<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 30, 1996
U.S. $500,000,000
HONEYWELL INC.
MEDIUM-TERM NOTES, SERIES B
DUE FROM 9 MONTHS OR MORE FROM DATE OF ISSUE
HONEYWELL FINANCE B.V.
HONEYWELL CANADA LIMITED
MEDIUM-TERM NOTES, SERIES A
DUE FROM 9 MONTHS OR MORE FROM DATE OF ISSUE
GUARANTEED AS TO PAYMENT OF
PRINCIPAL, PREMIUM, INTEREST AND ADDITIONAL AMOUNTS BY HONEYWELL INC.
---------------------
Honeywell Inc. (the "Company") may offer from time to time its Medium-Term
Notes, Series B (the "Series B Notes") due from 9 months or more from date of
issue and each of Honeywell Finance B.V. (the "Dutch Issuer") and Honeywell
Canada Limited (the "Canadian Issuer") may offer from time to time its
Medium-Term Notes, Series A, (the "Series A Notes" and, together with the Series
B Notes the "Notes") due from 9 months or more from date of issue, as selected
by the purchaser and agreed to by the applicable issuer (each an "Issuer" and
collectively the "Issuers"). The Notes issued by all Issuers will be limited to
an aggregate initial public offering price not to exceed U.S. $500,000,000, or
its equivalent in another currency or composite currency, subject to reduction
as a result of the sale of other Debt Securities. The Notes issued by the Dutch
Issuer and the Canadian Issuer will be unconditionally guaranteed by the Company
as to payment of principal and any premium, interest and Additional Amounts.
The Notes may be denominated in U.S. dollars or in such foreign currencies
or composite currencies as may be designated by the applicable Issuer at the
time of offering. The specific currency or composite currency, interest rate (if
any), issue price and maturity date of any Note will be set forth in the
applicable Pricing Supplement to this Prospectus Supplement. See "Description of
Notes and Guarantee".
Interest on the Fixed Rate Notes, unless otherwise specified in the
applicable Pricing Supplement, will be payable each June 15 and December 15 and
at maturity. Interest on the Floating Rate Notes or Indexed Notes will be
payable on the dates specified therein and in the applicable Pricing Supplement.
Floating Rate Notes will bear interest at a rate determined by reference to the
Commercial Paper Rate, Federal Funds Rate, LIBOR, Prime Rate, CD Rate, Treasury
Rate or CMT Rate, as adjusted by a Spread and/or Spread Multiplier, if any,
applicable to such Notes. Zero Coupon Notes will not bear interest.
Unless a Redemption Commencement Date or Repayment Date is specified in the
applicable Pricing Supplement, the Notes will not be redeemable or repayable
prior to their stated maturity except in the event of certain changes affecting
Dutch and Canadian taxes. If a Redemption Commencement Date or Repayment Date is
so specified, the Notes will be redeemable at the option of the applicable
Issuer or repayable at the option of the holder as described herein.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be issued in global or definitive form in denominations of $100,000 and
integral multiples of $1,000 in excess thereof or, in the case of Notes
denominated in foreign currencies or composite currencies, in the denominations
indicated in the applicable Pricing Supplement. A global Note representing
Book-Entry Notes will be registered in the name of The Depository Trust Company,
or its nominee, which will act as Depositary. Interests in Book-Entry Notes will
be shown on, and transfers thereof will be effected only through records
maintained by the Depositary (with respect to participants' interests) and its
participants. Except as described herein, owners of beneficial interests in a
global Note will not be considered the holders thereof and will not be entitled
to receive physical delivery of Notes in definitive form, and no global Note
will be exchangeable except for another global Note of like denomination and
terms to be registered in the name of the Depositary or its nominee. See
"Description of Notes and Guarantee".
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
<TABLE>
<CAPTION>
AGENTS'
DISCOUNTS OR PROCEEDS TO
PRICE TO PUBLIC (1) COMMISSIONS (2) ISSUER (2)(3)
------------------- ------------ --------------
<S> <C> <C> <C>
Per Note................................ 100% .125%-.875% 99.875%-99.125%
Total (4)............................... $500,000,000 $625,000-$4,375,000 $499,375,000-$495,625,000
</TABLE>
- ----------------------------------
(1) Unless otherwise specified in a Pricing Supplement, Notes will be issued at
100% of the principal amount thereof.
(2) The applicable Issuer will pay Goldman, Sachs & Co., Bear, Stearns & Co.
Inc., Chase Securities Inc., Citicorp Securities, Inc., Dillon, Read & Co.
Inc. and J. P. Morgan Securities Inc. (each, an "Agent" and collectively,
the "Agents") a commission (or grant a discount) of from .125% to .875%,
depending on maturity, of the principal amount of any Notes sold through
them as Agents (or sold to such Agents as principal in circumstances in
which no other discount is agreed). The applicable Issuer may sell Notes to
any Agent at a discount or premium for resale to one or more investors at
varying prices related to prevailing market prices at the time of resale, as
determined by such Agent, or at a fixed public offering price. The Issuers
and the Guarantor have agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting estimated expenses of $450,000 payable by the Issuers,
including reimbursement of the Agents' expenses.
(4) Or the equivalent thereof in foreign currencies or composite currencies.
----------------------------------
Offers to purchase the Notes are being solicited, on a reasonable efforts
basis, from time to time by the Agents on behalf of the Issuers. Notes may be
sold to the Agents on their own behalf at negotiated discounts. The Issuers
reserve the right to sell the Notes directly on their own behalf. No commission
will be payable on any sales made directly by the Issuers. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will not be listed on
any securities exchange, and there can be no assurance that the Notes offered in
this Prospectus Supplement will be sold or that there will be a secondary market
for the Notes. The Issuers also reserve the right to withdraw, cancel or modify
the offering contemplated hereby without notice. The Issuers or the soliciting
Agent may reject any order as a whole or in part. See "Supplemental Plan of
Distribution".
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
DILLON, READ & CO. INC.
J.P. MORGAN & CO.
The date of this Prospectus Supplement is July 18, 1996.
<PAGE>
IN CONNECTION WITH THE DISTRIBUTION OF THE NOTES, THE AGENTS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS IN THE NOTES WITH A VIEW TO STABILIZING OR MAINTAINING
THE MARKET PRICE OF THE NOTES AT LEVELS OTHER THAN THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON ANY EXCHANGE ON
WHICH THE NOTES MAY BE LISTED, IN ANY OVER-THE-COUNTER MARKET OR OTHERWISE AND,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES AND GUARANTEE
GENERAL
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 set forth
in the accompanying Prospectus, to which description reference is hereby made.
Unless different terms or additional terms are specified in the applicable
Pricing Supplement, the Notes will have the terms described below. References to
interest payments and interest-related information do not apply to Zero Coupon
Notes (as defined below).
The Series B Notes will be issued pursuant to the Indenture (the "Company
Indenture") between the Company and, unless otherwise indicated with respect to
a series of Series B Notes, The Chase Manhattan Bank [as successor by merger to
The Chase Manhattan Bank (National Association)], as Trustee, and the Series A
Notes will be issued under an Indenture (the "Subsidiary Indenture"), between
the Company, as Guarantor, the Dutch Issuer, the Canadian Issuer and, unless
otherwise indicated with respect to a series of Series A Notes, The Chase
Manhattan Bank, as Trustee (the Company Indenture and the Subsidiary Indenture
are hereinafter collectively referred to as the "Indentures"). The Notes will
represent senior, unsubordinated debt of the applicable Issuer and will rank
equally with all other unsecured and unsubordinated debt of the applicable
Issuer. The Notes issued by the Dutch Issuer and the Canadian Issuer will be
fully and unconditionally guaranteed by the Company as to payment of principal
and any premium, interest and Additional Amounts. The Guarantee will rank on a
parity with all other unsecured and unsubordinated indebtedness of the Company.
The Notes constitute a separate series of each Issuer for purposes of the
Indentures. The Indentures do not limit the aggregate principal amount of Debt
Securities that may be issued thereunder. The following summary of certain
provisions of the Indentures does not purport to be complete and is subject to
and is qualified in its entirety by reference to, all of the provisions of the
applicable Indenture, including the definitions therein of certain terms.
Unless previously redeemed or repaid, each Note will mature on the date from
9 months or more from its date of issue, as agreed to by the applicable Issuer
and the purchaser and specified in the Note and the applicable Pricing
Supplement or, if such Note is a Floating Rate Note (as defined below) and such
specified date is not a Business Day (as defined below) with respect to such
Note, the next succeeding Business Day (or, in the case of a LIBOR Note (as
defined below), if such next succeeding Business Day falls in the next calendar
month, the next preceding Business Day). If the maturity date specified in the
applicable Pricing Supplement for any Fixed Rate Note is a day that is not a
Business Day, principal will be paid on the next succeeding Business Day with
the same force and effect as if made on such specified maturity date. "Business
Day" means (a) with respect to any Note, any day that is not a Saturday or
Sunday and that in The City of New York, is not a day on which banking
institutions generally are authorized or obligated by law or executive order to
close (and with respect to LIBOR Notes is a day on which dealings in deposits in
the relevant Specified Currency (as defined below) are transacted in the London
interbank market) and (b) with respect to Foreign Currency Notes (as defined
below) only, any day that, in the capital city of the country of the currency in
which such Notes are denominated, is not a day on which banking institutions
generally are authorized or obligated by law to close (which in the case of
Foreign Currency Notes denominated in European Currency Units ("ECUs") shall be
Luxembourg, in which case "Business Day" shall not include any day that is a
non-ECU clearing day as determined by the ECU Banking Association in Paris).
S-2
<PAGE>
Each Note will be denominated in a currency or composite currency
("Specified Currency") as specified on the face thereof and in the applicable
Pricing Supplement. Purchasers of the Notes are required to pay for such Notes
by delivery of the requisite amount of the Specified Currency to an Agent,
unless other arrangements have been made.
The applicable Pricing Supplement will specify any redemption or repayment
terms applicable to the Notes. See "--Redemption and Repayment" below.
Unless otherwise specified in the applicable Pricing Supplement, the Notes,
other than Foreign Currency Notes, will be issuable only in definitive
registered form in denominations of $100,000 and integral multiples of $1,000 in
excess thereof. The authorized denominations of Notes denominated in foreign
currencies or composite currencies ("Foreign Currency Notes") will be indicated
in the applicable Pricing Supplement.
Each Note will be represented either by a global security (a "Global
Security") registered in the name of a nominee of The Depository Trust Company,
as depositary (the "Depositary") (each such Note represented by a Global
Security being herein referred to as a "Book-Entry Note"), or by a certificate
issued in definitive registered form, without coupons (a "Certificated Note"),
as set forth in the applicable Pricing Supplement. Except as set forth under
"--Book-Entry Notes" below, Book-Entry Notes will not be issuable in
certificated form. So long as the Depositary or its nominee is the registered
holder of any Global Security, the Depositary or its nominee, as the case may
be, will be considered the sole registered holder of the Book-Entry Notes
represented by such Global Security for all purposes under the Indentures and
such Notes. For a further description of the respective forms, denominations and
transfer and exchange procedures with respect to any such Global Security and
Book-Entry Note, reference is made to "--Book-Entry Notes" below and to the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement and except
as provided below under "--Book-Entry Notes," principal and any premium,
interest and Additional Amounts will be payable, the transfer of any Notes will
be registrable and any Notes will be exchangeable for Notes bearing identical
terms and provisions at the corporate trust office of The Chase Manhattan Bank
(the "Paying Agent"), in the Borough of Brooklyn, The City of New York, provided
that payments of interest on any Interest Payment Date (as defined below) with
respect to any Certificated Note may be made at the option of the Company by
check mailed to the address of the person entitled thereto as it appears on the
registry books of the Company at the close of business on the Regular Record
Date (as defined below) corresponding to the relevant Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, holders of
$10,000,000 or more in aggregate principal amount of Certificated Notes shall be
entitled to receive payments of interest, other than interest at the stated
maturity thereof or upon repayment or redemption, by wire transfer of
immediately available funds, if appropriate wire transfer instructions have been
given to the Paying Agent in writing not later than the Regular Record Date
preceding such Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, the
principal and any premium, interest and Additional Amounts payable at stated
maturity or upon repayment or redemption (other than interest payable on a
maturity date or repayment or redemption date that is also an Interest Payment
Date) on each Certificated Note will be paid in immediately available funds
against presentation of the Note at the above mentioned corporate trust office
of the Paying Agent.
The applicable Pricing Supplement will specify any additional terms
applicable to any Foreign Currency Note with respect to the payment of principal
and any premium, interest or Additional Amounts thereon.
Notes may be issued as Original Issue Discount Notes offered at a discount
from the principal amount thereof at the stated maturity as specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the amount payable to the holder of Zero Coupon Notes and
certain of such interest-bearing Notes issued as Original Issue Discount Notes
(as specified in the applicable Pricing Supplement) upon any acceleration of the
maturity thereof will be the Amortized
S-3
<PAGE>
Face Amount (as defined below) thereof, and the amount payable to the holder of
such Original Issue Discount Note upon any repayment or redemption thereof will
be the applicable percentage of the Amortized Face Amount thereof specified in
the applicable Pricing Supplement, in each case as determined by the applicable
Issuer plus, in the case of any interest bearing Note issued as an Original
Issue Discount Note, any accrued but unpaid "qualified stated interest payments"
(as defined under "United States Taxation--United States Noteholders--Original
Issue Discount"). The "Amortized Face Amount" of an Original Issue Discount Note
is equal to the sum of (i) the Issue Price (as defined below) of such Original
Issue Discount Note and (ii) that portion of the difference between the Issue
Price and the principal amount of such Original Issue Discount Note that has
been amortized at the Stated Yield (as defined below) of such Original Issue
Discount Note (computed in accordance with Section 1272(a)(4) of the Internal
Revenue Code of 1986, as amended, and Section 1.1275-1(b) of the Regulations (as
defined under "United States Taxation--United States Noteholders--Original Issue
Discount"), in each case as in effect on the issue date of such Original Issue
Discount Note), at the date as of which the Amortized Face Amount is calculated,
but in no event can the Amortized Face Amount exceed the principal amount of
such Note due at the stated maturity thereof. As used in the preceding sentence,
the term "Issue Price" means the principal amount of such Original Issue
Discount Note due at the stated maturity thereof less the "Original Issue
Discount" of such Original Issue Discount Note specified on the face thereof and
in the applicable Pricing Supplement. The term "Stated Yield" of such Original
Issue Discount Note means the "Yield to Maturity" specified on the face of such
Original Issue Discount Note and in the applicable Pricing Supplement for the
period from the Original Issue Date of such Original Issue Discount Note, as
specified on the face of such Original Issue Discount Note and in the applicable
Pricing Supplement, to the stated maturity thereof based on its Issue Price and
the principal amount payable at the stated maturity thereof. See "United States
Taxation--United States Noteholders-- Original Issue Discount."
INTEREST AND INTEREST RATES
Each Note that bears interest will bear interest at either (a) a fixed rate
(the "Fixed Rate Notes"), (b) an indexed rate ("Indexed Notes") or (c) a
floating rate determined by reference to one or more interest rate formulas,
which may be adjusted by a Spread and/or Spread Multiplier (each as defined
below), and, if so specified in the applicable Pricing Supplement with respect
to one or more Interest Periods (as defined below), one or more fixed rates (the
"Floating Rate Notes"). Any Floating Rate Note may also have either or both of
the following: (i) a maximum interest rate limitation, or ceiling, on the rate
of interest which may accrue during any Interest Period; and (ii) a minimum
interest rate limitation, or floor, on the rate of interest which may accrue
during any Interest Period. The applicable Pricing Supplement may designate any
of the following interest rate formulas as applicable to one or more Interest
Periods on each Floating Rate Note: (a) the Commercial Paper Rate, in which case
such Note will be a "Commercial Paper Rate Note" with respect to such Interest
Period or Interest Periods; (b) the Federal Funds Rate, in which case such Note
will be a "Federal Funds Rate Note" with respect to such Interest Period or
Interest Periods; (c) LIBOR, in which case such Note will be a "LIBOR Note" with
respect to such Interest Period or Interest Periods; (d) the Prime Rate, in
which case such Note will be a "Prime Rate Note" with respect to such Interest
Period or Interest Periods; (e) the CD Rate, in which case such Note will be a
"CD Rate Note" with respect to such Interest Period or Interest Periods; (f) the
Treasury Rate, in which case such Note will be a "Treasury Rate Note" with
respect to such Interest Period or Interest Periods; (g) the CMT Rate, in which
case such Note will be a "CMT Rate Note" with respect to such Interest Period or
Interest Periods; or (h) such other interest rate formula as is set forth in the
applicable Pricing Supplement.
The interest rate on each Floating Rate Note for each Interest Period will
be determined by reference to (i) the applicable interest rate formula specified
in the applicable Pricing Supplement for such Interest Period, plus or minus the
Spread, if any, and/or multiplied by the Spread Multiplier, if any, or (ii) the
applicable fixed rate per annum specified in the applicable Pricing Supplement
for such Interest Period. The "Spread" is the number of basis points specified
in the applicable Pricing Supplement as being
S-4
<PAGE>
applicable to such Floating Rate Note for such Interest Period, and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement as
being applicable to such Floating Rate Note for such Interest Period.
Each Note that bears interest will bear interest from and including its date
of issue or from and including the most recent Interest Payment Date (as defined
below) to which interest on such Note (or any predecessor Note) has been paid or
duly provided for (i) at the fixed rate per annum applicable to the related
Interest Period or Interest Periods, (ii) at the rate determined pursuant to the
applicable index or (iii) at the rate per annum determined pursuant to the
interest rate formula applicable to the related Interest Period or Interest
Periods, in each case as specified therein and in the applicable Pricing
Supplement, until the principal thereof is paid or made available for payment.
Interest will be payable on each Interest Payment Date and at the stated
maturity thereof or upon repayment or redemption. Except as provided below under
"--Book Entry Notes," interest will be payable to the person in whose name a
Note (or any predecessor Note) is registered at the close of business on the
Regular Record Date (as defined below) next preceding each Interest Payment
Date; provided, however, that interest payable on a maturity date or any
repayment or redemption date that is not an Interest Payment Date will be
payable to the person to whom principal shall be payable. The first payment of
interest on any Note originally issued after a Regular Record Date and on or
before an Interest Payment Date will be made on the Interest Payment Date
following the next succeeding Regular Record Date to the registered holder on
such next succeeding Regular Record Date. Interest rates and interest rate
formulas are subject to change by the applicable Issuer from time to time but no
such change will affect any Note theretofore issued or which such Issuer has
agreed to issue. Unless otherwise specified in the applicable Pricing
Supplement, the "Interest Payment Dates" and the "Regular Record Dates" for
Fixed Rate Notes shall be as described below under "--Fixed Rate Notes" and the
"Interest Payment Dates" and the "Regular Record Dates" for Floating Rate Notes
shall be as described below under "--Floating Rate Notes."
The interest rate on a Note for any Interest Period 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 current New York law
the maximum rate of interest is 25% per annum on a simple interest basis, with
certain exceptions. The limit may not apply to Floating Rate Notes in which
$2,500,000 or more has been invested.
The applicable Pricing Supplement will specify with respect to each Note
that bears interest: (i) the issue price, Interest Payment Dates and Regular
Record Dates; (ii) with respect to any Fixed Rate Note, the interest rate; (iii)
with respect to any Indexed Note, the index; and (iv) with respect to any
Floating Rate Note, the Initial Interest Rate (as defined below), the method
(which may vary from Interest Period to Interest Period) of calculating the
interest rate applicable to each Interest Period (including, if applicable, the
fixed rate per annum applicable to one or more Interest Periods, the period to
maturity of any instrument on which the interest rate formula for any Interest
Period is based (the "Index Maturity"), the Spread and/or Spread Multiplier, the
Interest Determination Dates (as defined below), the Interest Reset Dates (as
defined below) and any minimum or maximum interest rate limitations); (v)
whether such Note is an Original Issue Discount Note; and (vi) any other terms
consistent with the applicable Indenture.
FIXED RATE NOTES
Each Fixed Rate Note, whether or not issued as an Original Issue Discount
Note, will bear interest at the annual rate specified therein and in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Payment Dates for the Fixed Rate Notes will be
on June 15 and December 15 of each year and the Regular Record Dates for the
Fixed Rate Notes will be on the first day (whether or not a Business Day) of the
month in which each Interest Payment Date occurs. Unless otherwise specified in
the applicable Pricing Supplement, interest payments for Fixed Rate Notes shall
be the amount of interest accrued from, and including, the next preceding
Interest Payment Date to which interest has been paid or duly provided for (or
from, and including, the date of issue if no interest has been paid or duly
provided for with respect to such Fixed Rate Note) to, but excluding, the
relevant Interest Payment Date. Interest on Fixed Rate Notes will be computed
and paid on the basis of a 360-day
S-5
<PAGE>
year of twelve 30-day months. In the event that any Interest Payment Date on a
Fixed Rate Note is not a Business Day, interest will be paid on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date.
FLOATING RATE NOTES
The Interest Payment Dates for the Floating Rate Notes shall be as specified
in such Notes and in the applicable Pricing Supplement, and, unless otherwise
specified in the applicable Pricing Supplement, the Regular Record Dates for the
Floating Rate Notes will be the day (whether or not a Business Day) fifteen
calendar days preceding each Interest Payment Date. Unless otherwise specified
in the applicable Pricing Supplement and except as provided below, interest on
Floating Rate Notes will be payable on the following Interest Payment Dates: in
the case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Date, on the third Wednesday of each month or on the third Wednesday of March,
June, September and December of each year; in the case of Floating Rate Notes
with a quarterly Interest Reset Date, on the third Wednesday of March, June,
September and December of each year; in the case of Floating Rate Notes with a
semiannual Interest Reset Date, on the third Wednesday of the two months of each
year specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes with an annual Interest Reset Date, on the third Wednesday of the
month of each year specified in the applicable Pricing Supplement, and in each
case at the stated maturity thereof or upon repayment or redemption. If any
Interest Payment Date for any Floating Rate Note would otherwise be a day that
is not a Business Day, the Interest Payment Date for such Floating Rate Note
shall be postponed to the next day that is a Business Day, except that in the
case of a LIBOR Note, if such Business Day is in the next succeeding calendar
month, such Interest Payment Date shall be the immediately preceding Business
Day.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (the date on which each such reset
occurs, 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 as follows: in the case of Floating Rate Notes which
are reset daily, each Business Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) which are reset weekly, the Wednesday of each week; in
the case of Treasury Rate Notes which are reset weekly, the Tuesday of each week
(except if the auction date falls on a Tuesday, then the next Business Day, as
provided below); in the case of Floating Rate Notes which are reset monthly, the
third Wednesday of each month; in the case of Floating Rate Notes which are
reset quarterly, the third Wednesday of March, June, September and December of
each year; in the case of Floating Rate Notes which are reset semiannually, the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which are reset
annually, the third Wednesday of the month of each year specified in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate determined with respect to any Interest Determination Date will
become effective on and as of the next succeeding Interest Reset Date; provided,
however, that (i) the interest rate in effect from the date of issue to the
first Interest Reset Date with respect to a Floating Rate Note (the "Initial
Interest Rate") will be as specified in the applicable Pricing Supplement and
(ii) the interest rate in effect for the 10 days immediately prior to the stated
maturity will be that in effect on the tenth day preceding such maturity. 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 that in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Business Day.
As used herein, "Interest Determination Date" means the date as of which the
interest rate for a Floating Rate Note is to be calculated, to be effective as
of the following Interest Reset Date and calculated on the related Calculation
Date (as defined below). Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to any Interest Reset
Date for a Commercial Paper Rate Note, a Federal Funds Rate Note, a LIBOR Note,
a Prime Rate Note, a CD Rate
S-6
<PAGE>
Note or a CMT Rate Note (the "Commercial Paper Interest Determination Date," the
"Federal Funds Interest Determination Date," the "LIBOR Interest Determination
Date," the "Prime Interest Determination Date," the "CD Interest Determination
Date" and the "CMT Interest Determination Date," respectively) will be the
second Business Day prior to such Interest Reset Date. Unless otherwise
specified in the applicable Pricing Supplement, the Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury
Interest Determination Date") will be the day of the week on which Treasury
bills would normally be auctioned in the week in which such Interest Reset Date
falls. Treasury bills are usually sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is usually held on the
following Tuesday, except that such auction may be held on the preceding Friday.
If, as the result of a legal holiday, an auction is so held on the preceding
Friday, such Friday will be the Treasury Interest Determination Date pertaining
to the Interest Reset Date occurring in the next succeeding week. If an auction
date shall fall on any Interest Reset Date for a Treasury Rate Note, then such
Interest Reset Date shall instead be the first Business Day immediately
following such auction date.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments on an Interest Payment Date for a Floating Rate Note will include
interest accrued from, and including, the next preceding Interest Payment Date
to which interest has been paid or duly provided for (or from, and including,
the date of issue if no interest has been paid or duly provided for with respect
to such Floating Rate Note) to, but excluding, such Interest Payment Date (each
such interest accrual period, an "Interest Period"). Accrued interest from the
date of issue or from the last date to which interest has been paid or duly
provided for to the date for which interest is being calculated is calculated by
multiplying the face amount of a Floating Rate Note by the applicable accrued
interest factor (the "Accrued Interest Factor"). The Accrued Interest Factor is
computed by adding together the interest factors calculated for each day from
the date of issue, or from the last date to which interest has been paid or duly
provided for, to, but excluding, the date for which accrued interest is being
calculated. The interest factor for each such day is computed by dividing the
per annum interest rate applicable to such day by 360 in the case of Commercial
Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes, Prime Rate Notes and CD
Rate Notes, or by the actual number of days in the year in the case of Treasury
Rate Notes and CMT Rate Notes. The interest rate in effect on each day will be
(i) if such day is an Interest Reset Date, the interest rate with respect to the
Interest Determination Date 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 or in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, The Chase
Manhattan Bank will be the "Calculation Agent." On or before each Calculation
Date, the Calculation Agent will determine the interest rate as described below
and notify the Paying Agent. The Paying Agent will determine the Accrued
Interest Factor applicable to any such Floating Rate Note. The Paying Agent
will, upon the request of the holder of any Floating Rate Note, provide the
interest rate then in effect and the interest rate which will become effective
as a result of a determination made with respect to the most recent Interest
Determination Date with respect to such Floating Rate Note. The determinations
of interest rates made by the Calculation Agent shall be conclusive and binding,
and neither the Trustee nor the Paying Agent shall have the duty to verify
determinations of interest rates made by the Calculation Agent. The
determinations of Accrued Interest Factors made by the Paying Agent shall be
conclusive and binding. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," if applicable, pertaining to any Interest
Determination Date on a Floating Rate Note will be the earlier of (i) the tenth
calendar day after such Interest Determination Date, or, if any such day is not
a Business Day, the next succeeding Business Day and (ii) the Business Day
preceding the applicable Interest Payment Date or the stated maturity date or
repayment or redemption date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation referred to in this Prospectus
Supplement will be rounded, if necessary, to the nearest one hundred-thousandth
of one percentage point, with five one-millionths of one percentage point
rounded
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upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)
and 9.876544% (or .09876544) being rounded to 9.87654% (or .0987654); all
calculations of the interest factor for any day on Floating Rate Notes will be
rounded, if necessary, to the nearest one hundred-millionth, with five one-
billionths rounded upward (e.g., .098765455 being rounded to .09876546 and
.098765454 being rounded to .09876545); and all currency or composite currency
amounts used in or resulting from such calculations on the Notes will be rounded
to the nearest one-hundredth of a unit (with .005 of a unit being rounded
upward).
COMMERCIAL PAPER RATE NOTES. Commercial Paper Rate Notes will bear interest
at the interest rates (calculated with reference to the Commercial Paper Rate
and the Spread and/or Spread Multiplier, if any) specified in the Commercial
Paper Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate on that
date for commercial paper having the Index Maturity specified 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 ("H.15(519")) under the heading "Commercial
Paper." If by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Commercial Paper Interest Determination Date such rate is not so
published, then the Commercial Paper Rate shall be the Money Market Yield of the
rate on that Commercial Paper 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 United States Government
Securities" ("Composite Quotations") under the heading "Commercial Paper." If by
3:00 p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, the Commercial Paper Rate
for that Commercial Paper Interest Determination Date shall be calculated by the
Calculation Agent and shall be the Money Market Yield of the arithmetic mean of
the offered rates 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 Commercial Paper Interest Determination Date, for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement placed
for an industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized securities rating agency; provided, however, that if fewer
than three dealers selected as aforesaid by the Calculation Agent are quoting as
specified in this sentence, the Commercial Paper Rate with respect to such
Commercial Paper Interest Determination Date will remain the Commercial Paper
Rate in effect on such Commercial Paper 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 the 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.
FEDERAL FUNDS RATE NOTES. Federal Funds Rate Notes will bear interest at
the interest rates (calculated with reference to the Federal Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the Federal Funds Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on that day for Federal Funds as published in H.15(519) under the
heading "Federal Funds Effective" or, if not so published in H.15(519) by 3:00
p.m., New York City time, on the Calculation Date pertaining to such Federal
Funds Interest Determination Date, then the Federal Funds Rate will be the rate
on such Federal Funds Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If such rate is not
so published in either H.15(519) or Composite Quotations by 3:00 p.m., New
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York City time, on the Calculation Date pertaining to such Federal Funds
Interest Determination Date, the Federal Funds Rate for such Federal Funds
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the rates for the last transaction in overnight
Federal Funds arranged by three leading dealers of Federal Funds transactions in
The City of New York selected by the Calculation Agent as of 11:00 a.m., New
York City time, on such Federal Funds Interest Determination Date; provided,
however, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as specified in this sentence, the Federal Funds
Rate will remain the Federal Funds Rate in effect on such Federal Funds Interest
Determination Date.
LIBOR NOTES. LIBOR Notes will bear interest at the interest rates
(calculated with reference to LIBOR and the Spread and/or Spread Multiplier, if
any) specified in the LIBOR Notes 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 a LIBOR Interest Determination Date, LIBOR will be
determined on the basis of the offered rates for deposits in the Index
Currency (as defined below) having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second Business Day
immediately following that LIBOR Interest Determination Date, that appear as
of 11:00 a.m., London time, on that LIBOR Interest Determination Date on the
display screen designated "Page 3750" by Telerate Data Service, or such
other page as may replace such page 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 deposits in the
relevant Index Currency. If no rate appears on Telerate Page 3750, then
LIBOR in respect of that LIBOR Interest Determination Date will be the
arithmetic mean of the offered rates (unless the display referred to below
by its terms provides only for a single rate, in which case such single rate
shall be used) for deposits in the London interbank market in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement and commencing on the second Business Day immediately following
such LIBOR Interest Determination Date that appear on the display on the
Reuters Monitor Money Rates Service for the purpose of displaying the London
interbank offered rates of major banks for the applicable Index Currency as
of 11:00 a.m., London time, on such LIBOR Interest Determination Date, if at
least two such offered rates appear (unless, as aforesaid, only a single
rate is required). If fewer than two such rates appear (or, if such display
by its terms provides for only a single rate, in which case if no such rate
appears), then LIBOR in respect of such LIBOR Interest Determination Date
will be determined as if the parties had specified the rate described in
clause (ii) below.
(ii) If LIBOR with respect to a LIBOR Interest Determination Date is to
be determined pursuant to this clause (ii), the Calculation Agent will
request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in the
Index Currency for the period of the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, to prime banks
in the London interbank market at approximately 11:00 a.m., London time, on
such LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time. If at least two such quotations are provided, LIBOR
determined on such LIBOR Interest Determination Date will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR
determined on such LIBOR Interest Determination Date will be the arithmetic
mean of the rates quoted at approximately 11:00 a.m., (or such other time
specified in the applicable Pricing Supplement), in the applicable Principal
Financial Center (as defined below), on such LIBOR Interest Determination
Date by three major banks in such Principal Financial Center selected by the
Calculation Agent for loans in the Index Currency to leading European banks,
having the Index Maturity designated in the applicable Pricing Supplement
and in a principal amount that is representative for a single transaction in
such
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Index Currency in such market at such time; provided, however, that if the
banks so selected by the Calculation Agent are not quoting as mentioned in
this sentence, LIBOR determined on such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to United
States dollars, Deutsche marks, Italian lira, Swiss francs, Dutch guilders and
ECUs, the Principal Financial Center shall be The City of New York, Frankfurt,
Milan, Zurich, Amsterdam and Luxembourg, respectively.
PRIME RATE NOTES. Prime Rate Notes will bear interest at the interest rates
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) and will be payable on the dates specified on the face of
the Prime Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
rate set forth for the relevant Prime Rate Interest Determination Date in
H.15(519) under the heading "Bank Prime Loan." In the event that such rate is
not published prior to 9:00 a.m., New York City time, on the relevant
Calculation Date, then the Prime Rate with respect to such Interest Reset Date
will be the arithmetic mean of the rates of interest publicly announced by each
bank that appears on 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 United States banks) ("Reuters Screen USPRIME1 Page") as such bank's
prime rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates appear on the Reuters Screen
USPRIME1 Page on such Prime Rate Interest Determination Date, the Prime Rate
with respect to such Interest Reset Date will be the arithmetic mean of the
prime rates or base lending rates (quoted on the basis of the actual number of
days in the year divided by a 360-day year) as of the close of business on such
Prime Rate Interest Determination Date by three major banks in The City of New
York selected by the Calculation Agent; PROVIDED, HOWEVER, that if fewer than
three banks selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Prime Rate with respect to such Interest Reset
Date will be the Prime Rate in effect on such Prime Rate Interest Determination
Date.
CD RATE NOTES. CD Rate Notes will bear interest at the interest rates
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified in the CD Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity specified in
the applicable Pricing Supplement as such rate is published in H.15(519) under
the heading "CDs (Secondary Market)." If by 3:00 p.m., New York City time, on
the Calculation Date pertaining to such CD Interest Determination Date such rate
is not so published, then the CD Rate shall be the rate on such CD Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published in Composite
Quotations under the heading "Certificates of Deposit." If by 3:00 p.m., New
York City time, on such Calculation Date such rate is not so published in either
H.15(519) or Composite Quotations, the CD Rate for that CD Interest
Determination Date shall be calculated by the Calculation Agent and shall be the
arithmetic mean of the secondary market offered rates as of 3:00 p.m., New York
City time, on such CD Interest Determination Date, of three leading nonbank
dealers in negotiable United States dollar certificates of deposit in The City
of New York selected by the Calculation Agent for negotiable certificates of
deposit of major United States money market banks which are then rated A-1+ by
Standard & Poor's Corporation and P-1 by Moody's Investors Service with a
remaining maturity closest to the Index Maturity specified in the
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applicable Pricing Supplement in denominations of $5,000,000; provided, however,
that if fewer than three dealers selected as aforesaid by the Calculation Agent
are quoting as specified in this sentence, the CD Rate will remain the CD Rate
in effect on such CD Interest Determination Date.
TREASURY RATE NOTES. Treasury Rate Notes will bear interest at the interest
rates (calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any) specified in the Treasury Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate is published in H.15(519) under the heading "U.S.
Government Securities--Treasury Bills--auction average (investment)" or, if not
so published in H.15(519) by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Treasury Interest Determination Date, 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 otherwise reported as provided above by
3:00 p.m., New York City time, on such Calculation Date or no such auction is
held in a particular week, then the Treasury Rate shall be the rate published in
H.15(519) under the heading "U.S. Government Securities--Treasury
Bills--Secondary Market" (expressed as a bond equivalent yield on the basis of a
365 or 366 day year, as applicable, on a daily basis), or if not published by
3:00 p.m., New York City time on the related Calculation Date, the Treasury Rate
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) calculated using the arithmetic mean
of the secondary market bid rates, as of 3:30 p.m., New York City time, on such
Treasury 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
fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as specified in this sentence, the Treasury Rate with respect to such
Treasury Interest Determination Date will remain the Treasury Rate in effect on
such Treasury Interest Determination Date.
CMT RATE NOTES. CMT Rate Notes will bear interest at the rates (calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the rate displayed
on the Designated CMT Telerate Page (as defined below) under the caption
"...Treasury Constant Maturities...Federal Reserve Board Release H.15...Mondays
Approximately 3:45 p.m.," under the column for the Designated CMT Maturity Index
(as defined below) for (i) if the Designated CMT Telerate Page is 7055, the rate
on such CMT Interest Determination Date and (ii) if the Designated CMT Telerate
Page is 7052, the week or the month, as applicable, ended immediately preceding
the week in which the related CMT Interest Determination Date occurs. If such
rate is no longer displayed on the relevant page, or if not displayed by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT Rate for
such CMT Interest Determination Date will be such Treasury Constant Maturity
rate for the Designated CMT Maturity Index as published in the relevant
H.15(519). If such rate is no longer published, or, if not published by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT Rate for
such CMT Interest Determination Date will be such Treasury Constant Maturity
rate for the Designated CMT Maturity Index (or other United States Treasury rate
for the Designated CMT Maturity Index) for the CMT Interest Determination Date
with respect to such Interest Reset Date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States Department
of the Treasury that the Calculation Agent determines to be comparable to the
rate formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
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City time, on the related Calculation Date, then the CMT Rate for the CMT
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 p.m., New York City time on
the CMT Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York selected by the Calculation
Agent (from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury notes quotations, the CMT
Rate for such CMT Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 p.m., New
York City time, on the CMT Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100,000,000. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided however, that
if fewer than three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate will be the CMT Rate in effect on such
CMT Interest Determination Date. If two Treasury notes with an original maturity
as described in the third preceding sentence, have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the CMT Rate
Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
ZERO COUPON NOTES
Notes may be issued in the form of Original Issue Discount Notes that do not
provide any periodic payments of interest (the "Zero Coupon Notes"). The
specific terms of any Zero Coupon Notes will be set forth in the applicable
Pricing Supplement.
INDEXED NOTES
Notes may be issued from time to time as Indexed Notes. Indexed Notes are
Notes for which the principal amount payable at the stated maturity thereof or
upon redemption or repayment, or the amount of interest payable on an Interest
Payment Date, or both, is determined by reference to a currency exchange rate,
composite currency or currencies, commodity price or other financial or
non-financial index as set forth in the applicable Pricing Supplement. Specific
terms of any Indexed Notes will be set forth in such Notes and the applicable
Pricing Supplement.
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REDEMPTION AND REPAYMENT
The Notes will not be subject to any sinking fund and, unless an initial
date on which a Note may be redeemed by an Issuer (a "Redemption Commencement
Date") or a date on which a Note may be repayable at the option of a holder
thereof (a "Repayment Date") is specified in the applicable Pricing Supplement,
will not be redeemable or repayable prior to their stated maturity except, in
the case of the Series A Notes, in the event of certain changes affecting Dutch
or Canadian taxes. See "Description of Debt Securities and Guarantee--Optional
Tax Redemption" in the Prospectus. If a Redemption Commencement Date or
Repayment Date is so specified with respect to any Note, the applicable Pricing
Supplement will also specify one or more redemption or repayment prices
(expressed as a percentage of the principal amount of such Note) ("Redemption
Prices" or "Repayment Prices," respectively) and the redemption or repayment
period or periods ("Redemption Periods" or "Repayment Periods," respectively)
during which such Redemption Prices or Repayment Prices shall apply. Unless
otherwise specified in the Pricing Supplement, any such Note shall be redeemable
at the option of the applicable Issuer or repayable at the option of the holder
thereof (as specified in such Pricing Supplement) at any time on or after such
specified Redemption Commencement Date or Repayment Date, as the case may be, at
the specified Redemption Price or Repayment Price applicable to the Redemption
Period or Repayment Period during which such Note is to be redeemed or repaid,
together with interest accrued to the redemption or repayment date. With respect
to the redemption of Global Securities, the Depositary advises that if less than
all of the Notes with like tenor or terms are to be redeemed, the particular
interests (in integral multiples of $1,000) in the Book-Entry Notes representing
the Notes to be redeemed shall be selected by the Depositary's impartial lottery
procedures.
In the event that the option of the holder to elect repayment described
above is deemed to be a "tender offer" within the meaning of Rule 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company will comply with Rule 14e-1 as then in effect to the extent applicable.
OPTIONAL TAX REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement, the date on
or after which a change, execution or amendment of the type set forth in
"Description of Debt Securities and Guarantee--Optional Tax Redemption" in the
Prospectus may permit an optional tax redemption by the applicable Issuer will
be the date of such Pricing Supplement.
APPLICABILITY OF DEFEASANCE PROVISIONS
The provisions in the Indentures relating to defeasance and discharge and
covenant defeasance which are described in the accompanying Prospectus under
"Description of Debt Securities and Guarantee--Defeasance Provisions" will apply
to the Notes.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of the same series and bearing interest
(if any) at the same rate or pursuant to the same formula and having the same
date of issuance, redemption or repayment provisions (if any), stated maturity
and other terms will be represented by a single Global Security. Each Global
Security representing Book-Entry Notes will be deposited with, or on behalf of,
the Depositary and will be registered in the name of the Depositary or a nominee
of the Depositary.
Upon the issuance of a Global Security, the Depositary will credit accounts
held with it with the respective principal or face amounts of the Book-Entry
Notes represented by such Global Security. The accounts to be credited shall be
designated initially by the Agent through which the Note was sold or, to the
extent that such Notes are offered and sold directly, by the Issuer or the
Guarantor. Ownership of beneficial interests in a Global Security will be
limited to institutions that have accounts with the Depositary ("participants")
and to persons that may hold interests through such participants. Ownership of
beneficial interests by participants in a Global Security will be shown on, and
the transfer of that ownership interest will be effected only through, records
maintained by the Depositary for such Global Security. Ownership of beneficial
interests in such Global Security by persons that hold through participants will
be shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant.
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Payment of principal of and any premium or interest on Book-Entry Notes
represented by any such Global Security will be made to the Depositary or its
nominee, as the case may be, as the sole registered holder of the Book-Entry
Notes represented thereby for all purposes under the Indentures. None of the
Issuers, the Guarantor, the Trustee, the Paying Agent or any agent of the
Issuers, the Guarantor or the Trustee will have any responsibility or liability
for any aspect of the Depositary's records relating to or payments made on
account of beneficial ownership interests in a Global Security representing any
Book-Entry Notes or any other aspect of the relationship between the Depositary
and its participants or the relationship between such participants and the owner
of beneficial interests in a Global Security owning through such participants or
for maintaining, supervising or reviewing any of the Depositary's records
relating to such beneficial ownership interests.
The Issuers and the Guarantor have been advised by the Depositary that upon
receipt of any payment of principal of and any premium or interest on any such
Global Security, the Depositary will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of the Depositary.
Payments by participants to owners of beneficial interests in a Global Security
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held by such
participants for customer accounts registered in "street name," and will be the
sole responsibility of such participants.
No Global Security may be transferred except as a whole by a nominee of the
Depositary to the Depositary or to another nominee of the Depositary, or by the
Depositary or any such nominee to a successor of the Depositary or a nominee of
such successor.
Unless otherwise specified in the applicable Pricing Supplement, a Global
Security representing Book Entry Notes is exchangeable for Certificated Notes of
the same series and bearing interest (if any) at the same rate or pursuant to
the same formula, having the same date of issuance, redemption or repayment
provisions (if any), stated maturity and other terms and of differing authorized
denominations aggregating a like amount, only if (x) the Depositary notifies the
applicable Issuer or the Guarantor that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time the Depositary ceases to
be a clearing agency registered under the Exchange Act, (y) the applicable
Issuer or the Guarantor in its sole discretion determines that such Global
Security shall be exchangeable for Certificated Notes or (z) there shall have
occurred and be continuing an Event of Default with respect to the Notes. Such
Certificated Notes shall be registered in the names of the owners of the
beneficial interests in such Global Security as provided by the Depositary's
relevant participants (as identified by the Depositary).
Except as provided above, owners of beneficial interests in a Global
Security will not be entitled to receive physical delivery of Notes in
certificated form and will not be considered the registered holders thereof for
any purpose under the Indentures, and no Global Security representing Book-Entry
Notes shall be exchangeable or transferable. Accordingly, each person owning a
beneficial interest in such a Global Security must rely on the procedures of the
Depositary and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a registered holder under the Indentures. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in certificated form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Security.
The Depositary, as the registered holder of each Global Security, may
appoint agents and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a registered holder is entitled to give or take under the Indentures. The
Issuers and the Guarantor understand that under existing industry practices, in
the event that an Issuer or the Guarantor requests any action of registered
holders or that an owner of a beneficial interest in such a Global Security
desires to give or take any action which a registered holder is entitled to give
or take under the Indenture, the Depositary would authorize the participants
holding the relevant beneficial
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interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
The Depositary has advised the Issuers and the Guarantor that the Depositary
is a limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depositary was created to hold the
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Agents), banks (including the Trustee), trust companies, clearing corporations,
and certain other organizations some of whom (and/or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly.
FOREIGN CURRENCY RISKS
GENERAL
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and each of the Issuers
and the Guarantor disclaims any responsibility to advise prospective purchasers
who are residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of and interest on the Notes. Such persons should consult their own
financial and legal advisors with regard to such matters.
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN
FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE
IN A FOREIGN CURRENCY OR COMPOSITE CURRENCY, EITHER AS SUCH RISKS EXIST AT THE
DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY NOTES.
FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth below is by necessity incomplete and prospective
purchasers of Foreign Currency Notes should consult their own financial and
legal advisors with respect to any matters that may affect the purchase or
holding of a Foreign Currency Note or the receipt of payments of principal of
and any premium and interest on a Foreign Currency Note in a Specified Currency
(as defined below).
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated in United
States dollars. Such risks include, without limitation, the possibility of
significant changes in rate of exchange between the United States dollar and
Specified Currency and the possibility of the imposition or modification of
foreign exchange controls by either the United States or foreign governments.
Such risks generally depend on events over which the Issuers and Guarantor have
no control, such as economic and political events and the supply and demand for
relevant currencies. In recent years, rates of exchange between the United
States dollar and certain foreign currencies have been highly volatile and such
volatility may be expected in the future. The exchange rate between the U.S.
dollar and a foreign currency or currency unit is at any moment a result of the
supply of and demand for such currencies, and changes in the rate result over
time from the interaction of many factors, among which are rates of inflation,
interest rate levels, balances of payments and the extent of governmental
surpluses or deficits in the countries of such currencies. These factors
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are in turn sensitive to the monetary, fiscal and trade policies pursued by such
governments and those of other countries important to international trade and
finance. Fluctuations in any particular exchange rate that have occurred in the
past are not necessarily indicative, however, of fluctuations in the rate that
may occur during the term of any Foreign Currency Note. Depreciation of the
Specified Currency applicable to a Foreign Currency Note against the United
States dollar would result in a decrease in the United States dollar-equivalent
yield of such Note, in the United States dollar-equivalent value of the
principal payable at the stated maturity or upon repayment or redemption of such
Note and, generally, in the United States dollar-equivalent market value of such
Note.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to a Foreign Currency
Note's stated maturity which could affect exchange rates as well as the
availability of the Specified Currency at a Foreign Currency Note's stated
maturity or upon repayment or redemption. Even if there are no exchange
controls, it is possible that the Specified Currency for any particular Foreign
Currency Note would not be available at such Note's stated maturity or upon
repayment or redemption due to other circumstances beyond the control of the
Issuers. In that event, the applicable Issuer will repay in United States
dollars on the basis of the most recently available exchange rate.
JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Notes only in United States dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion into
United States dollars would be determined with reference to the date of default,
the date judgment is rendered or some other date. Under current New York law, a
state court in the State of New York rendering a judgment on a Foreign Currency
Note would be required to render such judgment in the Specified Currency in
which such Foreign Currency Note is denominated, and such judgment would be
converted into United States dollars at the exchange rate prevailing on the date
of entry of the judgment. Holders of Foreign Currency Notes would bear the risk
of exchange rate fluctuations between the time the amount of the judgment is
calculated and the time the Paying Agent converts United States dollars to the
Specified Currency for payment of the judgment.
LIMITED FACILITIES FOR CONVERSION
Currently, there are limited facilities in the United States for conversion
of United States dollars into foreign currencies, and vice versa. In addition,
banks offer limited non-United States dollar denominated checking or savings
account facilities in the United States. Accordingly, payments on Foreign
Currency Notes will, unless otherwise specified in the applicable Pricing
Supplement, be made from an account with a bank located in the country issuing
the Specified Currency (or, with respect to Foreign Currency Notes denominated
in ECUs, Brussels).
UNITED STATES TAXATION
The following is a summary of the principal United States federal income tax
consequences of the acquisition, ownership and disposition of the Notes. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
and existing final, temporary and proposed Treasury regulations, revenue rulings
and judicial decisions. It deals only with Notes held as capital assets by
initial purchasers at the issue price and not with special classes of holders,
such as dealers in securities or currencies, life insurance companies, persons
holding Notes as a hedge against or which are hedged against currency risks, and
United States Noteholders (as defined below) whose functional currency is not
the United States dollar. A person considering the purchase of Notes should
consult his or her own tax adviser concerning these matters and as to the tax
treatment under foreign, state and local tax laws and regulations.
Except as noted in the next sentence, it is intended that all Notes issued
under the Indentures will be properly characterized as indebtedness of the
Issuers, and the Issuers will so characterize all such Notes for all United
States federal income tax purposes. In accordance with the Indentures, however,
it is also
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possible that the Issuers could issue Notes with terms and conditions which
would cause the Notes to be characterized as equity of the Issuers. If such
Notes are issued, the Issuers will characterize all such Notes as equity of the
Issuers for all United States federal income tax purposes.
The characterization of a Note as debt or equity by the Issuers will be
binding on every Noteholder of a Note, unless the Noteholder discloses its
inconsistent characterization on such Noteholder's United States federal income
tax return. The Internal Revenue Service will not be bound by the
characterization of a Note by either the Issuers or the Noteholder.
The following is a summary of the principal United States federal income and
estate tax consequences of the acquisition, ownership and disposition of Notes
that are classified as debt for United States federal income tax purposes. In
the event that the Issuers issue Notes that are intended to be characterized by
the Issuers as equity for United States federal income tax purposes, the
Issuers' equity characterization and the United States federal income and estate
tax consequences for a Noteholder of such Notes will be disclosed and discussed
in the Pricing Supplements relating to any such Notes.
UNITED STATES NOTEHOLDERS
As used herein, the term "United States Noteholder" means a holder of a Note
who or which is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) otherwise subject to United States
federal income taxation on a net basis.
GENERAL. As a general rule, interest paid or accrued on the Notes will be
treated as ordinary income to the United States Noteholders. A United States
Noteholder using the accrual method of accounting for federal income tax
purposes is required to include interest paid or accrued on the Notes in
ordinary income as such interest accrues, while a United States Noteholder using
the cash receipts and disbursements method of accounting for federal income tax
purposes must include interest paid or accrued on the Notes in ordinary income
when payments are received (or made available for receipt) by such holder and
include original issue discount in the manner set forth below.
In the event that any of the Notes are determined to be "applicable high
yield discount obligations," under the provisions of the Code, additional
information regarding the federal income tax consequences associated with such
Notes will be provided as part of the Pricing Supplement for such Notes.
ORIGINAL ISSUE DISCOUNT. The Notes, including the Original Issue Discount
Notes, may be issued with "original issue discount." In general, original issue
discount is the difference between the "stated redemption price at maturity" of
the Note and its "issue price." The original issue discount with respect to a
Note will be considered to be zero if it is less than one quarter of one
percentage point of the Note's stated redemption price at maturity multiplied by
the number of complete years from the date of issue of such Note to its maturity
date. In addition, special rules described below apply to Notes having a fixed
maturity date not more than one year from the date of issue.
The stated redemption price at maturity of a Note generally will be equal to
the sum of all payments, whether denominated as principal or interest, to be
made with respect thereto other than "qualified stated interest" payments.
Qualified stated interest payments are interest payments based on a single fixed
rate of interest (or under certain circumstances, a variable rate tied to an
objective index) that are unconditionally payable at fixed periodic intervals of
one year or less during the entire term of the Note. Although, if so provided in
a Pricing Supplement, the Notes may be subject to optional redemption by the
applicable Issuer under certain circumstances for an amount in excess of their
principal amount, this excess should not be considered when determining the
stated redemption price at maturity of a Note. In general, the issue price of a
Note is the initial offering price to the public (not including bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers) at which a substantial amount of
Notes is sold.
It is possible that Notes which are not denominated as Original Issue
Discount Notes may also be treated as issued with original issue discount. For
example, Floating Rate Notes providing for one or
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more qualified floating rates of interest, a single fixed rate and one or more
qualified floating rates, an objective rate, or a single fixed rate and a single
objective rate that is a qualified inverse floating rate may also be deemed to
have original issue discount unless such interest is unconditionally payable at
least annually during the term of the Note at a single qualified floating rate
or a single objective rate within the meaning of the Regulations. If a Floating
Rate Note provides for two or more qualified floating rates that can reasonably
be expected to have approximately the same values throughout the term of the
Note, the qualified floating rates together constitute a single qualified
floating rate. If interest on a debt instrument 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. Two or more rates will be
conclusively presumed to meet the requirements of the preceding sentences if the
values of the applicable rates on the issue date are within 1/4 of one percent
of each other. Special tax considerations (including possible original issue
discount) may arise with respect to Floating Rate Notes providing for (i) one
base rate followed by one or more base rates, (ii) a single fixed rate followed
by a qualified floating rate or (iii) a Spread Multiplier. Purchasers of
Floating Rate Notes with any of such features should carefully examine the
applicable Pricing Supplement and should consult their tax advisors with respect
to such a feature since the tax consequences will depend, in part, on the
particular terms of the purchased Note. Special rules may also apply if a
Floating Rate Note is subject to a cap, floor, governor or similar restriction
that is not fixed throughout the term of the Note and is reasonably expected as
of the issue date to cause the yield on the Note to be significantly less or
more than the expected yield determined without the restriction.
Regulations issued on June 11, 1996, address, among other things, the
accrual of original issue discount on, and the character of gain realized on the
sale, exchange or retirement of, debt instruments providing for contingent
payments. Such regulations generally apply only to contingent payment debt
instruments issued on or after August 13, 1996. Prospective holders of Notes
providing for contingent payments should refer to the discussion regarding
taxation in the applicable Pricing Supplement.
In the case of Notes that are determined to be issued with original issue
discount ("Discount Notes"), a United States Noteholder must generally include
the original issue discount in ordinary gross income for federal income tax
purposes as it accrues in advance of the receipt of any cash attributable to
such income. The amount of original issue discount, if any, required to be
included in a Noteholder's ordinary gross income for federal income tax purposes
in any taxable year will be computed in accordance with Section 1272(a) of the
Code and the regulations thereunder. Original issue discount accrues on a daily
basis under a constant yield method that takes into account the compounding of
interest. The daily portions of original issue discount are determined by
allocating to each day in any "accrual period" a pro rata portion of the
original issue discount for that period. Accrual periods may be of any length
and may vary in length over the term of the Notes, provided that each accrual
period is not longer than one year and each scheduled payment of principal or
interest occurs either on the final day of an accrual period or on the first day
of an accrual period. Original issue discount for any accrual period will be the
excess of (i) the product of the Note's "adjusted issue price" at the beginning
of such accrual period and its yield to maturity over (ii) any qualified stated
interest payments for that accrual period. The adjusted issue price of a Note at
the start of any accrual period is the sum of the issue price and the accrued
original issue discount for each prior accrual period. One effect of this method
is that United States Noteholders generally will have to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
A holder may make an election (the "Constant Yield Election") to include in
gross income all interest that accrues on a Note (including stated interest,
acquisition discount, original issue discount, de minimis original issue
discount, market discount, de minimis market discount and unstated interest, as
adjusted by any amortizable bond premium or acquisition premium) in accordance
with the foregoing constant yield method that takes into account the compounding
of interest.
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The original issue discount provisions described above do not apply to Notes
having a fixed maturity date not more than one year from the date of issue. Such
a "short-term" Note will be treated as having been issued at an original issue
discount equal to the excess of the total principal and interest payments on the
Note over its issue price. An individual or other holder using the cash receipts
and disbursements method of tax accounting will not be required to include
original issue discount in ordinary gross income for federal income tax purposes
on a daily basis unless an election to do so is made. Holders of such short-term
Notes who report income under the accrual method of tax accounting and certain
other holders including banks, regulated investment companies and dealers in
such securities are required to include original issue discount in income on a
daily basis pursuant to a straight-line method, unless such holders make an
election to accrue original issue discount under the constant yield method
described above but taking into account daily compounding. In the case of
holders of such short-term Notes not required and not electing to include
original issue discount in income currently, any gain realized on the sale or
maturity of such short-term Notes will be ordinary gross income to the extent of
the original issue discount accrued on a straight-line basis (or, if elected on
a constant yield method, based on daily compounding) to the date of sale or
maturity. Holders of such short-term Notes not required and not electing to
include the original issue discount in income currently will be required to
defer deductions for interest on indebtedness incurred or continued to purchase
or carry such short-term Notes in an amount not exceeding the deferred income
until the deferred income is realized.
In accordance with applicable aggregation rules, under certain circumstances
if more than one type of Note is issued as part of the same issuance of
securities to a single holder, some or all of such Notes may be treated together
as a single debt instrument with a single issue price, maturity date, yield to
maturity and stated redemption price at maturity for purposes of calculating and
accruing any original issue discount. Unless otherwise provided in the related
Pricing Supplement, the Issuers do not expect to treat any of the Notes as being
subject to the aggregation rules for purposes of computing original issue
discount.
In addition to reporting interest paid on the Notes, each of the Issuers
will report annually to the Internal Revenue Service and holders of record of
the Notes, information with respect to the original issue discount accruing
thereon.
OPTIONAL REDEMPTION. If an Issuer has an option to redeem a Note prior to
its stated maturity, such option will be presumed to be exercised if, by
utilizing any date on which such Note may be redeemed as the maturity date and
the amount payable on such date in accordance with the terms of such Note (the
"redemption price") as the stated redemption price at maturity, the yield on the
Note would be lower than its yield to stated maturity. In such event, for
purposes of determining the amount of original issue discount that accrues
during a period, if any, the presumed option exercise date will be the "maturity
date" of the Note, and the redemption price under the option would be the final
payment amount under the Note. If such option is not in fact exercised when
presumed to be exercised, the Note would be treated solely for original issue
discount purposes as if it were redeemed, and a new Note were issued, on the
presumed exercise date for an amount equal to the redemption price.
AMORTIZABLE BOND PREMIUM. In general, if a United States Noteholder
purchases the Note at a premium (i.e. an amount in excess of the amount payable
upon the stated maturity thereof), such Noteholder will be considered to have
purchased such Note with "amortizable bond premium" equal in amount to such
excess. A United States Noteholder may elect to deduct the amortizable bond
premium as it accrues under a constant yield method that is similar to the
method used for the accrual of original issue discount over the remaining term
of the Note (or expected remaining term where such Note is optionally redeemable
prior to its maturity date). A Noteholder's tax basis in the Note will be
reduced by the amount of the amortizable bond premium deducted. Noteholders
should consult with their own tax advisers regarding special rules that apply
for determining the amount of and method for amortizing bond premium with
respect to Notes that may be redeemed in whole or in part prior to maturity. An
election to deduct bond premium applies to all taxable debt obligations then
owned and thereafter acquired by a taxpayer and may be revoked only with the
consent of the Internal Revenue Service.
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Proposed regulations have been issued that, if finalized in their current
form, would require a United States Noteholder that purchases a Note at a
premium to amortize such premium under a constant yield method similar (but not
identical) to the method for the accrual of original issue discount as discussed
above. As proposed, the new rules will be applicable to Notes issued on or after
the day which is 60 days after the regulations are published in final form.
However, a holder may elect to apply the new rules to all bonds held on or after
the first day of the taxable year that contains the day which is 60 days after
the regulations are published in final form.
SALE OF NOTES. If a Note is sold by a United States Noteholder or redeemed
by an Issuer or the Guarantor, such holder will recognize gain or loss equal to
the difference between the amount realized from the sale and the holder's
adjusted basis in such Note or applicable portion thereof. Such adjusted basis
generally will equal the cost of such Note to such holder, increased by any
original issue discount included in such holder's ordinary gross income with
respect to such Note and reduced by any amortized premium and any principal
payments on the Note previously received by such holder (including any other
payments on the Note that are not qualified stated interest payments (as defined
above)). Except as discussed with respect to short-term obligations, or to the
extent cash is received attributable to accrued interest, any gain or loss
recognized upon a sale, exchange, retirement or other disposition of a Note will
be capital gain or loss. If, however, it is determined that an Issuer or the
Guarantor intended on the date of issue of the Notes to call all or any portion
of the Notes prior to their stated maturity, any gain realized upon a sale,
exchange, retirement or other disposition of a Note would be considered, under
Section 1271(a)(2)(A) of the Code, ordinary income, to the extent it does not
exceed the unrecognized portion of the original issue discount, if any, with
respect to the Note.
BACKUP WITHHOLDING TAXES AND REPORTING REQUIREMENTS. Interest payments,
accrual of original issue discount and payments of principal and any premium
with respect to a Note will be reported to the extent required by the Code and
the regulations thereunder to the Noteholders and the Internal Revenue Service.
Such amounts will ordinarily not be subject to withholding of United States
federal income tax. However, certain noncorporate United States Noteholders may
be subject to a backup withholding tax at a rate of 31% if the United States
Noteholder (i) fails to furnish its Taxpayer Identification Number ("TIN")
which, for an individual would be his Social Security Number, (ii) furnishes an
incorrect TIN, (iii) is notified by the Internal Revenue Service that it has
failed to properly report payments of interest and dividends or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report interest
and dividend payments. United States Noteholders should consult their tax
advisers regarding their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
Noteholder will be allowed as a credit against such holder's United States
federal income tax liability and may entitle such holder to a refund, provided
that the required information is furnished to the Internal Revenue Service.
FOREIGN CURRENCY NOTES. A United States Noteholder who uses the cash method
of accounting and who receives interest (other than original issue discount) in
a foreign currency with respect to a Foreign Currency Note will be required to
include in income the United States dollar value of the interest received
(determined on the date such interest is received) regardless of whether the
interest payment is in fact converted to United States dollars at that time, and
such United States dollar value will be the United States Noteholder's tax basis
in the foreign currency. A cash method holder who receives such payment in
United States dollars pursuant to an option available under such Note will be
required to include the amount of such payment in income upon receipt.
To the extent the above paragraph is not applicable, a United States
Noteholder will be required to include in income the United States dollar value
of the amount of interest income (including original issue discount, but reduced
by amortizable bond premium to the extent applicable) that has accrued and is
otherwise required to be taken into account with respect to a Foreign Currency
Note during an accrual period. The United States dollar value of such accrued
income will be determined by translating such income at the average rate of
exchange for the accrual period or, with respect to an accrual period
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that spans two taxable years, at the average rate for the partial period within
the taxable year. Such United States Noteholder will recognize ordinary income
or loss with respect to accrued interest income on the date such income is
actually received. The amount of ordinary income or loss recognized will equal
the difference between the United States dollar value of the foreign currency
payment received (determined on the date such payment is received) in respect of
such accrual period (or where a United States Noteholder receives United States
dollars, the amount of such payment in respect of such accrual period) and the
United States dollar value of interest income that has accrued during such
accrual period (as determined above). A United States Noteholder may elect to
translate interest income (including original issue discount) into United States
dollars at the spot rate on the last day of the interest accrual period (or, in
the case of a partial accrual period, the spot rate on the last day of the
taxable year) or, if the date of receipt is within five business days of the
last day of the interest accrual period, the spot rate on the date of receipt. A
United States Noteholder that makes such an election must apply it consistently
to all debt instruments from year to year and cannot change the election without
the consent of the Internal Revenue Service. Original issue discount and
amortizable bond premium on a Foreign Currency Note are to be determined in the
relevant foreign currency.
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a United States Noteholder who has not
elected to amortize such premium will be a capital loss to the extent of such
bond premium. If such an election is made, amortizable bond premium taken into
account on a current basis shall reduce interest income in units of the relevant
foreign currency. Exchange gain or loss is realized on such amortized bond
premium with respect to any period by treating the bond premium amortized in
such period as a return of principal.
A United States Noteholder's tax basis in a Foreign Currency Note, and the
amount of any subsequent adjustment to such holder's tax basis, will be the
United States dollar value of the foreign currency amount paid for such Foreign
Currency Note, or of the foreign currency amount of the adjustment, determined
on the date of such purchase or adjustment. A United States Noteholder who
purchases a Foreign Currency Note with previously owned foreign currency will
recognize ordinary income or loss in an amount equal to the difference, if any,
between such United States Noteholder's tax basis in the foreign currency and
the United States dollar fair market value of the Foreign Currency Note on date
of purchase.
Gain or loss realized on the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between (i) the United States dollar value of the foreign
currency principal amount of such Note, and any payment with respect to accrued
interest, determined on the date such payment is received or such Note is
disposed of, and (ii) the United States dollar value of the foreign currency
principal amount of such Note, determined on the date such United States
Noteholder acquired such Note, and the United States dollar value of the accrued
interest received, as determined above. Such foreign currency gain or loss will
be recognized only to the extent of the total gain or loss realized by a United
States Noteholder on the sale, exchange or retirement of the Foreign Currency
Note. The source of such foreign currency gain or loss will be determined by
reference to the residence of the holder or the "qualified business unit" of the
holder on whose books the Note is properly reflected. Any gain or loss realized
by such a holder in excess of such foreign currency gain or loss will be capital
gain or loss (except in the case of a short-term Discount Note, to the extent of
any original issue discount not previously included in the holder's income).
A United States Noteholder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign Currency Note equal to
the United States dollar value of such foreign currency, determined at the time
of such sale, exchange or retirement. Regulations issued under Section 988 of
the Code provide a special rule for purchases and sales of publicly traded
Foreign Currency Notes by a cash method taxpayer under which units of foreign
currency paid or received are translated into United States dollars at the spot
rate on the settlement date of the purchase or sale. Accordingly, no exchange
gain or loss will result from currency fluctuations between the trade date and
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the settlement of such purchase or sale. An accrual method taxpayer may elect
the same treatment required of cash method taxpayers with respect to the
purchase and sale of publicly traded Foreign Currency Notes provided the
election is applied consistently. Such election cannot be changed without the
consent of the Internal Revenue Service. Any gain or loss realized by a United
States Noteholder on a sale or other disposition of foreign currency (including
its exchange for United States dollars or its use to purchase Foreign Currency
Notes) will be ordinary income or loss.
UNITED STATES ALIEN NOTEHOLDERS
The following is a discussion of the United States federal tax consequences
to a holder of a Note who is not United States Noteholder, as defined above
(hereinafter a "United States Alien Noteholder").
U.S. WITHHOLDING TAX. Under United States federal income tax laws now in
effect, and subject to the discussion of backup withholding tax below, payments
by any Issuer or any paying agent thereof (in its capacity as such) of principal
of and interest (including payments of original issue discount, if any) on (and
premium, if any, on) a Note to a United States Alien Noteholder will not be
subject to United States federal withholding tax, provided in the case of
interest (including payments of original issue discount, if any) that (i) such
holder does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Issuer entitled to vote;
(ii) such holder is not a controlled foreign corporation for United States tax
purposes with respect to which the relevant Issuer is a "related person" as
defined in the Code; (iii) such holder is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code; and (iv) (A) the beneficial owner
of the Note provides a signed written statement (usually on an Internal Revenue
Service Form W-8) to the relevant Issuer, or its agent, under penalties of
perjury, that certifies that it is a United States Alien Noteholder and provides
its name and address, (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution") and that holds the Note on
behalf of the beneficial owner provides an intermediary certificate to the
relevant Issuer or its agent under penalties of perjury that such a 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,
or (C) a securities clearing organization that is the last intermediary in the
chain before the relevant Issuer or its agent (a "qualified clearing
organization") electronically provides an intermediary certificate to the
relevant Issuer or its agent under penalties of perjury that such a statement
has been received from the beneficial owner by it or by an intermediary that is
a member of the qualified clearing organization and agrees to furnish (or to
cause the relevant member intermediary to furnish) such statement promptly upon
the request of the relevant Issuer or the Internal Revenue Service. A statement
described in this paragraph is effective only with respect to interest payments
made to the certifying holder after the issuance of the statement in the
calendar year of its issuance and the two immediately succeeding calendar years.
If the United States Alien Noteholder fails to provide a duly executed
Internal Revenue Service Form W-8 and otherwise fails to satisfy the
certification requirement discussed above, United States withholding tax at a
rate of 30% will be withheld on payments of interest and original issue discount
to such holder (unless some other exemption such as a reduced withholding rate
under a treaty applies). Such withholding would apply to payments made with
respect to Notes of the Canadian Issuer and the Dutch Issuer, as well as Notes
of the Company. Under proposed regulations issued in April 1996, if finalized in
their current form, a United States Alien Noteholder who failed to satisfy this
certification requirement will generally be subject to backup withholding at a
rate of 31%, as described below, in respect of payments of interest made after
December 31, 1997.
U.S. INCOME TAX. Except for the possible imposition of United States
withholding tax (see "--U.S. Withholding Tax" above) and backup withholding tax,
payments of principal of and interest (including
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accrued original issue discount, if any) on (and premium, if any, on) a Note to
a United States Alien Noteholder will not be subject to United States federal
income tax, and gains from the sale, redemption or other disposition of a Note
will not be subject to United States federal income tax, provided that:
(a) The holder (or the fiduciary, settlor, or beneficiary of, or a
person holding a power over, such holder, if such holder is an estate or
trust; or a partner of such holder, if such holder is a partnership) shall
not be or have been engaged in a trade or business in, or be or have been
present in, or have or have had a permanent establishment in, the United
States;
(b) There shall not have been a present or former connection between
such holder (or between the fiduciary, settlor, or beneficiary of, or a
person holder a power over, such holder, if such holder is an estate or
trust; or a partner of such holder, if such holder is a partnership) and the
United States, including, without limitation, such holder's status as a
citizen or former citizen thereof or resident or former resident thereof;
and
(c) The holder (or the fiduciary, settlor, or beneficiary of, or a
person holding a power over, such holder, if such holder is an estate or
trust; or a partner of such holder, if such holder is a partnership) is not
and has not been, for United States tax purposes, (i) a personal holding
company, (ii) a corporation that accumulates earnings to avoid United States
federal income tax, or (iii) a person treated as making an election the
effect of which is to make payments of principal of and interest (including
accrued original issue discount, if any) on (and premium, if any, on) Notes
subject to United States federal income tax.
If a United States Alien Noteholder is engaged in a trade or business in the
United States and interest (including accrued original issue discount, if any),
gain or income in respect of a Note of such holder is effectively connected with
the conduct of such trade or business, the holder, although exempt from the
withholding tax discussed in the preceding paragraphs, may be subject to United
States income tax on such interest (including accrued original issue discount,
if any), gain or income at the statutory rates provided for United States
persons after deduction of deductible expenses allocable to such effectively
connected interest, gain or income. In lieu of the certification described
above, such holder will be required to provide a properly executed Internal
Revenue Service Form 4224, or successor form, in order to claim an exemption
from withholding tax. In addition, if such a holder is a foreign corporation, it
may be subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, as adjusted for certain items, unless
a lower rate applies under a United States income tax treaty with the holder's
country of residence. For this purpose, interest (including accrued original
issue discount, if any), gain or income is effectively connected with the
conduct of the United States trade or business of the holder.
U.S. ESTATE TAX. A Note held by an individual who at the time of death is
not a citizen or resident of the United States will generally not be subject to
United States federal estate tax 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 relevant issuer and at the time of his death, payments with
respect to such Note (including accrued original issue discount, if any) would
not have been effectively connected with a United States trade or business of
the individual.
BACKUP WITHHOLDING TAXES AND REPORTING REQUIREMENTS. Under current United
States federal income tax law, a 31% backup withholding tax and information
reporting requirements apply to certain payments of principal, premium and
interest (including original issue discount) made to, and to the proceeds of
sale before maturity by, certain noncorporate United States persons. Under
current Treasury regulations, backup withholding will not apply to payments on a
Note if the certificates of non-United States status described above are
received, provided that the Company or its agent does not have actual knowledge
that the payee is a United States person.
Under current Treasury regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker generally
will not be subject to a backup withholding. However, if such broker is a United
States person, a controlled foreign corporation for United States tax
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purposes or a foreign person 50% or more of whose income for a specified
three-year period is effectively connected with the conduct of a trade or
business in the United States, information reporting will be required 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. Payments to or through the United
States office of a broker will be subject to backup withholding and information
reporting unless the holder certifies on an Internal Revenue Service Form W-8,
or substitute form, under penalties of perjury, that it is not a United States
person or otherwise establishes an exemption. These provisions are the subject
of proposed Treasury regulations issued in April 1996, which, if finalized in
their current form, would modify the current rules in certain respects for
payments made after December 31, 1997.
United States Alien Noteholders should consult their tax advisers regarding
the application of information reporting and backup withholding in their
particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Any amounts withheld
from a payment to a United States Alien Noteholder under the backup withholding
rules will be allowed as a credit against such holder's United States federal
income tax liability and may entitle such holder to a refund, provided that the
required information is furnished to the United States Internal Revenue Service.
NETHERLANDS TAXATION
The following is a summary of the principal Dutch income and estate tax
consequences of the acquisition, ownership and disposition of the Notes by a
non-Dutch Noteholder (as defined below). A non-Dutch Noteholder considering the
purchase of Notes should consult his or her own tax adviser concerning the tax
treatment under non-Dutch tax laws and regulations.
Except as noted in the next sentence, it is intended that all Notes issued
under the Indentures will be properly characterized as indebtedness of the
Issuers for Dutch tax purposes. In accordance with the Indentures, however, it
is also possible that the Issuers could issue Notes with terms and conditions
which would cause the Notes to be characterized as equity of the Issuers. The
following is a summary of the principal Dutch income and estate tax consequences
for a non-Dutch Noteholder of the acquisition, ownership and disposition of
Notes that are classified as debt for Dutch tax purposes. In the event that the
Issuers issue Notes that are intended to be characterized by the Issuers as
equity for Dutch tax purpose, the Issuers' equity characterization and the Dutch
income and estate tax consequences for a non-Dutch Noteholder of such Notes will
be disclosed and discussed in the Pricing Supplements relating to any such
Notes.
As used herein, the term "non-Dutch Noteholder" means a holder of a Note who
or which for Dutch tax purposes (i) is not a resident or a deemed resident of
the Netherlands; (ii) does not have and has not had an enterprise or an interest
in an enterprise which, in whole or in part, is carried on through a permanent
establishment or a permanent representative in the Netherlands and to which
enterprise or part of an enterprise the Notes are attributable; (iii) does not
have directly, or indirectly, a substantial interest or a deemed substantial
interest in the share capital of the Dutch Issuer, or does have such an interest
in the share capital of the Dutch Issuer, but only if such interest is
attributable to an enterprise carried on by him or for his account; or (iv) does
not carry out and has not carried out employment activities with which the
holding of the Note is connected.
WITHHOLDING TAX
Payments of principal and any premium, interest, Additional Amounts or any
other payments by the Dutch Issuer or the Company, as Guarantor, with respect to
the Notes can be made free of withholding or deduction, for or on account of any
taxes of whatsoever nature imposed, levied, withheld, or assessed by the
Netherlands or any political subdivision or taxing authority thereof or therein,
provided that the holder of a Note is not in any way related to the Dutch
Issuer. In this respect, the holder of a Note is considered as related to the
Dutch Issuer when such holder owns, directly or indirectly, an interest or a
deemed interest in the share capital and/or profits of the Dutch Issuer, or when
a person owns, directly or indirectly, an interest in the share capital and/or
profits of both such holder and the Dutch Issuer.
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TAXES ON INCOME AND CAPITAL GAINS
A non-Dutch Noteholder will not be subject to any Netherlands taxes on
income or capital gains in respect of any payment under the Note or in respect
of any gain realized on the disposal of the Note.
A non-Dutch Noteholder will not be subject to taxation in the Netherlands
solely by reason of the execution and delivery of the Notes, the consummation of
the transactions contemplated thereby, or the enforcement thereof by legal
proceedings (including the enforcement of any foreign judgment in the courts of
the Netherlands).
NET WEALTH TAX
A non-Dutch Noteholder will not be subject to Netherlands net wealth tax in
respect of the Note.
GIFT, ESTATE OR INHERITANCE TAXES
No gift, estate or inheritance taxes will arise in the Netherlands in
respect of the transfer of a Note by way of gift by a non-Dutch Noteholder, or
on the death of such a person, provided that the transfer is not construed as a
gift made by or on behalf of a person who is a resident or a deemed resident of
the Netherlands.
OTHER TAXES AND DUTIES
No registration tax, customs duty, stamp duty or any other similar tax or
duty other than court fees is payable in the Netherlands by a holder of a Note
in respect of or in connection with the execution and delivery of the Notes, the
consummation of the transactions contemplated thereby or the enforcement thereof
by legal proceedings (including the enforcement of any foreign judgment in the
Courts of the Netherlands).
No Netherlands turnover tax arises in respect of payments in consideration
for the issue of a Note or with respect to payments by the Dutch Issuer or the
Company, as Guarantor, with respect to the Notes.
CANADIAN TAXATION
The following is a summary of the principal Canadian federal income and
estate tax consequences of the acquisition, ownership and disposition of the
Notes by a non-Canadian Noteholder (as defined below). A non-Canadian Noteholder
considering the purchase of Notes should consult his or her own tax adviser
concerning the tax treatment under provincial, local and non-Canadian tax laws
and regulations.
Except as noted in the next sentence, it is intended that all Notes issued
under the Indentures will be properly characterized as indebtedness of the
Issuers for Canadian federal income tax purposes. In accordance with the
Indentures, however, it is also possible that the Issuers could issue Notes with
terms and conditions which would cause the Notes to be characterized as equity
of the Issuers. The following is a summary of the principal Canadian federal
income and estate tax consequences for a non-Canadian Noteholder of the
acquisition, ownership and disposition of Notes that are classified as debt for
Canadian federal income tax purposes. In the event that the Issuers issue Notes
that are intended to be characterized by the Issuers as equity for Canadian
federal income tax purpose, the Issuers' equity characterization and the
Canadian federal income and estate tax consequences for a non-Canadian
Noteholder of such Notes will be disclosed and discussed in the Pricing
Supplements relating to any such Notes.
As used herein, the term "non-Canadian Noteholder" means a holder of a Note
who or which for Canadian federal income tax purposes (i) is not a resident or
deemed resident of Canada; or (ii) does not and has not carried on business in
Canada to which the Notes are attributable.
PAYMENTS OF INTEREST
Interest (including payments of original issue discount, if any) payable on
the Notes issued by the Canadian Issuer to a non-Canadian Noteholder with whom
it deals at arm's length, as defined in the INCOME TAX ACT (CANADA) (the "Act"),
will be exempt from Canadian non-resident withholding tax under Part XIII of the
Act if under the terms of the Notes or any agreement relating thereto, the
Canadian Issuer
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may not, under any circumstances, be obliged to pay more than 25% of the total
principal amount of each single debt issue of obligations that are identical in
respect of all rights attaching thereto within five years from the date of issue
of that single debt issue except: in the event of failure or default thereunder;
if the terms of the obligation or any agreement relating thereto become unlawful
or are changed by virtue of legislation or by a court, statutory board or
commission; if the person exercises his right under the terms of the obligation
or any agreement relating thereto to convert the obligation into or exchange the
obligation for, a prescribed security; or in the event of the person's death.
It is anticipated that all Notes issued by the Canadian Issuer will have
terms, conditions and maturities sufficient to qualify interest paid with
respect to such Debt Securities for this withholding tax exemption. The Canadian
Issuer will issue Notes with original issue discount only if it receives a
favorable ruling from Revenue Canada or an opinion from recognized outside
counsel that payments of original issue discount under such Notes will be exempt
from Canadian withholding tax.
TAXES ON INCOME AND CAPITAL GAINS
A non-Canadian Noteholder will not be subject to any Canadian taxes on
income or capital gains in respect of any payment under such Note or in respect
of any gain realized on the disposal of such Note.
A non-Canadian Noteholder will not be subject to taxation in Canada solely
by reason of the execution and delivery of the Notes, the consummation of the
transactions contemplated thereby, or the enforcement thereof by legal
proceedings (including the enforcement of any foreign judgment in the courts of
Canada).
GIFT, ESTATE OR INHERITANCE TAXES
No gift, estate or inheritance taxes will arise in Canada in respect of the
transfer of a Note by way of a gift by a non-Canadian Noteholder, or on the
death of such a person, provided that the transfer is not construed as a gift
made by or on behalf of a person who is a resident or a deemed resident of
Canada.
OTHER TAXES AND DUTIES
No registration tax, customs duty, stamp duty or other similar tax or duty
is payable in Canada by a holder of a Note in respect of or in connection with
the execution and delivery of the Note, the consummation of the transactions
contemplated thereby or the enforcement thereof by legal proceedings (including
the enforcement of any foreign judgment in the courts of Canada).
No Canadian Goods and Services Tax arises in respect of payments in
consideration for the issue of a Note or with respect to payments by the
Canadian Issuer or the Company, as Guarantor, with respect to the Notes.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement,
the Notes are being offered on a continuing basis by the Company through
Goldman, Sachs & Co., Bear Stearns & Co. Inc., Chase Securities Inc., Citicorp
Securities, Inc., Dillon, Read & Co. Inc. and J.P. Morgan Securities Inc. (the
"Agents"), who have agreed to use reasonable efforts to solicit purchases of the
Notes. Each of the Issuers or the Guarantor will have the sole right to accept
offers to purchase Notes and may reject, in whole or in part, any proposed
purchase of Notes whether made directly to the Company or through an Agent. The
Agents shall have the right, in their discretion reasonably exercised, to
reject, in whole or in part, any offer to purchase Notes. No Series A Notes will
be sold unless and until the Company has notified the Agents of any applicable
selling restrictions with respect thereto. The applicable Issuer will pay the
Agents a commission of from .125% to .875% of the principal amount of Notes,
depending upon the maturity of the Notes, for sales made through them as Agents.
Each of the Issuers or the Guarantor may also sell Notes to the Agents as
principal for their own accounts at a discount to be agreed upon at the time of
sale, or the purchasing Agents may receive from the applicable Issuer a
commission or discount equivalent to that set forth on the cover page hereof
applicable to sales on an agency basis in the case of any such principal
transaction in which no other
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<PAGE>
discount is agreed. 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
of the principal amount equal to the commission applicable to any sale on an
agency basis of a Note of identical maturity. Such Notes may be resold by the
Agents at prevailing market prices, or at prices related thereto, at the time of
such resale, as determined by the Agents. Each of the Issuers reserves the right
to sell Notes directly on its own behalf. No commission will be payable on any
Notes sold directly by any of the Issuers.
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 may include all or part of the discount to be received
from the applicable Issuer. After the initial public offering of Notes to be
resold to investors and other purchasers, the public offering price (in the case
of Notes to be resold on a fixed public offering price basis), concession and
discount may be changed.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Act. The Issuers and the Guarantor have agreed to
indemnify the Agents against and contribute toward certain liabilities,
including liabilities under the Act. The Issuers and the Guarantor have agreed
to reimburse the Agents for certain expenses.
The Agents may sell to or through dealers who may resell to investors, and
the Agents may pay all or part of their discount or commission to such dealers.
Such dealers may be deemed to be "underwriters" within the meaning of the Act.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately available
funds in The City of New York on the date of settlement.
In the ordinary course of their respective businesses, certain of the Agents
and their affiliates have engaged, and may in the future engage, in investment
banking and commercial banking transactions with the Company and certain of its
affiliates. Unless otherwise indicated, The Chase Manhattan Bank is the Trustee
under the Indentures, and is an affiliate of Chase Securities Inc., one of the
Agents.
The Notes are a new issue of securities with no established trading market
and, unless otherwise provided in the applicable Pricing Supplement, will not be
listed on any securities exchange. The Agents may from time to time purchase and
sell Notes in the secondary market but they are not obligated to do so and there
can be no assurance that there will be a secondary market for the Notes or
liquidity in the secondary market if one develops.
LEGAL MATTERS
The validity of the Notes and the Guarantee has been passed upon for the
Company by John Kaminsky, Esq., Vice President and Associate General Counsel of
the Company, and Dorsey & Whitney LLP, Minneapolis, Minnesota. Certain matters
relating to the offering of the Notes will be passed upon for the Agents by
Davis Polk & Wardwell, New York, New York. Certain legal matters related to the
Notes governed by the laws of The Netherlands will be passed upon by Nauta
Dutilh, Amsterdam, The Netherlands. Certain legal matters governed by the laws
of the Province of Ontario, Canada, with respect to the Canadian Issuer and the
authorization of the Notes will be passed upon by Baker & McKenzie, Toronto,
Canada. The opinions of John Kaminsky, Esq. and Dorsey & Whitney LLP are
conditioned upon, and subject to certain assumptions regarding, future action
required to be taken by the applicable Issuer, the Guarantor and the Trustee in
connection with the issuance and sale of any particular Note, the specific terms
of Notes and other matters which may affect the validity of Notes but which
cannot be satisfied on the date of such opinions. In addition, the description
of income tax consequences relating to Dutch and Canadian law, contained in this
Prospectus Supplement under the captions "Netherlands Taxation" and "Canadian
Taxation," respectively, is based on the opinions of Baker & McKenzie Amsterdam,
The Netherlands and Toronto, Canada, respectively.
S-27
<PAGE>
PROSPECTUS
U.S. $500,000,000
HONEYWELL INC.
HONEYWELL FINANCE B.V.
HONEYWELL CANADA LIMITED
DEBT SECURITIES
GUARANTEE OF DEBT SECURITIES
------------------
Honeywell Inc. (the "Company"), Honeywell Finance B.V. (the "Dutch Issuer")
and Honeywell Canada Limited (the "Canadian Issuer") (the Company, the Dutch
Issuer and the Canadian Issuer are sometimes referred to individually as an
"Issuer" or collectively as the "Issuers"), may offer from time to time debt
securities (the "Debt Securities") in one or more series at an aggregate initial
offering price not to exceed U.S. $500,000,000, or its equivalent in one or more
foreign currencies or composite currencies designated by the Issuer thereof at
the time of the offering ("Foreign Currency Securities"), on terms to be
determined at the time of sale. A description of material risks relating to
Foreign Currency Securities will be set forth in the applicable Prospectus
Supplement or Prospectus Supplements. Because the Debt Securities offered hereby
are limited as to aggregate initial offering price, an issuance of the Debt
Securities by one of the Issuers will correspondingly reduce the amount of Debt
Securities available for issuance by the other Issuers. The Issuer or Issuers,
specific designation, aggregate principal amount, purchase price, maturity,
denominations (which may be in United States dollars, in any other currency or
in a composite currency), any interest rate or rates (which may be fixed or
variable) and time of payment of any interest, any redemption or extension
terms, any terms for sinking fund payments and other specific terms of the Debt
Securities will be set forth in one or more supplements to this Prospectus (each
a "Prospectus Supplement").
The Debt Securities may be sold to or through underwriters, dealers or
agents for public offering or directly to other purchasers pursuant to the terms
of an offering fixed at the time of sale. See "Plan of Distribution." Any
underwriters, dealers or agents participating in an offering of Debt Securities
will be named in the accompanying Prospectus Supplement or Prospectus
Supplements. Such underwriters, dealers or agents may be deemed "underwriters"
within the meaning of the Securities Act of 1933.
The Debt Securities offered by the Dutch Issuer and the Canadian Issuer (the
"Guaranteed Debt Securities") will be unconditionally guaranteed by the Company
(the "Guarantee"), and the Guarantee will rank on a parity with all unsecured
and unsubordinated indebtedness of the Company.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 30, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). The Dutch Issuer and the Canadian Issuer are not
(and will not become as a result of the effectiveness of the Registration
Statement of which this Prospectus is a part) subject to the informational
requirements of the Exchange Act. Reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's Common
Stock and Preferred Stock Purchase Rights are listed on the New York Stock
Exchange. Reports, proxy statements and other information concerning the Company
can also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Issuers have filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement, and exhibits thereto, which may be inspected
without charge at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies thereof may be obtained from the Commission
at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1995;
(b) Quarterly Report on Form 10-Q for the period ended March 31, 1996;
and
(c) Current Reports on Form 8-K dated January 31, 1996, February 29,
1996, April 16, 1996 and April 24, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of the offering of the Debt Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or any portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than certain exhibits to such documents). Requests for such copies should be
directed to Vice President Investor Relations, Honeywell Inc., P.O. Box 524,
Minneapolis, Minnesota 55440, telephone number (612) 951-2122.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("U.S. $," "$" or
"dollars").
2
<PAGE>
THE ISSUERS
HONEYWELL INC.
The Company is an international controls corporation that supplies
automation and control systems, components, software, products and services for
homes and buildings, industry and space and aviation. The Company's strategy is
to develop and supply advanced-technology products, systems and services that
conserve energy and protect the environment, improve productivity, enhance
comfort and increase safety. The Company's products and services are classified
into three primary industry segments: (i) Home and Building Control, (ii)
Industrial Control and (iii) Space and Aviation Control.
The Home and Building Control segment provides building automation, energy
management and fire and security systems, as well as thermostats, air cleaners
and other environmental control products and services for homes and other
buildings. The Company manufactures, markets and installs mechanical, pneumatic,
electrical and electronic control products and systems for heating, ventilating
and air conditioning homes and commercial, industrial and public buildings. The
Company also produces building management systems for commercial buildings,
burner and boiler controls, lighting controls, thermostatic radiator valves,
pressure regulators for water systems, thermostats, actuators, humidistats,
relays, contactors, transformers, air-quality products and gas valves and
ignition controls for homes and commercial buildings. Sales of these products
are made directly to original equipment manufacturers, including manufacturers
of heating and air conditioning equipment, through wholesalers, distributors,
dealers, contractors, hardware stores and home care centers, and also through
the company's nationwide sales and service organization. Services provided
include the following: indoor air-quality services and central-station burglary
and fire protection services for homes and commercial buildings; video
surveillance, access control and entry management services for commercial
buildings; contract maintenance services for mechanical and control systems of
commercial buildings; automated operations management for building complexes;
and energy management and retrofit services.
The Company's Industrial Control segment serves the automation and control
needs of its worldwide industrial customers by providing a wide variety of
products, systems and services designed to help customers improve productivity
and meet increasingly stringent environmental and safety requirements. The
Industrial Control segment supplies process control systems and associated
application software and services to customers in a broad range of markets,
which include process industries such as the refining, petrochemical, bulk and
fine chemical, pulp-and-paper, electric utility, food and consumer goods,
pharmaceutical, metals and transportation industries. Industrial Control has an
extensive customer base worldwide, including most of the leading oil refiners,
pulp and paper manufacturers and chemical companies. The Company also designs
and manufactures process instruments, process controllers, recorders,
programmers, programmable controllers, transmitters and other field instruments
that may be sold as stand-alone products or integrated into control systems.
These products are generally used in indicating, recording and automatically
controlling variables in manufacturing processes.
Under its MICRO SWITCH trademark, the Company manufactures solid-state
sensors (including position, pressure, airflow, temperature and current
sensors), sensor interface devices, manual controls, explosion-proof switches
and precision snap-acting switches, as well as proximity, photoelectric and
mercury switches and lighted/unlighted push buttons. These products are used in
industrial, commercial and business equipment and in consumer, medical,
automotive, aerospace and computer applications.
Other products include solenoid valves, optoelectronic devices, fiber-optic
systems and components, as well as microcircuits, sensors, transducers and
high-accuracy, noncontract measurement and detection products for factory
automation, quality inspection and robotics applications.
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The Company also furnishes industrial customers with various services,
including the following: product and component testing services; instrument
maintenance, repair and calibration services; various contract services for
industrial control equipment, including third party maintenance for CAD/CAM and
other industrial control equipment; and training, customized products for
customer applications and a range of other customer support services.
The Company's Space and Aviation Control segment supplies avionics for the
commercial, military and space markets. The Company designs, manufactures,
markets and services a variety of sophisticated electronic control systems and
components for commercial and business aircraft, military aircraft and
spacecraft. Products manufactured for aircraft use include the following: ring
laser gyro-based inertial reference systems; navigation and guidance systems;
flight control systems; flight management systems; inertial sensors; air data
computers; radar altimeters; automatic test equipment; cockpit display systems;
and other communication and flight instrumentation. Products and services
supplied by the Company have been used in every major U.S. space mission since
the mid-1960s. These products and services include guidance systems for launch
and re-entry vehicles, flight and engine control systems for manned spacecraft,
precision components for strategic missiles and on-board data processing
equipment. Other products include spacecraft attitude and positioning systems
and precision pointing and isolation systems. The Company's avionics have been
purchased by leading aircraft manufacturers for use in aircraft throughout the
world, including the Boeing 777, the McDonnell Douglas MD-11 and MD-90, the
GulfStream IV and V, the Cessna Citation X and the Bombardier Global Expressjet.
In the military and space markets, the Company solutions are found on key
platforms, including the F-15 and the F-16 military jets and Space Station
Alpha.
Products and services provided by the Company that are not included in the
Company's primary business segments include systems analysis and applied
research and development on systems and products, including application
software, sensors and advanced electronics. The Company also designs and
manufactures integrated circuits and sensors for internal use, government
customers and selected external customers. Through its operations in Germany,
the Company develops, markets and sells military avionics and electro-optic
devices for flight control and nautical systems, including sonar transducers and
echo sounders.
The Company was incorporated under the laws of the State of Delaware in
1927. The Company's principal executive offices are located at Honeywell Plaza,
Minneapolis, Minnesota 55408 (telephone (612) 951-1000). Unless the context
otherwise requires, the term the "Company" refers to Honeywell Inc. and its
subsidiaries.
HONEYWELL FINANCE B.V.
The Dutch Issuer is a wholly-owned subsidiary of the Company incorporated
under the laws of The Netherlands solely for the purpose of raising capital to
meet the financing needs of affiliated companies. The Dutch Issuer has no
independent operations. The Dutch Issuer's principal executive offices are at
1101 EA, Amsterdam, Z.O.E., The Netherlands, and its telephone number is
31-20-565-6911.
HONEYWELL CANADA LIMITED
The Canadian Issuer is a wholly-owned subsidiary of the Company and was
recently incorporated under the laws of Ontario, Canada solely for the purpose
of issuing debt securities to raise capital for the purposes described below
under "Use of Proceeds." The Canadian Issuer has no independent operations. The
Canadian Issuer's principal executive offices are at The Honeywell Center, 155
Gordon Baker Road, North York, Ontario, Canada M2H 3N7, and its telephone number
is 416-502-5200.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds from the sale of the Debt Securities will be used for general corporate
purposes, including working capital,
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repayment or repurchase of outstanding indebtedness and other securities of the
Company and its subsidiaries, possible acquisitions and capital expenditures.
Specific allocations of the proceeds to such purposes may not have been made at
the date of the applicable Prospectus Supplement, although management of the
Company will have determined that funds should be borrowed at that time in
anticipation of future funding requirements. The precise amount and timing of
the application of such proceeds will depend upon the funding requirements of
the Company and its subsidiaries and the availability and cost of other funds.
Pending such application, such net proceeds may be temporarily invested in
short-term interest-bearing securities.
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
THREE MONTHS ENDED ------------------------------------------
MARCH 31, 1996 1995 1994 1993 1992
--------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratios of earnings to fixed charges.................... 3.97 4.77 3.96 5.11 5.69
<CAPTION>
1991
---------
<S> <C>
Ratios of earnings to fixed charges.................... 4.84
</TABLE>
For the purpose of computing the ratios of earnings to fixed charges,
earnings consist of income before income taxes, plus fixed charges, plus a
proportional share of income or loss before income taxes of 50 percent owned
companies, less equity in undistributed earnings of companies owned less than 50
percent. Fixed charges consist of interest on all indebtedness, amortization of
debt expense and that portion of rental expense deemed to be representative of
interest.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEE
Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities of the Company will be issued under an Indenture dated as of August
1, 1994 (the "Company Indenture") between the Company and The Chase Manhattan
Bank (National Association), as Trustee, and the Debt Securities of the Dutch
Issuer and the Canadian Issuer will be issued under an Indenture (the
"Subsidiary Indenture") between the Company, as Guarantor, the Dutch Issuer, the
Canadian Issuer and The Chase Manhattan Bank (National Association), as Trustee
(the Company Indenture and the Subsidiary Indenture are hereinafter collectively
referred to as the "Indentures"). Copies of the forms of Indentures have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part. The following brief summary of certain provisions of the Indentures does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all of the provisions of the applicable Indenture, and is
further qualified by any description contained in the applicable Prospectus
Supplement or Prospectus Supplements. Certain terms capitalized and not
otherwise defined herein are defined in the applicable Indenture. Wherever
particular sections or defined terms of an Indenture are referred to, such
sections or defined terms are incorporated herein by reference.
The Debt Securities may be issued from time to time in one or more series.
The terms of each series of Debt Securities will be established by or pursuant
to a resolution of the Board of Directors of the applicable Issuer and set forth
or determined in the manner provided in an Officers' Certificate or by a
supplemental indenture. The particular terms of the Debt Securities offered
pursuant to any Prospectus Supplement or Prospectus Supplements will be
described in such Prospectus Supplement or Prospectus Supplements.
GENERAL
Neither of the Indentures limits the aggregate principal amount of Debt
Securities which may be issued thereunder nor the amount of other debt which may
be issued by any of the Issuers, the Guarantor, or the Company or any of its
subsidiaries. The Debt Securities will be unsecured obligations of the
applicable Issuer. The Debt Securities issued by the Dutch Issuer and the
Canadian Issuer will be fully and unconditionally guaranteed by the Company as
to payment of principal and any premium, interest and Additional Amounts (as
defined below) (the "Guaranteed Debt Securities").
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The Debt Securities will rank on a parity with all other unsecured and
unsubordinated indebtedness of the applicable Issuer. The Guarantee will rank on
a parity with all other unsecured and unsubordinated indebtedness of the
Company.
Unless otherwise indicated in the applicable Prospectus Supplement or
Prospectus Supplements, Debt Securities will be issued only in fully registered
form in denominations of U.S. $1,000 or any amount in excess thereof which is an
integral multiple of U.S. $1,000. (Section 302 of the applicable Indenture) Debt
Securities may be issuable in the form of one or more Global Securities, as
described below under "-- Global Securities." The Debt Securities (other than
those issued in the form of a Global Security) are exchangeable or transferable
without charge therefor, but the applicable Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith and require the holders to furnish appropriate endorsements and
transfer documents. (Section 305 of the applicable Indenture)
Debt Securities may be issued as Original Issue Discount Debt Securities to
be sold at a substantial discount below their principal amount. Special federal
income tax and other considerations applicable thereto and special federal tax
and other considerations applicable to any Debt Securities which are denominated
in a currency or currency unit other than United States dollars will be
described in the Prospectus Supplement or Prospectus Supplements relating
thereto.
Unless otherwise indicated in the applicable Prospectus Supplement or
Prospectus Supplements, the principal of and any premium, interest and
Additional Amounts on the Debt Securities will be payable, and the transfer of
the Debt Securities will be registrable, at the principal corporate trust office
of the Trustee. In addition, unless otherwise provided in the applicable
Prospectus Supplement or Prospectus Supplements and except in the case of Global
Securities, payment of interest may be made at the option of the applicable
Issuer by check mailed to the address of the person entitled thereto as it
appears on the Security Register. (Sections 301, 305, 1001 and 1002 of the
applicable Indenture)
The applicable Prospectus Supplement or Prospectus Supplements will describe
the terms of the Debt Securities offered thereby, including the following: (1)
the Issuer and title of the offered Debt Securities; (2) any limit on the
aggregate principal amount of the offered Debt Securities; (3) the Person to
whom any interest on the offered Debt Securities will be payable, if other than
the Person in whose name it is registered on the regular record date for such
interest; (4) the date or dates on which the offered Debt Securities will mature
and any rights of extension; (5) the rate or rates at which the offered Debt
Securities will bear interest, if any, or the formula pursuant to which such
rate or rates shall be determined, the date from which any such interest will
accrue and the dates on which any such interest on the offered Debt Securities
will be payable and the regular record dates therefor; (6) the place or places
where the principal of and any premium, interest and Additional Amounts on the
offered Debt Securities will be payable, if other than the corporate trust
office of the applicable Trustee; (7) the period or periods within which, the
price or prices at which and the terms and conditions upon which the offered
Debt Securities may be redeemed, if applicable, at the option of the applicable
Issuer or the Guarantor; (8) the obligation, if any, of the applicable Issuer to
redeem or purchase the offered Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof and the period or
periods within which, the price or prices at which and the terms and conditions
upon which Debt Securities shall be redeemed or purchased, in whole or in part,
pursuant to such obligation; (9) the denominations in which any offered Debt
Securities will be issuable, if other than denominations of U.S. $1,000 or any
amount in excess thereof which is an integral multiple of U.S. $1,000; (10) the
currency, currencies or currency units for the payment of principal of and any
premium, interest and Additional Amounts payable on the offered Debt Securities,
if other than United States dollars; (11) any other event or events of default
applicable with respect to the offered Debt Securities in addition to or in lieu
of those described below under "-- Events of Default"; (12) if less than the
principal amount thereof, the portion of the principal payable upon acceleration
of such Debt Securities following an Event of Default; (13) whether such Debt
Securities are to be issued in whole or in part in the form of one or more
Global Securities and, if
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so, the identity of the Depositary for such Global Security or Securities and
the circumstances under which any such Global Security may be exchanged for Debt
Securities registered in the name of, and any transfer of such Global Security
may be registered to, a Person other than such Depositary or its nominee; (14)
if principal of or any premium, interest or Additional Amounts on the offered
Debt Securities is denominated or payable in a currency, currencies or currency
units other than United States dollars, whether and under what terms and
conditions the applicable Issuer may defease the offered Debt Securities or
certain obligations in respect thereof; (15) in the case of Guaranteed Debt
Securities, whether and under what circumstances the applicable Issuer will not
pay Additional Amounts on the offered Debt Securities and will not have the
option to redeem such Debt Securities rather than pay such Additional Amounts;
(16) any other covenants with respect to the offered Debt Securities; and (17)
any other terms of the offered Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of the applicable
Indenture).
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a Depositary identified in the applicable Prospectus Supplement or
Prospectus Supplements. The specific terms of the depositary arrangement with
respect to a series of Debt Securities will be described in the applicable
Prospectus Supplement or Prospectus Supplements.
GUARANTEE OF DEBT SECURITIES OF DUTCH ISSUER AND CANADIAN ISSUER BY THE COMPANY
All Debt Securities issued by the Dutch Issuer or the Canadian Issuer will
be fully and unconditionally guaranteed pursuant to the Guarantee of the Company
of the payment of principal of and any premium, interest and Additional Amounts
on such Debt Securities when and as the same shall become due and payable,
whether at maturity or otherwise. Under the terms of the Guarantee, holders of
the Guaranteed Debt Securities will not be required to exercise their remedies
against the applicable Issuer prior to proceeding directly against the Company.
(Section 1301 of the Subsidiary Indenture)
PAYMENT OF ADDITIONAL AMOUNTS WITH RESPECT TO GUARANTEED DEBT SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement or
Prospectus Supplements, all amounts of principal of and any premium, and
interest, on any Guaranteed Debt Securities will be paid by the applicable
Issuer without deduction or withholding for any withholding taxes, levies,
imposts and other governmental charges whatsoever imposed by or for the account
of the jurisdiction (or any political subdivision or taxing authority thereof or
therein) in which the Dutch Issuer or the Canadian Issuer (or the successor
thereto) is incorporated or is a resident for tax purposes (the "Issuer
Jurisdiction"), or if deduction or withholding of any such taxes, levies,
imposts, assessments or other governmental charges shall at any time be required
by the Issuer Jurisdiction, the applicable Issuer will, pay as additional
interest such additional amounts ("Additional Amounts") as may be necessary in
order that the net amounts paid to the holders of such Debt Securities, after
such deduction or withholding, shall equal the respective amounts of principal
of and any premium, and interest, to which the holders of such Debt Securities
are then currently entitled; provided, however, that such "Additional Amounts"
shall not include (i) the amount of any such tax, levy, impost, assessment or
other governmental charge imposed by the United States or any political
subdivision or taxing authority thereof or therein; (ii) the amount of any such
tax, levy, impost, assessment or other governmental charge which would not be
payable or due but for (A) the existence of any present or former connection
between such Holder and the Issuer Jurisdiction, including, without limitation,
such Holder being or having been a citizen, national or resident thereof, or
being or having been engaged in business or present therein or having or having
had a permanent establishment therein, but not including the mere holding or
ownership of a debt security, or the collection of principal of and interest on,
or the enforcement of, a debt security, or (B) the presentation of the Debt
Security for payment more than 30 days after the date on which such payment
became due or was provided for, whichever is later; (iii) the amount of any
estate, inheritance, gift, sale, transfer, personal property or similar tax,
assessment or other governmental charge or any other tax, levy, impost,
assessment or
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other governmental charge which is payable otherwise than by withholding from
payments of (or in respect of) principal of and any premium, or interest, on,
the Debt Securities; (iv) the amount of any such tax, levy, impost, assessment
or other governmental charge that is imposed or withheld by reason of the
failure to comply by the Holder or the beneficial owner of the Debt Security
with a request of the applicable Issuer or the Company, as Guarantor, addressed
to the Holder (x) to provide information concerning the nationality, residence
or identity of the Holder or such beneficial owner or (y) to make any
declaration or other similar claim to satisfy any information or reporting
requirement, which in the case of (x) or (y), is required or imposed by a
statute, treaty, regulation or administrative practice of the Issuer
Jurisdiction as a precondition to exemption from all or part of such tax, levy,
impost, assessment or other governmental charge; or (v) any combination of items
(i), (ii), (iii) and (iv). (Section 1011 of the Subsidiary Indenture) The
Prospectus Supplement will describe any additional circumstances under which
Additional Amounts will not be paid with respect to Debt Securities. (Section
1011 of the Subsidiary Indenture)
OPTIONAL TAX REDEMPTION
Unless otherwise specified in the applicable Prospectus Supplement or
Prospectus Supplements, each series of Debt Securities of the Dutch Issuer or
the Canadian Issuer may be redeemed at the option of such Issuer, in whole but
not in part at any time (except in the case of Debt Securities that have a
variable rate of interest, which may be redeemed on any Interest Payment Date)
at a Redemption Price equal to the principal amount thereof plus accrued
interest to the date fixed for redemption (except in the case of Outstanding
Original Issue Discount Debt Securities which may be redeemed at the Redemption
Price specified by the terms of such series of Debt Securities) if, (i) the
applicable Issuer is or would be required to pay Additional Amounts as a result
of any change in or amendment to the laws or any regulations or rulings
promulgated thereunder of the Issuer Jurisdiction or any change in the official
application or interpretation of such laws, regulations or rulings, or any
change in the official application or interpretation of, or any execution of or
amendment to, any treaty or treaties affecting taxation to which such Issuer
Jurisdiction is a party, which change, execution or amendment becomes effective
on or after the date of issuance of such series, or (ii) as a result of any
change in the official application or interpretation of, or any execution of or
amendment to, any treaty or treaties affecting taxation to which the Issuer
Jurisdiction is a party, which change, execution or amendment becomes effective
on or after a date on which the Company or any of its subsidiaries (an
"Intercompany Debtor") borrows money from the applicable Issuer, the
Intercompany Debtor is or would be required to deduct or withhold tax on any
payment to the applicable Issuer to enable such Issuer to make any payment of
principal, premium, if any, or interest, and the payment of such Additional
Amounts in the case of clause (i) or such deductions or withholding, in the case
of clause (ii) cannot be avoided by the use of any reasonable measures available
to the applicable Issuer, the Company or the Intercompany Debtor. (Section 1108
of Subsidiary Indenture)
Such optional tax redemption may apply to individual issuances of Debt
Securities by the Dutch Issuer or the Canadian Issuer, but under no
circumstances may an Issuer redeem only part of an individual issuance.
The applicable Issuer or the Guarantor, as the case may be, will also pay,
or make available for payment, to Holders on the Redemption Date any Additional
Amounts resulting from the payment of such Redemption Price.
REDEMPTION
Reference is made to the applicable Prospectus Supplement or Prospectus
Supplements relating to the offered Debt Securities for provisions relating to
redemption of such Debt Securities.
RESTRICTIVE COVENANTS
LIMITATIONS ON SECURED DEBT. Each Indenture provides that the Company will
not itself, and will not permit any Restricted Subsidiary (defined below) to,
incur, issue, assume or guarantee any notes, bonds, debentures or other similar
evidences of indebtedness for money borrowed (herein called
8
<PAGE>
"debt"), secured by pledge of, or mortgage or other lien on, any Principal
Property (defined below), now owned or hereafter owned by the Company or any
Restricted Subsidiary, or any shares of stock or debt of any Restricted
Subsidiary (herein called "liens"), without effectively providing that the Debt
Securities of each series then Outstanding or the Guarantee thereof (together
with, if the Company shall so determine, any other debt of the Company or such
Restricted Subsidiary then existing or thereafter created which is not
subordinate to the Debt Securities of each series then Outstanding and the
Guarantee thereof) shall be secured equally and ratably with (or prior to) such
secured debt, so long as such secured debt shall be so secured. The foregoing
restrictions do not apply, however, to (a) liens on any Principal Property
acquired, constructed or improved by the Company or any Restricted Subsidiary
after the date of the applicable Indenture which are created or assumed
contemporaneously with, or within 120 days of, such acquisition, construction or
improvement, to secure or provide for the payment of all or any part of the cost
of such acquisition, construction or improvement; (b) liens on property, shares
of capital stock or debt existing at the time of acquisition thereof, whether by
merger, consolidation, purchase, lease or otherwise (including liens on
property, shares of capital stock or debt of a corporation existing at the time
such corporation becomes a Restricted Subsidiary); (c) liens in favor of the
Company or any Restricted Subsidiary; (d) liens in favor of the United States of
America or any State thereof, or any department, agency or instrumentality or
political subdivision thereof, or political entity affiliated therewith, or in
favor of any other country, or any political subdivision thereof, to secure
partial, progress, advance or other payments; (e) certain liens imposed by law,
such as mechanics', workmen's, repairmen's, materialmen's, carriers',
warehousemen's, vendors' or other similar liens arising in the ordinary course
of business; (f) certain pledges or deposits under workmen's compensation or
similar legislation or in certain other circumstances; (g) certain liens in
connection with legal proceedings, including certain liens arising out of
judgments or awards; (h) liens for certain taxes or assessments; (i) certain
liens consisting of restrictions on the use of real property which do not
interfere materially with the property's use; or (j) any extension, renewal or
replacement, as a whole or in part, of any lien referred to in the foregoing
clauses (a) to (i), inclusive. (Section 1007 of the applicable Indenture)
Notwithstanding the restrictions described above, the Company or any
Restricted Subsidiary may incur, issue, assume or guarantee debt secured by
liens without equally and ratably securing the Debt Securities of each series
then Outstanding and the Guarantee thereof, provided, that at the time of such
incurrence, issuance, assumption or guarantee, after giving effect thereto and
to the retirement of any debt which is concurrently being retired, the aggregate
amount of all outstanding debt secured by liens so incurred (other than liens
permitted as described in clauses (a) through (j) above) does not at such time
exceed 10% of Consolidated Net Tangible Assets (defined below) of the Company.
(Section 1007 of the applicable Indenture)
LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS. Sale and leaseback
transactions by the Company or any Restricted Subsidiary involving a Principal
Property are prohibited unless either (a) the Company or such Restricted
Subsidiary would be entitled, without equally and ratably securing the Debt
Securities of each series then Outstanding or the Guarantee thereof, to incur
debt secured by a lien on such property, pursuant to the provisions described in
clauses (a) through (j) above under "Limitations on Secured Debt,"; or (b) the
Company, within 120 days, applies to the retirement of its Funded Debt (defined
below) (subject to credits for certain voluntary retirements of Funded Debt) an
amount not less than the greater of (i) the net proceeds of the sale of the
Principal Property leased pursuant to such arrangement or (ii) the fair market
value of the Principal Property so leased. This restriction will not apply to a
sale and leaseback transaction between the Company and a Restricted Subsidiary
or between Restricted Subsidiaries or involving the taking back of a lease for a
period of less than three years.
Notwithstanding the restrictions described above, the Company or any
Restricted Subsidiary may enter into a Sale and Leaseback Transaction, provided,
that at the time of such transaction, after giving effect thereto, the aggregate
amount of all Attributable Debt (defined below) in respect of sale
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and leaseback transactions existing at such time (other than sale and leaseback
transactions permitted as described above) does not at such time exceed 10% of
Consolidated Net Tangible Assets of the Company. (Section 1008 of the applicable
Indenture)
CERTAIN DEFINITIONS. The term "Attributable Debt" means the total net
amount of rent (discounted at the rate of interest implicit in the terms of the
lease) required to be paid during the remaining term of any lease. (Section 101
of the applicable Indenture)
The term "Consolidated Net Tangible Assets" means the aggregate amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (excluding any indebtedness for
money borrowed having a maturity of less than 12 months from the date of the
most recent consolidated balance sheet of the Company but which by its terms is
renewable or extendable beyond 12 months from such date at the option of the
borrower) and (b) all goodwill, trade names, patents, unamortized debt discount
and expense and any other like intangibles, all as set forth on the most recent
consolidated balance sheet of the Company and computed in accordance with
generally accepted accounting principles. (Section 101 of the applicable
Indenture)
The term "Funded Debt" means debt which by its terms matures at or is
extendible or renewable at the option of the obligor to a date more than 12
months after the date of the creation of such debt. (Section 101 of the
applicable Indenture)
The term "Principal Property" means any manufacturing plant located within
the United States of America (other than its territories or possessions) and
owned by the Company or any Subsidiary, the gross book value (without deduction
of any depreciation reserves) of which on the date as of which the determination
is being made exceeds 1% of Consolidated Net Tangible Assets of the Company,
except any such plant (i) which is financed by obligations issued by a State or
local governmental unit pursuant to Section 142(a)(5), 142(a)(6), 142(a)(8) or
144(a) of the Internal Revenue Code of 1986, or any successor provision thereof,
or (ii) which is not of material importance to the business conducted by the
Company and its subsidiaries, taken as a whole. (Section 101 of the applicable
Indenture)
The term "Restricted Subsidiary" means any subsidiary of the Company which
owns or leases a Principal Property. (Section 101 of the applicable Indenture)
Other than as described above and except as may be otherwise specified in
the applicable Prospectus Supplement, neither of the Indentures contain
covenants specifically designed to protect Holders in the event of a highly
leveraged transaction involving the Company.
EVENTS OF DEFAULT
The following events are defined under each Indenture as "Events of Default"
with respect to the Debt Securities of any series issued pursuant to such
Indenture, unless otherwise provided with respect to such series: (1) failure to
pay any interest on any Debt Security of that series when due and payable,
continued for 30 days; (2) failure to pay principal of or any premium on any
Debt Security of that series when due and payable; (3) failure to deposit any
sinking fund payment, when and as due, in respect of any Debt Security of that
series; (4) failure to perform any other covenant of the applicable Issuer or,
in the case of Guaranteed Debt Securities, the Guarantor, in the applicable
Indenture (other than a covenant included in such Indenture solely for the
benefit of a series of Debt Securities other than that series), continued for 60
days after written notice as provided in such Indenture; (5) the occurrence of
an event of default under any indenture or instrument under which any Issuer, or
any Restricted Subsidiary shall have outstanding at least $10,000,000 aggregate
principal amount of indebtedness for money borrowed whose maturity has been
accelerated and such acceleration has not been annulled within 10 days after
written notice as provided in the applicable Indenture; (6) certain events in
bankruptcy, insolvency or reorganization involving the applicable Issuer or the
Company (if not such Issuer); and (7) any other Event of Default provided with
respect to Debt Securities of that series. (Section 501 of the applicable
Indenture)
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If an Event of Default with respect to any series of Debt Securities
Outstanding under an Indenture occurs and is continuing, then either the
applicable Trustee or the Holders of at least 25% in aggregate principal amount
of the Outstanding Debt Securities of that series by notice as provided in such
Indenture may declare the principal amount (or, if any of the Debt Securities of
that series are Original Issue Discount Debt Securities, such lesser portion of
the principal amount of such Debt Securities as may be specified in the terms
thereof) of all of the Debt Securities of that series to be due and payable
immediately. At any time after a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree for
payment of money has been obtained by the applicable Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. (Section 502 of the applicable Indenture)
Each Indenture provides that, subject to the duty of the applicable Trustee
during default to act with the required standard of care, the applicable Trustee
will be under no obligation to exercise any of its rights or powers under such
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the applicable Trustee reasonable indemnity. (Sections
601, 603 of the applicable Indenture) Subject to such provisions for the
indemnification of the applicable Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of any series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or exercising any trust or
power conferred on the applicable Trustee, with respect to the Debt Securities
of that series. (Section 512 of the applicable Indenture)
Each Indenture provides that each of the Issuers and, in the case of
Guaranteed Debt Securities, the Company, as Guarantor, is required to furnish to
the applicable Trustee annually a statement as to the performance by them of
certain of their obligations under the applicable Indenture and as to any
default in such performance. (Section 704 of the applicable Indenture)
MODIFICATION AND WAIVER
Modifications and amendments of each Indenture may be made by the applicable
Issuer, the Company, as Guarantor, and the applicable Trustee with the consent
of the Holders of not less than a majority in aggregate principal amount of the
Outstanding Debt Securities of each series affected by such modification or
amendment; PROVIDED, HOWEVER, that no such modification or amendment may,
without the consent of the Holder of each Outstanding Debt Security affected
thereby, change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Debt Security, reduce the principal amount of,
or premium or interest on, any Debt Security, or, in the case of Guaranteed Debt
Securities, change any obligation of an Issuer or the Guarantor to pay
Additional Amounts, reduce the amount of principal of an Original Issue Discount
Debt Security due and payable upon acceleration of the Maturity thereof, change
the place of payment where or coin or currency in which the principal of, or any
premium or interest on, any Debt Security is payable, impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security or Guarantee of such series, reduce the percentage in principal amount
of Outstanding Debt Securities of any series, the consent of the Holders of
which is required for modification or amendment of such Indenture or for waiver
of compliance with certain provisions of such Indenture or for waiver of certain
defaults, modify any of the above provisions or modify or affect in any manner
adverse to the interests of the Holders of any the Guaranteed Debt Securities
the terms and conditions of the obligations of the Guarantor in respect of the
due and punctual payment of the principal thereof, premium, if any, and
interest, if any, thereon or any sinking fund payments provided in respect
thereof. (Section 902 of the applicable Indenture)
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Debt Securities of each series may, on behalf of the Holders of all
Debt Securities of that series, waive, insofar as that series is concerned,
compliance by the applicable Issuer, or in the case of Guaranteed
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Debt Securities, the Guarantor, with certain restrictive provisions of the
applicable Indenture. (Section 1010 of the applicable Indenture) The Holders of
not less than a majority in aggregate principal amount of the Outstanding Debt
Securities of each series may, on behalf of the Holders of all Debt Securities
of that series, waive any past default under the applicable Indenture with
respect to Debt Securities of that series, except a default (1) in the payment
of principal of, or any premium or interest on, any Debt Security of such
series, or (2) in respect of a covenant or provision of such Indenture which
cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security of such series affected. (Section 513 of the
applicable Indenture)
Each Indenture provides that, in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of Holders of Debt Securities, (1)
the principal amount of an Original Issue Discount Debt Security that will be
deemed to be Outstanding will be the amount of the principal thereof that would
be due and payable as of the date of such determination upon acceleration of the
Maturity thereof to such date, and (2) the principal amount of a Debt Security
denominated in a foreign currency or currency unit that will be deemed to be
Outstanding will be the United States dollar equivalent, determined as of the
date of original issuance of such Debt Security, of the principal amount of such
Debt Security (or, in the case of an Original Issue Discount Debt Security, the
United States dollar equivalent, determined as of the date of original issuance
of such Debt Security, of the amount determined as provided in (1) above).
(Section 101 of the applicable Indenture)
CONSOLIDATION, MERGER AND SALE OF ASSETS
Any of the Issuers or the Company, as Guarantor, without the consent of the
Holders of any of the Outstanding Debt Securities under each Indenture, may
consolidate or merge with or into, or convey, transfer or lease its properties
and assets substantially as an entirety to, in the case of the Company, any
Person which is a corporation, partnership or trust organized and validly
existing under the laws of the United States, any State thereof or the District
of Columbia, and, in the case of the Dutch Issuer or the Canadian Issuer, any
corporation, partnership or trust, provided that (1) any successor Person
assumes by supplemental indenture the applicable Issuer's obligations on the
Debt Securities and in the case of Guaranteed Debt Securities, any successor to
the Company assumes the Company's obligations under the Guarantee, (2) after
giving effect to the transaction no Event of Default, and no event which, after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing under such Indenture, and (3) in the case of Guaranteed Debt
Securities, the Person formed by such consolidation or into which such Issuer is
merged or to whom such Issuer has conveyed, transferred or leased its properties
or assets substantially as an entirety (if such Person's Issuer Jurisdiction is
not within the United States) agrees to indemnify the Holder of each Debt
Security against (a) any Additional Amounts imposed on any such Holder as a
consequence of such consolidation, merger, conveyance, transfer or lease; and
(b) any costs or expenses of the act of such consolidation, merger, conveyance,
transfer or lease. (Section 801 of the applicable Indenture)
The Company or any of its subsidiaries may, subject to certain restrictions,
assume the obligations of any of the Issuers of the Guaranteed Debt Securities
without the consent of the Holders of such Debt Securities; PROVIDED that such
assumption shall not result in adverse tax consequences to such Holders and the
person assuming such obligations shall not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
DEFEASANCE PROVISIONS
DEFEASANCE AND DISCHARGE. Each Indenture provides that, if principal of and
any interest on the Debt Securities of any series of any Issuer are denominated
and payable in United States dollars, such Issuer and, in the case of Guaranteed
Debt Securities, the Company, as Guarantor, will be discharged from any and all
obligations in respect of such Debt Securities (except for certain obligations
to pay Additional Amounts, to register the transfer or exchange of such Debt
Securities, to replace stolen, lost or mutilated Debt Securities, to maintain
paying agencies and to hold moneys for payment in
12
<PAGE>
trust therefor) upon the deposit with the applicable Trustee, in trust, of
money, U.S. Government Obligations (as defined) or a combination thereof, which
through the payment of interest and principal thereof in accordance with their
terms will provide money in an amount sufficient to pay any installment of
principal of (and any premium) and interest on and any mandatory sinking fund
payments in respect of such Debt Securities on the Stated Maturity of such
payments in accordance with the terms of the applicable Indenture and such Debt
Securities. Such discharge may occur more than one year before the stated
maturity or earlier redemption date for such Debt Securities only if there has
been a change in applicable Federal law or such Issuer or the Company, as
Guarantor, has received from, or there has been published by, the United States
Internal Revenue Service a ruling to the effect that such a discharge will not
be deemed, or result in, a taxable event with respect to holders of the Debt
Securities; and such discharge will not be applicable to any Debt Securities
then listed on the New York Stock Exchange if the provision would cause such
Debt Securities to be de-listed as a result thereof. (Section 403 of the
applicable Indenture) The term "U.S. Government Obligations" is defined to mean
direct obligations of the United States of America, backed by its full faith and
credit. (Section 101 of the applicable Indenture)
DEFEASANCE OF CERTAIN COVENANTS. Each Issuer and the Company, as Guarantor,
may omit to comply with certain restrictive covenants described in Sections 1005
(Maintenance of Properties), 1006 (Payment of Taxes and Other Claims), 1007
(Restriction on Secured Debt) and 1008 (Restriction on Sale and Leaseback
Transactions) of the applicable Indenture as to any series of Debt Securities.
To exercise such option, such Issuer or the Company must deposit with the
applicable Trustee money, U.S. Government Obligations or a combination thereof,
which through the payment of interest and principal thereof in accordance with
their terms will provide money in an amount sufficient to pay any installment of
principal of and any premium, and interest on and any mandatory sinking fund
payments in respect of such Debt Securities on the Stated Maturity of such
payments in accordance with the terms of such Indenture and such Debt
Securities. Such Issuer or the Company will also be required to deliver to the
applicable Trustee an opinion of counsel to the effect that the deposit and
related covenant defeasance will not cause the holders of such Debt Securities
to recognize income, gain or loss for Federal income tax purposes. (Section 1009
of the applicable Indenture)
DEFEASANCE AND EVENTS OF DEFAULT. In the event an Issuer or the Company
exercises its option to omit compliance with certain covenants of the Indenture
and the Debt Securities are declared due and payable because of the occurrence
of any Event of Default, the amount of money and U.S. Government Obligations on
deposit with the applicable Trustee will be sufficient to pay amounts due on the
Debt Securities at the time of their Stated Maturity but may not be sufficient
to pay amounts due on the Debt Securities at the time of the acceleration
resulting from such Event of Default. However, such Issuer or the Company, as
Guarantor, shall remain liable for such payments.
REGARDING THE TRUSTEE
The Chase Manhattan Bank (National Association), the Trustee under each of
the Indentures, participates in a revolving line of credit and term loan
agreement with the Company and provides other banking and advisory services for
the Company in the ordinary course of business.
GOVERNING LAW
The Indentures, the Debt Securities and the Guarantee will be governed by,
and construed in accordance with, the laws of the State of New York.
SERVICE OF PROCESS
The Subsidiary Indenture provides that each of the Dutch Issuer and the
Canadian Issuer appoints the Company as its authorized agent for service of
process in any legal action or proceeding arising out of or relating to the
Subsidiary Indenture, the Guaranteed Debt Securities issued thereunder or the
Guarantee relating thereto brought in any federal or state court in the Borough
of Manhattan, The City of New York, State of New York and irrevocably submits to
the non-exclusive jurisdiction of such courts. (Section 115 of the applicable
Indenture)
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PLAN OF DISTRIBUTION
Each Issuer may sell the Debt Securities being offered hereby in any of four
ways: (i) directly to purchasers, (ii) through agents, (iii) through
underwriters and (iv) through dealers. The applicable Prospectus Supplement or
Prospectus Supplements will set forth the terms of the offering of the Debt
Securities, including the name or names of any agents, underwriters or dealers,
the purchase price of the Debt Securities and the proceeds to be received by the
applicable Issuer from such sale, any underwriting discounts and other items
constituting underwriters' compensation and any discounts and commissions
allowed or reallowed or paid to dealers or agents. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
or agents may be changed from time to time.
In connection with the sale of Debt Securities, underwriters or agents may
be deemed to have received compensation from the applicable Issuer in the form
of underwriting discounts or commissions. Underwriters may sell Debt Securities
to or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters. Underwriters,
dealers and agents participating in the distribution of Debt Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Debt Securities may be deemed
to be underwriting discounts and commissions, under the Securities Act of 1933,
as amended. Such underwriters, dealers and agents may be entitled under
agreements which may be entered into by the Issuers to indemnification against
and contribution toward certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
The Debt Securities may be distributed in one or more transactions from time
to time at a fixed price or prices, which may be changed, or from time to time
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Company also may offer and
sell the Debt Securities in exchange for one or more of its outstanding issues
of debt or convertible debt securities.
If so indicated in the applicable Prospectus Supplement or Prospectus
Supplements, the applicable Issuer will authorize dealers or other persons
acting as such Issuer's agents to solicit offers by certain institutions to
purchase Debt Securities from such Issuer at the public offering price set forth
in the applicable Prospectus Supplement or Prospectus Supplements pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in the applicable Prospectus Supplement or Prospectus
Supplements. Each Contract will be for an amount not less than, and the
aggregate amount of Debt Securities sold pursuant to Contracts shall be not less
nor more than, the respective amounts stated in the applicable Prospectus
Supplement or Prospectus Supplements. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but will in all cases be subject to the
approval of the applicable Issuer. The obligations of any purchaser under any
Contract will not be subject to any conditions except (1) the purchase by an
institution of the Debt Securities covered by its Contract shall not at the time
of delivery be prohibited under the laws of any jurisdiction to which such
institution is subject and (2) if Debt Securities are being sold to
underwriters, the applicable Issuer shall have sold to such underwriters the
total principal amount of such Debt Securities less the principal amount thereof
covered by Contracts.
In the event that Debt Securities of any series are not listed on a U.S.
national securities exchange, any underwriters or agents to or through whom Debt
Securities are sold by an Issuer for public offering and sale may make a market
in such Debt Securities, but such underwriters and agents will not be obligated
to do so and may discontinue any market-making at any time without notice. No
assurance can be given as to the liquidity of the trading market for any Debt
Securities.
Certain of the underwriters, dealers and/or agents and their associates may
be customers of, engage in transactions with and perform services for the
Company, including its subsidiaries, in the ordinary course of business.
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EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
VALIDITY OF DEBT SECURITIES AND GUARANTEE
The validity of the Debt Securities and Guarantee will be passed upon for
the Issuers by Edward D. Grayson, Esq., Vice President and General Counsel of
the Company, and, unless otherwise indicated in the applicable Prospectus
Supplement or Prospectus Supplements, certain matters with respect to the Debt
Securities and Guarantee offered by such Prospectus Supplement or Prospectus
Supplements will be passed upon for any underwriters or agents by Davis Polk &
Wardwell, New York, New York. Certain legal matters related to the Debt
Securities governed by the laws of The Netherlands will be passed upon by Nauta
Dutilh. Certain legal matters related to the Debt Securities governed by the
laws of the province of Ontario, Canada will be passed upon by Baker & McKenzie.
Mr. Grayson and Davis Polk & Wardwell will rely upon Nauta Dutilh and Baker &
McKenzie as to legal matters governed by the laws of The Netherlands and Canada,
respectively.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT, A 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, ANY PRICING SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY AND THEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT, A PRICING SUPPLEMENT OR THE PROSPECTUS
AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
--------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes and Guarantee........................................ S-2
Foreign Currency Risks.................................................... S-15
United States Taxation.................................................... S-16
Netherlands Taxation...................................................... S-24
Canadian Taxation......................................................... S-25
Supplemental Plan of Distribution......................................... S-26
Legal Matters............................................................. S-27
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Issuers............................................................... 3
Use of Proceeds........................................................... 4
Ratios of Earnings to Fixed Charges....................................... 5
Description of Debt Securities and Guarantee.............................. 5
Plan of Distribution...................................................... 14
Experts................................................................... 15
Validity of Debt Securities and Guarantee................................. 15
</TABLE>
U.S. $500,000,000
HONEYWELL INC.
MEDIUM-TERM NOTES, SERIES B
DUE FROM 9 MONTHS OR MORE
FROM DATE OF ISSUE
HONEYWELL FINANCE B.V.
HONEYWELL CANADA LIMITED
MEDIUM-TERM NOTES, SERIES A
DUE FROM 9 MONTHS OR MORE
FROM DATE OF ISSUE
GUARANTEED AS TO PAYMENT OF
PRINCIPAL, PREMIUM,
INTEREST AND ADDITIONAL
AMOUNTS BY HONEYWELL INC.
---------------------
PROSPECTUS SUPPLEMENT
---------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
DILLON, READ & CO. INC.
J.P. MORGAN & CO.
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