PROSPECTUS SUPPLEMENT
(To Prospectus dated July 23, 1996)
$200,000,000
ILLINOIS CENTRAL RAILROAD COMPANY
[LOGO]
______________
Medium-Term Notes, Series B
____________________
Due from Nine Months to 30 Years from Date of Issue
____________________
Illinois Central Railroad Company (the "Company") may offer from time
to time its Medium-Term Notes, Series B (the "Notes"), having an aggregate
initial offering price not to exceed $200,000,000 (or the equivalent
thereof in foreign currencies or currency units), subject to reduction
under certain circumstances as a result of the sale of other Securities of
the Company under the Prospectus to which this Prospectus Supplement
relates. The Notes will rank pari passu with the Company's other
unsecured, unsubordinated indebtedness, of which approximately $399.2
million was outstanding at May 31, 1996; the Company has no outstanding
indebtedness senior thereto and is not limited as to the amount of
indebtedness it may incur pari passu with or senior to the Notes. The
Notes will be offered in varying maturities from nine months to 30 years
from their dates of issue and may be subject to redemption at the option of
the Company or repayment at the option the Company or repayment at the
option of the Holder, in each case, in whole or in part prior to the
maturity date (as further defined below, the "Stated Maturity") thereof as
set forth in a Pricing Supplement to this Prospectus Supplement (a "Pricing
Supplement"). Each Note will be denominated in U.S. dollars unless other
currencies or currency units (the "Specified Currency") are designated in
the applicable Pricing Supplement (the "Multi-Currency Notes"). See
"Special Provisions Relating to Multi-Currency Notes" and "Risk Factors
- - Foreign Currency Risks." The Notes may be issued as "Amortizing Notes,"
"Original Issue Discount Notes," "Reset Notes," "Currency Indexed Notes" or
"Commodity Indexed Notes." See "Description of Notes."
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
=============================================================================
Price to Agents' Commission Proceeds to
Public (1) or Discount (2) Company (2) (3)
- -----------------------------------------------------------------------------
Per 100% .125% - .750% 99.250% - 99.875%
Note....
- -----------------------------------------------------------------------------
Total... $200,000,000 $250,000 - $1,500,000 $198,500,000 - $199,750,000
=============================================================================
(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amounts.
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc., BA
Securities, Inc., Chase Securities Inc., Deutsche Morgan Grenfel /
C.J. Lawrence Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Morgan Stanley & Co. Incorporated or Smith
Barney Inc. (each an "Agent," and, collectively, the "Agents") a
commission ranging from .125% to .750% of the principal amount of any
Note, depending on its Stated Maturity, sold through such Agent. Any
Agent, acting as principal, may also purchase Notes at a discount for
resale to one or more investors or one or more broker-dealers (acting
as principal for purposes of resale) at varying prices related to
prevailing market prices at the time of resale, as determined by such
Agent, or, if so agreed, at a fixed public offering price. The Company
has agreed to reimburse the Agents for certain expenses. The Company
has agreed to indemnify the Agents against certain liabilities,
including liabilities under applicable federal and state securities
laws.
(3) Before deducting offering expenses payable by the Company estimated at
$350,000.
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable best efforts to
solicit offers to purchase the Notes. The Company has reserved the right
to sell Notes directly to investors on its own behalf, and on such sales no
commissions will be paid. The Notes will not be listed on any securities
exchange, and there can be no assurance that the Notes will be sold or that
there will be a secondary market for the Notes. The Company reserves the
right to withdraw, cancel or modify the offer made hereby without notice.
The Company or the Agent that solicits an offer to purchase may reject any
such offer to purchase Notes in whole or in part. See "Supplemental Plan
of Distribution."
LEHMAN BROTHERS BA SECURITIES, INC. CHASE SECURITIES INC.
DEUTSCHE MORGAN GRENFELL MERRILL LYNCH & CO. MORGAN STANLEY & CO.
Incorporated
SMITH BARNEY INC.
July 29, 1996
(from preceding page)
Each Note will bear interest at a fixed rate (a "Fixed Rate Note"),
which may be zero in the case of certain Notes issued at a price
representing a discount from the principal amount payable at maturity (a
"Zero-Coupon Note"), or at a variable rate (a "Floating Rate Note")
determined by reference to the Commercial Paper Rate, CD Rate, Federal
Funds Rate, CMT Rate, 11th District Cost of Funds Rate, Kenny Rate, LIBOR,
Prime Rate or Treasury Rate or such other interest rate formula (the
"Interest Rate Basis") as may be indicated in the applicable Pricing
Supplement, as adjusted by a Spread or Spread Multiplier, if any,
applicable to such Notes. See "Description of Notes." Unless otherwise
specified in the applicable Pricing Supplement, interest on Fixed Rate
Notes will be payable semi-annually on each January 15 and July 15 (each an
"Interest Payment Date" with respect to such Fixed Rate Notes) and at
Stated Maturity. Interest on Floating Rate Notes will be payable on the
dates indicated in the applicable Pricing Supplement (each an "Interest
Payment Date" with respect to such Floating Rate Notes).
Each Note will be represented by either a global Security (a "Global
Security" or "Book-Entry Note") registered in the name of a nominee of The
Depository Trust Company ("DTC") or another depositary (DTC or such other
depositary as is indicated in the applicable Pricing Supplement is referred
to herein as the "U.S. Depositary"), unless the applicable Pricing
Supplement indicates that certificates will be issued in definitive form (a
"Certificated Note"). Beneficial interests in Book-Entry Notes will be
shown on, and transfers thereof will be effected only through, records
maintained by the U.S. Depositary and its participants. Owners of
beneficial interests in Book-Entry Notes will be entitled to physical
delivery of Certificated Notes only under the limited circumstances
described herein. See "Description of Notes--Book-Entry System." Unless
otherwise indicated in the applicable Pricing Supplement, Notes denominated
in U.S. dollars will be issued in denominations of $1,000 and any integral
multiple thereof. If the Notes are to be issued in a foreign currency or
units of a foreign composite currency, the authorized denominations and
currency exchange rate information will be set forth in the applicable
Pricing Supplement.
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------------
USE OF PROCEEDS
The Company intends to use the net proceeds from the sales of the Notes
to pay maturing commercial paper and for general corporate purposes. As of
July 29, 1996, the Company had outstanding $183.8 million of commercial paper
with an average maturity of 23 days and an average interest rate per annum of
5.619%.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the three-month periods ended
March 31, 1996 and 1995 and each of the years in the five-year period ended
December 31, 1995 are as follows:
Three Months Ended
March 31, Years Ended December 31,
------------------ -----------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
Ratio of earnings......... 5.70 6.23 5.68 4.75 3.96 2.81 2.26
to fixed charges
For purposes of these computations, earnings before fixed charges
consist of income before income taxes, extraordinary item and cumulative
effect of accounting changes plus fixed charges less capitalized interest.
Fixed charges consist of interest on indebtedness including the amortization
of debt issuance costs, capitalized interest and the portion of
non-capitalized lease expense representative of interest.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements and, to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Senior Securities (as
defined in the accompanying Prospectus) set forth under the heading
"Description of the Securities" in the accompanying Prospectus, to which
description reference is hereby made. The provisions of the Notes summarized
herein will apply to each Note unless otherwise indicated in the applicable
Pricing Supplement. Capitalized terms used but not defined herein have the
meanings specified in the Senior Indenture and/or the Notes.
General
The Notes offered hereby will be issued under the Senior Indenture
referred to in the accompanying Prospectus. The summary contained herein of
certain provisions of the Notes does not purport to be complete and is
qualified in its entirety by reference to the provisions of the Senior
Indenture and the forms of Notes, each of which has been filed as an exhibit
to the Registration Statement (the "Registration Statement"), of which the
accompanying Prospectus is a part, to which exhibits reference is hereby made.
The Notes constitute a single series for purposes of the Senior Indenture
and are limited to an aggregate initial offering price of U.S. $200,000,000
(or the equivalent thereof in the Specified Currency, calculated on the
applicable trade date). Unless otherwise indicated in the applicable Pricing
Supplement, currency amounts in this Prospectus Supplement, the accompanying
Prospectus and any Pricing Supplement are stated in United States dollars
("$", "dollars" or "U.S. $").
The Notes will constitute unsecured and unsubordinated indebtedness of
the Company and will rank on a parity with the Company's other unsecured and
unsubordinated indebtedness.
The Notes are offered on a continuing basis and will mature on a Business
Day (as defined below) from nine months to 30 years from their date of issue,
as selected by the initial purchaser and agreed to by the Company, and may be
subject to redemption at the option of the Company or repayment at the option
of the Holder prior to Maturity. See "Redemption and Repayment" below.
Floating Rate Notes will mature on an Interest Payment Date specified in the
Pricing Supplement applicable thereto.
Unless otherwise indicated in the applicable Pricing Supplement, the
Notes will be denominated in U.S. dollars, and payments of principal of,
premium, if any, and any interest on the Notes will be made in U.S. dollars.
If any of the Notes are to be denominated other than in U.S. dollars, or if
the principal of, or premium, if any, or any interest on any of the Notes is
to be payable at the option of the Holder or the Company in a currency or
composite currency unit other than that in which such Notes are denominated,
the applicable Pricing Supplement will provide additional information,
including authorized denominations and applicable exchange rate information
pertaining to the terms of such Notes and certain other matters of interest to
the Holders thereof. See "Special Provisions Relating to Multi-Currency
Notes."
Each Note will be issued initially as a Book-Entry Note unless the
applicable Pricing Supplement indicates such issuance as a Certificated
Note. Except as set forth under "Book-Entry System" below, Book-Entry
Notes will not be issuable in certificated form. Unless otherwise
specified in the applicable Pricing Supplement or as provided below with
respect to Multi-Currency Notes, Notes will be issued in denominations of
$1,000 and any integral multiple thereof.
Payments of interest and principal (and premium, if any) to Beneficial
Owners (as defined below) of Book-Entry Notes are expected to be made in
accordance with the U.S. Depositary's and its participants' procedures in
effect from time to time as described below under "Book-Entry System."
Unless otherwise specified in the applicable Pricing Supplement,
payments of interest and, in the case of Amortizing Notes, principal, with
respect to any Certificated Note (other than interest and, in the case of
Amortizing Notes, principal payable at Stated Maturity) will be made by
mailing a check to the Holder at the address of such Holder appearing on
the Security Register for the Notes on the applicable Regular Record Date
(as defined below). Notwithstanding the foregoing, at the option of the
Company, all payments of interest and, in the case of Amortizing Notes,
principal on the Notes may be made by wire transfer of immediately
available funds to an account at a bank located within the United States as
designated by each Holder not less than 15 calendar days prior to the
applicable Interest Payment Date. A Holder of $10,000,000 or more in
aggregate principal amount of Notes of like tenor and terms with the same
Interest Payment Date may demand payment by wire transfer but only if
appropriate payment instructions have been received in writing by the
Trustee, not less than 15 calendar days prior to the applicable Interest
Payment Date. In the event that payment is so made in accordance with
instructions of the Holder, such wire transfer shall be deemed to
constitute full and complete payment of such interest and principal on the
Notes. Payment of the principal of (and premium, if any) and interest due
with respect to any Certificated Note at Maturity will be made in
immediately available funds upon surrender of such Note at the principal
office of the Trustee in the Borough of Manhattan, The City of New York
accompanied by wire transfer instructions, provided that the Certificated
Note is presented to the Trustee in time for the Trustee to make such
payments in such funds in accordance with its normal procedures.
Notwithstanding anything in this Prospectus Supplement to the
contrary, unless otherwise specified in the applicable Pricing Supplement,
if a Note is an Original Issue Discount Note, the amount payable on such
Note in the event the principal thereof is declared to be due and payable
immediately as described in the accompanying Prospectus under "Description
of the Securities--Events of Default, Notice and Certain Rights on Default"
or in the event of the redemption or repayment thereof prior to its Stated
Maturity shall be the Amortized Face Amount of such Note as of the date of
declaration, redemption or repayment, as the case may be. The "Amortized
Face Amount" of an Original Issue Discount Note shall be the amount equal
to (i) the principal amount of such Note multiplied by the Issue Price set
forth in the applicable Pricing Supplement plus (ii) the portion of the
difference between the dollar amount determined pursuant to the preceding
clause (i) and the principal amount of such Note that has accreted at the
yield to maturity set forth in the Pricing Supplement (computed in
accordance with generally accepted United States bond yield computation
principles) to such date of declaration, redemption or repayment, but in no
event shall the Amortized Face Amount of an Original Issue Discount Note
exceed its principal amount.
The Pricing Supplement relating to each Note will describe, among
other things, the following items: (i) the Specified Currency with respect
to such Note (and, if such Specified Currency is other than U.S. dollars,
certain other terms relating to such Note, including the authorized
denominations); (ii) the price (expressed as a percentage of the aggregate
principal amount thereof) at which such Note will be issued (the "Issue
Price"); (iii) the date on which such Note will be issued (the "Original
Issue Date"); (iv) the date on which such Note will mature (the "Stated
Maturity") and whether the Stated Maturity may be extended by the Company,
and if so, the Extension Periods and the Final Maturity Date (each as
defined below); (v) whether such Note is a Fixed Rate Note or a Floating
Rate Note; (vi) if such Note is a Fixed Rate Note, the rate per annum at
which such Note will bear interest, if any, the Interest Payment Date or
Dates, if different from those set forth below under "Fixed Rate Notes" and
whether such rate may be changed by the Company prior to Stated Maturity;
(vii) if such Note is a Floating Rate Note, the Initial Interest Rate, the
Interest Rate Basis, the Interest Reset Dates, the Interest Payment Dates,
the Index Maturity, the maximum interest rate, if any, the minimum interest
rate, if any, the Spread, if any, the Spread Multiplier, if any (all as
defined herein), and any other terms relating to the particular method of
calculating the interest rate for such Note, and whether any such Spread
and/or Spread Multiplier may be changed by the Company prior to Stated
Maturity; (viii) whether such Note is an Original Issue Discount Note, and
if so, the yield to maturity; (ix) whether such Note is a Currency Indexed
Note or a Commodity Indexed Note and if so, the specific terms thereof;
(x) whether such Note is an Amortizing Note (as defined below), and if so,
the basis or formula for the amortization of principal and/or interest and
the payment dates for such periodic principal payments; (xi) the regular
record date or dates (each a "Regular Record Date") if other than as set
forth below; (xii) whether such Note may be redeemed at the option of the
Company, or repaid at the option of the Holder, prior to Stated Maturity
and, if so, the provisions relating to such redemption or repayment;
(xiii) whether such Note will be issued initially as a Book-Entry Note or a
Certificated Note; and (xiv) any other terms of such Note not inconsistent
with the provisions of the Senior Indenture.
Certificated Notes may be presented for registration of transfer or
exchange at the Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York.
All percentages resulting from any calculation with respect to any Notes
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation
on any Notes will be rounded to the nearest cent with one half cent being
rounded upward.
As used herein, "Business Day" means, unless otherwise specified in
the applicable Pricing Supplement, any Monday, Tuesday, Wednesday, Thursday
or Friday that in The City of New York is not a day on which banking
institutions are authorized or required by law, regulation or executive
order to close and, with respect to Notes as to which LIBOR (as defined
below) is the applicable Interest Rate Basis (as defined below), is also a
London Business Day, provided, however, that with respect to any Specified
Currency, such day is also not a day on which banking institutions are
authorized or required by law, regulation or executive order to close in
the principal financial center of the country of such Specified Currency
(or, in the case of ECUs, is not a day designated as an ECU Non-Settlement
Day by the ECU Banking Association in Paris or otherwise generally regarded
in the ECU interbank market as a day on which payments on ECUs shall not be
made). As used herein, "London Business Day" means any day (a) if the
Designated LIBOR Currency is other than the ECU, on which dealings in
deposits in such Designated LIBOR Currency are transacted in the London
interbank market or (b) if the Designated LIBOR Currency is the ECU, that
is not designated as an ECU Non-Settlement Day by the ECU Banking
Association in Paris or otherwise generally regarded in the ECU interbank
market as a day on which payments on ECUs shall not be made.
The Notes are referred to in the accompanying Prospectus as the
"Senior Securities." For a description of the rights attaching to different
series of Senior Securities under the Senior Indenture, see "Description of
the Securities" in the Prospectus. Unless otherwise indicated in the
applicable Pricing Supplement, the Notes will have the terms described
below.
Interest and Interest Rates
Each Note (other than a Zero-Coupon Note) will bear interest from and
including its Original Issue Date or from and including the most recent
Interest Payment Date with respect to which interest on such Note has been
paid or duly provided for, at a fixed rate per annum or at a rate per annum
determined pursuant to an Interest Rate Basis, stated therein and in the
applicable Pricing Supplement, that may be adjusted by a Spread and/or
Spread Multiplier, until the principal thereof is paid or made available
for payment. The Pricing Supplement relating to each Note will indicate
whether interest shall accrue on any overdue principal and on any overdue
installment of interest (to the extent that the payment of such interest is
legally enforceable) and at what rate any such interest will accrue.
Unless otherwise set forth in the applicable Pricing Supplement, interest
will be payable on each Interest Payment Date and at Maturity. "Maturity"
means the date on which the principal of a Note becomes due and payable in
full in accordance with its terms and the terms of the Senior Indenture,
whether at Stated Maturity, upon acceleration, redemption, repayment or
otherwise. Interest (other than defaulted interest which may be paid on a
special record date) will be payable to the Holder at the close of business
on the Regular Record Date next preceding such Interest Payment Date;
provided, however, that the first payment of interest on any Note
originally issued between a Regular Record Date and the next Interest
Payment Date will be made on the Interest Payment Date following the next
succeeding Regular Record Date to the Holder of record as of such next
succeeding Regular Record Date.
Interest rates, interest rate formulae and other variable terms of the
Notes are subject to change by the Company from time to time, but no such
change will affect any Note already issued or as to which an offer to
purchase has been accepted by the Company. Unless otherwise indicated in
the applicable Pricing Supplement, the Interest Payment Dates and the
Regular Record Dates for Fixed Rate Notes shall be as described below under
"Fixed Rate Notes." The Interest Payment Dates for Floating Rate Notes
shall be as indicated in the applicable Pricing Supplement, and unless
otherwise indicated in the applicable Pricing Supplement, each Regular
Record Date for a Floating Rate Note will be the fifteenth day (whether or
not a Business Day) preceding each Interest Payment Date.
Each Note (other than a Zero-Coupon Note) will bear interest at either
(a) a fixed rate or (b) a floating rate determined by reference to an
Interest Rate Basis which may be adjusted by a Spread and/or Spread
Multiplier. Any Floating Rate Note may also have either or both of the
following: (i) a maximum numerical interest rate limitation, or ceiling,
on the rate of interest which may accrue during any interest period, and
(ii) a minimum numerical interest rate limitation, or floor, on the rate of
interest which may accrue during any interest period. The applicable
Pricing Supplement relating to each Note will designate either a fixed rate
of interest per annum on the applicable Fixed Rate Note or one or more of
the following Interest Rate Bases as applicable to the relevant Floating
Rate Note: (a) the CD Rate, in which case such Note will be a "CD Rate
Note," (b) the Commercial Paper Rate, in which case such Note will be a
"Commercial Paper Rate Note," (c) the Federal Funds Rate, in which case
such Note will be a "Federal Funds Rate Note," (d) LIBOR, in which case
such Note will be a "LIBOR Note," (e) the Treasury Rate, in which case such
Note will be a "Treasury Rate Note," (f) the Prime Rate, in which case such
Note will be a "Prime Rate Note," (g) the CMT Rate, in which case such Note
will be a "CMT Rate Note," (h) the 11th District Cost of Funds Rate, in
which case such Note will be an "11th District Cost of Funds Rate Note,"
(i) the Kenny Rate, in which case such Note will be a "Kenny Rate Note," or
(j) such other Interest Rate Basis as is set forth in such Pricing
Supplement.
Notwithstanding the determination of the interest rate as provided below,
the interest rate on the Notes for any interest period shall not be greater
than the maximum interest rate, if any, or less than the minimum interest
rate, if any, specified in the applicable Pricing Supplement. The interest
rate on the Notes will in no event be higher than the maximum rate permitted
by New York or other applicable law, as the same may be modified by United
States law of general application. Under present New York law, the maximum
rate of interest is 25% per annum on a simple interest basis. This limit may
not apply to Notes in which $2,500,000 or more has been invested.
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, each
Fixed Rate Note (other than a Zero-Coupon Note) will bear interest from its
date of issue at the annual rate stated on the face thereof, as specified in
the applicable Pricing Supplement. Payments of interest on any Fixed Rate
Note with respect to any Interest Payment Date will include interest accrued
from and including the Original Issue Date, or from and including the next
preceding Interest Payment Date, to but excluding the applicable Interest
Payment Date or Maturity. Fixed Rate Notes may bear one or more annual rates
of interest during the periods or under the circumstances specified therein
and in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
and paid on the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Payment Dates for Fixed Rate Notes (other than Amortizing Notes) will
be semi-annual on each January 15 and July 15 and at Maturity, and the Regular
Record Dates will be each January 1 and July 1 (whether or not a Business
Day). Unless otherwise specified in the applicable Pricing Supplement,
payments of principal and interest on Fixed Rate Amortizing Notes will be made
either quarterly on each January 15, April 15, July 15 and October 15, or
semi-annually on each January 15 and July 15, as set forth in the applicable
Pricing Supplement, and at Maturity. Unless otherwise specified in the
applicable Pricing Supplement, Regular Record Dates with respect to Fixed Rate
Amortizing Notes will be the 15th day (whether or not a Business Day) next
preceding each Interest Payment Date. If any Interest Payment Date or the
Maturity for any Fixed Rate Note is a day that is not a Business Day, all
payments to be made on such day will be made on the next succeeding Business
Day with the same force and effect as if made on the due date, and no
additional interest shall be payable as a result of such delayed payment.
Payments with respect to Fixed Rate Amortizing Notes will be applied
first to interest due and payable thereon and then to the reduction of the
unpaid principal amount thereof. A table setting forth repayment information
in respect of each Fixed Rate Amortizing Note will be provided to the original
purchaser thereof and will be available, upon request, to subsequent Holders.
Floating Rate Notes
The interest rate on each Floating Rate Note will be equal to either (i)
the interest rate calculated by reference to the specified Interest Rate Basis
plus or minus the Spread, if any, or (ii) the interest rate calculated by
reference to the specified Interest Rate Basis multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points (one basis
point equals one-hundredth of a percentage point) specified in the applicable
Pricing Supplement as being applicable to such Note, and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement
as being applicable to such Note. The applicable Pricing Supplement will
specify the Interest Rate Basis and the Spread or Spread Multiplier, if any,
and the maximum or minimum interest rate limitation, if any, applicable to
each Floating Rate Note. In addition, such Pricing Supplement will contain
particulars as to the Calculation Agent (unless otherwise specified in the
applicable Pricing Supplement, the Trustee (in such capacity, the "Calculation
Agent")), Index Maturity, Original Issue Date, interest rate in effect for the
period from the Original Issue Date to the first Interest Reset Date set forth
in the applicable Pricing Supplement (the "Initial Interest Rate"), Interest
Determination Dates, Interest Payment Dates, Regular Record Dates and Interest
Reset Dates with respect to such Note.
Except as provided below or in the applicable Pricing Supplement,
interest on Floating Rate Notes, including Floating Rate Amortizing Notes,
will be payable, (i) in the case of Floating Rate Notes that reset daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified
on the face thereof and in the applicable Pricing Supplement; (ii) in the
case of Floating Rate Notes, including Floating Rate Amortizing Notes, that
reset quarterly, on the third Wednesday of March, June, September and
December of each year; (iii) in the case of Floating Rate Notes, including
Floating Rate Amortizing Notes, that reset semi-annually, on the third
Wednesday of each of two months of each year specified on the face thereof
and in the applicable Pricing Supplement; and (iv) in the case of Floating
Rate Notes, including Floating Rate Amortizing Notes, that reset annually,
on the third Wednesday of one month of each year specified on the face
thereof and in the applicable Pricing Supplement (each such day being an
"Interest Payment Date") and, in each case, at Maturity. If any Interest
Payment Date, other than Maturity, for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Payment Date
shall be postponed to the next day that is a Business Day, except that in
the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Payment Date shall be the immediately
preceding London Business Day. If the Maturity for any Floating Rate Note
falls on a day that is not a Business Day, payment of principal, premium,
if any, and interest with respect to such Note will be made on the next
succeeding Business Day with the same force and effect as if made on the
due date, and no additional interest shall be payable as a result of such
delayed payment.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (such period being
the "Reset Period" for such Note, and the first day of each Reset Period
being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. The Interest Reset Dates will be, in the case of Floating Rate
Notes which reset daily, each Business Day; in the case of Floating Rate
Notes (other than Treasury Rate Notes) which reset weekly, the Wednesday of
each week; in the case of Treasury Rate Notes which reset weekly, the
Tuesday of each week, except as provided below; in the case of Floating
Rate Notes which reset monthly, the third Wednesday of each month (with the
exception of monthly reset 11th District Cost of Funds Rate Notes, which
will reset on the first calendar day of the month); in the case of Floating
Rate Notes which reset quarterly, the third Wednesday of each March, June,
September and December; in the case of Floating Rate Notes which reset
semi-annually, the third Wednesday of the two months of each year specified
in the applicable Pricing Supplement; and in the case of Floating Rate
Notes which reset annually, the third Wednesday of one month of each year
specified in the applicable Pricing Supplement; provided, however, that the
interest rate in effect from and including the date of issue to but
excluding the first Interest Reset Date with respect to a Floating Rate
Note will be the Initial Interest Rate (as set forth in the applicable
Pricing Supplement). If any Interest Reset Date for any Floating Rate Note
would otherwise be a day that is not a Business Day for such Floating Rate
Note, the Interest Reset Date for such Floating Rate Note shall be
postponed to the next day that is a Business Day for such Floating Rate
Note, except that in the case of a LIBOR Note, if such Business Day is in
the next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding London Business Day. Each adjusted rate shall be
applicable on and after the Interest Reset Date to which it relates, to,
but not including, the next succeeding Interest Reset Date or until the
Stated Maturity or the date of redemption, as the case may be.
The interest rate for each Reset Period will be the rate determined by
the Calculation Agent on the Calculation Date (as defined below) pertaining
to the Interest Determination Date pertaining to the Interest Reset Date
for such Reset Period. Unless otherwise specified in the applicable
Pricing Supplement, the "Interest Determination Date" pertaining to an
Interest Reset Date for (a) a Commercial Paper Rate Note (the "Commercial
Paper Interest Determination Date"), (b) a Federal Funds Rate Note (the
"Federal Funds Interest Determination Date"), (c) a CD Rate Note (the "CD
Interest Determination Date"), (d) a Prime Rate Note (the "Prime Interest
Determination Date"), (e) a CMT Rate Note (the "CMT Interest Determination
Date"), or (f) a Kenny Rate Note (the "Kenny Rate Interest Determination
Date") will be the second Business Day prior to such Interest Reset Date.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Determination Date pertaining to an Interest Reset Date for an
11th District Cost of Funds Rate Note (the "11th District Interest
Determination Date") will be the last Business Day of the month immediately
preceding such Interest Reset Date on which the Federal Home Loan Bank of
San Francisco (the "FHLB of San Francisco") publishes the Index (as defined
below). Unless otherwise specified in the applicable Pricing Supplement,
the Interest Determination Date pertaining to an Interest Reset Date for a
LIBOR Note (the "LIBOR Interest Determination Date") will be the second
London Business Day immediately preceding such Interest Reset Date. Unless
otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for a Treasury Rate
Note (the "Treasury Interest Determination Date") will be the day of the
week in which such Interest Reset Date falls on which Treasury bills would
normally be auctioned. Treasury bills are usually sold at auction on
Monday of each week, unless that day is a legal holiday, in which case the
auction is usually held on the following Tuesday, except that such auction
may be held on the preceding Friday. If, as a result of a legal holiday,
an auction is so held on the preceding Friday, such Friday will be the
Treasury Interest Determination Date pertaining to the Reset Period
commencing in the next succeeding week. If an auction date shall fall on
any Interest Reset Date for a Treasury Rate Note, then such Interest Reset
Date shall instead be the first Business Day immediately following such
auction date. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date" pertaining to any Interest Determination
Date shall be the earlier of (i) the tenth calendar day after the Interest
Determination Date or, if such day is not a Business Day, the next
succeeding Business Day, or (ii) the Business Day preceding the applicable
Interest Payment Date or Maturity, as the case may be.
"Index Maturity" means, with respect to a Floating Rate Note, the
period to maturity of the instrument or obligation on which the interest
rate formula is based, as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
payments with respect to Floating Rate Amortizing Notes will be applied
first to interest due and payable thereon and then to the reduction of the
unpaid principal amount thereof. A table setting forth repayment
information in respect of each Floating Rate Amortizing Note will be
provided to the original purchaser thereof and will be available, upon
request, to subsequent Holders.
Unless otherwise indicated in the applicable Pricing Supplement,
interest on Floating Rate Notes will accrue from and including the date of
issue or from and including the immediately preceding Interest Payment Date
in respect of which interest has been paid or duly provided for, as the
case may be, to but excluding the Interest Payment Date or Maturity, as the
case may be. With respect to Floating Rate Notes, accrued interest is
calculated by multiplying the face amount of a Note by an accrued interest
factor. This accrued interest factor is computed by adding the interest
factors calculated for each day from and including the date of issue, or
from and including the last date to which interest has been paid or duly
provided for, to but excluding the date for which accrued interest is being
calculated. The interest factor for each such day (unless otherwise
specified) is computed by dividing the interest rate applicable to such day
by 360, in the case of Commercial Paper Rate Notes, CD Rate Notes, 11th
District Cost of Funds Rate Notes, Federal Funds Rate Notes, LIBOR Notes
and Prime Rate Notes or by the actual number of days in the year, in the
case of Treasury Rate Notes or CMT Rate Notes, or by 365 days in the case
of Kenny Rate Notes.
The Calculation Agent shall calculate the interest rate on the Floating
Rate Notes, as provided below. The Calculation Agent will, upon the request
of the Holder of any Floating Rate Note, provide the interest rate then in
effect and, if then determined, the interest rate which will become effective
as a result of a determination made with respect to the most recent Interest
Determination Date with respect to such Note. The Trustee shall act as the
initial Calculation Agent for the Notes. For purposes of calculating the rate
of interest payable on Floating Rate Notes, the Company will enter into an
agreement with the Calculation Agent. The Calculation Agent's determination
of any interest rate shall be final and binding in the absence of manifest
error.
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper
Interest Determination Date, the Money Market Yield (calculated as
described below) of the rate on such date for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published
by the Board of Governors of the Federal Reserve System in "Statistical
Release H.15(519), Selected Interest Rates" or any successor publication of
the Board of Governors ("H.15(519)") under the heading "Commercial Paper."
In the event that such rate is not published prior to 9:00 A.M., New York
City time, on the Calculation Date pertaining to such Commercial Paper
Interest Determination Date, then the Commercial Paper Rate with respect to
such Commercial Paper Interest Determination Date shall be the Money Market
Yield of the rate on such Commercial Paper Interest Determination Date for
commercial paper having the Index Maturity specified in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in
its daily statistical release "Composite 3:30 P.M. Quotations for U.S.
Government Securities" or any successor publication ("Composite
Quotations") under the heading "Commercial Paper." If by 3:00 P.M., New
York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the Commercial Paper Rate
for such Commercial Paper Interest Determination Date shall be calculated
by the Calculation Agent and shall be the Money Market Yield of the
arithmetic mean of the offered rates as of 11:00 A.M., New York City time,
on such Commercial Paper Interest Determination Date of three leading
dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper having the Index Maturity designated
in the applicable Pricing Supplement placed for an industrial issuer whose
bond rating is "AA," or the equivalent, from a nationally recognized
securities rating agency; provided, however,that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Commercial Paper Rate with respect to such Commercial Paper
Interest Determination Date will be the Commercial Paper Rate in effect
immediately prior to such Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded,
if necessary, to the nearest one hundred-thousandth of a percent) calculated
in accordance with the following formula:
Money Market Yield = D X 360 X 100
-------------
360 - (D X M)
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which accrued interest is being calculated.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated
with reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD
Rate" means, with respect to any CD Interest Determination Date, the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "CDs (Secondary Market)." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such CD Interest Determination Date, then the CD Rate with
respect to such CD Interest Determination Date shall be the rate on such CD
Interest Determination Date for negotiable certificates of deposit having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit." If by 3:00
P.M., New York City time, on such Calculation Date such rate is not published
in either H.15(519) or Composite Quotations, then the CD Rate on such CD
Interest Determination Date shall be calculated by the Calculation Agent and
shall be the arithmetic mean of the secondary market offered rates as of 10:00
A.M., New York City time, on such CD Interest Determination Date of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in
The City of New York selected by the Calculation Agent for negotiable
certificates of deposit of major United States money market banks (in the
market for negotiable certificates of deposit) with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement
in a denomination of $5,000,000; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the CD Rate with respect to such CD Interest Determination Date
will be the CD Rate in effect immediately prior to such CD Interest
Determination Date.
CMT Rate Notes
Each CMT Rate Note will bear interest at the interest rate (calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if
any) specified in the CMT Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT
Rate" means, with respect to any CMT Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption ". . . Treasury Constant Maturities . . . Federal Reserve Board
Release H.15 . . . Mondays Approximately 3:45 P.M.," under the column for
the Designated CMT Maturity Index (as defined below) for (i) if the
Designated CMT Telerate Page is 7055, the rate on such CMT Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052,
the week, or the month, as applicable, ended immediately preceding the week
in which the applicable CMT Interest Determination Date occurs. If such
rate is no longer displayed on the relevant page, or if not displayed by
3:00 P.M., New York City time, on the Calculation Date pertaining to such
CMT Interest Determination Date, then the CMT Rate for such CMT Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If
such rate is no longer published, or if not published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such CMT Interest
Determination Date, then the CMT Rate for such CMT Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated CMT
Maturity Index) for the CMT Interest Determination Date with respect to
such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the
rate formerly displayed on the Designated CMT Telerate Page and published
in the relevant H.15(519). If such information is not provided by 3:00
P.M., New York City time, on the Calculation Date pertaining to such CMT
Interest Determination Date, then the CMT Rate for the CMT Interest
Determination Date will be calculated by the Calculation Agent and will be
a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City
time, on the CMT Interest Determination Date reported, according to their
written records, by three leading primary United States government
securities dealers (each, a "Reference Dealer") in The City of New York
selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation
(or, in the event of equality, one of the lowest)), for the most recently
issued direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less
than such Designated CMT Maturity Index minus one year. If the Calculation
Agent cannot obtain three such Treasury Note quotations, the CMT Rate for
such CMT Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 P.M., New York
City time, on the CMT Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected
by the Calculation Agent and eliminating the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated
CMT Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in an amount of at least $100,000,000.
If three or four (and not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean of
the offer prices obtained and neither the highest nor the lowest of such
quotes will be eliminated; provided, however, that if fewer than three
Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate will be the CMT Rate in effect 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 Treasury Note with the shorter remaining term to maturity will be
used.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service on the page specified in the applicable Pricing Supplement
(or any other page as may replace such page on that service for the purpose
of displaying Treasury Constant Maturities as published in H.15(519)), for
the purpose of displaying Treasury Constant Maturities as published in
H.15(519). If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052, for the most
recent week.
"Designated CMT Maturity Index" means the original period to maturity
of the Treasury Notes (either one, two, three, five, seven, ten, twenty or
thirty years) specified in the applicable Pricing Supplement with respect
to which the CMT Rate will be calculated. If no such maturity is specified
in the applicable Pricing Supplement, the Designated CMT Maturity Index
shall be two years.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Federal Funds Rate" means, with respect to any Federal Funds Interest
Determination Date, the rate on such date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." In the event that
such rate is not published prior to 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Federal Funds Interest Determination
Date, then the Federal Funds Rate with respect to such Federal Funds
Interest Determination Date shall be the rate on such Federal Funds
Interest Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate." If by 3:00 P.M., New York City
time, on such Calculation Date such rate is not published in either
H.15(519) or Composite Quotations, then the Federal Funds Rate with respect
to such Federal Funds Interest Determination Date shall be calculated by
the Calculation Agent and shall be the arithmetic mean (each as rounded, if
necessary, to the nearest one hundred-thousandth of a percent) of the rates
as of 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date for the last transaction in overnight Federal Funds
arranged by three leading brokers of Federal Funds transactions in The City
of New York selected by the Calculation Agent; provided, however, that if
the brokers selected as aforesaid by the Calculation Agent are not quoting
as mentioned in this sentence, the Federal Funds Rate with respect to such
Federal Funds Interest Determination Date will be the Federal Funds Rate in
effect immediately prior to such Federal Funds Interest Determination Date.
11th District Cost of Funds Rate Notes
Each 11th District Cost of Funds Rate Note will bear interest at the
interest rate (calculated with reference to the 11th District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any) specified in the 11th
District Cost of Funds Rate Note and in the Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any 11th District
Interest Determination Date, the rate equal to the monthly weighted average
cost of funds for the calendar month preceding such 11th District Interest
Determination Date as set forth under the caption "11th District" on
Telerate Page 7058 as of 11:00 A.M., San Francisco time, on such 11th
District Interest Determination Date. If such rate does not appear on
Telerate Page 7058 on any related 11th District Interest Determination
Date, the 11th District Cost of Funds Rate for such 11th District Interest
Determination Date shall be the monthly weighted average cost of funds paid
by member institutions of the Eleventh Federal Home Loan Bank District that
was most recently announced (the "Index") by the FHLB of San Francisco as
such cost of funds for the calendar month preceding the date of such
announcement. If the FHLB of San Francisco fails to announce such rate for
the calendar month next preceding such 11th District Interest Determination
Date, then the 11th District Cost of Funds Rate for such 11th District
Interest Determination Date will be the 11th District Cost of Funds Rate
then in effect on such 11th District Interest Determination Date.
Kenny Rate Notes
Each Kenny Rate Note will bear interest at the interest rate (calculated
with reference to the Kenny Rate and the Spread and/or Spread Multiplier, if
any) specified in the applicable Kenny Rate Note and in the Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Kenny
Rate" means, with respect to any Kenny Rate Interest Determination Date, the
high grade weekly index (the "Weekly Index") on such date made available by
Kenny Information Systems ("Kenny") to the Calculation Agent. The Weekly
Index is, and shall be, based upon 30 day yield evaluations at par of bonds,
the interest on which is exempt from Federal income taxation under the
Internal Revenue Code of 1986, as amended (the "Code"), of not less than five
high grade component issuers selected by Kenny which shall include, without
limitation, issuers of general obligation bonds. The specific issuers
included among the component issuers may be changed from time to time by Kenny
in its discretion. The bonds on which the Weekly Index is based shall not
include any bonds on which the interest is subject to a minimum tax or similar
tax under the Code, unless all tax-exempt bonds are subject to such tax. In
the event Kenny ceases to make available such Weekly Index, a successor
indexing agent will be selected by the Calculation Agent, such index to
reflect the prevailing rate for bonds rated in the highest short-term rating
category by Moody's Investors Service, Inc. and Standard & Poor's Corporation
in respect of issuers most closely resembling the high grade component issuers
selected by Kenny for its Weekly Index, the interest on which is (A) variable
on a weekly basis, (B) exempt from Federal income taxation under the Code, and
(C) not subject to a minimum tax or similar tax under the Code, unless all
tax-exempt bonds are subject to such tax. If such successor indexing agent is
not available, the rate for any Kenny Rate Interest Determination Date shall
be 67% of the rate determined if the Treasury Rate option had been originally
selected.
LIBOR Notes
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in the LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
means, with respect to any LIBOR Interest Determination Date, the rate
determined in accordance with the following provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the Note and the
applicable Pricing Supplement, the arithmetic mean of the offered rates
(unless the specified Designated LIBOR Page (as defined below) by its
terms provides only for a single rate, in which case such single rate
shall be used) for deposits in the Designated LIBOR Currency (as defined
below) having the Index Maturity designated in the Note and the applicable
Pricing Supplement, commencing on the second London Business Day
immediately following the LIBOR Interest Determination Date, which appear
on the Designated LIBOR Page specified in the Note and the applicable
Pricing Supplement as of 11:00 A.M., London time, on that LIBOR Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the Note and the applicable
Pricing Supplement, the rate for deposits in the Designated LIBOR Currency
(as defined below) having the Index Maturity designated in the Note and
the applicable Pricing Supplement, commencing on the second London
Business Day immediately following such LIBOR Interest Determination Date,
which appears on the Designated LIBOR Page specified in the Note and the
applicable Pricing Supplement as of 11:00 A.M. London time on that LIBOR
Interest Determination Date. Notwithstanding the foregoing, if fewer than
two offered rates appear on the Designated LIBOR Page with respect to
LIBOR Reuters (unless the specified Designated LIBOR Page with respect to
LIBOR Reuters by its terms provides only for a single rate, in which case
such single rate shall be used), or if no rate appears on the Designated
LIBOR Page with respect to LIBOR Telerate, whichever may be applicable,
LIBOR in respect of the related LIBOR Interest Determination Date will be
determined as if the parties had specified the rate described in clause
(ii) below.
(ii) With respect to any LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Designated LIBOR Page with
respect to LIBOR Reuters (unless the Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate shall be
used), or if no rate appears on the Designated LIBOR Page with respect to
LIBOR Telerate, as the case may be, the Calculation Agent will request the
principal London office of each of four major banks in the London
interbank market selected by the Calculation Agent to provide the
Calculation Agent with its offered rate quotation for deposits in the
Designated LIBOR Currency (as defined below) for the period of the Index
Maturity designated in the Note and the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, to prime banks in the London interbank
market as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date and in a principal amount that is representative for a single
transaction in such Designated LIBOR Currency in such market at such time.
If at least two such quotations are provided, LIBOR determined on such
LIBOR Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR determined
on such LIBOR Interest Determination Date will be the arithmetic mean of
the rates quoted as of 11:00 A.M. in the applicable Principal Financial
Center (as defined below), on such LIBOR Interest Determination Date by
three major banks in such Principal Financial Center selected by the
Calculation Agent for loans in the Designated LIBOR Currency to leading
banks, commencing on the second London Business Day immediately following
such LIBOR Interest Determination Date, having the Index Maturity
designated in the Note and the applicable Pricing Supplement in a
principal amount that is representative for a single transaction in such
Designated LIBOR Currency in such market at such time; provided, however,
that if the banks so selected by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR determined on such LIBOR Interest
Determination Date will be LIBOR in effect on such LIBOR Interest
Determination Date.
"Designated LIBOR Currency" means, with respect to any LIBOR Note, the
currency (including a composite currency), if any, designated in the Note and
the applicable Pricing Supplement as the Designated LIBOR Currency. If no
such currency is designated in the Note and the applicable Pricing Supplement,
the Designated LIBOR Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London
interbank rates of major banks for the applicable Designated LIBOR Currency
(if "LIBOR Reuters" is designated in the Note and the applicable Pricing
Supplement), or (b) the display on the Dow Jones Telerate Service for the
purpose of displaying the London interbank rates of major banks for the
applicable designated LIBOR Currency (if "LIBOR Telerate" is designated in
the Note and the applicable Pricing Supplement). If neither LIBOR Reuters
nor LIBOR Telerate is specified in the Note and applicable Pricing
Supplement, LIBOR for the applicable Designated LIBOR Currency will be
determined as if LIBOR Telerate (and, if the U.S. dollar is the Designated
LIBOR Currency, page 3750) had been chosen.
"Principal Financial Center" means, with respect to any LIBOR Note,
unless otherwise specified in the Note and the applicable Pricing
Supplement, the capital city of the country that issues as its legal tender
the Designated LIBOR Currency of such Note, except that with respect to
U.S. dollars and ECUs, the Principal Financial Center shall be The City of
New York and Brussels, respectively.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in the Prime Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Prime Interest Determination Date,
the rate set forth on such date in H.15(519) under the heading "Bank Prime
Loan." In the event that such rate is not published prior to 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Prime Interest
Determination Date, then the Prime Rate with respect to such Prime Interest
Determination Date shall be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen USPRIME
1 Page as such bank's prime rate or base lending rate as in effect for that
Prime Interest Determination Date. If fewer than four such rates appear on
the Reuters Screen USPRIME 1 Page for the Prime Interest Determination
Date, the Prime Rate with respect to such Prime Interest Determination Date
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of
business on such Prime Interest Determination Date by at least two of the
three major money center banks in The City of New York selected by the
Calculation Agent. If fewer than two quotations are provided, the Prime
Rate with respect to such Prime Interest Determination Date shall be
determined on the basis of the rates furnished in The City of New York by
the appropriate number of substitute banks or trust companies organized and
doing business under the laws of the United States, or any state thereof,
having total equity capital of at least U.S. $500 million and being subject
to supervision or examination by Federal or state authority, selected by
the Calculation Agent to provide such rate or rates; provided, however,
that if the appropriate number of substitute banks or trust companies
selected as aforesaid are not quoting as mentioned in this sentence, the
Prime Rate with respect to such Prime Interest Determination Date will be
the Prime Rate in effect immediately prior to such Prime Interest
Determination Date. "Reuters Screen USPRIME 1 Page" means the display
designated as page "USPRIME 1" on the Reuters Monitor Money Rate Service
(or such other page as may replace the USPRIME 1 page on the service for
the purpose of displaying the prime rate or base lending rate of major
banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in the Treasury Rate Note and in the applicable
Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Treasury Rate" means, with respect to any Treasury Interest Determination
Date, the rate for the most recent auction of direct obligations of the
United States ("Treasury bills") having the Index Maturity specified in the
applicable Pricing Supplement as published in H.15(519) under the heading,
"Treasury bills--auction average (investment)" or, if not so published by
3:00 P.M., New York City time, on the Calculation Date pertaining to such
Treasury Interest Determination Date, the average auction rate (expressed
as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the
United States Department of the Treasury. In the event that such rate is
not available by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Treasury Interest Determination Date, or if no such
auction is held in a particular week, then the Treasury Rate with respect
to such Treasury Interest Determination Date shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 P.M., New York City time, on such
Treasury Interest Determination Date, of three leading primary U.S.
government securities dealers selected by the Calculation Agent for the
issue of Treasury bills with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent
are not quoting as mentioned in this sentence, the Treasury Rate with
respect to such Treasury Interest Determination Date will be the Treasury
Rate in effect immediately prior to such Treasury Interest Determination
Date.
Currency Indexed Notes
General
The Company may from time to time offer Notes, the principal amount
payable at Maturity and/or the interest rate of which is determined by a
formula which makes reference to the rate of exchange between one currency
("Currency I") and another currency ("Currency II;" together with Currency
I, the "Selected Currencies," both as specified in the applicable Pricing
Supplement), neither of which need be the Specified Currency of such Notes
(the "Currency Indexed Notes"). Unless otherwise specified in the
applicable Pricing Supplement, Holders of Currency Indexed Notes will be
entitled to receive (i) an amount in respect of principal equal to the
principal amount of the Currency Indexed Notes plus an adjustment, which
may be negative or positive, based on the change in the relationship
between Selected Currencies or (ii) an amount of interest calculated at the
stated rate of interest on the Currency Indexed Notes plus an adjustment,
which may be negative or positive, based on the change in the relationship
between the Selected Currencies, in each case determined as described below
under "Payment of Principal and Interest." As specified in the Pricing
Supplement, the exchange rate designated as the base exchange rate (the
"Base Exchange Rate") will be the initial rate at which Currency I can be
exchanged for Currency II and from which the change in such exchange rate
will be measured.
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, the
payment of principal at Maturity and interest on each Interest Payment Date
(until the payment thereof is paid or made available for payment) will be
payable in the Specified Currency in amounts calculated in the manner
described below.
Unless otherwise specified in the applicable Pricing Supplement,
principal at Maturity, if indexed, will be payable in an amount equal to
the principal amount of the Currency Indexed Note, plus or minus an amount
determined by reference to the difference between the Base Exchange Rate
specified in the applicable Pricing Supplement and the rate at which
Currency I can be exchanged for Currency II on the second Business Day
prior to the Maturity (the "Determination Date") of such Currency Indexed
Note, as determined by the determination agent specified in the applicable
Pricing Supplement (the "Determination Agent"). Unless otherwise specified
in the applicable Pricing Supplement, the interest payable on any Interest
Payment Date, if indexed, will be payable in an amount equal to the stated
interest rate of the Currency Indexed Note, plus or minus a rate adjustment
determined by reference to the difference between the Base Exchange Rate
specified in the applicable Pricing Supplement and the rate at which
Currency I can be exchanged for Currency II on the second Business Day
prior to the Interest Payment Date (the "Indexed Interest Determination
Date") of such Currency Indexed Note, as determined by the Determination
Agent, applied to the average principal amount outstanding of such Note for
the period being measured. For the purpose of this section, such rate of
exchange on the Determination Date or the Indexed Interest Determination
Date, as the case may be, will be the average of quotations for settlement
on the Maturity Date or the relevant Interest Payment Date, as the case may
be, obtained by the Determination Agent from three Reference Dealers in The
City of New York at approximately 11:00 A.M., New York City time, on either
the Determination Date or the relevant Indexed Interest Determination Date,
as the case may be.
The formulas to be used by the Determination Agent to determine the
principal amount and/or the stated interest rate of a Currency Indexed Note
payable at Maturity or on any Interest Payment Date will be specified in the
applicable Pricing Supplement by reference to the appropriate formula and will
be as follows:
Principal
A. If principal is to increase when the Spot Rate exceeds the Base
Exchange Rate, and if principal is to decrease when the Spot Rate is less than
the Base Exchange Rate, the formula to determine the principal amount of a
Currency Indexed Note payable at Maturity shall equal:
Principal Amount + (Principal Amount x F x [Spot Rate -- Base Exchange Rate])
----------------------------------
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will sell
Currency I in exchange for a single unit of Currency II.
B. If principal is to increase when the Base Exchange Rate exceeds the
Spot Rate, and if principal is to decrease when the Base Exchange Rate is less
than the Spot Rate, the formula to determine the principal amount of a
Currency Indexed Note payable at Maturity shall equal:
Principal Amount + (Principal Amount x F x [Base Exchange Rate -- Spot Rate])
---------------------------------
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will
purchase Currency I in exchange for a single unit of Currency II.
Interest
A. If interest is to increase when the Spot Rate exceeds the Base
Exchange Rate, and if interest is to decrease when the Spot Rate is less than
the Base Exchange Rate, the formula to determine the interest rate payable on
any Interest Payment Date on a Currency Indexed Note shall equal:
Stated Interest Rate + F x (Spot Rate -- Base Exchange Rate)
---------------------------------
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will sell
Currency I in exchange for a single unit of Currency II.
B. If interest is to increase when the Base Exchange Rate exceeds the
Spot Rate, and if interest is to decrease when the Base Exchange Rate is less
than the Spot Rate, the formula to determine the interest rate payable on any
Interest Payment Date on a Currency Indexed Note shall equal:
Stated Interest Rate + F x (Base Exchange Rate -- Spot Rate)
---------------------------------
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will
purchase Currency I in exchange for a single unit of Currency II.
In each of the above formulas "F" will be the leverage factor, if any,
used in such formula.
An investment in Notes indexed, as to principal or interest or both, to
one or more values of currency indices (including exchange rates between
currencies) entails significant risks that are not associated with similar
investments in a conventional fixed-rate debt security. If the interest rate
of such a Note is so indexed, it may result in an interest rate that is less
than that payable on a conventional fixed-rate debt security issued at the
same time, including the possibility that no interest will be paid, and, if
the principal amount of such a Note is so indexed, the principal amount
payable at Maturity may be less than the original purchase price of such Note
if allowed pursuant to the terms of such Note, including the possibility that
no principal will be paid. The secondary market for such Notes will be
affected by a number of factors, independent of the creditworthiness of the
Company and the value of the applicable currency index, including the
volatility of the applicable currency index, the time remaining to the
maturity of such Notes, the amount outstanding of such Notes and market
interest rates. The value of the applicable currency index depends on a
number of interrelated factors, including economic, financial and political
events, over which the Company has no control. Additionally, if the formula
used to determine the principal amount or interest payable with respect to
such Notes contains a multiple or leverage factor, the effect of any change in
the applicable currency index may be increased. The historical experience of
the relevant currency indices should not be taken as an indication of future
performance of such currency indices during the term of any Note.
Accordingly, prospective investors should consult their own financial and
legal advisors as to the risks entailed by an investment in such Notes and the
suitability of such Notes in light of their particular circumstances.
Commodity Indexed Notes
The Pricing Supplement relating to a Commodity Indexed Note will set
forth the method by which the amount of interest payable and the amount
payable at Stated Maturity in respect of such Commodity Indexed Note will be
determined, the tax consequences to holders of Commodity Indexed Notes, a
description of certain risks associated with investments in Commodity Indexed
Notes and other information relating to such Commodity Indexed Notes.
Original Issue Discount Notes
The Company may from time to time offer Original Issue Discount Notes.
The Pricing Supplement applicable to certain Original Issue Discount Notes may
provide that Holders of such Notes will not receive periodic payments of
interest. For purposes of determining whether Holders of the requisite
principal amount of Notes outstanding under the Senior Indenture have made a
demand or given a notice or waiver or taken any other action, the outstanding
principal amount of Original Issue Discount Notes shall be deemed to be the
amount of the principal that would be due and payable upon declaration of
acceleration of the Stated Maturity thereof as of the date of such
determination. See "General."
"Original Issue Discount Note" means, (i) a Note that has a stated
redemption price at Maturity that exceeds its issue price by at least 0.25% of
its stated redemption price at maturity multiplied by the number of full years
from the Original Issue Date to the Stated Maturity for such Notes and (ii)
any other Note designated by the Company as issued with original issue
discount for U.S. Federal income tax purposes.
Amortizing Notes
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Note
("Amortizing Notes"). Interest on each Amortizing Note will be computed as
set forth in the applicable Pricing Supplement or in the Book-Entry Note
representing such Amortizing Note. Unless otherwise provided in such Pricing
Supplement or in such Book-Entry Note, payments with respect to Amortizing
Notes will be applied first to interest due and payable thereon and then to
the reduction of the unpaid principal amount thereof. A table setting forth
repayment information with respect to each Amortizing Note will be provided to
the original purchaser of such Note and will be available upon request to the
subsequent Holders thereof.
Reset Notes
The Pricing Supplement relating to each Note as to which the Company has
the option with respect to such Note to reset the interest rate, in the case
of a Fixed Rate Note, or to reset the Spread and/or Spread Multiplier, in the
case of a Floating Rate Note (in each case, a "Reset Note"), will indicate (i)
the date or dates on which such interest rate or such Spread and/or Spread
Multiplier, as the case may be, may be reset (each an "Optional Interest Reset
Date") and (ii) the basis or formula, if any, for such resetting.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 calendar days
prior to an Optional Interest Reset Date for such Note. If the Company so
notifies the Trustee of such exercise, the Trustee will send, not later than
40 calendar days prior to such Optional Interest Reset Date, by telegram,
telex, facsimile transmission, hand delivery or letter (first class, postage
prepaid) to the Holder of such Note a notice (the "Reset Notice") indicating
(i) that the Company has elected to reset the interest rate, in the case of a
Fixed Rate Note, or the Spread and/or Spread Multiplier, in the case of a
Floating Rate Note, (ii) such new interest rate or such new Spread and/or
Spread Multiplier, as the case may be, and (iii) the provisions, if any, for
redemption during the period from such Optional Interest Reset Date to the
next Optional Interest Reset Date or, if there is no such next Optional
Interest Reset Date, to the Stated Maturity of such Note (each such period a
"Subsequent Interest Period"), including the date or dates on which or the
period or periods during which and the price or prices at which such
redemption may occur during such Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 calendar days prior
to an Optional Interest Reset Date for a Note, the Company may, at its
option, revoke the interest rate, in the case of a Fixed Rate Note, or the
Spread and/or Spread Multiplier, in the case of a Floating Rate Note,
provided for in the Reset Notice and establish a higher interest rate, in
the case of a Fixed Rate Note, or a Spread and/or Spread Multiplier
resulting in a higher interest rate, in the case of a Floating Rate Note,
for the Subsequent Interest Period commencing on such Optional Interest
Reset Date by causing the Trustee to send by telegram, telex, facsimile
transmission, hand delivery or letter (first class, postage prepaid) notice
of such higher interest rate or Spread and/or Spread Multiplier resulting
in a higher interest rate, as the case may be, to the Holder of such Note.
Such notice shall be irrevocable. All Notes with respect to which the
interest rate or Spread and/or Spread Multiplier is reset on an Optional
Interest Reset Date will bear such higher interest rate, in the case of a
Fixed Rate Note, or Spread and/or Spread Multiplier resulting in a higher
interest rate, in the case of a Floating Rate Note, whether or not tendered
for repayment as provided in the next paragraph.
If the Company elects prior to an Optional Interest Reset Date to
reset the interest rate or the Spread and/or Spread Multiplier of a Note,
the Holder of such Note will have the option to elect repayment of such
Note by the Company on such Optional Interest Reset Date at a price equal
to the principal amount thereof plus any accrued interest to such Optional
Interest Reset Date. In order for a Note to be so repaid on an Optional
Interest Reset Date, the Holder thereof must follow the procedures set
forth below under "Redemption and Repayment" for optional repayment, except
that the period for delivery of such Note or notification to the Trustee
shall be at least 25 but not more than 35 calendar days prior to such
Optional Interest Reset Date. A Holder who has tendered a Note for
repayment following receipt of a Reset Notice may revoke such tender for
repayment by written notice to the Trustee received prior to 5:00 P.M., New
York City time, on the tenth calendar day prior to such Optional Interest
Reset Date.
Extension of Maturity
The Pricing Supplement relating to each Note as to which the Company
has the option to extend the Stated Maturity of such Note for one or more
periods of from one to five whole years (each an "Extension Period") up to
but not beyond the date (the "Final Maturity Date"), will set forth each
applicable Extension Period and the Final Maturity Date.
The Company may exercise such option with respect to a Note by
notifying the Trustee of such exercise at least 45 but not more than 60
calendar days prior to the Stated Maturity of such Note in effect prior to
the exercise of such option (the "Original Stated Maturity Date"). If the
Company so notifies the Trustee of such exercise, the Trustee will send,
not later than 40 calendar days prior to the Original Stated Maturity Date,
by telegram, telex, facsimile transmission, hand delivery or letter (first
class, postage prepaid), to the Holder of such Note a notice (the
"Extension Notice") relating to such Extension Period, indicating (i) that
the Company has elected to extend the Stated Maturity of such Note, (ii)
the new Stated Maturity, (iii) in the case of a Fixed Rate Note, the
interest rate applicable to the Extension Period or, in the case of a
Floating Rate Note, the Spread and/or Spread Multiplier applicable to the
Extension Period, and (iv) the provisions, if any, for redemption during
the Extension Period, including the date or dates on which or the period or
periods during which and the price or prices at which such redemption may
occur during the Extension Period. Upon the sending by the Trustee of an
Extension Notice to the Holder of a Note, the Stated Maturity of such Note
shall be extended automatically, and, except as modified by the Extension
Notice and as described in the next two paragraphs, such Note will have the
same terms as prior to the sending of such Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior
to the Original Stated Maturity Date of a Note, the Company may, at its
option, revoke the interest rate, in the case of a Fixed Rate Note, or the
Spread and/or Spread Multiplier, in the case of a Floating Rate Note,
provided for in the Extension Notice and establish a higher interest rate,
in the case of a Fixed Rate Note, or a Spread and/or Spread Multiplier
resulting in a higher interest rate, in the case of a Floating Rate Note,
for the Extension Period by causing the Trustee to send by telegram, telex,
facsimile transmission, hand delivery or letter (first class, postage
prepaid) notice of such higher interest rate or Spread and/or Spread
Multiplier resulting in a higher interest rate, as the case may be, to the
Holder of such Note. Such notice shall be irrevocable. All Notes with
respect to which the Stated Maturity is extended will bear such higher
interest rate, in the case of a Fixed Rate Note, or Spread and/or Spread
Multiplier resulting in a higher interest rate, in the case of a Floating
Rate Note, for the Extension Period, whether or not tendered for repayment
as provided in the next paragraph.
If the Company elects to extend the Stated Maturity of a Note, the
Holder of such Note will have the option to elect repayment of such Note by
the Company on the Original Stated Maturity Date at a price equal to the
principal amount thereof plus any accrued and unpaid interest to such date.
In order for a Note to be so repaid on the Original Stated Maturity Date,
the Holder thereof must follow the procedures set forth below under
"Redemption and Repayment" for optional repayment, except that the period
for delivery of such Note or notification to the Trustee shall be at least
25 but not more than 35 calendar days prior to the Original Stated Maturity
Date. A Holder who has tendered a Note for repayment following receipt of
an Extension Notice may revoke such tender for repayment by written notice
to the Trustee received prior to 5:00 P.M., New York City time, on the
tenth calendar day prior to the Original Stated Maturity Date.
Renewable Notes
The applicable Pricing Supplement will indicate that a Note (other than
an Amortizing Note) will mature at its Original Stated Maturity Date unless
the term of all or any portion of any such Note is renewed by the Holder in
accordance with the procedures, if any, described in such Pricing Supplement.
Combination of Provisions
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "Reset Notes," "Extension of Maturity" and "Renewable
Notes."
Redemption and Repayment
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be subject to any sinking fund. The Notes will be
redeemable at the option of the Company prior to the Stated Maturity only
if an Initial Redemption Date is specified in the applicable Pricing
Supplement ("Initial Redemption Date"). If so specified, the Notes will be
subject to redemption at the option of the Company on any date on and after
the applicable Initial Redemption Date in whole or from time to time in
part in increments of $1,000 or the minimum denomination specified in such
Pricing Supplement (provided that any remaining principal amount thereof
shall be an authorized denomination), at the applicable Redemption Price
(as defined below) on notice given not more than 60 nor less than 30 days
prior to the date of redemption and in accordance with the provisions of
the Senior Indenture. "Redemption Price," with respect to a Note, means an
amount equal to the sum of (i) the Initial Redemption Percentage specified
in such Pricing Supplement (as adjusted by the Annual Redemption Percentage
Reduction, if applicable (as specified in such Pricing Supplement))
multiplied by the unpaid principal amount or the portion to be redeemed
plus (ii) accrued interest to the date of redemption. The Initial
Redemption Percentage, if any, applicable to a Note shall decline at each
anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the
Redemption Price is equal to 100% of the unpaid principal amount thereof or
the portion thereof to be redeemed.
The Pricing Supplement relating to each Note will indicate either that
such Note cannot be repaid prior to Stated Maturity or that such Note will be
repayable at the option of the Holder on a date or dates specified prior to
Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
In order for a Note that is repayable at the option of the Holder to
be repaid prior to Stated Maturity, the Paying Agent (initially, the
Company has appointed the Trustee as Paying Agent) must receive at least 30
but not more than 45 calendar days prior to the repayment date (i) the Note
with the form entitled "Option to Elect Repayment" on the reverse of the
Note duly completed or (ii) a telegram, telex, facsimile transmission, hand
delivery or letter (first class, postage prepaid) from a member of a
national securities exchange or the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States
setting forth the name of the Holder of the Note, the principal amount of
the Note, the principal amount of the Note to be repaid, the certificate
number or a description of the tenor and terms of the Note, a statement
that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid with the form entitled "Option to
Elect Repayment" on the reverse of the Note duly completed will be received
by the Trustee not later than five Business Days after the date of such
telegram, telex, facsimile transmission, hand delivery or letter (first
class, postage prepaid). If the procedure described in clause (ii) of the
preceding sentence is followed, such Note and form duly completed must be
received by the Trustee by such fifth Business Day. Exercise of the
repayment option by the Holder of a Note shall be irrevocable, except that
a Holder who has tendered a Note for repayment may revoke such tender for
repayment by written notice to the Paying Agent received prior to the close
of business on the tenth calendar day prior to the repayment date. The
repayment option may be exercised by the Holder of a Note for less than the
entire principal amount of the Note provided that the principal amount of
the Note remaining outstanding after such repayment is an authorized
denomination.
While the Book-Entry Notes are represented by the Global Security or
Securities held by or on behalf of the U.S. Depositary, and registered in the
name of the U.S. Depositary or the U.S. Depositary's nominee, the option for
repayment may be exercised by the applicable Participant (as defined herein)
that has an account with the U.S. Depositary, on behalf of the beneficial
owners of the Global Security or Securities representing such Book-Entry
Notes, by delivering a written notice substantially similar to the above
mentioned form to the Trustee at its Corporate Trust Office (or such other
address of which the Company shall from time to time notify the Holders), not
more than 60 nor less than 30 days prior to the date of repayment. Notices of
elections from Participants on behalf of beneficial owners of the Global
Security or Securities representing such Book-Entry Notes to exercise their
option to have such Book-Entry Notes repaid must be received by the Trustee by
5:00 P.M., New York City time, on the last day for giving such notice. In
order to ensure that a notice is received by the Trustee on a particular day,
the beneficial owner of the Global Security or Securities representing such
Book-Entry Notes must so direct the applicable Participant before such
Participant's deadline for accepting instructions for that day. Different
firms may have different deadlines for accepting instructions from their
customers. Accordingly, beneficial owners of the Global Security or
Securities representing Book-Entry Notes should consult the Participants
through which they own their interest therein for the respective deadlines for
such Participants. All notices shall be executed by a duly authorized officer
of such Participant (with signatures guaranteed) and shall be irrevocable. In
addition, beneficial owners of the Global Security or Securities representing
Book-Entry Notes shall effect delivery at the time such notices of election
are given to the U.S. Depositary by causing the applicable Participant to
transfer such beneficial owner's interest in the Global Security or Securities
representing such Book-Entry Notes, on the U.S. Depositary's records, to the
Trustee. See "Book-Entry System."
If applicable, the Company will comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, as amended, and any other
securities laws or regulations in connection with any such repayment.
Repurchase
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, surrendered to the Trustee for
cancellation.
Other Provisions
Any provisions with respect to the determination of an Interest Rate
Basis, the specifications of Interest Rate Basis, calculation of the interest
rate applicable to, or the principal payable at Maturity on, any Note, its
Interest Payment Dates or any other matter relating thereto may be modified by
the terms as specified under "Other Provisions" on the face of such Note, or
in an Annex relating thereto if so specified on the face thereof, and in the
applicable Pricing Supplement.
Book-Entry System
DTC will act as securities depositary for the Book-Entry Notes. The
Book-Entry Notes will be issued as fully-registered securities registered
in the name of Cede & Co. (DTC's partnership nominee). One fully-
registered Global Security will be issued for each issue of the Notes, in
the aggregate principal amount of such issue, and will be deposited with
D.C. If, however, the aggregate principal amount of any issue exceeds the
maximum principal amount authorized by DTC, one Global Security will be
issued with respect to such maximum principal amount and an additional
Global Security will be issued with respect to any remaining principal
amount of such issue.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended. DTC holds
securities that its participants ("Participants") deposit with D.C. DTC
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants ("Direct Participants") include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is owned by a number of
its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to DTC's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Book-Entry Notes under DTC's system must be made by or
through Direct Participants, which will receive a credit for the Book-Entry
Notes on DTC's records. The ownership interest of each actual purchaser of
each Book-Entry Note (the "Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details of
the transactions, as well as periodic statements of their holdings, from
the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the
Book-Entry Notes are to be accomplished by entries made on the books of
Participants acting on behalf of the Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in
Book-Entry Notes, except in the event that use of the book-entry system for
one or more Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Global Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Book-Entry Notes; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Book-Entry Notes are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, DTC's current practice is
to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to
Book-Entry Notes. Under its usual procedures, DTC will mail an "Omnibus
Proxy" to the Company as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Book-Entry Notes will be made
to D.C. DTC's practice is to credit Direct Participants' accounts on the
payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment
on the payable date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as in the case
of securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of DTC or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to DTC is the responsibility of the Company,
disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry
Notes purchased or tendered, through its Participant, to the Paying Agent,
and shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Book-Entry Notes,
on DTC's records, to the Paying Agent. The requirement for physical
delivery of Book-Entry Notes in connection with a demand for purchase or a
mandatory purchase will be deemed satisfied when the ownership rights in
the Book-Entry Notes are transferred by a Direct Participant on DTC's
records.
DTC may discontinue providing its services as securities depositary
with respect to the Book-Entry Notes at any time by giving reasonable
notice to the Company or the Agents. Under such circumstances, in the
event that a successor securities depositary is not obtained, Certificated
Notes will be printed and delivered in exchange for the Book-Entry Notes
represented by the Global Securities held by DTC.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Certificated Notes will be printed and delivered in exchange for the
Book-Entry Notes represented by the Global Securities held by DTC.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
Neither the Company, the Trustee, any Paying Agent nor the registrar for
the Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
Defeasance
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will be subject to defeasance and discharge as described under
"Description of the Securities-Defeasance and Covenant Defeasance" in the
Prospectus.
SPECIAL PROVISIONS RELATING TO MULTI-CURRENCY NOTES
General
Unless otherwise indicated in the applicable Pricing Supplement, the
Notes will be denominated in U.S. dollars and payments of principal of,
premium (if any) and interest on the Notes will be made in U.S. dollars. If
any of the Notes are to be denominated in a currency or currency unit other
than U.S. dollars, the following provisions shall apply, which are in addition
to, and to the extent inconsistent therewith replace, the description of
general terms and provisions of Notes set forth in the accompanying Prospectus
and elsewhere in this Prospectus Supplement.
Multi-Currency Notes are issuable in registered form only, without
coupons. The authorized denominations for Multi-Currency Notes will be
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, payment of the purchase price of
Multi-Currency Notes will be made in immediately available funds.
Currencies
Unless otherwise indicated in the applicable Pricing Supplement,
purchasers are to pay for Multi-Currency Notes in the Specified Currency in
immediately available funds. At the present time there are limited facilities
in the United States for converting U.S. dollars into the Specified Currencies
and vice versa, and banks do not offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested by a
prospective purchaser of a Multi-Currency Note on or prior to the fifth
Business Day preceding the date of delivery of the Multi-Currency Note, or by
such other day as determined by the Agent who presented such offer to purchase
the Multi-Currency Note to the Company, such Agent is prepared to arrange for
the conversion of U.S. dollars into the applicable Specified Currency to
enable such purchaser to pay for the Multi-Currency Notes. Each such
conversion will be made by the Agent on such terms and subject to such
conditions, limitations and charges as the Agent may from time to time
establish in accordance with its regular foreign exchange practices. All
costs of exchange will be borne by the purchasers of the Multi-Currency Notes.
Specific information about the foreign currency or currency unit in which
a particular Multi-Currency Note is denominated, including historical exchange
rates and a description of the currency and any exchange controls, will be set
forth in the applicable Pricing Supplement. See "Risk Factors-Foreign
Currency Risks."
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, payments
of interest and principal (and premium, if any) with respect to any
Multi-Currency Note will be made by wire transfer to such account with a bank
located in the country issuing the Specified Currency (or, with respect to
Multi-Currency Notes denominated in ECUs, Brussels) or other jurisdiction
acceptable to the Company and the Trustee as shall have been designated at
least 15 days prior to the Interest Payment Date or Maturity, as the case may
be, by the Holder of such Multi-Currency Note on the relevant Regular Record
Date or at Maturity, provided that, in the case of payment of principal of
(and premium, if any) and any interest due at Maturity, the Multi-Currency
Note is presented to the Paying Agent in time for the Paying Agent to make
such payments in such funds in accordance with its normal procedures. Such
designation shall be made by filing the appropriate information with the
Trustee at its Corporate Trust Office, and, unless revoked, any such
designation made with respect to any Multi-Currency Note by a Holder will
remain in effect with respect to any further payments with respect to such
Multi-Currency Note payable to such Holder. If a payment with respect to any
such Multi-Currency Note cannot be made by wire transfer because the required
designation has not been received by the Trustee on or before the requisite
date or for any other reason, a notice will be mailed to the Holder at its
registered address requesting a designation pursuant to which such wire
transfer can be made and, upon the Trustee's receipt of such a designation,
such payment will be made within 15 days of such receipt. The Company will pay
any administrative costs imposed by banks in connection with making payments
by wire transfer, but any tax, assessment or governmental charge imposed upon
payments will be borne by the Holders of the Multi-Currency Notes in respect
of which such payments are made.
If so specified in the applicable Pricing Supplement, except as provided
below, payments of interest and principal (and premium, if any) with respect
to any Multi-Currency Note will be made in U.S. dollars if the Holder of such
Multi-Currency Note on the relevant Regular Record Date or at Maturity, as the
case may be, has transmitted a written request for such payment in U.S.
dollars to the Paying Agent at its principal office on or prior to such
Regular Record Date or the date 15 days prior to Maturity, as the case may be.
Such request may be delivered by mail, by hand or by cable, telex or any other
form of facsimile transmission.
Any such request made with respect to any Multi-Currency Note by a Holder
will remain in effect with respect to any further payments of interest and
principal (and premium, if any) with respect to such Multi-Currency Note
payable to such Holder, unless such request is revoked by written notice
received by the Paying Agent on or prior to the relevant Regular Record Date
or the date 15 days prior to Maturity, as the case may be (but no such
revocation may be made with respect to payments made on any such
Multi-Currency Note if an Event of Default has occurred with respect thereto
or upon the giving of a notice of redemption). Holders of Multi-Currency
Notes whose Multi-Currency Notes are registered in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in U.S. dollars may be made.
The U.S. dollar amount to be received by a Holder of a Multi-Currency
Note who elects to receive payments in U.S. dollars will be based on the
highest indicated bid quotation for the purchase of U.S. dollars in exchange
for the Specified Currency obtained by the Currency Determination Agent (as
defined below) at approximately 11:00 A.M., New York City time, on the second
Business Day next preceding the applicable payment date (the "Conversion
Date") from the bank composite or multicontributor pages of the Quoting Source
for three (or two if three are not available) major banks in The City of New
York. The first three (or two) such banks selected by the Currency
Determination Agent which are offering quotes on the Quoting Source will be
used. If fewer than two such bid quotations are available at 11:00 A.M., New
York City time, on the second Business Day next preceding the applicable
payment date, such payment will be based on the Market Exchange Rate as of the
second Business Day next preceding the applicable payment date. If the Market
Exchange Rate for such date is not then available, such payment will be made
in the Specified Currency. As used herein, the "Quoting Source" means Reuters
Monitor Foreign Exchange Service, or if the Currency Determination Agent
determines that such service is not available, Telerate Monitor Foreign
Exchange Service, or if the Currency Determination Agent determines that
neither service is available, such comparable display or other comparable
manner of obtaining quotations as shall be agreed between the Company and the
Currency Determination Agent. All currency exchange costs associated with any
payment in U.S. dollars on any such Multi-Currency Note will be borne by the
Holder thereof by deductions from such payment. The currency determination
agent (the "Currency Determination Agent") with respect to any Multi-Currency
Notes will be specified in the applicable Pricing Supplement for such
Multi-Currency Notes. If payment in respect of a Multi-Currency Note is
required to be made in any currency unit (e.g. ECUs) and such currency unit
is unavailable, in the good faith judgment of the Company, due to the
imposition of exchange controls or other circumstances beyond the Company's
control, then all payments in respect of such Multi-Currency Note shall be
made in U.S. dollars until such currency unit is again available. The amount
of each payment of U.S. dollars shall be computed on the basis of the
equivalent of the currency unit in U.S. dollars, which shall be determined by
the Currency Determination Agent on the following basis. The component
currencies of the currency unit for this purpose (the "Component Currencies")
shall be the currency amounts that were components of the currency unit as of
the Conversion Date. The equivalent of the currency unit in U.S. dollars
shall be calculated by aggregating the U.S. dollar equivalents of the
Component Currencies. The U.S. dollar equivalent of each of the Component
Currencies shall be determined by the Currency Determination Agent on the
basis of the Market Exchange Rate for each such Component Currency as of the
Conversion Date. "Market Exchange Rate" means the noon buying rate in The City
of New York for cable transfers of such Specified Currency as certified for
customs purposes by the Federal Reserve Bank of New York.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of that currency as a
Component Currency shall be divided or multiplied in the same proportion. If
two or more Component Currencies are consolidated into a single currency, the
amounts of those currencies as Component Currencies shall be replaced by an
amount in such single currency equal to the sum of the amounts of the
consolidated Component Currencies expressed in such single currency. If any
Component Currency is divided into two or more currencies, the amount of the
original Component Currency shall be replaced by the amounts of such two or
more currencies, the sum of which shall be equal to the amount of the original
Component Currency.
All determinations referred to above made by the Currency Determination
Agent shall be at its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and binding on Holders of Multi-Currency
Notes.
Outstanding Multi-Currency Notes
For purposes of calculating the principal amount of any Multi-Currency
Note payable in a Specified Currency for any purpose under the Indenture, the
principal amount of such Multi-Currency Note at any time outstanding shall be
deemed to be the U.S. dollar equivalent, at the Market Exchange Rate
determined as of the date of the original issuance of such Multi-Currency
Note, of the principal amount of such Multi-Currency Note.
RISK FACTORS
Forward Looking Statements
This Prospectus Supplement, the Prospectus it supplements and the
documents incorporated therein contain statements that constitute forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements regarding, among other matters, the
intent, belief, or current expectations of the Company or its officers with
respect to (i) Plan 2000, future aspects of the 1992 Growth Plan, or other
plans and objectives; (ii) the Company's proposed capital expenditures,
employment levels, financing, or other matters; (iii) the Company's
anticipated responsibility and liability for certain activities; (iv)
potential transactions and other agreements with third parties; (v) the
adequacy of the Company's insurance, available cash reserves, access to debt,
and other factors affecting the Company's ability to meet future obligations,
known and unknown; or (vi) industry trends, government regulations, or other
factors affecting the Company's financial condition, results of operations,
cash flow or liquidity.
Prospective investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve known and
unknown risks, uncertainties, and other factors that may cause actual results
to differ materially from the future results expressed or implied in such
forward looking statements. Such factors include general economic and
business conditions, changes in railroad industry capacity and competition,
cooperation from labor unions, environmental authorities and other relevant
third parties, changes in tax laws and other laws and regulations affecting
the Company and its principal investors, and other factors which are described
in further detail in the Company's filings with the Securities and Exchange
Commission.
Foreign Currency Risks
Exchange Rates and Exchange Controls
An investment in Multi-Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of
significant changes in the rate of exchange between the U.S. dollar and the
Specified Currency and the possibility of the imposition or modification of
foreign exchange controls by either the United States or foreign governments.
Such risks generally depend on economic and political events over which the
Company has no control. In recent years, rates of exchange between the U.S.
dollar and certain foreign currencies have been highly volatile and such
volatility may be expected in the future. The exchange rate between the U.S.
dollar and a foreign currency or currency unit is at any moment a result of
the supply of and demand for such currencies, and changes in the rate result
over time from the interaction of many factors, among which are rates of
inflation, interest rate levels, balances of payments and the extent of
governmental surpluses or deficits in the countries of such currencies. These
factors are in turn sensitive to the monetary, fiscal and trade policies
pursued by such governments and those of other countries important to
international trade and finance. Fluctuations in any particular exchange rate
that have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Multi-Currency
Note. Depreciation of the Specified Currency applicable to a Multi-Currency
Note against the U.S. dollar would result in a decrease in the U.S.
dollar-equivalent yield of such Note, in the U.S. dollar-equivalent value of
the principal repayable at Maturity of such Note and, generally, in the U.S.
dollar-equivalent market value of such Note.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed noncommunist nations are
permitted to fluctuate in value relative to the U.S. dollar. Sovereign
governments, however, rarely voluntarily allow their currencies to float
freely in response to economic forces. In fact, such governments use a variety
of techniques, such as intervention by a country's central bank or imposition
of regulatory controls or taxes, to affect the exchange rate of their
currencies. Governments may also issue a new currency to replace an existing
currency or alter the exchange rate or relative exchange characteristics by
devaluation or revaluation of a currency. Thus, a special risk in purchasing
Notes that are denominated in a foreign currency or currency unit is that
their U.S. dollar-equivalent yields could be affected by governmental actions
which could change or interfere with a theretofore freely determined currency
valuation, by fluctuations in response to other market forces and by the
movement of currencies across borders. There will be no adjustment or change
in the terms of the Multi-Currency Notes in the event that exchange rates
should become fixed, or in the event of any devaluation or revaluation or
imposition of exchange or other regulatory controls or taxes, or in the event
of other developments, affecting the U.S. dollar or any applicable currency or
currency unit.
THE PROSPECTUS, INCLUDING THIS PROSPECTUS SUPPLEMENT, DOES NOT DESCRIBE
ALL RISKS OF AN INVESTMENT IN MULTI-CURRENCY NOTES THAT RESULT FROM SUCH NOTES
BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY UNIT EITHER AS SUCH RISKS
EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE
FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL
AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN MULTI-CURRENCY
NOTES. MULTI-CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS
WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise indicated in the applicable Pricing Supplement,
Multi-Currency Notes will not be sold in, or to residents of, the country of
the Specified Currency in which particular Multi-Currency Notes are
denominated. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents, and the
Company disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, premium, if any, and interest on Multi-Currency Notes. Such
persons should contact their own legal advisors with regard to such matters.
Judgments
The Notes will be governed by and construed in accordance with the laws
of the State of New York. A judgment for money damages by courts in the
United States, including money damages based on an obligation expressed in a
foreign currency, will ordinarily be rendered only in U.S. dollars. New York
statutory law provides that in an action based on an obligation expressed in a
currency other than U.S. dollars a court shall render a judgment or decree in
the foreign currency of the underlying obligation and that the judgment or
decree shall be converted into U.S. dollars at the exchange rate prevailing on
the date of entry of the judgment or decree.
Exchange Controls, Etc.
Governments have imposed from time to time exchange controls and may in
the future impose or revise exchange controls at or prior to a Note's
Maturity. Even if there are no exchange controls, it is possible that the
Specified Currency for any particular Multi-Currency Note would not be
available at such Note's Maturity. In that event, the Company will pay in
U.S. dollars on the basis of the Market Exchange Rate on the second day prior
to such payment, or if such Market Exchange Rate is not then available, on the
basis of the most recently available Market Exchange Rate. See "Special
Provisions Relating to Multi-Currency Notes--Payment of Principal and
Interest."
An applicable Pricing Supplement with respect to the applicable Specified
Currency (which includes information with respect to applicable current
foreign exchange controls, if any) will be delivered and will become part of
this Prospectus and Prospectus Supplement. The information concerning
exchange rates is furnished as a matter of information only and should not be
regarded as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the principal United States federal
income tax consequences of the acquisition, ownership and disposition of the
Notes to initial holders purchasing Notes at the "issue price" (as defined
below). This summary is based on the Internal Revenue Code of 1986, as amended
to the date hereof (the "Code"), administrative pronouncements, judicial
decisions, and existing, proposed and temporary Treasury Regulations,
including regulations which set forth rules applicable to debt instruments
issued with original issue discount (the "OID Regulations"), changes to any of
which subsequent to the date of this Prospectus Supplement may affect the tax
consequences described herein.
This summary discusses only the principal United States federal income
tax consequences to those holders holding Notes as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to a holder in light of the holder's
particular circumstances or to holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities or
foreign currencies, persons holding Notes as part of a "straddle" or
"conversion transaction" as these terms are defined in Sections 1092 and 1258
of the Code, respectively, persons holding Notes as a hedge against, or which
are hedged against, currency risks, or holders whose functional currency (as
defined in Section 985 of the Code) is not the United States dollar. Further,
this summary does not discuss Original Issue Discount Notes (as defined below)
which qualify as "applicable high-yield discount obligations" under Section
163(i) of the Code. Holders of Original Issue Discount Notes which are
applicable high-yield discount obligations may be subject to special rules.
Persons considering the purchase of Notes should consult their tax
advisors with regard to the application of the United States federal income
tax laws to their particular situations as well as any tax consequences to
them arising under the laws of any state, local or foreign taxing
jurisdiction.
Tax Consequences to United States Holders
As used herein, the term "United States Holder" means a beneficial owner
of a Note who or which is for United States federal income tax purposes either
(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) an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source. The term also includes certain former citizens of
the United States whose income and gain on the Notes will be subject to United
States taxation.
Payments of Interest
Interest paid on a Note, to the extent considered "qualified stated
interest" (as defined below), will generally be taxable to a United States
Holder as ordinary interest income at the time it accrues or is received in
accordance with the United States Holder's method of accounting for United
States federal income tax purposes. Interest paid on a Note that is not
considered qualified stated interest will be taxed in the manner described
below under "Original Issue Discount Notes."
Original Issue Discount Notes
United States Holders of Original Issue Discount Notes that mature more
than one year from then date of issuance will be required to include original
issue discount in income for federal income tax purposes as it accrues, in
accordance with a constant yield method based on a compounding of interest,
before the receipt of cash payments attributable to such income. Under this
method, United States Holders of Original Issue Discount Notes generally will
be required to include in income increasingly greater amounts of original
issue discount in successive accrual periods.
The amount of original issue discount on a Note is equal to the excess of
the "stated redemption price at maturity" of the Note over the "issue price"
of the Note. The "issue price" of a Note will equal the first price at which
a substantial amount of Notes of the same issue is sold for money (excluding
sales to bond houses, brokers or similar persons or organizations acting in
the capacity of underwriters, placement agents or wholesalers). The "stated
redemption price at maturity" of a Note will equal the sum of all payments
required under the Note other than certain contingent payments and "qualified
stated interest" payments. "Qualified stated interest" is stated interest
unconditionally payable as a series of payments in cash or property (other
than debt instruments of the issuer) at least annually during the entire term
of the Note and equal to the outstanding principal balance of the Note
multiplied by a single fixed rate of interest, one or more qualified floating
rates of interest, an objective rate, or certain combinations thereof. 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 apply if a Floating Rate Note bears
interest at an objective rate and it is reasonably expected that the average
value of the rate during the first half of the Note's term will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the Note's term. 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.
Final Treasury Regulations issued on June 14, 1996 (the "1996 OID
Regulations") address, among other things, the accrual of original discount
on, and the character of gain realized on the sale, exchange or retirement of,
debt instruments providing for contingent payments. The 1996 OID Regulations
generally apply only to contingent payment debt instruments issued on or after
August 13, 1996. Prospective Holders of Indexed Notes or Floating Rate Notes
providing for contingent payments should refer to the discussion regarding
taxation in the applicable Pricing Supplement and should consult their tax
advisers regarding the federal income tax consequences of the ownership and
disposition of such Notes.
If the difference between a Note's stated redemption price at maturity
and its issue price is less than a specified de minimis amount, equal to .0025
multiplied by the product of the stated redemption price at maturity and the
number of complete years to maturity (or, in the case of a Note providing for
payments prior to maturity of amounts included in its stated redemption price
at maturity, the weighted average maturity), then the Note will not be
considered to have original issue discount. United States Holders of Notes
with original issue discount less than such de minimis amount will generally
include such de minimis original issue discount in income as capital gain on a
pro rata basis as principal payments are made on the Notes.
In the case of an Original Issue Discount Note that has a fixed maturity
date one year or less from its date of issuance (a "Short-Term Original Issue
Discount Note"), a United States Holder of such a Note that uses the cash
method of accounting generally is not required to accrue original issue
discount for United States federal income tax purposes unless such Holder
elects to do so for all Short-Term Original Issue Discount Notes acquired on
or after the first day of the first tax year to which such election applies.
United States Holders who make such an election, United States Holders who
report income for federal income tax purposes on an accrual method and certain
other United States Holders, including banks and dealers in securities, are
required to include original issue discount in income on such Short-Term
Original Issue Discount Notes as it accrues on a straight-line basis, unless
an election is made with respect to a particular obligation to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of such a taxpayer, original issue discount is
determined by including all payments due on the instrument, including payments
of qualified stated interest, in the stated redemption price at maturity.
In the case of a United States Holder who is not required, and does not
elect, to include the original issue discount in income currently, stated
interest generally will be taxable at the time it is received and any gain
realized on the sale, exchange or retirement of the Short-Term Original Issue
Discount Note will be ordinary income to the extent of the original issue
discount accrued on a straight-line basis (or, if elected, according to a
constant yield method based on daily compounding) through the date of sale,
exchange or retirement. In addition, such Holders will be required to defer
deductions for all or a portion of any interest paid on indebtedness incurred
or continued to purchase or carry Short-Term Original Issue Discount Notes in
an amount not exceeding the sum of the accrued original issue discount not
previously included in income and the amount of any interest not included in
original issue discount which accrues during the tax year while the taxpayer
held the obligation but which is not included in the taxpayer's income by
reason of the taxpayer's method of accounting.
Under the OID Regulations, 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 a constant yield method
based on the compounding of interest.
Certain of the Original Issue Discount Notes may be redeemed prior to
maturity. Original Issue Discount Notes containing such a feature may be
subject to rules that differ from the general rules discussed above.
Purchasers of Original Issue Discount Notes with such a feature should
carefully examine the applicable Pricing Supplement and should consult their
tax advisors with respect to such a feature since the tax consequences with
respect to original issue discount will depend, in part, on the particular
terms and the particular features of the purchased Note.
The OID Regulations contain certain language ("aggregation rules")
stating in general that, with some exceptions, if more than one type of Note
is issued in connection with the same transaction or related transactions,
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 an original issue discount.
Unless otherwise provided in the applicable Pricing Supplement, the Company
does not expect to treat different types of Notes as being subject to the
aggregation rules for purposes of computing original issue discount.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (not including any amount
attributable to accrued but unpaid interest) and such Holder's adjusted tax
basis in the Note. To the extent attributable to accrued but unpaid interest,
the amount realized by the United States Holder will be treated as a payment
of interest. See "Payments of Interest," above. A United States Holder's
adjusted tax basis in a Note will equal the cost of the Note to such Holder,
increased by any discount with respect to a Short-Term Original Issue Discount
Note or any original issue discount previously included in income by such
Holder with respect to such Note and reduced by any principal payments
received by such Holder and, in the case of an Original Issue Discount Note or
Short-Term Original Issue Discount Note, by the amount of any other payments
received that were included in the stated redemption price at maturity, as
described above.
Gain or loss realized on the sale, exchange or retirement of a Note that
is not a Foreign Currency Note will be capital gain or loss (except in the
case of a Short-Term Original Issue Discount Note, to the extent of any
original issue discount not previously included in a United States Holder's
taxable income) and will be long-term capital gain or loss if at the time of
sale, exchange or retirement the Note has been held for more than one year.
See "Original Issue Discount Notes" above. The excess of net long-term
capital gains over net short-term capital losses is taxed at a lower rate than
ordinary income for certain non-corporate taxpayers. The distinction between
capital gain or loss and ordinary income or loss is also relevant for purposes
of, among other things, limitations on the deductibility of capital losses.
Amortizable Bond Premium
If a United States Holder purchases a Note for an amount that is greater
than the amount payable at maturity, such Holder will be considered to have
purchased such Note with "amortizable bond premium" equal in amount to such
excess, and may elect (in accordance with applicable Code provisions) to
amortize such premium, using a constant yield method, over the remaining term
of the Note (where such Note is not optionally redeemable prior to its
maturity date). If such Note may be optionally redeemed prior to maturity
after the Holder has acquired it, the amount of amortizable bond premium is
determined with reference to the amount payable on maturity or, if it results
in a smaller premium attributable to the period of earlier redemption date,
with reference to the amount payable on the earlier redemption date. A Holder
who elects to amortize bond premium must reduce his tax basis in the Note by
the amount of the premium amortized in any year. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the taxpayer and may be revoked only with the consent of the
Internal Revenue Service.
If a Holder makes a Constant Yield Election for a Note with amortizable
bond premium, such election will result in a deemed election to amortize bond
premium for all of the Holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service
with respect to debt instruments acquired after revocation.
Foreign Currency Notes And Multi-Currency Notes
The following summary relates to Notes that are denominated in a currency
or currency unit other than the U.S. dollar ("Foreign Currency Notes").
A United States Holder who used the cash method of accounting and who
receives a payment of interest in a foreign currency with respect to a Foreign
Currency Note (other than an Original Issue Discount Note on which original
issue discount is accrued on a current basis (except to the extent any
qualified stated interest is received)) will be required to include in income
the U.S. dollar value of the foreign currency payment (determined on the date
such payment is received) regardless of whether the payment is in fact
converted to U.S. dollars at that time, and such U.S. dollar value will be the
United States Holder's tax basis in the foreign currency. A cash method
Holder who receives such a payment in U.S. 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
Holder will be required to include in income the U.S. 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 U.S. 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 that spans two
taxable years, at the average rate for the partial period within the taxable
year. Such United States Holder 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 U.S. 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 Holder receives U.S. dollars, the amount of such
payment in respect of such accrual period) and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above). A United States Holder may elect to translate interest income
(including original issue discount) into U.S. 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 Holder 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 Holder who has
not elected to amortize such premium under Section 171 of the Code 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 Holder's tax basis in a Foreign Currency Note, and the
amount of any subsequent adjustment to such Holder's tax basis, will be the
U.S. 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 Holder 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 Holder's tax basis in the foreign currency and
the U.S. dollar fair market value of the Foreign Currency Note on the date of
purchase.
Gain or loss realized upon 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 U.S. 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 U.S. dollar value of the foreign currency principal
amount of such Note, determined on the date such United States Holder acquired
such Note, and the U.S. dollar value of the accrued interest received,
determined by translating such interest at the average exchange rate for the
accrual period. Such foreign currency gain or loss will be recognized only to
the extent of the total gain or loss realized by a United States Holder 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 Original Issue Discount Note, to the
extent of any original issue discount not previously included in the Holder's
income).
A United States Holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign Currency Note equal
to the U.S. 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 U.S. 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 the
settlement of such a 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 Holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase Foreign
Currency Notes) will be ordinary income or loss.
Indexed Notes
The United States federal income tax consequences to a United States
Holder of the ownership and disposition of Commodity Indexed Notes and
Currency Indexed Notes will be summarized in the applicable Pricing
Supplement.
Extendible Notes
If so specified in an applicable Pricing Supplement, the Company may have
the option to extend the maturity of a Note beyond its Original Stated
Maturity Date. See "Description of Notes--Extension of Maturity." A
description of the federal income tax consequences to a United States Holder
of the Company's option to extend the maturity of a Note will be contained in
the applicable Pricing Supplement.
Renewable Notes
A Note may be issued wherein the initial maturity of the Note may be
extended beyond its Original Stated Maturity Date at the Holder's option. See
"Description of Notes--Renewable Notes." A description of the federal income
tax consequences to a United States Holder of such Holder's option to renew a
Note will be contained in the applicable Pricing Supplement.
Reset Notes
Reset Notes may be subject to special rules for determining interest
income or gain or loss. The United States federal income tax consequences to
a United States Holder of the ownership and disposition of Reset Notes will be
summarized in the applicable Pricing Supplement.
Amortizing Notes
The United States federal income tax consequences to a United States
Holder of the ownership and disposition of Amortizing Notes will be summarized
in the applicable Pricing Supplement.
Integration of Notes and Related Hedges
The 1996 OID Regulations also set forth rules under which holders are
permitted to (or may, under certain circumstances, be required by the IRS)
treat a Note and a related hedge as an integrated "synthetic" debt instrument
if certain requirements are met. Prospective holders should consult their tax
advisers in advance regarding the possible application of these rules to their
particular situations.
Tax Consequences to United States Alien Holders
Under present United States federal income and estate tax law, and
subject to the discussion below concerning backup withholding:
(a) payments of principal, interest (including original issue
discount, if any) and premium on the Notes by the Company or any paying
agent to a beneficial owner of a Note that is not a United States Holder,
as defined above (hereinafter, a "United States Alien Holder"), will not
be subject to United States federal withholding tax, provided that, in the
case of interest, (i) such Holder does not own, actually or
constructively, ten percent or more of the total combined voting power of
all classes of stock of the Company entitled to vote, (ii) such Holder is
not, for United States federal income tax purposes, a controlled foreign
corporation related, directly or indirectly, to the Company through stock
ownership, (iii) such Holder is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code, and (iv) the certification requirements
under Section 871(h) or Section 881(c) of the Code and Treasury
Regulations thereunder (summarized below) are met;
(b) a United States Alien Holder of a Note will not be subject to
United States federal income tax on gain realized on the sale, exchange or
other disposition of such Note, unless (i) such Holder is an individual
who is present in the United States for 183 days or more in the taxable
year of disposition, and certain conditions are met or (ii) such gain is
effectively connected with the conduct by such Holder of a trade or
business in the United States; and
(c) a Note held by an individual who is not a citizen or resident of
the United States at the time of his death will not be subject to United
States federal estate tax as a result of such individual's death, provided
that (i) the individual does not own, actually or constructively, ten
percent or more of the total combined voting power of all classes of stock
of the Company entitled to vote, and (ii) at the time of such individual's
death, payments with respect to such Note would not have been effectively
connected with the conduct by such individual of a trade or business in
the United States.
Sections 871(h) and 881(c) of the Code and Treasury Regulations
thereunder require that, in order to obtain the exemption from withholding tax
described in paragraph (a) above, either (i) the beneficial owner of a Note
must certify, under penalties of perjury, to the Company or paying agent, as
the case may be, that such owner is a United States Alien Holder and must
provide such owner's name and address, and United States taxpayer
identification number, if any, or (ii) 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 thereof must certify, under
penalties of perjury, to the Company or paying agent, as the case may be, that
such certificate has been received from the beneficial owner by it or by a
Financial Institution between it and the beneficial owner and must furnish the
withholding agent with a copy thereof. A certificate described in this
paragraph is effective only with respect to payments of interest (including
original issue discount) made to the certifying United States Alien Holder
after issuance of the certificate in the calendar year of its issuance and the
two immediately succeeding calendar years. Under temporary United States
Treasury Regulations, such requirement will be fulfilled if the beneficial
owner of a Note certifies on Internal Revenue Service Form W-8, under
penalties of perjury, that it is not a United States Holder and provides its
name and address, and either the beneficial owner furnishes the withholding
agent with a copy of such statement or any Financial Institution holding the
Note on behalf of the beneficial owner files a statement with the withholding
agent to the effect that it has received such a statement from the beneficial
owner (and furnishes the withholding agent with a copy thereof).
Interest described in Section 871(h)(4) of the Code will be subject to
United States withholding tax at a 30 percent rate (or such lower rate
provided by an applicable treaty). In general, interest described in Section
871(h)(4) of the Code includes (subject to certain exceptions) any interest
the amount of which is determined by reference to receipts, sales or other
cash flow of the Company or a related person, any income or profits of the
Company or a related person, any change in the value of any property of the
Company or a related person or any dividend, partnership distributions or
similar payments made by the Company or a related person. Interest described
in Section 871(h)(4) of the Code may include other types of contingent
interest identified by the Internal Revenue Service in future Treasury
Regulations. The Company does not currently expect to issue Notes the
interest on which is described in Section 871(h)(4) of the Code, and the
United States withholding tax consequences of any such Notes issued by the
Company will be described in the applicable Pricing Supplement.
If a United States Alien Holder of a Note is engaged in a trade or
business in the United States, and if interest (including any original issue
discount) on the Note, or gain realized on the sale, exchange or other
disposition of a Note, is effectively connected with the conduct of such trade
or business, the United States Alien Holder, although exempt from United
States withholding tax, will generally be subject to United States income tax
on such interest (including any original issue discount) or gain in the same
manner as if it were a United States Holder. See "Tax Consequences to United
States Holders" above. In lieu of the certificate described in the second
preceding paragraph, such a holder will be required to provide to the Company
a properly executed Internal Revenue Service Form 4224 or successor form in
order to claim an exemption from withholding tax. In addition, if such United
States Alien Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30 percent (or such lower rate provided by an applicable
treaty) of its effectively connected earnings and profits for the taxable
year, subject to certain adjustments. For purposes of the branch profits tax,
interest (including any original issue discount) on, and any gain recognized
on the sale, exchange or other disposition of, a Note will be included in the
earnings and profits of such United States Alien Holder if such interest or
gain as the case may be is effectively connected with the conduct by the
United States Alien Holder of a trade or business in the United States.
Backup Withholding and Information Reporting
Under current United States federal income tax law, a 31 percent 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
non-corporate United States holders of the Notes.
In the case of a non-corporate United States Holder, backup withholding
will apply only if such Holder (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 penalties 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 Holders should consult their tax advisors 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
Holder 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.
In the case of a United States Alien Holder, under current Treasury
Regulations, backup withholding will not apply to payments of principal,
premium or interest including Original Issue Discount made by the Company or
any paying agent thereof on a Note if such Holder has provided the required
certification under penalties of perjury that it is not a United States Holder
(as defined above) and certain other conditions have been met or has otherwise
established an exemption, provided in each case that the Company or such
paying agent, as the case may be, does not have actual knowledge that the
payee is a United States Holder. The Company will, when required, report to
United States Alien Holders of the Notes and the Internal Revenue Service the
amount of any interest paid or original issue discount accruing on the Notes
in each calendar year and the amounts of tax withheld, if any, with respect to
such payments.
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 backup withholding. However, if such broker
is a United States person, a controlled foreign corporation for United States
tax purposes or a foreign person 50 percent or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, information reporting will be required unless the broker
has in its records documentary evidence that the beneficial owner is not a
United States Holder and certain other conditions are met or the beneficial
owner otherwise establishes an exemption. Under proposed Treasury
Regulations, backup withholding may apply to any payment which such broker is
required to report if such broker has actual knowledge that the payee is a
United States Holder. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the holder certifies, under penalties of perjury, that it is not a United
States Holder and certain other conditions are met or otherwise establishes an
exemption.
United States Alien Holders of Notes should consult their tax advisors
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 Holder 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 Internal Revenue
Service.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
purchases of the Notes. The Company will pay each Agent a commission of from
.125% to
its Stated Maturity, sold through such Agent. The Company will have the sole
right to accept offers to purchase Notes and may reject any such offer in
whole or in part. Each Agent will have the right, in its discretion
reasonably exercised, to reject in whole or in part any offer to purchase
Notes received by such Agent. The Company also may sell Notes to any Agent,
acting as principal, at a discount to be agreed upon at the time of sale, for
resale to one or more investors or to one or more broker-dealers (acting as
principal for purposes of resale) at varying prices related to prevailing
market prices at the time of resale, as determined by such Agent, or, if so
agreed, at a fixed public offering price. Unless otherwise indicated in the
applicable Pricing Supplement, if any Note is resold by an Agent to any
broker-dealer at a discount, such discount will not be in excess of the
discount or commission received by such Agent from the Company. In addition,
unless otherwise indicated in the applicable Pricing Supplement, any Note
purchased by an Agent as principal will be purchased at 100% of the principal
amount thereof less a percentage equal to the commission applicable to an
agency sale of a Note having an identical Stated Maturity. After the initial
public offering of the Notes, the public offering price (in the case of Notes
to be resold on a fixed public offering price basis), the concession and the
discount may be changed. The Company also reserves the right to sell the
Notes directly to investors on its own behalf in those jurisdictions where it
is authorized to do so or as otherwise provided in the applicable Pricing
Supplement. In such circumstances, the Company will have the sole right to
accept offers to purchase Notes and may reject any proposed purchase of Notes
in whole or in part. In the case of sales made directly by the Company, no
commission will be payable.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Act, or to contribute to the Agents such payments as each Agent may be
required to make in respect thereof. The Company has agreed to reimburse the
Agents for certain of the Agents' expenses, including, but not limited to, the
fees and expenses of counsel to the Agents.
The Company has been advised by each Agent that such Agent may from time
to time purchase and sell Notes in the secondary market, but that it is not
obligated to do so. There can be no assurance that there will be a secondary
market for the Notes or liquidity in such secondary market if one develops.
From time to time, each Agent may make a market in the Notes, but no Agent is
obligated to do so, and an Agent may discontinue any market making at any
time.
From time to time, the Agents and their affiliates may engage in
transactions with and perform services, including investment banking services,
for the Company and its affiliates in the ordinary course of business. From
time to time in the ordinary course of business, affiliates of certain Agents
also engage in general financing and banking transactions with the Company and
its affiliates. In addition, the Trustee is an affiliate of Chase Securities
Inc.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Davis
Polk & Wardwell, New York, New York, and Myles Tobin, Esq., Associate General
Counsel of the Company, and for the Agents by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
Mr. Tobin is an officer and full-time employee of the Company and the
beneficial owner of Common Stock of Illinois Central Corporation.
PROSPECTUS
Illinois Central Railroad Company
Debt Securities
--------------------
Illinois Central Railroad Company (the "Company" or the "Railroad"), a
Delaware corporation, from time to time may offer its debt securities (the
"Securities"), in one or more series, up to an aggregate principal face amount
of $200,000,000 (or such greater amount, if Securities are issued at an
original issue discount, as shall result in aggregate gross proceeds to the
Company of $200,000,000). The Securities will be unsecured obligations of the
Company, and will be senior Securities (the "Senior Securities"), ranking pari
passu with all existing and future unsecured and unsubordinated indebtedness
of the Company for borrowed money and senior to all future subordinated
indebtedness of the Company, or subordinated Securities (the "Subordinated
Securities"), subordinated as described herein under "Description of the
Securities -- Subordination of Subordinated Securities."
When the Securities of a particular series are offered, a supplement to
this Prospectus will be delivered (the "Prospectus Supplement"), together with
this Prospectus, setting forth the terms of the Securities, including, where
applicable, the specific designation, aggregate principal amount,
denominations, currency of payments, maturity, rate (which may be fixed or
variable) and time of payment of interest, any terms for redemption at the
option of the Company or the holder, any terms for sinking fund payments, the
initial public offering price, the names of, and the principal amounts to be
purchased by, underwriters and the compensation of such underwriters, any
listing of the Securities on a securities exchange and the other terms in
connection with the offering and sale of such Securities. Securities will be
Senior Securities unless the applicable Prospectus Supplement indicates that
they are Subordinated Securities.
The Company may sell the Securities to or through underwriters, and also
may sell the Securities directly to other purchasers or through agents or
dealers. See "Plan of Distribution." Such underwriters, agents or dealers may
include Lehman Brothers, Lehman Brothers Inc., Smith Barney Inc., BA
Securities, Inc., Chase Securities Inc., Deutsche Morgan Grenfell, Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley & Co. Incorporated or a group of underwriters, agents or dealers
represented by firms including Lehman Brothers, Lehman Brothers Inc., Smith
Barney Inc., BA Securities, Inc., Chase Securities Inc., Deutsche Morgan
Grenfell, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley & Co. Incorporated.
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.
July 23, 1996
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus or any Prospectus Supplement, in connection with the offering
contained herein or therein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any underwriter or agent. This Prospectus and any Prospectus
Supplement do not constitute an offer to sell, or a solicitation of an offer
to buy, any securities other than the registered securities to which it
relates or any of such securities in any jurisdiction to any person to whom it
is unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus or any Prospectus Supplement nor any sale made hereunder and
thereunder shall, under any circumstances, create an implication that there
has been no change in the information herein or therein set forth since the
date hereof or thereof or that such information is correct as of any time
subsequent to its date.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (which term shall include
all amendments, exhibits and schedules thereto) under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and to which reference is hereby made.
Statements made in this Prospectus as to the contents of any document referred
to are not necessarily complete. With respect to each such document filed as
an exhibit to the Registration Statement, reference is made to the exhibit for
a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. The Registration
Statement may be inspected, without charge, at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C 20549 at prescribed rates.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file annual and quarterly reports and other
information with the Commission. Reports and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 or at the Commission's regional offices located at 7 World Trade
Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
may be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Such
reports and other information can also be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that
file electronically with the Commission. The Company files electronically
with the Commission. The address of that Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995 (File No. 1-7092), Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 (File No. 1-7092) and Current Report on Form 8-K dated May 15,
1996 as amended by Amendment No. 1 dated July 12, 1996 (File No. 1-7092) are
incorporated by reference and made a part of this Prospectus.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein or contained in this Prospectus shall be deemed to be
supplemented, 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
supplements, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus.
The Company undertakes to provide without charge to each person to whom
this Prospectus is delivered, on written or oral request of such person, a
copy (without exhibits) of any and all documents incorporated herein by
reference. Requests for such copies should be directed to Illinois Central
Railroad Company, 455 North Cityfront Plaza Drive, Chicago, Illinois
60611-5504, Attention: Corporate Relations, telephone number (312) 755-7500.
THE COMPANY
Illinois Central Railroad Company and subsidiaries (the "Company" or the
"Railroad"), traces its origin to 1851, when the Railroad was incorporated as
the nation's first land grant railroad. Today, the Railroad operates 2,700
miles of main line track between Chicago and the Gulf of Mexico, primarily
carrying chemicals, coal and paper north, with coal, grain and milled grain
products moving south along its lines. The Railroad is a wholly-owned
subsidiary and a principal asset of Illinois Central Corporation ("IC"). The
principal executive office of the Railroad is located at 455 North Cityfront
Plaza Drive, Chicago, Illinois 60611-5504 and its telephone number is (312)
755-7500.
USE OF PROCEEDS
Unless otherwise indicated in an applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, such as, the retirement of outstanding
indebtedness, including commercial paper, and funding the expansion of the
Company's intermodal terminal in Chicago (approximately $20 million). At May
31, 1996, the total indebtedness of the Company was $399.2 million.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the years in the
five-year period ended December 31, 1995 and the ratio of earnings to fixed
charges for the three months ended March 31, 1996 and March 31, 1995 are as
follows:
Three Months
Ended March 31, Years Ended December 31,
---------------- --------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
Ratio of earnings
to fixed charges...... 5.70 6.23 5.68 4.75 3.96 2.81 2.26
For purposes of these computations, earnings before fixed charges consist of
income before income taxes, extraordinary item and cumulative effect of
accounting changes plus fixed charges less capitalized interest. Fixed
charges consist of interest on indebtedness including the amortization of debt
issuance costs, capitalized interest and the portion of non-capitalized lease
expense representative of interest.
DESCRIPTION OF THE SECURITIES
As of May 31, 1996, the Company's indebtedness was approximately $399.2
million. The Senior Securities offered hereby will be issued under the
Indenture dated as of July 25, 1996 (the "Senior Indenture") between the
Company and The Chase Manhattan Bank, as Trustee (the "Senior Trustee"). The
Subordinated Securities offered hereby will be issued under the Indenture
dated as of July 25, 1996 (the "Subordinated Indenture" and, together with the
Senior Indenture, the "Indentures") between the Company and The Chase
Manhattan Bank, as Trustee (the "Subordinated Trustee" and, together with the
Senior Trustee, or either the Subordinated Trustee or the Senior Trustee, as
the context implies, the "Trustee"). The statements herein relating to the
Securities and the Indentures are summaries and are subject to the detailed
provisions of the Indentures. A copy of the form of each Indenture is filed
as an exhibit to the Registration Statement of which this Prospectus is a part
and is available as described under "Available Information." The following
summaries of certain provisions of the Indentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures, including the definitions therein of
certain capitalized terms used in this Prospectus. Whenever particular
Sections or defined terms of the Indentures are referred to herein, such
Sections or defined terms are incorporated herein by reference.
General
Each Indenture provides for issuance of debentures, notes or other
evidences of indebtedness by the Company ("Securities") in one or more series
in an unlimited amount from time to time. The Securities may be issued in
registered form ("Registered Securities") without coupons or in unregistered
form ("Unregistered Securities") with or without coupons and in either case in
global form.
Registered Securities may be presented for registration of transfer or
exchange at the office or agency of the Company in New York, New York.
Subject to the limitations provided in the applicable Indenture, such services
will be provided without charge, other than any tax or other governmental
charge payable in connection therewith. Unregistered Securities transfer by
delivery (Section 2.7).
The Securities will be unsecured obligations of the Company. The Senior
Securities will rank pari passu with all existing and future unsecured and
unsubordinated indebtedness of the Company. The Subordinated Securities will
be subordinated as hereinafter described under "Subordination of Subordinated
Securities." Neither Indenture limits the incurrence or issuance of other
unsecured debt of the Company. The terms of the Senior Indenture (but not the
Subordinated Indenture) do restrict, however, the ability of the Company to
grant liens on its assets and the assets of Subsidiaries as more fully
described below under "Limitation on Liens." It is anticipated that the
Securities will not be listed on any securities exchange.
Unless otherwise indicated in the applicable Prospectus Supplement,
Securities will be Senior Securities. Reference is made to the Prospectus
Supplement for the following terms of the Securities of each series offered
thereby (to the extent such terms are applicable to such Securities): (1) the
designation of the Securities of the series; (2) any limit upon the aggregate
principal amount of the Securities of the series and any limitation on the
ability of the Company to increase such aggregate principal amount after the
initial issuance of such Securities; (3) any date on which the principal of
the Securities of the series is payable (which date may be fixed or
extendible); (4) any rate (which may be fixed or variable) per annum at which
any Securities of the series shall bear interest, any interest accrual,
payment and record dates and/or any method by which any such rate or date
shall be determined; (5) if other than as provided in the Indenture, any place
where principal of and interest on Securities of the series shall be payable,
where Registered Securities of the series may be surrendered for exchange,
where notices or demands may be served and where notice to Holders may be
published and any time of such payment at any place of payment; (6) any right
of the Company to redeem Securities of the series and any terms thereof; (7)
any obligation of the Company to redeem, purchase or repay Securities of the
series and any terms thereof; (8) if other than denominations of $1,000 and
any integral multiple thereof, the denominations in which Securities of the
series shall be issuable; (9) if other than the principal amount thereof, the
portion of the principal amount of Securities of the series which shall be
payable upon declaration of acceleration of the maturity thereof; (10) if
other than the coin or currency in which the Securities of the series are
denominated, the coin or currency in which payment of the principal of or
interest on the Securities of the series shall be payable or, if the amount of
any payments of principal of and/or interest on the Securities of the series
may be determined with reference to an index based on a coin or currency other
than that in which the Securities of the series are denominated, the manner in
which such amounts shall be determined; (11) if other than the currency of the
United States of America, the currency or currencies, including composite
currencies, in which payment of the principal of (and premium, if any) and
interest on the Securities of the series shall be payable, and the manner in
which any such currencies shall be valued against other currencies in which
any other Securities shall be payable; (12) if other than as Registered Global
Securities, whether the Securities of the series or any portion thereof will
be issuable as Registered Securities or Unregistered Securities (with or
without coupons), and any terms of exchange; (13) any obligation of the
Company to pay additional amounts on the Securities of the series in respect
of any tax, assessment or governmental charge withheld or deducted and any
right of the Company to redeem such Securities rather than pay such additional
amounts; (14) if the Securities of the series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary Security of
such series) only upon receipt of certain certificates or other documents or
satisfaction of other conditions, the form and terms of such certificates,
documents or conditions; (15) if other than the Person acting as Trustee, any
Agent acting with respect to the Securities of the series; (16) any provisions
for the defeasance of any Securities of the series in addition to, in
substitution for or in modification of the provisions described in "Defeasance
and Covenant Defeasance;" (17) the identity of any Depositary for Registered
Global Securities of the series other than The Depository Trust Company and
any circumstances other than those described in "Global Securities" in which
any Person may have the right to obtain Registered Securities in exchange
therefor; (18) any provisions for Events of Default applicable to any
Securities of the series in addition to, in substitution for or in
modification of those described in "Events of Default;" (19) any provision for
covenants applicable to any Securities of the series in addition to, in
substitution for or in modification of those described in "Covenants;" and
(20) any other terms of the Securities of the series not inconsistent with the
Indenture.
Global Securities
The Securities of each series will be issued in the form of one or more
fully registered global Securities (each a "Registered Global Security")
registered in the name of The Depository Trust Company (the "Depositary") or a
nominee thereof, unless otherwise established for the Securities of such
series. Except as described in a Prospectus Supplement hereto, Securities in
definitive form will not be issued. Unless and until a Registered Global
Security is exchanged in whole or in part for Securities in definitive form,
it may not be registered for transfer or exchange except as a whole by the
Depositary for such Registered Global Security to a nominee of such Depositary
or by such Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary (Section 2.7).
Upon the issuance of any Registered Global Security, and the deposit of
such Registered Global Security with or on behalf of the Depositary, the
Depositary will credit, on its book-entry registration and transfer system,
the respective principal amounts of the Securities represented by such
Registered Global Security to the accounts of institutions ("participants")
entitled thereto that have accounts with the Depositary designated by the
underwriters or their agents engaging in any distribution of the Securities.
Ownership of beneficial interests in a Registered Global Security will be
limited to participants or Persons that may hold interests through
participants. Ownership of beneficial interests by participants in a
Registered Global Security will be shown on, and the transfer of such
beneficial interests will be effected only through, records maintained by the
Depositary or by its nominee. Ownership of beneficial interests in a
Registered Global Security by Persons that hold through participants will be
shown on, and the transfer of such beneficial interests within such
participants will be effected only through, records maintained by such
participants. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated form.
The foregoing limitations and such laws may impair the ability to own,
transfer or pledge beneficial interests in Registered Global Securities.
So long as the Depositary, or its nominee, is the registered owner of a
Registered Global Security, the Depositary or such nominee, as the case may
be, will be considered the sole owner or holder of the Securities represented
by such Registered Global Security for all purposes under the Indenture.
Except as specified below, owners of beneficial interests in a Registered
Global Security will not be entitled to have Securities represented by such
Registered Global Security registered in their names, will not receive or be
entitled to receive physical delivery of Securities in certificated form and
will not be considered the Holders thereof for any purposes under the
Indenture (Section 2.7). Accordingly, each Person owning a beneficial
interest in a Registered 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 holder of Securities under the Indenture. The Depositary may
grant proxies and otherwise authorize participants to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action which a holder of Securities is entitled to give or take under the
applicable Indenture. The Company understands that, under existing industry
practices, if the Company requests any action of holders of Securities or any
owner of a beneficial interest in a Registered Global Security desires to give
any notice or take any action a holder of Securities is entitled to give or
take under the applicable Indenture, the Depositary would authorize the
participants holding the relevant beneficial interests to give such notice or
take such action, and such participants would authorize the beneficial owners
owning through such participants to give such notice or take such action or
would otherwise act upon the instructions of the beneficial owners owning
through them.
The Depositary or a nominee thereof, as holder of record of a Registered
Global Security, will be entitled to receive payments of principal and
interest for payment to beneficial owners in accordance with customary
procedures established from time to time by the Depositary. On the date
hereof, the agent for the payment, transfer and exchange of the Securities is
the Trustee therefor, acting through its Corporate Trust Office located in the
Borough of Manhattan, The City of New York.
The Company expects that the Depositary, upon receipt of any payment of
principal or interest in respect of a Registered Global Security, will
immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Registered Global Security as shown on the records of the Depositary.
The Company also expects that payments by participants to owners of beneficial
interests in a Registered Global Security held through such participants will
be governed by standing instructions and customary practices, and will be the
responsibility of such participants. None of the Company, the Trustee or any
agent of the Company or the Trustee shall have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in a Registered Global Security, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests (Section 2.14).
If the Depositary is at any time unwilling or unable to continue as
Depositary or ceases to be a clearing agency registered or in good standing
under the Exchange Act, and a successor depositary registered as a clearing
agency under the Exchange Act is not appointed by the Company within 90 days,
or, if at any time an Event of Default shall have occurred and be continuing
under the Indenture, the Company will issue Securities in definitive
certificated form in exchange for the Registered Global Securities (Section
2.7).
In the event that the book-entry system is discontinued, the following
provisions would apply. The Trustee or any successor registrar under the
applicable Indenture shall keep a register for the Securities in definitive
certificated form at its Corporate Trust Office. Subject to the further
conditions contained in the applicable Indenture, Securities in definitive
certificated form may be transferred or exchanged for one or more Securities
in different authorized denominations upon surrender thereof at the Corporate
Trust Office of the Trustee or any successor Registrar under the applicable
Indenture by the registered Holders or their duly authorized attorneys. Upon
surrender of any Security to be transferred or exchanged, the Trustee or any
successor registrar under the Indenture shall record the transfer or exchange
in the Security register and the Company shall issue, and the Trustee shall
authenticate and deliver, new Securities in definitive certificated form
appropriately registered and in appropriate authorized denominations (Section
2.7). The Trustee shall be entitled to treat the registered Holders of the
Securities in definitive certificated form, as their names appear in the
Security register as of the appropriate date, as the owners of such Securities
for all purposes under the applicable Indenture (Section 2.14). Subject to
the further conditions contained in each Indenture, payments in respect of the
Securities in definitive certificated form will be made at such office or
agency of the Company maintained for that purpose as the Company may designate
from time to time, except that, at the option of the Company, interest
payments, if any, on the Securities may be made (i) by checks mailed to the
Persons entitled thereto at their registered addresses or (ii) by transfer in
immediately available funds to an account maintained by the person entitled
thereto as specified by such Person (Section 4.1).
Consolidation, Merger or Sale by the Company
The Company shall not consolidate or merge with any other Person or sell,
convey, assign, transfer, lease or otherwise dispose of all or substantially
all of its properties and assets as an entirety in one transaction or series
of transactions to any Person, unless (1) either (a) the Company shall be the
continuing Person or (b) such Person shall be a corporation organized and
validly existing under the laws of the United States of America or any State
thereof or the District of Columbia and shall expressly assume by a
supplemental indenture all of the Company's obligations under the Securities
and under the Indentures; (2) immediately before and after such transaction or
each element of such series, no Default or Event of Default shall have
occurred and be continuing; and (3) giving effect to such transaction will not
cause an event of default under any mortgage, bond, debenture, note or other
instrument or obligation that the Company or any Subsidiary of the Company is
a party to or bound by. Upon any such consolidation, merger, sale,
conveyance, assignment, transfer, lease or other disposition, the successor
corporation formed by such consolidation, or into which the Company is merged
or to which such sale, conveyance, assignment, transfer, lease or other
disposition is made, shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indentures and under
the Securities (Sections 5.1 and 5.2).
Events of Default, Notice and Certain Rights on Default
Events of Default with respect to the Securities of any series are
defined in the applicable Indenture as being: (a) failure to pay any
installment of interest on any Security of such series when due and the
continuance of such failure for 30 days; (b) failure to pay the principal of
any Security of such series when due; (c) failure for 60 days after notice to
the Company by the Trustee, or by the Holders of 25% in aggregate principal
amount of the Securities of such series then outstanding, to perform or
observe any other covenant, condition or agreement in the Securities of such
series or in the Indenture; (d) the holders of other indebtedness of the
Company or any Subsidiary shall have declared an aggregate amount in excess of
$20,000,000 thereof to be due and payable prior to the date on which it would
otherwise have become due or payable and such declaration shall not have been
cured, waived, rescinded or annulled or such indebtedness shall not have been
discharged within a period of 30 days; (e) certain events of bankruptcy,
insolvency or reorganization of the Company or a Material Subsidiary; or (f)
any other Event of Default established for the Securities of such series
(Section 6.1).
Each Indenture provides that, if an Event of Default with respect to the
Securities of any series then outstanding thereunder occurs and is continuing,
then, either the Trustee for or the Holders of not less than 25% in aggregate
principal amount of the Securities of any such affected series then
outstanding (each such series treated as a separate class) by notice in
writing to the Company (and to the Trustee if given by Securityhol-ders), may
declare the entire principal (or, if the Securities of any such series are
Original Issue Discount Securities, such portion of the principal amount as
may be established for such series) of all Securities of such affected series,
and the interest accrued thereon, if any, to be due and payable immediately,
and upon any such declaration the same shall become immediately due and
payable, except that, if an Event of Default described in clause (e) occurs
and is continuing, then the principal amount (or, if any Securities are
Original Issue Discount Securities, such portion of the principal as may be
established for such series) of all the Securities then outstanding and
interest accrued thereon, if any, shall be and become immediately due and
payable, without any notice or other action by any Holder or the Trustee
therefor, to the full extent permitted by applicable law (Section 6.2).
Each Indenture provides that the Trustee thereunder will, within 60 days
after the occurrence of a Default with respect to the Securities, give to the
Holders of the Securities notice of all Defaults known to such Trustee,
provided that, except in the case of a Default in payment on the Securities,
the Trustee may withhold such notice if and so long as a Responsible Officer
in good faith determines that withholding such notice is in the interest of
the Holders of the Securities (Section 7.5). "Default" means any event which
is, or after notice or passage of time or both would be, an Event of Default
(Section 1.1).
Each Indenture provides that the holders of a majority in aggregate
principal amount of the then outstanding Securities thereunder, by notice to
the Trustee therefor, may direct the time, method and place of conducting any
proceeding for any remedy available to such Trustee, or exercising any trust
or power conferred on such Trustee (Section 6.5).
Subject to the further conditions contained in the applicable Indenture,
the holders of a majority in aggregate principal amount outstanding of the
Securities of any series may waive, on behalf of the holders of all Securities
of such series, any past Default or Event of Default and its consequences
except a Default or Event of Default (i) in the payment of the principal of or
interest, if any, on any Security of such series or (ii) in respect of a
covenant or provision of such Indenture which cannot under the terms of the
Indenture be amended or modified without the consent of the holder of each
outstanding Security adversely affected thereby (Section 6.4).
The term "Material Subsidiary" means each existing Subsidiary of the
Company and each Subsidiary hereafter acquired or formed by the Company which,
in each case, for the most recent fiscal year of the Company, was the owner of
5% or more of the consolidated assets of the Company and its Subsidiaries
taken as a whole, as set forth on the consolidated financial statements of the
Company for such fiscal year (Section 1.1).
The term "Subsidiary" means, with respect to any Person, any corporation
or other entity of which more than 50% of the shares of Voting Stock are, at
the time directly or indirectly owned by such Person. Unless otherwise
indicated, "Subsidiary" refers only to Subsidiaries of the Company (Section
1.1).
The term "Voting Stock" means stock of the class or classes having
general voting power under ordinary circumstances to elect at least a majority
of the board of directors, managers or trustees of a corporation or other
entity (irrespective of whether or not at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of
any contingency) (Section 1.1).
The applicable Prospectus Supplement will describe any provisions for
Events of Default applicable to the Securities of any series in addition to,
in substitution for, or in modification of, the provisions described above.
Limitation on Liens
The Senior Indenture provides that the Company will not, and will not
permit any Subsidiary to (a) create, issue, assume, incur or guarantee any
notes, bonds, debentures or other similar evidences of indebtedness for money
borrowed ("Debt") if such Debt is secured by a mortgage, pledge or lien
("Lien") upon, or (b) directly or indirectly secure any outstanding Debt by a
Lien upon, any Principal Property of the Company or any Subsidiary, now owned
or hereafter acquired, without effectively providing that the Senior
Securities shall be secured equally and ratably with such Debt, except that
the foregoing restrictions shall not apply to (i) Liens on any Principal
Property acquired after the date of the Senior Indenture to secure or provide
for the payment or refinancing of the purchase price or acquisition cost
thereof, (ii) Liens on any Principal Property to finance improvements thereof
which do not exceed in the aggregate $10,000,000 at any time, (iii) Liens on
any Principal Property of any corporation existing at the time such
corporation becomes a Subsidiary after the date of the Senior Indenture, (iv)
Liens in existence on Principal Property on the date of the Senior Indenture,
(v) Liens to secure Debt of a Subsidiary to the Company or another Subsidiary,
(vi) Liens in favor of governmental bodies to secure advance or progress
payments pursuant to any contract or statute, (vii) pledges or deposits in
connection with workers' compensation, unemployment insurance and other social
security legislation and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements, (viii) Liens for taxes not yet
due or which are being contested in good faith by appropriate proceedings,
(ix) any materialmen's, carriers', mechanics', workmen's, repairmen's or other
like Liens arising in the ordinary course of business in respect of
obligations which are not yet overdue or which are being contested in good
faith by appropriate proceedings, (x) Liens arising in connection with surety,
appeal and similar bonds incidental to the conduct of litigation, (xi) Liens
arising in connection with bid, performance or similar bonds which do not
exceed in the aggregate $5,000,000, (xii) easements, rights of way, general
real estate taxes not yet due and payable, municipal and zoning restrictions,
restrictions on the use of real property and defects and irregularities in the
title thereto and (xiii) any extension, renewal, substitution or replacement
(or successive extensions, renewals, substitutions or replace-ments), in whole
or in part, of any Lien referred to in the foregoing clauses (i) through
(xii), inclusive, or the Debt secured thereby (Section 4.5(a)).
Notwithstanding the foregoing, the Company and any Subsidiary may,
without equally and ratably securing the Senior Securities, create, issue,
assume, incur or guarantee secured Debt (which would otherwise be subject to
the foregoing Lien restrictions) in an aggregate amount which, together with
all other such secured Debt of the Company and its Subsidiaries (that is, not
including secured Debt of the Company and its Subsidiaries permitted pursuant
to the preceding paragraph) does not at any time exceed 10% of Consolidated
Net Tangible Assets of the Company (Section 4.5(b)).
The term "Principal Property" of any Person means, at any date of
determination, (a) any line of segment of track, together with signaling or
communication systems appurtenant thereto, owned by such Person as of such
date of determination over which at least 10 million gross tons of revenue
freight moved in the calendar year next preceding such date of determination;
(b) all locomotives and freight cars owned by the such Person as of such date
of determination; (c) all freight yards and repair facilities owned by such
Person as of such date of determination; and (d) all real estate related to
the property described in (a), (b) or (c) owned by such Person as of such date
of determination (Section 1.1).
The term "Consolidated Net Tangible Assets" with respect to any Person
means, as at any date of determination, the total amount of assets (less
applicable reserves and other properly deductible items) of such Person and
its Subsidiaries determined on a consolidated basis in conformity with GAAP
and set forth on the most recent consolidated balance sheet of such Person and
its Subsidiaries preceding such date of determination after deducting
therefrom (i) all current liabilities (excluding any thereof which are by
their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after such date of determination), (ii) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense and
other like intangibles, and (iii) appropriate adjustments on account of
minority interests of other persons holding stock in the Subsidiaries, all as
determined on a consolidated basis in conformity with GAAP and set forth on
such most recent consolidated balance sheet of such Person and its
Subsidiaries (Section 1.1).
Modification of the Indentures
Each Indenture contains provisions permitting the Company and the Trustee
to enter into one or more supplemental indentures without the consent of the
holders of Securities in order (i) to evidence the succession of another
corporation to the Company and the assumption of the covenants of the Company
by such successor, (ii) to comply with any requirements of the Commission in
connection with the qualification of the Indenture under the Trust Indenture
Act of 1939 as then in effect, (iii) to provide for a successor Trustee with
respect to the Securities of all or any series, (iv) to establish the forms
and terms of the Securities of any series, (v) to provide for uncertificated
or Unregistered Securities, or (vi) to cure any ambiguity or correct any
mistake or to make any change that does not materially adversely affect the
legal rights of any holder of the Securities under such Indenture (Section
9.1).
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the then outstanding Securities of any series, to execute
supplemental indentures adding any provisions to or changing or eliminating
any of the provisions of the Indenture or any supplemental indenture or
modifying the rights of the holders of such Securities, except that no such
supplemental indenture, or any amendment or waiver, may, without the consent
of the holder of each Security, (i) extend the stated maturity of the
principal of, or any sinking fund obligation or any installment of interest
on, such holder's Security, or reduce the principal amount thereof or the rate
of interest thereon (including any amount in respect of original issue
discount), or any premium payable with respect thereto, or adversely affect
the rights of such Holder under any mandatory redemption or repurchase
provision or any right of redemption or repurchase at the option of the
Company or such Holder, or reduce the amount of the principal of an Original
Issue Discount Security that would be due and payable upon an acceleration of
the maturity thereof or the amount thereof provable in bankruptcy, or change
any place of payment where, or the currency in which, any Security or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the due date
therefor, or change the manner of determining any of the foregoing; (ii)
reduce the percentage in principal amount of outstanding Securities of the
relevant series the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain provisions
of this Indenture or certain Defaults and their consequences provided for in
this Indenture; (iii) waive a Default in the payment of principal of or
interest on any Security of such Holder; (iv) change any obligation of the
Company to maintain an office or agency in the places and for the purposes in
the Indenture provided; or (v) modify any of the foregoing provisions, except
to increase any such percentage or to provide that certain other provisions of
the Indenture cannot be modified or waived without the consent of the Holder
of each outstanding Security affected thereby (Section 9.2).
Additionally, in the case of the Subordinated Indenture, no supplemental
indenture may adversely affect the rights of any Senior Indebtedness holder
to the benefits of subordination thereunder without such holder's consent.
After a supplemental indenture, amendment or waiver becomes effective, the
Company shall mail a notice to the holders of the Securities affected
thereby briefly describing the supplemental indenture, amendment or waiver
(Section 9.2).
Defeasance and Covenant Defeasance
Unless the terms of the Securities of any series provide otherwise,
the Company may elect either (1) to defease and be discharged from any and
all obligations with respect to (a) Securities of any series payable
within one year or (b) other Securities of any series upon certain
additional conditions described below (except as otherwise provided in the
applicable Indenture) ("defeasance") or (2) to be released from its
obligations with respect to certain covenants applicable to the Securities
of any series ("covenant defeasance"), upon the deposit with the Trustee,
in trust for such purpose, of money and/or U.S. Government Obligations
which through the payment of principal and interest in accordance with
their terms will provide money in an amount sufficient without reinvestment
to pay the principal of and interest on the Securities and the satisfaction
of certain other conditions set forth in such Indenture. As a condition to
defeasance of any Securities of any series payable later than one year from
the time of defeasance, the Company must deliver to the Trustee an Opinion
of Counsel or a ruling of the Internal Revenue Service to the effect that
the holders of the Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred (Article 8).
The Company may exercise either defeasance option with respect to the
Securities of any series notwithstanding its prior exercise of its covenant
defeasance option with respect thereto. If the Company exercises its
defeasance option, payment of the Securities of any series may not be
accelerated because of a Default or an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities of any
series may not be accelerated by reason of an Event of Default with respect to
the covenants to which such covenant defeasance is applicable. If such
acceleration were to occur by reason of another Event of Default, the
realizable value at the acceleration date of the money and U.S. Government
Obligations in the defeasance trust could be less than the principal and
interest then due on the Securities, in that the required deposit in the
defeasance trust is based upon scheduled cash flow rather than market value,
which will vary depending upon interest rates and other factors. The Company
will, however, remain liable for such payments at the time of the
acceleration.
Subordination of Subordinated Securities
The payment of the principal of and interest on the Subordinated
Securities will, to the extent set forth in the Subordinated Indenture, be
subordinate in right of payment to the prior payment in full of all Senior
Indebtedness of the Company (Section 11.2). In certain events of insolvency,
the holders of Senior Indebtedness shall be entitled to receive payment in
full of all principal of, premium, if any, and interest then due on all Senior
Indebtedness before any payment is made on the Subordinated Notes (Section
11.2).
"Senior Indebtedness" of the Company is defined in the Subordinated
Indenture to mean all notes, bonds, debentures or other similar evidences
of indebtedness for money borrowed of the Company, except the Subordinated
Securities and other such evidences subordinated to or subordinated on a
parity with the Subordinated Securities.
Governing Law
The Indentures and the Securities are governed by and construed in
accordance with the laws of the state of New York (Section 10.7).
The Trustee
The Chase Manhattan Bank, is Trustee under both the Senior Indenture and
the Subordinated Indenture. The Company also maintains banking and other
commercial relationships with the Trustee and its affiliates in the ordinary
course of business.
PLAN OF DISTRIBUTION
The Company may sell all or part of the Securities from time to time on
terms determined at the time such Securities are offered for sale. The
Securities may be sold (i) through underwriters or dealers; (ii) through
agents; (iii) directly to one or more purchasers; or (iv) through a
combination of any such methods of sale. The Prospectus Supplement relating
to the particular series of the Securities offered thereby will set forth the
terms of the offering of such series of the Securities, including the name or
names of any underwriters, dealers or agents, the purchase price of such
Securities, the proceeds to the Company from such sale, any underwriting
discounts and other items constituting underwriters' or agents' compensation,
any initial public offering price, any discounts or sales agent's commissions
or concessions allowed or reallowed or paid to dealers and any securities
exchanges on which the Securities of such series may be listed.
The distribution of the Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If underwriters are used in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price, or at varying prices determined at the time of sale. The
Securities may be offered to the public through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the related Prospectus Supplement, the
obligations of the underwriters to purchase Securities will be subject to
certain conditions precedent and the underwriters will be obligated to
purchase all the Securities of a series if any are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
public at varying prices to be determined by such dealer at the time of
resale. In the case of a sale to a dealer, the Company will provide a
Prospectus Supplement stating the name of such dealer, the amount of
Securities purchased and the price paid.
Offers to purchase Securities may be solicited directly by the Company or
by agents designated by the Company from time to time. Any such agent, which
may be deemed to be an underwriter as that term is defined in the Securities
Act, involved in the offer or sale of the Securities in respect of which this
Prospectus is delivered will be named in, and any commissions payable by the
Company to such agent will be set forth in, a Prospectus Supplement. Unless
otherwise indicated in such Prospectus Supplement, any such agent will be
acting on a best efforts basis.
Agents and underwriters may from time to time purchase and sell
Securities in the secondary market, but are not obligated to do so, and there
can be no assurance that there will be a secondary market for the Securities
or liquidity in the secondary market if one develops. From time to time,
agents and underwriters may make a market in the Securities.
Dealers, underwriters or agents may be entitled under agreements which
may be entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act.
Such dealers, underwriters or agents may be customers of, engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
The place and time of delivery for the Securities in respect of which
this Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
LEGAL MATTERS
Certain matters relating to the Securities will be passed upon for the
Company by Davis Polk & Wardwell, New York, New York. Certain legal matters
will be passed upon for the underwriters, if any, by Simpson Thacher &
Bartlett (a partnership which includes professional corporations), New York,
New York.
EXPERTS
The consolidated financial statements and financial statement schedule
of the Company included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, which are incorporated by reference in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, which is
incorporated by reference herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said report.
==================================== ====================================
No dealer, salesman or any other
person has been authorized to give
any information or to make any
representations, other than those
contained or incorporated by
referencein this Prospectus
Supplement (including the
accompanying Pricing Supplement)
or the Prospectus in connection
with the offer made by this $200,000,000
Prospectus Supplement and the
Prospectus and, if given or made,
such information or representations
must not be relied upon as having
beenauthorized by the Company or any
Agent. Neither the delivery of this
Prospectus Supplement (including the
Pricing Supplement) and [ LOGO ]
the Prospectus nor any sale made
hereunder and thereunder shall under
any circumstances create an
implication that there has been no
change in the affairs of the Company
since the date hereof. This
Prospectus Supplement (including the ILLINOIS CENTRAL
Pricing Supplement) and the RAILROAD COMPANY
Prospectusdo not constitute an offer
or a solicitation by anyone in
any jurisdiction in which such
offer or solicitation is not Medium-Term Notes, Series B
authorized or in which the person
making such offer or solicitation
is not qualified to do so or to
any person to whom it is unlawful
to make such offer or solicitation.
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PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS July 29, 1996
Page --------------------------------
----
Prospectus Supplement
Use of Proceeds............... S-#
Ratio of Earnings
to Fixed Charges............. S-#
Description of Notes.......... S-# BA SECURITIES, INC.
Special Provisions
Relating to Multi-Currency
Notes....................... S-#
Risk Factors.................. S-# CHASE SECURITIES INC.
United States Federal
Income Tax Consequences..... S-#
Supplemental Plan
of Distribution............. S-# DEUTSCHE MORGAN GRENFELL
Legal Matters S-#
Prospectus
Additional Information........ # MERRILL LYNCH & CO.
Incorporation of
Certain Documents
by Reference................ #
The Company................... #
Use of Proceeds............... # MORGAN STANLEY & CO.
Ratio of Earnings INCORPORATED
to Fixed Charges............ #
Description of
the Securities.............. #
Plan of Distribution.......... #
Legal Matters................. #
Experts....................... # SMITH BARNEY INC.
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