<PAGE> 1
Filed Pursuant To Rule 424(b)(5)
Registration No. 033-64459
PROSPECTUS SUPPLEMENT
DECEMBER 12, 1997
(TO PROSPECTUS DATED JANUARY 17, 1996)
$300,000,000
IBP, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
IBP, inc. (the "Company") may offer from time to time its Medium-Term Notes
(the "Notes"), in an aggregate principal amount (or in the case of Notes issued
at a discount from the principal amount, an aggregate initial offering price) of
up to $300,000,000 or the equivalent thereof in one or more Foreign Currencies
(as defined herein), subject to reduction as a result of the sale of other Debt
Securities of the Company. See "Description of Notes" and "Plan of Distribution
of Notes." Unless otherwise indicated in a pricing supplement accompanying this
Prospectus Supplement (the "Pricing Supplement"), the interest rate on each Note
will be either a fixed rate established by the Company at the date of issue of
such Note, or a floating rate or rates as set forth therein and specified in the
applicable Pricing Supplement. Notes may also be issued as otherwise described
under "Description of Notes."
The interest rate or rates and/or formula or formulae, if any, issue price,
maturity and other variable terms of the Notes will be established by the
Company and specified in the applicable Pricing Supplement. Interest rates and
interest rate formulae are subject to change by the Company, but no such change
will affect any Note which the Company has already issued or has agreed to
issue. Original Issue Discount Notes (as defined herein) may provide that
Holders of such Notes will not receive periodic payments of interest. Each Note
will mature on a Business Day nine months or more from the date of issue, as set
forth in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, the Notes may not be redeemed by the Company or
repaid to the Holder prior to maturity. Notes denominated in U.S. dollars will
be issued in denominations of $100,000 and integral multiples of $1,000 in
excess thereof, unless otherwise specified in the applicable Pricing Supplement.
The authorized denominations of Notes not denominated in U.S. dollars and any
terms relating to such Notes will be set forth in the applicable Pricing
Supplement.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") and will be represented by one or more fully registered global securities
(the "Global Notes") deposited with or on behalf of The Depository Trust Company
(the "Depository") and registered in the name of the Depository or the
Depository's nominee. Interests in the Global Notes will be shown on, and
transfer thereof will be effected only through, records maintained by the
Depository (with respect to its participants' interests) and the Depository's
participants (with respect to beneficial owners.) Except as described below
under "Description of Notes--Book-Entry Notes," owners of beneficial interests
in the Global Notes will not be entitled to receive physical delivery of Notes
in definitive form and will not be considered the Holders thereof.
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 SUPPLEMENT HERETO OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PRICE AGENTS' PROCEEDS
TO THE DISCOUNTS OR TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note...................................... 100% 0.125%-0.750% 99.875%-99.250%
Total(4)...................................... $300,000,000 $375,000-$2,250,000 $299,625,000-$297,750,000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes will
be issued at 100% of their principal amount. If the Company issues any Note
at a discount from or at a premium over its principal amount, the Price to
the Public of such Note will be set forth in the applicable Pricing
Supplement.
(2) Unless otherwise specified in the applicable Pricing Supplement, the Company
will pay a commission ranging from 0.125% to 0.750% of the principal amount
of any Note, depending on its maturity, sold through any Agents (as defined
below). This commission scale applies to Notes that mature between nine
months and thirty years (inclusive) from their date of issue. The commission
applicable to the sale of any Note that matures more than thirty years from
its date of issue will be determined by the relevant Agent and the Company
at the time of such sale and disclosed in the applicable Pricing Supplement.
The Company also may sell Notes to any Agent at a discount for resale to one
or more investors at varying prices related to prevailing market prices at
the time of resale, as determined by such Agent. In the case of Notes sold
directly or indirectly to investors by the Company, no discount will be
allowed or commission paid. The Company has agreed to indemnify each Agent
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Plan of Distribution of Notes."
(3) Before deducting other expenses payable by the Company estimated at
$300,000.
(4) Or the equivalent thereof in a Foreign Currency.
The Notes may be offered on a continuing basis by the Company through
Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Brothers Inc
(individually, an "Agent" and collectively, the "Agents"), each of which has
agreed to use reasonable efforts to solicit offers to purchase the Notes. The
Company may sell Notes to any Agent acting as principal for resale to one or
more investors. The Company has reserved the right (i) to sell Notes directly to
investors (other than broker-dealers) in those jurisdictions in which the
Company is so permitted and (ii) to accept offers to purchase Notes from time to
time through one or more additional agents or dealers, acting either as
principal or agent, on substantially the same terms as those applicable to sales
of Notes to or through the Agents. Unless otherwise specified in the applicable
Pricing Supplement, the Notes will not be listed on any securities exchange, and
there can be no assurance that there will be a secondary market for any of the
Notes. The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice. The Company may reject any offer in its sole
discretion, or an Agent may reject any offer it reasonably considers to be
unacceptable, in whole or in part. See "Plan of Distribution of Notes."
DONALDSON, LUFKIN & JENRETTE SALOMON SMITH BARNEY
SECURITIES CORPORATION
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE AGENTS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING AND MAY
BID FOR AND PURCHASE NOTES IN THE OPEN MARKET.
References herein to "U.S. dollars" or "U.S. $" or "$" are to the lawful
currency of the United States of America.
For definitions of certain terms used in this Prospectus Supplement and
accompanying Prospectus, see "Glossary" on page S-25 of this Prospectus
Supplement.
DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Notes (referred to
in the accompanying Prospectus as "Debt Securities") supplements, and to the
extent inconsistent therewith replaces, insofar as such description relates to
the Notes, the description of the general terms and provisions of the Debt
Securities set forth under the heading "Description of Debt Securities" in the
Prospectus. The terms and conditions set forth herein will apply to each Note
unless otherwise specified in the applicable Pricing Supplement. Capitalized
terms used herein but not otherwise defined shall have the meanings assigned to
such terms in the Indenture, dated as of January 26, 1996 (the "Indenture"),
between the Company and The Bank of New York, as trustee (the "Trustee"). 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, the provisions of the Indenture.
The Indenture provides for the issuance from time to time of various series
of Debt Securities, including the Notes offered hereby. Each series may differ
as to terms, including Maturity, interest rate, redemption and sinking fund
provisions, covenants, and events of default. As of September 27, 1997, the
Company had outstanding $200 million aggregate principal amount of Debt
Securities under the Indenture.
The Notes will be unsubordinated and unsecured obligations of the Company
and will rank pari passu in right of payment with all other unsubordinated and
unsecured indebtedness of the Company. Except as described under "Description of
the Debt Securities--Certain Restrictions" in the accompanying Prospectus or in
a Pricing Supplement, the Notes will not limit other indebtedness or securities
which may be incurred or issued by the Company or any of its subsidiaries or
contain financial or similar restrictions of the Company or any of its
subsidiaries.
This Prospectus Supplement and any Pricing Supplement may be used in
connection with the offer and sale from time to time of Notes in an aggregate
principal amount (or in the case of Notes issued at a discount from the
principal amount, an aggregate initial public offering price) of up to $300
million or the equivalent thereof in one or more currencies, currency units or
composite currencies other than U.S. dollars ("Foreign Currencies"); provided
that, with respect to Original Issue Discount Notes (as defined herein), the
initial offering price of such Notes shall be used in calculating the aggregate
principal amount of Notes offered hereunder. The aggregate principal amount of
Notes authorized to be issued hereunder may be increased by the Company from
time to time. The aggregate principal amount of Notes authorized to be issued
under this Prospectus Supplement is subject to reduction as a result of the sale
by the Company after the date of this Prospectus Supplement of other issues of
Debt Securities (as defined in the Prospectus) from time to time as described in
the accompanying Prospectus. See "Plan of Distribution of Notes" herein and in
the accompanying Prospectus.
The Pricing Supplement relating to a Note will describe the following
terms: (i) the Currency in which such Note is denominated (the "Specified
Currency") and, if other than the Specified Currency, the Currency in which
payments of principal and interest on such Note will be made (and, if the
Specified Currency is a Foreign Currency, certain other terms relating to such
Note (a "Foreign Currency Note") and such Specified Currency); (ii) whether such
Note bears a fixed rate of interest (a "Fixed Rate Note") or bears a floating
rate of interest (a "Floating Rate Note"); (iii) if other than 100%, the price
(generally expressed as a percentage of the aggregate principal amount thereof)
at which such Note will be issued; (iv) the date on which such Note will be
issued; (v) the date on which such Note will mature; (vi) if such
S-2
<PAGE> 3
Note is a Fixed Rate Note, the rate per annum at which such Note will bear
interest, if any; (vii) if such Note is a Floating Rate Note, the Interest Rate
Basis, the Initial Interest Rate, the Interest Payment Dates, the Index
Maturity, the Spread or Spread Multiplier, if any (each as defined below), and
any other terms relating to the particular method of calculating the interest
rate of such Note; (viii) if such Note is an Indexed Note (as defined below),
the terms relating to the particular Note; (ix) whether such Note is an Original
Issue Discount Note (as defined below under "United States Taxation--Tax
Consequences to Holders--Original Issue Discount Notes"); (x) whether such Note
may be redeemed at the option of the Company, or repaid at the option of the
Holder, prior to its Stated Maturity as described under "--Optional Redemption"
and "--Repayment at the Option of the Holder" below and, if so, the provisions
relating to such redemption or repayment, including, in the case of any Original
Issue Discount Notes, the information necessary to determine the amount due upon
redemption or repayment; (xi) any relevant tax consequences associated with the
terms of the Notes which have not been described under "Certain United States
Tax Considerations" below; and (xii) any other terms of such Note not
inconsistent with the provisions of the Indenture.
Unless previously redeemed, each Note will mature on a Business Day nine
months or more from its date of issue, as selected by the initial purchaser and
agreed to by the Company.
The Notes will be issued for a purchase price equal to 100% of the
principal thereof, unless issued as Original Issue Discount Notes or as
otherwise provided in a Pricing Supplement. The Notes, other than Foreign
Currency Notes, will be issuable only in denominations of $100,000 and integral
multiples of $1,000 in excess thereof, unless otherwise specified in the
applicable Pricing Supplement. For a description of the denominations of Foreign
Currency Notes, see "Special Provisions Relating to Foreign Currency Notes."
Each Note will be issued in fully registered form as a Book-Entry Note.
Except as set forth below under "Book-Entry Notes," the Notes will not be
issuable in definitive form.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium, if
any, and interest on the Notes will be made in U.S. dollars. If any of the Notes
are to be denominated in a Foreign Currency, or if the principal of, premium, if
any, and interest on any of the Notes is to be payable at the option of the
Holder or the Company in a Currency other than that in which such Note is
denominated, the applicable Pricing Supplement will provide additional
information pertaining to the terms of such Notes and other matters of interest
to the Holders thereof.
The total amount of any principal, premium, if any, and interest due on any
Book-Entry Note on any Interest Payment Date or at the Stated Maturity will be
made available to the Trustee on such date. As soon as possible thereafter, the
Trustee will make such payments to the Depository, in accordance with existing
arrangements between the Trustee and the Depository. The Depository will
allocate such payments to each Book-Entry Note and make payments to the owners
or Holders thereof in accordance with its existing operating procedures. Neither
the Company nor the Trustee shall have any responsibility or liability for such
payments by the Depository. So long as the Depository or its nominee is the
registered owner of any Global Note representing a Book-Entry Note or Notes, the
Depository 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. The Company understands, however, that under
existing industry practice, the Depository will authorize the persons on whose
behalf it holds a Global Note to exercise certain rights of Holders of Notes.
See "--Book-Entry Notes."
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes purchased by the Company may, at its discretion, be held,
resold or surrendered to the Security Registrar for cancellation.
The Indenture provisions relating to legal and covenant defeasance which
are described in the accompanying Prospectus under "Description of the Debt
Securities--Defeasance and Discharge" will apply to the Notes.
OPTIONAL REDEMPTION
Unless otherwise provided in the applicable Pricing Supplement, the Notes
cannot be redeemed prior to Maturity by the Company and will not be subject to
any sinking fund. If applicable, the Notes will be
S-3
<PAGE> 4
redeemable at the option of the Company prior to the Stated Maturity thereof
only if an "Initial Redemption Date" is specified in the applicable Pricing
Supplement. 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 such other
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), together
with unpaid interest accrued to the date of redemption, on notice given not more
than 60 nor less than 30 calendar 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 Initial Redemption Percentage specified
in the applicable Pricing Supplement (as adjusted by the Annual Redemption
Percentage Reduction specified therein, if applicable) multiplied by the unpaid
principal amount to be redeemed. 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 to be redeemed. The Redemption Price of Original Issue Discount
Notes is described below under "--Original Issue Discount Notes."
Foreign Currency Notes may be subject to different restrictions on
redemption. See "Special Provisions Relating to Foreign Currency Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Company at the option of the Holders
thereof prior to the Stated Maturity thereof only if one or more "Optional
Repayment Dates" is specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to repayment at the option of the Holders
thereof on any Optional Repayment Date in whole or from time to time in part in
increments of $1,000 or such other minimum denomination specified in the
applicable Pricing Supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or such other denomination), at a repayment
price equal to 100% of the unpaid principal amount to be repaid, together with
unpaid interest accrued to the date of repayment. For any Note to be repaid,
such Note must be received, together with the form thereon entitled "Option to
Elect Repayment" duly completed, by the Trustee at its corporate trust office
(or such other address of which the Company shall from time to time notify the
Holders of Notes) not more than 60 nor less than 30 calendar days prior to the
date of repayment. Exercise of such repayment option by the Holder will be
irrevocable. The repayment price of Original Issue Discount Notes is described
below under "--Original Issue Discount Notes." To the extent applicable, the
Company will comply with Section 14(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any other tender offer rules under
the Exchange Act which may then be applicable, in connection with any obligation
of the Company to purchase Notes at the option of the Holders thereof as
described herein.
Only the Depository may exercise the repayment option in respect of Global
Notes representing Book-Entry Notes. Accordingly, beneficial owners of Global
Notes that desire to have all or any portion of the Book-Entry Notes represented
by such Global Notes repaid must direct the participant of the Depository
through which they own their interest (each, a "Participant") to direct the
Depository to exercise the repayment option on their behalf by delivering the
related Global Note and duly completed election form to the Trustee as
aforesaid. In order to ensure that such Global Note and election form are
received by the Trustee on a particular day, the applicable beneficial owner
must so direct the Participant through which it owns its interest before such
Participant's deadline for accepting instructions for that day. Different firms
may have different deadlines for accepting instructions from their customers.
Accordingly, such beneficial owners should consult the Participants through
which they own their interest for the respective deadlines for such
Participants. All instructions given to Participants from beneficial owners of
Global Notes relating to the option to elect repayment shall be irrevocable. In
addition, at the time such instructions are given, each such beneficial owner
shall cause the Participant through which it owns its interest to transfer such
beneficial owner's interest in the Global Note or Notes representing the related
Book-Entry Notes, on the Depository's records, to the Trustee. See "Description
of the Debt Securities--Global and Book-Entry Debt Securities" in the
accompanying Prospectus.
S-4
<PAGE> 5
Foreign Currency Notes may be subject to different restrictions on
repayment. See "Special Provisions Relating to Foreign Currency Notes."
INTEREST
Each Note, except an Original Issue Discount Note, will bear interest from
and including the date of issue or from and including the most recent Interest
Payment Date to which interest on such Note has been paid or duly provided for
to, but excluding, the relevant Interest Payment Date at the fixed rate per
annum, or at the rate per annum determined pursuant to the interest rate formula
stated therein and in the applicable Pricing Supplement, until the principal
thereof is paid or made available for payment. Interest payments, if any, will
be in the amount of interest accrued from and including the next preceding
Interest Payment Date in respect of which interest has been paid or duly
provided for (or from and including the date of issue, if no interest has been
paid with respect to such Note) to, but excluding, the applicable Interest
Payment Date. Holders of Original Issue Discount Notes will receive no periodic
payments of interest on such Notes.
Interest, if any, will be payable on each Interest Payment Date and at
Maturity; provided, however, if a Note is issued between a Regular Record Date
and an Interest Payment Date, the interest so payable for the period from the
date of issue to such Interest Payment Date shall be paid on the next succeeding
Interest Payment Date to the Holder thereof on the related Regular Record Date.
Interest will be payable to the Person (which in the case of a Global Note
representing Book-Entry Notes shall be the Depository) in whose name an
interest-bearing Note is registered at the close of business on the Regular
Record Date next preceding each Interest Payment Date; provided, however, that
interest payable at Maturity or, if applicable, upon redemption, will be payable
to the Person to whom principal shall be payable. Unless otherwise indicated in
the applicable Pricing Supplement, the Regular Record Date for each Note shall
be the date 15 calendar days prior to each Interest Payment Date, whether or not
such date shall be a Business Day.
Interest rates and interest rate formulae are subject to change by the
Company from time to time, but no such change will affect any Note which the
Company has already issued or has agreed to issue.
Fixed Rate Notes
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Note. Unless
otherwise indicated in the applicable Pricing Supplement, the Interest Payment
Dates for Fixed Rate Notes will be February 1 and August 1 of each year and at
Maturity, and, if applicable, upon redemption. Unless otherwise indicated in the
applicable Pricing Supplement, interest payments for Fixed Rate Notes shall be
the amount of interest accrued to but excluding the relevant Interest Payment
Date. Interest on such Note will be computed on the basis of a 360-day year of
twelve 30-day months.
Floating Rate Notes
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis for such Floating Rate Note. Such basis may be:
(a) the CD Rate, in which case such Note will be a CD Rate Note, (b) the CMT
Rate, in which case such Note will be a CMT Rate Note, (c) the Commercial Paper
Rate, in which case such Note will be a Commercial Paper Rate Note, (d) the
Federal Funds Rate, in which case such Note will be a Federal Funds Rate Note,
(e) LIBOR, in which case such Note will be a LIBOR Note, (f) the Prime Rate, in
which case such Note will be a Prime Rate Note, (g) the Treasury Rate, in which
case such Note will be a Treasury Rate Note or (h) such other interest rate
formula as may be agreed to between the Company and the purchaser and set forth
in such Pricing Supplement. In addition, a Floating Rate Note may bear interest
at the lowest or highest or average of two or more interest rate formulae. The
applicable Pricing Supplement for a Floating Rate Note also will specify the
Spread or Spread Multiplier, if any, and the maximum or minimum interest rate
limitation, if any, applicable to each Note. In addition, such Pricing
Supplement will define or particularize for each Floating Rate Note the
following terms, if applicable: Calculation Agent, Calculation Dates, Initial
Interest Rate (which rate shall be determined on the same basis as that
subsequently applicable to such Note), Interest Payment Dates, Regular Record
Dates, Index Maturity, Interest Determination Dates, Interest Reset Dates,
Redemption Prices and Redemption Dates with respect to such Note.
S-5
<PAGE> 6
The rate of interest on a Floating Rate Note in effect on any date will be
(a) if such day is an Interest Reset Date (as defined below) with respect to
such Floating Rate Note, the interest rate on such Floating Rate Note determined
as of the Interest Determination Date pertaining to such Interest Reset Date, or
(b) if such day is not an Interest Reset Date with respect to such Floating Rate
Note, the interest rate on such Floating Rate Note determined as of the Interest
Determination Date pertaining to the immediately preceding Interest Reset Date
with respect to such Floating Rate Note; provided, however, that the interest
rate in effect from the Issue Date of a Floating Rate Note (or that of a
predecessor Note) to but excluding the first Interest Reset Date with respect to
such Floating Rate Note will be the Initial Interest Rate (as set forth in the
applicable Pricing Supplement).
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually or annually (each an "Interest Reset
Date"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, the Interest Reset Date will be,
in the case of Floating Rate Notes 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, except as provided in the following paragraph, the Tuesday of each week;
in the case of Floating Rate Notes which reset monthly, the third Wednesday of
each month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as indicated 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,
as indicated 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
with respect to such Note, such Interest Reset Date shall be the next succeeding
Business Day with respect to such Note, except that if such Note is a LIBOR Note
and the next succeeding Business Day falls in the next succeeding calendar
month, such Interest Reset Date shall be the immediately preceding Business Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
CD Rate Note (the "CD Rate Interest Determination Date"), a CMT Rate Note (the
"CMT Rate Interest Determination Date"), a Commercial Paper Rate Note (the
"Commercial Paper Interest Determination Date"), or Federal Funds Rate Note (the
"Federal Funds Interest Determination Date") or a Prime Rate Note (the "Prime
Rate Interest Determination Date"), will be the second Business Day preceding
the Interest Reset Date with respect to such Note. 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 preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note (the "Treasury Interest Determination Date")
will be the day on which Treasury bills are auctioned for the week in which such
Interest Reset Date falls, or if no auction is held for such week, the Monday of
such week (or if Monday is a legal holiday, the next succeeding Business Day)
and the Interest Reset Date will be the Business Day immediately following such
Treasury Interest Determination Date. 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 an auction for such week is held on Monday
or the preceding Friday, such Monday or preceding Friday shall be the Treasury
Interest Determination Date for such week, and the Interest Reset Date for such
week shall be the Tuesday of such week (or, if such Tuesday is not a Business
Day, the next succeeding Business Day). If the auction for such week is held on
any day of such week other than Monday, then such day shall be the Treasury
Interest Determination Date and the Interest Reset Date for such week shall be
the next succeeding Business Day.
A Floating Rate Note may have either or both of the following: (a) a
maximum numerical interest rate limitation, or ceiling, on the rate of interest
which may accrue during any prime interest period; and (b) a minimum numerical
interest rate limitation, or floor, on the rate of interest which may accrue
during any interest period. In addition to any maximum interest period which may
be applicable to any Floating Rate Note, the interest rate on such Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
present New York law, the maximum rate of interest, with certain exceptions, is
25% per annum on a simple interest basis. The limit may not apply to Notes in
which $2,500,000 or more has been invested.
S-6
<PAGE> 7
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, the Interest Payment Date will be, in the case of Floating
Rate Notes which reset daily or monthly, the third Wednesday of each month or
the third Wednesday of March, June, September and December of each year (as
indicated in the applicable Pricing Supplement); in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December of each year; 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 the month specified in the applicable
Pricing Supplement. If, pursuant to the preceding sentence, an Interest Payment
Date with respect to any Floating Rate Note (other than an Interest Payment Date
at Maturity) would otherwise be a day that is not a Business Day with respect to
such Note, such Interest Payment Date shall be the next succeeding Business Day
with respect to such Note, except that if such Note is a LIBOR Note and the next
succeeding Business Day falls in the next succeeding calendar month, such
Interest Payment Date shall be the immediately preceding Business Day. If the
Maturity of a Floating Rate Note falls on a day that is not a Business Day, the
payment of principal, premium, if any, and interest will be made on the next
succeeding Business Day and no interest on such payment shall accrue from and
after such Maturity.
Unless otherwise specified in the applicable Pricing Supplement, the
interest accrued from and including the date of issue, or from and including the
last date to which interest has been paid or duly provided for, is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day in such period from and including the date of issue, or
from and including the last date to which interest has been paid or duly
provided for, to but excluding the date for which accrued interest is being
calculated. Unless otherwise specified in the Note and the applicable Pricing
Supplement, the interest factor (expressed as a decimal rounded upwards, if
necessary, as described below) for each such day is computed by dividing the
interest rate (expressed as a decimal rounded upwards, if necessary, as
described below) applicable to such date by 360 (or, in the case of the Treasury
Rate Notes and CMT Rate Notes, by the actual number of days in the year). The
interest factor for Notes for which two or more interest rate formulae are
applicable will be calculated in each period in the same manner as if only the
lowest, highest or average of, as the case may be, such interest rate formulae
applied.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded to the nearest one-hundred thousandth of a percentage point, with five
one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544)
being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or
resulting from such calculation on Floating Rate Notes will be rounded to the
nearest cent or, in the case of Foreign Currency Notes, the nearest unit (with
one-half cent or five one-thousandths of a unit being rounded upwards).
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect and, if different, the
interest rate which will become effective as a result of a determination made on
the most recent Interest Determination Date with respect to such Floating Rate
Note.
CD Rate Notes. Each CD Rate Note will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread or Spread Multiplier,
if any) specified on the face of such 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 Rate 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
3:00 p.m., New York City time, on the Calculation Date pertaining to such CD
Rate Interest Determination Date, then the CD Rate shall be the rate on such CD
Rate 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 yet
published in either H.15(519) or Composite Quotations, the CD Rate for that CD
Interest
S-7
<PAGE> 8
Determination Date shall be calculated by the Calculation Agent and shall be the
arithmetic mean (rounded upwards, if necessary, to the next higher one-hundred
thousandth of a percentage point) of the secondary market offered rates, as of
10:00 a.m., New York City time, on that CD Rate Interest Determination Date, of
three leading nonbank dealers of 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 with a
remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement in a denomination of $5,000,000; provided, however, that if
fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the CD Rate will be the CD Rate in effect
on the CD Rate Interest Determination Date.
CMT Rate Notes. CMT Rate Notes will bear interest at the rate (calculated
with reference to the CMT Rate and the Spread or Spread Multiplier, if any)
specified in the applicable CMT Rate Note and Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement and CMT
Rate Note, "CMT Rate" means, with respect to any CMT Interest Determination
Date, the rate displayed on the Designated CMT Telerate Page (as defined below)
under the caption "Treasury Constant Maturities . . . Federal Reserve Board
Release H.15 . . . Mondays Approximately 3:45 P.M.", under the column for the
Designated CMT Maturity Index (as defined below) for (i) if the Designated CMT
Telerate Page is 7055, the rate on such CMT Interest Determination Date and (ii)
if the Designated CMT Telerate Page is 7052, the week or the month, as
applicable, ended immediately preceding the week in which the related CMT
Interest Determination Date occurs. If such rate is no longer displayed on the
relevant page, or if not displayed by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate for such CMT Interest Determination
Date will be such Treasury Constant Maturity rate for the Designated CMT
Maturity Index as published in the relevant H.15(519). If such rate is no longer
published, or if not published by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Interest Determination Date
will be such Treasury Constant Maturity rate for the Designated CMT Maturity
Index (or other United States Treasury rate for the Designated CMT Maturity
Index) as may then be published by either the Federal Reserve Board 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
available by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Interest Determination Date will be 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 the 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 million. 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 all the offer prices so obtained
and neither the highest nor 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 for such CMT Interest
Determination Date will be the CMT Rate determined on the immediately preceding
CMT Interest
S-8
<PAGE> 9
Determination Date or, in the case of the first CMT Interest Determination Date,
the Initial Interest Rate specified in the applicable CMT Rate Note and Pricing
Supplement. 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.
Commercial Paper Rate Notes. Each Commercial Paper Rate Note will bear
interest at the interest rate (calculated with reference to the Commercial Paper
Rate and the Spread or Spread Multiplier, if any) and will be payable on the
dates specified on the face of such 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 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" ("H.15 (519)"), or any successor publication of the Board of Governors of
the Federal Reserve System, under the heading "Commercial Paper." In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Commercial Paper Interest Determination
Date, then the Commercial Paper Rate 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" ("Composite
Quotations") under the heading "Commercial Paper." If by 3:00 p.m., New York
City time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, the Commercial Paper Rate for that Commercial
Paper Interest Determination Date shall be the Money Market Yield of the
arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, of the offered rates, as of 11:00 a.m., New York City time, on that
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 specified in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized rating agency; provided, however, that
if fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Commercial Paper Rate will be the
Commercial Paper Rate in effect on such Commercial Paper Interest Determination
Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded
upwards, if necessary, to the next higher one hundred thousandth of a percentage
point) calculated in accordance with the following formula:
<TABLE>
<S> <C> <C> <C> <C>
Money Market Yield = D x 360 x 100
---------------
360 - (D x M)
</TABLE>
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
Federal Funds Rate Notes. Each Federal Funds Rate Note will bear interest
at the interest rate (calculated with reference to the Federal Funds Rate and
the Spread or Spread Multiplier, if any) specified on the face of such 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 having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Federal Funds Interest Determination Date, then the Federal
Funds Rate will be the rate on such Federal Funds Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, the Federal
Funds Rate for that Federal Funds Interest Determination Date shall be the
arithmetic mean, as calculated by
S-9
<PAGE> 10
the Calculation Agent on such Calculation Date, of the rates, prior to 9:00
a.m., New York City time, on that 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 fewer than three brokers selected
as aforesaid by the Calculation Agent are quoting as mentioned in this sentence,
the Federal Funds Rate will be the Federal Funds Rate in effect on such Federal
Funds Interest Determination Date.
LIBOR Notes. Each LIBOR Note will bear interest at the interest rate
(calculated with reference to LIBOR and the Spread or Spread Multiplier, if any)
specified on the face of such LIBOR Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Reset Date will be determined by the Calculation Agent as
follows:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note, LIBOR will be either: (A) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement or if such Pricing Supplement does not
specify a source for LIBOR, the rate for deposits in the London interbank
market in the Index Currency having the Index Maturity designated in the
applicable Pricing Supplement commencing on the second London Business Day
immediately following such Interest Determination Date that appears on the
Designated LIBOR Page as of 11:00 a.m., London time, on such Interest
Determination Date, or (B) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the arithmetic mean of the offered rates
(unless the specified Designated LIBOR Page by its terms provides only for
a single rate, in which case such single rate shall be used) for deposits
in the London interbank market in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement and commencing on
the second London Business Day immediately following such Interest
Determination Date that appear on the Designated LIBOR Page as of 11:00
a.m., London time, on such 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. If no rate appears on the
Designated LIBOR Page (or, in the case of clause (i)(B) above, if the
Designated LIBOR Page by its terms provides for more than a single rate but
fewer than two offered rates appear on such Page), LIBOR in respect of such
Interest Determination Date will be determined as if the parties had
specified the rate described in clause (ii) below.
(ii) With respect to an Interest Determination Date relating to a
LIBOR Note to which the last sentence of clause (i) above applies, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second London Business Day immediately following such Interest
Determination Date to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such Interest Determination Date
and in a principal amount that is representative for a single transaction
in such Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
a.m. (or such other time specified in the applicable Pricing Supplement),
in the applicable Principal Financial Center, on such Interest
Determination Date for loans made in the Index Currency to leading European
banks having the Index Maturity designated in the applicable Pricing
Supplement commencing on the second London Business Day immediately
following such Interest Determination Date and in a principal amount that
is representative for a single transaction in such Index Currency in such
market at such time by three major banks in such Principal Financial Center
selected by the Calculation Agent; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such Interest Determination Date will be
LIBOR in effect on such Interest Determination Date.
S-10
<PAGE> 11
Prime Rate Notes. Each Prime Rate Note will bear interest at the interest
rate (calculated with reference to the Prime Rate and the Spread or Spread
Multiplier, if any) specified on the face of such Prime Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
rate set forth on such date in H.15(519) under the heading "Bank Prime Loan." In
the event that such rate is not published prior to 3:00 p.m., New York City
time, on such Prime Rate Interest Determination Date, then the Prime Rate will
be determined by the Calculation Agent and will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the Reuters
Screen USPRIME1 as such bank's prime rate or base lending rate as in effect for
that Prime Rate Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen USPRIME1 for the Prime Rate Interest Determination
Date, the Prime Rate will be the arithmetic mean of the announced 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 Rate Interest Determination Date by at
least two of three major money center banks in The City of New York selected by
the Calculation Agent. If fewer than two such quotations appear on the Reuters
Screen USPRIME1, the Prime Rate 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 $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 banks or trust companies selected as aforesaid
are not quoting as mentioned in this sentence, the Prime Rate will be the Prime
Rate then in effect on such Prime Rate Interest Determination Date.
Treasury Rate Notes. Each Treasury Rate Note will bear interest at the
interest rate (calculated with reference to the Treasury Rate and the Spread or
Spread Multiplier, if any), and will be payable on the dates, specified on the
face of such Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading "U.S. Government
Securities/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 auction average rate
(expressed as a bond equivalent, rounded, upwards if necessary, to the next
higher one hundred thousandth of a percentage point, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) for such auction
as otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury bills having the Index
Maturity specified in the applicable Pricing Supplement are not published or
reported as provided above by 3:00 p.m., New York City time, on such Calculation
Date, or if no such auction is held in a particular week, then the Treasury Rate
shall be the rate as published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills Secondary Market." In the event that such rate is not
so published by 3:00 p.m., New York City time, on such Calculation Date, then
the Treasury Rate shall be calculated by the Calculation Agent and shall be a
yield to maturity (expressed as a bond equivalent rounded, upwards if necessary,
to the next higher one hundred thousandth of a percentage point, on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, 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 United States government securities dealers in The City of New York
selected by the Calculation Agent, for the issue of Treasury bills with a
remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate will be the Treasury
Rate in effect on such Treasury Interest Determination Date.
INDEXED NOTES
Notes also may be issued with the principal amount payable at Maturity or
interest to be paid thereon, or both, to be determined with reference to the
price or prices of specified commodities or stocks, the exchange rate of the
Specified Currency relative to one or more other Currencies specified in the
Prospectus
S-11
<PAGE> 12
Supplement, or such other price or exchange rate as may be specified in such
Note ("Indexed Notes"), as set forth in a Pricing Supplement relating to such
Indexed Notes. In certain cases, Holders of such Indexed Notes may receive a
principal amount at Maturity that is greater than or less than the face amount
of the Indexed Notes, or an interest rate that is greater than or less than the
stated interest rate on the Indexed Notes, or both, depending upon the structure
of the Indexed Notes and the relative value at Maturity or at the relevant
Interest Payment Date, as the case may be, of the specified indexed item.
Information as to the method for determining the principal amount payable at
Maturity, the manner of determining the interest rate, certain historical
information with respect to the specified indexed item and tax considerations
associated with an investment in Indexed Notes will be set forth in the
applicable Pricing Supplement.
An investment in Indexed Notes entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate of an Indexed Note is indexed, it may result in an interest
rate that is less than that payable on a conventional fixed-rate debt security
issued by the Company at the same time, including the possibility that no
interest will be paid, and, if the principal amount of an Indexed Note is
indexed, the principal amount payable at Maturity may be less than the original
purchase price of such Indexed Note, including the possibility that no principal
will be paid (but in no event shall the amount of interest or principal paid
with respect to an Indexed Note be less than zero). Additionally, if the formula
used to determine the principal amount or interest payable with respect to such
Indexed Notes contains a multiple or leverage factor, the effect of any change
in the applicable Currency, commodity or interest rate index may be increased.
See "Foreign Currency Risks."
ORIGINAL ISSUE DISCOUNT NOTES
The Notes may be issued from time to time at an issue price (as specified
in the applicable Pricing Supplement) that is less than 100% of the principal
amount thereof (i.e., par) ("Original Issue Discount Notes"). Original Issue
Discount Notes may not bear any interest currently or may bear interest at a
rate that is below market rates at the time of issuance. The difference between
the issue price of an Original Discount Note and par is referred to herein as
the "Discount." In the event of redemption, acceleration or acceleration of
Maturity of an Original Issue Discount Note, the amount payable to the Holder of
such Original Issue Discount Note will be equal to the sum of (i) the issue
price (increased by any accruals of Discount) and, in the event of any
redemption by the Company of such Original Issue Discount Note (if applicable),
multiplied by the Initial Redemption Percentage specified in the applicable
Pricing Supplement (as adjusted by the Annual Redemption Percentage Reduction,
if applicable), and (ii) any unpaid interest on such Original Issue Discount
Note accrued from the date of issue to the date of such redemption, repayment or
acceleration of Maturity.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of Maturity occurs for an
Original Issue Discount Note, such Discount will be accrued using a constant
yield method. The constant yield will be calculated using a 30-day month,
360-day year convention, a compounding period that, except for the Initial
Period (as defined below), corresponds to the shortest period between Interest
Payment Dates for the applicable Original Issue Discount Note (with ratable
accruals within a compounding period), a coupon rate equal to the initial coupon
rate applicable to such Original Issue Discount Note and an assumption that the
Maturity of such Original Issue Discount Note will not be accelerated. If the
period from the date of issue to the initial Interest Payment Date for an
Original Issue Discount Note (the "Initial Period") is shorter than the
compounding period for such Original Issue Discount Note, a proportionate amount
of the yield for an entire compounding period will be accrued. If the Initial
Period is longer than the compounding period, then such period will be divided
into a regular compounding period and a short period with the short period being
treated as provided in the preceding sentence. The accrual of the applicable
Discount may differ from the accrual of original issue discount for purposes of
the Internal Revenue Code of 1986, as amended (the "Code").
Certain Original Issue Discount Notes may not be treated as having original
issue discount for federal income tax purposes, and Notes other than Original
Issue Discount Notes may be treated as issued with original issue discount for
federal income tax purposes. See "Certain United States Tax Considerations."
S-12
<PAGE> 13
BOOK-ENTRY NOTES
The Depository Trust Company (the "Depository") 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. (the
Depository's partnership nominee). One fully-registered Global Note will be
issued for each issue of the Notes, each in the aggregate principal amount of
such issue, and will be deposited with the Depository. If, however, the
aggregate principal amount of any issue exceeds the maximum principal amount (if
any) permitted by the Depository, one Global Note will be issued with respect to
such maximum principal amount and an additional Global Note will be issued with
respect to any remaining principal amount of such issue.
The Depository 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. The Depository holds securities that
Participants deposit with the Depository. The Depository 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. The Depository 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 the Depository'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 the Depository
and its Participants are on file with the Securities and Exchange Commission.
Except as set forth below, each Global Note may be transferred, in whole
and not in part, only to another nominee of the Depository or to a successor of
the Depository or its nominee.
Purchases of Book-Entry Notes under the Depository's system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Notes on the Depository's records. The ownership interest of each beneficial
owner of each Book-Entry Note ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. A Beneficial Owner will not
receive written confirmation from the Depository of its purchase, but such
Beneficial Owner is expected to receive a written confirmation providing details
of such transaction, as well as periodic statements of its holdings, from the
Direct or Indirect Participant through which such Beneficial Owner entered into
such 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 Notes deposited by
Participants with the Depository are registered in the name of the Depository's
partnership nominee, Cede & Co. The deposit of Global Notes with the Depository
and their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depository has no knowledge of the actual Beneficial Owners of
the Book-Entry Notes; the Depository'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 remain responsible for
keeping account of their holdings on behalf of their customers.
Delivery of notices and other communications by the Depository 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, the Depository's current
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
S-13
<PAGE> 14
Neither the Depository nor Cede & Co. will consent or vote with respect to
Book-Entry Notes. Under its usual procedures, the Depository will mail an
"Omnibus Proxy" to the issuer 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 the
Depository. The Depository's practice is to credit Direct Participants' accounts
on the payable date in accordance with their respective holdings shown on the
Depository's records unless the Depository 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 Participants
and not of the Depository, the Paying Agent 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 the Depository is the responsibility of the
Company or the Paying Agent, disbursement of such payments to Direct
Participants is the responsibility of the Depository, and disbursement of such
payments to the Beneficial Owners is 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 the Depository'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 Direct Participant on the Depository's records.
The Depository may discontinue providing its services as securities
depositary with respect to the Book-Entry Notes at any time by giving reasonable
notice to the Company or the Agents. Under such circumstances, in the event that
a successor securities depositary is not appointed, definitive Notes will be
printed and delivered in exchange for the Book-Entry Notes represented by the
Global Notes held by the Depository.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depository (or a successor securities depositary). In that
event, definitive Notes will be printed and delivered in exchange for the
Book-Entry Notes represented by the Global Notes held by the Depository.
The information in this section concerning the Depository and the
Depository'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.
None of the Company, any Agent, the Trustee, any Paying Agent or 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 Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
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 interest on the Notes will be made in U.S. dollars. If any of the Notes
are to be denominated in a Currency 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. For a description of certain risks associated with Foreign Currency
Notes, see "Foreign Currency Risks."
Unless otherwise indicated in the applicable Pricing Supplement, a Foreign
Currency Note will not be sold in, or to a resident of, the country of the
Specified Currency in which such Note is denominated.
S-14
<PAGE> 15
Foreign Currency Notes are issuable in registered form only, without
coupons. The denominations for particular Foreign Currency Notes will be
specified in the applicable Pricing Supplement.
Unless otherwise provided in the applicable Pricing Supplement, payment of
the purchase price of Foreign Currency Notes will be made in immediately
available funds.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers of Notes 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 or holding of, or receipt of payments of principal, premium
or interest in respect of, Notes. Such persons should consult their own advisors
with regard to such matters.
CURRENCIES
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency. At the
present time there are limited facilities in the United States for the
conversion of 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 on or prior to the fifth Business Day
preceding the date of delivery of the Notes, or by such other day as determined
by the Agent who presented such offer to purchase Notes to the Company, such
Agent is prepared to arrange for the conversion of U.S. dollars into the
Specified Currency set forth in the applicable Pricing Supplement to enable the
purchasers to pay for the Notes. Each such conversion will be made by the
applicable Agent on such terms and subject to such conditions, limitations and
charges as the applicable Agent may from time to time establish in accordance
with its regular foreign exchange practices. All costs of exchange will be borne
by the purchasers of the Notes.
Specific information about the Foreign Currency 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 contained in the
applicable Pricing Supplement. Such information contained therein shall 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. See "Foreign Currency Risks--Exchange Rates and
Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
The principal of, premium, if any, and interest on Foreign Currency Notes
are payable by the Company in the Specified Currency. Unless otherwise specified
in the applicable Pricing Supplement, because banks do not now have non-U.S.
dollar bank accounts in their offices in the United States, the Exchange Rate
Agent will convert all payments of principal of, premium, if any, and interest
on Foreign Currency Notes to U.S. dollars. However, unless otherwise specified
in the applicable Pricing Supplement, the Holder of a Foreign Currency Note may
elect to receive such payments in the Specified Currency as described below.
Any U.S. dollar amount to be received by a Holder of a Foreign Currency
Note will be based on the highest bid quotation in The City of New York received
by the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on
the second Business Day preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by the Company for the
purchase by the quoting dealer of the Specified Currency for U.S. dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency payable to all Holders of Foreign Currency Notes scheduled to receive
U.S. dollar payments and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments will be made in the
Specified Currency. All currency exchange costs will be borne by the Holder of
the Foreign Currency Note by deductions from such payments.
Notwithstanding the foregoing, unless otherwise specified in the applicable
Pricing Supplement, a Holder of Foreign Currency Notes may elect to receive
payment of the principal of, premium, if any, and interest on the Notes in the
Specified Currency by transmitting a written request for such payment to the
principal offices of The Bank of New York in the Borough of Manhattan, The City
of New York, as Paying Agent, on or prior to the Regular Record Date or at least
16 days prior to Maturity, as the case may be. Such request may be in
S-15
<PAGE> 16
writing (mailed or hand-delivered) or by cable, telex or other form of facsimile
transmission. A Holder of a Foreign Currency Note may elect to receive payment
in the Specified Currency for all principal, premium, if any, and interest
payments and need not file a separate election for each payment. Such election
will remain in effect until revoked by written notice to The Bank of New York in
the Borough of Manhattan, The City of New York, but written notice of any such
revocation must be received by The Bank of New York in the Borough of Manhattan,
The City of New York on or prior to the relevant Regular Record Date or at least
16 days prior to Maturity, as the case may be. Holders of Foreign Currency Notes
whose Foreign Currency Notes are to be held 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 the Specified Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of Book-Entry Notes denominated in a Specified Currency
electing to receive payments of principal or any premium or interest in the
Specified Currency must notify the participant through which its interest is
held on or prior to the applicable Regular Record Date or at least 16 days prior
to Maturity, as the case may be, of such beneficial owner's election to receive
all or a portion of such payment in a Specified Currency. Such participant must
notify the Depository of such election on or prior to the third Business Day
after such Regular Record Date. The Depository will notify the Paying Agent of
such election on or prior to the fifth Business Day after such Regular Record
Date. If complete instructions are received by the participant and forwarded by
the participant to the Depository, and by the Depository to the Paying Agent, on
or prior to such dates, the beneficial owner will receive payments in the
Specified Currency.
Interest on Foreign Currency Notes paid in U.S. dollars will be paid in the
manner specified in the accompanying Prospectus and this Prospectus Supplement
for interest on Notes denominated in U.S. dollars. Interest on Foreign Currency
Notes paid in the Specified Currency will be paid by a check drawn on an account
maintained at a bank outside the United States, unless other arrangements have
been made. The principal of Foreign Currency Notes, together with interest
accrued and unpaid thereon, due at Maturity will be paid in immediately
available funds against presentation of such Foreign Currency Notes at the
principal offices of The Bank of New York in the Borough of Manhattan, The City
of New York, as Paying Agent. Any payment of principal or interest required to
be made on an Interest Payment Date or at Maturity of a Foreign Currency Note
which is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
Interest Payment Date or at Maturity, as the case may be, and no interest shall
accrue for the period from and after such Interest Payment Date or Maturity.
PAYMENT CURRENCY
If a Specified Currency is not available for the payment of principal,
premium, if any, or interest with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company will be entitled to satisfy its obligations to Holders of
Foreign Currency Notes by making such payment in U.S. dollars on the basis of
the Market Exchange Rate on the date of such payment, or if such Market Exchange
Rate is not then available, on the basis of the most recently available Market
Exchange Rate. See "Foreign Currency Risks--Exchange Rates and Exchange
Controls."
FOREIGN CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS AND ANY PRICING SUPPLEMENT DO
NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES OR INDEXED
NOTES THE PAYMENT OF WHICH IS TO BE MADE IN OR RELATED TO THE VALUE OF A FOREIGN
CURRENCY AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE
PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE INVESTORS SHOULD
CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN
INVESTMENT IN SUCH NOTES. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR
INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY OR INDEXED
TRANSACTIONS.
S-16
<PAGE> 17
The information set forth in this Prospectus Supplement with respect to
foreign currency risks is directed to prospective purchasers who are United
States residents, and the Company disclaims any responsibility to advise
prospective purchasers of Foreign Currency Notes who are residents of countries
other than the United States with respect to any matters that may affect the
purchase, holding or receipt of payment of principal of, premium, if any, and
interest on, the Notes. Such person should consult their own counsel with regard
to such matters.
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 after the issuance of such Notes 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 to continue in the future. Fluctuations in
any particular exchange rate that have occurred in the past are not necessarily
indicative, however, of fluctuations in the rate that may occur during the term
of any 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. In addition, depending on a
specific term of a currency-linked Indexed Note, changes in exchange rates
relating to any of the currencies involved may result in a decrease in the
effective yield of such currency linked Indexed Note and, in certain
circumstances, could result in a loss of all or a substantial portion of the
principal of a currency linked Indexed Note to the investor.
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. National governments, however,
rarely voluntarily allow their currencies to float freely in response to
economic forces. Governments in fact 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 Foreign Currency Notes or currency
linked Indexed Notes is that their U.S. dollar-equivalent yields could be
affected by governmental actions, which could change or interfere with
theretofore freely determined currency valuation, fluctuations in response to
other market forces, and the movement of currencies across borders. There will
be no adjustment or change in the terms of such 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 Specified
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 the date of such payment, or if such Market Exchange
Rate is not then available, on the basis of the most recently available Market
Exchange Rate.
FOREIGN CURRENCY JUDGMENTS
The Indenture and Notes will be governed by and construed in accordance
with the laws of the State of New York. If an action based on Foreign Currency
Notes were commenced in a New York court, such court would render or enter a
judgment or decree in the Specified Currency. Such judgment would then be
converted into U.S. dollars at the rate of exchange prevailing on the date of
entry of the judgment or decree. In the event an action based on Foreign
Currency Notes were commenced in a court in the United States outside New York,
it is likely that the judgment currency would be U.S. dollars, but the method of
determining the applicable exchange rate may differ.
S-17
<PAGE> 18
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of the principal United States federal income
tax consequences of ownership and disposition of the Notes to initial holders
purchasing Notes at the "issue price" (as defined below). This summary is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), administrative pronouncements, judicial decisions and existing and
proposed Treasury Regulations, including regulations concerning the treatment of
debt instruments issued with original issue discount (the "OID Regulations"),
changes to any of which subsequent to the date of this Prospectus Supplement may
affect the tax consequences described herein, and such changes may be made with
retroactive effect. This summary discusses only Notes held 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 his 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 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 U.S. dollar. Finally, this summary does not discuss Original
Issue Discount Notes (as defined below) which qualify as "applicable high yield
discount obligations" under Section 163(i) of the Code. Holders of Original
Issue Discount Notes which are "applicable high yield discount obligations" may
be subject to special rules. Persons considering the purchase of Notes should
consult their tax advisors with regard to the application of the United States
federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "Holder" means an owner of a Note that is (i) for
United States federal income tax purposes 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,
(iii) an estate (or, for tax years beginning on or before December 31, 1996, a
trust) the income of which is subject to United States federal income taxation
regardless of its source or (iv) for taxable years beginning after December 31,
1996 (unless earlier elected), any trust if a court within the United States is
able to exercise primary jurisdiction over the administration of the trust and
one or more United States persons have the authority to control all substantive
decisions of the trust; provided that, under regulations authorized by the
Taxpayer Relief Act of 1997 but not yet issued, a trust that was in existence on
August 20, 1996 (other than a grantor trust) and was treated as a United States
person on the day before such date may elect to continue to be treated as a
United States person.
TAX CONSEQUENCE TO HOLDERS
Payments of Interest
Interest paid on a Note will generally be taxable to a Holder as ordinary
interest income at the time it accrues or is received, in accordance with the
Holder's method of accounting for federal income tax purposes. Under the OID
Regulations, all payments of interest on a Note that matures one year or less
from its date of issuance will be included in the stated redemption price at
maturity of the Note and will be taxed in the manner described below under
"Original Issue Discount Notes." Special rules governing the treatment of
interest paid with respect to Original Issue Discount Notes, including certain
Floating Rate Notes, Foreign Currency Notes and Indexed Notes are discussed
below.
Original Issue Discount Notes
A Note that has an "issue price" (as defined below) which is less than its
stated redemption price at maturity will generally be considered to have been
issued at an original issue discount for federal income tax purposes (an
"Original Issue Discount Note"). The "issue price" of a Note will equal the
first price to the public (not including bond houses, brokers of similar persons
or organizations acting in the capacity of underwriters, placement agents or
wholesalers) at which a substantial amount of the Notes is sold. The stated
redemption price at maturity of a Note will equal the sum of all payments
required under the Note other than payments of "qualified stated interest."
"Qualified stated interest" is stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate or certain variable rates of interest, or
certain combinations thereof. For example, interest that is unconditionally
payable in cash at least annually at a single qualified floating rate will be
qualified stated interest. In
S-18
<PAGE> 19
general, a rate is qualified floating rate if variations in the value of the
rate may reasonably be expected to measure contemporaneous fluctuations in the
cost of newly-borrowed funds. Special tax considerations (including possible
original issue discount) may arise with respect to Floating Rate Notes providing
for (i) one Base Rate followed by one or more Base Rates, (ii) a single fixed
rate followed by a floating rate or (iii) a Spread Multiplier. Purchasers of
Floating Rate Notes with any of such features should carefully examine the
applicable Pricing Supplement and should consult their tax advisors with respect
to such a feature because the tax consequences will depend, in part, on the
particular terms of the purchased Note. Special rules may also apply if a
Floating Rate Note is subject to a cap, floor, governor or similar restriction
that is not fixed throughout the term of the Note and is reasonably expected as
of the issue date to cause the yield on the Note to be significantly less or
more than the expected yield determined without the restriction.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e. 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the Note will not be considered to have been issued with
original issue discount. Holders of Notes with a de minimis amount of original
issue discount will generally include such original issue discount in income, as
capital gain, on a pro rata basis as principal payments are made on the Note.
A Holder of Original Issue Discount Notes will be required to include any
qualified stated interest payments in income in accordance with the Holder's
method of accounting for federal income tax purposes. Holders of Original Issue
Discount Notes that mature more than one year from their date of issuance will
be required to include original issue discount in income for federal income tax
purposes as it accrues, in accordance with a constant yield method based on a
compounding of interest, before the receipt of cash payments attributable to
such income, but such Holders will not be required to include separately in
income cash payments received on such Notes, even if denominated as interest, to
the extent they do not constitute qualified stated interest. The amount of
original issue discount includible in income for a taxable year by the Holder of
an Original Issue Discount Note will generally equal the sum of the "daily
portions" of the total original issue discount on the Original Issue Discount
Note for each day during the taxable year in which such Holder held the Original
Issue Discount Note ("accrued original issue discount"). Generally, the daily
portion of the original issue discount is determined by allocating to each day
in any "accrual period" a ratable portion of the original issue discount
allocable to each accrual period. The term "accrual period" means an interval of
time of one year or less, provided that each scheduled payment of principal or
interest occurs either on the final day or the first day of an accrual period.
The amount of original issue discount allocable to an accrual period will be the
excess of (a) the product of the "adjusted issue price" of the Original Issue
Discount Note at the beginning of such accrual period and its "yield to
maturity" over (b) the amount of any qualified stated interest allocable to the
accrual period. The "adjusted issue price" of an Original Issue Discount Note at
the beginning of an accrual period will equal the issue price plus the amount of
original issue discount previously includible in the gross income of any owner
of the Note, less any payments made on such Original Issue Discount Note (other
than qualified stated interest) on or before the first day of the accrual
period. The "yield to maturity" of the Original Issue Discount Note will be
computed on the basis of a constant annual interest rate and compounded at the
end of each accrual period. Under this method, 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.
Floating Rate Notes may be treated as Original Issue Discount Notes.
Persons intending to purchase such Notes should refer to the applicable Pricing
Supplement.
Under the OID Regulations, a Note that matures one year or less from its
date of issuance will be treated as a "short-term Original Issue Discount Note."
In general, a cash method Holder of a short-term Original Issue Discount Note is
not required to accrue original issue discount for United States federal income
tax purposes unless it elects to do so. Holders who make such an election,
Holders who report income on the accrual method and certain other 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 to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of a Holder that is not required and that does not
elect to include
S-19
<PAGE> 20
original issue discount in income currently, any gain realized on the sale,
exchange or retirement of the short-term Original Issue Discount Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis (or, if elected, according to a constant 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 any interest
paid on indebtedness incurred to purchase or carry short-term Original Issue
Discount Notes in an amount not exceeding the deferred interest income, until
such deferred interest income is recognized.
Under the OID Regulations, a Holder may make an election (the "Constant
Yield Election") to include in gross income all interest that accrues on a Note
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) in accordance with the constant yield method.
Certain of the Original Issue Discount Notes may be redeemed prior to
maturity. Original Issue Discount Notes containing such a feature may be subject
to rules that differ from the general rules discussed above. Purchasers of
Original Issue Discount Notes with such a feature should carefully examine the
applicable Pricing Supplement and should consult their tax advisors with respect
to such a feature since the tax consequences with respect to original issue
discount will depend, in part, on the particular terms and the particular
features of the purchased Note.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such Holder's adjusted tax basis in the Note.
For these purposes, the amount realized does not include any amount attributable
to accrued interest on the Note. Amounts attributable to accrued interest are
treated as interest as described under "Payments of Interest" above, in
accordance with the Holder's method of accounting for federal income tax
purposes as described therein. A Holder's adjusted tax basis in a Note will
equal the cost of the Note to such Holder, increased by the amount of any
original issue discount previously included in income by the Holder with respect
to such Note and reduced by any amortized premium and any principal payments
received by the Holder and, in the case of an Original Issue Discount Note, by
the amounts of any other payments that do not constitute qualified stated
interest (as defined above).
Subject to the discussion under "Foreign Currency Notes" below, gain or
loss realized on the sale, exchange or retirement of a 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 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" above. The excess of net long-term capital gains
over net short-term capital losses is taxed at lower rates than ordinary income
for certain noncorporate 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.
If a Holder purchases a Note for an amount that is greater than the amount
payable at maturity, such Holder will be considered to have purchased such Note
with "amortizable bond premium" equal in amount to such excess, and may elect
(in accordance with Section 171 of the Code) to amortize such premium, using a
constant yield method, over the remaining term of the Note (where such Note is
not optionally redeemable prior to its maturity date), as a reduction in the
amount of interest payments otherwise includible in income. If such Note may be
optionally redeemed prior to maturity after the Holder has acquired it, the
amount of amortizable bond premium is determined with reference to the amount
payable on maturity or, if it results in a smaller premium attributable to the
period of earlier redemption date, with reference to the amount payable on the
earlier redemption date. A Holder that elects to amortize bond premium must
reduce his tax basis in the Note by the amount of the premium amortized in any
year. An election to amortize bond premium applies to all taxable debt
obligations then owned and thereafter acquired by the taxpayer and may be
revoked only with the consent of the Internal Revenue Service.
If a Holder makes a Constant Yield Election for a Note with amortizable
bond premium, such election will result in a deemed election to amortize bond
premium for all the Holder's debt instruments with
S-20
<PAGE> 21
amortizable bond premium and may be revoked only with the permission of the
Internal Revenue Service with respect to debt instruments acquired after
revocation.
Foreign Currency Notes
The following summary relates to Notes that are denominated in a currency
or currency unit other than the U.S. dollar, or that pay interest or principal
in one or more currencies or currency units other than the U.S. dollar
(collectively, "Foreign Currency Notes").
A Holder who uses the cash method of accounting and who receives a payment
of qualified stated interest in a foreign currency with respect to a Foreign
Currency Note will be required to include in income the U.S. dollar value of the
foreign currency payment (determined on the date such payment is received)
regardless of whether the payment is in fact converted to U.S. dollars at that
time, and such U.S. dollar value will be the Holder's tax basis in the foreign
currency. A cash method Holder who receives such a payment in U.S. dollars
pursuant to an option available under such Note will be required to include the
amount of such payment in income upon receipt.
In the case of accrual method Holders of Original Issue Discount Notes, a
Holder will be required to include in income the U.S. dollar value of the amount
of interest income (including original issue discount, but reduced by
amortizable bond premium to the extent applicable) that has accrued and is
otherwise required to be taken into account with respect to a Foreign Currency
Note during an accrual period. The U.S. dollar value of such accrued income will
be determined by translating such income at the average rate of exchange for the
accrual period or, with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable year. Such
Holder will recognize ordinary income or loss with respect to accrued interest
income on the date such income is actually received. The amount of ordinary
income or loss recognized will equal the difference between the U.S. dollar
value of the foreign currency payment received (determined on the date such
payment is received) in respect of such accrual period (or, where a Holder
receives U.S. dollars, the amount of such payment in respect of such accrual
period) and the U.S. dollar value of interest income that has accrued during
such accrual period (as determined above). A Holder may elect to translate
interest income (including original issue discount) into U.S. dollars at the
spot rate on the last day of the interest accrual period (or, in the case of a
partial accrual period, the spot rate on the last date of the taxable year) or,
if the date of receipt is within five business days of the last day of the
interest accrual period, the spot rate on the date of receipt. A Holder that
makes such an election must apply it consistently to all debt instruments from
year to year and cannot change the election without the consent of the Internal
Revenue Service.
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a Holder who has not elected to amortize
such premium under Section 171 of the Code will be a capital loss to the extent
of such bond premium. If such an election is made, amortizable bond premium
taken into account on a current basis shall reduce interest income in units of
the relevant foreign currency. Exchange gain or loss is realized on such
amortized bond premium with respect to any period by treating the bond premium
amortized in such period as a return of principal.
A Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustment to such Holder's tax basis, will be the U.S. dollar value
of the foreign currency amount paid for such Foreign Currency Note, or of the
foreign currency amount of the adjustment, determine on the date of such
purchase or adjustment. A Holder that purchases a Foreign Currency Note with
previously owned foreign currency will recognize ordinary income or loss in an
amount equal to the difference, if any, between such Holder's tax basis in the
foreign currency and the U.S. dollar fair market value of the Foreign Currency
Note on the date of purchase.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between (i) the U.S. dollar value of the foreign currency
principal amount of such Note, and any payment with respect to accrued interest,
determined on the date such payment is received or such Note is disposed of, and
(ii) the U.S. dollar value of the foreign currency principal amount of such
Note, determined
S-21
<PAGE> 22
on the date such Holder acquired such Note, and the U.S. dollar value of the
accrued interest received, determined by translating such interest at the
average exchange rate for the accrual period. Such foreign currency gain or loss
will be realized only to the extent of the total gain or loss realized by a
Holder on the sale, exchange or retirement of the Foreign Currency Note. The
source of such foreign currency gain or loss will be determined by reference to
the residence of the Holder or the "qualified business unit" of the Holder on
whose books the Note is properly reflected. Any gain or loss realized by such a
Holder in excess of such foreign currency gain or loss is capital gain or loss,
except in the case of a short-term Original Issue Discount Note to the extent of
any original issue discount not previously included in the Holder's income.
A Holder will have a tax basis in any foreign currency received on the
sale, exchange or retirement of a Foreign Currency Note equal to the U.S. dollar
value of such foreign currency, determined at a time of such sale, exchange or
retirement. Regulations issued under Section 988 of the Code provide a special
rule for purchases and sales of publicly traded Foreign Currency Notes by a cash
method taxpayer under which units of foreign currency paid or received are
translated into U.S. dollars at the spot rate on the settlement date of the
purchase or sale. Accordingly, no exchange gain or loss will result from
currency fluctuations between the trade date and the settlement of such a
purchase or sale. An accrual method taxpayer may elect the same treatment
required of cash method taxpayers with respect to the purchase and sale of
publicly traded Foreign Currency Notes, provided the election is applied
consistently. Such election cannot be changed without the consent of the
Internal Revenue Service. Any gain or loss realized by a Holder on a sale or
other disposition of foreign currency (including its exchange for U.S. dollars
or its use to purchase Foreign Currency Notes) will be ordinary income or loss.
Notes Linked to Currency Exchange Rates
Indexed Notes that are linked to currency exchange rates should constitute
debt obligations of the Company for United States federal income tax purposes
and no portion of the issue price of the Notes should be separately allocated to
the foreign exchange feature of the Notes. However, the proper treatment of
payments of principal of and interest on such Currency Indexed Notes is
uncertain at this time.
Holders of Currency Indexed Notes should consult with their tax advisors as
to the federal income tax consequences of the ownership and disposition of such
Notes.
Notes Linked to Commodity Prices, Equity Indices or Other Factors
The United States federal income tax consequences to a Holder of the
ownership and disposition of Indexed Notes and Notes that are exchangeable into
the stock or a debt instrument of another issuer may vary depending on the exact
terms of the Notes. Holders intending to purchase Indexed Notes and Notes that
are exchangeable into the stock or debt instrument of another issuer should
refer to any discussion relating to taxation in the applicable Pricing
Supplement.
Backup Withholding and Information Reporting
Certain noncorporate Holders may be subject to backup withholding at a rate
of 31% on payments of principal, premium and interest (including the accrual of
original issue discount, if any) on, and the proceeds of disposition of, a Note.
Backup withholding will apply only if the 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 penalty of perjury, that it has furnished a correct TIN and has not been
notified by the Internal Revenue Service that it is subject to backup
withholding for failure to report interest and dividend payments. Holders should
consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining and establishing such an
exemption if applicable.
The amount of any backup withholding from a payment to a 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.
S-22
<PAGE> 23
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A PARTICULAR HOLDER'S SITUATION.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES (POSSIBLY INCLUDING RETROACTIVE CHANGES) IN FEDERAL
OR OTHER TAX LAWS.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Company for each of the
periods set forth below is as follows:
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED FISCAL YEARS ENDED
- -------------------------------- ---------------------------------------------------------------------------------
SEPTEMBER 27, SEPTEMBER 28, DECEMBER 28, DECEMBER 30, DECEMBER 31, DECEMBER 25, DECEMBER 26,
1997 1996 1996 1995 1994(1) 1993 1992
- -------------- -------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
4.91x 17.24x 14.47x 11.58x 7.28x 3.64x 2.84x
</TABLE>
- ---------------
(1) Fiscal year consisted of 53 weeks.
The ratio of earnings to fixed charges has been computed by dividing
pre-tax earnings available for fixed charges (earnings before income taxes
adjusted for interest expense and one-third of operating lease/rent expense) by
fixed charges. Fixed charges include interest expense (incurred interest before
capitalized interest and interest income) and one-third of operating lease/rent
expense. The Company's management believes that one-third of operating
lease/rent expense is representative of the interest factor.
PLAN OF DISTRIBUTION OF THE NOTES
Under the terms of the Distribution Agreement dated as of December 12, 1997
(the "Distribution Agreement"), the Notes are being offered on a continuing
basis by the Company through Donaldson, Lufkin & Jenrette Securities Corporation
and Salomon Brothers Inc (the "Agents"), each of which has agreed to use its
reasonable efforts to solicit purchases of the Notes. Except as otherwise agreed
by the Company and an Agent with respect to a particular Note, the Company will
pay each Agent a commission ranging from 0.125% to 0.750% of the principal
amount of each Note, depending on its Maturity, sold through such Agent. The
Company will have the sole right to accept offers to purchase Notes and may
reject any such offer, in whole or in part. Each Agent shall have the right, in
its sole discretion, to reject any offer to purchase Notes received by it, in
whole or in part, that it reasonably considers to be unacceptable.
The Company also may sell Notes to any Agent, acting as principal, at a
discount or concession to be agreed upon at the time of sale, for resale to one
or more investors or other purchasers at a fixed offering price or at varying
prices related to prevailing market prices at the time of such resale or
otherwise, as determined by such Agent and specified in the applicable Pricing
Supplement. The Agents may offer the Notes they have purchased as principal to
other dealers. The Agents may sell Notes to any dealer at a discount and, unless
otherwise specified in the applicable Pricing Supplement, such discount allowed
to any dealer will not be in excess of the discount to be received by such Agent
from the Company. Unless otherwise indicated in the applicable Pricing
Supplement, any Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof less a percentage
equal to the commission applicable to any agency sale of a Note of identical
maturity, and may be resold by the Agent to investors and other purchasers from
time to time in one or more transactions, including negotiated transactions as
described above. After the initial public offering of Notes to be resold to
investors and other purchasers, the public offering price, concession and
discount may be changed.
The Notes may also be sold by the Company directly to investors (other than
broker-dealers) in those jurisdictions in which the Company is permitted to do
so. No commission will be paid on Notes sold directly by the Company.
S-23
<PAGE> 24
The Company may also accept offers to purchase Notes from time to time
through one or more additional agents, acting either as agent or principal, on
substantially the same terms as those applicable to sales of Notes to or through
the Agents pursuant to the Distribution Agreement. Any such additional agent
shall, with respect to such Notes, be deemed to be included in all references to
an "Agent" or the "Agents" hereunder.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice.
Each purchaser of a Note will arrange for payment as instructed by the
applicable Agent or the Company. The Agents are required to deliver the proceeds
of the Notes to the Company in immediately available funds to a bank designated
by the Company in accordance with the terms of the Distribution Agreement, on
the date of settlement.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify the Agents against and contribution toward certain liabilities,
including liabilities under the Act. The Company has also agreed to reimburse
the Agents for certain expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Agents that the Agents
intend to make a market in the Notes, as permitted by applicable laws and
regulation. The Agents are not obligated to do so, however, and the Agents may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
Concurrently with the offering of the Notes through the Agents as described
herein, the Company may issue other Debt Securities from time to time as
described in the accompanying Prospectus. Other Debt Securities so issued may
reduce correspondingly the maximum aggregate principal amount of Notes that may
be offered by this Prospectus Supplement and the accompanying Prospectus. See
"Description of Notes."
Certain Agents and their affiliates have engaged and may in the future
engage in commercial banking and investment banking transactions with the
Company and its affiliates in the ordinary course of business. Additionally,
John S. Chalsty, Chairman of the Board and Chief Executive Officer of Donaldson,
Lufkin & Jenrette Securities Corporation, serves as a director of the Company.
VALIDITY OF THE NOTES
The validity of the Notes offered hereby will be passed upon for the
Company by Sheila B. Hagen, Esq., General Counsel of the Company and for the
Agents by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. The
opinions of Ms. Hagen and Skadden, Arps, Slate, Meagher & Flom LLP will be
conditioned upon, and subject to certain assumptions regarding, future action
required to be taken by the Company and the Trustee at the request of the
Company in connection with the issuance and sale of any particular Note, the
specific terms of Notes and other matters which may affect the validity of Notes
but which cannot be ascertained on the date of such opinions. Ms. Hagen is an
officer and full-time employee of the Company.
EXPERTS
The consolidated balance sheets as of December 28, 1996 and December 30,
1995 and the consolidated statements of earnings, changes in stockholders'
equity, and cash flows for the fiscal years then ended, and the related
financial statement schedule, all incorporated by reference or included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996
which are incorporated by reference herein have been audited by Coopers &
Lybrand L.L.P., independent public accountants, as indicated in their report
with respect thereto, which is incorporated by reference herein. The
consolidated statements of earnings, changes in stockholders' equity, and cash
flows for the fiscal year ended December 31, 1994 incorporated by reference or
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1996, which are incorporated by reference herein, have been audited
by Price Waterhouse LLP, independent public accountants, as indicated in their
reports with respect thereto, which is incorporated by reference herein. Such
financial statements and schedules are incorporated by reference herein in
reliance upon the reports of such independent public accountants, given upon
their authority as experts in accounting and auditing.
S-24
<PAGE> 25
GLOSSARY
Set forth below are definitions, or the locations elsewhere of definitions,
of some of the terms used in this Prospectus Supplement.
"Business Day" means (a) with respect to any Note (unless otherwise
provided in this definition), any day that is a Business Day in The City of New
York, (b) with respect to LIBOR Notes only, any Business Day in The City of New
York that is also a London Business Day, (c) with respect to Foreign Currency
Notes (other than Foreign Currency Notes denominated in European Currency Units
("ECUs")) only, any day that is a Business Day, both in The City of New York and
in the principal financial center of the country of the Specified Currency and
(d) with respect to Foreign Currency Notes denominated in ECU, any Business Day
in the City of New York that is also designated as an ECU settlement day by the
ECU Banking Association in Paris or otherwise generally regarded in the ECU
interbank market as a day in which payments in ECU are made.
"Calculation Agent" means the agent appointed by the Company to calculate
interest rates for Floating Rate Notes. Unless otherwise provided in a Pricing
Supplement, the Calculation Agent will be The Bank of New York.
"Calculation Date" means the date on which the Calculation Agent is to
calculate an interest rate for a Floating Rate Note, which is the applicable
date set forth below, unless otherwise specified in the applicable Pricing
Supplement:
CD Rate -- The earlier of (i) the tenth day after the related CD Rate
Interest Determination Date or, if such day is not a Business Day, the next
succeeding Business Day; and (ii) the Business Day next preceding the
relevant Interest Payment Date or date of Stated Maturity, as the case may
be.
Commercial Paper Rate -- The earlier of (i) the tenth day after the
related Commercial Paper Interest Determination Date or, if such day is not
a Business Day, the next succeeding Business Day; and (ii) the Business Day
next preceding the relevant Interest Payment Date or date of Stated
Maturity, as the case may be.
Federal Funds Rate -- The earlier of (i) the tenth day after the
related Federal Funds Interest Determination Date or, if such day is not a
Business Day, the next succeeding Business Day; and (ii) the Business Day
next preceding the relevant Interest Payment Date or date of Stated
Maturity, as the case may be.
LIBOR -- The LIBOR Interest Determination Date.
Prime Rate -- The Prime Rate Interest Determination Date.
Treasury Rate -- The earlier of (i) the tenth day after the related
Treasury Interest Determination Date or, if such day is not a Business Day,
the next succeeding Business Day; and (ii) the Business Day next preceding
the relevant Interest Payment Date or date of Stated Maturity, as the case
may be.
"CD Rate" means the rate calculated as set forth under the heading
"Description of Notes--Floating Rate Notes--CD Rate Notes," unless otherwise
indicated in the applicable Pricing Supplement.
"Commercial Paper Rate" means the rate calculated as set forth under the
heading "Description of Notes--Floating Rate Notes--Commercial Paper Rate
Notes," unless otherwise indicated in the applicable Pricing Supplement.
"Composite Quotations" means the daily statistical release entitled
"Composite 3:30 P.M. Quotations for U.S. Government Securities," or any
successor publication, published by the Federal Reserve Bank of New York.
"Designated CMT Maturity Index" means the original period to maturity of
the Treasury Notes (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in the
applicable Pricing Supplement and CMT Rate Note with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement and CMT Rate Note, the Designated CMT Maturity Index shall be
2 years.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement and CMT Rate
Note (or any other page that may replace
S-25
<PAGE> 26
such page on that service for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519). If no such page is specified in the
applicable Pricing Supplement and CMT Rate Note, the Designated CMT Telerate
Page shall be 7052, for the most recent week.
"Designated LIBOR Page" means the display on Page 3750 (or such other page
as is specified in the applicable Pricing Supplement) of the Dow Jones Telerate
Service for the purpose of displaying the London interbank offered rates of
major banks for the applicable Index Currency (or such other page as may replace
that page on that service for the purpose of displaying such rates), unless
"LIBOR Reuters" is designated in the applicable Pricing Supplement, in which
case the Designated LIBOR Page shall be the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank offered rates
of major banks for the applicable Index Currency.
"Federal Funds Rate" means the rate calculated as set forth under the
heading "Description of Notes--Floating Rate Notes--Federal Funds Rate Notes,"
unless otherwise indicated in the applicable Pricing Supplement.
"Fixed Rate Note" shall have the meaning set forth under the heading
"Description of Notes--Fixed Rate Notes."
"Floating Rate Notes" shall have the meaning set forth under the heading
"Description of Notes--Floating Rate Notes."
"Foreign Currency Exchange Gain or Loss" shall have the meaning set forth
under the heading "Certain United States Federal Tax Considerations--Foreign
Currency Notes--Interest Payments and Original Issue Discount."
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519), Selected Interest Rates," or any successor publication,
published by the Board of Governors of the Federal Reserve System.
"Index Currency" means the Currency specified in the applicable Pricing
Supplement as the Currency with respect to which LIBOR shall be calculated. If
no such Currency is specified in the applicable Pricing Supplement, the Index
Currency shall be U.S. dollars.
"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.
"Initial Interest Rate" means the rate at which an interest bearing Note
other than a Fixed Rate Note will bear interest from the date of issue to the
first Reset Date, as set forth in the applicable Pricing Supplement.
"Interest Determination Date" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Reset Date and calculated on the related Calculation Date (except in
the case of Prime Rate and LIBOR, which are calculated on the related Prime Rate
Interest Determination Date and LIBOR Interest Determination Date,
respectively). See the fourth paragraph under the heading "Description of
Notes--Floating Rate Notes" for the Interest Determination Dates for Floating
Rate Notes. The Interest Determination Dates for any Floating Rate Note will
also be set forth in the applicable Pricing Supplement and in such Note.
"Interest Reset Date" means the date on which a Floating Rate Note will
begin to bear interest at the variable interest rate determined as of any
Interest Determination Date. See the third paragraph under the heading
"Description of Notes--Floating Rate Notes" for the applicable Reset Dates for
such Notes. The Reset Dates with respect to any interest-bearing Note will also
be set forth in the applicable Pricing Supplement and on such Note.
"LIBOR" means the rate calculated as set forth under the heading
"Description of Notes--Floating Rate Notes--LIBOR Notes," unless otherwise
indicated in the applicable Prospectus Supplement.
"London Business Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
S-26
<PAGE> 27
"Original Issue Discount Note" means any Note which is considered to have
been issued at an original issue discount for federal income tax purposes (see
"United States Taxation--Tax Consequences to Holders--Original Issue Discount
Notes" above).
"Prime Rate" means the rate calculated as set forth under the heading
"Description of Notes Floating Rate Notes--Prime Rate Notes," unless otherwise
indicated in the applicable Pricing Supplement.
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service (or such other page as may
replace the USPRIME1 page on that service for the purpose of displaying the
prime rate or base lending rate of major United States banks).
"Section 988 Election" shall have the meaning set forth under the heading
"Certain United States Federal Tax Considerations--Foreign Currency
Notes--Interest Payments and Original Issue Discount."
"Specified Currency" shall have the meaning set forth in the first
paragraph under the heading "Special Provisions Relating to Foreign Currency
Notes--Currencies."
"Spread" means the number of basis points specified in the Note and the
applicable Pricing Supplement as being applicable to the Interest Rate for a
particular Floating Rate Note.
"Spread Multiplier" means the percentage specified in the applicable
Pricing Supplement as being applicable to the interest rate for a particular
Floating Rate Note.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service or
such other service as may be nominated as the information vendor, for the
purpose of displaying rates or pricing relating to LIBOR).
"Treasury Rate" means the interest rate calculated as set forth under the
heading "Description of Notes--Floating Rate Notes--Treasury Rate Notes," unless
otherwise indicated in the applicable Pricing Supplement.
S-27
<PAGE> 28
PROSPECTUS
$500,000,000
IBP, INC.
DEBT SECURITIES
------------------------
IBP, inc. ("IBP" or the "Company") may offer from time to time its senior
unsecured debt securities (the "Debt Securities") at an aggregate initial
offering price of up to $500,000,000 (or the equivalent thereof if any of the
Debt Securities are denominated other than in U.S. dollars) on terms to be
determined at the time of offering. The series, specific designation, aggregate
principal amount, maturity, rate (or manner of rate calculation) and time of
payment of any interest, purchase price, any terms relating to mandatory or
optional redemption or repayment (including any sinking fund), any modification
of the covenants and any other specific terms in connection with the sale of the
Debt Securities in respect of which this Prospectus is being delivered are set
forth in an accompanying Prospectus Supplement. The Prospectus Supplement also
includes information concerning any listing on a stock exchange of the Debt
Securities with respect to which this Prospectus and the Prospectus Supplement
are being delivered.
------------------------
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 Debt Securities may be offered directly by the Company, through agents
designated from time to time, through dealers or through underwriters. See "Plan
of Distribution." Any such agents, dealers or underwriters are set forth in the
accompanying Prospectus Supplement. If an agent of IBP or a dealer or
underwriter is involved in the offering of the Debt Securities, the name of such
agent, dealer or underwriter, any applicable commissions or discounts, and net
proceeds to IBP will be set forth in the Prospectus Supplement with respect to
such Debt Securities. Any agents, dealers or underwriters participating in the
offering may be deemed "underwriters" within the meaning of the Securities Act
of 1933, as amended.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
------------------------
The date of this Prospectus is January 17, 1996.
<PAGE> 29
AVAILABLE INFORMATION
IBP is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy materials and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy materials and other
information concerning IBP and the Registration Statement (as defined below) can
be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices maintained by the Commission at The Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and
at Seven World Trade Center, 13th Floor, New York, New York 10048. Copies can be
obtained by mail from the Commission at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and copies can be obtained
electronically through the Commission's Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. In addition, reports, proxy statements and other
information concerning IBP can be inspected at the office of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York, on which IBP's common stock
is listed.
IBP has filed with the Commission a registration statement on Form S-3
(herein, together with all information incorporated by reference therein and all
amendments and exhibits thereto, referred to as the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus and any applicable Prospectus Supplement do not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement
including the exhibits filed as a part thereof. Statements made in this
Prospectus and any applicable Prospectus Supplement as to the contents of any
documents referred to are not necessarily complete, and in each instance
reference is made to such exhibit for a more complete description and each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by IBP with the Commission (File No. 1-6085)
pursuant to the Exchange Act are incorporated in and made a part of this
Prospectus by reference thereto:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1994;
(b) Quarterly Reports on Form 10-Q for the thirteen weeks ended April
1, 1995, the twenty-six weeks ended July 1, 1995, and the thirty-nine weeks
ended September 30, 1995; and
(c) Current Reports on Form 8-K filed with the Commission on August 7,
1995 and January 16, 1996, respectively.
All other documents filed by IBP pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities made hereby shall be
deemed incorporated by reference in this Prospectus and any applicable
Prospectus Supplement and to be a part hereof from the date of filing of such
documents. Any statement contained in the documents incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus or any
applicable Prospectus Supplement, shall be deemed to be modified or superseded
for purposes of this Prospectus or any applicable Prospectus Supplement to the
extent that a statement contained herein or in any subsequently filed document
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any applicable Prospectus Supplement.
IBP will provide without charge to each person to whom this Prospectus and
any Prospectus Supplement have been delivered, upon written or oral request of
such person, a copy (without exhibits other than exhibits specifically
incorporated by reference) of any or all documents incorporated by reference
into this Prospectus or any applicable Prospectus Supplement. Requests for such
copies should be directed to Investor Relations Department, IBP, inc., Post
Office Box 515 #52A, Dakota City, Nebraska 68731; telephone number (402)
241-2559.
2
<PAGE> 30
THE COMPANY
IBP is the world's leading producer of fresh beef and pork, with fiscal
1994 net sales of approximately $12.1 billion. Customers include food retailers,
distributors, wholesalers, restaurant and hotel chains and other food
processors. IBP also produces fully cooked meats for the retail and food service
industries. Its allied products line includes more than 250 items, including
tanned hides for leather makers, ingredients for pharmaceuticals and raw
materials for animal feeds.
Founded in 1960 as Iowa Beef Packers, Inc., the Company began operations in
1961 with one plant in western Iowa. Today, IBP has 23 plant sites in North
America, regional sales offices throughout the United States and international
sales offices in England and Japan.
IBP is a Delaware corporation with executive offices located at IBP Avenue,
Dakota City, Nebraska 68731-0515. The telephone number of its Investor Relations
Department is (402) 241-2559. Unless the context indicates otherwise, all
references in this Prospectus to "IBP" or the "Company" include IBP, inc. and
its subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for IBP for each of the periods set
forth below is as follows:
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED FISCAL YEARS ENDED
- ------------------------------- --------------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 24, DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 28, DECEMBER 29,
1995 1994 1994(1) 1993 1992 1991 1990
- ------------- ------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
11.44x 5.78x 7.28x 3.64x 2.84x 1.01x 2.07x
</TABLE>
- ---------------
(1) Fiscal year consisted of 53 weeks.
The ratio of earnings to fixed charges has been computed by dividing
pre-tax earnings available for fixed charges (earnings before income taxes
adjusted for interest expense and one-third of operating lease/rent expense) by
fixed charges. Fixed charges include interest expense (incurred interest before
capitalized interest and interest income) and one-third of operating lease/rent
expense. The Company's management believes that one-third of operating
lease/rent expense is representative of the interest factor.
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement, the
net proceeds to IBP from the sale of the Debt Securities offered hereby will be
added to the working capital of IBP and will be available for general corporate
purposes.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (the "Indenture")
between the Company and The Bank of New York, as trustee (the "Trustee"). A form
of the Indenture has been filed as an exhibit to the Registration Statement. The
statements made under this heading relating to the Debt Securities and the
Indenture are summaries of the provisions thereof and do not purport to be
complete. Parenthetical references below are to the Indenture or to sections of
the Trust Indenture Act of 1939, as amended (the "TIA"), certain provisions of
which govern the terms of the Indenture, and, whenever any particular provision
of the Indenture or the TIA or any defined term used therein is referred to,
such provision or defined term is incorporated by reference as a part of the
statement in connection with which such reference is made, and the statement in
connection with which such reference is made is qualified in its entirety by
such reference. Capitalized terms used herein but not otherwise defined shall
have the meanings assigned to them in the Indenture.
3
<PAGE> 31
GENERAL
The Indenture does not limit the amount of 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 up to the aggregate principal amount
which may be authorized by the Company for each series. The Debt Securities will
be unsecured and unsubordinated Debt of the Company and will rank equally and
ratably with all other unsecured and unsubordinated indebtedness of the Company.
The particular terms of each series of Debt Securities, as well as any
modifications of or additions to the general terms of the Debt Securities as
described herein that may be applicable in the case of a particular series of
Debt Securities, will be described in the Prospectus Supplement relating to such
series of Debt Securities. Accordingly, for a description of the terms of a
particular series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of Debt Securities
set forth in this Prospectus.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for a description of the following
terms or additional provisions of the Debt Securities: (1) the title of such
Debt Securities; (2) any limit on the aggregate principal amount of such Debt
Securities; (3) the price or prices at which such Debt Securities will be
issued; (4) the date or dates, or the method by which such date or dates will be
determined or extended, on which the principal of such Debt Securities will be
payable; (5) the rate or rates per annum (which may be fixed, floating or
adjustable) at which such Debt Securities will bear interest, if any, or the
formula pursuant to which such rate or rates shall be determined; (6) the date
or dates from which interest, if any, on such Debt Securities shall accrue or
the method by which such date or dates shall be determined, the dates on which
such interest, if any, will be payable, the date on which payment of such
interest, if any, will commence, the Regular Record Dates for such Interest
Payment Dates, if any, and the Person to whom any interest on such Debt
Securities will be payable, if other than the Person in whose name such Debt
Securities are registered on any Regular Record Date; (7) the date, if any,
after which and the price or prices at which such Debt Securities may, pursuant
to any optional or mandatory redemption provisions, be redeemed at the option of
the Company or the Holder and any other terms and provisions of such optional or
mandatory redemptions; (8) the obligation, if any, of the Company to redeem,
repay or purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof and the period or periods within
which or the date or dates on which, the price or prices at which, the Currency
in which, and the other terms and conditions upon which, such Debt Securities
shall be redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation; (9) whether such Debt Securities are to be issuable as Registered
Securities or Bearer Securities or both, whether any of such Debt Securities
shall be issuable in whole or in part in temporary or permanent global form or
in the form of Book-Entry Securities and, if so, the circumstances under which
any such global security or global securities or Book-Entry Securities may be
exchanged for Debt Securities registered in the name of, and any transfer of
such global or Book-Entry Securities may be registered to, a Person other than
the depository for such temporary or permanent global securities or Book-Entry
Securities or its nominee; (10) if other than Dollars, the Currency in which
such Debt Securities will be denominated and in which the principal of (and
premium, if any) and any interest on such Debt Securities will be payable; (11)
whether the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with reference to an
index, formula or other method (which index, formula or method may be based on
one or more Currencies, commodities, equity indices or other indices) and the
manner in which such amounts shall be determined; (12) whether the Company or
Holder may elect payment of the principal of (and premium, if any) or interest,
if any, on such Debt Securities in one or more Currencies other than that in
which such Debt Securities are denominated or stated to be payable, the period
or periods within which, and the terms and conditions upon which, such election
may be made, and the time and manner of determining the exchange rate between
the Currency in which such Debt Securities are denominated or stated to be
payable and the Currency in which such Debt Securities are to be so payable;
(13) the place or places, if any, other than or in addition to the Borough of
Manhattan, The City of New York, where the principal of (and premium, if any)
and any interest on such Debt Securities shall be payable, any Registered
Securities of the series may be surrendered for registration of transfer, such
Debt Securities may be surrendered for exchange and notice or demands to or upon
the Company in respect of such Debt Securities and the Indenture may be served;
(14) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which any
4
<PAGE> 32
Registered Securities of the series shall be issuable and, if other than the
denomination of $5,000, the denomination or denominations in which any Bearer
Securities of the series shall be issuable; (15) the applicability, if at all,
to such Debt Securities of the provisions of Article XIV of the Indenture
described under "Defeasance and Covenant Defeasance" below, and any provisions
in modification of, in addition to or in lieu of any of the provisions of such
Article; (16) the Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, the manner in which, or the Person
to whom, any interest on any Bearer Security of the series shall be payable, if
otherwise than upon presentation and surrender of the coupons appertaining
thereto as they severally mature, and the extent to which, or the manner in
which, any interest payable on a temporary global security on an Interest
Payment Date will be paid if other than in the manner provided in the Indenture;
(17) whether and under what circumstances the Company will pay Additional
Amounts as contemplated by Section 10.4 of the Indenture on such Debt Securities
to any Holder who is not a United States Person (including any modification to
the definition of such term as contained in the Indenture as originally
executed) in respect of any tax, assessment or governmental charge and, if so,
whether the Company will have the option to redeem such Debt Securities rather
than pay such Additional Amounts (and the terms of any such option); (18)
provisions, if any, granting special rights to the Holders of such Debt
Securities upon the occurrence of such events as may be specified; (19) any
deletions from, modifications of or additions to the Events of Default or
covenants of the Company with respect to such Debt Securities, whether or not
such Events of Default or covenants are consistent with the Events of Default or
covenants set forth herein; (20) the date as of which any Bearer Securities of
the series and any temporary global security shall be dated if other than the
date of original issuance of the first of such Debt Securities; (21) if such
Debt Securities are to be issuable in definitive form (whether upon original
issue or upon exchange of a temporary security of such series) only upon receipt
of certain certificates or other documents or satisfaction of other conditions,
then the form and/or terms of such certificates, documents or conditions; (22)
the designation of the initial Exchange Rate Agent, if any; and (23) any other
terms of such Debt Securities (Section 3.1).
The Indenture does not contain any provisions that afford Holders of Debt
Securities of any series protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect Holders of the Debt Securities
(except to the limited extent that the covenants described below under "Certain
Restrictions" might affect the Company's ability to consummate such
transactions). Any provision that does provide such protection, if applicable to
the Debt Securities, will be described in the applicable Prospectus Supplement
relating thereto.
Some or all of the Debt Securities may be issued under the Indenture as
Original Issue Discount Securities (bearing no interest or interest at a rate
that at the time of issuance is below market rates) or as deferred interest Debt
Securities (paying interest at a later date) to be issued at prices below their
stated principal amounts. Certain federal income tax consequences and other
special considerations applicable to any such Original Issue Discount Securities
and deferred interest Debt Securities will be described in the applicable
Prospectus Supplement.
Debt Securities denominated or payable in foreign currencies may entail
significant risks. These risks include, without limitation, the possibility of
significant fluctuations in the foreign currency markets. These risks will vary
depending upon the currency or currencies involved and will be more fully
described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Registered Securities will be issuable in
denominations of $1,000 and integral multiples of $1,000 and Bearer Securities
will be issuable in the denomination of $5,000 or, in each case, in such other
denominations as may be in the terms of the Debt Securities of any particular
series. The Indenture also provides that Debt Securities of a series may be
issuable in temporary or permanent global form and may be issued as Book-Entry
Securities that will be deposited with, or on behalf of, The Depository Trust
Company or another depository named by the Company (the
5
<PAGE> 33
"Depository") and identified in a Prospectus Supplement with respect to such
series (Section 3.1). Unless otherwise specified in an applicable Prospectus
Supplement, Bearer Securities will have interest coupons attached (Section 2.1).
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. If (but only if)
provided in an applicable Prospectus Supplement, Bearer Securities (with all
unmatured coupons, except as provided below, and all matured coupons in default)
of any series may be exchanged for Registered Securities of the same series of
any authorized denominations and of a like aggregate principal amount and tenor.
In such event, Bearer Securities surrendered in a permitted exchange for
Registered Securities between a Regular Record Date or a Special Record Date and
the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest, and interest will not be
payable on such date for payment of interest in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable only
to the holder of such coupon when due in accordance with the terms of the
Indenture. Unless otherwise specified in the applicable Prospectus Supplement,
Bearer Securities will not be issued in exchange for Registered Securities
(Section 3.5).
The Debt Securities may be presented for exchange as described above, and
Registered Securities may be presented for registration of transfer (duly
endorsed or accompanied by a written instrument of transfer), at the corporate
trust office of the Trustee in the Borough of Manhattan, The City of New York,
or at the office of any transfer agent designated by the Company for such
purpose with respect to any series of Debt Securities and referred to in the
applicable Prospectus Supplement. No service charge will be made for any
transfer or exchange of 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 3.5). If a Prospectus Supplement refers to any
transfer agent (in addition to the Trustee) initially designated by the Company
with respect to any series of Debt Securities, the Company may at any time
rescind the designation of any such transfer agent or approve a change in the
location through which any such transfer agent acts, except that, if Debt
Securities of a series are issuable solely as Registered Securities, the Company
will be required to maintain a transfer agent in each Place of Payment for such
series and, if Debt Securities of a series may be issuable both as Registered
Securities and as Bearer Securities, the Company will be required to maintain
(in addition to the Trustee) a transfer agent in a Place of Payment for such
series located outside the United States. The Company may at any time designate
additional transfer agents with respect to any series of Debt Securities
(Section 10.2).
The Company shall not be required to (i) issue, register the transfer of or
exchange Debt Securities of any series during a period beginning at the opening
of business 15 days before any selection of Debt Securities of that series to be
redeemed and ending at the close of business on (A) if Debt Securities of the
series are issuable only as Registered Securities, the day of mailing of the
relevant notice of redemption and (B) if Debt Securities of the series are
issuable as Bearer Securities, the day of the first publication of the relevant
notice of redemption or, if Debt Securities of the series are also issuable as
Registered Securities and there is no publication, the mailing of the relevant
notice of redemption; (ii) register the transfer of or exchange any Registered
Security, or portion thereof, called for redemption, except the unredeemed
portion of any Registered Security being redeemed in part, (iii) exchange any
Bearer Security selected for redemption, except to exchange such Bearer Security
for a Registered Security of that series and like tenor which is simultaneously
surrendered for redemption; or (iv) issue, register the transfer of or exchange
any Debt Securities which has been surrendered for repayment at the option of
the Holder, except the portion, if any, thereof not to be so repaid (Section
3.5).
CERTAIN LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In order to avoid certain adverse United States federal income tax
consequences to the Company, Bearer Securities will not be offered, sold, resold
or delivered in connection with their original issuance in the United States or
to United States persons (each as defined in the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder), except as otherwise
permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D), including offers
and sales to offices located outside the United States of United States
financial institutions (as defined in Treasury Regulation Section
1.165-12(c)(1)(v)) that agree in writing to
6
<PAGE> 34
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Code and
the regulations thereunder. Any underwriters, agents and dealers participating
in the offering of Debt Securities must agree in writing that they will not
offer any Bearer Securities for sale or resale in the United States or to United
States persons (other than the financial institutions described above) or
deliver Bearer Securities within the United States. In addition, any such
underwriters, agents and dealers must agree to send confirmations to each
purchaser of a Bearer Security confirming that such purchaser represents that it
is not a United States person or that it is a financial institution described
above and, if such person is a dealer, that it will send similar confirmations
to purchasers from it. A Bearer Security may be delivered in connection with its
original issuance only if the person entitled to receive such Bearer Security
furnishes written certification of the beneficial ownership of the Bearer
Security as required by Treasury Regulation Section 1.163-5(c)(2)(i)(D)(3). In
the case of a Bearer Security in permanent global form, such certification must
be given in connection with notation of a beneficial owner's interest therein in
connection with the original issuance of such Debt Security (Section 3.3).
Bearer Securities and any coupons appertaining thereto must bear the
following legend: "Any United States person who holds this obligation will be
subject to limitations under the United States income tax laws, including the
limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue
Code." Under Sections 165(j) and 1287(a) of the Code, Holders that are United
States persons, with certain exceptions, will not be entitled to deduct any loss
on Bearer Securities and must treat as ordinary income any gain realized on the
sale or other disposition (including the receipt of principal) of Bearer
Securities.
Other restrictions and additional tax considerations may apply to the
issuance and holding of Bearer Securities. A description of any such
restrictions and federal income tax consequences will be set forth in the
applicable Prospectus Supplement.
GLOBAL AND BOOK-ENTRY DEBT SECURITIES
If Debt Securities to be sold in the United States are designated by the
Company in a Prospectus Supplement as Book-Entry Securities, a global security
representing the Book-Entry Securities will be deposited in the name of the
nominee for the Depository, representing the Debt Securities to be sold in the
United States. Upon such deposit of the Book-Entry Securities, the Depository
shall credit an account maintained or designated by an institution to be named
by the Company or any purchaser of the Debt Securities represented by the
Book-Entry Securities with an aggregate amount of Debt Securities equal to the
total number of Debt Securities that have been so purchased. The specific terms
of any depository arrangement with respect to any portion of a series of Debt
Securities to be represented by one or more global securities will be described
in the applicable Prospectus Supplement. Beneficial interests in such Debt
Securities will only be evidenced by, and transfers thereof will only be
effected through, records maintained by the Depository and the institutions that
are Depository participants.
If so specified in an applicable Prospectus Supplement, the portion of the
Debt Securities of a series which are issuable as Bearer Securities will
initially be represented by one or more temporary or permanent global Debt
Securities, without interest coupons, to be deposited with a common depository
in London for the Euroclear System ("Euroclear") and CEDEL S.A. ("CEDEL") for
credit to the designated accounts. Unless otherwise indicated by an applicable
Prospectus Supplement, on or after 40 days following its issuance, each such
temporary global Debt Security will be exchangeable for definitive Bearer
Securities, definitive Registered Securities or all or a portion of a permanent
global Debt Security, or any combination thereof, as specified in an applicable
Prospectus Supplement, only upon written certification in the form and to the
effect described under "Denominations, Registration and Transfer." No Bearer
Security (including a Debt Security in permanent global form) delivered in
exchange for a portion of a temporary or permanent global Debt Security shall be
mailed or otherwise delivered to any location in the United States in connection
with such exchange (Sections 3.4 and 3.5).
A Person having a beneficial interest in a permanent global Debt Security
will, except with respect to payment of principal of, premium, if any, and
interest on such permanent global Debt Security, be treated as a Holder of such
principal amount of Outstanding Debt Securities represented by such permanent
global Debt
7
<PAGE> 35
Security as shall be specified in a written statement of the Holder of such
permanent global Debt Security or, in the case of a permanent global Debt
Security in bearer form, of the operator of Euroclear or CEDEL which is provided
to the Trustee by such Person (Section 2.3).
CERTAIN RESTRICTIONS
RESTRICTIONS ON LIENS
The Indenture provides that neither the Company nor any Significant
Subsidiary of the Company shall incur, create, issue, assume, guarantee or
otherwise become liable for any Debt for money borrowed that is secured by a
Lien on any asset now owned or hereafter acquired by it unless the Company makes
or causes to be made effective provision whereby the Securities issued under the
Indenture will be secured by such Lien equally and ratably with (or prior to)
all other Debt thereby secured so long as any such Debt shall be secured. The
foregoing restriction does not apply to the following:
(i) Liens existing as of the date of the Indenture;
(ii) Liens created by Subsidiaries of the Company to secure Debt of
such Subsidiaries to the Company or to one or more other Subsidiaries of
the Company;
(iii) Liens affecting property of a Person existing at the time it
becomes a Subsidiary of the Company or at the time it merges into or
consolidates with the Company or a Subsidiary of the Company or at the time
of a sale, lease or other disposition of all or substantially all of the
properties of such Person to the Company or its Subsidiaries;
(iv) Liens on property existing at the time of the acquisition thereof
or incurred to secure payment of all or a part of the purchase price
thereof, including the expenses incurred in connection therewith, or to
secure Debt incurred prior to, at the time of, or within one year after the
acquisition thereof for the purpose of financing all or a part of the
purchase price thereof, including the expenses incurred in connection
therewith;
(v) Liens on any property to secure all or part of the cost of
improvements or construction thereon or Debt incurred to provide funds for
such purpose in a principal amount not exceeding the cost of such
improvements or construction, including the expenses incurred in connection
therewith;
(vi) Liens on shares of stock, Debt or other securities of a Person
that is not a Subsidiary;
(vii) Liens relating to accounts receivable of the Company or any of
its Subsidiaries which have been sold, assigned or otherwise transferred to
another Person in a transaction classified as a sale of accounts receivable
in accordance with generally accepted accounting principles (to the extent
the sale by the Company or the applicable Subsidiary is deemed to give rise
to a Lien in favor of the purchaser thereof in such accounts receivable or
the proceeds thereof);
(viii) Liens created pursuant to applications or reimbursement
agreements pertaining to commercial letters of credit which encumber only
the goods, or documents of title covering the goods that are sold or
shipped in the transaction for which such letters of credit were issued;
(ix) Liens incurred by the Company after the date of this Agreement in
connection with industrial revenue bond financing for facilities (including
pollution control equipment) to be used by the Company or any Subsidiary;
(x) Liens in favor of governmental bodies to secure progress, advance
or other payments;
(xi) other Liens arising in connection with Debt of the Company and
its Subsidiaries in an aggregate principal amount for the Company and its
Subsidiaries not exceeding 10% of the Consolidated Net Assets of the
Company at the time such Lien is issued, created or assumed; and
(xii) any extension, renewal or replacement (or successive extensions,
renewals or replacements) of any Lien referred to in the foregoing clauses
(i) through (xi) inclusive, or of any Debt secured thereby, provided that
the principal amount of Debt secured thereby shall not exceed the greater
of (A) the principal amount of Debt so secured at the time of such
extension, renewal or replacement and (B) the
8
<PAGE> 36
principal amount of Debt secured at the time the Lien was issued, created,
assumed or otherwise permitted, plus in either of (A) or (B) the expenses
of the Company and its Subsidiaries (including any premium) incurred in
connection with any such extension, renewal or replacement, and provided
further that such extension, renewal or replacement Lien shall be limited
to all or part of substantially the same property that secured the Lien
extended, renewed or replaced (plus improvements on such property) (Section
10.6).
RESTRICTIONS UPON SALE AND LEASEBACK TRANSACTIONS
The Company is not permitted, and may not permit a Significant Subsidiary,
to enter into any arrangement on or after the date of the Indenture, or such
other date as may be specified in any Prospectus Supplement for an applicable
series of Debt Securities issued pursuant to the Indenture, with any Person
(other than the Company or another Subsidiary) providing for the leasing by the
Company or any such Significant Subsidiary of any Principal Property (except a
lease for a temporary period, including renewals, of not more than 24 months by
the end of which it is intended that the use of such property by the lessee will
be discontinued) except (i) where the Company or such Subsidiary would be
entitled to incur Debt secured by a Lien on the property to be leased in an
amount equal to the Attributable Debt with respect to such Sale and Leaseback
Transaction without equally and ratably securing the Debt Securities, (ii) where
the Sale and Leaseback Transaction is entered into in respect of property
acquired by the Company or a Subsidiary within 24 months of such acquisition,
(iii) where such Sale and Leaseback Transaction is entered into by the Company
or a Subsidiary in respect of property within 24 months of the Company's or a
Subsidiary's acquisition of, or merger with, the Person owning such property, or
(iv) where the Company within 120 days of entering into the Sale and Leaseback
Transaction applies to the retirement of Debt Securities of any series an amount
equal to the greater of (a) the net proceeds of the sale of the property leased
pursuant to such Transaction or (b) the fair market value of the property so
leased (Section 10.7).
RESTRICTIONS UPON MERGER AND SALE OF ASSETS
The Indenture provides that the Company may not consolidate with or merge
into any other Person, or sell, convey, transfer, lease, or otherwise dispose
of, or permit one or more of its Subsidiaries to sell, convey, transfer, lease,
or otherwise dispose of, all or substantially all of the property and assets of
the Company, on a consolidated basis, to any Person unless, among other things,
(i) either the Company is the continuing corporation or such Person is a
corporation, partnership or trust organized and validly existing under the laws
of the United States of America, any state thereof or the District of Columbia,
and assumes by supplemental indenture all the obligations of the Company under
the Indenture and the Debt Securities, and (ii) immediately after the
transaction no Default or Event of Default shall exist (Section 8.1).
EVENTS OF DEFAULT
The Indenture defines an Event of Default with respect to the Debt
Securities of any series as being any one of the following events: (i) default
for 30 days in any payment of interest upon or any Additional Amounts payable in
respect of any Debt Security of that series when due; (ii) default in any
payment of principal of (or premium, if any, upon) any Debt Security of that
series when due; (iii) default in the deposit of any sinking fund payment, when
and as due by the terms of any Debt Security of that series; (iv) default for 60
days after appropriate notice in the performance of any other covenant in the
Indenture with respect to any Debt Security of that series; (v) certain events
in bankruptcy, insolvency, reorganization or other similar laws; and (vi) any
other Event of Default provided with respect to Debt Securities of that series
(Section 5.1).
In case an Event of Default shall occur and be continuing with respect to
the Debt Securities of any series, the Trustee or the Holders of not less than
25% in aggregate principal amount of the Debt Securities then Outstanding of
that series may declare the principal of the Debt Securities of such series (or,
if the Debt Securities of that series were issued as discounted Debt Securities,
such portion of the principal as may be specified in the terms of that series)
and the accrued interest thereon, if any, to be due and payable (Section 10.8).
9
<PAGE> 37
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 10.8). The Indenture provides that the Trustee may
withhold notice to the Holders of any default (except in payment of principal or
premium, if any, or interest) if it considers it in the interest of the Holders
to do so (Section 6.1).
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, order or direction
of Holders unless such Holders shall have offered to the Trustee reasonable
indemnity and security against the costs, expenses and liabilities which might
be incurred by it in compliance with such request (Section 5.7). Subject to such
provisions for indemnification and certain other rights of the Trustee, the
Indenture provides that the Holders of a majority in principal amount of the
Debt Securities of any series then Outstanding 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
(Section 5.12).
The Holders of at least a majority in aggregate principal amount of the
Outstanding Debt Securities of each series may, on behalf of the Holders of all
the Debt Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive portions of the Indenture
and, if applicable, such Debt Securities, unless a greater percentage of such
aggregate principal amount is specified in the applicable Prospectus Supplement.
The Holders of not less than a majority in principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all the Debt
Securities of such series and any related coupons waive any past default under
the Indenture with respect to such series and its consequences, except a default
(i) in the payment of the principal of (or premium, if any) or interest on or
Additional Amounts payable in respect of any Debt Security of such series, or
(ii) in respect of a covenant or provision that cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of such
series affected thereby (Section 5.13).
MODIFICATION OF THE INDENTURE
Modification and amendment of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of all Outstanding Debt Securities of any series that
are affected by such modification or amendment unless a greater percentage of
such aggregate principal amount is specified in the Prospectus Supplement;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security of such series, among
other things: (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Debt Security of such series; (ii) reduce the
principal amount of, the rate of interest on, or any premium payable upon the
redemption of, any Debt Security of such series; (iii) change any obligation of
the Company to pay Additional Amounts in respect of any Debt Security of such
series; (iv) reduce the amount of principal of an Original Issue Discount
Security of such series that would be due and payable upon a declaration of
acceleration of the Maturity thereof; (v) change the Place of Payment or
Currency of Payment of principal of, or any premium or interest on, any Debt
Security of such series; (vi) impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof or any
Redemption Date therefor; (vii) reduce the above-stated percentage of Holders of
Outstanding Debt Securities of such series necessary to modify or amend the
Indenture or to consent to any waiver thereunder or reduce the requirements for
voting or quorum described below; or (viii) modify the foregoing requirements or
reduce the percentage of Outstanding Debt Securities of such series necessary to
waive any past default (Section 9.2).
Modification and amendment of the Indenture may be made by the Company and
the Trustee without the consent of any Holder, for any of the following
purposes: (i) to evidence the succession of another Person to the Company as
obligor under the Indenture; (ii) to add to the covenants of the Company for the
benefit of the Holders of all or any series of Debt Securities; (iii) to add
Events of Default for the benefit of the Holders of all or any series of Debt
Securities; (iv) to add or change any provisions of the Indenture to facilitate
the issuance of Bearer Securities; (v) to change or eliminate any provisions of
the Indenture, provided that any such change or elimination shall become
effective only when there are no Outstanding Debt Securities of any
10
<PAGE> 38
series created prior thereto which are entitled to the benefit of such
provision; (vi) to establish the form or terms of Debt Securities of any series
and any related coupons; (vii) to secure the Debt Securities; (viii) to provide
for the acceptance of appointment by a successor Trustee; (ix) to cure any
ambiguity, defect or inconsistency in the Indenture, provided such action does
not adversely affect the interests of Holders of Debt Securities of any series
in any material respect; or (x) to supplement any of the provisions of the
Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of Debt Securities, provided such action shall not
adversely affect the interests of the Holders of any Debt Securities in any
material respect (Section 9.1).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent, waiver or other
action thereunder or are present at a meeting of Holders of Debt Securities for
quorum purposes, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof, and (ii) the principal amount of a Debt
Security denominated in a foreign currency or currency units shall be the Dollar
Equivalent of the Currency Unit, determined on the date of original issuance of
such Debt Security or, in the case of an Original Issue Discount Security, the
Dollar Equivalent of the Currency Unit, determined on the date of original
issuance of such Debt Security, of the amount determined as provided in (i)
above (Section 3.12).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of any series. A meeting may be called at any time by the
Trustee, and also, upon request, by the Company or the Holders of at least 10%
in principal amount of the Outstanding Debt Securities of any such series, in
any such case upon notice given as provided in the Indenture. Except for any
consent that must be given by the Holder of each Debt Security affected thereby,
as described above, any resolution presented at a meeting or adjourned meeting
at which a quorum is present may be adopted by the affirmative vote of the
Holders of a majority in principal amount of the Outstanding Debt Securities of
that series; provided, however, that any resolution with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
may be made, given or taken by the Holders of a specified percentage, which is
less than a majority, in principal amount of Outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series and the related
coupons. The quorum at any meeting called to adopt a resolution, and at any
reconvened meeting, will be the Persons entitled to vote a majority in principal
amount of the Outstanding Debt Securities of a series; provided, however, that
if any action is to be taken at such meeting with respect to a consent or waiver
that may be given by the Holders of a specified percentage in principal amount
of the Outstanding Debt Securities of a series, the Persons entitled to vote
such specified percentage in principal amount of the Outstanding Debt Securities
of such series will constitute a quorum (Article XV).
DEFEASANCE AND DISCHARGE
The Indenture provides that, if so specified with respect to the Debt
Securities of any series, the Company will be discharged from any and all
obligations in respect of the Debt Securities of such series upon the deposit
with the Trustee, in trust, of money and/or U.S. Government Obligations which
through the payment of interest and principal in respect thereof in accordance
with the terms will provide money in an amount sufficient to pay the principal
of (and premium, if any), each installment of interest on, and any sinking fund
payments on, the Debt Securities of such series on the Stated Maturity of such
payments in accordance with the terms of the Indenture and the Debt Securities
of such series. Such a trust may only be established if, among other things, the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
(i) the Company has received from, or there has been published by, the Internal
Revenue Service a rule, or (ii) since the date of the Indenture there has been a
change in applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the Holders of
11
<PAGE> 39
Debt Securities of such series will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge, and will be subject to federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred. In the event of any such
defeasance and discharge of Debt Securities of such series, Holders of Debt
Securities of such series would be able to look only to such trust fund for
payment of principal of and any premium and any interest on their Debt
Securities until Maturity (Section 14.2).
DEFEASANCE OF CERTAIN COVENANTS
The Indenture provides covenants that, if so specified with respect to the
Debt Securities of any series, the Company may omit to comply with the
restrictive covenants described under "Certain Restrictions" above and any other
covenants applicable to such Debt Securities which are subject to covenant
defeasance and any such omission shall not be an Event of Default with respect
to the Debt Securities of such series, upon the deposit with the Trustee, in
trust, of money and/or U.S. Government Obligations which through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of (and premium, if
any), each installment of interest on, and any sinking fund payments on, the
Debt Securities of such series on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Debt Securities of such
series. The obligations of the Company under the Indenture and the Debt
Securities of such series other than with respect to such covenant shall remain
in full force and effect. Such a trust may be established only if, among other
things, the Company has delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the Debt Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance of certain obligations and will be subject to federal income tax
on the same amounts and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred (Section 14.3).
In the event the Company exercises its option to omit compliance with the
covenants described under "Certain Restrictions" above with respect to the Debt
Securities of any series as described above and the Debt Securities of such
series are declared due and payable because of the occurrence of any Event of
Default, then 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 Default. The Company shall in any event remain
liable for such payments as provided in the Indenture.
Unless otherwise provided in the Prospectus Supplement, if, after the
Company has deposited funds and/or U.S. Government Obligations to effect
defeasance and discharge or covenant defeasance with respect to Debt Securities
of any series, (a) the Holder of a Debt Security of such series is entitled to,
and does, elect pursuant to the terms of such Debt Security to receive payment
in a Currency other than that in which such deposit has been made in respect of
such Debt Security, or (b) the Currency in which such deposit has been made in
respect of any Debt Security of such series ceases to be used by its government
of issuance, the Debt represented by such Debt Security shall be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest, if any, on such Debt Security
as they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the Currency in which such Debt
Security becomes payable as a result of such election or such cessation of usage
based on the applicable Market Exchange Rate (Section 14.5). Unless otherwise
provided in the Prospectus Supplement, all payments of principal of (and
premium, if any) and interest, if any, and Additional Amounts, if any, on any
Debt Security that is payable in a Foreign Currency that ceases to be used by
its government of issuance shall be made in Dollars (Section 3.12).
The Prospectus Supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Debt Securities of or
within a particular series and any related coupons.
12
<PAGE> 40
MEDIUM-TERM NOTES
The Company may offer from time to time medium-term notes (the "Medium-Term
Notes") as a series of Debt Securities under the Indenture. The particular terms
and provisions of the Medium-Term Notes will be described in the Prospectus
Supplement relating to such Medium-Term Notes.
THE TRUSTEE
The Company from time to time maintains bank accounts and has other
customary banking relationships with and obtains credit facilities and lines of
credit from the Trustee in the ordinary course of business. The Trustee may also
serve as trustee under other indentures covering other debt securities of the
Company.
PAYMENT AND PAYING AGENTS
Unless otherwise provided in an applicable Prospectus Supplement,
principal, premium, if any, and interest, if any, and Additional Amounts, if
any, on Bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such Paying Agents outside the United States as
the Company may designate from time to time (Section 10.2). Unless otherwise
provided in the Prospectus Supplement, payment of interest and certain
Additional Amounts on Bearer Securities on any Interest Payment Date will be
made only against presentation and surrender of the coupon relating to such
Interest Payment Date (Section 10.1). Unless otherwise provided in the
Prospectus Supplement, no payment with respect to any Bearer Security will be
made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal, premium, if any, and interest, if any, and
Additional Amounts, if any, in respect of Bearer Securities payable in Dollars
will be made at the office of the Company's Paying Agent in the Borough of
Manhattan, The City of New York, if (but only if) payment of the full amount
thereof in Dollars at all offices or agencies outside the United States is
illegal or effectively precluded by exchange controls or other similar
restrictions (Section 10.2).
Unless otherwise provided in an applicable Prospectus Supplement,
principal, premium, if any, and interest, if any, and Additional Amounts, if
any, on Registered Securities will be payable at the office of such Paying Agent
or Paying Agents as the Company may designate from time to time, except that, at
the option of the Company, interest (including Additional Amounts, if any) may
be paid (i) by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register or (ii) by transfer to an
account maintained by the payee located inside the United States. Unless
otherwise provided in the Prospectus Supplement, payment of any installment of
interest on Registered Securities will be made to the Person in whose name such
Registered Security is registered at the close of business on the Regular Record
Date for such interest (Section 3.7).
Any Paying Agents outside the United States and any other Paying Agents in
the United States initially designated by the Company for the Debt Securities
will be named in the Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that, if Debt Securities of a series are issuable only as Registered
Securities, the Company will be required to maintain a Paying Agent in each
Place of Payment for such series and, if Debt Securities of a series are also
issuable as Bearer Securities, the Company will be required to maintain (i) a
Paying Agent in the Borough of Manhattan, The City of New York, for payments
with respect to any Registered Securities of the series (and for payments with
respect to Bearer Securities of the series in the circumstances described above,
but not otherwise) and (ii) a Paying Agent in a Place of Payment located outside
the United States where Debt Securities of such series and any related coupons
may be presented and surrendered for payment; provided that if the Debt
Securities of such series are listed upon application by the Company on any
stock exchange located outside the United States and such stock exchange shall
so require, the Company will maintain a Paying Agent in any other required city
located outside the United States, as the case may be, for the Debt Securities
of such series (Section 10.2).
13
<PAGE> 41
Payments of principal of, premium, if any, and interest on Book-Entry
Securities registered in the name of any Depository or its nominee will be made
to the Depository or its nominee, as the case may be, as the registered owner of
the global security representing such Book-Entry Securities. The Company expects
that the Depository, upon receipt of any payment of principal, premium or
interest, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests as shown on the
records of such Depository or its nominee. None of the Company, the Trustee, any
Paying Agent or the Securities Registrar for such Debt Securities will have any
responsibility or liability for any aspects of the records relating to, or
payments made on account of, such beneficial ownership interests in the
Book-Entry Securities or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
CERTAIN DEFINITIONS
"Consolidated Net Assets" means the total assets of the Company and its
consolidated Subsidiaries as shown on the consolidated balance sheet of the
Company for the most recently completed accounting period for which financial
statements are publicly available, after deducting the amount of all current
liabilities (excluding any constituting Funded Debt by reason of their being
renewable or extendible).
"Funded Debt" means indebtedness for money borrowed which by its terms
matures at, or is extendible or renewable at the option of the obligor to, a
date more than 12 months after the date of the creation of such indebtedness for
money borrowed.
"Holder," when used with respect to any Security, means, in the case of a
Registered Security, the Person in whose name the Security is registered in the
Security Register and, in the case of a Bearer Security, the bearer thereof and,
when used with respect to any coupon, means the bearer thereof.
"Lien" means any pledge, mortgage, lien, charge, encumbrance or security
interest.
"Original Issue Discount Security" means any Debt Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 5.2.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Principal Property" means any facility (together with the land on which it
is erected, any future additions or improvements thereto, and all machinery and
equipment included therein) used by the Company or a Subsidiary primarily for
producing, processing, packaging, storing, or distributing its products, raw
materials, inventories or other materials and supplies, located in the United
States or Canada, owned or leased by the Company or a Subsidiary, and having an
acquisition cost plus capitalized improvements in excess of 2% of Consolidated
Net Assets as of the date of such determination, but shall not include any such
property financed through the issuance of tax-exempt governmental obligations,
or any such property or portion thereof that has been determined by Board
Resolution not to be of material importance to the respective business conducted
by the Company or a Subsidiary, effective as of the date such Board Resolution
is adopted.
"Significant Subsidiary" means, at any time, any Subsidiary that would be a
"Significant Subsidiary" at such time, as such term is defined in Regulation S-X
promulgated by the Commission, as in effect as of the date of the Indenture.
"Subsidiary" means any corporation, partnership, limited liability company,
joint venture, trust, association or unincorporated organization more than 50%
of the outstanding voting interest 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.
14
<PAGE> 42
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities to or through underwriters, and
also may sell the Debt Securities directly to other purchasers or through
agents, and any such sales may be made on a continuing basis. The Prospectus
Supplement with respect to the Debt Securities being offered thereby sets forth
the terms of the offering of such Debt Securities, including the name or names
of any underwriters or agents, the purchase price of such Debt Securities and
the proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchanges on which such Debt Securities may be listed.
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, or
at market prices prevailing at the time of sale, at prices relating 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, dealers and agents that participate in the distribution of Debt
Securities may be deemed to be underwriters and any discounts or commissions
received by them 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 underwriter or agent will be identified, and any such compensation will
be described, in a Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Debt Securities may be
entitled to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
the underwriters to solicit offers by certain institutions to purchase Debt
Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to Delayed Delivery Contracts providing for
payment and delivery on the date stated in the Prospectus Supplement. Each such
contract will be for an amount not less than, and unless the Company otherwise
agrees, the aggregate principal amount of Debt Securities sold pursuant to such
contracts shall not be more than, the respective amounts stated in the
Prospectus Supplement. Institutions with which such contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions, and other
institutions, but shall in all cases be subject to the approval of the Company.
Delayed Delivery Contracts will not be subject to any conditions except that the
purchase by an institution of the Debt Securities covered thereby shall not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject.
VALIDITY OF THE DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the Company by
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York and certain matters
will be passed upon for any underwriters by Skadden, Arps, Slate, Meagher &
Flom, New York, New York. Skadden, Arps, Slate, Meagher & Flom from time to time
provides legal services to the Company.
EXPERTS
The financial statements and schedules included in IBP's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, which are incorporated by
reference herein and in the Registration Statement, have been audited by Price
Waterhouse LLP, independent public accountants, as indicated in their report
with respect thereto, which is incorporated by reference herein. Such financial
statements and schedules are incorporated by reference herein in reliance upon
the report of Price Waterhouse LLP, given upon its authority as experts in
accounting and auditing.
15
<PAGE> 43
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE UNDERWRITERS OR ANY OTHER PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
Description of Notes.................. S-2
Special Provisions Relating to Foreign
Currency Notes...................... S-14
Foreign Currency Risks................ S-16
Certain United States Federal Tax
Considerations...................... S-18
Ratio of Earnings to Fixed Charges.... S-23
Plan of Distribution of the Notes..... S-23
Validity of the Notes................. S-24
Experts............................... S-24
Glossary.............................. S-25
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Ratio of Earnings to Fixed Charges.... 3
Use of Proceeds....................... 3
Description of the Debt Securities.... 3
Plan of Distribution.................. 15
Validity of the Debt Securities....... 15
Experts............................... 15
</TABLE>
======================================================
======================================================
$300,000,000
IBP, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
---------------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON SMITH BARNEY
DECEMBER 12, 1997
======================================================
