<PAGE>
Filed Pursuant to
Rule 424(b)(5)
----------------------
PROSPECTUS SUPPLEMENT Registration Statement
(File No. 33-57671)
(TO PROSPECTUS DATED MARCH 24, 1995)
$250,000,000
LOGO
MEDIUM-TERM NOTES, SERIES D
DUE FROM 9 MONTHS TO 15 YEARS FROM THE DATE OF ISSUE
--------------
Comdisco, Inc. (the "Company") may offer from time to time its Medium-Term
Notes, Series D (the "Notes"), up to $250,000,000 in aggregate principal
amount (or gross proceeds in the case of Notes issued at an original issue
discount), or the equivalent in foreign or composite currencies. Each Note
will mature on a date from 9 months to 15 years from the date of its issue as
selected by the initial purchaser and agreed to by the Company. Each Note may
be subject to redemption at the option of the Company or repayment at the
option of the Holder, prior to its stated maturity, as set forth on the face
thereof and specified in a Pricing Supplement accompanying this Prospectus
Supplement ("Pricing Supplement"). Unless otherwise indicated in the
applicable Pricing Supplement, the Notes will be issued only in fully
registered form and in denominations of $1,000 and any integral multiples
thereof. The Notes will bear interest at fixed or floating rates ("Fixed Rate
Notes" and "Floating Rate Notes", respectively). The interest rates or the
method of determining the interest rates, the issue prices, and the stated
maturity for each Note will be established by the Company at the date of
issuance of such Note and will be indicated in the applicable Pricing
Supplement. Interest rates and interest rate formulas are subject to change by
the Company but no such change will affect any Note already issued or which
the Company has agreed to issue.
Interest on Fixed Rate Notes will accrue from their dates of issue and,
unless otherwise provided in the applicable Pricing Supplement, will be
payable semi-annually in arrears on each March 1 and September 1 and at
maturity or, if applicable, upon redemption or optional repayment. The
applicable Pricing Supplement will specify whether a Floating Rate Note is a
Regular Floating Rate Note, a Floating Rate/Fixed Rate Note or an Inverse
Floating Rate Note and whether the rate of interest thereon will be determined
by reference to one or more of the Commercial Paper Rate, the Federal Funds
Rate, LIBOR, the Prime Rate, the Treasury Rate, the Eleventh District Cost of
Funds Rate, or the CMT Rate or any other interest rate basis or formula (each,
an "Interest Rate Basis"), and may be adjusted by a Spread and/or Spread
Multiplier, as such terms are defined herein. Interest on each Floating Rate
Note will accrue from its date of issue and, unless otherwise specified in the
applicable Pricing Supplement, will be payable in arrears monthly, quarterly,
semi-annually or annually, as set forth in the applicable Pricing Supplement,
and at maturity, or, if applicable, upon redemption or optional repayment.
Unless otherwise specified in the applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semi-annually or annually, as set forth therein and specified in
the applicable Pricing Supplement. The Notes may also be issued with original
issue discount, and such Notes may or may not pay any interest. See
"Description of the Notes".
If the Notes are to be denominated in a foreign or composite currency
("Foreign Currency Notes"), the provisions with respect thereto will be set
forth in a foreign currency supplement hereto ("Foreign Currency Prospectus
Supplement"), including currency exchange rate information and material tax
considerations.
Each Note will be represented by either a global note (a "Global Note"),
registered in the name of The Depository Trust Company (the "Depositary") or
its nominee (each such Note represented by a Global Note referred to herein as
a "Book-Entry Note") and deposited with the Depositary, or a certificate
issued in definitive form ("Certificated Note"), as set forth in the
applicable Pricing Supplement. An interest in a Book-Entry Note will be shown
only on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. The Company currently
intends to issue all Notes which can be so issued as Book-Entry Notes. See
"Description of the Notes--Book-Entry Notes".
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
AGENTS' DISCOUNTS
PRICE TO AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1)(2) COMPANY(1)(2)(3)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........................................ 100% .125%-.625% 99.375%-99.875%
-----------------------------------------------------------------------------------------------------------
Total(4)........................................ $250,000,000 $312,500-$1,562,500 $248,437,500-$249,687,500
-----------------------------------------------------------------------------------------------------------
</TABLE>
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(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Smith Barney Inc., Salomon Brothers Inc, Morgan Stanley & Co.
Incorporated, or UBS Securities Inc. (the "Agents"), will purchase the
Notes, as principal, from the Company for resale to one or more investors
or other purchasers at varying prices related to prevailing market prices
at the time of resale, to be determined by such Agent, or, if so specified
in an applicable Pricing Supplement, for resale at a fixed public offering
price. Unless otherwise specified in the applicable Pricing Supplement,
any Note sold to an Agent as principal will be purchased by such Agent at
a price equal to 100% of the principal amount thereof less a percentage
equal to the commission applicable to an agency sale of a Note of
identical maturity. If agreed to by the Company and an Agent, the Agent
may utilize its reasonable efforts on an agency basis to solicit offers to
purchase Notes at 100% of the principal amount thereof, unless otherwise
specified in an applicable Pricing Supplement. The Company will pay a
commission to each Agent, ranging from .125% to .625% of the principal
amount of any Note, depending upon the maturity of the Note, sold through
such Agent on behalf of the Company. Commissions with respect to Foreign
Currency Notes may differ, as set forth in the Foreign Currency Prospectus
Supplement. No commission will be payable on any sales made directly by
the Company.
(2) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(3) Assuming the Notes are issued at 100% and before deducting other expenses
payable by the Company estimated at $485,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
--------------
The Notes are being offered on a continuing basis by the Company through the
Agents. The Company may also sell Notes to any Agent acting as principal for
resale to one or more investors or other purchasers. The Company also may sell
Notes directly to one or more investors or other purchasers on its own behalf
in those jurisdictions where it is authorized to do so and through one or more
other agents identified in any applicable Pricing Supplement. The Company
reserves the right to withdraw, cancel or modify the offer made hereby without
notice. The Company or the Agent which solicits any offer may reject such
offer to purchase Notes, in whole or in part. See "Plan of Distribution".
--------------
MERRILL LYNCH & CO. SMITH BARNEY INC.
SALOMON BROTHERS INC
MORGAN STANLEY & CO. UBS SECURITIES INC.
INCORPORATED
--------------
The date of this Prospectus Supplement is March 24, 1995.
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered hereby
(referred to in the accompanying Prospectus as the "Debt Securities")
supplements, and to the extent, if any, inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which description reference is made. Unless
otherwise specified in the applicable Pricing Supplement, the Notes will have
the terms and conditions set forth below. Capitalized terms not defined herein
have the meanings assigned to such terms in the Prospectus.
GENERAL
The Notes offered hereby will be issued under an Indenture, dated as of
February 1, 1995 (the "Indenture"), between the Company and The Fuji Bank and
Trust Company, as Trustee. The Notes constitute a single series of Debt
Securities for purposes of the Indenture, currently limited to $250,000,000 in
aggregate principal amount (or gross proceeds in the case of Notes issued at an
original issue discount), or its equivalent in one or more foreign or composite
currencies, subject to reduction as a result of future sales of the Company's
Debt Securities described in the accompanying Prospectus. The foregoing limit,
however, may be increased by the Company if, in the future, it determines to
issue additional Notes. The Notes will be offered by the Company under the
Registration Statement on a continuing basis and each Note will mature on any
day from nine months to 15 years from the date of its issue (each, a "Stated
Maturity Date"), as selected by the initial purchaser of such Note and agreed
to by the Company, as specified in the applicable Pricing Supplement. Unless
otherwise specified in an applicable Pricing Supplement, interest-bearing Notes
will either be Fixed Rate Notes or Floating Rate Notes as specified in the
applicable Pricing Supplement. Notes may be issued at significant discounts
from their principal amount payable at the Stated Maturity Date (or on any
prior date on which the principal or an installment of principal of a Note
becomes due and payable, whether by the declaration of acceleration, call for
redemption at the option of the Company, repayment at the option of the holder,
or otherwise (the Stated Maturity Date or such prior date, as the case may be,
is herein referred to as the "Maturity Date" with respect to the principal
repayable on such date)), and some Notes may not bear interest.
Unless otherwise specified in the applicable Pricing Supplement, each Note,
other than a Foreign Currency Note, will be issuable only in fully registered
form as a Book-Entry Note or Certificated Note in denominations of $1,000 and
any integral multiples thereof. The authorized denominations of Foreign
Currency Notes will be indicated in the applicable Pricing Supplement. Interest
rates offered by the Company with respect to the Notes may differ depending
upon the aggregate principal amount of Notes subject to purchase in any single
transaction. Payments of principal of and interest on the Notes will be payable
in U.S. dollars, except as may otherwise be provided in the applicable Pricing
Supplement and Foreign Currency Prospectus Supplement. References herein to "$"
and "dollars" are references to U.S. dollars.
Except as set forth in the Prospectus under "Description of Debt Securities--
Global Securities" and below under "Book-Entry Notes", Book-Entry Notes will
not be issuable in certificated form. It is currently contemplated that only
Notes that are denominated and payable in U.S. dollars will be issued as Book-
Entry Notes.
The Notes are not secured by any lien but rank on a parity with other
unsecured and unsubordinated indebtedness of the Company. The Company also has
outstanding other unsecured indebtedness, as well as secured indebtedness. See
"Selected Financial Data" in the Prospectus.
Unless otherwise indicated in an applicable Pricing Supplement, payments of
principal of and any premium and interest on any Note, other than Book-Entry
Notes, will be payable, the transfer of the Notes, other than Book-Entry Notes,
will be registrable, and Notes, other than Book-Entry Notes, will be
exchangeable for Notes bearing identical terms and provisions, at the office of
the Trustee in The City of New York designated for such purpose which on the
date of this Prospectus Supplement is Two World Trade
S-2
<PAGE>
Center, New York, New York 10048; provided, however, that, at the option of the
Company, payment 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), may be made by check mailed to the address of the
person entitled thereto as shown on the Security Register. Payment of principal
and interest at maturity or upon redemption will be made in immediately
available funds. Notwithstanding the foregoing, a Holder of $10,000,000 or more
in aggregate principal amount of U.S. dollar denominated Notes having the same
Interest Payment Date shall upon written request be entitled to receive
payments of interest (other than at maturity or upon redemption or repayment)
by wire transfer of immediately available funds. With respect to payments of
interest on Book-Entry Notes and transfers of Book-Entry Notes and exchanges of
permanent Global Notes representing Book-Entry Notes, see "Book-Entry Notes"
below.
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. If so agreed upon by the Company and
the purchaser thereof, a Note will be redeemable on and after a date fixed at
the time of sale and specified in the applicable Pricing Supplement (the
"Initial Redemption Date") either in whole or in part, at the option of the
Company, on written notice given not more than 60 nor less than 30 days prior
to the date of redemption by the Company to the Holder thereof in accordance
with the provisions of the Indenture. On and after the Initial Redemption Date,
if any, such Note will be redeemable in increments of $1,000 (or the minimum
denomination specified in the applicable Pricing Supplement) at the option of
the Company at a redemption price, including any premium, as described below,
determined in accordance with the following paragraph (the "Redemption Price"),
together with interest thereon. If less than all Notes are to be redeemed, the
terms of the Notes to be so redeemed shall be selected by the Company. If the
Company elects to redeem any Note in part only, the remaining principal amount
of such Note will be an authorized denomination of such Note. If no Initial
Redemption Date is specified in the applicable Pricing Supplement, such Note
will not be redeemable prior to its Stated Maturity Date.
Unless otherwise indicated in the applicable Pricing Supplement, the
Redemption Price for each Note subject to redemption shall initially be equal
to a certain percentage (the "Initial Redemption Percentage") of the principal
amount of such Note to be redeemed and shall decline at each anniversary of the
Initial Redemption Date with respect to such Note by a percentage (the "Annual
Redemption Percentage Reduction") of the principal amount to be redeemed until
the Redemption Price is 100% of such principal amount. The Initial Redemption
Percentage and any Annual Redemption Percentage Reduction with respect to each
Note subject to redemption prior to maturity will be fixed at the time of sale
and set forth in the Note and any applicable Pricing Supplement.
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be subject to repayment by the Company at the option of the
Holders thereof in accordance with the terms of the Notes on the optional
repayment date or dates, if any, as agreed upon by the Company and the
purchasers at the time of sale and specified in the applicable Pricing
Supplement (the "Optional Repayment Dates"). If no Optional Repayment Date is
specified with respect to a Note, such Note will not be repayable by the
Company at the option of the Holder thereof prior to the Stated Maturity Date.
On any Optional Repayment Date with respect to a Note, such Note will be
repayable in whole or in part in increments of $1,000 (or the minimum
denomination specified in the applicable Pricing Supplement) provided that any
remaining principal amount of such Note will be an authorized denomination of
such Note. Unless otherwise specified in the applicable Pricing Supplement, the
repayment price for any Note to be repaid means an amount equal to the sum of
(i) 100% of the unpaid principal amount or the portion thereof to be repaid
plus (ii) accrued but unpaid interest to the date of repayment. Information
with respect to the repayment price for Indexed Notes (as defined below) shall
be set forth in the applicable Pricing Supplement. For any Note to be repaid,
such Note must be received, together with the form thereon entitled "Option to
Elect Repayment" duly completed, by the Trustee at its office (or such other
address of which the Company shall
S-3
<PAGE>
from time to time notify the Holders) not more than 60 nor less than 20 days
prior to the date of repayment. Exercise of such repayment option by the Holder
will be irrevocable.
While Book-Entry Notes are represented by the Global Notes held by or on
behalf of the Depositary, and registered in the name of the Depositary or the
Depositary's nominee, the option for repayment may be exercised by the
applicable Participant (as defined below) that has an account with the
Depositary, on behalf of the Beneficial Owners (as defined below) of the Global
Note or Notes representing such Book-Entry Notes, by delivering a written
notice substantially similar to the above mentioned form to the Trustee at its
office (or such other address of which the Company shall from time to time
notify the Holders), not more than 60 nor less than 20 days prior to the date
of repayment. Notices of elections from Participants on behalf of Beneficial
Owners of the Global Note or Notes representing such Book-Entry Notes to
exercise their option to have such Book-Entry Notes repaid must be received by
the Trustee, not later than 5:00 p.m., New York City time, on the last day for
giving such notice. In order to ensure that a notice is received by the Trustee
on a particular day, the Beneficial Owner of the Global Note or Notes
representing such Book-Entry Notes must so direct the applicable Participant
before such Participant's deadline for accepting instructions for that day.
Different firms may have different deadlines for accepting instructions from
their customers. Accordingly, Beneficial Owners of the Global Note or Notes
representing Book-Entry Notes should consult the Participants through which
they own their interest therein for the respective deadlines for such
Participants. All notices shall be executed by a duly authorized officer of
such Participant (with signature guaranteed) and shall be irrevocable. In
addition, Beneficial Owners of the Global Note or Notes representing Book-Entry
Notes shall effect delivery at the time such notices of election are given to
the Depositary by causing the applicable Participant to transfer such
Beneficial Owner's interest in the Global Note or Notes representing such Book-
Entry Notes, on the Depositary's records, to the Trustee. See "Book-Entry
Notes".
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended, and any other securities
laws or regulation in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Company may, at the discretion
of the Company, be held, resold or surrendered to the Trustee for cancellation.
INTEREST AND INTEREST RATES
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest at either (a) a fixed rate of interest
per annum (a "Fixed Rate Note"), which may be zero, or (b) a floating rate (a
"Floating Rate Note"), determined by reference to an interest rate formula,
plus or minus the Spread, if any, and/or multiplied by the Spread Multiplier,
if any, in the manner specified in the applicable Pricing Supplement and in the
Note.
Each Note will bear interest from the date of issue, or, except as otherwise
specified herein with respect to certain Floating Rate Notes, from the most
recent Interest Payment Date to which interest on such Note has been paid or
duly provided for at the annual rate, or at a rate calculated pursuant to an
interest rate formula, stated therein and in the applicable Pricing Supplement,
until the principal thereof is paid or made available for payment. Interest
will be payable on each Interest Payment Date and at maturity (or, if
applicable, on the applicable Redemption Date or Optional Repayment Date, if a
Note is redeemed or repaid by the Company prior to maturity). Interest will be
payable to the person in whose name a Note (or any Predecessor Security, as
defined in the Indenture) is registered at the close of business on the Regular
Record Date next preceding each Interest Payment Date; provided, however,
interest payable at maturity (or, if applicable, on the applicable Redemption
Date or Optional Repayment Date, if a Note is redeemed or repaid by the Company
prior to maturity) will be payable to the person to whom principal shall be
payable. The first payment of interest on any Note issued between a Regular
Record Date and an Interest Payment Date
S-4
<PAGE>
will be made on the Interest Payment Date following the next succeeding Regular
Record Date to the registered owner on such next succeeding Regular Record
Date. Interest rates and interest rate bases are subject to change by the
Company from time to time but no such change will affect any Note already
issued or to which an offer to purchase has been accepted by the Company. The
Interest Payment Dates and the Regular Record Dates for Fixed Rate Notes shall
be as described below under "Fixed Rate Notes". The Interest Payment Dates for
Floating Rate Notes shall be as indicated in the applicable Pricing Supplement
and in such Note, and unless otherwise specified in the applicable Pricing
Supplement, each Regular Record Date for a Floating Rate Note will be the
fifteenth calendar day (whether or not a Business Day) next preceding each
Interest Payment Date.
Unless otherwise specified in an applicable Pricing Supplement, all
percentages resulting from any calculation will be rounded, if necessary, to
the nearest one hundred-thousandth of a percentage point, with five one-
millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545)
being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544) being
rounded to 9.87654% (or .0987654)), and all amounts used in or resulting from
such calculation will be rounded, in the case of U.S. dollars, to the nearest
cent or, in the case of a currency other than U.S. dollars, to the nearest unit
(with one-half cent or unit being rounded upward).
As used herein, unless otherwise specified in the applicable Pricing
Supplement, "Business Day" means any day, other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which banking institutions are
authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that, with respect to Foreign Currency
Notes the payment of which is to be made in a Specified Currency other than
U.S. dollars, such day is also not a day on which banking institutions are
authorized or required by law, regulation or executive order to close in the
Principal Financial Center (as defined below) of the country issuing such
Specified Currency (or, in the case of the European Currency Unit ("ECU"), is
not a day designated as an ECU Non-Settlement Day on the display designated as
"ISDE" on the Reuter Monitor Money Rates Service (or a day so designated by the
ECU Banking Association) or, if ECU Non-Settlement Days do not appear on that
page (and are not so designated), is not a day on which payments in ECU cannot
be settled in the international interbank market); provided, further, that,
with respect to Notes as to which LIBOR is an applicable Interest Rate Basis,
such day is also a London Business Day (as defined below). "London Business
Day" means any day (i) if the Index Currency (as defined below) is other than
ECU, on which dealings in such Index Currency are transacted in the London
interbank market or (ii) if the Index Currency is ECU, that is not designated
as an ECU Non-Settlement Day on the display designated as "ISDE" on the Reuter
Monitor Money Rates Service (or a day so designated by the ECU Banking
Association) or, if ECU Non-Settlement Days do not appear on that page (and are
not so designated), is not a day on which payments in ECU cannot be settled in
the international interbank market.
A Floating Rate Note may also have either or both of the following: (i) a
maximum interest rate, or ceiling, that may accrue during any interest period
and (ii) a minimum interest rate, or floor, that may accrue during any interest
period. In addition to any maximum interest rate that may apply to any Floating
Rate Note, the interest rate on Floating Rate Notes will in no event be higher
than the maximum rate permitted by New York law, as the same may be modified by
United States law of general application.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issue at the annual
rate stated on the face thereof and in the applicable Pricing Supplement until
the principal thereof is paid in full or made available for payment. Unless
otherwise specified in the applicable Pricing Supplement, Interest Payment
Dates for the Fixed Rate Notes will be March 1 and September 1 of each year and
at maturity (or, if applicable, any Redemption Date or Optional Repayment Date,
if a Fixed Rate Note is redeemed or repaid by the Company prior to maturity).
The Regular Record Dates for such Notes will be the February 15 and August 15
next preceding the March 1 and September 1 Interest Payment Dates. The first
payment of interest on any Fixed Rate Note originally issued between a Regular
Record Date and an Interest Payment Date will be made on the Interest Payment
Date following the next succeeding Regular Record Date to the registered owner
on
S-5
<PAGE>
such next succeeding Regular Record Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
and paid on the basis of a 360-day year consisting of twelve 30-day months.
Interest payments on an Interest Payment Date will include interest accrued
from, and including, the immediately preceding Interest Payment Date in respect
of which interest has been paid (or from and including the date of issue if no
interest has been paid with respect to such Note) to, but excluding, the next
succeeding Interest Payment Date or Maturity Date, as the case may be. Any
payment of principal or interest required to be made on an Interest Payment
Date or at the stated maturity date of a Fixed Rate Note (or, if applicable,
the Redemption Date or Optional Repayment Date, if a Fixed Rate Note is
redeemed or repaid by the Company prior to maturity) 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 maturity date (or, if applicable, the Redemption Date or Optional
Repayment Date, if a Fixed Rate Note is redeemed or repaid by the Company prior
to maturity), as the case may be, and no interest shall accrue for the period
from and after such Interest Payment Date or maturity date (or, if applicable,
the Redemption Date or Optional Repayment Date, if a Fixed Rate Note is
redeemed or repaid by the Company prior to maturity).
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will designate one or more of the following Interest Rate Bases as applicable
to the relevant Note: (a) the Commercial Paper Rate, in which case the Note
shall be a "Commercial Paper Rate Note", (b) the Federal Funds Rate, in which
case the Note shall be a "Federal Funds Rate Note", (c) LIBOR, in which case
the Note shall be a "LIBOR Note", (d) the Prime Rate, in which case the Note
shall be a "Prime Rate Note", (e) the Treasury Rate, in which case the Note
shall be a "Treasury Rate Note", (f) the Eleventh District Cost of Funds Rate,
in which case the Note shall be a "Eleventh District Cost of Funds Rate Note",
(g) the CMT Rate, in which case such Note will be a "CMT Rate Note", or (h)
such other interest rate basis or formula as is set forth in such Pricing
Supplement; provided, however, that with respect to a Floating Rate/Fixed Rate
Note, the interest rate commencing on the Fixed Rate Commencement Date and
continuing until maturity shall be the Fixed Interest Rate, if such rate is
specified in the applicable Pricing Supplement, or if no such Fixed Interest
Rate is so specified, the interest rate in effect thereon on the Business Day
immediately preceding the Fixed Rate Commencement Date.
In addition, the applicable Pricing Supplement will specify certain other
terms with respect to which such Floating Rate Note is being delivered,
including: whether such Floating Rate Note is a "Regular Floating Rate Note," a
"Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate Note", the Spread
and/or Spread Multiplier, if any, the maximum or minimum interest rate
limitation, if any, the period to maturity of the instrument or obligation with
respect to which the Interest Basis or Bases will be calculated (the "Index
Maturity"), Initial Interest Rate, if any, Interest Payment Dates, Fixed Rate
Commencement Date, if any, Fixed Interest Rate, if applicable, Regular Record
Dates, Interest Reset Dates, Redemption Dates and Optional Repayment Dates, and
if one or more of the applicable Interest Rate Bases is LIBOR, the Index
Currency and the Designated LIBOR Page or the Designated CMT Maturity Index and
Designated CMT Telerate Page, respectively, as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, will bear interest at the rate determined by reference
to the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date, the rate
at which interest on such Regular Floating Rate Note shall be payable shall
be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate.
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<PAGE>
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the period, if
any, from the date of issue to the first Interest Reset Date will be the
Initial Interest Rate and (z) the interest rate in effect for the period
commencing on the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement or, if no such Fixed Interest Rate is so specified, the
interest rate in effect thereon on the Business Day immediately preceding
the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the applicable Pricing Supplement minus the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Pricing Supplement, the interest rate
thereon will not be less than zero percent. Commencing on the first
Interest Reset Date, the rate at which interest on such Inverse Floating
Rate Note is payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period from the
date of issue to the first Interest Reset Date will be the Initial Interest
Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate Note,
and the "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases by which such Interest Rate Basis or Bases will be multiplied to
determine the applicable interest rate on such Floating Rate Note.
Notwithstanding the foregoing, if such Floating Rate is designated as having
an Addendum attached as specified on the face thereof, such Floating Rate Note
shall bear interest in accordance with the terms described in such Addendum and
the applicable Pricing Supplement.
Except as otherwise specified in the applicable Pricing Supplement and in the
applicable Floating Rate Note, or as provided below, interest on Floating Rate
Notes will be payable, in the case of Floating Rate Notes which are reset
daily, weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year; in the case of
Floating Rate Notes which are reset quarterly, on the third Wednesday of each
March, June, September and December of each year; in the case of Floating Rate
Notes which are reset semi-annually, on the third Wednesday of the two months
of each year specified in the Floating Rate Note and in the applicable Pricing
Supplement; and in the case of Floating Rate Notes which are reset annually, on
the third Wednesday of the month specified in the Floating Rate Note and in the
applicable Pricing Supplement (each an "Interest Payment Date"), and in each
case, at its Stated Maturity Date (or, if applicable, on the Redemption Date or
Optional Repayment Date, if a Floating Rate Note is redeemed or repaid by the
Company prior to its Stated Maturity Date). If any Interest Payment Date for
any Floating Rate Note, other than an Interest Payment Date occurring at a
Maturity Date, would otherwise be a day that is not a Business Day for such
Floating Rate Note, the Interest Payment Date for such Floating Rate Note shall
be postponed to the next day that is a Business Day for such Floating Rate
Note, except that in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Payment Date shall be the
immediately preceding Business Day. If the Maturity Date for any Floating Rate
Note would otherwise be a day that is not a Business Day for such Floating Rate
Note, principal, premium, if any, and interest payable for such Floating Rate
Note will be paid on the next day that is a Business Day with the same force
and effect as if made on the Maturity Date, and no interest on such payment
will accrue for the period from and after the Maturity Date.
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The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semi-annually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). The Interest Reset Date will be, unless
otherwise specified in the applicable Pricing Supplement, in the case of
Floating Rate Notes which are reset daily, each Business Day; in the case of
Floating Rate Notes which are reset weekly, the Wednesday of each week (with
the exception of weekly reset Treasury Rate Notes which will be reset the
Tuesday of each week, except as specified below); in the case of Floating Rate
Notes which are reset monthly, the third Wednesday of each month (with the
exception of monthly reset Eleventh District Cost of Funds Rate Notes, which
will reset on the first calendar day of the month); in the case of Floating
Rate Notes which are reset quarterly, the third Wednesday of each March, June,
September and December; in the case of Floating Rate Notes which are reset
semi-annually, the third Wednesday of the two months specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes which are
reset annually, the third Wednesday of the month as specified in the applicable
Pricing Supplement; provided however, that, with respect to Floating Rate/Fixed
Rate Notes, the fixed rate of interest in effect for the period from the Fixed
Rate Commencement Date until its Stated Maturity Date (or, if applicable, on
the Redemption Date or Optional Repayment Date if a Note is redeemed or repaid
by the Company prior to its Stated Maturity Date) shall be the Fixed Interest
Rate or the interest rate in effect on the Business Day immediately preceding
the Fixed Rate Commencement Date, as specified in the applicable Pricing
Supplement; and provided further, that the interest rate in effect from the
date of issue to the first Interest Reset Date with respect to a Floating Rate
Note (the "Initial Interest Rate") will be as set forth in the applicable
Pricing Supplement if such rate is available. If any Interest Reset Date for
any Floating Rate Note would otherwise be a day that is not a Business Day for
such Floating Rate Note, the Interest Reset Date for such Floating Rate Note
shall be postponed to the next succeeding Business Day with respect to such
Note, except that if such Note is a LIBOR Note, and the next succeeding
Business Day falls in the next succeeding calendar month, such Interest Reset
Date shall be the immediately preceding Business Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note or any Floating Rate Note for which the interest
rate is determined with reference to the Commercial Paper Rate (the "Commercial
Paper Interest Determination Date"), for a Federal Funds Rate Note or any
Floating Rate Note for which the interest rate is determined with reference to
the Federal Funds Rate (the "Federal Funds Interest Determination Date"), or
for a Prime Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Prime Rate (the "Prime Rate Interest
Determination Date"), or for a CMT Rate Note, or any Floating Rate Note for
which the interest rate is determined with reference to the CMT Rate (the "CMT
Rate Interest Determination Date"), will be the second Business Day preceding
to the Interest Reset Date. The Interest Determination Date pertaining to an
Interest Reset Date for a LIBOR Note or any Floating Rate Note for which the
interest rate is determined with reference to LIBOR (the "LIBOR Interest
Determination Date") will be the second London Business Day immediately
preceding the Interest Reset Date with respect to such Note, unless the Index
Currency (as defined below) is British pounds sterling, in which case the
Interest Determination Date will be the applicable Interest Reset Date. The
Interest Determination Date pertaining to an Interest Reset Date for an
Eleventh District Cost of Funds Rate Note or any Floating Rate Note for which
the interest rate is determined with reference to the Eleventh District Cost of
Funds Rate (the "Eleventh District Cost of Funds Rate Interest Determination
Date") will be the last working day of the month immediately preceding the
applicable Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined below).
The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Treasury Rate (the "Treasury Interest
Determination Date") will be the day of the week on which Treasury bills (as
defined below) would normally be auctioned in the week in which such Interest
Reset Date falls. Treasury bills are usually sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is usually
held on the following Tuesday, except that such auction may be held on the
preceding Friday. If, as the result of a legal holiday, an auction is so held
on the preceding Friday, such Friday will be the Treasury Interest
Determination Date pertaining to the Interest Reset Date occurring in the next
succeeding week. If
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an auction date shall fall on a day which would otherwise be an Interest Reset
Date for a Treasury Rate Note, then such Interest Reset Date shall instead be
the first Business Day immediately following such auction date. The Interest
Determination Date pertaining to a Floating Rate Note the interest rate of
which is determined by reference to two or more Interest Rate Bases will be the
most recent Business Day which is at least two Business Days prior to the
applicable Interest Reset Date for such Floating Rate Note on which each
Interest Rate Basis is determinable. Each Interest Rate Basis will be
determined on such date, and the applicable interest rate will take effect on
the applicable Interest Reset Date.
Unless otherwise indicated in the Note and in the applicable Pricing
Supplement, interest payments on an Interest Payment Date for a Floating Rate
Note will include interest accrued from, and including, the next preceding
Interest Payment Date in respect of which interest has been paid (or from and
including the date of issue if no interest has been paid with respect to such
Floating Rate Note) to, but excluding, the next succeeding Interest Payment
Date or maturity (or, if applicable, the Redemption Date or Optional Repayment
Date if a Note is redeemed or repaid by the Company prior to maturity) as the
case may be. The interest for any period is calculated by multiplying the face
amount of a Note by an accrued interest factor. Such accrued interest factor is
computed by adding the interest factor for each day in the period for which
interest is being calculated. Unless otherwise specified in the applicable
Pricing Supplement, the interest factor for each such day will be computed by
dividing the interest rate applicable to such day by 360, in the case of Notes
for which the Interest Rate Basis of the Commercial Paper Rate, Eleventh
District Cost of Funds Rate, Federal Funds Rate, LIBOR or the Prime Rate, or by
the actual number of days in the year, in the case of Notes for which the
Interest Rate Basis of the CMT Rate or Treasury Rate. Unless otherwise
specified in an applicable Pricing Supplement, the interest factor for Notes
for which the interest rate is calculated with reference to two or more
Interest Rate Bases will be calculated in each period in the same manner as if
only one of the applicable Interest Rate Bases applied as specified in the
applicable Pricing Supplement and the Notes. The interest rate in effect on
each day will be (a) if such day is an Interest Reset Date, the interest rate
with respect to the Interest Determination Date pertaining to such Interest
Reset Date or, (b) if such day is not an Interest Reset Date, the interest rate
with respect to the Interest Determination Date pertaining to the next
preceding Interest Reset Date, subject in either case to any maximum or minimum
interest rate limitation referred to above and to any adjustment by a Spread
and/or a Spread Multiplier referred to above.
Unless otherwise provided in the applicable Pricing Supplement, the Trustee
will be the calculation agent (the "Calculation Agent") with respect to the
Notes and will determine the interest rate for each Interest Reset Date as
described below. Upon the request of the Holder of any Floating Rate Note, the
Calculation Agent will provide the interest rate then in effect and, if then
determined, the interest rate which will become effective on the next Interest
Reset Date with respect to such Floating Rate Note. Unless otherwise provided
in the applicable Pricing Supplement, the "Calculation Date", if applicable,
pertaining to any Interest Determination Date will be the earlier of (i) the
tenth calendar day after such Interest Determination Date or, if any 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 (or, if applicable, on the Redemption Date or Optional Repayment
Date if a Note is redeemed or repaid by the Company prior to maturity).
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at interest rates
calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, specified on the face of such Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as defined below) of the rate on that
date for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement, as such rate is published by the Board of Governors of the
Federal Reserve
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System in its weekly statistical release entitled "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication
("H.15(519)"), under the heading "Commercial Paper". In the event that such
rate is not published prior to 3:00 P.M., New York City time, on the
Calculation Date pertaining to that Commercial Paper Interest Determination
Date, then the Commercial Paper Rate will be the Money Market Yield on that
Commercial Paper Interest Determination Date of the rate for commercial paper
of the specified Index Maturity as published by the Federal Reserve Bank of New
York in its daily statistical release, entitled "Composite 3:30 P.M. Quotations
for U.S. Government Securities," or any successor publication ("Composite
Quotations"), under the heading "Commercial Paper" (with an Index Maturity of
one month or three months being deemed to be equivalent to an Index Maturity of
30 days or 90 days, respectively). If such rate was neither published in
H.15(519) nor in Composite Quotations by 3:00 P.M., New York City time, on such
Calculation Date, the Commercial Paper Rate for that Commercial Paper Interest
Determination Date will be calculated by the Calculation Agent and will be the
Money Market Yield of the arithmetic mean of the offered rates as of 11:00
A.M., New York City time, on that Commercial Paper Interest Determination Date,
of three leading dealers of commercial paper in The City of New York (which may
include one or more of the Agents or their respective affiliates) selected by
the Calculation Agent (after consultation with the Company), for commercial
paper of the Index Maturity designated in the applicable Pricing Supplement
placed for an industrial issuer whose bond rating is "AA", or the equivalent,
from a nationally recognized statistical rating agency; provided, however, that
if fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Commercial Paper Rate determined as
of such Commercial Paper Rate Interest Determination Date will be the
Commercial Paper Rate in effect on such Commercial Paper Interest Determination
Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
Money Market D X 360 X 100
Yield = ------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at interest rates calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, specified on the face of such Note and in the applicable
Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for U.S. dollar federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)". If such rate is not
published by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Federal Funds Interest Determination Date, the Federal Funds Rate will
be the rate on such Federal Funds Interest Determination Date for U.S. dollar
federal funds as published in Composite Quotations under the heading "Federal
Funds/Effective Rate". If by 3:00 P.M., New York City time, on such Calculation
Date such rate on a Federal Funds Interest Determination Date is not yet
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate for such Federal Funds Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged by three
leading brokers of federal funds transactions in The City of
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New York (which may include one or more of the Agents or their respective
affiliates) selected by the Calculation Agent (after consultation with the
Company) prior to 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date; provided, however, that if the brokers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Federal Funds Rate determined as of such Federal Funds Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Interest Determination Date.
LIBOR Notes
Each LIBOR Note will bear interest at interest rates calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, specified
on the face of such Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will be
either: (A) if "LIBOR: Reuters" is specified on the face of such Note or in
the applicable Pricing Supplement the arithmetic mean of offered rates
(unless the specified Designated LIBOR Page by its terms provides only for
a single rate, in which case such single rate shall be used) for deposits
in the Index Currency having the Index Maturity specified in the applicable
Pricing Supplement, commencing on the applicable Interest Reset Date, that
appear (or, if only a single rate is required as aforesaid, appears) on the
Designated LIBOR Page specified on the face of such Note or in the
applicable Pricing Supplement as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date, or (B) if "LIBOR: Telerate", is specified on
the face of such Note or if no method of calculation of LIBOR is specified,
the rate for deposits in the Index Currency having the Index Maturity
specified in the applicable Pricing Supplement which appears on the
Designated LIBOR Page specified on the face of such Note or in the
applicable Pricing Supplement as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two offered rates appear (unless
the specified Designated LIBOR Page by its terms provides for a single
rate), or if no rate appears, as applicable, LIBOR on such LIBOR Interest
Determination Date will be determined as if the parties had specified the
rate described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or if no rate appears, as the case may be,
on the applicable Designated LIBOR Page specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market (which may include
affiliates of certain of the Agents) selected by the Calculation Agent
(after consultation with the Company) to provide the Calculation Agent with
its offered quotation for deposits in the Index Currency for the period of
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the applicable Interest Reset Date, to prime banks in the
London interbank market at approximately 11:00 A.M., London time, on such
LIBOR Interest Determination Date and in a principal amount equal to an
amount that is representative for a single transaction in such Index
Currency in such market at such time. If at least two such quotations are
provided, then LIBOR on such LIBOR Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, then LIBOR on such LIBOR Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M., in the
applicable Principal Financial Center, on such LIBOR Interest Determination
Date by three major banks in such Principal Financial Center (which may
include affiliates of certain of the Agents), selected by the Calculation
Agent (after consultation with the Company) for loans in such Index
Currency to leading European banks, having the Index Maturity designated in
the applicable Pricing Supplement, and in a principal amount that is
representative for 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 as mentioned in this
sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
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"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: Telerate" is
specified on the face of a Note or in the applicable Pricing Supplement or
neither "LIBOR: Reuters" nor "LIBOR: Telerate" is specified as the method
for calculating LIBOR, the display on the Dow Jones Telerate Service or any
successor for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR: Reuters" is
specified in the applicable Pricing Supplement, the display on the Reuters
Monitor Money Rates Service or any successor for the purpose of displaying
the London interbank rates of major banks for the applicable Index
Currency.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to U.S.
dollars, Deutsche Marks, Dutch Guilders, Italian Lire, Swiss Francs and
ECUs, the Principal Financial Center shall be The City of New York,
Frankfurt, Amsterdam, Milan, Zurich and Brussels, respectively.
Prime Rate Notes
Each Prime Rate Note will bear interest at interest rates calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
specified on the face of such Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Prime Rate Interest Determination Date, the rate set
forth on such date in H.15(519) under the heading "Bank Prime Loan". If such
rate is not published prior to 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Prime Rate Interest Determination Date,
then the Prime Rate will be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen NYMF Page
(as defined below) as such bank's prime rate or base lending rate as in effect
for that Prime Rate Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen NYMF Page for such Prime Rate Interest
Determination Date, then the Prime Rate will be the arithmetic mean as
calculated by the Calculation Agent on such Calculation Date, of the prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks in The City of New York
(which may include affiliates of certain of the Agents) selected by the
Calculation Agent (after consultation with the Company). If fewer than four
major money center banks provide such quotations, the Prime Rate shall be
determined by the Calculation Agent and will be the arithmetic mean of four
prime rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Prime Rate Interest
Determination Date as furnished in The City of New York by the money center
banks that have provided quotations and as many substitute banks or trust
companies as necessary which are organized and doing business under the laws of
the United States, or any state thereof, having total equity capital of at
least $500 million and being subject to supervision or examination by Federal
or state authority, selected by the Calculation Agent (after consultation with
the Company) to provide such rate or rates; provided, however, that if the
substitute banks or trust companies selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Prime Rate determined
as of such Prime Rate Interest Determination Date will be the Prime Rate in
effect on such Prime Rate Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on the
Reuters Monitor Money Rates Service (or such other page as may replace the NYMF
page on that service for the purpose of displaying prime rates or base lending
rates of major United States banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest at interest rates calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
specified on the face of such Note and in the applicable Pricing Supplement.
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Unless otherwise specified in the Pricing Supplement, "Treasury Rate" means,
with respect to any Treasury Interest Determination Date, the rate applicable
to the auction held on such Treasury Interest Determination Date (an "Auction")
of direct obligations of the United States ("Treasury bills") having the Index
Maturity specified in the applicable Pricing Supplement, as published in
H.15(519) under the heading, "Treasury bills--auction average (investment)" or,
if not published by 3:00 P.M., New York City time, on the related Calculation
Date, the auction average rate of such Treasury bills (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States
Department of the Treasury. If 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 by 3:00 P.M., New York City time, on such
Calculation Date, or if no such Auction is held, then the Treasury Rate will be
calculated by the Calculation Agent and will be a yield to maturity (expressed
as a bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) of the arithmetic mean of the secondary market
bid rates as of approximately 3:30 P.M., New York City time, on such Treasury
Interest Determination Date, of three leading primary United States government
securities dealers (which may include one or more of the Agents or their
respective affiliates) selected by the Calculation Agent (after consultation
with the Company) for the issue of Treasury bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Treasury Rate
determined as of such Treasury Interest Determination Date will be the Treasury
Rate in effect on such Treasury Interest Determination Date.
Eleventh District Cost of Funds Rate
Each Eleventh District Cost of Funds Rate Note will bear interest at interest
rates calculated with reference to the Eleventh District Cost of Funds Rate and
the Spread and/or Spread Multiplier, if any, specified on the face of such Note
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Eleventh District Cost
of Funds Rate Interest Determination Date, the rate equal to the monthly
weighted average cost of funds for the calendar month immediately preceding the
month in which such Eleventh District Cost of Funds Rate Interest Determination
Date falls, as set forth under the caption "11th district" on Telerate Page
7058 (as defined below) as of 11:00 A.M., San Francisco time, on such Eleventh
District Cost of Funds Rate Interest Determination Date. If such rate does not
appear on Telerate Page 7058 on any related Eleventh District Cost of Funds
Rate Interest Determination Date, then the Eleventh District Cost of Funds Rate
for such Eleventh District Cost of Funds Rate Interest Determination Date will
be the monthly weighted average cost of funds paid by member institutions of
the Eleventh Federal Home loan Bank District that was most recently announced
(the "Index") by the FHLB of San Francisco as such cost of funds for the
calendar month immediately preceding the date of such announcement. If the FHLB
of San Francisco fails to announce such rate for the calendar month immediately
preceding such Eleventh District Cost of Funds Rate Interest Determination
Date, then the Eleventh District Cost of Funds Rate determined as of such
Eleventh District Cost of Funds Rate Interest Determination Date will be the
Eleventh District Cost of Funds Rate in effect on such Eleventh District Cost
of Funds Rate Interest Determination Date.
"Telerate Page 7058" means the display designated as page "7058" on the Dow
Jones Telerate Service (or such other page as may replace the 7058 page on that
service for the purpose of displaying the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District).
CMT Rate
Each CMT Rate Note will bear interest at the interest rates calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any,
specified on the face of such Note and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Rate Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption " . . .
Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . .
Mondays approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page
is 7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index as published in 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 CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated CMT
Maturity Index) for the CMT Rate Interest Determination Date with respect to
such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 P.M., New York City
time, on such CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York (which may include
one or more of the Agents or their respective 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 a remaining term to maturity of not less than such
Designated CMT Maturity Index minus one year. If the Calculation Agent cannot
obtain three such Treasury Note quotations, the CMT Rate on such CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 P.M., New York City time, on
the CMT Rate Interest Determination Date of three Reference Dealers in The City
of New York (from five such Reference Dealers selected by the Calculation Agent
(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 the maturity closest to
the Designated CMT Maturity Index and in an amount of at least $100 million. If
three or four (and not five) of such Reference Dealers are quoting as described
above, then the CMT Rate will be based on the arithmetic mean of the offer
prices obtained and neither the highest nor the lowest of such quotes will be
eliminated; provided however, that if fewer than three Reference Dealers so
selected by the Calculation Agent are quoting as described herein, the CMT Rate
determined as of such CMT Rate Interest Determination Date will be the CMT Rate
in effect on such CMT Rate Interest Determination Date. If two Treasury Notes
with an original maturity as described in the second preceding sentence have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the Treasury Note with the shorter remaining term to maturity
will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)) 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.
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"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing
Note will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement,
including a table setting forth repayment information for such Amortizing
Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Original Issue Discount Notes from time to time. Such
Original Issue Discount Notes may pay no current interest or interest at a rate
which at the time of issuance is below market rates. In the event of
redemption, repayment or acceleration of maturity in respect of an Original
Issue Discount Note, the amount payable to the Holder of such Original Issue
Discount Note will be equal to (i) the Amortized Face Amount (as defined below)
as of the date of such event, plus (ii) with respect to any redemption of an
Original Issue Discount Note, the Initial Redemption Percentage specified in
the applicable Pricing Supplement (as adjusted by the Annual Redemption
Percentage Reduction, if applicable) minus 100% multiplied by the Issue Price
specified in such Pricing Supplement (the "Issue Price"), not of any portion of
such Issue Price which has been paid prior to the date of redemption, or the
portion of the Issue Price (or the net amount) proportionate to the portion of
the unpaid principal amount to be redeemed, plus (iii) any accrued interest to
the date of such event the payment of which would constitute qualified stated
interest payments within the meaning of Treasury Regulation 1.1273-1(c) under
the Internal Revenue Code of 1986, as amended (the "Code"). The "Amortized Face
Amount" of an Original Issue Discount Note means an amount equal to (i) the
Issue Price thereof, plus (ii) the aggregate portions of the original issue
discount (the excess of the amounts considered as part of the "stated
redemption price at maturity" of such Original Issue Discount Note within the
meaning of Section 1273(a)(2) of the Code, whether denominated as principal or
interest, over the Issue Price) which shall theretofore have accrued pursuant
to Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code)
from the date of issue of such Original Issue Discount Note to the date of
determination, minus (iii) any amount considered as part of the "stated
redemption price at maturity" of such Original Issue Discount Note which has
been paid from the date of issue to the date of determination. See "Certain
United States Federal Income Tax Considerations." Certain additional
considerations relating to the offering of any Original Issue Discount Notes
may be set forth in the applicable Pricing Supplement.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Base Note, the Interest Payment Dates,
the Maturity Date or any other term relating thereto, may be modified and/or
supplemented as specified under "Other/Additional Provisions" on the face
thereof or in an Addendum relating thereto, if so specified on the face thereof
and in the applicable Pricing Supplement.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate
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of one or more specified currencies (including a composite currency such as the
ECU) relative to an indexed currency or to such other price(s) or exchange
rate(s) ("Indexed Notes"), as specified in the applicable Pricing Supplement.
In certain cases, Holders of Indexed Notes may receive a principal payment on
the Maturity Date that is greater than or less than the principal amount of
such Indexed Notes depending upon the relative value on the Maturity Date of
the specified indexed item. Information as to the method for determining the
amount of principal, premium, if any, and/or interest payable in respect of
Indexed Notes, certain historical information with respect to the specified
indexed item and tax considerations associated with an investment in Indexed
Notes will be specified in the applicable Pricing Supplement.
BOOK-ENTRY NOTES
Unless otherwise specified in the applicable Pricing Supplement, the Company
has established a depository arrangement with The Depository Trust Company with
respect to the Book-Entry Notes, the terms of which are summarized below. Any
additional or differing terms of the depository arrangement with respect to the
Book-Entry Notes will be described in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, currency of denomination and
payment, Interest Payment Dates (if any), Stated Maturity Date, redemption
provisions (if any), repayment provisions (if any) and other terms will be
represented by a single Global Security. Each Global Security representing
Book-Entry Notes will be deposited with, or on behalf of, the Depositary and
will be registered in the name of the Depositary or a nominee of the
Depositary. No Global Security may be transferred except as a whole by a
nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided in this section, the Beneficial Owners
of the Global Security or Securities representing Book-Entry Notes will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferrable. Accordingly, each Beneficial Owner (as defined below) must rely
on the procedures of the Depositary and, if such Beneficial Owner is not a
Participant (as defined below), on the procedures of the Participant through
which such Beneficial Owner owns its interest in order to exercise any rights
of a Holder under such Global Security or the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security
representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the Global
Securities, (ii) the Depositary ceases to be a clearing agency registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) the
Company in its sole discretion determines that the Global Securities shall be
exchangeable for Certificated Notes or (iv) there shall have occurred and be
continuing an Event of Default under the Indenture with respect to the Notes.
Upon any such exchange, the Certificated Notes shall be registered in the names
of the Beneficial Owners of the Global Security or Securities representing
Book-Entry Notes, which names shall be provided by the Depositary's relevant
Participants (as identified by the Depositary) to the Trustee.
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The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership
nominee). One fully registered Global Security will be issued for each
issue of Book-Entry Notes, each in the aggregate principal amount of such
issue, and will be deposited with the Depositary. If, however, the
aggregate principal amount of any issue exceeds $200,000,000, one Global
Security will be issued with respect to each $200,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants of the Depositary ("Direct Participants")
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations (including the Agents and the
Trustee). The Depositary is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to
the Depositary's system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for such
Book-Entry Notes on the Depositary's records. The ownership interest of
each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Security representing Book-Entry Notes will not receive
Certificated Notes representing their ownership interests therein, except
in the event that use of the book-entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary
are registered in the name of the Depositary's nominee, Cede & Co. The
deposit of Global Securities with, or on behalf of, the Depositary and
their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners
of the Global Securities representing the Book-Entry Notes; the
Depositary's records reflect only the identity of the Direct Participants
to whose accounts such Book-Entry Notes are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct and Indirect Participants to Beneficial Owners will by governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy
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to the Company as soon as possible after the applicable record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Book-Entry Notes are credited on
the applicable record date (identified in a listing attached to the Omnibus
Proxy).
Principal, premium, if any, and/or interest payments on the Global
Securities representing the Book-Entry Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason
to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such Participant and not of the Depositary,
the Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and/or interest to the Depositary is the responsibility of
the Company or the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes within an issue are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Company, through its Participant, to the
Trustee, and shall effect delivery of such Book-Entry Notes by causing the
Direct Participant to transfer the Participant's interest in the Global
Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Trustee. The requirement for physical delivery
of Book-Entry Notes in connection with a demand for repayment will be
deemed satisfied when the ownership rights in the Global Security or
Securities representing such Book-Entry Notes are transferred by Direct
Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
Certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
CERTAIN INVESTMENT CONSIDERATIONS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, to one or more currencies or composite currencies (including exchange
rates and swap indices between currencies or composite currencies),
commodities, interest rates or other indices, either directly or inversely,
entails significant risks that are not associated with similar investments in a
conventional fixed rate or floating rate debt security. Such risks include,
without limitation, the possibility that such index or indices may be subject
to significant changes, that the resulting interest rate will be less than that
payable on a conventional fixed rate or floating rate debt security issued by
the Company at the same time, that the repayment of principal and/or premium,
if any, can occur at times other than that expected by the investor, and that
the investor could lose all or a substantial portion of principal and/or
premium, if any, payable on the Maturity Date. Such risks depend on a number of
interrelated factors, including economic, financial and political events, over
which the Company has no control. Additionally, if the formula used to
determine the amount of
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principal, premium, if any, and/or interest payable with respect to such Notes
contains a multiple or leverage factor, the effect of any change in the
applicable index or indices will be magnified. In recent years, values of
certain indices have been highly volatile and such volatility may be expected
to continue in the future. Fluctuations in the value of any particular index
that have occurred in the past are not necessarily indicative, however, of
fluctuations that may occur in the future.
Any optional redemption feature of the Notes might affect the market value of
such Notes. Since the Company may be expected to redeem the Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
The secondary market for such Notes will be affected by a number of factors
independent of the creditworthiness of the Company and the value of the
applicable index or indices, including the complexity and volatility of such
index or indices, the method of calculating the principal, premium, if any,
and/or interest in respect of such Notes, the time remaining to the maturity of
such Notes, the outstanding amount of such Notes, any redemption features of
such Notes, the amount of other debt securities linked to such index or indices
and the level, direction and volatility of market interest rates generally.
Such factors also will affect the market value of the Notes. In addition,
certain Notes may be designed for specific investment objectives or strategies
and, therefore, may have a more limited secondary market and experience more
price volatility than conventional debt securities. Investors may not be able
to sell Notes readily or at prices that will enable investors to realize their
anticipated yield. No investor should purchase Notes unless such investor
understands and is able to bear the risk that certain Notes may not be readily
saleable, that the value of Notes will fluctuate over time and that such
fluctuations may be significant.
The credit ratings assigned to the Company's medium-term note program are a
reflection of the Company's credit status, but in no way are a reflection of
the potential impact of the factors discussed above, or other factors, on the
market value of the Notes. Accordingly, prospective investors should consult
their own financial and legal advisors as to the risks entailed by an
investment in the Notes and the suitability of such Notes in light of their
particular circumstances.
FOREIGN CURRENCY NOTES
If any Note is not to be denominated in U.S. dollars, the applicable Pricing
Supplement or Foreign Currency Prospectus Supplement will specify the currency
or currencies, including composite currencies such as the ECU, in which the
principal and interest with respect to such Note are to be paid, along with any
other terms relating to Foreign Currency Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes. It is
based on the Internal Revenue Code of 1986, as amended (the "Code"),
administrative pronouncements, judicial decisions, and final and proposed
Treasury Regulations now in effect, all of which are subject to change
(including changes in effective dates) or possible differing interpretations.
It deals only with Notes held as capital assets and does not purport to deal
with persons in special tax situations, such as financial institutions,
insurance companies, regulated investment companies, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes, or persons whose functional currency
is not the U.S. dollar. It also does not deal with holders other than original
purchasers (except where otherwise specifically noted). Persons considering the
purchase of the Notes should consult their own tax advisors concerning the
application of United States Federal income tax laws to their particular
situations as well as any consequences of the purchase, ownership and
disposition of the Notes arising under the laws of any other taxing
jurisdiction.
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As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source, or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
Original Issue Discount. The following summary is a general discussion of the
United States Federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
Regulations (the "OID Regulations") released by the Internal Revenue Service
("IRS") on January 27, 1994 under the original issue discount provisions of the
Code.
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as defined below) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. "Qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate. In addition, under the OID
Regulations, if a Note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of such Note (e.g., Notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on such Note or any "true" discount on such Note (i.e., the
excess of the Note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the stated interest on the Note
would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a Note are taxable to a Holder as
ordinary interest income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting). A U.S.
Holder of a Discount Note must include original issue discount in income as
ordinary interest for United States Federal income tax purposes as it accrues
under a constant yield method in advance of receipt of the cash payments
attributable to such income, regardless of the U.S. Holder's regular method of
tax accounting. In general, the amount of original issue discount included in
income by the initial U.S. Holder of a Discount Note is the sum of the daily
portions of original issue discount with respect to such Discount Note for each
day during the taxable year (or portion of the taxable year) on which such U.S.
Holder held such Discount Note. The "daily portion" of original issue discount
on any Discount Note is determined by allocating to each day in any accrual
period a ratable portion of the original issue discount allocable to that
accrual period. An "accrual period" may be of any length and the accrual
periods may vary in length over the term of the Discount Note, provided that
each accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or on
the first day of an accrual period. The amount of original issue discount
allocable to each accrual period is generally equal to the difference between
(a) the product of the Discount Note's adjusted issue price at the
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beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(b) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the
total noncontingent principal payments due under the Variable Note by more than
a specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions,
such as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the Note.
An "objective rate" is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and which is based upon:
(i) one or more qualified floating rates, (ii) one or more rates where each
rate would be a qualified floating rate for a debt instrument denominated in a
currency other than the currency in which the Variable Note is denominated,
(iii) either the yield or changes in the price of one or more items of actively
traded personal property (other than stock or debt of the issuer or a related
party), or (iv) a combination of objective rates. The OID Regulations also
provide that other variable interest rates may be treated as objective rates if
so designated by the IRS in the future. Despite the foregoing, a variable rate
of interest on a Variable Note will not constitute an objective rate if it is
reasonably expected that the average value of such rate during the first half
of the Variable Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Variable Note's term.
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A "qualified inverse floating rate" is any objective rate where such rate is
equal to a fixed rate minus a qualified floating rate, as long as variations in
the rate can reasonably be expected to reflect inversely contemporaneous
variations in the cost of newly borrowed funds. The OID Regulations also
provide that if a Variable Note provides for stated interest at a fixed rate
for an initial period of less than one year followed by a variable rate that is
either a qualified floating rate or an objective rate, and if the variable rate
on the Variable Note's issue date is intended to approximate the fixed rate
(e.g., the value of the variable rate on the issue date does not differ from
the value of the fixed rate by more than 25 basis points), then the fixed rate
and the variable rate together will constitute either a single qualified
floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified de minimis amount.
Original issue discount on such a Variable Note arising from "true" discount is
allocated to an accrual period using the constant yield method described above
by assuming that the variable rate is a fixed rate equal to (a) 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 (b) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable Note.
In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
After converting the fixed rate into either a qualified floating rate or a
qualified inverse floating rate, the Variable Note is then converted into an
"equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument. A U.S. Holder of
the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. In each accrual period, appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent"
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fixed rate debt instrument in the event that such amounts differ from the
actual amount of interest accrued or paid on the Variable Note during the
accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS released
proposed amendments to the OID Regulations which would broaden the definition
of an objective rate and would further clarify certain other provisions
contained in the OID Regulations. If ultimately adopted, these amendments to
the Regulations would be effective for debt instruments issued after April 3,
1994, but before the date which is 60 days after final regulations are
published in the Federal Register.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if treated as a contingent payment debt
obligation. The proper United States Federal income tax treatment of Variable
Notes that are treated as contingent payment debt obligations will be more
fully described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortized bond premium or acquisition
premium) that accrues on a debt instrument by using the constant yield method
applicable to original issue discount, subject to certain limitations and
exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based on
daily compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original
issue discount on a Short-Term Note on a straight-line basis unless an election
is made to accrue the original issue discount under a constant yield method
(based on daily compounding).
Market Discount. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, the U.S. Holder will be treated as having purchased such
Note at a "market discount," unless the difference is less than a specified de
minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income
to the extent of the lesser of (a) the amount of such payment or realized gain
or (b) the market discount which has not previously been included in income and
is treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of
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acquisition to the maturity date of the Note, unless the U.S. Holder elects to
accrue market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the taxable year to which such election applies and may be revoked only
with the consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, the U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be redeemed at the option of the Company after the U.S. Holder acquires it at a
price in excess of its stated redemption price at maturity, special rules would
apply which could result in a deferral of the amortization of some bond premium
until later in the term of the Note. Any election to amortize bond premium
applies to all taxable debt obligations then owned and thereafter acquired by
the U.S. Holder and may be revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be long-term
capital gain or loss if the Note was held for more than one year.
NOTES DENOMINATED IN A FOREIGN CURRENCY OR ON WHICH INTEREST IS PAYABLE IN A
FOREIGN CURRENCY
If any Note is to be denominated in a Foreign Currency or provides for
interest payable in a Foreign Currency, the applicable Foreign Currency
Prospectus Supplement and Pricing Supplement will address the principal United
States Federal income tax aspects of any such Note and payments to be made
thereunder. As used herein, "Foreign Currency" means a currency or currency
unit other than U.S. dollars.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company, or a bank receiving interest described in
section 881(C)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a non-
U.S. Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the
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beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder, and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made under
the Notes to a U.S. Holder must be reported to the IRS unless the U.S. Holder
is an exempt recipient or establishes an exemption. Compliance with the
identification procedures described in the preceding section would establish an
exemption from backup withholding for those non-U.S. Holders who are not exempt
recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (a) the broker
determines that the seller is a corporation or other exempt recipient, or (b)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company,
through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc, Smith
Barney Inc., and UBS Securities Inc. (the "Agents"), who will purchase the
Notes as principal, from the Company, for resale to investors and other
purchasers at varying prices relating to prevailing market prices at the time
of resale as determined by the Agents, or, if so specified in an applicable
Pricing Supplement, for resale at a fixed public offering price. If agreed to
by the Company and an Agent,
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the Agent may utilize its reasonable efforts on an agency basis to solicit
offers to purchase the Notes at 100% of the principal amount thereof, unless
otherwise specified in an applicable Pricing Supplement. The Company will pay a
commission to the Agent, ranging from .125% to .625% of the principal amount of
each Note, depending upon its stated maturity, sold through the Agent.
Commissions with respect to Foreign Currency Notes may differ, as set forth in
the applicable Foreign Currency Prospectus Supplement.
Unless otherwise specified in an applicable Pricing Supplement, any Note sold
to an Agent as principal will be purchased by the Agent at a price equal to
100% of the principal amount thereof less a percentage of the principal amount
equal to the commission applicable to an agency sale (as described below) of a
Note of identical maturity. The Agents may sell Notes they have purchased from
the Company as principal to other dealers for resale to investors and other
purchasers, and may allow any portion for the discount received in connection
with such purchase from the Company to such dealers. After the initial public
offering of Notes, the public offering price (in the case of Notes to be resold
at a fixed public offering price), the concession and the discount may be
changed.
The Notes also may be sold by the Company directly to one or more investors
or other purchasers in those jurisdictions in which the Company is authorized
to do so, and through one or more other agents, as disclosed in the applicable
Pricing Supplement, on substantially the same terms and conditions as sales
through an Agent. No commission will be paid on Notes sold directly by the
Company.
The Company reserves the right to withdraw, cancel or modify the offer
without notice and may reject orders in whole or in part (whether placed
directly with the Company or through the Agents). The Agents will have the
right, in their discretion reasonably exercised, to reject in whole or in part
any offer to purchase Notes received by them on an agency basis.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately
available funds in the currency or composite currency in which such Notes are
denominated in The City of New York on the date of settlement.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company has agreed to
indemnify the Agents against, and to contribute to payments with respect to,
certain civil liabilities, including liabilities under the Securities Act. The
Company has agreed to reimburse the Agents for certain expenses.
The Agents each engage in transactions with and perform services for the
Company in the ordinary course of business. Thomas H. Patrick, a director of
the Company, is an Executive Vice President, Office of the Chairman, of Merrill
Lynch & Co., Inc.
No Note will have an established trading market when issued. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will not be listed on
any securities exchange. Each of the Agents may from time to time purchase and
sell Notes in a secondary market, but is not obligated to do so, and there can
be no assurance that there will be a secondary market for the Notes or
liquidity in the secondary market if one develops. From time to time, each of
the Agents may make a market in the Notes, but is not obligated to do so and
may discontinue market-making at any time and without notice.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities described in the
accompanying Prospectus pursuant to the Indenture referred to herein.
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<PAGE>
PROSPECTUS
$500,000,000
LOGO
SENIOR DEBT SECURITIES
----------------
Comdisco, Inc. (the "Company") from time to time may issue in one or more
series its senior debt securities (the "Debt Securities"), up to $500,000,000
aggregate principal amount (or gross proceeds in the case of securities issued
at an original issue discount), or its equivalent in such foreign currencies or
units of two or more currencies, based on the applicable exchange rate at the
time of offering, as shall be designated by the Company at the time of
offering. The Debt Securities will be offered to the public on terms determined
by market conditions at the time of sale.
The Debt Securities will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company.
Each issue of Debt Securities may vary, where applicable, as to aggregate
principal amount, maturity date, public offering or purchase price, interest
rate or rates and timing of payments thereof, provision for redemption, sinking
fund requirements, if any, currencies of denomination or currencies otherwise
applicable thereto and any other variable terms and method of distribution. No
Debt Securities may be sold without delivery of a Prospectus Supplement
describing such issue of Debt Securities and the method and terms of offering
thereof.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMI-
NAL OFFENSE.
----------------
The Company may sell the Debt Securities to or through one or more
underwriters, dealers or agents, and may also sell Debt Securities directly to
other purchasers. Such dealers may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended. If any agents, dealers or
underwriters are involved in the sale of any Debt Securities in respect of
which this Prospectus is being delivered, the names of such agents, dealers or
underwriters and any applicable commissions or discounts will be set forth in a
Prospectus Supplement. The net proceeds to the Company from such sale will also
be set forth in a Prospectus Supplement. See "Plan of Distribution".
----------------
The date of this Prospectus is March 24, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the following Regional Offices of the
Commission: Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such reports and other information concerning the Company may also be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, Room
1102, New York, New York 10005 and the Chicago Stock Exchange, 440 S. LaSalle
Street, Chicago, Illinois 60605.
The Company has filed with the Commission a registration statement on Form S-
3 (File No. 33-57671) (together with all amendments and exhibits, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Debt Securities. This Prospectus does
not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information pertaining to the Debt Securities
and the Company, reference is made to the Registration Statement.
Statements made in this Prospectus concerning the provisions of any contract,
agreement or other document referred to herein are not necessarily complete.
With respect to each such statement concerning a contract, agreement or other
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission, reference is made to such exhibit or other filing for a
more complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission (File No. 1-7725)
pursuant to Section 13 of the Exchange Act and are hereby incorporated by
reference into this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994.
3. The Company's Amendment No. 1 to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994, filed on Form 10-Q/A on February 18, 1995.
4. The Company's Current Reports on Form 8-K dated November 7, 1994,
January 27, 1995, four reports dated February 15, 1995, and March 20, 1995.
All documents filed by the Company, pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of the Prospectus and prior to the
termination of the offering of the Debt Securities offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy
(without exhibits other than exhibits specifically incorporated by reference)
of any or all documents incorporated by reference into this Prospectus.
Requests for such copies should be directed to Edward A. Pacewicz, Vice
President/Finance, Comdisco, Inc., 6111 North River Road, Rosemont, Illinois
60018; telephone (708) 698-3000.
2
<PAGE>
THE COMPANY
Comdisco, Inc. (with its subsidiaries, the "Company" or "Comdisco") is
primarily engaged in the buying, selling and leasing of new and used computer
and other high technology equipment and in providing disaster recovery services
(also referred to as "business continuity services"). In addition, the Company
provides technology planning and asset management services, integrating leasing
and business continuity services with customized asset acquisition, asset
management software tools and data center moves and/or consolidations,
disposition and migration strategies. These services are designed to provide
integrated, long-term, cost effective asset and technological planning to users
of high technology equipment.
The Company was founded by Kenneth N. Pontikes in 1969 and incorporated in
Delaware in 1971. The executive offices of the Company are located in the
Chicago area at 6111 North River Road, Rosemont, Illinois 60018, and its
telephone number is (708) 698-3000. At September 30, 1994, the Company had
2,118 full-time employees.
The Company's operations are conducted through its principal office in the
Chicago area and approximately fifty offices in the United States, Canada,
Europe, the Pacific Rim and Australia. The Company also operates in South
America, however, it does not maintain local offices. Subsidiaries in Europe
and Canada offer services similar to those offered in the United States,
although the Company's European leasing operations are predominately in the
computer marketplace. The Company's disaster recovery activities include the
domestic, Canadian and European marketplaces.
LEASING
The Company believes it is the world's largest independent leasing company.
In its leasing activities, the Company specializes in central processing units,
desktop equipment, electronics, telecommunications equipment and, through a
subsidiary, medical equipment.
The Company offers its customers alternatives in managing high technology
equipment needs, including the leasing of equipment. The Company works closely
with its customers to develop strategies governing when and where to acquire
equipment, when to upgrade existing equipment and when to order new equipment
to take advantage of current technology. The Company also has the ability to
act as an outlet for the equipment being displaced.
The Company's customers include "Fortune 1000" corporations or companies of a
similar size as well as smaller corporations. A substantial portion of the
Company's transactions are with repeat customers. The Company's business is not
dependent on any single customer or on any single source for the purchasing,
selling or leasing of equipment.
COMPUTER
Central Processing Units: The Company buys or leases, and in turn sells,
leases or subleases International Business Machines ("IBM") computer equipment
as well as equipment manufactured by others. The Company's sale and lease
transactions include the "mainframe" central processing units, midrange, and/or
various peripherals, such as printers, tape and disk drives and other equipment
used with a mainframe.
The mainframe industry has been characterized by rapid and continuous
technological advances permitting broadened user applications. The introduction
of new equipment and/or technology by IBM or other manufacturers does not cause
existing equipment to become technically obsolete, but usually results in
adjustments in the "price/performance ratio" (the number of computations or
relative performance per dollar of cost) of the existing equipment. Users
upgrade equipment as their existing equipment becomes inappropriate for their
needs or as a result of changes in the required amount of data processing
capacity. To the extent equipment replaced by newer models becomes available
for remarketing, a secondary market in used equipment is created. Recent
technological advances in mainframe technology by IBM have focused on
3
<PAGE>
"parallel processing" systems. These systems include transaction processing and
database server models, designed for both "legacy" and newer technologies in
open systems.
The Company believes that in recent years, mainframe acquisition decisions
were being delayed because of concerns about the economy. The Company also
believes customers delayed making hardware decisions pending release of
additional information concerning new IBM product capabilities and delivery
schedules. Furthermore, leasing volume in general has been impacted by
consolidations and cutbacks as companies attempt to streamline operations.
Industry analysts predict a slowing decline in mainframe sales, at least in the
short-term, based on reports from the major mainframe manufacturers.
The focus of the Company's activities with respect to particular models of
computer equipment changes periodically as a result of changes in market
conditions and advances in computer technology. In September, 1994, IBM began
shipping its next-generation mainframes. These new parallel enterprise servers
are expected to be positioned as price-competitive replacement models for pre-
1990 IBM mainframes and the Company expects to include these models in its
activities. Advances in technology, such as these servers, affect the market
for computer products and may also have an impact on the way the Company has
traditionally conducted its leasing activities.
Desktop: The Company leases PC's and workstations manufactured by most of the
leading manufacturers. The company's lease transactions also include high-end
servers, printers and other desktop related equipment. The Company's integrated
asset management software tools let customers order, track and manage their
inventory of desktop equipment. The Company has business partnerships and/or
vendor leasing programs with major workstation manufacturers.
Other services: In fiscal 1994, the Company formed a systems intregation
group to address the needs of the developing open systems market, including
client/server (client/server computing is a type of processing in which a
client requests a service or information from a server that performs the
service and/or returns the requested information to the client). The Company
provides products, services and consultants to assist customers in implementing
or utilizing an open systems platform. Products include high-speed connectivity
systems, which provide access between mainframe and open systems data at
transaction-processing speeds. Services include transitional strategies,
integration planning and implementation, financing (hardware and software), and
business continuity planning. The Company, together with its consultants and
strategic alliances with client/server product providers, provides customers
with solutions based on requirements and goals.
The Company's asset management services assists customers in: planning and
implementing major data center relocations and consolidations; evaluating
information technology needs and system assessments; equipment procurement
strategies and timing.
OTHER HIGH TECHNOLOGY EQUIPMENT
Medical: Through its subsidiaries, the Company leases medical and other high
technology equipment to healthcare providers, including used, reconditioned
medical equipment. The Company's portfolio includes angiography, MRI systems,
CT Scanners and nuclear imaging devices. Additionally, the Company believes
that it has the largest and most comprehensive medical equipment refurbishing
center in the industry and that it was the one of the first such centers to
receive ISO 9002 certification, an internationally recognized program for
quality assurance in production and installation.
Electronics: The Company leases new and used electronic manufacturing,
testing and monitoring equipment, including semiconductor production equipment,
automated test equipment, assembly equipment and scientific/analytical
instrumentation. Additionally, the Company maintains a dedicated refurbishing
and sales facility in the Silicon Valley area.
4
<PAGE>
Telecommunications: The Company buys, sells, and leases new and refurbished
telecommunications equipment throughout North America. The Company also
provides its customers with a market for, and a source of, used equipment. The
telecommunications portfolio includes PBX systems, VSATs, voice mail, modems
and bridges, routers and concentrators. The Company also reconditions and
configures used systems.
Other: The Company buys, sells and leases new and used point-of-sale
terminals and leases other office equipment such as fax machines and copiers,
test equipment such as oscillascopes, analyzers and testers and laboratory
equipment such as microscopes and centrifuges.
At September 30, 1994, cost at lease inception of other high technology
equipment was approximately $3.0 billion, or approximately 46% of the Company's
total equipment cost at lease inception of $6.5 billion.
The Company competes in the leasing marketplace as a lessor and as a dealer
of new and used computer and selected other high technology equipment. The
Company competes with different firms in each of its activities. The Company's
competition includes equipment manufacturers such as IBM, Hewlett Packard,
Amdahl, Hitachi Data Systems, AT&T, Rolm, Hitachi Medical Systems, Siemens
Medical Systems and General Electric, other equipment dealers, brokers and
leasing companies (including captive or related leasing companies of IBM, AT&T
and General Electric and others) as well as financial institutions, including
commercial banks and investment banking firms. While its competitive
methodologies will differ, in general, the Company competes mainly on the basis
of its expertise in remarketing equipment, terms offered in its transactions,
its reliability in meeting its commitments, its manufacturers independence and
its ability to develop and offer alternative solutions and options to high
technology equipment users. The Company believes it is a full service lessor.
In mainframes the Company believes that it competes primarily with the
manufacturers and their captive or related leasing companies, if any, and with
a few other leasing companies. The Company also believes that, aside from IBM
and its captive leasing company, IBM Credit Corporation ("ICC"), it is one of
the largest purchasers, sellers and lessors of IBM equipment. The Company does
not believe that a significant amount of used IBM equipment is sold
independently by owner-users of the equipment to other owner-users. The
Company's continued ability to compete effectively may be affected by policies
of IBM.
In desktop, medical, electronics and telecommunications, the Company believes
it competes with the manufacturers and their captive leasing companies and
approximately five significant leasing companies, as well as banks and other
lessors and financial and lending institutions throughout the United States and
Canada. In its other services, the Company competes with manufactures and other
national and regional consulting and services organizations.
The Company's continued ability to compete is also affected by its ability to
attract and retain well qualified personnel and the availability of financing.
DISASTER RECOVERY SERVICES
These services include emergency data processing backup, principally for
large system users of IBM and IBM-compatible equipment, workarea recovery,
voice recovery, consulting services in business continuity planning as well as
other related data processing services, throughout the United States, Canada
and Europe. These services are designed to help minimize the impact of a
significant interruption of the operations of, or inaccessibility to, the
customer's data processing facility and/or communications network. The Company
also provides backup capabilities for Digital Equipment Corporation, IBM
midrange processors, Unisys, Hewlett Packard, Stratyis, and Tandem System
equipment users.
The Company believes that it competes with approximately five significant
domestic companies, including IBM and SunGard Data Systems, Inc., as well as
other regional firms in the domestic, Canadian and European marketplace, which
provide contract disaster recovery services and that it is one of the largest
international provider of such services.
5
<PAGE>
Through its network and facilities strategy entitled CDRS Net, the Company
offers customers access to its North American facilities, including a range of
data processing recovery services at hot sites, Customer Control Centers
("CCC") and shell sites. Hot sites are equipped computer facilities that
include central processing units, peripherals and communications equipment. A
CCC interfaces customers to geographically separated hot site by means of
telecommunications lines. A shell site contains the power, environmental and
support equipment necessary for the installation of replacement computer
equipment by the customer. Most facilities also include workarea recovery
capability. In September, 1994, the Company completed an expansion and service
enhancement project that included what the Company believes was the industry's
first recovery center dedicated to client/server environments. Enhanced
capabilities include client/server platforms, workareas, open systems networks,
midrange and mainframe computers.
Of the Company's twenty-eight disaster recovery services locations, nine
serve as regional recovery centers providing hot site and/or shell site
services. These nine regional recovery centers serve major commercial centers,
including New York, Chicago, Northern and Southern California, Texas, Georgia,
as well as a location in Southern New Jersey that serves the Mid-Atlantic
region and a center located in Toronto, Canada. Each recovery center has at
least one hot site or CCC and includes telecommunications capabilities,
conference rooms, office space, support areas, and appropriate on-site
technical personnel.
6
<PAGE>
SELECTED FINANCIAL DATA
The following summary of certain financial information is qualified by
reference to the financial statements and other information and data contained
in the documents incorporated herein by reference (see "Incorporation of
Certain Documents by Reference"). The financial data of the Company for the
five years ended September 30, 1994 were derived from audited financial
statements. The data for the periods ended December 31, 1994 and 1993 are
unaudited, but in the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Results for interim periods are not necessarily indicative of
the results which may be expected for the full year. All per share amounts and
common equivalent shares outstanding have been adjusted to reflect a 5% stock
dividend distributed on March 30, 1992 to stockholders of record as of March
12, 1992. This summary should be read in conjunction with the consolidated
financial statements and the notes thereto incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31, FISCAL YEAR ENDED SEPTEMBER 30,
-------------- ---------------------------------------
1994 1993 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS EXCEPT FOR
SELECTED RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenue................. $ 524 $ 536 $2,098 $2,153 $2,205 $2,174 $1,920
Earnings from continuing
operations before in-
come taxes, extraordi-
nary items and
cumulative effect of
change in accounting
principle
(1)(2)(3)(4)(5)(6)..... 41 39 89 144 34 136 134
Earnings from continuing
operations before ex-
traordinary items and
cumulative effect of
change in accounting
principle
(1)(2)(3)(4)(5)(6)..... 25 23 53 87 20 83 83
Earnings per common and
common equivalent share
from continuing opera-
tions before extraordi-
nary items and cumula-
tive effect of change
in accounting principle
(1)(2)(3)(4)(5)(6)..... 0.62 0.54 1.16 1.97 0.49 2.03 1.95
Net earnings (loss) per
share to common stock-
holders
(1)(2)(3)(4)(5)(6)..... 23 21 1.16 1.97 (0.21) 1.69 2.23
Net leased assets....... 3,954 3,918 3,840 3,907 4,154 3,982 3,911
Total assets............ 4,995 4,929 4,807 4,960 5,236 5,006 4,785
Equipment purchased for
leasing................ 513 414 1,433 1,547 1,915 1,928 1,825
CASH FLOW DATA
Total expected future
contractual cash re-
ceipts at year end:
From leasing activities
(7).................... $ -- $ -- $3,660 $3,755 $4,086 $3,923 $3,922
From disaster recovery
contracts (7).......... -- -- 525 510 515 440 400
------ ------ ------ ------ ------ ------ ------
Total expected future
contractual cash re-
ceipts................. $ -- $ -- $4,185 $4,265 $4,601 $4,363 $4,322
====== ====== ====== ====== ====== ====== ======
Net cash provided by op-
erating activities..... $ 490 $ 427 $1,639 $1,873 $1,833 $2,020 $1,495
CAPITALIZATION
Discounted lease rentals
(secured nonrecourse).. $1,473 $1,703 $1,548 $1,670 $1,823 $1,900 $2,047
Term notes payable--se-
cured.................. 53 55 54 56 58 60 61
Notes payable........... 525 488 593 655 766 353 589
Term notes payable...... 490 230 237 150 180 266 36
Senior notes............ 1,006 1,141 1,040 1,107 1,062 1,029 792
Subordinated debentures
(net of bond discount). 33 12 33 12 14 147 132
------ ------ ------ ------ ------ ------ ------
Total debt.............. 3,580 3,629 3,505 3,650 3,903 3,755 3,657
------ ------ ------ ------ ------ ------ ------
Preferred Stock......... 95 100 100 100 75 -- --
Common stockholders' eq-
uity................... 650 647 641 639 624 634 589
------ ------ ------ ------ ------ ------ ------
Total capitalization.... $4,325 $4,376 $4,246 $4,389 $4,602 $4,389 $4,246
====== ====== ====== ====== ====== ====== ======
SELECTED RATIOS
Net cash provided by op-
erating
activities/Total debt.. -- -- 46.8% 51.3% 47.0% 53.8% 40.9%
Total expected future
contractual cash
receipts/Total debt.... -- -- 1.2 1.2 1.2 1.2 1.2
Percentage of equipment
purchased for leasing
financed by secured
nonrecourse debt....... 22.4% 62.3% 50.6% 49.3% 42.5% 44.1% 48.0%
Total debt/Stockholders'
equity................. 5.5 5.6 4.7 4.9 5.6 5.9 6.2
Return on average common
stockholders' equity
(8).................... -- -- 6.9% 12.7% (1.4)% 11.3% 16.7%
</TABLE>
-------
(1) Effective October 1, 1992, the Company adopted FASB Statement No. 109 ("FAS
109"), "Accounting for Income Taxes." As permitted by FAS 109, the Company
has elected not to restate the financial statements of any prior year.
7
<PAGE>
--------
(2) In fiscal 1991 and 1992, IBM and ICC filed actions against the Company.
Additional costs associated with these lawsuits, including outside legal
counsel and additional in-house personnel, resulted in increased selling,
general and administrative expenses in fiscal years 1991, 1992, 1993 and
1994. During fiscal year 1992, the Company established a $20 million
litigation reserve ($12 million after-tax) to cover estimated costs
associated with the ultimate resolution of these matters, and increased
this reserve by $10 million ($6 million after tax) in fiscal year 1994. On
August 26, 1994, the Company entered into a settlement with IBM and ICC
pursuant to which, among other things, the lawsuits were dismissed, the
parties exchanged mutual releases of claims and the Company paid IBM $70
million. See Notes 8 and 9 of Notes to Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, incorporated herein by reference for additional
information.
(3) During the quarter ended March 31, 1992, the Company recorded a $25 million
charge for estimated receivables losses ($15 million after-tax), reflecting
continued uncertainty in the U.S. economy and its impact on the Company's
receivables and the credit quality of the Company's lease portfolio.
(4) During the quarter ended March 31, 1992, the Company undertook several
actions to realign its businesses, reduce its overall cost structure and
withdraw from the leasing of certain high technology equipment. These
actions resulted in a restructuring charge of $35 million ($21 million
after-tax) for anticipated employee severance programs, primarily related
to planned reorganizations of the Company's headquarters and U.S. marketing
operations, lease termination costs for excess facilities, and for the
estimated cost to withdraw from leasing of identified product lines. The
restructuring plan is complete and requires no future cash outlays.
(5) On November 11, 1991, the Company's Board of Directors decided to
discontinue the Company's involvement in the oil and gas business. In
fiscal 1991, the Company recorded a non-cash charge of $15 million, net of
income tax benefits of $10 million, related to its interest in an oil and
gas joint venture. The charge was primarily the result of engineering
studies which revealed a net reduction in the estimated net present value
of proved reserves. Based on certain events occurring in fiscal 1993,
management revised its estimate of the net realizable value of the
company's oil and gas investment, resulting in a loss provision of $33
million ($20 million after-tax). In September, 1994, the joint venture
adopted a plan of dissolution and transferred certain assets, specifically
the leases, personal property and incidental rights and the crude oil and
other hydrocarbons, along with the assumption of certain liabilities, for a
minority interest in Consolidated Oil & Gas, Inc. The exchange was based on
the estimated fair market value of the assets, which approximated net book
value. The Company's assets remaining in the joint venture, though
immaterial, are expected to be disposed of during fiscal 1995.
See Note 11 of Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1994,
incorporated herein by reference, for additional information regarding
discontinued oil and gas operations.
(6) In fiscal 1992, the Company purchased $28 million and redeemed the balance
of its outstanding 9.65% Senior Subordinated Debentures at 100.8% of the
principal amount. The difference between the purchase and/or redemption
price and the outstanding principal amount, along with remaining
unamortized bond discount of $41 million, were recorded as an extraordinary
loss of $42 million ($25 million after-tax).
During fiscal 1992, the Company purchased $33 million and redeemed the
balance of its outstanding 10% Senior Notes. The difference between the
purchase and/or redemption price and the outstanding principal amount, along
with remaining deferred issuance costs of $1 million, were recorded as an
extraordinary loss of $6 million ($4 million after-tax).
(7) Expected cash to be provided from existing contracts includes the firm,
noncancellable rents, disaster recovery subscription fees and rents
receivable on equipment leased from others. See Note 5 of Notes to
8
<PAGE>
Consolidated Financial Statements in the Company's Annual Report on Form 10-
K for the fiscal year ended September 30, 1994, incorporated herein by
reference, for additional information. Estimated cash to be provided from
the remarketing of residuals is excluded.
(8) Return on average common stockholders' equity is based on net earnings
(loss) to common stockholders.
LIQUIDITY AND CAPITAL RESOURCES
The Company utilizes a variety of financial instruments, in addition to
internally generated funds, to fund its short and long term needs. The Company
believes that its current financial resources and estimated cash flow from
operations are adequate to fund anticipated future growth and operating
requirements.
Cash payments for equipment acquired for lease in the fiscal year ended
September 30, 1994 were $1.433 billion. This compares to cash payments of
$1.547 billion for equipment acquired for lease in the fiscal year ended
September 30, 1993.
Capital expenditures for equipment are generally financed by cash provided by
operating activities, recourse debt, or by assigning the noncancellable lease
rentals to various financial institutions at fixed interest rates on a
nonrecourse basis. Net cash provided by operating activities for the fiscal
year ended September 30, 1994 was $1.639 billion, compared to $1.873 billion
for the year earlier period. Cash provided by operations has been used to
finance equipment purchases and, accordingly, has had a positive impact on the
level of borrowing required to support the Company's investment in its lease
portfolio.
The Company's external financial resources include the following:
. The Company has historically utilized its lease rentals receivable and
underlying equipment in leasing transactions as collateral to borrow from
financial institutions at fixed rates on a nonrecourse basis. As of
September 30, 1994, such borrowings were $1.5 billion. During the last five
years, these borrowings provided cash totalling $4.0 billion. In fiscal
1994, 51% of equipment purchased for leasing was financed by these secured
nonrecourse borrowings, up from 49% in fiscal 1993. See Note 6 of Notes to
Consolidated Financial Statements in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994, incorporated herein by
reference, for additional information.
. At September 30, 1994, the Company had $1.1 billion of available
domestic and international borrowing capacity under various lines of credit
from commercial banks and commercial paper facilities, of which $457
million was unused.
. The average daily interest-bearing liabilities outstanding, including
term notes, during fiscal 1994 were approximately $3.6 billion with a
related weighted average interest rate of 7.19%. This compares to average
daily interest-bearing liabilities during fiscal 1993 of approximately $3.7
billion, with a related weighted average interest rate of 7.73%.
. On February 13, 1995, the Company filed a registration statement on
Form S-3 with the Securities and Exchange Commission for a shelf offering
of up to $500 million of senior debt securities (the "1995 Shelf") on terms
to be set at the time of each sale. The Company has designated $250 million
in Debt Securities as "Medium-Term Notes, Series D" under the 1995 Shelf,
but as of the date hereof no Debt Securities have been issued under the
1995 Shelf.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends for the Company for the periods
indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, FISCAL YEAR ENDED SEPTEMBER 30,
----------------------- ---------------------------------------------------
1994 1993 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1.52 1.48 1.27 1.42 1.09 1.33 1.35 1.51
</TABLE>
9
<PAGE>
For purposes of calculating the ratio of earnings to fixed charges, earnings
have been calculated by adding fixed charges and income taxes to net earnings
to common stockholders without taking into account earnings and losses
attributed to the discontinued operations and extraordinary items. Fixed
charges consist of interest expense on all indebtedness, amortization of debt
issuance costs, and one-third of rental expense, which is assumed to be the
representative interest portion of rental expense.
USE OF PROCEEDS
Unless otherwise stated in the accompanying Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes, including equipment purchases, repayment of
short-term debt and redemption or repurchase of senior debt. Pending such
applications, the net proceeds may be temporarily invested in cash equivalents.
Management of the Company expects that it will, on a recurrent basis, engage in
additional financings as the need arises to finance the growth of the Company
or to lengthen the average maturity of its borrowings.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture, dated as of February
1, 1995 (the "Indenture"), between the Company and The Fuji Bank and Trust
Company, as trustee (the "Trustee"). The terms of the Debt Securities include
those stated in the Indenture and those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and the holders of Debt Securities are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary of certain
provisions of the Debt Securities and the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture (including the definitions therein of certain terms) and the
Trust Indenture Act. The term "Debt Securities", as used under this caption,
refers to all Securities issued or issuable from time to time under the
Indenture. The particular terms of the Debt Securities offered by a Prospectus
Supplement and the extent, if any, to which such general provisions may apply
to Debt Securities, will be described in the Prospectus Supplement relating to
such Debt Securities.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder. The Indenture provides that Debt
Securities may be issued from time to time in one or more series. The Debt
Securities will be unsecured obligations ranking equally with each other and
with other unsecured and unsubordinated indebtedness of the Company.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Debt Securities: (i) the title of the Debt
Securities; (ii) any limit on the aggregate principal amount of the Debt
Securities; (iii) whether the Debt Securities are to be issuable as Registered
Securities or Bearer Securities or both and whether the Debt Securities may be
represented in temporary or permanent global form, and if so, the initial
Depositary with respect to such temporary or permanent global Debt Security
and, if other than as provided in Section 304 or Section 305 of the Indenture,
as applicable, whether and the circumstances under which beneficial owners of
interests in any such temporary or permanent global Debt Security may exchange
such interests for Debt Securities of such series of like tenor and of any
authorized form and denomination; (iv) the price or prices (expressed as a
percentage of the aggregate principal amount thereof) at which the Debt
Securities will be issued; (v) the date or dates on which the principal of the
Debt Securities is payable or the method of determination thereof; (vi) the
rate or rates at which the Debt Securities will bear interest, if any, and the
date or dates from which such interest, if any, will accrue; (vii) the Interest
Payment Dates for any interest payable on any Debt Securities which are
Registered Securities; (viii) the person to whom any interest will be payable
on any Debt Securities which are Registered Securities, if other than the
person in whose name the Debt Securities are registered at the close of
business on the Regular
10
<PAGE>
Record Date for such interest; (ix) the manner in which, or the person to whom,
any interest on any Debt Securities which are Bearer Securities will be
payable, if other than upon presentation and surrender of the coupons
appertaining thereto, and the extent to which, or the manner in which, any
interest payable on a temporary or permanent global Debt Security on an
Interest Payment Date will be paid; (x) any mandatory or optional sinking fund
or analogous provisions and any provisions for the remarketing of the Debt
Securities; (xi) each office or agency where, subject to the terms of the
Indenture as described below, the principal of and interest, if any, on the
Debt Securities will be payable and each office or agency where, subject to the
terms of the Indenture as described below, the Debt Securities may be presented
for exchange and Debt Securities which are Registered Securities may be
presented for registration of transfer; (xii) the date, if any, after or on
which and the price or prices at which the Debt Securities may, pursuant to any
optional or mandatory redemption provisions, be redeemed, in whole or in part,
and the other detailed terms and provisions of any such optional or mandatory
redemption provisions; (xiii) the denomination in which any Debt Securities
which are Registered Securities will be issuable, if other than the
denomination of $1,000 and integral multiples thereof, and the denominations in
which any Debt Securities which are Bearer Securities will be issuable, if
other than denominations of $5,000 and $100,000; (xiv) the currency or
currencies, including composite currencies, of payment of principal of and
interest, if any, on the Debt Securities, if other than U.S. dollars, and if
other than U.S. dollars, whether the Debt Securities may be satisfied and
discharged other than as provided in Article Four of the Indenture; (xv) if the
amount of payments of principal of and interest, if any, on the Debt Securities
is to be determined by reference to an index, formula or other method, or based
on a coin or currency other than that in which the Debt Securities are stated
to be payable, the manner in which such amounts are to be determined and the
calculation agent, if any, with respect thereto; (xvi) if other than the
principal amount thereof, the portion of the principal amount of the Debt
Securities which will be payable upon declaration of acceleration of the
Maturity thereof pursuant to an Event of Default; (xvii) if other than as
defined in the Indenture, the meaning of "Business Day" when used with respect
to the Debt Securities; (xviii) if the Debt Securities may be issued or
delivered (whether upon original issuance or upon exchange of a temporary
Security of such series or otherwise), or any installment of principal or
interest is payable, only upon request of certain certificates or other
documents or satisfaction of other conditions in addition to those specified in
the Indenture, the forms and terms of such certificates, documents or
conditions; (xix) information with respect to book-entry procedures, if any;
(xx) whether and under what circumstances the Company will pay additional
amounts ("Additional Amounts") in respect of Debt Securities held by a person
who is not a U.S. person (as defined below) in respect of specified taxes,
assessments or other governmental charges and whether the Company has the
option to redeem the affected Debt Securities rather than pay such Additional
Amounts; and (xxi) any other terms of the Debt Securities not inconsistent with
the provisions of the Indenture. Any such Prospectus Supplement will also
describe any special provisions for the payment of additional amounts with
respect to the Debt Securities. The variable terms of the Debt Securities are
subject to change from time to time, but no such change will affect any Debt
Security already issued or as to which an offer to purchase has been accepted
by the Company.
Debt Securities issued under the Indenture may be sold at a discount below
their principal amount. Special United States Federal income tax considerations
applicable to Debt Securities issued at an original issue discount will be
described in any applicable Prospectus Supplement. Special United States
Federal income tax considerations or other restrictions or terms applicable to
any Debt Securities which are (i) issuable in bearer form, (ii) offered
exclusively to United States Aliens (as defined in the Indenture) or (iii)
denominated in a currency other than United States dollars will be set forth in
a Prospectus Supplement relating thereto.
Reference is made to the Prospectus Supplement for the terms of the Debt
Securities being offered thereby.
The Debt Securities may be issued, to the extent provided in the Prospectus
Supplement, in fully registered form without coupons, and/or in bearer form
with or without coupons ("Bearer Securities"), and in denominations set forth
in the Prospectus Supplement.
11
<PAGE>
The provisions of the Indenture described above provide the Company with the
ability, in addition to the ability to issue Debt Securities with terms
different from those of Debt Securities previously issued, to "reopen" a
previous issue of a series of Debt Securities and issue additional Debt
Securities of such series.
The Indenture does not include covenants of the Company restricting its
ability to incur additional debt.
Principal and interest, premium and Additional Amounts, if any, will be
payable in the manner, at the places and subject to the restrictions set forth
in the Indenture, the Debt Securities and the Prospectus Supplement relating
thereto, provided that payment of any interest and any Additional Amounts may
be made at the option of the Company by check mailed to the holders of
registered Debt Securities at their registered addresses.
Debt Securities may be presented for exchange, and registered Debt Securities
may be presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Indenture, the Debt Securities and the Prospectus
Supplement relating thereto. Debt Securities in bearer form and the coupons, if
any, pertaining thereto will be transferable by delivery. No service charge
will be made for any transfer or exchange of Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
LIMITATIONS ON ISSUANCE AND SALE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered, sold or delivered during the "restricted period"
as defined in Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury
regulations (the "D Rules") (in general, the restricted period is the first 40
days after the closing date and, with respect to unsold allotments, until
sold), in the United States or to United States persons (each as defined below)
except to the extent permitted under the D Rules, and any underwriters, agents
and dealers participating in the offering of Debt Securities must agree that
they will not offer any Bearer Securities for sale or resale in the United
States or to United States persons, except to the extent permitted under the D
Rules, nor deliver Bearer Securities within the United States.
Specific requirements of the D Rules and other relevant United States
Treasury regulations affecting Bearer Securities will be described in the
applicable Prospectus Supplement.
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia) and its possessions including Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern
Mariana Islands.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in global
form. A Debt Security in global form will be deposited with, or on behalf of, a
Depositary, which will be identified in an applicable Prospectus Supplement. A
global Debt Security may be issued in either registered or bearer form and in
either temporary or definitive form. A Debt Security in global form may not be
transferred except as a whole by the Depositary for such Debt Security to a
nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor of such Depositary or a nominee of such successor.
If any Debt Securities of a series are issuable in global form, the applicable
Prospectus Supplement will describe the circumstances, if any, under which the
beneficial owners of interests in any such global Debt Security may exchange
such interests for definitive Debt Securities of such series and of like tenor
and principal amount in any authorized form and denomination, the manner of
payment of principal of and interest, if any, on any such global Debt Security
and the specific terms of the depository arrangement with respect to any such
global Debt Security.
12
<PAGE>
MERGER AND CONSOLIDATION
Under the Indenture, the Company may consolidate or merge with or into any
other corporation, and the Company may sell, lease or convey all or
substantially all of its assets to any corporation, organized and existing
under the laws of the United States of America or a State thereof, provided
that (i) the corporation (if other than the Company) formed by or resulting
from any such consolidation or merger or which shall have received such assets
shall assume payment of the principal of (and premium, if any) and interest on
the Debt Securities and the performance and observance of all of the covenants
and conditions of the Indenture to be performed or observed by the Company, and
(ii) the Company or such successor corporation shall not immediately thereafter
be in default under the Indenture.
MODIFICATION OF THE INDENTURE AND WAIVER
Modification and amendment of the Indenture may be effected by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the Outstanding Debt Securities of each series affected thereby,
provided that no such modification or amendment may, without the consent of the
Holder of each of the Outstanding Debt Securities affected thereby, (a) change
the maturity of any installment of principal of, or interest on, or change the
obligation of the Company to pay Additional Amounts (other than as provided in
the Indenture) with respect to, any Debt Security or change the Redemption
Price; or (b) reduce the principal amount of, or interest on, or Additional
Amounts payable with respect to, any Debt Security, or reduce the amount of
principal which could be declared due and payable prior to maturity; (c) change
the place or currency of any payment of principal or interest on any Debt
Security, except as may otherwise be provided in the Indenture; (d) impair the
right to institute suit for the enforcement of any payment on or with respect
to any Debt Security; (e) reduce the percentage in principal amount of the
Outstanding Debt Securities of any series, the consent of whose Holders is
required to modify or amend the Indenture; or (f) modify the foregoing
requirements or reduce the percentage of Outstanding Debt Securities necessary
to waive any past default to less than a majority. Except with respect to
certain fundamental provisions, the Holders of at least a majority in principal
amount of Outstanding Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions of the Indenture. The Indenture also contains
provisions permitting the Company and the Trustee to effect certain
modifications and amendments without the consent of the Holders to cure
ambiguities, correct inconsistencies and make other changes, provided such
modifications and amendments do not adversely affect the interest of the
Holders in any material respect.
EVENTS OF DEFAULT
Unless otherwise described in the applicable Prospectus Supplement, under the
Indenture, the following will be Events of Default with respect to Debt
Securities of any series under the Indenture: (a) default in the payment of any
interest or Additional Amounts upon any of the Debt Securities of that series
when due, continued for 30 days; (b) default in the payment of any principal or
premium, if any, on any of the Debt Securities of that series when due, whether
at maturity, upon declaration of acceleration, notice of redemption, request
for repayment, or otherwise; (c) default in the deposit of any sinking fund
payment, when due, in respect of any of the Debt Securities of that series; (d)
default in the performance of any covenant of the Company, contained in the
Indenture (other than a covenant expressly included in the Indenture for the
benefit of a series of Debt Securities other than such series or otherwise
expressly dealt with in the Indenture or the Debt Securities) continued for 60
days after written notice as provided in the Indenture; (e) default in the
payment when due (subject to any applicable grace period), whether at stated
maturity or otherwise, of any principal of or interest on (however designated)
any indebtedness for borrowed money of, or guaranteed by, the Company (other
than the Debt Securities of any series and other than non-recourse
indebtedness) in an aggregate principal amount exceeding 5% of the consolidated
net worth of the Company and its subsidiaries (determined as of the most recent
fiscal quarter for which a balance sheet is available), whether such
indebtedness now exists or shall hereafter be created, which default shall
result in such indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable and the Trustee
receives written notice from a Holder or the Company of such declaration;
provided,
13
<PAGE>
however, that if any such acceleration shall subsequently be rescinded or
annulled (including through the discharge of the accelerated indebtedness)
prior to the obtaining of any judgment or decree for the payment of any money
due on such indebtedness or the actual payment of money due on such
indebtedness, any acceleration with respect to Debt Securities of any series
consequent solely on such other acceleration shall likewise be deemed rescinded
or annulled without further action on the part of any Holders; provided,
further, that for a default other than a default in payment, so long as the
Company is contesting in good faith such event of default and the Company
delivers to the Trustee a certificate that the Company is contesting in good
faith the existence of such event of default, then no Event of Default shall be
deemed to exist under this clause; (f) certain events in bankruptcy, insolvency
or reorganization; and (g) any other Event of Default established with respect
to Debt Securities of that series. The Trustee may withhold notice to the
Holders of any series of Debt Securities issued under the Indenture of any
default (except in the payment of principal, premium, if any, or interest, if
any, on any of the Debt Securities of such series or in the making of any
sinking fund installment) if it considers it in the interest of such Holders to
do so. No Event of Default with respect to a particular series of Debt
Securities necessarily constitutes an Event of Default with respect to any
other series of Debt Securities issued under the Indenture.
If an Event of Default with respect to Outstanding Debt Securities of any
series occurs and is continuing, the Trustee or the Holders of not less than
25% in principal amount of the Outstanding Debt Securities of that series may
declare the principal amount of all Outstanding Debt Securities of that series
(or such lesser amount as may be provided for in the Debt Securities of that
series) and the interest accrued thereon and Additional Amounts payable in
respect thereof, if any, to be due and payable immediately. At any time after a
declaration of acceleration has been made with respect to Debt Securities of
any series, but before a judgment or decree for payment of money due has been
obtained by the Trustee, the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those due as
a result of acceleration) have been made and all Events of Default have been
remedied or waived.
Any default with respect to Debt Securities of any series may be waived by
the Holders of a majority in principal amount of all Outstanding Debt
Securities of that series, except a default in the payment of principal or
premium, if any, or interest or Additional Amounts, if any, on any of the Debt
Securities of that series or a default in respect of a covenant or provisions
which cannot be modified or amended without the consent of the Holder of each
of the Outstanding Debt Securities of such series affected. Upon any such
waiver, such default shall cease to exist and any Event of Default arising from
it shall be deemed to be cured.
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to Debt Securities of such
series, provided that such direction shall not be in conflict with any rule of
law or the Indenture and the Trustee determines that the action so directed is
not unduly prejudicial to the rights of other Holders of such series. Before
proceeding to exercise any right or power under the Indenture at the direction
of such Holders, the Trustee shall be entitled to receive from such Holders
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in complying with any such direction.
The Company is required to file with the Trustee annually a written statement
as to the presence or absence of certain defaults under the Indenture and
compliance by the Company with all conditions and covenants under the
Indenture.
CONCERNING THE TRUSTEE
The Trustee has its principal office at Two World Trade Center, New York, New
York 10048. The Trustee's offices for the purpose of presenting Securities for
payment or registration of transfer or exchange are located at the same
address. The Company has leased equipment to the Trustee and provides it with
business continuity services through its subsidiaries. The Trustee is one of
several core relationship banks which provide credit and banking services to
the Company and its subsidiaries, both domestically and internationally.
14
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell any of the Debt Securities directly to purchasers, or
through agents, dealers, or underwriters.
The Prospectus Supplement and Pricing Supplement, if any, set forth the terms
of the offering of the particular series of Debt Securities to which such
Prospectus Supplement and any such Pricing Supplement relate, including (i) the
name or names of any underwriters or agents with whom the Company has entered
into arrangements with respect to the sale of such series of Debt Securities,
(ii) the initial public offering or purchase price of such series of Debt
Securities, (iii) any underwriting discounts, commissions and other items
constituting underwriters' compensation from the Company and any other
discounts, concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers, (iv) any commissions paid to any agents, (v) the
net proceeds to the Company, and (vi) the securities exchanges, if any, on
which such series of Debt Securities will be listed.
If underwriters are used in the sale, the Debt Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase such Debt Securities will be
subject to certain conditions precedent, and the underwriters will be obligated
to purchase all the Debt Securities offered by the Prospectus Supplement
relating to such series if any are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Offers to purchase the Debt Securities may be solicited directly by the
Company or by agents designated by the Company from time to time. Any agent
involved in the offering and sale thereof in respect of which this Prospectus
is delivered is named and any commissions payable by the Company to such agent
are set forth in the Prospectus Supplement relating to such series. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment.
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, the Company will sell such Debt Securities
to the dealer, as principal. The dealer may then resell such Debt Securities to
the public at varying prices to be determined by such dealer at the time of
resale. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If the sale is accomplished through an underwriter or underwriters, the
Company will enter into an underwriting agreement with such underwriters at the
time of sale to them, and the names of the underwriters (including
identification of any managing underwriter or underwriters) and the terms of
the transaction will be set forth in the Prospectus Supplement, which, together
with this Prospectus, will be used by the underwriters to make resales of the
Debt Securities in respect of which the Prospectus Supplement and this
Prospectus is delivered to the public.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize underwriters, agents or dealers to solicit offers by certain
institutions to purchase Debt Securities to which such Prospectus Supplement
relates pursuant to Delayed Delivery Contracts ("Contracts") providing for
payment and delivery on the date or dates stated in the Prospectus Supplement.
Each of the Contracts will be for an amount not less than, and, unless the
Company otherwise agrees, the aggregate principal amount of Debt Securities
sold pursuant to such Contracts shall not be less or more than, the respective
amounts stated in the Prospectus Supplement. Institutions with whom Contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
that (i) the purchase by an institution of Debt Securities covered thereby
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and
(ii) if the particular Debt Securities are being sold to underwriters,
15
<PAGE>
the Company shall have sold to such underwriters the total amount of such Debt
Securities less the amount thereof covered by such arrangements. Underwriters,
agents or dealers will not have any responsibility in respect of the validity
of such arrangements or the performance of the Company or such institutional
investors thereunder.
Underwriters, agents and dealers may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the underwriters or agents may be required to
make in respect thereof. Underwriters, agents and dealers may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
Underwriters, agents and dealers participating in the distribution of the
Debt Securities may be deemed to be underwriters under the Securities Act, and
any discounts and commissions received by them and any profit realized by them
on resale of Debt Securities may be deemed to be underwriting discounts and
commissions under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Debt Securities
will be passed upon for the Company by Jeremiah M. Fitzgerald, Esq., Vice
President and General Counsel of the Company and for the underwriters, agents
and dealers by Brown & Wood, New York, New York. Certain other legal matters
will be passed upon for the Company by McBride Baker & Coles, Chicago,
Illinois. Mr. Fitzgerald beneficially owns 10,102 shares of the Company's
Common Stock and holds options, granted under the Company's stock option plans,
to purchase an additional 29,143 shares of Common Stock.
EXPERTS
The consolidated financial statements and schedules of Comdisco, Inc. and
subsidiaries as of September 30, 1994 and 1993 and for each of the years in the
three-year period ended September 30, 1994 incorporated herein by reference to
the Annual Report on Form 10-K of the Company for the year ended September 30,
1994 have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in auditing and accounting.
16
<PAGE>
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NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT
OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLE-
MENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY AGENT. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IM-
PLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of the
Notes.................. S-2
Certain Investment Con-
siderations............ S-18
Certain United States
Federal Income Tax Con-
siderations............ S-19
Plan of Distribution.... S-25
PROSPECTUS
Available Information... 2
Incorporation of Certain
Documents by Reference. 2
The Company............. 3
Selected Financial Data. 7
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends.............. 9
Use of Proceeds......... 10
Description of Debt Se-
curities............... 10
Plan of Distribution.... 15
Legal Matters........... 16
Experts................. 16
</TABLE>
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$250,000,000
LOGO
MEDIUM-TERM NOTES, SERIES D
----------------
PROSPECTUS SUPPLEMENT
----------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
SALOMON BROTHERS INC
MORGAN STANLEY & CO.
INCORPORATED
UBS SECURITIES INC.
MARCH 24, 1995
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