<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 20, 1996)
U.S. $150,000,000
MAYTAG CORPORATION
MEDIUM-TERM NOTES, SERIES B
DUE FROM NINE MONTHS TO 30 YEARS FROM DATE OF ISSUE
Maytag Corporation (the "Company") may offer from time to time its Medium-Term
Notes, Series B (the "Notes"), having an aggregate initial offering price not
to exceed $150,000,000, subject to reduction under certain circumstances as a
result of the sale of other Securities of the Company under the Prospectus to
which this Prospectus Supplement relates. The Notes will be offered in varying
maturities from nine months to 30 years from their date of issue and may be
subject to redemption at the option of the Company or repayment at the option
of the Holder (as defined in the accompanying Prospectus), in each case, in
whole or in part prior to the maturity date (as further defined below, the
"Stated Maturity") thereof as specified in a Pricing Supplement to this
Prospectus Supplement (a "Pricing Supplement"). Each Note will be denominated
in U.S. dollars. The Notes may be issued as "Original Issue Discount Notes" or
"Amortizing Notes." See "Description of Notes."
Each Note will bear interest at a fixed rate (a "Fixed Rate Note"), which may
be zero in the case of certain Notes issued at a price representing a discount
from the principal amount payable at maturity (a "Zero-Coupon Note"), or at a
variable rate (a "Floating Rate Note") determined by reference to one or more
of the Commercial Paper Rate, CD Rate, CMT Rate, Federal Funds Rate, 11th
District Cost of Funds Rate, Kenny Rate, LIBOR, Prime Rate or Treasury Rate or
such other interest rate formula (the "Interest Rate Basis") as may be
specified in the applicable Pricing Supplement, as adjusted by a Spread and/or
Spread Multiplier, if any, applicable to such Notes. See "Description of
Notes." Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes and, in the case of Fixed Rate Amortizing Notes,
interest and principal, will be payable semi-annually on each February 15 and
August 15 (each an "Interest Payment Date" with respect to such Fixed Rate
Notes) and at Maturity (as defined below under "Interest and Interest Rates").
Interest on Floating Rate Notes and, in the case of Floating Rate Amortizing
Notes, interest and principal, will be payable on the dates specified in the
applicable Pricing Supplement (each an "Interest Payment Date" with respect to
such Floating Rate Notes) and at Maturity.
Each Note will be represented by either a global security (a "Book-Entry
Note") registered in the name of a nominee of The Depository Trust Company
("DTC") or other depositary (DTC or such other depositary as is specified in
the applicable Pricing Supplement is referred to herein as the "Depositary"),
or a certificate issued in definitive form (a "Certificated Note"), as
specified in the applicable Pricing Supplement. Beneficial interests in Book-
Entry Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary and its participants. Owners of
beneficial interests in Book-Entry Notes will be entitled to physical delivery
of Certificated Notes only under the limited circumstances described herein.
See "Description of Notes--Book-Entry System." Unless otherwise specified in
the applicable Pricing Supplement, Notes will be issued in denominations of
$1,000 and integral multiples of $1,000 in excess 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 PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENT'S COMMISSION OR PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(2)(3)
<S> <C> <C> <C>
Per Note......... 100.000% .125%-.750% 99.875%-99.250%
Total............ U.S. $150,000,000 U.S. $187,500-$1,125,000 U.S. $149,812,500-
$148,875,000
</TABLE>
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(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount.
(2) The Company will pay Salomon Brothers Inc and Lehman Brothers Inc. (each
an "Agent," and, collectively, the "Agents") a commission ranging from
.125% to .750% of the principal amount of any Note, depending on its
Stated Maturity, sold through such Agent. Any Agent, acting as principal,
may also purchase Notes at a discount for resale to one or more investors
or one or more broker-dealers (acting as principal for purposes of resale)
at varying prices related to prevailing market prices at the time of
resale, as determined by such Agent, or, if so agreed, at a fixed public
offering price. The Company has agreed to reimburse the Agents for certain
expenses. The Company has agreed to indemnify the Agents against certain
liabilities, including liabilities under applicable federal and state
securities laws.
(3) Before deducting offering expenses payable by the Company estimated at
$300,000.
The Notes are offered on a continuing basis by the Company through the Agents,
each of which has agreed to use its reasonable efforts to solicit offers to
purchase the Notes. Notes may be sold to the Agents on their own behalf at
negotiated discounts. The Company has reserved the right to sell Notes
directly to investors on its own behalf, and on such sales no commissions will
be paid. The Notes will not be listed on any securities exchange, and there
can be no assurance that the Notes will be sold or that there will be a
secondary market for the Notes. The Company reserves the right to withdraw,
cancel or modify the offer made hereby without notice. The Company or the
Agent that solicits an offer to purchase may reject any such offer to purchase
Notes in whole or in part. See "Supplemental Plan of Distribution."
SALOMON BROTHERS INC LEHMAN BROTHERS
The date of this Prospectus Supplement is August 20, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY SUPPLEMENTS AND, TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE
DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES (AS
DEFINED IN THE ACCOMPANYING PROSPECTUS) SET FORTH UNDER THE HEADING
"DESCRIPTION OF DEBT SECURITIES" IN THE ACCOMPANYING PROSPECTUS, TO WHICH
DESCRIPTION REFERENCE IS HEREBY MADE. THE PROVISIONS OF THE NOTES SUMMARIZED
HEREIN WILL APPLY TO EACH NOTE UNLESS OTHERWISE SPECIFIED IN THE APPLICABLE
PRICING SUPPLEMENT. CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN HAVE THE
MEANINGS SPECIFIED IN THE ACCOMPANYING PROSPECTUS AND/OR THE INDENTURE (AS
DEFINED IN THE ACCOMPANYING PROSPECTUS).
GENERAL
The Notes offered hereby will be issued under the Indenture referred to in
the accompanying Prospectus. The summary contained herein of certain
provisions of the Notes is subject to and is qualified in its entirety by
reference to the provisions of the Indenture and the forms of Notes, each of
which has been filed as an exhibit to the Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Notes, to which exhibits reference is
hereby made.
The Notes constitute a single series for purposes of the Indenture and are
limited to an aggregate initial offering price of $150,000,000. The Notes will
be denominated in U.S. dollars, and payments of principal of, premium, if any,
and any interest on the Notes will be made in U.S. dollars. Currency amounts
in this Prospectus Supplement, the accompanying Prospectus and any Pricing
Supplement are stated in United States dollars ("$", "dollars" or "U.S. $").
The Notes will constitute unsecured and unsubordinated indebtedness of the
Company and will rank on a parity with the Company's other unsecured and
unsubordinated indebtedness.
The Notes are offered on a continuing basis and will mature on a day from
nine months to 30 years from their date of issue, as selected by the initial
purchaser and agreed to by the Company, and may be subject to redemption at
the option of the Company or repayment at the option of the Holder prior to
Stated Maturity. See "Redemption and Repayment" below. Interest rates offered
by the Company with respect to the Notes may differ depending upon, among
other things, the aggregate principal amount of the Notes purchased in any
single transaction.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth under "Book-Entry System" below and in
the accompanying Prospectus, Book-Entry Notes will not be issuable in
certificated form. Unless otherwise specified in the applicable Pricing
Supplement, Notes will be issued in denominations of $1,000 and integral
multiples of $1,000 in excess thereof.
Payments of interest and principal (and premium, if any) to Beneficial
Owners (as defined below under "Book-Entry System") of Book-Entry Notes are
expected to be made in accordance with the Depositary's and its participants'
procedures in effect from time to time as described below under "Book-Entry
System."
Payments of interest and, in the case of Amortizing Notes, principal with
respect to any Certificated Note (other than interest and, in the case of
Amortizing Notes, principal payable at Stated
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Maturity) will be made by mailing a check to the Holder at the address of the
Holder appearing in the Security Register (as defined in the Indenture) for
the Notes on the applicable Regular Record Date (as defined below).
Notwithstanding the foregoing, at the option of the Company, all payments of
interest and, in the case of Amortizing Notes, principal on the Notes may be
made by wire transfer of immediately available funds to an account designated
by each Holder at a bank located in the United States. Payment of the
principal of (and premium, if any) and interest due with respect to any
Certificated Note at Maturity will be made in immediately available funds upon
surrender of such Note accompanied by wire transfer instructions at the
Corporate Trust Office of The First National Bank of Chicago (the "Trustee")
at One North State Street, 9th floor in The City of Chicago, Illinois or at
its agency in the Borough of Manhattan, The City of New York, provided that
the Certificated Note is presented to the Trustee in time for the Trustee to
make such payment in such funds in accordance with its normal procedures.
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is
an Original Issue Discount Note, the amount payable on such Note in the event
the principal amount thereof is declared to be due and payable immediately as
described in the accompanying Prospectus under "Description of Debt
Securities--Events of Default" or in the event of redemption or repayment
thereof prior to its Stated Maturity, in lieu of the principal amount due at
the Stated Maturity thereof, will be the Amortized Face Amount of such Note as
of the date of declaration, redemption or repayment, as the case may be. The
"Amortized Face Amount" of an Original Issue Discount Note will be the amount
equal to (i) the principal amount of such Note multiplied by the Issue Price
(as defined below) specified in the applicable Pricing Supplement plus (ii)
the portion of the difference between the dollar amount determined pursuant to
the preceding clause (i) and the principal amount of such Note that has
accreted at the yield to maturity specified in the applicable Pricing
Supplement (computed in accordance with generally accepted United States bond
yield computation principles) to such date of declaration, redemption or
repayment, but in no event will the Amortized Face Amount of an Original Issue
Discount Note exceed its principal amount.
The Pricing Supplement relating to each Note will describe, among other
things, the following items: (i) the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Note will be issued (the
"Issue Price"); (ii) the date on which such Note will be issued (the "Original
Issue Date"); (iii) the date on which such Note will mature (the "Stated
Maturity"); (iv) whether such Note is a Fixed Rate Note or a Floating Rate
Note; (v) if such Note is a Fixed Rate Note, the rate per annum at which such
Note will bear interest, if any, the Interest Payment Date or Dates, if
different from those set forth below under "Fixed Rate Notes"; (vi) if such
Note is a Floating Rate Note, the Initial Interest Rate, the Interest Rate
Basis, the Interest Reset Dates, the Interest Payment Dates, the Index
Maturity, the maximum interest rate, if any, the minimum interest rate, if
any, the Spread, if any, the Spread Multiplier, if any (all as defined
herein), and any other terms relating to the particular method of calculating
the interest rate for such Note; (vii) whether such Note is an Original Issue
Discount Note, and if so, the yield to maturity; (viii) whether such Note is
an Amortizing Note (as defined below under "Amortizing Notes"), and if so, the
basis or formula for the amortization of principal and/or interest and the
payment dates for such periodic principal payments; (ix) the regular record
date or dates for determining the person entitled to receive payments of
interest, principal and premium, if any (a "Regular Record Date"), if other
than as set forth below; (x) whether such Note may be redeemed at the option
of the Company, or repaid at the option of the Holder, prior to Stated
Maturity and, if so, the provisions relating to such redemption or repayment;
(xi) any sinking fund or other mandatory redemption provisions with respect to
such Note; (xii) whether such Note will be issued initially as a Book-Entry
Note or a Certificated Note; and (xiii) any other terms of such Note not
inconsistent with the provisions of the Indenture.
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Certificated Notes may be presented for registration of transfer or exchange
at the Corporate Trust Office of the Trustee at One North State Street, 9th
Floor, Chicago, Illinois in The City of Chicago, Illinois or at its agency in
the Borough of Manhattan, The City of New York.
All percentages resulting from any calculation with respect to any Notes
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation
on any Notes will be rounded to the nearest cent with one-half cent being
rounded upward.
As used herein, "Business Day" means, unless otherwise specified in the
applicable Pricing Supplement, any Monday, Tuesday, Wednesday, Thursday or
Friday that in The City of New York is not a day on which banking institutions
are authorized or obligated by law, regulation or executive order to close
and, with respect to Notes as to which LIBOR (as defined below under "Floating
Rate Notes--LIBOR Notes") is the applicable Interest Rate Basis is also a
London Business Day. As used herein, "London Business Day" means any day (a)
if the Designated LIBOR Currency under "Floating Rate Notes--LIBOR Notes" is
other than the ECU, on which dealings in deposits in such Designated LIBOR
Currency are transacted in the London interbank market or (b) if the
Designated LIBOR Currency is the ECU, that is not designated as an ECU Non-
Settlement Day by the ECU Banking Association in Paris or otherwise generally
regarded in the ECU interbank market as a day on which payments on ECUs will
not be made.
The Notes are referred to in the accompanying Prospectus as "Debt
Securities." For a description of the rights attaching to different series of
Debt Securities under the Indenture, see "Description of Debt Securities" in
the Prospectus. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will have the terms described below.
INTEREST AND INTEREST RATES
Unless otherwise specified in the applicable Pricing Supplement, each Note
(other than a Zero-Coupon Note) will bear interest from and including its
Original Issue Date or from and including the most recent Interest Payment
Date to which interest on such Note has been paid or duly provided for at a
fixed rate per annum or at a rate per annum determined pursuant to an Interest
Rate Basis, stated therein and in the applicable Pricing Supplement, that may
be adjusted by a Spread and/or Spread Multiplier, until the principal thereof
is paid or made available for payment. Unless otherwise specified in the
applicable Pricing Supplement, interest will be payable on each Interest
Payment Date and at Maturity. "Maturity" means the date on which the principal
of a Note or an installment of principal becomes due and payable in accordance
with its terms and the terms of the Indenture, whether at Stated Maturity,
upon acceleration, redemption, repayment or otherwise. Interest (other than
defaulted interest which may be paid to the Holder on a special record date)
will be payable to the Holder at the close of business on the Regular Record
Date next preceding an Interest Payment Date; provided, however, that the
first payment of interest on any Note originally issued between a Regular
Record Date and the next Interest Payment Date will be made on the Interest
Payment Date following the next succeeding Regular Record Date to the Holder
on such next succeeding Regular Record Date.
Interest rates, interest rate formulae and other variable terms of the Notes
are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has
been accepted by the Company. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Payment Dates and the Regular Record Dates
for Fixed Rate Notes will be as described below under "Fixed Rate Notes." The
Interest Payment Dates for Floating Rate Notes will be as specified in the
applicable Pricing Supplement, and unless otherwise specified in the
applicable Pricing Supplement, each Regular Record Date for a Floating Rate
Note will be the fifteenth day (whether or not a Business Day) preceding each
Interest Payment Date.
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Each Note (other than a Zero-Coupon Note) will bear interest at either (a) a
fixed rate or (b) a floating rate determined by reference to an Interest Rate
Basis which may be adjusted by a Spread and/or Spread Multiplier. Any Floating
Rate Note may also have either or both of the following: (i) a maximum
interest rate, or ceiling, on the rate of interest which may accrue during any
interest period, and (ii) a minimum interest rate, or floor, on the rate of
interest which may accrue during any interest period. The applicable Pricing
Supplement relating to each Note will designate either a fixed rate of
interest per annum on the applicable Fixed Rate Note or one or more of the
following Interest Rate Bases as applicable to the relevant Floating Rate
Note: (a) the Commercial Paper Rate, in which case such Note will be a
"Commercial Paper Rate Note," (b) the CD Rate, in which case such Note will be
a "CD Rate Note," (c) the CMT Rate, in which case such Note will be a "CMT
Rate Note," (d) the Federal Funds Rate, in which case such Note will be a
"Federal Funds Rate Note," (e) the 11th District Cost of Funds Rate, in which
case such Note will be an "11th District Cost of Funds Rate Note," (f) the
Kenny Rate, in which case such Note will be a "Kenny Rate Note," (g) LIBOR, in
which case such Note will be a "LIBOR Note," (h) the Prime Rate, in which case
such Note will be a "Prime Rate Note," (i) the Treasury Rate, in which case
such Note will be a "Treasury Rate Note," or (j) such other Interest Rate
Basis or formula as may be specified in such Pricing Supplement.
Notwithstanding the determination of the interest rate as provided below,
the interest rate on the Notes for any interest period shall not be greater
than the maximum interest rate, if any, or less than the minimum interest
rate, if any, specified in the applicable Pricing Supplement. The interest
rate on the Notes will in no event be higher than the maximum rate permitted
by Illinois or other applicable law, as the same may be modified by United
States law of general application. Under present Illinois law, there is no
maximum rate of interest applicable to loans made to a corporation.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note (other than a Zero-Coupon Note) will accrue interest from and
including its Original Issue Date at the annual rate stated on the face
thereof, as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, payments of interest on any
Fixed Rate Note with respect to any Interest Payment Date or Maturity will
include interest accrued from and including the Original Issue Date, or from
and including the most recent Interest Payment Date to which interest has been
paid or duly provided for, to but excluding such Interest Payment Date or
Maturity. Fixed Rate Notes may bear one or more annual rates of interest
during the periods or under the circumstances specified therein and in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed and paid on
the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Payment Dates for Fixed Rate Notes, including Fixed Rate Amortizing
Notes, will be semi-annually on each February 15 and August 15 and the Regular
Record Dates will be each February 1 and August 1 (whether or not a Business
Day). In the case of Fixed Rate Amortizing Notes, Interest Payment Dates may
be quarterly on each February 15, May 15, August 15 and November 15 if
specified in the applicable Pricing Supplement, and the Regular Record Dates
will be each February 1, May 1, August 1 and November 1 (whether or not a
Business Day) next preceding each such Interest Payment Date. If the Interest
Payment Date or Maturity for any Fixed Rate Note is not a Business Day, all
payments to be made on such day with respect to such Note will be made on the
next day that is a Business Day with the same force and effect as if made on
the due date, and no additional interest will be payable as a result of such
delayed payment.
Unless otherwise specified in the applicable Pricing Supplement, payments
with respect to Fixed Rate Amortizing Notes will be applied first to interest
due and payable thereon and then to the reduction of the unpaid principal
amount thereof. A table setting forth repayment information in respect
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of each Fixed Rate Amortizing Note will be provided to the original purchaser
of such Note and will be available, upon request, to subsequent Holders.
FLOATING RATE NOTES
The interest rate on each Floating Rate Note will be equal to either (i) the
interest rate calculated by reference to the specified Interest Rate Basis
plus or minus the Spread, if any, or (ii) the interest rate calculated by
reference to the specified Interest Rate Basis multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points (one basis
point equals one-hundredth of a percentage point) specified in the applicable
Pricing Supplement as being applicable to such Note, and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement
as being applicable to such Note. The applicable Pricing Supplement will
specify the Interest Rate Basis and the Spread or Spread Multiplier, if any,
and the maximum or minimum interest rate, if any, applicable to each Floating
Rate Note. In addition, such Pricing Supplement will contain particulars as to
the Calculation Agent (unless otherwise specified in the applicable Pricing
Supplement, The First National Bank of Chicago (in such capacity, the
"Calculation Agent")), Index Maturity, Original Issue Date, the interest rate
in effect for the period from the Original Issue Date to the first Interest
Reset Date specified in the applicable Pricing Supplement (the "Initial
Interest Rate"), Interest Determination Dates, Interest Payment Dates, Regular
Record Dates, and Interest Reset Dates with respect to such Note.
Except as provided below or in the applicable Pricing Supplement, the
Interest Payment Dates for Floating Rate Notes, including Floating Rate
Amortizing Notes, will be (i) in the case of Floating Rate Notes that reset
daily, weekly or monthly, the third Wednesday of each month or the third
Wednesday of March, June, September and December of each year, as specified on
the face thereof and in the applicable Pricing Supplement; (ii) in the case of
Floating Rate Notes that reset quarterly, the third Wednesday of March, June,
September and December of each year as specified on the face thereof and in
the applicable Pricing Supplement; (iii) in the case of Floating Rate Notes
that reset semiannually, the third Wednesday of each of two months of each
year, as specified on the face thereof and in the applicable Pricing
Supplement; and (iv) in the case of Floating Rate Notes that reset annually,
the third Wednesday of one month of each year, as specified on the face
thereof and in the applicable Pricing Supplement and, in each case, at
Maturity. If any Interest Payment Date, other than Maturity, for any Floating
Rate Note is not a Business Day for such Floating Rate Note, such Interest
Payment Date will be postponed to the next day that is a Business Day for such
Floating Rate Note, except that in the case of a LIBOR Note, if such Business
Day for such Floating Rate Note is in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding London Business Day.
If the Maturity for any Floating Rate Note falls on a day that is not a
Business Day, all payments to be made on such day with respect to such Note
will be made on the next day that is a Business Day with the same force and
effect as if made on the due date, and no additional interest will be payable
on the date of payment for the period from and after the due date as a result
of such delayed payment.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Reset
Period" for such Note, and the first day of each Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
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 for such Floating Rate Note; in the case of Floating Rate Notes
(other than Treasury Rate Notes) which reset weekly, the Wednesday of each
week; in the case of Treasury Rate Notes which reset weekly, the Tuesday of
each week, except as provided below; in the case of Floating Rate Notes which
reset monthly, the third Wednesday of each month (with the exception of
monthly reset 11th District Cost of Funds Rate Notes, which will reset on the
first calendar day of the month); in the case of Floating Rate Notes which
reset quarterly,
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the third Wednesday of each March, June, September and December; in the case
of Floating Rate Notes which reset semiannually, the third Wednesday of each
of two months of each year, as specified in the applicable Pricing Supplement;
and in the case of Floating Rate Notes which reset annually, the third
Wednesday of one month of each year, as specified in the applicable Pricing
Supplement; provided, however, that the interest rate in effect from the
Original Issue Date to but excluding the first Interest Reset Date with
respect to a Floating Rate Note will be the Initial Interest Rate (as
specified in the applicable Pricing Supplement). If any Interest Reset Date
for any Floating Rate Note is not a Business Day for such Floating Rate Note,
such Interest Reset Date will be postponed to the next day that is a Business
Day for such Floating Rate Note, except that in the case of a LIBOR Note, if
such Business Day is in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding London Business Day. Each
adjusted rate will be applicable on and after the Interest Reset Date to which
it relates to but excluding the next succeeding Interest Reset Date or until
Maturity.
The interest rate for each Reset Period will be the rate determined by the
Calculation Agent on the Calculation Date (as defined below) pertaining to the
Interest Determination Date pertaining to the Interest Reset Date for such
Reset Period. Unless otherwise specified in the applicable Pricing Supplement,
the "Interest Determination Date" pertaining to an Interest Reset Date for (a)
a Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), (b) a CD Rate Note (the "CD Interest Determination Date"), (c) a CMT
Rate Note (the "CMT Interest Determination Date"), (d) a Federal Funds Rate
Note (the "Federal Funds Interest Determination Date"), (e) a Kenny Rate Note
(the "Kenny Rate Interest Determination Date") or (f) a Prime Rate Note (the
"Prime Interest Determination Date") will be the second Business Day prior to
such Interest Reset Date. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset
Date for the 11th District Cost of Funds Rate Note (the "11th District
Interest Determination Date") will be the last Business Day of the month
immediately preceding such Interest Reset Date on which the Federal Home Loan
Bank of San Francisco (the "FHLB of San Francisco") publishes the Index (as
defined below under "11th District Cost of Funds Rate Notes"). Unless
otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the
"LIBOR Interest Determination Date") will be the second London Business Day
immediately preceding each Interest Reset Date. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. If an auction is
so held on the preceding Friday, such Friday will be the Treasury Interest
Determination Date pertaining to the Reset Period commencing in the next
succeeding week. If an auction date falls on any Interest Reset Date for a
Treasury Rate Note, then such Interest Reset Date will instead be the first
Business Day immediately following such auction date. Unless otherwise
specified in the applicable Pricing Supplement, the "Calculation Date"
pertaining to any Interest Determination Date will be the earlier of (i) the
tenth calendar day after the Interest Determination Date or, if such day is
not a Business Day, the next day that is a Business Day, or (ii) the Business
Day preceding the applicable Interest Payment Date or Maturity, as the case
may be.
"Index Maturity" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, payments
with respect to Floating Rate Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in
respect of each Floating Rate Amortizing Note will be provided to the original
purchaser of such Note and will be available, upon request, to subsequent
Holders.
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Unless otherwise specified in the applicable Pricing Supplement, each
Floating Rate Note will accrue interest from and including its Original Issue
Date at the rate determined as provided in such Note and as specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, payments of interest on any Floating Rate Note with
respect to any Interest Payment Date will include interest accrued from and
including the Original Issue Date, or from and including the most recent
Interest Payment Date to which interest has been paid or duly provided for, to
but excluding the Interest Payment Date or Maturity. With respect to Floating
Rate Notes, accrued interest is calculated by multiplying the face amount of a
Note by an accrued interest factor. This accrued interest factor is computed
by adding the interest factors calculated for each day from and including the
Original Issue Date, or from and including the last date to which interest has
been paid or duly provided for, to but excluding the date for which accrued
interest is being calculated. The interest factor for each such day (unless
otherwise specified) is computed by dividing the interest rate applicable to
such day by 360, in the case of Commercial Paper Rate Notes, CD Rate Notes,
Federal Funds Rate Notes, 11th District Cost of Funds Rate Notes, LIBOR Notes
and Prime Rate Notes or by the actual number of days in the year, in the case
of CMT Rate Notes or Treasury Rate Notes, or by 365 days in the case of Kenny
Rate Notes.
The Calculation Agent will calculate the interest rate on the Floating Rate
Notes, as provided below. The Calculation Agent will, upon the request of the
Holder of any Floating Rate Note, provide the interest rate then in effect
and, if then determined, the interest rate which will become effective as a
result of a determination made with respect to the most recent Interest
Determination Date with respect to such Note. For purposes of calculating the
rate of interest payable on Floating Rate Notes, the Company has entered into
or will enter into an agreement with the Calculation Agent. The Calculation
Agent's determination of any interest rate shall be final and binding in the
absence of manifest error.
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate on
such date for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" or any successor publication of the Board of Govenors ("H.15(519)")
under the heading "Commercial Paper." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Commercial Paper Interest Determination Date, then the
Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date will be the Money Market Yield of the rate on such
Commercial Paper Interest Determination Date for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Commercial
Paper." If by 3:00 P.M., New York City time, on such on such Calculation Date
such rate is not published in either H.15(519) or Composite Quotations, then
the Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date will be calculated by the Calculation Agent and will be the
Money Market Yield of the arithmetic mean of the offered rates (quoted on a
bank discount basis) as of 11:00 A.M., New York City time, on such Commercial
Paper Interest Determination Date of three leading dealers of commercial paper
in The City of New York selected by the Calculation Agent for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement
placed for an industrial issuer whose bond rating is "AA," or the equivalent,
from a nationally
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recognized securities rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Commercial Paper Rate with respect to such Commercial Paper
Interest Determination Date will be the Commercial Paper Rate in effect
immediately prior to such Commercial Paper Interest Determination Date.
"Money Market Yield" will be a yield (expressed as a percentage rounded, if
necessary, to the nearest one hundred-thousandth of a percent) calculated in
accordance with the following formula:
DX360
Money Market Yield = ---------- X 100
360-(DXM)
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which accrued interest is being calculated.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "CDs (Secondary Market)." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such CD Interest Determination Date, then the CD Rate with
respect to such CD Interest Determination Date will be the rate on such CD
Interest Determination Date for negotiable certificates of deposit having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit." If by 3:00
P.M., New York City time, on such Calculation Date such rate is not published
in either H.15(519) or Composite Quotations, then the CD Rate with respect to
such CD Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such CD Interest Determination Date of
three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent for
negotiable certificates of deposit of major United States money market banks
(in the market for negotiable certificates of deposit) with a remaining
maturity closest to the Index Maturity specified in the applicable Pricing
Supplement in a denomination of $5,000,000; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the CD Rate with respect to such CD Interest
Determination Date will be the CD Rate in effect immediately prior to such CD
Interest Determination Date.
CMT Rate Notes
Each CMT Rate Note will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the rate displayed
on the Designated CMT Telerate Page (as defined below) under the caption
". . . Treasury Constant Maturities . . . Federal Reserve Board Release H.15
. . . Mondays Approximately 3:45 P.M.," under the column for the Designated
CMT
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Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page
is 7055, such CMT Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the week, or the month, as specified in the applicable
Pricing Supplement, ended immediately preceding the week in which the
applicable CMT Interest Determination Date occurs. If such rate is no longer
displayed on the relevant page, or if not displayed by 3:00 P.M., New York
City time, on the Calculation Date pertaining to such CMT Interest
Determination Date, then the CMT Rate with respect to such CMT Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or if not published by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CMT Interest Determination
Date, then the CMT Rate with respect to such CMT Interest Determination Date
will be such treasury constant maturity rate for the Designated CMT Maturity
Index (or other United States Treasury rate for the Designated CMT Maturity
Index) for the CMT Interest Determination Date with respect to such Interest
Reset Date as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury that
the Calculation Agent determines to be comparable to the rate formerly
displayed on the Designated CMT Telerate Page and published in the relevant
H.15(519). If such information is not provided by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CMT Interest Determination
Date, then the CMT Rate with respect to 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 with respect to such CMT Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on the CMT Interest Determination
Date of three Reference Dealers in The City of New York (from five such
Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the
next highest to the Designated CMT Maturity Index and the remaining term to
maturity closest to the Designated CMT Maturity Index and in an amount of at
least $100,000,000. If three or four (and not five) of such Reference Dealers
are quoting as described above, then the CMT Rate with respect to such CMT
Interest Determination Date will be based on the arithmetic mean of the offer
prices obtained and neither the highest nor the lowest of such quotes will be
eliminated; provided, however, that if fewer than three Reference Dealers
selected by the Calculation Agent are quoting as described herein, the CMT
Rate will be the CMT Rate in effect immediately prior to such CMT Interest
Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the
Treasury Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as published in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as published in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page will be 7052, for the most recent week.
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"Designated CMT Maturity Index" means the original period to maturity of the
Treasury Notes (either one, two, three, five, seven, ten, twenty or thirty
years) specified in the applicable Pricing Supplement with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Pricing Supplement, the Designated CMT Maturity Index will be two
years.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds as published in H.15(519) under
the heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 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 with respect to such Federal Funds Interest Determination Date 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
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate with respect to such Federal Funds Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean (rounded,
if necessary, to the nearest one hundred-thousandth of a percent) of the rates
as of 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date for the last transaction in overnight Federal Funds
arranged by three leading brokers of Federal Funds transactions in The City of
New York selected by the Calculation Agent; provided, however, that if the
brokers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate with respect to such
Federal Funds Interest Determination Date will be the Federal Funds Rate in
effect immediately prior to such Federal Funds Interest Determination Date.
11th District Cost of Funds Rate Notes
Each 11th District Cost of Funds Rate Note will bear interest at the
interest rate (calculated with reference to the 11th District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any) specified in the 11th
District Cost of Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any 11th District Interest
Determination Date, the rate equal to the monthly weighted average cost of
funds for the calendar month preceding such 11th District Interest
Determination Date as set forth under the caption "11th District" on Telerate
Page 7058 as of 11:00 A.M., San Francisco time, on such 11th District Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related 11th District Interest Determination Date, the 11th District Cost of
Funds Rate for such 11th District Interest Determination Date will be the
monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Index") by the FHLB of San Francisco as such cost of funds for the calendar
month preceding the date of such announcement. If the FHLB of San Francisco
fails to announce such rate for the calendar month next preceding such 11th
District Interest Determination Date, then the 11th District Cost of Funds
Rate with respect to such 11th District Interest Determination Date will be
the 11th District Cost of Funds Rate then in effect on such 11th District
Interest Determination Date.
Kenny Rate Notes
Each Kenny Rate Note will bear interest at the interest rate (calculated
with reference to the Kenny Rate and the Spread and/or Spread Multiplier, if
any) specified in the Kenny Rate Note and in the applicable Pricing
Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "Kenny
Rate" means, with respect to any Kenny Rate Interest Determination Date, the
high grade weekly index (the "Weekly Index") on such date made available by J.
J. Kenny Information Systems ("Kenny") to the Calculation Agent. The Weekly
Index is, and will be, based upon 30 day yield evaluations at par of bonds,
the interest on which is exempt from Federal income taxation under the
Internal Revenue Code of 1986, as amended (the "Code"), of not less than five
high grade component issuers selected by Kenny which will include, without
limitation, issuers of general obligation bonds. The specified issuers
included among the component issuers may be changed from time to time by Kenny
in its discretion. The bonds on which the Weekly Index is based will not
include any bonds on which the interest is subject to a minimum tax or similar
tax under the Code unless all tax-exempt bonds are subject to such tax. In the
event Kenny ceases to make available such Weekly Index, a successor indexing
agent will be selected by the Calculation Agent, such index to reflect the
prevailing rate for bonds rated in the highest short-term rating category by
Moody's Investors Service, Inc. and Standard & Poor's Corporation in respect
of issuers most closely resembling the high grade component issuers selected
by Kenny for its Weekly Index, the interest on which is (A) variable on a
weekly basis, (B) exempt from Federal income taxation under the Code and (C)
not subject to a minimum tax or similar tax under the Code unless all tax-
exempt bonds are subject to such tax. If such successor indexing agent is not
available, the Kenny Rate with respect to any Kenny Rate Interest
Determination Date will be 67% of the rate determined as if the Treasury Rate
option had been originally selected.
LIBOR Notes
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in the LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means, with respect to any LIBOR Interest Determination Date, the rate
determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will be
either: (a) if "LIBOR Reuters" is specified in the Note and the applicable
Pricing Supplement, the arithmetic mean of the offered rates (unless the
specified Designated LIBOR Page (as defined below) by its terms provides
only for a single rate, in which case such single rate will be used) for
deposits in the Designated LIBOR Currency (as defined below) having the
Index Maturity specified in the Note and the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, which appear on the Designated LIBOR
Page specified in the Note and the applicable Pricing Supplement as of
11:00 A.M., London time, on that LIBOR Interest Determination Date, if at
least two such offered rates appear (unless, as aforesaid, only a single
rate is required) on such Designated LIBOR Page, or (b) if "LIBOR Telerate"
is specified in the Note and the applicable Pricing Supplement, the rate
for deposits in the Designated LIBOR Currency having the Index Maturity
specified in the Note and the applicable Pricing Supplement, commencing on
the second London Business Day immediately following such LIBOR Interest
Determination Date, which appears on the Designated LIBOR Page specified in
the Note and the applicable Pricing Supplement as of 11:00 A.M., London
time, on that LIBOR Interest Determination Date. Notwithstanding the
foregoing, if fewer than two offered rates appear on the Designated LIBOR
Page with respect to LIBOR Reuters (unless the specified Designated LIBOR
Page by its terms provides only for a single rate, in which case such
single rate will be used), or if no rate appears on the Designated LIBOR
Page with respect to LIBOR Telerate, whichever may be applicable, LIBOR
with respect to such LIBOR Interest Determination Date will be determined
as if the parties had specified the rate described in clause (ii) below.
(ii) With respect to any LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Designated LIBOR Page with respect to
LIBOR Reuters (unless the specified
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Designated LIBOR Page by its terms provides only for a single rate, in
which case such single rate will be used), or if no rate appears on the
Designated LIBOR Page with respect to LIBOR Telerate, as the case may be,
the Calculation Agent will request the principal London office of each of
four major banks in the London interbank market selected by the Calculation
Agent to provide the Calculation Agent with its offered rate quotation for
deposits in the Designated LIBOR Currency for the period of the Index
Maturity specified in the Note and the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, to prime banks in the London interbank
market as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date and in a principal amount that is representative for a single
transaction in such Designated LIBOR Currency in such market at such time.
If at least two such quotations are provided, LIBOR with respect to such
LIBOR Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR with respect to such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted as of
11:00 A.M. in the applicable Principal Financial Center (as defined below),
on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Designated LIBOR Currency to leading European banks, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date having the Index Maturity specified in the Note and the
applicable Pricing Supplement in a principal amount that is representative
for a single transaction in such Designated LIBOR Currency in such market
at such time; provided, however, that if the banks so selected by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR with
respect to such LIBOR Interest Determination Date will be LIBOR in effect
immediately prior to such LIBOR Interest Determination Date.
"Designated LIBOR Currency" means, with respect to any LIBOR Note, the
currency (including a composite currency), if any, specified in the Note and
the applicable Pricing Supplement as the Designated LIBOR Currency. If no such
currency is specified in the Note and the applicable Pricing Supplement, the
Designated LIBOR Currency will be U.S. dollars.
"Designated LIBOR Page" means either (a) the display on the Reuters Monitor
Money Rates Service for the purpose of displaying the London interbank rates
of major banks for the applicable Designated LIBOR Currency (if "LIBOR
Reuters" is specified in the Note and the applicable Pricing Supplement), or
(b) the display on the Dow Jones Telerate Service for the purpose of
displaying the London interbank rates of major banks for the applicable
designated LIBOR Currency (if "LIBOR Telerate" is specified in the Note and
the applicable Pricing Supplement). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the Note and the applicable Pricing Supplement, LIBOR
for the applicable Designated LIBOR Currency will be determined as if LIBOR
Telerate (and, if the U.S. dollar is the Designated LIBOR Currency, page 3750)
had been chosen.
"Principal Financial Center" means, with respect to any LIBOR Note, unless
otherwise specified in the Note and the applicable Pricing Supplement, the
capital city of the country that issues as its legal tender the Designated
LIBOR Currency of such Note, except that with respect to U.S. dollars and
ECUs, the Principal Financial Center will be The City of New York and
Brussels, respectively.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in the Prime Rate Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Interest Determination Date, the rate
on such date as published in H.15(519)
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under the heading "Bank Prime Loan." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Prime Interest Determination Date, then the Prime Rate with
respect to such Prime Interest Determination Date will be calculated 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 with respect to such
Prime Interest Determination Date. If fewer than four such rates appear on the
Reuters Screen USPRIME1 with respect to such Prime Interest Determination
Date, the Prime Rate with respect to such Prime Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the prime rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Prime Interest
Determination Date by at least two of the three major money center banks in
The City of New York selected by the Calculation Agent. If fewer than two
quotations are provided, the Prime Rate with respect to such Prime Interest
Determination Date will 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 $500,000,000 and
being subject to supervision or examination by Federal or state authority,
selected by the Calculation Agent to provide such rate or rates; provided,
however, that if the appropriate number of substitute banks or trust companies
selected as aforesaid are not quoting as mentioned in this sentence, the Prime
Rate with respect to such Prime Interest Determination Date will be the Prime
Rate in effect immediately prior to such Prime Interest Determination Date.
"Reuters Screen USPRIME1" means the display designated as page "USPRIME1" on
the Reuters Monitor Money Rate Service (or such other page which may replace
the USPRIME1 page on the service for the purpose of displaying the prime rate
or base lending rate of major banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier,
if any) specified in the Treasury Rate Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the
rate for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Pricing Supplement as published in H.15(519) under the heading, "Treasury
bills-auction average (investment)" or, if not so published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Treasury Interest
Determination Date, the average auction rate on such Treasury Interest
Determination Date (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that
such rate is not available by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Treasury Interest Determination Date, or
if no such auction is held in a particular week, then the Treasury Rate with
respect to such Treasury Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on such Treasury
Interest Determination Date, of three leading primary U.S. government
securities dealers selected by the Calculation Agent for the issue of Treasury
bills with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Treasury Rate with respect to such Treasury Interest
Determination Date will be the Treasury Rate in effect immediately prior to
such Treasury Interest Determination Date.
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ORIGINAL ISSUE DISCOUNT NOTES
The Company may from time to time offer Original Issue Discount Notes. The
Pricing Supplement applicable to certain Original Issue Discount Notes may
provide that Holders of such Notes will not receive periodic payments of
interest. For purposes of determining whether Holders of the requisite
principal amount of Notes outstanding under the Indenture have made a demand
or given a notice or waiver or taken any other action, the outstanding
principal amount of Original Issue Discount Notes shall be deemed to be the
amount of the principal that would be due and payable upon declaration of
acceleration of the Stated Maturity thereof as of the date of such
determination. See "General."
"Original Issue Discount Note" means (i) a Note that has a "stated
redemption price at maturity" that exceeds its "issue price" (each as defined
for U.S. Federal income tax purposes) by at least 0.25% of its stated
redemption price at maturity multiplied by the number of complete years from
the Original Issue Date to the Stated Maturity for such Note (or, in the case
of a Note that provides for payment of any amount other than the qualified
stated interest prior to maturity, the weighted average maturity of the Note)
and (ii) any other Note designated by the Company as issued with original
issue discount for U.S. Federal income tax purposes.
AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Note
("Amortizing Notes"). Interest on each Amortizing Note will be computed as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, payments with respect to an Amortizing Note
will be applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. A table setting forth
repayment information with respect to each Amortizing Note will be provided to
the original purchaser of such Note and will be available, upon request, to
subsequent Holders.
REDEMPTION AND REPAYMENT
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity only if an Initial
Redemption Date is specified in the applicable Pricing Supplement ("Initial
Redemption Date"). If so specified, the Notes will be subject to redemption at
the option of the Company on any date on and after the applicable Initial
Redemption Date in whole or from time to time in part in increments of $1,000
or the minimum denomination, if any, specified in such Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such minimum denomination). The amount to be paid to the Holder upon
redemption with respect to a Note, equals the sum of (i) the Initial
Redemption Percentage specified in such Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction, if applicable (as specified in such
Pricing Supplement)) multiplied by the unpaid principal amount or the portion
to be redeemed (the "Redemption Price") plus (ii) accrued and unpaid interest
to but excluding the date of redemption, but payments due with respect to such
Note prior to the date of redemption will be payable to the Holder of record
of such Note at the close of business on the relevant Regular Record Date
specified in the applicable Pricing Supplement, all as provided in the
Indenture. The Initial Redemption Percentage, if any, applicable to a Note
will decline at each anniversary of the Initial Redemption Date by an amount
equal to the applicable Annual Redemption Percentage Reduction, if any, until
the Redemption Price is equal to 100% of the unpaid principal amount thereof
or the portion thereof to be redeemed. The Company may exercise such option by
causing the Trustee to mail a notice of such redemption at least 30 but not
more than 60 calendar days prior to the date of redemption in accordance with
the provisions of the Indenture. In the event of redemption of a Note in part
only, such Note will be cancelled and a new Note or Notes representing the
unredeemed portion thereof will be issued in the name of the Holder thereof.
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Unless otherwise specified in the applicable Pricing Supplement, a Note will
not be repayable, in whole or in part, prior to Stated Maturity at the option
of the Holder. A Note will be redeemable at the option of the Holder on a date
or dates specified prior to Stated Maturity at a price or prices only if and
as specified in the applicable Pricing Supplement, plus accrued and unpaid
interest to but excluding the date of repayment. Unless otherwise specified in
the applicable Pricing Supplement, if a Note is repayable in part pursuant to
the preceding sentence, the principal amount of the Note or Notes to be issued
to the Holder for the portion of such Note not being repaid must be $1,000 or
an integral multiple of $1,000 in excess thereof.
In order for a Note that is repayable at the option of the Holder to be
repaid prior to Stated Maturity, the Paying Agent (initially, the Company has
appointed the Trustee as Paying Agent) must receive at least 30 but not more
than 45 calendar days prior to the repayment date (i) the Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed
or (ii) a telegram, telex, facsimile transmission or letter (first class,
postage prepaid) from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company in the United States setting forth the name of the Holder of the Note,
the principal amount of the Note, the principal amount of the Note to be
repaid, the certificate number or a description of the tenor and terms of the
Note, a statement that the option to elect repayment is being exercised
thereby and a guarantee that the Note to be repaid with the form entitled
"Option to Elect Repayment" on the reverse of the Note duly completed will be
received by the Paying Agent not later than five Business Days after the date
of such telegram, telex, facsimile transmission or letter and such Note and
form duly completed are received by the Paying Agent by such fifth Business
Day. Exercise of the repayment option by the Holder of a Note will be
irrevocable, except that a Holder who has tendered a Note for repayment may
revoke such tender for repayment by written notice to the Paying Agent
received prior to 5:00 P.M., New York City time, on the tenth calendar day
prior to the repayment date. The repayment option may be exercised by the
Holder of a Note for less than the entire principal amount of the Note
provided that the principal amount of the Note remaining outstanding after
such repayment is an authorized denomination. Upon such partial repayment such
Note will be cancelled and a new Note or Notes for the remaining principal
amount thereof will be issued in the name of the Holder thereof.
While the Book-Entry Notes are represented by global securities held by or
on behalf of the Depositary (each, a "Global Security"), and registered in the
name of the Depositary or its nominee, the option for repayment may be
exercised by the applicable Participant (as defined below under "Book-Entry
System") that has an account with the Depositary, on behalf of the Beneficial
Owners of the Global Security or Securities representing such Book-Entry
Notes, by delivering a written notice substantially similar to the above-
mentioned form duly completed to the Trustee at its Corporate Trust Office (or
such other address of which the Company will from time to time notify the
Holders), at least 30 but not more than 60 calendar days prior to the date of
repayment. Notices of elections from Participants on behalf of Beneficial
Owners of the Global Security or Securities representing such Book-Entry Notes
to exercise their option to have such Book-Entry Notes repaid must be received
by the Trustee by 5:00 P.M., New York City time, on the last day for giving
such notice. In order to ensure that a notice is received by the Trustee on a
particular day, the Beneficial Owner of the Global Security or Securities
representing such Book-Entry Notes must so direct the applicable Participant
before such Participant's deadline for accepting instructions for that day.
Different firms may have different deadlines for accepting instructions from
their customers. Accordingly, Beneficial Owners of the Global Security or
Securities representing Book-Entry Notes should consult the Participants
through which they own their interest therein for the respective deadlines for
such Participants. All notices shall be executed by a duly authorized officer
of such Participant (with signatures guaranteed) and will be irrevocable. In
addition, Beneficial Owners of the Global Security or Securities representing
Book-Entry Notes shall effect delivery at the time such notices of election
are given to the Depositary by causing
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the applicable Participant to transfer such Beneficial Owner's interest in the
Global Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Trustee. See "Book-Entry System."
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended, and any other
securities laws or regulations in connection with any such repayment.
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation.
OTHER PROVISIONS
Any provisions with respect to the determination of an Interest Rate Basis,
the specifications of an Interest Rate Basis, calculation of the interest rate
applicable to, or the principal payable at Maturity on, any Note, its Interest
Payment Dates or any other matter relating thereto may be modified by the
terms as specified under "Other Provisions" on the face of such Note, or in an
annex relating thereto if so specified on the face thereof, and/or in the
applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
DTC will act as securities depositary for the Book-Entry Notes. The Book-
Entry Notes will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One fully-registered Global
Security will be issued for each issue of the Notes, each in the aggregate
principal amount of such issue, and will be deposited with DTC. If, however,
the aggregate principal amount of any issue exceeds the maximum principal
amount (if any) permitted by DTC, one Global Security will be issued with
respect to such maximum principal amount and an additional Global Security
will be issued with respect to any remaining principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants ("Direct Participants") include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to DTC's system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under DTC's system must be made by or through
Direct Participants, which will receive a credit for the Book-Entry Notes on
DTC's records. The ownership interest of each 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 DTC of its purchase, but such Beneficial Owner is expected
to receive a written
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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 Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Book-Entry Notes; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Book-Entry Notes are credited, which may or may not be the Beneficial
Owners. The Participants remain responsible for keeping account of their
holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants
and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the Book-
Entry Notes within an issue are being redeemed, DTC's current practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Book-Entry
Notes. Under its usual procedures, DTC will mail an "Omnibus Proxy" to the
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 DTC.
DTC's practice is to credit Direct Participants' accounts on the payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case of securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participants and not of DTC, 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 DTC
is the responsibility of the Company or the Paying Agent, disbursement of such
payments to Direct Participants is the responsibility of DTC, 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 DTC's records,
to the Paying Agent. The requirement for physical delivery of Book-Entry Notes
in connection with a demand for purchase or a mandatory purchase will be
deemed satisfied when the ownership rights in the Book-Entry Notes are
transferred by Direct Participants on DTC's records.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, or if DTC
ceases to be a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934, as amended, the Company
will issue individual Certificated Notes in exchange for Book-Entry Notes
represented by
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Global Securities. In addition, the Company may at any time, and in its sole
discretion, determine not to have one or more Book-Entry Notes represented by
one or more Global Securities and, in such event, will issue individual
Certificated Notes in exchange for Book-Entry Notes represented by Global
Securities. If the Notes are Book-Entry Notes represented by one or more
Global Securities and if an Event of Default with respect to the Notes shall
have occurred and be continuing, the Company will issue individual
Certificated Notes in exchange for such Book-Entry Notes represented by Global
Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
None of the Company, any Agents, 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 Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DEFEASANCE
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be subject to defeasance and discharge as described under "Description of
Debt Securities-Defeasance" in the accompanying Prospectus.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the principal United States federal income
tax consequences of the purchase, ownership and disposition of Notes to
beneficial owners ("holders") of Notes purchasing Notes at their original
issuance. This summary is based on the Code, legislative history,
administrative pronouncements, judicial decisions and final, temporary and
proposed Treasury Regulations, changes to any of which subsequent to the date
hereof may affect the tax consequences described herein. Any such change may
apply retroactively. This summary is also based on final Treasury Regulations
(the "1996 OID Regulations") published by the Internal Revenue Service ("IRS")
on June 14, 1996, which set forth rules applicable to "contingent payment debt
instruments."
This summary discusses only the principal United States federal income tax
consequences to those holders holding Notes as capital assets within the
meaning of Section 1221 of the Code. It does not address all of the tax
consequences that may be relevant to a holder in light of the holder's
particular circumstances or to holders subject to special rules (including
pension plans and other tax-exempt investors, banks, thrifts, insurance
companies, real estate investment trusts, regulated investment companies,
dealers in securities, currencies and persons so treated for federal income
tax purposes, persons whose functional currency (as defined in Section 985 of
the Code) is other than the United States dollar, and persons who hold Notes
as part of a straddle, hedging or conversion transaction). This summary does
not discuss the taxation of Notes which qualify as "applicable high yield
discount obligations" under Section 163(i) of the Code. Holders of such
obligations may be subject to special rules which will be set forth in an
applicable Pricing Supplement, if appropriate. Finally, this summary is
subject to the requirement that a taxpayer obtain the consent of the IRS
before changing a method of accounting.
Persons considering the purchase of Notes should consult their tax advisors
with regard to the application of United States federal income tax laws to
their particular situations as well as any tax consequences to them arising
under the laws of any state, local or foreign taxing jurisdiction. State,
local and foreign income tax laws may differ substantially from the
corresponding federal income tax laws, and this discussion does not purport to
describe any aspect of the tax laws of any state, local or foreign
jurisdiction. Therefore, potential investors should consult their own tax
advisors with respect to the various state, local and foreign tax consequences
of an investment in Notes.
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As used herein, the term "United States Holder" means a beneficial owner of
a Note who or which is, for United States federal income tax purposes, either
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
of any political subdivision thereof or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. The term also includes certain holders who are former citizens of the
United States whose income and gain from the Notes will be subject to United
States taxation.
TAXATION OF INTEREST
The taxation of interest on a Note will depend on whether it constitutes
"qualified stated interest" (as defined below). Interest on a Note that
constitutes qualified stated interest is includible in a United States
Holder's income as ordinary interest income when actually or constructively
received, if such Holder uses the cash method of accounting for federal income
tax purposes, or when accrued, if such Holder uses an accrual method of
accounting for federal income tax purposes. Interest that does not constitute
qualified stated interest is included in a United States Holder's income under
the rules described below under "Original Issue Discount," regardless of such
Holder's method of accounting. Notwithstanding the foregoing, interest that is
payable on a Note with a maturity of one year or less from its issue date (a
"Short-Term Note") is included in a United States Holder's income under the
rules described below under "Short-Term Notes".
Fixed Rate Notes
Interest on a Fixed Rate Note will constitute "qualified stated interest" if
the interest is unconditionally payable, or will be constructively received
under Section 451 of the Code, in cash or in property (other than debt
instruments of the Company) at least annually at a single fixed rate.
Floating Rate Notes
Interest on a Floating Rate Note that is unconditionally payable, or will be
constructively received under Section 451 of the Code, in cash or in property
(other than debt instruments of the Company) at least annually will constitute
"qualified stated interest" if the Note is a "variable rate debt instrument"
("VRDI") under the rules described below and the interest is payable at a
single "qualified floating rate" or single "objective rate" (each as defined
below). If the Note is a VRDI but the interest is payable other than at a
single qualified floating rate or at a single objective rate, special rules
apply to determine the portion of such interest that constitutes "qualified
stated interest". See "Original Issue Discount--Floating Rate Notes that are
VRDIs", below.
Definition of Variable Rate Debt Instrument (VRDI), Qualified Floating Rate
and Objective Rate
A Note is a VRDI if all of the four following conditions are met. First, the
"issue price" of the Note (as described below) must not exceed the total
noncontingent principal payments by more than an amount equal to the lesser of
(i) .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue date (or,
in the case of a Note that provides for payment of any amount other than
qualified stated interest before maturity, its weighted average maturity) and
(ii) 15% of the total noncontingent principal payments.
Second, the Note must provide for stated interest (compounded or paid at
least annually) at (a) one or more qualified floating rates, (b) a single
fixed rate and one or more qualified floating rates, (c) a single objective
rate or (d) a single fixed rate and a single objective rate that is a
"qualified inverse floating rate" (as defined below).
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Third, the Note must provide that a qualified floating rate or objective
rate in effect at any time during the term of the Note is set at the value of
the rate on any day that is no earlier than three months prior to the first
day on which that value is in effect and no later than one year following that
first day.
Fourth, the Note may not provide for any principal payments that are
contingent except as provided in the first requirement set forth above.
Subject to certain exceptions, a variable rate of interest on a Note is a
"qualified floating rate" if variations in the value of the rate can
reasonably be expected to measure contemporaneous fluctuations in the cost of
newly borrowed funds in the currency in which the Note is denominated. A
variable rate will be considered a qualified floating rate if the variable
rate equals (i) the product of an otherwise qualified floating rate and a
fixed multiple (i.e., a Spread Multiplier) that is greater than 0.65, but not
more than 1.35 or (ii) an otherwise qualified floating rate (or the product
described in clause (i)) plus or minus a fixed rate (i.e., a Spread). If the
variable rate equals the product of an otherwise qualified floating rate and a
single Spread Multiplier greater than 1.35 or less than or equal to 0.65,
however, such rate will generally constitute an objective rate, described more
fully below. A variable rate will not be considered a qualified floating rate
if the variable rate is subject to a cap, floor, governor (i.e., a restriction
on the amount of increase or decrease in the stated interest rate) or similar
restriction that is reasonably expected as of the issue date to cause the
yield on the Note to be significantly more or less than the expected yield
determined without the restriction (other than a cap, floor or governor that
is fixed throughout the term of the Note).
Subject to certain exceptions, an "objective rate" is a rate (other than a
qualified floating rate) that is determined using a single fixed formula and
that is based on objective financial or economic information that is neither
within the control of the issuer (or a related party) nor unique to the
circumstances of the issuer (or a related party). For example, an objective
rate generally includes a rate that is based on one or more qualified floating
rates or on the yield of actively traded personal property (within the meaning
of Section 1092(d)(1) of the Code). For purposes of the preceding sentence, a
foreign currency for which there is an active interbank market is presumed to
be actively traded. Notwithstanding the first sentence of this paragraph, a
rate on a debt instrument is not an objective rate if it is reasonably
expected that the average value of the rate during the first half of the debt
instrument's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the debt
instrument's term. An objective rate is a "qualified inverse floating rate" if
(a) the rate is equal to a fixed rate minus a qualified floating rate and (b)
the variations in the rate can reasonably be expected to reflect inversely
contemporaneous variations in the cost of newly borrowed funds (disregarding
any caps, floors, governors or similar restrictions that would not, as
described above, cause a rate to fail to be a qualified floating rate).
If interest on a Note is stated at a fixed rate for an initial period of
less than one year, followed by a variable rate that is either a qualified
floating rate or an objective rate for a subsequent period, and the value of
the variable rate on the issue date is intended to approximate the fixed rate,
the fixed rate and the variable rate together constitute a single qualified
floating rate or objective rate.
ORIGINAL ISSUE DISCOUNT
Original issue discount ("OID") with respect to a Note is the excess, if
any, of the Note's "stated redemption price at maturity" over the Note's
"issue price". A Note's "stated redemption price at maturity" is the sum of
all payments provided by the Note (whether designated as interest or as
principal) other than payments of qualified stated interest. The "issue price"
of a Note is the first price at which a substantial amount of the Notes in the
issuance that includes such Note is sold for money (excluding sales to bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers).
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As described more fully below, United States Holders of Notes with OID that
mature more than one year from their issue date generally will be required to
include such OID in income as it accrues in accordance with the constant yield
method described below, before the receipt of the related cash payments. A
United States Holder's tax basis in a Note is increased by each accrual of OID
and decreased by each payment other than a payment of qualified stated
interest.
The amount of OID with respect to a Note will be treated as zero if the OID
is less than an amount equal to .0025 multiplied by the product of the stated
redemption price at maturity and the number of complete years to maturity (or,
in the case of a Note that provides for payment of any amount other than
qualified stated interest prior to maturity, the weighted average maturity of
the Note). If the amount of OID with respect to a Note is less than that
amount, the OID that is not included in payments of stated interest is
included in income as capital gain as principal payments are made. The amount
includible with respect to a principal payment equals the product of the total
amount of OID and a fraction, the numerator of which is the amount of such
principal payment and the denominator of which is the stated principal amount
of the Note.
Fixed Rate Notes
In the case of OID with respect to a Fixed Rate Note, the amount of OID
includible in the income of a United States Holder for any taxable year is
determined under the constant yield method, as follows. First, the "yield to
maturity" of the Note is computed. The yield to maturity is the discount rate
that, when used in computing the present value of all interest and principal
payments to be made under the Note (including payments of qualified stated
interest) produces an amount equal to the issue price of the Note. The yield
to maturity is constant over the term of the Note and, when expressed as a
percentage, must be calculated to at least two decimal places.
Second, the term of the Note is divided into "accrual periods". Accrual
periods may be of any length and may vary in length over the term of the Note,
provided that each accrual period is no longer than one year and that each
scheduled payment of principal or interest occurs either on the final day of
an accrual period or on the first day of an accrual period.
Third, the total amount of OID on the Note is allocated among accrual
periods. In general, the OID allocable to an accrual period equals the product
of the "adjusted issue price" of the Note at the beginning of the accrual
period and the yield to maturity of the Note, less the amount of any qualified
stated interest allocable to the accrual period. The adjusted issue price of a
Note at the beginning of the first accrual period is its issue price.
Thereafter, the adjusted issue price of the Note is its issue price, increased
by the amount of OID previously includible in the gross income of any Holder
and decreased by the amount of any payment previously made on the Note other
than a payment of qualified stated interest. For purposes of computing the
adjusted issue price of a Note, the amount of OID previously includible in the
gross income of any Holder is determined without regard to "premium" and
"acquisition premium", as those terms are defined below under "Premium and
Acquisition Premium".
Fourth, the "daily portions" of OID are determined by allocating to each day
in an accrual period its ratable portion of the OID allocable to the accrual
period.
A United States Holder includes in income in any taxable year the daily
portions of OID for each day during the taxable year that such Holder held
Notes. In general, under the constant yield method described above, United
States Holders will be required to include in income increasingly greater
amounts of OID in successive accrual periods.
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Floating Rate Notes that are VRDIs
The taxation of OID (including interest that does not constitute qualified
stated interest) on a Floating Rate Note will depend on whether the Note is a
"VRDI", as that term is defined above under "Taxation of Interest--Definition
of Variable Rate Debt Instrument (VRDI), Qualified Floating Rate and Objective
Rate."
In the case of a VRDI that provides for stated interest at a single
qualified floating rate or single objective rate (and that is unconditionally
payable in cash or in property, other than debt instruments of the issuer, or
that will be constructively received under Section 451 of the Code, at least
annually), all stated interest is qualified stated interest and the amount of
qualified stated interest and the amount of OID, if any, includible in income
during a taxable year are determined under the rules applicable to fixed rate
debt instruments (described above) by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or a
qualified inverse floating rate, the value, as of the issue date, of the
qualified floating rate or qualified inverse floating rate, or (ii) in the
case of an objective rate (other than a qualified inverse floating rate), the
rate that reflects the yield that is reasonably expected for the debt
instrument. Qualified stated interest allocable to an accrual period is
increased (or decreased) if the interest actually paid during an accrual
period exceeds (or is less than) the interest assumed to be paid during the
accrual period.
If a Note that is a VRDI does not provide for interest either at a single
qualified floating rate or at a single objective rate (i.e., provides for
interest at two or more qualified floating rates, at a single fixed rate and
one or more qualified floating rates, or at a single fixed rate and a single
objective rate that is a qualified inverse floating rate), the amount of
interest and OID accruals are determined by constructing an equivalent fixed
rate debt instrument, as follows.
First, in the case of an instrument that provides for interest at one or
more qualified floating rates or at a qualified inverse floating rate and, in
addition, at a fixed rate, replace the fixed rate with a qualified floating
rate (or qualified inverse floating rate) such that the fair market value of
the instrument, so modified, as of the issue date would be approximately the
same as the fair market value of the unmodified instrument.
Second, determine the fixed rate substitute for each variable rate provided
by the Note. The fixed rate substitute for each qualified floating rate
provided by the Note is the value of that qualified floating rate on the issue
date. If the Note provides for two or more qualified floating rates with
different intervals between interest adjustment dates (for example, the 30-day
Commercial Paper Rate and quarterly LIBOR), the fixed rate substitutes are
based on intervals that are equal in length (for example, the 90-day
Commercial Paper Rate and quarterly LIBOR, or the 30-day Commercial Paper Rate
and monthly LIBOR). The fixed rate substitute for an objective rate that is a
qualified inverse floating rate is the value of the qualified inverse floating
rate on the issue date. The fixed rate substitute for an objective rate (other
than a qualified inverse floating rate) is a fixed rate that reflects the
yield that is reasonably expected for the Note.
Third, construct an equivalent fixed rate debt instrument that has terms
that are identical to those provided under the Note, except that the
equivalent fixed rate debt instrument provides for the fixed rate substitutes
determined in the second step, in lieu of the qualified floating rates or
objective rate provided by the Note.
Fourth, determine the amount of qualified stated interest and OID for the
equivalent fixed rate debt instrument under the rules (described above) for
Fixed Rate Notes. These amounts are taken into account as if the United States
Holder held the equivalent fixed rate debt instrument. See "Taxation of
Interest" and "Original Issue Discount--Fixed Rate Notes", above.
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Fifth, make appropriate adjustments for the actual values of the variable
rates. In this step, qualified stated interest or OID allocable to an accrual
period is increased (or decreased) if the interest actually accrued or paid
during the accrual period exceeds (or is less than) the interest assumed to be
accrued or paid during the accrual period under the equivalent fixed rate debt
instrument. The Treasury Regulations are unclear in certain respects as to the
method for making these adjustments.
Floating Rate Notes that are not VRDIs
The tax treatment of Floating Rate Notes that are not VRDIs ("Contingent
Notes") is as follows. First, the Company is required to determine, as of the
issue date, the comparable yield for the Contingent Note. The comparable yield
is generally the yield at which the Company would issue a fixed rate debt
instrument with terms and conditions similar to those of the Contingent Note,
(including the level of subordination, term, timing of payments and general
market conditions, but not taking into consideration the riskiness of the
contingencies or the liquidity of the Contingent Note), but not less than the
applicable federal rate announced monthly by the IRS (the "AFR"). In certain
cases where Contingent Notes are marketed or sold in substantial part to tax-
exempt investors or other investors for whom the prescribed inclusion of
interest is not expected to have a substantial effect on their U.S. tax
liability, the comparable yield for the Contingent Note, without proper
evidence to the contrary, is presumed to be the AFR.
Second, solely for tax purposes, the Company constructs a projected schedule
of payments determined under the 1996 OID Regulations for the Contingent Note
(the "Schedule"). The Schedule is determined as of the issue date and
generally remains in place throughout the term of the Contingent Note. If a
right to a contingent payment is based on market information, the amount of
the projected payment is the forward price of the contingent payment. If a
contingent payment is not based on market information, the amount of the
projected payment is the expected value of the contingent payment as of the
issue date. The Schedule must produce the comparable yield determined as set
forth above. Otherwise, the Schedule must be adjusted under the rules set
forth in the 1996 OID Regulations.
Third, under the usual rules applicable to OID and based on the Schedule,
the interest income on the Contingent Note for each accrual period is
determined by multiplying the comparable yield of the Contingent Note
(adjusted for the length of the accrual period) by the Contingent Note's
adjusted issue price at the beginning of the accrual period (determined under
rules set forth in the 1996 OID Regulations). The amount so determined is then
allocated on a ratable basis to each day in the accrual period that the United
States Holder held the Contingent Note.
Fourth, appropriate adjustments are made to the interest income determined
under the foregoing rules to account for any differences between the Schedule
and actual contingent payments. Under the rules set forth in the 1996 OID
Regulations, differences between the actual amounts of any contingent payments
made in a calendar year and the projected amounts of such payments are
generally aggregated and taken into account, in the case of a positive
difference, as additional interest income, or, in the case of a negative
difference, first as a reduction in interest income for such year and
thereafter, subject to certain limitations, as ordinary loss.
The Company is required to provide each holder of a Contingent Note with the
Schedule described above. If the Company does not create a Schedule or the
Schedule is unreasonable, a United States Holder must set its own projected
payment schedule and explicitly disclose the use of such schedule and the
reason therefor. Unless otherwise prescribed by the IRS, the United States
Holder must make such disclosure on a statement attached to the United States
Holder's timely filed federal income tax return for the taxable year in the
Contingent Note was acquired.
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In general, any gain realized by a United States Holder on the sale,
exchange or retirement of a Contingent Note is interest income. In general,
any loss on a Contingent Note accounted for under the method described above
is ordinary loss to the extent it does not exceed such Holder's prior interest
inclusions on the Contingent Note (net of negative adjustments). Special rules
apply in determining the tax basis of a Contingent Note and the amount
realized on the retirement of a Contingent Note.
Other Rules
Certain Notes having OID may be redeemed prior to maturity or may be
repayable at the option of the holder. Such Notes may be subject to rules that
differ from the general rules discussed above relating to the tax treatment of
OID. Purchasers of such Notes with a redemption feature should consult their
tax advisors with respect to such feature since the tax consequences with
respect to original issue discount will depend, in part, on the particular
terms and the particular features of the purchased Note.
The Treasury Regulations relating to the tax treatment of OID contain
certain language ("aggregation rules") stating in general that, with some
exceptions, if more than one type of Note is issued in connection with the
same transaction or related transactions, such Notes may be treated as a
single debt instrument with a single issue price, maturity date, yield to
maturity and stated redemption price at maturity for purposes of calculating
and accruing any OID. Unless otherwise provided in the applicable Pricing
Supplement, the Company does not expect to treat different types of Notes as
being subject to the aggregation rules for purposes of computing OID.
MARKET DISCOUNT
If a United States Holder acquires a Note having a maturity date of more
than one year from the date of its issuance and has a tax basis in the Note
that is, in the case of a Note that does not have OID, less than its stated
redemption price at maturity, or, in the case of a Note that has OID, less
than its adjusted issue price (as defined above), the amount of such
difference is treated as "market discount" for federal income tax purposes,
unless such difference is less than 1/4 of one percent of the stated
redemption price at maturity multiplied by the number of complete years to
maturity (from the date of acquisition).
Under the market discount rules of the Code, a United States Holder is
required to treat any principal payment (or, in the case of a Note that has
OID, any payment that does not constitute a payment of qualified stated
interest) on, or any gain on the sale, exchange, retirement or other
disposition of, a Note as ordinary income to the extent of the accrued market
discount that has not previously been included in income. Thus, partial
principal payments are treated as ordinary income to the extent of accrued
market discount that has not previously been included in income. If such Note
is disposed of by the United States Holder in certain otherwise nontaxable
transactions, accrued market discount will be includible as ordinary income by
the United States Holder as if such Holder had sold the Note at its then fair
market value.
In general, the amount of market discount that has accrued is determined on
a ratable basis. A United States Holder may, however, elect to determine the
amount of accrued market discount on a constant yield to maturity basis. This
election is made on a bond-by-bond basis and is irrevocable.
With respect to Notes with market discount, a United States Holder may not
be allowed to deduct immediately a portion of the interest expense on any
indebtedness incurred or continued to purchase or to carry such Notes. A
United States Holder may elect to include market discount in income currently
as it accrues, in which case the interest deferral rule set forth in the
preceding sentence will not apply. Such an election will apply to all debt
instruments acquired by the United States Holder on or after the first day of
the first taxable year to which such election applies and is irrevocable
without the consent of the IRS. A United States Holder's tax basis in a Note
will be increased by the amount of market discount included in such Holder's
income under such an election.
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In lieu of the foregoing rules, different rules apply in the case of
Contingent Notes where a holder's tax basis in a Contingent Note is less than
the Contingent Note's adjusted issue price (determined under special rules set
out in the 1996 OID Regulations). Accordingly, prospective purchasers of
Contingent Notes should consult with their tax advisors with respect to the
application of such rules to such Notes.
PREMIUM AND ACQUISITION PREMIUM
A United States Holder will be treated as having purchased a Note at a
"premium" (or "amortizable bond premium") if the Note's adjusted basis,
immediately after its purchase by such Holder, exceeds the sum of all amounts
payable on the Note after the purchase date other than payments of qualified
stated interest. United States Holders may elect to amortize the premium over
the remaining term of the Note (where such Note is not callable prior to its
maturity date), as a reduction in the amount of the interest payments
otherwise includible in income, and the United States Holders will not be
required to include in income OID (if any) with respect to any Note purchased
at a premium. If such Note may be called by the Company prior to maturity
after the United States Holder has acquired it, the amount of amortizable bond
premium is determined with reference to either the amount payable at maturity,
or, if it results in a smaller premium attributable to the period through the
earlier call date, with reference to the amount payable on the earlier call
date. If a United States Holder makes this election, the premium will be
allocated among the interest payments on the Note, on the basis of the United
States Holders's yield to maturity, with compounding at the close of each
accrual period. A United States Holder who elects to amortize premium must
reduce the tax basis of the Note by the amount of the premium amortized in any
year. If this election is made with respect to any Note, it will also apply to
all debt instruments held by the United States Holder at the beginning of the
first taxable year to which the election applies and to all debt instruments
acquired by the United States Holder, and will be binding for all subsequent
taxable years unless the election is revoked with the consent of the IRS.
On June 27, 1996, the IRS published in the Federal Register proposed
regulations (the "Proposed Premium Regulations") on the amortization of bond
premium. The Proposed Premium Regulations describe the constant yield method
under which such premium is amortized and provide that the resulting offset to
interest income can be taken into account only as a United States Holder takes
the corresponding interest income into account under such holder's regular
accounting method. In the case of instruments that may be redeemed at the
option of the Company or repaid at the option of the Holder prior to maturity,
the Proposed Premium Regulations provide that the premium is calculated by
assuming that the issuer will exercise or not exercise its redemption rights
in the manner that maximizes the United States Holder's yield and the United
States Holder will exercise or not exercise its repayment option in a manner
that maximizes the United States Holder's Yield. The Proposed Premium
Regulations are proposed to be effective for debt instruments acquired on or
after the date 60 days after the date final regulations are published in the
Federal Register. However, if a United States Holder elects to amortize bond
premium for the taxable year containing such effective date, the Proposed
Premium Regulations would apply to all the United States Holder's debt
instruments held on or after the first day of that taxable year. It cannot be
predicted at this time whether the Proposed Premium Regulations will become
effective or what, if any, modifications will be made to them prior to their
becoming effective.
If a United States Holder purchases a Note issued with OID at an
"acquisition premium", the amount of OID that the United States Holder
includes in gross income is reduced to reflect the acquisition premium. A Note
is purchased at an acquisition premium if its adjusted basis, immediately
after its purchase, is (a) less than or equal to the sum of all amounts
payable on the Note after the purchase date other than payments of qualified
stated interest and (b) greater than the Note's "adjusted issue price" (as
described above under "Original Issue Discount--Fixed Rate Notes").
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If a Note is purchased at an acquisition premium, the United States Holder
reduces the amount of OID otherwise includible in income during an accrual
period by a fraction. The numerator of this fraction is the excess of the
adjusted basis of the Note immediately after its acquisition by the purchaser
over the adjusted issue price of the Note. The denominator of the fraction is
the excess of the sum of all amounts payable on the Note after the purchase
date, other than payments of qualified stated interest, over the Note's
adjusted issue price.
As an alternative to reducing the amount of OID otherwise includible in
income by this fraction, the United States Holder may elect to compute OID
accruals by treating the purchase as a purchase at original issuance and
applying the constant yield method described above.
In lieu of the foregoing rules, different rules apply in the case of
Contingent Notes where a holder's tax basis in a Contingent Note is greater
than the Contingent Note's adjusted issue price (determined under special
rules set out in the 1996 OID Regulations). Accordingly, prospective
purchasers of Contingent Notes should consult with their tax advisors with
respect to the application of such rules to such Notes.
SHORT-TERM NOTES
In the case of a Short-Term Note, no interest is treated as qualified stated
interest, and therefore all interest is included in OID. United States Holders
that report income for federal income tax purposes on an accrual method and
certain other United States Holders, including banks and dealers in
securities, are required to include OID in income on such Short-Term Notes on
a straight-line basis, unless an election is made to accrue the OID according
to a constant yield method based on daily compounding.
Any other United States Holder of a Short-Term Note is not required to
accrue OID for federal income tax purposes, unless it elects to do so. In the
case of a United States Holder that is not required, and does not elect, to
include OID in income currently, any gain realized on the sale, exchange or
retirement of a Short-Term Note is ordinary income to the extent of the OID
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, United States Holders that are not required, and do
not elect, to include OID in income currently are required to defer deductions
for any interest paid on indebtedness incurred or continued to purchase or
carry a Short-Term Note in an amount not exceeding the deferred interest
income with respect to such Short-Term Note (which includes both the accrued
OID and accrued interest that are payable but that have not been included in
gross income), until such deferred interest income is realized. A United
States Holder of a Short-Term Note may elect to apply the foregoing rules
(except for the rule characterizing gain on sale, exchange or retirement as
ordinary) with respect to "acquisition discount" rather than OID. Acquisition
discount is the excess of the stated redemption price at maturity of the
Short-Term Note over the United States Holder's basis in the Short-Term Note.
This election applies to all obligations acquired by the taxpayer on or after
the first day of the first taxable year to which such election applies, unless
revoked with the consent of the IRS. A United States Holder's tax basis in a
Short-Term Note is increased by the amount included in such Holder's income on
such a Note.
ELECTION TO TREAT ALL INTEREST AS OID
United States Holders may elect to include in gross income all interest that
accrues on a Note, including any stated interest, acquisition discount, OID,
market discount, de minimis OID, de minimis market discount and unstated
interest (as adjusted by amortizable bond premium and acquisition premium), by
using the constant yield method described above under "Original Issue
Discount". Such an election for a Note with amortizable bond premium will
result in a deemed election to amortize bond
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premium for all debt instruments owned and later acquired by the United States
Holder with amortizable bond premium and may be revoked only with the
permission of the IRS. Similarly, such an election for a Note with market
discount will result in a deemed election to accrue market discount in income
currently for such Note and for all other bonds acquired by the United States
Holder with market discount on or after the first day of the taxable year to
which such election first applies, and may be revoked only with the permission
of the IRS. A United States Holder's tax basis in a Note will be increased by
each accrual of the amounts treated as OID under the constant yield election
described in this paragraph.
INTEGRATION OF NOTES WITH OTHER FINANCIAL INSTRUMENTS
Any United States Holder of Notes that also acquires or has acquired any
financial instrument which, in combination with such Notes, would permit the
calculation of a single yield to maturity or could generally constitute a VRDI
of an equivalent term, may in certain circumstances treat such Notes and such
financial instrument as an integrated debt instrument for purposes of the
Code, with a single determination of issue price and the character and timing
of income, deductions, gains and losses. (For purposes of determining OID,
none of the payments under the integrated debt instrument will be treated as
qualified stated interest.) Moreover, the IRS may require in certain
circumstances that a United States Holder who owns Notes integrate such Notes
with a financial instrument held or acquired by such Holder or a related
party. United States Holders should consult their tax advisors as to the
possible integration of the Notes under the 1996 OID Regulations.
SALE OR EXCHANGE OF NOTES
A United States Holder generally will recognize gain or loss upon the sale
or exchange of a Note equal to the difference between the amount realized upon
such sale or exchange and the United States Holder's adjusted basis in the
Note. Such adjusted basis in the Note generally will equal the cost of the
Note, increased by OID, acquisition discount or market discount previously
included in respect thereof, and reduced (but not below zero) by any payments
on the Note other than payments of qualified stated interest and by any
premium that the United States Holder has taken into account. To the extent
attributable to accrued but unpaid interest, the amount realized by the United
States Holder will be treated as a payment of interest. Generally, any gain or
loss will be capital gain or loss if the Note was held as a capital asset,
except as provided under "Market Discount," "Short-Term Notes" and "Original
Issue Discount--Floating Rate Notes that are not VRDIs", above. Special rules
apply in determining the tax basis of a Contingent Note and the amount
realized on the retirement of a Contingent Note. The excess of net long-term
capital gains over net short-term capital losses is taxed at a lower rate than
ordinary income for certain non-corporate taxpayers. The distinction between
capital gain or loss and ordinary income or loss is also relevant for purposes
of, among other things, limitations on the deductibility of capital losses.
FOREIGN HOLDERS
As used herein, the term "Non-United States Holder" means a holder of a Note
that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or
more of the members of which is, for United States federal income tax
purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of Non-United States Holders. The 1996 Proposed
Regulations are generally proposed to be effective for payments after December
31, 1997, regardless of the issue date of the Note with respect to which such
payments are made, subject to certain transition rules. It cannot be predicted
at this time whether the 1996 Proposed
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Regulations will become effective as proposed or what, if any, modifications
may be made to them. The discussion under this heading and under "Backup
Withholding and Information Reporting," below, is not intended to include a
complete discussion of the provisions of the 1996 Proposed Regulations, and
prospective investors are urged to consult their tax advisors with respect to
the effect the 1996 Proposed Regulations may have if adopted.
In general, Non-United States Holders will not be subject to United States
federal withholding tax with respect to payments of principal and interest
(including OID) on Notes, provided that certain conditions are met. Under
current United States federal income tax law now in effect, and subject to the
discussion of backup withholding in the following section, payments of
principal and interest (including OID) with respect to a Note by the Company
or by any paying agent to any Non-United States Holder will not be subject to
United States federal withholding tax, provided, in the case of interest
(including OID), that (i) such Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (ii) such Holder is not for federal income tax
purposes a controlled foreign corporation related, directly or indirectly, to
the Company through stock ownership, (iii) such Holder is not a bank receiving
interest described in Section 881(c)(3)(A) of the Code and (iv) either (A) the
beneficial owner of the Note certifies, under penalties of perjury, to the
Company or paying agent, as the case may be, that such Holder is a Non-United
States Holder and provides such Holder's name and address, or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note, certifies, under penalties of
perjury, to the Company or paying agent, as the case may be, that such Note
has been received from the beneficial owner by it or by a financial
institution between it and the beneficial owner and furnishes the payor with a
copy thereof. A certificate described in this paragraph is effective only with
respect to payments of interest (including OID) made to the certifying Non-
United States Holder after the issuance of the certificate in the calendar
year of its issuance and the two immediately succeeding calendar years. Under
temporary Treasury Regulations, the foregoing certification may be provided by
the beneficial owner of a Note on IRS Form W-8.
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations would not affect the documentation rules described above, but
would add "intermediary certification" options for certain qualifying
withholding agents. Under one such option, a withholding agent would be
allowed to rely on IRS Form W-8 furnished by a financial institution or other
intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution
or intermediary has entered into a withholding agreement with the IRS and thus
is a "qualified intermediary." Under another option, an authorized foreign
agent of the U.S. withholding agent would be permitted to act on behalf of the
U.S. withholding agent, provided certain conditions are met.
For purposes of the certification requirements, the 1996 Proposed
Regulations, if adopted, would treat the partners of a foreign partnership,
rather than the partnership, as the beneficial owners of payments on the Notes
(subject to certain exceptions). The status of an entity as a "partnership"
for this purpose (but not for purposes of determining the application of
treaties) would generally be determined under U.S. tax principles. Thus,
subject to certain exceptions, each partner, rather than the partnership,
would be required to provide the required certifications to qualify for the
withholding exemption described above.
The 1996 Proposed Regulations provide certain presumptions with respect to
withholding for holders not providing the required certifications to qualify
for the withholding exemption described above. In addition, the 1996 Proposed
Regulations would replace a number of current tax certification forms
(including IRS Form W-8 and IRS Form 4224, discussed below) with a single,
restated form (and, in certain circumstances, additional information) and
standardize the period of time for which withholding agents could rely on such
certifications.
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Notwithstanding the foregoing, interest described in Section 871(h)(4) of
the Code will be subject to United States withholding tax at a 30% rate (or
such lower rate as may be provided by an applicable treaty). In general,
interest described in Section 871(h)(4) of the Code includes (subject to
certain exceptions) any interest the amount of which is determined by
reference to receipts, sales or other cash flow of the issuer or a related
person, any income or profits of the issuer or a related person, any change in
the value of any property of the issuer or a related person or any dividends,
partnership distribution or similar payments made by the issuer or a related
person. Interest described in Section 871(h)(4) of the Code may include other
types of contingent interest identified by the IRS in future Treasury
Regulations. If the Company issues Notes interest on which is described in
Section 871(h)(4) of the Code, the United States withholding tax consequences
of any such Notes will be described in the applicable Pricing Supplement.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest (including OID) on the Note is effectively
connected with the conduct of such trade or business, the Non-United States
Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest (including OID)
in the same manner as if it were a United States Holder. In lieu of the
certificate described above, such Holder will be required to provide a
properly executed IRS Form 4224 in order to claim an exemption from
withholding tax. In addition, if such Holder is a foreign corporation, it may
be subject to a branch profits tax equal to 30% (or such lower rate as may be
specified by an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose,
interest (including OID) on a Note will be included in the earnings and
profits of such Holder if such interest (including OID) is effectively
connected with the conduct by such Holder of a trade or business in the United
States.
Generally, any gain or income (other than that attributable to accrued
interest or OID) realized upon the sale, exchange, retirement or other
disposition of a Note will not be subject to United States federal income tax
unless (i) such gain or income is effectively connected with a trade or
business in the United States of the Non-United States Holder or (ii) in the
case of a Non-United States Holder who is a nonresident alien individual, the
Non-United States Holder is present in the United States for 183 days or more
in the taxable year of such sale, exchange, retirement or other disposition
and either (a) such individual has a "tax home" (as defined in Section
911(d)(3) of the Code) in the United States or (b) the gain is attributable to
an office or other fixed place of business maintained by such individual in
the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, information reporting
requirements apply to interest (including OID) and principal payments made to,
and to the proceeds of sales before maturity by, certain non-corporate United
States Holders. In addition, a 31% backup withholding tax will apply if the
non-corporate United States Holder (i) fails to furnish such holder's Taxpayer
Identification Number ("TIN") (which, for an individual, would be his or her
Social Security Number) to the payor in the manner required, (ii) furnishes an
incorrect TIN and the payor is so notified by the IRS, (iii) is notified by
the IRS that it has failed properly to report payments of interest and
dividends or (iv) in certain circumstances, fails to certify, under penalties
of perjury, that it has not been notified by the IRS that it is subject to
backup withholding for failure properly to report interest and dividend
payments. Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations (within the meaning of Section
7701(a) of the Code) and tax-exempt organizations.
In the case of a Non-United States Holder, under Treasury Regulations,
backup withholding and information reporting will not apply to payments of
principal and interest made by the Company or any paying agent thereof on a
Note with respect to which such holder has provided the required certification
under penalties of perjury that it is a Non-United States Holder or has
otherwise established an exemption, provided that (i) the Company or paying
agent, as the case may be, does not have actual knowledge that the payee is a
United States person and (ii) certain other conditions are satisfied.
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In general, if principal or interest payments on a Note are collected
outside the United States by a foreign office of a custodian, nominee or other
agent acting on behalf of a beneficial owner of a Note, such custodian,
nominee or other agent will not be required to apply backup withholding to
such payments made to such beneficial owner and will not be subject to
information reporting. However, if such custodian, nominee or other agent is a
United States person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income is effectively
connected with its conduct of a United States trade or business for a
specified three-year period, such custodian, nominee or other agent may be
subject to certain information reporting (but not backup withholding)
requirements with respect to such payment unless such custodian, nominee or
other agent has in its records documentary evidence that the beneficial owner
is not a United States person and certain conditions are met or the beneficial
owner otherwise establishes an exemption.
Under Treasury Regulations, payments on the sale, exchange or retirement of
a Note effected by or through a foreign office of a broker will not be subject
to backup withholding. However, if such broker is a United States person, a
controlled foreign corporation for United States tax purposes, or a foreign
person 50% or more of whose gross income is effectively connected with its
conduct of a United States trade or business for a specified three-year
period, information reporting (but not backup withholding) will be required
unless such broker has in its records documentary evidence that the beneficial
owner is not a United States person and certain other conditions are met or
the beneficial owner otherwise establishes an exemption.
The 1996 Proposed Regulations would, if adopted, alter the foregoing rules
in certain respects. In particular, the 1996 Proposed Regulations would
provide certain presumptions under which Non-United States Holders may be
subject to information reporting and backup withholding in the absence of
required certification.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a holder under the backup withholding rules will be
allowed as a refund or a credit against such holder's United States federal
income tax, provided that the required information is furnished to the IRS.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding to their particular situations,
the availability of an exemption therefrom, and the procedure for obtaining
such an exemption, if available.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
offers to purchase the Notes. The Company will pay each Agent a commission of
from .125% to .750% of the principal amount of each Note, depending upon its
Stated Maturity, sold through such Agent. The Company has reserved the right
to accept (but not solicit) offers to purchase Notes through additional agents
on substantially the same terms and conditions (including commission rates) as
would apply to purchases of Notes to or through the Agents pursuant to the
Distribution Agreement. Each Agent will have the right, in its discretion
reasonably exercised, to reject in whole or in part any offer to purchase
Notes received by such Agent. The Company will have the sole right to accept
offers to purchase Notes and may reject any such offer in whole or in part.
The Company also may sell Notes for resale to any Agent, acting as principal,
at a discount to be agreed upon at the time of sale. Any Agent may utilize a
selling or dealer group in connection with the resale of such Notes. The
Agents may offer the Notes they have purchased as principal to other dealers.
Any Agent may sell Notes to any dealer at a discount. In addition, unless
otherwise specified in the applicable Pricing Supplement, any Note purchased
by an Agent as principal
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will be purchased at 100% of the principal amount thereof less a percentage
equal to the commission applicable to an agency sale of a Note having an
identical Stated Maturity. After the initial public offering of the Notes, the
public offering price (in the case of Notes to be resold on a fixed public
offering price basis), any concession and the discount may be changed. The
Company also reserves the right to sell Notes directly to investors on its own
behalf in those jurisdictions where it is authorized to do so or as otherwise
provided in the applicable Pricing Supplement. In such circumstances, the
Company will have the sole right to accept offers to purchase Notes and may
reject any offer to purchase Notes in whole or in part. In the case of sales
made directly by the Company, no commissions will be paid.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act. The Company has agreed to indemnify each Agent against certain
liabilities, including liabilities under the Act, or to contribute to payments
each Agent may be required to make in respect thereof. The Company has agreed
to reimburse the Agents for certain of the Agents' expenses, including, but
not limited to, the fees and expenses of counsel to the Agents.
The Company has been advised by each Agent that it may from time to time
purchase and sell Notes in the secondary market, but that it is not obligated
to do so. There can be no assurance that there will be a secondary market for
the Notes or liquidity in the secondary market if one develops. From time to
time, each Agent may make a market in the Notes.
The Agents and their affiliates may engage in transactions with and perform
services for the Company in the ordinary course of business.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Edward H.
Graham, Senior Vice President, General Counsel and Assistant Secretary of the
Company and Sidley & Austin, Chicago, Illinois, and for the Agents by Winston
& Strawn, Chicago, Illinois. The opinions of Sidley & Austin and Winston &
Strawn will be conditioned upon, and subject to certain assumptions regarding,
future action required to be taken by the Company and the Trustee in
connection with the issuance and sale of any particular Note, the specific
terms of the Notes and other matters which may affect the validity of the
Notes but which cannot be ascertained on the date of such opinions. Mr. Graham
is an officer and full-time employee of the Company and the beneficial owner
of Common Stock of the Company.
S-32
<PAGE>
MAYTAG CORPORATION
DEBT SECURITIES
Maytag Corporation (the "Company") from time to time may offer its debt
securities (the "Debt Securities") at an aggregate initial offering price not
to exceed $150,000,000 (or its equivalent, based on the applicable exchange
rate at the time of sale, in such foreign currencies or units of two or more
thereof, as shall be designated by the Company). The Debt Securities may be
offered as separate series in amounts, at prices and on terms to be determined
at the time of sale. The accompanying Prospectus Supplement (as supplemented
by any applicable Pricing Supplement related thereto, a "Prospectus
Supplement") sets forth with regard to the Debt Securities in respect of which
this Prospectus is being delivered (the "Offered Debt Securities"), the title,
aggregate principal amount, currency, currencies or currency units in which
the principal (and premium, if any) and any interest are payable,
denominations, maturity, rate (which may be fixed or variable) and time of
payment of any interest, any terms for redemption at the option of the Company
or the holder, any terms for sinking fund payments, any listing on a
securities exchange and any initial public offering price and other terms in
connection with the offering and sale of the Offered Debt Securities.
The Company may sell Debt Securities to or through underwriters or dealers,
and also may sell Debt Securities directly to other purchasers or through
agents. See "Plan of Distribution." Such underwriters may include Salomon
Brothers Inc and Lehman Brothers Inc., or may be a group of underwriters
represented by firms including one or more of such firms. Such firms may also
act as agents. The Prospectus Supplement sets forth the names of any
underwriters or agents involved in the sale of the Offered Debt Securities and
any applicable commissions or discounts. The net proceeds to the Company from
such sale will be the public offering price of such Debt Securities less the
applicable commission or discount and less other expenses of the Company
associated with the issuance and sale of such Debt Securities.
----------------
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 AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is August 20, 1996.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY AGENT, UNDERWRITER OR DEALER. THIS PROSPECTUS
AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY OR
THEREBY 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. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Company has filed
with the Commission a registration statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Debt Securities offered hereby and warrants to
purchase debt securities. This Prospectus does not contain all information set
forth in the Registration Statement and reference is hereby made to the
Registration Statement and the exhibits thereto for further information with
respect to the Company and the Debt Securities offered hereby. Such reports,
proxy statements, Registration Statement, exhibits and other information can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the following Regional Offices of the Commission: Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511; and Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Branch of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Company is subject to the electronic filing
requirements of the Commission. Accordingly, pursuant to the rules and
regulations of the Commission, certain documents, including annual and
quarterly reports and proxy statements, filed by the Company with the
Commission have been or will be filed electronically. The Commission maintains
a World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission at (http://www.sec.gov). The aforementioned reports, proxy
statements and other information concerning the Company can also be inspected
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005, on which the Company's Common Stock is listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report of the Company on Form 10-K for the year ended December
31, 1995, the Quarterly Report of the Company on Form 10-Q for the period
ended March 31, 1996, the Quarterly Report of the Company on Form 10-Q for the
period ended June 30, 1996, the Current Report of the Company on Form 8-K
dated February 9, 1996 and the Current Report of the Company on Form 8-K dated
August 20, 1996 are incorporated by reference into this Prospectus. All
documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Debt Securities contemplated hereby shall
be deemed to be incorporated by reference into this Prospectus and to be made
a part hereof
2
<PAGE>
from the respective dates of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of the Registration
Statement and this Prospectus to the extent that a statement contained herein,
in the accompanying Prospectus Supplement or in any subsequently filed
document which 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 the Registration Statement or this Prospectus. The
Company will provide without charge to each person to whom a copy of this
Prospectus has been delivered, on the written or oral request of such person,
a copy of any or all of the documents referred to above which have been or may
be incorporated in this Prospectus by reference, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference
therein. Written requests or requests by telephone for such copies should be
directed to David D. Urbani, Vice President and Treasurer, Maytag Corporation,
Newton, Iowa 50208 (telephone no. 515-792-8000).
THE COMPANY
Maytag Corporation is a leading appliance enterprise focused on five
principal areas of home management: laundry, cooking, dishwashing,
refrigeration and floor care. Vending equipment is an additional corporate
business. Maytag's headquarters are located in Newton, Iowa.
HOME APPLIANCES
Maytag Appliances headquartered in Newton, Iowa, designs, manufactures,
distributes and services a broad line of major home appliances in all four of
the Company's major home appliance brands: Maytag, Jenn-Air, Magic Chef and
Admiral. The Maytag Appliances product line includes washers and dryers, gas
and electric ranges, cooktops and ovens, and refrigerators and dishwashers.
Maytag and Jenn-Air compete in the premium brand, high-end of the market;
Magic Chef and Admiral are positioned in the mid-to-lower price range and
compete on value-pricing and product quality. In addition to home appliances,
Maytag commercial laundry equipment is another long-standing business line.
Maytag Appliances also handles parts distribution and customer service
nationwide for the Maytag, Jenn-Air, Magic Chef and Admiral brands.
Maytag brands are distributed through direct sales from the factory to
independent dealers, mass merchandisers, and Maytag Home Appliances Centers,
which are dedicated Maytag and Admiral brand retail sales and service centers.
Commercial laundry equipment is sold through independent distributors.
Maytag Appliances operates manufacturing locations in North America for
major home appliances in Newton Iowa; Galesburg, Illinois; Cleveland,
Tennessee; Indianapolis, Indiana (with respect to such facility, the Company
has announced plans to phase out production by the end of 1996); Jackson,
Tennessee; and Herrin, Illinois.
The Hoover Company headquartered in North Canton, Ohio, is the market leader
in the North American floor care industry. The Hoover Company's main product
lines include upright and canister vacuums, stick and hand-held cleaners,
steam carpet cleaners, wet/dry utility vacuums, floor polishers, central
cleaning systems and commercial vacuum cleaners.
Hoover products are sold directly to retailers, including national accounts
and department stores, catalog showrooms and membership clubs, hardware and
appliance stores and vacuum specialty shops.
Hoover operates manufacturing sites in Ohio, Texas, Canada and Mexico.
Hoover products are distributed from a National Distribution Center in Ohio.
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<PAGE>
VENDING EQUIPMENT
Dixie-Narco, Inc. ("Dixie-Narco") headquartered in Williston, South Carolina
manufactures a variety of bottle and can vending equipment and glass front
coolers. Dixie-Narco products are sold worldwide primarily to soft drink
bottlers and vending equipment distributors. Dixie-Narco operates a state-of-
the-art manufacturing plant in Williston, South Carolina.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement, the net proceeds to
be received by the Company from the sale of the Debt Securities will be used
for general corporate purposes. These purposes may include the repayment or
reduction of indebtedness, working capital, capital expenditures, acquisitions
and the repurchase of shares of the Company's Common Stock. Pending use for
these purposes, the Company may invest proceeds from the sale of the Debt
Securities in short-term marketable securities.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
the Company and its consolidated subsidiaries for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------ ------------------------
1996 1995(1) 1995 1994 1993 1992 1991
---- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........ 4.49 0.50 1.93 3.84 2.03 1.05 2.27
</TABLE>
The ratio of earnings to fixed charges was computed by dividing "Earnings,"
the sum of income from continuing operations before taxes on income and fixed
charges by total fixed charges. "Fixed charges" consist of interest on
indebtedness and an imputed interest portion of the rent expense on operating
leases.
- --------
(1) Earnings were inadequate to cover fixed charges. The amount of additional
earnings required to achieve a ratio of 1.0 was $17.6 million.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating
to such Debt Securities.
The Offered Debt Securities are to be issued under an Indenture, dated as of
June 15, 1987, as supplemented from time to time (the "Indenture"), between
the Company and The First National Bank of Chicago, as Trustee (the
"Trustee"), a copy of which is incorporated by reference as an exhibit to the
Registration Statement. The following summaries of certain provisions of the
Debt Securities and the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by express reference to, all
the provisions of the Indenture, including the definitions therein of certain
terms. Certain terms defined in the Indenture are capitalized herein.
Particular section numbers refer to sections in the Indenture.
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<PAGE>
GENERAL
The Debt Securities will be unsecured and unsubordinated indebtedness of the
Company and will rank on a parity with all other unsecured and unsubordinated
indebtedness.
The Indenture does not limit the aggregate principal 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. The Company
has previously issued Debt Securities pursuant to the Indenture.
The Indenture limits the ability of the Company to incur certain secured
indebtedness and to engage in certain sale and lease-back transactions. See
"--Restrictive Covenants" below. The Indenture does not restrict the Company's
ability to incur unsecured indebtedness or, subject to the restrictions
described in "--Restrictive Covenants" below, to engage in corporate
transactions or reorganizations which have the effect of increasing the
Company's indebtedness. Accordingly, the Indenture does not afford Holders
protection against the Company incurring such indebtedness or (subject as
aforesaid) engaging in such transactions or reorganizations, which could
result in the Company being highly leveraged.
Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities for the following terms thereof: (1) the title of the Offered Debt
Securities; (2) any limit on the aggregate principal amount of the Offered
Debt Securities; (3) the date or dates on which the principal of the Offered
Debt Securities is payable; (4) the rate or rates (which may be fixed or
variable) per annum at which the Offered Debt Securities will bear interest,
if any, and the date from which such interest will accrue, the Interest
Payment Dates on which such interest will be payable and the Regular Record
Date for the interest payable on any Interest Payment Date; (5) the place or
places where the principal of (and premium, if any) and interest on the
Offered Debt Securities shall be payable; (6) the period or periods within
which, the price or prices at which and the terms and conditions upon which
the Offered Debt Securities may be redeemed, in whole or in part, at the
option of the Company, pursuant to any sinking fund or otherwise; (7) the
obligation, if any, of the Company to redeem or purchase Offered Debt
Securities pursuant to any sinking fund or analogous provisions or at the
option of a Holder thereof and the period or periods within which, the price
or prices at which and the terms and conditions upon which Offered Debt
Securities shall be redeemed or purchased, in whole or in part, pursuant to
such obligation; (8) if other than Dollars and denominations of $1,000 and any
integral multiple thereof, the currency or composite currencies and
denominations in which Offered Debt Securities shall be issuable; (9) if other
than the principal amount thereof, the portion of the principal amount of
Offered Debt Securities which shall be payable upon declaration of
acceleration of the Maturity thereof; (10) additional Events of Default with
respect to Offered Debt Securities, if any, other than those set forth in the
Indenture; and (11) any other terms of the Offered Debt Securities not
inconsistent with the provisions of the Indenture (Section 301). For a
description of the terms of the Offered Debt Securities, reference must be
made to the Prospectus Supplement relating thereto, including any applicable
Pricing Supplement related thereto, to the description of Debt Securities set
forth herein.
Unless otherwise specified in the Prospectus Supplement relating thereto,
the principal of, and any premium or interest on, the Offered Debt Securities
will be payable, and the Offered Debt Securities will be exchangeable and
transfers thereof will be registerable at the Corporate Trust Office of the
Trustee at One North State Street, 9th Floor, Chicago, Illinois or at its
agency in the Borough of Manhattan, The City of New York, provided that, at
the option of the Company, payment of interest may be made by check mailed to
the address of the Person entitled thereto as it appears in the Security
Register (Sections 202, 301, 305 and 1002).
Unless otherwise specified in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued in United States dollars in fully
registered form, without coupons, in denominations of $1,000 or any integral
multiple thereof (Section 302). No service charge will be made
5
<PAGE>
for any transfer or exchange of the Offered Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith other than certain exchanges not
involving any transfer (Sections 304, 305, 906 and 1107).
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities to be offered and sold at a substantial discount from the principal
amount thereof. Special federal income tax, accounting and other
considerations applicable to any such Original Issue Discount Securities will
be described in the Prospectus Supplement relating thereto. "Original Issue
Discount Security" means any security which provides for an amount less than
the principal amount thereof to be due and payable upon the declaration of
acceleration of the Maturity thereof upon the occurrence of an Event of
Default and during the continuation thereof (Sections 101 and 502).
RESTRICTIVE COVENANTS
Restrictions Upon Secured Debt
The Company covenants that it will not, and will not permit any Restricted
Subsidiary to, create, incur, issue, assume or guarantee any indebtedness for
borrowed money (hereafter called "indebtedness") secured by a mortgage,
security interest, pledge or lien (hereafter called "mortgage") of or upon any
Principal Property or any shares of stock or indebtedness of any Restricted
Subsidiary, whether owned at the date of the Indenture or thereafter acquired,
without effectively providing that the Debt Securities (together with, if the
Company shall so determine, any other indebtedness issued, assumed or
guaranteed by the Company or any Restricted Subsidiary and then existing or
thereafter created) shall be secured equally and ratably with (or, at the
option of the Company, prior to) such indebtedness so long as such
indebtedness shall be so secured. The foregoing restrictions, however, shall
not apply to (a) mortgages of or upon any property acquired, constructed or
improved by, or of or upon any shares of capital stock or indebtedness
acquired by, the Company or any Restricted Subsidiary after the date of the
Indenture to secure the payment of any part of the purchase price of such
property, shares of capital stock or indebtedness upon the acquisition thereof
by the Company or any Restricted Subsidiary or to secure any indebtedness
issued, assumed or guaranteed by the Company or any Restricted Subsidiary
prior to, at the time of or within 270 days after (i) in the case of property,
the later of the acquisition, completion of construction (including any
improvements on existing property) or commencement of commercial operation of
such property or (ii) in the case of shares of capital stock or indebtedness,
the acquisition of such shares of capital stock or indebtedness, which
indebtedness is issued, assumed or guaranteed for the purpose of financing or
refinancing all or any part of the purchase price of such property, shares of
capital stock or indebtedness and, in the case of property, the cost of
construction thereof or improvements thereon, provided that in the case of any
such acquisition, construction or improvement the mortgage shall not apply to
any property, shares of capital stock or indebtedness theretofore owned by the
Company or any Restricted Subsidiary, other than, in the case of any such
construction or improvement, any theretofore unimproved or substantially
unimproved real property on which the property so constructed or the
improvement is located; (b) mortgages of or upon any property, shares of
capital stock or indebtedness existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary; (c) mortgages of or upon property of
a corporation existing at the time such corporation is merged with or into or
consolidated with the Company or any Restricted Subsidiary or at the time of a
sale or transfer of the properties of a corporation as an entirety or
substantially as an entirety to the Company or any Restricted Subsidiary; (d)
mortgages of or upon any property of, or shares of capital stock or
indebtedness of, a corporation existing at the time such corporation becomes a
Restricted Subsidiary; (e) mortgages to secure indebtedness of any Restricted
Subsidiary to the Company or another Restricted Subsidiary; (f) mortgages in
favor of certain governmental bodies to secure partial, progress, advance or
other payments pursuant to any contract or statute or to secure indebtedness
incurred or guaranteed to finance or refinance all or any part of the purchase
price of the property, shares of capital stock or indebtedness subject to such
mortgages, or the cost of constructing or improving the
6
<PAGE>
property subject to such mortgages; and (g) extensions, renewals or
replacements of any mortgage existing on the date of the Indenture or any
mortgage referred to in the foregoing clauses (a) through (f), inclusive,
provided, however, that the principal amount of indebtedness secured thereby
may not exceed the principal amount of indebtedness so secured at the time of
such extension, renewal or replacement, and that such extension, renewal or
replacement shall be limited to all or a part of the property (plus
improvements and construction on such property), shares of capital stock or
indebtedness which was subject to the mortgage so extended, renewed or
replaced (Section 1006).
Notwithstanding the restrictions outlined above, the Company or any
Restricted Subsidiary may, without equally and ratably securing the Debt
Securities, issue, assume or guarantee indebtedness secured by a mortgage not
excepted under clauses (a) through (g) above, if the aggregate amount of such
indebtedness, together with all other indebtedness of, or indebtedness
guaranteed by, the Company and its Restricted Subsidiaries existing at such
time and secured by mortgages not so excepted and the Attributable Debt
existing in respect of Sale and Lease-Back Transactions existing at such time
(other than Sale and Lease-Back Transactions permitted by clause (i) under the
subsection Restrictions Upon Sale and Lease-Back Transactions and those
proceeds of which have been applied pursuant to clause (iii) thereof in
respect of which amounts equal to the Attributable Debt relating to the
transactions shall have been applied, within 270 days after the effective date
of the arrangement, to the prepayment or retirement (other than any mandatory
prepayment or retirement) of long-term indebtedness and Sale and Lease-Back
Transactions in which the property involved would have been permitted to be
mortgaged under clause (a) or (f) above), does not at the time exceed 10% of
Consolidated Net Tangible Assets (Sections 1006 and 1007).
Restrictions Upon Sale and Lease-Back Transactions
Sale and Lease-Back Transactions by the Company or any Restricted Subsidiary
of any Principal Property are prohibited unless (i) the Company or such
Restricted Subsidiary would be entitled, without equally and ratably securing
the Debt Securities, to issue, assume or guarantee indebtedness secured by a
mortgage on the property to be leased pursuant to clause (a) or (f) under the
subsection Restrictions Upon Secured Debt above, (ii) the Company or such
Restricted Subsidiary would be entitled, pursuant to the immediately preceding
paragraph, without equally and ratably securing the Debt Securities, to issue,
assume or guarantee indebtedness secured by a mortgage on such property in an
amount at least equal to the Attributable Debt in respect of the Sale and
Lease-Back Transaction, or (iii) the Company applies, within 270 days after
the effective date of the arrangement, an amount equal to the Attributable
Debt in respect of the transaction to the payment or retirement (other than
any mandatory prepayment or retirement) of indebtedness incurred or assumed by
the Company or any Restricted Subsidiary which by its terms matures or is
extendible or renewable at the option of the obligor to a date more than
twelve months after the date of the creation of such indebtedness (Sections
1006 and 1007).
Certain Definitions
The term "Attributable Debt" in respect of a Sale and Lease-Back Transaction
means the present value (discounted at the rate of interest implicit in the
lease involved in such Sale and Lease-Back Transaction, as determined in good
faith by the Company) of the obligation of the lessee thereunder for rental
payments (excluding, however, any amounts required to be paid by such lessee,
whether or not designated as rent or additional rent, on account of
maintenance and repairs, insurance, taxes, assessments, water rates or similar
charges or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales, maintenance and repairs, insurance,
taxes, assessments, water rates or similar charges) during the remaining term
of such lease (including any period for which such lease has been extended or
may, at the option of the lessor, be extended) (Section 101).
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<PAGE>
The term "Consolidated Net Tangible Assets" means, as of any particular
time, the total amount of assets (less applicable reserves) after deducting
therefrom (a) all current liabilities (excluding any thereof which are by
their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is
being computed and excluding current maturities of long-term indebtedness),
and (b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangible assets, all as shown in the
audited consolidated balance sheet of the Company and subsidiaries contained
in the Company's then most recent annual report to stockholders, except that
assets shall include an amount equal to the Attributable Debt in respect of
any Sale and Lease-Back Transaction not capitalized on such balance sheet
(Section 101).
The term "Holder" means a Person in whose name a Debt Security is registered
in the Security Register (Section 101).
The term "Principal Property" means any manufacturing plant or manufacturing
facility located within the United States of America, having a gross book
value in excess of 1% of Consolidated Net Tangible Assets at the time of
determination thereof and owned by the Company or any Restricted Subsidiary,
in each case other than (1) any such plant or facility which, in the opinion
of the Board of Directors of the Company, is not of material importance to the
total business conducted by the Company and its Restricted Subsidiaries taken
as a whole, or (2) any portion of such a plant or facility similarly found not
to be of material importance to the use or operation thereof (Section 101).
The term "Restricted Subsidiary" means any Subsidiary (a) substantially all
of the property of which is located, or substantially all of the business of
which is carried on, within the United States of America (other than its
territories or possessions and other than Puerto Rico) and (b) which owns a
Principal Property; provided however that any Subsidiary which is principally
engaged in financing operations outside the United States of America or which
is principally engaged in leasing or in financing installment receivables
shall not be a Restricted Subsidiary (Section 101).
The term "Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Restricted Subsidiary
of any Principal Property, whether owned at the date of the Indenture or
thereafter acquired (except for temporary leases for a term, including any
renewal thereof, of not more than three years and except for leases between
the Company and any Restricted Subsidiary, between any Restricted Subsidiary
and the Company or between Restricted Subsidiaries), which property has been
or is to be sold or transferred by the Company or such Restricted Subsidiary
to such Person with the intention of taking back a lease of such property
(Section 101).
The term "Subsidiary" means any corporation more than 50% of the outstanding
voting stock of which is at the time owned, directly or indirectly, by the
Company and/or one or more of its other Subsidiaries (Section 101).
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to Debt
Securities of any series: (a) failure to pay any interest on any Debt Security
of that series when due, continued for 30 days; (b) failure to pay principal
of (or premium, if any) on any Debt Security of that series at its Maturity;
(c) failure to deposit any sinking fund payment in respect of any Debt
Security of that series when due; (d) failure to perform or breach of any
covenant or warranty of the Company in the Indenture (other than a covenant
included in the Indenture solely for the benefit of series of Debt Securities
other than that series), continued for 90 days after written notice as
provided in the Indenture; (e) certain events of bankruptcy, insolvency or
reorganization relating to the Company; and (f) any other Event of Default
provided with respect to Debt Securities of that series (Section 501).
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<PAGE>
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding shall occur and be continuing, either the Trustee or the
Holders of at least 25% in principal amount of the Outstanding Debt Securities
of that series may declare the principal amount (or, if the Debt Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all of
the Debt Securities of that series to be due and payable immediately. However,
at any time after a declaration of acceleration with respect to Debt
Securities of any series has been made, but before a judgment or decree based
on such acceleration has been obtained, the Holders of a majority in principal
amount of Outstanding Debt Securities of that series may, subject to certain
conditions, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal, with respect to Debt
Securities of that series have been cured or waived as provided in the
Indenture (Section 502). For information as to waiver of defaults, see
"Modification and Waiver." Reference is made to the Prospectus Supplement
relating to any series of Offered Debt Securities which are Original Issue
Discount Securities for the particular provisions relating to acceleration of
the Maturity of a portion of the principal amount of such Original Issue
Discount Securities upon the occurrence of an Event of Default and the
continuation thereof.
The Indenture provides that, subject to the duties of the Trustee to act
with the required standard of care if an Event of Default shall occur and be
continuing, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity (Sections 601 and 603). Subject to such provisions for
security or indemnification of the Trustee and certain other restrictions, the
Holders of a majority in principal amount of the Outstanding Debt Securities
of any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Debt Securities of that series (Section 512).
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default with respect to Debt
Securities of that series and unless also the Holders of at least 25% in
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable security or indemnity, to the
Trustee to institute such proceeding as Trustee, and the Trustee shall not
have received from the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days
(Section 507). However, the Holder of any Debt Security will have an absolute
and unconditional right to receive payment of the principal of (and premium,
if any) and any interest, as provided for in the Indenture, on such Debt
Security on the Stated Maturity or Maturities expressed in such Debt Security
and to institute suit for the enforcement of any such payment (Section 508).
The Indenture requires the Company to furnish to the Trustee annually a
statement as to the absence of certain defaults under the Indenture (Section
1008). The Indenture provides that the Trustee may withhold notice to the
Holders of Debt Securities of any series of any default (except in payment of
principal (or premium, if any) or interest or in sinking fund payments) with
respect to Debt Securities of that series if it considers it in the interest
of the Holders of Debt Securities of that series to do so (Section 602).
MODIFICATION AND WAIVER
Modification and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of 66 2/3% in aggregate principal
amount of the Outstanding Debt Securities of each series affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security affected thereby: (a)
change
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<PAGE>
the Stated Maturity of the principal of, or any installment of principal of or
interest on, any Debt Security; (b) reduce the principal amount of (or
premium, if any) or interest on, any Debt Security; (c) reduce the amount of
principal of an Original Issue Discount Security payable upon acceleration of
the Maturity thereof; (d) change the place or currency of payment of principal
of, or premium, if any, or interest on, any Debt Security; (e) impair the
right to institute suit for the enforcement of any payment on or with respect
to any Debt Security after the Stated Maturity; or (f) reduce the percentage
in principal amount of Outstanding Debt Securities of any series, the consent
of the Holders of which is required for modification or amendment of the
Indenture, for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults (Section 902).
The Holders of 66 2/3% in aggregate principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities
of that series waive, insofar as that series is concerned, prospective
compliance by the Company with certain restrictive covenants of the Indenture
(Section 1009). 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 Debt Securities of that series waive any past default under the Indenture
with respect to that series, except a default in the payment of the principal
of (or premium, if any) or any interest on any Debt Security of that series or
in respect of a provision which under the Indenture cannot be modified or
amended without the consent of the Holder of each Outstanding Debt Security of
that series affected (Section 513).
DEFEASANCE
Defeasance and Discharge. Subject to certain restrictions, if the Debt
Securities of any series so provide, the Company will be discharged
(hereinafter, "defeasance") from its obligations in respect of Debt Securities
of that series (except for certain obligations to register the transfer or
exchange of Debt Securities of that series, to replace stolen, destroyed, lost
or mutilated Debt Securities of that series, to maintain paying agencies, to
compensate and indemnify the Trustee and to furnish the Trustee (if the
Trustee is not the registrar) with the names and addresses of the holders of
Debt Securities of that series) upon the irrevocable deposit with the Trustee,
in trust, of money and/or securities of the government which issued the
currency in which the Debt Securities of that series are payable or securities
issued by government agencies backed by the full faith and credit of such
government which, in the opinion of a nationally recognized firm of
independent public accountants, 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) and the
interest on the Debt Securities of that series on the Stated Maturity of such
payments and any mandatory sinking fund payments or analagous payments in
accordance with the terms of the Debt Securities of that series (Sections 1302
and 1304). Such a defeasance may be effected only if, among other things, the
Company has delivered to the Trustee an Opinion of Counsel (who may be an
employee of or counsel for the Company) stating that the Company has received
from the Internal Revenue Service a private letter ruling to the effect that
Holders of the Debt Securities of that series will not recognize income, gain
or loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times, as would have been the case if such defeasance had not
occurred, there has been a change in the applicable federal income tax law
from the time of this Indenture to such effect or there has been published by
the Internal Revenue Service a revenue ruling to such effect pertaining to a
comparable form of transaction (Section 1304). In addition, the Company may
also obtain a discharge of the Indenture with respect to all Debt Securities
issued under the Indenture by depositing with the Trustee, in trust, money
sufficient to pay at Stated Maturity or upon redemption all of such Debt
Securities, provided that such Debt Securities are by their terms to become
due and payable within one year or are to be called for redemption within one
year (Section 401).
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Defeasance of Certain Covenants and Certain Events of Default. Subject to
certain restrictions, if the Debt Securities of any series so provide, the
Company may omit to comply (hereinafter, "covenant defeasance") with the
restrictive covenants described under "Restrictive Covenants--Restrictions
Upon Secured Debt" and "--Restrictions Upon Sale and Lease-Back Transactions"
and "--Consolidation, Merger and Sale of Assets," and no Event of Default
shall arise with respect to Debt Securities of such series by reason of any
failure to comply therewith, upon the irrevocable deposit with the Trustee, in
trust, of money and/or securities of the government which issued the currency
in which the Debt Securities of that series are payable or securities issued
by government agencies backed by the full faith and credit of such government
which, in the opinion of a nationally recognized firm of independent public
accountants, 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) and the interest on the Debt
Securities of that series on the Stated Maturity of such payments and any
mandatory sinking fund payments in accordance with the terms of the Debt
Securities of that series (Sections 1303 and 1304). The obligations of the
Company under the Debt Securities of that series other than with respect to
the covenants referred to above and all Events of Default other than with
respect to such covenants shall remain in full force and effect. Such a
covenant defeasance may be effected only if, among other things, the Company
has delivered to the Trustee an Opinion of Counsel (who may be an employee of
or counsel for the Company) to the effect that the Holders of the Debt
Securities of that series will not recognize income, gain or loss for federal
income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times, as would have been the case if such covenant defeasance had
not occurred (Section 1304).
Covenant Defeasance and Certain Other Events of Default. In the event the
Company exercises its option to effect a covenant defeasance with respect to
the Debt Securities of any series as described above and the Debt Securities
of that series are thereafter declared due and payable because of the
occurrence of any Event of Default other than the Event of Default caused by
failing to comply with the covenants which are defeased, the amount of money
and securities on deposit with the Trustee would be sufficient to pay amounts
due on the Debt Securities of that series at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Debt Securities of that
series at the time of the acceleration resulting from such Event of Default.
However, the Company would remain liable for such payments (Section 301).
CONSOLIDATION, MERGER AND SALE OF ASSETS
Nothing in the Indenture or in any of the Debt Securities shall prevent any
consolidation of the Company with or merger of the Company into any other
corporation or shall prevent any lease, sale or transfer of all or
substantially all of the property and assets of the Company to any other
Person; provided, however, and the Company covenants and agrees, that any such
consolidation, merger, lease, sale or transfer shall be upon the condition
that (i) the due and punctual payment of the principal of, and premium, if
any, and interest on, all the Debt Securities according to their tenor, and
the due and punctual performance and observance of all the terms, covenants
and conditions of the Indenture to be kept or performed by the Company, shall,
by an indenture supplemental to the Indenture, executed and delivered to the
Trustee, be assumed by the corporation formed by such consolidation or into
which the Company shall have merged, or the Person which shall have acquired
by lease, sale or transfer all or substantially all of the property and assets
of the Company and (ii) immediately after giving effect to such transaction
and treating indebtedness for borrowed money which becomes an obligation of
the Company or a Restricted Subsidiary as a result of such transaction as
having been incurred by the Company or such Restricted Subsidiary at the time
of such transaction, no Event of Default, and no event which after notice or
lapse of time or both, would become an Event of Default, shall have occurred
and be continuing (Section 801).
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If, upon any such consolidation or merger, or upon any such lease, sale or
transfer, any Principal Property or any shares of capital stock or
indebtedness of any Restricted Subsidiary, owned immediately prior thereto,
would thereupon become subject to any mortgage, security interest, pledge or
lien securing any indebtedness for borrowed money of, or guaranteed by, such
other corporation or Person (other than any mortgage, security interest,
pledge or lien permitted as described under "Restrictive Covenants--
Restrictions Upon Secured Debt" above), the Company, prior to such
consolidation, merger, lease, sale or transfer, will by indenture supplemental
to the Indenture secure the due and punctual payment of the principal of (and
premium, if any) and interest on the Debt Securities (together with, if the
Company shall so determine, any other indebtedness of, or guaranteed by, the
Company or any Restricted Subsidiary and then existing or thereafter created)
equally and ratably with (or, at the option of the Company, prior to) the
indebtedness secured by such mortgage, security interest, pledge or lien
(Section 802).
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in global
form that will be deposited with, or on behalf of, a depositary identified in
the Prospectus Supplement. Global securities may be issued in either
registered or bearer form and in either temporary or permanent form (each a
"Global Security"). Payments of principal of (premium, if any) and interest on
Debt Securities represented by a Global Security will be made by the Company
to the Trustee and then by such Trustee to the depositary.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York ("DTC"),
that such Global Securities will be registered in the name of DTC's nominee,
and that the following provisions will apply to the depositary arrangements
with respect to any such Global Securities. Additional or differing terms of
the depositary arrangements will be described in the Prospectus Supplement
relating to a particular series of Debt Securities issued in the form of
Global Securities.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Debt Securities represented by such Global Security for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in a
Global Security will not be entitled to have Debt Securities represented by
such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of Debt Securities in certificated form
and will not be considered the owners or Holders thereof under the Indenture.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in certificated form; accordingly, such
laws may limit the transferability of beneficial interests in a Global
Security.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, or if DTC
ceases to be a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act, the Company will issue individual Debt
Securities in certificated form in exchange for Debt Securities represented by
Global Securities. In addition, the Company may at any time, and in its sole
discretion, determine not to have one or more Debt Securities represented by
one or more Global Securities and, in such event, will issue individual Debt
Securities in certificated form in exchange for Debt Securities represented by
Global Securities. If Debt Securities of any series shall have been issued in
the form of one or more Debt Securities represented by Global Securities and
if an Event of Default with respect to the Debt Securities of such series
shall have occurred and be continuing, the Company will issue individual Debt
Securities in certificated form in exchange for such Debt Securities
represented by Global Securities.
REGARDING THE TRUSTEE
The Company maintains banking relationships in the ordinary course of
business with the Trustee under the Indenture. The Trustee has committed to
lend the Company up to $60,000,000 under the Credit Agreement dated as of July
28, 1995, as amended February 7, 1996 and July 1, 1996, among the Company and
the banks which are parties thereto.
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<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters or dealers,
and also may sell Debt Securities directly to one or more other purchasers or
through agents. Such underwriters may include one or more of Salomon Brothers
Inc and Lehman Brothers Inc. or a group of underwriters represented by firms
including one or more of such firms. Such firms may also act as agents.
The Prospectus Supplement with respect to the Offered Debt Securities sets
forth the terms of the offering, including the name or names of any
underwriters or agents, the purchase price of the Offered Debt Securities, the
proceeds to the Company, any initial public offering price, any discounts,
commissions and other items constituting compensation from the Company and any
discounts, concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers. Any discounts or commissions received by
underwriters or agents and any profit on the resale of Debt Securities by them
may be deemed to be underwriting discounts and commissions under the
Securities Act.
The Debt Securities may be sold from time to time in one or more
transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. In the event that the Offered Debt
Securities are sold pursuant to a firm commitment underwriting, the Prospectus
Supplement will set forth the price at which the underwriters will purchase
the Offered Debt Securities from the Company and will also state that, after
the Offered Debt Securities are released for sale to the public, the offering
price and other selling terms of the Offered Debt Securities may from time to
time be varied by the underwriters or their representatives.
In the event that the Offered Debt Securities are not listed on a national
securities exchange, certain broker-dealers may make a market in the Offered
Debt Securities, but will not be obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given that any
broker-dealer will make a market in the Offered Debt Securities or as to the
liquidity of the trading market for the Offered Debt Securities, whether or
not the Offered Debt Securities are listed on a national securities exchange.
The Prospectus Supplement with respect to the Offered Debt Securities will
state, if known, whether or not any broker-dealer intends to make a market in
such Offered Debt Securities.
If so indicated in the Prospectus Supplement, the Company may authorize
dealers or other persons acting as the Company's agents to solicit offers by
certain institutions to purchase Offered Debt Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial savings
banks, insurance companies, pension funds, investment companies, educational
and charitable institutions and others, but in all cases such institutions
must be approved by the Company. The obligations of any purchaser under any
such contract will be subject to the condition that the purchase of the
Offered Debt Securities shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject. The dealers
and such other agents will not have any responsibility in respect of the
validity or performance of such contracts. The Prospectus Supplement will set
forth the commission payable for solicitation of such contracts.
Underwriters and agents who participate in the distribution of Debt
Securities may be entitled under agreements which may be entered into by the
Company to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution with
respect to payments which the underwriters or agents may be required to make
in respect thereof. Such underwriters and agents may be customers of, engage
in transactions with, or perform services for the Company in the ordinary
course of business.
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EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report (Form 10-K) for the year ended December 31,
1995 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements and schedule are
incorporated herein by reference in reliance upon such reports given upon the
authority of such Firm as experts in accounting and auditing.
14
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT (INCLUDING ANY ACCOMPANYING PRICING SUPPLEMENT) OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT. THIS
PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF
THE NOTES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AU-
THORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUAL-
IFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT (INCLUDING
ANY PRICING SUPPLEMENT) AND THE PROSPECTUS NOR ANY SALE OR SOLICITATION MADE
HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF OR THAT INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PROSPECTUS SUPPLEMENT
<S> <C>
Description of Notes....................................................... S-2
United States Federal Income Tax Consequences.............................. S-19
Supplemental Plan of Distribution.......................................... S-31
Legal Matters.............................................................. S-32
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents
by Reference.............................................................. 2
The Company................................................................ 3
Use of Proceeds............................................................ 4
Ratios of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................. 4
Plan of Distribution....................................................... 13
Experts.................................................................... 14
</TABLE>
U.S. $150,000,000
MAYTAG CORPORATION
MEDIUM-TERM NOTES, SERIES B
DUE FROM NINE MONTHS TO 30 YEARS FROM DATE OF ISSUE
SALOMON BROTHERS INC
LEHMAN BROTHERS
PROSPECTUS SUPPLEMENT
DATED AUGUST 20, 1996
