<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 28, 1998)
$300,000,000
THE NEW YORK TIMES COMPANY
---------------
MEDIUM-TERM NOTES
---------------------
DUE MORE THAN NINE MONTHS FROM DATE OF ISSUE
------------------------
THE NEW YORK TIMES COMPANY (THE "COMPANY") MAY OFFER FROM TIME TO TIME, ITS
MEDIUM-TERM NOTES, WHICH ARE ISSUABLE IN ONE OR MORE SERIES AND MAY BE OFFERED
AND SOLD IN THE UNITED STATES. THE MEDIUM-TERM NOTES (THE "NOTES") OFFERED BY
THIS PROSPECTUS SUPPLEMENT ARE OFFERED PRIMARILY IN THE UNITED STATES AT AN
AGGREGATE INITIAL PUBLIC OFFERING PRICE OF UP TO $300,000,000 OR THE EQUIVALENT
THEREOF IN OTHER CURRENCIES, INCLUDING COMPOSITE CURRENCIES SUCH AS THE EUROPEAN
CURRENCY UNITS ("ECU"), AS MAY BE SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT
(THE "SPECIFIED CURRENCY"). SEE "SPECIAL PROVISIONS RELATING TO FOREIGN
CURRENCY" AND "IMPORTANT CURRENCY EXCHANGE INFORMATION." SUCH AGGREGATE OFFERING
PRICE IS SUBJECT TO REDUCTION AS A RESULT OF THE SALE BY THE COMPANY OF CERTAIN
OTHER DEBT SECURITIES. SEE "PLAN OF DISTRIBUTION."
THE INTEREST RATE ON EACH NOTE WILL BE EITHER A FIXED RATE ESTABLISHED BY
THE COMPANY AT THE DATE OF ISSUE OF SUCH NOTE, WHICH MAY BE ZERO IN THE CASE OF
CERTAIN ORIGINAL ISSUE DISCOUNT NOTES, OR A FLOATING RATE AS SET FORTH THEREIN
AND SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT. SUCH INTEREST RATES MAY BE
DETERMINED BY REFERENCE TO THE PRICES OF CERTAIN SECURITIES OR COMMODITIES. A
FIXED RATE NOTE MAY PAY A LEVEL AMOUNT IN RESPECT OF BOTH INTEREST AND PRINCIPAL
AMORTIZED OVER THE LIFE OF THE NOTE (AN "AMORTIZING NOTE"). EACH NOTE WILL
MATURE ON ANY DAY MORE THAN NINE MONTHS FROM THE DATE OF ISSUE, AS SET FORTH IN
THE APPLICABLE PRICING SUPPLEMENT. SEE "DESCRIPTION OF NOTES." UNLESS OTHERWISE
SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT, THE NOTES MAY NOT BE REDEEMED BY
THE COMPANY OR BE REPAYABLE AT THE OPTION OF THE HOLDER PRIOR TO MATURITY AND
WILL BE ISSUED IN FULLY REGISTERED FORM IN DENOMINATIONS OF $1,000 (OR, IN THE
CASE OF NOTES NOT DENOMINATED IN U.S. DOLLARS ("FOREIGN CURRENCY NOTES"), THE
EQUIVALENT THEREOF IN THE SPECIFIED CURRENCY, ROUNDED TO THE NEAREST 1,000 UNITS
OF THE SPECIFIED CURRENCY) OR ANY AMOUNT IN EXCESS THEREOF WHICH IS AN INTEGRAL
MULTIPLE OF $1,000 (OR, IN THE CASE OF NOTES NOT DENOMINATED IN U.S. DOLLARS,
1,000 UNITS OF THE SPECIFIED CURRENCY). ANY TERMS RELATING TO NOTES BEING
DENOMINATED IN FOREIGN CURRENCIES OR COMPOSITE CURRENCIES WILL BE AS SET FORTH
IN THE APPLICABLE PRICING SUPPLEMENT.
EACH NOTE WILL BE REPRESENTED EITHER BY A GLOBAL NOTE REGISTERED IN THE NAME
OF A NOMINEE OF THE DEPOSITORY TRUST COMPANY, AS DEPOSITARY (A "BOOK-ENTRY
NOTE"), OR BY A CERTIFICATE ISSUED IN DEFINITIVE FORM (A "CERTIFICATED NOTE"),
AS SET FORTH IN THE APPLICABLE PRICING SUPPLEMENT. INTERESTS IN GLOBAL NOTES
REPRESENTING BOOK-ENTRY NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE
EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY THE DEPOSITARY (WITH RESPECT TO
PARTICIPANTS' INTERESTS) AND ITS PARTICIPANTS. BOOK-ENTRY NOTES WILL NOT BE
ISSUABLE AS CERTIFICATED NOTES EXCEPT UNDER THE CIRCUMSTANCES DESCRIBED IN THE
ACCOMPANYING PROSPECTUS.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
------------------ ------------------------------ -------------------------------------
<S> <C> <C> <C> <C> <C>
PER NOTE......................... 100.000% .125% - .750% 99.875% - 99.250%
TOTAL(4)......................... $300,000,000 $375,000 - $2,250,000 $299,625,000 - $297,750,000
</TABLE>
- --------------------------
(1) UNLESS OTHERWISE SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT, NOTES WILL
BE SOLD AT 100% OF THEIR PRINCIPAL AMOUNT. IF THE COMPANY ISSUES ANY NOTE AT
A DISCOUNT FROM OR AT A PREMIUM OVER ITS PRINCIPAL AMOUNT, THE PRICE TO
PUBLIC OF ANY NOTE ISSUED AT A DISCOUNT OR PREMIUM WILL BE SET FORTH IN THE
APPLICABLE PRICING SUPPLEMENT.
(2) UNLESS OTHERWISE SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT, THE
COMMISSION PAYABLE TO AN AGENT FOR EACH NOTE SOLD THROUGH SUCH AGENT WILL
RANGE FROM .125% TO .750% OF THE PRICE TO PUBLIC OF SUCH NOTE; PROVIDED,
HOWEVER, THAT COMMISSIONS WITH RESPECT TO NOTES HAVING A MATURITY OF 30
YEARS OR GREATER WILL BE NEGOTIATED. THE COMPANY MAY ALSO SELL NOTES TO AN
AGENT, AS PRINCIPAL, AT NEGOTIATED DISCOUNTS, FOR RESALE TO INVESTORS AND
OTHER PURCHASERS.
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $300,000.
(4) OR THE EQUIVALENT THERETO IN OTHER CURRENCIES, INCLUDING COMPOSITE
CURRENCIES.
------------------------------
OFFERS TO PURCHASE THE NOTES ARE BEING SOLICITED FROM TIME TO TIME BY MORGAN
STANLEY & CO. INCORPORATED, CHASE SECURITIES INC. AND SALOMON SMITH BARNEY INC.
(INDIVIDUALLY, AN "AGENT" AND COLLECTIVELY, THE "AGENTS"), ON BEHALF OF THE
COMPANY. THE AGENTS HAVE AGREED TO USE REASONABLE EFFORTS TO SOLICIT PURCHASES
OF SUCH NOTE. THE COMPANY MAY ALSO SELL NOTES TO AN AGENT ACTING AS PRINCIPAL
FOR ITS OWN ACCOUNT OR OTHERWISE AS DETERMINED BY SUCH AGENT. NO TERMINATION
DATE FOR THE OFFERING OF THE NOTES HAS BEEN ESTABLISHED. THE COMPANY OR THE
AGENTS MAY REJECT ANY ORDER IN WHOLE OR IN PART. 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. SEE
"PLAN OF DISTRIBUTION."
MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC.
SALOMON SMITH BARNEY
SEPTEMBER 24, 1998
<PAGE>
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS IN THIS
PROSPECTUS SUPPLEMENT ARE FORWARD-LOOKING STATEMENTS THAT RISKS AND
UNCERTAINTIES COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PREDICTED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES
INCLUDE NATIONAL AND LOCAL CONDITIONS THAT COULD INFLUENCE THE LEVELS OF RETAIL,
NATIONAL AND CLASSIFIED ADVERTISING REVENUE AS WELL AS CIRCULATION REVENUE, THE
IMPACT OF COMPETITION THAT COULD AFFECT LEVELS (RATE AND VOLUME) OF ADVERTISING
AND CIRCULATION GENERATED BY THE MARKETS SERVED BY THE COMPANY'S BUSINESS
SEGMENTS, MATERIAL INCREASES IN NEWSPRINT AND MAGAZINE PAPER PRICES, AND OTHER
RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S PUBLICLY-FILED DOCUMENTS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH NOTES, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE AGENTS. THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY SECURITIES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Important Currency Exchange Information.................................................................... S-3
Description of Notes....................................................................................... S-4
Special Provisions Relating to Foreign Currency Notes...................................................... S-19
Foreign Currency Risks..................................................................................... S-22
United States Taxation..................................................................................... S-24
Plan of Distribution....................................................................................... S-34
Validity of Notes.......................................................................................... S-35
PROSPECTUS
Available Information...................................................................................... 2
Incorporation of Certain Documents by Reference............................................................ 2
The Company................................................................................................ 3
Use of Proceeds............................................................................................ 3
Consolidated Ratio of Earnings to Fixed Charges............................................................ 3
Description of Debt Securities............................................................................. 4
Foreign Currency Risks..................................................................................... 14
Plan of Distribution....................................................................................... 15
Validity of Offered Securities............................................................................. 16
Experts.................................................................................................... 16
</TABLE>
S-2
<PAGE>
------------------------
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in U.S. dollars, and payments
of principal, premium, if any, and interest on Notes will be made in U.S.
dollars, unless otherwise provided in the applicable Pricing Supplement.
Currently, there are limited facilities in the United States for the conversion
of U.S. dollars into foreign currencies and vice versa. In addition, most banks
do not currently offer non-U.S. dollar denominated checking or savings account
facilities in the United States. Accordingly, unless otherwise specified in a
Pricing Supplement or unless alternative arrangements are made (and subject, in
the case of Book-Entry Notes, to any additional procedures that may be
required), payment of principal, premium, if any, and interest on Notes in a
Specified Currency other than U.S. dollars will be made to an account at a bank
outside the United States. See "Description of Notes," "Special Provisions
Relating to Foreign Currency Notes" and "Foreign Currency Risks."
If the applicable Pricing Supplement provides for payments of principal of
and interest on a Foreign Currency Note to be made in U.S. dollars or for
payments of principal of and interest on a U.S. dollar denominated Note to be
made in a Specified Currency other than U.S. dollars, the conversion of the
Specified Currency into U.S. dollars or U.S. dollars into the Specified
Currency, as the case may be, will be handled by Morgan Stanley Dean Witter
("Morgan Stanley"), in its capacity as Exchange Rate Agent, or such other
Exchange Rate Agent identified in the Pricing Supplement. The costs of such
conversion will be borne by the holder of the Note through deductions from such
payments.
References herein to "U.S. dollars" or "U.S.$" or "$" are to the currency of
the United States of America.
------------------------
S-3
<PAGE>
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
in the Prospectus, to which reference is hereby made. In particular, as used
under this caption, the term "Company" means The New York Times Company. The
particular terms of the Notes sold pursuant to any pricing supplement (a
"Pricing Supplement") will be described therein. The terms and conditions set
forth in "Description of Notes" will apply to each Note unless otherwise
specified in the applicable Pricing Supplement and in such Note. Capitalized
terms not defined herein have the meanings assigned to such terms in the
Prospectus or the Indenture.
If any Note is not to be denominated in U.S. dollars, the applicable Pricing
Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit (the "ECU"), in which the
principal, premium, if any, and interest, if any, with respect to such Note are
to be paid, along with any other terms relating to the non-U.S. dollar
denomination, including exchange rates for the Specified Currency as against the
U.S. dollar at selected times during the last five years, and any exchange
controls affecting such Specified Currency. See "Special Provisions Relating to
Foreign Currency Notes" and "Foreign Currency Risks."
GENERAL
The Notes will be issued under the Indenture (the "Indenture") referred to
in the accompanying Prospectus. The Notes will constitute a single series under
such Indenture, together with any medium-term notes of the Company issued in the
future under such Indenture which are designated by the Company as constituting
a single series of securities with such Notes for purposes of such Indenture.
The Indenture does not limit the amount of additional indebtedness that the
Company may incur. At June 30, 1998, the Company had $250,000,000 aggregate
principal amount of 7 5/8% Notes Due March 15, 2005 (the "7 5/8% Notes") and
$71,909,000 aggregate principal amount of 8 1/4% Debentures Due March 15, 2025
(the "8 1/4% Debentures") outstanding under the Indenture. The aggregate
principal amount of Debt Securities issued under the Indenture may be increased
from time to time as authorized by, or pursuant to authority delegated by, the
Board of Directors of the Company. For the purpose of this paragraph, (i) the
principal amount of any Original Issue Discount Note (as defined below) means
the Issue Price (as defined below) of such Note and (ii) the principal amount of
any Note issued in a foreign currency or composite currency means the U.S.
dollar equivalent on the date of issue of the Issue Price of such Note.
Fixed Rate Notes, Amortizing Notes and Original Issue Discount Notes will
mature on any day more than nine months from the date of issue, as set forth in
the applicable Pricing Supplement. Floating Rate Notes (including Renewable
Notes, as defined below) will mature on an Interest Payment Date (as defined
below) more than nine months from the date of issue, as set forth in the
applicable Pricing Supplement. Except as may be specified for Notes denominated
in foreign or composite currencies or as otherwise provided in the applicable
Pricing Supplement, the Notes will be issued only in fully registered form in
denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000.
Unless otherwise provided in the applicable Pricing Supplement, Foreign
Currency Notes will be issued in denominations of the equivalent of $1,000
(rounded to an integral multiple of 1,000 units of the particular Specified
Currency), or any amount in excess thereof which is an integral multiple of
1,000 units of such Specified Currency, as determined by reference to the noon
dollar buying rate in New York City for cable transfers of such Specified
Currency published by the Federal Reserve Bank of New York (the "Market Exchange
Rate") on the Business Day (as defined below) immediately preceding the date of
issuance; PROVIDED, HOWEVER, that in the case of ECUs, the Market Exchange Rate
shall be the rate of exchange determined by the Commission of the European
Communities (or any successor thereto) as published in the Official Journal of
the European Communities, or any successor publication, on the Business Day
immediately preceding the date of issuance.
S-4
<PAGE>
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a Book-Entry Note or a Certificated Note. Except as
set forth in the Prospectus under "Description of Debt Securities--Global
Securities," Book-Entry Notes will not be issuable as Certificated Notes. See
"Book-Entry System" below.
The Notes may be presented for payment of principal, premium, if any, and
interest, transfer of the Notes will be registrable and the Notes will be
exchangeable at the agency in the Borough of Manhattan, The City of New York,
maintained by the Company for such purpose; PROVIDED that Book-Entry Notes will
be exchangeable only in the manner and to the extent set forth under
"Description of Debt Securities-- Global Securities" in the Prospectus. On the
date hereof, the agent for the payment, transfer and exchange of the Notes (the
"Paying Agent") is The Chase Manhattan Bank, acting through its corporate trust
office at 450 West 33rd Street, 15th Floor, New York, New York 10001.
The applicable Pricing Supplement will specify the price (the "Issue Price")
of each Note to be sold pursuant thereto, the interest rate or interest rate
formula, ranking, maturity, currency or composite currency, principal amount and
any other terms on which each such Note will be issued.
As used herein, the following terms shall have the meanings set forth below:
"Business Day" means any day, other than a Saturday or Sunday, that meets
each of the following applicable requirements: the day is (a) not a day on which
banking institutions are authorized or required by law or regulation to be
closed in The City of New York and (b) if the Note is denominated in a Specified
Currency other than U.S. dollars, (i) not a day on which banking institutions
are authorized or required by law or regulation to close in the major financial
center of the country issuing the Specified Currency (which in the case of ECU
shall be as determined by the ECU Banking Association in Paris), (ii) a day on
which banking institutions in such financial center are carrying out
transactions in such Specified Currency and (iii) if the Note is denominated in
euros, a day on which the Trans-European Automated Real-Time Gross Settlement
Express Transfer System ("Target") is operating and (c) with respect to LIBOR
Notes, a London Banking Day for U.S. dollars.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
"London Banking Day" means any day on which dealings in deposits in the
relevant Index Currency (as defined below) are transacted in the London
interbank market.
"Original Issue Discount Note" means any Note that provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof pursuant to the relevant Indenture.
The "Record Date" with respect to any Interest Payment Date shall be the
date 15 calendar days prior to such Interest Payment Date, whether or not such
date shall be a Business Day.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; PROVIDED that the
interest payable upon maturity, redemption or repayment (whether or not the date
of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest payment
on a Note will be made on the first Interest Payment Date falling after the date
the Note is issued; PROVIDED, HOWEVER, that payments of interest (or, in the
case of an Amortizing Note, principal and interest) on a Note issued less than
15 calendar days before an Interest Payment Date will be paid on the next
succeeding Interest Payment Date to the holder of record on the Record Date with
respect to such succeeding Interest Payment Date. See "United States Taxation--
Original Issue Discount" below.
S-5
<PAGE>
U.S. dollar payments of interest, other than interest payable at maturity
(or on the date of redemption or repayment, if a Note is redeemed or repaid by
the Company prior to maturity), will be made by check mailed to the address of
the person entitled thereto as shown on the Note register. U.S. dollar payments
of principal, premium, if any, and interest upon maturity, redemption or
repayment will be made in immediately available funds against presentation and
surrender of the Note. Notwithstanding the foregoing, (a) the Depositary (as
defined below), as holder of Book-Entry Notes, shall be entitled to receive
payments of interest by wire transfer of immediately available funds and (b) a
holder of $10,000,000 (or the equivalent) or more in aggregate principal amount
of Certificated Notes having the same Interest Payment Date (or the Holder of
the equivalent thereof in a Specified Currency other than U.S. dollars that is
permitted to elect and has elected to receive payments in U.S. dollars as
described under "Special Provisions Relating to Foreign Currency Notes--Payment
of Principal and Interest") shall be entitled to receive payments of interest by
wire transfer of immediately available funds upon written request to the Paying
Agent not later than 15 calendar days prior to the applicable Interest Payment
Date.
Unless otherwise indicated in the applicable Pricing Supplement, payments of
principal of, premium, if any, and interest on any Note payable at Maturity will
be made in immediately available funds at the office of the Paying Agent in the
Borough of Manhattan, The City of New York, PROVIDED that payments in such funds
will be made only if such Notes are presented to the Paying Agent in time for
the Paying Agent to make such payments in such funds in accordance with its
normal procedures. The Company has initially designated The Chase Manhattan
Bank, acting through its principal corporate trust office in the Borough of
Manhattan, The City of New York, as its Paying Agent for the Notes. Beneficial
owners of Book-Entry Notes are expected to be paid in accordance with the
Depository's and its Participants' (as defined herein) procedures in effect from
time to time. See "--Book-Entry System." Payments of interest to a Holder of a
Foreign Currency Note that has not elected to receive payments in U.S. dollars
will be made to an account at a bank outside the United States, unless other
arrangements have been made. See "Special Provisions Relating to Foreign
Currency Notes--Payment of Principal and Interest."
Certain Notes, including Original Issue Discount Notes, may be considered to
be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant yield. See "United
States Taxation--Original Issue Discount" below. Unless otherwise specified in
the applicable Pricing Supplement, if the principal of any Original Issue
Discount Note is declared to be due and payable immediately as described under
"Description of Debt Securities--Events of Default" in the Prospectus, the
amount of principal due and payable with respect to such Note shall be limited
to the aggregate principal amount of such Note multiplied by the sum of its
Issue Price (expressed as a percentage of the aggregate principal amount) plus
the original issue discount amortized from the date of issue to the date of
declaration, which amortization shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles in effect
on the date of declaration). Special considerations applicable to any such Notes
will be set forth in the applicable Pricing Supplement.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof, except as described below under
"Extension of Maturity," until the principal thereof is paid or made available
for payment. Unless otherwise specified in the applicable Pricing Supplement,
such interest will be computed on the basis of a 360-day year of twelve 30-day
months. Unless otherwise specified in the applicable Pricing Supplement,
payments of interest on Fixed Rate Notes other than Amortizing Notes will be
made semiannually on each February 15 and August 15 and at maturity or upon any
earlier redemption or repayment. Payments of principal and interest on
Amortizing Notes, which are securities on which payments of principal and
interest are made in equal installments over the life of the security, will be
made either quarterly on each February 15, May 15, August 15 and November 15 or
semiannually on each February 15 and August 15, as set forth in the applicable
Pricing Supplement, and at maturity or upon any
S-6
<PAGE>
earlier redemption or repayment. 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. A table setting forth repayment
information in respect of each Amortizing Note will be provided to the original
purchaser and will be available, upon request made to the Company, to subsequent
holders.
If any Interest Payment Date for any Fixed Rate Note would fall on a day
that is not a Business Day, the interest payment shall be postponed to the next
day that is a Business Day, and no interest on such payment shall accrue for the
period from and after the Interest Payment Date. If the maturity date (or date
of redemption or repayment) of any Fixed Rate Note would fall on a day that is
not a Business Day, the payment of interest and principal (and premium, if any)
may be made on the next succeeding Business Day, and no interest on such payment
shall accrue for the period from and after the maturity date (or date of
redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from
and including the date of issue or from and including the last date in respect
of which interest has been paid or duly provided for, as the case may be, to,
but excluding, the Interest Payment Date or the date of maturity or earlier
redemption or repayment, as the case may be. The interest rates the Company will
agree to pay on newly issued Fixed Rate Notes are subject to change without
notice by the Company from time to time, but no such change will affect any
Fixed Rate Notes theretofore issued or that the Company has agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate determined
by reference to an interest rate basis or formula (the "Base Rate"), which may
be adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one or more of the following Base
Rates as applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate
Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the
Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"),
(e) the Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury
Rate Note"), (g) the Constant-Maturity Treasury Rate (a "CMT Rate Note") or (h)
such other Base Rate or interest rate formula as is set forth in such Pricing
Supplement and in such Floating Rate Note. The "Index Maturity" for any Floating
Rate Note is the period of maturity of the instrument or obligation from which
the Base Rate is calculated and will be specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate of interest which may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate of
interest that may accrue during any interest period ("Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
current New York law, the maximum rate of interest, subject to certain
exceptions, for any loan in an amount less than $250,000 is 16% and for any loan
in the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a
simple interest basis. These limits do not apply to loans of $2,500,000 or more.
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 (such period being the
S-7
<PAGE>
"Interest Reset Period" for such Note, and the first day of each Interest Reset
Period being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. The determination of the rate of interest at which a Floating Rate
Note will be reset on any Interest Reset Date will be made on the Interest
Determination Date (as defined below) pertaining to such Interest Reset Date.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be, in the case of Floating Rate Notes which reset daily, each Business
Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week, except as provided below; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each year,
as specified in the applicable Pricing Supplement; PROVIDED, HOWEVER, that (a)
the interest rate in effect from the date of issue to the first Interest Reset
Date with respect to a Floating Rate Note will be the initial interest rate set
forth in the applicable Pricing Supplement (the "Initial Interest Rate") and (b)
unless otherwise specified in the applicable Pricing Supplement, the interest
rate in effect for the ten calendar days immediately prior to maturity,
redemption or repayment will be that in effect on the tenth calendar day
preceding such maturity, redemption or repayment 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 shall be postponed to the next succeeding Business
Day, except that in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset Date,
on the third Wednesday of each month or on the third Wednesday of March, June,
September and December, as specified in the applicable Pricing Supplement; (ii)
in the case of Floating Rate Notes with a quarterly Interest Reset Date, on the
third Wednesday of March, June, September and December; (iii) in the case of
Floating Rate Notes with a semiannual Interest Reset Date, on the third
Wednesday of the two months specified in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes with an annual Interest Reset Date, on
the third Wednesday of the month specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, if any Interest
Payment Date (other than the maturity date or any earlier redemption or
repayment date) for any Floating Rate Note would fall on a day that is not a
Business Day with respect to such Floating Rate Note, such Interest Payment Date
will be the following day that is a Business Day with respect to such Floating
Rate Note, except that, in the case of a LIBOR Note, if such Business Day is in
the next succeeding calendar month, such Interest Payment Date shall be the
immediately preceding day that is a Business Day with respect to such LIBOR
Note. If the maturity date or any earlier redemption or repayment date of a
Floating Rate Note would fall on a day that is not a Business Day, the payment
of principal, premium, if any, and interest will be made on the next succeeding
Business Day, and no interest on such payment shall accrue for the period from
and after such maturity, redemption or repayment date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue or from and including the last date to which
interest has been paid to, but excluding, the Interest Payment Date or maturity
date or date of redemption or repayment.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes,
S-8
<PAGE>
Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime
Rate Notes or by the actual number of days in the year, in the case of Treasury
Rate Notes and CMT Rate Notes. All percentages used in or resulting from any
calculation of the rate of interest on a Floating Rate Note will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point
(.0000001), with five one-millionths of a percentage point rounded upward, and
all dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent, with one-half cent rounded upward.
The interest rate in effect on any Interest Reset Date will be the applicable
rate as reset on such date. The interest rate applicable to any other day is the
interest rate from the immediately preceding Interest Reset Date (or, if none,
the Initial Interest Rate).
The applicable Pricing Supplement shall specify a calculation agent (the
"Calculation Agent") with respect to any issue of Floating Rate Notes. Upon the
request of the holder of any Floating Rate Note, the Calculation Agent will
provide the interest rate then in effect and, if determined, the interest rate
that will become effective on the next Interest Reset Date with respect to such
Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, Prime Rate
Notes and CMT Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding such
Interest Reset Date, except that the Interest Determination Date pertaining to
an Interest Reset Date for a LIBOR Note for which the Index Currency is pounds
sterling will be such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note will be the day of
the week in which such Interest Reset Date falls on which Treasury bills would
normally be auctioned. Treasury bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, but such auction may be held on the
preceding Friday. If, as the result of a legal holiday, an auction is so held on
the preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week. If
an auction falls on a day that is an Interest Reset Date, such Interest Reset
Date will be the next following Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an 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 preceding the applicable Interest Payment
Date or Maturity Date, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)," or, if
not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published in
the daily update of H.15(519) available through the world-wide web site of the
Board of Governors of the Federal Reserve System at http://www.bog.frb.fed.us/
S-9
<PAGE>
releases/h.15/update, or any successor site or publication of the Board of
Governors of the Federal Reserve System ("H.15 Daily Update") under the heading
"CDs (secondary market)." If such rate is not yet published in either H.15(519)
or the H.15 Daily Update by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, the CD Rate on such
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the secondary market offered rates as of 10:00 A.M.,
New York City time, on such Interest Determination Date for certificates of
deposit in an amount that is representative for a single transaction at that
time with a remaining maturity closest to the Index Maturity designated in the
Pricing Supplement of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money center
banks; PROVIDED, HOWEVER, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as set forth above, the "CD Rate" in effect
for the applicable period will be the same as the CD Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the rate of interest payable on the CD Rate Notes for which such CD Rate is
being determined shall be the Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on such date for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial Paper--
Nonfinancial." In the event that such rate is not published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield on such Interest Determination Date of the rate for commercial paper of
the specified Index Maturity as published in H.15 Daily Update under the heading
"Commercial Paper-- Nonfinancial (with an Index Maturity of one month or three
months being deemed to be equivalent to an Index Maturity of 30 or 90 days,
respectively)." If by 3:00 P.M., New York City time, on such Calculation Date
such rate is not yet available in either H.15(519) or H.15 Daily Update, then
the Commercial Paper Rate shall be the Money Market Yield of the arithmetic mean
of the offered rates as of 11:00 A.M., New York City time, on such Interest
Determination Date of three leading dealers of commercial paper in The City of
New York selected by the Calculation Agent for commercial paper of the specified
Index Maturity, placed for an industrial issuer whose bond rating is "AA," or
the equivalent, from a nationally recognized statistical rating agency;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting offered rates as mentioned in this sentence, the
Commercial Paper Rate in effect for the applicable period will be the same as
the Commercial Paper Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the rate of interest payable on
the Commercial Paper Rate Notes for which such Commercial Paper Rate is being
determined shall be the Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = DX360 X100
360 - (DXM)
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 Index Maturity.
S-10
<PAGE>
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date, the
rate on such date for Federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)," or, if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in H.15 Daily Update under the heading "CDs (secondary market)." If
such rate is not yet published in either H.15(519) or the H.15 Daily Update by
3:00 P.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal
funds, as of 11:00 A.M., New York City time, on such Interest Determination
Date, arranged by three leading brokers of Federal funds transactions in The
City of New York selected by the Calculation Agent; PROVIDED, HOWEVER, that if
the brokers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the "Federal Funds Rate" in effect for the applicable period
will be the same as the Federal Funds Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable on the Federal Funds Rate Notes for which such Federal Funds
Rate is being determined shall be the Initial Interest Rate).
LIBOR NOTES
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Determination Date will be determined by the Calculation Agent as
follows:
(i) As of the Interest Determination Date, the Calculation Agent will
determine (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the Index Currency for the period of the Index Maturity, each as designated
in the applicable Pricing Supplement, commencing on the second London
Banking Day immediately following such Interest Determination Date, which
appear on the Designated LIBOR Page at approximately 11:00 A.M., London
time, on such Interest Determination Date, if at least two such offered
rates appear (unless, as aforesaid, only a single rate is required) on such
Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement, the rate for deposits in the Index Currency
for the period of the Index Maturity, each as designated in the applicable
Pricing Supplement, commencing on the second London Banking Day following
such Interest Determination Date (or, if pounds sterling is the Index
Currency, commencing on such Interest Determination Date), that appears on
the Designated LIBOR Page at approximately 11:00 A.M., London time, on such
Interest Determination Date. If fewer than two offered rates appear (if
"LIBOR Reuters" is specified in the applicable Pricing Supplement and
calculation of LIBOR is based on the arithmetic mean of the offered rates),
or if no rate appears (if the applicable Pricing Supplement specifies either
(x) "LIBOR Reuters" and the Designated LIBOR Page by its terms provides only
for a single rate or (y) "LIBOR Telerate"), LIBOR in respect of that
Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
S-11
<PAGE>
(ii) With respect to an Interest Determination Date on which fewer than
two offered rates appear (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement and calculation of LIBOR is based on the arithmetic mean
of the offered rates) or no rate appears (if the applicable Pricing
Supplement specifies either (x) "LIBOR Reuters" and the Designated LIBOR
Page by its terms provides only for a single rate or (y) "LIBOR Telerate"),
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 (after consultation with the Company), to provide the
Calculation Agent with its offered quotations for deposits in the Index
Currency for the period of the specified Index Maturity, commencing on the
second London Banking Day immediately following such Interest Determination
Date (or, if pounds sterling is the Index Currency, commencing on such
Interest Determination Date), to prime banks in the London interbank market
at approximately 11:00 A.M., London time, on such Interest Determination
Date and in a principal amount equal to an amount of not less than $1
million (or the equivalent in the Index Currency, if the Index Currency is
not the U.S. dollar) that is representative of a single transaction in such
Index Currency in such market at such time. If at least two such quotations
are provided, LIBOR determined on such Interest Determination Date will be
the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of rates quoted at approximately 11:00 A.M. (or such other
time specified in the applicable Pricing Supplement), in the applicable
principal financial center for the country of the Index Currency on such
Interest Determination Date, by three major banks in such principal
financial center selected by the Calculation Agent (after consultation with
the Company) on such Interest Determination Date for loans in the Index
Currency to leading European banks, for the period of the specified Index
Maturity commencing on the second London Banking Day immediately following
such Interest Determination Date (or, if pounds sterling is the Index
Currency, commencing on such Interest Determination Date) and in a principal
amount of not less than $1 million (or the equivalent in the Index Currency,
if the Index Currency is not the U.S. dollar) that is representative of a
single transaction in such Index Currency in such market at such time;
PROVIDED, HOWEVER, that if the banks selected as aforesaid by the
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which LIBOR is being determined shall be the Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, Page 3750) had been specified.
S-12
<PAGE>
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate
is not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be the arithmetic mean of the rates of interest publicly
announced by each bank named on the Reuters Screen USPRIME1 Page (as defined
below) as such bank's prime rate or base lending rate as in effect for such
Interest Determination Date as quoted on the Reuters Screen USPRIME1 Page on
such Interest Determination Date, or, if fewer than four such rates appear on
the Reuters Screen USPRIME1 Page for such Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Interest Determination Date by at least two of the three major money center
banks in The City of New York selected by the Calculation Agent from which
quotations are requested. If fewer than two quotations are provided, the Prime
Rate shall be calculated by the Calculation Agent and shall be determined as the
arithmetic mean on the basis of the prime rates in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, in each case
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 quote such rate or rates; PROVIDED, HOWEVER, that if the
banks or trust companies selected as aforesaid by the Calculation Agent are not
quoting rates as set forth above, the "Prime Rate" in effect for such Interest
Reset Period will be the same as the Prime Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable on the Prime Rate Notes for which such Prime Rate is being
determined shall be the Initial Interest Rate). "Reuters Screen USPRIME1 Page"
means the display designated as Page "USPRIME1" on the Reuters Monitor Money
Rates Service (or such other page as may replace the USPRIME1 Page on that
service for the purpose of displaying prime rates or base lending rates of major
United States banks).
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the rate
for the auction held on such date of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement, as published in H.15(519) under the heading "Treasury
Bills--auction average (investment)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination Date
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or reported as provided above by 3:00 P.M., New
York City time, on such Calculation Date or if no such auction is held on such
Interest Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using the arithmetic mean of the
S-13
<PAGE>
secondary market bid rates, as of approximately 3:30 P.M., New York City time,
on such Interest Determination Date, of three leading primary United States
government securities dealers selected by the Calculation Agent for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; PROVIDED, HOWEVER, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting bid rates
as mentioned in this sentence, the "Treasury Rate" for such Interest Reset Date
will be the same as the Treasury Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the Treasury Rate Notes for which the Treasury Rate is being
determined shall be the Initial Interest Rate).
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed for
the Index Maturity designated in such CMT Rate Note on the Designated CMT
Telerate Page (as defined below) under the caption "... Treasury Constant
Maturities ... Federal Reserve Board Release H.15" under the column for the
Designated CMT Maturity Index (as defined below) for (i) if the Designated CMT
Telerate Page is 7055, the rate on such 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 Interest Determination
Date occurs. If such rate is no longer displayed on the relevant page, or if not
displayed by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such Interest Determination Date will be such Treasury
Constant Maturity rate for the Designated CMT Maturity Index as published in the
relevant H.15(519). If such rate is no longer published, or if not published by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for such 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 Interest
Determination Date with respect to the related Interest Reset Date as may then
be published by either the Board of Governors of the Federal Reserve System or
the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in the relevant H.15(519). If such information is
not provided by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for the Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30 P.M.,
New York City time, on the Interest Determination Date reported, according to
their written records, by three leading primary United States government
securities dealers (each, a "Reference Dealer") in The City of New York (which
may include the Agent or its affiliates) selected by the Calculation Agent (from
five such Reference Dealers selected by the Calculation Agent, after
consultation with the Company, 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
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury notes
quotations, the CMT Rate for such Interest Determination Date will be calculated
by the Calculation Agent and will be a yield to maturity based on the arithmetic
mean of the secondary market offer side prices as of approximately 3:30 P.M.,
New York City time, on the Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent, after consultation with the Company, 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
S-14
<PAGE>
Index and in an amount of at least $100,000,000. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; PROVIDED, HOWEVER,
that if fewer than three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate for such Interest Reset Date will be
the same as the CMT Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the rate of interest payable on
the CMT Rate Notes for which the CMT Rate is being determined shall be the
Initial Interest Rate). If two Treasury notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the Treasury
note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in an 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)), for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in an 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 two years.
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate (calculated
with reference to a Base Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Renewable Notes and in the applicable Pricing Supplement.
Renewable Notes are Book-Entry Floating Rate Notes.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates in
March and September in each year (unless different Interest Payment Dates are
specified in the applicable Pricing Supplement) (each such Interest Payment
Date, an "Election Date"), the maturity of the Renewable Notes will be extended
to the Interest Payment Date occurring twelve months after such Election Date
(unless a different extension period is specified in the applicable Pricing
Supplement), unless the holder thereof elects to terminate the automatic
extension of the maturity of the Renewable Notes or of any portion thereof
having a principal amount of $1,000 or any multiple of $1,000 in excess thereof
by delivering a notice to such effect to the Paying Agent not less than nor more
than a number of days to be specified in the applicable Pricing Supplement prior
to such Election Date. Such option may be exercised with respect to less than
the entire principal amount of the Renewable Notes; PROVIDED that the principal
amount for which such option is not exercised is at least $1,000 or any larger
amount that is an integral multiple of $1,000. Notwithstanding the foregoing,
the maturity of the Renewable Notes may not be extended beyond the Final
Maturity Date, as specified in the applicable Pricing Supplement (the "Final
Maturity Date"). If the holder elects to terminate the automatic extension of
the maturity of any portion of the principal amount of the Renewable Notes and
such election is not revoked as described below, such portion will become due
and payable on the Interest Payment Date falling six months (unless another
period is specified in the applicable Pricing Supplement) after the Election
Date prior to which the holder made such election.
Unless otherwise specified in the applicable Pricing Supplement, an election
to terminate the automatic extension of maturity may be revoked as to any
portion of the Renewable Notes having a principal amount of $1,000 or any
multiple of $1,000 in excess thereof by delivering a notice to such effect to
the Paying Agent on
S-15
<PAGE>
any day following the effective date of the election to terminate the automatic
extension of maturity and prior to the date 15 days before the date on which
such portion would otherwise mature. Such a revocation may be made for less than
the entire principal amount of the Renewable Notes for which the automatic
extension of maturity has been terminated; PROVIDED that the principal amount of
the Renewable Notes for which the automatic extension of maturity has been
terminated and for which such a revocation has not been made is at least $1,000
or any larger amount that is an integral multiple of $1,000. Notwithstanding the
foregoing, a revocation may not be made during the period from and including a
Record Date to but excluding the immediately succeeding Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Dates in each year specified in the applicable
Pricing Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price of 100% of the principal
amount of the Renewable Notes to be redeemed, together with accrued and unpaid
interest to the date of redemption. Notwithstanding anything to the contrary in
this Prospectus Supplement, notice of redemption will be provided by mailing a
notice of such redemption to each holder by first-class mail, postage prepaid,
at least 180 days and not more than 210 days prior to the date fixed for
redemption.
Renewable Notes may also be issued, from time to time, with the Spread or
Spread Multiplier to be reset by a remarketing agent in remarketing procedures
(the "Remarketing Procedures") to be specified in such Renewable Notes and in
the applicable Pricing Supplement. A description of the Remarketing Procedures,
the terms of the remarketing agreement between the Company and the remarketing
agent and the terms of any additional agreements with other parties that may be
involved in the Remarketing Procedures will be set forth in the applicable
Pricing Supplement.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
(the "Indexed Notes"), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value, rate
or price of the specified index and the face amount of the Indexed Note and
certain additional United States federal tax considerations will be described in
the applicable Pricing Supplement.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS
AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH INDEXED NOTES AND THE
SUITABILITY OF SUCH INDEXED NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
SUCH INDEXED NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS, COMMODITY PRICES,
EQUITY INDICES AND OTHER FINANCIAL OR NON-FINANCIAL INDICES.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Fixed Rate Note (other than an
Amortizing Note or a Currency Linked Note) will indicate whether the Company has
the option to extend the maturity of such Fixed Rate Note for one or more
periods of one or more whole years (each, an "Extension Period") up to but
S-16
<PAGE>
not beyond the date (the "Final Maturity Date") set forth in such Pricing
Supplement. If the Company has such option with respect to any such Fixed Rate
Note (an "Extendible Note"), the following procedures will apply, unless
modified as set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an Extendible Note by
notifying the Trustee of such exercise at least 45 but not more than 60 days
prior to the maturity date originally in effect with respect to such Note (the
"Original Maturity Date") or, if the maturity date of such Note has already been
extended, prior to the maturity date then in effect (an "Extended Maturity
Date"). No later than 38 days prior to the Original Maturity Date or an Extended
Maturity Date, as the case may be (each, a "Maturity Date"), the Trustee will
mail to the holder of such Note a notice (the "Extension Notice") relating to
such Extension Period, first-class mail, postage prepaid, setting forth (a) the
election of the Company to extend the maturity of such Note; (b) the new
Extended Maturity Date; (c) the interest rate applicable to the Extension
Period; and (d) the provisions, if any, for redemption during the Extension
Period, including the date or dates on which, the period or periods during which
and the price or prices at which such redemption may occur during the Extension
Period. Upon the mailing by the Trustee of an Extension Notice to the holder of
an Extendible Note, the maturity of such Note shall be extended automatically,
and, except as modified by the Extension Notice and as described in the next
paragraph, such Note will have the same terms it had prior to the mailing of
such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 A.M., New York City time, on the immediately succeeding Business Day), the
Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate for the Extension Period
by causing the Trustee to send notice of such higher interest rate to the holder
of such Note by first-class mail, postage prepaid, or by such other means as
shall be agreed between the Company and the Trustee. Such notice shall be
irrevocable. All Extendible Notes with respect to which the Maturity Date is
extended in accordance with an Extension Notice will bear such higher interest
rate for the Extension Period, whether or not tendered for repayment.
If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Company to repay such
Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date. In order for
an Extendible Note to be so repaid on such Maturity Date, the holder thereof
must follow the procedures set forth below under "Repayment at the Noteholders'
Option; Repurchase" for optional repayment, except that the period for delivery
of such Note or notification to the Paying Agent shall be at least 25 but not
more than 35 days prior to the Maturity Date then in effect and except that a
holder who has tendered an Extendible Note for repayment pursuant to an
Extension Notice may, by written notice to the Paying Agent, revoke any such
tender for repayment until 3:00 P.M., New York City time, on the twentieth
calendar day prior to the Maturity Date then in effect (or, if such day is not a
Business Day, until 3:00 P.M., New York City time, on the immediately succeeding
Business Day).
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, ranking, maturity date and
other terms, if any, will be represented by a single Global Note, and all
Floating Rate Book-Entry Notes having the same Issue Date, Initial Interest
Rate, Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity,
Spread and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, ranking, maturity date and other terms, if any, will be
represented by a single Global Note. Each Global Note representing Book-Entry
Notes will be deposited with, or on behalf of, The Depository Trust Company, New
York, New York (the "Depositary"), and registered in the name of a nominee of
the Depositary. Certificated Notes will not be exchangeable for
S-17
<PAGE>
Book-Entry Notes (or interests therein) and, except under the circumstances
described in the Prospectus under "Description of Debt Securities--Global
Securities," Book-Entry Notes (or interests therein) will not be exchangeable
for Certificated Notes and will not otherwise be issuable as Certificated Notes.
A further description of the Depositary's procedures with respect to Global
Notes representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities--Global Securities." The Depositary has
confirmed to the Company, the Agent and each Trustee that it intends to follow
such procedures.
OPTIONAL REDEMPTION
If applicable, the Pricing Supplement will indicate the terms on which the
Notes will be redeemable at the option of the Company. Notice of redemption will
be provided by mailing a notice of such redemption to each holder by first-class
mail, postage prepaid, at least 30 days and not more than 60 days prior to the
date fixed for redemption to the respective address of each holder as that
address appears upon the books maintained by the Paying Agent. The Notes, except
for Amortizing Notes, will not be subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note was
issued with original issue discount, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive at
least 15 days but not more than 30 days prior to the repayment date (i) the Note
with the form entitled "Option to Elect Repayment" on the reverse of the Note
duly completed or (ii) a telegram, telex, facsimile transmission or a letter
from a member of a national securities exchange, or the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States setting forth the name of the holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid, the
certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment on the reverse of the Note, will be received
by the Paying Agent not later than the fifth Business Day after the date of such
telegram, telex, facsimile transmission or letter; PROVIDED, HOWEVER, that such
telegram, telex, facsimile transmission or letter shall only be effective if
such Note and form duly completed are received by the Paying Agent by such fifth
Business Day. Except in the case of Renewable Notes or Extendible Notes, and
unless otherwise specified in the applicable Pricing Supplement, exercise of the
repayment option by the holder of a Note will be irrevocable. The repayment
option may be exercised by the holder of a Note for less than the entire
principal amount of the Note but, in that event, the principal amount of the
Note remaining outstanding after repayment must be an authorized denomination.
If a Note is represented by a Registered Global Security, the Depositary's
nominee will be the holder of such Note and therefore will be the only entity
that can exercise a right to repayment. In order to ensure that the Depositary's
nominee will timely exercise a right to repayment with respect to a particular
Note, the beneficial owner of such Note must instruct the broker or other direct
or indirect participant through which it holds an interest in such Note to
notify the Depositary of its desire to exercise a right to repayment. Different
firms have different cut-off times for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other direct or indirect participant through which it holds an interest in a
Note in order to ascertain the cut-off time by which such an instruction must be
given in order for timely notice to be delivered to the Depositary.
S-18
<PAGE>
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be held
or resold or surrendered to the relevant Trustee for cancellation.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium, if
any, and interest on the Notes will be made in U.S. dollars. If any of the Notes
are to be denominated in a currency or currency unit other than U.S. dollars,
the following provisions shall apply, which are in addition to, and to the
extent inconsistent therewith replace, the description of general terms and
provisions of Notes set forth in the accompanying Prospectus and elsewhere in
this Prospectus Supplement.
Foreign Currency Notes are issuable in registered form only, without
coupons. The denominations for particular Foreign Currency Notes will be
specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Foreign Currency Notes will be made in immediately
available funds.
Unless otherwise provided in the applicable Pricing Supplement, all currency
and currency unit amounts used and resulting from calculations relating to
currencies for a Foreign Currency Note will be rounded to the nearest
one-hundredth of a unit (with five one-thousandths of a unit being rounded up).
PAYMENT OF PRINCIPAL AND INTEREST
The principal of, premium, if any, and interest on Foreign Currency Notes
are payable by the Company in the Specified Currency. Unless otherwise specified
in the applicable Pricing Supplement, a Holder of Foreign Currency Notes may
elect to receive payment of the principal of, premium, if any, and interest on a
Foreign Currency Note in U.S. dollars by transmitting a written request for such
payment to the principal office of the Paying Agent in the Borough of Manhattan,
The City of New York on or prior to the Regular Record Date or at least 15 days
prior to Maturity, as the case may be. Such request may be in writing (mailed or
hand delivered) or by cable, telex or other form of facsimile transmission. A
Holder of a Foreign Currency Note may elect to receive payment in U.S. dollars
for all principal, premium, if any, and interest payments and need not file a
separate election for each payment. Such election will remain in effect until
revoked by written notice to the Paying Agent in the Borough of Manhattan, The
City of New York, but written notice of any such revocation must be received by
the Paying Agent in the Borough of Manhattan, The City of New York on or prior
to the Regular Record Date or at least 15 days prior to Maturity, as the case
may be. Holders of Foreign Currency Notes whose Foreign Currency 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 U.S. dollars may be
made. See "--Payment Currency."
Interest on Foreign Currency Notes paid in U.S. dollars will be paid in the
manner specified in this Prospectus Supplement for interest on Notes denominated
in U.S. dollars. Interest on Foreign Currency Notes paid in the Specified
Currency will be made to an account at a bank outside the United States, unless
other arrangements have been made. The principal and premium, if any, of Foreign
Currency Notes, together with interest accrued and unpaid thereon, due at
Maturity will be paid in immediately available funds against presentation of
such Foreign Currency Notes at the principal offices of The Chase Manhattan Bank
in the Borough of Manhattan, The City of New York. Any payment of principal,
premium, if any, or interest required to be made on an Interest Payment Date or
a Maturity of a Foreign Currency Note which is not a Business Day need not be
made on such day, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date or at Maturity, as
the case may be, and no interest shall accrue for the period from and after such
Interest Payment Date or Maturity.
S-19
<PAGE>
PAYMENT CURRENCY
If the Holder of a Foreign Currency Note is permitted to elect, and has
elected, to receive payments of principal of, premium, if any, and interest on a
Foreign Currency Note in U.S. dollars, the Specified Currency will be converted
into U.S. dollars 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 which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on the payment date in the aggregate amount of the
specified Currency payable to the holders of Notes and at which the applicable
dealer commits to execute a contract. If such bid quotations are not available,
payments will be made in the Specified Currency unless such Specified Currency
is not available due to the imposition of exchange controls or to other
circumstances beyond the Company's control, in which case the Company will be
entitled or obligated to make payments in other currencies as described below.
All currency exchange costs will be borne by the holders of Notes by deductions
from such payments.
Except as set forth below, if the principal of, premium, if any, or interest
on, any Note is payable in a Specified Currency other than U.S. dollars and such
Specified Currency is not available to the Company for making payments thereof
due to the imposition of exchange controls or other circumstances beyond the
control of the Company or is no longer used by the government of the country
issuing the currency or for the settlement of transactions by public
institutions within the international banking community, then the Company will
be entitled to satisfy its obligations to holders of the Notes by making the
payments in U.S. dollars on the basis of the Market Exchange Rate on the date of
the payment or, if the Market Exchange Rate is not available on such date, as of
the most recent practicable date; provided, however, that if such Specified
Currency is replaced by the Euro (as described under "Special Provisions
Relating to Notes Denominated in ECU" below), the payment of principal of,
premium, if any, or interest on any Note denominated in such currency shall be
effected in Euro in conformity with legally applicable measures taken pursuant
to, or by virtue of, the treaty establishing the European Community (the "EC"),
as amended by the treaty on European Union (as so amended, the "Treaty"). Any
payment made under such circumstances in U.S. dollars (or, if applicable, in
Euro) where the required payment is in a Specified Currency other than U.S.
dollars will not constitute an Event of Default. As used herein the term "Market
Exchange Rate" means the noon dollar buying rate in New York City for cable
transfers of the Specified Currency published by the Federal Reserve Bank of New
York.
SPECIAL PROVISIONS RELATING TO NOTES DENOMINATED IN ECU
VALUATION OF THE ECU
Subject to the provisions under "Payments in a Component Currency" below,
the value of the ECU, in which the Notes may be denominated or may be payable,
is equal to the value of the ECU that is from time to time used as the unit of
account of the EC and which is at the date hereof valued on the basis of
specified amounts of the currencies of 12 of the 15 member states of the EC.
Under Article 109G of the Treaty, the currency composition of the ECU may not be
changed. Other changes to the ECU may be made by the EC in conformity with EC
law, in which event the ECU will change accordingly. The Treaty contemplates
that European economic and monetary union ("EMU") will occur in three stages.
The Treaty provides that the third stage of EMU will start on January 1, 1999,
and on that date the value of the ECU as against the currencies of member states
participating in the third stage will be irrevocably fixed and the ECU will
become a currency in its own right. On June 17, 1997, the Council of the
European Union adopted Council Regulation (EC) No. 1103/97, which recites that
the name of that currency will be the Euro and provides that, in accordance with
the Treaty, references to the ECU will be replaced by references to the Euro at
the rate of one Euro for one ECU. References in this Prospectus Supplement to
the "Euro" are to such new currency adopted pursuant to the Treaty. From the
start of the third stage of EMU, all payments in respect of the Notes
denominated or payable in ECU will be payable in Euro at the rate of one Euro
for one ECU.
S-20
<PAGE>
On May 2, 1998 the Council of the EU decided that Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain
will adopt the Euro on January 1, 1999 (the first day of Stage III of EMU).
Bilateral conversion rates between currencies of such countries were also
announced by the EU governments and central banks. Each of the relevant central
banks has committed to ensure, by appropriate market action, that the market
exchange rates on December 31, 1998 will be equal to the announced rates, which
will be used to fix the conversion rates into the Euro on that same date. After
December 31, 1998, there will be a three-year transition period during which
currencies of EMU member states will continue to exist, but as subdivisions of
the Euro. On January 1, 2002 Euro banknotes and coins will be introduced. Soon
thereafter the members' banknotes and coins will cease to be legal tender.
PAYMENT IN A COMPONENT CURRENCY
With respect to each due date for the payment of principal of, premium, if
any, or interest on, the Notes on or after the first business day in Brussels on
which the ECU ceases to be used as the unit of account of the EC and has not
been replaced by the Euro, the Company shall choose a substitute currency (the
"Chosen Currency"), which may be any currency which was, on the last day on
which the ECU was used as the unit of account of the EC, a component currency of
the ECU or U.S. dollars, in which all payments due on or after the date with
respect to the Notes, shall be made. The amount of each payment in such Chosen
Currency shall be computed on the basis of the equivalent of the ECU in that
currency determined as described below, as of the fourth business day in
Brussels prior to the date on which such payment is due.
On the first business day in Brussels on which the ECU ceases to be used as
the unit of account of the EC and has not been replaced by the Euro, the Company
shall select a Chosen Currency in which all payments with respect to Notes
having a due date prior thereto but not yet presented for payment are to be
made. The amount of each payment in such Chosen Currency shall be computed on
the basis of the equivalent of the ECU in that currency, determined as described
below, as of such first business day.
The equivalent of the ECU in the relevant Chosen Currency as of any date
(the "Day of Valuation") shall be determined by, or on behalf of, the Exchange
Rate Agent on the following basis. The amounts and components composing the ECU
for this purpose (the "Components") shall be the amounts and components that
composed the ECU as of the last date on which the ECU was used as the unit of
account of the EC. The equivalent of the ECU in the Chosen Currency shall be
calculated by, first, aggregating the U.S. dollar equivalents of the Components;
and then, in the case of a Chosen Currency other than U.S. dollars, using the
rate used for determining the U.S. dollar equivalent of the Components in the
Chosen Currency as set forth below, calculating the equivalent in the Chosen
Currency of such aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be determined by,
or on behalf of, the Exchange Rate Agent on the basis of the middle spot
delivery quotations prevailing at 2:30 P.M., Brussels time, on the Day of
Valuation, as obtained by, or on behalf of, the Exchange Rate Agent from one or
more major banks, as selected by the Company, in the country of issue of the
component currency question.
If for any reason no direct quotations are available for a Component as of a
Day of Valuation from any of the banks selected for this purpose, in computing
the U.S. dollar equivalent of such Component, the Exchange Rate Agent shall
(except as provided below) use the most recent direct quotations for such
Component obtained by it or on its behalf, provided that such quotations were
prevailing in the country of issue not more than two Business Days before such
Day of Valuation. If such most recent quotations were so prevailing in the
country of issue more than two Business Days before such Day of Valuation, the
Exchange Rate Agent shall determine the U.S. dollar equivalent of such Component
on the basis of cross rates derived from the middle spot delivery quotations for
such component currency and for the U.S. dollar prevailing at 2:30 P.M.,
Brussels time, on such Day of Valuation, as obtained by, or on behalf of, the
S-21
<PAGE>
Exchange Rate Agent from one or more major banks, as selected by the Company, in
a country other than the country of issue of such component currency.
Notwithstanding the foregoing, the Exchange Rate Agent shall determine the U.S.
dollar equivalent of such Component on the basis of such cross rates if the
Company judges that the equivalent so calculated is more representative than the
U.S. dollar equivalent calculated as provided in the first sentence of this
paragraph. Unless otherwise specified by the Company, if there is more than one
market for dealing in any Component currency by reason of foreign exchange
regulations or for any other reason, the market to be referred to in respect of
such currency shall be that upon which a nonresident issuer of securities
denominated in such currency would purchase such currency in order to make
payments in respect of such securities.
Payments in the Chosen Currency will be made at the specified office of a
paying agent in the country of the Chosen Currency, or, if none, or at the
option of the Holder, at the specified office of any Paying Agent either by a
check drawn on, or by transfer to an account maintained by the Holder with, a
bank in the principal financial center of the country of the Chosen Currency.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
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 Components 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 that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall have a value on
the date of division equal to the amount of the former component currency
divided by the number of currencies in which that currency was divided.
All determinations referred to above made by, or on behalf of, the Company
or by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding on holders of Notes and coupons.
NOTES DENOMINATED IN THE CURRENCIES OF EC MEMBER STATES
If, pursuant to the Treaty, all or some of the currencies of the member
countries of the EC are replaced by the Euro, the payment of principal of,
premium, if any, or interest on the Notes denominated in such currencies shall
be effected in Euro in conformity with legally applicable measures taken
pursuant to, or by virtue of, the Treaty.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either the
U.S. or foreign governments. Such risks generally depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange between U.S. dollars and certain foreign currencies have been highly
volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in such rate that may occur
during the term of any Note. Depreciation against the U.S. dollar of the
currency in which a Note is payable would result in a decrease in the effective
yield of such Note below its coupon rate and, in certain circumstances, could
result in a loss to the investor on a U.S. dollar basis. In addition, depending
on the specific terms of a currency linked Note, changes in exchange rates
relating to any of the currencies involved may result in a decrease in its
effective yield and,
S-22
<PAGE>
in certain circumstances, could result in a loss of all or a substantial portion
of the principal of a Note to the investor.
THE INFORMATION SET FORTH BELOW DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT
IN NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A
FOREIGN CURRENCY OR A COMPOSITE CURRENCY EITHER AS SUCH RISKS EXIST AT THE DATE
OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. ANY
ADDITIONAL MATERIAL FOREIGN CURRENCY RISKS PERTAINING TO A PARTICULAR NOTE
DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN
CURRENCY OR A COMPOSITE CURRENCY WILL BE DISCLOSED IN A FURTHER PROSPECTUS
SUPPLEMENT OR A PRICING SUPPLEMENT REGARDING SUCH NOTE. PROSPECTIVE PURCHASERS
SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED
BY AN INVESTMENT IN NOTES THAT ARE DENOMINATED IN, OR THE PAYMENT OF WHICH IS
RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR A COMPOSITE CURRENCY. SUCH NOTES
ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and 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, premium, if
any, and interest on the Notes. Such persons should consult their own counsel
with regard to such matters.
Foreign exchange rates can either float or be fixed by sovereign
governments. Exchange rates of most economically developed nations are permitted
to fluctuate in value relative to the U.S. dollar. National governments,
however, rarely voluntarily allow their currencies to float freely in response
to economic forces. From time to time governments use a variety of techniques,
such as intervention by a country's central bank or imposition of regulatory
controls or taxes, to affect the exchange rate of their currencies. Governments
may also issue a new currency to replace an existing currency or alter the
exchange rate or relative exchange characteristics by devaluation or revaluation
of a currency. Thus, a special risk in purchasing non-U.S. dollar denominated
Notes or currency linked Notes is that their U.S. dollar-equivalent yields or
payouts could be affected by governmental actions, which could change or
interfere with theretofore freely determined currency valuation, fluctuations in
response to other market forces, and the movement of currencies across borders.
There will be no adjustment or change in the terms of such Notes in the event
that exchange rates should become fixed, or in the event of any devaluation or
revaluation or imposition of exchange or other regulatory controls or taxes, or
in the event of other developments affecting the U.S. dollar or any applicable
Specified Currency.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a specified foreign currency (or of securities denominated in such currency)
at the time of payment of principal of, premium, if any, or interest on a Note.
Even if there are no actual exchange controls, it is possible that the Specified
Currency for any particular Note not denominated in U.S. dollars would not be
available when payments on such Note are due, including as a result of the
replacement of such Specified Currency by a single European currency (expected
to be named the Euro). In that event, the Company would make required payments
in U.S. dollars on the basis of the Market Exchange Rate on the date of such
payment, or if such rate of exchange is not then available, on the basis of the
Market Exchange Rate as of the most recent practicable date; PROVIDED, HOWEVER,
that, if the Specified Currency for any Note is not available because it has
been replaced by the Euro, the Company would make such payments in Euro in
conformity with legally applicable measures taken pursuant to, or by virtue of,
the Treaty. See "Special Provisions Relating to Foreign Currency Notes--Payment
Currency."
S-23
<PAGE>
With respect to any Note denominated in a foreign currency or currency unit,
or the payment of, or in respect to, any Note which is related to the value of,
a foreign currency or currency unit, the applicable Pricing Supplement will
include information with respect to applicable current exchange controls, if
any, and historic exchange rate information on such currency or currency unit.
The information contained therein shall constitute a part of this Prospectus
Supplement and is furnished as a matter of information only and should not be
regarded as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If a court in the United States were to grant a judgment
in an action based on Notes denominated in a Specified Currency other than U.S.
dollars, it is likely that such court would grant judgment only in U.S. dollars.
If the court were a New York court, however, such court would grant a judgment
in the Specified Currency or currency in respect of which any payment on a Note
was due. Such judgment would then be converted into U.S. dollars at the rate of
exchange prevailing on the date of entry of the judgment.
UNITED STATES TAXATION
The following is a summary of certain United States federal income tax
considerations that apply to the acquisition, ownership and disposition of Notes
by a noteholder that is an individual citizen or resident of the United States,
a corporation created or organized in or under the laws of the United States or
any political subdivision thereof or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source (a
"United States Holder") or by a noteholder that is, for United States federal
income tax purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust (a "United States Alien
Holder"). Although the following summary does not purport to describe all of the
tax considerations that may be relevant to a prospective purchaser of Notes, in
the opinion of Morgan, Lewis & Bockius LLP, tax counsel to the Company, such
summary describes the material United States federal income tax consequences to
a United States Holder or, as the case may be, a United States Alien Holder.
Opinions of tax counsel have no binding effect or official status of any kind;
no assurance can be given that the conclusions set out below would be sustained
by a court if challenged by the Internal Revenue Service (the "IRS"). This
summary deals only with Notes that are held as capital assets by United States
Holders, or, as the case may be, United States Alien Holders, and does not
address tax considerations applicable to (i) United States Holders that may be
subject to special tax rules, such as dealers or traders in securities or
currencies, financial institutions, life insurance companies, tax-exempt
entities, United States Holders that hold Notes as a hedge or that are hedged
against currency risks or that hold Notes as a part of a straddle, conversion
transaction or other arrangement involving more than one position or United
States Holders whose functional currency is not the United States dollar and
(ii) United States Alien Holders that may be subject to special tax rules, such
as nonresident alien individuals who have lost United States citizenship or who
have ceased to be treated as resident aliens, corporations that are treated as
foreign or domestic personal holding companies, controlled foreign corporations
or passive foreign investment companies or certain other United States Alien
Holders that are owned or controlled by persons subject to United States federal
income tax. Moreover, the summary deals only with Notes that are due to mature
30 years or less from the date on which they are issued. The United States
federal income tax consequences of ownership of Notes that are due to mature
more than 30 years from their date of issue will be discussed in an applicable
Pricing Supplement.
The discussion below is based upon the provisions of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings
and judicial decisions thereunder as of the date hereof; any such authority may
be repealed, revoked or modified, perhaps with retroactive effect, so as to
result in federal income tax consequences different from those discussed below.
S-24
<PAGE>
THE DISCUSSION SET OUT BELOW IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE NOTES, INCLUDING THE APPLICATION TO THEIR
PARTICULAR SITUATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE
APPLICATION OF STATE, LOCAL OR FOREIGN TAX LAWS. THE STATEMENTS OF UNITED STATES
TAX LAW SET OUT BELOW ARE BASED ON THE LAWS IN FORCE AND INTERPRETATIONS THEREOF
AS OF THE DATE OF THIS OFFERING MEMORANDUM, AND ARE SUBJECT TO ANY CHANGES
OCCURRING AFTER THAT DATE.
TAXATION OF UNITED STATES HOLDERS
PAYMENTS OF INTEREST
STATED INTEREST. Interest on a Note that is denominated in United States
dollars, other than interest that is not "qualified stated interest" (as defined
below under "Original Issue Discount--In General"), will be taxable to a United
States Holder as ordinary interest income at the time that such interest is
received or is accrued, in accordance with the United States Holder's method of
accounting for federal income tax purposes.
PRE-ISSUANCE ACCRUED INTEREST. If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within one year of the Note's
issue date and (iii) the payment will equal or exceed the amount of pre-issuance
accrued interest, then the United States Holder may elect to decrease the issue
price of the Note by the amount of pre-issuance accrued interest. In that event,
a portion of the first stated interest payment will be treated as a return of
the excluded pre-issuance accrued interest and not as an amount payable on the
Note.
ORIGINAL ISSUE DISCOUNT
IN GENERAL. A Note will be considered to be issued with original issue
discount for United States federal income tax purposes (an "original issue
discount Note"), if its stated redemption price at maturity exceeds its issue
price by more than a specified de minimis amount. In general, the issue price of
a Note is the first price at which a substantial amount of Notes included in the
issue of which the Note is a part is sold to persons other than 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 on the Note other than payments of
qualified stated interest. In general, qualified stated interest is stated
interest that is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate during the
entire term of the Note, with the consequence that Notes with irregular payment
schedules will generally be treated as original issue discount Notes. Special
rules for variable rate Notes (as defined below) and short-term Notes (as
defined below) are described below under "--Variable Rate Notes" and
"--Short-Term Notes," respectively.
In general, if the stated redemption price at maturity of a Note exceeds its
issue price by an amount that is less than 0.25% of the Note's stated redemption
price at maturity multiplied by the number of complete years to maturity, then
the excess is treated as de minimis original issue discount and the Note is not
treated as an original issue discount Note. Unless a United States Holder makes
the election described below under "Election To Treat All Interest as Original
Issue Discount," the United States Holder must include de minimis original issue
discount in income as stated principal payments on the Note are made. The amount
that is includible in income with respect to each principal payment is equal to
the product of the total amount of de minimis original issue discount and a
fraction, the numerator of which is the amount of the specified principal
payment and the denominator of which is the stated principal amount of the Note.
S-25
<PAGE>
A United States Holder of an original issue discount Note that matures more
than one year from the date of issuance, whether such holder uses the cash
method or the accrual method of accounting, must include original issue discount
in income as it accrues, in accordance with a constant-yield method based on the
compounding of interest, before the receipt of the cash payments attributable to
such income, and generally will be required to include in income increasingly
greater amounts of original issue discount over the term of the Note. In
general, a United States Holder of such a Note will be required to include in
ordinary gross income the sum of the daily portions of original issue discount
with respect to the Note for each day during the taxable year on which the
United States Holder holds the Note. The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the
original issue discount allocable to that accrual period. Accrual periods with
respect to a Note may be of any length selected by the United States Holder and
may vary in length over the term of the Note, so long as (i) no accrual period
is longer than one year and (ii) each scheduled payment of interest or principal
on the Note occurs on either the final day or first day of an accrual period.
The amount of original issue discount on a Note that is allocable to an accrual
period is equal to the excess of (i) the product of the adjusted issue price of
the Note at the beginning of the accrual period and the yield to maturity of the
Note (determined on the basis of compounding at the close of each accrual period
and properly adjusted for the length of the accrual period) over (ii) the sum of
the payments of qualified stated interest on the Note that are allocable to the
accrual period. The adjusted issue price of a Note at the beginning of any
accrual period is the issue price of the Note, increased by the amount of
accrued original issue discount for each prior accrual period and decreased by
the amount of any payments previously made on the Note other than payments of
qualified stated interest. For purposes of determining the amount of original
issue discount that is allocable to an accrual period, if an interval between
payments of qualified stated interest on the Note contains more than one accrual
period, then the amount of qualified stated interest payable at the end of the
interval (including any qualified stated interest that is payable on the first
day of the accrual period immediately following the interval) is allocated on a
pro rata basis to each accrual period in the interval, and the adjusted issue
price of the Note at the beginning of each accrual period in the interval must
be increased by the amount of any qualified stated interest that has accrued
prior to the first day of the accrual period but that is not payable until the
end of the interval. The amount of original issue discount allocable to an
initial short accrual period may be computed using any reasonable method, if all
other accrual periods (other than a final short accrual period) are of equal
length. The amount of original issue discount allocable to the final accrual
period is the difference between (i) the amount payable at the maturity of the
Note (other than any payment of qualified stated interest) and (ii) the adjusted
issue price of the Note as of the beginning of the final accrual period.
ACQUISITION PREMIUM. A United States Holder of an original issue discount
Note that acquires the Note for an amount less than or equal to the sum of all
amounts payable on the Note after the purchase date (other than payments of
qualified stated interest) but in excess of its adjusted issue price (any such
excess being "acquisition premium") and that does not make the election
described below under "Election To Treat All Interest as Original Issue
Discount" is permitted to reduce the daily portions of original issue discount
includible in its income by a fraction, the numerator of which is the excess of
the United States Holder's adjusted tax basis in the Note immediately after its
purchase over the adjusted issue price of the Note and the denominator of which
is the excess of the sum of all amounts payable on the Note after the purchase
date (other than payments of qualified stated interest) over the Note's adjusted
issue price.
NOTES SUBJECT TO CONTINGENCIES, INCLUDING OPTIONAL REDEMPTION. In general,
if (i) a Note provides for one or more alternative payment schedules that apply
upon the occurrence of a contingency or contingencies (other than a remote or
incidental contingency), (ii) the timing and amounts of the payments that
comprise each payment schedule are known as of the issue date and (iii) based on
all of the facts and circumstances as of the issue date, one of the alternative
payment schedules is significantly more likely than not to occur, then the yield
and maturity of the Note are determined on the basis of that payment schedule.
(If there is no single payment schedule that is significantly more likely than
not to occur (other than because of a mandatory sinking fund), then the Note
will be subject to the rules that govern
S-26
<PAGE>
contingent-payment obligations. These rules will be discussed in an applicable
Pricing Supplement.) Notwithstanding the general rule stated in the first
sentence of this paragraph, if the alternative payment schedules on a Note arise
from an unconditional option on the part of the Company to redeem a Note or an
unconditional option on the part of a United States Holder to cause a Note to be
repurchased, in each case prior to stated maturity, then (i) in the case of an
option exercisable by the Company, the Company will be deemed to exercise or not
exercise the option in the manner that minimizes the yield on the Note and (ii)
in the case of an option exercisable by a United States Holder, the United
States Holder will be deemed to exercise or not exercise the option in the
manner that maximizes the yield on the Note. If a contingency (including the
exercise of an option) actually occurs or does not occur in a manner that is
contrary to an assumption made according to the rules described in this
paragraph (a "change in circumstances"), then, except in the case of certain pro
rata prepayments and solely for purposes of the accrual of original issue
discount, the yield and maturity of the Note are redetermined by treating the
Note as retired and reissued on the date of the change in circumstances for an
amount equal to its adjusted issue price on that date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. A United States
Holder may elect to include in gross income all interest that accrues on a Note
using the constant-yield method described above under the heading "--In
General," with the modifications described below. For purposes of this election,
interest includes stated interest, original issue discount, de minimis original
issue discount, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium or acquisition premium. In
applying the constant-yield method to a Note with respect to which this election
has been made, the issue price of the Note will be the electing United States
Holder's adjusted tax basis in the Note immediately after its acquisition, the
issue date of the Note will be the date of its acquisition by the electing
United States Holder and no payments on the Note will be treated as payments of
qualified stated interest. This election generally will apply only to the Note
with respect to which it is made and may not be revoked without the consent of
the IRS. If this election is made with respect to a Note with amortizable bond
premium, then the electing United States Holder will be deemed to have elected
to amortize bond premium as an offset to interest income with respect to all
debt instruments with amortizable bond premium (other than debt instruments the
interest on which is excludible from gross income) held by the electing United
States Holder as of the beginning of the taxable year in which the Note with
respect to which the election is made is acquired or thereafter acquired. The
deemed election with respect to amortizable bond premium may not be revoked
without the consent of the IRS. If the election to apply the constant-yield
method to all interest on a Note is made with respect to a market discount Note
(as defined below), then the electing United States Holder will be considered to
have made the election discussed below under "Market Discount" to include market
discount in income currently for all debt instruments held or thereafter
acquired by such United States Holder.
VARIABLE RATE NOTES. In general, a "variable rate Note" is a Note that (i)
has an issue price that does not exceed the total amount of noncontingent
principal payments on the Note by more than the lesser of (x) the product of (1)
the total amount of noncontingent principal payments on the Note, (2) the number
of complete years to maturity from the issue date and (3) .015 or (y) 15% of the
total amount of noncontingent principal payments and (ii) provides for stated
interest compounded or paid at least annually at (w) one or more "qualified
floating rates," (x) a single fixed rate and one or more qualified floating
rates, (y) a single "objective rate" or (z) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate."
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the Note
is denominated or (ii) the rate is equal to the product of such a rate and
either a fixed multiple that is greater than 0.65 but not more than 1.35 or a
fixed multiple greater than 0.65 but not more than 1.35, increased or decreased
by a fixed rate. If a Note provides for two or more qualified floating rates
that (i) are within 0.25 percentage points of each other on the issue date or
(ii) can reasonably be expected
S-27
<PAGE>
to have approximately the same values throughout the term of the Note, then the
qualified rates together constitute a single qualified floating rate. Further,
if interest on a Note is stated at a fixed rate for an initial period of one
year or less followed by either a qualified floating rate or an objective rate
for a subsequent period and (i) the fixed rate and the qualified floating rate
or objective rate have values on the issue date of the Note that do not differ
by more than 0.25 percentage points or (ii) the value of the qualified floating
rate or objective rate is intended to approximate the fixed rate, then the fixed
rate and the qualified floating rate or the objective rate together constitute a
single qualified floating rate or objective rate. However, a variable rate is
not a qualified floating rate if the rate is subject to certain restrictions
(including caps, floors, governors or other similar restrictions), unless the
restrictions are fixed throughout the term of the Note or are not reasonably
expected to affect significantly the yield on the Note. An "objective rate" is a
rate, other than a qualified floating rate, that is determined using a single
fixed formula and that is based on objective financial or economic information.
An objective rate cannot be based on information that is within the control of
the Company (or a related party) or on information that is unique to the
circumstances of the Company (or a related party). An objective rate generally
is a "qualified inverse floating rate," if (i) the rate is equal to a fixed rate
minus a qualified floating rate and (ii) the variations in the rate reasonably
can be expected to reflect inversely contemporaneous variations in the qualified
floating rate. A qualified floating rate or objective rate in effect at any time
during the term of the Note must be set at a "current value" of that rate. A
current value of a rate is the value of the rate on any day that is no earlier
than three months prior to the first day on which that value is in effect and no
later than one year following that first day.
In general, if a variable rate Note provides for stated interest that is
unconditionally payable at least annually at a single qualified floating rate or
a single objective rate, then all stated interest on the Note is qualified
stated interest and the amount of original issue discount, if any, on the Note
is determined by using, 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, in the case of any other
objective rate, a fixed rate that reflects the yield reasonably expected for the
Note. If a variable rate Note does not provide for stated interest at a single
qualified floating rate or a single objective rate (or at a single fixed rate,
other than at a singled fixed rate for an initial period), then the accrual of
interest and original issue discount on the Note is determined by (i)
determining a fixed rate substitute for each variable rate provided under the
Note (generally, the value of each variable rate as of the issue date or, in the
case of an objective rate that is not a qualified inverse floating rate, a fixed
rate that reflects the reasonably expected yield on the Note), (ii) constructing
the equivalent fixed rate debt instrument (using the fixed rate substitute(s)
described above), (iii) determining the amount of qualified stated interest and
original issue discount with respect to the equivalent fixed rate debt
instrument and (iv) making the appropriate adjustments for actual variable rates
during the applicable accrual period.
If a variable rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate and, in
addition, provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), then the accrual of interest and
original issue discount on the Note is determined in the manner described in the
immediately preceding sentence, with the modification that the variable rate
Note is treated, for purposes of the first three steps of the determination, as
if it provided for a qualified floating rate (or a qualified inverse floating
rate, as the case may be) rather than the fixed rate. The qualified floating
rate (or qualified inverse floating rate) replacing the fixed rate must be such
that the fair market value of the variable rate Note as of the issue date would
be approximately the same as the fair market value of an otherwise identical
debt instrument that provides for the qualified floating rate (or qualified
inverse floating rate) rather than the fixed rate.
S-28
<PAGE>
SHORT-TERM NOTES. In general, an individual or other cash-basis United
States Holder of a Note having a term of one year or less (a "short-term Note")
is not required to accrue original issue discount (as specially defined below
for the purposes of this paragraph) for United States federal income tax
purposes unless it elects to do so (but may be required to include any stated
interest in income as the interest is received). Accrual-basis United States
Holders and certain other United States Holders, including banks, regulated
investment companies, dealers in securities, common trust funds, United States
Holders that hold Notes as part of certain identified hedging transactions,
certain pass-through entities and cash-basis United States Holders that so
elect, are required to accrue original issue discount on short-term Notes on
either a straight-line basis or under the constant-yield method (based on daily
compounding), at the election of the United States Holder. In the case of a
United States Holder that is not required, and that does not elect, to include
original issue discount in income currently, any gain realized on the sale,
exchange or retirement of the short-term Note will be treated as ordinary
income, to the extent of the original issue discount accrued on a straight-line
basis (unless the United States Holder elects to accrue the original issue
discount under the constant-yield method based on daily compounding) through the
date of sale or retirement. United States Holders that are not required, and
that do not elect, to accrue original issue discount on short-term Notes may be
required to defer deductions for the net direct interest expense with respect to
each such Note (defined, for each taxable year, as the excess of interest
expense allocable to the Note over interest (including original issue discount)
includible in income in respect of the Note) in an amount not exceeding the
deferred income until the deferred income is realized.
For purposes of determining the amount of original issue discount on a
short-term Note, all interest payments on the Note, including stated interest
payments, are included in the Note's stated redemption price at maturity.
FOREIGN CURRENCY DISCOUNT NOTES. In the case of an original issue discount
Note that is a Foreign Currency Note (as defined below under "Foreign Currency
Notes"), original issue discount for any accrual period will be determined in
units of foreign currency using the constant-yield method described above, and
the accrued original issue discount for any accrual period will be translated
into United States dollars in the manner described below under "Foreign Currency
Notes." Upon receipt of a payment that is attributable to accrued original issue
discount (whether in connection with a payment of interest or the sale or
retirement of a Note), a United States Holder may recognize additional foreign
currency gain or loss that is treated as ordinary income or loss.
MARKET DISCOUNT
If a United States Holder acquires a Note (other than a short-term Note) for
an amount that is less than the stated redemption price at maturity of the Note
(or, in the case of an original issue discount Note, the adjusted issue price of
the Note) by more than a specified de minimis amount, then the Note will be
considered to bear market discount in the hands of the United States Holder. In
such a case, any gain recognized by the United States Holder on the sale,
exchange or retirement of the Note will be treated as ordinary income, to the
extent that such gain does not exceed the accrued market discount on the Note.
Alternatively, a United States Holder of a market discount Note may elect to
include market discount in income currently over the term of the Note. This
election applies to all debt instruments with market discount acquired by the
electing United States Holder on or after the first day of the first taxable
year to which the election applies. This election may not be revoked without the
consent of the IRS. A United States Holder that makes the election described
under "Original Issue Discount--Election To Treat All Interest as Original Issue
Discount" will be deemed to have elected to include market discount in income
currently.
Market discount on a market discount Note will accrue on a straight-line
basis, unless the United States Holder elects to accrue such market discount
using a constant-yield method. This election applies only to the Note with
respect to which it is made and may not be revoked without the consent of the
IRS. A United States Holder of a market discount Note that does not elect, and
is not deemed to have elected,
S-29
<PAGE>
to include market discount in income currently generally will be required to
defer deductions for net direct interest expense with respect to such Note
(defined, for each taxable year, as the excess of interest expense allocable to
the Note over interest (including original issue discount) includible in income
in respect of the Note) in an amount not exceeding the accrued market discount
on such Note until the maturity or disposition of such Note.
NOTES PURCHASED AT A PREMIUM
A United States Holder of a Note that purchases the Note at a cost greater
than its stated redemption price at maturity will be considered to have
purchased the Note at a premium, and may elect to treat such excess as
"amortizable bond premium" and then will amortize that premium on a
constant-yield basis as an offset to interest income on the Note over the
remaining term of the Note. An election to amortize bond premium applies to all
bonds (other than bonds the interest on which is excludible from gross income)
held by the United States Holder at the beginning of the first taxable year to
which the election applies or thereafter acquired by the United States Holder,
and is irrevocable without the consent of the IRS. See also "Original Issue
Discount--Election To Treat All Interest as Original Issue Discount."
PURCHASE, SALE AND RETIREMENT OF NOTES
A United States Holder's tax basis in a Note generally will be the United
States dollar cost of such Note which, in the case of a Note purchased with a
foreign currency, will be the United States dollar value of the purchase price
on the date of purchase, (i) increased by the amount of any original issue
discount or market discount (and the amount of income attributable to de minimis
original issue discount and de minimis market discount) included in income by
the United States Holder with respect to the Note and (ii) reduced by the amount
of any payments on the Note other than payments of qualified stated interest and
the amount of any amortizable bond premium applied to reduce interest on the
Note. Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale, exchange or retirement (other than amounts
attributable to accrued but unpaid interest, which will be taxable as such) and
the adjusted tax basis of the Note in the hands of the United States Holder.
Except as discussed above under "Original Issue Discount--Short-Term Notes" or
"Market Discount" or below under "Foreign Currency Notes," such gain or loss
will be capital gain or loss and will be long-term capital gain or loss if the
Note has been held for more than one year.
FOREIGN CURRENCY NOTES
In the case of a Note that is denominated in a currency or currency unit
other than the United States dollar (a "Foreign Currency Note"), a United States
Holder that uses the cash method of accounting and that receives a payment of
qualified stated interest (or that otherwise receives interest income that is
not required to be accrued prior to the receipt thereof) will recognize ordinary
interest income on the date of receipt in an amount equal to the dollar value of
the foreign currency payment (translated at the spot currency exchange rate on
the date of receipt), regardless of whether the payment in fact is converted to
dollars at that time. The United States Holder will not realize any separate
foreign currency gain or loss, except to the extent that such gain or loss
arises on the actual disposition of the foreign currency received.
If a United States Holder is required or elects to accrue interest income on
a Foreign Currency Note prior to the receipt thereof (because the United States
Holder uses the accrual method of accounting, under the original issue discount
or market discount rules or otherwise), then the United States Holder will
recognize ordinary interest income in an amount equal to the dollar value of the
amount of interest income (including original issue discount or market discount,
but reduced by any acquisition premium or amortizable bond premium) that has
accrued and is required to be taken into account with respect to the Note during
each accrual period. In each case, the amount of the accrual will be determined
in units of foreign currency, and the dollar value of the foreign currency
accrual will be determined by translating the
S-30
<PAGE>
accrued 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
of exchange for the partial period within the taxable year. The United States
Holder will recognize additional foreign currency gain or loss, treated as
ordinary income or loss, on the date that the accrued interest income actually
is received, in an amount equal to the difference between the dollar value of
the foreign currency received (translated at the spot exchange rate on the date
that such payment is received) and the dollar amount previously accrued into
income (as determined above). Alternatively, a United States Holder may elect to
translate accrued interest income into dollars at the spot rate on the last day
of the accrual period (or, in the case of a partial accrual period, at the spot
rate on the last day of the taxable year) or, if the date of receipt is within
five business days of the last day of the accrual period, at the spot rate on
the date of receipt. A United States Holder that makes this election must apply
it consistently to all debt instruments held at the beginning of the first
taxable year to which the election applies or thereafter acquired by the United
States Holder and cannot change the election without the consent of the IRS.
If a United States Holder elects to amortize bond premium on a Foreign
Currency Note, then the United States Holder will calculate the amortization of
premium in units of foreign currency and will net the amount of premium
amortized in each period against the amount of interest (calculated in units of
foreign currency) otherwise includible in income for that period, prior to
applying the translation rules described above. In addition, the United States
Holder will realize exchange gain or loss on the amortized bond premium for any
period, by treating the bond premium amortized in such period as a return of
principal.
Market discount on a Foreign Currency Note will be determined in units of
foreign currency. For purposes of the market discount rules discussed above,
accrued market discount (other than market discount that is included in income
currently) will be translated into dollars at the spot rate on the date that the
market discount Note is sold, exchanged or retired.
A United States Holder's cost for a Foreign Currency Note will be the United
States dollar value of the foreign currency amount paid for the Foreign Currency
Note, determined on the date of such purchase (or, as discussed below,
determined on the settlement date for such purchase in the case of a publicly-
traded Foreign Currency Note). A United States Holder that purchases a Foreign
Currency Note with previously-owned foreign currency will recognize ordinary
income or loss in an amount equal to the difference, if any, between its tax
basis in the foreign currency and the dollar fair market value of the foreign
currency on the date of purchase (or settlement).
Gain realized by a United States Holder on the sale, exchange or retirement
of a Foreign Currency Note will be treated as ordinary income to the extent of
the foreign currency gain realized by the United States Holder on the sale,
exchange or retirement; similarly, loss realized by a United States Holder on
the sale, exchange or retirement of a Foreign Currency Note will be treated as
ordinary loss to the extent of the foreign currency loss realized by the United
States Holder on the sale, exchange or retirement. In general, the amount of
foreign currency gain or loss realized by a United States Holder on the sale,
exchange or retirement of a Note will be the sum of (i) the foreign currency
gain or loss realized by the United States Holder with respect to any interest
(including original issue discount) accrued by the United States Holder prior
to, and received by the United States Holder in connection with, the sale,
exchange or retirement (calculated in the manner described above) and (ii) the
foreign currency gain or loss realized by the United States Holder with respect
to the "principal amount" of the Note (calculated in the manner described
below). For purposes of computing foreign currency gain or loss, the "principal
amount" of a Note generally will be the United States Holder's purchase price in
units of the foreign currency. The amount of foreign currency gain or loss
realized by a United States Holder with respect to the principal amount of a
Note will be determined by (i) translating the principal amount into dollars at
the spot rate on the date of sale, exchange or retirement (or, as discussed
below, on the settlement date with respect to such sale, exchange or retirement)
and (ii) subtracting from that amount the amount computed by translating the
principal amount into dollars at the spot rate on the date that the United
States Holder acquired the Note.
S-31
<PAGE>
Notwithstanding any of the general rules described above, however, the aggregate
foreign currency gain realized on a sale, exchange or retirement of a Note may
not exceed the total gain, if any, realized on the sale, exchange or retirement;
similarly, the aggregate foreign currency loss realized on a sale, exchange or
retirement of a Note may not exceed the total loss, if any, realized on the
sale, exchange or retirement.
A United States Holder will have a tax basis in any foreign currency
received as interest or on the sale, exchange or retirement of a Foreign
Currency Note equal to the dollar value of such foreign currency, determined at
the time such interest is received or at the time of such sale, exchange or
retirement. Regulations issued under Section 988 of the Code provide a special
rule for purchases and sales of publicly-traded Foreign Currency Notes by a cash
method taxpayer, under which units of foreign currency paid or received are
translated into dollars at the spot rate on the settlement date of the purchase
or sale. Accordingly, no foreign currency gain or loss will result from currency
fluctuations between the trade date and the settlement date of such a purchase
or sale. An accrual method taxpayer may elect the same treatment required of
cash method taxpayers with respect to the purchase and sale of publicly-traded
Foreign Currency Notes, provided that the election is applied consistently. Such
election cannot be changed without the consent of the IRS. Any gain or loss
realized by a United States Holder on a sale or other disposition of foreign
currency (including its exchange for dollars or its use to purchase Foreign
Currency Notes) will be treated as ordinary income or loss.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
For each calendar year in which the Notes are outstanding, each DTC
participant or indirect participant holding an interest in a Note on behalf of a
beneficial owner of a Note and each paying agent making payments in respect of a
Note to a beneficial owner generally will be required to provide the IRS with
certain information, including such beneficial owner's name, address and
taxpayer identification number (either such beneficial owner's Social Security
number or its employer identification number, as the case may be), and the
aggregate amount of interest and principal paid to such beneficial owner during
the calendar year. These reporting requirements, however, do not apply with
respect to certain beneficial owners, including corporations, securities
broker-dealers, other financial institutions, tax-exempt organizations,
qualified pension and profit sharing trusts and individual retirement accounts.
In the event that a beneficial owner of a Note fails to establish its
exemption from such information reporting requirements or is subject to the
reporting requirements described above and fails to supply its correct taxpayer
identification number in the manner required by applicable law, or underreports
its tax liability, as the case may be, the DTC participant or indirect
participant holding such interest on behalf of such beneficial owner or paying
agent making payments in respect of a Note may be required to impose "backup"
withholding tax at a rate equal to 31% of each payment of interest and principal
with respect to the Notes. This backup withholding tax is not an additional tax
and may be credited against the beneficial owner's United States federal income
tax liability (which may entitle such beneficial owner to a refund) if the
required information is furnished to the IRS.
On October 6, 1997, the Treasury Department issued final regulations
relating to withholding tax, information reporting and backup withholding tax
that unify current certification procedures and forms and clarify reliance
standards (the "Final Regulations"). The Final Regulations generally will be
effective with respect to payments made after December 31, 1999.
Prospective purchasers of the Notes should consult their own tax advisors as
to the application of information reporting and backup withholding tax in their
particular situations and to the effect, if any, of the Final Regulations on
their purchase, ownership and disposition of the Notes.
INDEXED, RENEWABLE, EXTENDIBLE, CONVERTIBLE, EXCHANGEABLE AND AMORTIZING NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules, including, if applicable, the rules
governing contingent-payment obligations, that apply to
S-32
<PAGE>
indexed Notes that are not subject to the rules governing variable rate Notes
and with respect to any renewable, extendible, convertible, exchangeable or
amortizing Notes.
TAXATION OF UNITED STATES ALIEN HOLDERS
The following discussion assumes that (i) the Notes are not subject to the
rules of Section 871(h)(4)(A) of the Code (relating to interest payments that
are determined by reference to the income, profits, cash flow, changes in value
of property or specified other attributes of the debtor or a related party) and
(ii) income or gain with respect to the Notes is not effectively connected with
the conduct by the United States Alien Holder of a trade or business in the
United States.
WITHHOLDING TAX
Under present United States federal income tax law and subject to the
discussion of backup withholding tax below:
(i) payments of principal, premium (if any) and interest (including
original issue discount) by the Company or any of its paying agents (in its
capacity as such) to a United States Alien Holder will be exempt from
withholding of United States federal income tax (such exemption, the
"Portfolio Interest Exemption"), provided that (i) such United States Alien
Holder does not own, actually or constructively, 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote, is not a controlled foreign corporation related to the Company through
stock ownership and is not a bank receiving interest described in Section
881(c)(3)(A) of the Code and (ii) the statement described below has been
provided by or with respect to the beneficial owner; and
(ii) a United States Alien Holder of a Note will not be subject to
withholding of United States federal income tax on any gain realized on the
sale or exchange of a Note.
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
Portfolio Interest Exemption with respect to a Note, either the beneficial owner
of the Note, or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "financial institution") and that holds the Note on behalf of
such beneficial owner, file a statement with the withholding agent to the effect
that the beneficial owner of the Note is not a United States person (within the
meaning of Section 7701(a)(30) of the Code). Under current United States
Treasury regulations, which generally apply to payments on a Note on or before
December 31, 1999, the statement requirement of Sections 871(h) and 881(c) will
be satisfied if (i) the beneficial owner of a Note certifies on IRS Form W-8,
under penalties of perjury, that it is not a United States person and provides
its name and address and (ii) any financial institution holding the Note on
behalf of the beneficial owner files a statement with the withholding agent to
the effect that it has received such a statement from the beneficial owner (and
furnishes the withholding agent with a copy thereof). The Final Regulations,
which generally apply to payments on a Note after December 31, 1999, provide
alternative methods for satisfying the certification requirement described
above.
ESTATE TAX
Under Section 2105(b) of the Code, a Note held by an individual who is not a
citizen or resident of the United States at the time of his death will not be
subject to United States federal estate tax as a result of such individual's
death, provided that (i) the individual does not own, actually or
constructively, 10% or more of the total combined voting power of all classes of
stock of the Company entitled to vote and (ii) at the time of such individual's
death, income with respect to such Note would not have been effectively
connected to the conduct by such individual of a trade or business in the United
States.
S-33
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Backup withholding tax will not apply to payments made by the Company or a
paying agent (in its capacity as such) on a Note if the certifications required
by Sections 871(h) and 881(c) are received, provided in each case that the
Company or such paying agent, as the case may be, does not have actual knowledge
(and, with respect to payments made after December 31, 1999, does not have
reason to know) that the payee is a United States person.
Payments of proceeds from the sale or exchange of a Note generally will not
be subject to information reporting or backup withholding tax if they are made
to or through a foreign office of a broker. However, if such broker is a United
States person, a controlled foreign corporation for United States tax purposes,
a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period or, in the case of payments made after December 31, 1999, a foreign
partnership at least 50 percent of the capital or profits interests in which are
owned by United States persons or that is engaged in the conduct of a United
States trade or business, information reporting will be required unless the
broker has in its records documentary evidence that the beneficial owner is not
a United States person and certain other conditions are met or the beneficial
owner otherwise establishes an exemption. Payments to or through the United
States office of a broker will be subject to backup withholding tax and
information reporting unless the holder certifies, under penalties of perjury,
that it is not a United States person or otherwise establishes an exemption.
United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding tax in
their particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Any amounts withheld
from a payment to a United States Alien Holder under the backup withholding tax
rules will be allowed as a credit against such United States Alien Holder's
United States federal income tax liability and may entitle such United States
Alien Holder to a refund, provided that the required information is furnished to
the IRS.
PLAN OF DISTRIBUTION
Under the terms of a Distribution Agreement, dated September 24, 1998, the
Notes are being offered on a continuing basis by the Company exclusively through
the Agents, who have agreed to use reasonable efforts to solicit offers to
purchase such Notes. The Company will have the sole right to accept offers to
purchase Notes and may reject any such offer in whole or in part. An Agent will
have the right to reject any offer to purchase Notes solicited by it in whole or
in part. Payment of the purchase price of the Notes will be required to be made
in immediately available funds. Unless otherwise specified in the applicable
Pricing Supplement, the Company will pay an Agent, in connection with sales of
Notes resulting from a solicitation made or an offer to purchase received by
such Agent, a commission ranging from .125% to .750% of the initial offering
price of the Notes to be sold, depending upon the maturity of the Notes;
PROVIDED, HOWEVER, that commissions with respect to Notes having a maturity of
30 years or greater will be negotiated. The Company may appoint other agents to
solicit sales of the Notes on the same terms and conditions as the Agents have
agreed to. The names of any agent so appointed will be set forth in the
applicable Pricing Supplement.
The Company may also sell Notes to an Agent as principal for its own account
at discounts to be agreed upon at the time of sale. Such Notes may be resold to
investors and other purchasers at a fixed offering price or at prevailing market
prices, or prices related thereto at the time of such resale or otherwise, as
determined by the Agent and specified in the applicable Pricing Supplement. An
Agent may offer the Notes it has purchased as principal to other dealers. An
Agent may sell the Notes to any dealer at a discount and, unless otherwise
specified in the applicable Pricing Supplement, such discount allowed to any
dealer will not be in excess of the discount to be received by such Agent from
the Company. After the
S-34
<PAGE>
initial public offering of Notes that are to be resold by the Agents to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
In order to facilitate the offering of the Notes, the Agents may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Agents may overallot in connection with the offering,
creating a short position in the Notes for their own account. In addition, to
cover overallotments or to stabilize the price of the Notes, the Agents may bid
for, and purchase, the Notes in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the Notes in the offering, if the syndicate repurchases
previously distributed the Notes in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Notes above independent market
levels. The Agents are not required to engage in these activities, and may end
any of these activities at any time.
The Agents may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company and the Agents have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments made in
respect thereof. The Company has also agreed to reimburse the Agents for certain
expenses.
Unless otherwise provided in the applicable Pricing Supplement, the Company
does not intend to apply for the listing of the Notes on a national securities
exchange, but has been advised by the Agents that the Agents intend to make a
market in the Notes, as permitted by applicable laws and regulations. The Agents
are not obligated to do so, however, and the Agents may discontinue making a
market at any time without notice. No assurance can be given as to the liquidity
of any trading market for the Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities pursuant to the Indentures
referred to herein. Any Debt Securities sold by the Company pursuant to the
Prospectus, will reduce the aggregate offering price of Notes that may be
offered by this Prospectus Supplement and the Prospectus.
The Agents and/or certain of their affiliates may engage in transactions
with and perform services for the Company and certain of its affiliates in the
ordinary course of business. An affiliate of Chase Securities Inc. is Trustee
under the Indenture for the Notes.
In the event that an amount in excess of 10% of the aggregate net proceeds
from any offering of Notes is used to pay indebtedness owed to affiliates of any
Agent, any such sale of Notes will be made in accordance with Rule 2710(c)(8) of
the NASD Conduct Rules.
VALIDITY OF NOTES
The validity of the securities offered by this Prospectus Supplement will be
passed upon for the Company by Solomon B. Watson IV, Senior Vice President and
General Counsel of the Company. Certain legal matters will be passed on for the
Company by Morgan, Lewis & Bockius LLP, New York, New York, and for the
underwriters by Sullivan & Cromwell, New York, New York. The opinions of Solomon
B. Watson IV, Morgan, Lewis & Bockius LLP and Sullivan & Cromwell will be
conditioned upon, and subject to certain assumptions regarding, future action
required to be taken by the Company and the Trustee in connection with the
issuance and sale of any particular Notes, the specific terms of Notes and other
matters which may affect the validity of Notes but which cannot be ascertained
on the date of such opinions.
S-35
