<PAGE>
File 333-18921
Rule 424(b)2
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 9, 1997)
$500,000,000
TRIBUNE COMPANY
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
---------------
Tribune Company (the "Company") may offer from time to time its Medium-Term
Notes (the "Notes") with an aggregate initial offering price not to exceed
$500,000,000, or the equivalent thereof in one or more foreign or composite
currencies. Such aggregate principal amount is subject to reduction as a
result of the sale by the Company of certain other debt securities under the
Prospectus to which this Prospectus Supplement relates. Each Note will mature
on any day nine months or more from the date of issue, as specified in a
pricing supplement hereto (each, a "Pricing Supplement"), and may be subject
to redemption by the Company or repayment at the option of the holder thereof,
in each case, in whole or in part, prior to its Stated Maturity Date, as set
forth therein and specified in the applicable Pricing Supplement.
The interest rate, if any, or the formula for the determination of any such
interest rate, applicable to each Note and other variable terms of the Notes
as described herein will be established by the Company at the date of issue of
such Note and will be set forth therein and specified in a Pricing Supplement.
Interest rates, interest rate formulae and such other variable terms are
subject to change by the Company, but no change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in definitive form (a "Definitive Note"), as set forth in the
applicable Pricing Supplement, in denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable Pricing
Supplement. Each Book-Entry Note will be represented by one or more fully
registered global securities deposited with or on behalf of The Depository
Trust Company (or such other depository as is identified in the applicable
Pricing Supplement) (the "Depositary") and registered in the name of the
Depositary or the Depositary's nominee. Interests in Book-Entry Notes will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to its participants) and the
Depositary's participants (with respect to beneficial owners).
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating
rates (the "Floating Rate Notes"). The applicable Pricing Supplement will
specify whether a Floating Rate Note is a Regular Floating Rate Note, Floating
Rate/Fixed Rate Note or Inverse Floating Rate Note and whether its rate of
interest is determined by reference to one or more of the CD Rate, the CMT
Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the
Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an
"Interest Rate Basis"), or any other interest rate basis or formula, as
adjusted by any Spread and/or Spread Multiplier and will specify such other
terms applicable to such Note. Notes may also be issued as Foreign Currency
Notes, Indexed Notes or Amortizing Notes. See "Description of Notes." Interest
on Fixed Rate Notes will accrue from their date of issue and, unless otherwise
specified in the applicable Pricing Supplement, will be payable semiannually
in arrears on May 15 and November 15 of each year and at Maturity. Unless
otherwise specified in the applicable Pricing Supplement, the rate of interest
on each Floating Rate Note will be reset daily, weekly, monthly, quarterly,
semiannually or annually, as set forth therein and specified in the applicable
Pricing Supplement, and interest on each Floating Rate Note will accrue from
its date of issue and will be payable in arrears monthly, quarterly,
semiannually or annually, as specified in the applicable Pricing Supplement,
and at Maturity. Notes may also be issued with original issue discount, and
such Notes may or may not currently pay interest.
SEE "CERTAIN RISK FACTORS" COMMENCING ON PAGE S-2 FOR A DISCUSSION OF
CERTAIN RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE NOTES OFFERED HEREBY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, THE PROSPECTUS OR ANY PRICING SUPPLEMENT HERETO.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(2)(3)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.............................. 100% .125% --.750% 99.875% --99.250%
- ---------------------------------------------------------------------------------------------------
Total(4).............................. $500,000,000 $625,000--$3,750,000 $499,375,000--$496,250,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to public will be 100% of the principal amount.
(2) The Company will pay a commission to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Citicorp Securities, Inc., J.P.
Morgan Securities Inc. or Salomon Brothers Inc, each as agent
(collectively, the "Agents"), in the form of a discount, ranging from
.125% to .750% of the principal amount of a Note, depending upon its
Stated Maturity, sold through such Agent. Commissions with respect to
Notes with Stated Maturity Dates in excess of 30 years that are sold
through such Agent will be negotiated between the Company and such Agent
at the time of such sale. The Company may also sell notes to an Agent, as
principal, for resale to investors and other purchasers at varying prices
relating to prevailing market prices at the time of resale as determined
by such Agent, or, if so specified in the 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 of the principal amount equal to the
commission applicable to an agency sale (as described above) of a Note of
identical maturity. The Company has agreed to indemnify each Agent
against, and to provide contribution with respect to, certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Plan of Distribution of Notes."
(3) Before deducting expenses payable by the Company estimated at $450,000,
including reimbursement of certain of the Agents' expenses.
(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, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. The Company may also sell Notes to any Agent, as
principal, for resale to investors and other purchasers at varying prices
relating to prevailing market prices at the time of resale as determined by
such Agent, or, if so specified in the applicable Pricing Supplement, for
resale at a fixed public offering price. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be listed on any securities
exchange and there can be no assurance that the Notes offered by this
Prospectus Supplement will be sold or that there will be a secondary market
for the Notes. The Company reserves the right to cancel or modify the offer
made hereby without notice. The Company or the Agent may reject any offer to
purchase Notes in whole or in part. See "Plan of Distribution of Notes."
---------------
MERRILL LYNCH & CO.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
---------------
The date of this Prospectus Supplement is January 14, 1997.
<PAGE>
IN CONNECTION WITH AN OFFERING OF NOTES PURCHASED BY ONE OR MORE AGENTS AS A
PRINCIPAL ON A FIXED PRICE BASIS, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
CERTAIN RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in Notes that result from such Notes being denominated or payable
in or determined by reference to a currency or composite currency other than
United States dollars or to one or more interest rate, currency or other
indices or formulas. The Company and the Agents disclaim any responsibility to
advise prospective investors of such risks as they exist at the date of this
Prospectus Supplement or as they change from time to time. Prospective
investors should consult their own financial and legal advisors as to the
risks entailed by an investment in such Notes and the suitability of investing
in such Notes in light of their particular circumstances. Such Notes are not
an appropriate investment for investors who are unsophisticated with respect
to foreign currency transactions or transactions involving the applicable
interest rate index or currency index or other indices or formulas.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, if any, to one or more currencies or composites currencies
(including exchange rates and swap indices between currencies or composite
currencies), commodities, interest rates or other indices or formulas, either
directly or inversely, entails significant risks that are not associated with
similar investments in a conventional fixed rate or floating rate debt
security. Such risks include, without limitation, the possibility that such
indices or formulas may be subject to significant changes, that no interest
will be payable or that interest will be payable at a rate lower than one
applicable to 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, may 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 at Maturity (as defined under "Description of
Notes--General"). Such risks depend on a number of interrelated factors,
including economic, financial and political events, over which the Company has
no control. Additionally, if the formula used to determine the amount of
principal, premium, if any, and/or interest, if any, payable with respect to
such Notes contains a multiplier or leverage factor, the effect of any change
in the applicable index or indices or formula or formulas will be magnified.
In recent years, values of certain indices and formulas have been highly
volatile and such volatility may be expected to continue in the future.
Fluctuations in the value of any particular index or formula that have
occurred in the past are not necessarily indicative, however, of fluctuations
that may occur in the future.
Any optional redemption feature of Notes might affect the market value of
such Notes. Since the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, an investor generally will not
be able to reinvest the redemption proceeds at an effective interest rate as
high as the interest rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the liquidity of
such market if one develops. See "Plan of Distribution."
The secondary market for Notes will be affected by a number of factors
independent of the creditworthiness of the Company and the value of the
applicable index or indices or formula or formulas, including the complexity
and volatility of each such index or formula, the method of calculating the
principal, premium, if any, and/or interest, if any, 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
S-2
<PAGE>
index or formula and the level, direction and volatility of market interest
rates generally. Such factors also will affect the market value of such Notes.
In addition, certain Notes may be designed for specific investment objectives
or strategies and, therefore, may have a more limited secondary market and
experience more price volatility than conventional debt securities. Investors
may not be able to sell such Notes readily or at prices that will enable
investors to realize their anticipated yield. No investor should purchase
Notes unless such investor understands and is able to bear the risk that such
Notes may not be readily saleable, that the value of such Notes will fluctuate
over time and that such fluctuations may be significant.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as defined under "Description of
Notes--General") entails significant risks that are not associated with a
similar investment in a debt security denominated and payable in United States
dollars. Such risks include, without limitation, the possibility of
significant changes in the rate of exchange between the United States dollar
and the Specified Currency (as defined under "Description of Notes--General")
and the possibility of the imposition or modification of exchange controls by
the applicable governments or monetary authorities. Such risks generally
depend on factors over which the Company has no control, such as economic,
financial and political events and the supply and demand for the applicable
currencies or composite currencies. In addition, if the formula used to
determine the amount of principal, premium, if any, and/or interest, if any,
payable with respect to Foreign Currency Notes contains a multiplier or
leverage factor, the effect of any change in the applicable currencies or
composite currencies will be magnified. In recent years, rates of exchange
between the United States dollar and foreign currencies or composite
currencies have been highly volatile and such volatility may be expected to
continue in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations
that may occur in the future. Depreciation of the Specified Currency
applicable to a Foreign Currency Note against the United States dollar would
result in a decrease in the United States dollar-equivalent yield of such
Foreign Currency Note, in the United States dollar-equivalent value of the
principal and premium, if any, payable at Maturity of such Foreign Currency
Note, and, generally, in the United States dollar-equivalent market value of
such Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and may
in the future impose or revise, exchange controls at or prior to the date on
which any payment of principal of, or premium, if any, or interest, if any,
on, a Foreign Currency Note is due, which could affect exchange rates as well
as the availability of the Specified Currency on such date. Even if there are
no exchange controls, it is possible that the Specified Currency would not be
available on the applicable payment date due to other circumstances beyond the
control of the Company. In such cases, the Company will be entitled to satisfy
its obligations in respect of such Foreign Currency Note in United States
dollars. See "Special Provisions Relating to Foreign Currency Notes--Payment
Currency."
CREDIT RATINGS
Any credit ratings assigned to the Company's medium-term note program may
not reflect the potential impact of all risks related to structure and other
factors on the 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 investing in such Notes in
light of their particular circumstances.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms of the Debt Securities (as defined in the
accompanying Prospectus) set forth under the heading "Description of Debt
Securities" in the Prospectus, to which description reference is made. The
following description will apply to each Note unless otherwise specified in
the applicable Pricing Supplement.
S-3
<PAGE>
GENERAL
The Notes will be issued under an Indenture dated as of January 1, 1997 (as
supplemented from time to time in accordance with its terms, the "Indenture"),
between the Company and Bank of Montreal Trust Company, which is more fully
described in the Prospectus. All Debt Securities, including the Notes, issued
and to be issued under the Indenture will be unsecured general obligations of
the Company and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Company from time to time outstanding. The
Indenture does not limit the aggregate principal amount of Debt Securities
which may be issued thereunder and Debt Securities may be issued thereunder
from time to time in one or more series up to the aggregate principal amount
from time to time authorized by the Company for each series. The Company may,
from time to time, without the consent of the holders of the Notes, provide
for the issuance of Debt Securities under the Indenture in addition to the
Notes offered hereby.
The Notes are currently limited to an aggregate initial offering price of
$500,000,000, or the equivalent thereof in one or more foreign or composite
currencies. The Notes will be offered on a continuing basis and will mature on
any day nine months or more from the date of issue, as specified in the
applicable Pricing Supplement (the "Stated Maturity Date"). Unless otherwise
specified in the applicable Pricing Supplement, interest-bearing Notes will
either be Fixed Rate Notes or Floating Rate Notes as specified in the
applicable Pricing Supplement. Notes may 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) (each such date, a "Maturity"), and some Notes may not bear
interest.
Each Note will be denominated in a currency or currency unit (the "Specified
Currency") as specified on the face thereof and in the applicable Pricing
Supplement. Unless otherwise indicated in a Note or in the applicable Pricing
Supplement, the Notes will be denominated in United States dollars and
payments of principal of, and premium, if any, and interest on, the Notes will
be made in United States dollars. Unless otherwise specified in the applicable
Pricing Supplement, purchasers are required to pay for Notes that are
denominated in, or provide for payments determined by reference to, a
Specified Currency other than the United States dollar ("Foreign Currency
Notes") in the Specified Currency. At the present time, there are limited
facilities in the United States for the conversion of United States dollars
into foreign currencies or currency units and vice versa, and commercial banks
do not generally offer non-U.S. dollar checking or savings account facilities
in the United States. If requested on or prior to the third Business Day (as
defined below) preceding the date of delivery of the Notes, or by such other
day as determined by the Agent who presented such offer to purchase Notes to
the Company, such Agent may be prepared to arrange for the conversion of
United States dollars into the Specified Currency to enable the purchasers to
pay for the Notes. If agreed to by such Agent, each such conversion will be
made by such Agent on such terms and subject to such conditions, limitations
and charges as such Agent may from time to time establish in accordance with
its regular foreign exchange practices. All costs of exchange will be borne by
the purchasers of Foreign Currency Notes. See "Special Provisions Relating to
Foreign Currency Notes" below.
Interest rates, interest rate formulae and other variable terms of the Notes
are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has
been accepted by the Company.
Each Note, other than a Foreign Currency Note, will be issued in fully
registered form as a Book-Entry Note or a Definitive Note, in denominations of
$1,000 and integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement. 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, among other things, the aggregate principal amount of Notes
purchased in any single transaction.
Beneficial interests in Book-Entry Notes may be transferred or exchanged
only through the Depositary. See "Book-Entry Notes." Registration of transfer
of Definitive Notes will be made at the office or agency of the
S-4
<PAGE>
Trustee in the Borough of Manhattan, The City of New York. No service charge
will be made by the Company or the Trustee for any such registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith (other than exchanges pursuant to the Indenture not
involving any transfer).
Payments of principal of, and premium and interest, if any, on Book-Entry
Notes will be made by the Company through the Trustee to the Depositary. See
"Book-Entry Notes." In the case of Definitive Notes, payment of principal or
premium, if any, at the Maturity of each Definitive Note will be made in
immediately available funds upon presentation of the Definitive Note at the
office or agency of the Trustee in the Borough of Manhattan, The City of New
York, the office maintained for such purpose by any duly authorized Paying
Agent, or at such other place as the Company may designate (or, in the case of
any repayment on an Optional Repayment Date, upon presentation of the
Definitive Note in accordance with the provisions thereof as described below).
Payment of interest due at Maturity will be made to the person to whom payment
of the principal shall be made. Payment of interest due on Definitive Notes
(other than at Maturity) will be made at the office or agency of the Trustee
or the office maintained for such purpose by the Paying Agent or, at the
option of the Company, may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the registry books of
the Company. Notwithstanding the foregoing, a holder of $10,000,000 or more in
aggregate principal amount of Definitive Notes having the same Interest
Payment Dates will, at the option of the Company, be entitled to receive
interest payments by wire transfer of immediately available funds if
appropriate wire transfer instructions have been received in writing by the
Trustee not less than 15 days prior to the applicable Interest Payment Date.
Such wire instructions, upon receipt by the Trustee, shall remain in effect
until revoked by such holder.
For special payment terms applicable to Foreign Currency Notes, see "Special
Provisions Relating to Foreign Currency Notes" below.
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise indicated in the applicable Pricing Supplement, Notes will
not be subject to any sinking fund. The Notes will be redeemable at the option
of the Company prior to the Stated Maturity Date only if an Initial Redemption
Date is specified therein and in the applicable Pricing Supplement. If so
indicated in the applicable Pricing Supplement, Notes will be subject to
redemption at the option of the Company on any date on and after the
applicable Initial Redemption Date specified in such Pricing Supplement. On
and after the Initial Redemption Date, if any, the related Note may be
redeemed at any time in whole or from time to time in part in increments of
$1,000 at the option of the Company at the applicable Redemption Price,
together with interest thereon payable to the date of redemption, on notice
given not more than 60 nor less than 30 days prior to the date of redemption
and in accordance with the provisions of the Indenture. "Redemption Price,"
with respect to a Note, will initially mean a percentage, the Initial
Redemption Percentage, of the principal amount of such Note to be redeemed
specified in the applicable Pricing Supplement and shall decline at each
anniversary of the Initial Redemption Date by a percentage, the Annual
Redemption Percentage Reduction, if any, specified in the applicable Pricing
Supplement, of the principal amount to be redeemed until the Redemption Price
is 100% of such principal amount.
REPAYMENT AT THE OPTION OF THE HOLDER
If so indicated in the applicable Pricing Supplement, Notes will be
repayable by the Company in whole or in part at the option of the holders
thereof on their respective Optional Repayment Dates specified in such Pricing
Supplement. If no Optional Repayment Date is indicated with respect to a Note,
such Note will not be repayable at the option of the holder prior to the
Stated Maturity Date. Any repayment in part will be in increments of $1,000
provided that any remaining principal amount of such Note will be an
authorized denomination of such Note. Unless otherwise provided in the
applicable Pricing Supplement, the repayment price for any Note so repaid will
be 100% of the principal amount to be repaid, together with accrued interest
thereon payable to the date of repayment. For any Note to be so repaid, the
Note must be received, together with the form thereon
S-5
<PAGE>
entitled "Option to Elect Repayment" duly completed, by the Trustee at its
Corporate Trust Office (or such other address of which the Company shall from
time to time notify the holders) not more than 60 nor less than 30 days prior
to the Optional Repayment Date. Exercise of such repayment option by the holder
will be irrevocable.
If the Book-Entry Notes are represented by global securities held by or on
behalf of the Depositary, and registered in the name of the Depositary or the
Depositary's nominee, the Depositary or its nominee will be the holder of such
Book-Entry Note and therefore will be the only entity that can exercise a right
to repayment. In order to ensure that the Depositary or its nominee will timely
exercise a right to repayment with respect to a particular Book-Entry Note, the
beneficial owner of such Book-Entry Note must instruct the participant through
which it holds an interest in such Book-Entry Note to notify the Depositary of
its desire to exercise a right of repayment. Different firms may have different
deadlines for accepting instructions from their customers. Accordingly,
beneficial owners of Book-Entry Notes should consult the participants through
which they own their interest in the Book-Entry Notes 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, such beneficial owners of Book-Entry Notes shall
effect delivery of such Book-Entry Notes at the time such notices of election
are given to the Depositary by causing the participant to transfer such
beneficial owner's interest in the Book-Entry Notes, on the Depositary's
records, to the Trustee. Conveyance of notices and other communications by the
Depositary to participants, by participants to indirect participants and by
participants and indirect participants to beneficial owners of the Book-Entry
Notes will be governed by agreements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
any other securities laws or regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Company may be held or resold
or, at the discretion of the Company, may be surrendered to the Trustee for
cancellation.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from the date of issue at the rate per annum or, in the case
of a Floating Rate Note, pursuant to the 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 in arrears on each
Interest Payment Date specified in the applicable Pricing Supplement on which
an installment of interest is due and payable and at Maturity. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest
on any Note originally issued between a record date and the related Interest
Payment Date will be made on the Interest Payment Date immediately following
the next succeeding record date to the registered holder on such next
succeeding record date. Unless otherwise specified in the applicable Pricing
Supplement, a "Record Date" shall be the fifteenth calendar day (whether or not
a Business Day) immediately preceding the related Interest Payment Date.
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note will bear interest from, and including, the Original Issue Date, at
the rate per annum stated on the face thereof until the principal amount
thereof is paid or made available for payment. Interest payments on Fixed Rate
Notes will equal the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid (or
from and including the Original Issue Date, if no interest has been paid with
respect to such Fixed Rate Notes), to but excluding the related Interest
Payment Date or Maturity, as the case may be. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
S-6
<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable semiannually on May 15 and November 15 of each
year and at Maturity. If any Interest Payment Date or the Maturity of a Fixed
Rate Note falls on a day that is not a Business Day, the related payment of
principal, premium, if any, or interest will be made on the next succeeding
Business Day as if made on the date such payment was due, and no interest will
accrue on the amount so payable for the period from and after such Interest
Payment Date or Maturity, as the case may be.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. Each applicable Pricing
Supplement will specify certain 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 Interest Rate Basis or Bases, Initial Interest Rate,
Interest Reset Dates, Record Dates, Interest Payment Dates, Index Maturity,
maximum interest rate and minimum interest rate, if any, and the Spread and/or
Spread Multiplier, if any, and if one or more of the specified Interest Rate
Bases is LIBOR, the Index Currency and the Designated LIBOR Page, as described
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 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 (i) plus or minus the applicable
Spread, if any, and/or (ii) 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 Original Issue Date to the first Interest
Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis (i) plus or
minus the applicable Spread, if any, and/or (ii) 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 (i) the interest rate in effect for the period from
the Original Issue Date to the first Interest Reset Date will be the
Initial Interest Rate; and (ii) the interest rate in effect commencing on,
and including, the Fixed Rate Commencement Date to 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 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 related Pricing Supplement minus the rate
determined by reference to the Interest Rate Basis (i) plus or minus the
applicable Spread, if any, and/or (ii) multiplied by the applicable Spread
Multiplier, if any; provided, however, that, unless otherwise specified in
the applicable Pricing Supplement, the interest rate thereon will not be
less than zero. Commencing on the 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 Original Issue Date to the first Interest
Reset Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note 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.
S-7
<PAGE>
Unless otherwise provided in the applicable Pricing Supplement, the interest
rate with respect to each Interest Rate Basis will be determined in accordance
with the applicable provisions below. Except as set forth above or in the
applicable Pricing Supplement, the interest rate in effect on each day shall be
(a) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date immediately preceding such Interest Reset Date
or (b) if such day is not an Interest Reset Date, the interest rate determined
as of the Interest Determination Date immediately preceding the next preceding
Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to an
"Interest Rate Basis," which may be one or more of (i) the "CD Rate," (ii) the
"CMT Rate," (iii) the "Commercial Paper Rate," (iv) the "Eleventh District Cost
of Funds Rate," (v) the "Federal Funds Rate," (vi) "LIBOR," (vii) the "Prime
Rate," (viii) the "Treasury Rate," or (ix) such other Interest Rate Basis or
interest rate formula as may be set forth in the applicable 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 day immediately preceding
the Fixed Rate Commencement Date.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate Note.
The "Spread Multiplier" is the percentage of the related Interest Rate Basis or
Bases applicable to such Floating Rate Note by which such Interest Rate Basis
or Bases will be multiplied to determine the applicable interest rate on such
Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the Interest Rate Basis or Bases
will be calculated. The Spread, Spread Multiplier, Index Maturity and other
variable terms of the Floating Rate Notes are subject to change by the Company
from time to time, but no such change will affect any Floating Rate Note
previously issued or as to which an offer has been accepted by the Company.
Each applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such Interest Rate will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Treasury Rate Notes
which will reset the Tuesday of each week, except as specified below); (iii)
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); (iv) quarterly, the third Wednesday of March, June,
September and December of each year; (v) semiannually, the third Wednesday of
the two months specified in the applicable Pricing Supplement; and (vi)
annually, the third Wednesday of the month specified in the applicable Pricing
Supplement; provided however, that, with respect to Floating Rate/Fixed Rate
Notes, the fixed rate of interest in effect for the period from the Fixed Rate
Commencement Date until Maturity shall be the Fixed Interest Rate or the
interest rate in effect on the day immediately preceding the Fixed Rate
Commencement Date, as specified in the applicable Pricing Supplement. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding day that is a Business Day, except that in the case of a Floating
Rate Note as to which LIBOR is an applicable Interest Rate Basis, if such
Business Day falls in the next succeeding calendar month, such Interest Reset
Date will be the immediately preceding Business Day. As used herein, "Business
Day" means, unless otherwise specified in the applicable Pricing Supplement,
any day that in The City of New York, is not a day on which banking
institutions are authorized or required by law, regulation or executive order
to close and, with respect to Notes as to which LIBOR is an applicable Interest
Rate Basis, is also a London Business Day. As used herein, "London Business
Day" means any day (a) if the Index Currency is other than the European
Currency Unit ("ECU"), on which dealings in deposits in such Index Currency are
transacted in the London interbank market or (b) if the Index Currency is the
ECU, that is not designated as an ECU Non-Settlement Day by the ECU Banking
Association in Paris or otherwise generally regarded in the ECU interbank
market as a day on which payments on ECUs shall not be made.
S-8
<PAGE>
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period, and (ii) a minimum numerical limitation, or
floor, on the rate at which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on 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.
Each Floating Rate Note will bear interest from the date of issue at the
rates specified therein until the principal thereof is paid or otherwise made
available for payment. Except as provided below or in the applicable Pricing
Supplement, the Interest Payment Dates will be, in the case of Floating Rate
Notes which reset: (i) daily, weekly or monthly, the third Wednesday of each
month or on the third Wednesday of March, June, September and December of each
year, as specified in the applicable Pricing Supplement; (ii) quarterly, the
third Wednesday of March, June, September and December of each year, (iii)
semiannually, the third Wednesday of the two months of each year specified in
the applicable Pricing Supplement; and (iv) annually, the third Wednesday of
the month of each year specified in the applicable Pricing Supplement and, in
each case, interest will be payable at Maturity. If any Interest Payment Date
for any Floating Rate Note (other than an Interest Payment Date at Maturity)
would otherwise be a day that is not a Business Day, such Interest Payment Date
will be postponed to the next succeeding day that is a Business Day except that
in the case of a Floating Rate Note as to which LIBOR is an applicable Interest
Rate Basis, if such Business Day falls in the next succeeding calendar month,
such Interest Payment Date will be the immediately preceding Business Day. If
the Maturity of a Floating Rate Note falls on a day that is not a Business Day,
the payment of principal, premium, if any, and interest will be made on the
next succeeding Business Day, and no interest on such payment shall accrue for
the period from and after such Maturity.
All percentages resulting from any calculation on Floating Rate Notes will be
rounded to the nearest one hundred-thousandth of a percentage point, with five
one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded to the nearest cent or, in the case of Notes denominated other than in
United States dollars, the nearest unit (with one-half cent or unit being
rounded upward).
Interest payments on Floating Rate Notes will equal the amount of interest
accrued from, and including the next preceding Interest Payment Date in respect
of which interest has been paid (or from, and including the Original Issue
Date, if no interest has been paid with respect to such Floating Rate Notes)
to, but excluding the related Interest Payment Date or Maturity, as the case
may be.
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued 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 is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Notes for which the Interest Rate Basis is the
Treasury Rate or the CMT Rate. Unless otherwise specified in the 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 applicable to each Interest Rate Reset Period commencing on
the Interest Reset Date with respect to such Interest Rate Reset Period will be
the rate determined as of the applicable Interest Determination Date. The
Interest Determination Date with respect to the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day preceding each Interest Reset Date; the Interest
Determination Date with respect to the Eleventh District Cost of Funds Rate
will be the last working
S-9
<PAGE>
day of the month immediately preceding each Interest Reset Date on which the
Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco") publishes
the Index; the Interest Determination Date with respect to LIBOR will be the
second London Business Day immediately preceding each Interest Reset Date
unless the Index Currency is British pounds sterling, in which case the
Interest Determination Date will be the applicable Interest Reset Date. With
respect to the Treasury Rate, the Interest Determination Date will be the day
in the week in which the related Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday); provided,
however, that if an auction is held on the Friday of the week preceding the
related Interest Reset Date, the related Interest Determination Date will be
such preceding Friday; and provided, further, that if an auction falls on any
Interest Reset Date, then the related Interest Reset Date will instead be the
first Business Day following such auction. The Interest Determination Date
pertaining to a Floating Rate Note the interest rate of which is determined
with reference to two or more Interest Rate Bases will be the most recent
Business Day which is at least two Business Days prior to such 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 related Interest Reset Date.
Unless otherwise provided in the applicable Pricing Supplement, Bank of
Montreal Trust Company will be the "Calculation Agent." Upon request of the
Holder of any Floating Rate Note, the Calculation Agent will provide the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next Interest
Reset Date with respect to such Floating Rate Note. Unless otherwise specified
in the applicable Pricing Supplement, the "Calculation Date," if applicable,
pertaining to any Interest Determination Date will be the earlier of (i) the
tenth calendar day after such Interest Determination Date, or, if such day is
not a Business Day, the next succeeding Business Day or (ii) the Business Day
preceding the applicable Interest Payment Date or Maturity, as the case may be.
CD Rate. CD Rate Notes will bear interest at the rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable United States dollar certificates of deposit having
the Index Maturity specified in the applicable Pricing Supplement as published
by the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Certificates
of Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the secondary
market offered rates as of 10:00 A.M., New York City time, on such CD Rate
Interest Determination Date, of three leading nonbank dealers in negotiable
United States dollar certificates of deposit in The City of New York selected
by the Calculation Agent for negotiable certificates of deposit of major United
States money market banks for negotiable United States dollar certificates of
deposit with a remaining maturity closest to the Index Maturity designated in
the applicable Pricing Supplement in an amount that is representative for a
single transaction in that market at that time; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as set forth
above, the CD Rate with respect to such CD Rate Interest Determination Date
will be the CD Rate in effect on such CD Rate Interest Determination Date.
S-10
<PAGE>
CMT Rate. CMT Rate Notes will bear interest at the rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a Floating
Rate Note for which the interest rate is determined with reference to the CMT
Rate (a "CMT Rate Interest Determination Date"), the rate displayed on the
Designated CMT Telerate Page under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
week, or the month, as applicable, ended immediately preceding the week in
which the related CMT Rate Interest Determination Date occurs. If such rate is
no longer displayed on the relevant page or is not displayed by 3:00 P.M., New
York City time, on the related Calculation Date, then the CMT Rate for such CMT
Rate Interest Determination Date will be such treasury constant maturity rate
for the Designated CMT Maturity Index as published in the relevant H.15(519).
If such rate is no longer published or is not published by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for
the Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date
with respect to such Interest Reset Date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate on the CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing 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 the Agents or their affiliates) selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity
of approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one year. If
the Calculation Agent is unable to obtain three such Treasury Note quotations,
the CMT Rate on such CMT Rate Interest Determination Date will be calculated by
the Calculation Agent and will be a yield to maturity based on the arithmetic
mean of the secondary market offer side prices as of approximately 3:30 P.M.,
New York City time, on such CMT Rate Interest Determination Date of three
Reference Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100 million. If three or four (and
not five) of such Reference Dealers are quoting as described above, then the
CMT Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated; provided
however, that if fewer than three Reference Dealers so selected by the
Calculation Agent are quoting as mentioned herein, the CMT Rate determined as
of such CMT Rate Interest Determination Date will be the CMT Rate in effect on
such CMT Rate Interest Determination Date. If two Treasury Notes with an
original maturity as described in the second preceding sentence have remaining
terms to maturity equally close to the Designated CMT Maturity Index, the
Calculation Agent will obtain from five Reference Dealers quotations for the
Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any
other page as may replace such page on that service for
S-11
<PAGE>
the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)) for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052 for the most recent
week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at the
rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate Notes
and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date relating to
a Commercial Paper Rate Note or any Floating Rate Note for which the interest
rate is determined with reference to the Commercial Paper Rate (a "Commercial
Paper Rate Interest Determination Date"), the Money Market Yield (as defined
below) on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Commercial Paper." In the event that such rate is not published by
3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate will be the Money Market Yield on such Commercial Paper
Rate Interest Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
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 by 3:00 P.M., New York City
time, on the related Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate on such
Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized securities rating agency; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Commercial Paper Rate determined on
such Commercial Paper Rate Interest Determination Date will be the Commercial
Paper Rate in effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
Money Market Yield = D X 360 X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the
Eleventh District Cost of Funds Rate and the Spread and/or Spread Multiplier,
if any) specified in such Eleventh District Cost of Funds Rate Notes and in any
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to 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 (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the
S-12
<PAGE>
monthly weighted average cost of funds for the calendar month preceding such
Eleventh District Cost of Funds Rate Interest Determination Date as set forth
under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M., San
Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate for such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month preceding the date of
such announcement. If the FHLB of San Francisco fails to announce such rate for
the calendar month next preceding such 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 Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in
any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to
a Federal Funds Rate Note or any Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date,
the rate on such Federal Funds Rate Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 P.M., New York City time, on the related Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate on such Federal Funds Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the rates for the
last transaction in overnight United States dollar federal funds arranged by
three leading brokers of federal funds transactions in The City of New York
selected by the Calculation Agent prior to 9:00 A.M., New York City time on
such Federal Funds Rate Interest Determination Date; provided, however that if
the brokers so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Federal Funds Rate with respect to such Federal Funds
Rate Interest Determination Date will be the Federal Funds Rate in effect on
such Federal Funds Rate Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates (calculated with reference
to LIBOR and the Spread and/or Spread Multiplier, if any) specified in such
LIBOR Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the 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 designated in the applicable Pricing
Supplement, commencing on the second London Business Day immediately
following that LIBOR Interest Determination Date, that appear on the
Designated LIBOR Page specified in the applicable Pricing Supplement as of
11:00 A.M. London time, on that LIBOR Interest Determination Date, if at
least two such offered rates appear (unless, as aforesaid, only a single
rate is required) on such Designated LIBOR Page, or (b) if "LIBOR Telerate"
is specified in the applicable Pricing Supplement, the rate for deposits in
the Index Currency having the Index Maturity designated in the applicable
Pricing Supplement commencing on the second London Business Day immediately
following that LIBOR Interest Determination Date that appears on the
Designated LIBOR Page specified in the applicable Pricing Supplement as of
11:00 A.M. London time, on that LIBOR Interest
S-13
<PAGE>
Determination Date. If fewer than two offered rates appear, or no rate
appears, as applicable, LIBOR in respect of the related 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 no rate appears, as the case may be, on
the applicable Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination
Date and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time. If at least
two such quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable Principal Financial Center, on
such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the 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 so selected
by the Calculation Agent are not quoting as mentioned in this sentence,
LIBOR determined on such LIBOR Interest Determination Date will be LIBOR in
effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, Page 3750) had been specified.
"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 and ECUs, the Principal Financial Center shall be The City of New York
and Luxembourg, respectively.
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in such Prime Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date relating to a Prime Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME1 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 but more than one such rate appear on the Reuters
Screen USPRIME1 for
S-14
<PAGE>
such Prime Rate Interest Determination Date, the Prime Rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by a 360-day year as of the close of business on such
Prime Rate Interest Determination Date by four major money center banks in The
City of New York selected by the Calculation Agent. If fewer than two such
rates appear on the Reuters Screen USPRIME1, the Prime Rate will be determined
by the Calculation Agent on the basis of the rates furnished in The City of New
York by three substitute banks or trust companies organized and doing business
under the laws of the United States, or any state thereof, having total equity
capital of at least $500 million and being subject to supervision or
examination by Federal or state authority, selected by the Calculation Agent to
provide such rate or rates; provided, however, that if the banks or trust
companies selected as aforesaid are not quoting as mentioned in this sentence,
the Prime Rate for such Prime Rate Interest Determination Date will be the
Prime Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1" means the display designated as page "USPRIME1" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
USPRIME1 page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in any applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate is published in
H.15(519) under the heading "Treasury Bills-auction average (investment)" or,
if not published by 3:00 P.M., New York City time, on the related Calculation
Date, the auction average rate (expressed as a bond equivalent on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the Index
Maturity designated in the applicable Pricing Supplement are not reported as
provided by 3:00 P.M., New York City time, on such Calculation Date, or if no
such auction is held in a particular week, then the Treasury Rate 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
Rate Interest Determination Date, of three leading primary United States
government securities dealers (which may include the Agents) selected by the
Calculation Agent, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Treasury Rate with respect to
such Treasury Rate Interest Determination Date will be the Treasury Rate in
effect on such Treasury Rate Interest Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to Notes, including the determination of an
Interest Rate Basis, the specification of an Interest Rate Basis, calculation
of the interest rate applicable to a Floating Rate Note, its Interest Payment
Dates or any other matter relating thereto may be modified by the terms as
specified under "Other Provisions" on the face thereof or in an Addendum
relating thereto, if so specified on the face thereof and in the applicable
Pricing Supplement.
AMORTIZING NOTES
The Company may from time to time offer Notes which pay a level amount in
respect of both interest and principal amortized over the life of the Note
("Amortizing Notes"). Unless otherwise specified in the applicable
S-15
<PAGE>
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 conditions of any issue of
Amortizing Notes will be provided in the applicable Pricing Supplement. A table
setting forth repayment information in respect of each Amortizing Note will be
included in the applicable Pricing Supplement and set forth in such Notes.
ORIGINAL ISSUE DISCOUNT NOTES
Notes may be issued at a price less than their "stated redemption price at
maturity," resulting in such Notes being treated as if they were issued with
original issue discount for federal income tax purposes. Such original issue
discount Notes may currently pay no interest or interest at a rate which at the
time of issuance is below market rates. See "United States Federal Income Tax
Consequences." Certain additional considerations relating to any original issue
discount Notes may be described in the Pricing Supplement relating thereto.
INDEXED NOTES
Notes also may be issued with the principal amount payable at Maturity and/or
interest to be paid thereon to be determined with reference to the price or
prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the ECU) relative
to an indexed currency, or such other price or exchange rate as may be
specified in such Note ("Indexed Notes"), as set forth in the applicable
Pricing Supplement. Holders of such Notes may receive a principal amount at
Maturity that is greater than or less than the face amount of the Notes
depending upon the relative value at Maturity of the specified indexed item.
Information as to the method for determining the principal amount payable at
Maturity, certain historical information with respect to the specified indexed
item and tax considerations associated with investment in Indexed Notes will be
set forth in the applicable Pricing Supplement.
BOOK-ENTRY NOTES
The Company has established a depositary arrangement with The Depository
Trust Company (the "Depositary") with respect to the Book-Entry Notes, the
terms of which are summarized below. Any additional or differing terms of the
depositary arrangement with respect to the Book-Entry Notes will be described
in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes 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
transferable. Accordingly, each Beneficial Owner must rely on the procedures of
the Depositary and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such Global Security
or the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such
S-16
<PAGE>
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the Global
Securities, (ii) the Depositary ceases to be a clearing agency registered under
the Exchange Act, (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.
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. 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
S-17
<PAGE>
& Co. The deposit of Global Securities with, or on behalf of, the
Depositary and their registration in the name of Cede & Co. effect no
change in beneficial ownership. The Depositary has no knowledge of the
actual Beneficial Owners of the Global Securities representing the Book-
Entry Notes; the Depositary's records reflect only the identity of the
Direct Participants to whose accounts such Book-Entry Notes are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Securities representing the Book-Entry Notes. Under its usual
procedure, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, 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, if any, 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.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the accompanying
Prospectus under "Description of Securities--Global Securities."
S-18
<PAGE>
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than United States dollars or ECUs will not be sold in, or
to residents of, the country issuing the Specified Currency in which particular
Notes are denominated. The information set forth in this Prospectus Supplement
is directed to prospective purchasers who are United States residents, and the
Company disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any matters
that may affect the purchase, holding or receipt of payments of principal of
and any interest on the Notes. Such persons should consult their own financial
and legal advisors with regard to such matters.
The information set forth below is by necessity incomplete and prospective
purchasers of Foreign Currency Notes should consult their own financial and
legal advisors with respect to any matters that may affect the purchase or
holding of a Foreign Currency Note or the receipt of payments of principal of
and any premium and interest on a Foreign Currency Note in a Specified
Currency.
JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of Illinois. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Notes only in United States dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion into
United States dollars would be determined with reference to the date of
default, the date judgment is rendered or some other date. Under current
Illinois law, a state court in the State of Illinois rendering a judgment on a
Foreign Currency Note would, unless otherwise provided in such Foreign Currency
Note, require such judgment to be payable in the Specified Currency in which
such Foreign Currency Note is denominated or, at the option of the Company, in
United States dollars based upon the spot rate of exchange on the banking date
next preceding the date on which the judgment is satisfied. Holders of Foreign
Currency Notes would bear the risk of exchange rate fluctuations between the
time the amount of the judgment is calculated and the time the Paying Agent
converts United States dollars to the Specified Currency for payment of the
judgment.
PAYMENT OF PRINCIPAL AND ANY PREMIUM AND INTEREST
The Company is obligated to make payments of principal of and any premium and
interest on Foreign Currency Notes in the Specified Currency (or, if such
Specified Currency is not at the time of such payment legal tender for the
payment of public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of such payment is
legal tender for the payment of such debts). Any such amounts paid by the
Company will, unless otherwise specified in the applicable Pricing Supplement,
be converted by the Exchange Rate Agent named in the applicable Pricing
Supplement to United States dollars for payment to holders. However, unless
otherwise indicated in the applicable Pricing Supplement, the holder of a
Foreign Currency Note may elect to receive such payments in the Specified
Currency as hereinafter described.
Any United States dollar amount to be received by a holder of a Foreign
Currency Note will be based on the highest bid quotation in the City of New
York received by the Exchange Rate Agent at approximately 11:00 a.m., New York
City time, on the second Business Day preceding the applicable payment date
from three recognized foreign exchange dealers (one of which may be the
Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the
Company for the purchase by the quoting dealer of the Specified Currency for
United States dollars for settlement on such payment date in the aggregate
amount of the Specified Currency payable to all holders of Foreign Currency
Notes scheduled to receive United States dollar payments and at which the
applicable dealer commits to execute a contract. If such bid quotations are not
available, payments will be made in the Specified Currency. All currency
exchange costs will be borne by the holder of the Foreign Currency Note by
deductions from such payments.
S-19
<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, a holder of
a Foreign Currency Note may elect to receive payment of the principal of and
any premium and interest on such Note in the Specified Currency by submitting a
written request for such payment to the Paying Agent at its office in the City
of New York maintained for such purpose on or prior to the Record Date or at
least sixteen days prior to Maturity, as the case may be. Such written request
may be mailed or hand-delivered or sent by cable, telex or other form of
facsimile transmission. A holder of a Foreign Currency Note may elect to
receive payment in the Specified Currency for all principal and any premium and
interest payments and need not file a separate election for each payment. Such
election will remain in effect until revoked by written notice to the Paying
Agent, but written notice of any such revocation must be received by the Paying
Agent on or prior to the relevant Record Date or at least the sixteenth
calendar day prior to Maturity, as the case may be. Holders of Foreign Currency
Notes whose Notes are to be held in the name of a broker or nominee should
contact such broker or nominee to determine whether and how an election to
receive payments in the Specified Currency may be made.
Principal of, and any premium and interest on, a Foreign Currency Note paid
in United States dollars will be paid in the manner specified in the Prospectus
and this Prospectus Supplement for interest on Notes denominated in United
States dollars. Interest on a Foreign Currency Note paid in the Specified
Currency will be paid by check mailed at the address of the person entitled
thereto as it appears in the Security Register. All checks payable in a
Specified Currency will be drawn on a bank office located outside the United
States. Payments of principal of and any premium and interest on Foreign
Currency Notes paid in the Specified Currency at Maturity will be made by wire
transfer of immediately available funds to an account with a bank located in
the country of the Specified Currency, as shall have been designated at least
sixteen days prior to Maturity by the holder, provided that the Note is
presented at the office or agency of the Trustee or the office maintained for
such purpose by the Paying Agent in time for the Paying Agent to make such
payments in such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a beneficial
owner of Book-Entry Notes denominated in a Specified Currency electing to
receive payments of principal or any premium or interest in a currency other
than United States dollars must notify the participant through which its
interest is held on or prior to the applicable Record Date, in the case of a
payment of interest, and on or prior to the sixteenth day prior to Maturity, in
the case of principal or premium, of such beneficial owner's election to
receive all or a portion of such payment in a Specified Currency. Such
participant must notify the Depositary of such election on or prior to the
third Business Day after such Record Date. The Depositary will notify the
Paying Agent of such election on or prior to the fifth Business Day after such
Record Date. If complete instructions are received by the participant and
forwarded by the participant to the Depositary, and by the Depositary to the
Paying Agent, on or prior to such dates, the beneficial owner will receive
payments in the Specified Currency.
PAYMENT CURRENCY
If a Specified Currency is not available for the payment of principal or any
premium or interest with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances beyond the control of
the Company, the Company will be entitled to satisfy its obligations to holders
of Foreign Currency Notes by making such payment in United States dollars on
the basis of the Market Exchange Rate on the second Business Day prior to such
payment, or if such Market Exchange Rate is not then available, on the basis of
the most recently available Market Exchange Rate or as otherwise indicated in
the applicable Pricing Supplement. The "Market Exchange Rate" for any Specified
Currency means the noon buying rate in the City of New York for cable transfer
for such Specified Currency as certified for customs purposes (or if not so
certified, as otherwise determined) by the Federal Reserve Bank of New York.
Any payment made under such circumstances in United States dollars where the
required payment is in other than United States dollars will not constitute an
Event of Default under the Indenture.
If payment in respect of a Note is required to be made in any currency unit
(e.g., ECU), and such currency unit is unavailable due to the imposition of
exchange controls or other circumstances beyond the Company's control, then the
Company will be entitled, but not required, to make any payments in respect of
such Note in
S-20
<PAGE>
United States dollars until such currency unit is again available. The amount
of each payment in United States dollars shall be computed on the basis of the
equivalent of the currency unit in United States dollars, which shall be
determined by the Company or its agent on the following basis. The component
currencies of the currency unit for this purpose (the "Component Currencies"
or, individually, a "Component Currency") shall be the currency amounts that
were components of the currency unit as of the last day on which the currency
unit was used. The equivalent of the currency unit in United States dollars
shall be calculated by aggregating the United States dollar equivalents of the
Component Currencies. The United States dollar equivalent of each of the
Component Currencies shall be determined by the Company or such agent on the
basis of the most recently available Market Exchange Rate for each such
Component Currency, or as otherwise indicated in the applicable Pricing
Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by the Company or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the holders of the Notes.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the principal United States federal income
tax consequences of the purchase, ownership and disposition of Notes to
beneficial owners ("holders"). This summary is based on the Internal Revenue
Code of 1986, as amended to the date hereof (the "Code"), legislative history,
administrative pronouncements, judicial decisions and final, temporary and
proposed Treasury Regulations, changes to any of which subsequent to the date
of this Prospectus Supplement may affect the tax consequences described herein.
Any such change may apply retroactively. This summary is also based on final
Treasury Regulations (the "1996 OID Regulations") published by the Internal
Revenue Service ("IRS") on June 14, 1996, which set forth rules applicable to
"contingent payment debt instruments."
This summary discusses only the principal United States federal income tax
consequences to those holders holding Notes as capital assets within the
meaning of Section 1221 of the Code. It does not address all of the tax
consequences that may be relevant to a holder in light of the holder's
particular circumstances or to holders subject to special rules (including
pension plans and other tax-exempt investors, banks, thrifts, insurance
companies, real estate investment trusts, regulated investment companies,
dealers in securities, currencies and persons so treated for federal income tax
purposes, persons whose functional currency (as defined in Section 985 of the
Code) is other than the United States dollar, and persons who hold Notes as
part of a straddle, hedging or conversion transaction). This summary is subject
to the requirement that a taxpayer obtain the consent of the IRS before
changing a method of accounting.
Persons considering the purchase of Notes should consult their tax advisors
with regard to the application of United States federal income tax laws to
their particular situations as well as any tax consequences to them arising
under the laws of any state, local or foreign taxing jurisdiction. State, local
and foreign income tax laws may differ substantially from the corresponding
federal income tax laws, and this discussion does not purport to describe any
aspect of the tax laws of any state, local or foreign jurisdiction. Therefore,
potential investors should consult their own tax advisers with respect to the
various state, local and foreign tax consequences of an investment in Notes.
S-21
<PAGE>
As used herein, the term "United States Holder" means a holder who or which
is, for United States federal income tax purposes, (i) a citizen or resident of
the United States, (ii) a corporation or partnership created or organized in or
under the laws of the United States or of any political subdivision thereof,
(iii) an estate (or, for tax years beginning on or before December 31, 1996, a
trust) the income of which is subject to United States federal income taxation
regardless of its source or (iv) for tax years beginning after December 31,
1996 (unless earlier elected), any trust if a court within the United States is
able to exercise primary jurisdiction over the administration of the trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of the trust. The term also includes certain holders who
are former citizens of the United States whose income and gain from the Notes
are subject to United States taxation. The term "non-United States Holder"
means a holder that is not a United States Holder.
TAXATION OF INTEREST
The taxation of interest on a Note depends on whether it is "qualified stated
interest" (as defined below). Interest that is qualified stated interest is
includible in a United States Holder's income as ordinary interest income when
actually or constructively received, if such holder uses the cash method of
accounting for federal income tax purposes, or when accrued, if such holder
uses an accrual method of accounting for federal income tax purposes. Interest
that is not qualified stated interest and that is payable on a Note with a
maturity of more than one year from its issue date is included in a United
States holder's income under the rules governing "original issue discount,"
described below, regardless of such holder's method of accounting. Interest
that is payable on a Note with a maturity of one year or less from its issue
date (a "Short-Term Note") is included in a United States Holder's income under
the rules described below under "Short-Term Notes."
Definition of Qualified Stated Interest
Qualified stated interest is stated interest that is unconditionally payable,
or that will be constructively received, in cash or in property (other than
debt instruments of the issuer) at least annually at a single fixed rate.
Qualified stated interest also includes stated interest that is payable on a
Note (such as a Floating Rate Note or Indexed Note) at a variable interest
rate, provided that the (i) Note qualifies as a "variable rate debt instrument"
("VRDI") and (ii) such stated interest is at a single "qualified floating rate"
or "objective rate" (each as defined below) and is unconditionally payable, or
will be constructively received, in cash or in property (other than debt
instruments of the issuer) at least annually.
Definition of a Variable Rate Debt Instrument. A Note is a VRDI if all of the
four following conditions are met.
First, the issue price (as described below) of the Note must not exceed the
total noncontingent principal payments by more than an amount equal to the
lesser of (i) .015 multiplied by the product of the total noncontingent
principal payments and the number of complete years to maturity from the issue
date (as described below) (or, in the case of a Note that is an "installment
obligation," its weighted average maturity) and (ii) 15% of the total
noncontingent principal payments. An installment obligation is a debt
instrument that provides for payment of any amount other than qualified stated
interest before maturity.
Second, the Note must provide for stated interest (compounded or paid at
least annually) at (a) one or more qualified floating rates, (b) a single fixed
rate and one or more qualified floating rates, (c) a single objective rate or
(d) a single fixed rate and a single objective rate that is a "qualified
inverse floating rate" (as defined below).
Third, the Note must provide that a qualified floating rate or objective rate
in effect at any time during the term of the instrument is set at the current
value of that rate. A current value is the value of the rate on any day that is
no earlier than three months prior to the first day on which that value is in
effect and no later than one year following that first day.
S-22
<PAGE>
Fourth, the Note may not provide for any principal payments that are
contingent except as provided in the first requirement set forth above.
Definition of a Qualified Floating Rate. Subject to certain exceptions, a
variable rate of interest is a qualified floating rate if variations in the
value of the rate can reasonably be expected to measure contemporaneous
fluctuations in the cost of newly borrowed funds in the currency in which the
Note is denominated. A variable rate is considered a qualified floating rate if
the variable rate equals (i) the product of an otherwise qualified floating
rate and a fixed multiple (i.e., a Spread Multiplier) that is greater than 0.65
but not more than 1.35 or (ii) an otherwise qualified floating rate (or the
product described in clause (i)) plus or minus a fixed rate (i.e., a Spread).
If the variable rate equals the product of an otherwise qualified floating rate
and a single multiplier greater than 1.35 or less than or equal to 0.65,
however, such rate generally is an objective rate, described more fully below.
A variable rate is not considered a qualified floating rate if the variable
rate is subject to a cap, floor, governor (i.e., a restriction on the amount of
increase or decrease in the stated interest rate) or similar restriction that
is reasonably expected as of the issue date to cause the yield on the Note to
be significantly more or less than the expected yield determined without the
restriction (other than a cap, floor or governor that is fixed throughout the
term of the Note).
Definition of an Objective Rate. Subject to certain exceptions, an "objective
rate" is a rate (other than a qualified floating rate) that is determined using
a single fixed formula and that is based on objective financial or economic
information that is neither within the control of the issuer (or a related
party) nor unique to the circumstances of the issuer (or a related party). For
example, an objective rate generally includes a rate that is based on one or
more qualified floating rates or on the yield or price of actively traded
personal property (within the meaning of Section 1092(d)(1) of the Code).
Notwithstanding the first sentence of this paragraph, a rate on a debt
instrument is not an objective rate if it is reasonably expected that the
average value of the rate during the first half of the Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the debt instrument's term. An objective
rate is a "qualified inverse floating rate" if (a) the rate is equal to a fixed
rate minus a qualified floating rate and (b) the variations in the rate can
reasonably be expected to reflect inversely contemporaneous variations in the
cost of newly borrowed funds (disregarding any caps, floors, governors or
similar restrictions that would not, as described above, cause a rate to fail
to be a qualified floating rate).
If interest on a Note is stated at a fixed rate for an initial period of one
year or less, followed by a variable rate that is either a qualified floating
rate or an objective rate for a subsequent period, and the value of the
variable rate on the issue date is intended to approximate the fixed rate, the
fixed rate and the variable rate together constitute a single qualified
floating rate or objective rate.
TAXATION OF ORIGINAL ISSUE DISCOUNT--GENERAL RULES FOR FIXED RATE NOTES
Definition of OID
OID is the excess of a Note's "stated redemption price at maturity" over its
"issue price." A Note's stated redemption price at maturity is the sum of all
payments provided by the Note other than payments of qualified stated interest.
Thus, any payments provided by a Note that are not payments of qualified stated
interest are included in the Note's stated redemption price at maturity,
whether such payments are designated as interest or as principal. The issue
price and issue date of a Note will be the first price and the first settlement
or closing date, respectively, at which a substantial amount of the Notes in
the issuance that includes such Note is sold for money (excluding sales to bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers).
United States Holders of Notes with OID that mature more than one year from
their issue date generally are required to include such OID in income as it
accrues in accordance with the constant yield method described below, before
the receipt of the related cash payments. A United States Holder's tax basis in
a Note is increased by each accrual of OID and decreased by each payment other
than a payment of qualified stated interest.
S-23
<PAGE>
If the amount of OID with respect to a Note is less than a specified de
minimis amount, the amount of OID is treated as zero. The de minimis amount is
an amount equal to .0025 multiplied by the product of the stated redemption
price at maturity and the number of complete years to maturity. In the case of
a Note that is an installment obligation, the de minimis amount is determined
by reference to the weighted average maturity of the Note rather than the
number of complete years to maturity.
Treatment of De Minimis OID
If a Note has de minimis OID, all payments of stated interest are treated as
payments of qualified stated interest. As discussed above, in general,
qualified stated interest is includible in a United States Holder's income
according to such holder's regular method of accounting (i.e., the cash method
or an accrual method). Any de minimis OID that is not included in payments of
stated interest is included in income as capital gain as principal payments are
made. The amount includible equals the product of the total amount of de
minimis OID and a fraction, the numerator of which is the amount of the
principal payment made and the denominator of which is the stated principal
amount of the Note.
Inclusion of OID in Income
The general rules for including OID on a Note in the income of a United
States Holder are as follows. These general rules apply to Fixed Rate Notes but
do not apply to Notes, such as Floating Rate Notes and Indexed Notes, on which
interest accrues based on an index. The special rules that apply to this type
of Notes are described below under "--Taxation of OID on Floating Rate Notes
and Indexed Notes."
The amount of OID includible in the income of a United States Holder for any
taxable year is determined under the constant yield method, in four steps.
In the first step, the "yield to maturity" of the Note is computed. The yield
to maturity is the discount rate that, when used in computing the present value
of all interest and principal payments to be made under the Note (including
payments of qualified stated interest) produces an amount equal to the issue
price of the Note. The yield to maturity is constant over the term of the Note
and, when expressed as a percentage, must be calculated to at least two decimal
places.
In the second step, the term of the Note is divided into "accrual periods."
Accrual periods may be of any length and may vary in length over the term of
the Note, provided that each accrual period is no longer than one year and that
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period.
In the third step, the total amount of OID on the Note is allocated among
accrual periods. In general, the OID allocable to an accrual period equals the
product of the "adjusted issue price" of the Note at the beginning of the
accrual period and the yield to maturity of the Note, less the amount of any
qualified stated interest allocable to the accrual period. The adjusted issue
price of a Note at the beginning of the first accrual period is its issue
price. Thereafter, the adjusted issue price of the Note is its issue price,
increased by the amount of OID previously includible in the gross income of any
United States Holder and decreased by the amount of any payment previously made
on the Note other than a payment of qualified stated interest. For purposes of
computing the adjusted issue price of a Note, the amount of OID previously
includible in the gross income of any United States Holder is determined
without regard to "premium" and "acquisition premium," as those terms are
defined below.
In the fourth step, the "daily portions" of OID are determined. The daily
portions of OID are determined by allocating to each day in an accrual period
its ratable portion of the OID allocable to the accrual period.
A United States Holder includes in income in any taxable year the daily
portions of OID for each day during the taxable year that such holder held
Notes. In general, under the constant yield method described above, United
S-24
<PAGE>
States Holders generally are required to include in income increasingly greater
amounts of OID in successive accrual periods.
In the case of a Note that is redeemable at the option of the Company or
repayable by the Company at the option of the holder, the maturity and the
yield to maturity of the Note are determined by assuming that the Company and
the holder will exercise or not exercise the options available to them in a
manner that minimizes the yield, in the case of options available to the
Company, or maximizes the yield, in the case of options available to the
holder. Unless specified to the contrary in the applicable Pricing Supplement,
the Redemption Price payable by the Company upon the exercise of an option to
redeem is at all times at least equal to the principal amount of the Note
redeemed plus accrued interest and the repayment price payable by the Company
upon exercise of the holder's option is at all times equal to the principal
amount of the Note so repaid plus accrued interest. Accordingly, the existence
of such options should not generally affect the determination of the maturity
and the yield to maturity of Notes having an issue price equal to 100% of the
principal amount.
Taxation of OID on Floating Rate Notes and Indexed Notes
The taxation of OID (including interest that does not constitute qualified
stated interest) on a Floating Rate Note or an Indexed Note will depend on
whether the Note is a "VRDI," as that term is defined above under "--Taxation
of Interest--Definition of a Variable Rate Debt Instrument."
Notes that are VRDIs. In the case of a VRDI that provides for qualified
stated interest, the amount of qualified stated interest and the amount of OID,
if any, includible in income during a taxable year are determined under the
rules applicable to Fixed Rate Notes (described above) by assuming that the
variable rate is a fixed rate equal to (i) in the case of a qualified floating
rate or a qualified inverse floating rate, the value, as of the issue date, of
the qualified floating rate or qualified inverse floating rate, or (ii) in the
case of an objective rate (other than a qualified inverse floating rate), the
rate that reflects the yield that is reasonably expected for the Note.
Qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds (or
is less than) the interest assumed to be paid during the accrual period.
If a Note that is a VRDI does not provide for interest at a single variable
rate as described above, the amount of interest and OID accruals are determined
by constructing an equivalent fixed rate debt instrument, as follows.
First, in the case of an instrument that provides for interest at one or more
qualified floating rates or at a qualified inverse floating rate and, in
addition, at a fixed rate, replace the fixed rate with a qualified floating
rate (or qualified inverse floating rate) such that the fair market value of
the instrument, so modified, as of the issue date would be approximately the
same as the fair market value of the unmodified instrument.
Second, determine the fixed rate substitute for each variable rate provided
by the Note. The fixed rate substitute for each qualified floating rate
provided by the Note is the value of that qualified floating rate on the issue
date. If the Note provides for two or more qualified floating rates with
different intervals between interest adjustment dates (for example, the 30-day
Commercial Paper Rate and quarterly LIBOR), the fixed rate substitutes are
based on intervals that are equal in length (for example, the 90-day Commercial
Paper Rate and quarterly LIBOR, or the 30-day Commercial Paper Rate and monthly
LIBOR). The fixed rate substitute for an objective rate that is a qualified
inverse floating rate is the value of the qualified inverse floating rate on
the issue date. The fixed rate substitute for an objective rate (other than a
qualified inverse floating rate) is a fixed rate that reflects the yield that
is reasonably expected for the Note.
Third, construct an equivalent fixed rate debt instrument that has terms that
are identical to those provided under the Note, except that the equivalent
fixed rate debt instrument provides for the fixed rate substitutes determined
in the second step, in lieu of the qualified floating rates or objective rate
provided by the Note.
Fourth, determine the amount of qualified stated interest and OID for the
equivalent fixed rate debt instrument under the rules (described above) for
Fixed Rate Notes. These amounts are taken into account as if the United States
Holder held the equivalent fixed rate debt instrument. See "--Taxation of
Interest" above.
S-25
<PAGE>
Fifth, make appropriate adjustments for the actual values of the variable
rates. In this step, qualified stated interest or OID allocable to an accrual
period is increased (or decreased) if the interest actually accrued or paid
during the accrual period exceeds (or is less than) the interest assumed to be
accrued or paid during the accrual period under the equivalent fixed rate debt
instrument.
Notes that are not VRDIs. The tax treatment of Floating Rate Notes or Indexed
Notes that are not VRDIs ("Contingent Notes") is as follows. First, the Company
is required to determine, as of the issue date, the comparable yield for the
Contingent Note. The comparable yield is generally the yield at which the
Company would issue a fixed rate debt instrument with terms and conditions
similar to those of the Contingent Note (including the level of subordination,
term, timing of payments and general market conditions, but not taking into
consideration the riskiness of the contingencies or the liquidity of the
Contingent Note), but not less than the applicable federal rate announced
monthly by the IRS (the "AFR"). In certain cases where Contingent Notes are
marketed or sold in substantial part to tax-exempt investors or other investors
for whom the prescribed inclusion of interest is not expected to have a
substantial effect on their U.S. tax liability, the comparable yield for the
Contingent Note, without proper evidence to the contrary, is presumed to be the
AFR.
Second, solely for tax purposes, the Company constructs a projected schedule
of payments determined under the 1996 OID Regulations for the Contingent Note
(the "Schedule"). The Schedule is determined as of the issue date and generally
remains in place throughout the term of the Contingent Note. If a right to a
contingent payment is based on market information, the amount of the projected
payment is the forward price of the contingent payment. If a contingent payment
is not based on market information, the amount of the projected payment is the
expected value of the contingent payment as of the issue date. The Schedule
must produce the comparable yield determined as set forth above. Otherwise, the
Schedule must be adjusted under the rules set forth in the 1996 OID
Regulations.
Third, under the usual rules applicable to OID and based on the Schedule, the
interest income on the Contingent Note for each accrual period is determined by
multiplying the comparable yield of the Contingent Note (adjusted for the
length of the accrual period) by the Contingent Note's adjusted issue price at
the beginning of the accrual period (determined under rules set forth in the
1996 OID Regulations). The amount so determined is then allocated on a ratable
basis to each day in the accrual period that the United States Holder held the
Contingent Note.
Fourth, appropriate adjustments are made to the interest income determined
under the foregoing rules to account for any differences between the Schedule
and actual contingent payments. Under the rules set forth in the 1996 OID
Regulations, differences between the actual amounts of any contingent payments
made in a calendar year and the projected amounts of such payments are
generally aggregated and taken into account, in the case of a positive
difference, as additional interest income, or, in the case of a negative
difference, first as a reduction in interest income for such year and
thereafter, subject to certain limitations, as ordinary loss.
The Company is required to provide each holder of a Contingent Note with the
Schedule described above. If the Company does not create a Schedule or the
Schedule is unreasonable, a United States Holder must set its own projected
payment schedule and explicitly disclose the use of such schedule and the
reason therefor. Unless otherwise prescribed by the IRS, the United States
Holder must make such disclosure on a statement attached to the United States
Holder's timely filed federal income tax return for the taxable year in which
the Contingent Note was acquired.
In general, any gain realized by a United States Holder on the sale,
exchange, redemption, or retirement of a Contingent Note is interest income. In
general, any loss on a Contingent Note accounted for under the method described
above is ordinary loss to the extent it does not exceed such holder's prior
interest inclusions on the Contingent Note (net of negative adjustments).
Special rules apply in determining the tax basis of a Contingent Note and the
amount realized on the retirement of a Contingent Note.
S-26
<PAGE>
MARKET DISCOUNT
A United States Holder may be subject to the market discount rules of the
Code. If a United States Holder acquires a Note having a maturity date of more
than one year from the date of its issuance and has a tax basis in the Note
that is, in the case of a Note that does not have OID, less than its stated
redemption price at maturity, or, in the case of a Note that has OID, less than
an amount which generally equals its adjusted issue price, such difference is
treated as market discount for federal income tax purposes, unless such
difference is less than a specified de minimis amount. The de minimis amount is
1/4 of one percent of the stated redemption price at maturity multiplied by the
number of complete years to maturity (from the date of acquisition).
Under the market discount rules of the Code, a United States Holder is
required to treat any principal payment (or, in the case of a Note that has
OID, any payment that is not a payment of qualified stated interest) on, or any
gain on the sale, exchange, retirement, redemption or other disposition of, a
Note as ordinary income to the extent of the market discount that has not
previously been included in income and is treated as having accrued on such
Note at the time of such payment or disposition. Thus, partial principal
payments are treated as ordinary income to the extent of market discount that
has not previously been included in income and is treated as having accrued. If
such Note is disposed of by the United States Holder in certain otherwise
nontaxable transactions, accrued market discount is includible as ordinary
income by the United States Holder as if such holder had sold the Note at its
then fair market value.
In general, the amount of market discount that has accrued is determined on a
ratable basis. A United States Holder may, however, elect to determine the
amount of accrued market discount on a constant yield to maturity basis. This
election is made on a bond-by-bond basis and is irrevocable.
With respect to Notes with market discount, a United States Holder may not be
allowed to deduct immediately a portion of the interest expense on any
indebtedness incurred or continued to purchase or to carry such Notes. A United
States Holder may elect to include market discount in income currently as it
accrues, in which case the interest deferral rule set forth in the preceding
sentence does not apply. Such an election applies to all bonds acquired by the
United States Holder on or after the first day of the first taxable year to
which such election applies and is irrevocable without the consent of IRS. A
United States Holder's tax basis in a Note is increased by the amount of market
discount included in such holder's income under such an election.
In lieu of the foregoing rules, different rules apply in the case of
Contingent Notes where a holder's tax basis in a Contingent Note is less than
the Contingent Note's adjusted issue price (determined under special rules set
out in the 1996 OID Regulations). Accordingly, prospective purchasers of
Contingent Notes should consult with their tax advisors with respect to the
application of such rules to such Notes.
PREMIUM AND ACQUISITION PREMIUM
If a United States Holder purchases a Note at a "premium," the United States
Holder does not include any OID in gross income. A Note is purchased at a
premium (or "amortizable bond premium") if its adjusted basis, immediately
after its purchase by such holder, exceeds the sum of all amounts payable on
the Note after the purchase date other than payments of qualified stated
interest. United States Holders may elect to amortize the premium over the
remaining term of the Note (where such Note is not callable prior to its
maturity date), as a reduction in the amount of the interest payments otherwise
includible in income. If such Note may be called by the Company prior to
maturity after the United States Holder has acquired it, the amount of
amortizable bond premium is determined with reference to either the amount
payable at maturity, or, if it results in a smaller premium attributable to the
period through the earlier call date, with reference to the amount payable on
the earlier call date. If a United States Holder makes this election, the
premium is allocated among all the interest payments on the Note, on the basis
of the United States Holder's yield to maturity, with compounding at the close
of each accrual period. A United States Holder who elects to amortize premium
must reduce the tax basis of the Note by the amount of the premium amortized in
any year. If this election is made with respect to any Note, it will also apply
to all debt instruments held by the United States Holder at the beginning of
the first
S-27
<PAGE>
taxable year to which the election applies and to all debt instruments acquired
by the United States Holder, and will be binding for all subsequent taxable
years unless the election is revoked with the consent of the IRS.
On June 27, 1996, the IRS published in the Federal Register proposed
regulations (the "Proposed Premium Regulations") on the amortization of bond
premium. The Proposed Premium Regulations describe the constant yield method
under which such premium is amortized and provide that the resulting offset to
interest income can be taken into account only as a United States Holder takes
the corresponding interest income into account under such holder's regular
accounting method. In the case of instruments that may be redeemed at the
option of the Company or repaid at the option of the holder prior to maturity,
the Proposed Premium Regulations provide that the premium is calculated by
assuming that the Company will exercise or not exercise its redemption rights
in the manner that maximizes the United States Holder's yield and the United
States Holder will exercise or not exercise its repayment option in a manner
that maximizes the United States Holder's yield. The Proposed Premium
Regulations are proposed to be effective for debt instruments acquired on or
after the date 60 days after the date final regulations are published in the
Federal Register. However, if a United States Holder elects to amortize bond
premium for the taxable year containing such effective date, the Proposed
Premium Regulations would apply to all of the United States Holder's debt
instruments held on or after the first day of that taxable year. It cannot be
predicted at this time whether the Proposed Premium Regulations will become
effective or what, if any, modifications will be made to them prior to their
becoming effective.
If a United States Holder does not purchase a Note at a premium, but instead
purchases such Note at an "acquisition premium," the amount of OID that the
United States Holder includes in gross income is reduced to reflect the
acquisition premium. A Note is purchased at an acquisition premium if its
adjusted basis, immediately after its purchase is (a) less than or equal to the
sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest and (b) greater than the Note's adjusted
issue price.
If a Note is purchased at an acquisition premium, the United States Holder
reduces the amount of OID otherwise includible in income during an accrual
period by a fraction. The numerator of this fraction is the excess of the
adjusted basis of the Note immediately after its acquisition by the purchaser
over the adjusted issue price of the Note. The denominator of the fraction is
the excess of the sum of all amounts payable on the Note after the purchase
date, other than payments of qualified stated interest, over the Note's
adjusted issue price.
As an alternative to reducing the amount of OID otherwise includible in
income by this fraction, the United States Holder may elect to compute OID
accruals by treating the purchase as a purchase at original issuance and
applying the constant yield method described under "--Taxation of Original
Issue Discount--General Rules for Fixed Rate Notes--Inclusion of OID in Income"
above.
In lieu of the foregoing rules, different rules apply in the case of
Contingent Notes where a holder's tax basis in a Contingent Note is greater
than the Contingent Note's adjusted issue price (determined under special rules
set out in the 1996 OID Regulations). Accordingly, prospective purchasers of
Contingent Notes should consult with their tax advisors with respect to the
application of such rules to such Notes.
SHORT-TERM NOTES
In the case of Short-Term Notes, no interest is treated as qualified stated
interest and therefore all interest is included in OID. United States Holders
that report income for federal income tax purposes on an accrual method and
certain other United States Holders, including banks and dealers in securities,
are required to include OID in income on such Short-Term Notes on a straight-
line basis, unless an election is made to accrue the OID according to a
constant yield method based on daily compounding.
Any other United States Holder of a Short-Term Note is not required to accrue
OID for federal income tax purposes, unless it elects to do so, with the
consequence that the reporting of such income is deferred until it is received.
In the case of a United States Holder that is not required, and does not elect,
to include OID in income currently, any gain realized on the sale, exchange,
retirement or redemption of a Short-Term Note is ordinary
S-28
<PAGE>
income to the extent of the OID accrued on a straight-line basis (or, if
elected, according to a constant yield method based on daily compounding)
through the date of sale, exchange or retirement. In addition, such non-
electing United States Holders that are not subject to the current inclusion
requirement described in the first sentence of this paragraph are required to
defer deductions for any interest paid on indebtedness incurred or continued to
purchase or carry a Short-Term Note in an amount not exceeding the deferred
interest income with respect to such Short-Term Note (which includes both the
accrued OID and accrued interest that are payable but that have not been
included in gross income), until such deferred interest income is realized. A
United States Holder of a Short-Term Note may elect to apply the foregoing
rules (except for the rule characterizing gain on sale, exchange or retirement
as ordinary) with respect to "acquisition discount" rather than OID.
Acquisition discount is the excess of the stated redemption price at maturity
of the Short-Term Note over the United States Holder's basis in the Short-Term
Note. This election applies to all obligations acquired by the taxpayer on or
after the first day of the first taxable year to which such election applies,
unless revoked with the consent of the IRS. A United States Holder's tax basis
in a Short-Term Note is increased by the amount included in such holder's
income on such a Note.
ELECTION TO TREAT ALL INTEREST AS OID
United States Holders may elect to include in gross income all interest that
accrues on a Note, including any stated interest, acquisition discount, OID,
market discount, de minimis OID, de minimis market discount and unstated
interest (as adjusted by amortizable bond premium and acquisition premium), by
using the constant yield method described above under "--Taxation of Original
Issue Discount--General Rules for Fixed Rate Notes--Inclusion of OID in
Income." Such an election for a Note with amortizable bond premium results in a
deemed election to amortize bond premium for all debt instruments owned by the
United States Holder with amortizable bond premium and may be revoked only with
the permission of the IRS. Similarly, such an election for a Note with market
discount results in a deemed election to accrue market discount in income
currently for such Note and for all other bonds acquired by the United States
Holder with market discount on or after the first day of the taxable year to
which such election first applies, and may be revoked only with the permission
of the IRS. A United States Holder's tax basis in a Note is increased by each
accrual of the amounts treated as OID under the constant yield election
described in this paragraph.
INTEGRATION OF NOTES WITH OTHER FINANCIAL INSTRUMENTS
Any United States Holder of Notes that also acquires or has acquired any
financial instrument which, in combination with such Notes, would produce the
same cash flows as a fixed-rate debt instrument or VRDI of an equivalent term,
may in certain circumstances treat such Notes and such financial instrument as
an integrated debt instrument for purposes of the Code, with a single
determination of issue price and the character and timing of income,
deductions, gains and losses. (For purposes of determining OID, none of the
payments under the integrated debt instrument will be treated as qualified
stated interest.) Moreover, the IRS may require in certain circumstances that a
United States Holder who owns Notes integrate such Notes with a financial
instrument held or acquired by such Holder or a related party. United States
Holders should consult their tax advisors as to the possible integration of the
Notes under the 1996 OID Regulations.
SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF NOTES
A United States Holder generally recognizes gain or loss upon the sale,
exchange, redemption or retirement of a Note equal to the difference between
the amount realized upon such sale, exchange, redemption or retirement and the
United States Holder's adjusted basis in the Note. Such adjusted basis in the
Note generally equals the cost of the Note, increased by OID, acquisition
discount or market discount previously included in respect thereof, and reduced
(but not below zero) by any payments on the Note other than payments of
qualified stated interest and by any premium that the United States Holder has
taken into account. To the extent attributable to accrued but unpaid interest,
the amount realized by the United States Holder is treated as a payment of
interest. Subject to the discussion under "--Foreign Currency Notes" below, any
gain or loss is capital gain or loss,
S-29
<PAGE>
except as provided under "--Market Discount" and "--Short-Term Notes," above.
Special rules apply in determining the tax basis of a Contingent Note and the
amount realized on the retirement of a Contingent Note. The excess of net long-
term capital gains over net short-term capital losses is taxed at a lower rate
than ordinary income for certain non-corporate taxpayers. The distinction
between capital gain or loss and ordinary income or loss is also relevant for
purposes of, among other things, limitations on the deductibility of capital
losses.
FOREIGN CURRENCY NOTES
The following summary describes special rules that apply, in addition to the
rules described above, to Foreign Currency Notes. The treatment of a debt
instrument, such as a Foreign Currency Note, that provides for interest
payments that are not fixed in amount at the time that the debt instrument is
issued (like the treatment of a Floating Rate Note or Indexed Note) depends on
whether the debt instrument qualifies as a VRDI. A Foreign Currency Note
qualifying as a VRDI is subject to the rules discussed above in "--Taxation of
Interest" and "--Taxation of Original Issue Discount--General Rules for Fixed
Rate Notes" in addition to the rules discussed below. Foreign Currency Notes
not qualifying as VRDIs may be subject to the rules discussed above in "--
Taxation of Original Issue Discount--General Rules for Fixed Rate Notes--
Taxation of OID on Floating Rate Notes and Indexed Notes--Notes that are Not
VRDIs" in addition to the rules discussed below.
Interest Includible In Income Upon Receipt
An interest payment on a Foreign Currency Note that is not required to be
included in income by the United States Holder prior to the receipt of such
payment (e.g., qualified stated interest received by a cash method United
States Holder) is includible in income by the United States Holder based on the
United States dollar value of the foreign currency determined on the date such
payment is received, regardless of whether the payment is in fact converted to
United States dollars at that time. Such United States dollar value is the
United States Holder's tax basis in the foreign currency received.
Interest Includible In Income Prior To Receipt
In the case of interest income on a Foreign Currency Note that is required to
be included in income by the United States Holder prior to the receipt of
payment (e.g., stated interest on a Foreign Currency Note held by an accrual
basis United States Holder or accrued OID or accrued market discount that is
includible in income as it accrues), a United States Holder is required to
include in income the United States dollar value of the amount of interest
income that has accrued and is otherwise required to be taken into account with
respect to a Foreign Currency Note during an accrual period. Original issue
discount, market discount, acquisition premium, and amortizable bond premium of
a Foreign Currency Note are to be determined in the relevant foreign currency.
Unless the United States Holder makes the election discussed in the next
paragraph, the United States dollar value of such accrued income is determined
by translating such income at the average rate of exchange for the accrual
period or, with respect to an accrual period that spans two taxable years, at
the average rate for the portion of the accrual period within the taxable year.
The average rate of exchange for the accrual period (or partial period) is the
simple average of the exchange rates for each business day of such period (or
other method if such method is reasonably derived and consistently applied).
Such United States Holder recognizes, as ordinary gain or loss, foreign
currency exchange gain or loss with respect to accrued interest income on the
date such income is actually received, reflecting fluctuations in currency
exchange rates between the last day of the relevant accrual period and the date
of payment. The amount of gain or loss recognized equals the difference between
the United States dollar value of the foreign currency payment received in
respect of such accrual period determined based on the exchange rate on the
date such payment is received and the United States dollar value of interest
income that has accrued during such accrual period (as determined above).
Under the so-called "spot rate convention election," a United States Holder
may, in lieu of applying the rules described in the preceding paragraph, elect
to translate accrued interest income into United States dollars at the exchange
rate in effect on the last day of the relevant accrual period for OID, market
discount or accrued interest, or in the case of an accrual period that spans
two taxable years, at the exchange rate in effect on the last
S-30
<PAGE>
day of the taxable year. Such United States Holder will recognize ordinary
income or loss with respect to accrued interest income on the date such income
is actually received, equal to the difference (if any) between the United
States dollar value of the foreign currency payment received (determined on the
date such payment is received) and the United States dollar value of interest
income translated at the relevant spot rate described in the preceding
sentence. If a payment of such income is actually received within five business
days of the last day of the accrual period or taxable year, an electing United
States Holder may instead translate such income into United States dollars at
the exchange rate in effect on the day of actual receipt. Any such election
applies to all debt instruments held by the United States Holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired by the United States Holder and is irrevocable without the consent of
the IRS.
Purchase, Sale, Exchange, Redemption or Retirement
A United States Holder that converts United States dollars to a foreign
currency and immediately uses that currency to purchase a Foreign Currency Note
denominated in the same foreign currency normally does not recognize gain or
loss in connection with such conversion and purchase. However, a United States
Holder that purchases a Foreign Currency Note with previously owned foreign
currency does recognize ordinary income or loss in an amount equal to the
difference, if any, between such holder's tax basis in the foreign currency and
the United States dollar market value of the Foreign Currency Note on the date
of the purchase. A United States Holder's tax basis in a Foreign Currency Note
(and the amount of any subsequent adjustment to such Holder's tax basis) is the
United States dollar value of the foreign currency amount paid for such Foreign
Currency Note (or of the foreign currency amount of the adjustment) determined
on the date of such purchase or adjustment. In the case of an adjustment
resulting from accrual of OID or market discount, such adjustment is made at
the rate at which such OID or market discount is translated into United States
dollars under the rules described above.
Gain or loss realized upon the sale, exchange, redemption or retirement of,
or the receipt of principal on, a Foreign Currency Note, to the extent
attributable to fluctuations in currency exchange rates, is ordinary income or
loss. Gain or loss attributable to fluctuations in exchange rates equals the
difference between (i) the United States dollar value of the foreign currency
purchase price for such Note, determined on the date such Note is disposed of,
and (ii) the United States dollar value of the foreign currency purchase price
for such Note, determined on the date such United States Holder acquired such
Note. Any portion of the proceeds of such sale, exchange, redemption or
retirement attributable to accrued interest income may result in exchange gain
or loss under the rules set forth above pertaining to payments of interest
income. Such foreign currency gain or loss is recognized only to the extent of
the overall gain or loss realized by a United States Holder on the sale,
exchange, redemption or retirement of the Foreign Currency Note. In general,
the source of such foreign currency gain or loss is determined by reference to
the residence of the United States Holder or the "qualified business unit" of
such holder on whose books the Note is properly reflected. Any gain or loss
realized by a United States Holder in excess of such foreign currency gain or
loss is capital gain or loss (except to the extent of any accrued market
discount not previously included in such holder's income or, in the case of a
Short-Term Note having OID, to the extent of any OID not previously included in
such holder's income).
The tax basis of a United States Holder in any foreign currency received on
the sale, exchange, redemption or retirement of a Foreign Currency Note is
equal to the United States dollar value of such foreign currency, determined at
the time of such sale, exchange, redemption or retirement. Regulations provide
a special rule for purchases and sales of publicly traded debt instruments by a
cash method taxpayer under which units of foreign currency paid or received are
translated into United States dollars at the spot rate on the settlement date
of the purchase or sale. Accordingly, no exchange gain or loss results from
currency fluctuations between the trade date and the settlement of such a
purchase or sale. An accrual method taxpayer may elect the same treatment
required of cash method taxpayers with respect to the purchase and sale of
publicly traded debt instruments provided the election is applied consistently.
Such election cannot be changed without consent of the IRS. United States
Holders should consult their tax advisors concerning the applicability to
Foreign Currency Notes of the special rules summarized in this paragraph.
S-31
<PAGE>
Market discount, acquisition premium and amortizable bond premium of a
Foreign Currency Note are determined in the relevant foreign currency. The
amount of such market discount or acquisition premium that is included in (or
reduces) income currently is to be determined for any accrual period in the
relevant foreign currency and then translated into United States dollars on the
basis of the average exchange rate in effect during such accrual period or with
reference to the spot rate convention election as described above. Exchange
gain or loss realized with respect to such accrued market discount or
acquisition premium is determined and recognized in accordance with the rules
relating to accrued interest described above. The amount of accrued market
discount (other than market discount that is included in income currently)
taken into account upon the receipt of any partial principal payment or upon
the sale, exchange, redemption, retirement or other disposition of a Foreign
Currency Note is the United States dollar value of such accrued market
discount, determined on the date of receipt of such partial principal payment
or upon the sale, exchange, redemption, retirement or other disposition, and no
portion thereof is treated as exchange gain or loss.
Any gain or loss realized on the sale, exchange, retirement or redemption of
a Foreign Currency Note with amortizable bond premium by a United States Holder
who has not elected to amortize such premium (under the rules described under
"--Premium and Acquisition Premium" above) will be ordinary income or loss to
the extent attributable to fluctuations in currency exchange rates determined
as described above. If such an election is made, amortizable bond premium taken
into account on a current basis will reduce interest income in units of the
relevant foreign currency. Exchange gain or loss will be realized on such
amortized bond premium with respect to any period by treating the bond premium
amortized in such period as a return of principal. Similar rules apply in the
case of acquisition premium.
NON-UNITED STATES HOLDERS
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of non-United States Holders. The 1996 Proposed
Regulations are generally proposed to be effective for payments after December
31, 1997, regardless of the issue date of the Note with respect to which such
payments are made, subject to certain transition rules. It cannot be predicted
at this time whether the 1996 Proposed Regulations will become effective as
proposed or what, if any, modifications may be made to them. The discussion
under this heading and under "--Backup Withholding and Information Reporting,"
below, is not intended to be a complete discussion of the provisions of the
1996 Proposed Regulations, and prospective investors are urged to consult their
tax advisors with respect to the effect the 1996 Proposed Regulations may have
if adopted.
Under current United States federal income tax law now in effect, and subject
to the discussion of backup withholding in the following section, payments of
principal and interest (including OID) with respect to a Note by the Company or
by any paying agent to any non-United States Holder are not subject to United
States federal withholding tax, provided, in the case of interest (including
OID), that (i) such holder does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of the Company
entitled to vote, (ii) such holder is not for federal income tax purposes a
controlled foreign corporation related, directly or indirectly, to the Company
through stock ownership, (iii) such holder is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code and (iv) either (A) the
beneficial owner of the Note certifies, under penalties of perjury, to the
Company or paying agent, as the case may be, that such owner is a non-United
States Holder and provides such owner's name and address, or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note, certifies, under penalties of
perjury, to the Company or paying agent, as the case may be, that such
certificate has been received from the beneficial owner by it or by a financial
institution between it and the beneficial owner and furnishes the payor with a
copy thereof. A certificate described in this paragraph is effective only with
respect to payments of interest (including OID) made to the certifying non-
United States Holder after the issuance of the certificate in the calendar year
of its issuance and the two immediately succeeding calendar years. Under
temporary Treasury Regulations, the foregoing certification may be provided by
the beneficial owner of a Note on IRS Form W-8.
S-32
<PAGE>
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations would not affect the documentation rules described in the preceding
paragraph, but would add "intermediary certification" options for certain
qualifying withholding agents. Under one such option, a withholding agent would
be allowed to rely on IRS Form W-8 furnished by a financial institution or
other intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution
or intermediary has entered into a withholding agreement with the IRS and thus
is a "qualified intermediary." Under another option, an authorized foreign
agent of a U.S. withholding agent would be permitted to act on behalf of the
U.S. withholding agent, provided certain conditions are met.
For purposes of establishing entitlement to the withholding exemption
described above, the 1996 Proposed Regulations generally would, if adopted,
treat as the beneficial owners of payments on a Note those persons that, under
United States tax principles, are the taxpayers with respect to such payments.
Thus, for example, the partners of a foreign partnership, rather than the
partnership itself, would be required to provide the required certifications to
qualify for such withholding exemption. For purposes of determining entitlement
to the benefits of an income tax treaty, however, the tax principles in effect
under the laws of the relevant foreign jurisdiction would control in
identifying the beneficial owners of payments on the Notes, and therefore the
persons entitled to claim treaty benefits and required to provide the relevant
certifications. In addition, the 1996 Proposed Regulations would replace a
number of current tax certification forms (including IRS Form W-8 and IRS Form
4224, discussed below) with a single, restated form and standardize the period
of time for which withholding agents could rely on such certifications.
Notwithstanding the foregoing, interest described in Section 871(h)(4) of the
Code is subject to United States withholding tax at a 30% rate (or such lower
rate as may be provided by an applicable treaty). In general, interest
described in Section 871(h)(4) of the Code includes (subject to certain
exceptions) any interest the amount of which is determined by reference to
receipts, sales or other cash flow of the issuer or a related person, any
income or profits of the issuer or a related person, any change in the value of
any property of the issuer or a related person or any dividends, partnership
distribution or similar payments made by the issuer or a related person.
Interest described in Section 871(h)(4) of the Code may include other types of
contingent interest identified by the IRS in future Treasury Regulations.
If a non-United States Holder is engaged in a trade or business in the United
States and interest (including OID) on the Note is effectively connected with
the conduct of such trade or business, the non-United States Holder, although
exempt from the withholding tax discussed in the preceding paragraphs, is
subject to United States federal income tax on such interest (including OID) in
the same manner as if it were a United States Holder. In lieu of the
certificate described above, such holder must provide a properly executed IRS
Form 4224 annually in order to claim an exemption from withholding tax. In
addition, if such holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% (or such lower rate as may be specified by an
applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to adjustments. For this purpose, interest (including
OID) on, and any gain recognized on the sale, exchange, redemption, retirement,
or other disposition of, a Note is included in the earnings and profits of such
holder if such interest (including OID) or gain is effectively connected with
the conduct by such holder of a trade or business in the United States.
Generally, any gain or income (other than that attributable to accrued
interest or OID) realized upon the sale, exchange, redemption, retirement or
other disposition of a Note is not subject to federal income tax unless (i)
such gain or income is effectively connected with a trade or business in the
United States of the non-United States Holder or (ii) in the case of a non-
United States Holder who is an individual, the non-United States Holder is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition and either (a) such individual
has a "tax home" (as defined in Section 911(d)(3) of the Code) in the United
States or (b) the gain is attributable to an office or other fixed place of
business maintained by such individual in the United States.
S-33
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, information reporting
requirements apply to interest (including OID) and principal payments made to,
and to the proceeds of sales before maturity by, certain non-corporate United
States Holders. In addition, a 31% backup withholding tax applies if the non-
corporate United States Holder (i) fails to furnish such holder's Taxpayer
Identification Number ("TIN") (which, for an individual, would be his or her
Social Security Number) to the payor in the manner required, (ii) furnishes an
incorrect TIN and the payor is so notified by the IRS, (iii) is notified by the
IRS that such holder has failed properly to report payments of interest and
dividends or (iv) in certain circumstances, fails to certify, under penalties
of perjury, that such holder has not been notified by the IRS that it is
subject to backup withholding for failure properly to report interest and
dividend payments. Backup withholding does not apply with respect to payments
made to certain exempt recipients, such as corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts and individual
retirement accounts, provided that they establish entitlement to an exemption.
In the case of a non-United States Holder, under Treasury Regulations, backup
withholding and information reporting do not apply to payments of principal and
interest made by the Company or any paying agent thereof on a Note with respect
to which such holder has provided the required certification under penalties of
perjury that such holder is a non-United States Holder or has otherwise
established an exemption, provided that (i) the Company or paying agent, as the
case may be, does not have actual knowledge that the payee is a United States
person and (ii) certain other conditions are satisfied.
Subject to the discussion below, payments to or through the United States
office of a broker are subject to backup withholding and information reporting
unless the holder (i) certifies under penalties of perjury as to such holder's
status as a non-United States Holder, establishes certain other qualifications
and provides such holder's name and address (and no agent of the broker who is
responsible for receiving or reviewing such certification has actual knowledge
that it is incorrect) or (ii) otherwise establishes an exemption.
In general, (i) payments of interest or original issue discount on a Note
collected outside the United States by a custodian, nominee or other agent
acting on behalf of a beneficial owner of a Note and (ii) payments on the sale,
exchange, retirement or redemption of a Note to or through a foreign office of
a broker are not subject to backup withholding or information reporting.
However, if such custodian, nominee, agent or broker is a United States person,
a controlled foreign corporation for United States tax purposes, or a foreign
person 50% or more of whose gross income is effectively connected with the
conduct of a United States trade or business for a specified three-year period,
such custodian, nominee, agent or broker may be subject to certain information
reporting (but not backup withholding) requirements with respect to such
payments, unless such custodian, nominee, agent or broker has in its records
documentary evidence that the beneficial owner is not a United States person
and certain conditions are met or the beneficial owner otherwise establishes an
exemption.
The 1996 Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. In particular, the 1996 Proposed Regulations would require
backup withholding with respect to the payments described in the preceding
paragraph in the event that the custodian, nominee, agent or broker has actual
knowledge that the beneficial owner is a United States person.
Backup withholding tax is not an additional tax. Rather, any amounts withheld
from a payment to a holder under the backup withholding rules are allowed as a
refund or a credit against such holder's United States federal income tax,
provided that the required information is furnished to the IRS.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding to their particular situations,
the availability of an exemption therefrom, and the procedure for obtaining
such an exemption, if available.
S-34
<PAGE>
PLAN OF DISTRIBUTION OF NOTES
The Notes are being offered on a continuing basis for sale by the Company,
through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Citicorp Securities, Inc., J.P. Morgan Securities Inc. or
Salomon Brothers Inc, each as agent (collectively, the "Agents"), each of
which has agreed to use its reasonable best efforts to solicit offers to
purchase the Notes. The Company will pay a commission to an Agent, in the form
of a discount, ranging from .125% to .750% of the principal amount of a Note,
depending upon its Stated Maturity Date, sold through such Agent. Commissions
with respect to Notes with Stated Maturity Dates in excess of 30 years that
are sold through an Agent will be negotiated between the Company and such
Agent at the time of such sale. The Company may also sell Notes to any Agent,
as principal, for resale to investors and other purchasers at varying prices
relating to prevailing market prices at the time of resale as determined by
such Agent, or, if so specified in the 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 of the principal amount equal to the commission
applicable to an agency sale (as described above) of a Note of identical
maturity. The Company may appoint other agents to solicit sales of the Notes
on the same terms and conditions as the Agents have agreed to. The names of
any other agents so appointed will be set forth in the applicable Pricing
Supplement.
Any Agent may sell Notes it has purchased from the Company as principal to
other dealers for resale to investors and other purchasers, and may allow any
portion of the discount received in connection with such purchase from the
Company to such dealers. After the initial 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 Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part whether placed
directly with the Company or through any Agent. Each Agent will have the
right, in its discretion reasonably exercised, to reject in whole or in part
any offer to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in New York City on the date of settlement.
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. Any Agent may from time to time purchase
and sell Notes in the secondary market, but such Agent 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, any Agent may make a market in the Notes, but such Agent is not
obligated to do so and may discontinue any market-making activity at any time.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against certain liabilities including
liabilities under the Securities Act, or to contribute to payments the Agents
may be required to make in respect thereof. The Company has agreed to
reimburse the Agents for certain other expenses.
The Agents and certain affiliates thereof have engaged, and may in the
future engage, in transactions with and perform services, including investment
banking and commercial banking transactions, for the Company and/or its
affiliates in the ordinary course of business.
Concurrently with the offering of Notes through any Agent as described
herein, the Company may issue other Debt Securities pursuant to the Indenture
referred to herein.
The Company reserves the right to sell Notes directly to investors on its
own behalf in those jurisdictions where it is authorized to do so or as
otherwise provided in the applicable Pricing Supplement. In such
circumstances, the Company will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
In the case of sales made directly by the Company, no commissions will be
paid.
S-35
<PAGE>
PROSPECTUS
TRIBUNE COMPANY
DEBT SECURITIES AND
WARRANTS TO PURCHASE DEBT SECURITIES
Tribune Company (the "Company") intends to issue from time to time in one or
more series its unsecured debt securities ("Debt Securities") and warrants
("Warrants") to purchase Debt Securities (the Debt Securities and the Warrants
being herein collectively called the "Securities") with an aggregate initial
public offering price or purchase price of up to $500,000,000, or the
equivalent thereof if any of the Securities are denominated in a foreign
currency or composite currency such as the European Currency Unit ("ECU"). The
Debt Securities of each series and the Warrants will be offered on terms to be
determined at the time of sale. See "Description of Debt Securities" and
"Description of Warrants." The Debt Securities and Warrants may be sold for
United States dollars, foreign currencies or composite currencies such as the
ECU, and the principal of, premium, if any, and any interest on the Debt
Securities may be payable in United States dollars, foreign currencies or
composite currencies such as the ECU. The specific designation, aggregate
principal amount, the currency or composite currency in which the principal,
premium, if any, and any interest are payable, the rate (or method of
calculation) and the time and place of payment of any interest, authorized
denominations, maturity, offering price, any redemption terms and any other
specific terms of the Debt Securities in respect of which this Prospectus is
being delivered are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement"). With regard to the Warrants, if any, in respect of
which this Prospectus is being delivered, the Prospectus Supplement sets forth
a description of the Debt Securities for which the Warrants are exercisable
and the offering price, if any, exercise price, duration and any other
specific terms of the Warrants.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities may be sold by the Company directly to purchasers, through
agents designated from time to time, or to or through underwriters or dealers.
If underwriters or agents are involved in the offering of Securities, the
names of the underwriters or agents will be set forth in the Prospectus
Supplement. If an underwriter, agent or dealer is involved in the offering of
any Securities, the underwriter's discount, agent's commission or dealer's
purchase price will be set forth in, or may be calculated from the information
set forth in, the Prospectus Supplement, and the net proceeds to the Company
from such offering will be the public offering price of the Securities less
such discount in the case of an offering through an underwriter or the
purchase price of the Securities less such commission in the case of an
offering through an agent, and less, in each case, the other expenses of the
Company associated with the issuance and distribution of the Securities. See
"Plan of Distribution."
The date of this Prospectus is January 9, 1997
<PAGE>
AVAILABLE INFORMATION
Tribune Company (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, proxy statements and other information
with the Securities and Exchange Commission (the "Commission") and with the
New York, Chicago and Pacific stock exchanges, on which the Company's Common
Stock is listed. Such reports, proxy statements and other information
concerning 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, and at the Commission's Regional Offices at Seven World Trade
Center, 13th Floor, New York, New York 10048; and Citicorp Center, 500 W.
Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such materials
can be obtained upon written request addressed to the Commission, Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such materials may be inspected at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005; the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605; and
the Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104.
Copies of reports, proxy statements and other information electronically filed
with the Commission by the Company may be inspected by accessing the
Commission's World Wide Web site at http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of 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, reference is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
Sections 13 and 14 of the Exchange Act (File No. 1-8572) are incorporated
herein by reference: (i) the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, (ii) the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1996, June 30, 1996 and September 29, 1996 and
(iii) the Company's Current Reports on Form 8-K dated January 8, 1996,
February 13, 1996, March 12, 1996, March 15, 1996, July 9, 1996, July 26,
1996, August 2, 1996, August 14, 1996, October 21, 1996 and November 8, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus.
Any statement contained herein 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 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 a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference,
excluding the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests should be
directed to the Corporate Relations Department, Tribune Company, Suite 600,
435 North Michigan Avenue, Chicago, Illinois 60611, telephone (312) 222-3238.
2
<PAGE>
THE COMPANY
Tribune Company is an information, entertainment and education company.
Through its subsidiaries, the Company is engaged in the publishing of
newspapers, books, educational reference material and information in print and
digital formats and the broadcasting, production and syndication of
information and entertainment in metropolitan areas in the United States. The
Company was founded in 1847 and incorporated in Illinois in 1861. As a result
of a corporate restructuring in 1968, the Company became a holding company
incorporated in Delaware. The executive offices of the Company are located at
435 North Michigan Avenue, Chicago, Illinois 60611. Its telephone number is
(312) 222-9100.
USE OF PROCEEDS
The Company expects to add substantially all of the net proceeds from the
sale of the Securities to its general funds to be used for general corporate
purposes, including capital expenditures, working capital, repayment of long-
term and short-term debt, securities repurchase programs and the financing of
acquisitions. Funds not required immediately may be invested in short-term
marketable securities.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's Ratios of Earnings to Fixed Charges for each of the periods
indicated are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FISCAL YEAR ENDED
SEPTEMBER DECEMBER
------------ ------------------------
1996 1995 1995 1994 1993 1992 1991
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges......... 6.9 8.6 8.7 8.2 6.4 4.9 4.0
</TABLE>
For purposes of computing the foregoing ratios: (i) Earnings consist of
income from continuing operations before cumulative effects of accounting
changes plus income tax expense and losses on equity investments plus Fixed
Charges (including amortization of capitalized interest but excluding
capitalized interest and interest related to the Company's guarantees of the
debt of its Employee Stock Ownership Plan); and (ii) Fixed Charges consist of
interest, whether expensed or capitalized, the portion of rental payments on
operating leases estimated to represent an interest component and interest
related to the Company's guarantees of the debt of its Employee Stock
Ownership Plan.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be issued under an Indenture, as supplemented from
time to time in accordance with its terms (the "Indenture"), to be entered
into between the Company and Bank of Montreal Trust Company (the "Trustee").
The following brief summary of the Indenture and the Debt Securities is
subject to the detailed provisions of the Indenture, a copy of which is an
exhibit to the Registration Statement. Wherever references are made to
particular provisions of the Indenture, such provisions are incorporated by
reference as a part of the statements made herein and such statements are
qualified in their entirety by such reference. Certain defined terms in the
Indenture are capitalized herein. References in italics are to section numbers
of the Indenture.
The Indenture does not limit the amount of Debt Securities which may be
issued thereunder. It provides that Debt Securities may be issued from time to
time in series. The Debt Securities will be unsecured obligations of the
Company and will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company.
3
<PAGE>
Reference is made to the Prospectus Supplement for a description of the
following terms of the Debt Securities in respect of which this Prospectus is
being delivered: (i) the title of such Debt Securities; (ii) the limit, if
any, upon the aggregate principal amount of such Debt Securities; (iii) the
dates on which or periods during which such Debt Securities may be issued and
the date or dates on which the principal of (and premium, if any, on) such
Debt Securities will be payable; (iv) the rate or rates, if any, or the method
of determination thereof, at which such Debt Securities will bear interest, if
any; the date or dates from which such interest will accrue; the dates on
which such interest will be payable; and the regular record dates for the
interest payable on such interest payment dates; (v) the obligation, if any,
of the Company to redeem, repay or purchase such Debt Securities pursuant to
any sinking fund or analogous provisions or at the option of a holder and the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (vi) the periods
within which or the dates on which, the prices, if any, at which and the terms
and conditions upon which such Debt Securities may be redeemed, in whole or in
part, at the option of the Company; (vii) if other than denominations of
$1,000 and any integral multiple thereof, the denominations in which such Debt
Securities will be issuable; (viii) whether such Debt Securities are to be
issued at less than the principal amount thereof and the amount of discount
with which such Debt Securities will be issued; (ix) provisions, if any, for
the defeasance of such Debt Securities; (x) if other than United States
dollars, the currency or composite currency in which such Debt Securities are
to be denominated, or in which payment of the principal of (and premium, if
any) and interest on such Debt Securities will be made and the circumstances,
if any, when such currency of payment may be changed; (xi) if the principal of
(and premium, if any) or interest on such Debt Securities are to be payable,
at the election of the Company or a holder, in a currency or composite
currency other than that in which such Debt Securities are denominated or
stated to be payable, the periods within which, and the terms and conditions
upon which, such election may be made and the time and the manner of
determining the exchange rate between the currency or composite currency in
which such Debt Securities are denominated or stated to be payable and the
currency in which such Debt Securities are to be paid pursuant to such
election; (xii) if the amount of payments of principal of (and premium, if
any) or interest on the Debt Securities may be determined with reference to an
index including, but not limited to an index based on a currency or currencies
other than that in which such Debt Securities are stated to be payable, the
manner in which such amounts shall be determined; (xiii) whether such Debt
Securities will be issued in the form of one or more Global Securities and, if
so, the identity of the depository for such Global Securities; (xiv) any
additional Events of Default or covenants relating solely to such Debt
Securities or any Events of Default or covenants generally applicable to Debt
Securities which are not to apply to the particular series of Debt Securities
in respect of which this Prospectus is being delivered; and (xv) any other
terms of such Debt Securities not inconsistent with the provisions of the
Indenture. (Section 3.01) Unless otherwise indicated in the applicable
Prospectus Supplement, the Indenture does not afford the holder of any series
of Debt Securities the right to tender such Debt Securities to the Company for
repurchase, or provide for any increase in the rate or rates of interest per
annum at which such Debt Securities will bear interest, in the event the
Company should become involved in a highly leveraged transaction.
The Debt Securities may be issued under the Indenture bearing no interest or
interest at a rate below the prevailing market rate at the time of issuance,
to be offered and sold at a discount below their stated principal amount.
Federal income tax consequences and other special considerations applicable to
any such discounted Debt Securities or to other Debt Securities offered and
sold at par which are treated as having been issued at a discount for federal
income tax purposes will be described in the Prospectus Supplement relating
thereto.
A substantial portion of the assets of the Company is held by subsidiaries.
The Company's right and the rights of its creditors, including the holders of
Debt Securities, to participate in the assets of any subsidiary upon its
liquidation or recapitalization would be subject to the prior claims of such
subsidiary's creditors, except to the extent that the Company may itself be a
creditor with recognized claims against such subsidiary. There is no
restriction in the Indenture against subsidiaries of the Company incurring
unsecured indebtedness.
Unless otherwise described in the Prospectus Supplement, the Debt Securities
will be issued only in fully registered form without coupons, in denominations
of $1,000 and multiples of $1,000, and will be payable only
4
<PAGE>
in United States dollars. (Section 3.02) In addition, all or a portion of the
Debt Securities of any series may be issued in permanent registered global
form which will be exchangeable for definitive Debt Securities only under
certain conditions. (Section 2.03) The Prospectus Supplement indicates the
denominations to be issued, the procedures for payment of interest and
principal thereon, and other matters. No service charge will be made for any
registration of transfer or exchange of the Debt Securities, but the Company
may, in certain instances, require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. (Section
3.05)
GLOBAL SECURITIES
The Debt Securities of a particular series may be issued in the form of one
or more Global Securities which will be deposited with a depository (the
"Depositary"), or its nominee, each of which will be identified in the
Prospectus Supplement relating to such series. Unless and until exchanged, in
whole or in part, for Debt Securities in definitive registered form, a Global
Security may not be transferred except as a whole by the Depositary for such
Global Security to a nominee of such Depositary, 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. (Section 2.03) The specific terms of the depository
arrangement with respect to any portion of a particular series of Debt
Securities to be represented by a Global Security will be described in the
Prospectus Supplement relating to such series. The Company anticipates that
the following provisions will apply to all depository arrangements.
Upon the issuance of a Global Security, the Depositary therefor or its
nominee will credit, on its book entry and registration system, the respective
principal amounts of the Debt Securities represented by such Global Security
to the accounts of such persons having accounts with such Depositary
("participants") as shall be designated by the underwriters or agents
participating in the distribution of such Debt Securities or by the Company if
such Debt Securities are offered and sold directly by the Company. Ownership
of beneficial interests in a Global Security will be limited to participants
or persons that may hold beneficial interests through participants. Ownership
of beneficial interests in a Global Security will be shown on, and the
transfer of such ownership will be effected only through, records maintained
by the Depositary therefor or its nominee (with respect to beneficial
interests of participants) or by participants or persons that hold through
participants (with respect to interests of persons other than participants).
The laws of some states require certain purchasers of securities to take
physical delivery thereof in definitive form. Such depository arrangements and
such laws may impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner thereof, such Depositary or such nominee, as the case may be,
will be considered the sole owner or holder of the Debt Securities represented
by such Global Security for all purposes under the Indenture. Except as
provided below, owners of beneficial interests in a Global Security will not
be entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in definitive form and
will not be considered the owners or holders thereof under the Indenture.
Principal, premium, if any, and interest payments on a Global Security
registered in the name of a Depositary or its nominee will be made to such
Depositary or nominee, as the case may be, as the registered owner of such
Global Security. None of the Company, the Trustee or any paying agent for Debt
Securities of the series represented by such Global Security will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or
for maintaining, supervising or reviewing any records relating to such
beneficial interests.
The Company expects that the Depositary for a Global Security or its
nominee, upon receipt of any payment of principal, premium or interest, will
immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security as shown on
5
<PAGE>
the records of such Depositary or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the
responsibility of such participants.
If the Depositary for a Global Security representing Debt Securities of a
particular series is at any time unwilling or unable to continue as Depositary
and a successor Depositary is not appointed by the Company within 90 days, the
Company will issue Debt Securities of such series in definitive form in
exchange for such Global Security. In addition, the Company may at any time
and in its sole discretion determine not to have the Debt Securities of a
particular series represented by one or more Global Securities and, in such
event, will issue Debt Securities of such series in definitive form in
exchange for all of the Global Securities representing Debt Securities of such
series.
CERTAIN COVENANTS OF THE COMPANY
Limitation on Indebtedness Secured by a Mortgage. The Indenture provides
that neither the Company nor any Restricted Subsidiary will create, assume,
guarantee or suffer to exist any Indebtedness secured by any mortgage, pledge,
lien, security interest, conditional sale or other title retention agreement
or other similar encumbrance ("Mortgage") on any assets of the Company or a
Restricted Subsidiary unless the Company secures or causes such Restricted
Subsidiary to secure the Debt Securities equally and ratably with, or prior
to, such secured Indebtedness. This restriction will not apply to Indebtedness
secured by (i) Mortgages on the property of any corporation which Mortgages
existed at the time such corporation became a Restricted Subsidiary; (ii)
Mortgages in favor of the Company or a Restricted Subsidiary; (iii) Mortgages
on property of the Company or a Restricted Subsidiary in favor of the United
States of America or any State or political subdivision thereof, or in favor
of any other country or any political subdivision thereof, to secure payment
pursuant to any contract or statute or to secure any indebtedness incurred for
the purpose of financing all or part of the purchase price or the cost of
construction or improvement of the property subject to such Mortgages; (iv)
Mortgages on any property subsequently acquired by the Company or any
Restricted Subsidiary, contemporaneously with such acquisition or within 120
days thereafter, to secure or provide for the payment of any part of the
purchase price of such property, or Mortgages assumed by the Company or any
Restricted Subsidiary upon any property subsequently acquired by the Company
or any Restricted Subsidiary which were existing at the time of such
acquisition, provided that the amount of any Indebtedness secured by any such
Mortgage created or assumed does not exceed the cost to the Company or
Restricted Subsidiary, as the case may be, of the property covered by such
Mortgage; (v) Mortgages representing the extension, renewal or refunding of
any Mortgage referred to in the foregoing clauses (i) through (iv), inclusive;
and (vi) any other Mortgage, other than Mortgages referred to in the foregoing
clauses (i) through (v), inclusive, so long as the aggregate of all
Indebtedness secured by Mortgages pursuant to this clause (vi) and the
aggregate Value of the Sale and Lease-Back Transactions in existence at that
time (not including those in connection with which the Company has voluntarily
retired funded debt as provided in the Indenture) does not exceed 10% of
Consolidated Net Tangible Assets of the Company and its consolidated
Subsidiaries. (Section 10.07)
Limitation on Sale and Lease-Back Transactions. The Indenture provides that
neither the Company nor any Subsidiary will enter into any Sale and Lease-Back
Transaction with respect to any Principal Property unless either (i) the
Company or such Subsidiary would be entitled, pursuant to the foregoing
covenant relating to "Limitation on Indebtedness Secured by a Mortgage," to
create, assume, guarantee or suffer Indebtedness in a principal amount equal
to or exceeding the Value of such Sale and Lease-Back Transaction secured by a
Mortgage on the property to be leased without equally and ratably securing the
Debt Securities or (ii) the Company, within four months after the effective
date of such transaction, applies an amount equal to the greater of (x) the
net proceeds of the sale of the property subject to the Sale and Lease-Back
Transaction and (y) the Value of such Sale and Lease-Back Transaction, to the
voluntary retirement of the Debt Securities or other unsubordinated
Indebtedness of the Company. (Section 10.08)
6
<PAGE>
Certain Definitions. A "Sale and Lease-Back Transaction" is defined in the
Indenture as the leasing by the Company or a Subsidiary for a period of more
than three years of any Principal Property which has been sold or is to be
sold or transferred by the Company or any such Subsidiary to any party (other
than the Company or a Subsidiary) to which funds have been or will be advanced
by such party on the security of the leased property. (Section 10.08)
"Value" is defined in the Indenture to mean, with respect to any particular
Sale and Lease-Back Transaction, as of any particular time, the amount equal
to the greater of (i) the net proceeds of the sale or transfer of the property
leased pursuant to such Sale and Lease-Back Transaction or (ii) the fair value
in the opinion of the Board of Directors of the Company of such property at
the time of the Company's entering into such Sale and Lease-Back Transaction,
subject to adjustment at any particular time for the length of the remaining
initial lease term. (Section 10.08)
"Principal Property" is defined in the Indenture to mean any manufacturing
or printing plant, warehouse, office building, power plant or transmission
facility owned by the Company or any Subsidiary or any property or right owned
by or granted to the Company or any Subsidiary and used or held for use in the
newspaper, newsprint, radio or television business conducted by the Company or
any Subsidiary, except for any such property or right which, in the opinion of
the Board of Directors of the Company, is not material to the total business
conducted by the Company and its Subsidiaries considered as one enterprise.
(Section 1.01)
"Indebtedness" is defined in the Indenture to mean (i) long-term liabilities
representing borrowed money and purchase money obligations as shown on the
liability side of a balance sheet (other than liabilities evidenced by
obligations under leases and contracts payable for broadcast rights), (ii)
indebtedness secured by any mortgage, pledge or lien existing on property
owned subject to such mortgage, pledge or lien, whether or not such secured
indebtedness has been assumed and (iii) contingent obligations in respect of,
or to purchase or otherwise acquire, any such indebtedness of others described
in the foregoing clauses (i) and (ii) above, including guarantees and
endorsements (other than for purposes of collection in the ordinary course of
business of any such indebtedness). (Section 10.07)
"Consolidated Net Tangible Assets" is defined in the Indenture to mean total
consolidated assets of the Company and its Consolidated Subsidiaries, less (i)
current liabilities of the Company and its Consolidated Subsidiaries; (ii)
contracts payable for broadcast rights; (iii) the net book amount of all
intangible assets of the Company and its Consolidated Subsidiaries; (iv)
appropriate amounts to account for minority interests of other persons holding
stock in Subsidiaries; and (v) investments in Subsidiaries (other than
Restricted Subsidiaries) aggregating in excess of 10% of the Net Worth of the
Company and its Consolidated Subsidiaries. (Section 10.07)
"Consolidated Subsidiary" is defined in the Indenture to mean a Subsidiary
the accounts of which are consolidated with those of the Company for public
financial reporting purposes. (Section 1.01)
"Restricted Subsidiary" is defined in the Indenture to mean each Subsidiary
of the Company as of the date of the Indenture and each Subsidiary thereafter
created or acquired, unless expressly excluded by resolution of the Board of
Directors of the Company before, or within 120 days following, such creation
or acquisition. (Section 10.07)
"Subsidiary" is defined in the Indenture to mean a corporation more than 50%
of the outstanding voting stock of which is owned, directly or indirectly, by
the Company or by one or more other Subsidiaries or by the Company and one or
more other Subsidiaries. For the purposes of this definition, "voting stock"
means stock which ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such
voting power by reason of any contingency. (Section 1.01)
"Net Worth" is defined in the Indenture to mean the aggregate amount of
stockholders' investment as determined in accordance with generally accepted
accounting principles. (Section 10.07)
7
<PAGE>
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company may not consolidate with or merge
into any other corporation, or convey, transfer or lease its properties and
assets substantially as an entirety to any other party, unless, among other
things, (i) the corporation formed by such consolidation or into which the
Company is merged or the party which acquires by conveyance or transfer, or
which leases the properties and assets of the Company substantially as an
entirety, is organized and existing under the laws of the United States, any
State thereof or the District of Columbia and expressly assumes the Company's
obligations on the Debt Securities and under the Indenture by means of an
indenture supplemental to the Indenture; and (ii) immediately after giving
effect to such transaction no Event of Default, and no event which, after
notice or lapse of time, or both, would become an Event of Default, shall have
happened and be continuing. (Section 8.01)
EVENTS OF DEFAULT, WAIVER AND NOTICE
With respect to the Debt Securities an Event of Default is defined in the
Indenture as being (i) default for 30 days in payment of any interest upon the
Debt Securities; (ii) default in payment of the principal of or premium, if
any, on the Debt Securities when due either at maturity or upon acceleration,
redemption or otherwise; (iii) default by the Company in the performance of
any other of the covenants or warranties in the Indenture applicable to the
Company which shall not have been remedied for a period of 60 days after
Notice of Default; and (iv) certain events of bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary. (Section 5.01)
Within 90 days after the occurrence of any default under the Indenture, the
Trustee is required to notify the Holders of Debt Securities of any default
(except in payment of principal of or premium, if any, or interest on any Debt
Securities), unless the Board of Directors, the executive committee or a trust
committee of the Board of Directors or Responsible Officers of the Trustee in
good faith considers it in the interest of the Holders of Debt Securities not
to do so. (Section 6.02)
"Significant Subsidiary" is defined in the Indenture to mean any Subsidiary
(i) which, as of the close of the fiscal year of the Company immediately
preceding the date of determination, contributed more than 7% of the
consolidated gross operating revenues of the Company and its Subsidiaries for
such year or (ii) the Net Worth of which (determined in a manner consistent
with the manner of determining consolidated Net Worth of the Company and its
Subsidiaries) as of the close of such immediately preceding fiscal year
exceeded 7% of the consolidated Net Worth of the Company and its Subsidiaries.
(Section 5.01)
The Indenture provides that if an Event of Default with respect to Debt
Securities shall have occurred and be continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the Debt Securities
then outstanding may declare the entire principal and accrued interest of all
Debt Securities to be due and payable immediately. However, any time after a
declaration of acceleration with respect to the Debt Securities has been made,
but before a judgment or decree for the payment of money based on such
acceleration has been obtained by the Trustee, the Holders of a majority in
principal amount of the Outstanding Debt Securities, may, under certain
circumstances, rescind and annul such acceleration. The Holders of a majority
in principal amount of the Outstanding Debt Securities may waive any past
defaults under the Indenture with respect to the Debt Securities, except
defaults in payment of principal of or premium, if any (other than by a
declaration of acceleration), or interest on the Debt Securities or covenants
that may not be modified or amended without the consent of the Holders of all
Outstanding Debt Securities. (Sections 5.02 and 5.13)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of its covenants and agreements under the
Indenture. (Section 10.09)
Subject to certain conditions set forth in the Indenture, the Holders of a
majority in principal amount of the then Outstanding Debt Securities shall
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee under the Indenture in
respect of such series. No Holder of
8
<PAGE>
any Debt Securities shall have any right to institute any proceedings,
judicial or otherwise, with respect to the Indenture or any remedy thereunder
unless, among other things, the Holder or Holders of Debt Securities shall
have offered to the Trustee reasonable indemnity against costs, expenses and
liabilities relating to such proceedings. (Sections 5.12 and 5.07)
MODIFICATION OF THE INDENTURE
With respect to the Debt Securities, modification or amendment of the
Indenture may be made by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Debt Securities,
except that no such modification or amendment may, without the consent of the
Holders of all then Outstanding Debt Securities (i) change the due date of the
principal of, or any installment of principal of or interest on, any Debt
Securities; (ii) reduce the principal amount of, or rate of interest on, or
any premium payable on redemption of any Debt Securities; (iii) reduce the
principal amount of any Debt Securities payable upon acceleration of the
maturity thereof; (iv) change the place or the currency of payment of
principal of, or any premium or interest on, any Debt Securities; (v) impair
the right to institute suit for the enforcement of any payment on or with
respect to any Debt Securities on or after the due date thereof (or, in the
case of redemption, on or after the redemption date thereof); (vi) reduce the
percentage in principal amount of Debt Securities then outstanding, the
consent of whose holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults; or (vii) modify certain provisions of the
Indenture regarding the amendment or modification of, or waiver with respect
to, any provision of the Indenture or the Debt Securities. (Section 9.02)
DEFEASANCE
If provision is made pursuant to Section 3.01 of the Indenture for the
defeasance of a series of Debt Securities, and if such series is payable only
in United States dollars (unless otherwise specifically provided), the
Company, at its option, in respect of such series of Debt Securities (i) will
be discharged from any and all obligations in respect of such Debt Securities
(except for certain obligations to register the transfer or exchange of Debt
Securities, replace stolen, lost or mutilated Debt Securities, maintain paying
agencies and hold moneys for payment in trust) or (ii) will not be subject to,
among other things, the provisions of the Indenture described above under
"Consolidation, Merger and Sale of Assets," "Limitation on Indebtedness
Secured by a Mortgage," and "Limitation on Sale and Lease-Back Transactions"
if the Company deposits with the Trustee, in trust, money or U.S. Government
Obligations which through the payment of interest thereon and principal
thereof in accordance with their terms will provide money in an amount
sufficient to pay all the principal of, and interest on, such Debt Securities
on the dates such payments are due in accordance with the terms of such Debt
Securities. To exercise any such option, the Company is required to deliver to
the Trustee (x) an opinion of a nationally recognized tax counsel to the
effect that the deposit and related defeasance would not cause the holders of
the Debt Securities to recognize income, gain or loss for federal income tax
purposes as a result of the Company's exercise of its option and would cause
the holders of the Debt Securities to be subject to federal income tax on the
same amount and in the same manner and at the same times as would have been
the case if such option had not been exercised, and, if the Company is being
discharged from any and all obligations in respect of such Debt Securities
(other than as specified above), accompanied by a ruling to that effect
received from or published by the Internal Revenue Service and (y) if the Debt
Securities are then listed on the New York Stock Exchange (the "NYSE"), an
opinion of counsel to the effect that the Debt Securities would not be
delisted from the NYSE as a result of the exercise of such option. (Sections
13.01 and 13.02)
THE TRUSTEE
Bank of Montreal Trust Company, a wholly-owned subsidiary of Harris Trust
and Savings Bank, will be the Trustee under the Indenture. The Trustee is a
depository for funds of and performs other services for and transacts other
banking business with the Company in the normal course of business. Bank of
Montreal, an affiliate of the Trustee, is a commercial lender under the
Company's credit facilities.
9
<PAGE>
DESCRIPTION OF WARRANTS
The following description of the terms of the Warrants sets forth certain
general terms and provisions of the Warrants to which any Prospectus
Supplement may relate. The particular terms of the Warrants offered by any
Prospectus Supplement and the extent, if any, to which such general provisions
may apply to the Warrants so offered will be described in the Prospectus
Supplement relating to such Warrants.
GENERAL
Warrants may be offered together with any series of Debt Securities offered
by a Prospectus Supplement and if so offered will be attached to such Debt
Securities and will entitle the holder thereof to purchase additional Debt
Securities having the same terms and interest rate as the offered Debt
Securities. Each series of Warrants will be issued under a separate warrant
agreement (a "Warrant Agreement") to be entered into between the Company and a
bank or trust company, as warrant agent (the "Warrant Agent"), all as
described in the Prospectus Supplement relating to such series of Warrants.
The Warrant Agent will act solely as the agent of the Company under the
applicable Warrant Agreement and in connection with the certificates for the
Warrants (the "Warrant Certificates") of such series, and will not assume any
obligation or relationship of agency or trust for or with any holders of such
Warrant Certificates or beneficial owners of Warrants. A copy of the form of
Warrant Agreement, including the form of Warrant Certificates, is filed as an
exhibit to the Registration Statement. The following summary of certain
provisions of the forms of Warrant Agreement and Warrant Certificates does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Warrant Agreement and the Warrant
Certificates.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of such
Warrants, including, where applicable: (i) the offering price; (ii) the
currency or currencies in which such Warrants are being offered; (iii) the
designation, aggregate principal amount, currency or currencies, denominations
and other terms of the series of Debt Securities purchasable upon exercise of
such Warrants; (iv) the designation and terms of the series of Debt Securities
with which such Warrants are being offered and the number of such Warrants
being offered with each such Debt Security; (v) the date on and after which
such Warrants and the related series of Debt Securities will be transferable
separately; (vi) the principal amount of the Debt Securities purchasable upon
exercise of each such Warrant and the price at which and currency or
currencies in which such principal amount of Debt Securities may be purchased
upon such exercise; (vii) the date on which the right to exercise such
Warrants shall commence (the "Exercise Date") and the date on which such right
shall expire (the "Expiration Date"); and (viii) any other terms of such
Warrants not inconsistent with the applicable Warrant Agreement.
Warrants of any series will be exchangeable into Warrants of the same series
representing in the aggregate the number of Warrants surrendered for exchange.
Warrant Certificates may be presented for exchange or transfer at the
corporate trust office of the Warrant Agent for such series of Warrants (or
any other office indicated in the Prospectus Supplement relating to such
series of Warrants). Prior to the exercise of their Warrants, holders of
Warrants will not have any of the rights of holders of the series of Debt
Securities purchasable upon such exercise, including the right to receive
payments of principal of, premium, if any, or interest, if any, on the Debt
Securities purchasable upon such exercise, or to enforce any of the covenants
in the Indenture.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder thereof to purchase such principal
amount of the related series of Debt Securities at such exercise price as
shall in each case be set forth in, or calculable as set forth in, the
Prospectus Supplement relating to such Warrant. Warrants of a series may be
exercised at the corporate trust office of the Warrant Agent for such series
(or any other office indicated in the Prospectus Supplement relating to such
series) at any time on or after the Exercise Date and prior to 5:00 P.M.,
Chicago time (unless otherwise indicated in the related Prospectus
Supplement), on the Expiration Date set forth in the Prospectus Supplement
relating to such
10
<PAGE>
series of Warrants. After the close of business on the Expiration Date
relating to such series of Warrants, unexercised Warrants of such series will
be void.
Warrants of a series may be exercised by delivery to the appropriate Warrant
Agent of payment, as provided in the Prospectus Supplement relating to such
series of Warrants, of the consideration required to purchase the principal
amount of the series of Debt Securities purchasable upon such exercise,
together with certain information as set forth on the reverse side of the
Warrant Certificate evidencing such Warrants. Such Warrants will be deemed to
have been exercised upon receipt of the exercise price, subject to the receipt
of the Warrant Certificate evidencing such Warrants within five business days.
Upon receipt of such payment and such Warrant Certificate, properly completed
and duly executed, at the corporate trust office of the appropriate Warrant
Agent (or any other office indicated in the Prospectus Supplement relating to
such series of Warrants), the Company will, as soon as practicable, issue and
deliver the principal amount of the series of Debt Securities purchasable upon
such exercise. If fewer than all of the Warrants represented by a Warrant
Certificate are exercised, a new Warrant Certificate will be issued and
delivered for the remaining amounts of Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) to or through
underwriters or dealers, (ii) through agents or (iii) directly to one or more
purchasers. With respect to each series of Securities being offered hereby,
the terms of the offering of the Securities of such series, including the name
or names of any underwriters, dealers or agents, the purchase price of such
Securities and the proceeds to the Company from such sale, any underwriting
discounts, selling commissions and other items constituting underwriters',
dealers' or agents' compensation, any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers or agents,
and any securities exchanges on which the Securities of such series may be
listed, will be set forth in, or may be calculated from the information set
forth in, the Prospectus Supplement. Only underwriters so named in the
Prospectus Supplement are deemed to be underwriters in connection with the
Securities offered thereby.
If underwriters are used in the sale, the 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
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase Securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the
Securities offered by the Prospectus Supplement if any of such Securities are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
Securities may also be sold directly by the Company or through agents (which
may also act as principals) designated by the Company from time to time. Any
agent involved in the offer or sale of the Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth in, or may be calculated from the
information set forth in, the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
best efforts basis for the period of its appointment. In the case of sales
made directly by the Company, no commission will be payable.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a future date specified in the
Prospectus Supplement. Such contracts will be subject to the conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement will set
forth the commissions payable for solicitation of such contracts.
11
<PAGE>
Agents and underwriters 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 agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engage in transactions with, or perform services for the Company or its
affiliates in the ordinary course of business.
In the event that the Securities of any series are not listed on a national
securities exchange, certain broker-dealers may make a market in the
Securities of such series, but will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given that any broker-dealer will make a market in the Securities or as to the
liquidity of the trading market for the Securities. The Prospectus Supplement
with respect to the Securities of any series will state, if known, whether or
not any broker-dealer intends to make a market in such Securities. If no such
determination has been made, the Prospectus Supplement will so state.
LEGAL MATTERS
Certain legal matters relating to the Securities will be passed upon for the
Company by Sidley & Austin, Chicago, Illinois, and for the underwriters and
agents, if any, by Mayer, Brown & Platt, Chicago, Illinois.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1995
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Renaissance Communication Corp. at
December 31, 1994 and 1995 and for each of the years in the three-year period
ended December 31, 1995, appearing in the Company's Current Report on Form 8-K
dated July 26, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such incorporated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
12
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT (INCLUDING THE ACCOMPANYING PRICING SUPPLEMENT) AND THE PROSPECTUS
IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT (INCLUDING THE
ACCOMPANYING PRICING SUPPLEMENT) AND THE PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT (INCLUDING THE ACCOMPANYING PRICING SUPPLEMENT) OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICA-
TION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT (INCLUDING THE ACCOMPANYING PRIC-
ING SUPPLEMENT) AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANY-
ONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
Prospectus Supplement
<S> <C>
Certain Risk Factors....................................................... S-2
Description of Notes....................................................... S-3
Special Provisions Relating to
Foreign Currency Notes.................................................... S-19
United States Federal Income Tax Consequences.............................. S-21
Plan of Distribution of Notes.............................................. S-35
Prospectus
Available Information...................................................... 2
Incorporation of Certain Documents By Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Ratios of Earnings to Fixed Charges........................................ 3
Description of Debt Securities............................................. 3
Description of Warrants.................................................... 10
Plan of Distribution....................................................... 11
Legal Matters.............................................................. 12
Experts.................................................................... 12
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$500,000,000
TRIBUNE COMPANY
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
----------------
PROSPECTUS SUPPLEMENT
----------------
MERRILL LYNCH & CO.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
JANUARY 14, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
