<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(3)
REGISTRATION NO. 333-38545
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 30, 1997)
LOGO
HELLER FINANCIAL, INC.
U.S.$500,000,000
MEDIUM-TERM NOTES, SERIES G
DUE FROM NINE MONTHS TO THIRTY YEARS FROM DATE OF ISSUE
-------------
Heller Financial, Inc. (the "Company") may from time to time offer its
Medium-Term Notes, Series G (the "Notes"), with an aggregate initial public
offering price or purchase price of up to U.S.$500,000,000 or the equivalent
thereof in other currencies or composite currencies. These Notes constitute a
portion of the aggregate of $2,500,000,000 in Medium-Term Notes, Series G
initially described in the Company's Prospectus Supplement dated October 17,
1995 to the Company's Prospectus dated October 6, 1995. As of November 3,
1997, the Company had issued an aggregate of $1,959,750,000 in principal
amount of its Medium-Term Notes, Series G.
The Notes will be offered at varying maturities from nine months to thirty
years from their dates of issue and may be subject to redemption at the option
of the Company or repayment at the option of the holder prior to maturity.
Each Note will be denominated in U.S. dollars or in other currencies, European
Currency Units ("ECUs") or other composite currencies (in any case, the
"Specified Currency") as set forth in a pricing supplement (the "Pricing
Supplement") to this Prospectus Supplement. See "Risk Factors--Currency Risks"
and "Important Currency Information." Each Note will bear interest at a fixed
rate (a "Fixed Rate Note"), which may be zero in the case of certain Notes
issued at a price representing a discount from the principal amount payable at
maturity, or at a floating rate (a "Floating Rate Note") determined by
reference to the Commercial Paper Rate, LIBOR, the Treasury Rate, the Federal
Funds Rate, the Prime Rate or any other Base Rate (all as defined herein) set
forth in the applicable Pricing Supplement, as adjusted by the Spread (as
defined herein) or Spread Multiplier (as defined herein), if any, applicable
to such Note. See "Description of Notes."
A Note may provide for principal payments to be made over the life of the
Note (an "Amortizing Note"), or the principal amount payable at the stated
maturity of, or the interest on a Note, or both, may be determined by
reference to currencies, currency units, commodity prices, financial or non-
financial indices or other factors (an "Indexed Note"), all as indicated in
the applicable Pricing Supplement. See "Description of Notes--Indexed Notes"
and "--Amortizing Notes."
Each Note will be issued in fully registered form and will be represented by
either a global certificate (a "Global Security") registered in the name of,
or the name of a nominee of, The Depository Trust Company ("DTC") or another
depositary (DTC or such other depositary as is specified in the applicable
Pricing Supplement is herein referred to as the "Depositary", and each Note
represented by a Global Security is herein referred to as a "Book-Entry
Note"), or a certificate issued in definitive form (a "Certificated Note"), as
set forth in the applicable Pricing Supplement. Interests in Book-Entry Notes
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. See "Description of Notes--
Book-Entry System."
Each Note will be issued in the denomination of U.S.$1,000 or any larger
amount that is an integral multiple of U.S.$1,000 or, in the case of a Note
denominated in a Specified Currency other than U.S. dollars, in the
denominations set forth in the applicable Pricing Supplement.
Unless otherwise indicated, interest on each Fixed Rate Note will accrue
from its date of issue and will be payable either semiannually on each March 1
and September 1 or annually on each February 1, and at maturity. Interest on
each Floating Rate Note will accrue from its date of issue and will be payable
monthly, quarterly, semiannually or annually, as set forth in the applicable
Pricing Supplement, and at maturity.
The Specified Currency, any applicable interest rate or interest rate
formula, the issue price, the maturity, any interest payment dates, any
redemption provisions and any repayment provisions for each Note, whether such
Note may be issued as an Indexed Note or an Amortizing Note, whether such Note
will be a Book Entry Note or a Certificated Note and any other terms
applicable to such Note will be established at the time of issuance of each
such Note and will be set forth therein and in the applicable Pricing
Supplement.
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SEE "RISK FACTORS" ON PAGE S-2 FOR A DESCRIPTION OF CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
PRICE TO PUBLIC(1) AGENTS' COMMISSION(2) PROCEEDS TO THE COMPANY(2)(3)
- -----------------------------------------------------------------------------------------------------------------
Per Note ................... 100% .125% to .750% 99.250%-99.875%
- -----------------------------------------------------------------------------------------------------------------
Total(4).................... U.S.$500,000,000 U.S.$625,000-U.S.$3,750,000 U.S.$496,250,000-U.S.$499,375,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Each Note will be sold at 100% of its principal amount, except as may be
provided in the applicable Pricing Supplement.
(2) The Company will pay a commission to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, BancAmerica Robertson Stephens, Inc.,
Chase Securities Inc., Citicorp Securities, Inc., Credit Suisse First
Boston Corporation, First Chicago Capital Markets, Inc., Goldman, Sachs &
Co., Lehman Brothers, Lehman Brothers Inc., J.P. Morgan Securities Inc. or
UBS Securities Inc., each as agent (collectively, the "Agents"), in the
form of a discount, ranging from .125% to .750%, depending upon the
maturity of the Note, of the principal amount of any Note sold through
such Agent. The Company may also sell Notes to an Agent at a discount for
resale to investors or other purchasers at varying prices related to
prevailing market prices at the time of resale to be determined by such
Agent, or otherwise. 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 equal to the commission applicable to an agency sale of a Note
of identical maturity, and may be resold by such Agent.
(3) Before deducting other expenses payable by the Company estimated to be
U.S.$250,000, including reimbursement of certain of the Agents' expenses.
(4) Or the equivalent thereof in other currencies or composite currencies. The
Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
-------------
The Notes are being offered on a continuous basis by the Company through the
Agents, each of whom has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. In addition, Notes may be sold to the Agents, as
principals, for resale to investors or other purchasers. The Company may also
sell Notes directly to investors on its behalf. The Notes will not be listed
on any securities exchange, and there can be no assurance that the Notes
offered hereby will be sold or that there will be a secondary market for any
of the Notes. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or the Agent who solicits any
offer may reject such offer in whole or in part. See "Plan of Distribution."
-------------
MERRILL LYNCH & CO.
BANCAMERICA ROBERTSON STEPHENS, INC.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
FIRST CHICAGO CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
J.P. MORGAN
SECURITIES INC.
------------- UBS SECURITIES
INC.
The date of this Prospectus Supplement is November 4, 1997.
<PAGE>
IN CONNECTION WITH AN OFFERING OF NOTES PURCHASED BY THE AGENTS AS PRINCIPAL
ON A FIXED OFFERING PRICE BASIS, THE AGENTS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF SUCH NOTES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND THE PURCHASE OF NOTES TO COVER SHORT
POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
----------------
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus Supplement, the accompanying
Prospectus and the applicable Pricing Supplement, the following risk factors
before purchasing the Notes offered hereby.
CURRENCY RISKS
An investment in a Note denominated in a Specified Currency other than the
currency of the country in which a purchaser is resident or the currency
(including any composite currency) in which a purchaser conducts its primary
business (the "home currency") entails significant risks that are not
associated with a similar investment in a security denominated in the home
currency. Similarly, an investment in a Currency Indexed Note (as defined
herein) entails significant risks that are not associated with a similar
investment in a security the principal amount of which payable at maturity is
not determined by reference to the rate of exchange between two currencies or
composite currencies. Such risks include, without limitation, the possibility
of significant changes in the rate of exchange between the home currency and
the Specified Currency, in the case of a Note denominated in a Specified
Currency other than the applicable home currency, and in the rate of exchange
between the Denominated Currency (as defined herein) and the Indexed Currency
(as defined herein), in the case of a Currency Indexed Note, and the
possibility of the imposition or modification of foreign exchange controls with
respect to the Specified Currency. Such risks generally depend on factors over
which the Company has no control, such as economic, financial and political
events and the supply of, and demand for, the relevant currencies. In recent
years, rates of exchange for certain 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 the rate that may occur during the term
of any Note. Depreciation of the Specified Currency in which a Note is
denominated against the relevant home currency would result in a decrease in
the effective yield of such Note below its coupon rate and in certain
circumstances could result in a loss to the investor on a home currency basis.
Similarly, depreciation of the Denominated Currency of a Currency Indexed Note
against the relevant Indexed Currency would result in the principal amount
payable at the Stated Maturity Date being less than the Face Amount of such
Currency Indexed Note which, in turn, would decrease the effective yield of
such Note below its coupon rate and could also result in a loss to the
investor. See "Description of Notes--Indexed Notes--Currency Indexed Notes--
Payment of Principal and Interest".
Governments or monetary authorities have from time to time imposed, and may
in the future impose or revise, exchange controls that could affect exchange
rates as well as the availability of a Specified Currency for making payments
with respect to a Note. At present, the Company has identified the following
currencies and currency units in which payments on Notes may be made:
Australian dollars, Canadian dollars, Danish kroner, English pounds sterling,
Italian lire, New Zealand dollars, United States dollars and ECUs. There can be
no assurances that exchange controls will not restrict or prohibit payments in
any such currency or currency unit. Even if there are no actual exchange
controls, it is possible that on a payment date with respect to any particular
Note, the Specified Currency for such Note would not be available to the
Company to make payments then due. In such event, the Company will make such
payments in the manner set forth under "Description of Notes--Indexed Notes--
Currency Indexed Notes--Payment Currency".
Unless otherwise provided in the applicable Pricing Supplement, Notes
denominated in foreign currencies other than ECUs will not be sold in, or to
residents of, the country of the Specified Currency in which particular Notes
are denominated.
The Pricing Supplement relating to each Note denominated in a Specified
Currency other than U.S. dollars or any Currency Indexed Note will contain
information concerning relevant historical exchange rates for the applicable
Specified Currency, Denominated Currency and/or Indexed Currency, as the case
may be, a description of such currency or currencies and any exchange controls
affecting such currency or currencies.
S-2
<PAGE>
THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO AND THE PROSPECTUS
DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED IN A
CURRENCY (INCLUDING ANY COMPOSITE CURRENCY) OTHER THAN A PROSPECTIVE
PURCHASER'S HOME CURRENCY, OR OF AN INVESTMENT IN CURRENCY INDEXED NOTES, AND
THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF
SUCH RISKS AS THEY EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH
RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR
OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN
NOTES DENOMINATED IN A CURRENCY (INCLUDING ANY COMPOSITE CURRENCY) OTHER THAN
THE PARTICULAR HOME CURRENCY, OR OF AN INVESTMENT IN CURRENCY INDEXED NOTES.
SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, if any, to one or more currencies or composite currencies (including
exchange rates and swap indices between currencies or composite currencies),
commodities, 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 the resulting interest
rate will be less than that payable on a conventional fixed rate or floating
rate debt security issued by the Company at the same time, that the repayment
of principal and/or premium, if any, can occur at times other than that
expected by the investor, and that the investor could lose all or a substantial
portion of principal and/or premium, if any, payable on the Stated Maturity
Date (as defined herein). 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, and/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 be expected to 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 might affect the market value of
such Notes. Since the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance that a secondary market for the Notes will develop or as to
the continued liquidity of such market if one develops. See "Plan of
Distribution."
The secondary market, if any, for such Notes will be affected by a number of
factors independent of the creditworthiness of the Company and the value of the
applicable index or indices or formula or formulas, including the complexity
and volatility of each such index or formula, the method of calculating the
principal, premium, if any, and/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 any applicable index or formula and the level, direction
and volatility of market interest rates generally. Such factors also will
affect the market value of 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. Investors may not be able to sell such Notes
readily or at prices that will enable investors to realize their anticipated
yield. No investor should purchase Notes unless such investor understands and
is able to bear the risk that such Notes
S-3
<PAGE>
may not be readily saleable, that the value of such Notes will fluctuate over
time and that such fluctuations may be significant.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for Notes in the currency in which such Notes
are denominated. Currently, there are limited facilities in the United States
for conversion of U.S. dollars into foreign currencies and vice versa, and
banks may have limited ability to offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested by a prospective
purchaser of Notes denominated in a currency other than U.S. dollars, the Agent
soliciting the offer to purchase will arrange for the conversion of U.S.
dollars into such currency to enable the purchaser to pay for such Notes. Such
requests must be made on or before the third Business Day preceding the date of
delivery of the Notes, or by such other date as determined by such Agent. 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 purchasers of the Notes.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities (as defined in the
accompanying Prospectus) set forth under the heading "Description of Debt
Securities" in the Prospectus, to which description reference is hereby made.
The following description will apply to each Note unless otherwise specified in
the applicable Pricing Supplement.
GENERAL
The Notes will be issued as a series of Debt Securities under an indenture
relating to senior securities, dated as of September 1, 1995, as amended (the
"Senior Indenture"), between the Company and State Street Bank and Trust
Company, as successor to Shawmut Bank Connecticut, National Association, as
trustee (the "Trustee"), which is more fully described in the Prospectus. A
copy of the Senior Indenture is filed as an exhibit to the Registration
Statement of which the Prospectus is a part. The Company has appointed The Fuji
Bank and Trust Company as Paying Agent and Securities Registrar under the
Senior Indenture with respect to the Notes. In addition, the Trustee has
appointed The Fuji Bank and Trust Company as Authenticating Agent under the
Senior Indenture with respect to the Notes.
The Notes will be unsecured obligations of the Company and will rank pari
passu with all other unsecured Senior Debt (as defined in the Senior Indenture)
of the Company.
Neither the Senior Indenture nor the Notes afford the holders of the Notes
specific protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect holders of the Notes.
The Notes are limited to an aggregate initial public offering price or
purchase price of up to U.S.$500,000,000 or the equivalent thereof in other
currencies or composite currencies. These Notes constitute a portion of the
aggregate of $2,500,000,000 in Medium-Term Notes, Series G initially described
in the Company's Prospectus Supplement dated October 17, 1995 to the Company's
Prospectus dated October 6, 1995. As of November 3, 1997, the Company had
issued an aggregate of $1,959,750,000 in principal amount of its Medium-Term
Notes, Series G. The U.S. dollar equivalent of Notes denominated in currencies
other than U.S. dollars will be determined by the Exchange Rate Agent (as
defined below), on the basis of the noon buying rate for cable transfers in The
City of New York, as determined by the Federal Reserve Bank of New York (the
"Market Exchange Rate"), for such currencies on the applicable issue dates.
S-4
<PAGE>
The Notes will be offered on a continuous basis by the Company through the
Agents and will mature on any Business Day (as defined below) from nine months
to thirty years from the date of issue, as selected by the purchaser and agreed
to by the Company, and may be subject to redemption at the option of the
Company or repayment at the option of the holder prior to maturity as set forth
under "--Redemption and Repayment." Each Note will be denominated in U.S.
dollars or in other currencies, ECUs or such other composite currencies (in any
case, the "Specified Currency") as specified in the applicable Pricing
Supplement. Each Note will bear interest at either (i) a fixed rate (a "Fixed
Rate Note"), which may be zero in the case of certain Notes issued at an Issue
Price (as defined below) representing a discount from the principal amount
payable at maturity (a "Zero-Coupon Note"), or (ii) a floating rate (a
"Floating Rate Note") determined by reference to the interest rate basis or
combination of interest rate bases (the "Base Rate") specified in the
applicable Pricing Supplement which may be adjusted by a Spread or Spread
Multiplier (each as defined below).
The Notes may be issued as Currency Indexed Notes the principal amount of
which payable at maturity will be determined by the difference between the
currency in which such Notes are denominated and another currency or composite
currency set forth in the applicable Pricing Supplement. See "--Indexed Notes--
Currency Indexed Notes" below. Notes may also be issued with the principal
amount payable at the Stated Maturity Date (as defined below) and/or the amount
of interest payable on any Interest Payment Date (as defined below) to be
determined by reference to one or more commodity prices, equity indices or
other financial or non-financial indices and on such other terms as may be set
forth in the relevant Pricing Supplement (together with the Currency Indexed
Notes, the "Indexed Notes"). Information as to the method for determining the
principal amount payable at maturity and/or the amount of interest payable and
certain additional tax considerations regarding Indexed Notes will be set forth
in the applicable Pricing Supplement. In addition, Notes may be issued from
time to time as Amortizing Notes (as defined below) with the principal amount
payable in accordance with a table included in the applicable Pricing
Supplement.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note in fully registered form without coupons. Except as set forth
under "Book-Entry System" below, Book-Entry Notes will not be issuable in
certificated form. It is currently contemplated that only Notes that are
denominated in a Specified Currency of U.S. dollars will be issued as Book-
Entry Notes.
The authorized denominations of each Note denominated in U.S. dollars will be
U.S.$1,000 or any larger amount that is an integral multiple of U.S.$1,000. The
authorized denominations of Notes denominated in a Specified Currency other
than U.S. dollars will be set forth in the applicable Pricing Supplement.
"Business Day" means any day, other than a Saturday or Sunday, that meets
each of the following applicable requirements: the day is (i) not a day on
which banking institutions are authorized or required by law or regulation to
be closed in The City of New York, (ii) if the Note is denominated in a
Specified Currency other than U.S. dollars, (a) not a day on which banking
institutions are authorized or required by law or regulation to close in the
financial center of the country issuing the Specified Currency (which in the
case of ECUs shall be Brussels, Belgium) and (b) a day on which banking
institutions in such financial center are carrying out transactions in such
Specified Currency and (iii) with respect to LIBOR Notes, a London Banking Day.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Original Issue Discount Note" means (i) a Note, including any Zero-Coupon
Note, that has a stated redemption price at maturity that exceeds its Issue
Price by at least 0.25% of its principal amount multiplied by the number of
full years from the Original Issue Date to the Stated Maturity Date (each as
defined below) for such Note and (ii) any other Note designated by the Company
as issued with original issue discount for United States federal income tax
purposes.
The Pricing Supplement relating to each Note will describe the following
terms: (i) the Specified Currency for such Note (and, if such Specified
Currency is other than U.S. dollars, certain other terms relating to such Note,
including the authorized denominations); (ii) the price (which may be expressed
as a
S-5
<PAGE>
percentage of the aggregate principal amount thereof) at which such Note will
be issued (the "Issue Price"); (iii) the date on which such Note will be issued
(the "Original Issue Date"); (iv) the date on which such Note will mature (the
"Stated Maturity Date"); (v) whether such Note is a Fixed Rate Note or a
Floating Rate Note; (vi) if such Note is a Fixed Rate Note, the rate per annum
at which such Note will bear interest, if any, and the interest payment date or
dates, if different from those set forth below under "Fixed Rate Notes"; (vii)
if such Note is a Floating Rate Note, the Base Rate, the Initial Interest Rate,
the Interest Determination Dates, the Interest Reset Period, the Interest Reset
Dates, the Interest Payment Period, the Interest Payment Dates, the Index
Maturity, the Maximum Interest Rate, if any, the Minimum Interest Rate, if any,
the Spread, if any, the Spread Multiplier, if any (all as defined below), and
any other terms relating to the particular method of calculating the interest
rate for such Note; (viii) whether such Note is an Original Issue Discount Note
and, if so, the original issue discount; (ix) if such Note is an Indexed Note,
information pertaining to the method for determining the principal amount
payable at the Stated Maturity Date and historical information relating to the
specified index; (x) if such Note is a Currency Indexed Note, the Denominated
Currency, the Indexed Currency, the Face Amount, the Base Exchange Rate, the
Determination Agent and the Reference Dealers relating to such Currency Indexed
Notes (all as defined below); (xi) whether such Note may be redeemed at the
option of the Company, or repaid at the option of the holder, prior to the
Stated Maturity Date and, if so, the provisions relating to such redemption or
repayment; (xii) whether such Note will be issued initially as a Book-Entry
Note or a Certificated Note; (xiii) if such Note is an Amortizing Note, a table
setting forth repayment information; (xiv) certain additional United States
federal income tax considerations; and (xv) any other terms of such Note not
inconsistent with the provisions of the Senior Indenture.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of, and any premium and interest on, each Note are payable by
the Company in the Specified Currency for such Note. If the Specified Currency
for a Note is other than U.S. dollars, the Company will, unless otherwise
specified in the applicable Pricing Supplement, appoint an agent (initially,
The Fuji Bank and Trust Company) (the "Exchange Rate Agent") to determine the
exchange rate for converting all payments in respect of such Note into U.S.
dollars in the manner described in the following paragraph and to perform such
conversions on behalf of the Company. Notwithstanding the foregoing, the holder
of a Note denominated in a Specified Currency other than U.S. dollars may (if
the Note and the applicable Pricing Supplement so indicate) elect to receive
all such payments in the Specified Currency by delivery of a written request to
the Paying Agent (which shall initially be The Fuji Bank and Trust Company, Two
World Trade Center, 81st Floor, New York, New York 10048 (Attention: Trust
Administration Department) or at such other address as it may designate as its
principal corporate trust office in The City of New York) which must be
received by the Paying Agent on or prior to the applicable record date or at
least 15 calendar days prior to maturity, as the case may be. Such election
shall remain in effect unless and until changed by written notice to the Paying
Agent, but the Paying Agent must receive written notice of any such change on
or prior to the applicable record date or at least 15 calendar days prior to
maturity, as the case may be. Any such election or change thereof shall be
deemed to be made for all Notes denominated in such Specified Currency which
are registered in the name of such holder, unless such holder specifies in such
written request the particular Notes (by the Note number of each such Note)
with regard to which such election or change thereof shall not apply. However,
such election may not be effective under certain circumstances as described
below under "Indexed Notes--Currency Indexed Notes--Payment Currency." In the
absence of manifest error, all determinations by the Exchange Rate Agent shall
be final and binding on the Company and the holders of the Notes. Until the
Notes are paid or payment thereof is duly provided for, the Company will, at
all times, maintain a Paying Agent in The City of New York capable of
performing the duties described in the Senior Indenture and herein to be
performed by the Paying Agent. The Company will notify the holders of the
Notes, in accordance with the Senior Indenture, of any change in the Paying
Agent or its address.
In the case of a Note denominated in a Specified Currency other than U.S.
dollars, unless the holder has elected otherwise as provided above, payment in
respect of such Note shall be made in U.S. dollars based
S-6
<PAGE>
upon the exchange rate as determined by the Exchange Rate Agent based on the
highest firm bid quotation expressed in U.S. dollars received by such Exchange
Rate Agent at approximately 11:00 a.m., New York City time, on the second
Business Day preceding the applicable payment date, from three recognized
foreign exchange dealers 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)
for the purchase by the quoting dealer, for settlement on such payment date, of
the aggregate amount of the Specified Currency payable to all holders of Notes
denominated in such Specified Currency electing to receive payment in U.S.
dollars on such payment date. If no such bid quotations are available, payments
will be made in the Specified Currency, unless such Specified Currency is
unavailable due to the imposition of exchange controls or to other
circumstances beyond the Company's control, in which case payment will be made
as described below under "--Indexed Notes--Currency Indexed Notes--Payment
Currency." All currency exchange costs will be borne by the holders of such
Notes by deductions from such payments.
Unless otherwise specified in the applicable Pricing Supplement, payments in
U.S. dollars of interest on Certificated Notes (other than interest payable at
maturity or upon earlier redemption or repayment) will be made by mailing a
check to the holder at the address of such holder appearing in the security
register on the applicable record date (which, in the case of Global Securities
representing Book-Entry Notes, will be a nominee of the Depositary).
Notwithstanding the foregoing, a holder of U.S.$10,000,000 or more in aggregate
principal amount of Certificated Notes of like tenor and terms (or a holder of
the equivalent thereof in a Specified Currency other than U.S. dollars) shall
be entitled to receive such payments in U.S. dollars by wire transfer of
immediately available funds, but only if appropriate payment instructions have
been received in writing by the Paying Agent not less than 15 calendar days
prior to the applicable Interest Payment Date. Simultaneously with the election
by any holder to receive payments in a Specified Currency other than U.S.
dollars (by written request to the Paying Agent, as provided above), such
holder shall provide appropriate payment instructions to the Paying Agent, and
all such payments will be made in immediately available funds to an account
maintained by the payee in the Specified Currency. Beneficial owners of Book-
Entry Notes will be paid in accordance with the Depositary's and the
participant's procedures in effect from time to time as described under "Book-
Entry System" below. Unless otherwise specified in the applicable Pricing
Supplement, principal, and any premium and interest payable at maturity or upon
earlier redemption or repayment in respect of a Note, will be paid in
immediately available funds upon surrender of such Note accompanied by wire
instructions at the office of the Paying Agent.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described in the Prospectus under "Description of Debt
Securities--Provisions Applicable to Senior, Subordinated and Junior
Subordinated Debt Securities--Events of Default, Notice and Waiver," the amount
of principal due and payable with respect to such Note shall be the Amortized
Face Amount of such Note as of the date of such declaration. The "Amortized
Face Amount" of an Original Issue Discount Note shall be the amount equal to
(i) the Issue Price set forth in the applicable Pricing Supplement plus (ii)
the portion of the difference between the Issue Price and the principal amount
of such Note that has accrued at the yield to maturity set forth in the Pricing
Supplement (computed in accordance with generally accepted United States bond
yield computation principles) to such date of declaration, but in no event
shall the Amortized Face Amount of an Original Issue Discount Note exceed its
principal amount.
The record date with respect to any Interest Payment Date (as defined below)
shall be the date (whether or not a Business Day) 15 calendar days (unless
otherwise specified in the applicable Pricing Supplement) immediately preceding
such Interest Payment Date. Interest payable and punctually paid or duly
provided for on any Interest Payment Date will be paid to the person in whose
name a Note is registered at the close of business on the record date
immediately preceding such Interest Payment Date; provided, however, that the
first payment of interest on any Note with an Original Issue Date between a
record date and an Interest Payment Date or on an Interest Payment Date will be
made on the Interest Payment Date following the next succeeding record date to
the registered holder on such next succeeding record date; provided, further,
that interest payable at maturity or upon earlier redemption or repayment will
be payable to the person to whom principal shall be payable.
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All percentages resulting from any calculations will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point (with
five one-millionths of a percentage point being rounded upward) and all
currency or currency unit amounts used in or resulting from such calculation on
the Notes will be rounded to the nearest one-hundredth of a unit (with .005 of
a unit being rounded upward).
The interest rate on the Notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States law
of general application. Under present New York law, the maximum rate of
interest is 25% per annum on a simple interest basis, with certain exceptions.
This limit may not apply to Notes in which U.S.$2,500,000 or more has been
invested.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or payment thereof is duly provided for. The Pricing Supplement relating
to each Fixed Rate Note will indicate whether interest on such Fixed Rate Note
will be payable either semiannually on each March 1 and September 1 or annually
on each February 1 (each an "Interest Payment Date") and, in either case, at
maturity or upon earlier redemption or repayment. Unless otherwise provided,
each payment of interest in respect of an Interest Payment Date will include
interest accrued to, but excluding, such Interest Payment Date. Interest on
Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-
day months.
Any payment otherwise required to be made in respect of a Fixed Rate Note on
a date that is not a Business Day for such Fixed Rate Note need not be made on
such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on such date, and no additional interest shall
accrue as a result of such delayed payment.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its Original Issue Date at
rates determined by reference to the Base Rate plus or minus the Spread, if
any, or multiplied by the Spread Multiplier, if any (each as specified in the
applicable Pricing Supplement) until the principal thereof is paid or payment
thereof is duly provided for. The "Spread" is the number of basis points (one
basis point equals one-hundredth of a percentage point) specified in the
applicable Pricing Supplement as being applicable to such Note, and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement as
being applicable to such Note. Any Floating Rate Note may also have either or
both of the following: (i) a maximum numerical interest rate limitation, or
ceiling, on the rate of interest that may accrue during any interest period
(the "Maximum Interest Rate") and (ii) a minimum numerical interest rate
limitation, or floor, on the rate of interest that may accrue during any
interest period (the "Minimum Interest Rate"). The applicable Pricing
Supplement will designate one of the following Base Rates as applicable to each
Floating Rate Note: (a) the Commercial Paper Rate (a "Commercial Paper Rate
Note"), (b) LIBOR (a "LIBOR Note"), (c) the Treasury Rate (a "Treasury Rate
Note"), (d) the Federal Funds Rate (a "Federal Funds Note"), (e) the Prime Rate
(a "Prime Rate Note") or (f) such other Base Rate or Spread as is 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 (such period being the "Interest
Reset Period" for such Note, and the first day of each Interest Reset Period
being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
the Interest Reset Date will be, in the case of Floating Rate Notes that reset
daily, each Business Day; in the case of Floating Rate Notes (other than
Treasury Rate Notes) that reset weekly, Wednesday of each week; in the case of
Treasury Rate Notes that reset weekly, Tuesday of each week (except as provided
below); in the case of Floating Rate Notes that reset monthly, the third
Wednesday of each month; in the case of Floating Rate Notes that reset
quarterly, the third Wednesday of March, June, September and December; in the
case of Floating Rate Notes that reset
S-8
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semiannually, the third Wednesday of each of two months specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes that
reset annually, the third Wednesday of the month specified in the applicable
Pricing Supplement. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Reset Date shall
be postponed to the next day that is a Business Day, except, in the case of a
LIBOR Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day. If an
auction of Treasury bills (as defined below) falls on a day that is an Interest
Reset Date for Treasury Rate Notes, the Interest Reset Date shall be the
following day that is a Business Day.
Interest on each Floating Rate Note will be payable monthly, quarterly,
semiannually or annually (the "Interest Payment Period"). Except as provided
below or in the applicable Pricing Supplement, the date or dates on which
interest will be payable (each an "Interest Payment Date") will be, in the case
of Floating Rate Notes with a monthly Interest Payment Period, the third
Wednesday of each month; in the case of Floating Rate Notes with a quarterly
Interest Payment Period, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes with a semiannual Interest Payment
Period, the third Wednesday of each of the two months specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes with an
annual Interest Payment Period, the third Wednesday of the month specified in
the applicable Pricing Supplement. If any Interest Payment Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Payment Date shall be postponed to the next day that is a Business Day
except, in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding Business Day. If the Stated Maturity Date of a Floating Rate Note
falls on a day that is not a Business Day, the payment of principal, premium,
if any, and interest will be made on the next succeeding Business Day, and no
interest on such payment shall accrue for the period from and after such Stated
Maturity Date.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments on each Interest Payment Date for Floating Rate Notes will include
accrued interest from and including the Original Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, such Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, accrued
interest will be calculated by multiplying the principal amount of a Floating
Rate Note by an accrued interest factor. Such accrued interest factor will be
computed by adding the interest factors calculated for each day in the period
for which accrued interest is being calculated. The interest factor (expressed
as a decimal) for each such day will be computed by dividing the interest rate
applicable to such day by 360, in the case of Commercial Paper Rate Notes,
LIBOR Notes, Federal Funds Notes and Prime Rate Notes, or by the actual number
of days in the year, in the case of Treasury Rate Notes. The interest rate in
effect on each day will be (i) if such day is an Interest Reset Date, the
interest rate with respect to the Interest Determination Date (as defined
below) pertaining to such Interest Reset Date, or (ii) if such day is not an
Interest Reset Date, the interest rate with respect to the Interest
Determination Date pertaining to the next preceding Interest Reset Date,
subject in either case to any Maximum or Minimum Interest Rate limitation
referred to above and to any adjustment by a Spread or Spread Multiplier
referred to above; provided, however, that the interest rate in effect for the
period from the Original Issue Date to the first Interest Reset Date set forth
in the applicable Pricing Supplement will be the "Initial Interest Rate"
determined as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for
Commercial Paper Rate Notes, Federal Funds Rate Notes and Prime Rate Notes will
be the second Business Day next preceding such Interest Reset Date. The
Interest Determination Date pertaining to an Interest Reset Date for a LIBOR
Note will be the second London Banking Day next preceding such Interest Reset
Date. The Interest Determination Date pertaining to an Interest Reset Date for
a Treasury Rate Note will be the day of the week in which such Interest Reset
Date falls on which Treasury bills of the Index Maturity specified on the face
of such Note are auctioned. Treasury
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bills are normally sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction of Treasury bills is so held on the
preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week.
The "Calculation Date", where applicable, pertaining to an 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 or Stated Maturity Date (or earlier redemption or
repayment).
Unless otherwise specified in the applicable Pricing Supplement, the Company
will perform the functions of the calculation agent (in such capacity, the
"Calculation Agent") with respect to Floating Rate Notes. Upon request of the
holder of any Floating Rate Note, the Calculation Agent will provide the
interest rate then in effect and, if determined, the interest rate that will
become effective on the next Interest Reset Date with respect to such Floating
Rate Note.
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the interest rate
calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (calculated as described below) of the rate on such date
for commercial paper having the Index Maturity designated in the applicable
Pricing Supplement as such rate is published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates", or any successor publication of such Board ("H.15(519)"), under the
heading "Commercial Paper--Nonfinancial." If such rate is not published by 9:00
a.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on that Interest Determination Date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 p.m. Quotations for U.S. Government Securities" or any
successor publication of the Federal Reserve Bank ("Composite Quotations")
under the heading "Commercial Paper." If such rate is not published by 3:00
p.m., New York City time on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate for that Interest
Determination Date shall be calculated by the Calculation Agent and shall be
the Money Market Yield of the arithmetic mean of the offered rates of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent as of 11:00 a.m., New York City time, on that Interest
Determination Date, for commercial paper having the Index Maturity designated
in the applicable Pricing Supplement placed for an industrial issuer whose bond
rating is "AA," or the equivalent, from a nationally recognized rating agency;
provided, however, that, if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate will be the Commercial Paper Rate in effect on such Interest
Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
------------
Money Market Yield =^
X 100
360 - (D X
M)
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
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LIBOR Notes
Each LIBOR Note will bear interest at the interest rate calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any, specified in
such Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to an Interest Determination Date, LIBOR will be, as
specified in the applicable Pricing Supplement, either: (a) the rate for
deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Banking Day
immediately following that Interest Determination Date, that appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on that Interest
Determination Date ("LIBOR Telerate"), or (b) the arithmetic mean of the
offered rates for deposits in U.S. dollars having the Index Maturity
designated in the applicable Pricing Supplement, commencing on the second
London Banking Day immediately following that Interest Determination Date,
that appear on the Reuters Screen LIBO Page as of 11:00 a.m., London time,
on that Interest Determination Date, if at least two such offered rates
appear on the Reuters Screen LIBO Page ("LIBOR Reuters"). "Reuters Screen
LIBO Page" means the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks). "Telerate Page 3750" means the display designated as
page "3750" on the Telerate Service (or such other page as may replace page
3750 on that service or such other service or services as may be nominated
by the British Bankers' Association for the purpose of displaying London
interbank offered rates for U.S. dollar deposits). If neither LIBOR Reuters
nor LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR
will be determined as if LIBOR Telerate had been specified. If fewer than
two offered rates appear on the Reuters Screen LIBO Page, or if no rate
appears on the Telerate Page 3750, as applicable, LIBOR in respect of that
Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to an Interest Determination Date on which fewer than
two offered rates appear on the Reuters Screen LIBO Page, as specified in
(i)(a) above, or on which no rate appears on Telerate Page 3750, as
specified in (i)(b) above, as applicable, LIBOR will be determined on the
basis of the rates at which deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing Supplement are offered at
approximately 11:00 a.m., London time, on that Interest Determination Date
by four major banks in the London interbank market selected by the
Calculation Agent ("Reference Banks") to prime banks in the London
interbank market commencing on the second London Banking Day immediately
following that Interest Determination Date and in a principal amount equal
to an amount of not less than $1,000,000 that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR in respect of that Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR in respect of that Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m., New York
City time, on that Interest Determination Date by three major banks in The
City of New York selected by the Calculation Agent for loans in U.S.
dollars to leading European banks having the Index Maturity designated in
the applicable Pricing Supplement commencing on the second London Banking
Day immediately following that Interest Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR with
respect to such Interest Determination Date will be the rate of LIBOR in
effect on such date.
If LIBOR with respect to any LIBOR Note is indexed to the offered rates for
deposits in a Specified Currency other than U.S. dollars, the applicable
Pricing Supplement will set forth the method for determining such rate.
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<PAGE>
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any, specified in such Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such Interest Determination Date of direct
obligations of the United States ("Treasury bills") having the Index Maturity
designated in the applicable Pricing Supplement as such rate is published in
H.15(519) under the heading "U.S. Government Securities--Treasury bills--
auction average (investment)" or, if such rate is not so published by 3:00
p.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Treasury Rate shall be the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury bills having the Index Maturity designated in the applicable
Pricing Supplement are not published or reported as provided above by 3:00
p.m., New York City time, on such Calculation Date or if no such auction is
held in a particular week, then the Treasury Rate for that Interest
Determination Date shall be calculated by the Calculation Agent and shall be a
yield to maturity (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic
mean of the secondary market bid rates, as of approximately 3:30 p.m., New York
City time, on such Interest Determination Date, of three leading primary United
States government securities dealers selected by the Calculation Agent for the
issue of Treasury bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate will be the Treasury Rate in
effect on such Interest Determination Date.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any, specified in such Note and the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
that day published in H.15(519) under the heading "Federal Funds (Effective)"
or, if not so published by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, then the Federal Funds
Rate shall be the rate on such Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate". If
neither of such rates is published by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate will be calculated by the Calculation Agent and will be the
arithmetic mean on such Interest Determination Date calculated by the
Calculation Agent of the rates for the last transaction of not less than
$1,000,000 in overnight Federal Funds arranged by three leading brokers of
Federal Funds transactions in The City of New York (which may include one or
more of the Agents) 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 selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate will be the Federal Funds
Rate in effect on such Interest Determination Date.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate calculated with
reference to the Prime Rate and the Spread or Spread multiplier, if any,
specified in such Note and the applicable Pricing Supplement.
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<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, the "Prime
Rate" means, with respect to any Interest Determination Date, the rate on such
date as such rate is published in H.15(519) under the heading "Bank Prime
Loan." If such rate is not published prior to 3:00 P.M., New York City time, on
the related Calculation Date, then the Prime Rate 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 on 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 shall be the arithmetic mean
of the prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than four such quotations are so
provided, then the Prime Rate 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 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 as many substitute banks or trust
companies as necessary in order to obtain four such prime rate quotations,
provided such substitute banks or trust companies are organized and doing
business under the laws of the United States, or any state thereof, each having
total equity capital of at least $500 million and being subject to supervision
or examination by a Federal or State authority, selected by the Calculation
Agent to provide such rate or rates; provided, however, that if the banks or
trust companies so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Prime Rate determined as of such Interest
Determination Date will be the in effect on such Interest Determination Date.
"Reuters Screen USPRIME1" means the display designated as page "USPRIME1" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
USPRIME1 page on that service for the purpose of displaying prime rates or base
lending rates of major U.S. banks).
INDEXED NOTES
GENERAL
The Company may from time to time offer Notes the principal amount of which
payable at the Stated Maturity Date is determined by the rate of exchange
between the currency or composite currency in which such Notes (the "Currency
Indexed Notes") are denominated (the "Denominated Currency") and the other
currency or composite currency designated as the Indexed Currency in the
applicable Pricing Supplement (the "Indexed Currency"). In addition, Notes may
be issued from time to time with the principal amount payable at the Stated
Maturity Date and/or the amount of interest payable on any Interest Payment
Date to be determined by reference to one or more commodity prices, equity
indices or other financial or non-financial indices and on such other terms as
may be set forth in the relevant Pricing Supplement (together with the Currency
Indexed Notes, the "Indexed Notes"). Prospective investors should consult their
own financial and legal advisors as to the risks entailed by an investment in
Indexed Notes. Such Indexed Notes are not an appropriate investment for
investors who are unsophisticated with respect to foreign currency
transactions, commodity prices, equity indices and other financial or non-
financial indices. See "Risk Factors" for information concerning risks of an
investment in Indexed Notes.
CURRENCY INDEXED NOTES
Unless otherwise indicated in the applicable Pricing Supplement, holders of
Currency Indexed Notes will be entitled to receive a principal amount of such
Currency Indexed Notes exceeding the amount designated as the face amount of
such Currency Indexed Notes in the applicable Pricing Supplement (the "Face
Amount") if, at the Stated Maturity Date, the rate at which the Denominated
Currency can be exchanged for the Indexed Currency is greater than the rate of
such exchange designated as the Base Exchange Rate in the applicable Pricing
Supplement (the "Base Exchange Rate"), and will be entitled to receive a
principal amount of such Currency Indexed Notes less than the Face Amount of
such Currency Indexed Notes, if, at the Stated Maturity Date, the rate at which
the Denominated Currency can be exchanged for the Indexed Currency is less than
such Base Exchange Rate, in each case determined as described below under "--
Payment of Principal and Interest." Information as to the relative historical
value of the applicable Denominated Currency against the applicable Indexed
Currency, any exchange controls
S-13
<PAGE>
applicable to such Denominated Currency or Indexed Currency and the tax
consequences to holders will be set forth in the applicable Pricing Supplement.
An investment in a Currency Indexed Note entails significant risks that are not
associated with a similar investment in a security the principal amount of
which payable at maturity is not determined by the rate of exchange between two
currencies or composite currencies.
Unless otherwise specified in the applicable Pricing Supplement, the term
"Exchange Rate Day" shall mean any day which is a Business Day in The City of
New York and, (a) if the Denominated Currency or Indexed Currency is the
Canadian Dollar, in Toronto, Canada, (b) if the Denominated Currency or Indexed
Currency is the Japanese Yen, in Tokyo, Japan, (c) if the Denominated Currency
or Indexed Currency is the Pound Sterling, in London, England, (d) if the
Denominated Currency or Indexed Currency is the Australian Dollar, in
Melbourne, Australia, (e) if the Denominated Currency or the Indexed Currency
is the ECU, in Brussels, Belgium, and/or (f) if the Denominated Currency or the
Indexed Currency is any other currency or currency unit (other than the U.S.
Dollar), in the principal financial center of the country of such Denominated
Currency or Indexed Currency.
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, interest
will be payable by the Company in the Denominated Currency based on the Face
Amount of the Currency Indexed Notes and at the rate and times and in the
manner set forth herein and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, principal of
a Currency Indexed Note will be payable by the Company in the Denominated
Currency at the Stated Maturity Date in an amount equal to the Face Amount of
the Currency Indexed Note, plus or minus an amount determined by an agent
appointed by the Company (which, unless otherwise specified in the applicable
Pricing Supplement, will initially be The Fuji Bank and Trust Company) (the
"Determination Agent") by reference to the difference between the Base Exchange
Rate and the rate at which the Denominated Currency can be exchanged for the
Indexed Currency as determined on the second Exchange Rate Day prior to Stated
Maturity Date of such Currency Indexed Note (the "Determination Date") by the
Determination Agent based upon the arithmetic mean of the open market spot
offer quotations for the Indexed Currency (spot bid quotations for the
Denominated Currency) obtained by the Determination Agent from the Reference
Dealers (as defined below) in The City of New York at 11:00 a.m., New York City
time, on the Determination Date, for an amount of Indexed Currency equal to the
Face Amount of such Currency Indexed Note multiplied by the Base Exchange Rate,
with the Denominated Currency for settlement at the Stated Maturity Date (such
rate of exchange, as so determined, is hereinafter referred to as the "Spot
Rate"). If such quotations from the Reference Dealers are not available on the
Determination Date due to circumstances beyond the control of the Company or
the Determination Agent, the Spot Rate will be determined on the basis of the
most recently available quotations from the Reference Dealers. The principal
amount of the Currency Indexed Notes determined by the Determination Agent to
be payable at the Stated Maturity Date will be payable to the holders thereof
in the manner set forth herein and in the applicable Pricing Supplement. As
used herein, the term "Reference Dealers" shall mean the three banks or firms
specified as such in the applicable Pricing Supplement or, if any of them shall
be unwilling or unable to provide the requested quotations, such other major
money center bank or banks in The City of New York selected by the Company, in
consultation with the Determination Agent, to act as Reference Dealer or
Dealers in replacement therefor. In the absence of manifest error, the
determination by the Determination Agent of the Spot Rate and the principal
amount of Currency Indexed Notes payable at the Stated Maturity Date thereof
shall be final and binding on the Company and the holders of such Currency
Indexed Notes.
Unless otherwise specified in the applicable Pricing Supplement, on the basis
of the aforesaid determination by the Determination Agent and the formulae and
limitations set forth below, (i) if the Base Exchange Rate equals the Spot Rate
for any Currency Indexed Note, then the principal amount of such Currency
Indexed Note payable at the Stated Maturity Date would be equal to the Face
Amount of such Currency Indexed Note; (ii) if the Spot Rate exceeds the Base
Exchange Rate (i.e., the Denominated Currency
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has appreciated against the Indexed Currency during the term of the Currency
Indexed Note), then the principal amount so payable would be greater than (but
no greater than twice) the Face Amount of such Currency Indexed Note; (iii) if
the Spot Rate is less than the Base Exchange Rate (i.e., the Denominated
Currency has depreciated against the Indexed Currency during the term of the
Currency Indexed Note) but is greater than one-half of the Base Exchange Rate,
then the principal amount so payable would be less than the Face Amount of such
Currency Indexed Note; and (iv) if the Spot Rate is less than or equal to one-
half of the Base Exchange Rate, then the Spot Rate will be deemed to be one-
half of the Base Exchange Rate and no principal amount of the Currency Indexed
Note would be payable at the Stated Maturity Date.
Unless otherwise specified in the applicable Pricing Supplement, the formulae
to be used by the Determination Agent to determine the principal amount of a
Currency Indexed Note payable at the Stated Maturity Date will be as follows:
If the Spot Rate exceeds or equals the Base Exchange Rate, the principal
amount of a Currency Indexed Note payable at the Stated Maturity Date shall
equal:
Face Amount + (Face Amount X Spot Rate - Base Exchange Rate
Spot Rate ).
If the Base Exchange Rate exceeds the Spot Rate, the principal amount of
a Currency Indexed Note payable at the Stated Maturity Date (which shall,
in no event, be less than zero) shall equal:
Face Amount - (Face Amount X Base Exchange Rate - Spot Rate
Spot Rate ).
If the formulae set forth above are applicable to a Currency Indexed Note,
the maximum principal amount payable at the Stated Maturity Date in respect of
such Currency Indexed Note would be an amount equal to twice the Face Amount
and the minimum principal amount payable would be zero.
Unless otherwise specified in the applicable Pricing Supplement, in the event
of any redemption or repayment of the Currency Indexed Notes prior to the
Stated Maturity Date, the term "Stated Maturity Date" used above would refer to
the redemption or repayment date of such Currency Indexed Notes.
Payment Currency
Except as set forth below, if payment on a Note is required to be made in a
Specified Currency other than U.S. dollars and on a payment date with respect
to such Note such currency is unavailable due to the imposition of exchange
controls or other circumstances beyond the Company's control, or is no longer
used by the government of the country issuing such currency or for the
settlement of transactions by public institutions of or within the
international banking community, then all payments due on such payment date
shall be made in U.S. dollars. The amount so payable on any payment date in
such foreign currency shall be converted into U.S. dollars at a rate determined
by the Exchange Rate Agent on the basis of the most recently available Market
Exchange Rate for such currency, or as otherwise indicated in the applicable
Pricing Supplement.
If payment on a Note is required to be made in ECUs and on a payment date
with respect to such Note ECUs are unavailable due to the imposition of
exchange controls or other circumstances beyond the Company's control, or are
no longer used in the European Monetary System, then all payments due on such
payment date shall be made in U.S. dollars. The amount so payable on any
payment date in ECUs shall be converted into U.S. dollars at a rate determined
by the Exchange Rate Agent as of the second Business Day prior to the date on
which such payment is due on the following basis: The component currencies of
the ECU for this purpose (the "Components") shall be the currency amounts that
were components of the ECU as of the last date on which ECUs were used in the
European Monetary System. The equivalent of ECU in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by the
Exchange Rate Agent on the basis of the most recently available Market Exchange
Rate for the Components, or as otherwise indicated in the applicable Pricing
Supplement.
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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
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 Components 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 that currency as a Component shall be
replaced by amounts of such two or more currencies, each of which shall have a
value on the date of division equal to the amount of the former component
currency divided by the number of currencies into which that currency was
divided.
All determinations referred to above made by the Exchange Rate Agent shall be
at its sole discretion (except to the extent expressly provided herein or in
the applicable Pricing Supplement that any determination is subject to approval
by the Company) and, in the absence of manifest error, shall be conclusive for
all purposes and binding on holders of the Notes and the Company, and the
Exchange Rate Agent shall have no liability therefor.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Information
concerning terms and conditions of any issuance of Amortizing Notes will be
provided in the applicable Pricing Supplement. A table setting forth repayment
information in respect of each Amortizing Note will be included in the
applicable Pricing Supplement and set forth on such Notes.
REDEMPTION AND REPAYMENT
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to maturity or that such Note will be redeemable
at the option of the Company on a date or dates specified prior to maturity at
a price or prices set forth in the applicable Pricing Supplement, together with
accrued interest to the date of redemption. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be subject to any sinking
fund. The Company may redeem any of the Notes that are redeemable and remain
outstanding either in whole or from time to time in part, upon not less than 30
nor more than 60 days' notice. If less than all of the Notes with like tenor
and terms are to be redeemed, the Notes to be redeemed shall be selected by the
Trustee by such method as the Trustee shall deem fair and appropriate.
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to maturity or that such Note will be repayable at
the option of the holder on a date or dates specified prior to maturity at a
price or prices set forth in the applicable Pricing Supplement, together with
accrued interest to the date of repayment.
In order for a Note to be repaid, the Paying Agent must receive at least 30
days but not more than 45 days prior to the repayment date (i) the Note with
the form entitled "Option to Elect Repayment" on the reverse of the Note duly
completed or (ii) a telegram, telex, facsimile transmission or letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States setting forth the name of the holder of the Note, the principal amount
of the Note, the principal amount of the Note to be repaid, the certificate
number or a description of the tenor and terms of the Note, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
the Note to be repaid with the form entitled "Option to Elect Repayment" on the
reverse of the Note duly completed will be received by the Paying Agent not
later than five Business Days after the date of such telegram, telex, facsimile
transmission or letter and such Note and form duly completed are received by
the Paying Agent by such fifth Business Day. Exercise of the repayment option
by the holder of a Note shall be irrevocable. The repayment option may be
exercised by the holder of a Note for less than the entire principal amount of
the Note provided that the principal amount of the Note remaining outstanding
after repayment is an authorized denomination.
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If a Note is represented by a Global Security, the Depositary's nominee will
be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note,
the beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to the Depositary.
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is
an Original Issue Discount Note, the amount payable on such Note in the event
of redemption or repayment prior to its Stated Maturity Date shall be the
Amortized Face Amount of such Note as of the date of redemption or the date of
repayment, as the case may be. The "Amortized Face Amount" of an Original Issue
Discount Note shall be the amount equal to (i) the Issue Price set forth in the
applicable Pricing Supplement plus (ii) the portion of the difference between
the Issue Price and the principal amount of such Note that has accrued at the
yield to maturity set forth in the Pricing Supplement (computed in accordance
with generally accepted United States bond yield computation principles) to
such date of redemption or repayment, but in no event shall the Amortized Face
Amount of an Original Issue Discount Note exceed its principal amount.
The Company will comply with Rule 14e-1 promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and any other tender offer
rules under the 1934 Act which may then be applicable in connection with any
obligation of the Company to purchase Notes at the option of the holders
thereof.
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Company may be held or resold
or, at the discretion of the Company, may be surrendered to the Trustee for
cancellation.
BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes denominated in the same Specified
Currency, Original Issue Date, Stated Maturity Date, redemption and repayment
provisions, Interest Payment Period and Dates, in the case of Fixed Rate Notes,
interest rate or, in the case of Floating Rate Notes, Base Rate, Initial
Interest Rate, Index Maturity, Interest Reset Period and Dates, Spread or
Spread Multiplier, if any, Maximum Interest Rate, if any, and Minimum Interest
Rate, if any, and, in the case of Currency Indexed Notes, Denominated Currency,
Indexed Currency, Face Amount and Base Exchange Rate will be represented by a
single Global Security. Each Global Security representing Book-Entry Notes will
be deposited with, or on behalf of, DTC or other Depositary specified in the
applicable Pricing Supplement, and registered in the name of the Depositary or
its nominee. Book-Entry Notes will not be exchangeable for Certificated Notes
and, except as set forth below, will not otherwise be issuable in definitive
form. Unless otherwise specified in the applicable Pricing Supplement, DTC will
be the Depositary. DTC currently only accepts Notes that are denominated in a
Specified Currency of U.S. dollars. See "Description of Debt Securities--
Provisions Applicable to Senior, Subordinated and Junior Subordinated Debt
Securities--Book Entry, Delivery and Form" and "--Same-Day Settlement" in the
Prospectus.
FOREIGN CURRENCY JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. A judgment for money damages by courts in the United
States, including a money judgment based on an obligation expressed in a
foreign currency, will ordinarily be rendered only in U.S. dollars. New York
statutory law provides that in an action based on an obligation expressed in a
currency other than U.S. dollars
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a court shall render a judgment or decree in the foreign currency of the
underlying obligation and that the judgment or decree shall be converted into
U.S. dollars at the exchange rate prevailing on the date of entry of the
judgment or decree.
CREDIT RATINGS
Any 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 market 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 such Notes in light of
their particular circumstances.
CERTAIN UNITED STATES TAX CONSIDERATIONS
UNITED STATES HOLDERS
The following is a summary of certain United States federal income tax
considerations that may be relevant to a holder of a Note, including a Note
denominated in a single currency or currency unit other than the U.S. dollar (a
"Foreign Currency Note"). This summary applies to any holder that is a citizen
or resident of the United States, a corporation, partnership, limited liability
company or other entity created or organized in or under the laws of the United
States or of any political subdivision thereof, an estate or trust the income
of which is subject to United States federal income taxation regardless of its
source (a "United States person") or any other person or entity that otherwise
is subject to United States federal income taxation on a net income basis in
respect of a Note (a "United States holder"). This summary is based on laws,
regulations, rulings and decisions now in effect (or, in the case of certain
Treasury regulations, now in proposed form), all of which are subject to
change, including retroactively. This summary deals only with United States
holders that will hold Notes as capital assets and does not address tax
considerations applicable to investors that may be subject to special tax
rules, such as financial institutions, tax-exempt organizations, regulated
investment companies, insurance companies or dealers in securities or
currencies, persons that will hold Notes as a position in a "straddle" or as
part of a hedging transaction for tax purposes, or persons that have a
"functional currency" other than U.S. dollars. Additional United States federal
income tax considerations applicable to particular Notes may be set forth in
the applicable Pricing Supplement. Certain United States federal income tax
considerations that may be relevant to a non-United States holder with respect
to the ownership of Notes are summarized below under "United States Alien
Holders."
Investors should consult their own tax advisors in determining the tax
considerations that may be relevant in connection with holding, purchasing or
disposing of the Notes, including the application to their particular situation
of the tax considerations discussed below, as well as the application of state,
local, foreign or other tax laws.
PAYMENTS OF INTEREST
Payments of interest on a Note, other than interest on an Original Issue
Discount Note that is not a payment of "qualified stated interest" (as defined
below under "Original Issue Discount"), will be taxable to a United States
holder as ordinary interest income at the time that such payments are accrued
or are received (in accordance with the United States holder's method of tax
accounting). If a United States holder elects to receive payments of interest
pursuant to the terms of a Foreign Currency Note in a currency or composite
currency other than U.S. dollars (a "foreign currency"), the amount of interest
income realized by a cash basis United States holder will be the U.S. dollar
value of the interest payment received based on the exchange rate in effect on
the date of receipt, regardless of whether the payment is in fact converted
into U.S. dollars. In the case of an accrual basis United States holder not
electing the "spot rate convention," described below, the amount of interest
income with respect to an interest accrual period will be the U.S. dollar value
of the interest accrued during the period based on the average exchange rate in
effect during the period (or, with
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respect to an interest accrual period that spans two taxable years, the partial
period within the taxable year), and, upon receipt of payment of accrued
interest (including a payment attributable to accrued but unpaid interest upon
the sale or retirement of a Note), the accrual basis United States holder will
recognize ordinary foreign currency exchange gain or loss measured by the
difference between the amount of interest income previously accrued and the
U.S. dollar value of the interest payment received based on the exchange rate
in effect on the date of receipt (subject to a limitation that the sum of any
such exchange gain or loss with respect to principal and interest is recognized
only to the extent of the total gain or loss to the holder on the transaction),
regardless of whether the payment is in fact converted into U.S. dollars.
Accrual basis United States holders may determine the U.S. dollar value of any
interest income accrued in a Specified Currency under an alternative method, as
described below in the case of a "spot rate convention election." These
exchange rates may not be the same exchange rates as those determined by the
Exchange Rate Agent for converting interest payments on a Foreign Currency Note
into U.S. dollars. Therefore, a holder of a Foreign Currency Note that receives
interest payments in U.S. dollars may realize more or less interest income for
federal income tax purposes than it receives in cash. Any foreign currency gain
or loss will be treated as ordinary income or loss and not as additional
interest income or interest expense unless otherwise provided in future
regulations or administrative pronouncements.
If a United States holder elects to receive interest payments in a foreign
currency, an additional foreign currency gain or loss could result on the sale
or other disposition of foreign currency received if the exchange rate on the
date of sale or other disposition differs from the exchange rate on the date of
receipt. A United States holder will have a tax basis in foreign currency equal
to the U.S. dollar value of such foreign currency, determined at the time of
receipt. Any foreign currency gain or loss recognized by a United States holder
on a sale or other disposition of foreign currency (including its exchange for
U.S. dollars) will be treated as ordinary income or loss, and not as interest
income or expense unless otherwise provided in future regulations or
administrative pronouncements.
PURCHASE, SALE AND RETIREMENT OF NOTES
A United States holder's tax basis in a Note generally will equal the cost of
such Note to such holder, increased by any amounts includible in income by the
holder as original issue discount (and market discount) and reduced by any
amortized premium (each as described below) and any payments other than
qualified stated interest payments made on such Note, such as principal
payments received by such holder in the case of an Amortizing Note. In the case
of a Foreign Currency Note, the cost of such Note to a United States holder
will be the U.S. dollar value of the foreign currency purchase price on the
date of purchase. The amount of any subsequent adjustments to a United States
holder's tax basis in a Foreign Currency Note in respect of original issue
discount and premium will be determined in the manner described below. A United
States holder who purchases a Note with foreign currency will recognize foreign
currency gain or loss attributable to the difference, if any, between his tax
basis in the foreign currency and the fair market value of the Note in U.S.
dollars on the date of purchase of such Note. However, the conversion of U.S.
dollars to a foreign currency and the immediate use of that currency to
purchase a Note generally will not result in taxable foreign currency gain or
loss for a United States holder.
Upon the sale, exchange or retirement of a Note, a United States holder
generally will recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement (less any accrued interest,
which will be taxable as such) and the holder's tax basis in the Note. A holder
who receives U.S. dollar payments on the sale, exchange or retirement of a
Foreign Currency Note may have a different amount realized for United States
federal income tax purposes than the amount it receives in cash, because the
relevant exchange rates required to be used for United States federal income
tax purposes may not be the same as the exchange rates used by the Exchange
Rate Agent to convert foreign currency payments into U.S. dollar payments.
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If a United States holder elects to receive foreign currency in respect of
the sale, exchange or retirement of a Foreign Currency Note, the amount
realized generally will be the U.S. dollar value of the foreign currency
received (on the date that payment is received or the Note is disposed of, in
accordance with the United States holder's method of tax accounting). In
addition, a holder will recognize foreign currency gain or loss on the
principal of a Foreign Currency Note attributable to the movement in exchange
rates between the time of purchase and the time of sale, exchange or retirement
of the Note. Such foreign currency gain or loss cannot exceed the related non-
exchange gain or loss. This foreign currency gain or loss will be treated as
ordinary income or loss and not as interest income or expense unless otherwise
provided in future regulations or administrative pronouncements.
If a United States holder elects to receive payment in a foreign currency, an
additional foreign currency gain or loss could result on the sale or other
disposition of the foreign currency received if the exchange rate on the date
of sale or other disposition differs from the exchange rate on the date of
receipt. A United States holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Note equal to the U.S. dollar
value of such foreign currency, determined at the time of such sale, exchange
or retirement. Any gain or loss realized by a United States holder on a sale or
other disposition of foreign currency (including its exchange for U.S. dollars)
will be treated as ordinary income or loss and not as interest income or
expense unless otherwise provided in future regulations or administrative
pronouncements.
Except as discussed above with respect to foreign currency gain or loss and
below with respect to market discount, gain or loss recognized by a United
States holder on the sale, exchange or retirement of a Note generally will be
capital gain or loss. Under recent legislation, the capital gain will be long-
term if the Note has been held by the holder for more than 18 months, will be
mid-term gain if the Note has been held by the holder for more than one year
but not more than 18 months, and otherwise will be short-term gain. The maximum
marginal rate on ordinary income for individuals, trusts and estates currently
is 39.6%, but due to the phase-out of personal exemptions and the enactment of
limitations on itemized deductions for individual taxpayers whose adjusted
gross income exceeds certain threshold amounts that depend on the taxpayer's
filing status, the actual maximum marginal rate may be greater. By contrast,
the maximum rate on the net capital gain of individuals, trusts and estates is
20% for long-term gains and 28% for mid-term gains. Capital gains and ordinary
income of corporate taxpayers are taxed at a nominal maximum rate of 35%.
In addition to the special foreign currency rules discussed above, the
provisions governing the taxation of foreign currency transactions otherwise
may affect the taxation of both interest and principal payments received by a
United States holder on a Foreign Currency Note. Thus, for example, the source
of all foreign currency gains and losses is determined by reference to the
residence of the taxpayer. Further, the United States Treasury Department has
the authority to issue regulations to recharacterize interest and principal
payments with respect to obligations denominated in hyperinflationary
currencies.
ORIGINAL ISSUE DISCOUNT
United States holders of Original Issue Discount Notes generally will be
subject to the special tax accounting rules for original issue discount
obligations provided by the Internal Revenue Code of 1986, as amended (the
"Code"), and certain final regulations issued thereunder that apply to debt
instruments issued on or after April 4, 1994 (the "Regulations"). United States
holders of such Notes having a maturity of more than one year from the date of
issue should be aware that, as described in greater detail below, they
generally must include original issue discount in ordinary gross income for
United States federal income tax purposes as it accrues, in advance of the
receipt of cash attributable to that income.
A Note will be treated as issued with original issue discount ("an Original
Issue Discount Note") in an amount equal to the excess, if any, of the Note's
"stated redemption price at maturity" over its issue price (defined as the
first price at which a substantial amount of the Notes in an issue are sold
(not including bond houses, brokers, or similar persons or organizations acting
in the capacity of underwriters or wholesalers)), unless such excess is
generally less than 0.25% of such Note's stated redemption price at maturity
multiplied by the number of complete years to its maturity (which "de minimis"
excess would be reported under one of several alternative methods). "Stated
redemption price at maturity" is defined as the total of all payments
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provided by the Note that are not payments of "qualified stated interest."
"Qualified stated interest" is stated interest that is unconditionally payable
in cash or in property (other than debt instruments of the issuer) at least
annually at a single fixed rate, or certain variable rates or certain
combinations of rates, as discussed below. Qualified stated interest payments
are included in income in accordance with the holder's regular method of
accounting. See "Payments of Interest" above. Whether the rate of interest with
respect to a Fixed Rate Note or Floating Rate Note is qualified stated interest
and whether a note is an Original Issue Discount Note will be described in the
applicable Pricing Supplement. An accrual basis holder may elect to include in
gross income all interest income on a debt instrument by using a constant yield
method.
In general, each United States holder of an Original Issue Discount Note
having a maturity of more than one year from the date of issue, whether such
holder uses the cash or the accrual method of tax accounting, will be required
to include in ordinary gross income the sum of the "daily portions" of original
issue discount on that Note for all days during the taxable year on which the
United States holder owns the Note. The daily portions of original issue
discount on an Original Issue Discount Note are determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. The accrual period for an Original Issue
Discount Note may be of any length and may vary in length over the term of such
Note, provided that each accrual period is not longer than one year and each
scheduled payment of principal or interest occurs at the end of an accrual
period. In general, the computation of original issue discount is simplest if
accrual periods correspond to the intervals between payment dates provided by
the terms of the Original Issue Discount Note. The appropriate Agent will
specify the accrual period it intends to use in the applicable Pricing
Supplement, although the holder is not bound by the choice made by the Agent.
In the case of an initial holder, the amount of original issue discount on an
Original Issue Discount Note allocable to each accrual period is determined by
(i) multiplying the "adjusted issue price" (as defined below) of the Note at
the beginning of an accrual period by a fraction, the numerator of which is the
applicable yield to maturity (determined by compounding at the end of each
accrual period and properly adjusted for the length of the accrual period) of
the Note and the denominator of which is the number of accrual periods in a
year and (ii) subtracting from that product the amount, if any, payable as
interest during that accrual period. The "adjusted issue price" of an Original
Issue Discount Note at the beginning of any accrual period will be the sum of
its issue price (including accrued interest) and the amount of original issue
discount allocable to all prior accrual periods, reduced by the amount of all
payments that were not qualified stated interest payments. In determining
original issue discount allocable to each accrual period included in any
interval between qualified stated interest payments, the qualified stated
interest payable at the end of the interval would be allocated on a pro rated
basis to each such accrual period, and the adjusted issue price would be
increased by the amount of any qualified stated interest accrued prior to the
beginning of the accrual period but not payable until a later date. As a result
of this "constant yield" method of including original issue discount income,
the amounts so includible in income by a United States holder in respect of an
Original Issue Discount Note are lesser in the early years and greater in the
later years than the amounts that would be includible on a straight-line basis,
ignoring the effect of foreign currency exchange rate fluctuations in the case
of a Foreign Currency Note.
The Regulations set forth a set of special rules for "variable rate debt
instruments," as a consequence of which Floating Rate Notes and Indexed Notes
may or may not be Original Issue Discount Notes. Notice will be given in the
applicable Pricing Supplement when a particular Note will be an Original Issue
Discount Note. Unless an applicable Pricing Supplement so indicates, Floating
Rate Notes and Indexed Notes will not be Original Issue Discount Notes. If a
Note that provides for a variable rate of interest does not qualify as a
variable rate debt instrument, the Note will be a contingent payment debt
instrument, as discussed below.
A variable rate debt instrument is a debt instrument that (i) provides for
stated interest (compounded or paid at least annually) at (a) one or more
qualified floating rates, (b) a single fixed rate and one or more qualified
floating rates, (c) a single objective rate, or (d) a single fixed rate and a
single objective rate that is a
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qualified inverse floating rate; and (ii) has an issue price that generally
does not exceed the total noncontingent principal payments by more than the
lesser of (a) .015 multiplied by the product of the total noncontingent
principal payments and the number of complete years to maturity or (b) 15% of
the total noncontingent principal payments. No principal payments may be
contingent. In addition, a qualified floating rate or objective rate in effect
at a given time for a Note must be set at a value of that rate on any day that
is no earlier than three months prior to the first day on which that value is
in effect and no later than one year following that first day.
In case of a variable rate debt instrument, qualified stated interest
includes payments that are unconditionally payable (or that will be
constructively received under Section 451 of the Code) in cash or property
(other than debt instruments of the issuer) at least annually during the entire
term of the Note at (i) a single fixed rate, (ii) a single "qualified floating
rate" or (iii) a single "objective rate."
Subject to certain exceptions, a variable rate of interest is a "qualified
floating rate" if variations in the value of the rate can reasonably be
expected to measure contemporaneous fluctuations in the cost of newly borrowed
funds in the currency in which the Note is denominated. A variable rate will be
considered a qualified floating rate if the variable rate equals (i) the
product of an otherwise qualified floating rate and a fixed multiple (i.e., a
Spread Multiplier) that is greater than zero but not more than 1.35 or (ii) an
otherwise qualified floating rate (or the product described in clause (i)) plus
or minus a fixed rate (i.e., a Spread). If the variable rate equals the product
of an otherwise qualified floating rate and a single fixed multiplier greater
than 1.35, however, such rate will generally constitute an "objective rate,"
described more fully below. A variable rate will not be considered a qualified
floating rate if the variable rate is subject to a cap, floor, governor (i.e.,
a restriction on the amount of increase or decrease in the stated interest
rate) or similar restriction that is reasonably expected as of the issue date
to cause the yield on the Note to be significantly more or less than the
expected yield determined without the restriction (other than a cap, floor or
governor that is fixed throughout the term of the Note).
Subject to certain exceptions, an "objective rate" is defined as a rate
(other than a qualified floating rate) that is determined using a single fixed
formula and that is based on (i) one or more qualified floating rates, (ii) one
or more rates where each rate would be a qualified floating rate for a Note
denominated in a currency other than the currency in which the Note is
denominated, (iii) the yield or changes in the price of one or more items of
personal property (other than stock or debt of the Company or a related party)
that is "actively traded" or (iv) a combination of the rates described in
clauses (i), (ii) and (iii) of this sentence. A variable rate of interest on a
Note will not be considered an objective rate if it is reasonably expected that
the average value of the rate during the first half of the Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Note's term. Regulations have been
proposed that would prospectively broaden the definition of "objective rate"
(other than a qualified floating rate) to mean a rate that is determined using
a single fixed formula and that is based on objective financial or economic
information.
If interest on a Note is stated at a fixed rate for an initial period of less
than one year followed by a variable rate that is either a qualified floating
rate or an objective rate for a subsequent period, and the value of the
variable rate on the issue date is intended to approximate the fixed rate, the
fixed rate and the variable rate together constitute a single qualified
floating rate or objective rate.
If a Note provides for stated interest at a single qualified floating rate or
objective rate that is unconditionally payable (or that will be constructively
received under Section 451 of the Code) in cash or in property (other than debt
instruments of the issuer) at least annually during the entire term of the
Note, all stated interest with respect to the Note will be qualified stated
interest and such interest allocable to an accrual period will be increased (or
decreased) if the interest paid during an accrual period exceeds (or is less
than) the interest assumed to be paid during such accrual period.
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If a Note provides for interest at (i) more than one qualified floating rate,
(ii) a single fixed rate and one or more qualified floating rates or (iii) in
certain cases a single fixed rate and a single objective rate, then all or a
portion of the Note's stated interest may be treated as qualified stated
interest. However, in certain instances a portion of that Note's stated
interest will not be so treated, but instead will be included in the Note's
stated redemption price at maturity. As a result, such Note may be treated as
being issued with original issue discount. The amount of interest and original
issue discount accruals for the Notes are determined by reference to a
hypothetical equivalent fixed rate debt instrument pursuant to the following
steps: First, a "fixed rate substitute" is determined for each variable rate
provided for in the Note, which for a qualified floating rate generally equals
the value of that rate on the issue date (with adjustments in certain
circumstances to reflect different intervals between interest adjustment
dates), and for an objective rate will be a fixed rate that reflects the yield
that is reasonably expected for the Note. Second, an equivalent fixed-rate note
is constructed that has terms that are identical to those provided under the
Note, except that the equivalent fixed rate note provides for the fixed rate
substitutes determined above in lieu of the qualified floating rate or
objective rate provided under the Note. Third, the amount of qualified stated
interest and original issue discount, if any, are determined for the equivalent
fixed-rate note under the general rules described above and are taken into
account as if the United States holder held the equivalent fixed-rate note.
Fourth, qualified stated interest or original issue discount allocable to an
accrual period is increased (or decreased) if the interest actually accrued or
paid during an accrual period exceeds (or is less than) the interest assumed to
be accrued or paid during the accrual period under the equivalent fixed-rate
note. The Regulations are unclear in certain respects as to the method for
making this adjustment.
For purposes of determining the yield to maturity and the amount of original
issue discount of an Original Issue Discount Note, the Regulations may
aggregate all Notes issued to a holder as part of the same issue (i.e., Notes
with the same credit and payment terms and sold at substantially the same time
pursuant to a common plan of marketing) as a single Note for purposes of
determining the original issue discount includible by such holder in income.
Unless otherwise provided in the applicable Pricing Supplement, the Company
does not expect to treat different types of Notes as being subject to the
aggregation rules for purposes of computing original issue discount.
The Regulations also set forth certain rules regarding the treatment of a
debt instrument that may be either purchased or retired before its stated
maturity date, at the option of the issuer or the holder of such debt
instrument. Pursuant to these rules, the debt instrument will be presumed to be
redeemed or not redeemed depending on the impact of such action on the yield to
maturity of such debt instrument. These rules may affect the amount of original
issue discount of an Original Issue Discount Note depending on the specific
terms of such Note. However, if the amount payable on an Original Issue
Discount Note (in the event of the redemption or repayment of such Note prior
to its Stated Maturity Date) is the Amortized Face Amount of such Note as of
the date of redemption or repayment, as the case may be, then under these
rules, such repurchase or repayment option should have no effect upon the
original issue discount includible with respect to such Original Issue Discount
Note.
In the case of an Original Issue Discount Note that is also a Foreign
Currency Note, a United States holder, absent the election described in the
second following sentence, should determine the U.S. dollar amount includible
in income as original issue discount for each accrual period by (i) calculating
the amount of original issue discount allocable to each accrual period in the
foreign currency using the constant yield method described above and (ii)
translating the foreign currency amount so derived at the average exchange rate
in effect during that accrual period (or, with respect to an accrual period
that spans two taxable years, at the average exchange rate for the partial
period within the taxable year). Upon the receipt of payment attributable to
accrued original issue discount (whether in connection with a payment of
interest or the sale or retirement of a Note), a United States holder will
recognize ordinary foreign currency exchange income or loss measured by the
difference between the U.S. dollar value of the accrued original issue discount
based on such average exchange rate and the U.S. dollar value of the payment
based on the exchange rate in effect on the date of receipt (subject to a
limitation that exchange gain or loss is limited to total gain or loss on the
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transaction). A United States holder may elect with respect to the translation
described in clause (ii) of the second preceding sentence to translate the
foreign currency amount so derived at the exchange rate on the last day of the
accrual period (and in the case of a partial accrual period, the exchange rate
on the last day of the taxable year). To make such election, the holder must
file a statement with the holder's first income tax return in which the
election is effective clearly indicating such election, and must consistently
apply such election to all debt instruments from year to year unless permitted
otherwise by the Internal Revenue Service. Because exchange rates may
fluctuate, a United States holder of an Original Issue Discount Note that is
also a Foreign Currency Note may recognize a different amount of original issue
discount income in each accrual period than would the holder of a similar
Original Issue Discount Note denominated in U.S. dollars. As noted above, such
holder may recognize foreign currency gain or loss with respect to original
issue discount on an Original Issue Discount Note that is also a Foreign
Currency Note. Under regulations yet to be issued, the foreign currency tax
treatment of an Original Issue Discount Note that is also a Foreign Currency
Note may differ if such a Note is considered to be a contingent payment debt
instrument.
A subsequent United States holder of an Original Issue Discount Note that
purchases the Note at a cost less than its stated principal amount also
generally will be required to include in gross income the daily portions of
original issue discount, calculated as described above. In accordance with a
formula, the amount of such original issue discount will be reduced if the
amount paid by such subsequent United States holder for such Original Issue
Discount Note exceeds the sum of its issue price plus the aggregate amount of
original issue discount accrued through the purchase date.
In general, a holder of a Note who uses the cash method of tax accounting
(e.g., an individual) is not required to accrue original issue discount with
respect to an Original Issue Discount Note that matures one year or less from
the date of its issuance (a "short-term Original Issue Discount Note") unless
an election is made by such holder to do so. A United States holder who reports
income for United States federal income tax purposes on the accrual method of
tax accounting or a cash basis holder who makes the election to accrue original
issue discount with respect to such a Note is required to include original
issue discount on such a Note on a straight-line basis, unless an election is
made to accrue the original issue discount according to a constant interest
method based on daily compounding. In the case of a United States holder who is
not required, and does not elect, to include original issue discount in income
currently, any gain realized on the sale, exchange or retirement of the short-
term Original Issue Discount Note will be ordinary income to the extent of the
original issue discount accrued on a straight-line basis (or, if elected,
according to a constant interest method based on daily compounding) through the
date of sale, exchange or retirement. In addition, such a non-electing holder
who is not subject to the current inclusion requirement described in this
paragraph will be required to defer deductions for any interest paid on
indebtedness incurred or continued to purchase or carry such a short-term
Original Issue Discount Note in an amount not exceeding the deferred interest
income, until such deferred interest income is realized.
Under the Regulations, an accrual basis United States holder may elect to
treat all interest on any Note as original issue discount and calculate the
amount includible in gross income under the constant yield method described
above. For the purposes of this election, interest includes stated interest,
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. If a United States holder
makes this election for a Note with market discount or amortizable bond
premium, the election is treated as an election under the market discount or
amortizable bond premium provisions described below, and the electing United
States holder will be required to amortize bond premium or include market
discount in income currently for all of the United States holder's other debt
instruments with market discount or amortizable bond premium. The election is
to be made for the taxable year in which the United States holder acquired the
Note, and may not be revoked without the consent of the Internal Revenue
Service. United States holders should consult with their own tax advisors about
this election.
For all debt instruments issued with contingent payments (e.g., certain
payments of interest on Floating Rate Notes or Indexed Notes that are not paid
or treated as paid at a qualified floating rate or an objective
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rate, as described above) the issuer must determine a projected payment
schedule for the debt instrument as of the issue date and, based on such
schedule (and the issue price), determine the instrument's projected yield and
the daily portions of interest that accrue on the debt instrument (effectively,
original issue discount). Such accruals will be required to be included in
income even though, for example, contingent payments are not yet fixed. The
projected payment schedule will contain all noncontingent payments and a
projected amount for each contingent payment, all determined as of the
instrument's issue date. Investors should consult their own tax advisors
concerning the possible application of any regulations relating to contingent
payments on the Notes.
In the case of a Foreign Currency Note, a United States holder may elect to
translate original issue discount (and, in the case of an accrual basis United
States holder, accrued interest) into U.S. dollars at the exchange rate in
effect on the last day of an accrual period for the original issue discount or
interest, or in the case of an accrual period that spans two taxable years, at
the exchange rate in effect on the last day of the partial period within the
taxable year (the "spot rate convention election"). Additionally, if a payment
of accrued original issue discount or accrued interest is actually received
within 5 business days of the last day of the accrual period or taxable year,
an electing United States holder may instead translate such original issue
discount or interest into U.S. dollars at the exchange rate in effect on the
day of actual receipt. Any such election will apply to all debt instruments
held by the United States holder at the beginning of the first taxable year to
which the election applies or thereafter acquired by the United States holder,
and will be irrevocable without the consent of the Internal Revenue Service.
United States holders should consult with their own tax advisors about this
election.
PREMIUM AND MARKET DISCOUNT
A United States holder that purchases a Note, including an Original Discount
Note, at a premium (defined under the Regulations as an amount paid in excess
of all amounts payable on the instrument after the purchase other than
qualified stated interest) is not subject to the original issue discount rules,
and may elect to amortize the "amortizable bond premium" (defined generally
under the Code as an amount paid in excess of the amount payable at maturity),
in which case the amount required to be included in the United States holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the holder's yield to
maturity) to such year. Any such election shall apply to all debt instruments
(other than bonds the interest on which is excludable from gross income) held
by the United States holder at the beginning of the first taxable year to which
the election applies or thereafter acquired by the United States holder, and is
irrevocable without the consent of the Internal Revenue Service.
A United States holder that purchases an Original Discount Note at an
acquisition premium (defined under the Regulations as an amount paid in excess
of its adjusted issue price but less than or equal to all amounts payable on
the instrument after the purchase other than qualified stated interest) is
subject to the original issue discount rules, but proportionately reduces the
daily portions of original issue discount includible in income to reflect the
premium paid relative to issue price. In lieu of such offset, the holder may
compute original issue discount accruals by treating the purchase price as the
issue price and applying the constant yield method.
In the case of premium on a Foreign Currency Note, a United States holder
should calculate the amortizable premium in the foreign currency in which the
Note is denominated (or in which the payments are determined). Amortizable
premium generally will reduce the United States holder's interest income
measured in foreign currency. Foreign currency exchange gain or loss will be
realized with respect to amortizable premium based on the difference between
the spot exchange rate on the date the premium is paid to acquire the Note and
the spot exchange rate on the date the premium is treated as being returned as
part of the stated interest.
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If a subsequent purchaser of a Note disposes of such Note, holds it until
maturity or receives a principal payment, the tax consequences are the same as
described above, except that any gain upon a sale or other disposition
(including certain nontaxable dispositions such as a gift and upon receipt of
principal payments) will be recognized and treated as ordinary income to the
extent of any "market discount" accrued for the period that such purchaser
holds the Note. Such holder may instead elect to include market discount in
income as it accrues. The United States holder may be required to defer, until
the maturity of the Note or its earlier disposition in a taxable transaction,
the deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Note. Such holder may instead
elect to include market discount in income as it accrues, in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made,
applies to all market discount obligations acquired on or after the first
taxable year to which the election applies, and may not be revoked without the
consent of the Internal Revenue Service. Market discount will generally equal
the excess, if any, of the adjusted basis that the Note would have in the hands
of the original holder (or in the case of an Original Issue Discount Note, its
issue price plus the aggregate amount of original issue discount previously
accrued thereon) over the purchaser's basis in the Note immediately after such
purchaser acquired the Note. In general, market discount on a Note will be
treated as accruing ratably over the term of such Note, or at the election of
the holder, under a constant yield method.
Market discount on a Foreign Currency Note is determined in the foreign
currency in which the Note is denominated (or in which the payments are
determined). Accrued market discount that is not currently included in the
holder's income will not result in exchange gain or loss. Exchange gain or loss
with respect to accrued market discount currently includible in income is
calculated in the same manner as exchange gain or loss with respect to accrued
interest income, as described above.
CURRENCY INDEXED NOTES
The federal income tax consequences relating to Currency Indexed Notes are
unclear. Two possible approaches exist. Under one approach, the Currency
Indexed Notes would constitute debt obligations of the Company for United
States federal income tax purposes on which payments denominated as interest
would be treated as such, no portion of the issue price of the Currency Indexed
Notes would be separately allocated to the foreign exchange feature of the
Currency Indexed Notes, and gain or loss recognized by a United States holder
on the sale or retirement of a Currency Indexed Note which is attributable to
changes in exchange rates would be treated as ordinary income or loss, and not
as interest income or expense except as provided in Temporary Treasury
Regulation Section 1.861-9T or in future regulations or administrative
pronouncements.
A second approach would be to treat a Currency Indexed Note as subject to the
contingent payment rules contained in the Proposed Regulation, described above
under "Original Issue Discount," because the principal amount payable with
respect to a Currency Indexed Note may vary depending upon the foreign exchange
feature. If a Currency Indexed Note were treated as a contingent debt
instrument subject to the Proposed Regulations, a projected payment schedule
including the contingent and noncontingent payments would have to be determined
and the excess of such payments over the issue price of such Note would have to
be accrued in income over such schedule in advance of the receipt of such
payments.
The United States federal income tax treatment of payments with respect to
Currency Indexed Notes may differ under future regulations from the treatment
discussed above with respect to other Notes denominated in a foreign currency
if Currency Indexed Notes are considered to be debt instruments denominated in
more than one currency. Persons considering the purchase of Currency Indexed
Notes should consult their own tax advisors with regard to the application of
the United States federal income tax laws to their particular situations, as
well as any consequences arising under the laws of any other taxing
jurisdiction.
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UNITED STATES ALIEN HOLDERS
In the opinion of Katten Muchin & Zavis, special tax counsel to the Company,
under present United States federal income and estate tax law, and subject to
the discussion of backup withholding below:
(i) interest and principal payments, including premium, and original
issue discount on an Original Issue Discount Note (as defined above), made
by the Company or any of its paying agents on a Note to any holder which is
a foreign corporation, a nonresident alien individual, a nonresident
fiduciary of a foreign estate or trust or a foreign partnership one or more
of the members of which is, as to the United States, a foreign corporation,
a nonresident alien individual or a nonresident fiduciary of a foreign
estate or trust (a "United States Alien") will not be subject to United
States withholding tax, provided that in the case of original issue
discount or interest, (a) the holder 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, (b) the holder is not a controlled foreign
corporation that is related to the Company through stock ownership, (c) the
holder is not a bank receiving interest described in section 881(c)(3)(A)
of the Code, (d) the interest is not contingent interest for this purpose,
and (e) either (1) the beneficial owner of the Note certifies to the
Company or its agent, under penalties of perjury, that it is not a United
States person (as defined above) and provides its name and address or (2) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the Note on behalf of the beneficial
owner certifies to the Company or its agent, under penalty of perjury, that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof;
(ii) a holder of a Note who is a United States Alien will not be subject
to United States federal income tax on gain realized on the sale, exchange
or retirement of a Note if such gain is not effectively connected with the
conduct of a United States trade or business and, in the case of a United
States Alien holder who is an individual, such holder is not present in the
United States for a total of 183 days or more during the taxable year in
which such gain is realized; and
(iii) a Note held by an individual who at the time of death is not a
citizen or resident of the United States (including its territories,
possessions and other areas subject to its jurisdiction, such as the
Commonwealth of Puerto Rico) will not be subject to United States federal
estate tax as a result of such individual's death if the 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, the interest
is not contingent interest for this purpose, and at the time of the
individual's death, payments with respect to the Note would not have been
effectively connected with the conduct of a trade or business by the
individual in the United States.
The opinion of counsel as set forth above is based on laws, regulations,
rulings and decisions in effect as of the date of this Prospectus Supplement.
Subsequent developments in these areas could have a material effect on the
opinion. Purchasers of a Note should consult their own tax advisors with
respect to their particular circumstances.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under current United States federal income tax law, a 31% "backup"
withholding tax is applied to certain interest and principal payments
(including premium and original issue discount) made to, and to the proceeds of
sales before maturity by, certain United States persons if such persons fail to
supply taxpayer identification numbers and other information. In addition,
certain persons making such payments are required to submit information returns
to the United States Treasury Department with regard to those payments. Backup
withholding and information reporting, however, generally do not apply to any
such payments made to certain "exempt recipients" such as corporations. Under
current law, backup withholding and information reporting will not apply to
interest and principal payments (including premium and original
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issue discount) made by the Company or any of its paying agents on a Note if
the Company or such paying agents, as the case may be, receive the
certification described in section (i)(e) under "United States Alien Holders"
above and do not have actual knowledge that the payee is a United States
person, and in the case of principal payments (including premium), receive
certification from the payee as to the absence of the conditions set forth in
section (ii) under "United States Alien Holders" above.
Under current regulations, payments on the sale, exchange or retirement of a
Note to or through a foreign office of a broker will not be subject to backup
withholding. Such payments, however, will be subject to information reporting
if the broker is a United States person, a controlled foreign corporation for
United States federal income tax purposes or a foreign person 50% or more of
whose gross income is effectively connected with the conduct of a United States
trade or business for a specified three-year period, unless the broker has in
its records documentary evidence that the beneficial owner is not a United
States person and certain other conditions are met, or the beneficial owner
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
holder will be allowed as a refund or a credit against such holder's United
States federal income tax liability, provided that the required information is
provided to the Internal Revenue Service.
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments after
December 31, 1998, subject to certain transition rules. Prospective investors
are urged to consult their own tax advisors regarding the New Regulations.
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PLAN OF DISTRIBUTION
Under the terms of a Distribution Agreement between the Company and each of
the Agents, the Notes are being offered on a continuous basis by the Company
through the Agents, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BancAmerica Robertson Stephens, Inc., Chase Securities Inc.,
Citicorp Securities, Inc., Credit Suisse First Boston Corporation, First
Chicago Capital Markets, Inc., Goldman, Sachs & Co., Lehman Brothers, Lehman
Brothers Inc., J.P. Morgan Securities Inc. and UBS Securities Inc., each of
whom has agreed to use its reasonable best efforts to solicit offers to
purchase Notes. The Company will pay each Agent a commission, in the form of a
discount, of .125% to .750% of the principal amount of each Note sold through
such Agent, depending upon the maturity of the Note. In addition, the Agents
may offer the Notes they have purchased as principal to other dealers. The
Agents may sell Notes to any dealer at a discount and, unless otherwise
specified in the applicable Pricing Supplement, such discount allowed to any
dealer will not be in excess of the discount to be received by such Agent from
the Company.
Unless otherwise indicated in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage equal to the
commission applicable to any agency sale of a Note of identical maturity, and
may be resold by the Agent to investors and other purchasers from time to time
in one or more transactions, including negotiated transactions, at varying
prices determined at the time of sale by such Agent, or otherwise, or may be
resold to certain dealers as described above. After the initial public offering
of Notes to be resold to investors and other purchasers, the public offering
price (in the case of a fixed price reoffering), concession and discount may be
changed.
The Company may also sell Notes directly on its behalf to investors other
than the Agents. In the case of such sales made directly by the Company, no
commission will be payable to any of the Agents.
During and after offerings of the Notes, the Agents may purchase and sell
offered Notes in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases of Notes to cover short positions
created in connection with such offerings. The Agents also may impose penalty
bids, whereby selling concessions allowed to other broker-dealers in respect of
the Notes sold in such offerings for their account may be reclaimed by the
Agents if such securities are repurchased by the Agents in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market prices of such Notes, which may be higher than the prices
that would otherwise prevail in the open market. These transactions may be
effected in the over-the-counter market or otherwise, and these activities, if
commenced, may be discontinued at any time.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes in whole or in part. 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.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each Agent may make a market in the
Notes, but no Agent is obligated to do so. Any Agent that makes a market in the
Notes may discontinue market-making at any time without notice. There can be no
assurance that the Notes offered hereby will be sold or that there will be a
secondary market for any of the Notes. See "Risk Factors--Structure Risks."
Each of the Agents and certain affiliates thereof engage in transactions
with, and perform services, for the Company in the ordinary course of business.
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The Company has agreed to indemnify each Agent against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), or to contribute to payments such Agent may be required
to make in respect thereof. Each Agent may be deemed to be an "underwriter"
within the meaning of the Securities Act. The Company has also agreed to
reimburse the Agents for certain expenses.
LEGAL MATTERS
Certain legal matters in connection with the Notes will be passed upon for
the Company by Mark J. Ohringer, Esq., Associate General Counsel of the
Company, and for the Agents by Katten Muchin & Zavis, Chicago, Illinois. Katten
Muchin & Zavis from time to time acts as counsel in certain matters for the
Company and certain of its subsidiaries. Katten Muchin & Zavis, Chicago,
Illinois will also act as special tax counsel to the Company with respect to
the Notes.
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-38545
PROSPECTUS
LOGO HELLER FINANCIAL, INC.
DEBT SECURITIES
WARRANTS TO PURCHASE DEBT SECURITIES
SENIOR PREFERRED STOCK
---------------
Heller Financial, Inc. (the "Company") may from time to time offer unsecured
debt securities (the "Debt Securities") consisting of debentures, notes and/or
other evidences of unsecured indebtedness, in one or more series, or warrants
to purchase Debt Securities ("Warrants"), or shares of senior preferred stock,
$.01 par value per share (the "Senior Preferred Stock"), in one or more series
(the Debt Securities, Warrants and Senior Preferred Stock being hereinafter
collectively referred to as the "Securities"), or any combination of the
foregoing, at an aggregate initial offering price not to exceed
$3,000,000,000, or the equivalent thereof if any of the Securities are
designated in a foreign currency or foreign currency unit, at prices and on
terms to be determined at or prior to the time of sale. The Debt Securities
and Warrants may be sold for U.S. dollars, foreign currencies or foreign
currency units, and the principal of, and premium, if any, and interest, if
any, on, the Debt Securities may be payable in U.S. dollars, foreign
currencies or foreign currency units.
Specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement
(the "Prospectus Supplement"), together with the terms of the offering of such
Securities, the initial price of such Securities and the net proceeds to the
Company from their sale. Without limitation, the Prospectus Supplement will
set forth the following: (i) in the case of Debt Securities, the specific
designation, ranking as senior, subordinated or junior subordinated debt,
aggregate principal amount, maturity, rate (or method of calculation) of any
interest and dates for payment thereof, currency or currencies or currency
unit or currency units for which the Debt Securities may be purchased,
currency or currencies or currency unit or currency units in which principal,
premium, if any, and interest, if any, is payable, authorized denominations,
tax consequences, any exchangeability, conversion, redemption, prepayment or
sinking fund provisions and additional covenants, conditions and events of
default, if any; (ii) in the case of Warrants, the designation and terms of
the Debt Securities purchasable upon exercise of the Warrants, the designation
and terms of any Debt Securities with which the Warrants are issued, the
exercise price, the duration and detachability from any related Debt
Securities; and (iii) in the case of Senior Preferred Stock, the designation,
number of shares, liquidation preference per share, dividend rate (or method
of calculation thereof), dates on which dividends, if any, shall be payable
and from which dividends shall accrue, voting rights, if any, any redemption
or sinking fund provisions, and any conversion or exchange rights.
The Company has not yet determined whether any Securities offered hereby
will be listed on any exchange or over-the-counter market. If the Company
decides to seek listing of any such Securities, the Prospectus Supplement
relating thereto will disclose such exchange or market.
The Securities may be offered directly to purchasers, to or through
underwriters, dealers or agents, as designated from time to time, or through a
combination of any such methods. If any underwriters, dealers or agents are
involved in the offering of the Securities, then the names of such
underwriters, dealers or agents and any applicable fee, commission or discount
arrangements with them will be set forth in the Prospectus Supplement. See
"Plan of Distribution." Except as otherwise provided in a Prospectus
Supplement, the net proceeds to the Company from any offering will be added to
the general funds of the Company. See "Use of Proceeds."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 30, 1997.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
In this Prospectus and any Prospectus Supplement references to "dollar" and
"$" are to United States dollars, and the term "United States" or "U.S." means
the United States of America, its states, its territories, its possessions and
all areas subject to its jurisdiction.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted as permitted by the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this Prospectus, or in the
documents incorporated by reference herein, as to the contents of any
contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission,
reference is made to the copy so filed, and each such statement shall be
deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. The
Registration Statement, as well as such reports and other information filed by
the Company with the Commission, can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission at 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Certain securities of the Company are listed on the New York Stock Exchange,
and reports and other information concerning the Company may be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005. Copies of reports, proxy and information statements and other
information regarding registrants that file electronically (including the
Company) are available on the Commission's Web Site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1997 and June 30, 1997; and
(3) The Company's Current Reports on Form 8-K dated January 27, 1997,
April 3, 1997, April 22, 1997, July 24, 1997 and October 22, 1997.
2
<PAGE>
All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of any offering of the Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of each such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus has been delivered, upon the written or oral request of such person,
a copy of any or all of the documents referred to above which have been
incorporated in this Prospectus by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the information that this Prospectus incorporates). Requests for such copies
should be directed to: Treasurer, Heller Financial, Inc., 500 West Monroe
Street, Chicago, Illinois 60661 (telephone (312) 441-7000).
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This Prospectus contains, any Prospectus Supplement will contain, and the
documents incorporated by reference herein contain or will contain certain
"forward-looking statements" (as defined in Section 27A of the Securities Act)
that are based on the beliefs of the Company's management, as well as
assumptions made by, and information currently available to, the Company's
management. Wherever possible, the Company has identified these forward-looking
statements by using words such as "anticipates," "believes," "estimates,"
"expects" and similar expressions. These forward-looking statements are subject
to risks and uncertainties which could cause the Company's actual results,
performance or achievements to differ materially from those expressed in, or
implied by, these statements. These risks and uncertainties include, but are
not limited to, the following: (1) the results of the Company's efforts to
implement its business strategy; (2) the effect of economic conditions and the
performance of borrowers; (3) actions of the Company's competitors and the
Company's ability to respond to such actions; (4) the cost of the Company's
capital, which depends in part on the Company's portfolio quality, ratings,
prospects and outlook; and (5) changes in governmental regulations, tax rates
and similar matters. The Company assumes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
3
<PAGE>
THE COMPANY
GENERAL
The Company was incorporated in 1919 under the laws of the State of Delaware
and is engaged in various aspects of the commercial finance business. The
Company and its consolidated subsidiaries employ approximately 2,300 people.
The Company's executive offices are located at 500 West Monroe Street, Chicago,
Illinois 60661 (telephone: (312) 441-7000). Unless the context indicates
otherwise, references to the Company include Heller Financial, Inc. and its
consolidated subsidiaries.
The Company is a diversified financial services company which provides a
broad array of commercial financial products and services primarily to middle-
market companies in the United States and internationally. The Company provides
its products and services through five product categories: (i) asset based
finance, (ii) cash flow lending, (iii) real estate finance, (iv) international
asset based finance and factoring and (v) specialized finance. The middle-
market segment served includes entities primarily in the manufacturing and
service sectors with annual sales in the range of $15 million to $200 million
and in the real estate sector with property values generally in the range of $5
million to $40 million.
The Company's emphasis has been to grow the lower risk asset based finance
businesses, maintain significant franchises in corporate finance and real
estate finance and continue to grow its international asset based lending
businesses. The asset based businesses have developed to become the largest
product category in assets and revenues. Earnings quality has been strengthened
through the growth in the asset based businesses, which provide more consistent
revenue streams and produce lower and less volatile credit quality costs. The
Company manages asset quality through the use of disciplined underwriting
standards and aggressive account management techniques. The underwriting
standards and credit disciplines employed on the post-1990 corporate finance
and real estate finance portfolios have resulted in strong credit quality for
these portfolios. In addition, the Company continues to significantly reduce
its pre-1990 corporate finance and real estate finance portfolios. The Company
has maintained a conservative capital structure with substantial equity, low
leverage and moderate reliance for funding on the commercial paper market.
PRODUCT CATEGORIES
The Company offers a wide range of financial products and services to its
customers through five product categories.
Asset Based Finance
Asset based financing is offered by six distinct product groups: Heller
Current Asset Management ("Current Asset Management"), Heller Business Credit
("Business Credit"), Heller Equipment Finance and Leasing ("Equipment Finance
and Leasing"), Heller Vendor Finance ("Vendor Finance"), Heller First Capital
("First Capital") and Heller Sales Finance ("Sales Finance").
Current Asset Management provides working capital financing, receivables
management and credit protection to companies in a broad range of industries.
Current Asset Management is the fourth largest domestic factor in the United
States and is the Company's oldest business with over 50 years of operations.
The group offers factoring services to over 600 clients and 80,000 customers,
primarily in the apparel, textile, houseware, transportation and home
furnishings industries. In return for a commission, the group purchases the
client's accounts receivables and provides collection, credit protection and
management information services. Working capital is provided by advancing on a
formula basis a percentage of the purchase price of the client's factored
accounts receivables. Current Asset Management also provides advances against
inventory on a formula basis.
Business Credit provides asset based working capital and term financing to
middle market companies for refinancings, recapitalizations, acquisitions,
seasonal borrowing, debtor-in-possession (DIP) and post-DIP
4
<PAGE>
transactions through senior loans secured primarily by accounts receivable and
inventory. The group provides financing to manufacturers, retailers,
wholesalers, distributors, exporters and service firms. The group also serves
as co-lender or participant in transactions agented by other asset-based
lenders. Revolving credit facilities and term loans are generally cross-
collateralized. The Company protects its position against deterioration of a
borrower's performance by using established advance rates against eligible
collateral. Transaction sizes range from $5 million to $75 million, and the
group utilizes syndication capabilities to lower the average retained
transaction size to approximately $20 million in commitments and $10 million in
fundings.
Equipment Finance and Leasing is comprised of four direct origination finance
divisions: Heller Commercial Equipment Finance ("Commercial Equipment
Finance"), Heller Aircraft Finance ("Aircraft Finance"), Heller Public Finance
("Public Finance") and Heller Industrial Equipment Finance ("Industrial
Equipment Finance"). Commercial Equipment Finance provides leasing and
financing programs to a diverse group of middle market companies collateralized
by equipment for expansion, replacement or modernization or to refinance
existing equipment obligations. Typically, the equipment is essential to the
operations of the borrower, and the amount financed is generally not a
substantial part of the borrower's capital structure. Commercial Equipment
Finance serves various markets, including transportation, supermarket,
manufacturing, energy, restaurant and food processing. Transaction sizes
generally range from $500,000 to $15 million, with terms ranging from three to
ten years and an average transaction size in 1996 of approximately $4 million.
Aircraft Finance offers financing for commercial aircraft and aircraft engines
through operating leases and senior and junior secured loans. Transaction sizes
range from $5 million to $40 million, with terms ranging from five to fifteen
years and an average transaction size in 1996 of approximately $13 million.
During 1996, the Company formed Public Finance to provide equipment and
project/facility financing to state and local governments and Industrial
Equipment Finance to provide collateral based equipment financing to smaller
middle market companies in the machine tool, construction, printing and
trucking industries. The targeted average transaction size is approximately $2
million for Public Finance and less than $1 million for Industrial Equipment
Finance.
Vendor Finance provides customized equipment leasing and financing programs
to manufacturers and distributors of a wide variety of commercial, industrial
and technology based products. These services, offered through approximately 75
programs with manufacturers and vendors, are established to finance sales to
end users. Transactions under these programs generally have partial or in some
cases full recourse to the vendor. The group serves the financing needs of the
machining, graphic arts, information technology, energy management, healthcare,
communication and food processing markets. Transaction sizes range from $50,000
to approximately $3 million, with an average transaction size in 1996 of
approximately $150,000. The group also provides capital to independent finance
and leasing companies.
First Capital provides long-term financing to independent small businesses
and franchises under the United States Small Business Administration ("SBA")
loan programs. First Capital is one of the largest participants in the SBA's
7(A) loan program under which up to 80% of each loan is guaranteed by the SBA.
The Company also makes loans under the SBA's 504 program. These loans are
senior to an accompanying SBA loan and have an average loan to collateral value
of 50%. First Capital's SBA 7(A) and 504 loans include financing for real
estate acquisition, refinancing or construction financing, equipment or
business acquisition, permanent working capital for expansion efforts and debt
consolidation. The guaranteed portions of the SBA 7(A) loans are sometimes sold
in the secondary market, with servicing rights retained by First Capital.
Transaction sizes generally range from $50,000 to $2 million, with an average
transaction size in 1996 of approximately $400,000.
Sales Finance provides financing, primarily through senior lines and, to a
lesser extent, subordinated debt to originators of consumer receivables.
Financing is primarily provided for vacation ownership, home equity and
improvement, non-prime auto, security alarm monitoring contracts and municipal
tax liens. Sales Finance is a major capital source in the United States in the
vacation ownership industry. Transaction sizes generally range from $3 million
to $25 million, with an average transaction size in 1996 of approximately $7
million.
5
<PAGE>
Cash Flow Lending
Heller Corporate Finance ("Corporate Finance") is a leading provider of
middle market financing based on the cash flows underlying a client's business.
This lending is generally provided through coordination with private equity
sponsors and includes the financing of corporate recapitalizations,
refinancings, expansions, acquisitions and buy-outs of publicly and privately
held entities in a wide variety of industries. Loans are provided on both a
term and revolving basis for periods of up to ten years and are typically
collateralized by senior liens on the borrower's stock or assets or both.
Transactions may also include some unsecured or subordinated financings or
modest non-voting equity investments. The group also serves as co-lender or
participant in transactions agented by other asset based lenders. Transaction
sizes range from $5 million to $50 million, and the group utilizes syndication
capabilities to lower the average retained transaction size to approximately
$16 million in commitments and $9 million in fundings for 1996. Corporate
Finance also invests in equity funds generally originated by equity sponsors.
Real Estate Finance
Heller Real Estate Financial Services ("Real Estate Finance") specializes in
providing financing products to real estate owners, investors and developers,
primarily for the acquisition, refinancing and renovation of commercial income-
producing properties in a wide range of property types and geographic areas.
The group is one of the nation's largest providers of loans secured by
manufactured housing communities and self-storage facility property types to be
sold in the capital markets through a commercial mortgage securitization. The
group also offers financing for discounted loan portfolio acquisitions, single
family housing developments, credit sale-leasebacks and to be built properties
with credit tenants. The group also holds investments in acquisition,
development and construction transactions, as well as certain available for
sale debt securities. Loans generally have terms ranging from one to five years
and are principally collateralized by first mortgages. Transaction sizes
generally range from $1 million to $15 million, with an average transaction
size in 1996 of approximately $3 million.
International Asset Based Finance and Factoring
Heller International Group, Inc. ("Heller International") offers financial
products through commercial finance subsidiaries and joint ventures in 18
countries in Europe, Asia/Pacific and Latin America. The joint ventures and
subsidiaries primarily provide factoring, asset based financing and receivables
management services, and also make loans for acquisition financing, leasing,
vendor finance and/or trade finance programs, primarily to small and mid-sized
businesses outside the United States. Heller International also makes modest
investments in international equity funds.
On April 2, 1997, Heller International purchased the interest of its joint
venture partner in Factofrance Heller S.A. ("Factofrance") for $174 million. As
a result, Heller International increased its ownership interest in Factofrance
from 48.8% to 97.6%. Heller International has held an interest in Factofrance
for over 30 years, using the equity method of accounting for its previous
ownership position. Factofrance, founded in 1965, is the leading factoring
company in the French marketplace. Factofrance is headquartered in Paris and
has seven regional sales offices covering local markets.
Specialized Finance
Heller Project Finance, formerly known as Project Investment and Advisory
Division, consists of transactions in project finance offering financing to
independent power producers and industrial projects in the oil and gas, coal,
mining, paper and environmental industries. Financing is provided in the form
of senior and junior secured loans and equity investments. Transaction sizes
generally range from $5 million to $25 million, and terms range from seven to
15 years.
6
<PAGE>
SYNDICATION, SECURITIZATION AND LOAN SALE ACTIVITIES
A key element of the Company maintaining strong asset quality is its focus on
managing exposure to individual credits and industry concentrations. A major
part of the effort is syndicating loans or selling participations to control
the concentration of credit risk. The Company has established syndication
programs in most of its businesses, with receivable syndications and
participations totaling $453 million during 1996. In addition, Real Estate
Finance originates loans to manufactured housing communities, self storage
facilities and multi-tenant industrial property types, which may be sold as
whole loans or in the capital markets through a commercial mortgage
securitization. Other business groups also originate receivables which may be
sold as whole loans or through a securitization to take advantage of market
pricing and to reduce concentrations of credit risk. During 1996, the Company
had loan sales totaling $304 million. Through September 30, 1997, the Company
sold through securitization $268 million of loans and leases originated in its
Equipment Finance and Leasing and Vendor Finance businesses and $505 million of
mortgage loans originated in its Real Estate Finance business.
OWNERSHIP
All of the outstanding Common Stock of the Company is owned by Heller
International Corporation (the "Parent"), a wholly-owned subsidiary of The Fuji
Bank, Limited ("Fuji Bank"), headquartered in Tokyo, Japan. Fuji Bank also
directly owns 21% of the outstanding shares of Heller International, a
consolidated subsidiary of the Company engaged in international factoring and
asset based financing activities. Fuji Bank is one of the largest banks in the
world, with total deposits of approximately $311.4 billion at March 31, 1997.
For a discussion of the Keep Well Agreement between Fuji Bank and the Company,
see "Keep Well Agreement with Fuji Bank" below.
The following table summarizes selected financial data obtained from Fuji
Bank's most recent available financial statements, as prepared in accordance
with accounting principles generally accepted in Japan, which differ from
generally accepted accounting principles in the United States.
THE FUJI BANK, LIMITED
(CONSOLIDATED FINANCIAL STATEMENTS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------
1997 1996
------------------------ -------------------------
YEN DOLLARS* YEN DOLLARS*
(BILLIONS) (MILLIONS) (BILLIONS) (MILLIONS)
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Total Assets............ (Yen)56,211.2 $452,950.5 (Yen)54,401.4 $511,531.8
Total Deposits.......... 38,649.5 311,438.2 37,280.4 350,544.2
Total Liabilities....... 54,276.8 437,363.5 52,764.8 496,142.9
Total Stockholders'
Equity................. 1,934.3 15,587.0 1,636.1 15,388.9
Net Income.............. 109.0 878.7 (325.4) (3,059.9)
</TABLE>
- --------
*Rates of Exchange: 3/31/97 (Yen) 124.10 = U.S. $1.00
3/31/96 (Yen) 106.35 = U.S. $1.00
If the financial statements from which the numbers in the foregoing table were
taken had been prepared in accordance with accounting principles generally
accepted in the United States, some of the amounts shown might have been
materially different. The Company currently understands that accounting
principles generally accepted in Japan differ from generally accepted
accounting principles in the United States in various areas including the
following: valuation of securities; accounting treatment of guarantees,
commitments, unearned income, deferred taxes, leases, depreciation, foreign
currency transactions and investments in subsidiaries, and creation and
maintenance of optional and required reserves.
7
<PAGE>
KEEP WELL AGREEMENT WITH FUJI BANK
The Company entered into a Keep Well Agreement (as amended from time to
time, the "Keep Well Agreement") with Fuji Bank on April 23, 1983 in order to
assist the Company in maintaining its credit rating. The Keep Well Agreement
was amended and supplemented on January 26, 1984, in connection with the
consummation of the purchase of the Company by Fuji Bank and has been amended
since that date from time to time. Most recently, on June 17, 1997, the Keep
Well Agreement was amended in connection with the Company's offering of its
Fixed Rate Noncumulative Perpetual Senior Preferred Stock, Series B, $.01 par
value ("Series B Preferred Stock"). The Keep Well Agreement shall not be
terminated prior to the date (the "Termination Date") which is the earlier of
(i) December 31, 2007 and (ii) the date on which the Company has received
written certifications from Moody's Investor Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") that, upon termination of the Keep Well
Agreement, the ratings on the Company's senior unsecured indebtedness without
the support provided by the Keep Well Agreement will be no lower than such
ratings with the support of the Keep Well Agreement, but in no event shall the
Termination Date be earlier than December 31, 2002. In addition, the Keep Well
Agreement includes certain restrictions on termination relating to the
Company's 8 1/8% Cumulative Perpetual Senior Preferred Stock, Series A, $.01
par value ("Series A Preferred Stock"), the Series B Preferred Stock and any
fixed rate noncumulative perpetual Senior Preferred Stock issued in exchange
for the Series B Preferred Stock ("B Exchange Preferred Stock"), which
restrictions are discussed below.
The Keep Well Agreement provides that Fuji Bank will maintain the Company's
net worth in an amount equal to $500 million. Accordingly, if the Company
should determine, at the close of any month, that its net worth is less than
$500 million, then Fuji Bank will purchase, or cause one of its subsidiaries
to purchase, shares of the Company's NW Preferred Stock, Class B, no par value
("NW Preferred Stock"), in an amount necessary to increase the Company's net
worth to $500 million. The NW Preferred Stock is a series of the Company's
preferred stock, no par value per share ("Junior Preferred Stock"), and,
accordingly, if and when issued will rank junior to the Series A Preferred
Stock, Series B Preferred Stock, any B Exchange Preferred Stock and any other
Senior Preferred Stock issued by the Company in the future (including any
Senior Preferred Stock offered hereby) as to payment of dividends, and in all
other respects. If and when the NW Preferred Stock is issued, dividends
thereon will be noncumulative and will be payable (if declared) quarterly at a
rate per annum equal to 1% over the three-month London Inter-bank Offered
Rate. Such dividends will not be paid during a default in the payment of
principal or interest on any of the outstanding indebtedness for money
borrowed by the Company. Subject to certain conditions, the NW Preferred Stock
will be redeemable, at the option of the holder, within a specified period of
time after the end of a calendar quarter in an aggregate amount not greater
than the excess of the net worth of the Company as of the end of such calendar
quarter over $500 million. See "Description of Existing Preferred Stock--NW
Preferred Stock."
The Keep Well Agreement further provides that if the Company should lack
sufficient cash, other liquid assets or credit facilities to meet its payment
obligations on its commercial paper, then Fuji Bank will lend the Company up
to $500 million (the "Liquidity Commitment"), payable on demand, which the
Company may use only for the purpose of meeting such payment obligations. Any
such loan by Fuji Bank to the Company (a "Liquidity Advance") will bear
interest at a fluctuating interest rate per annum equal to the announced prime
commercial lending rate of Morgan Guaranty Trust Company of New York plus
0.25% per annum. Each Liquidity Advance will be repayable on demand at any
time after the business day following the 29th day after such Liquidity
Advance was made. No repayment of the Liquidity Advance will be made during a
period of default in the payment of the Company's senior indebtedness for
borrowed money.
No Liquidity Advances or purchases of NW Preferred Stock have been made by
Fuji Bank under the Keep Well Agreement; other infusions of capital in the
Company have been made by the Parent, the last one of which occurred in 1992.
Under the Keep Well Agreement, the Company has covenanted to maintain, and
Fuji Bank has undertaken to assure that the Company will maintain, unused
short-term lines of credit, asset sales facilities and committed
8
<PAGE>
credit facilities in an amount approximately equal to 75% of the amount of its
commercial paper obligations from time to time outstanding. In addition, under
the Keep Well Agreement, neither Fuji Bank nor any of its subsidiaries can
sell, pledge or otherwise dispose of shares of Common Stock of the Company, or
permit the Company to issue shares of its Common Stock, except to Fuji Bank or
a Fuji Bank affiliate.
Neither Fuji Bank nor the Company is permitted to terminate the Keep Well
Agreement for any reason prior to the Termination Date. After the Termination
Date, either Fuji Bank or the Company may terminate the Keep Well Agreement
upon 30 business days' prior written notice, except as set forth below. So long
as the Series A Preferred Stock is outstanding and held by third parties other
than Fuji Bank, the Keep Well Agreement may not be terminated by either party
unless the Company has received written certifications from Moody's and S&P
that upon such termination the Series A Preferred Stock will be rated by them
no lower than "a3" and "A-1," respectively. Additionally, so long as the Series
B Preferred Stock or B Exchange Preferred Stock is outstanding and held by
third parties other than Fuji Bank, the Keep Well Agreement may not be
terminated by either party unless the Company has received written
certifications from Moody's and S&P that upon such termination the Series B
Preferred Stock or B Exchange Preferred Stock, as the case may be (or both the
Series B Preferred Stock and B Exchange Preferred Stock if both are then
outstanding), will be rated no lower than "baa1" and "BBB" by Moody's and S&P,
respectively. For these purposes, the Series A Preferred Stock, Series B
Preferred Stock or B Exchange Preferred Stock will no longer be deemed
outstanding at such time as an effective notice of redemption of all of the
Series A Preferred Stock, Series B Preferred Stock or B Exchange Preferred
Stock, as the case may be, shall have been given by the Company and funds
sufficient to effectuate such redemption shall have been deposited with the
party designated for such purpose in the notice. So long as the Series A
Preferred Stock is outstanding, if both Moody's and S&P shall discontinue
rating the Series A Preferred Stock, then Goldman, Sachs & Co., or its
successor, shall, within 30 days, select a nationally recognized substitute
rating agency and identify the comparable ratings from such agency. So long as
the Series A Preferred Stock is no longer outstanding but the Series B
Preferred Stock or B Exchange Preferred Stock is outstanding, if both Moody's
and S&P shall discontinue rating the Series B Preferred Stock or B Exchange
Preferred Stock, as the case may be, then Lehman Brothers Inc., or its
successor, shall, within 30 days, select a nationally recognized substitute
rating agency and identify the comparable ratings from such agency. Any
termination of the Keep Well Agreement by the Company must be consented to by
Fuji Bank. Any such termination will not relieve the Company of its obligations
in respect of any NW Preferred Stock outstanding on the date of termination or
the dividends thereon, any amounts owed in respect of Liquidity Advances on the
date of termination or the unpaid principal or interest on those Liquidity
Advances or Fuji Bank's fee relating to the Liquidity Commitment. Any such
termination will not adversely affect the Company's commercial paper
obligations outstanding on the date of termination. The Keep Well Agreement can
be modified or amended by a written agreement of Fuji Bank and the Company.
However, no such modification or amendment may change the prohibition against
termination before the Termination Date or the other restrictions on
termination or adversely affect the Company's then-outstanding commercial paper
obligations.
Under the Keep Well Agreement, the Company's commercial paper obligations and
any other debt instruments are solely the obligations of the Company. The Keep
Well Agreement is not a guarantee by Fuji Bank of the payment of the Company's
commercial paper obligations, indebtedness, liabilities or obligations of any
kind.
USE OF PROCEEDS
Except as otherwise provided in a Prospectus Supplement, the net proceeds
from the sale of the Securities will be added to the general funds of the
Company and will be available for the repayment of short-term borrowings and
for other corporate purposes. From time to time, the Company may engage in
additional public or private financings of a character and amount that the
Company may deem appropriate.
9
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data of the Company and its consolidated
subsidiaries have been derived from information contained in, and should be
read in conjunction with, the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 and the Company's Quarterly Report on Form
10-Q for the six months ended June 30, 1997. The data presented below for, and
as of the end of, each of the years in the five-year period ended December 31,
1996 are derived from the audited consolidated financial statements of the
Company and its subsidiaries. The data presented below for, and as of the end
of, the six months ended June 30, 1997 and 1996 are derived from unaudited
financial statements and include, in the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the data for the periods.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
-------------- ----------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income............ $ 446 $ 400 $ 807 $ 851 $ 702 $ 620 $ 634
Interest expense........... 247 223 452 464 336 264 295
------- ------ ------ ------ ------ ------ ------
Net interest income...... 199 177 355 387 366 356 339
Fees and other income...... 79 37 79 148 117 88 52
Factoring commissions...... 43 26 55 50 53 50 49
Income of international
joint ventures............ 19 20 44 35 21 23 26
------- ------ ------ ------ ------ ------ ------
Operating revenues....... 340 260 533 620 557 517 466
Operating expenses......... 152 119 247 216 195 174 169
Provision for losses....... 56 49 103 223 188 210 252
------- ------ ------ ------ ------ ------ ------
Income before income
taxes, minority interest
and change in accounting
principle............... 132 92 183 181 174 133 45
Income tax
provision/(benefit)....... 45 21 43 49 51 11 (5)
Minority interest in
income of Heller
International Group,
Inc....................... 4 2 7 7 5 5 3
------- ------ ------ ------ ------ ------ ------
Income before change in
accounting principle.... 83 69 133 125 118 117 47
Cumulative effect of a
change in accounting
principle for income
taxes..................... -- -- -- -- -- -- 41
------- ------ ------ ------ ------ ------ ------
Net income............... $ 83 $ 69 $ 133 $ 125 $ 118 $ 117 $ 88
======= ====== ====== ====== ====== ====== ======
Common dividends paid.... $ 28 $ 24 $ 56 $ 52 $ 20 $ -- $ --
======= ====== ====== ====== ====== ====== ======
<CAPTION>
JUNE 30, DECEMBER 31,
-------------- ----------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Receivables................ $10,109 $8,167 $8,529 $8,085 $7,616 $7,062 $7,465
Allowance for losses of
receivables............... 250 230 225 229 231 221 224
Investments................ 881 771 805 693 634 370 280
Investment in
international joint
ventures.................. 193 235 272 233 174 144 140
Total assets............... $11,608 $9,475 $9,926 $9,638 $8,476 $7,913 $7,952
======= ====== ====== ====== ====== ====== ======
Senior debt:
Commercial paper and
short-term borrowings... $ 3,826 $2,440 $2,745 $2,223 $2,451 $1,981 $2,422
Notes and debentures..... 4,600 4,768 4,761 5,145 3,930 3,893 3,521
Junior subordinated debt... -- -- -- -- -- 75 225
------- ------ ------ ------ ------ ------ ------
Total debt............... $ 8,426 $7,208 $7,506 $7,368 $6,381 $5,949 $6,168
======= ====== ====== ====== ====== ====== ======
Total liabilities.......... $ 9,907 $7,997 $8,402 $8,208 $7,107 $6,625 $6,777
Preferred stock............ 275 150 150 150 150 150 150
Common equity.............. 1,368 1,276 1,317 1,234 1,180 1,103 994
------- ------ ------ ------ ------ ------ ------
Total stockholders'
equity.................. $ 1,643 $1,426 $1,467 $1,384 $1,330 $1,253 $1,144
======= ====== ====== ====== ====== ====== ======
Ratio of commercial paper
and short-term borrowings
to total debt............. 45% 34% 37% 30% 38% 33% 39%
======= ====== ====== ====== ====== ====== ======
Ratio of debt (net of
short-term investments)
to total stockholders'
equity.................... 5.0x 4.8x 5.0x 5.0x 4.7x 4.7x 5.4x
======= ====== ====== ====== ====== ====== ======
</TABLE>
10
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for the
Company and its consolidated subsidiaries for the periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED JUNE FOR THE YEAR ENDED DECEMBER
30, 31,
----------- -----------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(1).......................... 1.53x 1.41x 1.40x 1.38x 1.51x 1.49x 1.15x
Ratio of earnings to combined fixed
charges and preferred stock
dividends(2)........................ 1.48x 1.36x 1.35x 1.34x 1.44x 1.43x 1.14x
</TABLE>
- --------
(1) The ratio of earnings to fixed charges is calculated by dividing (i)
income before income taxes, the minority interest in Heller International
income and fixed charges by (ii) fixed charges. Fixed charges consist of
interest on all indebtedness and one-third of annual rentals (approximate
portion representing interest).
(2) The ratio of earnings to combined fixed charges and preferred stock
dividends is calculated by dividing (i) income before income taxes, the
minority interest in Heller International income and fixed charges by (ii)
fixed charges plus preferred stock dividends.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the indentures under which the Debt Securities are to be issued. The
particular terms of each issue of Debt Securities (the "Offered Debt
Securities"), as well as any modifications or additions to such general terms
that may apply in the case of such Offered Debt Securities, will be described
in the Prospectus Supplement relating to such Offered Debt Securities and will
be set forth in a filing with the Commission. Accordingly, for a description
of the terms of a particular issue of Debt Securities, reference must be made
to both the Prospectus Supplement relating thereto and to the following
description.
The Debt Securities will be unsecured general obligations of the Company,
and may be senior Debt Securities ("Senior Debt Securities"), subordinated
Debt Securities ("Subordinated Debt Securities") or junior subordinated Debt
Securities ("Junior Subordinated Debt Securities"). None of the Company's
outstanding Debt Securities are, and none of the Debt Securities will be,
guaranteed by Fuji Bank. The Senior Debt Securities will be issued under an
indenture dated as of September 1, 1995, as amended, between the Company and
State Street Bank and Trust Company ("State Street"), as successor to Shawmut
Bank Connecticut, National Association ("Shawmut"), as trustee (such
indenture, as at any time amended, being referred to herein as the "Senior
Indenture"); the Subordinated Debt Securities will be issued under an
indenture dated as of September 1, 1995, as amended, between the Company and
State Street, as successor to Shawmut, as trustee (such indenture, as at any
time amended, being referred to herein as the "Subordinated Indenture"); and
the Junior Subordinated Debt Securities will be issued under an indenture
dated as of September 1, 1995, as amended, between the Company and State
Street, as successor to Shawmut, as trustee (such indenture being referred to
as the "Junior Subordinated Indenture"). The Senior Indenture, the
Subordinated Indenture and the Junior Subordinated Indenture are sometimes
hereinafter referred to individually as an "Indenture" and collectively as the
"Indentures." The trustee under each Indenture (and any successor thereto
under each Indenture) is referred to herein as the "Trustee." The statements
under this caption relating to the Debt Securities and the Indentures are
summaries only and do not purport to be complete. All section references
appearing herein are to sections of the applicable Indenture or Indentures,
and capitalized terms not defined herein shall have the meanings ascribed to
them in the applicable Indenture or Indentures. Wherever particular provisions
of the Indentures are referred to, such provisions are incorporated by
reference as part of the statements made herein, and such statements are
qualified in their entirety by such reference. Copies of the Senior Indenture,
the Subordinated Indenture and the
11
<PAGE>
Junior Subordinated Indenture have been filed with the Commission as exhibits
to the Registration Statement and are available from the offices of the
Commission as referred to under "Available Information."
There is no requirement that future issues of debt securities of the Company
be issued under any of the Indentures, and the Company will be free to employ
other indentures or documentation containing provisions different from those
included in the Indentures or applicable to one or more issues of Offered Debt
Securities, in connection with future issues of such other debt securities.
PROVISIONS APPLICABLE TO SENIOR, SUBORDINATED AND JUNIOR SUBORDINATED DEBT
SECURITIES
General
Each Indenture provides that the Debt Securities issued thereunder may be
issued without limit as to aggregate principal amount, in one or more series,
and may be denominated in any currency or currency unit, in each case as
established from time to time in, or pursuant to authority granted by, a
resolution of the Board of Directors of the Company or as established in one or
more indentures supplemental to such Indenture. (Section 3.01). Each Indenture
also provides that there may be more than one Trustee under such Indenture,
each with respect to one or more series of Debt Securities. The Trustee under
any Indenture may resign or be removed with respect to one or more series of
Debt Securities issued under such Indenture, and a successor Trustee may be
appointed to act with respect to such series. (Section 8.10). If two or more
persons are acting as Trustee with respect to different series of Debt
Securities issued under the same Indenture, each such Trustee shall be a
Trustee of a trust under such Indenture separate and apart from the trust
administered by any other such Trustee (Section 8.11), and any action described
herein to be taken by the "Trustee" may then be taken by each such Trustee with
respect to, and only with respect to, the one or more series of Debt Securities
for which it is Trustee under such Indenture.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered hereby for the following terms of the Offered
Debt Securities: (i) the title of the Offered Debt Securities and whether such
Offered Debt Securities will be Senior Debt, Subordinated Debt or Junior
Subordinated Debt; (ii) any limit on the aggregate principal amount of the
Offered Debt Securities; (iii) the percentage of their principal amount for
which the Offered Debt Securities will be issued; (iv) the date or dates on
which the principal of (and premium, if any, on) the Offered Debt Securities
will be payable; (v) the rate or rates (which may be fixed or variable) per
annum, or the method by which such rate or rates shall be determined, at which
the Offered Debt Securities will bear interest, if any; (vi) if other than U.S.
Dollars, the currency or currencies or currency unit or units for which the
Offered Debt Securities may be purchased and the currency or currencies or
currency unit or units in which the principal of, and premium, if any, and
interest, if any, on, such Offered Debt Securities may be payable; (vii) the
date or dates from which any such interest will accrue, the date or dates on
which any such interest will be payable and the regular record dates for such
interest payments; (viii) the place or places where the principal of, and
premium, if any, and interest, if any, on, the Offered Debt Securities will be
payable; (ix) the period or periods within which, the price or prices at which
and the terms and conditions upon which the Offered Debt Securities may be
redeemed, in whole or in part, at the option of the Company, pursuant to any
sinking fund or otherwise, if the Company is to have such an option, and
whether any special terms and conditions of redemption shall apply if the
Offered Debt Securities are Registered Securities (as hereinafter defined) or
Unregistered Securities (as hereinafter defined); (x) the obligation, if any,
of the Company to redeem, repay or purchase the Offered Debt Securities
pursuant to any sinking fund or analogous provision or at the option of a
Holder thereof, and the period or periods within which, the price or prices at
which and the terms and conditions upon which the Offered Debt Securities will
be redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation; (xi) the terms for conversion or exchange, if any; (xii) any Events
of Default with respect to the Offered Debt Securities in addition to those set
forth under "Events of Default, Notice and Waiver" below; (xiii) the securities
exchange or market, if any, on which the Offered Debt Securities will be
listed; and (xiv) any other terms of the Offered Debt Securities not
inconsistent with the provisions of the respective Indenture.
12
<PAGE>
The Company will comply with Rule 14e-1 promulgated under the Exchange Act,
and any other tender offer rules under the 1934 Act which may then be
applicable in connection with any obligation of the Company to purchase Offered
Debt Securities at the option of the Holders thereof. Any such obligation
applicable to an issue of Securities will be described in the Prospectus
Supplement relating thereto.
The Debt Securities may be issued in fully registered form without coupons
("Fully Registered Securities"), or in a form registered as to principal only
with coupons ("Registered Securities") or in bearer form with or without
coupons ("Unregistered Securities"). The Debt Securities of a series may be
issued in whole or in part in the form of one or more global securities that
will be deposited with, or on behalf of, a depositary identified in the
applicable Prospectus Supplement. The specific depositary arrangement with
respect to a series of Offered Debt Securities or any part thereof will be
described in the applicable Prospectus Supplement. Unless otherwise specified
in the Prospectus Supplement, the Offered Debt Securities will be issued only
as Fully Registered Securities in denominations of $1,000 and any integral
multiple thereof and will be payable in U.S. dollars. (Section 3.02).
An investment in Offered Debt Securities indexed, as to principal or interest
or both, to one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant risks
that are not associated with similar investments in a conventional fixed-rate
debt security. If the interest rate of such an Offered Debt Security is so
indexed, it may result in an interest rate that is less than that payable on a
conventional fixed-rate debt security issued at the same time, including the
possibility that no interest will be paid, and, if the principal amount of such
an Offered Debt Security is so indexed, the principal amount payable at
maturity may be less than the original purchase price of such Offered Debt
Security if allowed pursuant to the terms of such Offered Debt Security,
including the possibility that no principal will be paid. The secondary market
for such Offered Debt Securities will be affected by a number of factors,
independent of the creditworthiness of the Company and the value of the
applicable currency, commodity or interest rate index, including the volatility
of the applicable currency, commodity or interest rate index, the time
remaining to the maturity of such Offered Debt Securities, the amount
outstanding of such Offered Debt Securities and market interest rates. The
value of the applicable currency, commodity or interest rate index depends on a
number of interrelated factors, including economic, financial and political
events, over which the Company has no control. Additionally, if the formula
used to determine the principal amount or interest payable with respect to such
Offered Debt Securities contains a multiple or leverage factor, the effect of
any change in the applicable currency, commodity or interest rate index will be
increased. The historical experience of the relevant currencies, commodities or
interest rate indices should not be taken as an indication of future
performance of such currencies, commodities or interest rate indices during the
term of any Offered Debt Security. Accordingly, prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in such Offered Debt Securities and the suitability of such Offered
Debt Securities in light of their particular circumstances.
One or more series of Offered Debt Securities may be sold at a discount
(which may be substantial) below their stated principal amount or bear no
interest or interest at a rate which at the time of issuance is below market
rates ("Original Issue Discount Securities"). Special federal income tax,
accounting and other considerations applicable thereto will be described in the
Prospectus Supplement relating to any such Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
foreign currency unit or if the principal of, and premium, if any, and
interest, if any, on, any series of Offered Debt Securities are payable in any
foreign currency or foreign currency unit, the restrictions, elections, tax
consequences, specific terms and other information with respect to such issue
of Offered Debt Securities and such foreign currency or currency unit will be
set forth in the Prospectus Supplement relating thereto.
The Debt Securities will be unsecured obligations of the Company. None of the
Company's outstanding debt securities are, and none of the Debt Securities will
be, guaranteed by Fuji Bank.
13
<PAGE>
Certain Definitions
The following terms are defined in each Indenture. (Sections 1.01 and 12.07).
The term "Consolidated Net Tangible Assets" is defined to mean the total of
all assets reflected on a consolidated balance sheet of the Company and its
consolidated Subsidiaries, prepared in accordance with generally accepted
accounting principles, at their net book values (after deducting related
depreciation, depletion, amortization and all other valuation reserves which,
in accordance with such principles, should be set aside in connection with the
business conducted), but excluding goodwill, unamortized debt discount and all
other like segregated intangible assets, and amounts on the asset side of such
balance sheet for capital stock of the Company, all as determined in accordance
with such principles, less the aggregate of the current liabilities of the
Company and its consolidated Subsidiaries reflected on such balance sheet, all
as determined in accordance with such principles. For purposes of this
definition, "current liabilities" include all indebtedness for money borrowed,
incurred, issued, assumed or guaranteed by the Company and its consolidated
Subsidiaries, credit balances of factoring clients and other payables and
accruals, in each case payable on demand or due within one year of the date of
determination of Consolidated Net Tangible Assets, all as reflected on such
consolidated balance sheet of the Company and its consolidated Subsidiaries,
prepared in accordance with generally accepted accounting principles.
The term "Debt" is defined to mean all liabilities, whether issued or
assumed, in respect of money borrowed, whether or not evidenced by notes,
debentures or other like written obligations to pay money, and all guarantees
in respect of money borrowed by third persons, whether or not evidenced by
notes, debentures or other like written obligations of such third persons to
pay money.
The term "Finance Business" is defined to mean the business of making loans,
extending credit, or providing financial accommodations to any person and such
activities as may be incidental thereto, including, but not limited to: the
purchase of obligations growing out of the sale or lease of all types of
consumer, commercial and industrial property; the making of loans to
individuals and business enterprises, including the extension of wholesale or
floor plan accommodations to permit distributors and dealers to carry
inventories for resale; factoring; leasing of tangible personal property to
others; mortgage brokerage and servicing; and other business of a similar
character to the extent that other companies similarly situated, within the
limits of sound trade practice, may have heretofore engaged or may hereafter
engage in such other business.
The term "Junior Subordinated Debt" is defined to mean all Debt of the
Company which is by its terms made subordinate and junior to Senior Debt and
Subordinated Debt.
The term "Lien" is defined to mean any mortgage, pledge, security interest or
lien.
The term "Restricted Subsidiary" is defined to mean any Subsidiary of the
Company or of a Restricted Subsidiary (i) which is primarily engaged in the
Finance Business, (ii) which conducts such Finance Business primarily in the
United States and (iii) of which the Company and/or a Restricted Subsidiary
owns 51% or more of each class of its Voting Stock.
The term "Senior Debt" is defined to mean all Debt of the Company which is
not by its terms made subordinate or junior in right of payment with respect to
the general assets of the Company to any other Debt of the Company.
The term "Subordinated Debt" is defined to mean all Debt of the Company which
is by its terms made subordinate or junior in right of payment to any other
Debt of the Company, except Junior Subordinated Debt.
The term "Subsidiary" is defined to mean any corporation of which more than
50% of the Voting Stock, other than directors' qualifying shares (if any),
shall at the time be owned by the Company and/or one or more Subsidiaries.
14
<PAGE>
The term "Voting Stock" is defined to mean stock of the class or classes
having general voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of such corporation
(irrespective of whether or not at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of
any contingency).
Certain Restrictions
The Company agrees in each Indenture that it will not, and will not permit
any Restricted Subsidiary to, create, incur or assume any Lien on property of
any character of the Company or any Restricted Subsidiary to secure
indebtedness for money borrowed, incurred, issued, assumed or guaranteed by
the Company or any Restricted Subsidiary ("indebtedness") unless: (i) the Lien
equally and ratably secures the Debt Securities and the indebtedness (subject,
in the case of Debt Securities constituting either Subordinated Debt or Junior
Subordinated Debt, to subordination of respective rights of payment as
provided in the Subordinated Indenture or the Junior Subordinated Indenture,
as the case may be); or (ii) the Lien is on property or shares of stock of a
corporation at the time the corporation becomes a Restricted Subsidiary or
merges into or consolidates with the Company or a Restricted Subsidiary; or
(iii) the Lien is on property at the time the Company or a Restricted
Subsidiary acquires the property; or (iv) the Lien secures indebtedness
incurred to finance all or part of the purchase price or cost of construction
of property of the Company or a Restricted Subsidiary; or (v) the Lien secures
indebtedness of a Restricted Subsidiary owing to the Company or another
Restricted Subsidiary; or (vi) the Lien is on property of a person at the time
the person transfers or leases all or substantially all of its assets to the
Company or a Restricted Subsidiary; or (vii) the Lien is in favor of a
government or governmental entity and is for taxes or assessments or secures
payments pursuant to a contract or statute; or (viii) the Lien arises out of a
judgment, decree or court order or the Lien arises in connection with other
proceedings or actions at law or in equity; or (ix) the Lien is on receivables
of the Company, or cash, deposited or otherwise subjected to a Lien as a basis
for the issuance of bankers' acceptances or letters of credit in connection
with any financing of customers' operations by the Company or any Restricted
Subsidiary; or (x) the Lien is on property (or any receivables arising in
connection with the lease thereof) acquired by the Company or a Restricted
Subsidiary through repossession, foreclosure or like proceeding and secures
indebtedness incurred at the time of such acquisition or at any time
thereafter to finance all or part of the cost of maintenance, improvement or
construction relating thereto; or (xi) the Lien is created in favor of the
Small Business Administration on property owned by a Restricted Subsidiary
which is organized as a small business investment company under Title 15, 681,
of the United States Code; or (xii) the Lien extends, renews or replaces in
whole or in part a Lien enumerated in clauses (i) through (xi) above; or
(xiii) the Lien secures indebtedness of the Company or a Restricted Subsidiary
and the sum of the following does not exceed 10% of Consolidated Net Tangible
Assets: (x) such indebtedness plus (y) other indebtedness of the Company and
its Restricted Subsidiaries secured by Liens on property of the Company and
its Restricted Subsidiaries, excluding indebtedness secured by a Lien existing
as of the date of the Indenture and excluding indebtedness secured by a Lien
permitted by one of clauses (i) through (xii) above. (Section 12.07).
Each Indenture provides that the Company may omit in any particular instance
to comply with any part or the entirety of the foregoing restriction on Liens
if the Holders of at least a majority in principal amount of the Offered Debt
Securities at the time Outstanding of each series that is affected thereby
shall either waive such compliance in such instance or generally waive
compliance. (Section 12.08).
None of the Indentures limits the amount of Senior Debt, Subordinated Debt
or Junior Subordinated Debt that may be incurred by the Company. However,
under certain restrictive provisions of other indentures and agreements, the
Company has covenanted that it will not at any time permit the aggregate
principal amount of all Debt which is reflected on the consolidated balance
sheets of the Company to exceed 10 times consolidated stockholders' equity,
determined in accordance with generally accepted accounting principles. The
foregoing provisions are contained in certain indentures and agreements of
varying terms, the longest of which is currently scheduled to expire on May
15, 2002. None of the Indentures affects the Company's ability to terminate or
amend such provisions prior to such date.
15
<PAGE>
Mergers, Consolidations and Transfers of Assets
Each Indenture provides that the Company will not consolidate with or merge
into any other corporation or convey, transfer or lease its properties and
assets substantially as an entirety to any person, unless (a) the corporation
formed by such consolidation or into which the Company is merged or the person
which shall have acquired by conveyance or transfer, or which leases such
properties and assets is a corporation, partnership, limited liability company
or trust organized and existing under the laws of any United States
jurisdiction, and shall assume payment of the principal of, and premium, if
any, and interest, if any, on, the Debt Securities and the performance or
observance of every covenant to be performed or observed by the Company under
the Indentures, (b) immediately thereafter, no Event of Default (or event
which, with notice or lapse of time, or both, would be such) shall have
occurred and be continuing and (c) certain other conditions have been met.
(Section 10.01). If any such transaction were to occur, then, provided that all
such conditions were satisfied, the Company would (except in the case of a
lease) be discharged from all of its obligations and covenants under the
Indenture and the Debt Securities. (Section 10.02).
Payment and Transfer
Principal of, and premium, if any, and interest, if any, on, Fully Registered
Securities is to be payable at the Corporate Trust Office of the Trustee under
the applicable Indenture or any other office maintained by the Company for such
purposes, provided that payment of interest, if any, on Fully Registered
Securities may be made at the option of the Company by check mailed to the
persons in whose names such Debt Securities are registered at the close of
business on the day or days specified in the applicable Prospectus Supplement.
(Sections 3.08, 3.12). The principal of, and premium, if any, and interest, if
any, on, Offered Debt Securities in other forms will be payable in such manner
and at such place or places as may be designated by the Company and specified
in the applicable Prospectus Supplement. (Section 3.12).
Fully Registered Securities may be transferred or exchanged at the Corporate
Trust Office of the Trustee under the applicable Indenture or at any other
office or agency maintained by the Company for such purposes, subject to the
limitations in the applicable Indenture, without the payment of any service
charge except for any tax or governmental charge incidental thereto. Provisions
with respect to the transfer and exchange of Offered Debt Securities in other
forms will be set forth in the applicable Prospectus Supplement. (Section
3.05).
Book Entry, Delivery and Form
If the accompanying Prospectus Supplement so indicates, the Offered Debt
Securities will be represented by one or more certificates in registered,
global form (the "Global Securities"). The Global Security representing Offered
Debt Securities will be deposited with, or on behalf of, The Depository Trust
Company ("DTC") in New York, New York or other successor depositary appointed
by the Company (DTC or such other depositary is herein referred to as the
"Depositary") and registered in the name of the Depositary or its nominee.
DTC currently limits the maximum denomination of any single Global Security
to $200,000,000. Therefore, for purposes hereof, "Global Security" refers to
the Global Security or Global Securities representing the entire issue of
Offered Debt Securities.
DTC has advised the Company and any underwriters, dealers or agents named in
the accompanying Prospectus Supplement as follows: DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participants (the "Participants") and to facilitate the
clearance and settlement of securities transactions among its Participants in
such securities through electronic book-entry changes in accounts of the
Participants, thereby eliminating the need for physical movement of securities
certificates. The Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's book-entry system is also available to other entities, such as banks,
brokers, dealers and trust companies, that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
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Ownership of beneficial interests in Debt Securities represented by a Global
Security (each, a "Book-Entry Debt Security") will be limited to Participants
or persons that may hold interests through Participants. Upon deposit of a
Global Debt Security, the Depositary will credit, on its book-entry
registration and transfer system, the Participants' accounts with the
respective principal amounts of the Book-Entry Debt Securities represented by
such Global Debt Security beneficially owned by such Participants. The
accounts to be credited shall be designated by any dealers, underwriters or
agents participating in the distribution of such Book-Entry Debt Securities.
Ownership of Book-Entry Debt Securities will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained by
the Depositary for the related Global Debt Security (with respect to interests
of Participants) and on the records of Participants (with respect to interests
of persons holding through Participants). The laws of some states may require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interest in Book-Entry Debt
Securities.
So long as the Depositary for a Global Debt Security, or its nominee, is the
registered owner of such Global Debt Security, the Depositary or such nominee,
as the case may be, will be considered the sole owner or Holder of the Book-
Entry Debt Securities represented by such Global Debt Security for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in Book-Entry Debt Securities will not be entitled to have such
securities registered in their names, will not receive or be entitled to
receive physical delivery of a certificate in definitive form representing
such securities and will not be considered the owners or Holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, approvals or instructions to the Trustee thereunder. As a result,
the ability of a person having a beneficial interest in Book-Entry Securities
represented by a Global Debt Security to pledge such interest to persons or
entities that do not participate in the Depositary's system, or to otherwise
take actions with respect to such interest, may be affected by the lack of a
physical certificate evidencing such interest. Accordingly, each person owning
Book-Entry Debt Securities must rely on the procedures of the Depositary for
the related Global Debt Security and, if such person is not a Participant, on
the procedures of the Participant through which such person owns its interest,
to exercise any rights of a Holder under the Indenture.
The Company understands that, under existing industry practice, if a Company
requests any action of Holders or an owner of a beneficial interest in a
Global Debt Security desires to give any notice or take any action a Holder is
entitled to give or take under the Indenture, the Depositary will authorize
the Participants on whose behalf it holds a Global Debt Security to give such
notice or take such action, and Participants will authorize beneficial owners
owning through such Participants to give such notice or take such action or
will otherwise act upon the instructions of beneficial owners owning through
them. The Indentures provide that the Company, the Trustee and their
respective agents will treat as the Holders of a Debt Security the persons
specified in a written statement of the Depositary with respect to such Global
Debt Security for purposes of obtaining any consents or directions required to
be given by Holders of the Debt Securities pursuant to the Indentures.
Payments of principal of, and premium, if any, and interest, if any, on,
Book-Entry Debt Securities will be made by the Company through the Trustee
under the applicable Indenture, or a paying agent (the "Paying Agent"), which
may also be the Trustee under the applicable Indenture, to the Depositary or
its nominee, as the case may be, as the registered Holder of the related
Global Debt Security. Under the terms of the Indentures, the Company and the
Trustee may treat the persons in whose names the Offered Debt Securities,
including the Global Debt Security, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, none of the Company, the Trustee or the Paying Agent
or any agent of the Trustee will have any responsibility or liability for any
aspect of the records relating to, or payments made on account of beneficial
ownership interests in, such Global Debt Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary, upon receipt of any payment of
principal of, or premium or interest, if any, on, a Global Debt Security, will
immediately credit Participants' accounts with payments in
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amounts proportionate to the respective amounts of Book-Entry Debt Securities
held by each such Participant as shown on the records of the Depositary. The
Company also expects that payments by Participants to owners of beneficial
interests in Book-Entry Debt Securities held through such Participants will be
governed by standing customer instructions and customary practices, as is now
the case with the securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of the
Participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary or ceases to be a clearing agency registered under the Exchange Act,
and a successor depositary registered as a clearing agency under the Exchange
Act is not appointed by the Company within 90 days, certificates representing
the Offered Debt Securities in definitive form will be issued to each person
that the Depositary identifies as the beneficial owner of the Book-Entry Debt
Securities represented by the Global Debt Security.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or any person that may hold interests through a
Participant in identifying the beneficial owners of the Book-Entry Debt
Securities, and the Company and the Trustee may conclusively rely on, and shall
be protected in relying on, instructions from the Depositary for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Book-Entry Debt Securities to be issued).
The foregoing information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable. The Company takes no responsibility for the accuracy
of such information or the performance by the Depositary or its Participants of
their respective obligations as described hereunder or under the rules and
procedures governing their respective operations.
Same-Day Settlement
If the accompanying Prospectus Supplement so indicates, settlement for
Offered Debt Securities will be made by the underwriters, dealers or agents in
immediately available funds and all applicable payments of principal and
interest on Offered Debt Securities will be made by the Company in immediately
available funds. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearinghouse or next-day funds. In
contrast, Debt Securities subject to settlement in immediately available funds
will trade in the Depositary's Same-Day Funds Settlement System until maturity,
and secondary market trading activity in Offered Debt Securities will therefore
be required by the Depositary to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in Offered Debt Securities.
Events of Default, Notice and Waiver
Except as may otherwise be set forth in the applicable Prospectus Supplement
with respect to any series of Offered Debt Securities, each Indenture provides
that the following events are Events of Default with respect to any series of
Offered Debt Securities issued thereunder: (a) default in the payment of the
principal of (or premium, if any, on) any Offered Debt Security of such series
at its maturity, upon redemption (if applicable) or otherwise; (b) default for
30 days in the payment of any installment of interest on any Offered Debt
Security of such series; (c) default for 60 days after written notice in the
performance of any other covenant in respect of the Offered Debt Securities of
such series contained in such Indenture or in such Offered Debt Securities; (d)
(i) an Event of Default with respect to any other series of Offered Debt
Securities issued pursuant to such Indenture, or (ii) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed, issued,
assumed or guaranteed by the Company having unpaid principal in excess of
$2,000,000 or under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any such indebtedness
for money borrowed, whether such indebtedness now exists or shall hereafter be
created, which Event of Default or default, as the case may be, in either such
case, shall have resulted in such other series of Offered Debt Securities or
such indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable, without such other
series of Offered Debt Securities or such indebtedness having been discharged
or such declaration of acceleration having been rescinded
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or annulled within a period of 60 days after there shall have been given, by
registered or certified mail, to the Company by the Trustee, or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount
of the outstanding Securities of such series, a written notice specifying such
Event of Default or default, as the case may be, and requiring the Company to
cause such indebtedness to be discharged or cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of Default"
under the Indenture, unless at the end of such 60-day period and thereafter
the Event of Default or default is being contested in good faith by the
Company; (e) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company or its
property; and (f) any other Event of Default provided in, or pursuant to, the
applicable resolution of the Board of Directors of the Company, or established
in the supplemental indenture under which such series of Offered Debt
Securities is issued. (Section 7.01). No Event of Default with respect to a
particular series of Offered Debt Securities necessarily constitutes an Event
of Default with respect to any other series of Offered Debt Securities issued
under the same or another Indenture.
Within 90 days after the occurrence of any default with respect to any
series of Debt Securities, the Trustee for such series must give the Holders
of such Debt Securities notice of all defaults of which it has knowledge and
that have not been cured or waived. Nevertheless, the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of principal, premium
or interest) if and so long as it determines in good faith that the
withholding of such notice is in the best interest of such Holders. (Section
8.02).
If an Event of Default with respect to any series of Debt Securities occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Debt Securities of such series may declare
the principal thereof and accrued but unpaid interest thereon (or, in the case
of a series of Original Issue Discount Securities, such portion of the
principal amount as may be specified in the Prospectus Supplement respecting
the offer and sale of such Debt Securities) to be due and payable immediately.
(Section 7.02).
Each Indenture contains a provision entitling the Trustee to be indemnified
by the Holders of Offered Debt Securities issued thereunder before proceeding
to exercise any right or power under such Indenture at the request of any
Holders. (Section 8.03). Each Indenture provides that the Holders of a
majority in principal amount of the outstanding Debt Securities of any series
issued thereunder may, with certain exceptions, direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, with respect to the
Debt Securities of such series. (Section 7.12). The right of a Holder to
institute a proceeding with respect to the applicable Indenture is subject to
certain conditions precedent, including notice and indemnity to the applicable
Trustee, but each Holder has an absolute right to the receipt of principal,
premium, if any, and interest, if any, at the respective Stated Maturities of
the Debt Securities (or, in the case of a redemption, on the Redemption Date)
or to institute suit for the enforcement thereof. (Sections 7.07 and 7.08).
The Holders of at least a majority in principal amount of the outstanding
Debt Securities of any series may, on behalf of the Holders of all such Debt
Securities, waive any past default, except (a) a default in the payment of the
principal of, or premium, if any, or interest, if any, on, any Debt Security
of such series at maturity, upon redemption or otherwise, and (b) a default in
respect of any covenant or provision of the applicable Indenture that cannot
be amended or modified without the consent of the Holder of each of the
outstanding Debt Securities affected. (Section 7.13).
Each Indenture requires the Company to furnish to the applicable Trustee
annual statements as to the fulfillment by the Company of its obligations
under such Indenture. (Section 12.05).
Modification of the Indentures
The Company and the applicable Trustee, with the consent of the Holders of a
majority in principal amount of each series of the Debt Securities at the time
outstanding under the Indenture that is affected thereby, may enter into
supplemental indentures for the purpose of amending or modifying, provisions
of such Indenture or any indenture supplemental thereto; provided, however,
that no such modification or amendment may, without the consent of the Holder
of each of the outstanding Debt Securities affected thereby: (i) modify the
terms of
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payment of principal or interest; (ii) reduce the above-stated percentage of
Holders of outstanding Securities necessary to modify or amend such Indenture
or to waive compliance by the Company with any restrictive covenant; or (iii)
subordinate the indebtedness evidenced by the Debt Securities to any
indebtedness of the Company other than to subordinate Subordinated Debt to
Senior Debt or to subordinate Junior Subordinated Debt to Senior Debt and
Subordinated Debt. (Section 11.02).
Satisfaction and Discharge
Each Indenture provides that the Company shall be discharged from its
obligations under the Debt Securities of a series at any time prior to the
Stated Maturity or redemption thereof when (a) the Company has irrevocably
deposited with the Trustee, in trust, (i) sufficient funds in the currency or
currency unit in which the Debt Securities are denominated to pay the principal
of, and premium, if any, and interest, if any, to Stated Maturity (or
redemption) on, the Debt Securities of such series, or (ii) such amount of
direct obligations of, or obligations the principal of, and interest on, which
are fully guaranteed by, the government which issued the currency in which the
Debt Securities are denominated, and which are not subject to prepayment,
redemption or call, as will, together with the predetermined and certain income
to accrue thereon without consideration of any reinvestment thereof, be
sufficient to pay when due the principal of, and premium, if any, and interest,
if any, to Stated Maturity (or redemption) on, the Debt Securities of such
series, (b) the Company has paid all other sums payable with respect to the
Debt Securities of such series, (c) if the deposit occurs more than one year
prior to the Stated Maturity or redemption of the Debt Securities of such
series, the Company has delivered to the Trustee an opinion of recognized tax
counsel to the effect that such deposit and discharge will not result in
recognition by the Holders of the Debt Securities of such series of income,
gain or loss for Federal income tax purposes (other than income, gain or loss
which would have been recognized in like amount and at a like time absent such
deposit and discharge) and (d) the Company has delivered to the Trustee an
Opinion of Counsel as to certain other matters. Upon such discharge, the
Holders of the Debt Securities of such series shall no longer be entitled to
the benefits of the Indenture, except for the purposes of registration of
transfer and exchange of the Debt Securities of such series, and replacement of
lost, stolen or mutilated Debt Securities and shall look only to such deposited
funds or obligations for payment. (Sections 6.01 and 6.03). However, each
Indenture provides that, if the Trustee is unable to apply any money or
obligations deposited with the Trustee by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, or by reason
of the Trustee's inability to convert any such money or Government Obligations
into the currency or currency unit required to be paid with respect to the Debt
Securities of such series, the Company's obligations under the Indenture will
be reinstated until such time as the Trustee is permitted to apply all such
money and obligations in accordance with the provisions of such Indenture.
(Section 6.04).
The Trustee
State Street Bank and Trust Company will serve as Trustee under the Senior
Indenture, the Subordinated Indenture and the Junior Subordinated Indenture.
Each Indenture contains certain limitations on the right of the Trustee, as a
creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. The Trustee is permitted to engage in other
transactions, except that, if it acquires any conflicting interest (as
defined), it must eliminate such conflict or resign. The Trustee is trustee
with respect to outstanding senior or subordinated unsecured debt securities of
the Company previously issued under the Indentures and may from time to time
perform certain other services for, including extending lines of credit to, the
Company in the ordinary course of business.
PROVISIONS APPLICABLE SOLELY TO THE SENIOR DEBT SECURITIES
The Senior Debt Securities will be issued under the Senior Indenture. Each
series of Senior Debt Securities will constitute Senior Debt and will rank pari
passu with each other series of Senior Debt Securities. All Subordinated Debt
(including, but not limited to, all Subordinated Debt Securities) and all
Junior Subordinated Debt (including, but not limited to, all Junior
Subordinated Debt Securities) will be subordinated to the Senior Debt
Securities.
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PROVISIONS APPLICABLE SOLELY TO THE SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities will be issued under the Subordinated
Indenture. Each series of Subordinated Debt Securities will constitute
Subordinated Debt and will rank pari passu with each other series of
Subordinated Debt Securities. All Junior Subordinated Debt (including, but not
limited to, all Junior Subordinated Debt Securities) will be subordinated to
the Subordinated Debt Securities, and the Subordinated Debt Securities will be
subordinated to all Senior Debt (including, but not limited to, all Senior Debt
Securities).
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its property, or if any
Subordinated Debt Security is declared due and payable because of the
occurrence of an Event of Default, then, in either event, all principal of, and
premium, if any, and interest, if any, on, all Senior Debt will be paid in full
before any payment is made on such Subordinated Debt Security. (Section 14.01
of the Subordinated Indenture).
If Subordinated Debt Securities are issued under the Subordinated Indenture,
the aggregate principal amount of Senior Debt outstanding as of a recent date
will be set forth in the applicable Prospectus Supplement. The applicable
Prospectus Supplement will also set forth any limitation on the issuance by the
Company of any additional Senior Debt.
PROVISIONS APPLICABLE SOLELY TO THE JUNIOR SUBORDINATED DEBT SECURITIES
The Junior Debt Subordinated Securities will be issued under the Junior
Subordinated Indenture. Each series of Junior Subordinated Securities will rank
pari passu with each other series of Junior Debt Subordinated Securities. The
Junior Subordinated Debt Securities will be subordinated to all Senior Debt
(including, but not limited to, all Senior Debt Securities) and all
Subordinated Debt (including, but not limited to, all Subordinated Debt
Securities).
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its property, or if any
Junior Subordinated Debt Security is declared due and payable because of the
occurrence of an Event of Default, then, in either event, all principal of, and
premium, if any, and interest, if any, on, all Senior Debt and all Subordinated
Debt will be paid in full before any payment is made on such Junior
Subordinated Debt Security. (Section 14.01 of the Junior Subordinated
Indenture).
If Junior Subordinated Debt Securities are issued under the Junior
Subordinated Indenture, the aggregate principal amount of Senior Debt and
Subordinated Debt outstanding as of a recent date will be set forth in the
applicable Prospectus Supplement. The applicable Prospectus Supplement will
also set forth any limitation on the issuance by the Company of any additional
Senior Debt or Subordinated Debt.
As of June 30, 1997, the aggregate principal amount of Senior Debt
outstanding was $8.4 billion, and there was no outstanding Subordinated Debt or
Junior Subordinated Debt.
DESCRIPTION OF WARRANTS
The following statements with respect to the Warrants are summaries of, and
subject to, the detailed provisions of a Warrant Agreement (the "Warrant
Agreement") to be entered into by the Company and a warrant agent to be
selected at the time of issue (the "Warrant Agent"), a form of which is filed
with the Commission as an exhibit to the Registration Statement.
GENERAL
The Warrants, evidenced by Warrant certificates (the "Warrant Certificates"),
may be issued under the Warrant Agreement independently or together with any
Debt Securities offered by any Prospectus Supplement and may be attached to or
separate from such Debt Securities. If Warrants are offered, the Prospectus
Supplement
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will describe the terms of the Warrants, including the following: (i) the
offering price, if any; (ii) the designation, aggregate principal amount and
terms of the Debt Securities purchasable upon exercise of the Warrants; (iii)
if applicable, the designation and terms of the Debt Securities with which the
Warrants are issued and the number of Warrants issued with each such Debt
Security; (iv) if applicable, the date on and after which the Warrants and the
related Debt Securities will be separately transferable; (v) the principal
amount of Debt Securities purchasable upon exercise of one Warrant and the
price at which such principal amount of Debt Securities may be purchased upon
such exercise; (vi) the date on which the right to exercise the Warrants shall
commence and the date on which such right shall expire; (vii) federal income
tax consequences; (viii) whether the Warrants represented by the Warrant
Certificates will be issued in registered or bearer form; and (ix) any other
terms of the Warrants.
Warrant Certificates may be exchanged for new Warrant Certificates of
different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Warrant Agent or
any co-Warrant Agent, which will be listed in the Prospectus Supplement, or at
such other office as may be set forth therein. Warrant holders do not have any
of the rights of Holders of Debt Securities and are not entitled to payments of
principal of, and premium, if any, and interest, if any, on, such Debt
Securities.
EXERCISE OF WARRANTS
Warrants may be exercised by surrendering the Warrant Certificate at the
corporate trust office of the Warrant Agent or at the corporate trust office of
the co-Warrant Agent, if any, with the form of election to purchase on the
reverse side of the Warrant Certificate properly completed and executed, and by
payment in full of the exercise price, as set forth in the Prospectus
Supplement. Upon the exercise of Warrants, the Warrant Agent or co-Warrant
Agent, if any, will, as soon as practicable, deliver the Debt Securities in
authorized denominations in accordance with the instructions of the exercising
Warrantholder and at the sole cost and risk of such Holder. If less than all of
the Warrants evidenced by the Warrant Certificate are exercised, a new Warrant
Certificate will be issued for the remaining amount of Warrants.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of the capital stock of the Company is qualified in
its entirety by reference to the Company's Amended and Restated Certificate of
Incorporation, as amended (the "Restated Certificate"), which is filed with the
Commission as an exhibit to the Registration Statement, and to the Certificates
of Designation, Preferences and Rights relating to the Series A Preferred Stock
and the Series B Preferred Stock, which have been filed with, and are available
from the offices of, the Commission as referred to under "Available
Information."
The Restated Certificate authorizes the Company to issue 22,000,000 shares of
capital stock, of which 1,999,000 shares shall be designated preferred stock,
no par value per share ("Junior Preferred Stock"), 20,000,000 shares shall be
designated senior preferred stock, $.01 par value per share ("Senior Preferred
Stock" and, together with the Junior Preferred Stock, "Preferred Stock") and
1,000 shares shall be designated common stock, $.025 par value per share
("Common Stock"). As of October 1, 1997, there were 6,600,000 shares of
Preferred Stock authorized and issued or reserved for issuance as follows:
5,000,000 shares of Series A Preferred Stock, a series of Senior Preferred
Stock, 1,500,000 shares of Series B Preferred Stock, a series of Senior
Preferred Stock, and 100,000 shares of NW Preferred Stock, a series of Junior
Preferred Stock. As of October 1, 1997, 5,000,000 shares of Series A Preferred
Stock, 1,500,000 shares of Series B Preferred Stock, no shares of NW Preferred
Stock and 105 shares of Common Stock were issued and outstanding. All
outstanding shares of Common Stock and Preferred Stock are fully paid and
nonassessable, and any Senior Preferred Stock offered hereby will, upon full
payment of the purchase price therefor, likewise be fully paid and
nonassessable.
Under the Restated Certificate, the Board of Directors of the Company may
provide for the issuance of Senior or Junior Preferred Stock in one or more
series from time to time, and the rights, preferences, privileges
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and restrictions, including dividend rights, voting rights, conversion rights,
terms of redemption and liquidation preferences, of the Senior Preferred Stock
or Junior Preferred Stock of each series will be fixed or designated by the
Board of Directors pursuant to a certificate of designation, preferences and
rights without any further vote or action by the Company's stockholders,
except as required pursuant to the terms of the Series A Preferred Stock and
Series B Preferred Stock (and any fixed rate noncumulative perpetual Senior
Preferred Stock issued in exchange therefor) as described below.
The description of Senior Preferred Stock set forth below and the
description of the terms of a particular series of Senior Preferred Stock that
will be set forth in a Prospectus Supplement do not purport to be complete and
are qualified in their entirety by reference to the Restated Certificate and
the certificate of designation relating to such series, a form of which will
be filed with the Commission. The specific terms of a particular series of
Senior Preferred Stock offered hereby will be described in a Prospectus
Supplement relating to such series and will include the following:
(i) the maximum number of shares to constitute the series and the
distinctive designation thereof;
(ii) the annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate and whether dividends will be
cumulative;
(iii) whether the shares of the series will be redeemable and, if so, the
price at and the terms and conditions on which the shares of the series may
be redeemed, including the time during which shares of the series may be
redeemed and any accumulated dividends thereon that the holders of shares
of the series shall be entitled to receive upon the redemption thereof;
(iv) the liquidation preference, if any, applicable to shares of the
series;
(v) whether the shares of the series will be subject to operation of a
retirement or sinking fund and, if so, the extent and manner in which any
such fund shall be applied to the purchase or redemption of the shares of
the series for retirement or for other corporate purposes, and the terms
and provisions relating to the operation of such fund;
(vi) the terms and conditions, if any, on which the shares of the series
shall be convertible into, or exchangeable for, shares of any other class
or classes of Senior Preferred Stock of the Company, or of any other series
of the same class, including the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same;
(vii) the voting rights, if any, of the shares of the series; and
(viii) any other preferences and relative, participating, optional or
other special rights or qualifications, limitations or restrictions
thereof.
EXISTING PREFERRED STOCK
Series A Preferred Stock
The Series A Preferred Stock has an annual dividend rate of 8.125%.
Dividends are cumulative and payable quarterly. The Company is prohibited from
declaring or paying cash dividends on Common Stock, Junior Preferred Stock or
other series of Senior Preferred Stock on parity with the Series A Preferred
Stock unless full cumulative dividends on all outstanding shares of Series A
Preferred Stock for all past dividend periods have been paid. The Series A
Preferred Stock is not redeemable prior to September 22, 2000. On or after
that date, the Series A Preferred Stock will be redeemable at the option of
the Company, in whole or in part, at a redemption price of $25 per share, plus
accrued and unpaid dividends. Except as required by law and as set forth
herein, the holders of Series A Preferred Stock have no voting rights. In case
the Company shall be in arrears in the payment of six consecutive quarterly
dividends on the outstanding Series A Preferred Stock, the holders of Series A
Preferred Stock, voting separately as a class and in addition to any voting
rights that holders of the Series A Preferred Stock shall have as required by
law, shall have the exclusive right to elect two additional directors beyond
the number to be elected by the stockholders at the next annual meeting of the
stockholders called for the election of directors, and at every subsequent
such meeting at which the terms of office of the directors so elected by the
Series A Preferred Stock expire, provided such arrearage exists on the date of
such
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meeting or subsequent meetings, as the case may be. Any such elected directors
shall serve until the dividend default shall cease to exist. In addition,
without the vote of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock, the Company shall not (i) issue, from any
class or series of stock now existing or to be created in the future, any
shares of stock ranking senior to the outstanding shares of Series A Preferred
Stock as to the payment of dividends and upon liquidation or (ii) amend the
Restated Certificate or the Company's By-laws, as amended, if such amendment
would increase or decrease the aggregate number of authorized shares of Series
A Preferred Stock, increase or decrease the par value of the shares of Series
A Preferred Stock or alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect the holders of the Series A
Preferred Stock adversely. The Series A Preferred Stock carries a liquidation
preference of $25 per share, plus accrued and unpaid dividends. The Series A
Preferred Stock ranks senior with respect to payment of dividends and
liquidation preferences to the Common Stock and Junior Preferred Stock.
Series B Preferred Stock
On June 17, 1997 (the "Issuance Date"), the Company issued 1,500,000 shares
of Series B Preferred Stock at an offering price of $100.00 per share.
Dividends on the Series B Preferred Stock are noncumulative and, if declared,
will be payable at an annual rate of 6.687%. If one or more amendments to the
Internal Revenue Code of 1986, as amended (the "Code"), are enacted that
reduce the percentage of the dividends received reduction (currently 70%) as
specified in Section 243(a)(1) of the Code or any successor provision, the
amount of each dividend payable (if declared) per share of the Series B
Preferred Stock shall be increased according to a formula set forth in the
Certificate of Designation, Preferences and Rights relating to the Series B
Preferred Stock. The Series B Preferred Stock is not redeemable prior to
August 15, 2007. On and after such date, the Series B Preferred Stock is
redeemable, in whole or in part, at the option of the Company, at $100.00 per
share, plus an amount equal to the sum of all accrued and unpaid dividends
(whether or not declared) for the then-current dividend period to the
Redemption Date (without accumulation of accrued and unpaid dividends for
prior dividend periods unless previously declared). The Series B Preferred
Stock is not entitled to the benefit of any sinking fund. Except as required
by law and as set forth herein, the holders of Series B Preferred Stock have
no voting rights. If dividends payable on any share or shares of the Series B
Preferred Stock or on any other class or series of Senior Preferred Stock for
which dividends are noncumulative ("Noncumulative Preferred Stock") ranking on
a parity with the Series B Preferred Stock and upon which like voting rights
have been conferred and are exercisable (excluding any class or series of
Noncumulative Preferred Stock entitled to elect additional directors by a
separate vote, "Voting Preferred Stock") have not been paid or declared and
set aside for payment for the equivalent of six full quarterly dividend
periods (whether or not consecutive), the number of directors of the Company
will be increased by two (without duplication of any increase made pursuant to
the terms of any other class or series of Voting Preferred Stock), and the
holders of the Series B Preferred Stock, voting as a single class with the
holders of the Voting Preferred Stock, will be entitled to elect such two
directors to fill such newly-created directorships. Such right of the holders
of the Series B Preferred Stock and the Voting Preferred Stock shall continue
until dividends on the Series B Preferred Stock and the Voting Preferred Stock
have been paid or declared and set apart for payment regularly for at least
one year (i.e., four consecutive full quarterly dividend periods). Any such
elected directors shall serve until the Company's next annual meeting of
stockholders and until their respective successors are elected and qualified
(notwithstanding that prior to the end of such term the dividend default shall
cease to exist). In addition, the affirmative vote or consent of the holders
of at least 66 2/3% of the outstanding shares of the Series B Preferred Stock
will be required for any amendment, alteration or repeal of any provisions of
the Restated Certificate, of the Offered Preferred Certificate or of any other
certificate amendatory of or supplemental to the Restated Certificate which
would adversely affect the powers, preferences, privileges or rights of the
Series B Preferred Stock. The affirmative vote or consent of the holders of at
least 66 2/3% of the outstanding shares of the Series B Preferred Stock and
any other series of Noncumulative Preferred Stock ranking on a parity with the
Series B Preferred Stock either as to dividends or upon liquidation, voting as
a single class without regard to series, will be required to issue, authorize
or increase the authorized amount of, or issue or authorize any obligation or
security convertible into or evidencing a right to purchase, any additional
class or series of stock ranking prior to the Series B Preferred Stock as to
dividends or upon liquidation, or to reclassify any authorized stock of the
Company into such prior shares, but such vote will not be required for the
Company to take any such actions with respect to any stock ranking on a parity
with
24
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or junior to the Series B Preferred Stock. The Series B Preferred Stock is
entitled to a liquidation preference of $100.00 per share, plus an amount
equal to the sum of all accrued and unpaid dividends (whether or not earned or
declared) for the then-current dividend period to the date of final
distribution (without accumulation of accrued and unpaid dividends for prior
dividend periods unless previously declared), that is senior to payments to
holders of the Common Stock, the Junior Preferred Stock or any other class or
series of stock of the Company ranking junior to the Series B Preferred Stock
and pari passu with payments to holders of each other series of Senior
Preferred Stock outstanding on the date of original issue of the Series B
Preferred Stock.
The Series B Preferred Stock has not been registered under the Securities
Act or any applicable state securities law. Pursuant to a Registration Rights
Agreement (the "Registration Rights Agreement") between the Company and the
initial purchasers of the Series B Preferred Stock, the Company has agreed (i)
to use its reasonable best efforts to file, within 150 days after the Issuance
Date, a registration statement with respect to an offer to exchange (the
"Exchange Offer") shares of Series B Preferred Stock for shares of fixed rate
noncumulative perpetual Senior Preferred Stock of the Company with
substantially identical terms to the Series B Preferred Stock and (ii) to use
its reasonable best efforts to cause such registration statement to become
effective under the Securities Act within 180 days after the Issuance Date. In
the event that applicable law or interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer, or in
certain other circumstances, the Company will use its reasonable best efforts
to cause to become effective a shelf registration statement with respect to
the resale of the Series B Preferred Stock and to keep such shelf registration
statement effective for up to two years after the Issuance Date.
NW Preferred Stock
The Company has authorized the issuance of 100,000 shares of NW Preferred
Stock pursuant to the Keep Well Agreement wherein, among other things, Fuji
Bank has agreed to purchase NW Preferred Stock in an amount required to
maintain the Company's net worth at $500 million. The Company's net worth was
approximately $1.5 billion at December 31, 1996. If and when issued, the NW
Preferred Stock will have an annual dividend rate equal to 1% per annum above
the three-month rate at which deposits in United States dollars are offered by
The Fuji Bank, Limited in London, England to prime banks in the London
interbank market. Dividends on the NW Preferred Stock will be noncumulative
and payable (if declared) quarterly, and the Company will be prohibited from
paying cash dividends on Common Stock unless full dividends for the then-
current dividend period (without accumulation of accrued and unpaid dividends
for prior dividend periods unless previously declared) on all outstanding
shares of NW Preferred Stock have been declared and paid or declared and a sum
sufficient set aside for such payment. Subject to certain conditions, NW
Preferred Stock will be redeemable at the option of the holder, in whole or in
part, within a specified period of time after the end of a calendar quarter in
an aggregate amount not greater than the excess of the net worth of the
Company as of the end of such calendar quarter over $500 million and at a
redemption price equal to the price paid to the Company upon the issuance
thereof, plus accrued and unpaid dividends for the then-current dividend
period (without accumulation of accrued and unpaid dividends for prior
dividend periods unless previously declared). Except as required by law, the
holders of NW Preferred Stock will have no voting rights. The NW Preferred
Stock will carry a liquidation preference equal to the price paid for each
share upon issuance thereof, plus accrued and unpaid dividends for the then-
current dividend period (without accumulation of accrued and unpaid dividends
for prior dividend periods unless previously declared). The NW Preferred Stock
will rank senior with respect to payment of dividends and liquidation
preference to the Common Stock and junior to the Senior Preferred Stock. No
purchases of NW Preferred Stock have been made by Fuji Bank under the Keep
Well Agreement.
COMMON STOCK
All outstanding shares of the Common Stock are held by the Parent. Subject
to the rights of holders of the Senior Preferred Stock and Junior Senior
Preferred Stock, including any Senior Preferred Stock offered hereby, the
holders of outstanding shares of Common Stock are entitled to share ratably in
dividends declared out of assets legally available therefor at such time and
in such amounts as the Board of Directors of the Company may from time to time
lawfully determine. Each holder of Common Stock is entitled to one vote for
each share held.
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All shares of Common Stock currently outstanding are fully paid and
nonassessable, not subject to redemption and assessment and without conversion,
preemptive or other rights to subscribe for or purchase any proportionate part
of any new or additional issues of any class or of securities convertible into
stock of any class.
PLAN OF DISTRIBUTION
The Company may offer the Securities directly to purchasers, to or through
underwriters, through dealers or agents or through a combination of any such
methods. Any such underwriter(s), dealer(s) or agent(s) involved in the offer
and sale of the Securities in respect of which this Prospectus is delivered
will be named in a Prospectus Supplement. The Prospectus Supplement with
respect to such Securities also will set forth the terms of the offering of
such Securities, including the purchase price of such Securities and the
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
and any securities exchanges or markets on which such Securities may be listed.
If underwriters are used in an offering of Securities, the Company will
execute an underwriting agreement with such underwriters, and the name of each
underwriter and the terms of the transaction, including any underwriting
discounts and other items constituting compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement relating to
such offering, and, if an underwriting syndicate is used, the managing
underwriter or underwriters will be set forth on the cover of such Prospectus
Supplement. Such Securities will be acquired by the underwriters for their own
accounts and may be resold from time to time in one or more transactions, (i)
at a fixed price or prices, which may be changed, (ii) at market prices
prevailing at the time of sale, (iii) at prices relating to such prevailing
market price or (iv) at negotiated prices. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase all of
the Securities offered will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of the Securities offered if any
are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If a dealer is used in an offering of Securities, the Company will sell such
Securities to the dealer, as principal. The dealer then may resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of the dealer and the terms of the transaction
will be set forth in the Prospectus Supplement relating thereto.
If an agent is used in an offering of Securities, the agent will be named,
and the terms of the agency will be set forth, in the Prospectus Supplement
relating thereto. Unless otherwise indicated in such Prospectus Supplement, an
agent will act on a best efforts basis for the period of its appointment.
Dealers and agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Securities
described therein. Underwriters, dealers and agents, under underwriting
agreements and other agreements which may be entered into with the Company, may
be entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Offers to purchase Securities may be solicited, and sales thereof may be
made, by the Company directly to institutional investors or others who may be
deemed to be underwriters within the meaning of the Securities Act with respect
to any resales thereof. The terms of any such offer will be set forth in the
Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or other agents of the Company to solicit offers by
certain institutional investors to purchase Securities from the Company
pursuant to contracts providing for payment and delivery at a future date.
Institutional investors with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all cases
such purchasers must be approved
26
<PAGE>
by the Company. The obligations of any purchaser under any such contract will
not be subject to any conditions except that (i) the purchase of the
Securities shall not at the time of delivery be prohibited under the laws of
any jurisdiction to which such purchaser is subject and (ii) if the Securities
also are being sold to underwriters, the Company shall have sold to such
underwriters the Securities not subject to delayed delivery. Underwriters and
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
The anticipated date of delivery of Securities will be set forth in the
Prospectus Supplement relating to each applicable offering.
There can be no assurance that a secondary market will be created for the
Securities, or if it is created, that it will continue.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with, serve as financial advisors to, and perform other
general financing and bank services for, the Company and its affiliates in the
ordinary course of business.
To facilitate an offering of a series of Securities, certain persons
participating in the offering may engage in transactions that stabilize,
maintain or otherwise affect the price of the Securities. This may include
over-allotments or short sales of the Securities, which involves the sale by
persons participating in the offering of more Securities than have been sold
to them by the Company. In such circumstances, such persons would cover such
over-allotments or short positions by purchasing in the open market or by
exercising the over-allotment option granted to such persons. In addition,
such persons may stabilize or maintain the price of the Securities by bidding
for or purchasing Securities in the open market or by imposing penalty bids,
whereby selling concessions allowed to dealers participating in any such
offering may be reclaimed if Securities sold by them are repurchased in
connection with stabilization transactions. The effect of these transactions
may be to stabilize or maintain the market price of the Securities at a level
above that which might otherwise prevail in the open market. Such
transactions, if commencement, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Company by Mark J. Ohringer, Esq., Associate General
Counsel of the Company. Certain legal matters will be passed upon for any
agents or underwriters by Katten Muchin & Zavis, a partnership including
professional corporations, 525 West Monroe Street, Suite 1600, Chicago,
Illinois 60661-3693. Katten Muchin & Zavis from time to time acts as counsel
in certain matters for the Company and certain of its subsidiaries.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements and schedules incorporated in this Prospectus and
elsewhere in the Registration Statement by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 and the financial
statements for the five years ended December 31, 1996 from which the five-year
selected financial data included in this Prospectus have been derived, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto. These financial statements,
schedules and five-year selected financial data forming a part of this
Prospectus and Registration Statement have been included or incorporated by
reference, as the case may be, herein in reliance upon the authority of said
firm as experts in giving such reports. The interim financial statements for
the periods ended June 30, 1996 and June 30, 1997 have not been audited.
27
<PAGE>
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT (INCLUDING THE
ACCOMPANYING PRICING SUPPLEMENT) OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED. THIS PROSPECTUS SUPPLEMENT (INCLUDING THE PRICING SUPPLEMENT) AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS SUP-
PLEMENT (INCLUDING THE ACCOMPANYING PRICING SUPPLEMENT) AND THE PROSPECTUS OR
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLIC-
ITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLE-
MENT (INCLUDING THE PRICING SUPPLEMENT) AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT (INCLUDING THE PRICING SUP-
PLEMENT) AND THE PROSPECTUS.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.............................................................. S-2
Important Currency Information............................................ S-4
Description of Notes...................................................... S-4
Certain United States Tax Considerations.................................. S-18
Plan of Distribution...................................................... S-29
Legal Matters............................................................. S-30
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Safe Harbor for Forward-Looking Statements................................ 3
The Company............................................................... 4
Use of Proceeds........................................................... 9
Selected Financial Data................................................... 10
Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends............................................ 11
Description of Debt Securities............................................ 11
Description of Warrants................................................... 21
Description of Capital Stock.............................................. 22
Plan of Distribution...................................................... 26
Legal Matters............................................................. 27
Independent Public Accountants............................................ 27
</TABLE>
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U.S.$500,000,000
HELLER FINANCIAL, INC.
MEDIUM-TERM NOTES,
SERIES G
DUE FROM NINE MONTHS
TO THIRTY YEARS
FROM DATE OF ISSUE
LOGO
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
BANCAMERICA ROBERTSON STEPHENS, INC.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
FIRST CHICAGO CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
J.P. MORGAN SECURITIES INC.
UBS SECURITIES INC.
NOVEMBER 4, 1997
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