<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 18, 1996)
$150,000,000
[LOGO]
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
----------------
International Multifoods Corporation (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 $150,000,000 (or the equivalent thereof in foreign
currencies or currency units), subject to reduction under certain circumstances
as a result of the sale of other Debt Securities of the Company under the
Prospectus to which this Prospectus Supplement relates. The Notes will be
offered in varying maturities from nine months or more from their date of issue
and may be subject to redemption at the option of 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 or in other
currencies or currency units (the "Specified Currency") as may be designated by
the Company and set forth in the applicable Pricing Supplement (the "Foreign
Currency Notes"). See "Special Provisions Relating to Foreign Currency Notes"
and "Foreign Currency Risks." The Notes may be issued as "Amortizing Notes,"
"Original Issue Discount Notes," "Currency Indexed Notes" or "Commodity Indexed
Notes" (each as defined below). See "Description of Notes."
(CONTINUED ON NEXT PAGE)
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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.
<TABLE>
<CAPTION>
Price to Agents' Commission Proceeds to
Public (1) or Discount (2) Company (2)(3)
<S> <C> <C> <C>
Per Note................ 100% .125%-.750% 99.875%-99.250%
Total................... $150,000,000 $187,500-$1,125,000 $149,812,500-$148,875,000
</TABLE>
(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes will
be sold at 100% of their principal amount.
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc., BA Securities,
Inc., BT Securities Corporation, First Chicago Capital Markets, Inc. or
J.P. Morgan Securities 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,
except that the commission payable by the Company to the Agents with
respect to Notes with maturities of greater than 30 years will be
negotiated at the time the Company issues such Notes. 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
$250,000.
---------------------------
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 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.
BT SECURITIES CORPORATION
FIRST CHICAGO CAPITAL MARKETS, INC.
J.P. MORGAN SECURITIES INC.
February 1, 1996
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(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, CMT Rate, Federal Funds 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
accompanying 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 either semiannually on each March 15 and September 15 or
annually on March 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 such 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 "Book-Entry
Note") registered in the name of a nominee of The Depository Trust Company
("DTC") or other depositary (DTC or such other depositary as is indicated in the
applicable Pricing Supplement is referred to herein as the "Depositary"), or a
certificate issued in definitive form (a "Certificated Note"), as indicated in
the applicable Pricing Supplement. Beneficial interests in Book-Entry Notes will
be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. 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 integral multiples of $1,000 in excess 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.
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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
Unless otherwise indicated in the applicable Pricing Supplement, the net
proceeds to be received by the Company from the issuance and sale of the Notes
will be used to reduce short-term indebtedness of the Company or its
subsidiaries. Such indebtedness has various maturities and bears interest at
various rates. As of November 30, 1995, the Company's consolidated short-term
debt was $165,000,000, with a weighted average interest rate of approximately
7.2%.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities (as
defined in the accompanying Prospectus) set forth under the heading "Description
of Debt Securities" in the 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 Indenture and/or the Notes.
GENERAL
The Notes offered hereby will be issued under the 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 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 Indenture and are
limited to an aggregate initial offering price of $150,000,000 (or the
equivalent thereof in the Specified Currency, calculated on the applicable trade
date). Unless otherwise indicated in the applicable Pricing Supplement, currency
amounts in this Prospectus Supplement, the accompanying Prospectus and any
Pricing Supplement are stated in United States dollars ("$," "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 nine months or
more 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, (and 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 Foreign Currency Notes."
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<PAGE>
Each Note will be issued initially as either a Book-Entry Note or 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 Foreign Currency Notes, Notes will be issued in denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
Payments of principal (and premium, if any) and any interest to Beneficial
Owners (as defined below) of Book-Entry Notes are expected to be made in
accordance with the procedures of the Depositary and its participants 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 any Certificated Note 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 Certificated 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 any interest due with respect to any Certificated Note
at Maturity (as defined below) will be made in immediately available funds upon
surrender of such Note at the Corporate Trust Office of the Trustee in 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 Debt Securities--Events of
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"); (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";
(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 below),
and any other terms relating to the particular method of calculating the
interest rate for such Note; (viii) whether
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such Note is an Original Issue Discount Note (as defined below), and if so, the
yield to maturity; (ix) whether such Note is a Currency Indexed Note or a
Commodity Indexed Note (each as defined below), 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 (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 Indenture.
Certificated Notes may be presented for registration of transfer or exchange
at the Corporate Trust Office of the Trustee in 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 LIBOR Notes, is also a London Business Day (as defined below);
PROVIDED, HOWEVER, that with respect to Foreign Currency Notes, such day is also
not a day on which banking institutions are authorized or required by law,
regulation or executive order to close in the principal financial center 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 (i) if the Designated LIBOR Currency (as defined below) is other than
the ECU, on which dealings in deposits in such Designated LIBOR Currency are
transacted in the London interbank market or (ii) 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.
Unless otherwise indicated in a Pricing Supplement, neither the covenants of
the Company under the Indenture nor those contained in the Notes will
necessarily afford Holders of the Notes protection in the event of a highly
leveraged transaction involving the Company, such as a leveraged buyout.
The Notes are referred to in the accompanying Prospectus as the "Debt
Securities." For a description of the rights attaching to different series of
Debt Securities under the Indenture, see "Description of Debt 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 its
Original Issue Date, or from and including the most recent Interest Payment Date
to which interest on such Note has been paid or duly provided for, 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 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 interest
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payable at Maturity will be payable to the person to whom principal shall be
payable. 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 on 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 (i) a
fixed rate or (ii) 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 of the following Interest Rate Bases as applicable to the relevant
Floating Rate Note: (i) the Commercial Paper Rate, in which case such Note will
be a "Commercial Paper Rate Note," (ii) the CD Rate, in which case such Note
will be a "CD Rate Note," (iii) the Federal Funds Rate, in which case such Note
will be a "Federal Funds Rate Note," (iv) the CMT Rate, in which case such Note
will be a "CMT Rate Note," (v) the 11th District Cost of Funds Rate, in which
case such Note will be an "11th District Cost of Funds Rate Note," (vi) the
Kenny Rate, in which case such Note will be a "Kenny Rate Note," (vii) LIBOR, in
which case such Note will be a "LIBOR Note," (viii) the Prime Rate, in which
case such Note will be a "Prime Rate Note," (ix) the Treasury Rate, in which
case such Note will be a "Treasury Rate Note," or (x) 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
Each Fixed Rate Note (other than a Zero Coupon Note) will bear interest from
its Original Issue Date 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. 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 either semiannually on each March 15 and September 15 or annually on March 15
and the Regular Record Dates will be each March 1 and September 1 or March 1, as
the case may be (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 March 15, June 15,
September 15 and December 15, semiannually on each March 15 and
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September 15 or annually on each March 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 the Interest Payment Date or 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 the interest
rate calculated by reference to the specified Interest Rate Basis (i) plus or
minus the Spread, if any, and/or (ii) 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 and/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 specified in the applicable Pricing Supplement, First
Trust of New York, National Association (in such capacity, the "Calculation
Agent")), Index Maturity, Original Issue Date, the interest rate in effect for
the period from the Original Issue Date to the first Interest Reset Date set
forth in the applicable Pricing Supplement (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 semiannually, 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, semiannually 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 Date 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
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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 semiannually, the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and in the case of Floating Rate
Notes which 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 the Original Issue Date to 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, the
Interest Reset Date for such Floating Rate Note shall be postponed to the next
day that is a Business Day, except that in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding 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 Maturity, 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 (i) a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
(ii) a CD Rate Note (the "CD Interest Determination Date"), (iii) a Federal
Funds Rate Note (the "Federal Funds Interest Determination Date"), (iv) a CMT
Rate Note (the "CMT Interest Determination Date"), (v) a Kenny Rate Note (the
"Kenny Rate Interest Determination Date"), or (vi) a Prime Rate Note (the "Prime
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 each 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.
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Unless otherwise indicated in the applicable Pricing Supplement, interest on
Floating Rate Notes will accrue from and including the Original Issue Date 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
the Original Issue Date, or from the last date to which interest has been paid,
to 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, Federal Funds Rate Notes, 11th District Cost of Funds
Rate Notes, LIBOR Notes and Prime Rate Notes, or by 365 days in the case of
Kenny Rate Notes or by the actual number of days in the year, in the case of CMT
Rate Notes or Treasury 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. 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.
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"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:
D X 360
Money Market Yield = ---------------- X 100
360 - (DXM)
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
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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
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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 Cost of Funds Rate 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, 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 Internal Revenue
Code of 1986, as amended, 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 (i) variable on a weekly
basis, (ii) exempt from Federal income taxation under the Internal Revenue Code
of 1986, as amended, and (iii) not subject to a minimum tax or similar tax under
the Internal Revenue Code of 1986, as amended, 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.
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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 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 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 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, 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.
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"Designated LIBOR Currency" means, as 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 (i) 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 (ii) 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 NYMF 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 NYMF 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 bank or trust company selected as
aforesaid is 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 NYMF Page" means the display designated as page "NYMF" on the Reuters
Monitor Money Rate Service (or such other page as may replace the NYMF 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
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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 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 Note 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
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<PAGE>
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 any Interest Payment Date will be specified in the
applicable Pricing Supplement by reference to the appropriate formula and will
be as follows:
PRINCIPAL
(i) If principal is to increase when the Spot Rate (as defined below)
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:
<TABLE>
<S> <C>
Principal Amount + (Principal Amount X F X [Spot Rate - Base Exchange Rate])
--------------------------------
Spot Rate
</TABLE>
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.
(ii) 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:
<TABLE>
<S> <C>
Principal Amount + (Principal Amount X F X [Base Exchange Rate - Spot Rate])
--------------------------------
Spot Rate
</TABLE>
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
(i) 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:
<TABLE>
<S> <C>
Stated Interest Rate + (F X [Spot Rate - Base Exchange Rate])
--------------------------------
Spot Rate
</TABLE>
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.
(ii) 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:
<TABLE>
<S> <C>
Stated Interest Rate + (F X [Base Exchange Rate - Spot Rate])
--------------------------------
Spot Rate
</TABLE>
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
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<PAGE>
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 CURRENCIES INDICES SHOULD NOT BE TAKEN AS AN
INDICATION OF FUTURE PERFORMANCE OF SUCH CURRENCIES 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 applicable Pricing Supplement may provide that the principal amount
payable at Maturity and/or the interest rate of a Note shall be determined by a
formula which makes reference to a commodity price and/or commodity index, as
specified in the applicable Pricing Supplement (a "Commodity Indexed Note"). The
Pricing Supplement relating to a Commodity Indexed Note will set forth the
method by which the amount of interest payable, and the amount of principal
payable at 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 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 (as defined for U.S.
federal income tax purposes) 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 such Amortizing Note. Unless
otherwise provided in such Pricing Supplement or in such Amortizing 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.
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<PAGE>
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 at least $1,000 or such minimum 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 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 whether such Note
can be repaid prior to Stated Maturity or whether 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 60 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 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
Paying Agent not later than five Business Days after the date of such telegram,
telex, facsimile transmission or letter and such Note and form duly completed
are received by the Paying Agent by such Business Day. Unless otherwise
specified in the applicable Pricing Supplement, exercise of the repayment option
by the Holder of a Note shall be irrevocable. The repayment option may be
exercised by the Holder of a Note for less than the entire principal amount of
the Note, provided that the principal amount of the Note remaining outstanding
after such repayment is of an authorized denomination.
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment may be exercised by the
applicable Participant (as defined below) that has an account with the
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 election 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
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<PAGE>
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 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 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, may be 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
addendum relating thereto if so specified on the face thereof, and in the
applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
So long as the Depositary or its nominee, as the case may be, is the
registered owner of any Global Note, the Depositary or its nominee, as the case
may be, will be considered the sole owner or Holder of the Book-Entry Note or
Notes represented by such Global Note for all purposes under the Indenture and
the Book-Entry Notes. It is currently contemplated that only Notes that have a
Specified Currency of U.S. dollars will be issued as Book-Entry Notes.
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, each in the aggregate
principal amount of such issue, and will be deposited with DTC.
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 DTC. 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 ("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
S-19
<PAGE>
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 DTC.
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 Paying Agent. 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.
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<PAGE>
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
Debt Securities--Defeasance of Debt Securities or Certain Covenants in Certain
Circumstances" in the Prospectus.
SPECIAL PROVISIONS RELATING TO FOREIGN 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 any 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.
Foreign Currency Notes are issuable in registered form only, without
coupons. The authorized denominations for Foreign Currency Notes will be
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, payment of the purchase price of Foreign
Currency Notes will be made in immediately available funds.
CURRENCIES
Unless otherwise indicated in the applicable Pricing Supplement, purchasers
are to pay for Foreign 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 Foreign
Currency Note on or prior to the third Business Day preceding the date of
delivery of the Foreign Currency Note, or by such other day as determined by the
Agent who presented such offer to purchase the Foreign 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
Foreign 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 their regular foreign exchange
practices. All costs of exchange will be borne by the purchasers of the Foreign
Currency Notes.
Specific information about the foreign currency or currency unit in which a
particular Foreign 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 "Foreign Currency Risks."
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal (and premium, if any) and any interest with respect to any Foreign
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 Foreign
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 Foreign 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
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Maturity, the Foreign 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 Foreign Currency Note by a Holder
will remain in effect with respect to any further payments with respect to such
Foreign Currency Note payable to such Holder. If a payment with respect to any
such Foreign 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 Foreign Currency Notes in respect of which such payments
are made.
If so specified in the applicable Pricing Supplement, except as provided
below, payments of principal (and premium, if any) and any interest with respect
to any Foreign Currency Note will be made in U.S. dollars if the Holder of such
Foreign 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 Foreign Currency Note by
a Holder will remain in effect with respect to any further payments of principal
(and premium, if any) and any interest with respect to such Foreign 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 Foreign Currency Note if
an Event of Default has occurred with respect thereto or upon the giving of a
notice of redemption). Holders of Foreign Currency Notes whose Foreign 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 Foreign 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 (as defined below) 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 Foreign
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 Foreign Currency Notes will be specified in the applicable
Pricing Supplement for such Foreign Currency Notes.
If payment in respect of a Foreign 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
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respect of such Foreign 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 Foreign Currency
Notes.
OUTSTANDING FOREIGN CURRENCY NOTES
For purposes of calculating the principal amount of any Foreign Currency
Note payable in a Specified Currency for any purpose under the Indenture, the
principal amount of such Foreign 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 Original Issue Date of such Foreign Currency Note, of the principal
amount of such Foreign Currency Note.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated in 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 Foreign Currency Note. Depreciation of the Specified Currency applicable
to a Foreign 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.
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Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed 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 Foreign 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 FOREIGN 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 FOREIGN CURRENCY
NOTES. FOREIGN 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, Foreign
Currency Notes will not be sold in, or to residents of, the country of the
Specified Currency in which particular Foreign 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 any interest on Foreign Currency Notes. Such persons should contact
their own legal advisors with regard to such matters.
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
will be 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.
PAYMENT CURRENCY
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 Foreign 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 Conversion Date, 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 Foreign Currency Notes--Payment of
Principal and Interest."
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
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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.
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.
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 final Treasury
Regulations released by the Internal Revenue Service on January 27, 1994 (the
"OID Regulations"), which set forth rules applicable to debt instruments issued
with "original issue discount"), 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 which qualify as "applicable high-yield discount
obligations" under Section 163(i) of the Code.
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."
DEFINITION OF QUALIFIED STATED INTEREST
Qualified stated interest generally includes stated interest that is
unconditionally payable in cash or in property (other than debt instruments of
the issuer), or that will be constructively received under Section 451 of the
Code, at least annually in an amount equal to the product of the outstanding
principal amount of the Note and a single fixed rate of interest (adjusted to
reflect differing lengths of time between payment, as appropriate).
Qualified stated interest also includes certain stated interest on a debt
instrument that provides for interest at a variable rate, if that debt
instrument qualifies as a "variable rate debt instrument." In general, a debt
instrument qualifies as a variable rate debt instrument if the following
requirements are met. First, the issue price of the debt instrument must not
exceed the total noncontingent principal payments on the debt instrument by more
than an amount equal to the lesser of 15 percent of the total noncontingent
principal
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payments or .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue date (or,
in the case of an installment obligation, the weighted average maturity).
Second, the debt instrument must provide for stated interest that is compounded
or paid at least annually at a rate or rates described in the OID Regulations,
including (i) one or more "qualified floating rates," (ii) a single fixed rate
and one or more qualified floating rates, (iii) a single "objective rate" or
(iv) a single fixed rate and a single objective rate that is a "qualified
inverse floating rate." Third, the debt instrument must provide that a variable
rate in effect at any time during the term of the instrument is set at the
"current value" of that rate. The "current value" of a rate is the value of that
rate on a day that is no earlier than three months prior to the first day on
which that value is in effect and no later than one year following that first
day.
Subject to certain exceptions, a variable rate of interest is a "qualified
floating rate" if variations in the value of the rate can reasonably be expected
to measure contemporaneous fluctuations in the cost of newly borrowed funds in
the currency in which the Note is denominated. A variable rate will also be
considered a qualified floating rate if the variable rate equals (i) the product
of an otherwise qualified floating rate and a fixed multiple (i.e., a Spread
Multiplier) that is greater than zero but not more than 1.35 or (ii) an
otherwise qualified floating rate (or the product described in clause (i)) plus
or minus a fixed rate (i.e., a Spread). If the variable rate equals the product
of an otherwise qualified floating rate and a single fixed multiplier greater
than 1.35, however, such rate will generally constitute an "objective rate,"
described more fully below. A variable rate will not be considered a qualified
floating rate if the variable rate is subject to a cap, floor, governor (i.e., a
restriction on the amount of increase or decrease in the stated interest rate)
or similar restriction that is reasonably expected as of the issue date to cause
the yield on the Note to be significantly more or less than the expected yield
determined without the restriction (other than a cap, floor or governor that is
fixed throughout the term of the Note).
Subject to certain exceptions, an "objective rate" is defined as a rate
(other than a qualified floating rate) that is determined using a single fixed
formula and that is based on (i) one or more qualified floating rates, (ii) one
or more rates where each rate would be a qualified floating rate for a Note
denominated in a currency other than the currency in which the Note is
denominated, (iii) the yield or changes in the price of one or more items of
personal property (other than stock or debt of the Company or a related party)
that is "actively traded" or (iv) a combination of the rates described in
clauses (i), (ii) and (iii) of this sentence. A variable rate of interest on a
Note will not be considered an objective rate if it is reasonably expected that
the average value of the rate during the first half of the Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Note's term.
Proposed Treasury Regulations issued by the Internal Revenue Service on
December 16, 1994 could change the definition of objective rate to include any
rate (other than a qualified floating rate) that is determined using a single
fixed formula and that is based on objective financial or economic information,
with the exception that an objective rate does not include a rate based on
information that is within the control of the issuer or a related party, or that
is unique to the circumstances of the issuer or a related party. The new
definition of objective rate would be effective only for debt instruments issued
on or after the date that is 60 days after final regulations are issued.
If interest on a Note is stated at a fixed rate for an initial period of
less than one year (e.g., an Initial Interest Rate) followed by a variable rate
that is either a qualified floating rate or an objective rate for a subsequent
period, and the value of the variable rate on the issue date is intended to
approximate the fixed rate, the fixed rate and the variable rate together
constitute a single qualified floating rate or objective rate.
If a Note that qualifies as a variable rate debt instrument provides for
stated interest at a single qualified floating rate or objective rate that is
unconditionally payable in cash or in property (other than debt instruments of
the issuer) or that will be constructively received, at least annually, all
stated interest with respect to the debt instrument is qualified stated
interest.
If a Note is a variable rate debt instrument, but provides for interest at
(i) more than one qualified floating rate, (ii) a single fixed rate and one or
more qualified floating rates, or (iii) in certain cases a single fixed rate and
a single objective rate, then all or a portion of the Note's stated interest may
be treated as
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qualified stated interest. However, in certain instances a portion of that
Note's stated interest will not be so treated, but instead will be included in
the Note's stated redemption price at maturity. As a result, such Notes may be
treated as being issued with original issue discount. Unless otherwise specified
in the applicable Pricing Supplement, each Floating Rate Note will qualify as a
variable rate debt instrument, and all stated interest on each Floating Rate
Note will qualify as qualified stated interest. The Company does not currently
expect to issue Notes with the terms described in the first sentence of this
paragraph. In the event such Notes are issued, the United States federal income
tax consequences to purchasers and holders thereof will be discussed in the
applicable Pricing Supplement. Purchasers of such Notes should carefully examine
the Pricing Supplement and should consult their tax advisors regarding the
purchase, ownership and disposition of such Notes.
ORIGINAL ISSUE DISCOUNT NOTES
United States Holders of Original Issue Discount Notes 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.
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.
The amount of original issue discount includible in income during a taxable
year by a United States Holder of an Original Issue Discount Note will equal the
sum of the daily portions of the original issue discount with respect to the
Original Issue Discount Note for each day during the taxable year on which such
Holder held the Original Issue Discount Note. The daily portion of the original
issue discount on any Original Issue Discount Note is determined by allocating
to each day in any "accrual period" a ratable portion of the original issue
discount allocable to such accrual period. A United States Holder of a Note may
use accrual periods that are of any length and that vary in length over the term
of the Note, provided that each accrual period is not longer than one year and
that each scheduled payment of principal or interest occurs either on the final
day of an accrual period or on the first day of an accrual period. The Company
will specify the accrual period it intends to use in the applicable Pricing
Supplement, but a United States Holder is not required to use the same accrual
period for purposes of determining the amount of original issue discount
includible in its income for a taxable year. The original issue discount
allocable to any accrual period is an amount equal to the excess (if any) of (i)
the product of the Original Issue Discount Note's "adjusted issue price" at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and adjusted for the
length of the accrual period) over (ii) the sum of all payments of qualified
stated interest, if any, payable on such Original Issue Discount Note and
allocable to such accrual period. The "adjusted issue price" of an Original
Issue Discount Note at the beginning of an accrual period is the Original Issue
Discount Note's issue price increased by the amount of original issue discount
includible in the gross income of any holder (without reduction for any
amortized
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acquisition premium or bond premium, as described below) with respect to the
Original Issue Discount Note for all prior accrual periods, and decreased by the
amount of payments previously made on such Note other than payments of qualified
stated interest.
A United States Holder that purchases an Original Issue Discount Note for an
amount that is greater than its adjusted issue price, but less than or equal to
the sum of all amounts payable on the Note other than payments of qualified
stated interest, will be considered to have purchased such Note at an
"acquisition premium." In computing the daily portions of original issue
discount with respect to an Original Issue Discount Note for such a purchaser,
the daily portion for any day is reduced by the amount that would be the daily
portion for such day (computed in accordance with the rules set forth above)
multiplied by a fraction, the numerator of which is the amount, if any, by which
the price paid by such purchaser for that Note exceeds the adjusted issue price,
and the denominator of which is the excess of the sum of all amounts payable on
that Note after the purchase date over the Note's adjusted issue price.
Neither the OID Regulations nor any other currently effective Treasury
Regulations address the treatment of Notes that provide for contingent payments
and do not qualify as variable rate debt instruments ("contingent payment debt
instruments"). Although Proposed Treasury Regulations were published on December
16, 1994 which provide rules for contingent payment debt instruments, these
regulations are applicable only to debt instruments issued sixty days after such
regulations are finalized. The applicable Pricing Supplement will summarize the
rules applicable to any Notes that are contingent payment debt instruments.
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 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 (or, if elected, acquisition
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. A United States Holder
may elect to apply the foregoing rules by accruing "acquisition discount,"
(i.e., the excess of the stated redemption price at maturity over the taxpayer's
basis) rather than original issue discount. Such an election applies 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.
Certain of the Original Issue Discount Notes may be redeemed prior to
maturity at the option of the Company for an amount in excess of their principal
amount. This excess should generally not be considered when determining the
stated redemption price at maturity of a Note. Purchasers of Original Issue
Discount
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Notes which may be redeemed prior to maturity 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 any 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.
SPECIAL RULES FOR ACCRUAL OF ORIGINAL ISSUE DISCOUNT AND QUALIFIED STATED
INTEREST ON VARIABLE RATE DEBT INSTRUMENTS
The amount of original issue discount on a variable rate debt instrument
that provides for stated interest at a single qualified floating rate or
objective rate that is unconditionally payable in cash or in property (other
than debt instruments of the issuer), or that will be constructively received
under Section 451, at least annually, is determined under the rules applicable
to fixed rate debt instruments (described above) by assuming that the variable
rate is a fixed rate determined as follows. In the case of a qualified floating
rate or qualified inverse floating rate, the fixed rate is equal to the value,
as of the issue date of the debt instrument, of the qualified floating rate or
qualified inverse floating rate. In the case of an objective rate (other than a
qualified inverse floating rate) the fixed rate is a rate that reflects the
yield that is reasonably expected for the debt instrument.
The Internal Revenue Service issued proposed regulations on December 16,
1994 that would extend the foregoing rules to the accrual of qualified stated
interest on a variable rate debt instrument. Under these proposed regulations,
which would be effective for debt instruments issued on or after April 4, 1994,
the amount of qualified stated interest that accrues during an accrual period on
a variable rate debt instrument described in the foregoing paragraph is
determined by assuming that the debt instrument bears interest at a fixed rate
determined in the manner described in the foregoing paragraph. Qualified stated
interest allocable to an accrual period is increased (or decreased) if the
interest actually paid during an accrual period exceeds (or is less than) the
interest assumed to be paid during the accrual period.
MARKET DISCOUNT AND PREMIUM
If a United States Holder that acquires a Note has a tax basis in the Note
that is less than its "stated redemption price at maturity" (or, in the case of
an Original Issue Discount Note, less than its "adjusted issue price"), the
amount of the difference will be treated as "market discount" for federal income
tax purposes, unless such difference is less than a specified DE MINIMIS amount.
Under the market discount rules of the Code, a United States Holder will be
required to treat any principal payment (or, in the case of an Original Issue
Discount Note, any payment that does not constitute a payment of qualified
stated interest) on, or any gain on the sale, exchange, retirement or other
disposition of, a Note as ordinary income to the extent of the accrued market
discount that has not previously been included in income. If such Note is
disposed of in a nontaxable transaction (other than certain nonrecognition
transactions specified in regulations yet to be issued), accrued market discount
will be includible as ordinary income to the United States Holder as if such
holder had sold the Note at its then fair market value. Market discount
generally accrues on a straight-line basis over the remaining term of a Note
except that, at the election of the United States Holder (made with respect to a
particular debt instrument), market discount may accrue on a constant yield
basis. A United States Holder may not be allowed to deduct immediately all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or to carry such Note. A United States Holder may elect to include
market discount in income currently, as it accrues (either on a straight-line
basis or, if the United States Holder so elects with respect to a particular
debt instrument, on a constant yield basis), in which case the interest deferral
rule set forth in the preceding sentence will not apply. Such an
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election to accrue market discount in income as it accrues will apply to all
bonds acquired by the United States Holder on or after the first day of the
first taxable year to which such election applies and may be revoked only with
the consent of the Internal Revenue Service.
A United States Holder that purchases an Original Issue Discount Note for an
amount that is greater than its adjusted issue price but less than the stated
redemption price at maturity will be considered to have purchased such Note at
an "acquisition premium." Rules applicable to such a Holder are set forth under
"Original Issue Discount Notes" above.
If a United States Holder purchases a Note for an amount that is greater
than the stated redemption price at maturity, such Holder will be considered to
have purchased such Note with "amortizable bond premium" equal in amount to such
excess, and generally will not be required to include any original issue
discount in income. A United States Holder 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 callable
prior to its maturity date). If such Note may be called prior to maturity after
the United States Holder has acquired it, the amount of amortizable bond premium
is determined with reference to either the amount payable on maturity or, if it
results in a smaller premium attributable to the period through the earlier call
date, with reference to the amount payable on the earlier call date. A United
States 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 United States Holder and may be revoked only with the
consent of the Internal Revenue Service.
Under the OID Regulations, a United States Holder may elect to include in
gross income its entire return on a Note (i.e., in general, the excess of all
payments to be received on the Note over the amount paid for the Note by such
Holder) or class or group of Notes in accordance with a constant yield method
based on the compounding of interest. Such an election for a Note with
amortizable bond premium will result in a deemed election to amortize bond
premium for all the United States Holder's debt instruments with amortizable
bond premium and may be revoked only with the permission of the Internal Revenue
Service. Similarly, such an election for a Note with market discount will result
in a deemed election to accrue market discount in income currently for such Note
and for all other bonds acquired by the United States Holder with market
discount on or after the first day of the taxable year to which such election
first applies, and may be revoked only with the permission of the Internal
Revenue Service.
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
the amount of any market discount, 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 amortized
bond premium and 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
except in the case of any Note acquired with market discount, to the extent of
any accrued market discount not previously included in the 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" and "Market Discount and Premium" above. The
excess of net long-term capital gains over net
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<PAGE>
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.
FOREIGN CURRENCY NOTES
The United States federal income tax consequences to a United States Holder
of the ownership and disposition of Foreign Currency Notes will be summarized in
the applicable Pricing Supplement.
INDEXED NOTES
The United States federal income tax consequences to a United States Holder
of the ownership and disposition of Currency Indexed Notes and Commodity Indexed
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.
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:
(i) 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, (a) 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, (b) 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, (c) such
Holder is not a bank receiving interest described in Section 881(c)(3)(A) of
the Code, (d) the certification requirements under Section 871(h) or Section
881(c) of the Code and Treasury Regulations thereunder (summarized below)
are met, and (e) such interest is neither effectively connected with the
conduct of a trade or business in the United States nor described in Section
871(h)(4) of the Code (which in general is limited to certain types of
contingent interest, as summarized below);
(ii) 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 Notes unless (a) 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 (b) such gain is effectively
connected with the conduct by such Holder of a trade or business in the
United States; and
(iii) 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 (a) 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, (b) the Note does not provide for interest
described in Section 871(h)(4) of the Code (as summarized below), and (c) 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 (i) 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 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
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<PAGE>
beneficial owner by it or by a Financial Institution between it and the
beneficial owner and must furnish the payor 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 original issue discount or
market 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 market 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 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
original issue discount and market 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 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 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.
S-32
<PAGE>
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 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 that 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 offers
to purchase the Notes. The Company will pay each Agent a commission of from
.125% to .750% of the principal amount of each Note, depending upon its Stated
Maturity, sold through such Agent, except that the commission payable by the
Company to the Agents with respect to Notes with maturities of greater than 30
years will be negotiated at the time the Company issues such Notes. The Company
will have the sole right to accept offers to purchase Notes and may reject any
such offer in whole or in part. The Company reserves the right to accept offers
to purchase Notes through agents other than the Agents under certain
circumstances. 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
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<PAGE>
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 payments 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 it 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 the secondary market if one develops. From time to time,
each Agent may make a market in the Notes.
Certain of the Agents and their affiliates perform various investment
banking and commercial banking services for the Company from time to time in the
ordinary course of business and may perform such services in the future.
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<PAGE>
PROSPECTUS
$150,000,000
INTERNATIONAL MULTIFOODS CORPORATION
DEBT SECURITIES
----------------
International Multifoods Corporation (the "Company") may offer from time to
time its debt securities consisting of debentures, notes and/or other unsecured
evidences of indebtedness ("Debt Securities") at an aggregate initial offering
price of not more than $150,000,000 (or the equivalent in foreign currency or
composite currencies). The Debt Securities may be offered as separate series in
amounts, at prices and on terms to be determined at the time of sale and to be
set forth in supplements to this Prospectus. The Company may sell Debt
Securities to or through underwriters to be designated from time to time, and
may also sell Debt Securities directly to other purchasers or through agents or
broker-dealers. See "Plan of Distribution".
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, currency or currencies of denomination
and payment, maturity, rate (which may be fixed or variable) and time of payment
of interest, if any, terms for redemption at the option of the Company or the
holder, if any, terms for sinking fund payments, if any, the initial public
offering price, the names of any underwriters or agents, the principal amounts,
if any, to be purchased by underwriters, the compensation, if any, of such
underwriters or agents and any other terms in connection with the offering and
sale of the Debt Securities with respect to which this Prospectus is being
delivered are set forth in the accompanying Prospectus Supplement ("Prospectus
Supplement").
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is January 18, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C., 20549, or at the
Commission's regional offices located at 1400 Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60601 and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy
statements and other information concerning the Company also may be inspected at
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement, which may be
inspected without charge at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may be obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Commission under the
Exchange Act, are incorporated in this Prospectus by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1995.
(2) The Company's Quarterly Reports on Form 10-Q for quarters ended May
31, 1995, August 31, 1995 and November 30, 1995.
(3) The Company's Current Report on Form 8-K dated June 26, 1995.
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 the offering of the Debt Securities shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated herein by reference (other than certain
exhibits to such documents). Requests for such documents should be directed to
International Multifoods Corporation, 33 South 6th Street, P.O. Box 2942,
Minneapolis, Minnesota 55402, Attention: Secretary (telephone (612) 340-3579).
2
<PAGE>
THE COMPANY
International Multifoods Corporation, incorporated in Delaware in 1969 as
the successor to a business founded in 1892, operates in three businesses:
foodservice distribution in the United States, bakery products in the United
States and Canada, and bakery and agricultural products in Venezuela.
The Foodservice Distribution segment includes the vending distribution
business; the limited-menu distribution business, which comprises the
limited-menu distribution business of Leprino Foods Company acquired in fiscal
year 1995 and the former Pueringer limited-menu foodservice distribution
business; and the food exporting business. The Company is the largest U.S.
vending distributor, serving approximately 14,000 vending and office coffee
service operators and other concessionaires. The Company's limited-menu
distribution business delivers a broad selection of cheeses, meats, snacks,
paper goods and other products, including pizza ingredients, to independent
pizza restaurants and other select limited-menu operators, including sandwich
shops, Mexican restaurants, bakery shops and movie theaters. The Company also
markets and exports a variety of goods, primarily food products.
The Bakery segment comprises bakery products for foodservice, retail bakery,
in-store bakery and wholesale bakery customers in North America and consumer
products in Canada, which include primarily home baking products and condiments.
The Company's North America Bakery division produces approximately 3,000 bakery
mix products, including mixes for breads, rolls, bagels, donuts, muffins,
danish, cakes, cookies, brownies, bars and pizza crusts, as well as fillings and
icings. In addition, the Company manufactures and markets frozen desserts. In
Canada, the Company also produces wheat flour, durum and oat products. The
Company's consumer products division markets flour, specialty baking mixes, hot
cereals and pickles, relishes and other condiments to consumers in Canada.
The Venezuela Foods segment includes consumer products for home baking,
bakery products for food processors and commercial and retail bakeries, and
products for the agricultural sector. The Company's Venezuelan subsidiary is one
of the largest food companies in Venezuela and the second-largest producer of
animal feeds for the agricultural sector. The Company's consumer products
include wheat flour, corn flour, whole grain rice, rice flour and oat cereals,
which are sold to grocery stores. The Company also sells wheat flour and
prepared bakery mixes to food processors and commercial and retail bakeries. The
Company's animal feeds are sold to animal producers and farm distributors.
The Company's principal executive offices are located at 33 South 6th
Street, P.O. Box 2942, Minneapolis, Minnesota 55402, and its telephone number is
(612) 340-3300.
USE OF PROCEEDS
Except as may be set forth in the Prospectus Supplement, the net proceeds to
be received by the Company from the issuance and sale of the Debt Securities
offered hereby may be used to reduce short-term and other indebtedness, to
finance acquisitions, to provide working capital and for other general corporate
purposes. The precise amount and timing of the application of such proceeds have
not yet been determined and will depend upon the funding requirements of the
Company and the availability and cost of other funds. Pending such use, a
portion of such funds may be invested in short-term marketable securities.
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
- ------------------------ FISCAL YEAR ENDED LAST DAY OF FEBRUARY
AUGUST 31, AUGUST 31, ---------------------------------------------
1995 1994 1995 1994 1993 1992 1991
- ---------- ---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1.69 4.92 3.80 .40 3.57 3.12 2.85
</TABLE>
For the year ended February 28, 1994, earnings were inadequate to cover
fixed charges. The deficiency for fiscal 1994 was $13,463,000. In fiscal 1994,
the Company recognized unusual charges of $70.0 million relating to the
disposition of certain underperforming assets and the reorganization of
remaining operations.
3
<PAGE>
The reorganization entailed the consolidation and closing of certain U.S. and
Canadian facilities, plant rationalization and organizational changes. Exclusive
of these unusual items, the ratio of earnings to fixed charges would have been
3.50 for the year ended February 28, 1994.
For purposes of computing the ratios, earnings represent earnings from
continuing operations before income taxes plus fixed charges (excluding
capitalized interest). Earnings from continuing operations before income taxes
have also been adjusted to reflect income received (but not undistributed
amounts) from less-than-fifty-percent-owned persons and the full amount of
losses of majority-owned subsidiaries. Fixed charges include all interest
(including capitalized interest) and the portion of rents deemed representative
of the interest factor.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate. The specific terms of the Debt Securities offered by any Prospectus
Supplement (the "Offered Debt Securities") and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered will be described
in the Prospectus Supplement relating to such Offered Debt Securities.
The Offered Debt Securities are to be issued in one or more series under an
Indenture dated as of January 1, 1990, as supplemented by the First Supplemental
Indenture dated as of May 29, 1992, and as further amended and supplemented from
time to time (the "Indenture"), between the Company and First Trust of New York,
National Association (successor to Morgan Guaranty Trust Company of New York),
as trustee (the "Trustee"), copies of which are exhibits to the Registration
Statement. The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indenture, including the definitions of
certain terms contained in the Indenture. Wherever particular sections or
defined terms of the Indenture are referred to, such sections or defined terms
are incorporated herein by reference. Capitalized terms not otherwise defined
herein shall have the meanings given to them in the Indenture. Section numbers
set forth below refer to provisions of the Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company and will
rank on a parity with all other unsecured and unsubordinated indebtedness of the
Company.
The Indenture does not limit the aggregate principal amount of the Debt
Securities which may be issued thereunder and provides that Debt Securities may
be issued thereunder from time to time in one or more series. (Section 301)
Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities for the following terms thereof: (1) the title of the Offered Debt
Securities; (2) any limit on the aggregate principal amount of the Offered Debt
Securities; (3) the date or dates on which the Offered Debt Securities will
mature; (4) the rate or rates per annum (or the method of calculating such rate)
at which the Offered Debt Securities will bear interest, if any, and the date
from which such interest, if any, will accrue; (5) the times at which any such
interest will be payable; (6) the dates, if any, on which and the price or
prices at which the Offered Debt Securities may, pursuant to any mandatory or
optional sinking fund provisions, be redeemed by the Company and other detailed
terms and provision of any such sinking funds; (7) the date, if any, after which
and the price or prices at which the Offered Debt Securities may, pursuant to
any optional redemption provisions, be redeemed at the option of the Company or
of the holder thereof and other detailed terms and provisions of any such
optional redemption; (8) if the Offered Debt Securities are Original Issue
Discount Securities, the amount (or the method of calculating such amount) of
principal payable upon acceleration of such Debt Securities following an Event
of Default; (9) the coin or currency, which may be a composite currency such as
the European Currency Unit, in which payment of the principal of (and premium,
if any) and interest on the Offered Debt Securities will be made if other than
the coin or currency of the United States; (10) any provisions enabling the
Company or Holders of Offered Debt Securities to elect to make or receive
payments of the principal of and any premium or interest on the Offered Debt
Securities in a coin or
4
<PAGE>
currency other than that in which the Offered Debt Securities are stated to be
payable; (11) the manner in which the amount of payments of principal of (and
premium, if any) or interest on the Offered Debt Securities is to be determined
if such determination is to be made with reference to an index; (12) the right
of the Company to defease the Offered Debt Securities or certain covenants under
the Indenture; (13) whether the Offered Debt Securities will be issued in whole
or in part in the form of one or more Global Securities and the Depository
therefor; and (14) any other terms of the Offered Debt Securities. (Section 301)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of (and premium, if any) and interest on the Offered Debt Securities
will be payable, and the Offered Debt Securities will be exchangeable and
transfers thereof will be registrable, at the Corporate Trust Office of the
Trustee, provided that, at the option of the Company, payment of any interest
may be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register. (Sections 301, 305 and 1002)
In addition, unless otherwise indicated in the Prospectus Supplement
relating thereto, the Offered Debt Securities will be issued only in fully
registered form without coupons in denominations of $1,000 or any integral
multiple thereof. (Section 302) No service charge will be made for any transfer
or exchange of the Offered Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. (Section 305)
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities to be offered and sold at a substantial discount from their stated
principal amount. If the Offered Debt Securities are Original Issue Discount
Securities, the special Federal income tax, accounting and other considerations
applicable thereto will be described in the Prospectus Supplement relating
thereto.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES
Certain of the restrictive provisions of the Indenture are applicable to the
Company and its Restricted Subsidiaries and do not apply to Unrestricted
Subsidiaries. The assets and indebtedness of Unrestricted Subsidiaries are not
consolidated with those of the Company and its Restricted Subsidiaries in
calculating Consolidated Net Tangible Assets under the Indenture. "Unrestricted
Subsidiaries" are defined as (1) any Subsidiary substantially all of the
physical properties of which are located, or substantially all of the business
of which is carried on, outside the United States of America, its territories
and possessions, and Canada, (2) certain finance Subsidiaries, (3) certain
inactive Subsidiaries and (4) any majority-owned Subsidiary of an Unrestricted
Subsidiary. "Restricted Subsidiaries" are all Subsidiaries other than
Unrestricted Subsidiaries. The term "Subsidiary" means a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or indirectly,
by the Company or by one or more other Subsidiaries, or by the Company and one
or more other Subsidiaries. (Section 101)
The Company may change the designation of a Restricted Subsidiary to an
Unrestricted Subsidiary, unless such Restricted Subsidiary (1) owns an Operating
Property or (2) owns shares of stock or indebtedness of another Restricted
Subsidiary. In addition, neither the Company nor any Restricted Subsidiary may
transfer an Operating Property, or shares of stock or indebtedness of a
Restricted Subsidiary, to an Unrestricted Subsidiary. (Section 1014)
An Unrestricted Subsidiary may not be designated a Restricted Subsidiary
unless, after giving effect thereto, the aggregate amount of all indebtedness of
the Company and its Restricted Subsidiaries secured by mortgages which would
otherwise be subject to the restrictions described under "Certain Covenants of
the Company Restrictions on Liens" and the Value of all Sale and Lease-back
Transactions in existence at such time (other than any Sale and Lease-back
Transaction permitted under clause (3) under "Certain Covenants of the Company
Restrictions on Sale and Lease-back Transactions") does not at the time exceed
10% of Consolidated Net Tangible Assets. (Section 1015)
CERTAIN COVENANTS OF THE COMPANY
RESTRICTIONS ON LIENS. The Indenture provides that the Company will not,
and will not permit any Restricted Subsidiary to, issue, assume or guarantee any
indebtedness for money borrowed (herein referred to as "Debt") if such Debt is
secured by any mortgage, security interest, pledge, lien or other encumbrance
(herein referred to as a "mortgage") upon any Operating Property of the Company
or any Restricted
5
<PAGE>
Subsidiary or any shares of stock or indebtedness of any Restricted Subsidiary,
whether owned at the date of the Indenture or thereafter acquired, without
effectively securing the Debt Securities equally and ratably with such Debt. The
foregoing restriction does not apply to (1) mortgages on any property acquired,
constructed or improved after May 29, 1992 which are created or assumed within
180 days after such acquisition, construction or improvement (or within six
months thereafter pursuant to a firm commitment for financing arrangements
entered into within such 180-day period) to secure or provide for the payment of
the purchase price or cost thereof incurred after May 29, 1992; (2) mortgages
existing on property at the time of its acquisition (including acquisition
through merger or consolidation) and mortgages on property of any corporation
existing at the time it becomes a Restricted Subsidiary; (3) mortgages to secure
Debt of a Restricted Subsidiary to the Company or to another Restricted
Subsidiary; (4) mortgages in favor of governmental bodies to secure partial
progress, advance or other payments pursuant to any contract or statute or to
secure indebtedness incurred to finance the purchase price or cost of
constructing or improving the property subject to such mortgages; or (5)
mortgages for extending, renewing or replacing Debt secured by any mortgage
referred to in the foregoing clauses (1) to (4), inclusive, or in this clause
(5) or any mortgages existing on May 29, 1992. Such restriction does not apply
to the issuance, assumption or guarantee by the Company or any Restricted
Subsidiary of Debt secured by a mortgage which would otherwise be subject to the
foregoing restrictions up to an aggregate amount which, together with all other
secured Debt of the Company and its Restricted Subsidiaries (not including
secured Debt existing on May 29, 1992 and secured Debt permitted under the
foregoing exceptions) and the Value of Sale and Lease-back Transactions existing
at such time (other than Sale and Lease-back Transactions the proceeds of which
have been applied to the retirement of Debt Securities or of certain long-term
indebtedness or to the purchase of one or more other Operating Properties, and
other than Sale and Lease-back Transactions in which the property involved would
have been permitted to be mortgaged under clause (1) above), does not exceed 10%
of Consolidated Net Tangible Assets. (Section 1007)
RESTRICTIONS ON SALE AND LEASE-BACK TRANSACTIONS. Sale and Lease-back
Transactions by the Company or any Restricted Subsidiary of any Operating
Property are prohibited (except for temporary leases for a term, including
renewals, of not more than 36 months and except for leases between the Company
and a Restricted Subsidiary or between Restricted Subsidiaries) unless the net
proceeds of such Sale and Lease-back Transactions are at least equal to the fair
value (as determined by the Board of Directors of the Company) of the Operating
Property to be leased and either (1) the Company or such Restricted Subsidiary
would be entitled to incur Debt secured by a mortgage on the property to be
leased without securing the Debt Securities pursuant to clause (1) under
"Restrictions on Liens" or (2) the Value thereof would be an amount permitted
under the last sentence under "Restrictions on Liens" or (3) the Company applies
an amount equal to the fair value (as so determined) of such property (a) to the
redemption or repurchase of Debt Securities, (b) to the payment or other
retirement of certain long-term indebtedness of the Company or a Restricted
Subsidiary or (c) to the purchase of one or more Operating Properties (other
than that involved in such Sale and Lease-back Transaction). (Section 1008)
CERTAIN DEFINITIONS
The term "Consolidated Net Tangible Assets" is defined to mean the total of
all the assets (less applicable reserves for depreciation, amortization,
doubtful receivables and other asset reserves) appearing on the consolidated
balance sheet of the Company and its Restricted Subsidiaries less the following:
(1) current liabilities; (2) intangible assets such as goodwill, trademarks,
trade names and patents; (3) appropriate adjustments on account of minority
interests of other persons holding stock in any Restricted Subsidiary; and (4)
unamortized debt discount and expense. (Section 101)
The term "Operating Property" is defined to mean any manufacturing or
processing plant, retail store, warehouse or distribution center, together with
the land upon which it is situated, located within the United States of America
or its territories or possessions or in Canada and owned and operated now or
hereafter by the Company or any Restricted Subsidiary and having a net book
value on the date as of which the determination is being made of more than 0.5%
of Consolidated Net Tangible Assets other than property which, in the opinion of
the Board of Directors of the Company, is not of material importance to the
total business conducted by the Company and its Restricted Subsidiaries taken as
a whole. (Section 101)
6
<PAGE>
The term "Value" is defined to mean, with respect to a Sale and Lease-back
Transaction, as of any particular time, the amount equal to the greater of (1)
the net proceeds from the sale or transfer of the property leased pursuant to
such Sale and Lease-back Transaction or (2) the fair value in the opinion of the
Board of Directors of the Company of such property at the time of entering into
such Sale and Lease-back Transaction, in either case multiplied by a fraction,
the numerator of which shall be equal to the number of full years of the term of
the lease remaining at the time of determination and the denominator of which
shall be equal to the number of full years of such term, without regard to any
renewal or extension options contained in the lease. (Section 101)
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities for any particular provisions relating to such Offered
Debt Securities, including any additional restrictive covenants that may be
included in the terms thereof.
Unless otherwise indicated in a Prospectus Supplement, the covenants
described above and in the Offered Debt Securities would not necessarily afford
Holders of the Offered Debt Securities protection in the event of a highly
leveraged transaction involving the Company, such as a leveraged buyout.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may, without the consent of the
Holders of the Debt Securities, consolidate with or merge into any other
corporation, or convey, transfer or lease its properties and assets
substantially as an entirety to any person, or permit any person to consolidate
with or merge into the Company or to convey, transfer or lease its properties
and assets substantially as an entirety to the Company, provided that in any
such case (1) the successor corporation, if other than the Company, shall be a
domestic corporation and such corporation shall assume by a supplemental
indenture the Company's obligations under the Indenture and the Debt Securities,
(2) immediately after such transaction, no Event of Default and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have happened and be continuing, (3) if as a result of any such merger,
consolidation, or such conveyance, transfer or lease, properties or assets of
the Company would become subject to a mortgage (as defined) which would not be
permitted under "Restrictions on Liens" described above, the Debt Securities
would be secured, equally and ratably with (or prior to) all indebtedness so
secured and (4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease complies with the Indenture and that all
conditions precedent in the Indenture relating to such transaction have been
complied with. Upon compliance with these provisions by a successor corporation
in connection with a consolidation with or merger of the Company into, or
conveyance, transfer or lease to, such successor corporation, the Company
(except in the case of a lease) would be relieved of its obligations under the
Indenture and the Debt Securities. (Sections 801 and 802)
EVENTS OF DEFAULT
The Indenture defines an Event of Default with respect to any series of Debt
Securities as being any one of the following events: (1) default for 30 days in
any payment of interest on such series; (2) default in any payment of principal
of (or premium, if any, on) such series when due; (3) default in the payment of
any sinking fund installment with respect to such series when due; (4) default
for 60 days after appropriate notice in performance of any other covenant or
warranty in the Indenture (other than a covenant or warranty included in the
Indenture solely for the benefit of series of Debt Securities other than that
series); (5) default under any outstanding evidence or evidences of Debt in an
aggregate principal amount in excess of $10,000,000 by the Company or any
Restricted Subsidiary (including certain defaults with respect to Debt
Securities other than that series) or under any mortgage, indenture or
instrument under which any such Debt is issued or secured (including the
Indenture), which results in acceleration of the maturity of such Debt without
such acceleration having been rescinded or annulled, or such Debt having been
discharged such that the aggregate amount of such Debt subject to acceleration
and not discharged remains in excess of $10,000,000, within 10 days after
written notice as provided in the Indenture; (6) certain events in bankruptcy,
insolvency or reorganization; or (7) any other Event of Default provided with
respect to Debt Securities of that series. In case an Event of Default shall
occur and be continuing with respect to any series of Debt Securities, the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
7
<PAGE>
Outstanding Debt Securities of that series may declare the principal of such
series (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal as may be specified in the terms of
that series) to be immediately due and payable. Any Event of Default with
respect to a particular series of Debt Securities may be waived by the Holders
of a majority in aggregate principal amount of the Outstanding Debt Securities
of such series, except in each case a failure to pay principal of (or premium,
if any) or interest on such Debt Security or in respect of a provision which
under the Indenture cannot be modified without the consent of the Holder of each
Outstanding Debt Security of the series affected. (Sections 501, 502, 513)
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Indenture requires the Company to file annually with the Trustee an
Officers' Certificate as to the absence of certain defaults under the terms of
the Indenture. (Section 1016) The Indenture provides that the Trustee will,
within 90 days after the occurrence of a default in respect to the Debt
Securities of any series, transmit by mail to all Holders of such Debt
Securities notice of any default known to the Trustee, unless such default shall
have been cured or waived, provided that the Trustee may withhold notice to the
Holders of such Debt Securities of any default (except in payment of principal
(or premium, if any) or interest or any sinking fund installment) if it
considers it in the interest of the Holders of such Debt Securities to do so.
(Section 602)
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Indenture
provides that the Trustee shall be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of the Holders
of the Debt Securities unless such Holders shall have offered to the Trustee
reasonable indemnity. (Sections 601, 603) Subject to such provisions for
indemnification and certain other rights of the Trustee, the Indenture provides
that the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of any series affected shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee with respect
to the Debt Securities of such series. However, the Indenture provides that the
Trustee need take no action which would be unduly prejudicial to the Holders not
joining such direction. (Sections 512, 603)
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless (1) such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default with respect to Debt Securities
of that series, (2) the Holders of at least 25% in aggregate principal amount of
the Outstanding Debt Securities of that series shall have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, (3) the Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the Outstanding Debt Securities of that series
a direction inconsistent with such request within 60 days of such notice,
request and offer of indemnity and (4) the Trustee shall have failed to
institute such proceeding within that 60 day period. (Section 507) However, the
Holder of any Debt Security will have an absolute right to receive payment of
the principal of (and premium, if any) and interest on such Debt Security on or
after the due dates expressed in such Debt Security and to institute suit for
the enforcement of any such payment. (Section 508)
MODIFICATION AND WAIVER
Modification and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of at least a majority of the
principal amount of the Outstanding Debt Securities of each series affected by
such modifications or amendments; PROVIDED, HOWEVER, that no such modification
or amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (1) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (2) reduce
the principal amount of, the rate of interest on, or any premium payable on
redemption of any Debt Security, or reduce the amount of principal of an
Original Issue Discount Security that would be
8
<PAGE>
due and payable upon acceleration, (3) change the place or currency of payment
of principal of, or any premium or interest on, any Debt Security, (4) impair
the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security after the Stated Maturity thereof, or (5) reduce
the percentage in principal amount of Outstanding Debt Securities of any series,
the consent of whose Holders is required for modification or amendment of the
Indenture, for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults. (Section 902)
The Holders of at least a majority of the principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
(Section 1017)
DEFEASANCE OF DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
The Indenture provides, if such provision is made applicable to the Debt
Securities of any series pursuant to Section 301 of the Indenture, that the
Company may elect either (1) to defease and be discharged from any and all
obligations with respect to such Debt Securities (except for the obligations to
register the transfer or exchange of such Debt Securities, to replace temporary
or mutilated, destroyed, lost and stolen Debt Securities, to maintain an office
or agency in respect of the Debt Securities and to hold moneys for payment in
trust) ("defeasance") or (2) to be released from its obligations with respect to
such Debt Securities under the restrictions described under "Certain Covenants
of the Company--Restrictions on Liens" and "--Restrictions on Sale and
Lease-back Transactions", respectively, in which case the events described in
clause (4) under "Events of Default" shall no longer be an Event of Default with
respect to such Debt Securities ("covenant defeasance"), upon the deposit with
the Trustee (or other qualifying 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 to pay the principal of (and premium, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor. Such a trust may only be established if,
among other things, the Company has delivered to the Trustee an opinion of
counsel (as specified in the Indenture) to the effect that the Holders of such
Debt Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred. Such opinion, in the case of defeasance under clause (1)
above, must refer to and be based upon a ruling of the Internal Revenue Service
or a change in applicable Federal income tax law occurring after the date of the
Indenture. The Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance with respect to the Debt
Securities of a particular series. (Sections 1009 through 1013, inclusive)
In the event the Company exercises its option to omit compliance with
certain covenants of the Indenture with respect to any series of Debt Securities
and the Debt Securities of such series are declared due and payable because of
the occurrence of any Event of Default, the amount of money and U.S. Government
Obligations on deposit with the Trustee will be sufficient to pay amounts due on
the Debt Securities of such series at the time of their Stated Maturity but may
not be sufficient to pay amounts due on the Debt Securities of such series at
the time of the acceleration resulting from such Event of Default. However, the
Company shall remain liable for such payments.
The Prospectus Supplement will state if any defeasance provision will apply
to the Offered Debt Securities.
CONCERNING THE TRUSTEE
First Trust of New York, National Association, the Trustee under the
Indenture, is also trustee with respect to another series of debt securities
issued pursuant to the Indenture. In the ordinary course of its business,
affiliates of the Trustee have engaged and may in the future engage in
commercial banking transactions with the Company and its affiliates.
9
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters and also may
sell Debt Securities directly to other purchasers or through agents.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents, in the form of discounts, concessions or commissions.
Underwriters and agents that participate in the distribution of Debt Securities
may be deemed to be underwriters, and any discounts or commissions received by
them from the Company and any profit on the resale of Debt Securities by them
may be deemed to be underwriting discounts and commissions, under the Securities
Act. Any such underwriters or agents will be identified in the Prospectus
Supplement. Any such compensation received by such underwriters from the Company
will also be described in the Prospectus Supplement. Underwriters may sell Debt
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent. The Company may
also offer and sell Debt Securities in exchange for securities of one or more of
its outstanding issues of debt securities.
If so indicated in the Prospectus Supplement, the Company will authorize
dealers or other persons acting as agents of the Company to solicit offers by
certain institutions to purchase Debt Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. The obligations of any purchaser under any such contract will not
be subject to any conditions except that the purchase of the Offered Debt
Securities shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The dealers and such other
persons will not have any responsibility in respect of the validity or
performance of such contracts.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
The Debt Securities will be a new issue of securities with no established
trading market. Any underwriters or agents to or through whom Debt Securities
are sold by the Company for public offering and sale may make a market in such
Debt Securities, but such underwriters and agents will not be obligated to do so
and may discontinue any market-making at any time without notice. No assurance
can be given as to the liquidity of the trading market for any Debt Securities.
Certain of the underwriters, dealers and/or agents and their associates may
be customers of, engage in transactions with and perform services for the
Company, including its subsidiaries, in the ordinary course of business.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities offered hereby is being passed upon for
the Company by Frank W. Bonvino, General Counsel of the Company, and for any
underwriter by Skadden, Arps, Slate, Meagher & Flom, Chicago, Illinois. Mr.
Bonvino may rely on Skadden, Arps, Slate, Meagher & Flom as to matters of New
York law. The opinions of Mr. Bonvino and Skadden, Arps, Slate, Meagher & Flom
will be conditioned upon, and subject to certain assumptions regarding, future
action required to be taken by the Company and the Trustee in connection with
the issuance and sale of any particular Debt Securities, the specific terms of
Debt Securities and other matters that may affect the validity of Debt
Securities but that cannot be ascertained on the date of such opinions. At
October 31, 1995, Mr. Bonvino was the beneficial owner of 18,835 shares of
common stock of the Company, including 7,870 restricted shares, and held options
to purchase 26,775 additional shares.
10
<PAGE>
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company and subsidiaries as of the last day of February, 1995 and 1994 and
for each of the years in the three-year period ended February 28, 1995
incorporated herein by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended February 28, 1995 have been incorporated herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of such
firm as experts in accounting and auditing.
11
<PAGE>
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR
PRICING SUPPLEMENT AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER
OR AGENT. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR PRICING
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY AND THEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR PRICING
SUPPLEMENT AT ANY TIME SHALL NOT UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds............................... S-3
Description of Notes.......................... S-3
Special Provisions Relating to Foreign
Currency Notes............................... S-21
Foreign Currency Risks........................ S-23
United States Federal Income Tax
Consequences................................. S-25
Supplemental Plan of Distribution............. S-33
PROSPECTUS
Available Information......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Company................................... 3
Use of Proceeds............................... 3
Ratios of Earnings to Fixed Charges........... 3
Description of Debt Securities................ 4
Plan of Distribution.......................... 10
Validity of Debt Securities................... 10
Experts....................................... 11
</TABLE>
$150,000,000
[LOGO]
MEDIUM-TERM NOTES, SERIES B
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PROSPECTUS SUPPLEMENT
FEBRUARY 1, 1996
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LEHMAN BROTHERS
BA SECURITIES, INC.
BT SECURITIES CORPORATION
FIRST CHICAGO
CAPITAL MARKETS, INC.
J.P. MORGAN SECURITIES INC.
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