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Filed Pursuant to Rule 424(b)(2)
Registration No. 033-52157
PROSPECTUS SUPPLEMENT [LOGO]
(To Prospectus Dated March 1, 1994)
$500,000,000
NORWEST FINANCIAL, INC.
MEDIUM-TERM NOTES, SERIES B
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
Norwest Financial, Inc. (the "Company") may offer from time to time its
Medium-Term Notes, Series B (the "Notes") at an initial offering price of up to
$500,000,000. Each Note will mature on a day from 9 months to 30 years from its
date of issue, as selected by the initial purchaser and agreed to by the
Company. Unless otherwise set forth in the applicable Pricing Supplement (the
"Pricing Supplement") to this Prospectus Supplement, the Notes will not be
redeemable or repayable prior to their Maturity. The Notes may be issued as
Senior Securities or Senior Subordinated Securities. Senior Subordinated
Securities will be subordinated to all Senior Indebtedness. The Notes will be
issued in fully registered form and will be denominated in U.S. dollars. Unless
otherwise indicated in the applicable Pricing Supplement, the Notes will be
issued in denominations of $1,000 and integral multiples of $1,000 in excess
thereof. See "Description of Notes" herein.
Each Note will be represented by either a Global Security registered in the
name of a nominee of the Depository Trust Company, as depository (the
"Depository") (each such Note represented by a Global Security being referred to
herein as a "Book-Entry Note"), or a certificate issued in definitive form (a
"Certificated Note"), as set forth in the applicable Pricing Supplement.
Beneficial interests in Book-Entry Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depository's
participants. Owners of beneficial interests in the Book-Entry Notes will be
entitled to receive physical delivery of Notes in certificated form in the
amount of their beneficial interests only under the limited circumstances
described herein. See "Description of Notes--Book-Entry System" herein.
The interest rate or interest rate formulas on each Note will be established
by the Company at the date of issuance of such Note and will be indicated in the
applicable Pricing Supplement. Interest rates and interest rate formulas are
subject to change by the Company, but no such change will affect the interest
rate or interest rate formula on any Note previously issued or which the Company
has agreed to sell. Unless otherwise indicated in the applicable Pricing
Supplement, the Notes will bear interest at a fixed rate (which may be zero in
the case of certain Notes issued at a discount from the principal amount payable
at Maturity) or at rates determined by reference to the CD Rate, the Commercial
Paper Rate, the Federal Funds Rate, LIBOR, the Treasury Rate, the Prime Rate,
the CMT Rate (each as defined herein) or such other interest rate formula as may
be designated in an applicable Pricing Supplement, as adjusted by the Spread or
Spread Multiplier, if any, applicable to such Notes. See "Description of Notes"
herein.
Interest on Fixed Rate Notes which are Senior Securities will accrue from
the date of issuance of any such Fixed Rate Note and will be payable on each
April 1 and October 1 and at Maturity or upon redemption or repayment unless
otherwise indicated in the applicable Pricing Supplement. Interest on Fixed Rate
Notes which are Senior Subordinated Securities will accrue from the date of
issuance of any such Fixed Rate Note and will be payable on each April 15 and
October 15 and at Maturity or upon redemption or repayment unless otherwise
indicated in the applicable Pricing Supplement. Interest on Floating Rate Notes
will accrue from the date of issuance of any such Floating Rate Note and will be
payable on the dates indicated therein and in the applicable Pricing Supplement
and at Maturity or upon redemption or repayment.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY
SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<S> <C> <C> <C>
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PRICE TO AGENT'S DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
- -------------------------------------------------------------------------------------------------------------------
Per Note............................... 100% Not to exceed .75% Not less than 99.25%
- -------------------------------------------------------------------------------------------------------------------
Total.................................. $500,000,000 Not to exceed $3,750,000 Not less than $496,250,000
===================================================================================================================
</TABLE>
(1) Unless otherwise indicated in a Pricing Supplement, the Notes will be issued
at 100% of their principal amount.
(2) The Company will pay Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, PaineWebber Incorporated or Salomon Brothers Inc as
agents (each an "Agent", collectively the "Agents"), a commission not to
exceed .75% of the principal amount of any Note, depending on its Maturity,
sold through any such Agent. The Company may also sell to an Agent, acting
as principal, for resale to investors and other purchasers at varying prices
related to prevailing market prices at the time of resale to be determined
by such Agent or, if so agreed, at a fixed public offering price. Unless
otherwise specified in the applicable Pricing Supplement, any Note sold to
an Agent, as principal, will be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage equal to the
commission applicable to an agency sale of a Note of identical Maturity, and
may be resold by such Agent. The Company may also sell Notes directly to
investors on its own behalf, in which case no commission will be payable.
The Company has agreed to indemnify the Agents against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
(3) Assuming the Notes are issued at 100% of principal amount and before
deducting other expenses payable by the Company estimated at $300,000.
The Notes are being offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its best efforts to solicit orders to
purchase Notes. The Company also may sell Notes to any Agent, as principal, for
resale to one or more investors and other purchasers at varying prices related
to prevailing market prices at the time of resale to be determined by such
Agent, or, if so agreed, at a fixed public offering price. The Company reserves
the right to sell the Notes through one or more additional agents, as agent, or
to one or more additional agents, as principal, for resale. In addition, the
Company reserves the right to sell the Notes directly to investors on its own
behalf in those jurisdictions where it is authorized to do so. There can be no
assurance that the Notes offered by this Prospectus Supplement will be sold or
that there will be a secondary market for the Notes. No termination date for the
offering of the Notes has been established. The Company reserves the right to
withdraw, cancel or modify the offer made hereby without notice. The Company or
any Agent, if it receives an offer, may reject any offer to purchase Notes, in
whole or in part. See "Plan of Distribution" herein.
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
The date of this Prospectus Supplement is November 8, 1994
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IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements and, to the extent inconsistent therewith, replaces the
description of the general terms of the Debt Securities set forth under the
heading "Description of Debt Securities" in the accompanying Prospectus, to
which description reference is made. The provisions of the Notes summarized
herein will apply to such Notes unless otherwise specified in the applicable
Pricing Supplement and the applicable Note.
The Notes are referred to in the accompanying Prospectus as the "Debt
Securities". Unless otherwise defined herein, capitalized terms set forth below
have the meanings specified in the accompanying Prospectus, the applicable
Indenture and/or the Notes.
GENERAL
The Notes may be issued under the Senior Indenture or under the Senior
Subordinated Indenture. The Notes issued under each Indenture will constitute a
single series for purposes of such Indenture. The Notes issued under the Senior
Subordinated Indenture will rank pari passu with all other Senior Subordinated
Indebtedness of the Company and, together with such other Senior Subordinated
Indebtedness, will be subordinated in right of payment to the prior payment in
full of the Senior Indebtedness of the Company. For a description of the rights
attaching to Notes which are Senior Securities and Notes which are Senior
Subordinated Securities under the applicable Indenture, see "Description of Debt
Securities" in the Prospectus. The Notes are currently limited to $500,000,000
in initial offering price. The foregoing limit, however, may be increased by the
Company if in the future it determines that it may wish to sell additional
Notes. The Company may from time to time sell additional series of Debt
Securities (as defined in the accompanying Prospectus), including additional
series of medium-term notes.
The Notes will be offered on a continuous basis and will mature at par on
any day from 9 months to 30 years from the date of issue, as selected by the
initial purchaser and agreed to by the Company, and may be subject to redemption
or repayment prior to Maturity at the price or prices specified in the
applicable Pricing Supplement. Each Note will bear interest at either (i) a
fixed rate (a "Fixed Rate Note"), which may be zero in the case of certain Notes
issued at an Issue Price (as defined below) representing a discount from the
principal amount payable at Maturity (a "Zero-Coupon Note"), or (ii) a floating
rate (a "Floating Rate Note") determined by reference to the interest rate basis
or combination of interest rate bases (the "Base Rate") specified in the
applicable Pricing Supplement that may be adjusted by a Spread or Spread
Multiplier (each as defined below).
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth herein under "Book-Entry System",
Book-Entry Notes will not be issuable in certificated form. See "Book-Entry
System" below.
The Notes will be issuable only in fully registered form. The authorized
denominations of the Notes will be $1,000 or any larger amount that is an
integral multiple of $1,000.
"Business Day" means any day, other than a Saturday or Sunday, that meets
each of the following applicable requirements: the day is (a) not a day on which
banking institutions are authorized or required by law, regulation or executive
order to be closed in The City of New York or Chicago, and (b) with respect to
LIBOR Notes, is also a London Banking Day. "London Banking Day" means any day on
which dealings in deposits in U.S. dollars are transacted in the London
interbank market.
"Original Issue Discount Note" means a Note, including any Zero-Coupon
Note, which has a stated redemption price at Maturity that exceeds its Issue
Price by more than a specified de minimis amount and which the applicable
Pricing Supplement indicates will be an "Original Issue Discount Note."
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The Pricing Supplement relating to each Note will describe the following
terms: (1) whether such Note is a Senior Subordinated Security or a Senior
Security; (2) whether such Note is a Fixed Rate Note or a Floating Rate Note
(and if a Fixed Rate Note, whether such Note is a Zero-Coupon Note) and whether
such Note is an Original Issue Discount Note; (3) the price (expressed as a
percentage of the aggregate principal amount thereof) at which such Note will be
issued (the "Issue Price"); (4) the date on which such Note will be issued (the
"Original Issue Date"); (5) the date on which such Note will mature (the
"Maturity Date"); (6) if such Note is a Fixed Rate Note, the rate per annum at
which such Note will bear interest, if any; (7) if such Note is a Floating Rate
Note, the Base Rate, the Initial Interest Rate, the Interest Reset Period, the
Interest Reset Dates, the Interest Payment Period, the Interest Payment Dates,
the Maximum Interest Rate and the Minimum Interest Rate, if any, and the Spread
or Spread Multiplier, if any (each as defined below), the period to maturity of
the instrument or obligation on which the interest rate formula is based (the
"Index Maturity") and any other terms relating to the particular method of
calculating the interest rate for such Note; (8) whether such Note may be
redeemed or repaid prior to the Maturity Date and, if so, the provisions
relating to such redemption or repayment; (9) whether such Note is represented
by one or more Book-Entry Notes, and if so, any special provisions with respect
to such Book-Entry Note or Notes; (10) whether the Company has the option to
extend the Maturity Date for one or more periods with respect to such Note; and
(11) any other terms of such Note not inconsistent with the provisions of the
related Indenture.
As provided in the Indenture and subject to certain limitations therein set
forth, Notes (other than Book-Entry Notes) are transferable on the Securities
Register of the Company, upon surrender for registration of transfer at the
office or agency of the Company to be maintained for that purpose in the Borough
of Manhattan, The City of New York, or at any other office or agency of the
Company maintained for that purpose, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Securities Registrar duly executed by the Holder thereof or his attorney duly
authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees. The transfer or exchange of Book-Entry
Notes will be effected as specified in "Book-Entry System" below.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of and any premium and interest on each Note is payable by
the Company in U.S. dollars. Unless otherwise specified in the applicable
Pricing Supplement, payments of interest, principal and premium, if any, on the
Notes will be payable at the Corporate Trust Office of the applicable Trustee or
at the office or agency of the Company maintained for such purposes in the
Borough of Manhattan, The City of New York; provided, however, that at the
option of the Company payment of interest may be made by mailing a check to the
Holder at the address of such Holder appearing on the Securities Register on the
applicable Record Date. Notwithstanding the foregoing, the Company may at its
option make such payments by wire transfer of immediately available funds, but
only to Holders of Notes owning an aggregate principal amount of Notes in excess
of $5,000,000 and only if appropriate payment instructions have been received in
writing by the applicable Trustee not less than fifteen calendar days prior to
the applicable Interest Payment Date. Unless otherwise specified in the
applicable Pricing Supplement, principal and any premium and interest payable at
Maturity or upon earlier redemption or repayment in respect of a Note will be
paid in immediately available funds upon surrender of such Note at the office or
agency of the Company maintained for such purposes in the Borough of Manhattan,
The City of New York.
The total amount of any principal, premium, if any, or interest due on any
Global Security representing one or more Book-Entry Notes on any Interest
Payment Date or at Maturity or upon earlier redemption or repayment in respect
of a Note will be made available to the applicable Trustee on such date. As soon
as possible thereafter, the applicable Trustee will make such payments to the
Depository in accordance with existing arrangements between the applicable
Trustee and the Depository. The Depository will allocate such payments to each
Book-Entry Note represented by such Global Security and make payments to the
owners or Holders thereof in accordance with its existing operating procedures.
Neither the Company nor the Trustees shall have any responsibility or liability
for such payments by the Depository. So long as the Depository or its nominee is
the registered owner of any Global Security, the Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the Book-Entry
Note or Notes represented by such Global Securities for all purposes under the
Indentures.
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Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described in the accompanying Prospectus under "Description of
Debt Securities--Events of Default, Notice and Waiver", the amount of principal
due and payable with respect to such Note shall be limited to the sum of the
aggregate principal amount of such Note multiplied by the Issue Price (expressed
as a percentage of the aggregate principal amount), plus the original issue
discount accrued from the date of issue to the date of declaration, which
accrual shall be calculated using the "interest method" (computed in accordance
with generally accepted accounting principles) in effect on the date of
declaration.
The "Record Date" with respect to any Interest Payment Date (as defined
below) shall mean (a) for Fixed Rate Notes, the first day of the calendar month
if such Interest Payment Date is the fifteenth day of the calendar month, or the
fifteenth day of the calendar month preceding such Interest Payment Date if such
Interest Payment Date is the first day of the calendar month, in each case
whether or not such date shall be a Business Day, and (b) for Floating Rate
Notes, the fifteenth day preceding each Interest Payment Date, whether or not
such date shall be a Business Day.
Interest payable and punctually paid or duly provided for on any Interest
Payment Date will be paid to the person in whose name a Note is registered at
the close of business on the Record Date next preceding such Interest Payment
Date; provided, however, that the first payment of interest on any Note with an
Original Issue Date between a Record Date and an Interest Payment Date or on an
Interest Payment Date will be made on the Interest Payment Date following the
next succeeding Record Date to the registered owner on such next succeeding
Record Date; and provided, further, that interest payable at Maturity or upon
earlier redemption or repayment will be payable to the person to whom principal
shall be payable. See "Certain United States Federal Income Tax
Consequences--Original Issue Discount" below for a discussion of the possible
tax treatment of a Note issued between a Record Date and an Interest Payment
Date.
All percentages resulting from any calculations will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point being rounded upwards, and all
currency or currency unit amounts used and resulting from such calculations on
the Notes will be rounded to the nearest one-hundredth of a unit (with .005 of a
unit being rounded upwards).
Interest payments in respect of the Notes will equal the amount of interest
accrued from and including the immediately preceding Interest Payment Date in
respect of which interest has been paid or duly made available for payment (or
from and including the Original Issue Date, if no interest has been paid with
respect to the applicable Note) to but excluding the related Interest Payment
Date or the Maturity Date (or date of redemption or repayment), as the case may
be.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum stated on the face thereof and in the applicable Pricing
Supplement until the principal amount thereof is paid or made available for
payment. Unless otherwise set forth in an applicable Pricing Supplement,
interest on each Fixed Rate Note will be payable semi-annually, for Senior
Securities on each April 1 and October 1 and for Senior Subordinated Securities
on each April 15 and October 15 and at Maturity or upon earlier redemption or
repayment. Each date on which interest on a Note is payable is referred to
herein as "Interest Payment Date". Each payment of interest in respect of an
Interest Payment Date shall include interest accrued to but excluding such
Interest Payment Date. Interest on Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date (or date of redemption or
repayment) of a Fixed Rate Note falls on a day that is not a Business Day, the
required payment of principal, premium, if any, and/or interest will be made on
the next succeeding Business Day as if made on the date such payment was due,
and no interest will accrue on such payment for the period from and after such
Interest Payment Date or the Maturity Date (or date of redemption or repayment),
as the case may be, to the date of such payment on the next succeeding Business
Day.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its Original Issue Date for
such Note at the initial interest rate set forth on the face thereof (the
"Initial Interest Rate") and in the applicable Pricing Supplement. Thereafter,
the
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interest rate on such Note for each Interest Reset Period (as defined below)
will be determined by reference to the Base Rate plus or minus the Spread, if
any, or multiplied by the Spread Multiplier, if any (each as specified in the
applicable Pricing Supplement) until the principal thereof is paid or made
available for payment. The "Spread" is the number of basis points (one basis
point equals one one-hundredth of a percentage point) that may be specified in
the applicable Pricing Supplement as being applicable to such Floating Rate
Note, and the "Spread Multiplier" is the percentage that may be specified in the
applicable Pricing Supplement as being applicable to such Note. Any Floating
Rate Note may also have either or both of the following: (i) a maximum numerical
interest rate limitation, or ceiling, on the rate of interest which may accrue
during any interest period (the "Maximum Interest Rate") or (ii) a minimum
numerical interest rate limitation, or floor, on the rate of interest which may
accrue during any interest period (the "Minimum Interest Rate"). The applicable
Pricing Supplement will designate one of the following Base Rates as applicable
to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"), (b) the
Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Federal Funds
Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the Treasury
Rate (a "Treasury Rate Note"), (f) the Prime Rate (a "Prime Rate Note"), (g) the
CMT Rate (a "CMT Rate Note") or (h) such other Base Rate as is set forth in the
Pricing Supplement.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (the "Interest Reset
Period"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, the date or dates on which
interest will be reset (each an "Interest Reset Date") will be, in the case of
Floating Rate Notes that reset daily, each Business Day; in the case of Floating
Rate Notes (other than Treasury Rate Notes) that reset weekly, Wednesday of each
week; in the case of Treasury Rate Notes that reset weekly, Tuesday of each week
(except as provided below); in the case of Floating Rate Notes that reset
monthly, the third Wednesday of each month; in the case of Floating Rate Notes
that reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes that reset semi-annually, the third
Wednesday of the two months specified in the applicable Pricing Supplement; and
in the case of Floating Rate Notes that reset annually, the third Wednesday of
the month specified in the applicable Pricing Supplement. If any Interest Reset
Date for any Floating Rate Note is not a Business Day, such Interest Reset Date
shall be postponed to the next day that is a Business Day, except in the case of
a LIBOR Note, if such Business Day is in the next succeeding calendar month,
such Interest Reset Date shall be the immediately preceding Business Day.
Interest on each Floating Rate Note will be payable monthly, quarterly,
semi-annually or annually (in each case, the "Interest Payment Period") and at
Maturity or upon earlier redemption or repayment. Except as provided below or in
the applicable Pricing Supplement, each Interest Payment Date will be, in the
case of Floating Rate Notes with a monthly Interest Payment Period, on the third
Wednesday of each month; in the case of Floating Rate Notes with a quarterly
Interest Payment Period, on the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes with a semi-annual Interest Payment
Period, on the third Wednesday of the two months specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes with an annual
Interest Payment Period, on the third Wednesday of the month specified in the
applicable Pricing Supplement.
If any Interest Payment Date for any Floating Rate Note would otherwise be
a day that is not a Business Day, such Interest Payment Date shall be postponed
to the next day that is a Business Day, except that in the case of a LIBOR Note,
if such Business Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding Business Day. If the Maturity
Date (or date of redemption or repayment) of a Floating Rate Note falls on a day
that is not a Business Day, the required payment of principal, premium, if any,
and/or interest will be made on the next succeeding Business Day as if made on
the date such payment was due, and no interest shall accrue on such payment for
the period from and after the Maturity Date (or date of redemption or repayment)
to the date of such payment on the next succeeding Business Day.
Interest payments on each Interest Payment Date for Floating Rate Notes
will include accrued interest from and including the Original Issue Date or from
and including the last date in respect of which interest has been paid, as the
case may be, to, but excluding, such Interest Payment Date, Maturity Date or
date of redemption or repayment, as the case may be. Accrued interest will be
calculated by multiplying the principal amount of a Floating Rate Note by an
accrued interest factor. This accrued interest factor will be computed by adding
the interest factors calculated for each day in the period for which accrued
interest is being calculated. The interest factor (expressed as
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a decimal) for each such day will be computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes, or by
the actual number of days in the year, in the case of Treasury Rate Notes or CMT
Rate Notes. The interest rate in effect on each day for a Floating Rate Note
will be (a) if such day is an Interest Reset Date, the interest rate with
respect to the Interest Determination Date (as defined below) pertaining to such
Interest Reset Date, or (b) if such day is not an Interest Reset Date, the
interest rate with respect to the Interest Determination Date pertaining to the
next preceding Interest Reset Date, subject in either case to any Maximum
Interest Rate or Minimum Interest Rate limitation referred to above and to any
adjustment by a Spread or a Spread Multiplier referred to above; provided,
however, that the interest rate in effect for the period from the Original Issue
Date to the first Interest Reset Date set forth in the Pricing Supplement with
respect to a Floating Rate Note will be the Initial Interest Rate specified in
the applicable Pricing Supplement. The interest rate on the Floating Rate Notes
will in no event be higher than the maximum rate permitted by New York law, as
the same may be modified by United States law of general application. Under
present New York law, the maximum rate of interest is 25% per annum on a simple
interest basis. This limit may not apply to Floating Rate Notes in which
$2,500,000 or more has been invested.
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day next preceding
such Interest Reset Date. The Interest Determination Date pertaining to an
Interest Reset Date for a Treasury Rate Note will be the day of the week in
which such Interest Reset Date falls on which Treasury bills of the Index
Maturity specified on the face of the Treasury Rate Notes are auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that such auction may be held on the preceding Friday.
If, as a result of a legal holiday, an auction is so held on the preceding
Friday, such Friday will be the Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week. If an auction falls
on a day that is an Interest Reset Date for Treasury Rate Notes, the Interest
Reset Date shall be the following day that is a Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date", where applicable, pertaining to any Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or if any such day is not a Business Day, the next succeeding
Business Day and (ii) the Business Day immediately preceding the applicable
Interest Payment Date or the Maturity Date (or date of redemption or repayment),
as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, The First
National Bank of Chicago will be the calculation agent (the "Calculation Agent")
with respect to the Floating Rate Notes. Upon request of the Holder of any
Floating Rate Note, the Calculation Agent will provide the interest rate then in
effect and, if determined, the interest rate which will become effective on the
next Interest Reset Date with respect to such Floating Rate Note. The
Calculation Agent will also provide such information to the applicable Trustee
and Paying Agent as soon as the interest rate with respect to the Floating Rate
Notes has been determined and as soon as practicable after any change in such
interest rate.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated 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 of the Federal
Reserve System ("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 Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New
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York in its daily statistical release, "Composite 3:30 p.m. Quotations for U.S.
Government Securities" ("Composite Quotations") under the heading "Certificates
of Deposit." If such rate is not yet published by 3:00 p.m., New York City time,
on the Calculation Date pertaining to such Interest Determination Date, then the
CD Rate on such 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 Interest
Determination Date, of three leading non-bank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money center
banks of the highest credit standing (in the market for negotiable certificates
of deposit) with a remaining Maturity closest to the Index Maturity designated
in the Pricing Supplement in a denomination of $5,000,000; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the CD Rate for the applicable period
will be the same as the CD Rate for the immediately preceding Interest Reset
Period (or, if there was no Interest Reset Period, the Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in the Commercial Paper Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement, "Commercial
Paper Rate" means with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on that date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement as
published in H.15(519), under the heading "Commercial Paper." In the event that
such rate is not published by 9:00 a.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, then the Commercial Paper
Rate shall be the Money Market Yield of the rate on that Interest Determination
Date for commercial paper having the Index Maturity designated in the applicable
Pricing Supplement as published in Composite Quotations under the heading
"Commercial Paper". If by 3:00 p.m., New York City time, on such Calculation
Date such rate is not yet published in Composite Quotations, the Commercial
Paper Rate for that Interest Determination Date shall be calculated by the
Calculation Agent and shall be the Money Market Yield of the arithmetic mean of
the offered rates of three leading dealers of commercial paper in The City of
New York selected by the Calculation Agent as of 11:00 a.m., New York City time,
on that Interest Determination Date, for commercial paper having the Index
Maturity designated in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA", or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Commercial Paper Rate will be the same as the Commercial
Paper Rate for the immediately preceding Interest Reset Period (or, if there was
no such Interest Reset Period, the Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
that day for Federal Funds as published in H.15(519) under the heading "Federal
Funds (Effective)" or, if not so published by 9:00 a.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate will be the rate on such Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate". If
neither of such rates is published by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such
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Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates 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 as of 9:00 a.m., New York City time,
on such Interest Determination Date; provided, however, that if the brokers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Federal Funds Rate will be the same as the Federal Funds Rate
for the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Interest Rate).
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in the
LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement, with
respect to LIBOR Notes indexed to the offered rates for U.S. dollar deposits,
"LIBOR" will be determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date, LIBOR will be
determined as follows: (A) if the method of calculation of LIBOR for a
LIBOR Note is specified on the face thereof to be "LIBOR-Reuters", LIBOR
for such Interest Determination Date will be determined on the basis of the
offered rates for deposits in U.S. dollars having the Index Maturity
designated in the applicable Pricing Supplement, commencing on the second
London Banking Day immediately following that Interest Determination Date,
which appear on the Reuters Screen LIBO Page as of 11:00 a.m., London time,
on that Interest Determination Date (if at least two such offered rates
appear on the Reuters Screen LIBO Page, the rate in respect of that
Interest Determination Date will be the arithmetic mean of such offered
rates as determined by the Calculation Agent) or (B) if the method of
calculation of LIBOR for a LIBOR Note is specified on the face thereof to
be "LIBOR-Telerate", LIBOR for such Interest Determination Date will be the
rate for deposits in U.S. dollars having the Index Maturity specified in
the applicable Pricing Supplement which appears on the Telerate Page 3750
or such other page as may replace Telerate Page 3750 on that service for
the purpose of displaying London interbank offered rates of major banks
(the "Telerate Page") as of 11:00 A.M., London time, on the Interest
Determination Date. If fewer than two offered rates appear, in the case of
alternative (A) above, or if such rate does not appear on the Telerate
Page, in the case of alternative (B) above, the rate for that Interest
Determination Date will be determined as if the parties had specified the
rate as described in (ii) below. If neither LIBOR-Reuters nor
LIBOR-Telerate is specified in the applicable Pricing Supplement, LIBOR
will be determined as if LIBOR Telerate had been specified. "Reuters Screen
LIBO Page" means the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks).
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page or if the
rate for deposits does not appear on the Telerate Page as applicable and as
specified in (i) above, LIBOR will be determined on the basis of the rates
at which deposits in U.S. dollars are offered by four major banks in the
London interbank market selected by the Calculation Agent at approximately
11:00 a.m., London time, on that Interest Determination Date to prime banks
in the London interbank market having the Index Maturity designated in the
Pricing Supplement commencing on the second London Banking Day immediately
following that Interest Determination Date and in a principal amount equal
to an amount of not less than U.S. $1,000,000 that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of such banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR
in respect of that Interest Determination Date will be the arithmetic mean
of such quotations. If fewer than two quotations are provided, LIBOR in
respect of that Interest Determination Date will be the arithmetic mean of
the rates quoted by three major banks in The City of New York selected by
the Calculation Agent at approximately 11:00 a.m., New York time, on that
Interest Determination Date for loans in U.S. dollars to leading European
banks, having the Index Maturity designated in the applicable Pricing
Supplement commencing on the second London Banking Day immediately
following that Interest Determination Date and in a principal amount equal
to an amount of not less than U.S. $1,000,000 that is representative for a
single transaction in such market at such time; provided, however, that if
the banks selected as aforesaid by the Calculation Agent are not quoting as
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mentioned in this sentence, LIBOR for the applicable period will be the
same as LIBOR for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the Initial Interest Rate).
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in the Treasury Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date, the rate for the
auction held on such Interest Determination Date of direct obligations of the
United States ("Treasury bills") having the Index Maturity designated in the
applicable Pricing Supplement as published in H.15(519) under the heading "U.S.
Government Securities--Treasury bills--auction average (investment)" or, if not
so published by 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or reported as provided above by 3:00 p.m., New
York City time, on such Calculation Date or if no such auction is held in a
particular week, then the Treasury Rate shall be calculated by the Calculation
Agent and shall be a yield to Maturity (expressed as a bond equivalent, on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 p.m., New York City time, on such 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 designated in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Treasury Rate for the
applicable period will be the same as the Treasury Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Interest Rate).
CMT RATE NOTES
CMT Rate Notes will bear interest at the rates (calculated with reference
to the CMT Rate and the Spread and/or Spread Multiplier, if any) specified in
such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption ". . .Treasury Constant Maturities. . . Federal Reserve Board Release
H.15. . .Mondays Approximately 3:45 P.M.," under the column for the Designated
CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate
Page is 7055, the rate on such CMT Rate Interest Determination Date and (ii) if
the Designated CMT Telerate Page is 7052, the week or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate 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 Rate Interest Determination Date with respect to
such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City Time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market closing
offer side prices as of approximately 3:30 P.M., New York City time, on the CMT
Rate Interest Determination Date reported, according to their written records,
by three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include the Agents or
their respective affiliates) 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
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of the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 P.M., New
York City time, on the CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the Number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100,000,000. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided, however,
that if fewer than three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate will be the CMT Rate in effect on such
CMT Rate Interest Determination Date. If two Treasury Notes with an original
maturity as described in the third preceding sentence have remaining terms to
maturity equally close to the Designated CMT Maturity Index, the quotes for the
Treasury Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service, for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (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. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the arithmetic
mean of the prime rates quoted on the basis of the actual number of days in the
year divided by a 360-day year as of the close of business on such Interest
Determination Date by three major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two quotations are provided,
the Prime Rate shall be determined on the basis of the rate or rates furnished
in The City of New York by any substitute bank or trust company organized and
doing business under the laws of the United States, or any state thereof, having
total equity capital of at least U.S. $500,000,000 and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
banks or trust companies selected as aforesaid are not quoting as mentioned in
this sentence, the Prime Rate for the applicable period will be the same as the
Prime Rate for the immediately preceding Interest Reset Period (or, if there was
no such Interest Reset Period, the Initial Interest Rate).
REDEMPTION
Unless otherwise specified in an applicable Pricing Supplement, each Note
will not be redeemable prior to Maturity. If the applicable Pricing Supplement
specifies that a Note is redeemable, then such Note will be redeemable at the
option of the Company on a date or dates specified prior to Maturity at a price
or prices set forth in the applicable Pricing Supplement, together with accrued
interest to the date of redemption.
The Notes will not be subject to any sinking fund. The Company may redeem
any of the Notes which are redeemable and remain outstanding either in whole or
from time to time in part, upon not less than 30 nor more than 90 days' notice
prior to the Redemption Date, to the Holders of Notes to be redeemed. If less
than all of the Notes with like tenor and terms are to be redeemed, the Notes to
be redeemed shall be selected by the applicable
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Trustee by such method as such Trustee shall deem fair and appropriate. The
Depository advises that if less than all of the Book-Entry Notes with like tenor
and terms are to be redeemed, the particular interests (in integral multiples of
$1,000) in the Global Securities representing the Book-Entry Notes to be
redeemed shall be selected by the Depository's impartial lottery procedures.
REPAYMENT AND REPURCHASE
Unless otherwise indicated in the applicable Pricing Supplement, each Note
will not be repayable prior to Maturity. If the applicable Pricing Supplement
specifies that a Note is repayable prior to Maturity, then such Note will be
repayable at the option of the Holder on a date or dates specified prior to
Maturity at a price or prices set forth in the applicable Note and Pricing
Supplement, together with accrued interest to the date of repayment.
In order for a Note other than a Book-Entry Note to be repaid, the
applicable Trustee must receive at the specified location of the applicable
Trustee at least 15 days but not more than 30 days, prior to the specified
repayment date (i) the Note with the form entitled "Option to Elect Repayment"
on the Note duly completed or (ii) a telegram, telex, facsimile transmission or
a letter 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 of America 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
(which shall not be less than the minimum authorized denomination of such Note),
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 Note duly completed will be received by the applicable Trustee
at such location 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 applicable Trustee by such fifth Business Day.
Exercise of the repayment option by the Holder of a Note shall be irrevocable,
except as otherwise described under "Extension of Maturity". 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 repayment is an authorized denomination. All
questions as to validity, eligibility (including time of receipt) and acceptance
of any Note for repayment will be determined by the Company whose determination
will be final and binding.
If a Note is represented by a Global Security, the Depository or its
nominee will be the Holder of such Book-Entry Note and therefore will be the
only entity that can exercise a right to repayment. In order to ensure that the
Depository or its nominee will timely exercise a right to repayment with respect
to a particular Book-Entry Note, the Beneficial Owner of such Book-Entry Note
must instruct the broker or other Direct or Indirect Participant through which
such Beneficial Owner holds an interest in such Note to notify the Depository of
its desire to exercise a right to repayment. Different firms have different
cut-off times for accepting instructions from their customers and, accordingly,
each Beneficial Owner should consult the broker or other Direct or Indirect
Participant through which such Beneficial Owner holds an interest in a
Book-Entry Note to ascertain the cut-off time by which such an instruction must
be given for timely notice to be delivered to the Depository.
Unless otherwise specified in the applicable Pricing Supplement, if an
Original Issue Discount Note is to be repaid prior to its specified Maturity,
the amount of principal due and payable with respect to such Note shall be
limited to the sum of the principal amount of such Note multiplied by the Issue
Price (expressed as a percentage of the aggregate principal amount), plus the
original issue discount accrued from the date of issue to the date of
declaration, which accrual shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles) in effect
on the date of declaration.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may be held or resold or, at the
discretion of the Company, may be surrendered to the applicable Trustee for
cancellation.
EXTENSION OF MATURITY
If the Company has the option to extend the Maturity Date of any Note for
one or more periods (each an "Extension Period") up to but not beyond the date
(the "Final Maturity Date") set forth in the Pricing Supplement relating to such
Note, such Pricing Supplement will indicate such option and the basis or
formula, if any, for setting the interest rate, in the case of a Fixed Rate
Note, or the Spread and/or Spread Multiplier, in the case of a Floating
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Rate Note, applicable to any such Extension Period, and such Pricing Supplement
will describe any special tax consequences to Holders of such Notes.
The Company may exercise such option with respect to a Note by notifying
the applicable Trustee of such exercise at least 45 but not more than 60 days
prior to the Maturity Date of such Note in effect prior to the exercise of such
option (the "Original Stated Maturity"). No later than 40 days prior to the
Original Stated Maturity, the applicable Trustee will mail to the Holder of such
Note a notice (the "Extension Notice") relating to such Extension Period, first
class, postage prepaid, setting forth (i) the election of the Company to extend
the Maturity Date of such Note, (ii) the new Maturity Date, (iii) 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 (iv) 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 such redemption may occur
during the Extension Period. Upon the mailing by the Trustee of an Extension
Notice to the Holder of a Note, the Maturity Date of such Note shall be extended
automatically as set forth in the Extension Notice, and, except as modified by
the Extension Notice and as described in the next paragraph, such Note will have
the same terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Original
Stated Maturity for a Note, the Company, may, at its option revoke 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, provided for in the Extension Notice and
establish a higher interest rate, in the case of a Fixed Rate Note, or a higher
Spread and/or Spread Multiplier, in the case of a Floating Rate Note, for the
Extension Period by mailing or causing the applicable Trustee to mail notice of
such higher interest rate or higher Spread and/or Spread Multiplier, as the case
may be, first class, postage prepaid, to the Holder of such Note. Such notice
shall be irrevocable. All Notes with respect to which the Stated Maturity is
extended will bear such higher interest rate, in the case of a Fixed Rate Note,
or higher Spread and/or Spread Multiplier, in the case of a Floating Rate Note,
for the Extension Period.
If the Company elects to extend the Maturity Date of a Note, the Holder of
such Note will have the option to elect repayment of such Note by the Company at
the Original Stated Maturity at a price equal to the principal amount thereof
plus any accrued interest to such date. In order for a Note to be so repaid on
the Original Stated Maturity, the Holder thereof must follow the procedures set
forth below under "Repayment and Repurchase" for optional repayment, except that
the period for delivery of such Note or notification to the applicable Trustee
shall be at least 25 but not more than 35 days prior to the Original Stated
Maturity and except that a Holder who has tendered a Note for repayment pursuant
to an Extension Notice may, by written notice to the applicable Trustee, revoke
any such tender for repayment until the close of business on the tenth day prior
to the Original Stated Maturity.
BOOK-ENTRY SYSTEM
Upon issuance, if indicated in the applicable Pricing Supplement, all
Book-Entry Notes having the same original issuance date, rank (senior or senior
subordinated), Maturity, redemption provisions, repayment provisions, Interest
Payment Period, Interest Payment Date, and, in the case of Fixed Rate Notes,
interest rate or, in the case of Floating Rate Notes, Base Rate, Initial
Interest Rate, Index Maturity, Interest Determination Date, Interest Reset
Period, Interest Reset Date, Interest Payment Period, Interest Payment Dates,
Spread or Spread Multiplier, if any, Minimum Interest Rate, if any, and Maximum
Interest Rate, if any, will be represented by a single Global Security. Each
Global Security representing Book-Entry Notes will be deposited with, or on
behalf of, the Depository or such other depository as is specified in the
applicable Pricing Supplement, and registered in the name of a nominee of the
Depository. Book-Entry Notes will not be exchangeable for Certificated Notes in
definitive form except under the circumstances described below.
The Depository has advised the Company and the Agents as follows: The
Depository is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Depository holds securities of
institutions that have accounts with the Depository or its nominee
("Participants"). The Depository also facilitates the clearance and settlement
of securities transactions among Participants in such
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securities through electronic computerized book-entry changes in accounts of the
Participants, thereby eliminating the need for physical movement of securities
certificates. "Direct Participants" include securities brokers and dealers
(including the Agents), banks, trust companies, clearing corporations, and
certain other organizations. The Depository is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the Depository's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to the Depository and its
Participants are on file with the Securities and Exchange Commission.
The Book-Entry Notes will be represented by one or more Global Securities
that will be registered in the name of the Depository or its nominee. Global
Securities will be issued in registered form. Upon the issuance of a Global
Security, the Depository for such Global Security or its nominee will credit, on
its book-entry registration and transfer system, the respective principal
amounts of the Book-Entry Notes represented by such Global Security to the
accounts of the Participants. The accounts to be credited shall be designated by
the underwriters or Agents with respect to such Notes, or by the Company if such
Notes are offered and sold directly by the Company. Ownership of beneficial
interests in a Global Security will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Security will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the Depository or its nominee
(with respect to interests of Participants) for such Global Security and on the
records of Participants (with respect to interests of persons other than
Participants). Each actual purchaser of interests in the Global Security
("Beneficial Owner") is expected to receive written confirmations providing
details of the transaction, as well as periodic statements of such Beneficial
Owner's holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Beneficial Owners will not
receive certificates representing their ownership interests in the Global
Security, except as described below. The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depository for a Global Security, or its nominee, is the
registered Holder or owner of such Global Security, such Depository or such
nominee, as the case may be, will be considered the sole owner or Holder of the
Book-Entry Notes represented by such Global Security for all purposes of such
Book-Entry Notes and for all purposes under the Indenture governing such Notes.
Except as set forth below, Beneficial Owners will not be entitled to have
Book-Entry Notes represented by such Global Security registered in their names,
will not receive or be entitled to receive physical delivery of Certificated
Notes of such series in definitive form and will not be considered the owners or
Holders thereof under the applicable Indenture governing such Notes.
Accordingly, each Beneficial Owner must rely on the procedures of the Depository
and, if such person is not a Participant, on the procedures of the Participant
through which such person owns its interests, to exercise any rights of a Holder
of Notes under the Indentures or such Global Security. The Book-Entry Notes
permit the Depository to grant proxies and otherwise to authorize Participants
to take any action which the Depository, as the Holder of such Global Security,
is entitled to take under the Indentures or such Global Security. The Company
understands that under existing industry practice, in the event the Company
requests any action of Holders of Notes or a Beneficial Owner desires to take
any action that the Depository, as the Holder of such Global Security, is
entitled to take, the Depository would authorize the Participants to take such
action and that the Participants would authorize Beneficial Owners owning
through such Participants to take such action or would otherwise act upon the
instructions of Beneficial Owners owning through them.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with the Depository are registered in the name of the Depository's
partnership nominee, Cede & Co. The deposit of Global Securities with the
Depository and their registration in the name of Cede & Co. effect no change in
beneficial ownership. The Depository has no knowledge of the actual Beneficial
Owners of the interests in the Global Securities; the Depository's records
reflect only the identity of the Direct Participants to whose accounts interests
in the Global Securities 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.
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Payment of principal of, interest, if any, and premium, if any, on
Book-Entry Notes represented by a Global Security registered in the name of or
held by a Depository or its nominee will be made to the Depository or its
nominee, as the case may be, as the registered owner or Holder of such Global
Security.
The Company expects that the Depository for a Global Security or its
nominee, upon receipt of any payment of principal, premium or interest or other
amounts in respect of such Global Security, will credit immediately
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of such Depository or its nominee. The Company also
expects that payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in a
"street name", and will be the responsibility of such Participants. Subject to
any statutory or regulatory requirements as may be in effect from time to time,
neither the Company, the relevant Trustee, the relevant Paying Agent, nor the
relevant Securities Registrar 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 for any Book-Entry Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between the
Depository and its Participants or the relationship between such Participants
and the Beneficial Owners. Payment of principal and interest to the Depository
is the responsibility of the Company or the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of the Depository,
and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
Unless and until it is exchanged in whole or in part for Certificated Notes
of such series in definitive form, a Global Security may not be transferred
except as a whole by the Depository to a nominee of such Depository or by a
nominee of such Depository to such Depository or another nominee of such
Depository or by such Depository or any such nominee to a successor of such
Depository or nominee of such successor.
The Book-Entry Notes of a series of Notes represented by one or more Global
Securities are exchangeable for Certificated Notes in definitive form of like
tenor as such Book-Entry Notes if (i) the Depository for such Global Securities
notifies the Company that it is unwilling or unable to continue as Depository
for such Global Securities or if at any time such Depository ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, and, in either case, a successor depository is not appointed by the
Company within 90 days, (ii) the Company in its discretion at any time
determines not to have all of the Book-Entry Notes of such series represented by
one or more Global Security or Securities and notifies the Trustee thereof, or
(iii) an Event of Default has occurred and is continuing with respect to the
Notes of such series. Any Book-Entry Note that is exchangeable pursuant to the
preceding sentence is exchangeable for Certificated Notes issuable in authorized
denominations and registered in such names as the Depository holding such Global
Security shall direct. The authorized denominations of the Notes will be $1,000
or any greater amount that is an integral multiple of $1,000. Subject to the
foregoing, a Global Security is not exchangeable, except for a Global Security
or Global Securities of the same aggregate denominations to be registered in the
name of such Depository or its nominee or in the name of a successor of such
Depository or a nominee of such successor.
The information in this section concerning the Depository and the
Depository's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
CONCERNING THE TRUSTEES
Each Trustee has extended a line of credit to the Company. The Company
maintains bank accounts, borrows money and has other customary banking
relationships with each Trustee in the ordinary course of business.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Orrick, Herrington & Sutcliffe, Special Tax Counsel for
the Company, the following summary correctly describes certain United States
federal income tax consequences of the ownership of Notes as of the date hereof.
This summary is based on the Internal Revenue Code of 1986 (the "Code") as well
as final, temporary and proposed Treasury regulations and administrative and
judicial decisions. Legislative, judicial and administrative
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changes may occur, possibly with retroactive effect, affecting the accuracy of
the statements set forth herein. This summary does not purport to address all
federal income tax matters that may be relevant to particular purchasers of
Notes. For example, it generally is addressed only to original purchasers of the
Notes, deals only with Notes held as capital assets within the meaning of
Section 1221 of the Code, and does not address tax consequences of holding Notes
that may be relevant to investors in special tax situations, such as life
insurance companies, tax-exempt organizations, dealers in securities or
currencies, Notes held as a hedge or as part of a hedging, straddle or
conversion transaction or Holders whose "functional currency" (as defined in
Code Section 985) is not the United States dollar. Persons considering the
purchase of Notes should consult their own tax advisors concerning the
application of United States federal income tax laws, as well as the laws of any
state, local or foreign taxing jurisdictions, to their particular situations.
Additional United States federal income tax consequences applicable to
particular Notes may be set forth in the applicable Pricing Supplement.
PAYMENT OF INTEREST
Except as set forth below, interest on a Note will be taxable to a Holder
as ordinary interest income at the time it accrues or is received, in accordance
with the Holder's method of accounting for tax purposes. Special rules governing
the treatment of Notes issued at an original issue discount are described under
"Original Issue Discount" below. Additional United States federal income tax
consequences applicable to particular Notes issued at an original issue discount
may be set forth in the applicable Pricing Supplement.
ORIGINAL ISSUE DISCOUNT
The following is a summary of the principal federal income tax consequences
of the ownership of Notes issued at an original issue discount. It is based in
part upon the rules governing original issue discount that are set forth in Code
Sections 1271 through 1275 and in Treasury regulations thereunder (the "OID
Regulations"). The OID Regulations were issued as final Treasury regulations on
January 27, 1994, and they adopted, with certain changes, the proposed Treasury
regulations on the same subjects that were published in the Federal Register on
December 22, 1992. The following summary is also based in part upon certain
proposed Treasury regulations relating to contingent payment debt instruments
released by the Internal Revenue Service (the "IRS") in 1986 and modified in
1991 (the "Proposed Regulations"). Proposed Treasury regulations are subject to
modification through the adoption of final regulations, and the IRS has provided
no assurance that any final regulations will be consistent with the Proposed
Regulations or that taxpayers may rely upon the Proposed Regulations for
guidance prior to the issuance of any final regulations. On January 19, 1993,
the IRS released a form of proposed Treasury regulations substantially revising
the Proposed Regulations. However, on January 22, 1993, these revised rules were
suspended prior to their publication in the Federal Register. It is uncertain
when or if those suspended rules again will be formally proposed and published
in the Federal Register, and if formally proposed, whether they will remain in
substantially the same form. The following summary disregards those suspended
rules.
A Note which has an issue price of less than its "stated redemption price
at maturity" generally will be issued at an original issue discount for federal
income tax purposes. The issue price of a Note generally is the first price at
which a substantial amount of the issue of Notes is sold to the public
(excluding bond houses, brokers, or similar persons acting in the capacity of
underwriters or wholesalers). The "stated redemption price at maturity" is the
total amount of all payments provided by the Note other than "qualified stated
interest" payments; qualified stated interest generally is stated interest that
is unconditionally payable at least annually either at a single fixed rate, or,
to the extent described below, at a "qualifying variable rate." A Note will be
considered to have de minimis original issue discount if the excess of its
stated redemption price at maturity over its issue price is less than the
product of 0.25 percent of the stated redemption price at maturity and the
number of complete years to maturity (or the "weighted average maturity" in the
case of a Note that provides for payment of an amount other than qualified
stated interest before maturity). Holders of Notes having de minimis original
issue discount generally must include a proportionate amount of each payment of
stated principal in income as a payment received in retirement of the Note.
Holders of Notes issued at an original issue discount that is not de
minimis original issue discount and that mature more than one year from the date
of issuance will be required to include such original issue discount in gross
income for federal income tax purposes as it accrues, in advance of receipt of
the cash attributable to such income. Original issue discount accrues based on a
compounded, constant yield to maturity; accordingly, Holders of Notes
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issued at an original issue discount will be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods. The annual amount of original issue discount includable in income by
the initial Holder of a Note issued at an original issue discount will equal the
sum of the daily portions of the original issue discount with respect to the
Note for each day on which such Holder held the Note during the taxable year.
Generally, the daily portions of the original issue discount are determined by
allocating to each day in an accrual period the ratable portion of the original
issue discount allocable to such accrual period. The term "accrual period" means
an interval of time with respect to which the accrual of original issue discount
is measured, and which may vary in length over the term of the Note provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs at the beginning or end of an accrual period.
The amount of original issue discount allocable to an accrual period will be the
excess of (a) the product of the "adjusted issue price" of the Note at the
commencement of such accrual period and its "yield to maturity" over (b) the
amount of any qualified stated interest payments allocable to the accrual
period. The "adjusted issue price" of the Note at the beginning of the first
accrual period is its issue price, and, on any day thereafter, it is the sum of
the issue price and the amount of the original issue discount previously
includable in the gross income of any Holder (without regard to any acquisition
premium), reduced by the amount of any payment other than a payment of qualified
stated interest previously made with respect to the Note; the OID Regulations
provide a special rule for determining the original issue discount allocable to
an accrual period if an interval between payments of qualified stated interest
contains more than one accrual period. The "yield to maturity" of the Note is
the yield to maturity computed on the basis of a constant interest rate,
compounding at the end of each accrual period; such constant yield, however,
must take into account the length of the particular accrual period. If all
accrual periods are of equal length except for an initial or an initial and
final shorter accrual period(s), the amount of original issue discount allocable
to the initial period may be computed using any reasonable method; the original
issue discount allocable to the final accrual period is in any event the
difference between the amount payable at maturity (other than a payment of
qualified stated interest) and the adjusted issue price at the beginning of the
final accrual period.
For purposes of calculating the yield and maturity of a Note subject to an
issuer or Holder right to accelerate principal repayment, such call or put
option is presumed exercised if the yield on the Note would be less or more,
respectively, than it would be if the option were not exercised. The effect of
this rule generally may be to accelerate or defer the inclusion of original
issue discount in the income of a Holder whose Note is subject to a put or a
call option, as compared to a Note that does not have such an option. If any
such option presumed to be exercised is not in fact exercised, the Note is
treated as reissued on the date of presumed exercise for an amount equal to its
adjusted issue price on that date for purposes of redetermining such Note's
yield and maturity and any related subsequent accruals of original issue
discount.
The OID Regulations describe certain categories of variable rate debt
instruments which bear interest at a "qualifying variable rate." As a threshold
matter, the issue price of the variable rate debt instrument may not exceed the
total noncontingent principal payments by more than the product of such
noncontingent principal payments and the lesser of (i) 15 percent or (ii) the
product of 1.5 percent and the number of complete years in the debt instrument's
term (or its weighted average maturity in the case of an installment
obligation). The debt instrument further must provide for stated interest paid
or compounded at least annually at (i) one or more "qualified floating rates,"
(ii) a single fixed rate and one or more "qualified floating rates," (iii) a
single "objective rate," or (iv) a single fixed rate and a single objective rate
that is a "qualified inverse floating rate." A qualified floating rate or
objective rate must be set at a "current value" of that rate; a "current value"
is the value of the variable 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 day. A "qualified floating rate" is a variable rate
whose variations can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the debt
instrument is denominated. A qualified floating rate may be multiplied by a
fixed, positive multiple not exceeding 1.35, which may be increased or decreased
by a fixed rate. Certain combinations of rates constitute a single qualified
floating rate, including (i) interest stated at a fixed rate for an initial
period of less than one year followed by a qualified floating rate if the value
of the floating rate at the issue date is intended to approximate the fixed
rate, and (ii) two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the debt
instrument. A combination of such rates is conclusively presumed to be a single
qualified floating rate if the values of all rates on the issue date are within
0.25 percentage points of each other. A variable rate that is subject to an
interest rate cap, floor, "governor" or similar restriction on rate adjustment
may be a qualified floating rate only if such restriction is fixed throughout
the term of
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the debt instrument, or is not reasonably expected as of the issue date to cause
the yield on the debt instrument to differ significantly from its expected yield
absent the restriction. An "objective rate" is a rate (other than a qualified
floating rate) determined using a single formula fixed for the life of the debt
instrument, which is based on (i) one or more qualified floating rates
(including a multiple or inverse of a qualified floating rate), (ii) one or more
rates each of which would be a qualified floating rate for a debt instrument
denominated in a foreign currency, (iii) the yield or changes in price of one or
more items of "actively traded" personal property (other than stock or debt of
the issuer or a related party), (iv) a combination of the foregoing objective
rates, or (v) a rate designated by the IRS. However, a variable rate is not an
objective rate if it is reasonably expected that the average value of the rate
during the first half of the debt instrument's term will differ significantly
from the average value of such rate during the final half of its term. A
combination of interest stated at a fixed rate for an initial period of less
than one year followed by an objective rate is treated as a single objective
rate if the value of the objective rate at the issue date is intended to
approximate the fixed rate; such a combination of rates is conclusively presumed
to be a single objective rate if the objective rate on the issue date does not
differ from the fixed rate by more than 0.25 percentage points. An objective
rate is a qualified inverse floating rate if it is equal to a fixed rate reduced
by a qualified floating rate, the variations in which can reasonably be expected
to inversely reflect contemporaneous variations in the cost of newly borrowed
funds (disregarding permissible rate caps, floors, governors and similar
restrictions such as are discussed above).
If a Note bears interest at a "qualifying variable rate," the OID
Regulations specify rules for determining the amount of qualified stated
interest and the amount and accrual of any original issue discount. If the Note
bears interest that is unconditionally payable at least annually at a single
qualified floating rate or objective rate, all stated interest is treated as
qualified stated interest. The accrual of any original issue discount is
determined by assuming the Note bears interest at a fixed interest rate equal to
the issue date value of the qualified floating rate or qualified inverse
floating rate, or equal to the reasonably expected yield for the Note in the
case of any other objective rate. If the Note bears interest at a qualifying
variable rate other than a single qualified floating rate, the amount and
accrual of original issue discount generally are determined by (i) determining a
fixed rate substitute for each variable rate as described in the preceding
sentence, (ii) determining the amount of qualified stated interest and original
issue discount by assuming the Note bears interest at such substitute fixed
rates, and (iii) making appropriate adjustments to the qualified stated interest
and original issue discount so determined for actual interest rates under the
Note. However, if such qualifying variable rate includes a fixed rate, the Note
first is treated for purposes of applying clause (i) of the preceding sentence
as if it provided for an assumed qualified floating rate (or qualified inverse
floating rate if the actual variable rate is such) in lieu of the fixed rate;
the assumed variable rate would be a rate that would cause the Note to have
approximately the same fair market value.
Variable rate debt instruments that do not bear interest at a "qualifying
variable rate" or that have an issue price that exceeds the noncontingent
principal payments by more than the allowable amount will be treated as
contingent payment debt instruments. Interest on such instruments could be
includable in income as it becomes fixed under the Proposed Regulations, or
according to rules similar to those described above for variable rate debt
instruments, or according to some other method. Additionally, under the Proposed
Regulations, debt instruments that provide for one or more contingent payments
determined in any part by reference to the value of publicly traded property may
in certain circumstances be bifurcated into a noncontingent debt instrument and
a separate instrument characterized in accordance with its economic substance.
These rules may require allocation of the issue price of such a Note among the
instruments, with the result that the issue price of the portion of the Note
treated as a debt instrument may be less than its stated redemption price at
maturity, which in turn could require annual accruals of original issue discount
with respect to such portion. It is unclear whether and the extent to which any
aspect of these bifurcation rules might apply to the Notes. Persons purchasing
Floating Rate Notes should consult their tax advisors concerning the
applicability of the Proposed Regulations to such Notes.
In general, an individual or other cash method Holder of a Note that
matures one year or less from the date of its issuance (a "Short-term Note") is
not required to accrue original issue discount for federal income tax purposes
unless it elects to do so. Holders who report income for federal income tax
purposes on the accrual method and certain other Holders, including banks,
regulated investment companies and dealers in securities, are required to
include original issue discount on such Notes on a straight-line basis, unless
an election is made to accrue the original issue discount according to a
constant interest method based on daily compounding. In the case of a Holder who
is not required and does not elect to include original issue discount in income
currently, any gain realized on the
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sale, exchange or retirement of such a Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis (or, if
elected, according to a constant interest method based on daily compounding)
through the date of sale, exchange or retirement. In addition, such non-electing
Holders who are not subject to the current inclusion requirement described in
this paragraph will be required to defer deductions for any interest paid on
indebtedness incurred or continued to purchase or carry such Notes in an amount
not exceeding the deferred interest income, until such deferred interest income
is realized.
PREMIUM AND MARKET DISCOUNT
If a Holder purchases a Note (other than a Short-term Note) for an amount
that is less than the Note's stated redemption price at maturity, or, in the
case of a Note issued at an original issue discount, less than its adjusted
issue price (as defined above) as of the date of purchase, the amount of the
difference will generally be treated as "market discount" for federal income tax
purposes; however; a Note acquired at its original issue will not have market
discount unless the Note is purchased at less than its issue price. Market
discount generally will be de minimis and hence disregarded, however, if it is
less than the product of 0.25 percent of the stated redemption price at maturity
of the Note and the number of remaining complete years to maturity (or weighted
average maturity in the case of Notes paying any amount other than qualified
stated interest prior to maturity). Under the market discount rules, a Holder is
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
any accrued market discount which has not previously been included in income. If
such Note is disposed of in a nontaxable transaction (other than certain
specified nonrecognition transactions), accrued market discount will be
includable as ordinary income to the Holder as if such Holder had sold the Note
at its then fair market value. In addition, the Holder may be required to defer,
until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Market discount is considered to accrue ratably during the period from the
date of acquisition to the maturity of a Note, unless the Holder elects to
accrue on a constant interest basis. A Holder of a Note may elect to include
market discount in income currently as it accrues (on either a ratable or
constant interest basis), in which case the rule described above regarding
deferral of interest deductions will not apply. This election to include market
discount currently applies to all market discount obligations acquired during or
after the first taxable year to which the election applies, and may not be
revoked without the consent of the IRS.
A Holder who purchases a Note issued at an original issue discount for an
amount exceeding its adjusted issue price (as defined above) and 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 will be considered to have
purchased such Note with "acquisition premium." The amount of original issue
discount which such Holder must include in gross income with respect to such
Note will be reduced in the proportion that such excess bears to the original
issue discount remaining to be accrued as of the Note's acquisition.
A Holder who acquires a Note for an amount that is greater than the sum of
all amounts payable on the Note after the purchase date other than payments of
qualified stated interest will be considered to have purchased such Note at a
premium, and may elect to amortize such premium using a constant interest
method, generally over the remaining term of the Note. Any such election shall
apply to all debt instruments (other than debt instruments the interest on which
is excludable from gross income) held at the beginning of the first taxable year
to which the election applies or thereafter acquired, and is irrevocable without
consent of the IRS.
CONSTANT YIELD ELECTION
A Holder of a Note may elect to include in income all interest, discount
and premium based on a constant yield method determined with respect to such
Holder's basis. If such election is made with respect to a Note having market
discount, such Holder will be deemed to have elected currently to include market
discount on a constant interest basis with respect to all debt instruments
having market discount acquired during the year of election or thereafter. If
made with respect to a Note having amortizable bond premium, such Holder will be
deemed to have made an election to amortize premium generally with respect to
debt instruments having amortizable bond premium held by the taxpayer during the
year of election or thereafter.
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SALE AND RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized from
the sale, exchange or retirement and the Holder's adjusted tax basis in the
Note. Such gain or loss generally will be capital gain or loss, except to the
extent of any accrued market discount (see "Premium and Market Discount" above),
such capital gain or loss will be long term capital gain or loss if the Note has
been held for more than one year. A Holder's adjusted tax basis in a Note will
equal the cost of the Note, increased by any original issue discount or market
discount includable in taxable income by the Holder with respect to such Note,
and reduced by any amortizable bond premium applied to reduce interest on a
Note, any principal payments received by the Holder, and in the case of Notes
issued at an original issue discount, any other payments not constituting
qualified stated interest (as defined above).
Special rules regarding the treatment of gain realized with respect to
Short-term Notes issued at an original issue discount are described under
"Original Issue Discount" above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A 31 percent "backup" withholding tax and certain information reporting
requirements may apply to payments of principal, premium and interest (including
any original issue discount) made to, and the proceeds of disposition of a Note
by, certain Holders. Backup withholding will apply only if (i) the Holder fails
to furnish its Taxpayer Identification Number ("TIN") to the payor, (ii) the IRS
notifies the payor that the Holder has furnished an incorrect TIN, (iii) the IRS
notifies the payor that the Holder has failed to report properly payments of
interest and dividends or (iv) under certain circumstances, the Holder fails to
certify, under penalty of perjury, that it has both furnished a correct TIN and
not been notified by the IRS that it is subject to backup withholding for
failure to report interest and dividend payments. Backup withholding will not
apply with respect to payments made to certain exempt recipients, such as
corporations and financial institutions. Holders should consult their tax
advisors regarding their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption.
The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's federal income tax liability and may
entitle such Holder to a refund, provided that the required information is
furnished to the IRS.
NON-UNITED STATES HOLDERS
A "non-United States Holder" is any person other than (i) a citizen or
resident of the United States, (ii) a corporation or partnership organized in or
under the laws of the United States, any state thereof or the District of
Columbia, or (iii) an estate or trust the income of which is includible in gross
income for United States federal income tax purposes regardless of its source. A
non-United States Holder generally will not be subject to United States federal
withholding tax with respect to payments on Notes, provided that (1) such Holder
does not actually or constructively own 10 percent or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (2) such
Holder is not for United States federal income tax purposes a controlled foreign
corporation related to the Company through stock ownership, (3) the beneficial
owner of the Note certifies under penalties of perjury as to its status as a
non-United States Holder and complies with applicable identification procedures,
and (4) such payment is not a payment of "contingent interest" described in Code
Section 871(h)(4). In certain circumstances, the above-described certification
can be provided by a bank or other financial institution. In addition, a
non-United States Holder of a Note generally will not be subject to United
States federal income tax on any gain realized upon the sale, retirement or
other disposition of a Note, unless such Holder is an individual who is present
in the United States for 183 days or more during the taxable year of such sale,
retirement or other disposition. If a non-United States Holder of a Note is
engaged in a trade or business in the United States and income or gain from the
Note is effectively connected with the conduct of such trade or business, the
non-United States Holder will be exempt from the withholding tax discussed above
if the appropriate exemption certification has been provided, but will generally
be subject to regular United States income tax on such income and gain in the
same manner as if it were a United States Holder. In addition, if such
non-United States Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30 percent of its effectively connected earnings and
profits for the taxable year, subject to adjustments.
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Backup withholding will not apply to payments of principal, premium, if
any, and interest made to a non-United States Holder by the Company on a Note
with respect to which the Holder has provided the required certification under
penalties of perjury of its non-United States Holder status or has otherwise
established an exemption, provided in each case that the Company or its paying
agent, as the case may be, does not have actual knowledge that the payee is a
United States person. Payments on the sale, exchange or other disposition of a
Note to or through a foreign office of a broker will not be subject to backup
withholding. However, if such broker is a United States person, a controlled
foreign corporation for United States tax purposes or a foreign person 50
percent or more of whose gross income is derived from its conduct of a United
States trade or business for a specified three-year period, information
reporting will be required unless the broker has in its records documentary
evidence that the beneficial owner is not a United States person and certain
other conditions are met or the beneficial owner otherwise establishes an
exemption. Payments to or through the United States office of a broker will be
subject to backup withholding and information reporting unless the Holder
certifies under penalties of perjury to its non-United States Holder status or
otherwise establishes an exemption.
Non-United States Holders should consult their tax advisors regarding the
application of United States federal income tax laws, including information
reporting and backup withholding, to their particular situations.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Agents, each of
whom has agreed to use its best efforts to solicit purchases of Notes. Unless
otherwise specified in the applicable Pricing Supplement, the Company will pay
the Agents a commission not to exceed .75%, depending upon Maturity, of the
principal amount of the Notes sold through the Agents. The Company may also sell
the Notes to one or more of the Agents, as principal, at a discount for resale
to investors and other purchasers at varying prices related to prevailing market
prices at the time of resale, to be determined by such Agents or, if so agreed,
at a fixed public offering price. The Company reserves the right to sell the
Notes through one or more additional agents as agent, or to one or more
additional agents, as principal, for resale (each such additional agent being
hereinafter referred to as an "Additional Agent" and, collectively, "Additional
Agents"; unless otherwise indicated, the term "Agent" as used in the remainder
of this section shall include "Additional Agents"). Any such Additional Agent
will be identified in any Pricing Supplement relating to any Notes sold by or to
any such Additional Agent. The Company also reserves the right to sell Notes
directly to investors on its own behalf in those jurisdictions where it is
authorized to do so. In the case of such sales made directly by the Company, no
commission will be payable to the Agents. The Company has agreed to reimburse
the Agents for certain expenses.
Unless otherwise indicated in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage equal to the
commission applicable to any agency sale of a Note of identical maturity. Such
Notes may be resold by the Agent to investors and other purchasers from time to
time in one or more transactions, including negotiated transactions, or at
varying prices relating to prevailing market prices determined at the time of
sale or, if so agreed, at a fixed public offering price. After the initial
public offering of Notes to be resold to investors and other purchasers, the
public offering price (in the case of Notes to be resold at a fixed public
offering price), and any concession or discount, may be changed. In addition,
the Agents may resell Notes they have purchased as principal to other dealers.
Such resales may be at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any dealer will not
exceed the discount to be received by such Agent from the Company. Such dealers
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Act").
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes in whole or in part. Each Agent will
have the right, in its discretion reasonably exercised, to reject any offer to
purchase Notes received by it in whole or in part.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Act. The Company has agreed to indemnify the Agents against certain liabilities,
including certain liabilities under the Act, and to contribute to payments the
Agents may be required to make in respect thereof.
S-20
<PAGE> 21
Each of the Agents may from time to time purchase and sell Notes in the
secondary market, but is not obligated to do so, and 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 of the Agents may make
a market in the Notes.
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
PaineWebber Incorporated and Salomon Brothers Inc each engage in transactions
with and perform services for the Company in the ordinary course of business.
LEGAL OPINIONS
The validity of the Notes will be passed upon for the Company by Steve R.
Wagner, who serves as Assistant General Counsel of the Company. The validity of
the Notes will be passed upon for the Agents, and certain federal income tax
consequences of the Notes will be passed upon for the Company, by Orrick,
Herrington & Sutcliffe, New York, New York.
S-21
<PAGE> 22
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE PROSPECTUS SUPPLEMENT OR ANY
PRICING SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS, THE
PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES OFFERED BY THIS PROSPECTUS, THE PROSPECTUS SUPPLEMENT AND ANY PRICING
SUPPLEMENT OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS, THE PROSPECTUS SUPPLEMENT OR ANY PRICING SUPPLEMENT NOR ANY SALE
MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS
PROSPECTUS, THE PROSPECTUS SUPPLEMENT OR ANY PRICING SUPPLEMENT, OR THAT THE
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes.................... S-2
Certain United States Federal Income Tax
Consequences.......................... S-14
Plan of Distribution.................... S-20
Legal Opinions.......................... S-21
PROSPECTUS
Available Information................... 2
Incorporation of Documents by
Reference............................. 2
The Company............................. 3
Ratios of Earnings to Fixed Charges..... 3
Use of Proceeds......................... 3
Description of Debt Securities.......... 4
Plan of Distribution.................... 7
Legal Opinions.......................... 8
Experts................................. 8
</TABLE>
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$500,000,000
[LOGO]
NORWEST FINANCIAL, INC.
MEDIUM-TERM NOTES, SERIES B
DUE FROM 9 MONTHS TO
30 YEARS FROM DATE OF ISSUE
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
NOVEMBER 8, 1994
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