<PAGE>
Filed Pursuant to Rule No. 424(b)(2)
Registration No. 333-58723
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 17, 1998)
LOGO
HELLER FINANCIAL, INC.
U.S.$5,000,000,000
MEDIUM-TERM NOTES, SERIES I
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 I (the "Notes"), with an aggregate initial public
offering price or purchase price of up to U.S.$5,000,000,000 or the equivalent
thereof in other currencies or composite currencies, subject to reduction as a
result of the Company's sale of other Debt Securities, Warrants, Senior
Preferred Stock or Class A Common Stock (each as defined in the accompanying
Prospectus) pursuant to the Registration Statement of which the Prospectus is
a part. The Notes will constitute Senior Debt Securities (as defined in the
Prospectus) of the Company.
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 or
Spread Multiplier (each 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 without coupons 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 and 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 RELATING TO THE NOTES" BEGINNING ON PAGE S-2 OF THIS
PROSPECTUS SUPPLEMENT AND "RISK FACTORS" BEGINNING ON PAGE 1 OF THE PROSPECTUS
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% 0.125% to 0.750% 99.250%-99.875%
- ---------------------------------------------------------------------------------------------------------------
U.S.$6,250,000- U.S.$4,962,500,000-
Total(4).................... U.S.$5,000,000,000 U.S.$37,500,000 U.S.$4,993,750,000
</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, 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
Warburg Dillon Read LLC, each as agent (collectively, the "Agents"), in
the form of a discount, ranging from 0.125% to 0.750%, 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. See "Plan of
Distribution."
(3) Before deducting other expenses payable by the Company estimated to be
U.S.$2,800,000, 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.
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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
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON
FIRST CHICAGO CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
J.P. MORGAN & CO.
------------- WARBURG DILLON READ LLC
The date of this Prospectus Supplement is August 28, 1998.
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CERTAIN PERSONS PARTICIPATING IN AN OFFERING OF NOTES PURCHASED BY ONE OR
MORE AGENTS AS PRINCIPAL ON A FIXED PRICE OFFERING BASIS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF NOTES.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
----------------
RISK FACTORS RELATING TO THE NOTES
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
and the risk factors set forth under the heading "Risk Factors" in the
Prospectus 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 (as defined herein) 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 such 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
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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 index or indices or
formula or formulas 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 may affect the market value of such
Notes. Because the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, an investor may 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 any of the Notes will develop
or as to the continued liquidity of any 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 may not be
readily saleable, that the value of such Notes will fluctuate over time and
that such fluctuations may be significant.
S-3
<PAGE>
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. Capitalized
terms used in this Prospectus Supplement but not defined herein shall have the
meanings ascribed to them in the Prospectus.
GENERAL
The Notes will be issued as a series of Senior Debt Securities under an
indenture relating to Senior Debt 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 has been filed with, and is
available from the offices of, the Commission as referred to in the Prospectus
under the heading "Available Information." The Company has appointed the
Trustee as Paying Agent and Securities Registrar under the Senior Indenture
with respect to the Notes, and the Trustee will maintain an office or agency
in The City of New York for such purposes.
The Notes will be unsecured obligations of the Company and will rank pari
passu with all other unsecured Senior Debt 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.$5,000,000,000 or the equivalent thereof in other
currencies or composite currencies, subject to reduction as a result of the
Company's sale of other Debt Securities, Warrants, Senior Preferred Stock or
Class A Common Stock pursuant to the Registration Statement of which the
Prospectus is a part. 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.
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 their dates 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
S-4
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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 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 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 (as defined below) to the Stated
Maturity Date 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 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
S-5
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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; and (xiv) any other terms
of such Note not inconsistent with the provisions of the Senior Indenture. The
Pricing Supplement may also include a summary of certain United States federal
income tax considerations.
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 Trustee) (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 (addressed to State Street Bank and Trust Company, Goodwin
Square, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate
Trust Window or at such other address as it may designate as its office or
agency 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 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
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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. 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. Unless otherwise specified in the
applicable Pricing Supplement, payments of interest on Global Securities
representing Book-Entry Notes will be paid by immediately available funds to
the Depositary or its nominee. 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 in the Prospectus under "Description of
Debt Securities--Provisions Applicable to Senior, Subordinated and Junior
Subordinated Debt Securities--Book-Entry, Delivery and Form." 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 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.
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 five
one-thousandths of a unit being rounded upward).
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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 consisting 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 equaling 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; 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 semiannually, the third Wednesday of each of the 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.
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Interest on each Floating Rate Note will be payable monthly, quarterly,
semiannually or annually (the "Interest Payment Period") and, in any case, at
maturity or upon earlier redemption or repayment. 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 (a) 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, and (b) the
interest rate in effect for the ten calendar days immediately prior to the
Stated Maturity Date will be that in effect on the tenth calendar day
preceding the Stated Maturity Date.
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 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 Date or Stated Maturity Date (or earlier
redemption or repayment).
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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 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, then the Commercial Paper
Rate shall be the Money Market Yield of the rate on 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--
Nonfinancial." 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 a nonfinancial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized rating organization; 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.
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
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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)(b) above, or on which no rate appears on Telerate Page 3750, as
specified in (i)(a) 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.
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
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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 in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date,
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 in the applicable Pricing Supplement.
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
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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 Page" 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 Relating to the Notes" 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 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
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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 Trustee) (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
formula 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 will equal the Face
Amount of such Currency Indexed Note; (ii) if the Spot Rate exceeds the Base
Exchange Rate (i.e., the Denominated Currency 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.
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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 formulas set forth above were 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.
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.
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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.
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.
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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 or with 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 such 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 unless the Company in its sole discretion
determines otherwise and, except as set forth in the Prospectus or upon the
occurrence of an Event of Default, 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.
DTC has advised the Company that it will take any action permitted to be
taken by a registered holder of any Notes under the Senior Indenture only at
the direction of one or more Participants to whose accounts with DTC such
Notes are credited; beneficial owners who hold through Participants (or
indirect participants) will not be entitled to take any such action directly.
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, a court shall render a judgment or decree
in the foreign currency of the underlying obligation and 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.
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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
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 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
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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.
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 the 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.
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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. The capital gain will be long-term gain if the Note has
been held by the holder for more than 12 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 long-
term gains of individuals, trusts and estates is 20%. 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 August 13, 1996 (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 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.
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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 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 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."
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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 0.65 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 objective financial or economic information, and
may include (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.
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.
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 such 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: (1) 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; (2) 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; (3) 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; and (4) qualified stated interest or original issue discount
allocable to an accrual period
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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 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
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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 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
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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 shall be 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.
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 gifts, 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.
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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
Regulations 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 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.
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 of, 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
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(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 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, receives the certification described in section (i)(e) under "United
States Alien Holders" above and does 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, 1999, 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, 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 Warburg Dillon Read LLC, 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, ranging from 0.125% to 0.750%, depending upon the maturity of the
Note, of the principal amount of each Note sold through such Agent. 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, if so specified in
the applicable Pricing Supplement, for resale at a fixed offering price, 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.
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 Relating to the
Notes--Structure Risks."
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If the Agent creates or the Agents
create, as the case may be, a short position in the Notes, i.e., if it sells
or they sell Notes in an aggregate principal amount exceeding that set forth
in the applicable Pricing Supplement, such Agent(s) may reduce that short
position by purchasing Notes in the open market. In general, purchases of
Notes for the purpose of stabilization or to reduce a short position could
cause the price of Notes to be higher than it might be in the absence of such
purchases.
Neither the Company nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described in the immediately preceding paragraph may have on the
price of the Notes. In addition, neither the Company nor any of the Agents
makes any representation that the Agents will engage in any such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
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. A limited number of Katten Muchin & Zavis attorneys own, in the
aggregate, less than 1% of the outstanding shares of Class A Common Stock.
S-29
<PAGE>
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS 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 AUTHORIZED. 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 SUPPLEMENT (INCLUDING THE 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 SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT (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 SUPPLEMENT) AND THE PROSPECTUS.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors Relating to the Notes........................................ S-2
Important Currency Information............................................ S-4
Description of Notes...................................................... S-4
Certain United States Tax Considerations.................................. S-18
Plan of Distribution...................................................... S-28
Legal Matters............................................................. S-29
PROSPECTUS
Available Information..................................................... ii
Incorporation of Certain Documents by Reference........................... ii
Risk Factors.............................................................. 1
Safe Harbor for Forward-Looking Statements................................ 7
The Company............................................................... 8
Use of Proceeds........................................................... 14
Selected Financial Data................................................... 15
Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends............................................ 16
Description of Debt Securities............................................ 16
Description of Warrants................................................... 26
Description of Capital Stock.............................................. 27
Plan of Distribution...................................................... 35
Legal Matters............................................................. 36
Independent Public Accountants............................................ 36
</TABLE>
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U.S.$5,000,000,000
HELLER FINANCIAL, INC.
MEDIUM-TERM NOTES,
SERIES I
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
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON
FIRST CHICAGO CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
J.P. MORGAN & CO.
WARBURG DILLON READ LLC
AUGUST 28, 1998
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