i) the Issue Price
increased by any
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accruals of Discount and, in the event of any redemption of such Discount
Note, multiplied by the Initial Redemption Percentage (as adjusted by any
applicable Annual Redemption Percentage Reduction) and (ii) any unpaid
interest accrued thereon to the date of such redemption, repayment or
acceleration of maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, such Discount will be accrued using a constant yield method.
The constant yield will be calculated using a 30-day month, 360-day year
convention, a compounding period that, except for the Initial Period (as
hereinafter defined), corresponds to the shortest period between Interest
Payment Dates for the applicable Discount Note (with ratable accruals within a
compounding period), a coupon rate equal to the initial coupon rate applicable
to such Discount Note and an assumption that the maturity of such Discount
Note will not be accelerated. If, in the case of an interest bearing Discount
Note, the period from the date of issue to the initial Interest Payment Date
for a Discount Note (the "Initial Period") is shorter than the compounding
period for such Discount Note, a proportionate amount of the yield for an
entire compounding period will be accrued. If, in such case, the Initial
Period is longer than the compounding period, then such period will be divided
into a regular compounding period and a short period with the short period
being treated as provided in the preceding sentence. The accrual of the
applicable Discount may differ from the accrual of original issue discount for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
certain Discount Notes may not be treated as having original issue discount
within the meaning of the Code, and Notes other than Discount Notes may be
treated as issued with original issue discount for federal income tax
purposes. See "United States Federal Income Tax Considerations."
INDEXED NOTES
The Company may from time to time offer Notes ("Indexed Notes") with the
amount of principal, premium or interest payable in respect thereof to be
determined by reference to the price or prices of specified commodities or
stocks or to other items, in each case as specified in the applicable Pricing
Supplement. In certain cases, Holders of Indexed Notes may receive a principal
payment on the Maturity Date that is greater than or less than the principal
amount of such Indexed Notes depending upon the relative value on the Maturity
Date of the specified indexed item. Information as to the method for
determining the amount of principal, premium, if any, or interest, if any,
payable in respect of Indexed Notes, certain historical information with
respect to the specified indexed item and any material tax considerations
associated with an investment in Indexed Notes will be specified in the
applicable Pricing Supplement. See also "Risk Factors."
AMORTIZING NOTES
The Company may from time to time offer Notes ("Amortizing Notes") with the
amount of principal thereof and interest thereon payable in installments over
the term of such Notes. Unless otherwise specified in the applicable Pricing
Supplement, interest on each Amortizing Note will be computed on the basis of
a 360-day year of twelve 30-day months. Payments with respect to Amortizing
Notes will be applied first to interest due and payable thereon and then to
the reduction of the unpaid principal amount thereof. Further information
concerning additional terms and provisions of Amortizing Notes will be
specified in the applicable Pricing Supplement, including a table setting
forth repayment information for such Amortizing Notes.
BOOK-ENTRY NOTES
The Company has established a depositary arrangement with The Depository
Trust Company with respect to the Book-Entry Notes, the terms of which are
summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
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Upon issuance, all Book-Entry Notes of an issue thereof of like tenor and
terms and up to $200,000,000 in aggregate principal amount will be represented
by a single Global Security. Each Global Security will be deposited with, or
on behalf of, the Depositary and will be registered in the name of the
Depositary or a nominee of the Depositary. No Global Security may be
transferred except as a whole by a nominee of the Depositary to the Depositary
or to another nominee of the Depositary, or by the Depositary or such nominee
to a successor of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided below, the Beneficial Owners of the
Global Security or Securities representing Book-Entry Notes will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the Holders thereof for any purpose under the Indenture.
Accordingly, each Beneficial Owner must rely on the procedures of the
Depositary and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such Global
Security or the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such laws may impair the ability of the Company to issue
Book-Entry Notes with respect to a particular issue of such Notes if persons
subject to such laws purchase any of such Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations in a
like aggregate principal amount, only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the
Global Securities or the Company becomes aware that the Depositary has ceased
to be a clearing agency registered under the Exchange Act and, in any such
case, the Company shall not have appointed a successor to the Depositary
within 60 days thereafter, (ii) the Company, in its sole discretion,
determines that the Global Securities shall be exchangeable for Certificated
Notes or (iii) an Event of Default shall have occurred and be continuing with
respect to the Notes under the Indenture. Upon any such exchange, the
Certificated Notes shall be registered in the names of the Beneficial Owners
of the Global Security or Securities representing Book-Entry Notes, which
names shall be provided by the Depositary's relevant Participants (as
identified by the Depositary) to the Paying Agent.
The following is based on information furnished by the Depositary:
The Depositary will act as a securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's nominee). One fully
registered Global Security will be issued for each issue of Book-Entry
Notes, each in the aggregate principal amount of such issue, and will be
deposited with the Depositary. If, however, the aggregate principal amount
of any issue exceeds $200 million, one Global Security will be issued with
respect to each $200 million of principal amount and an additional Global
Security will be issued with respect to any remaining principal amount of
such issue.
The Depositary 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 Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
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 of the Depositary ("Direct Participants")
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations. The
Depositary 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 the Depositary's
system is also
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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 the Depositary and its Participants
are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for such
Book-Entry Notes on the Depositary's records. The ownership interest of
each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the records of
Direct Participants and Indirect Participants. Beneficial Owners will not
receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Direct Participants or Indirect Participants through
which such Beneficial Owners entered into the transaction. Transfers of
ownership interests in a Global Security representing Book-Entry Notes are
to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated Notes
representing their ownership interests therein, except in the event that
use of the book-entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes that are deposited by Participants with the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit
of Global Securities with the Depositary and their registration in the name
of Cede & Co. effect no change in beneficial ownership. The Depositary has
no knowledge of the actual Beneficial Owners of the Global Securities
representing the Book-Entry Notes; the Depositary'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 the Depositary 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 that may be in effect from time to time.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes of like tenor and terms are being
redeemed, the Depositary's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable 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 applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, or interest, if any, payments on the Global
Securities representing the Book-Entry Notes will be made in immediately
available funds to the Depositary. The Depositary's practice is to credit
Direct Participants' accounts on the applicable payment date in accordance
with their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on such
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is 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 Participant and
not of the Depositary, the Trustee, the Paying Agent or the Company,
subject to such statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, or interest, if
any, to the Depositary is the responsibility of the Company and the Paying
Agent, disbursement of such payments to Direct Participants is the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners is the responsibility of Direct Participants and Indirect
Participants.
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The Beneficial Owner of Notes subject to repayment at the option of the
Holder may give notice of any election to have its Book-Entry Notes repaid
by the Company, through its Participant, to the Paying Agent and effect
delivery of such Book-Entry Notes by causing the Direct Participant to
transfer the Participant's interest in the Global Security or Securities
representing such Book-Entry Notes, on the Depositary's records, to the
Paying Agent. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Security or Securities representing such
Book-Entry Notes are transferred by Direct Participants on the Depositary's
records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Paying Agent. Under such
circumstances, if a successor securities depository is not obtained,
Certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, tax-exempt organizations, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding
Notes as a hedge against currency risks or as a position in a "straddle" for
tax purposes or persons whose functional currency is not the United States
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.
Any special United States Federal income tax considerations relevant to a
particular issue of the Notes will be provided in the applicable Pricing
Supplement. It also does not deal with Holders other than original purchasers
(except where otherwise specifically noted). Persons considering the purchase
of the Notes should consult their own tax advisors concerning the application
of United States Federal income tax laws to their particular situations as
well as any consequences of the purchase, ownership and disposition of the
Notes arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation or partnership created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is subject to United
States Federal income taxation regardless of its source or (iv) a trust which
is subject to the supervision of a court within the Unites States and the
control of a United States person. As used herein, the term "non-U.S. Holder"
means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting).
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("Original Issue
Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service
("IRS") on January 27, 1994, as amended on June 11, 1996, December 31, 1996,
December 20, 1997 and January 4, 1998, under the original issue discount
provisions of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a
Note providing for the payment of any amount other than qualified stated
interest (as hereinafter defined) prior to maturity, multiplied by the
weighted average maturity of such Note). The issue price of each Note in an
issue of Notes equals the first price at which a substantial amount of such
Notes has been sold (ignoring sales to bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers). The stated redemption price at maturity of a Note is
the sum of all payments provided by the Note other than "qualified stated
interest" payments. The term "qualified stated interest" generally means
stated interest that is unconditionally payable in cash or property
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(other than debt instruments of the issuer) at least annually at a single
fixed rate. In addition, under the OID Regulations, if a Note bears interest
for one or more accrual periods at a rate below the rate applicable for the
remaining term of such Note (e.g., Notes with teaser rates or interest
holidays) and if the greater of either the resulting foregone interest on such
Note or any "true" discount on such Note (i.e., the excess of the Note's
stated principal amount over its issue price) equals or exceeds a specified de
minimis amount, then the stated interest on the Note would be treated as
original issue discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note must include
original issue discount in income as ordinary interest for United States
Federal income tax purposes as it accrues under a constant yield method in
advance of receipt of the cash payments attributable to such income,
regardless of such U.S. Holder's regular method of tax accounting. In general,
the amount of original issue discount included in income by the initial U.S.
Holder of an Original Issue Discount Note is the sum of the daily portions of
original issue discount with respect to such Original Issue Discount Note for
each day during the taxable year (or portion of the taxable year) on which
such U.S. Holder held such Original Issue Discount Note. The "daily portion"
of original issue discount on any Original Issue Discount Note is determined
by allocating to each day in any accrual period a ratable portion of the
original issue discount allocable to that accrual period. An "accrual period"
may be of any length and the accrual periods may vary in length over the term
of the Original Issue Discount Note, provided that each accrual period is no
longer than one year and each scheduled payment of principal or interest
occurs on either the first or last day of an accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Original Issue Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and (ii) the amount of any qualified stated
interest payments allocable to such accrual period. The "adjusted issue price"
of an Original Issue Discount Note at the beginning of any accrual period is
the sum of the issue price of the Original Issue Discount Note plus the amount
of original issue discount allocable to all prior accrual periods minus the
amount of any prior payments on the Original Issue Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
Note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount Note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross
income with respect to such Original Issue Discount Note for any taxable year
(or portion thereof in which the U.S. Holder holds the Original Issue Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) the issue price does not exceed the
total noncontingent principal payments due under the Variable Note by more
than a specified de minimis amount and (b) it provides for stated interest,
paid or compounded at least annually, at current values of (i) one or more
qualified floating rates, (ii) a single fixed rate and one or more qualified
floating rates, (iii) a single objective rate, or (iv) a single fixed rate and
a single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiplier
that is greater than .65 but not more than 1.35 will constitute a qualified
floating rate. A variable rate
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equal to the product of a qualified floating rate and a fixed multiplier that
is greater than .65 but not more than 1.35, increased or decreased by a fixed
rate, will also constitute a qualified floating rate. In addition, under the
OID Regulations, two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the
Variable Note (e.g., two or more qualified floating rates with values within
25 basis points of each other as determined on the Variable Note's issue date)
will be treated as a single qualified floating rate. Notwithstanding the
foregoing, a variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions such as a
maximum numerical limitation (i.e., a cap) or a minimum numerical limitation
(i.e., a floor) may, under certain circumstances, fail to be treated as a
qualified floating rate under the OID Regulations unless such cap or floor is
fixed throughout the term of the Note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon objective financial or economic
information. A rate will not qualify as an objective rate if it is based on
information that is within the control of the issuer (or a related party) or
that is unique to the circumstances of the issuer (or a related party), such
as dividends, profits or the value of the issuer's stock (although a rate does
not fail to be an objective rate merely because it is based on the credit
quality of the issuer). A "qualified inverse floating rate" is any objective
rate where such rate is equal to a fixed rate minus a qualified floating rate,
as long as variations in the rate can reasonably be expected to reflect
inversely contemporaneous variations in the qualified floating rate. The OID
Regulations also provide that, if a Variable Note provides for stated interest
at a fixed rate for an initial period of one year or less followed by a
variable rate that is either a qualified floating rate or an objective rate
and if the variable rate on the Variable Note's issue date is intended to
approximate the fixed rate (e.g., the value of the variable rate on the issue
date does not differ from the value of the fixed rate by more than 25 basis
points), then the fixed rate and the variable rate together will constitute
either a single qualified floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and
if interest on such Note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually, then all stated
interest on such Note will constitute qualified stated interest and will be
taxed accordingly. Thus, a Variable Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations will generally not be treated as having been issued with
original issue discount unless the Variable Note is issued at a "true"
discount (i.e., at a price below the Note's stated principal amount) in excess
of a specified de minimis amount. The amount of qualified stated interest and
the amount of original issue discount, if any, that accrues during an accrual
period on such Variable Note is determined under the rules applicable to fixed
rate debt instruments by assuming that the variable rate is a fixed rate equal
to (i) in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or (ii) in the case of an objective rate
(other than a qualified inverse floating rate), a fixed rate that reflects the
yield that is reasonably expected for the Variable Note. The qualified stated
interest allocable to an accrual period is increased (or decreased) if the
interest actually paid during an accrual period exceeds (or is less than) the
interest assumed to be paid during the accrual period pursuant to the
foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable
Note. In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate,
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if the Variable Note provides for a qualified inverse floating rate). Under
such circumstances, the qualified floating rate or qualified inverse floating
rate that replaces the fixed rate must be such that the fair market value of
the Variable Note as of the Variable Note's issue date is approximately the
same as the fair market value of an otherwise identical debt instrument that
provides for either the qualified floating rate or qualified inverse floating
rate rather than the fixed rate. Subsequent to converting the fixed rate into
either a qualified floating rate or a qualified inverse floating rate, the
Variable Note is then converted into an "equivalent" fixed rate debt
instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S.
Holder of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. For each accrual period appropriate adjustments will be
made to the amount of qualified stated interest or original issue discount
assumed to have been accrued or paid with respect to the "equivalent" fixed
rate debt instrument if such amounts differ from the actual amount of interest
accrued or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. U.S. Holders should be aware that, as
amended on December 31, 1996, the Treasury Department issued final regulations
(the "CPDI Regulations") concerning the proper United States Federal income
tax treatment of contingent payment debt instruments. The CPDI Regulations
generally require a U.S. Holder of such an instrument to include future
contingent and noncontingent interest payments in income as such interest
accrues based upon a projected payment schedule. Moreover, in general, under
the CPDI Regulations, any gain recognized by a U.S. Holder on the sale,
exchange, or retirement of a contingent payment debt instrument will be
treated as ordinary income and all or a portion of any loss realized could be
treated as ordinary loss as opposed to capital loss (depending upon the
circumstances). The proper United States Federal income tax treatment of
Variable Notes that are treated as contingent payment debt obligations will be
more fully described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase Notes with such
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes
Under the OID Regulations, all payments on notes that have a fixed maturity
of one year or less ("Short-Term Notes") will be included in the stated
redemption price at maturity and, thus, such Short-Term Notes will be treated
as having been issued with original issue discount. In general, an individual
or other cash method U.S. Holder is not required to include accrued original
issue discount in income unless the U.S. Holder elects to
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do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary
income to the extent of the original issue discount accrued on a straight-line
basis, or upon election under the constant yield method (based on daily
compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States
Federal income tax purposes under the accrual method, and certain other
holders including banks and dealers in securities, are required to accrue
original issue discount on a Short-Term Note on a straight-line basis unless
an election is made to accrue the original issue discount under a constant
yield method (based on daily compounding).
Market Discount
If a U.S. Holder purchases a Note, other than an Original Issue Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of an Original Issue Discount Note, for an amount that is less than its
adjusted issue price as of the purchase date, such U.S. Holder will be treated
as having purchased such Note at a "market discount," unless such market
discount is less than a specified de minimis amount. (The market discount
rules do not apply to Short-Term Notes.)
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of an Original Issue Discount Note,
any payment that does not constitute qualified stated interest) on, or any
gain realized on the sale, exchange, retirement or other disposition of, a
Note as ordinary income to the extent of the lesser of (i) the amount of such
payment or realized gain or (ii) 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. 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 U.S. Holder elects to accrue market discount on
the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note
or certain earlier dispositions, because a current deduction is only allowed
to the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of
certain cash payments and regarding the deferral of interest deductions will
not apply. Generally, such currently included market discount is treated as
ordinary interest for United States Federal income tax purposes. Such an
election will apply to all debt instruments acquired by the U.S. Holder on or
after the first day of the first taxable year to which such election applies
and may be revoked only with the consent of the IRS.
Premium
If a U.S. Holder purchases a Note for an amount that is greater than the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest, such U.S. Holder will be considered to have
purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be taken into account under the U.S. Holder's regular
method of accounting included during any taxable year by the amortized amount
of such premium for the taxable year. If the Note, however, may be optionally
redeemed by the Company after the U.S. Holder purchases a Note with
amortizable bond premium, special rules would apply which could result in a
deferral of the amortization of some bond premium until later in the term of
the Note. Any election to amortize bond premium applies to all taxable debt
instruments then owned and thereafter acquired by the U.S. Holder on or after
the first day of the first taxable year to which such election applies and may
be revoked only with the consent of the IRS.
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Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a Note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued
market discount, if any, if the U.S. Holder has included such market discount
in income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss will be capital gain or loss (except
to the extent of any accrued market discount), and will be long-term capital
gain or loss if the Note were 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.
Foreign Currency Notes
The following is a summary of the principal United States federal income tax
consequences to a U.S. Holder of the ownership of a Note denominated in a
currency other than the U.S. dollar (a "Foreign Currency Note"). If interest
payments are made in a Foreign Currency to a U.S. 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 U.S. Holder that is required to accrue interest on a Foreign 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 U.S. 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 U.S. Holder has previously included in income with respect to
such payment.
OID on a Note that is also a Foreign 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 U.S. 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 Foreign 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
Foreign Currency Note is retired or otherwise disposed of. If the U.S. Holder
has elected to accrue market discount currently, then the amount which accrues
is determined in the Foreign Currency and then
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translated into U.S. dollars on the basis of the average exchange rate in
effect during such accrual period. A U.S. 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 Foreign Currency Note will be computed in the applicable
Foreign Currency. With respect to a U.S. 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 Foreign 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 U.S. Holder's tax basis in a Foreign Currency Note will be the U.S. dollar
value of the Foreign Currency amount paid for such Foreign 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
U.S. Holder on the sale, exchange or retirement of a Foreign Currency Note,
the amount realized upon such sale, exchange or retirement 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 or retirement.
A U.S. Holder will realize 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 or retirement) of a Foreign Currency
Note. Such gain or loss will be treated as ordinary income or loss. The
recognition of such gain or loss will be limited to the amount of overall gain
or loss realized on the disposition of a Foreign Currency Note. Under the
approach of proposed Treasury regulations issued on March 17, 1992, if a
Foreign 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 Foreign Currency Note.
A U.S. Holder's tax basis in Foreign Currency received as interest on (or
OID with respect to), or received on the sale or retirement of, a Foreign
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 U.S. Holder on a sale, exchange or other disposition of Foreign Currency
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.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to withholding of United States
Federal income taxes on payments of principal, premium (if any) or interest
(including original issue discount, if any) on a Note provided that (i) 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, (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 which receives interest on a Note or an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of its trade
or business, (iv) the beneficial owner provides the ownership statement
described
S-30
<PAGE>
below, and (v) such interest is not contingent interest. To qualify for the
exemption from taxation, the last United States payor in the chain of payment
prior to payment to a non-U.S. Holder (the "Withholding Agent") must have
received in the year in which a payment of interest or principal occurs, or in
either of the two preceding calendar years, a statement that (i) is signed by
the beneficial owner of the Note under penalties of perjury, (ii) certifies
that such owner is not a U.S. Holder and (iii) provides the name and address
of the beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement under penalties of perjury to the
Withholding Agent. In such case, however, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
A non-U.S. Holder will not be subject to withholding of United States
Federal income taxes on any amount which constitutes capital gain upon
retirement or disposition of a Note.
If a non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described above, payments of premium (if any) or interest
(including original issue discount) made to such non-U.S. 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) IRS Form 1001 (or successor form) claiming an exemption from
withholding under the benefit of a tax treaty or (2) IRS Form 4224 (or
successor form) stating that interest paid on the Note is not 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-U.S. Holder is engaged in a trade or business in the United States
and premium, if any, or interest (including original issue discount) on the
Note is effectively connected with the conduct of such trade or business, the
non-U.S. Holder, although exempt from the withholding tax discussed above,
will be subject to United States federal income tax on such premium, interest
and original issue discount on a net income basis in the same manner as if it
were a U.S. Holder. In addition, if such non-U.S. Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or lower
treaty rate) of its effectively connected earnings and profits for the taxable
year, including such premium, if any, and interest (including original issue
discount) on a Note.
Any gain 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 is effectively connected with a trade or business in the
United States of the non-U.S. Holder, or (ii) in the case of a non-U.S. 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.
The Notes will not be includible in the estate of a non-U.S. Holder,
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 and provided that at the time of such individual's death,
payments in respect of the Notes would not have been effectively connected
with the conduct by such individual of a trade or business in the United
States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Notes to a U.S. Holder must be reported to the
IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification
S-31
<PAGE>
procedures described in the preceding section would establish an exemption
from backup withholding and information reporting for those non-U.S. Holders
who are not exempt recipients 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, original issue discount 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 pays the proceeds of the sale of a Note to the
owner thereof. If, however, such custodian, nominee, agent or broker is a
United States person, a controlled foreign corporation or a foreign person
that derives 50% or more of its gross income 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.
Payments of principal, interest, original issue discount 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 above and the payor does not have actual knowledge that
the beneficial owner is a United States person, or the beneficial owner
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
On October 6, 1997, the IRS released final Treasury regulations that revise
the withholding and information reporting rules described above for payments
of principal, interest, original issue discount or premium made after December
31, 1999. The regulations modify the requirements imposed on a non-U.S. Holder
or certain intermediaries for establishing the beneficial owner's status as a
non-U.S. Holder eligible for exemption from withholding and information
reporting. In particular, the regulations impose more stringent conditions on
the ability of financial intermediaries acting for a non-U.S. Holder to
provide certifications on behalf of the non-U.S. Holder, which may include
entering into an agreement with the IRS to audit certain documentation with
respect to such certifications. Non-U.S. Holders should consult their tax
advisors to determine how the regulations will affect their particular
circumstances.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Note in the Specified Currency for
such Note. Currently, there are limited facilities in the United States for
conversion of U.S. dollars into foreign currencies and vice versa, and banks
generally do not offer non-U.S. dollar checking or savings account facilities
in the United States. If requested by a prospective purchaser of Foreign
Currency Notes, however, the Agent soliciting the offer to purchase will
arrange for the conversion of U.S. dollars into the appropriate Specified
Currency to enable the purchaser to pay for such Foreign Currency Notes. Such
requests must be made on or before the fifth Business Day preceding the date
of delivery of the Foreign Currency Notes or by such other date as determined
by the Agent which presents the offer to the Company. Each such conversion
will be made by the relevant Agent on such terms and subject to such
conditions, limitations and charges as such Agent may from time to time
establish in accordance with its regular foreign exchange practice. All costs
of exchange will be borne by the relevant purchaser of the Foreign Currency
Notes.
S-32
<PAGE>
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company to
or through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Chase Securities Inc., Lehman Brothers Inc., and Morgan Stanley
& Co. Incorporated (the "Agents"). The Agents, individually or in a syndicate,
may purchase Notes, as principal, from the Company from time to time for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the applicable
Agent or, if so specified in the applicable Pricing Supplement, for resale at
a fixed offering price. If agreed to by the Company and an Agent, such Agent
may also utilize its reasonable efforts on an agency basis to solicit offers
to purchase the Notes at 100% of the principal amount thereof, unless
otherwise specified in the applicable Pricing Supplement. The Company will pay
a commission to an Agent, ranging from .125% to .750% of the principal amount
of each Note, depending upon its stated maturity, sold through such Agent as
an agent of the Company. Commissions with respect to Notes with stated
maturities in excess of 30 years that are sold through an Agent as an agent of
the Company will be negotiated between the Company and such Agent at the time
of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. An Agent may sell Notes it has purchased from the Company
as principal to certain dealers less a concession equal to all or any portion
of the discount received in connection with such purchase. Such Agent may
allow, and such dealers may reallow, a discount to certain other dealers.
After the initial offering of Notes, the offering price (in the case of Notes
to be resold on a fixed offering price basis), the concession and the
reallowance may be changed.
Notwithstanding the foregoing, the Company may issue and sell Notes, on
terms that are substantially similar (including discounts and commissions) to
the terms described above, to or through one or more agents, dealers or
underwriters other than the Agents or, on its own behalf, directly to the
investors or other purchasers thereof without the intervention or any agents,
dealers or underwriters.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject offers in whole or in part (whether
placed directly with the Company or through an Agent). 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 it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in United States dollars in The City of New York on the date
of settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Agents may from time
to time purchase and sell Notes in the secondary market, but the Agents are
not obligated to do so, and there can be no assurance that there will be a
secondary market for the Notes or that there will be liquidity in the
secondary market if one develops. From time to time, the Agents may make a
market in the Notes, but the Agents are not obligated to do so and may
discontinue any market-making activity at any time.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If the Agent creates or the Agents
create, as the case may be, a short position in Notes, i.e., if it sells or
they sell Notes in an aggregate principal amount exceeding that set forth in
the applicable Pricing Supplement, such Agent(s) may reduce that short
position by purchasing Notes in the open market. In general, purchases of
Notes for the purpose of stabilization or to reduce a short position could
cause the price of Notes to be higher than it might be in the absence of such
purchases.
S-33
<PAGE>
Neither the Company nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described in the immediately preceding paragraph may have on the
price of Notes. In addition, neither the Company nor any of the Agents makes
any representation that the Agents will engage in any such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act. The Company has agreed to indemnify the Agents against, and to
provide contribution with respect to, certain liabilities (including
liabilities under the Securities Act). The Company has agreed to reimburse the
Agents for certain other expenses.
In the ordinary course of its business, the Agents and their affiliates have
engaged and may in the future engage in investment and commercial banking
transactions with the Company and certain of its affiliates. Chase Bank of
Texas, National Association, the Trustee, is an affiliate of Chase Securities
Incorporated.
From time to time, the Company may issue and sell other Debt Securities
described in the accompanying Prospectus, and the amount of Notes offered
hereby is subject to reduction as a result of such sales.
S-34
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT
OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS
SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE AGENTS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR
ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors............................................................... S-2
Recent Development......................................................... S-5
Description of Notes....................................................... S-5
Certain United States Federal Income Tax Considerations.................... S-24
Important Currency Information............................................. S-32
Plan of Distribution....................................................... S-33
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents By Reference............................ 3
The Company................................................................ 4
Use of Proceeds............................................................ 5
Ratio of Earnings to Fixed Charges......................................... 6
Description of Debt Securities............................................. 6
Description of Capital Stock............................................... 16
Distribution............................................................... 19
Legal Matters.............................................................. 19
Experts.................................................................... 19
</TABLE>
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$600,000,000
LOGO
[LOGO OF HALLIBURTON COMPANY APPEARS HERE]
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE, SERIES B
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
SEPTEMBER 29, 1998
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