<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 31, 1997)
$400,000,000
BOEING CAPITAL CORPORATION
SERIES X MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
--------------------
Boeing Capital Corporation (the "Company") (formerly known as McDonnell
Douglas Finance Corporation) may offer from time to time up to $400,000,000
aggregate initial offering price, or the equivalent thereof in one or more
foreign or composite currencies, of its Series X Senior Medium-Term Notes (the
"Senior Notes") and Series X Subordinated Medium-Term Notes (the "Subordinated
Notes") Due Nine Months or More From Date of Issue (collectively, the "Notes").
Such aggregate initial offering price is subject to reduction as a result of the
sale by the Company of other Debt Securities described in the accompanying
Prospectus. Each Note will mature on any day nine months or more from the date
of issue, as specified in the applicable pricing supplement hereto (each, a
"Pricing Supplement"), and may be subject to redemption at the option of the
Company or repayment at the option of the Holder thereof, in each case, in whole
or in part, prior to its Stated Maturity Date, as specified in the applicable
Pricing Supplement. In addition, each Note may be denominated and/or payable in
United States dollars or a foreign or composite currency, as specified in the
applicable Pricing Supplement. The Notes, other than Foreign Currency Notes,
will be issued in denominations of $100,000 and integral multiples of $1,000 in
excess thereof, unless otherwise specified in the applicable Pricing Supplement,
while Foreign Currency Notes will be issued in the minimum denominations
specified in the applicable Pricing Supplement. The interest rate, or formula
for the determination of the interest rate, applicable to each Note and the
other variable terms thereof will be established by the Company on the date of
issue of such Note and will be specified in the applicable Pricing Supplement.
Interest rates or formulae and other terms of Notes are subject to change by the
Company, but no change will affect any Note already issued or as to which an
offer to purchase has been accepted by the Company.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
bear interest at fixed rates ("Fixed Rate Notes") or at floating rates
("Floating Rate Notes"). The applicable Pricing Supplement will specify whether
a Floating Rate Note is a Regular Floating Rate Note, a Floating Rate/Fixed Rate
Note or an Inverse Floating Rate Note and whether the rate of interest thereon
is determined by reference to one or more of the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate basis or formula, as adjusted by any Spread
and/or Spread Multiplier. Interest on each Floating Rate Note will accrue from
its date of issue and, unless otherwise specified in the applicable Pricing
Supplement, will be payable monthly, quarterly, semiannually or annually in
arrears, as specified in the applicable Pricing Supplement, and on the Maturity
Date. Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually, as specified in the applicable Pricing
Supplement. Interest on each Fixed Rate Note will accrue from its date of issue
and, unless otherwise specified in the applicable Pricing Supplement, will be
payable semiannually in arrears on March 15 and September 15, in the case of
Senior Fixed Rate Notes, and on January 15 and July 15, in the case of
Subordinated Fixed Rate Notes, of each year and on the Maturity Date. Notes may
also be issued that do not bear any interest currently or that bear interest at
a below market rate. See "Description of Notes".
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee. Interests
in the Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to its
participants) and the Depositary's participants (with respect to beneficial
owners).
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-2 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Agents' Discounts
and Proceeds to
Price to Public(1) Commissions(1)(2) Company(1)(3)
<S> <C> <C> <C>
Per Note..................... 100% .125%-.75% 99.875%-99.25%
Total(4)..................... $400,000,000 $500,000-$3,000,000 $399,500,000-$397,000,000
</TABLE>
(1) Chase Securities Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and PaineWebber Incorporated (each an "Agent" and,
collectively, the "Agents"), may purchase Notes, as principal, from the
Company, for resale to investors and other purchasers at varying prices
relating to prevailing market prices at the time of resale as determined by
the applicable Agent, or, if so specified in the applicable Pricing
Supplement, for resale at a fixed offering price. 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 of the principal amount equal to
the discount negotiated and agreed between the Company and such Agent and
set forth in the applicable Pricing Supplement. If agreed to by the Company
and the applicable Agent, such Agent may utilize its reasonable best efforts
on an agency basis to solicit offers to purchase the Notes at 100% of the
principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Company will pay a commission to each Agent, ranging
from .125% to .75% of the principal amount of a Note, depending upon its
stated maturity, sold through such Agent. Commissions with respect to Notes
with stated maturities in excess of 30 years that are sold through an Agent
will be negotiated between the Company and such Agent at the time of such
sale and may be greater than .75%. See "Plan of Distribution".
(2) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution".
(3) Before deducting expenses payable by the Company estimated at $265,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
----------------------------------
The Notes are expected to be offered on a continuous basis by the Company to
or through the Agents, subject to the Company's capital requirements and the
pricing of other sources of capital which may be available to the Company.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
not be listed on any securities exchange and there can be no assurance that the
Notes offered hereby will be sold or that there will be a secondary market for
the Notes. The Company reserves the right to cancel or modify the offer made
hereby without notice. The Company or an Agent, if such Agent solicits the offer
on an agency basis, may reject any offer to purchase Notes in whole or in part.
See "Plan of Distribution".
CHASE SECURITIES INC.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
----------------
The date of this Prospectus Supplement is October 31, 1997.
<PAGE>
In connection with the offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) may engage in
transactions that stabilize, maintain or otherwise affect the price of Notes.
Such transactions may include stabilizing and the purchase of Notes to cover
short positions of such Agent(s). For a description of these activities see
"Plan of Distribution."
RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in Notes that result from such Notes being denominated or payable in
or determined by reference to a currency or composite currency other than United
States dollars or to one or more interest rate, currency or other indices or
formulas. The Company and the Agents disclaim any responsibility to advise
prospective investors of such risks as they exist at the date of this Prospectus
Supplement or as they change from time to time. Prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in such Notes. Such Notes are not an appropriate investment for
investors who are unsophisticated with respect to foreign currency transactions
or transactions involving the applicable interest rate, currency or other
indices or formulas.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, to one or more currencies or composite currencies (including exchange
rates and swap indices between currencies or composite currencies), commodities,
interest rates or other indices or formulas, either directly or inversely,
entails significant risks that are not associated with similar investments in a
conventional fixed rate or floating rate debt security. Such risks include,
without limitation, the possibility that such indices or formulas may be subject
to significant changes, that the resulting interest rate will be less than that
payable on a conventional fixed rate or floating rate debt security issued by
the Company at the same time, that the repayment of principal and/or premium, if
any, can occur at times other than that expected by the investor, and that the
investor could lose all or a substantial portion of principal and/or premium, if
any, payable on the Maturity Date (as defined under "Description of
Notes--General"). Such risks depend on a number of interrelated factors,
including economic, financial and political events, over which the Company has
no control. Additionally, if the formula used to determine the amount of
principal, premium, if any, and/or interest payable with respect to such Notes
contains a multiplier or leverage factor, the effect of any change in the
applicable index or indices or formula or formulas will be magnified. Values of
certain indices and formulas at times have been highly volatile and such
volatility may be expected to continue in the future. Fluctuations in the value
of any particular index or formula that have occurred in the past are not
necessarily indicative, however, of fluctuations that may occur in the future.
Any optional redemption feature of Notes might affect the market value of
such Notes. Since the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the continued
liquidity of such market if one develops. See "Plan of Distribution".
The secondary market for such Notes will be affected by a number of factors
independent of the creditworthiness of the Company and the value of the
applicable index or indices or formula or formulas, including the complexity and
volatility of each such index, the method of calculating the principal, premium,
if any, and/or interest in respect of such Notes, the time remaining to the
maturity of such Notes, the outstanding amount of such Notes, any redemption
features of such Notes, the amount of other debt securities linked to such index
or formula and the level, direction and volatility of market interest rates
generally. Such factors also will affect the market value of such Notes. In
addition, certain Notes may be
S-2
<PAGE>
designed for specific investment objectives or strategies and, therefore, may
have a more limited secondary market and experience more price volatility than
conventional debt securities. Investors may not be able to sell such Notes
readily or at prices that will enable investors to realize their anticipated
yield. No investor should purchase Notes unless such investor understands and is
able to bear the risk that such Notes may not be readily saleable, that the
value of such Notes will fluctuate over time and that such fluctuations may be
significant.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as defined under "Description of
Notes--General") entails significant risks that are not associated with a
similar investment in a debt security denominated and payable in United States
dollars. Such risks include, without limitation, the possibility of significant
changes in the rate of exchange between the United States dollar and the
applicable foreign currency or composite currency and the possibility of the
imposition or modification of exchange controls by the applicable governments or
monetary authorities. Such risks generally depend on factors over which the
Company has no control, such as economic, financial and political events and the
supply and demand for the applicable currencies or composite currencies. In
addition, if the formula used to determine the amount of principal, premium, if
any, and/or interest payable with respect to Foreign Currency Notes contains a
multiplier or leverage factor, the effect of any change in the applicable
currencies or composite currencies will be magnified. In recent years, rates of
exchange between the United States dollar and foreign currencies or composite
currencies have been highly volatile and such volatility may be expected in the
future. Fluctuations in any particular exchange rate that have occurred in the
past are not necessarily indicative, however, of fluctuations that may occur in
the future. Depreciation of the foreign currency or composite currency in which
a Foreign Currency Note is payable against the United States dollar would result
in a decrease in the United States dollar-equivalent yield of such Foreign
Currency Note, in the United States dollar-equivalent value of the principal and
premium, if any, payable on the Maturity Date of such Foreign Currency Note,
and, generally, in the United States dollar-equivalent market value of such
Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and may
in the future impose or revise, exchange controls at or prior to the date on
which any payment of principal of, or premium, if any, or interest on, a Foreign
Currency Note is due, which could affect exchange rates as well as the
availability of the foreign currency or composite currency in which such payment
is to be made on such date. Even if there are no exchange controls, it is
possible that the foreign currency or composite currency in which a payment in
respect of any particular Foreign Currency Note is to be made would not be
available on the applicable payment date due to other circumstances beyond the
control of the Company. In such cases, the Company will be entitled to satisfy
its obligations in respect of such Foreign Currency Note in United States
dollars. See "Special Provisions Relating to Foreign Currency Notes--Payment
Currency".
CREDIT RATINGS
Any credit ratings assigned to the Company's medium-term note program may
not reflect the potential impact of all risks related to structure and other
factors on the market value of the Notes. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by an investment in the Notes and the suitability of such Notes in light of
their particular circumstances.
S-3
<PAGE>
DESCRIPTION OF NOTES
The Notes will be either Senior Notes or Subordinated Notes (referred to in
the accompanying Prospectus as "Senior Securities" and "Subordinated
Securities", respectively). The Senior Notes will be issued as a single series
under an indenture dated as of April 15, 1987 as amended by the First
Supplemental Indenture dated as of June 12, 1995 (the "Senior Indenture"),
between the Company and Bankers Trust Company ("Bankers Trust" or the
"Trustee"), as Trustee. The Subordinated Notes will be issued as a single series
under an indenture dated as of June 15, 1988, as amended by the First
Supplemental Subordinated Indenture dated as of June 12, 1995 (the "Subordinated
Indenture"), between the Company and Bankers Trust, as successor Trustee. The
Senior Indenture and the Subordinated Indenture are collectively referred to
herein as the "Indentures". The Indentures are subject to, and governed by, the
Trust Indenture Act of 1939, as amended. The following summary of certain
provisions of the Notes and the Indentures does not purport to be complete and
is qualified in its entirety by reference to the actual provisions of the Notes
and the Indentures. Capitalized terms used but not defined herein shall have the
meanings given to them in the accompanying Prospectus, the Notes or the
Indentures, as the case may be. The term "Debt Securities", as used in this
Prospectus Supplement, refers to all debt securities, including the Notes,
issued and issuable from time to time under the Indentures. The following
description of Notes will apply to each Note offered hereby unless otherwise
specified in the applicable Pricing Supplement.
GENERAL
The Indentures do not limit the aggregate initial offering price of Debt
Securities that may be issued thereunder and Debt Securities may be issued
thereunder from time to time in one or more series up to the aggregate initial
offering price from time to time authorized by the Company for each series. As
of the date of this Prospectus Supplement, the Company has issued $2,800.0
million aggregate principal amount of Debt Securities under the Indentures,
$998.0 million of which was outstanding as of such date. The Company may, from
time to time, without the consent of the Holders of the Notes, provide for the
issuance of Notes or other Debt Securities under the Indentures in addition to
the $400,000,000 aggregate initial offering price of Notes offered hereby.
The Notes will be unsecured general obligations of the Company. The Senior
Notes will rank PARI PASSU with all other Senior Securities of the Company and
with all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Notes, together with other subordinated indebtedness, if any,
issued by the Company, will be subordinate in right of payment to the prior
payment in full of all Senior Notes and all existing and future Senior
Indebtedness of the Company, including Senior Notes, and, unless specifically
designated as ranking junior to other subordinated debt securities of the
Company, will rank PARI PASSU with all other subordinated debt securities of the
Company which have not been specifically designated as ranking junior to other
subordinated debt securities of the Company. See "Description of the
Securities--Subordination" in the accompanying Prospectus. At June 30, 1997, the
outstanding Senior Indebtedness of the Company was approximately $1,667.8
million.
As of the date hereof, Senior Notes with an aggregate initial offering price
of $490.0 million have been issued and are outstanding, and Subordinated Notes
with an aggregate initial offering price of $60.0 million have been issued and
are outstanding. As of the date hereof, the Company has authorized the issuance
and sale of up to an additional $400,000,000 aggregate initial offering price,
or the equivalent thereof in one or more foreign or composite currencies, of
Notes. The Notes are expected to be offered on a continuous basis, subject to
the Company's capital requirements and the pricing of other sources of capital
which may be available to the Company, and will mature on any day nine months or
more from their dates of issue (each, a "Stated Maturity Date"), as specified in
the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, interest-bearing Notes will either be Fixed Rate Notes or
Floating Rate Notes, as specified in the applicable Pricing Supplement. Notes
may also be issued that do not bear any interest currently or that bear interest
at a below market rate.
S-4
<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest will be made in, United States dollars. The Notes also may be
denominated in, and payments of principal, premium, if any, and/or interest may
be made in, one or more foreign currencies or composite currencies ("Foreign
Currency Notes"). See "Risk Factors--Exchange Rates and Exchange Controls" and
"Special Provisions Relating to Foreign Currency Notes--Payments of Principal,
Premium, if any, and Interest". The currency or composite currency in which a
Note is denominated, whether United States dollars or otherwise, is herein
referred to as the "Specified Currency". References herein to "United States
dollars", "U.S. dollars" or "$" are to the lawful currency of the United States
of America (the "United States").
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for the Notes in the applicable Specified Currencies. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies or composite
currencies and vice versa, and commercial banks do not generally offer
non-United States dollar checking or savings account facilities in the United
States. The applicable Agent may be prepared to arrange for the conversion of
United States dollars into the applicable Specified Currency to enable the
purchaser to pay for the related Foreign Currency Note, provided that a request
is made to such Agent on or prior to the third Business Day (as hereinafter
defined) preceding the date of delivery of such Foreign Currency Note, or by
such other day as determined by the applicable Agent. Each such conversion will
be made by the applicable Agent on such terms and subject to such conditions,
limitations and charges as such Agent may from time to time establish in
accordance with its regular foreign exchange practices. All costs of exchange
will be borne by the purchaser of each such Foreign Currency Note. See "Special
Provisions Relating to Foreign Currency Notes".
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of Notes
purchased in any single transaction. Interest rates or formulae and other terms
of Notes are subject to change by the Company from time to time, but no such
change will affect any Note already issued or as to which an offer to purchase
has been accepted by the Company.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $100,000 and integral multiples of $1,000 in
excess thereof, unless otherwise specified in the applicable Pricing Supplement,
while the authorized denominations of each Foreign Currency Note will be
specified in the applicable Pricing Supplement.
Payments of principal of, and premium, if any, and interest on, Book-Entry
Notes will be made by the Company through the Trustee to the Depositary. See
"--Book-Entry Notes". In the case of Certificated Notes, payment of principal
and premium, if any, due on the Stated Maturity Date or any prior date on which
the principal, or an installment of principal, of each Certificated Note becomes
due and payable, whether by the declaration of acceleration, notice of
redemption at the option of the Company, notice of the Holder's option to elect
repayment or otherwise (the Stated Maturity Date or such prior date, as the case
may be, is herein referred to as the "Maturity Date" with respect to the
principal repayable on such date) will be made in immediately available funds
upon presentation and surrender thereof at the office or agency maintained by
the Company for such purpose in the Borough of Manhattan, The City of New York
(or, in the case of any repayment on an Optional Repayment Date, upon
presentation of such Certificated Note and a duly completed election form in
accordance with the provisions described below), currently the corporate trust
office of the Trustee located at Four Albany Street, New York, New York 10015.
Payment of interest due on the Maturity Date of each Certificated Note will be
made to the person to whom payment of the principal and premium, if any, shall
be made. Payment of interest due on each Certificated Note on any Interest
Payment Date (as hereinafter defined) other than the Maturity Date will be made
at the office or agency referred to above maintained by the Company for such
purpose or, at the option of the Company, may be made by check mailed to the
address of the Holder entitled thereto as such address shall
S-5
<PAGE>
appear in the Security Register of the Company. Notwithstanding the foregoing, a
Holder of $10,000,000 (or, if the applicable Specified Currency is other than
United States dollars, the equivalent thereof in such Specified Currency) or
more in aggregate principal amount of Notes (whether having identical or
different terms and provisions) will be entitled to receive interest payments on
any Interest Payment Date other than the Maturity Date by wire transfer of
immediately available funds if appropriate wire transfer instructions have been
received in writing by the Trustee not less than 15 days prior to such Interest
Payment Date. Any such wire transfer instructions received by the Trustee shall
remain in effect until revoked by such Holder. For special payment terms
applicable to Foreign Currency Notes, see "Special Provisions Relating to
Foreign Currency Notes--Payments of Principal, Premium, if any, and Interest".
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that, with respect to Foreign Currency
Notes the payment of which is to be made in a Specified Currency other than
United States dollars, such day is also not a day on which banking institutions
are authorized or required by law, regulation or executive order to close in the
Principal Financial Center (as hereinafter defined) of the country issuing such
Specified Currency unless the Specified Currency is European Currency Units
("ECU"), in which case such day is also not a day that appears as an ECU
non-settlement day on the display designated as "ISDE" on the Reuter Monitor
Money Rates Service (or a day so designated by the ECU Banking Association) or,
if ECU non-settlement days do not appear on that page (and are not so
designated), is not a day on which payments in ECU cannot be settled in the
international interbank market); provided, further, that, with respect to Notes
as to which LIBOR is an applicable Interest Rate Basis, such day is also a
London Business Day. "London Business Day" means any day on which dealings in
the Designated LIBOR Currency are transacted in the London interbank market.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency (except as described in the immediately
preceeding paragraph with respect to ECU) or (ii) the capital city of the
country to which the Designated LIBOR Currency relates (or, in the case of ECU,
Luxembourg), as applicable, except, in the case of (i) or (ii) above, that with
respect to U.S. dollars, Australian dollars, Canadian dollars, Deutsche marks,
Dutch guilders, Italian lire, and Swiss francs, the "Principal Financial Center"
shall be The City of New York, Sydney, Toronto, Frankfurt, Amsterdam, Milan
(solely in the case of the Specified Currency) and Zurich respectively.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "--Book-Entry Notes". Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by the
Company for such purpose in the Borough of Manhattan, The City of New York. No
service charge will be made by the Company or the Trustee for any such
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith (other than exchanges pursuant to the
Indenture not involving any transfer).
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity Date only if an Initial
Redemption Date is specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to redemption at the option of the Company
on any date on and after the applicable Initial Redemption Date in whole or from
time to time in part in increments of $1,000 or such other minimum denomination
specified in such Pricing Supplement (provided that any remaining principal
amount thereof shall be at least $100,000 or such other minimum denomination),
at the applicable Redemption Price (as hereinafter defined), together with
unpaid interest accrued to the date of redemption, on notice given not more than
60 nor less than 30 calendar days prior to the date of redemption and in
accordance with the provisions of the Indenture. "Redemption Price", with
respect to a Note, means an
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<PAGE>
amount equal to the Initial Redemption Percentage specified in the applicable
Pricing Supplement (as adjusted by the Annual Redemption Percentage Reduction,
if applicable) multiplied by the unpaid principal amount to be redeemed. The
Initial Redemption Percentage, if any, applicable to a Note shall decline at
each anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the Redemption
Price is equal to 100% of the unpaid principal amount to be redeemed. See also
"--Original Issue Discount Notes".
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Company at the option of the Holders
thereof prior to the Stated Maturity Date only if one or more Optional Repayment
Dates are specified in the applicable Pricing Supplement. If so specified, the
Notes will be subject to repayment at the option of the Holders thereof on any
Optional Repayment Date in whole or from time to time in part in increments of
$1,000 or such other minimum denomination specified in the applicable Pricing
Supplement (provided that any remaining principal amount thereof shall be at
least $100,000 or such other minimum denomination), at a repayment price equal
to 100% of the unpaid principal amount to be repaid, together with unpaid
interest accrued to the date of repayment. For any Note to be repaid, such Note
must be received, together with the form thereon entitled "Option to Elect
Repayment" duly completed, by the Trustee at its corporate trust office (or such
other address of which the Company shall from time to time notify the Holders)
not more than 60 nor less than 30 calendar days prior to the date of repayment.
Exercise of such repayment option by the Holder will be irrevocable. See also
"--Original Issue Discount Notes".
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, Beneficial Owners (as
hereinafter defined) of Global Securities that desire to have all or any portion
of the Book-Entry Notes represented by such Global Securities repaid must direct
the Participant (as hereinafter defined) through which they own their interest
to direct the Depositary to exercise the repayment option on their behalf by
delivering the related Global Security and duly completed election form to the
Trustee as aforesaid. In order to ensure that such Global Security and election
form are received by the Trustee on a particular day, the applicable Beneficial
Owner must so direct the Participant through which it owns its interest before
such Participant's deadline for accepting instructions for that day. Different
firms may have different deadlines for accepting instructions from their
customers. Accordingly, Beneficial Owners should consult the Participants
through which they own their interest for the respective deadlines for such
Participants. All instructions given to Participants from Beneficial Owners of
Global Securities relating to the option to elect repayment shall be
irrevocable. In addition, at the time such instructions are given, each such
Beneficial Owner shall cause the Participant through which it owns its interest
to transfer such Beneficial Owner's interest in the Global Security or
Securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee. See
"--Book-Entry Notes".
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
any other securities laws or regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
S-7
<PAGE>
INTEREST
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
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 date of
issue, if no interest has been paid or duly made available for payment with
respect to the applicable Note) to but excluding the applicable Interest Payment
Date or the Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any Note originally issued between a Record Date (as hereinafter defined) and
the related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Record Date to the Holder on such next
succeeding Record Date. Unless otherwise specified in the applicable Pricing
Supplement, a "Record Date" shall be the fifteenth calendar day (whether or not
a Business Day) immediately preceding the related Interest Payment Date.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable on March 15 and September 15, in the case of
Senior Fixed Rate Notes, and on January 15 and July 15, in the case of
Subordinated Fixed Rate Notes, of each year (each, an "Interest Payment Date")
and on the Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, 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 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, as the case may be, to the date of such payment on the next succeeding
Business Day.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note", a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note", the Fixed Rate Commencement Date, if applicable, Fixed Interest
Rate, if applicable, Interest Rate Basis or Bases, Initial Interest Rate, if
any, Initial Interest Reset Date, Interest Reset Period and Dates, Interest
Payment Period and Dates, Index Maturity, Maximum Interest Rate and/or Minimum
Interest Rate, if any, and Spread and/or Spread Multiplier, if any, as such
terms are defined below. If one or more of the applicable Interest Rate Bases is
LIBOR or the CMT Rate, the applicable Pricing Supplement will also specify the
Designated LIBOR Currency and Designated LIBOR Page or the Designated CMT
Maturity Index and Designated CMT Telerate Page, respectively, as such terms are
defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
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<PAGE>
(i) Unless such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note" or an "Inverse Floating Rate Note" or as having an Addendum attached
or having "Other/Additional Provisions" apply, such Floating Rate Note will be
designated as a "Regular Floating Rate Note" and, except as described below or
in the applicable Pricing Supplement, will bear interest at the rate determined
by reference to the applicable Interest Rate Basis or Bases (a) plus or minus
the applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date, the rate at
which interest on such Regular Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that the interest rate
in effect for the period, if any, from the date of issue to the Initial Interest
Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed Rate
Note", then, except as described below or in the applicable Pricing Supplement,
such Floating Rate Note will bear interest at the rate determined by reference
to the applicable Interest Rate Basis or Bases (a) plus or minus the applicable
Spread, if any, and/or (b) multiplied by the applicable Spread Multiplier, if
any. Commencing on the Initial Interest Reset Date, the rate at which interest
on such Floating Rate/Fixed Rate Note shall be payable shall be reset as of each
Interest Reset Date; provided, however, that (y) the interest rate in effect for
the period, if any, from the date of issue to the Initial Interest Reset Date
will be the Initial Interest Rate and (z) the interest rate in effect for the
period commencing on the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate, if such rate is specified in the applicable Pricing
Supplement or, if no such Fixed Interest Rate is specified, the interest rate in
effect thereon on the day immediately preceding the Fixed Rate Commencement
Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating Rate
Note", then, except as described below or in the applicable Pricing Supplement,
such Floating Rate Note will bear interest at the Fixed Interest Rate minus the
rate determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless otherwise
specified in the applicable Pricing Supplement, the interest rate thereon will
not be less than zero. Commencing on the Initial Interest Reset Date, the rate
at which interest on such Inverse Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that the interest rate
in effect for the period, if any, from the date of issue to the Initial Interest
Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate Note.
The "Spread Multiplier" is the percentage of the related Interest Rate Basis or
Bases applicable to such Floating Rate Note by which such Interest Rate Basis or
Bases will be multiplied to determine the applicable interest rate on such
Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as hereinafter defined) immediately preceding
such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement; provided, however, that the interest rate in
effect on a Floating Rate Note for the period, if any, from the date of issue to
the Initial
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<PAGE>
Interest Reset Date will be the Initial Interest Rate; provided, further, that
with respect to a Floating Rate/ Fixed Rate Note the interest rate in effect for
the period commencing on the Fixed Rate Commencement Date to the Maturity Date
shall be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement or, if no such Fixed Interest Rate is specified, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year, (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided however, that,
with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date on or prior to the Calculation Date (as hereinafter
defined). Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" with respect to the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day immediately preceding the applicable Interest Reset Date;
the "Interest Determination Date" with respect to the Eleventh District Cost of
Funds Rate will be the last working day of the month immediately preceding the
applicable Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as hereinafter
defined); and the "Interest Determination Date" with respect to LIBOR will be
the second London Business Day immediately preceding the applicable Interest
Reset Date, unless the Designated LIBOR Currency is British pounds sterling, in
which case the "Interest Determination Date" will be the applicable Interest
Reset Date. With respect to the Treasury Rate, the "Interest Determination Date"
will be the day in the week in which the applicable Interest Reset Date falls on
which day Treasury Bills (as hereinafter defined) are normally auctioned
(Treasury Bills are normally sold at an auction held 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); provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the Interest Determination Date
will be such preceding Friday; provided, further, that if an auction falls on
the applicable Interest Reset Date, then the Interest Reset Date will instead be
the first Business Day following such auction. The "Interest Determination Date"
pertaining to a Floating Rate Note the interest rate of which is determined by
reference to two or more Interest Rate Bases will be the most recent Business
Day which is at least two Business Days prior to the applicable Interest Reset
Date for such Floating Rate Note on which each Interest Rate Basis is
determinable. Each Interest Rate Basis will be determined as of such date, and
the applicable interest rate will take effect on the applicable Interest Reset
Date.
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<PAGE>
A Floating Rate Note may also have either or both of the following: (i) a
Maximum Interest Rate, or ceiling, that may accrue during any Interest Period
and (ii) a Minimum Interest Rate, or floor, that may accrue during any Interest
Period. In addition to any Maximum Interest Rate that may apply to any Floating
Rate Note, the interest rate on 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.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year, (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, on the third Wednesday of the month of
each year specified in the applicable Pricing Supplement (each an "Interest
Payment Date") and, in each case, on the Maturity Date. If any Interest Payment
Date other than the Maturity Date for any Floating Rate Note would otherwise be
a day that is not a Business Day, such Interest Payment Date will be postponed
to the next succeeding Business Day, except that in the case of a Floating Rate
Note as to which LIBOR is an applicable Interest Rate Basis and such Business
Day falls in the next succeeding calendar month, such Interest Payment Date will
be the immediately preceding Business Day. If the Maturity Date of a Floating
Rate Note falls on a day that is not a Business Day, the required payment of
principal, premium, if any, and 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 the Maturity Date to the
date of such payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign currency or composite currency, to the nearest unit (with one-half cent
or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Floating Rate Notes for which an applicable Interest
Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for Floating Rate Notes
for which the interest rate is calculated with reference to two or more Interest
Rate Bases will be calculated in each period in the same manner as if only one
of the applicable Interest Rate Bases applied as specified in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Bankers
Trust will be the "Calculation Agent". Upon request of the Holder of any
Floating Rate Note, the Calculation Agent will disclose the interest rate then
in effect and, if determined, the interest rate that will become effective as a
result of a determination made for the next succeeding Interest Reset Date with
respect to such Floating Rate Note. Unless otherwise specified in the applicable
Pricing Supplement, the "Calculation Date", if applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date, or, if such day is not a Business Day,
the next succeeding Business Day or (ii) the Business Day immediately preceding
the applicable Interest Payment Date or the Maturity Date, as the case may be.
S-11
<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CD Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)", or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Certificates
of Deposit". If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on such CD Rate Interest
Determination Date, of three leading nonbank dealers in negotiable United States
dollar certificates of deposit in The City of New York (which may include the
Agents or their respective affiliates) selected by the Calculation Agent for
negotiable United States dollar certificates of deposit of major United States
money center banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity specified in the applicable Pricing
Supplement in an amount that is representative for a single transaction in that
market at that time; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
determined as of such CD Rate Interest Determination Date will be the CD Rate in
effect on such CD Rate Interest Determination Date.
CMT RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
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 under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.", under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 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 is 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 as published in H.15(519). If such rate is no
longer published or is not published by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate on 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 on the 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
closing offered rates as of approximately 3:30 P.M., New York City time, on such
CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each a
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<PAGE>
"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 of the lowest)), for the most
recently issued direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the Designated CMT
Maturity Index and a remaining term to maturity of not less than such Designated
CMT Maturity Index minus one year. If the Calculation Agent is unable to obtain
three such Treasury Note quotations, the CMT Rate on such CMT 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 such 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 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided however, that if fewer than
three Reference Dealers so selected by the Calculation Agent are quoting as
mentioned herein, the CMT Rate determined as of such CMT Rate Interest
Determination Date 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 second preceding sentence have remaining terms to maturity equally close
to the Designated CMT Maturity Index, the Calculation Agent will obtain from
five Reference Dealers quotations for the Treasury Note with the shorter
remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Markets
Limited (or any sucessor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)). If no such page is specified in the applicable Pricing Supplement,
the Designated CMT Telerate Page shall be page 7052.
"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.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as hereinafter
defined) on such date of the rate for commercial paper having the Index Maturity
specified 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
3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date
will be the Money Market Yield of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the caption "Commercial Paper--Nonfinancial" (with an
Index Maturity of one month or three months being deemed to be equivalent to an
Index Maturity of 30 days or 90 days, respectively). If such rate is not yet
published in either H.15(519) or Composite Quotations by 3:00 P.M., New York
City time, on the related Calculation Date, then the Commercial Paper Rate on
such Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
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commercial paper in The City of New York (which may include the Agents or their
respective affiliates) selected by the Calculation Agent for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement placed
for a non-financial entity whose bond rating is "Aa", or the equivalent, from a
nationally recognized statistical rating organization; provided, however, that
if the dealers so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Commercial Paper Rate determined as of such Commercial
Paper Rate Interest Determination Date will be the Commercial Paper Rate in
effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
<TABLE>
<S> <C> <C> <C>
Money Market Yield = D x 360
------------ X 100
360 - (D x M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated.
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds Rate
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 United
States dollar federal funds arranged by three leading brokers of federal funds
transactions in The City of New York (which may include the Agents or their
respective affiliates) selected by the Calculation Agent prior to 9:00 A.M., New
York City time, on such Federal Funds Rate Interest Determination Date;
provided, however, that if the brokers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Federal Funds Rate determined as
of such Federal
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Funds Rate Interest Determination Date will be the Federal Funds Rate in effect
on such Federal Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a Floating
Rate Note for which the interest rate is determined with reference to LIBOR (a
"LIBOR Interest Determination Date"), LIBOR will be either: (a) if "LIBOR
Reuters" is specified in the applicable Pricing Supplement, the arithmetic mean
of the offered rates (unless the Designated LIBOR Page by its terms provides
only for a single rate, in which case such single rate shall be used) for
deposits in the Designated LIBOR Currency having the Index Maturity specified in
such Pricing Supplement, commencing on the applicable Interest Reset Date, that
appear (or, if only a single rate is required as aforesaid, appears) on the
Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest
Determination Date, or (b) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the rate for deposits in the Designated LIBOR Currency having the Index
Maturity specified in such Pricing Supplement, commencing on such Interest Reset
Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London time,
on such LIBOR Interest Determination Date. If fewer than two such offered rates
appear, or if no such rate appears, as applicable, LIBOR on such LIBOR Interest
Determination Date will be determined in accordance with the provisions
described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
Designated LIBOR Page as specified in clause (i) above, the Calculation Agent
will request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the Calculation Agent, to provide
the Calculation Agent with its offered quotation for deposits in the Designated
LIBOR Currency for the period of the Index Maturity specified in the applicable
Pricing Supplement, commencing on the applicable Interest Reset Date, to prime
banks in the London interbank market at approximately 11:00 A.M., London time,
on such LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in such Designated LIBOR Currency in
such market at such time. If at least two such quotations are so provided, then
LIBOR on such LIBOR Interest Determination Date will be the arithmetic mean of
such quotations. If fewer than two such quotations are so provided, then LIBOR
on such LIBOR Interest Determination Date will be the arithmetic mean of the
rates quoted at approximately 11:00 A.M., in the applicable Principal Financial
Center, on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in the
Designated LIBOR Currency to leading European banks, having the Index Maturity
specified in the applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in such Designated LIBOR Currency in
such market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined as of such LIBOR Interest Determination Date will be LIBOR in effect
on such LIBOR Interest Determination Date.
"Designated LIBOR Currency" means the currency or composite currency
specified in the applicable Pricing Supplement as to which LIBOR shall be
calculated. If no such currency or composite currency is specified in the
applicable Pricing Supplement, the Designated LIBOR Currency shall be United
States dollars.
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"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) for the purpose of displaying the London
interbank rates of major banks for the applicable Designated LIBOR Currency, or
(b) if "LIBOR Telerate" is specified in the applicable Pricing Supplement or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Pricing Supplement as the method for calculating LIBOR, the display on the Dow
Jones Markets Limited (or any successor service) for the purpose of displaying
the London interbank rates of major banks for the applicable Designated LIBOR
Currency.
PRIME RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate is published in H.15(519) under the heading "Bank
Prime Loan". If such rate is not published prior to 3:00 P.M., New York City
time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME1 Page (as hereinafter defined) as such
bank's prime rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates appear on the Reuters Screen
USPRIME1 Page for such Prime Rate Interest Determination Date, then the Prime
Rate shall be the arithmetic mean of the prime rates or base lending rates
quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than four such quotations are so
provided, then the Prime Rate shall be the arithmetic mean of four 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 Prime Rate Interest
Determination Date as furnished in The City of New York by the major money
center banks, if any, that have provided such quotations and by a reasonable
number of substitute banks or trust companies as necessary in order to obtain
four such prime rate quotations, provided such substitute banks or trust
companies are organized and doing business under the laws of the United States,
or any State thereof, each having total equity capital of at least $500 million
and being subject to supervision or examination by Federal or State authority,
selected by the Calculation Agent to provide such rate or rates; provided,
however, that if the banks or trust companies so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Prime Rate determined
as of such Prime Rate Interest Determination Date will be the Prime Rate in
effect on such Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor Money
Rates Service (or any successor service) on the USPRIME1 Page (or such other
page as may replace the USPRIME1 Page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate is published in H.15(519) under the heading "Treasury
Bills-auction average (investment)" or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the auction average rate of such
Treasury Bills (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 specified in the
applicable Pricing Supplement are not reported as provided above by 3:00 P.M.,
New York City time, on the related Calculation Date, or if no such Auction is
held, then the Treasury Rate will be calculated by the Calculation Agent and
will be a yield to maturity
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(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 P.M., New York City time,
on such Treasury Rate Interest Determination Date, of three leading primary
United States government securities dealers (which may include the Agents or
their respective affiliates) selected by the Calculation Agent, for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity specified
in the applicable Pricing Supplement; provided, however, that if the dealers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Treasury Rate determined as of such Treasury Rate Interest Determination
Date will be the Treasury Rate in effect on such Treasury Rate Interest
Determination Date.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Maturity Date or any other term relating thereto, may be modified and/or
supplemented as specified under "Other/Additional Provisions" on the face
thereof or in an Addendum relating thereto, if so specified on the face thereof.
Such provisions will be described in the applicable Pricing Supplement.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing Note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement,
including a table setting forth repayment information for such Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Notes ("Original Issue Discount Notes") from time to
time that have an Issue Price (as specified in the applicable Pricing
Supplement) that is less than 100% of the principal amount thereof (i.e., par).
Original Issue Discount Notes may not bear any interest currently or may bear
interest at a rate that is below market rates at the time of issuance. The
difference between the Issue Price of an Original Issue Discount Note and par is
referred to herein as the "Discount". In the event of redemption, repayment or
acceleration of maturity of an Original Issue Discount Note, the amount payable
to the Holder of such Original Issue Discount Note will be equal to the sum of
(i) the Issue Price (increased by any accruals of Discount) and, in the event of
any redemption of such Original Issue Discount Note (if applicable), multiplied
by the Initial Redemption Percentage specified in the applicable Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) and (ii) any unpaid interest on such Original Issue Discount Note
accrued from the date of issue to the date of such redemption, repayment or
acceleration of maturity.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for an
Original Issue Discount Note, such Discount will be accrued using a constant
yield method. The constant yield will be calculated using a 30-day month,
360-day year convention, a compounding period that, except for the Initial
Period (as defined below), corresponds to the shortest period between Interest
Payment Dates for the applicable Original Issue Discount Note (with ratable
accruals within a compounding period), a coupon rate equal to the initial coupon
rate applicable to such Original Issue Discount Note and an assumption that the
maturity of such Original Issue Discount Note will not be accelerated. If the
period from the date of issue to the initial Interest Payment Date for an
Original Issue
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Discount Note (the "Initial Period") is shorter than the compounding period for
such Original Issue Discount Note, a proportionate amount of the yield for an
entire compounding period will be accrued. If the Initial Period is longer than
the compounding period, then such period will be divided into a regular
compounding period and a short period with the short period being treated as
provided in the preceding sentence. The accrual of the applicable Discount may
differ from the accrual of original issue discount for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"), certain Original Issue Discount
Notes may not be treated as having original issue discount within the meaning of
the Code, and Notes other than Original Issue Discount Notes may be treated as
issued with original issue discount for federal income tax purposes. See
"Certain United States Federal Income Tax Considerations" herein.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate of one or more
specified currencies (including a composite currency such as the ECU) relative
to an indexed currency or to such other price(s) or exchange rate(s) ("Indexed
Notes"), as specified in the applicable Pricing Supplement. In certain cases,
Holders of Indexed Notes may receive a principal payment on the Maturity Date
that is greater than or less than the principal amount of such Indexed Notes
depending upon the relative value on the Maturity Date of the specified indexed
item. Information as to the method for determining the amount of principal,
premium, if any, and/or interest payable in respect of Indexed Notes, certain
historical information with respect to the specified indexed item and tax
considerations associated with an investment in Indexed Notes will be specified
in the applicable Pricing Supplement. See "Risk Factors".
APPLICABILITY OF DEFEASANCE PROVISIONS
The Indentures contain provisions, applicable to the Notes, relating to
defeasance and discharge which are described in the accompanying Prospectus
under "Description of the Securities--Discharge and Defeasance".
BOOK-ENTRY NOTES
The Company has established a depositary arrangement with The Depository
Trust Company with respect to the Book-Entry Notes, the terms of which are
summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes of like tenor or terms up to
$200,000,000 aggregate principal amount bearing interest (if any) at the same
rate or pursuant to the same formula and having the same date of issue, currency
of denomination and payment, Interest Payment Dates (if any), Stated Maturity
Date, redemption provisions (if any), repayment provisions (if any) and other
terms will be represented by a single Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary and will be registered in the name of the Depositary or a nominee of
the Depositary. No Global Security may be transferred except as a whole by a
nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided in this section, the Beneficial Owners
of the Global Security or Securities representing Book-Entry Notes will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferrable.
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Accordingly, each Beneficial Owner must rely on the procedures of the Depositary
and, if such Beneficial Owner is not a Participant, on the procedures of the
Participant through which such Beneficial Owner owns its interest in order to
exercise any rights of a Holder under such Global Security or the Indenture. The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the Global
Securities, (ii) the Depositary ceases to be a clearing agency registered under
the Exchange Act or (iii) the Company in its sole discretion determines that the
Global Securities shall be exchangeable for Certificated Notes. Upon any such
exchange, the Certificated Notes shall be registered in the names of the
Beneficial Owners of the Global Security or Securities representing Book-Entry
Notes, which names shall be provided by the Depositary's relevant Participants
(as identified by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully registered securities registered in
the name of Cede & Co. (the Depositary's partnership nominee). One fully
registered Global Security will be issued for each issue of Book-Entry Notes,
each in the aggregate principal amount of such issue, and will be deposited with
the Depositary. If, however, the aggregate principal amount of any issue exceeds
$200,000,000, one Global Security will be issued with respect to each
$200,000,000 of principal amount and an additional Global Security will be
issued with respect to any remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants of the Depositary ("Direct
Participants") include securities brokers and dealers (including the Agent),
banks, trust companies, clearing corporations and certain other organizations.
The Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to the Depositary and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for such Book-Entry
Notes on the Depositary's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global Security ("Beneficial
Owner") is in turn to be recorded on the records of Direct and Indirect
Participants. Beneficial Owners will not receive written confirmation from the
Depositary of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which such Beneficial Owner entered into the transaction. Transfers of ownership
interests in a Global Security representing Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting
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on behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated Notes representing
their ownership interests therein, except in the event that use of the
book-entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit of
Global Securities with, or on behalf of, the Depositary and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
Depositary has no knowledge of the actual Beneficial Owners of the Global
Securities representing the Book-Entry Notes; the Depositary's records reflect
only the identity of the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Book-Entry Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest payments, if any, on the Global
Securities representing the Book-Entry Notes will be made in immediately
available funds to the Depositary. The Depositary's practice is to credit Direct
Participants' accounts on the applicable payment date in accordance with their
respective holdings shown on the Depositary's records unless the Depositary has
reason to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of the Depositary, the Trustee or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and/or interest, if
any, to the Depositary is the responsibility of the Company and the Trustee,
disbursement of such payments to Direct Participants shall be the responsibility
of the Depositary, and disbursement of such payments to the Beneficial Owners
shall be the responsibility of Direct and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Notes of like tenor and terms are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Company, through its Participant, to the Trustee,
and shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global Security or
Securities representing such Book-Entry Notes, on the Depositary's records, to
the Trustee. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Security or Securities representing such
Book-Entry Notes are transferred by Direct Participants on the Depositary's
records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving reasonable
notice to the Company or the Trustee. Under such circumstances, in the event
that a successor securities depository is not obtained, Certificated Notes are
required to be printed and delivered.
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The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In that
event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, and
premium, if any, and interest on, the Foreign Currency Notes. Such persons
should consult their own financial and legal advisors with regard to such
matters. See "Risk Factors--Exchange Rates and Exchange Controls".
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, the Company
is obligated to make payments of principal of, and premium, if any, and interest
on, Foreign Currency Notes in the applicable Specified Currency (or, if such
Specified Currency is not at the time of such payment legal tender for the
payment of public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of such payment is
legal tender for the payment of such debts). Any such amounts payable by the
Company in a foreign currency or composite currency will, unless otherwise
specified in the applicable Pricing Supplement, be converted by the Exchange
Rate Agent named in the applicable Pricing Supplement into United States dollars
for payment to Holders. However, the Holder of a Foreign Currency Note may elect
to receive amounts payable in a foreign currency or composite currency in such
foreign currency or composite currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by the Company for the
purchase by the quoting dealer of the applicable foreign currency or composite
currency for United States dollars for settlement on such payment date in the
aggregate amount of such currency or composite currency payable to all Holders
of Foreign Currency Notes scheduled to receive United States dollar payments and
at which the applicable dealer commits to execute a contract. All currency
exchange costs will be borne by the Holders of such Foreign Currency Notes by
deductions from such payments. If three such bid quotations are not available,
payments will be made in the applicable foreign currency or composite currency.
If the principal of, and premium, if any, and interest on a Foreign Currency
Note are payable in a foreign currency or composite currency, the Holder of such
Foreign Currency Note may elect to receive all or a specified portion of such
payments in such foreign currency or composite currency by submitting a written
request for such payment to the Trustee at its corporate trust office in The
City of New York on or prior to the applicable Record Date or at least 15
calendar days prior to the Maturity Date, as the case may be. Such written
request may be mailed or hand delivered or sent by cable, telex or other form of
facsimile transmission. A Holder of a Foreign Currency Note may elect to receive
all or a specified portion of all future payments in the applicable foreign
currency or composite currency in respect of such principal,
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premium, if any, and/or interest and need not file a separate election for each
payment. Such election will remain in effect until revoked by written notice to
the Trustee, but written notice of any such revocation must be received by the
Trustee on or prior to the applicable Record Date or at least 15 calendar days
prior to the Maturity Date, as the case may be. Holders of Foreign Currency
Notes whose Notes are to be held in the name of a broker or nominee should
contact such broker or nominee to determine whether and how an election to
receive payments in the applicable foreign currency or composite currency may be
made.
Payments of the principal of, and premium, if any, and/or interest on,
Foreign Currency Notes which are to be made in United States dollars will be
made in the manner specified herein with respect to Notes denominated in United
States dollars. See "Description of Notes--General". Payments of interest on
Foreign Currency Notes which are to be made in the applicable foreign currency
or composite currency on an Interest Payment Date other than the Maturity Date
will be made by check mailed to the address of the Holders of such Foreign
Currency Notes as they appear in the Security Register, subject to the right to
receive such interest payments by wire transfer of immediately available funds
under the circumstances described under "Description of Notes--General".
Payments of principal of, and premium, if any, and/or interest on, Foreign
Currency Notes which are to be made in the applicable foreign currency or
composite currency on the Maturity Date will be made by wire transfer of
immediately available funds to an account with a bank designated at least 15
calendar days prior to the Maturity Date by each Holder thereof, provided that
such bank has appropriate facilities therefor and that the applicable Foreign
Currency Note is presented and surrendered at the principal corporate trust
office of the Trustee in time for the Trustee to make such payments in such
funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a
Beneficial Owner of a Global Security or Securities representing Book-Entry
Notes payable in a currency or composite currency other than United States
dollars which elects to receive payments of principal, premium, if any, and/or
interest in such currency or composite currency must notify the Participant
through which it owns its interest on or prior to the applicable Record Date or
at least 15 calendar days prior to the Maturity Date, as the case may be, of
such Beneficial Owner's election. Such Participant must notify the Depositary of
such election on or prior to the third Business Day after such Record Date or at
least 12 calendar days prior to the Maturity Date, as the case may be, and the
Depositary will notify the Trustee of such election on or prior to the fifth
Business Day after such Record Date or at least 10 calendar days prior to the
Maturity Date, as the case may be. If complete instructions are received by the
Participant from the Beneficial Owner and forwarded by the Participant to the
Depositary, and by the Depositary to the Trustee, on or prior to such dates,
then such Beneficial Owner will receive payments in the applicable foreign
currency or composite currency.
PAYMENT CURRENCY
If the applicable composite currency (e.g., ECU) for a Foreign Currency Note
is not available for the required payment of principal, premium, if any, and/or
interest due to the imposition of exchange controls or other circumstances
beyond the control of the Company, the Company will be entitled to satisfy its
obligations to the Holder of such Foreign Currency Note by making such payment
in United States dollars on the basis of the Market Exchange Rate on the second
Business Day prior to such payment or, if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate or
as otherwise specified in the applicable Pricing Supplement.
If payment in respect of a Foreign Currency Note is required to be made in
any composite currency, and such composite currency is unavailable due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company will be entitled to satisfy its obligations to the Holder
of such Foreign Currency Note by making such payment in United States dollars.
The amount of each payment in United States dollars shall be computed by the
Exchange Rate Agent on the basis of the equivalent of the composite currency in
United States dollars. The component currencies of the composite currency for
this purpose (collectively, the "Component Currencies" and each, a "Component
Currency") shall be the currency amounts that were components of the composite
currency as of the last day on which
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the composite currency was used. The equivalent of the composite currency in
United States dollars shall be calculated by aggregating the United States
dollar equivalents of the Component Currencies. The United States dollar
equivalent of each of the Component Currencies shall be determined by the
Exchange Rate Agent on the basis of the most recently available Market Exchange
Rate for each such Component Currency, or as otherwise specified in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a currency or composite currency other than
United States dollars means the noon dollar buying rate in The City of New York
for cable transfers for such currency or composite currency as certified for
customs purposes by (or if not so certified, as otherwise determined by) the
Federal Reserve Bank of New York. Any payment made in United States dollars
under such circumstances where the required payment is in a currency or
composite currency other than United States dollars will not constitute an Event
of Default under the Indenture with respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Foreign Currency Notes only in United States
dollars. It is not clear, however, whether, in granting such judgment, the rate
of conversion into United States dollars would be determined with reference to
the date of default, the date of entry of the judgment or some other date. Under
current New York law, a state court in the State of New York rendering a
judgment on a Foreign Currency Note would be required to render such judgment in
the applicable foreign currency or composite currency, and such judgment would
be converted into United States dollars at the exchange rate prevailing on the
date of entry of the judgment. Accordingly, Holders of Foreign Currency Notes
would bear the risk of exchange rate fluctuations between the time the amount of
the judgement is calculated and the time such amount is converted from United
States dollars into the applicable foreign currency or composite currency.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate whose
income is subject to United States federal income tax regardless of its source,
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all substantial decisions of the
trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to such date, that elect to continue to
be treated as United States persons also will be a U.S. Holder; or (v) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST
Payments of interest on a Note generally will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting).
ORIGINAL ISSUE DISCOUNT
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("Discount Notes"). The
following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") on January 27,
1994, as amended on June 11, 1996 under the original issue discount provisions
of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a DE MINIMIS amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest (as
hereinafter defined) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes equals
the first price at which a substantial amount of such Notes has been sold
(ignoring sales to bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers). The
stated redemption price at maturity of a Note is the sum of all payments
provided by the Note other
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than "qualified stated interest" payments. The term "qualified stated interest"
generally means stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate. In addition, under the OID Regulations, if a Note bears
interest for one or more accrual periods at a rate below the rate applicable for
the remaining term of such Note (e.g., Notes with teaser rates or interest
holidays), and if the greater of either the resulting foregone interest on such
Note or any "true" discount on such Note (i.e., the excess of the Note's stated
principal amount over its issue price) equals or exceeds a specified de minimis
amount, then the stated interest on the Note would be treated as original issue
discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium". Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (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" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the
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currency in which the Variable Note is denominated. Although a multiple of a
qualified floating rate will generally not itself constitute a qualified
floating rate, a variable rate equal to the product of a qualified floating rate
and a fixed multiple that is greater than .65 but not more than 1.35 will
constitute a qualified floating rate. A variable rate equal to the product of a
qualified floating rate and a fixed multiple that is greater than .65 but not
more than 1.35, increased or decreased by a fixed rate, will also constitute a
qualified floating rate. In addition, under the OID Regulations, two or more
qualified floating rates that can reasonably be expected to have approximately
the same values throughout the term of the Variable Note (e.g., two or more
qualified floating rates with values within 25 basis points of each other as
determined on the Variable Note's issue date) will be treated as a single
qualified floating rate. Notwithstanding the foregoing, a variable rate that
would otherwise constitute a qualified floating rate but which is subject to one
or more restrictions such as a maximum numerical limitation (i.e., a cap) or a
minimum numerical limitation (i.e., a floor) may, under certain circumstances,
fail to be treated as a qualified floating rate under the OID Regulations unless
such cap or floor is fixed throughout the term of the Note. An "objective rate"
is a rate that is not itself a qualified floating rate but which is determined
using a single fixed formula and that is based on objective financial or
economic information. A rate will not qualify as an objective rate if it is
based on information that is within the control of the issuer (or a related
party) or that is unique to the circumstances of the issuer (or a related
party), such as dividends, profits, or the value of the issuer's stock (although
a rate does not fail to be an objective rate merely because it is based on the
credit quality of the issuer). A "qualified inverse floating rate" is any
objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the qualified floating rate. The
OID Regulations also provide that if a Variable Note provides for stated
interest at a fixed rate for an initial period of less than one year followed by
a variable rate that is either a qualified floating rate or an objective rate
and if the variable rate on the Variable Note's issue date is intended to
approximate the fixed rate (e.g., the value of the variable rate on the issue
date does not differ from the value of the fixed rate by more than 25 basis
points), then the fixed rate and the variable rate together will constitute
either a single qualified floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and if
the interest on such note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually then all stated interest
on the Note will constitute qualified stated interest and will be taxed
accordingly. Thus, a Variable Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the Variable Note is issued at a "true" discount (i.e., at
a price below the Note's stated principal amount) in excess of a specified de
minimis amount. The amount of qualified stated interest and the amount of
original issue discount, if any, that accrues during an accrual period on such a
Variable Note is determined under the rules applicable to fixed rate debt
instruments. By assuming that the variable rate is a fixed rate equal to (i) in
the case of a qualified floating rate or qualified inverse floating rate, the
value as of the issue date, of the qualified floating rate or qualified inverse
floating rate, or (ii) in the case of an objective rate (other than a qualified
inverse floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note. The qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid during
an accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period pursuant to the foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the
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Variable Note with a fixed rate equal to the value of the qualified floating
rate or qualified inverse floating rate, as the case may be, as of the Variable
Note's issue date. Any objective rate (other than a qualified inverse floating
rate) provided for under the terms of the Variable Note is converted into a
fixed rate that reflects the yield that is reasonably expected for the Variable
Note. In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or a
qualified inverse floating rate, if the Variable Note provides for a qualified
inverse floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. U.S. Holders should be aware that on June
11, 1996, the Treasury Department issued final regulations (the "CPDI
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In general, the CPDI Regulations would
cause the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character of
income, gain or loss reported on a contingent payment debt instrument uner
general principles of current United States Federal income tax law.
Specifically, the CPDI Regulations generally require a U.S. Holder of such an
instrument to include future contingent and noncontingent interest payments in
income as such interest accrues based upon a projected payment schedule.
Moreover, in general, under the CPDI Regulations, any gain recognized by a U.S.
Holder on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any loss
realized could be treated as ordinary loss as opposed to capital loss (depending
upon the circumstances). The CPDI Regulations apply to debt instruments issued
on or after August 13, 1996. The proper United States Federal income tax
treatment of Variable Notes that are treated as contingent payment debt
obligations will be more fully described in the applicable Pricing Supplement.
Furthermore, any other special United States Federal income tax considerations,
not otherwise described herein, which are applicable to any particular issue of
Notes will be described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de
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minimis market discount, and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium) that accrues on a debt instrument by using
the constant yield method applicable to original issue discount, subject to
certain limitations and exceptions.
SHORT-TERM NOTES
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with original issue discount. In general,
an individual or other cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT
If a U.S. Holder purchases a Note, other than a Discount Note, for an amount
that is less than its issue price (or, in the case of a subsequent purchaser,
its stated redemption price at maturity) or, in the case of a Discount Note, for
an amount that is less than its adjusted issue price as of the purchase date,
such U.S. Holder will be treated as having purchased such Note at a "market
discount", unless such market discount is less than a specified de minimis
amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income to
the extent of the lesser of (i) the amount of such payment or realized gain or
(ii) the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments acquired by the U.S. Holder on or after the first day of the taxable
year to which such election applies and may be revoked only with the consent of
the IRS.
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PREMIUM
If a U.S. Holder purchases 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, such U.S. Holder will be considered to have
purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. Any election to amortize bond premium applies to all taxable
debt obligations then owned and thereafter acquired by the U.S. Holder and may
be revoked only with the consent of the IRS.
DISPOSITION OF A NOTE
Except as discussed above, upon the sale, exchange or retirement of a Note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in a
Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified stated
interest payments, received and amortizable bond premium taken with respect to
such Note. Such gain or loss generally will be long-term capital gain or loss if
the Note were held for more than the applicable holding period. The Taxpayer
Relief Act of 1997 reduces the maximum rates on long-term capital gains
recognized on capital assets held by individual taxpayers for more than 18
months as of the date of disposition (and would further reduce the maximum rates
on such gains in the year 2001 and thereafter for certain individual taxpayers
who meet specified conditions). Prospective investors should consult their own
tax advisors concerning these tax law changes.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY
CASH METHOD. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period.
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The U.S. dollar value of such accrued income will be determined by translating
such income at the average rate of exchange for the accrual period or, with
respect to an accrual period that spans two taxable years, at the average rate
for the partial period within the taxable year. A U.S. Holder may elect,
however, to translate such accrued interest income using the rate of exchange on
the last day of the accrual period or, with respect to an accrual period that
spans two taxable years, using the rate of exchange on the last day of the
taxable year. If the last day of an accrual period is within five business days
of the date of receipt of the accrued interest, a U.S. Holder may translate such
interest using the rate of exchange on the date of receipt. The above election
will apply to other debt obligations held by the U.S. Holder and may not be
changed without the consent of the IRS. A U.S. Holder should consult a tax
advisor before making the above election. A U.S. Holder will recognize exchange
gain or loss (which will be treated as ordinary income or loss) with respect to
accrued interest income on the date such income is received. The amount of
ordinary income or loss recognized will equal the difference, if any, between
the U.S. dollar value of the Foreign Currency payment received (determined on
the date such payment is received) in respect of such accrual period and the
U.S. dollar value of interest income that has accrued during such accrual period
(as determined above).
PURCHASE, SALE AND RETIREMENT OF NOTES
A U.S. Holder who purchases a Note with previously owned Foreign Currency
will recognize ordinary income or loss in an amount equal to the difference, if
any, between such U.S. Holder's tax basis in the Foreign Currency and the U.S.
dollar fair market value of the Foreign Currency used to purchase the Note,
determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. 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 not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year. To
the extent the amount realized represents accrued but unpaid interest, however,
such amounts must be taken into account as interest income, with exchange gain
or loss computed as described in "Payments of Interest in a Foreign Currency"
above. If a U.S. Holder receives Foreign Currency on such a sale, exchange or
retirement the amount realized will be based on the U.S. dollar value of the
Foreign Currency on the date the payment is received or the Note is disposed of
(or deemed disposed of in the case of a taxable exchange of the Note for a new
Note). In the case of a Note that is denominated in Foreign Currency and is
traded on an established securities market, a cash basis U.S. Holder (or, upon
election, an accrual basis U.S. Holder) will determine the U.S. dollar value of
the amount realized by translating the Foreign Currency payment at the spot rate
of exchange on the settlement date of the sale. A U.S. Holder's adjusted tax
basis in a Note will equal the cost of the Note to such holder, increased by the
amounts of any market discount or original issue discount previously included in
income by the holder with respect to such Note and reduced by any amortized
acquisition or other premium and any principal payments received by the holder.
A U.S. Holder's tax basis in a Note, and the amount of any subsequent
adjustments to such holder's tax basis, will be the U.S. dollar value of the
Foreign Currency amount paid for such Note, or of the Foreign Currency amount of
the adjustment, determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
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Currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
ORIGINAL ISSUE DISCOUNT
In the case of a Discount Note or Short-Term Note, (i) original issue
discount is determined in units of the Foreign Currency, (ii) accrued original
issue discount is translated into U.S. dollars as described in "Payments of
Interest in a Foreign Currency-Accrual Method" above and (iii) the amount of
Foreign Currency gain or loss on the accrued original issue discount is
determined by comparing the amount of income received attributable to the
discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
PREMIUM AND MARKET DISCOUNT
In the case of a Note with market discount, (i) market discount is
determined in units of the Foreign Currency, (ii) accrued market discount taken
into account upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note (other than accrued market
discount required to be taken into account currently) is translated into U.S.
dollars at the exchange rate on such disposition date (and no part of such
accrued market discount is treated as exchange gain or loss) and (iii) accrued
market discount currently includible in income by a U.S. Holder for any accrual
period is translated into U.S. dollars on the basis of the average exchange rate
in effect during such accrual period, and the exchange gain or loss is
determined upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note in the manner described in
"Payments of Interest in a Foreign Currency Accrual Method" above with respect
to computation of exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in units
of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
EXCHANGE OF FOREIGN CURRENCIES
A U.S. Holder will have a tax basis in any Foreign Currency received as
interest or on the sale, exchange or retirement of a Note equal to the U.S.
dollar value of such Foreign Currency, determined at the time the interest is
received or at the time of the sale, exchange or retirement. Any gain or loss
realized by a U.S. Holder on a sale or other disposition of Foreign Currency
(including its exchange for U.S. dollars or its use to purchase Notes) will be
ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of the Company, a controlled foreign corporation
related to the Company or a bank receiving interest described in section
881(c)(3)(A) of the Code. To qualify for the exemption from taxation, the last
United States payor in the chain of payment prior to payment to a non-U.S.
Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be
S-31
<PAGE>
made on an IRS Form W-8 or a substantially similar form, and the beneficial
owner must inform the Withholding Agent of any change in the information on the
statement within 30 days of such change. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
PLAN OF DISTRIBUTION
The Notes are expected to be offered on a continuous basis for sale by the
Company to or through Chase Securities Inc., Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and PaineWebber Incorporated, subject to the
Company's capital requirements and the pricing of other sources of capital which
may be available to the Company. The Agents may purchase Notes, as principal,
from the Company from time to time for resale to investors and other purchasers
at varying prices relating to
S-32
<PAGE>
prevailing market prices at the time of resale as determined by the applicable
Agent, or, if so specified in the applicable Pricing Supplement, for resale at a
fixed offering price. If agreed to by the Company and an Agent, such Agent may
also utilize its reasonable best efforts on an agency basis to solicit offers to
purchase the Notes at 100% of the principal amount thereof, unless otherwise
specified in the applicable Pricing Supplement. The Company will pay a
commission to each Agent, ranging from .125% to .75% of the principal amount of
each Note, depending upon its stated maturity, sold through such Agent, unless
the applicable Pricing Supplement provides otherwise. Commissions with respect
to Notes with stated maturities in excess of 30 years that are sold through an
Agent will be negotiated between the Company and such Agent at the time of such
sale and may exceed .75% of the principal amount of such Notes.
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 of the
principal amount equal to the commission discount negotiated and agreed to by
the Company and such Agent and set forth in the applicable Pricing Supplement.
An Agent may sell Notes it has purchased from the Company as principal to other
dealers for resale to investors and other purchasers, and may allow any portion
of the discount received in connection with such purchase from the Company to
such dealers. After the initial offering of Notes, the offering price (in the
case of Notes to be resold on a fixed price basis), the concession and the
discount may be changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject offers in whole or in part (whether placed
directly with the Company or through an Agent). Each Agent will have the right,
in its discretion reasonably exercised, to reject in whole or in part any offer
to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date of
settlement. See "Description of Notes--General".
Upon issuance, the Notes will not have an established trading market. The
Notes are not expected to be listed on any securities exchange. Each of the
Agents may from time to time purchase and sell Notes in the secondary market,
but no Agent is obligated to do so, and there can be no assurance that there
will be a secondary market for the Notes or that there will be liquidity in the
secondary market if one develops. From time to time, each of the Agents may make
a market in the Notes, but no Agent is obligated to do so and may discontinue
any market-making activity at any time.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of Notes. If the Agent creates or the Agents create, as
the case may be, a short position in Notes, i.e., if it sells or they sell Notes
in an aggregate principal amount exceeding that set forth in the applicable
Pricing Supplement, such Agent(s) may reduce that short position by purchasing
Notes in the open market. In general, purchases of Notes for the purpose of
stabilization or to reduce a short position could cause the price of Notes to be
higher than it might be in the absence of such purchases.
Each of the Agents may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"). The Company
has agreed to indemnify the Agents against certain liabilities (including
liabilities under the Securities Act), or to contribute to payments the Agents
may be required to make in respect thereof. The Company has agreed to reimburse
the Agents for certain other expenses.
In the ordinary course of its business, the Agents and their respective
affiliates have engaged and may in the future engage in investment and
commercial banking transactions with the Company and certain of its affiliates.
In connection with any particular issue of Notes, the Company may enter into
swaps or other hedging transactions with, or arranged by, the applicable Agent
or an affiliate thereof. Such Agent or other parties may receive compensation,
trading gain or other benefits from such transactions.
Concurrently with the offering of Notes described herein, the Company may
issue other Debt Securities described in the accompanying Prospectus.
S-33
<PAGE>
P R O S P E C T U S
$1,200,000,000
BOEING CAPITAL CORPORATION
SENIOR/SUBORDINATED DEBT SECURITIES
---------------
Boeing Capital Corporation (the "Company" or "BCC") (formerly known as
McDonnell Douglas Finance Corporation) from time to time may offer and sell up
to $1,200,000,000 aggregate initial offering price, or its equivalent, based on
the applicable exchange rate at the time of the offering, in such foreign
currencies, units or composites of two or more thereof as shall be designated by
the Company at the time of offering, of its senior debt securities (the "Senior
Securities") and/or subordinated debt securities (the "Subordinated
Securities"). The Senior Securities and the Subordinated Securities will be
referred to collectively as the "Securities". The Securities may be offered in
one or more separate series in amounts, at prices and on terms to be determined
at the time of sale and set forth in a supplement to this Prospectus (a
"Prospectus Supplement").
The Securities will be unsecured obligations of the Company. The Senior
Securities will rank equally with all other unsecured and unsubordinated
indebtedness of the Company. The Subordinated Securities will be subordinated to
all existing and future Senior Indebtedness (as defined below) of the Company.
See "Description of the Securities". The Securities may be issued in registered
form ("Registered Securities") without coupons or in bearer form ("Bearer
Securities") with coupons attached or both. Bearer Securities will be offered
only to non-United States persons and to offices located outside the United
States of certain United States financial institutions.
The specific terms of the Securities in respect of which this Prospectus is
being delivered, including, where applicable, the specific designation,
aggregate principal amount, authorized denominations, currency, maturity,
interest rate (which may be fixed or variable) and time of payment of interest,
if any, terms for any redemption or repayment at the option of the Company or
the holder, terms for sinking fund payment, if any, whether the Securities are
Senior Securities or Subordinated Securities, the initial public offering price
or purchase price, any stock exchange listings, any special provisions related
to Securities denominated in a foreign or composite currency or issued as
medium-term notes, original issue discount securities or other special terms
will be set forth in the accompanying Prospectus Supplement. As used herein,
Securities shall include securities denominated in United States dollars or, at
the option of the Company if so specified in the applicable Prospectus
Supplement, in any other currency or in composite currencies.
The Securities may be sold to underwriters for public offering pursuant to
terms of offering established at the time of sale. In addition, the Securities
may be sold by the Company directly or through dealers or agents designated from
time to time. The Prospectus Supplement will also set forth with respect to the
sale of the Securities in respect of which this Prospectus is being delivered
the names of the underwriters, dealers or agents, if any, any applicable
commissions or discounts, the net proceeds to the Company from such sale and any
other terms of the offering. Any underwriters, dealers or agents participating
in the offering may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 31, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and New York Regional
Office, 13th Floor, Seven World Trade Center, New York, New York 10048. Copies
of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
other information regarding registrants, such as the Company, that file
electronically with the Commission. The address of such site is
http:\\www.sec.gov. Copies of such material also may be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005,
on which exchange certain of the Company's securities are listed.
This Prospectus constitutes a part of two Registration Statements on Form
S-3 (together with all exhibits thereto, the "Registration Statements") filed
with the Commission under the Securities Act, with respect to $1,200,000,000
aggregate initial offering price of Senior Securities and Subordinated
Securities of the Company. This Prospectus does not contain all of the
information contained in the Registration Statements. Reference is made to the
Registration Statements for further information with respect to the Company and
the Securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and
June 30, 1997, and Current Reports on Form 8-K dated October 24, 1997 and
October 28, 1997, as filed with the Commission, are hereby incorporated by
reference into this Prospectus and made a part hereof.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities shall
be deemed to be incorporated by reference into this Prospectus and made a part
hereof from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein, or contained in this Prospectus, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus contains brief summaries of certain more detailed
information contained in documents incorporated herein by reference. Such
summaries are qualified in their entirety by the more detailed information
contained in the incorporated documents.
The Company will provide without charge to each person (including any
beneficial owner) to whom this Prospectus is delivered, upon the written or oral
request of any such person (identified to the Company's satisfaction), a copy of
any or all documents incorporated by reference into this Prospectus (without
exhibits unless such exhibits are specifically incorporated by reference
herein). Requests should be directed to:
Boeing Capital Corporation
4060 Lakewood Boulevard, 6th Floor
Long Beach, California 90808-1700
Attention: Treasury Department
Telephone: (562) 627-3100
2
<PAGE>
THE COMPANY
The Company is a commercial finance company primarily engaged in commercial
aircraft financing and commercial equipment leasing. The Company was
incorporated in Delaware in 1968. The Company is a wholly-owned subsidiary of
Boeing Capital Services Corporation, a wholly-owned subsidiary of McDonnell
Douglas Corporation ("MDC"), which, in turn, is a wholly-owned subsidiary of The
Boeing Company ("Boeing"). The Company became a subsidiary of Boeing on August
1, 1997 as a result of a merger between MDC and Boeing. As described in more
detail in the Company's Report on Form 10-Q for the period ended June 30, 1997,
incorporated by reference herein, Boeing's management is currently considering,
among other things, the strategic value of the Company and, accordingly, the
future direction of the Company is uncertain.
The Company's commercial aircraft financing group, located in Long Beach,
California, finances commercial aircraft (historically primarily MDC aircraft)
by purchasing such aircraft subject to lease to airlines and by providing
secured and unsecured notes receivable financing in connection with such
aircraft. Although since 1986 the Company has provided financing to airlines
(primarily regional airlines) for aircraft manufactured by manufacturers other
than MDC, aircraft manufactured by MDC continue to comprise a substantial
majority of the Company's commercial aircraft portfolio. At June 30, 1997 and
December 31, 1996, the carrying amount of the Company's commercial aircraft
portfolio was $1,725.5 million and $1,814.9 million, respectively, with 33
customers (25 domestic and 8 foreign) and 34 customers (25 domestic and 9
foreign), respectively. At June 30, 1997 and December 31, 1996, 88.9% and 89.1%,
respectively, of the Company's commercial aircraft portfolio (60.3% and 61.5%,
respectively, of the Company's total portfolio) was comprised of aircraft
manufactured by MDC. No Boeing aircraft were in the Company's portfolio as of
June 30, 1997. On September 30, 1997, the Company purchased a used Boeing
767-300 aircraft on lease to a major international airline.
The commercial equipment leasing business segment provides single-investor,
tax-oriented lease financing and debt financing as its primary products. This
segment, which maintains its principal operations in Long Beach, California and
has marketing offices in Chicago, Illinois, Atlanta, Georgia and Detroit,
Michigan, obtains its business primarily through direct solicitation by its
marketing personnel. The commercial equipment leasing business segment
specializes in leasing equipment such as executive aircraft, machine tools,
over-the-road transportation equipment, printing equipment, and other types of
equipment which it believes will maintain strong collateral and residual values.
At June 30, 1997 and December 31, 1996, the carrying amount of the Company's
commercial equipment leasing portfolio was $790.3 million and $769.8 million,
respectively.
The principal executive office of the Company is located at 4060 Lakewood
Boulevard, 6th Floor, Long Beach, California 90808-1700; telephone number (562)
627-3000.
USE OF PROCEEDS
Net proceeds from the sale of the Securities will be used to fund the
acquisition of receivables (possibly including, without limitation, the
acquisition of portfolios of receivables), to purchase equipment for lease and
for other corporate purposes, and may be used to reduce, from time to time,
other indebtedness, including indebtedness to MDC and Boeing.
3
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following is a summary of certain consolidated financial information of
the Company and its subsidiaries at the dates or for each of the periods
indicated. The selected consolidated financial data at December 31, 1996 and
1995 and for each of the years ended December 31, 1996, 1995 and 1994 has been
derived from, should be read in conjunction with, and is qualified in its
entirety by reference to, the audited consolidated financial statements and
notes thereto of the Company included in its Annual Report on Form 10-K for the
year ended December 31, 1996, incorporated by reference in this Prospectus. See
"Incorporation of Certain Documents by Reference". The selected consolidated
financial information as of and for the six months ended June 30, 1997 and 1996
included below has been derived from, and should be read in conjunction with,
the Company's unaudited interim consolidated financial statements, which in the
opinion of the Company's management include all adjustments, consisting only of
normal recurring adjustments, which the Company considers necessary for a fair
presentation of the financial condition and results of operations of the Company
for these periods. Operating data for the six months ended June 30, 1997 are not
necessarily indicative of the results of operations that may be expected for the
full year.
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected earnings data:
Operating income.......................... $ 118.9 $ 108.0 $ 221.5 $ 190.6 $ 186.8 $ 196.9 $ 251.5
Interest expense.......................... 64.2 57.0 117.3 101.9 108.3 116.4 145.9
Net income................................ 25.4 23.4 48.8 39.3 28.3 16.8 27.7
Ratio of earnings to fixed charges(1)....... 1.61 1.62 1.62 1.57 1.37 1.33 1.30
Selected balance sheet data:
Total assets.............................. $ 2,588.8 $ 2,330.5 $ 2,666.6 $ 2,049.6 $ 1,929.6 $ 2,055.5 $ 1,999.0
Total debt................................ 1,732.4 1,582.5 1,850.2 1,339.7 1,215.1 1,361.2 1,330.4
Shareholder's equity...................... 349.2 301.9 325.5 280.2 271.9 269.4 256.4
Cash dividends paid(2)...................... 1.7 1.7 3.5 42.0 19.5 3.6 105.8
</TABLE>
- ------------------------
(1) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of earnings from continuing operations before income taxes,
cumulative effect of accounting changes and fixed charges, and fixed charges
consist of interest expense and preferred stock dividends.
(2) The provisions of various credit and debt agreements require the Company to
maintain a minimum net worth, restrict indebtedness, and limit cash
dividends and other distributions. At June 30, 1997 and December 31, 1996,
at least $91.6 million and $68.4 million, respectively, of earnings retained
for growth was available for dividends.
DESCRIPTION OF THE SECURITIES
The Senior Securities are to be issued under an indenture dated as of April
15, 1987, as supplemented by a supplemental indenture dated as of June 12, 1995
(as so supplemented, the "Senior Indenture"), between the Company and Bankers
Trust Company, as trustee ("Bankers Trust"). The Subordinated Securities are to
be issued pursuant to an indenture dated as of June 15, 1988, as supplemented by
a supplemental indenture dated as of June 12, 1995 (as so supplemented, the
"Subordinated Indenture"), between the Company and Bankers Trust, (successor to
First Trust of California), as trustee. The Senior Indenture and the
Subordinated Indenture are referred to collectively herein as the "Indentures",
and Bankers Trust is referred to herein as the "Trustee". A copy of each of the
Indentures is an exhibit to the Registration Statement. The Indentures provide
that there may be more than one trustee, each with respect to one or more series
of Securities.
4
<PAGE>
The following information concerning the Securities and certain provisions
of the Indentures is intended to provide a summary thereof and does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Indentures, including the definitions therein of
certain terms. Wherever reference is made to defined terms (which are
capitalized herein) of either of the Indentures, such defined terms are
incorporated herein by reference.
GENERAL
Reference is made to the Prospectus Supplement relating to the particular
series of Securities offered thereby for the following terms of such Securities:
(a) the title of such Securities; (b) any limit on the aggregate principal
amount of such series of Securities; (c) whether such Securities are to be
Senior Securities or Subordinated Securities; (d) whether such Securities are to
be issuable as Registered Securities or Bearer Securities or both and whether
such Securities are to be issuable initially in temporary global form or
permanent global form; (e) the price or prices (expressed as a percentage of the
aggregate principal amount thereof) at which such Securities will be issued; (f)
the date or dates on which, and the method of determining Holders to which, the
principal of such Securities will be payable; (g) the rate or rates per annum
(which may be fixed or variable), or the formula by which such rate or rates
will be determined, at which such Securities will bear interest, if any, and the
date from which such interest, if any, will accrue; (h) each Interest Payment
Date on which such interest, if any, on such Securities will be payable and the
Regular Record Date for the interest payable on such Securities which are
Registered Securities on any Interest Payment Date; (i) any mandatory or
optional sinking fund or analogous provisions; (j) each office or agency where,
subject to the terms of the appropriate Indenture as described below under
"Payment and Paying Agents", the principal of and premium, if any, and interest,
if any, on such Securities will be payable and each office or agency where such
Securities may be presented for registration of transfer or exchange; (k) the
date, if any, after which and the price or prices at which such Securities may,
pursuant to any optional or mandatory redemption provisions, be redeemed, in
whole or in part, and the other detailed terms and provisions of any such
optional or mandatory redemption provisions; (l) the denominations in which such
Securities which are Registered Securities will be issuable in other than
denominations of $1,000 and any integral multiple thereof, and the denominations
in which such Securities which are Bearer Securities will be issuable; (m) the
currency or currencies (including composite currencies) of payment of principal
of and premium, if any, and interest, if any, on such Securities; (n) any index
used to determine the amount of payments of principal of and premium, if any,
and interest, if any, on such Securities; (o) whether and under what
circumstances the Company will pay additional amounts ("Additional Amounts") in
respect of the Securities held by persons who are non-United States persons (as
defined in the Prospectus Supplement if applicable) in respect of specified
taxes, assessments or other governmental charges and whether the Company has the
option to redeem the affected Securities rather than pay Additional Amounts; and
(p) any other terms of such Securities not inconsistent with the provisions of
the appropriate Indenture. Any such Prospectus Supplement will also describe any
special provisions for the payment of Additional Amounts with respect to such
Securities.
The Securities may be issued as Original Issue Discount Securities to be
sold at a substantial discount below their principal amount and may be
denominated in currencies other than United States dollars. Special United
States federal income tax considerations applicable to any such Securities will
be set forth in a Prospectus Supplement relating thereto.
The Securities will be unsecured obligations of the Company. The Senior
Securities will rank equally with all other unsecured and unsubordinated
indebtedness of the Company. The Subordinated Securities will be subordinated in
right of payment to the prior payment in full of all existing and future Senior
Indebtedness of the Company as described below under "Subordination".
The Indentures do not limit the aggregate principal amount of Securities
that may be issued thereunder or of any particular series of such Securities.
5
<PAGE>
Under the Indentures, the Company will have the ability, in addition to the
ability to issue Securities with terms the same as or different from those of
Securities previously issued, to "reopen" a previous issue of a series of
Securities and issue additional Securities of such series or establish
additional terms of such series of Securities.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The Securities of a series may be issued solely as Registered Securities,
solely as Bearer Securities (with coupons attached) or as both Registered
Securities and Bearer Securities. Securities of a series may be issuable in
whole or part in the form of one or more global Securities, as described below
under "Global Securities".
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Securities of any
series are issuable as both Registered Securities and Bearer Securities, at the
option of the Holder, subject to the terms of the appropriate Indenture, Bearer
Securities (accompanied by all unmatured coupons, except as provided below, and
all matured coupons in default) of such series will be exchangeable for
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. Unless otherwise indicated in the
Prospectus Supplement relating thereto, any Bearer Security surrendered in
exchange for a Registered Security between a Regular Record Date or a Special
Record Date and the relevant date for payment of interest will be surrendered
without the coupon relating to such date for payment of interest and interest
will not be payable in respect of the Registered Security issued in exchange for
such Bearer Security, but will be payable only to the Holder of such coupon when
due in accordance with the terms of the appropriate Indenture. Bearer Securities
will not be issued in exchange for Registered Securities.
Securities may be presented for exchange as provided above, and unless
otherwise indicated in an applicable Prospectus Supplement, Registered
Securities may be presented for registration of transfer (duly endorsed, or
accompanied by a duly executed written instrument of transfer), at the office of
Bankers Trust, Four Albany Street, New York, New York 10006, Attention:
Corporate Trust and Agency Group (the "Security Registrar") or at the office of
any transfer agent designated by the Company for such purpose with respect to
any series of Securities and referred to in the Prospectus Supplement relating
thereto, without service charge and upon payment of any taxes and other
governmental charges as described in the appropriate Indenture. Such transfer or
exchange will be effected upon the Security Registrar or such transfer agent, as
the case may be, being satisfied with the documents of title and identity of the
person making the request. If a Prospectus Supplement refers to any transfer
agents (in addition to the Security Registrar) designated by the Company with
respect to any series of Securities, the Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that, if Securities of a
series are issuable only as Registered Securities, the Company will be required
to maintain a transfer agent in each Place of Payment for such series and, if
Securities of a series are issuable as Bearer Securities, the Company will be
required to maintain (in addition to the Security Registrar) a transfer agent in
a Place of Payment for such series located outside the United States. The
Company may at any time designate additional transfer agents with respect to any
series of Securities.
In the event of any partial redemption of Securities of any series, the
Company will not be required to (i) register the transfer of or exchange
Securities of that series during a period beginning at the opening of business
15 days before any selection of Securities of that series to be redeemed and
ending at the close of business on (a) if Securities of the series are issuable
only as Registered Securities, the day of mailing of the relevant notice of
redemption and (b) if Securities of the series are issuable only as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if Securities of the series are issuable as Bearer Securities and
Registered Securities and there is no publication, the mailing of the relevant
notice of redemption; (ii) register the transfer of or exchange any Registered
Security, or portion
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thereof, called for redemption, except the unredeemed portion of any Registered
Security being redeemed in part; or (iii) exchange any Bearer Security called
for redemption, except to exchange such Bearer Security for a Registered
Security of that series and of like tenor and principal amount that is
immediately surrendered for redemption.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the Prospectus Supplement relating thereto,
payment of principal of and premium, if any, and interest, if any, on Registered
Securities will be made at the office of such Paying Agent or Paying Agents as
the Company may designate from time to time, except that at the option of the
Company, payment of any interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer to an account maintained by the Person
entitled thereto as specified in the Security Register. Unless otherwise
indicated in the Prospectus Supplement relating thereto, payment of any
installment of interest on Registered Securities will be made to the Person in
whose name such Registered Security is registered at the close of business on
the Regular Record Date for such interest.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
payment of principal of and premium, if any, and interest, if any, on Bearer
Securities will be payable, subject to any applicable laws and regulations, at
the office of such Paying Agents outside the United States as the Company may
designate from time to time, or by check or by transfer to an account maintained
by the payee outside the United States. Unless otherwise indicated in the
Prospectus Supplement relating thereto, any payment of interest on Bearer
Securities will be made only against surrender of the coupon relating to such
interest installment.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the principal office of Bankers Trust will be designated as the Company's sole
Paying Agent for payments with respect to Securities which are issuable solely
as Registered Securities and as the Company's Paying Agent in the Borough of
Manhattan, The City of New York for payments with respect to Securities (subject
to any limitations described in any related Prospectus Supplement) which are
issuable as Bearer Securities. Any Paying Agents outside the United States and
any other Paying Agents in the United States initially designated by the Company
for the Securities will be named in an applicable Prospectus Supplement. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent or approve a change in the office through which
any Paying Agent acts, except that, if Securities of a series are issuable only
as Registered Securities, the Company will be required to maintain a Paying
Agent in each Place of Payment for such series and, if Securities of a series
are issuable as Bearer Securities, the Company will be required to maintain (i)
a Paying Agent in the Borough of Manhattan, The City of New York, for payments
with respect to any Registered Securities of the series (and for payments with
respect to Bearer Securities of the series in the circumstances described in the
appropriate Indenture, but not otherwise), and (ii) a Paying Agent in a Place of
Payment located outside the United States where Securities of such series and
any related coupons may be presented and surrendered for payment; provided,
however, that if the Securities of such series are listed on The International
Stock Exchange of the United Kingdom and the Republic of Ireland Limited (the
"London Stock Exchange") or the Luxembourg Stock Exchange or any other stock
exchange located outside the United States and such stock exchange shall so
require, the Company will maintain a Paying Agent in London or Luxembourg or any
other required city located outside the United States, as the case may be, for
the Securities of such series.
All moneys paid by the Company to a Paying Agent for the payment of
principal of or premium, if any, or interest, if any, on any Security which
remain unclaimed at the end of one year after such principal, premium, if any,
or interest, if any, shall have become due and payable will be repaid to the
Company for payment thereof.
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GLOBAL SECURITIES
The Securities of a series may be issued in whole or in part in global form.
A Security in global form (a "Global Security") will be deposited with, or on
behalf of, a Depositary, which will be identified in the Prospectus Supplement
relating thereto. A Global Security may be issued in either registered or bearer
form and in either temporary or permanent form. A Global Security may not be
transferred except as a whole by the Depositary for such Security to a nominee
of such Depositary or by such Depositary or any such nominee to a successor of
such Depositary or a nominee of such successor. If any Securities of a series
are issuable in global form, the related Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
Global Security may exchange such interests for definitive Securities of such
series and of like tenor and principal amount in any authorized form and
denomination, the manner of payment of principal of and premium, if any, and
interest, if any, on any such Global Security and the specific terms of the
depositary arrangement with respect to any such Global Security.
CERTAIN DEFINED TERMS
Unless otherwise noted herein all defined terms are applicable to both the
Indentures.
"Consolidated Assets" is defined as the amount of all assets which under
generally accepted accounting principles as in effect on the date of such
balance sheet would appear on a consolidated balance sheet of the Company and
its Subsidiaries (after deducting related depreciation, amortization, unearned
finance charges, allowance for credit losses, and other valuation reserves), but
shall not include goodwill, unamortized debt discount and expenses, corporate
organization expense, patents and trademarks.
"Consolidated Liabilities" is defined as the amount of all liabilities which
under generally accepted accounting principles (as in effect as of the date of
such balance sheet) would appear on the consolidated balance sheet of the
Company and its Subsidiaries including, without limitation, the par value or
involuntary liquidation value, whichever is greater, of minority interests, if
any, in preference stock of all Subsidiaries, but not including any of the
following: redeemable preferred or preference stock, minority interests, if any,
in common stock of Subsidiaries, valuation reserves (including unearned finance
charges and allowances for credit losses deducted from assets), Capital Stock
and surplus and surplus reserves of the Company, deferred taxes, deferred
investment tax credit and any Subordinated Indebtedness of the Company.
"Debt" is defined as, with respect to any Person, all obligations for
borrowed money of such Person which in accordance with generally accepted
accounting principles shall be classified upon a balance sheet of such Person as
liabilities of such Person, including all (a) direct Debt and other similar
monetary obligations of such Person, (b) obligations secured by any lien upon
Property owned by such Person or obligations created or arising under any
conditional sale, capital lease, or other title retention agreement with respect
to Property acquired by such Person; provided, however, that Debt does not
include any indebtedness, including purchase money indebtedness, with respect to
which a creditor has no recourse against the obligor except recourse to specific
Property the acquisition of which was financed by or otherwise secures such
indebtedness, or to the proceeds of any sale or lease of such Property or both,
(c) obligations under agreements to pay installments of purchase price or other
like payments with respect to fixed assets not utilized by such Person or its
subsidiaries in the ordinary course of its business, including obligations
ostensibly to pay rent under which an equity interest is to be acquired in the
rented Property. In addition, Debt includes all Guarantees of such Person to the
extent the amount of such Guarantees is in excess of 50% of the Shareholder's
Equity of such Person.
"Lien" is defined as any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract (but excluding a
landlord's statutory lien for rent not yet due), and including, but not limited
to,
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the security interest lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" includes reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property. Under the
Indentures, the Company or a Subsidiary will be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sales
agreement, capital lease or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
"Original Issue Discount Security" is defined as any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof, as provided in the
applicable Indenture.
"Property" is defined as any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Senior Indebtedness" as defined in the Subordinated Indenture shall mean
all of the indebtedness of, or guaranteed by, the Company for borrowed money
(including the principal of, premium, if any, or interest on any such borrowed
money and any commitment fees for unborrowed amounts which, if borrowed, would
constitute Senior Indebtedness), whether currently outstanding or hereafter
incurred, unless, under the instrument evidencing the same or under which the
same is outstanding, it is expressly provided that such indebtedness is
subordinate to other indebtedness and obligations of the Company.
"Shareholder's Equity" of any Person shall mean the shareholder's equity
appearing on the balance sheet of such Person as determined under generally
accepted accounting principles.
"Subordinated Indebtedness" as defined in the Subordinated Indenture shall
mean the Subordinated Securities and all other indebtedness of, or guaranteed
by, the Company whether or not outstanding on the date of the Subordinated
Indenture, which is by the terms thereof made subordinate and junior in right of
payment to all Senior Indebtedness.
CERTAIN COVENANTS
LIMITATION ON DIVIDENDS. The Indentures provide that no dividend shall be
paid or declared or other distribution made on any Capital Stock of the Company
(except in shares of Capital Stock of the Company), and neither the Company nor
any Subsidiary of the Company shall acquire any shares of such stock unless,
after giving effect thereto, Consolidated Assets would be at least equal to 115%
of Consolidated Liabilities. For purposes of this limitation, the definition of
Capital Stock shall not include any preferred stock issued by the Company or its
Subsidiaries. The foregoing restrictions, however, shall not prevent any
acquisition of shares of Capital Stock of the Company solely in exchange for
other shares of Capital Stock of the Company, any acquisition of such shares of
Capital Stock of the Company through the application of the net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of other shares of such Capital Stock of the Company, or the payment of
any dividend within 60 days after the date of declaration thereof, if at such
date such declaration complied with the restrictions of such limitation.
LIMITATION UPON LIENS. The Indentures provide that the Company will not,
and will not permit any Subsidiary to, create or permit to continue in existence
any Lien or charge of any kind upon any Property or assets of the Company or of
any Subsidiary unless the Securities then outstanding shall be equally and
ratably secured (subject, in the case of the Subordinated Securities, to
subordination as to rights of payment as provided in the Subordinated
Indenture), with any other obligation or indebtedness so secured, subject to
certain exceptions including (a) leases or subleases of Property in the ordinary
course of business of the Company or any Subsidiary, or if such Property is not
needed in the operation of the business; (b) Liens created within 12 months
after the acquisition or construction of Property to secure or to provide for
the payment of the purchase or construction price of such Property and Liens
existing on any Property
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at the time of acquisition or certain pre-existing Liens and conditional sales
agreements and/or title retention agreements with respect to any subsequently
acquired Property, provided that the aggregate principal amount of the
indebtedness secured by all such Liens on any particular Property may not exceed
the cost (including improvements thereon) of such Property to the Company or any
Subsidiary, and that such Lien(s) do not extend to other Property owned prior to
such acquisition or construction or to Property thereafter acquired or
constructed; (c) Liens securing indebtedness incurred to finance or refinance
the acquisition of the Property subject to the Lien and in respect of which the
creditor has no recourse against the Company or any Subsidiary except recourse
to such Property, or to the proceeds of any sale or lease of such Property or
both; (d) Liens on Property of the Company or a Subsidiary in favor of the
United States or any State thereof, or any department, governmental body, agency
or instrumentality or political subdivision of any such jurisdiction, to secure
partial, progress, advance or other payments pursuant to any contract or statute
relating thereto; (e) deposits with or security interest given to a governmental
agency as a condition to the transaction of business or the exercise of a
privilege, or made to enable the Company or such Subsidiary to maintain
self-insurance or participate in any fund, or in connection with workmen's
compensation, unemployment insurance, old age pensions, or other social
security, or to share in any privileges or other benefits available to
corporations participating in any such arrangements, or for any other purpose
required by law or regulation promulgated by said governmental agency as a
condition to the transaction of any business or the exercise of any privilege or
license, or deposit assets of the Company or such Subsidiary with any surety
company or clerk of any court or in escrow, as collateral in connection with, or
in lieu of, any bond on appeal by the Company or such Subsidiary from any
judgment or in connection with any other judicial proceedings by or against the
Company or such Subsidiary; (f)(i) Liens for taxes, assessments or other
governmental charges or levies which are not yet due or are payable without
penalty or are being contested in good faith and against which reserves deemed
adequate by the Company or such Subsidiary have been established, provided that
foreclosure or similar proceedings have not been commenced (unless cured by
payment), (ii) Liens of any judgment and other similar Liens arising in
connection with court proceedings, providing such Lien is discharged or the
execution or other enforcement of such Lien is effectively stayed within six
months of the creation of such Lien, (iii) undetermined Liens or charges
incident to construction, (iv) mechanics' or other like Liens arising in the
ordinary course of business in respect of obligations which are not overdue or
which are being contested by the Company or such Subsidiary in good faith, or
deposits to obtain the release of such Liens, or (v) immaterial encumbrances
consisting of zoning restrictions, licenses, easements and restrictions on the
use of real property and minor defects and irregularities in the title thereto;
(g) banker's liens and rights of off-set in the holders of indebtedness such as
commercial paper or monies of the Company or a Subsidiary deposited with such
Lender in the ordinary course of business; (h) Liens related solely to the
purchase of, or the investment in or with respect to, a specific item or items
of tangible personal property and securing indebtedness evidenced by
participation certificates, trust certificates, indentures or the like, however
denominated, provided that no such Lien shall constitute a general lien or
mortgage on substantially all the tangible assets of the Company; (i)
refundings, replacements or extensions of any permitted Liens not exceeding the
principal amount of indebtedness so refunded or extended at the time of such
refunding or extension and covering the same Property theretofore securing the
same; (j) deposits or pledges as security for the performance of any contract or
undertaking in the ordinary course of business but unrelated to the borrowing of
money or to the securing of indebtedness; (k) Liens existing on April 15, 1987
on its Property (with respect to the Senior Indenture) and Liens existing on
June 15, 1988 on its Property (with respect to the Subordinated Indenture); (l)
Liens on aircraft or equipment held by the Company or a Subsidiary or leased to
third parties, if such obligation is without recourse to the Company or such
Subsidiary; and (m) in addition to Liens permitted under clauses (a) through (l)
above, Liens with respect to an aggregate amount of indebtedness of the Company
(including its Subsidiaries) not in excess of an amount equal to 15% of
Consolidated Assets.
Reference is made to the Prospectus Supplement relating to the Securities
offered thereby for information with respect to any additional covenants that
may be included in the terms of such Securities.
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MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may consolidate or merge with or into any other corporation, and
the Company may convey, transfer or lease all or substantially all of its
Properties or assets to another Person provided that (a) the corporation (if
other than the Company) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume payment of the principal of and premium, if any and interest, if any,
(including all Additional Amounts) on the Securities and the performance and
observance of the respective Indenture, and (b) the Company or such successor
corporation shall not immediately thereafter be in default under the respective
Indenture and certain other conditions are met.
EVENTS OF DEFAULT, NOTICE AND WAIVER
If an Event of Default with respect to the Securities of any series then
outstanding shall have occurred and be continuing, the Trustee or the Holders of
at least 25% in principal amount of the Securities of such series then
outstanding may declare the principal (or, if the Securities of that series are
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of that series) and accrued interest of all the
Securities of such series to be due and payable immediately; provided, that, in
certain cases, if all Events of Default with respect to such series shall have
been remedied, the Holders of a majority in aggregate principal amount of the
Securities of such series then outstanding may rescind and annul such
declaration and its consequences. Reference is made to the Pricing Supplement
relating to any series of Securities which is issued at a substantial discount
from the principal amount thereof for the particular provisions relating to
acceleration of the maturity of a portion of the principal amount of such
Securities upon the occurrence of an Event of Default and the continuation
thereof.
An Event of Default with respect to the Securities of any series then
outstanding is defined in the Indenture as being: default for a period of 30
days or more in the payment of any interest on the Securities of such series
whether or not, in the case of the Subordinated Securities, such payment is
prohibited by the subordination provisions referred to below under
"Subordination"; default in payment of any principal of (or premium, if any, on)
the Securities of such series whether or not, in the case of the Subordinated
Securities, such payment is prohibited by the subordination provisions referred
to below under "Subordination"; default in the deposit of any sinking fund
payment, when and as due by the terms of a Security of that series whether or
not, in the case of the Subordinated Securities, such payment is prohibited by
the subordination provisions referred to below under "Subordination"; default
for a period of 60 days after notice by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series or by the Trustee in the
performance of any other covenant or warranty of the Company in the respective
Indenture with respect to a series of the Securities; an event of default, as
defined in any mortgage, indenture or instrument evidencing any indebtedness of
the Company for money borrowed (including other series of the Securities) in
excess of $10,000,000 aggregate principal amount then outstanding (except that
such dollar amount shall not apply with respect to a default with respect to
Securities of any series outstanding), as a result of which such indebtedness of
the Company shall have been accelerated and such acceleration shall not have
been annulled or rescinded within a period of 20 days after written notice
thereof; or certain events of bankruptcy, insolvency or reorganization.
The Trustee is required, within 90 days after the occurrence of any default
which is known to the Trustee and is continuing, to give to the Holders of the
applicable series of Securities with respect to which such default has occurred
notice of such default; provided that, except in the case of default in the
payment of principal, premium, if any (including any sinking fund payment) or
interest, if any, on a series of Securities with respect to which such default
has occurred, the Trustee shall be protected in withholding such notice if it
determines in good faith that the withholding of such notice is in the interest
of the Holders of the Securities of such series.
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The Trustee, subject to its duties during default to act with the required
standard of care, may require indemnification by the Holders of a series of
Securities with respect to which a default has occurred before proceeding to
exercise any right or power under the applicable Indenture at the request of the
Holders of Securities of such series. The Holders of a majority in principal
amount of the Outstanding Securities of this series may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee.
In certain cases, the Holders of a majority in principal amount of an
outstanding series of Securities may, on behalf of the Holders of all Securities
of such series, and any coupons appertaining thereto, waive any past default
with respect to such series except a default in the payment of the principal,
premium, if any, or interest (except to the extent that such interest has been
paid), if any, on such series of Securities with respect to which such default
has occurred.
The Company is required to file annually with the Trustee a certificate as
to the absence of defaults under each Indenture.
DISCHARGE AND DEFEASANCE
Under each of the Indentures, the Company may discharge certain obligations
to holders of any series of Securities that have not already been delivered to
the Trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by depositing with the applicable Trustee, in trust, funds in an amount
sufficient to pay the entire indebtedness on such Securities in respect of
principal and premium, if any, and interest, if any, to the date of such deposit
(if such Securities have become due and payable) or to the Maturity thereof, as
the case may be.
Each Indenture further provides that, if the provisions of Section 403
thereof are made applicable to the Securities of any series pursuant to Section
301 thereof, the Company may elect to defease and be discharged from any and all
obligations with respect to such Securities (except for, among other things, the
obligation to pay Additional Amounts, if any, upon the occurrence of certain
events of taxation, assessment or governmental charge with respect to payments
on such Securities and the obligations to register the transfer or exchange of
such Securities, to replace temporary or mutilated, destroyed, lost or stolen
Securities, to maintain an office or agency in respect of such Securities and to
hold moneys for payment in trust) ("defeasance") upon the irrevocable deposit by
the Company with the Trustee, in trust, of an amount of money or Government
Obligations (as defined below), or both, applicable to such Securities which
through the scheduled payment of principal and interest in accordance with their
terms will provide money in an amount sufficient to pay the principal of (and
premium, if any) and interest, if any, on such Securities, and any mandatory
sinking fund or analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, (i) the
defeasance does not result in a breach or violation of, or constitute a default
under, the applicable Indenture or any other agreement or instrument to which
the Company is a party or by which it is bound, (ii) no default or Event of
Default with respect to the Securities to be defeased shall have occurred and be
continuing on the date of the establishment of such a trust and (iii) the
Company has delivered to the Trustee an Opinion of Counsel (as specified in the
applicable Indenture) to the effect that the holders of such Securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner at the same times as would have been the case if
such defeasance had not occurred, and such Opinion of Counsel must refer to and
be based upon a letter ruling of the Internal Revenue Service received by the
Company, a Revenue Ruling published by the Internal Revenue Service or a change
in applicable U.S. federal income tax law occurring after the date of the
applicable Indenture. "U.S. Government Obligations" means generally direct
noncallable obligations of the United States of America for the payment of which
its full faith and credit is pledged or obligations of a person controlled or
supervised by and acting as an agency or instrumentality of the United
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States of America, the timely payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of America.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting defeasance, including any modifications to the provisions
described above, with respect to the Securities of a particular series.
NOTICES
Except as otherwise provided in the Indentures, notices to Holders of Bearer
Securities will be given by publication at least twice in a daily newspaper in
The City of New York and in such other city or cities as may be specified in
such Securities. Notices to Holders of Registered Securities will be given by
mail to the addresses of such Holders as they appear in the Security Registers.
MODIFICATION OF THE INDENTURES
Modification and amendment of the Indentures may be made by the Company and
the Trustee with the consent of the Holders of not less than 66 2/3% in
aggregate principal amount of the Outstanding Securities of an affected series,
provided that no such modification or amendment may, without the consent of the
Holder of each Outstanding Security affected thereby, (a) change the Stated
Maturity of, or any installment of principal or interest (or any Additional
Amount) on, any Outstanding Security, or reduce the principal amount or rate of
interest thereon, or change the Redemption Price; (b) change the place or
currency of payment of principal of or premium, if any, or interest on any
Security; (c) impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof; (d) reduce the above-stated
percentage of Outstanding Securities necessary to modify or amend the respective
Indentures; (e) modify the foregoing requirements or reduce the percentage of
Outstanding Securities necessary to waive any past default or compliance with
certain restrictive provisions to less than a majority; (f) with respect to the
Senior Securities, reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the Maturity thereof; or (g) with respect
to the Subordinated Securities, reduce the amount of principal of or the rate of
interest on a Security payable upon acceleration of the Maturity thereof. The
Holders of at least a majority in aggregate principal amount of the Outstanding
Securities may waive past defaults and compliance by the Company with certain
restrictive provisions.
Modification and amendment of the Indentures may be made by the Company and
the Trustee without the consent of any Holder, for any of these purposes: (a) to
evidence the succession of another corporation to the Company; (b) to add to the
covenants of the Company for the benefit of the Holders of all or any series of
Securities; (c) to add additional Events of Default; (d) to change any provision
of the Indentures or either of them to facilitate the issuance of Bearer
Securities; (e) to change or eliminate any provision of any Indenture, provided
no Security Outstanding of any series is entitled to the benefit of such
provision; (f) to secure the Securities; (g) to establish the form or terms of
Securities; (h) to provide for the acceptance of appointment by a successor
Trustee; or (i) to cure any ambiguity, defect or inconsistency in either
Indenture or both of them provided such action does not adversely affect the
interests of Holders of Securities.
SUBORDINATION
The indebtedness evidenced by the Subordinated Securities and the payment of
the principal of and premium, if any, and interest, if any, on each and all of
the Subordinated Securities are subordinated in right of payment to the prior
payment in full of Senior Indebtedness and, unless specifically designated as
ranking junior to other subordinated debt securities of the Company, are PARI
PASSU with all other subordinated debt securities of the Company which have not
been specifically designated as ranking junior to other subordinated debt
securities of the Company. The Company has not issued any subordinated debt
ranking junior to the Subordinated Securities but the Company may issue such
junior subordinated debt.
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If the Company defaults in the payment of any Senior Indebtedness, unless
and until such default shall have been cured or waived, no direct or indirect
payment shall be made on account of the principal of and premium, if any, or
interest, if any, or any Additional Amounts on the Subordinated Securities, or
in respect of any sinking fund for, or redemption, retirement or purchase or
other acquisition of any of the Subordinated Securities.
If any other event of default occurs with respect to any Senior
Indebtedness, permitting the holders thereof to accelerate the maturity thereof,
then, unless and until such event of default shall have been cured or waived, no
direct or indirect payment shall be made on account of the principal of, or
premium, if any, or interest, if any (including Additional Amounts) on any
Subordinated Securities or in respect of any sinking fund for, or redemption,
retirement, purchase or other acquisition of the Subordinated Securities, during
any period of 90 days after written notice of such default shall have been given
to the Company by any holder of Senior Indebtedness or during any period in
which any judicial proceeding is pending in respect of such default and a notice
of acceleration of the maturity of such Senior Indebtedness has been transmitted
to the Company in respect of such default.
In the event of: (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment or other similar proceeding relating to the
Company, its creditors or its property; (ii) any proceeding for the liquidation,
dissolution or other winding up of the Company, whether voluntary or
involuntary, whether or not involving bankruptcy proceedings; (iii) any
assignment by the Company for the benefit of creditors; or (iv) any other
marshalling of the assets of the Company, all Senior Indebtedness shall first be
paid in full before any payment or distribution shall be made to any Holder of
Subordinated Securities.
If any such payment or distribution to be paid to the holders of Senior
Indebtedness shall be made to any Holder of Subordinated Securities in
contravention of the foregoing and before all the Senior Indebtedness shall have
been paid in full, such payment or distribution shall be received in trust for
the benefit of, and shall be paid over or delivered and transferred to, the
holders of Senior Indebtedness at the time outstanding in accordance with the
priorities then existing among such holders for applications to the payment of
all Senior Indebtedness remaining unpaid.
Senior Indebtedness shall not be deemed to have been paid in full unless the
holders thereof shall have received cash equal to the amount of Senior
Indebtedness then outstanding. Upon payment in full of all Senior Indebtedness,
the Holders of Subordinated Securities shall be subrogated to all rights of any
holders of Senior Indebtedness to receive any further payments or distributions
applicable to the Senior Indebtedness until all amounts owing on the
Subordinated Securities shall have been paid in full, and such payments or
distributions which otherwise would be paid or distributed to the holders of
Senior Indebtedness, shall, as between the Company and its creditors (other than
the holders of Senior Indebtedness), on the one hand, and the Holders of the
Subordinated Securities, on the other hand, be deemed to be a payment by the
Company on account of Senior Indebtedness and on account of the Subordinated
Securities.
As of June 30, 1997, the Company had issued $2,642.1 million of its Senior
Securities pursuant to the Senior Indenture and $157.9 million of its
Subordinated Securities pursuant to the Subordinated Indenture. As of June 30,
1997, there was $1,667.8 million of Senior Indebtedness of the Company
outstanding and $79.8 million of Subordinated Indebtedness of the Company
outstanding. Pursuant to certain indebtedness of the Company not covered by the
Indentures, the Company's most restrictive covenants regarding the incurrence of
additional senior debt allow the Company to incur additional senior debt to the
extent of 500% of the sum of net worth plus subordinated debt, less certain
adjustments. The maximum amount of additional senior debt which could have been
incurred as of June 30, 1997 was $535.9 million. In addition, certain of the
Company's other indebtedness not covered by the Indentures contains covenants
restricting the incurrence of additional senior debt. However, such covenants
are not as restrictive as the covenants described in this paragraph.
The holders of the Securities should not rely on the continued existence of
the covenants described above because they will expire (i) as the indebtedness
related thereto matures and is paid, (ii) if the
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Company prepays such related indebtedness or (iii) if the Company amends or
deletes such restrictions through the process of negotiation.
THE TRUSTEE UNDER THE INDENTURES
Bankers Trust is the Trustee under the Senior Indenture and the Subordinated
Indenture. Bankers Trust is also the Trustee for certain other series of the
Company's medium-term notes. The Company maintains banking and borrowing
relations with Bankers Trust.
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors directly or
through agents that solicit or receive offers on behalf of the Company or
through dealers or through a combination of any such method of sale. Any such
underwriter, dealer or agent involved in the offer and sale of the Securities
will be named in a supplement to this Prospectus.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Company may authorize
agents of the Company acting on a best efforts or other basis to solicit and
receive offers by certain institutions to purchase the Securities from the
Company upon the terms and conditions as are set forth in the Prospectus
Supplement. Each Prospectus Supplement will describe the method of distribution
of the Securities offered thereby.
In connection with the sale of the Securities, underwriters may receive
compensation from the Company or from purchasers of Securities for whom they may
act as agents, in the form of discounts, concessions or commissions. The
underwriters, dealers and agents which participate in the distribution of
Securities (including agents only soliciting or receiving offers to purchase
Securities on behalf of the Company) may be deemed to be underwriters under the
Securities Act, and any discounts or commissions received by them and any profit
on the resale of Securities by them may be deemed to be underwriting discounts
and commissions under the Securities Act. Any such dealer will be identified and
any such compensation will be set forth in the Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents which participate in the distribution of Securities may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Each underwriter, dealer and agent participating in the distribution of any
Securities which are issuable as Bearer Securities will agree that it will not
offer, sell or deliver, directly or indirectly, Bearer Securities in the United
States or to United States persons (other than qualifying financial
institutions), in connection with the original issuance of the Securities.
Each underwriter, dealer and agent participating in the distribution of any
Securities involving the United Kingdom will represent and agree that:
(a) in relation to Securities which have a maturity of one year or more and
which are to be listed on the London Stock Exchange, it has not offered
or sold and will not offer or sell any Securities to persons in the
United Kingdom prior to admission of such Securities to listing in
accordance with Part IV of the Financial Services Act 1986 (the "FSA")
except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for
the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995 or the FSA;
(b) in relation to Securities which have a maturity of one year or more and
which are not to be listed on the London Stock Exchange, it has not
offered or sold and, prior to the expiry of the period of
15
<PAGE>
six months from the Issue Date of such Securities will not offer or sell
any such Securities to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995;
(c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue
of the Securities, other than in relation to Securities to be listed on
the London Stock Exchange, any document which consists of or any part of
listing particulars, supplementary listing particulars or any other
document required or permitted to be published by the listing rules under
Part IV of the FSA, to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996, as amended, or is a person to whom the document
may otherwise be lawfully issued or passed on; and
(d) it has complied and will comply with all applicable provisions of the
FSA with respect to anything done by it in relation to the Securities in,
from or otherwise involving the United Kingdom.
Certain of the underwriters, dealers or agents participating in the
distribution of the Securities or affiliates thereof may engage in transactions
with and perform services for the Company in the ordinary course of business. In
connection with any particular distribution of Securities, the Company may enter
into swaps or other hedging transactions with, or arranged by, an underwriter,
dealer or agent participating in such distribution or an affiliate thereof. Such
underwriter, dealer, agent or affiliate may receive compensation, trading gain
or other benefits from such transactions.
LEGAL MATTERS
The validity of the Securities will be passed upon for the Company by
Michael C. Draffin, Vice President--Taxes & Associate General Counsel and
Secretary of the Company or by H. David Heumann, Assistant General Counsel of
the Company or by Melinda A. Johnson, Counsel of the Company, and for the
underwriters or agents by Brown & Wood LLP, New York, New York. Mr. Draffin, Mr.
Heumann or Ms. Johnson may rely, as to all matters governed by New York law, on
the opinion of Brown & Wood LLP.
EXPERTS
The consolidated financial statements and schedules of Boeing Capital
Corporation (formerly McDonnell Douglas Finance Corporation) and subsidiaries
appearing in its Annual Report on Form 10-K for the year ended December 31, 1996
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. The
information under the caption "Selected Consolidated Financial Data" for each of
the five years in the period ended December 31, 1996, included elsewhere herein
has been derived from consolidated financial statements audited by Ernst & Young
LLP as set forth in their report, included in the Annual Report on Form 10-K for
the year ended December 31, 1996, and incorporated herein by reference. Such
consolidated financial statements and selected consolidated financial data have
been incorporated herein by reference and included herein, respectively, in
reliance upon such report, given upon the authority of such firm as experts in
accounting and auditing.
Any financial statements and schedules to be included in subsequently filed
documents will be incorporated herein in reliance upon the reports of
independent auditors pertaining to such financial statements (to the extent
covered by consents filed with the Securities and Exchange Commission) given
upon the authority of such firm as experts in accounting and auditing.
16
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR
THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER
AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors................................... S-2
Description of Notes........................... S-4
Special Provisions Relating to Foreign Currency
Notes......................................... S-21
Certain United States Federal Income Tax
Considerations................................ S-24
Plan of Distribution........................... S-32
PROSPECTUS
Available Information.......................... 2
Incorporation of Certain Documents By
Reference..................................... 2
The Company.................................... 3
Use of Proceeds................................ 3
Selected Consolidated Financial Data........... 4
Description of the Securities.................. 4
Plan of Distribution........................... 15
Legal Matters.................................. 16
Experts........................................ 16
</TABLE>
$400,000,000
BOEING CAPITAL CORPORATION
SERIES X MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
---------------------
PROSPECTUS SUPPLEMENT
---------------------
CHASE SECURITIES INC.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
OCTOBER 31, 1997
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