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PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(5)
(To Prospectus dated April 30, 1999) Registration Number 333-75827
$400,000,000
Maytag Corporation
Medium-Term Notes, Series D
Due from Nine Months to 30 Years from Date of Issue
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The Company: Maytag Corporation. Our executive offices are located at 403
West Fourth Street North, Newton, Iowa 50208, and our telephone number is (515)
787-7000.
Terms: We plan to offer and sell the Notes with various terms, including the
following:
. Stated maturities from 9 . Interest at fixed or
months to 30 years from date floating rates, or no
of issue. interest at all. The
. Redemption and/or repayment floating interest rate may
provisions, if applicable, be based on one or more of
at our option or at the the following indices plus
option of the holders of the or minus a spread and/or
Notes. multiplied by a spread
. Payments in U.S. dollars or multiplier:
one or more foreign . Commercial paper rate
currencies. . CD rate
. Issued in denominations of . CMT rate
$1,000 and integral . Federal funds rate
multiples of $1,000 in . Eleventh district cost of
excess thereof or other funds rate
specified denominations for . LIBOR
foreign currencies. . Prime rate
. Book-entry (through The . Treasury rate
Depository Trust Company) or . Such other interest rate
certificated form. formula as may be specified
. Interest payments on fixed in the applicable pricing
rate Notes on each February supplement
15 and August 15.
. Interest payments on
floating rate Notes on a
monthly, quarterly,
semiannual or annual basis.
The final terms for each Note, which may be different from the terms
described in this prospectus supplement, will be specified in the applicable
pricing supplement. If we sell other securities under the accompanying
prospectus, the aggregate amount of Notes that we may offer and sell under this
prospectus supplement would be reduced.
Investing in the Notes involves certain risks. See "Risk Factors" on page
S-3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement, the accompanying prospectus or any pricing
supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
We may sell the Notes to the agents as principals for resale at varying or
fixed offering prices or through the agents as agents using their reasonable
best efforts on our behalf. Unless otherwise specified in the applicable
pricing supplement, the price to the public for the Notes will be 100% of the
principal amount. We will pay commissions to the agents, ranging from .125% to
.750% of the principal amount of each Note sold through such agents, depending
upon the stated maturity of such Note. If we sell all of the Notes, we expect
to receive proceeds of between $399,500,000 and $397,000,000, after paying the
agents' discounts and commissions of between $500,000 and $3,000,000 and before
deducting expenses payable by us, including reimbursement of certain of the
agents' expenses. We may also sell the Notes without the assistance of the
agents (whether acting as principal or as agent).
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Salomon Smith Barney
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
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The date of this prospectus supplement is June 3, 1999.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Supplement
Risk Factors............................................................... S-3
Description of Notes....................................................... S-5
Special Provisions Relating to Foreign Currency Notes...................... S-24
United States Federal Income Tax Considerations............................ S-26
Supplemental Plan of Distribution.......................................... S-41
Legal Matters.............................................................. S-41
Prospectus
About This Prospectus...................................................... 2
Where You Can Find More Information........................................ 2
The Company................................................................ 4
Use of Proceeds............................................................ 4
Ratios of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................. 4
Description of Warrants.................................................... 12
Plan of Distribution....................................................... 14
Legal Matters.............................................................. 15
Experts.................................................................... 15
</TABLE>
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You should rely only on the information contained in this prospectus
supplement and, except as set forth in the next paragraph, the prospectus. We
have not, and the agents have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the agents
are not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information
appearing in this prospectus supplement is accurate as of the date on the front
cover of this prospectus supplement only. Our business, financial condition,
results of operations and prospects may have changed since this date.
This prospectus supplement sets forth certain terms of the Notes that we may
offer. It supplements the "Description of Debt Securities" in the prospectus.
This prospectus supplement supersedes the prospectus to the extent it contains
information that is different from the information in the prospectus.
Each time we offer Notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the Notes we are offering and the terms of the offering. The
pricing supplement will supersede this prospectus supplement to the extent it
contains information that is different from the information contained in this
prospectus supplement.
It is important for you to read and consider all information contained in
this prospectus supplement and the accompanying prospectus and pricing
supplement in making your investment decision. You should also read and
consider the information contained in the documents identified in "Where You
Can Find More Information" in the prospectus.
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RISK FACTORS
Your investment in the Notes will include certain risks. In consultation
with your own financial and legal advisers, you should carefully consider,
among other matters, the following discussion of risks before deciding whether
an investment in the Notes is suitable for you. The Notes are not an
appropriate investment for you if you are unsophisticated with respect to the
significant components of the Notes.
Structure Risks
General
If you invest in Notes indexed to one or more interest rates, currency or
other index or formula, there will be significant risks not associated with a
conventional fixed rate or floating rate debt security. Such risks include
fluctuation of interest rates, exchange rates, indices or formulas and the
possibility that you will receive a lower (or no) amount of principal, premium
or interest and at different times than you expected. We have no control over a
number of factors, including economic, financial and political events, that are
important in determining the existence, magnitude and longevity of such risks
and their results. In addition, if an index or formula used to determine any
amounts payable in respect of the Notes contains a multiplier or leverage
factor, the effect of any change in such index or formula will be magnified. In
recent years, the values of certain indices and formulas have been volatile,
and volatility in those and other indices and formulas may be expected in the
future. However, past experience is not necessarily indicative of what may
occur in the future.
Redemption
If the Notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may (in the case of optional redemption) or must (in
the case of mandatory redemption) redeem the Notes at times when prevailing
interest rates may be relatively low. Accordingly, you generally will not be
able to reinvest the redemption proceeds in a comparable security at an
effective interest rate as high as that of the Notes.
Uncertain Trading Markets
We cannot assure you a trading market for the Notes will ever develop or be
maintained. Many factors independent of our creditworthiness affect the trading
market and value of the Notes. These factors include:
. the complexity and volatility of any index or formula applicable to the
Notes;
. the method of calculating the principal, premium and interest in respect
of the Notes;
. the time remaining to the maturity of the Notes;
. the outstanding amount of the Notes;
. the redemption features of the Notes;
. the amount of other debt securities linked to any index or formula
applicable to the Notes; and
. the level, direction and volatility of market interest rates generally.
In addition, certain Notes have a more limited trading market and experience
more price volatility because they were designed for specific investment
objectives or strategies. There may be a limited number of buyers when you
decide to sell such Notes. This may affect the price you receive for such Notes
or your ability to sell such Notes at all. You should not purchase Notes unless
you understand and know you can bear these investment risks.
Exchange Rates and Exchange Controls
If you invest in Notes that are denominated or payable in a currency other
than U.S. dollars ("Foreign Currency Notes"), there will be significant risks
not associated with an investment in a debt security denominated and payable in
U.S. dollars, including the possibility of material changes in the exchange
rate
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between U.S. dollars and the payment currency for your Foreign Currency Notes
and the imposition or modification of exchange controls by the applicable
governments. We have no control over the factors that generally affect these
risks, such as economic, financial and political events and the supply and
demand for the applicable currencies. Moreover, if payments on the Foreign
Currency Notes are determined by reference to a formula containing a multiplier
or leverage factor, the effect of any change in the exchange rates between the
applicable currencies will be magnified. In recent years, the exchange rates
between certain currencies have been highly volatile, and volatility between
such currencies or with other currencies may be expected in the future.
Fluctuations between currencies in the past are not necessarily indicative,
however, of fluctuations that may occur in the future. Depreciation of the
payment currency for your Foreign Currency Notes would result in a decrease in
the U.S. dollar equivalent yield of the Foreign Currency Notes, in the U.S.
dollar equivalent value of the principal and any premium payable at maturity or
earlier redemption of the Foreign Currency Notes and, generally, in the U.S.
dollar equivalent market value of the Foreign Currency Notes. Governmental
exchange controls could affect exchange rates and the availability of the
payment currency for your Foreign Currency Notes on a required payment date.
Even if there are no exchange controls, it is possible that the payment
currency for your Foreign Currency Notes will not be available on a required
payment date because of circumstances beyond our control. In such cases, we
will be allowed to satisfy our obligations on the Foreign Currency Notes in
U.S. dollars.
Credit Ratings
The credit ratings on the Notes may not reflect the potential impact of all
risks related to structure and other factors on the value of the Notes. In
addition, real or anticipated changes in our credit ratings will generally
affect the market value of the Notes.
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DESCRIPTION OF NOTES
We will issue the Notes as a series of Debt Securities under an Indenture,
dated as of June 15, 1987, as amended or modified from time to time (the
"Indenture"), between us and The First National Bank of Chicago, as trustee
(the "Trustee"). The Indenture is subject to, and governed by, the Trust
Indenture Act of 1939, as amended. Capitalized terms used but not defined
herein shall have the meanings given to them in the accompanying prospectus, or
the Indenture, as the case may be. The term "Debt Securities," as used in this
prospectus supplement, refers to all debt securities, including the Notes,
issued and issuable from time to time under the Indenture. The following
description of Notes will apply to each Note offered under this prospectus
supplement unless otherwise specified in the applicable pricing supplement. For
additional terms of the Notes, See "Description of Debt Securities" in the
accompanying prospectus.
General
The Notes constitute a single series for purposes of the Indenture and are
limited to an aggregate initial offering price of $400,000,000, or its
equivalent in one or more foreign currencies. Unless otherwise specified in the
applicable pricing supplement, the Notes will be denominated in U.S. dollars,
and payments of principal of, premium, if any, and any interest on the Notes
will be made in U.S. dollars. The Notes also may be denominated in, and
payments of principal, premium, if any, and/or interest, if any, may be made
in, one or more foreign currencies. See "Special Provisions Relating to Foreign
Currency Notes--Payment of Principal, Premium, if any, and Interest, if any."
The currency in which a particular Note is denominated, or if such currency is
no longer legal tender for the payment of public and private debts in the
relevant country (or, if such currency is the currency of the member states of
the European Union that have adopted the single currency in accordance with the
Treaty establishing the European Community, as amended by the Treaty on
European Union, such other currency which is then legal tender for the payment
of such debts) is referred to in this prospectus supplement as the "Specified
Currency" with respect to such Note. References in this prospectus supplement
to "United States dollars," "U.S. dollars" or "$" are to the lawful currency of
the United States of America (the "United States").
Unless otherwise specified in the applicable pricing supplement, purchasers
are required to pay for the Notes in the applicable Specified Currency. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies and vice versa, and
commercial banks do not generally offer non-United States dollar checking or
savings account facilities in the United States. The agent from or through
which a Foreign Currency Note is purchased may be prepared to arrange for the
conversion of United States dollars into the Specified Currency in order to
enable the purchaser to pay for such Foreign Currency Note, provided that a
request is made to such agent on or prior to the fifth Business Day (as defined
herein) preceding the date of delivery of such Foreign Currency Note, or by
such other day as determined by such agent. Each agent will make such
conversion on such terms and subject to such conditions, limitations and
charges as such agent may from time to time establish in accordance with its
regular foreign exchange practices. The purchaser of each such Foreign Currency
Note will bear all costs of exchange. See "Special Provisions Relating to
Foreign Currency Notes."
The Notes will constitute our unsecured and unsubordinated indebtedness and
will rank on a parity with our 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 ("Stated Maturity"), unless
the principal (or any installment of principal) becomes due and payable prior
to Stated Maturity, whether by the declaration of acceleration of maturity,
notice of redemption at our option, notice of the option of the holder to elect
repayment or otherwise (See "--Redemption at Our Option" and "--Repayment at
the Option of the Holder" below) or unless the maturity of the Note is extended
at our option (See "--Extension of Maturity" below). Interest rates offered by
us with respect to the Notes may differ depending upon, among other things, the
aggregate principal amount of the Notes purchased in any single transaction.
S-5
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Each Note will be issued initially as either a fully registered book-entry
note (a "Book-Entry Note") represented by one or more global securities or a
certificate issued in definitive form (a "Certificated Note"). Except as set
forth under "--Book-Entry Notes" 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, other than Foreign
Currency Notes, will be issued in denominations of $1,000 and integral
multiples of $1,000 in excess thereof. The applicable pricing supplement will
specify the minimum denominations of each Foreign Currency Note.
Payments of interest, principal and premium, if any, to Beneficial Owners
(as defined below under "--Book-Entry Notes") of Book-Entry Notes are expected
to be made in accordance with The Depositary Trust Company's (the "Depositary")
and its participants' procedures in effect from time to time as described below
under "--Book-Entry Notes."
Payments of interest and, in the case of Amortizing Notes (as defined
herein), principal with respect to any Certificated Note (other than interest
and any principal payable at Stated Maturity) will be made by mailing a check
to the holder at its address listed in the Security Register (as defined in the
Indenture) for the Notes on the applicable Regular Record Date (as defined
herein). Notwithstanding the foregoing, at our option, 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 (as defined herein) 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 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 (as defined herein), 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 herein) specified in the applicable pricing
supplement plus (ii) the portion of the difference between the 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:
. the currency in which the Note will be denominated (and, if the
Specified Currency is not United States dollars, certain other terms of
the Note);
. the price (expressed as a percentage of the aggregate principal amount
thereof) at which such Note will be issued (the "Issue Price");
. the date on which such Note will be issued (the "Original Issue Date");
. the Stated Maturity;
. whether such Note will bear interest at a fixed rate (a "Fixed Rate
Note") or at a variable rate (a "Floating Rate Note");
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. if such Note is a Fixed Rate Note, the rate per annum at which such Note
will bear interest, if any, and the Interest Payment Date or Dates (as
defined herein), if different from those set forth below under
"Interest--Fixed Rate Notes";
. 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;
. whether such Note is an Original Issue Discount Note, and if so, the
yield to maturity;
. whether such Note is an Amortizing Note, and if so, the basis or formula
for the amortization of principal and/or interest and the payment dates
for such periodic principal payments;
. 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;
. whether the interest rate, in the case of a Fixed Rate Note, or the
Spread and/or Spread Multiplier, in the case of a Floating Rate Note,
may be reset at our option, and, if so, the date or dates on which the
interest rate or the Spread and/or Spread Multiplier may be reset and
the provisions relating to such reset;
. whether the maturity of such Note (other than an Amortizing Note) may be
extended at our option for one or more periods of one or more years up
to the Final Maturity specified in the applicable pricing supplement;
. whether such Note may be redeemed at our option, or repaid at the option
of the Holder, prior to Stated Maturity and, if so, the provisions
relating to such redemption or repayment;
. any sinking fund or mandatory redemption provisions with respect to such
Note;
. whether such Note will be issued initially as a Book-Entry Note or a
Certificated Note; and
. any other terms of such Note not inconsistent with the provisions of the
Indenture.
Certificated Notes may be presented for registration of transfer or exchange
at the Corporate Trust Office of the Trustee 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. Book-Entry Notes may be
transferred or exchanged only through the Depositary. See "--Book-Entry Notes."
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 amounts used in or resulting from such calculation on any Notes will be
rounded, in the case of United States dollars, to the nearest cent or, in the
case of a foreign currency, to the nearest unit (with one-half cent or unit
being rounded upwards).
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 (a
"Regular Weekday"); provided, however, that with respect to Foreign Currency
Notes, such Regular Weekday is also not a day on which commercial banks are
authorized or obligated by law, regulation or executive order to close in the
Principal Financial Center (as defined herein) of the country issuing the
Specified Currency (or, if the Specified Currency is euro, such Regular Weekday
is also a day on which the Trans-European Automated Real-Time Gross Settlement
Express Transfer (TARGET) System is open); provided, further, that with respect
to Notes as to which LIBOR (as defined below under "--Floating Rate Notes--
LIBOR") is the applicable Interest Rate Basis such Regular Weekday is also a
London Business Day. As used herein, "London Business Day" means any day on
which dealings in deposits in the Designated LIBOR Currency are transacted in
the London interbank market. "Principal Financial Center" means (i) the capital
city of the country issuing the
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Specified Currency or (ii) the capital city of the country to which the
Designated LIBOR currency relates, as applicable, except, in the case of (i) or
(ii) above, that with respect to United States dollars and euros, Australian
dollars, Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos,
South African rand and Swiss francs, the "Principal Financial Center" shall be
The City of New York, Sydney and (solely in the case of the Specified Currency)
Melbourne, Toronto, Frankfurt, Amsterdam, London, Johannesburg and Zurich,
respectively.
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
General
Unless otherwise specified in the applicable pricing supplement, each
interest-bearing 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 us 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 us. Unless otherwise specified in the applicable pricing supplement, the
Interest Payment Dates and the Regular Record Dates for Fixed Rate Notes will
be 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.
Each interest-bearing Note will bear interest at either a fixed rate or 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:
. a maximum interest rate, or ceiling, on the rate of interest which may
accrue during any interest period, and
. 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:
. the Commercial Paper Rate, in which case such Note will be a "Commercial
Paper Rate Note,"
. the CD Rate, in which case such Note will be a "CD Rate Note,"
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. the CMT Rate, in which case such Note will be a "CMT Rate Note,"
. the Federal Funds Rate, in which case such Note will be a "Federal Funds
Rate Note,"
. the Eleventh District Cost of Funds Rate, in which case such Note will
be an "Eleventh District Cost of Funds Rate Note,"
. LIBOR, in which case such Note will be a "LIBOR Note,"
. the Prime Rate, in which case such Note will be a "Prime Rate Note,"
. the Treasury Rate, in which case such Note will be a "Treasury Rate
Note," or
. 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
interest-bearing Fixed Rate 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 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
Unless otherwise specified in the applicable pricing supplement, each
Floating Rate Note will bear interest at a variable rate determined by
reference to the specified Interest Rate Basis plus or minus the Spread, if
any, and/or multiplied by the Spread Multiplier, if any. The "Spread" is the
number of basis points (one basis point
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equals one-hundredth of a percentage point) specified in the applicable pricing
supplement as being applicable to such Note. 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 and minimum
interest rate, if any, applicable to each Floating Rate Note. In addition, such
pricing supplement will contain particulars as to 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. "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, The First National Bank of Chicago will be the "Calculation Agent."
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 in the case of Floating Rate Notes which 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 prospectus
supplement;
. 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;
. semi-annually, the third Wednesday of each of two months of each year,
as specified on the face thereof and in the applicable pricing
supplement; and
. 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, semi-annually or annually (such period being the "Reset
Period" for such Note, and the first day of each Reset Period being an
"Interest Reset Date"), as specified in the applicable pricing supplement.
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;
. weekly, the Wednesday of each week (with the exception of weekly reset
Floating Rate Notes as to which the Treasury Rate is an applicable
Interest Rate Basis which generally reset on the Tuesday of each week,
but may reset on other days as explained below);
. monthly, the third Wednesday of each month (with the exception of
monthly reset Eleventh District Cost of Funds Rate Notes, which will
reset on the first calendar day of the month);
. quarterly, the third Wednesday of each March, June, September and
December of each year;
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. semi-annually, the third Wednesday of each of two months of each year,
as specified in the applicable pricing supplement; and
. 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 Rate 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 herein) 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 Commercial Paper Rate Note (the "Commercial Paper Interest
Determination Date"), a CD Rate Note (the "CD Interest Determination
Date"), a CMT Rate Note (the "CMT Interest Determination Date"), a
Federal Funds Rate Note (the "Federal Funds Interest Determination
Date"), or a Prime Rate Note (the "Prime Interest Determination Date")
will be the second Business Day prior to such Interest Reset Date;
. the Eleventh District Cost of Funds Rate Note (the "Eleventh 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 under "Eleventh District Cost of Funds Rate Notes");
. a LIBOR Note (the "LIBOR Interest Determination Date") will be the
second London Business Day immediately preceding each Interest Reset
Date; and
. 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:
. 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
. the Business Day preceding the applicable Interest Payment Date or
Maturity as the case may be.
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, Eleventh 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.
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, we have 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. Each Commercial Paper Rate Note will bear interest at
the interest rate specified in the Commercial Paper Rate Note and in the
applicable pricing supplement. The interest rate will be calculated with
reference to the Commercial Paper Rate and the Spread and/or Spread Multiplier,
if any.
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 Governors ("H.15(519)")
under the caption "Commercial Paper--Nonfinancial" or, if not so published by
9:00 A.M., New York City time, on the related Calculation Date, the rate on
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 Board of Governors of the Federal Reserve System
in its daily update of H.15(519), available through the World Wide Web site of
the Board of Governors of the Federal Reserve System at
http://www.bog.frb.us/releases/h15/update, or any successor site or publication
("H.15 Daily Update") under the caption "Commercial Paper--Nonfinancial." If
such rate is not yet published by 3:00 P.M., New York City time, on the related
Calculation Date in either H.15(519) or H.15 Daily Update, then the Commercial
Paper Rate on 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 industrial
issuers whose bond rating is "AA", or the equivalent, from a nationally
recognized statistical rating agency; provided, however, that if the dealers so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Commercial Paper Rate determined as of such Commercial Paper
Interest Determination Date will be the Commercial Paper Rate in effect on such
Commercial Paper Interest Determination Date.
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"Money Market Yield" means a yield (expressed as a percentage rounded, if
necessary, to the nearest one hundred-thousandth of a percent) calculated in
accordance with the following formula:
Money Market Yield = D X 360 x 100
360-(D X M)
where "D" refers to the applicable 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. Each CD Rate Note will bear interest at the interest rate specified
in the CD Rate Note and in the applicable pricing supplement. The interest rate
will be calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any.
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)" or, if not so published by 9:00 A.M., New York
City time, on the related Calculation Date, the rate on such CD Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable pricing supplement as published in H.15 Daily
Update under the caption "CDs (Secondary Market)." If such rate is not yet
published in either H.15(519) or H.15 Daily Update by 3:00 P.M., New York City
time, on the related Calculation Date, then the CD Rate on 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 United States 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 deposits) 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 so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the CD Rate determined as of such CD Interest Determination Date will
be the CD Rate in effect on such CD Interest Determination Date.
CMT Rate. Each CMT Rate Note will bear interest at the interest rate
specified in the CMT Rate Note and in the applicable pricing supplement. The
interest rate will be calculated with reference to the CMT Rate and the Spread
and/or Spread Multiplier, if any.
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 under the caption " . . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7051, such CMT Interest Determination Date
and (ii) if the Designated CMT Telerate Page is 7052, the week or 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 is not so displayed by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT Rate
for such CMT Interest Determination Date will be such treasury constant
maturity rate for the Designated CMT Maturity Index as published in the
relevant H.15(519). If such rate is no longer published or is not so published
by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate on 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 so
provided by 3:00 P.M., New York
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City time, on the related Calculation Date, then the CMT Rate on the CMT
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 P.M., New York City
time, on such CMT Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers in The City of New York (each, a "Reference Dealer") 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 is unable to obtain three such Treasury Note quotations,
the CMT Rate on 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 such CMT Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event
of equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not
five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of 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 so selected by the
Calculation Agent are quoting as mentioned herein, the CMT Rate determined as
of such CMT Interest Determination Date will be the CMT Rate in effect on such
CMT Interest Determination Date. If two Treasury Notes with an original
maturity as described in the 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 such service) for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519) or, if no such
page is specified in the applicable pricing supplement, page 7052 for the most
recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
Treasury Notes (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in the
applicable pricing supplement with respect to which the CMT Rate will be
calculated or, if no such maturity is specified in the applicable pricing
supplement, 2 years.
Federal Funds Rate. Each Federal Funds Rate Note will bear interest at the
interest rate specified in the Federal Funds Rate Note and in the applicable
pricing supplement. The interest rate will be calculated with reference to the
Federal Funds Rate and the Spread and/or Spread Multiplier, if any.
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)", or, if such rate is not so published
by 3:00 P.M., New York City time, on the related Calculation Date, the rate on
such Federal Funds Interest Determination Date as published in H.15 Daily
Update under the caption "Federal Funds/Effective Rate." If such rate is not
yet published in either H.15(519) or H.15 Daily Update by 3:00 P.M., New York
City time, on the related Calculation Date, then the Federal Funds Rate on 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 so selected by the Calculation
Agent are not quoting as mentioned in this sentence,
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the Federal Funds Rate determined as of such Federal Funds Interest
Determination Date will be the Federal Funds Rate then in effect on such
Federal Funds Interest Determination Date.
Eleventh District Cost of Funds Rate. Each Eleventh District Cost of Funds
Rate Note will bear interest at the interest rate specified in the Eleventh
District Cost of Funds Rate Note and in the applicable pricing supplement. The
interest rate will be calculated with reference to the Eleventh District Cost
of Funds Rate and the Spread and/or Spread Multiplier, if any.
Unless otherwise specified in the applicable pricing supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Eleventh District
Determination Date, the rate equal to the monthly weighted average cost of
funds for the calendar month preceding such Eleventh District Interest
Determination Date falls as set forth under the caption "11th District" on the
display on Telerate Page 7058 as of 11:00 A.M., San Francisco time, on such
Eleventh District Interest Determination Date. If such rate does not appear on
Telerate Page 7058 on such Eleventh District Interest Determination Date, the
Eleventh District Cost of Funds Rate on such Eleventh 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 immediately preceding the date of such
announcement. If the FHLB of San Francisco fails to announce such rate for the
calendar month immediately preceding such Eleventh District Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Interest Determination Date will be the Eleventh
District Cost of Funds Rate in effect on such Eleventh District Interest
Determination Date.
LIBOR. Each LIBOR Note will bear interest at the interest rate specified in
the LIBOR Note and in the applicable pricing supplement. The interest rate will
be calculated with reference to LIBOR and the Spread and/or Spread Multiplier,
if any.
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:
. With respect to any LIBOR Interest Determination Date, LIBOR will be
either: (a) if "LIBOR Reuters" is specified in the Note and applicable
pricing supplement, the arithmetic mean of the offered rates (unless the
specified Designated LIBOR Page (as defined below) by its terms provides
for only 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 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 the
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 the following bullet
point paragraph.
. With respect to any LIBOR Interest Determination Date on which fewer
than two offered rates appear (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 no rate appears, as the case may be, on
the Designated LIBOR Page
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with respect to LIBOR Telerate, as the case may be, the Calculation Agent
will request the principal London offices of each of four major banks in
the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in
the 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 the
Designated LIBOR Currency in such market at such time. If at least two
such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If
fewer than two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates
quoted as of 11:00 A.M., in the applicable Principal Financial Center, 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 and in a principal amount that is
representative for a single transaction in the Designated LIBOR Currency
in such market at such time; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
"Designated LIBOR Currency" means, with respect to any LIBOR Note, the
currency (including a composite currency), if any, specified in the Note and
the applicable pricing supplement as the Designated LIBOR Currency or, if no
such currency is specified in the Note and the applicable pricing supplement,
United States dollars.
"Designated LIBOR Page" means either:
. if "LIBOR Reuters" is specified in the Note and the applicable pricing
supplement, 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; or
. if "LIBOR Telerate" is specified in the Note and the applicable pricing
supplement, 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 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.
Prime Rate. Each Prime Rate Note will bear interest at the interest rate
specified in the Prime Rate Note and in the applicable pricing supplement. The
interest will be calculated with reference to the Prime Rate and the Spread
and/or Spread Multiplier, if any.
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 such rate is published in H.15(519) under the caption "Bank Prime
Loan" or, if not published by 9:00 A.M., New York City time, on the related
Calculation Date, the rate on 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 for
such Prime Interest Determination Date. If fewer than four such rates so appear
on the Reuters Screen USPRIME1 for such Prime Interest Determination Date, then
the Prime Rate shall be the arithmetic mean of the prime rates quoted on the
basis of the actual number of days in the year divided by 360 as of the close
of business on such Prime Interest Determination Date by at least two of the
three major money center banks in The City of New York selected
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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 million and being subject to supervision or
examination by Federal or state authority, selected by the Calculation Agent to
provide such rate or rates; provided, however, that if the appropriate number
of substitute banks or trust companies so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Prime Rate determined as of such
Prime Interest Determination Date will be the Prime Rate in effect on such
Prime Interest Determination Date.
"Reuters Screen USPRIME1" means the display designated as page "USPRIME1" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
USPRIME1 page on such service for the purpose of displaying prime rates or base
lending rates of major banks).
Treasury Rate. Each Treasury Rate Note will bear interest at the interest
rate specified in the Treasury Rate Note and in the applicable pricing
supplement. The interest rate will be calculated with reference to the Treasury
Rate and the Spread and/or Spread Multiplier, if any.
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 related Calculation 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 related Calculation 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 United States 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 so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate determined as of such
Treasury Interest Determination Date will be the Treasury Rate in effect on
such Treasury Interest Determination Date.
Other Provisions; Addendum
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Stated Maturity, any redemption or repayment provisions or any other term
relating to the Notes, may be modified and/or supplemented as specified under
"Other Provisions" on the face of such Notes or in an addendum relating
thereto, if so specified on the face of such Notes and described in the
applicable pricing supplement.
Original Issue Discount Notes
We 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
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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 us as issued with original issue discount
for U.S. federal income tax purposes.
Amortizing Notes
We may offer Notes ("Amortizing Notes") with the amount of principal thereof
and interest thereon payable in installments over the term of such 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 Amortizing Notes will be applied
first to interest due and payable on such Amortizing Notes and then to the
reduction of the unpaid principal amount of such Amortizing Notes. 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.
Currency Indexed Notes
We may from time to time offer Notes, the principal amount payable at
Maturity and/or the interest rate of which is determined by reference to the
rate of exchange between the Specified Currency and the other currency we
specify as the indexed currency in the applicable pricing supplement, or as
determined in such other manner as we may specify in the applicable pricing
supplement ("Currency Indexed Notes").
Unless we specify otherwise in the applicable pricing supplement, holders of
Currency Indexed Notes will be entitled to receive (i) an amount of principal
exceeding the stated face amount of the principal of, and/or an amount of
interest at an interest rate exceeding the stated rate of interest on, their
Currency Indexed Notes if, at Maturity or upon the relevant Interest Payment
Date, as the case may be, the rate at which the Specified Currency can be
exchanged for the indexed currency exceeds the rate of such exchange designated
as the base exchange rate, expressed in units of the indexed currency per one
unit of the Specified Currency, in the applicable pricing supplement or (ii) an
amount of principal less than such stated face amount and/or an amount of
interest at an interest rate less than such stated interest rate if, at
Maturity or upon the relevant Interest Payment Date, as the case may be, the
rate at which the Specified Currency can be exchanged for the indexed currency
is less than such base exchange rate, in each case determined as described
above under "--Interest."
Information about the payment of principal and interest, the relative
historical value (which information is not necessarily indicative of relative
future value) of the applicable Specified Currency against the applicable
indexed currency, any exchange controls applicable to such Specified Currency
or indexed currency and certain tax consequences to holders of Currency Indexed
Notes will be described in the applicable pricing supplement. See "Risk
Factors--Exchange Rates and Exchange Controls."
Other Indexed Notes
In addition to Currency Indexed Notes, Notes may be issued where the
principal amount payable at Maturity and/or the interest rate or premium to be
paid on such Notes are to be determined by reference to the relationship
between two or more currencies, to the price of one or more specified
securities or commodities exchange indices or other indices or by other similar
methods or formulas. Such Notes are called "Indexed Notes." In the pricing
supplement relating to such an Indexed Note, we will describe, as applicable,
the method by which the amount of interest payable on any Interest Payment Date
and the amount of principal payable at
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Maturity in respect of such Indexed Note will be determined, certain special
tax consequences of the purchase, ownership or disposition of such Indexed
Notes, certain risks associated with an investment in such Indexed Notes and
other information relating to such Indexed Notes.
Subsequent Interest Periods
The pricing supplement relating to each Note will indicate whether we have
the option to reset the interest rate, in the case of a Fixed Rate Note, or to
reset the Spread and/or Spread Multiplier, in the case of a Floating Rate Note,
and, if so, the date or dates on which we may reset the interest rate or the
Spread and/or Spread Multiplier (each an "Optional Reset Date"). If we have
this option, the following procedures will apply, unless modified in the
applicable pricing supplement.
We may exercise this option by notifying the Trustee 50 to 60 days prior to
an Optional Reset Date. Not later than 40 days prior to the Optional Reset
Date, the Trustee will mail to the holder of the Note a notice (the "Reset
Notice") setting forth:
. the new interest or new Spread and/or Spread Multiplier; and
. our election to reset the interest rate, in the case of a Fixed Rate
Note, or the Spread and/or Spread Multiplier, in the case of a Floating
Rate Note;
. the provisions, if any, for redemption or repayment during the period
from the Optional Reset Date to the next Optional Reset Date or, if
there is no next Optional Reset Date, to the Maturity of the Note (each
period being a "Subsequent Interest Period"), including the date or
dates on which or the period or periods during which and the price or
prices at which redemption may occur during the Subsequent Interest
Period.
When the Trustee transmits a Reset Notice to holders of the Notes, the new
interest rate or new Spread and/or Spread Multiplier will take effect
automatically on the Optional Reset Date, and, except as modified by the Reset
Notice and as described in the next paragraph, the Note will have the same
terms as prior to the transmittal of the Reset Notice.
Notwithstanding the foregoing, not later than 20 days prior to an Optional
Reset Date for a Note, we may, at our option, revoke the new interest rate, or
the Spread and/or Spread Multiplier provided for in the Reset Notice and
establish a higher interest rate or a Spread and/or Spread Multiplier for the
Subsequent Interest Period commencing on such Optional Reset Date, by causing
the Trustee to transmit a notice of the higher interest rate or higher Spread
and/or Spread Multiplier to holders of the Notes. This notice will be
irrevocable. All Notes whose interest rate or Spread and/or Spread Multiplier
is reset on an Optional Reset Date and which have not been tendered for
repayment (or with respect to which tenders have been validly revoked) pursuant
to the next succeeding paragraph will bear the higher interest rate or higher
Spread and/or Spread Multiplier for the Subsequent Interest Period.
If we elect to reset the interest rate or the Spread and/or Spread
Multiplier of a Note, holders of the Notes will have the option to elect that
we repay the Notes on any Optional Reset Date at a price equal to the aggregate
principal amount of the Note outstanding on, plus any accrued interest to, the
Optional Reset Date. In order for a Note to be repaid on an Optional Reset
Date, holders of the Notes must follow the procedures set forth below under "--
Repayment at the Option of the Holder" for optional repayment, except that the
period for delivery of the Note or notification to the Trustee will be between
25 and 35 days prior to the Optional Reset Date and except that if holders of
the Notes have tendered a Note for repayment pursuant to a Reset Notice, such
holders may, by written notice to the Trustee, revoke their tenders for
repayment until the close of business on the tenth day prior to the Optional
Reset Date.
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Extension of Maturity
The pricing supplement relating to each Note (other than an Amortizing Note)
will indicate if we have the option to extend the maturity of the Note for one
or more periods of one or more years (each an "Extension Period") up to the
date (the "Final Maturity") set forth in the applicable pricing supplement. If
we have this option with respect to any Note (other than an Amortizing Note),
the following procedures will apply, unless modified in the applicable pricing
supplement, which will contain complete details of our option to extend the
maturity of a Note (other than an Amortizing Note).
We may exercise our option by notifying the Trustee from 45 to 60 days prior
to the Maturity originally in effect (the "Original Maturity") or, if the
Maturity of the Note has already been extended, prior to the Maturity then in
effect (an "Extended Maturity"). No later than 40 days prior to the Original
Maturity or an Extended Maturity, (each, a "Maturity Date"), the Trustee will
mail you a notice (the "Extension Notice") relating to the Extension Period,
setting forth:
. our election to extend the Original Maturity or Extended Maturity, as
applicable,
. the new Maturity Date,
. in the case of a Fixed Rate Note, the interest rate applicable to the
Extension Period or, in the case of a Floating Rate Note, the Spread
and/or Spread Multiplier applicable to the Extension Period, and
. the provisions, if any, for redemption during the Extension Period,
including the date or dates on which or the period or periods during
which and the price or prices at which redemption may occur during the
Extension Period.
When the Trustee mails you an Extension Notice, the Maturity Date will be
extended automatically; and except as modified by the Extension Notice and as
described in the next paragraph, your Note will have the same terms as prior to
the mailing of the Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Maturity
Date for a Note which was in effect prior to the mailing of an Extension
Notice, we may, at our option, revoke the interest rate or the Spread and/or
Spread Multiplier provided for in the Extension Notice and establish a higher
interest rate or a Spread and/or Spread Multiplier for the Extension Period, by
mailing or causing the Trustee to transmit notice of the higher interest rate
or higher Spread and/or Spread Multiplier to holders of the Notes. This notice
will be irrevocable. All Notes whose Maturity Dates are extended and which have
not been tendered for repayment (or with respect to which tenders have been
validly revoked) pursuant to the next succeeding paragraph will bear a higher
interest rate or higher Spread and/or Spread Multiplier for the Extension
Period.
If we elect to extend the Maturity of a Note, holders of the Notes will have
the option to elect that we repay the Notes on the Maturity Date in effect
prior to the mailing of the Extension Notice at a price equal to the principal
amount plus any accrued interest. In order for a Note to be repaid on the
Maturity Date in effect prior to the mailing of the Extension Notice, holders
of the Notes must follow the procedures under "--Repayment at the Option of the
Holder" below for optional repayment, except that the period for delivery of
the Note or notification to the Trustee will be between 30 and 35 days prior to
the Maturity Date in effect prior to the mailing of the Extension Notice and
except that if holders of the Notes have tendered a Note for repayment pursuant
to an Extension Notice such holders may, by written notice to the Trustee,
revoke their tenders for repayment until the close of business on the tenth day
prior to the Maturity Date in effect prior to the mailing of the Extension
Notice.
Redemption at Our Option
Unless otherwise specified in the applicable pricing supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at our
option prior to the Stated Maturity Date only if an Initial Redemption Date is
specified in the applicable pricing supplement. If so specified, the Notes will
be subject to redemption at our option on any date on and after the applicable
Initial Redemption Date in whole or from time
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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.
However, 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. We 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 canceled and a
new Note or Notes representing the unredeemed portion thereof will be issued in
the name of the holder thereof.
Repayment at the Option of the Holder
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 or, in the case of Foreign
Currency Notes, the minimum denomination specified in the applicable pricing
supplement.
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, we have 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 by written notice to the
Paying Agent revoke such tender for repayment until the close of business on
the tenth calendar day prior to the repayment date. The repayment option may be
exercised by the holder of a Note for less than the entire principal amount of
the Note provided that the principal amount of the Note remaining outstanding
after such repayment is an authorized denomination. Upon such partial repayment
such Note will be canceled 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
Notes") that has an account with the Depositary, on behalf of the Beneficial
Owners of the Global Security or Securities
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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 we 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
of 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 deliver at the time such
notices of election are given to the Depositary by causing the applicable
Participant to transfer such Beneficial Owner's interest in the Global Security
or Securities representing such Book-Entry Notes, on the Depositary's records,
to the Trustee. See "--Book-Entry Notes."
If applicable, we 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
We may at any time purchase Notes at any price or prices in the open market
or otherwise. Notes so purchased by us may be held or resold, or, at our
discretion. 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 Notes
The Depositary will act as securities depository for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully registered securities registered
in the name of Cede & Co. (the Depositary'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 the
Depositary. If, however, the aggregate principal amount of any issue exceeds
the maximum principal amount, if any, permitted by the Depositary, 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.
The Depositary is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary 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
of the Depositary ("Direct Participants") include securities brokers and
dealers, banks, trust
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companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to the Depositary and its Participants are on file with
the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for such Book-Entry
Notes on the Depositary's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global Security ("Beneficial
Owner") is in turn to be recorded on the records of Direct Participants and
Indirect Participants. Beneficial Owners will not receive written confirmation
from the Depositary of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct Participants or Indirect
Participants through which such Beneficial Owner entered into the transaction.
Transfers of ownership interests in a Global Security representing Book-Entry
Notes are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive certificates representing their
ownership interests in Book-Entry Notes, except in the event that use of the
book-entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing Book-
Entry Notes which are deposited with the Depositary are registered in the name
of the Depositary's nominee, Cede & Co. The deposit of Global Securities with
the Depositary and their registration in the name of Cede & Co. effect no
change in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Global Securities representing the Book-Entry Notes;
the Depositary's records reflect only the identity of the Direct Participants
to whose accounts such Book-Entry Notes are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary 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 and terms are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an "Omnibus Proxy" to us as soon as possible
after the applicable 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 applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal and interest payments on the Global Securities representing the
Book-Entry Notes will be made to the Depositary. The Depositary's practice is
to credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the Depositary's records
unless the Depositary has reason to believe that it will not receive payment on
such date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of the
Depositary, the Paying Agent or us, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to the Depositary is the responsibility of us or the Paying Agent,
disbursement of such payments to Direct Participants shall be the
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responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct Participants and
Indirect Participants.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by us, 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 Global Security or
Securities representing such Book-Entry Notes, on the Depositary's records, to
the Paying Agent. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Security or Securities representing such Book-
Entry Notes are transferred by Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to us or to the Trustee. Under such circumstances, in the
event that a successor securities depository is not obtained. Certificated
Notes are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor securities depository). In that event,
Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that we believe
to be reliable, but neither we nor any agent takes any responsibility for its
accuracy.
None of us, 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.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
General
Unless otherwise specified in the applicable pricing supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
Specified Currency. The information set forth in this prospectus supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. We and the
agents disclaim any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any matters
that may affect the purchase, holding or receipt of payments of principal of,
and premium, if any, and interest, if any, on, Foreign Currency Notes. Such
persons should consult their own financial and legal advisors with regard to
such matters. See "Risk Factors--Exchange Rates and Exchange Controls."
Payment of Principal, Premium, if any, and Interest, if any
Unless otherwise specified in the applicable pricing supplement, we are
obligated to make payments of principal of, and premium, if any, and interest,
if any, on, a Foreign Currency Note in the Specified Currency. Any such amounts
payable by us in the Specified Currency will be converted by the exchange rate
agent named
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in the applicable pricing supplement (the "Exchange Rate Agent") into United
States dollars for payment to holders unless otherwise specified in the
applicable pricing supplement or the holder of such Foreign Currency Note
elects, in the manner described in this prospectus supplement, to receive such
amounts in the Specified Currency.
Except as provided under "--Availability of Specified Currency" below, any
United States dollar amount to be received by a holder of a Foreign Currency
Note will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York time,
on the second Business Day preceding the applicable payment date from three
recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by us for the purchase
by the quoting dealer of the Specified Currency for United States dollars for
settlement on such payment date in the aggregate amount of such Specified
Currency payable to all holders of Foreign Currency Notes scheduled to receive
United States dollar payments and at which the applicable dealer commits to
execute a contract. All currency exchange costs will be borne by the holders of
such Foreign Currency Notes by deductions from such payments. If three such bid
quotations are not available, payments will be made in the Specified Currency.
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of any payment of principal, premium, if any, and/or interest, if any,
in the Specified Currency by submitting a written request for such payment to
the Trustee at its corporate trust office in The City of New York on or prior
to the applicable Record Date or at least 15 calendar days prior to Maturity,
as the case may be. Such written request may be mailed or hand delivered or
sent by cable, telex or other form of facsimile transmission. Holders of
Foreign Currency Notes may elect to receive all or a specified portion of all
future payments in the Specified Currency and need not file a separate election
for each payment. Such election will remain in effect until revoked by written
notice to the Trustee, but written notice of any such revocation must be
received by the Trustee on or prior to the applicable Record Date or at least
15 calendar days prior to Maturity, as the case may be. Holders of Foreign
Currency Notes to be held in the name of a broker or nominee should contact
such broker or nominee to determine whether and how an election to receive
payments in the Specified Currency may be made.
Unless otherwise specified in the applicable pricing supplement, if the
Specified Currency is other than United States dollars, a Beneficial Owner of
the related Global Security or Securities which elects to receive payments of
principal, premium, if any, and/or interest, if any, in the Specified Currency
must notify the Participant through which it owns its interest on or prior to
the applicable Record Date or at least 15 calendar days prior to the Maturity,
as the case may be, of such Beneficial Owner's election. Such Participant must
notify the Depositary of such election on or prior to the third Business Day
after such Record Date or at least 12 calendar days prior to the Maturity, as
the case may be, and the Depositary will notify the Trustee of such election on
or prior to the fifth Business Day after such Record Date or at least 10
calendar days prior to the Maturity, as the case may be. If complete
instructions are received by the Participant from the Beneficial Owner and
forwarded by the Participant to the Depositary, and by the Depositary to the
Trustee, on or prior to such dates, then such Beneficial Owner will receive
payments in the Specified Currency.
Payments of the principal of, and premium, if any, and/or interest, if any,
on, Foreign Currency Notes which are to be made in United States dollars will
be made in the manner specified in this prospectus supplement with respect to
Notes denominated in United States dollars. See "Description of Notes--
General." Payments of interest, if any, on Foreign Currency Notes which are to
be made in the Specified Currency on an Interest Payment Date other than
Maturity will be made by check mailed to the address of the holders of such
Foreign Currency Notes as they appear in the Security Register, subject to the
right to receive such interest payments by wire transfer of immediately
available funds under the circumstances describe under "Description of Notes--
General." Payments of principal of, and premium, if any, and/or interest, if
any, on, Foreign Currency Notes which are to be made in the Specified Currency
at Maturity will be made by wire transfer of immediately available funds to an
account with a bank designated at least fifteen calendar days prior to Maturity
by each holder, provided that such bank has appropriate facilities and that the
applicable Foreign Currency Note is presented and surrendered at the Corporate
Trust Office of the Trustee at One North State
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Street, 9th floor in the City of Chicago, Illinois or at its agency in the
Borough of Manhattan, The City of New York in time for the Trustee to make such
payments in such funds in accordance with its normal procedures.
Availability of Specified Currency
If the Specified Currency for a Foreign Currency Note is not available for
the required payment of principal, premium, if any, and/or interest, if any, in
respect of such Foreign Currency Note due to the imposition of exchange
controls or other circumstances beyond our control, we will be entitled to
satisfy our obligations to the holder of such Foreign Currency Note by making
such payment in United States dollars on the basis of the Market Exchange Rate
(as defined herein) computed by the Exchange Rate Agent, on the second Business
Day prior to such payment or, if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate, or
as otherwise specified in the applicable pricing supplement.
The "Market Exchange Rate" for a Specified Currency other than United States
dollars means the noon dollar buying rate in The City of New York for cable
transfer for such Specified Currency as certified for customs purposes (or, if
not so certified, as otherwise determined) by the Federal Reserve Bank of New
York. Any payment made in United States dollars under such circumstances where
the required payment is in a Specified Currency other than United States
dollars will not constitute an Event of Default under the Indenture with
respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of the Foreign Currency
Notes.
Judgments
If an action based on Foreign Currency Notes were commenced in a federal
court of the United States, it is not clear whether such court would grant
judgment relating to such Notes in United States dollars or in the Specified
Currency. Furthermore, if the judgment were rendered in United States dollars,
it is not clear whether the rate of conversion into United States dollars would
be determined with reference to the date of default, the date judgment is
rendered or some other date. Under current Illinois law, a state court in the
State of Illinois rendering a judgment on a Foreign Currency Note would, unless
otherwise provided in such Foreign Currency Note, require such judgment to be
payable in the Specified Currency in which such Foreign Currency Note is
denominated or, at our option, in United States dollars based upon the spot
rate of exchange on the banking date next preceding the date on which the
judgment is satisfied. Holders of Foreign Currency Notes bear the risk of
exchange rate fluctuations between the time the amount of the judgment is
calculated and the time the paying agent converts the Specified Currency to
United States dollars for payment of the judgment. Although the Notes will be
governed by and construed in accordance with the laws of the State of Illinois,
it is not certain whether the court of any other jurisdiction would determine
the judgment currency on the basis of Illinois law.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal United States federal income
tax considerations relating to the purchase, ownership and disposition of Notes
to beneficial owners ("holders") purchasing Notes at their original issuance.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), legislative history, administrative pronouncements, judicial decisions
and final, temporary and proposed Treasury Regulations, changes to any of which
subsequent to the date of this prospectus supplement may affect the tax
consequences described herein. Any such change may apply retroactively.
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
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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 the applicable pricing
supplement, if appropriate. This summary also assumes that a taxpayer obtains
any necessary consent of the Internal Revenue Service (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 advisers with respect to the
various state, local and foreign tax consequences of an investment in Notes.
As used herein, the term "United States Holder" means a holder of a Note who
or which is, for United States federal income tax purposes:
. a citizen or resident of the United States,
. a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof, or
. an estate or trust described in Section 7701(a)(30) of the Code.
The term also includes certain holders who are former citizens of the United
States whose income and gain from the Notes are subject to United States
taxation. The term "non-United States Holder" means a holder that is not a
United States Holder.
Taxation of Interest
The taxation of interest on a Note depends 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 is not qualified stated interest is
includible in a United States Holder's income under the rules governing
"original issue discount," described below, 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 our debt
instruments) 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 our debt instruments) at least annually will constitute "qualified
stated interest' if the Note is a variable rate debt instrument ("VRDI") under
the rules
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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 "--Taxation of
Original Issue Discount--General Rules for Fixed Rate Notes--Taxation of OID on
Floating Rate Notes and Indexed Notes--Notes that are VRDIs" below.
Definition of a Variable Rate Debt Instrument. A Floating Rate Note is a
VRDI if all of the four following conditions are met.
First, the "issue price" (as described below) of the Note 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:
. one or more qualified floating rates,
. a single fixed rate and one or more qualified floating rates,
. a single objective rate, or
. a single fixed rate and a single objective rate that is a "qualified
inverse floating rate" (as defined below).
Third, the Note must provide that a qualified floating rate or objective
rate in effect at any time during the term of the instrument is set at the
current value of that rate. A current value is 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.
Definition of a Qualified Floating Rate. 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 is 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 multiplier greater than
1.35 or less than or equal to 0.65, however, such rate generally is an
objective rate, described more fully below. A variable rate is not 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).
Definition of an Objective Rate. 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 or price of
actively traded personal property (within the meaning of Section 1092(d)(1) of
the Code). Notwithstanding the first sentence of this paragraph, a rate is not
an objective rate if it is reasonably expected that the average value of the
rate during the first half of the Note's term will be either significantly less
than or significantly greater than the average value of the rate
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during the final half of the Note's term. The IRS may designate rates other
than those specified above that will be treated as objective rates. As of the
date of this prospectus supplement, no such other rates have been designated.
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 one
year or less, 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.
Taxation of Original Issue Discount--General Rules for Fixed Rate Notes
Definition of OID
OID is the excess of a Note's "stated redemption price at maturity" over its
"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 principal)
other than payments of qualified stated interest. The "issue price" and "issue
date" of a Note will be the first price and the first settlement or closing
date (whichever is applicable), respectively, 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).
As described more fully below, United States Holders of Notes with OID that
mature more than one year from their issue date generally are required to
include such OID in income as it accrues in accordance with the constant yield
method described below, irrespective of 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
generally 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.
Inclusion of OID in Income
The amount of OID includible in the income of a United States Holder for any
taxable year is determined under the constant yield method, in four steps.
In the first step, 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.
In the second step, 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.
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In the third step, 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
United States 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 United States Holder is determined
without regard to "premium" and "acquisition premium," as those terms are
defined below.
In the fourth step, 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 are required to include in income increasingly greater amounts
of OID in successive accrual periods.
In the case of a Note that is redeemable at our option or repayable by us at
the option of the holder, the maturity and the yield to maturity of the Note
are determined by assuming that we and the holder will exercise or not exercise
the options in a manner that minimizes the yield, in the case of options
available to us, or maximizes the yield, in the case of options available to
the holder. Unless specified to the contrary in the applicable pricing
supplement, the Redemption Price payable by us upon the exercise of an option
to redeem is at all times at least equal to the principal amount of the Note
redeemed plus accrued interest and the repayment price payable by us upon
exercise of the holder's option is at all times equal to the principal amount
of the Note so repaid plus accrued interest. Accordingly, the existence of such
options should not generally affect the determination of the maturity and the
yield to maturity of Notes having an issue price equal to 100% of the principal
amount.
Taxation of OID on Floating Rate Notes and Indexed Notes
The taxation of OID (including interest that does not constitute qualified
stated interest) on a Floating Rate Note or an Indexed Note will depend on
whether the Note is a "VRDI," as that term is defined above under "--Taxation
of Interest--Definition of a Variable Rate Debt Instrument."
Notes that are VRDIs. In the case of a VRDI that provides for qualified
stated interest, the amount of qualified stated interest and OID, if any,
includible in income during a taxable year are determined under the rules
applicable to Fixed Rate Notes (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 Note. 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 at a single variable
rate as described above, 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.
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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" above.
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.
Notes that are not VRDIs. Floating Rate Notes or Indexed Notes that are not
VRDIs ("Contingent Notes") are taxable under the rules applicable to contingent
payment debt instruments (the "Contingent Debt Regulations") as follows.
First, we are required to determine, as of the issue date, the comparable
yield for the Contingent Note. The comparable yield is generally the yield at
which we 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, we construct a projected schedule of
payments determined under the Contingent Debt Regulations for the Contingent
Note (the "Schedule"). The Schedule is determined as of the issue date and
generally remains m 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 Contingent Debt 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 Contingent Debt 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.
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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 Contingent
Debt 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.
We are required to provide each holder of a Contingent Note with the
Schedule described above. If we do 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 which the
Contingent Note was acquired.
In general, any gain realized by a United States Holder on the sale,
exchange, redemption, 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.
Certain Indexed Notes. Although the above discussion generally applies to
Indexed Notes, special rules apply to certain Indexed Notes. A Currency Indexed
Note that is not a Foreign Currency Note but has payments of interest or
principal determined with reference to a single foreign currency, generally has
the tax consequences described below for Foreign Currency Notes. See "Foreign
Currency Notes" below. The proper tax treatment of payments of principal of and
interest on other Currency Indexed Notes is uncertain at this time. The tax
consequences to a holder of the ownership and disposition of other Indexed
Notes and Notes that are exchangeable into the stock or a debt instrument of
another issuer may vary depending on the exact terms of the Notes. United
States Holders intending to purchase Indexed Notes or exchangeable Notes should
refer to the discussion relating to taxation in the applicable pricing
supplement.
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 carefully
examine the applicable pricing supplement and should consult their tax advisors
with respect to such features since the tax consequences with respect to
interest and OID will depend, in part, on the particular terms and the
particular features of the 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, we do
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, in the case of a Note that does not have OID, is less than its stated
redemption price at maturity, or, in the case of a Note that has OID, is less
than its adjusted issue price (as defined above), 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).
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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 is not qualified stated interest) on, or any gain on the
sale, exchange, retirement, redemption or other disposition of, a Note as
ordinary income to the extent of the 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 is 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 Note-by-Note 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 does not apply. Such an election applies 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 IRS. A United States Holder's tax basis in a Note is increased by
the amount of market discount included in such holder's income under such an
election.
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 Contingent Debt Regulations). Accordingly, prospective purchasers of
Contingent Notes should consult with their tax advisors with respect to the
application of the market discount rules to such Notes.
Premium and Acquisition Premium
If a United States Holder purchases a Note at a "premium," the United States
Holder does not include any OID in gross income. A Note is purchased at a
premium (or "amortizable bond premium") if its 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), using a constant yield method similar to that described above.
In the case of Notes that may be redeemed prior to maturity, the premium is
calculated assuming that we or the United States Holder will exercise or not
exercise redemption rights in a manner that maximizes the United States
Holder's yield. A United States Holder who elects to amortize bond premium must
reduce such holder's tax basis in the Note by the amount of the premium used to
offset qualified stated interest income as set forth above. 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.
If a United States Holder purchases a Note 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).
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
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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 under "--Taxation of Original
Issue Discount- General Rules for Fixed Rate Notes--Inclusion of OID in Income"
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 Contingent Debt Regulations). Accordingly, prospective
purchasers of Contingent Notes should consult with their tax advisors with
respect to the application of the acquisition premium and amortizable bond
premium rules to such Notes.
Short-Term Notes
In the case of a Note with a maturity of one year or less from its issue
date (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, with the
consequence that the reporting of such income is deferred until it is received.
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,
retirement or redemption 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, such non-electing United States Holders
that are not subject to the current inclusion requirement described in the
first sentence of this paragraph 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 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 "--Taxation of Original
Issue Discount--General Rules for Fixed Rate Notes--Inclusion of OID in
Income." Such an election for a Note with amortizable bond premium results in a
deemed election to amortize bond 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 results in a deemed election to accrue market
discount in income currently for such Note and for all other debt instruments
acquired by the United States
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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 is increased by each
accrual of the amounts treated as OID under the constant yield election
described in this paragraph.
The application of the foregoing rules may be different in the case of
Contingent Notes. Accordingly, prospective purchasers should consult with their
tax advisors with respect to the application of the market discount,
acquisition premium and amortizable bond premium rules to such Notes.
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, under the Contingent Debt Regulations, 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 such possible integration.
Sale, Exchange, Redemption or Retirement of Notes
A United States Holder generally recognizes gain or loss upon the sale,
exchange, redemption or retirement of a Note equal to the difference between
the amount realized upon such sale, exchange, redemption or retirement and the
United States Holder's adjusted basis in the Note. Such adjusted basis in the
Note generally equals 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 qualified
stated interest, the amount realized by the United States Holder is treated as
a payment of interest. Subject to the discussion under "--Foreign Currency
Notes" below, any gain or loss is capital gain or loss, except as provided
under "--Market Discount" and "--Short-Term Notes," above. Special rules apply
in determining the tax basis of a Contingent Note and the amount realized on
the retirement of a Contingent Note. For non-corporate taxpayers, the maximum
tax rate on adjusted net capital gain is 20%. Adjusted net capital gain is
generally the excess of net long-term capital gain (the net gain on capital
assets held for more than 12 months) over net short-term capital loss (the net
loss on capital assets held for 12 months or less). Net short-term capital gain
(net gain on assets held for 12 months or less) is subject to tax at the same
rates as ordinary income. 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.
The application of the foregoing rules may be different in the case of
Contingent Notes. Accordingly, prospective purchasers of Contingent Notes
should consult with their tax advisors with respect to rules governing the
sale, exchange, redemption or retirement of such Notes.
Foreign Currency Notes
The following summary describes special rules that apply, in addition to the
rules described above, to Foreign Currency Notes. The treatment of a debt
instrument, such as a Foreign Currency Note, that provides for interest
payments that are not fixed in amount at the time that the debt instrument is
issued (like the treatment of a Floating Rate Note) depends on whether the debt
instrument qualifies as a VRDI. A Foreign Currency Note qualifying as a VRDI is
subject to the rules discussed above in "--Taxation of Interest" and "--
Taxation of Original Issue Discount--General Rules for Fixed Rate Notes" in
addition to the rules discussed below. Foreign Currency Notes not qualifying as
VRDIs may be subject to the rules discussed above
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in "--Taxation of Original Issue Discount--General Rules for Fixed Rate Notes--
Taxation of OID on Floating Rate Notes and Indexed Notes--Notes that are not
VRDIs" in addition to the rules discussed below.
Interest Includible In Income Upon Receipt
An interest payment on a Foreign Currency Note that is not required to be
included in income by the United States Holder prior to the receipt of such
payment (e.g., qualified stated interest received by a cash method United
States Holder) is includible in income by the United States Holder based on the
United States dollar value of the foreign currency determined on the date such
payment is received, regardless of whether the payment is in fact converted to
United States dollars at that time. Such United States dollar value is the
United States Holder's tax basis in the foreign currency received.
Interest Includible In Income Prior To Receipt
In the case of interest income on a Foreign Currency Note that is required
to be included in income by the United States Holder prior to the receipt of
payment (e.g., stated interest on a Foreign Currency Note held by an accrual
basis United States Holder or accrued OID or accrued market discount that is
includible in income as it accrues), a United States Holder is required to
include in income the United States dollar value of the amount of interest
income that has accrued and is otherwise required to be taken into account with
respect to a Foreign Currency Note during an accrual period. Unless the United
States Holder makes the election discussed in the next paragraph, the United
States dollar value of such accrued income is determined by translating such
income at the average rate of exchange for the accrual period or, with respect
to an accrual period that spans two taxable years, at the average rate for the
portion of the accrual period within the taxable year. The average rate of
exchange for the accrual period (or partial period) is the simple average of
the exchange rates for each business day of such period (or other method if
such method is reasonably derived and consistently applied). Such United States
Holder recognizes, as ordinary gain or loss, foreign currency exchange gain or
loss with respect to accrued interest income on the date such income is
actually received, reflecting fluctuations in currency exchange rates between
the last day of the relevant accrual period and the date of payment. The amount
of gain or loss recognized equals the difference between the United States
dollar value of the foreign currency payment received in respect of such
accrual period determined based on the exchange rate on the date such payment
is received and the United States dollar value of interest income that has
accrued during such accrual period (as determined above).
Under the so-called "spot rate convention election," a United States Holder
may, in lieu of applying the rules described in the preceding paragraph, elect
to translate accrued interest income into United States dollars at the exchange
rate in effect on the last day of the relevant accrual period for OID, market
discount or accrued interest, or in the case of an accrual period that spans
two taxable years, at the exchange rate in effect on the last day of the
taxable year. Additionally, if a payment of such income is actually received
within five business days of the last day of the accrual period or taxable
year, an electing United States Holder may instead translate such income into
United States dollars at the exchange rate in effect on the day of actual
receipt. Any such election applies to all debt instruments held by the United
States Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the United States Holder and is irrevocable
without the consent of the IRS.
Purchase, Sale, Exchange, Redemption or Retirement
A United States Holder that converts United States dollars to a foreign
currency and immediately uses that currency to purchase a Foreign Currency Note
denominated in the same foreign currency normally does not recognize gain or
loss in connection with such conversion and purchase. However, a United States
Holder that purchases a Foreign Currency Note with previously owned foreign
currency does recognize ordinary income or loss in an amount equal to the
difference, if any, between such holder's tax basis in the foreign currency and
the United States dollar market value of the Foreign Currency Note on the date
of the purchase. A United States Holder's tax basis in a Foreign Currency Note
(and the amount of any subsequent adjustment to such Holder's tax basis) is the
United States dollar value of the foreign currency amount paid for such Foreign
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Currency Note (or of the foreign currency amount of the adjustment) determined
on the date of such purchase or adjustment. In the case of an adjustment
resulting from accrual of OID or market discount, such adjustment is made at
the rate at which such OID or market discount is translated into United States
dollars under the rules described above.
Gain or loss realized upon the sale, exchange, redemption or retirement of,
or the receipt of principal on, a Foreign Currency Note, to the extent
attributable to fluctuations in currency exchange rates, is generally ordinary
income or loss. Gain or loss attributable to fluctuations in exchange rates
equals the difference between (i) the United States dollar value of the foreign
currency purchase price for such Note, determined on the date such Note is
disposed of, and (ii) the United States dollar value of the foreign currency
purchase price for such Note, determined on the date such United States Holder
acquired such Note. Any portion of the proceeds of such sale, exchange,
redemption or retirement attributable to accrued interest income may result in
exchange gain or loss under the rules set forth above. Such foreign currency
gain or loss is recognized only to the extent of the overall gain or loss
realized by a United States Holder on the sale, exchange, redemption or
retirement of the Foreign Currency Note. In general, the source of such foreign
currency gain or loss is determined by reference to the residence of the United
States Holder or the "qualified business unit" of such holder on whose books
the Note is properly reflected. Any gain or loss realized by a United States
Holder in excess of such foreign currency gain or loss is capital gain or loss
(except to the extent of any accrued market discount not previously included in
such holder's income or, in the case of a Short-Term Note having OID, to the
extent of any OID not previously included in such holder's income).
The tax basis of a United States Holder in any foreign currency received on
the sale, exchange, redemption or retirement of a Foreign Currency Note is
equal to the United States dollar value of such foreign currency, determined at
the time of such sale, exchange, redemption or retirement. Treasury Regulations
provide a special rule for purchases and sales of publicly traded debt
instruments by a cash method taxpayer under which units of foreign currency
paid or received are translated into United States dollars at the spot rate on
the settlement date of the purchase or sale. Accordingly, no exchange gain or
loss results from currency fluctuations between the trade date and the
settlement of such a purchase or sale. An accrual method taxpayer may elect the
same treatment required of cash method taxpayers with respect to the purchase
and sale of publicly traded debt instruments provided the election is applied
consistently. Such election cannot be changed without consent of the IRS.
United States Holders should consult their tax advisors concerning the
applicability to Foreign Currency Notes of the special rules summarized in this
paragraph.
Market discount, acquisition premium and amortizable bond premium of a
Foreign Currency Note are determined in the relevant foreign currency. The
amount of such market discount or acquisition premium that is included in (or
reduces) income currently is to be determined for any accrual period in the
relevant foreign currency and then translated into United States dollars on the
basis of the average exchange rate in effect during such accrual period or with
reference to the spot rate convention election as described above. Exchange
gain or loss realized with respect to such accrued market discount or
acquisition premium is determined and recognized in accordance with the rules
relating to accrued interest described above. The amount of accrued market
discount (other than market discount that is included in income currently)
taken into account upon the receipt of any partial principal payment or upon
the sale, exchange, redemption, retirement or other disposition of a Foreign
Currency Note is the United States dollar value of such accrued market
discount, determined on the date of receipt of such partial principal payment
or upon the sale, exchange, redemption, retirement or other disposition, and no
portion thereof is treated as exchange gain or loss. Exchange gain or loss with
respect to amortizable bond premium is determined by treating the portion of
premium amortized with respect to any period as a return of principal. With
respect to a United States Holder of a Foreign Currency Note that does not
elect to amortize premium, the amount of premium, if any, is treated as a
capital loss when such Note matures.
The Section 988 Regulations do not discuss the tax consequences of the
acquisition of a Foreign Currency Note that is denominated either in a so-
called hyperinflationary currency or in more than one currency, or that does
not qualify as a VRDI and thus is treated as a Contingent Note. Foreign
Currency Notes containing such features may be subject to rules that differ
from the general rules described above. United States Holders
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intending to purchase Foreign Currency Notes with such a feature should examine
the applicable pricing supplement and should consult their own tax advisors
with respect to the purchase, ownership and disposition of such a Foreign
Currency Note.
Extension of Maturity
If so indicated in the pricing supplement relating to a Note, we will have
the option to extend the maturity of such Note. See "Description of Notes--
Extension of Maturity" above. The treatment of a United States Holder of Notes
with respect to which such an option has been exercised who does not elect to
have us repay such Notes on the Original Maturity will depend on the terms
established for such Notes by us pursuant to the exercise of such option. Such
United States Holder may be treated for United States federal income tax
purposes as having exchanged such Notes (the "Old Notes") for new Notes with
revised terms (the "New Notes"). If the United States Holder is treated as
having exchanged Old Notes for New Notes, such exchange may be treated as
either a taxable exchange or a recapitalization.
If the exercise of the option by us is not treated as an exchange of Old
Notes for New Notes, no gain or loss will be recognized by a United States
Holder as a result thereof. If the exercise of the option is treated as a
taxable exchange of Old Notes for New Notes, a United States Holder would
recognize gain or loss generally equal to the difference between the issue
price of the New Notes and such United States Holder's adjusted tax basis in
the Old Notes. If the exercise of the option is treated as a recapitalization,
no loss would be recognized by a United States Holder as a result thereof and
gain, if any, would be recognized to the extent of the fair market value of the
excess, if any, of the principal amount of the New Notes over the principal
amount of the Old Notes. In this regard, the meaning of the term "principal
amount" is not clear. Such term could be interpreted to mean the face amounts
of the Notes or, instead, the "issue price" with respect to the New Notes and
"adjusted issue price" with respect to the Old Notes. Legislation adopting the
latter interpretation has been proposed by the Clinton Administration for
recapitalizations occurring on or after the date of enactment. It is not
possible to determine whether such legislation will be enacted, and it is
unclear whether such an interpretation would prevail even in the absence of new
legislation.
However, whether or not such exercise results in an exchange of the Old
Notes for New Notes, the Old Notes may be treated as retired and then reissued
on the date of exercise for the adjusted issue price of the Old Notes solely
for purposes of calculating original issue discount.
Additional tax considerations may arise from the ownership of extendible
Notes in light of the particular features or combination of features of such
Notes. Therefore, prospective holders of extendible Notes should carefully
examine the applicable pricing supplement and should consult with their tax
advisors regarding the tax consequences of the ownership of such Notes.
Non-United States Holders
Under present United States federal income tax law, and subject to the
discussion below concerning backup withholding, payments of principal, premium
(if any) and interest (including OID) with respect to a Note by us or any
paying agent to any non-United States Holder, and gain realized on the sale or
exchange of a Note by a non-United States Holder, will be exempt from the
United States federal income or withholding tax (we refer to this exemption
from withholding tax as the portfolio interest exemption), provided that:
. such non-United States Holder does not own, actually or constructively,
10 percent or more of the total combined voting power of all classes of
our stock entitled to vote, is not a controlled foreign corporation
related, directly or indirectly, to us through stock ownership, and is
not a bank receiving interest described in Section 881(c)(3)(A) of the
Code;
. the statement requirement set forth in Section 871(h) or Section 881(c)
of the Code has been fulfilled with respect to the holder, as discussed
below;
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. such non-United States Holder is not an individual who is present in the
United States for 183 days or more in the taxable year of disposition, or
such individual does not have a "tax home" (as defined in Section
911(d)(3) of the Code) or an office or other fixed place of business in
the United States;
. such payments and gain are not effectively connected with the conduct by
such non-United States Holder of a trade or business in the United
States; and
. the payments are not payments of contingent interest (generally, interest
the amount of which is determined by reference to receipts, sales, cash
flow, income, profits, property values, dividends, or comparable
attributes of us or a party related to us).
The statement requirement referred to in the preceding paragraph will be
fulfilled if the holder of a Note certifies on an appropriate form (generally
IRS Form W-8BEN), under penalties of perjury, that it is non-United States
Holder and provides its name and address, and (a) the holder files that form
with the withholding agent or (b) a securities clearing organization, bank or
other financial institution holding customers' securities in the ordinary
course of its trade or business holds the Note on behalf of the holder, files
with the withholding agent a statement that it has received that form from the
holder and furnishes the withholding agent with a copy thereof. With respect to
any Note held by a foreign partnership, under current law, this certification
may be provided by the foreign partnership. However, unless a foreign
partnership has entered into a withholding agreement with the IRS, each partner
that is a non-United States Holder will be required to supply this
certification in order to avoid withholding with respect to such partner's
share of interest (including original issue discount) paid to the foreign
partnership after December 31, 1999 (after December 31, 2000, if the IRS
implements its recently announced intention to postpone the effective date).
Certain alternative methods for satisfying the certification requirements apply
with respect to payments made after December 31, 1999 (after December 31, 2000,
if the IRS implements its recently announced intention to postpone the
effective date). Prospective holders, including foreign partnerships and their
partners, should consult their tax advisors regarding possible additional or
alternative reporting requirements.
If a Non-United States Holder of a Note is engaged in a trade or business in
the United States and if interest 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 in the preceding paragraphs, will
generally be subject to regular United States federal income tax on interest
and/or any gain realized on the sale or exchange of the Note in the same manner
as if it were a United States Holder. In lieu of the certificate described in
the preceding paragraph, such a Non-United States Holder will be required to
provide to the withholding agent an appropriate form (generally IRS form W-
8ECI), executed under penalties of perjury, in order to claim an exemption from
withholding tax. In addition, if such a Non-United States Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments.
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 holders of Notes. In
the case of a non-corporate United States Holder, a 31% backup withholding tax
applies if (i) such holder fails to furnish his or her Taxpayer Identification
Number ("TIN") (which, for an individual, would be his or her Social Security
Number) to the payor in the manner required, (ii) such holder furnishes an
incorrect TIN and the payor is so notified by the IRS, (iii) the payor is
notified by the IRS that such holder has failed properly to report payments of
interest and dividends or (iv) in certain circumstances, such holder fails to
certify, under penalties of perjury, that such holder 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 does not apply with respect
to payments made to certain exempt recipients, such as a corporation (within
the meaning of Section 7701(a) of the Code and tax-exempt organizations.
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The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such holder's United States federal
income tax liability and may entitle such holder to a refund, provided that the
required information is furnished to the IRS.
Backup withholding and information reporting will not apply to:
. payments to a non-United States Holder of principal, premium and interest
(including OID, if any); and
. payments to a non-United States Holder on the sale, exchange or other
disposition of a Note, in each case if such non-United States Holder
provides the required certification to establish an exemption from the
withholding of the United States federal income tax or otherwise
establishes an exemption.
Similarly, unless the payor has actual knowledge that the payee is a United
States Holder, backup withholding will not apply to:
. payments of principal, premium and interest (including OID, if any) made
outside the United States to certain offshore accounts; and
. payments on the sale, exchange, redemption, retirement or other
disposition of a Note effected outside the United States.
However, information reporting (but not backup withholding) may apply with
respect to such payments by a payor that is, for United States federal
income tax purposes:
. a United States person;
. a controlled foreign corporation;
. a United States branch of a foreign bank or foreign insurance company;
. a foreign partnership controlled by United States persons or engaged in a
United States trade or business; or
. a foreign person 50 percent or more of whose gross income is effectively
connected with the conduct of a United States trade or business for a
specified three-year period, unless such payor has in its records
documentary evidence that the holder is not a United States Holder and
certain other conditions are met or the holder otherwise establishes an
exemption.
Non-United States Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any amounts
withheld from payment to a non-United States Holder under the backup
withholding rules will be allowed as a credit against such non-United States
Holder's United States federal income tax liability and may entitle such holder
to a refund, provided that the required information is furnished to the IRS.
Possible Legislative or Other Action Affecting Tax Considerations
Prospective holders should recognize that our present federal income tax
treatment may be modified by future legislative, judicial or administrative
actions or decisions at any time, which may be retroactive in effect, and, as a
result, any such action or decision may affect investments and commitments
previously made. The rules dealing with federal income taxation are constantly
under review by persons involved in the legislative process and by the IRS and
the Treasury Department, resulting in statutory changes as well as promulgation
of new, or revisions to existing, regulations and revised interpretations of
established concepts. For example, on February 1, 1999, the Clinton
Administration released a summary of its proposed budget plan which contains
proposals affecting among other items, accrual of market discount and, as
discussed above ("Description of Notes--Extension of Maturity"), certain
recapitalizations. No prediction can be made as to the likelihood of passage of
any new tax legislation or other provisions either directly or indirectly
affecting us or our securityholders.
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SUPPLEMENTAL PLAN OF DISTRIBUTION
We are offering the Notes on a continuing basis through Salomon Smith Barney
Inc., Goldman, Sachs & Co., Lehman Brothers Inc. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as agents, each of which
has agreed to use its reasonable efforts to solicit offers to purchase the
Notes. We 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. We have 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 between us and the
agents. Each agent will have the right, in its discretion reasonable exercised,
to reject in whole or in part any offer to purchase Notes received by such
agent. We will have the sole right to accept offers to purchase Notes and may
reject any such offer in whole or in part. We 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 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 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. We also reserve the right to sell Notes directly
to investors on our own behalf in those jurisdictions where it is authorized to
do so or as otherwise provided in the applicable pricing supplement. In such
circumstances, we 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 us, no commissions will be paid.
The agents may be deemed to be "underwriters" within the meaning of the
Securities Act. We have agreed to indemnify the agents against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the agents may be required to make in respect thereof. We have
agreed to reimburse the agents for certain other expenses, including, but not
limited to, the fees and expenses of counsel to the agents.
We have 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 us in the ordinary course of business.
LEGAL MATTERS
The validity of the Notes will be passed upon for us by Edward H. Graham,
our Senior Vice President, General Counsel and Secretary, 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 us 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 ours and the
beneficial owner of approximately 31,800 shares of our common stock and options
to acquire approximately 41,900 additional shares of our common stock.
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Prospectus
- --------------------------------------------------------------------------------
Maytag Corporation
Debt Securities and
Warrants to Purchase Debt Securities
- --------------------------------------------------------------------------------
By this prospectus, we may offer in one or more discrete offerings up to
$400,000,000 of our Debt Securities and Warrants to purchase Debt Securities.
The Debt Securities may be issued in one or more series and will be unsecured.
We will determine the terms for the Debt Securities and Warrants at the time of
sale. We will provide the specific terms of the Debt Securities and Warrants in
one or more supplements to this prospectus. You should read this prospectus and
the applicable supplements carefully before you invest.
Our executive offices are located at 403 West Fourth Street North, Newton,
Iowa 50208, and our telephone number is (515) 787-7000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
We may offer the Debt Securities and Warrants in any of the following ways:
.directly to purchasers;
.through agents;
.through dealers; or
.through one or more underwriters or a syndicate of underwriters in an
underwritten offering.
Additional information on our plan of distribution can be found inside under
"Plan of Distribution." We will describe the plan of distribution for any Debt
Securities and Warrants in the applicable prospectus supplements.
- --------------------------------------------------------------------------------
The date of this prospectus is April 30, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus...................................................... 2
Where You Can Find More Information........................................ 2
The Company................................................................ 4
Use of Proceeds............................................................ 4
Ratios of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................. 4
Description of Warrants.................................................... 12
Plan of Distribution....................................................... 14
Legal Matters.............................................................. 15
Experts.................................................................... 15
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement (No. 333-75827) that we
filed with the Securities and Exchange Commission ("SEC") utilizing a "shelf"
registration process. Under this shelf process, we may offer the Debt
Securities and Warrants described in this prospectus in one or more offerings
with a total aggregate principal amount or initial purchase price not to exceed
$400,000,000. The Debt Securities and the Warrants are collectively called the
"Securities." This prospectus provides you with a general description of the
Securities we may offer. Each time we offer Securities, we will provide you
with a prospectus supplement and, if applicable, a pricing supplement. The
prospectus supplement and any applicable pricing supplement will describe the
specific amounts, prices and terms of the Debt Securities being offered and, in
the case of Warrants, will describe the Debt Securities issuable upon exercise
of the Warrants and the offering price, if any, exercise price, duration or any
other terms of the Warrants. The prospectus supplement and any applicable
pricing supplement may also add, update or change the information in this
prospectus. Please carefully read this prospectus, the applicable prospectus
supplement and any applicable pricing supplement, together with the information
contained in the documents referred to under the heading "Where You Can Find
More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the SEC. You may read and copy any document we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549 or at the SEC's regional offices located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. You may obtain further
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Our SEC filings are also available to the public over the
Internet at the SEC's Web site at http://www.sec.gov. In addition, you may
inspect our SEC filings at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, unless
we update or supersede that information by the information contained in this
prospectus or a prospectus supplement or by information that we file
subsequently that is incorporated by reference into this prospectus. We are
incorporating by reference the following documents that we have filed with the
SEC and our future filings with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 until our offering of the
Securities is completed:
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. Annual Report on Form 10-K for the year ended December 31, 1998; and
. Current Reports on Form 8-K dated January 15, 1999, February 16, 1999 and
March 25, 1999.
This prospectus is part of a registration statement we have filed with the
SEC relating to the Securities. As permitted by SEC rules, this prospectus does
not contain all of the information included in the registration statement and
the accompanying exhibits and schedules we file with the SEC. You may refer to
the registration statement, the exhibits and schedules for more information
about us and our Securities. The registration statement, exhibits and schedules
are also available at the SEC's Public Reference Room or through its Web site.
You may obtain a copy of these filings, at no cost, by writing to or
telephoning us at the following address:
Maytag Corporation
Communications Department
403 West Fourth Street North
Newton, Iowa 50208
Telephone (515) 787-8339
You should rely only on the information incorporated by reference or
provided in this prospectus and the applicable prospectus supplement, and in
any pricing supplement. We have not authorized anyone to provide you with
different information. You should not assume that the information in this
prospectus, any applicable prospectus supplement or any pricing supplement is
accurate as of any date other than the date on the cover of the document. We
are not making an offer of the Securities in any state in which the offer or
sale is not permitted.
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THE COMPANY
Maytag Corporation operates in three business segments: home appliances,
commercial appliances and international appliances. We manufacture, sell and
service washers, dryers, dishwashers, refrigerators, cooking appliances and
floor care products under the Maytag, Hoover, Jenn-Air and Magic Chef brand
names. We manufacture, sell and service commercial washers and dryers and
commercial cooking equipment under the Maytag, Dixie-Narco, Blodgett and Pitco
Frialator brand names. Our international appliances segment consists of our
50.5 percent owned joint venture in China, Rongshida-Maytag, which manufactures
and distributes laundry products and refrigerators under the RSD brand name. We
were organized as a Delaware corporation in 1925 and our headquarters are
located in Newton, Iowa.
USE OF PROCEEDS
Unless we state otherwise in the applicable prospectus supplement, we expect
to add substantially all of the net proceeds from the sale of the Securities to
our general funds to be used for general corporate purposes, including
securities repurchase programs, capital expenditures, working capital,
repayment or reduction of long-term and short-term debt and the financing of
acquisitions. We may invest funds that we do not immediately require in short-
term marketable securities.
RATIOS OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges for each of the periods indicated
are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
December 31,
------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges............... 7.72 5.26 4.78 1.93 3.84
</TABLE>
The ratio of earnings to fixed charges was computed by dividing "earnings,"
the sum of income from continuing operations before taxes on income, minority
interest, extraordinary items, cumulative effect of accounting changes and
fixed charges by total fixed charges. "Fixed charges" consists of interest on
indebtedness, depreciation of capitalized interest and an imputed interest
portion of the rent expense on operating leases.
DESCRIPTION OF DEBT SECURITIES
General
The Debt Securities will be issued under an Indenture dated as of June 15,
1987, between us and The First National Bank of Chicago (the "Trustee"). The
following brief summary of the Indenture and the Debt Securities is subject to
the detailed provisions of the Indenture, a copy of which is an exhibit to the
registration statement. Wherever we refer to particular provisions of the
Indenture, such provisions are incorporated by reference as a part of the
statements made in this document and such statements are qualified in their
entirety by such reference. References in italics are to section numbers of the
Indenture.
The Indenture does not limit the amount of Debt Securities which we may
issue under the Indenture. It provides that Debt Securities may be issued from
time to time in one or more series. We have previously issued Debt Securities
pursuant to the Indenture. The Debt Securities will be our unsecured
obligations and will rank equally with all of our other unsecured and
unsubordinated indebtedness.
The Indenture limits our ability to incur certain secured indebtedness and
to engage in certain sale and lease-back transactions. See "Restrictive
Covenants" below. The Indenture does not restrict our ability to incur
unsecured indebtedness or, except as described under "Restrictive Covenants"
below, to engage in corporate transactions or reorganizations which have the
effect of increasing our indebtedness. Accordingly, unless we state otherwise
in the applicable prospectus supplement, the Debt Securities will not contain
any provisions that
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afford holders protection against our incurring such indebtedness or (except as
described under "Restrictive Covenants") engaging in such transactions or
reorganizations. As a result, we could become highly leveraged.
The Prospectus Supplement may contain a description of the following terms
of the Debt Securities:
. the title of the Debt Securities;
. the limit, if any, upon the aggregate principal amount of the Debt
Securities;
. the date or dates on which the principal of such Debt Securities will be
payable;
. the rate or rates, which may be fixed or variable, at which the Debt
Securities will bear interest, if any; the date or dates from which
interest will accrue; the dates on which such interest will be payable;
and the regular record dates for payment of interest;
. the place or places where the principal of, and premium, if any, and
interest on the Debt Securities will be payable;
. the terms and conditions upon which we may redeem the Debt Securities, in
whole or in part, at our option;
. the terms and conditions under which we may be obligated to redeem or
purchase the Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of a holder;
. if other than denominations of $1,000 and any integral multiple of
$1,000, the currency or composite currencies and denominations in which
the Debt Securities will be issuable;
. if other than the principal amount thereof, the portion of the principal
amount of the Debt Securities which will be payable upon the declaration
of acceleration of the maturity thereof;
. any additional events of default with respect to the Debt Securities, if
any, other than those set forth in the Indenture; and
. any other terms of the Debt Securities not inconsistent with the
provisions of the Indenture. (Section 301)
Unless otherwise indicated in the applicable prospectus supplement, the
principal of, and any premium or interest on, the Debt Securities will be
payable, and the Debt Securities will be exchangeable and transfers of the Debt
Securities can be registered at the Corporate Trust Office of the Trustee at
One North State Street, 9th Floor, Chicago, Illinois or at its agency in
Manhattan, New York, provided that, at our option, payment of interest may be
made by check mailed to the address of the party entitled thereto as it appears
in the security register. (Sections 202, 301, 305 and 1002)
Unless otherwise specified in the applicable prospectus supplement, the Debt
Securities will be issued in United States dollars in fully registered form,
without coupons, in denominations of $1,000 or any multiples of $1,000 (Section
302). No service charge will be made for any transfer or exchange of the Debt
Securities, but we may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with such transactions other
than certain exchanges not involving any transfer. (Sections 304, 305, 906 and
1107)
The Debt Securities may be issued under the Indenture bearing no interest or
interest at a rate below the prevailing market rate at the time of issuance and
be offered and sold at a discount below their stated principal amount. We will
describe any federal income tax, accounting and other considerations applicable
to these discounted Debt Securities in the applicable prospectus supplement.
(Sections 101 and 502)
Restrictive Covenants
Restrictions Upon Secured Debt. The Indenture provides that neither we nor
any Restricted Subsidiary will create, incur, issue, assume or guarantee any
indebtedness for borrowed money secured by a mortgage, security interest,
pledge or lien ("mortgage") of or upon any Principal Property or any shares of
stock or indebtedness
5
<PAGE>
of any Restricted Subsidiary, whether owned at the date of the Indenture or
acquired after the date of the Indenture, without effectively providing that
the Debt Securities (together with, if we so determine, any other indebtedness
issued, assumed or guaranteed by us or any Restricted Subsidiary and then
existing or thereafter created) will be secured equally and ratably with or, at
our option, prior to such indebtedness so long as such indebtedness will be so
secured. This restriction will not apply to:
. mortgages on any property acquired, constructed or improved by, or on any
shares of capital stock or indebtedness acquired by, us 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 us or any Restricted
Subsidiary or to secure any indebtedness issued, assumed or guaranteed by
us or any Restricted Subsidiary to finance or refinance all or any part
of the purchase price of such property, shares of capital stock or
indebtedness or, in the case of property, the cost of construction
thereof or improvements thereon (provided, that the mortgage shall not
apply to any property, shares of capital stock or indebtedness previously
owned by us or any Restricted Subsidiary, other than any previously
unimproved or substantially unimproved real property on which the
property to be constructed or improved is located) prior the time of or
within 270 days after either of the following:
--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
--in the case of shares of capital stock or indebtedness, the
acquisition of such shares of capital stock or indebtedness;
. mortgages on any property, shares of capital stock or indebtedness
existing at the time of acquisition thereof by us or any Restricted
Subsidiary;
. mortgages on property of a corporation existing at the time such
corporation is merged with or into or consolidated with us or any
Restricted Subsidiary or existing at the time of a sale or transfer of
the properties of a corporation as an entirety or substantially as an
entirety to us or any Restricted Subsidiary;
. mortgages on any property of, or shares of capital stock or indebtedness
of, a corporation existing at the time such corporation becomes a
Restricted Subsidiary;
. mortgages to secure indebtedness of any Restricted Subsidiary to us or
another Restricted Subsidiary;
. 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 property subject to such mortgage; and
. extensions, renewals or replacements of any mortgage existing on the date
of the Indenture or any mortgage referred to above, 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 restriction outlined above, we or any Restricted
Subsidiary may, without equally and ratably securing the Debt Securities,
issue, assume or guarantee indebtedness secured by a mortgage not excepted from
the restriction as described above, if the aggregate amount of (i) such
indebtedness, (ii) all other indebtedness of, or indebtedness guaranteed by, us
or our Restricted Subsidiaries existing at such time and secured by mortgages
not so excepted and (iii) the Attributable Debt existing in respect of Sale and
Lease-Back Transactions existing at such time (other than Sale and Lease-Back
Transactions permitted under the provisions described in the first bullet point
under "Restrictive Covenants--Restrictions on Sale and Lease-Back
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<PAGE>
Transactions" and Sale and Lease-Back Transactions the proceeds of which have
been applied in accordance with the provisions described under the third bullet
point under "Restrictive Covenants--Restrictions on Sale and Lease-Back
Transactions"), does not at the time exceed 10% of Consolidated Net Tangible
Assets. (Sections 1006 and 1007)
Restrictions on Sale and Lease-Back Transactions. The Indenture provides
that neither we nor any Restricted Subsidiary will enter into any Sale and
Lease-Back Transactions with respect to any Principal Property unless either:
. we or such Restricted Subsidiary are entitled under the provisions
described in the first or sixth bullet point in the first paragraph under
"Restrictive Covenants--Restrictions Upon Secured Debt" to issue, assume
or guarantee indebtedness secured by a mortgage on the property to be
leased without equally and ratably securing the Debt Securities; or
. we or such Restricted Subsidiary are entitled under the provisions
described in the last bullet point in the first paragraph under
"Restrictive Covenants--Restrictions Upon Secured Debt" 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 without equally and ratably securing the Debt
Securities; or
. we apply, 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 us or any Restricted
Subsidiary which by its terms matures at or is extendible or renewable at
the option of the obligor to a date more than 12 months after the date of
the creation of such indebtedness. (Sections 1006 and 1007)
Certain Definitions
"Attributable Debt" is defined in the Indenture to mean, in the context of a
Sale and Lease-Back Transaction, 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 us, of the obligation of the lessee
under the lease 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)
"Consolidated Net Tangible Assets" is defined in the Indenture to mean the
total amount of assets (less applicable reserves), less:
. all current liabilities (excluding any liabilities which are by their
terms extendible or renewable at the option of the obligor 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
. all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangible assets,
all as shown in our audited consolidated balance sheet contained in our 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)
"Holder" is defined in the Indenture to mean a Person in whose name a Debt
Security is registered in the security register. (Section 101)
"Principal Property" is defined in the Indenture to mean 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 us or any Restricted
Subsidiary, in each case, except for any such property or facility, or any
portion of such property or facility,
7
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which, in the opinion of our board of directors, is not material to the total
business conducted by us and our Restricted Subsidiaries considered as one
enterprise or any portion of such a plant or facility found not to be of
material importance to the use or operation of such plant or facility. (Section
101)
"Restricted Subsidiary" is defined in the Indenture to mean any Subsidiary
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 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 will not be a Restricted Subsidiary. (Section 101)
"Sale and Lease-Back Transaction" is defined in the Indenture to mean the
leasing by us or any Restricted Subsidiary of any Principal Property, whether
owned at the date of the Indenture or acquired after the date of the Indenture
(except for temporary leases for a term, including any renewal thereof, of not
more than three years and except for leases between us and any Restricted
Subsidiary, between any Restricted Subsidiary and us or between Restricted
Subsidiaries), which property has been or is to be sold or transferred by us or
such Restricted Subsidiary to any party with the intention of taking back a
lease of such property. (Section 1007)
"Subsidiary" is defined in the Indenture to mean any corporation more than
50% of the outstanding voting stock of which is at the time owned, directly or
indirectly, by us and/or by one or more other Subsidiaries. (Section 101)
Events of Default
With respect to the Debt Securities of any series, an "Event of Default" is
defined in the Indenture as being:
. default for 30 days in payment of any interest upon the Debt Securities
of that series;
. default in payment of the principal of or premium, if any, on the Debt
Securities of that series when due at maturity;
. failure to deposit any sinking fund payment in respect of the Debt
Securities of that series when due;
. our default in the performance of any of our other covenants or
warranties in the Indenture applicable to the Debt Securities of that
series which has not been remedied for a period of 90 days after written
notice of default;
. certain events of bankruptcy, insolvency or reorganization relating to
us; and
. any other event of default provided with respect to the Debt Securities
of that series. (Section 501)
The Indenture provides that if an Event of Default with respect to Debt
Securities of any series at the time outstanding has occurred and is
continuing, either the Trustee or the holders of at least 25% in principal
amount of the Debt Securities of that series then outstanding may declare the
principal amount (or, if the Debt Securities of that series provide for an
amount less than the principal amount of such Debt Securities to be due and
payable upon a declaration of maturity thereof upon an Event of Default, 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 the outstanding Debt Securities of that series
may, under 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." The applicable prospectus supplement relating to any
series of Debt Securities which provide for an amount less than the principal
amount of such Debt Securities to be due and payable upon a declaration of
maturity thereof upon an Event of Default will contain provisions relating to
the terms relating to such declaration of maturity upon an Event of Default and
the continuation thereof.
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The Indenture provides that, subject to the duties of the Trustee to act
with the required standard of care if an Event of Default has occurred and is
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 of Debt Securities, unless such holders 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 under
the Indenture, unless the Trustee has failed to institute such proceeding for
60 days after the holder has previously given to the Trustee written notice of
a continuing Event of Default with respect to Debt Securities of that series
and unless the holders of at least 25% in principal amount of the outstanding
Debt Securities of that series have made written request, and offered
reasonable security or indemnity, to the Trustee to institute such proceeding
as Trustee, and the Trustee has not received from the holders of a majority in
principal amount of the Outstanding Debt Securities of that series a direction
inconsistent with such request. (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 date or dates they are to be paid as
expressed in such Debt Security and to institute suit for the enforcement of
any such payment. (Section 508)
We will be required 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, 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
With respect to the Debt Securities, we and the Trustee may modify or amend
the Indenture with the consent of the holders of 66 2/3% in aggregate principal
amount of the outstanding Debt Securities of each series affected thereby.
However, no such modification or amendment may, without the consent of the
holders of all then outstanding Debt Securities affected thereby:
. change the due date of the principal of, or any installment of principal
of or interest on, any Debt Securities;
. reduce the principal amount of, any premium or rate of interest on, any
Debt Securities;
. reduce the principal amount of any Debt Securities providing for an
amount less than the principal amount of such Debt Securities to be due
and payable upon a declaration of maturity thereof upon an Event of
Default payable upon such declaration of maturity of such Debt
Securities;
. change the place or currency of payment of principal of, or any premium
or interest on, any Debt Securities;
. impair the right to institute suit for the enforcement of any payment on
or with respect to any Debt Securities after the due date thereof; or
. reduce the percentage in principal amount of any Debt Securities then
outstanding, the consent of whose holders is required for modification or
amendment of the Indenture, for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults. (Section
902)
The holders of 66 2/3% in aggregate principal amount of the outstanding Debt
Securities of any series may waive future compliance by us with certain
restrictive covenants of the Indenture. (Section 1009) The holders
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of a majority in principal amount of the outstanding Debt Securities of any
series may waive any past default under the Indenture with respect to the Debt
Securities of such series, except a default in the payment of the principal of
or premium, if any, or any interest on any Debt Securities of that series or a
provision that cannot be modified or amended without the consent of the holders
of all outstanding Debt Securities of that series. (Section 513)
Defeasance
Defeasance and Discharge. The Indenture provides that, if the Debt
Securities of any series so provide, we may be discharged from any and all
obligations in respect of the 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 or to furnish the Trustee (if the Trustee is not the registrar) with
the names and addresses of holders of Debt Securities of such series). We will
be so discharged upon the irrevocable deposit with the Trustee, in trust, of
money and/or securities of the government which issues the currency in which
the Debt Securities of that series are payable or securities of agencies backed
by the full faith and credit of such government, that, through the payment of
interest and principal in accordance with their terms, will provide money in an
amount sufficient in the opinion of a nationally recognized firm of independent
public accountants to pay each installment of principal, premium and interest
on and any mandatory sinking fund payments in respect of the Debt Securities of
that series on the stated maturity of those payments in accordance with the
terms of those Debt Securities. (Sections 1302 and 1304)
This discharge may occur only if, among other things, we have delivered to
the Trustee an opinion of counsel stating that we have received from, or there
has been published by, the United States Internal Revenue Service a ruling or,
since the date of execution of the Indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the holders of the
Debt Securities of that series will not recognize income, gain or loss for
United States federal income tax purposes as a result of such defeasance and
will be subject to United States federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if the
defeasance had not occurred. (Section 1304)
In addition, we 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 on the date such payments are due or upon
redemption of 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)
Defeasance of Certain Covenants. The Indenture provides that, if provided by
the terms of the applicable series of Debt Securities, upon compliance with
certain conditions:
. we may omit to comply with the covenants described under "Restrictive
Covenants--Restrictions Upon Secured Debt", "--Restrictions on Sale and
Lease-Back Transactions" and "Consolidation, Merger and Sale of Assets"
(all other obligations under the Debt Securities of that series shall
remain in full force and effect); and
. any omission to comply with those covenants will not constitute an Event
of Default with respect to the Debt Securities of that series ("covenant
defeasance"). (Sections 1303 and 1304)
The conditions include:
. depositing with the Trustee money and/or securities of the government
which issues the currency in which the Debt Securities of that series are
payable or securities of agencies backed by the full faith and credit of
such government, that, through the payment of interest and principal in
accordance with their terms, will provide money in an amount sufficient
in the opinion of a nationally recognized firm of independent public
accountants to pay and discharge each installment of principal of,
premium and interest on and any mandatory sinking fund payments in
respect of the Debt Securities of that series on the stated maturity of
those payments in accordance with the terms of those Debt Securities; and
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. delivering to the Trustee an opinion of counsel to the effect that the
holders of the Debt Securities of that series will not recognize income,
gain or loss for United States federal income tax purposes as a result of
the deposit and related covenant defeasance and will be subject to United
States federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if the deposit and related
covenant defeasance had not occurred. (Section 1304)
Covenant Defeasance and Certain Other Events of Default. If we exercise our
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 the dates such payments are due 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, we would
remain liable for such payments. (Section 301)
Consolidation, Merger and Sale of Assets
The Indenture provides that we may consolidate with or merge into any other
corporation, or lease, sell or transfer all or substantially all of our
property and assets if:
. the corporation formed by such consolidation or into which we are merged,
or the party which acquires by lease, sale or transfer all or
substantially all of our property and assets, assumes the payment of the
principal of, and premium, if any, and interest on, all Debt Securities
and the performance and observance of all covenants and conditions of the
Indenture by executing and delivering to the Trustee a supplemental
indenture; and
. immediately after giving effect to such transaction and treating
indebtedness for borrowed money which becomes an obligation of us or a
Restricted Subsidiary as a result of such transaction as having been
incurred by us 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, has happened and
is continuing. (Section 801)
If, upon any such consolidation or merger, or upon any such lease, sale or
transfer of all or substantially all of our property and assets, 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 party (other
than any mortgage, security interest, pledge or lien permitted as described
under "Restrictive Covenants--Restrictions Upon Secured Debt" above), we, prior
to such consolidation, merger, lease, sale or transfer, will by executing and
delivering to the Trustee a supplemental indenture secure the due and punctual
payment of the principal of, premium, if any, and interest on the Debt
Securities (together with, if we so determine, any other indebtedness of, or
guaranteed by, us or any Restricted Subsidiary and then existing or thereafter
created) equally and ratably with (or, at our option, 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 the form of one or more
global securities which 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.
Payments of principal of, premium, if any, and interest on Debt Securities
represented by a global security will be made by us to the Trustee and then by
such Trustee to the depositary.
We anticipate 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
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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
applicable prospectus supplement.
So long as DTC or its nominee is the registered owner of the 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 of the global security
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 us 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, we will issue individual Debt Securities
in certificated form in exchange for Debt Securities represented by global
securities. In addition, we may at any time, and in our 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 has happened and
is continuing, we will issue individual Debt Securities in certificated form in
exchange for such Debt Securities represented by global securities.
Regarding the Trustee
The First National Bank of Chicago will be the Trustee under the Indenture
and we maintain banking relationships in the ordinary course of business with
the Trustee under the Indenture. The Trustee is a commercial lender under our
credit facility.
DESCRIPTION OF WARRANTS
The following description of the terms of the Warrants sets forth certain
general terms and provisions of the Warrants to which any prospectus supplement
may relate. The particular terms of the Warrants offered by any prospectus
supplement and the extent, if any, to which such general provisions may apply
to the Warrants so offered will be described in the applicable prospectus
supplement.
General
We may offer Warrants independently or together with any series of Debt
Securities offered by a prospectus supplement. Any Warrants so offered may be
attached to or separate from such Debt Securities. Each series of Warrants will
be issued under a separate warrant agreement (a "Warrant Agreement") to be
entered into between us and a bank or trust company, as warrant agent (the
"Warrant Agent"), all as described in the applicable prospectus supplement. The
Warrant Agent will act solely as our agent under the applicable Warrant
Agreement and in connection with the certificates for the Warrants (the
"Warrant Certificates") of such series, and the Warrant Agent will not assume
any obligation or relationship of agency or trust for or with any holders of
such Warrant Certificates or beneficial owners of Warrants. A copy of the form
of Warrant Agreement, including the form of Warrant Certificates, is filed as
an exhibit to the registration statement. The following summary of certain
provisions of the forms of Warrant Agreement and Warrant Certificates does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Warrant Agreement and the Warrant
Certificates.
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The prospectus supplement relating to a particular series of Warrants, if
any, may contain the terms of such Warrants, including, where applicable:
. the offering price;
. the currency or currencies in which such Warrants are being offered;
. the designation, aggregate principal amount, currency or currencies,
denominations and other terms of the series of Debt Securities
purchasable upon exercise of such Warrants;
. the designation and terms of the series of Debt Securities with which
such Warrants are being offered (if any) and the number of such Warrants
being offered with each such Debt Security;
. the date on and after which such Warrants and the related series of Debt
Securities will be transferable separately;
. the principal amount of the Debt Securities purchasable upon exercise of
each such Warrant and the price at which and currency or currencies in
which such principal amount of Debt Securities may be purchased upon such
exercise;
. the date on which the right to exercise such Warrants shall commence and
the date on which such right shall expire; and
. federal income tax consequences; and
. any other terms of such Warrants not inconsistent with the applicable
Warrant Agreement.
Warrants of any series will be exchangeable into Warrants of the same series
representing in the aggregate the number of Warrants surrendered for exchange.
Warrant Certificates may be presented for exchange or transfer at the corporate
trust office of the Warrant Agent for such series of Warrants (or any other
office indicated in the applicable prospectus supplement). Prior to the
exercise of their Warrants, holders of Warrants will not have any of the rights
of holders of the series of Debt Securities purchasable upon such exercise,
including the right to receive payments of principal of, premium, if any, or
interest, if any, on the Debt Securities purchasable upon such exercise, or to
enforce any of the covenants in the Indenture.
Exercise of Warrants
Each Warrant will entitle the holder thereof to purchase such principal
amount of the related series of Debt Securities at such exercise price as shall
in each case be set forth in, or calculable as set forth in, the applicable
prospectus supplement. Warrants of a series may be exercised at the corporate
trust office of the Warrant Agent for such series (or any other office
indicated in the applicable prospectus supplement) at any time on or after the
exercise date indicated in the prospectus supplement relating to such Warrants
and prior to 5:00 P.M., New York time (unless otherwise indicated in the
applicable prospectus supplement), on the expiration date set forth in such
prospectus supplement. After the close of business on the expiration date
relating to such applicable series of Warrants, unexercised Warrants of such
series will be void.
Warrants of a series may be exercised by delivery to the appropriate Warrant
Agent of payment, as provided in the applicable prospectus supplement, of the
consideration required to purchase the principal amount of the series of Debt
Securities purchasable upon such exercise, together with certain information as
set forth on the reverse side of the Warrant Certificate evidencing such
Warrants. Such Warrants will be deemed to have been exercised upon receipt of
the exercise price, subject to the receipt of the Warrant Certificate
evidencing such Warrants within five business days. Upon receipt of such
payment and such Warrant Certificate, properly completed and duly executed, at
the corporate trust office of the appropriate Warrant Agent (or any other
office indicated in the prospectus supplement relating to such series of
Warrants), we will, as soon as practicable, issue and deliver the principal
amount of the series of Debt Securities purchasable upon such exercise. If
fewer than all of the Warrants represented by a Warrant Certificate are
exercised, a new Warrant Certificate will be issued and delivered for the
remaining amounts of Warrants.
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PLAN OF DISTRIBUTION
We may sell the Securities in any of four ways:
. directly to purchasers;
. through agents;
. through dealers; or
. through one or more underwriters or a syndicate of underwriters in an
underwritten offering.
With respect to each series of Securities, the terms of any offering,
including the name or names of any underwriters, dealers or agents, the
purchase price of such Securities and the proceeds to us from such sale, any
underwriting discounts, selling commissions and other items constituting
underwriters', dealers' or agents' compensation, any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
or agents, and any securities exchanges on which the Securities of such series
may be listed, will be set forth in, or may be calculated from the information
set forth in, the related prospectus supplement. Only underwriters named in the
prospectus supplement are deemed to be underwriters in connection with the
Securities offered thereby.
If we sell Securities through underwriters, the underwriters will acquire
the Securities for their own account. The Securities may be resold from time to
time in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the applicable prospectus supplement, the
obligations of the underwriters to purchase Securities will be subject to
certain conditions precedent and the underwriters will be obligated to purchase
all the Securities offered by the prospectus supplement if any of such
Securities are purchased. Any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers may be changed from time
to time.
We may also sell the Securities directly or through agents (which may also
act as principals) which we may designate from time to time. Any agent involved
in the offer or sale of the Securities with regard to which this prospectus is
delivered will be named, and any commissions we may pay to such agent will be
set forth in, or may be calculated from the information set forth in, the
applicable prospectus supplement. Unless otherwise indicated in the applicable
prospectus supplement, any such agent will be acting on a best efforts basis
for the period of its appointment. In the case of sales we may directly make,
no commission will be payable.
If so indicated in a prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers by certain specified institutions to
purchase Securities from us at the public offering price set forth in that
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in the prospectus supplement.
Such contracts will be subject to the conditions set forth in the prospectus
supplement, and the prospectus supplement will set forth the commissions
payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
us to indemnification by us against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect
to payments which the agents or underwriters may be required to make with
respect to such liabilities. Agents and underwriters may be customers of,
engage in transactions with, or perform services for us or our affiliates in
the ordinary course of business.
If the Securities of any series are not listed on a national securities
exchange, certain broker-dealers may make a market in the Securities of such
series, but will not be obligated to do so and may discontinue any market
making at any time without notice. We can give no assurance that any broker-
dealer will make a market in the Securities or as to the liquidity of the
trading market for the Securities. The prospectus supplement with respect to
the Securities of any series will state, if known, whether or not any broker-
dealer intends to make a market in such Securities. If no such determination
has been made, the prospectus supplement will so state.
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LEGAL MATTERS
Certain legal matters relating to the Securities will be passed upon for us
by Edward H. Graham, our Senior Vice President, General Counsel and Secretary,
and Sidley & Austin, Chicago, Illinois. Mr. Graham is an officer and full-time
employee of ours and the beneficial owner of approximately 31,800 shares of our
common stock and options to acquire approximately 41,900 additional shares of
our common stock.
EXPERTS
Our consolidated financial statements and schedule appearing in our Annual
Report (Form 10-K) for the year ended December 31, 1998 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 report given on the authority of such Firm as experts in
accounting and auditing.
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$400,000,000
MAYTAG CORPORATION
Medium-Term Notes, Series D Due Nine Months to Thirty Years From Date of Issue
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PROSPECTUS SUPPLEMENT
June 3, 1999
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Salomon Smith Barney
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
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