<PAGE>1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 20, 1999
$70,000,000
KENTUCKY POWER COMPANY
Floating Rate Notes, Series B, due 2002
------------
We will pay interest on the Floating Rate Notes on each February 19, May
19, August 19 and November 19. The first interest payment will be made on
February 19, 2001. The annual interest rate on the Floating Rate Notes for each
quarterly interest period will be reset quarterly based on the three-month LIBOR
rate plus .65%. The Floating Rate Notes may be redeemed on any interest payment
date on or after November 19, 2001. There is no sinking fund for the Floating
Rate Notes.
The Floating Rate Notes will be unsecured and will rank equally with all
of our other unsecured and unsubordinated indebtedness and will be effectively
subordinated to all of our secured debt, including $119,500,000 of outstanding
first mortgage bonds as of November 10, 2000.
Proceeds to
Underwriting Kentucky
Price to Discounts and Power
Public (1) Commissions Company
---------- --------
Per Floating Rate Note............. 100% .25% 99.75%
Total.............................. $70,000,000 $.175,000 $69,825,000
(1) Plus accrued interest, if any, from November 17, 2000, if settlement
occurs after that date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
Delivery of the Floating Rate Notes in book-entry form only will be made on
or about November 17, 2000.
Credit Suisse First Boston BNY Capital Markets, Inc.
The date of this prospectus supplement is November 10, 2000.
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TABLE OF CONTENTS
Prospectus Supplement
Page
USE OF PROCEEDS............................. S-3
SUPPLEMENTAL DESCRIPTION OF THE
FLOATING RATE NOTES...................... S-3
Principal Amount, Maturity and Interest. S-3
Redemption.............................. S-4
Certain Definitions..................... S-4
UNDERWRITING................................ S-5
NOTICE TO CANADIAN RESIDENTS................ S-7
Prospectus
WHERE YOU CAN FIND MORE
INFORMATION .............................. 2
THE COMPANY.................................. 2
PROSPECTUS SUPPLEMENTS....................... 2
RATIO OF EARNINGS TO.
FIXED CHARGES............................. 3
USE OF PROCEEDS ............................. 3
DESCRIPTION OF THE NOTES .................... 3
General................................. 3
Redemptions ............................ 4
Remarketed Notes......................... 4
Book-Entry Notes - Registration,
Transfer, and Payment of Interest and
Principal ......................... 4
Note Certificates- Registration, Transfer, and
Payment of Interest and Principal ........ 6
Interest Rate............................ 6
General............................ 6
Fixed Rate Notes .................. 6
Floating Rate Notes: General....... 6
Floating Rate Notes: Date of Interest
Rate Change.......................... 7
Floating Rate Notes: When Interest
Rate is Determined................... 7
Floating Rate Notes: When Interest
Is Paid............................... 7
Floating Rate Notes: Interest Rate
Formulas.............................. 8
Events of Default........................ 14
Modification of Indenture................ 15
Consolidation, Merger or Sale............ 15
Legal Defeasance......................... 15
Covenant Defeasance...................... 15
Governing Law............................ 16
Concerning the Trustee................... 16
PLAN OF DISTRIBUTION.......................... 16
LEGAL OPINIONS................................ 17
EXPERTS....................................... 17
GLOSSARY...................................... 17
--------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
S-2
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USE OF PROCEEDS
We will use the net proceeds from the sale of the Floating Rate Notes to
pay down short-term indebtedness, a portion of which was used to retire our $80
million Floating Rate Notes, Series A, due 2000, which matured on November 2,
2000.
SUPPLEMENTAL DESCRIPTION OF THE FLOATING RATE NOTES
The following description of the particular terms of the Floating Rate
Notes supplements and, to the extent it is not consistent with the description
of the general terms and provisions of floating rate notes under "Description of
the Notes" in the accompanying Prospectus, supersedes such description. There
will be no additional pricing supplement relating to the Floating Rate Notes. We
will issue the Floating Rate Notes under an Indenture, dated as of September 1,
1997, between us and Bankers Trust Company, as Trustee, as supplemented and
amended and as to be further supplemented and amended.
Principal Amount, Maturity and Interest
This series of Floating Rate Notes will be limited in aggregate principal
amount to $70,000,000.
The Floating Rate Notes will mature and become due and payable, together
with any accrued and unpaid interest, on November 19, 2002. The Company will pay
interest on the Floating Rate Notes on each February 19, May 19, August 19 and
November 19, commencing on February 19, 2001 through the maturity date of
November 19, 2002. Interest will accrue from the issue date of November 17, 2000
and will be paid to holders of record on the fifteenth calendar day before each
interest payment date. If the scheduled interest payment date (other than the
maturity date) of the Floating Rate Notes falls on a day which is not a Business
Day, such interest payment date will be the following date that is a Business
Day, except that if such Business Day is in the next calendar month, such
interest payment date shall be the immediately preceding Business Day. If the
maturity date of the Floating Rate Notes falls on a day that is not a Business
Day, we will make the required payment of principal and/or interest on the
following day which is a Business Day as if it were made on the date the payment
was due. Interest will not accrue as a result of this delayed payment.
The Floating Rate Notes will bear interest for each quarterly Interest
Period at an annual rate determined by the Calculation Agent, subject to the
maximum interest rate permitted by New York or other applicable state law, as
such law may be modified by United States law of general application. The
interest rate applicable during each quarterly Interest Period will be equal to
LIBOR on the Interest Determination Date for such Interest Period plus .65%;
provided, however, that in certain circumstances described below, the interest
rate will be determined without reference to LIBOR. Promptly upon such
determination, the Calculation Agent will notify the trustee for the Floating
Rate Notes, if the trustee is not then serving as the Calculation Agent, of the
interest rate for the new Interest Period. The interest rate determined by the
Calculation Agent, absent manifest error, shall be binding and conclusive upon
the beneficial owners and
S-3
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holders of the Floating Rate Notes, the Company and the trustee for the Floating
Rate Notes.
If the following circumstances exist on any Interest Determination Date,
the Calculation Agent shall determine the interest rate for the notes as
follows:
(1) In the event no Reported Rate (as defined below) appears on Telerate
Page 3750 (as defined below) as of approximately 11:00 a.m. London time on an
Interest Determination Date, the Calculation Agent shall request the principal
London offices of each of four major banks in the London interbank market
selected by the Calculation Agent (after consultation with the Company) to
provide a quotation of the rate (the "Rate Quotation") at which three month
deposits in amounts of not less than $1,000,000 are offered by it to prime banks
in the London interbank market, as of approximately 11:00 a.m. on such Interest
Determination Date, that is representative of single transactions at such time
(the "Representative Amounts"). If at least two Rate Quotations are provided,
the interest rate will be the arithmetic mean of the Rate Quotations obtained by
the Calculation Agent, plus .65%.
(2) In the event no Reported Rate appears on Telerate Page 3750 as of
approximately 11:00 a.m. London time on an Interest Determination Date and there
are fewer than two Rate Quotations, the interest rate will be the arithmetic
mean of the rates quoted at approximately 11:00 a.m. New York City time on such
Interest Determination Date, by three major banks in New York City selected by
the Calculation Agent (after consultation with the Company), for loans in
Representative Amounts in U. S. dollars to leading European banks, having an
index maturity of three months for a period commencing on the second London
Business Day immediately following such Interest Determination Date, plus .65%;
provided, however, that if fewer than three banks selected by the Calculation
Agent are quoting such rates, the interest rate for the applicable Interest
Period will be the same as the interest rate in effect for the immediately
preceding Interest Period.
Upon the request of a holder of the Floating Rate Notes, the Calculation
Agent will provide to such holder the interest rate in effect on the date of
such request and, if determined, the interest rate for the next Interest Period.
Redemption
All or part of the Floating Rate Notes may be redeemed from time to time
on any interest payment date on or after November 19, 2001 at our option, upon
not less than 30 nor more than 60 days' notice, at a redemption price equal to
the principal amount of the Floating Rate Notes to be redeemed plus interest
accrued to the redemption date. The Floating Rate Notes are not subject to the
benefits of any sinking fund.
Certain Definitions
The following definitions apply to the Floating Rate Notes and, to the
extent they are inconsistent with definitions appearing in the accompanying
Prospectus, supersede the definitions in the accompanying Prospectus.
"Business Day" means any day that is not a day on which banking
institutions in New York City are authorized or required by law or regulation to
close.
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"Calculation Agent" means Bankers Trust Company, or its successor
appointed by the Company, acting as calculation agent.
"Interest Determination Date" means the second London Business Day
immediately preceding the first day of the relevant Interest Period.
"Interest Period" means the period commencing on an interest payment
date for the Floating Rate Notes (or commencing on the issue date for the
Floating Rate Notes, if no interest has been paid or duly made available for
payment since that date) and ending on the day before the next succeeding
interest payment date for the Floating Rate Notes.
"LIBOR" for any Interest Determination Date will be the offered rate for
deposits in U. S. dollars having an index maturity of three months for a period
commencing on the second London Business Day immediately following the Interest
Determination Date in amounts of not less than $1,000,000, as such rate appears
on Telerate Page 3750 or a successor reporter of such rates selected by the
Calculation Agent and acceptable to the Company, at approximately 11:00 a.m.
London time on the Interest Determination Date (the "Reported Rate").
"London Business Day" means a day other than a Saturday or Sunday that
is not a day on which banking institutions in London, England and New York, New
York are authorized or obligated by law or executive order to be closed and a
day on which dealings in deposits in U. S. dollars are transacted, or with
respect to any future date are expected to be transacted, in the London
interbank market.
"Telerate Page 3750" means the display designated on page 3750 on Dow
Jones Markets Limited (or such other page as may replace the 3750 page on that
service or such other service as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates for U.
S. dollar deposits).
We will issue the Floating Rate Notes only in registered form in multiples
of $1,000. We will pay the principal of the Floating Rate Notes and interest
payable at maturity in immediately available funds at the office of Bankers
Trust Company, Four Albany Street, New York, New York.
UNDERWRITING
Under the terms and subject to the conditions of the underwriting agreement
dated November 10, 2000, we have agreed to sell to the underwriters named below,
for whom Credit Suisse First Boston Corporation is acting as representative, the
following respective principal amounts of Floating Rate Notes:
Principal
Amount
Underwriter Of Notes
----------- --------
Credit Suisse First Boston $ 42,000,000
Corporation
BNY Capital Markets, Inc. $ 28,000,000
------------
Total $ 70,000,000
============
The underwriting agreement provides that the underwriters are obligated to
purchase all of the Floating Rate Notes if any are purchased.
We estimate that our expenses for this offering will be approximately
$140,000.
S-5
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The underwriters propose to offer the Floating Rate Notes initially at the
public offering price on the cover page of this prospectus supplement and to
selling group members at that price less a selling concession of .15% of the
principal amount per Floating Rate Note. The underwriters and selling group
members may allow a discount of .10% of the principal amount per Floating Rate
Note on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to broker/dealers may be
changed by the representative.
The Floating Rate Notes are a new issue of securities with no established
trading market. The Floating Rate Notes will not be listed on any securities
exchange. One or more of the underwriters intends to make a secondary market for
the Floating Rate Notes. However, they are not obligated to do so and may
discontinue making a secondary market for the Floating Rate Notes at any time
without notice. No assurance can be given as to how liquid the trading market
for the Floating Rate Notes will be.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933.
In connection with the offering the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.
o Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum.
o Over-allotment involves sales by the underwriters of shares in excess of the
principal amount of the Floating Rate Notes the underwriters are obligated
to purchase, which creates a syndicate short position. The underwriters may
close out any short position by purchasing Floating Rate Notes in the open
market.
o Syndicate covering transactions involve purchases of Floating Rate Notes in
the open market after the distribution has been completed in order to cover
syndicate short positions.
o Penalty bids permit the representatives to reclaim a selling concession from
a syndicate member when the Floating Rate Notes originally sold by such
syndicate member are purchased in a stabilizing transaction or a syndicate
covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of the Floating
Rate Notes or preventing or retarding a decline in the market price of the
Floating Rate Notes. As a result the price of the Floating Rate Notes may be
higher than the price that might otherwise exist in the open market. These
transactions, if commenced, may be discontinued at any time.
We expect that delivery of the Floating Rate Notes will be made against
payment therefor on or about the closing date specified on the cover page of
this prospectus supplement, which is the 5th business day following the date of
pricing
S-6
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of the Floating Rate Notes (this settlement cycle being referred to as "T+5").
Under Rule 15c6-1 under the Securities Exchange Act of 1934, trades in the
secondary market generally are required to settle in three business days, unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade Floating Rate Notes on the date of pricing or the next
succeeding business day will be required, by virtue of the fact that the
Floating Rate Notes initially will settle in T+5, to specify an alternate
settlement cycle at the time of any such trade to prevent a failed settlement
and should consult their own advisor.
The underwriters or their affiliates engage in transactions with, and have
performed services for, us and our affiliates in the ordinary course of
business.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Floating Rate Notes in Canada is being made only on
a private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of Floating Rate Notes are made. Any resale of the Floating Rate Notes in
Canada must be made under applicable securities laws which will vary depending
on the relevant jurisdiction, and which may require resales to be made under
available statutory exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers are advised to
seek legal advice prior to any resale of the Floating Rate Notes.
Representations of Purchasers
By purchasing Floating Rate Notes in Canada and accepting a purchase
confirmation a purchaser is representing to us and to the dealer from whom the
purchase confirmation is received that
o the purchaser is entitled under applicable provincial securities laws to
purchase the Floating Rate Notes without the benefit of a prospectus
qualified under those securities laws,
o where required by law, the purchaser is purchasing as principal and not as
agent, and
o the purchaser has reviewed the text above under Resale Restrictions.
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U. S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or
S-7
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such persons. All or a substantial portion of the assets of the issuer and such
persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against the issuer or such persons in Canada or
to enforce a judgment obtained in Canadian courts against such issuer or persons
outside of Canada.
Notice to British Columbia Residents
A purchaser of Floating Rate Notes to whom the Securities Act (British
Columbia) applies is advised that the purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Floating Rate Notes acquired by the purchaser pursuant to this offering. The
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR#95/17, a copy of which may be obtained from us. Only one
report must be filed for Floating Rate Notes acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of Floating Rate Notes should consult their own legal
and tax advisors with respect to the tax consequences of an investment in the
Floating Rate Notes in their particular circumstances and about the eligibility
of the Floating Rate Notes for investment by the purchaser under relevant
Canadian legislation.
S-8
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PROSPECTUS
KENTUCKY POWER COMPANY
1701 Central Avenue
Ashland, Kentucky 41101
(800) 572-1141
$150,000,000
UNSECURED NOTES
TERMS OF SALE
The following terms may apply to the notes that we may sell at one or more
times. A pricing supplement will include the final terms for each note. If we
decide to list upon issuance any note or notes on a securities exchange, a
pricing supplement will identify the exchange and state when we expect trading
could begin.
- Mature 9 months to 42 years
- Fixed or floating interest rate. The floating interest rate formula
would be based on:
Commercial paper rate LIBOR
Prime rate Treasury rate
CD rate CMT rate
Federal Funds rate Another interest rate index
- Remarketing features
- Certificate or book-entry form
- Subject to redemption
- Not convertible, amortized or subject to a sinking fund
- Interest paid on fixed rate notes quarterly or semi-annually
- Interest paid on floating rate notes monthly, quarterly,semi-annually,
or annually
- Issued in multiples of a minimum denomination
The notes have not been approved by the SEC or any state securities commission,
nor have these organizations determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is April 20, 1999.
<PAGE> 10
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the
SEC. We also file annual, quarterly and special reports and other information
with the SEC. You may read and copy any document we file at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.
You may also examine our SEC filings through the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we sell all the notes.
- Annual Report on Form 10-K for the year ended December 31, 1998.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Mr. G. C. Dean
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
614-223-1000
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making an offer of
these notes in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
THE COMPANY
We generate, sell, purchase, transmit and distribute electric power. We
serve approximately 170,000 customers in eastern Kentucky. We also sell and
transmit power at wholesale to other electric utilities, municipalities,
electric cooperatives and non-utility entities engaged in the wholesale power
market. Our principal executive offices are located at 1701 Central Avenue,
Ashland, Kentucky 41101 (telephone number 800-572-1141). We are a subsidiary of
American Electric Power Company, Inc., a public utility holding company, and we
are a part of the American Electric Power integrated utility system. The
executive offices of American Electric Power Company, Inc. are located at 1
Riverside Plaza, Columbus, Ohio 43215 (telephone number 614-223-1000).
PROSPECTUS SUPPLEMENTS
We provide information to you about the notes in three separate
documents that progressively provide more detail: (a) this prospectus provides
general information some of which may not apply to your notes, (b) the
accompanying prospectus supplement provides more specific terms of your notes,
and (c) the pricing supplement provides the final terms of your notes. It is
important for you to consider the information contained in this prospectus, the
prospectus supplement
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and the pricing supplement in making your investment decision.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated
is as follows:
Twelve Months
Period Ended Ratio
---------------- -----
December 31, 1994 2.30
December 31, 1995 2.22
December 31, 1996 1.88
December 31, 1997 2.12
December 31, 1998 2.09
For current information on the Ratio of Earnings to Fixed Charges, please see
our most recent Form 10-K and 10-Q. See Where You Can Find More Information.
USE OF PROCEEDS
The net proceeds from the sale of the notes will be used for general
corporate purposes relating to our utility business. These purposes include
redeeming or repurchasing outstanding debt and other corporate purposes. If we
do not use the net proceeds immediately, we temporarily invest them in
short-term, interest-bearing obligations. We estimate that our construction
costs in 1999 will approximate $42,500,000. At March 24, 1999, our outstanding
short-term debt was $12,000,000.
DESCRIPTION OF THE NOTES
General
We will issue the notes under the Indenture dated September 1, 1997 (as
previously supplemented and amended) entered into between us and the Trustee,
Bankers Trust Company. This prospectus briefly outlines some provisions of the
Indenture. If you would like more information on these provisions, review the
Indenture and any supplemental indentures or company orders that we file with
the SEC. See Where You Can Find More Information on how to locate these
documents. You may also review these documents at the Trustee's offices at Four
Albany Street, New York, New York.
The Indenture does not limit the amount of notes that may be issued. The
Indenture permits us to issue notes in one or more series or tranches upon the
approval of our board of directors and as described in one or more company
orders or supplemental indentures. Each series of notes may differ as to their
terms.
The notes are unsecured and will rank equally with all our unsecured
unsubordinated debt. Substantially all of our fixed properties and franchises
are subject to the lien of our first mortgage bonds issued under and secured by
a Mortgage and Deed of Trust, dated as of May 1, 1949, as previously
supplemented and amended, between us and Bankers Trust Company, as trustee. For
current information on our debt outstanding see our most recent Form 10-K and
10-Q. See Where You Can Find More Information.
The notes will be denominated in U.S. dollars and we will pay principal
and interest in U.S. dollars. Unless an applicable pricing or prospectus
supplement states otherwise, the notes will not be subject to any conversion,
amortization, or sinking fund. We expect that
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the notes will be "book-entry," represented by a permanent global note
registered in the name of The Depository Trust Company, or its nominee. We
reserve the right, however, to issue note certificates registered in the name of
the noteholders.
In the discussion that follows, whenever we talk about paying principal
on the notes, we mean at maturity or redemption. Also, in discussing the time
for notices and how the different interest rates are calculated, all times are
New York City time and all references to New York mean the City of New York,
unless otherwise noted.
The following terms may apply to each note as specified in the
applicable pricing or prospectus supplement and the note.
Redemptions
If we issue redeemable notes, we may redeem such notes at our option
unless an applicable pricing or prospectus supplement states otherwise. The
pricing or prospectus supplement will state the terms of redemption. We may
redeem notes in whole or in part by delivering written notice to the noteholders
no more than 60, and not less than 30, days prior to redemption. If we do not
redeem all the notes of a series at one time, the Trustee selects the notes to
be redeemed in a manner it determines to be fair.
Remarketed Notes
If we issue notes with remarketing features, an applicable pricing or
prospectus supplement will describe the terms for the notes including: interest
rate, remarketing provisions, our right to redeem notes, the holders' right to
tender notes, and any other provisions.
Book-Entry Notes - Registration, Transfer, and Payment of Interest and Principal
Book-entry notes of a series will be issued in the form of a global note
that the Trustee will deposit with The Depository Trust Company, New York, New
York ("DTC"). This means that we will not issue note certificates to each
holder. One or more global notes will be issued to DTC who will keep a
computerized record of its participants (for example, your broker) whose clients
have purchased the notes. The participant will then keep a record of its clients
who purchased the notes. Unless it is exchanged in whole or in part for a note
certificate, a global note may not be transferred; except that DTC, its
nominees, and their successors may transfer a global note as a whole to one
another.
Beneficial interests in global notes will be shown on, and transfers of
global notes will be made only through, records maintained by DTC and its
participants.
DTC has provided us the following information: DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
securities that its participants ("Direct Participants") deposit with DTC. DTC
also records the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for Direct Participant's accounts. This eliminates the need
to exchange note certificates. Direct Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations.
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Other organizations such as securities brokers and dealers, banks and
trust companies that work through a Direct Participant also use DTC's book-entry
system. The rules that apply to DTC and its participants are on file with the
SEC.
A number of its Direct Participants and the New York Stock Exchange,Inc.
The American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. own DTC.
We will wire principal and interest payments to DTC's nominee. We and
the Trustee will treat DTC's nominee as the owner of the global notes for all
purposes. Accordingly, we, the Trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global notes to owners of
beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal
or interest, to credit Direct Participants' accounts on the payment date
according to their respective holdings of beneficial interests in the global
notes as shown on DTC's records. In addition, it is DTC's current practice to
assign any consenting or voting rights to Direct Participants whose accounts are
credited with notes on a record date. The customary practices between the
participants and owners of beneficial interests will govern payments by
participants to owners of beneficial interests in the global notes and voting by
participants, as is the case with notes held for the account of customers
registered in "street name." However, payments will be the responsibility of the
participants and not of DTC, the Trustee or us.
DTC management is aware that some computer applications, systems, and
the like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. DTC has informed the Industry that it is
contacting (and will continue to contact) third party vendors from whom DTC
acquires services to: (i) impress upon them the importance of such services
being Year 2000 compliant; and (ii) determine the extent of their efforts for
Year 2000 remediation (and, as appropriate, testing) of their services. In
addition, DTC is in the process of developing such contingency plans as it deems
appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
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Notes represented by a global note will be exchangeable for note
certificates with the same terms in authorized denominations only if:
- DTC notifies us that it is unwilling or unable to continue as depositary
or if DTC ceases to be a clearing agency registered under applicable law
and a successor depositary is not appointed by us within 90 days; or
- we determine not to require all of the notes of a series to be
represented by a global note and notify the Trustee of our decision.
Note Certificates-Registration, Transfer, and Payment of Interest and Principal
If we issue note certificates, they will be registered in the name of
the noteholder. The notes may be transferred or exchanged, pursuant to
administrative procedures in the indenture, without the payment of any service
charge (other than any tax or other governmental charge) by contacting the
paying agent. Payments on note certificates will be made by check.
Interest Rate
General
We have provided a Glossary at the end of this prospectus to define the
capitalized terms used in discussing the interest rates payable on the notes.
The interest rate on the notes will either be fixed or floating. The
interest paid will include interest accrued to, but excluding, the date of
maturity or redemption. Interest is generally payable to the person in whose
name the note is registered at the close of business on the record date before
each interest payment date. Interest payable at maturity or redemption, however,
will be payable to the person to whom principal is payable.
If we issue a note after a record date but on or prior to the related
interest payment date, we will pay the first interest payment on the interest
payment date after the next record date. We will pay interest payments by check
or wire transfer, at our option.
Fixed Rate Notes
Each pricing or prospectus supplement will designate the record dates,
payment dates and the fixed rate of interest payable on a note. We will pay
interest quarterly or semi-annually, and upon maturity or redemption. Unless an
applicable pricing or prospectus supplement states otherwise, if any payment
date falls on a day that is not a Business Day, we will pay interest on the next
Business Day and no additional interest will be paid. Interest payments will be
the amount of interest accrued to, but excluding, each payment date. Interest
will be computed using a 360-day year of twelve 30-day months.
Floating Rate Notes: General
Each floating rate note will have an interest rate formula. The formula
may be based on:
- the commercial paper rate; - the prime rate; - the CD rate; - the
federal funds effective rate; - the LIBOR; - the Treasury rate; - the
CMT rate; or - another interest rate index.
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The applicable pricing supplement will also indicate the Spread and/or
Spread Multiplier, if any. In addition, any floating rate note may have a
maximum or minimum interest rate limitation.
Upon request, the Calculation Agent will provide the current interest
rate and, if different, the interest rate which will become effective on the
next Interest Reset Date.
Floating Rate Notes: Date of Interest Rate Change
The interest rate on each floating rate note may be reset daily, weekly,
monthly, quarterly, semi-annually, or annually. The Interest Reset Date will be:
- for notes which reset daily, each Business Day;
- for notes (other than Treasury rate notes) which reset weekly, the
Wednesday of each week;
- for Treasury rate notes which reset weekly, the Tuesday of each week;
for notes which reset monthly, on the third Wednesday of each month;
- for notes which reset quarterly, the third Wednesday of March, June,
September and December;
- for notes which reset semi-annually, the third Wednesday of the two
months of each year indicated in the applicable pricing supplement; and
- for notes which reset annually, the third Wednesday of the month of each
year indicated in the applicable pricing supplement.
The applicable pricing supplement will state the initial interest rate
or interest rate formula on each note effective until the first Interest Reset
Date. After that, the interest rate will be the rate determined on the next
Interest Determination Date, as explained below. Each time a new interest rate
is determined, it will become effective on the subsequent Interest Reset Date.
If any Interest Reset Date is not a Business Day, then the Interest Reset Date
will be postponed to the next Business Day. However, in the case of a LIBOR
note, if the next Business Day is in the next calendar month, the Interest Reset
Date will be the immediately preceding Business Day.
Floating Rate Notes: When Interest Rate Is Determined
The Interest Determination Date for all notes (except Treasury rate
notes) is the second Business Day before the Interest Reset Date (second London
Business Day before the Interest Reset Date for LIBOR notes).
The Interest Determination Date for Treasury rate notes will be the day
of the week in which the Interest Reset Date falls on which Treasury bills would
normally be auctioned. Treasury bills are usually sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
usually held on Tuesday. However, the auction may be held on the preceding
Friday. If an auction is held on the preceding Friday, that day will be the
Interest Determination Date pertaining to the Interest Reset Date occurring in
the next week. If an auction date falls on any Interest Reset Date then the
Interest Reset Date will instead be the first Business Day immediately following
the auction date.
Floating Rate Notes: When Interest Is Paid
Interest is paid as follows:
- for notes which reset daily, weekly or monthly, on the third Wednesday
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of each month or on the third Wednesday of March, June, September and
December (as indicated in the applicable pricing supplement);
- for notes which reset quarterly, on the third Wednesday of March,
June, September, and December;
- for notes which reset semi-annually, on the third Wednesday of the two
months specified in the applicable pricing supplement;
- for notes which reset annually, on the third Wednesday of the month
specified in the applicable pricing supplement; and
- at maturity or redemption.
If interest is payable on a day which is not a Business Day, payment
will be postponed to the next Business Day and no additional interest shall be
due. However, for LIBOR notes, if the next Business Day is in the next calendar
month, interest will be paid on the preceding Business Day.
Unless an applicable pricing supplement states otherwise, the record
date will be 15 calendar days prior to each day interest is paid, whether or not
such day is a Business Day.
The interest payable will be the amount of interest accrued to, but
excluding, the interest payment date. However, for notes on which the interest
resets daily or weekly, the interest payable will include interest accrued to
and including the record date prior to the interest payment date. If the
interest payment date is also a day that principal is due, the interest payable
will include interest accrued to, but excluding, the date of maturity or
redemption.
The accrued interest for any period is calculated by multiplying the
principal amount of a note by an accrued interest factor. The accrued interest
factor is computed by adding the interest factor calculated for each day in the
period to the date for which accrued interest is being calculated. The interest
factor (expressed as a decimal rounded upwards if necessary) is computed by
dividing the interest rate (expressed as a decimal rounded upwards if necessary)
applicable to such date by 360, unless the applicable pricing supplement states
otherwise, or the notes are Treasury rate notes or CMT rate notes, in which case
it will be divided by the actual number of days in the year.
All percentages resulting from any calculation of floating rate notes
will be rounded, if necessary, to the nearest one-hundred thousandth of a
percentage point, with five one-millionths of a percentage point rounded 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 will be rounded to the
nearest cent (with one-half cent being rounded upwards).
Floating Rate Notes: Interest Rate Formulas
Commercial Paper Rate Notes. Each commercial paper rate note will bear
interest at the rate (calculated with reference to the Commercial Paper Rate and
the Spread and/or Spread Multiplier, if any) specified on the commercial paper
rate note and in the applicable pricing supplement.
"Commercial Paper Rate" means, with respect to any Commercial Paper Rate
Interest Determination Date, the Money Market Yield (calculated as described
below) of the rate on such date for commercial paper having the
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Index Maturity specified in the applicable pricing supplement as published in
Federal Reserve Statistical Release H.15(519) under the heading "Commercial
Paper--Nonfinancial."
The following procedures will occur if the rate cannot be set as
described above:
(a) If that rate is not published in H.15 (519) prior to 3:00 P.M.
on the Calculation Date, then the Commercial Paper Rate will be the Money
Market Yield of the rate on the Commercial Paper Rate Interest
Determination Date for commercial paper having the Index Maturity
specified in the applicable pricing supplement as published in Composite
Quotations under the heading "Commercial Paper."
(b) If the rate is not published in either H.15 (519) or in
Composite Quotations by 3:00 P.M. on the Calculation Date, the Commercial
Paper Rate for that Commercial Paper Rate Interest Determination Date will
then be calculated by the Calculation Agent in the following manner.
The Commercial Paper Rate will be calculated as the Money Market
Yield of the average for the offered rates, as of 11:00 A.M. on that date,
of three leading dealers of commercial paper in New York selected for
commercial paper having the applicable Index Maturity placed for an
industrial issuer whose bond rating is "Aa," or the equivalent, from a
nationally recognized rating agency.
(c) Finally, if fewer than three dealers are quoting as mentioned,
the rate of interest in effect for the applicable period will be the same
as the rate of interest in effect for the prior interest reset period.
Prime Rate Notes. Each prime rate note will bear interest at the rate
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified on the prime rate note and 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."
The following procedures will occur if the rate cannot be set as
described above:
(a) If that rate is not published in H.15(519) prior to 3:00 P.M.
on the Calculation Date, then the Prime Rate will be the average of the
rates of interest publicly announced by each bank that appear on the
Reuters Screen USPRIME1 Page as its prime rate or base lending rate as in
effect for that Prime Rate Interest Determination Date.
(b) If fewer than four rates appear on the Reuters Screen USPRIME1
Page, the Prime Rate will be the average of the prime rates or base
lending rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on the Prime Rate
Interest Determination Date by four major money center banks in New York
selected by the Calculation Agent.
(c) If fewer than four banks are quoting as mentioned, the Prime
Rate shall be determined on the basis of the rates furnished in New York
by the major money center banks, if any, that have provided such
quotations, and by an appropriate number of substitute
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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 a Federal or State authority, as selected by
the Calculation Agent.
(d) Finally, if the banks are not quoting as mentioned above, the
rate of interest in effect for the applicable period will be the same as
the rate of interest in effect for the prior interest reset period.
CD Rate Notes. Each CD rate note will bear interest at the rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified on the CD rate note and in the applicable pricing
supplement.
"CD Rate" means, with respect to any CD Rate Interest Determination
Date, the rate on that date for negotiable U.S. dollar 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)."
The following procedures will occur if the rate cannot be set as
described above:
(a) If that rate is not published in H.15(519) prior to 3:00 P.M.
on the Calculation Date, then the CD Rate will be the rate on that CD Rate
Interest Determination Date for negotiable U.S. Dollar certificates of
deposit having the applicable Index Maturity as published in Composite
Quotations under the heading "Certificates of Deposit."
(b) If that rate is not published in either H.15 (519) or in
Composite Quotations by 3:00 P.M. on that Calculation Date, the CD Rate
for that CD Rate Interest Determination Date shall be calculated by the
Calculation Agent as follows:
The CD Rate will be calculated as the average of the secondary
market offered rates, as of 10:00 A.M., of three leading nonbank dealers
of negotiable U.S. dollar certificates of deposit in New York selected by
the Calculation Agent for negotiable U.S. dollar 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 representative amount.
(c) Finally, if fewer than three dealers are quoting as mentioned,
the rate of interest in effect for the applicable period will be the same
as the rate of interest in effect for the prior interest reset period.
Federal Funds Rate Notes. Each federal funds rate note will bear
interest at the rate (calculated with reference to the Federal Funds Rate and
the Spread and/or Spread Multiplier, if any) specified on the federal funds rate
note and in the applicable pricing supplement.
"Federal Funds Rate" means, with respect to any Federal Funds Rate
Interest Determination Date, the rate on such date for U.S. dollar federal funds
as published in H.15(519) under the heading "Federal Funds (Effective)."
The following procedures will occur if the rate cannot be set as
described above:
(a) If that rate is not published in H.15(519) prior to 3:00 P.M.
on the Calculation Date, then the Federal Funds Rate will be the rate on that
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<PAGE> 19
Federal Funds Rate Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate."
(b) If that rate is not published in either H.15 (519) or in
Composite Quotations by 3:00 P.M. on the Calculation Date, the Federal
Funds Rate for that Federal Funds Rate Interest Determination Date will be
calculated by the Calculation Agent as follows:
The Federal Funds Rate will be the average of the rates, as of 9:00
A.M. on that date, for the last transaction in overnight federal funds
arranged by three leading brokers of federal funds transactions in New
York selected by the Calculation Agent.
(c) Finally, if fewer than three brokers are quoting as mentioned
above, the rate of interest in effect for the applicable period will be
the same as the rate of interest in effect for the prior interest reset
period.
LIBOR Notes. Each LIBOR note will bear interest at the rate (calculated
with reference to LIBOR and the Spread and/or Spread Multiplier, if any)
specified on the LIBOR note and in the applicable pricing supplement.
"LIBOR" means the London interbank offered rate for deposits in U.S.
dollars and will be determined by the Calculation Agent as follows:
(a) With respect to any LIBOR Interest Determination Date, LIBOR
will be determined by either:
(1) the average of the offered rates for deposits in U.S.
dollars having the Index Maturity specified in the applicable pricing
supplement, beginning on the second Business Day immediately after that
date, that appear on the Reuters Screen LIBO Page as of 11:00 A.M.,
London time, on that date, if at least two offered rates appear on the
Reuters Screen LIBO Page; or
(2) the rate for deposits in U.S. dollars having the Index
Maturity designated in the applicable pricing supplement, beginning on
the second London Business Day immediately after such date, that
appears on the Telerate Page 3750 as of 11:00 A.M., London time, on
that date.
If neither Reuters Screen LIBO Page nor Telerate Page 3750 is
specified in the applicable pricing supplement, LIBOR will be determined
as if Telerate Page 3750 had been specified.
In the case where (1) above applies, if fewer than two offered
rates appear on the Reuters Screen LIBO Page, or, in the case where (2)
above applies, if no rate appears on the Telerate Page 3750, LIBOR for
that date will be determined as follows:
(b) LIBOR will be determined based on the rates at approximately
11:00 A.M., London time, on that LIBOR Interest Determination Date at
which deposits in U.S. dollars having the applicable Index Maturity are
offered to prime banks in the London interbank market by four major banks
in the London interbank market selected by the Calculation Agent that in
the Calculation Agent's judgment is representative for a single
transaction in such market at such time (a "Representative Amount"). The
offered
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rates must begin on the second Business Day immediately after that LIBOR
Interest Determination Date.
The Calculation Agent will request the principal London office of
each such bank to provide a quotation of its rate. If at least two such
quotations are provided, LIBOR for such date will be the average of such
quotations.
(c) If fewer than two quotations are provided, LIBOR for that date
will be the average of the rates quoted at approximately 11:00 A.M. on
such date by three major banks in New York, selected by the Calculation
Agent. The rates will be for loans in U.S. dollars to leading European
banks having the specified Index Maturity beginning on the second Business
Day after that date and in a Representative Amount.
(d) Finally, if fewer than three banks are quoting as mentioned,
the rate of interest in effect for the applicable period will be the same
as the rate of interest in effect for the prior interest reset period.
Treasury Rate Notes. Each Treasury rate note will bear interest at the
rate (calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any) specified on the Treasury rate note and in the
applicable pricing supplement.
"Treasury Rate" means, with respect to any Treasury Rate 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)."
The following procedures will occur if the rate cannot be set as
described above:
(a) If that rate is not published in H.15(519) by 3:00 P.M. on the
applicable Calculation Date, the rate will be the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) for such auction as
otherwise announced by the United States Department of the Treasury.
(b) If the results of the auction of Treasury Bills having the
applicable Index Maturity are not published in H.15(519) by 3:00 P.M., or
otherwise published or reported as provided above by 3:00 P.M. on the
Calculation Date, or if no auction is held in a particular week, then the
Treasury Rate shall be calculated by the Calculation Agent as follows:
The rate will be calculated as a yield to maturity (expressed as a
bond equivalent, on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) of the average of the secondary market bid
rates as of approximately 3:30 P.M. on the Treasury Rate Interest
Determination Date, of three leading primary United States government
securities dealers in New York selected by the Calculation Agent for the
issue of Treasury Bills with a remaining maturity closest to the specified
Index Maturity.
(c) Finally, if fewer than three dealers are quoting as mentioned,
the rate of interest in effect for the period will be the same as the rate
of interest in effect for the prior interest reset period.
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CMT Rate Notes. Each CMT rate note will bear interest at the rate
(calculated with reference to the CMT Rate and the Spread or Spread Multiplier,
if any) specified on such CMT rate note and in the applicable pricing
supplement.
"CMT Rate" means, with respect to any CMT Rate Interest Determination
Date, the rate displayed on the Designated CMT Telerate Page under the caption
"... Treasury Constant Maturities.. Federal Reserve Board Release H.15...
Mondays Approximately 3:45 P.M.," under the column for the applicable Index
Maturity designated in the applicable pricing supplement for:
(1) if the Designated CMT Telerate Page is 7055, the rate for the a
pplicable CMT Rate Interest Determination Date; or
(2) if the Designated CMT Telerate Page is 7052, the week, or the month,
as applicable, ended immediately preceding the week in which the CMT Rate
Interest Determination Date occurs.
The following procedures will occur if the rate cannot be set as
described above:
(a) If no page is specified in the applicable pricing supplement
and on the face of such CMT Rate note, the Designated CMT Telerate Page
shall be 7052 for the most recent week. If such rate is no longer
displayed on the relevant page, or if it is not displayed by 3:00 P.M. on
the related Calculation Date, then the CMT Rate will be the Treasury
constant maturity rate for the applicable Index Maturity as published in
the relevant H.15 (519).
(b) If that rate is no longer published in H.15(519), or is not
published by 3:00 P.M. on the related Calculation Date, then the CMT Rate
for such CMT Rate Interest Determination Date will be the Treasury
constant maturity rate for the applicable Index Maturity (or other United
States Treasury rate for such Index Maturity for that CMT Rate Interest
Determination Date with respect to such Interest Reset Date) 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).
(c) If that information is not provided by 3:00 P.M. on the related
Calculation Date, then the CMT Rate for that CMT Rate Interest
Determination Date will be calculated by the Calculation Agent as follows:
The rate will be calculated as a yield to maturity, based on the
average of the secondary market closing offer side prices as of
approximately 3:30 P.M. on that CMT Rate Interest Determination Date
reported, according to their written records, by three leading primary
United States government securities dealers (each, a "Reference Dealer")
in New York selected by the Calculation Agent. These dealers will be
selected from five such Reference Dealers.
The Calculation Agent will eliminate 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
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United States ("Treasury Notes") with an original maturity of
approximately the applicable Index Maturity and a remaining term to
maturity of not less than such Index Maturity minus one year.
If two Treasury Notes with an original maturity as described in the
preceding sentence have remaining terms to maturity equally close to the
applicable Index Maturity, the quotes for the Treasury Note with the
shorter remaining term to maturity will be used.
(d) If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for that CMT Rate Interest Determination Date
will be calculated by the Calculation Agent as follows:
The rate will be calculated as a yield to maturity based on the
average of the secondary market offer side prices as of approximately 3:30
P.M. on that CMT Rate Interest Determination Date of three Reference
Dealers in New York selected by the Calculation Agent using the same
method described above, for Treasury Notes with an original maturity of
the number of years that is the next highest to the applicable Index
Maturity with a remaining term to maturity closest to such Index Maturity
and in an amount of at least $100 million.
If three or four (and not five) of the Reference Dealers are
quoting as described above, then the CMT Rate will be based on the average
of the offer prices obtained and neither the highest nor the lowest of
such quotes will be eliminated.
(e) Finally, if fewer than three Reference Dealers are quoting as
mentioned, the rate of interest in effect for the applicable period will
be the same as the rate of interest in effect for the prior interest reset
period.
Events of Default
"Event of Default" means any of the following:
- failure to pay for three Business Days the principal of (or
premium, if any, on) any note of a series when due and payable;
- failure to pay for 30 days any interest on any note of any series
when due and payable;
- failure to perform any other requirements in such notes, or in the
Indenture in regard to such notes, for 90 days after notice;
- certain events of bankruptcy or insolvency; or
- any other event of default specified in a series of notes.
An Event of Default for a particular series of notes does not
necessarily mean that an Event of Default has occurred for any other series of
notes issued under the Indenture. If an Event of Default occurs and continues,
the Trustee or the holders of at least 33% of the principal amount of the notes
of the series affected may require us to repay the entire principal of the notes
of such series immediately ("Repayment Acceleration"). In most instances, the
holders of at least a majority in aggregate principal amount of the notes of the
affected series may rescind a previously triggered Repayment Acceleration.
However, if we cause an Event of Default because we have failed to pay
(unaccelerated)
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principal, premium, if any, or interest, Repayment Acceleration may be rescinded
only if we have first cured our default by depositing with the Trustee enough
money to pay all (unaccelerated) past due amounts and penalties, if any.
The Trustee must within 90 days after a default occurs, notify the
holders of the notes of the series of default unless such default has been cured
or waived. We are required to file an annual certificate with the Trustee,
signed by an officer, concerning any default by us under any provisions of the
Indenture.
Subject to the provisions of the Indenture relating to its duties in
case of default, 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 any
holders unless such holders offer the Trustee reasonable indemnity. Subject to
the provisions for indemnification, the holders of a majority in principal
amount of the notes of any series may direct the time, method and place of
conducting any proceedings for any remedy available to, or exercising any trust
or power conferred on, the Trustee with respect to such notes.
Modification of Indenture
Under the Indenture, our rights and obligations and the rights of the
holders of any notes may be changed. Any change affecting the rights of the
holders of any series of notes requires the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding notes of all
series affected by the change, voting as one class. However, we cannot change
the terms of payment of principal or interest, or a reduction in the percentage
required for changes or a waiver of default, unless the holder consents. We may
issue additional series of notes and take other action that does not affect the
rights of holders of any series by executing supplemental indentures without the
consent of any noteholders.
Consolidation, Merger or Sale
We may merge or consolidate with any corporation or sell substantially
all of our assets as an entirety as long as the successor or purchaser expressly
assumes the payment of principal, and premium, if any, and interest on the
notes.
Legal Defeasance
We will be discharged from our obligations on the notes of any series at
any time if:
- we deposit with the Trustee sufficient cash or government securities
to pay the principal, interest, any premium and any other sums due to
the stated maturity date or a redemption date of the note of the series,
and
- we deliver to the Trustee an opinion of counsel stating that the
federal income tax obligations of noteholders of that series will not
change as a result of our performing the action described above.
If this happens, the noteholders of the series will not be entitled to
the benefits of the Indenture except for registration of transfer and exchange
of notes and replacement of lost, stolen or mutilated notes.
Covenant Defeasance
We will be discharged from our obligations under any restrictive
covenant applicable to the notes of a particular series if we perform both
actions described above.
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See Legal Defeasance. If this happens, any later breach of that particular
restrictive covenant will not result in Repayment Acceleration. If we cause an
Event of Default apart from breaching that restrictive covenant, there may not
be sufficient money or government obligations on deposit with the Trustee to pay
all amounts due on the notes of that series. In that instance, we would remain
liable for such amounts.
Governing Law
The Indenture and notes of all series will be governed by the laws of
the State of New York.
Concerning the Trustee
We and our affiliates use or will use some of the banking services of
the Trustee in the normal course of business.
PLAN OF DISTRIBUTION
We may sell the notes (a) through agents; (b) through underwriters or
dealers; or (c) directly to one or more purchasers.
By Agents
Notes may be sold on a continuing basis through agents designated by us.
The agents will agree to use their reasonable efforts to solicit purchases for
the period of their appointment.
Unless the pricing supplement states otherwise, the notes will be sold
to the public at 100% of their principal amount. Agents will receive commissions
from .125% to .750% of the principal amount per note depending on the maturity
of the note they sell.
The Agents will not be obligated to make a market in the notes. We
cannot predict the amount of trading or liquidity of the notes.
By Underwriters
If underwriters are used in the sale, the underwriters will acquire the
notes for their own account. The underwriters may resell the notes in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The obligations of
the underwriters to purchase the notes will be subject to certain conditions.
The underwriters will be obligated to purchase all the notes of the series
offered if any of the notes are purchased. Any initial public offering price and
any discounts or concessions allowed or re-allowed or paid to dealers may be
changed from time to time.
Direct Sales
We may also sell notes directly. In this case, no underwriters or agents
would be involved.
General Information
Underwriters, dealers, and agents that participate in the distribution
of the notes may be underwriters as defined in the Securities Act of 1933 (the
"Act"), and any discounts or commissions received by them from us and any profit
on the resale of the notes by them may be treated as underwriting discounts and
commissions under the Act.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our affiliates in the ordinary course of their
businesses.
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LEGAL OPINIONS
Our counsel, Simpson Thacher & Bartlett, New York, NY, and one of our
lawyers will each issue an opinion about the legality of the notes for us. Dewey
Ballantine LLP, New York, NY will issue an opinion for the agents or
underwriters. From time to time, Dewey Ballantine LLP acts as counsel to our
affiliates for some matters.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
GLOSSARY
Set forth below are definitions of some of the terms used in this
Prospectus.
"Business Day" means any day other than a Saturday or Sunday that (a) is
not a day on which banking institutions in New York, New York, are authorized or
obligated by law or executive order to be closed, and (b) with respect to LIBOR
Notes only, is a day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market.
"Calculation Agent" means the entity we choose to perform the duties
related to interest rate calculation and resets for floating rate notes. The
applicable pricing supplement will identify the Calculation Agent.
"Calculation Date" means the date on which the Calculation Agent
calculates an interest rate for a floating rate note, which will be one of the
following:
"Prime Rate" - tenth day after the related Prime Rate Interest
Determination Date or, if such day is not a Business Day, the next Business
Day.
"CD Rate" - tenth day after the related CD Rate Interest Determination Date
or, if such day is not a Business Day, the next Business Day.
"CMT Rate" - tenth day after the related CMT Rate Interest Determination
Date or, if such day is not a Business Day, the next Business Day.
"Commercial Paper Rate" - tenth day after the related Commercial Paper Rate
Interest Determination Date or, if such day is not a Business Day, the next
Business Day.
"LIBOR" - the LIBOR Interest Determination Date.
"Treasury Rate" - tenth day after the related Treasury Rate Interest
Determination Date or, if such day is not a Business Day, the next Day.
"Federal Funds Rate" - tenth day after the related Federal Funds Rate
Interest Determination Date or, if such day is not a Business Day, the
next Business Day.
"Composite Quotations" means the successor publication to the daily
statistical release entitled "Composite 3:30 P.M. Quotations for U.S. Government
Securities,"
17
<PAGE> 26
published by The Federal Reserve Bank of New York.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service on the page designated in the applicable pricing supplement and
on the face of such CMT Rate note (or any other page as may replace such page on
that service) for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519).
"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 Maturity" means, with respect to a floating rate note, the period
to maturity of the note on which the interest rate formula is based, as
indicated 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 Interest Reset Date and calculated on the related Calculation Date
(except in the case of LIBOR which is calculated on the related LIBOR Interest
Determination Date). The Interest Determination Dates will be indicated in the
applicable pricing supplement and in the note.
"Interest Reset Date" means the date on which a floating rate note will
begin to bear interest at the variable interest rate determined on any Interest
Determination Date. The Interest Reset Dates will be indicated in the applicable
pricing supplement and in the note.
"Money Market Yield" is the 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:
Money Market Yield = D X 360 X 100
---------------
360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which interest is being calculated.
"Reuters Screen LIBO Page" means the display designated as page "LIBO"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London interbank
offered rates of major banks).
"Reuters Screen USPRIME1 Page" means the display designated as page
USPRIME1 on the Reuters Monitor Money Rates Service (or such other page as may
replace the USPRIME1 page on that service for the purpose of displaying prime
rates or base lending rates of major U.S. banks).
"Spread" means the number of basis points specified in the applicable
pricing supplement as being applicable to the interest rate for a floating rate
note.
"Spread Multiplier" means the percentage specified in the applicable
pricing supplement as being applicable to the interest rate for a floating rate
note.
"Telerate Page 3750" means the display designated as page "3750" on the
Dow Jones Telerate Service (or such other page as may replace the 3750 page on
that service or such other service or services as may be nominated by the
British Bankers Association for the purpose of displaying London interbank
offered rates of major banks for U.S. dollar deposits.
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