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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-66077
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 4, 1998)
$500,000,000
TRIBUNE COMPANY
MEDIUM-TERM NOTES, SERIES F
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
----------------
THE COMPANY: Tribune Company. Our executive offices are located at 435 North
Michigan Avenue, Chicago, Illinois 60611, and our telephone number is (312)
222-9100.
TERMS: We plan to offer and sell the Notes with various terms, including the
following:
. Ranking as our senior indebtedness . Interest at fixed or floating
rates, or no interest at all. The
floating interest rate may be
based on one or more of the
following indices plus or minus a
spread and/or multiplied by a
spread multiplier:
. Stated maturities of 9 months or
more from date of issue
. Redemption and/or repayment
provisions, if applicable,
whether mandatory, at or our
option or at the option of the
Noteholders
. CD rate
. CMT rate
. Payments in U.S. dollars or one
or more foreign currencies . Commercial paper rate
. Minimum denominations of $1,000 . Eleventh district cost of funds
or other specified denominations rate
for foreign currencies
. Federal funds rate
. Book-entry (through The
Depository Trust Company) or . LIBOR
certificated form
. Prime rate
. Interest payments on fixed rate
Notes on each May 15 and November . Treasury rate
15
. Such other interest rate basis or
interest rate formula as may be
specified in the applicable
Pricing Supplement
. Interest payments on floating
rate Notes on a monthly,
quarterly, semiannual or annual
basis
The final terms for each Note, which may be different from the terms described
in this Prospectus Supplement, will be specified in the applicable Pricing
Supplement. If we sell other securities under the accompanying Prospectus, the
aggregate amount of Notes that we may offer and sell under this Prospectus
Supplement would be reduced.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON PAGE S-
2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus Supplement, the accompanying Prospectus or any Pricing
Supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
We may sell the Notes to the Agents as principals for resale at varying or
fixed offering prices or through the Agents as agents using their reasonable
best efforts on our behalf. Unless otherwise specified in the applicable
Pricing Supplement, the price to the public for the Notes will be 100% of the
principal amount. We will pay commissions to Agents, ranging from .125% to
.750% of the principal amount of each Note sold through such Agents, depending
upon the stated maturity of such Note. If we sell all of the Notes, we expect
to receive proceeds of between $499,375,000 and $496,250,000, after paying the
Agents' discounts and commissions of between $625,000 and $3,750,000 and before
deducting expenses payable by us, including reimbursement of certain of the
Agents' expenses. We may also sell the Notes without the assistance of the
Agents (whether acting as principal or as agent).
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MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
----------------
The date of this Prospectus Supplement is November 12, 1998.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
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PAGE
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<S> <C>
Risk Factors............................................................... S-2
Description of Notes....................................................... S-4
Special Provisions Relating to Foreign Currency Notes...................... S-20
United States Federal Income Tax Considerations............................ S-22
Supplemental Plan of Distribution.......................................... S-36
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
About This Prospectus...................................................... 2
Where You Can Find More Information........................................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Ratios of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................. 4
Description of Warrants.................................................... 11
Plan of Distribution....................................................... 13
Legal Matters.............................................................. 14
Experts.................................................................... 14
</TABLE>
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You should rely only on the information contained in this Prospectus
Supplement. We have not, and the Agents have not, authorized any other person
to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. We are not,
and the Agents are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this Prospectus Supplement is accurate as of the
date on the front cover of this Prospectus Supplement only. Our business,
financial condition, results of operations and prospects may have changed since
this date.
----------------
RISK FACTORS
Your investment in the Notes will include certain risks. In consultation with
your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks before deciding whether an
investment in the Notes is suitable for you. The Notes are not an appropriate
investment for you if you are unsophisticated with respect to the significant
components of the Notes.
STRUCTURE RISKS
General
If you invest in Notes indexed to one or more interest rate, currency or
other index or formula, there will be significant risks not associated with a
conventional fixed rate or floating rate debt security. Such risks include
fluctuation of interest rates, exchange rates, indices or formulas and the
possibility that you will receive a lower (or no) amount of principal, premium
or interest and at different times than you expected. We have no control over a
number of matters, including economic, financial and political events, that are
important in determining the existence, magnitude and longevity of such risks
and their results. In addition, if an index or formula used to determine any
amounts payable in respect of the Notes contains a multiplier or leverage
factor, the effect of any change in such index or formula will be magnified. In
recent years, the values of certain indices and formulas have been volatile,
and volatility in those and other indices and formulas may be expected in the
future. However, past experience is not necessarily indicative of what may
occur in the future.
Redemption
If the Notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may (in the case of optional redemption) or must (in
the case of mandatory redemption) choose to
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redeem the Notes at times when prevailing interest rates may be relatively low.
Accordingly, you generally will not be able to reinvest the redemption proceeds
in a comparable security at an effective interest rate as high as that of the
Notes.
Uncertain Trading Markets
We cannot assure you a trading market for the Notes will ever develop or be
maintained. Many factors independent of our creditworthiness affect the trading
market and value of the Notes. These factors include:
. the complexity and volatility of any index or formula applicable to the
Notes,
. the method of calculating the principal, premium and interest in respect of
the Notes,
. the time remaining to the maturity of the Notes,
. the outstanding amount of the Notes,
. the redemption features of the Notes,
. the amount of other debt securities linked to any index or formula
applicable to the Notes, and
. the level, direction and volatility of market interest rates generally.
In addition, certain Notes have a more limited trading market and experience
more price volatility because they were designed for specific investment
objectives or strategies. There may be a limited number of buyers when you
decide to sell such Notes. This may affect the price you receive for such Notes
or your ability to sell such Notes at all. You should not purchase Notes unless
you understand and know you can bear these investment risks.
EXCHANGE RATES AND EXCHANGE CONTROLS
If you invest in Notes that are denominated or payable in a currency other
than U.S. dollars ("Foreign Currency Notes"), there will be significant risks
not associated with an investment in a debt security denominated and payable in
U.S. dollars, including the possibility of material changes in the exchange
rate between U.S. dollars and your payment currency and the imposition or
modification of exchange controls by the applicable governments. We have no
control over the factors that generally affect these risks, such as economic,
financial and political events and the supply and demand for the applicable
currencies. Moreover, if payments on the Foreign Currency Notes are determined
by reference to a formula containing a multiplier or leverage factor, the
effect of any change in the exchange rates between the applicable currencies
will be magnified. In recent years, the exchange rates between certain
currencies have been highly volatile, and volatility between such currencies or
with other currencies may be expected in the future. Fluctuations between
currencies in the past are not necessarily indicative, however, of fluctuations
that may occur in the future. Depreciation of your payment currency would
result in a decrease in the U.S. dollar equivalent yield of the Foreign
Currency Notes, in the U.S. dollar equivalent value of the principal and any
premium payable at maturity or earlier redemption of the Foreign Currency Notes
and, generally, in the U.S. dollar equivalent market value of the Foreign
Currency Notes.
Governmental exchange controls could affect exchange rates and the
availability of your payment currency on a required payment date. Even if there
are no exchange controls, it is possible that your payment currency will not be
available on a required payment date for circumstances beyond our control. In
such cases, we will be allowed to satisfy our obligations on the Foreign
Currency Notes in U.S. dollars.
CREDIT RATINGS
The credit ratings on the Notes may not reflect the potential impact of all
risks related to structure and other factors on the value of the Notes. In
addition, real or anticipated changes in our credit ratings will generally
affect the market value of the Notes.
S-3
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DESCRIPTION OF NOTES
We will issue the Notes as a series of Debt Securities under an Indenture,
dated as of January 1, 1997, as amended or modified from time to time (the
"Indenture"), between us and Bank of Montreal Trust Company, as trustee (the
"Trustee"). The Indenture is subject to, and governed by, the Trust Indenture
Act of 1939, as amended. The following summary of certain provisions of the
Notes and the Indenture is subject to the actual provisions of the Notes and
the Indenture. Capitalized terms used but not defined herein shall have the
meanings given to them in the accompanying Prospectus, the Notes or the
Indenture, as the case may be. The term "Debt Securities," as used in this
Prospectus Supplement, refers to all debt securities, including the Notes,
issued and issuable from time to time under the Indenture. The following
description of Notes will apply to each Note offered under this Prospectus
Supplement unless otherwise specified in the applicable Pricing Supplement. For
additional terms of the Notes, See "Description of Debt Securities" in the
accompanying Prospectus.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be our unsecured general obligations and will rank equally with
all of our other unsecured and unsubordinated indebtedness from time to time
outstanding. The Indenture does not limit the aggregate initial offering price
of Debt Securities that may be issued under the Indenture, and Debt Securities
may be issued under the Indenture from time to time in one or more series up to
the aggregate initial offering price from time to time authorized for each
series. We may, from time to time, without the consent of the Holders of the
Notes, provide for the issuance of Notes or other Debt Securities under the
Indenture in addition to the $500,000,000 aggregate initial offering price of
Notes offered under this Prospectus Supplement.
The Notes are currently limited to up to $500,000,000 in aggregate initial
offering price, or its equivalent in one or more foreign currencies. Each Note
will mature on any day nine months or more from its date of issue (the "Stated
Maturity Date"), as specified in the applicable Pricing Supplement, unless the
principal (or any installment of principal) becomes due and payable prior to
the Stated Maturity Date, whether by the declaration of acceleration of
maturity, notice of redemption at our option, notice of the Holder's option to
elect repayment or otherwise (the Stated Maturity Date or such prior date, as
the case may be, is referred to in this Prospectus Supplement as the "Maturity
Date" with respect to the principal of such Note repayable on such 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. We may also issue Discount
Notes, Indexed Notes and Amortizing Notes (as such terms are defined in this
Prospectus Supplement).
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest, if any, in respect of the Notes will be made in, United States
dollars. The Notes also may be denominated in, and payments of principal,
premium, if any, and/or interest, if any, may be made in, one or more foreign
currencies. See "Special Provisions Relating to Foreign Currency Notes--Payment
of Principal, Premium, if any, and Interest, if any." The currency in which a
particular Note is denominated (or (i) if such currency (other than Euro) is no
longer legal tender for the payment of public and private debts in the relevant
country, such other currency which is then legal tender in such country for the
payment of such debts or (ii) if such currency is Euro, such other currency
which is then legal tender in the member states of the European Union that have
adopted the single currency in accordance with the Treaty establishing the
European Community, as amended by the Treaty on European Union) is referred to
in this Prospectus Supplement as the "Specified Currency" with respect to such
Note. References in this Prospectus Supplement to "United States dollars,"
"U.S. dollars" or "$" are to the lawful currency of the United States of
America (the "United States").
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for the Notes in the applicable Specified Currencies. At
the present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies and vice versa, and
commercial banks do not
S-4
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generally offer non-United States dollar checking or savings account facilities
in the United States. The Agent from or through which a Foreign Currency Note
is purchased may be prepared to arrange for the conversion of United States
dollars into the Specified Currency in order to enable the purchaser to pay for
such Foreign Currency Note, provided that a request is made to such Agent on or
prior to the fifth Business Day (as defined in this Prospectus Supplement)
preceding the date of delivery of such Foreign Currency Note, or by such other
day as determined by such Agent. Each Agent will make such conversion 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. The purchaser of each such Foreign Currency Note will bear all costs
of exchange. See "Special Provisions Relating to Foreign Currency Notes."
Interest rates offered by us with respect to the Notes may differ depending
upon, among other factors, the aggregate principal amount of Notes purchased in
any single transaction. We may also offer Notes with different variable terms
other than interest rates concurrently to different investors. Interest rates
or formulas and other terms of Notes are subject to change by us from time to
time, but no such change will affect any Note previously issued or as to which
an offer to purchase has been accepted by us.
Each Note will be issued as a fully registered book-entry note (a "Book-Entry
Note") represented by one or more fully registered Global Securities (as
defined in this Prospectus Supplement) or as a fully registered certificated
note (a "Certificated Note"). The minimum denominations of each Note other than
a Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement. The applicable
Pricing Supplement will specify the minimum denominations of each Foreign
Currency Note.
We will make payments of principal of, and premium, if any, and interest, if
any, on, Book-Entry Notes through the Trustee to the Depositary. See "Book-
Entry Notes." In the case of Certificated Notes, we will make payment of
principal and premium, if any, due on the Maturity Date in immediately
available funds upon presentation and surrender of any such Note (and, in the
case of any repayment on an Optional Repayment Date, upon submission of a duly
completed election form in accordance with the provisions described below) at
the office or agency we maintain for such purpose in the Borough of Manhattan,
The City of New York, currently the corporate trust office of the Trustee
located at Wall Street Plaza, 88 Pine Street, New York, New York 10005. Payment
of interest, if any, due on the Maturity Date of a Certificated Note will be
made to the person to whom payment of the principal of such Note and premium,
if any, on such Note shall be made. Payment of interest, if any, due on a
Certificated Note on any Interest Payment Date (as defined in this Prospectus
Supplement) other than the Maturity Date will be made by check mailed to the
address of the Holder entitled to such payment as such address shall appear in
our Security Register. Notwithstanding the foregoing, a Holder of $10,000,000
(or, if the Specified Currency is other than United States dollars, the
equivalent in such Specified Currency) or more in aggregate principal amount of
Certificated Notes will be entitled to receive interest payments, if any, on
any Interest Payment Date other than the Maturity Date by wire transfer of
immediately available funds if the Trustee receives appropriate wire transfer
instructions in writing not less than 15 days prior to such Interest Payment
Date. Any such wire transfer instructions received by the Trustee shall remain
in effect until revoked by such Holder. For special payment terms applicable to
Foreign Currency Notes, see "Special Provisions Relating to Foreign Currency
Notes--Payment of Principal, Premium, if any, and Interest, if any."
As used in this Prospectus Supplement, "Business Day" means any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by law, regulation or executive
order to close in The City of New York; provided, however, that, with respect
to Foreign Currency Notes, such day is also not a day on which commercial banks
are authorized or required by law, regulation or executive order to close in
the Principal Financial Center (as defined in this Prospectus Supplement) of
the country issuing the Specified Currency (or, if the Specified Currency is
Euro, such day is also a day on which the Trans-European Automated Real-Time
Gross Settlement Express Transfer (TARGET) System is open); provided, further,
that, with respect to Notes as to which LIBOR is an applicable Interest Rate
Basis (as defined in this Prospectus Supplement), such day is also a London
Business Day.
S-5
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"London Business Day" means a day on which commercial banks are open for
business (including dealings in the Designated LIBOR Currency (as defined in
this Prospectus Supplement)) in London.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency or (ii) the capital city of the country to which
the Designated LIBOR Currency relates, as applicable, except, in the case of
(i) or (ii) above, that with respect to United States dollars, Australian
dollars, Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos,
South African rand and Swiss francs, the "Principal Financial Center" shall be
The City of New York, Sydney and (solely in the case of the Specified Currency)
Melbourne, Toronto, Frankfurt, Amsterdam, London (solely in the case of the
Designated LIBOR Currency), Johannesburg and Zurich, respectively.
Book-Entry Notes may be transferred or exchanged only through the Depositary.
See "--Book-Entry Notes." Registration of transfer or exchange of Certificated
Notes will be made at the office or agency maintained by us for such purpose in
the Borough of Manhattan, The City of New York, currently the corporate trust
office of the Trustee located at Wall Street Plaza, 88 Pine Street, New York,
New York 10005. No service charge will be made by us or the Trustee for any
such registration of transfer or exchange of Notes, but we may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with such transfer or exchange (other than exchanges
pursuant to the Indenture not involving any transfer).
The defeasance and covenant defeasance provisions contained in the Indenture
shall apply to the Notes unless otherwise specified in the applicable Pricing
Supplement.
REDEMPTION AT OUR OPTION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at our
option prior to the Stated Maturity Date only if an Initial Redemption Date is
specified in the applicable Pricing Supplement. If so specified, the Notes will
be subject to redemption at our option on any date on and after the applicable
Initial Redemption Date in whole or from time to time in part in increments of
$1,000 or any other integral multiple of an authorized denomination specified
in such Pricing Supplement (provided that any remaining principal amount of the
Notes shall be at least $1,000 or such other minimum authorized denomination
applicable to such Note), at the applicable Redemption Price (as defined in
this Prospectus Supplement), together with unpaid interest accrued thereon to
the date of redemption, on written notice given to the Holders of the Notes not
more than 60 nor less than 30 calendar days prior to the date of redemption and
in accordance with the provisions of the Indenture. "Redemption Price", with
respect to a Note, means an amount equal to the Initial Redemption Percentage
specified in the applicable Pricing Supplement (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial
Redemption Date by an amount equal to the applicable Annual Redemption
Percentage Reduction, if any, until the Redemption Price is equal to 100% of
the unpaid principal amount to be redeemed. For a discussion of the redemption
of Discount Notes, see "--Discount Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by us at the option of the Holders of the Notes
prior to the Stated Maturity Date only if one or more Optional Repayment Dates
are specified in the applicable Pricing Supplement. If so specified, the Notes
will be subject to repayment at the option of the Holders of the Notes on any
Optional Repayment Date in whole or from time to time in part in increments of
$1,000 or any other integral multiple of an authorized denomination specified
in the applicable Pricing Supplement (provided that any remaining principal
amount of the Notes shall be at least $1,000 or such other minimum authorized
denomination applicable thereto), at a repayment price equal to 100% of the
unpaid principal amount to be repaid, together with unpaid interest accrued on
such Notes to the date of repayment. For any Note to be repaid, the Trustee
must receive such Note, together with the form thereon entitled "Option to
Elect Repayment" duly completed,
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at its office maintained for such purpose in the Borough of Manhattan, The City
of New York, currently the corporate trust office of the Trustee located at
Wall Street Plaza, 88 Pine Street, New York, New York 10005, not more than 60
nor less than 30 calendar days prior to the date of repayment. Exercise of such
repayment option by the Holder will be irrevocable. For a discussion of the
repayment of Discount Notes, see "--Discount Notes."
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, Beneficial Owners (as
defined in this Prospectus Supplement) of Global Securities that desire to have
all or any portion of the Book-Entry Notes represented by such Global
Securities repaid must instruct the Participant (as defined in this Prospectus
Supplement) through which they own their interest to direct the Depositary to
exercise the repayment option on their behalf by delivering the related Global
Security and duly completed election form to the Trustee as described above. In
order to ensure that such Global Security and election form are received by the
Trustee on a particular day, the applicable Beneficial Owner must so instruct
the Participant through which it owns its interest before such Participant's
deadline for accepting instructions for that day. Different firms may have
different deadlines for accepting instructions from their customers.
Accordingly, Beneficial Owners should consult the Participants through which
they own their interest for the respective deadlines for such Participants. All
instructions given to Participants from Beneficial Owners of Global Securities
relating to the option to elect repayment shall be irrevocable. In addition, at
the time such instructions are given, each such Beneficial Owner shall cause
the Participant through which it owns its interest to transfer such Beneficial
Owner's interest in the Global Security or Securities representing the related
Book-Entry Notes, on the Depositary's records, to the Trustee. See "--Book-
Entry Notes."
If applicable, we will comply with the requirements of Section 14(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
promulgated thereunder, and any other applicable securities laws or regulations
in connection with any such repayment.
We may at any time purchase Notes at any price or prices in the open market
or otherwise. We may, at our discretion, hold, resell or surrender to the
Trustee for cancellation any Notes we purchase.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
Notes will be made in an amount equal to the interest accrued from and
including the immediately preceding Interest Payment Date in respect of which
interest has been paid or duly made available for payment (or from and
including the date of issue, if no interest has been paid or duly made
available for payment) to but excluding the applicable Interest Payment Date or
the Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless
otherwise specified in the applicable Pricing Supplement, the first payment of
interest on any such Note originally issued between a Record Date (as
hereinafter defined) and the related Interest Payment Date will be made on the
Interest Payment Date immediately following the next succeeding Record Date to
the Holder on such next succeeding Record Date. Unless otherwise specified in
the applicable Pricing Supplement, a "Record Date" shall be the fifteenth
calendar day (whether or not a Business Day) immediately preceding the related
Interest Payment Date.
Fixed Rate Notes
Interest on Fixed Rate Notes will be payable on May 15 and November 15 of
each year or on such other date(s) specified in the applicable Pricing
Supplement (each, an "Interest Payment Date" with respect to Fixed
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Rate Notes) and on the Maturity Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after such Interest Payment Date or the
Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
Floating Rate Notes
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include:
. 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;
. the Treasury Rate; or
. such other Interest Rate Basis or interest rate formula as may be
specified in the applicable Pricing Supplement.
The applicable Pricing Supplement will specify certain terms with respect to
which each Floating Rate Note is being delivered, including: whether such
Floating Rate Note is a "Regular Floating Rate Note," a "Floating Rate/Fixed
Rate Note" or an "Inverse Floating Rate Note," the Fixed Rate Commencement
Date, if applicable, Fixed Interest Rate, if applicable, Interest Rate Basis or
Bases, Initial Interest Rate, if any, Initial Interest Reset Date, Interest
Reset Dates, Interest Payment Dates, Index Maturity, Maximum Interest Rate
and/or Minimum Interest Rate, if any, and Spread and/or Spread Multiplier, if
any, as such terms are defined below. If one or more of the applicable Interest
Rate Bases is LIBOR or the CMT Rate, the applicable Pricing Supplement will
also specify the Designated LIBOR Currency and Designated LIBOR Page or the
Designated CMT Maturity Index and Designated CMT Telerate Page, respectively,
as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
. Unless such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note" or an "Inverse Floating Rate Note," or as having an Addendum
attached or having "Other/Additional Provisions" apply, in each case
relating to a different interest rate formula, such Floating Rate Note
will be designated as a "Regular Floating Rate Note" and, except as
described below or in the applicable Pricing Supplement, will bear
interest at the rate determined by reference to the applicable Interest
Rate Basis or Bases (a) plus or minus the applicable Spread, if any,
and/or (b) multiplied by the applicable Spread Multiplier, if any.
Commencing on the Initial Interest Reset Date, the rate at which interest
on such Regular Floating Rate Note shall be payable shall be reset as of
each Interest Reset Date; provided, however, that the interest rate in
effect for the period, if any, from the date of issue to the Initial
Interest Reset Date will be the Initial Interest Rate.
. If such Floating Rate Note is designated as a "Floating Rate/Fixed Rate
Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases
(a) plus or minus the
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applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date, the
rate at which interest on such Floating Rate/Fixed Rate Note shall be
payable shall be reset as of each Interest Reset Date; provided, however,
that (y) the interest rate in effect for the period, if any, from the date
of issue to the Initial Interest Reset Date will be the Initial Interest
Rate and (z) the interest rate in effect (the "Fixed Interest Rate") for
the period commencing on the date specified for such Floating Rate/Fixed
Rate Note in the applicable Pricing Supplement (the "Fixed Rate
Commencement Date") to the Maturity Date shall be the interest rate so
specified in the applicable Pricing Supplement or, if no such rate is
specified, the interest rate in effect for such Floating Rate/Fixed Rate
Note on the day immediately preceding the Fixed Rate Commencement Date.
. If such Floating Rate Note is designated as an "Inverse Floating Rate
Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed
Interest Rate minus the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if
any, and/or (b) multiplied by the applicable Spread Multiplier, if any;
provided, however, that, unless otherwise specified in the applicable
Pricing Supplement, the interest rate thereon will not be less than
zero. Commencing on the Initial Interest Reset Date, the rate at which
interest on such Inverse Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period, if any, from the date of issue
to the Initial Interest Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to
maturity of the instrument or obligation with respect to which the related
Interest Rate Basis or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or
in the applicable Pricing Supplement, the interest rate in effect on each day
shall be:
. if such day is an Interest Reset Date, the interest rate determined as
of the Interest Determination Date (as defined in this Prospectus
Supplement) immediately preceding such Interest Reset Date; or
. if such day is not an Interest Reset Date, the interest rate determined
as of the Interest Determination Date immediately preceding the most
recent Interest Reset Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case
of Floating Rate Notes which reset:
. daily, each Business Day;
. weekly, the Wednesday of each week (with the exception of weekly reset
Floating Rate Notes as to which the Treasury Rate is an applicable
Interest Rate Basis, which will reset the Tuesday of each week, except
as described below);
. monthly, the third Wednesday of each month (with the exception of
monthly reset Floating Rate Notes as to which the Eleventh District Cost
of Funds Rate is an applicable Interest Rate Basis, which will reset on
the first calendar day of the month);
. quarterly, the third Wednesday of March, June, September and December of
each year;
. semiannually, the third Wednesday of the two months specified in the
applicable Pricing Supplement; and
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. annually, the third Wednesday of the month specified in the applicable
Pricing Supplement;
provided however, that, with respect to Floating Rate/Fixed Rate Notes, the
rate of interest thereon will not reset after the applicable Fixed Rate
Commencement Date. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Reset Date will be
postponed to the next succeeding Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis and
such Business Day falls in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined by the Calculation
Agent (as defined in this Prospectus Supplement) as of the applicable Interest
Determination Date and calculated on or prior to the Calculation Date (as
defined in this Prospectus Supplement), except with respect to LIBOR and the
Eleventh District Cost of Funds Rate, which will be calculated on such 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 immediately preceding the applicable
Interest Reset Date.
. The "Interest Determination Date" with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month immediately
preceding the applicable Interest Reset Date on which the Federal Home
Loan Bank of San Francisco (the "FHLB of San Francisco") publishes the
Index (as defined in this Prospectus Supplement).
. The "Interest Determination Date" with respect to LIBOR will be the
second London Business Day immediately preceding the applicable Interest
Reset Date, unless the Designated LIBOR Currency is British pounds
sterling, in which case the "Interest Determination Date" will be the
applicable Interest Reset Date.
. The "Interest Determination Date" with respect to the Treasury Rate will
be the day in the week in which the applicable Interest Reset Date falls
on which day Treasury Bills (as defined in this Prospectus Supplement)
are normally auctioned (Treasury Bills are normally sold at an auction
held on Monday of each week, unless such Monday is a legal holiday, in
which case the auction is normally held on the immediately succeeding
Tuesday although such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the "Interest Determination
Date" will be such preceding Friday; provided, further, that if the
Interest Determination Date would otherwise fall on an Interest Reset
Date, then such Interest Reset Date will be postponed to the next
succeeding Business Day.
. The "Interest Determination Date" pertaining to a Floating Rate Note the
interest rate of which is determined by reference to two or more Interest
Rate Bases will be the most recent Business Day which is at least two
Business Days prior to the applicable Interest Reset Date for such
Floating Rate Note on which each Interest Rate Basis is determinable.
Each Interest Rate Basis will be determined as of such date, and the
applicable interest rate will take effect on the applicable Interest
Reset Date.
Notwithstanding the foregoing, a Floating Rate Note may also have either or
both of the following: (i) a Maximum Interest Rate, or ceiling, that may accrue
during any Interest Period and (ii) a Minimum Interest Rate, or floor, that may
accrue during any Interest Period. In addition to any Maximum Interest Rate
that may apply to any Floating Rate Note, the interest rate on Floating Rate
Notes will in no event be higher than the maximum rate permitted by Illinois
law, as the same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset:
. daily, weekly or monthly, on the third Wednesday of each month or on the
third Wednesday of March, June, September and December of each year, as
specified in the applicable Pricing Supplement;
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. quarterly, on the third Wednesday of March, June, September and December
of each year;
. semiannually, on the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and
. annually, on the third Wednesday of the month of each year specified in
the applicable Pricing Supplement
(each, an "Interest Payment Date" with respect to Floating Rate Notes) and, in
each case, on the Maturity Date. If any Interest Payment Date other than the
Maturity Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Payment Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity Date of a Floating Rate
Note falls on a day that is not a Business Day, the required payment of
principal, premium, if any, and interest will be made on the next succeeding
Business Day as if made on the date such payment was due, and no interest will
accrue on such payment for the period from and after the Maturity Date to the
date of such payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will be
rounded to the nearest one-hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign currency, to the nearest unit (with one-half cent or unit being rounded
upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Floating Rate Notes for which an applicable
Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise
specified in the applicable Pricing Supplement, the interest factor for
Floating Rate Notes for which the interest rate is calculated with reference to
two or more Interest Rate Bases will be calculated in each period in the same
manner as if only the applicable Interest Rate Basis specified in the
applicable Pricing Supplement applied.
Unless otherwise specified 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 disclose the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next succeeding
Interest Reset Date with respect to such Floating Rate Note. Unless otherwise
specified in the applicable Pricing Supplement, the "Calculation Date," if
applicable, pertaining to any Interest Determination Date will be the earlier
of (i) the tenth calendar day after such Interest Determination Date or, if
such day is not a Business Day, the next succeeding Business Day or (ii) the
Business Day immediately preceding the applicable Interest Payment Date or the
Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing Supplement, "CD
Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date
for negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) (as defined in this Prospectus Supplement) under the heading
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"CDs (secondary market)" or, if not so 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 in H.15 Daily Update (as defined in this Prospectus Supplement), or
such other recognized electronic source used for the purpose of displaying such
rate, under the caption "CDs (secondary market)." If such rate is not yet
published in H.15(519), H.15 Daily Update or another recognized electronic
source by 3:00 P.M., New York City time, on the related Calculation Date, then
the CD Rate on such CD Rate Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on such CD Rate Interest
Determination Date, of three leading nonbank dealers in negotiable United
States dollar certificates of deposit in The City of New York (which may
include the Agents or their affiliates) selected by the Calculation Agent for
negotiable United States dollar certificates of deposit of major United States
money center banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity specified in the applicable Pricing
Supplement in an amount that is representative for a single transaction in that
market at that time; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
determined as of such CD Rate Interest Determination Date will be the CD Rate
in effect on such CD Rate Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
CMT RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption "...Treasury Constant
Maturities...Federal Reserve Board Release H.15...Mondays Approximately 3:45
P.M.," under the column for the Designated CMT Maturity Index for (i) if the
Designated CMT Telerate Page is 7051, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or monthly average, as specified in the applicable Pricing Supplement,
for the week or the month, as applicable, ended immediately preceding the week
or the month, as applicable, in which the related CMT Rate Interest
Determination Date falls. If such rate is no longer displayed on the relevant
page or is not so displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index as published in H.15(519). If such rate is no longer published
or is not so 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
H.15(519). If such information is not so 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 offered rates as of approximately 3:30 P.M., New York City time, on such
CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
in The City of New York (which may include the Agents or their affiliates)
(each, a "Reference Dealer") 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
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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 offered rates 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 offered
rates 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 quotations for the Treasury Note with the
shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on Bridge Telerate, Inc. (or
any successor service) on the page specified in the applicable Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519) or,
if no such page is specified in the applicable Pricing Supplement, page 7052.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated or, if no such maturity is specified in the applicable Pricing
Supplement, 2 years.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as defined in this
Prospectus Supplement) 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 caption "Commercial Paper--Nonfinancial" or, if not so
published by 3:00 P.M., New York City time, on the related Calculation Date,
the rate on such Commercial Paper Rate Interest Determination Date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "Commercial Paper--Nonfinancial." If such rate is not yet published in
H.15(519), H.15 Daily Update or another recognized electronic source by 3:00
P.M., New York City time, on the related Calculation Date, then the Commercial
Paper Rate on such Commercial Paper Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the Money Market Yield of the
arithmetic mean of the offered rates at approximately 11:00 A.M., New York City
time, on such Commercial Paper Rate Interest Determination Date of three
leading dealers of United States dollar commercial paper in The City of New
York (which may include the Agents or their affiliates) selected by the
Calculation Agent for commercial paper having the Index Maturity specified in
the applicable Pricing Supplement placed for industrial issuers whose bond
rating is "Aa", or the equivalent, from a nationally recognized statistical
rating organization; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate determined as of such Commercial Paper Rate Interest Determination
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
Money Market Yield = D X 360 X 100
-------------
360 - (D X
M)
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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 applicable Interest Reset Period.
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate
Note for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls as set
forth under the caption "11th District" on the display on Bridge Telerate, Inc.
(or any successor service) on page 7058 (or any other page as may replace such
page on such service) ("Telerate Page 7058") as of 11:00 A.M., San Francisco
time, on such Eleventh District Cost of Funds Rate Interest Determination Date.
If such rate does not appear on Telerate Page 7058 on such Eleventh District
Cost of Funds Rate Interest Determination Date, then the Eleventh District Cost
of Funds Rate on such Eleventh District Cost of Funds Rate Interest
Determination Date shall be the monthly weighted average cost of funds paid by
member institutions of the Eleventh Federal Home Loan Bank District that was
most recently announced (the "Index") by the FHLB of San Francisco as such cost
of funds for the calendar month immediately preceding such Eleventh District
Cost of Funds Rate Interest Determination Date. If the FHLB of San Francisco
fails to announce the Index on or prior to such Eleventh District Cost of Funds
Rate Interest Determination Date for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate determined as of such Eleventh District
Cost of Funds Rate Interest Determination Date will be the Eleventh District
Cost of Funds Rate in effect on such Eleventh District Cost of Funds Rate
Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)", as such rate is displayed on Bridge Telerate, Inc. (or any
successor service) on page 120 (or any other page as may replace such page on
such service) ("Telerate Page 120"), or, if such rate does not appear on
Telerate Page 120 or is not so 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 for United States dollar federal funds as published in H.15
Daily Update, or such other recognized electronic source used for the purpose
of displaying such rate, under the caption "Federal Funds (Effective)." If such
rate does not appear on Telerate Page 120 or is not yet published in H.15(519),
H.15 Daily Update or another recognized electronic source by 3:00 P.M., New
York City time, on the related Calculation Date, then the Federal Funds Rate on
such Federal Funds Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged by three
leading brokers of United States dollar federal funds transactions in The City
of New York (which may include the Agents or their affiliates) selected by the
Calculation Agent prior to 9:00 A.M., New York City time, on such Federal Funds
Rate Interest Determination Date; provided, however, that if the brokers so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Federal Funds Rate determined as of such Federal Funds Rate
Interest Determination Date will be the Federal Funds Rate in effect on such
Federal Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
. With respect to any Interest Determination Date relating to a Floating
Rate Note for which the interest rate is determined with reference to
LIBOR (a "LIBOR Interest Determination Date"), LIBOR will be either: (a)
if "LIBOR Telerate" is specified in the applicable Pricing Supplement or
if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable Pricing Supplement as the method for calculating LIBOR, the
rate for deposits in the Designated LIBOR Currency having the Index
Maturity specified in such Pricing Supplement, commencing on such
Interest Reset Date, that appears on the Designated LIBOR Page as of
11:00 A.M., London time, on such LIBOR Interest Determination Date; or
(b) if "LIBOR Reuters" is specified in the applicable Pricing Supplement,
the arithmetic mean of the
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offered rates (unless the Designated LIBOR Page by its terms provides only
for a single rate, in which case such single rate shall be used) for
deposits in the Designated LIBOR Currency having the Index Maturity
specified in such Pricing Supplement, commencing on the applicable
Interest Reset Date, that appear (or, if only a single rate is required as
aforesaid, appears) on the Designated LIBOR Page as of 11:00 A.M., London
time, on such LIBOR Interest Determination Date. If fewer than two such
offered rates so appear, or if no such rate so appears, as applicable,
LIBOR on such LIBOR Interest Determination Date will be determined in
accordance with the provisions described in the following bullet point
paragraph.
. With respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
Designated LIBOR Page as specified in the preceding bullet point
paragraph, the Calculation Agent will request the principal London
offices of each of four major reference banks (which may include
affiliates of the Agents) in the London interbank market, as selected by
the Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Designated LIBOR Currency for the period of
the Index Maturity specified in the applicable Pricing Supplement,
commencing on the applicable Interest Reset Date, to prime banks in the
London interbank market at approximately 11:00 A.M., London time, on such
LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in the Designated LIBOR Currency
in such market at such time. If at least two such quotations are so
provided, then LIBOR on such LIBOR Interest Determination Date will be
the arithmetic mean of such quotations. If fewer than two such quotations
are so provided, then LIBOR on such LIBOR Interest Determination Date
will be the arithmetic mean of the rates quoted at approximately 11:00
A.M., in the applicable Principal Financial Center, on such LIBOR
Interest Determination Date by three major banks (which may include
affiliates of the Agents) in such Principal Financial Center selected by
the Calculation Agent for loans in the Designated LIBOR Currency to
leading European banks, having the Index Maturity specified in the
applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in the Designated LIBOR Currency
in such market at such time; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
"Designated LIBOR Currency" means the currency specified in the applicable
Pricing Supplement as to which LIBOR shall be calculated or, if no such
currency is specified in the applicable Pricing Supplement, United States
dollars.
"Designated LIBOR Page" means:
. if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
display on the Reuters Monitor Money Rates Service (or any successor
service) on the page specified in such Pricing Supplement (or any other
page as may replace such page on such service) for the purpose of
displaying the London interbank rates of major banks for the Designated
LIBOR Currency; or
. if "LIBOR Telerate" is specified in the applicable Pricing Supplement or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable Pricing Supplement as the method for calculating LIBOR, the
display on Bridge Telerate, Inc. (or any successor service) on the page
specified in such Pricing Supplement (or any other page as may replace
such page on such service) for the purpose of displaying the London
interbank rates of major banks for the Designated LIBOR Currency.
PRIME RATE. Unless otherwise specified in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating
to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate is published in H.15(519) under the caption
"Bank Prime Loan" or, if not published by 3:00 P.M., New York City time, on
the related Calculation Date, the rate on such Prime Rate Interest
Determination
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Date as published in H.15 Daily Update, or such other recognized electronic
source used for the purpose of displaying such rate, under the caption "Bank
Prime Loan." If such rate is not yet published in H.15(519), H.15 Daily Update
or another recognized electronic source by 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 US PRIME 1 Page (as defined in this Prospectus Supplement) as
such bank's prime rate or base lending rate as of 11:00 A.M., New York City
time, on such Prime Rate Interest Determination Date. If fewer than four such
rates so appear on the Reuters Screen US PRIME 1 Page for such Prime Rate
Interest Determination Date, then the Prime Rate shall be the arithmetic mean
of the prime rates or base lending rates quoted on the basis of the actual
number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Interest Determination Date by three major banks
(which may include affiliates of the Agents) in The City of New York selected
by the Calculation Agent; provided, however, that if the banks or trust
companies so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate Interest
Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuters Monitor
Money Rates Service (or any successor service) on the "US PRIME 1" page (or
such other page as may replace the US PRIME 1 page on such service) for the
purpose of displaying prime rates or base lending rates of major United States
banks.
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable
Pricing Supplement under the caption "AVGE INVEST YIELD" on the display on
Bridge Telerate, Inc. (or any successor service) on page 56 (or any other page
as may replace such page on such service) ("Telerate Page 56") or page 57 (or
any other page as may replace such page on such service) ("Telerate Page 57")
or, if not so published by 3:00 P.M., New York City time, on the related
Calculation Date, the auction average rate of such Treasury Bills (expressed as
a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States
Department of the Treasury. In the event that the results of the Auction of
Treasury Bills having the Index Maturity specified in the applicable Pricing
Supplement are not so published by 3:00 P.M., New York City time, on the
related Calculation Date, or if no such Auction is held, then the Treasury Rate
will be the 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) on such Treasury Rate
Interest Determination Date of Treasury Bills having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the caption "U.S. Government Securities/Treasury Bills/Secondary Market" or, if
not yet published by 3:00 P.M., New York City time, on the related Calculation
Date, the rate on such Treasury Rate Interest Determination Date of such
Treasury Bills as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "U.S. Government Securities/Treasury Bills/Secondary Market." If such
rate is not yet published in H.15(519), H.15 Daily Update or another recognized
electronic source, 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 primary United States government securities
dealers (which may include the Agents or their affiliates) selected by the
Calculation Agent, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable Pricing Supplement;
provided, however, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Treasury Rate determined as of
such Treasury Rate Interest Determination Date will be the Treasury Rate in
effect on such Treasury Rate Interest Determination Date.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment
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Dates, the Stated Maturity Date, any redemption or repayment provisions or any
other term relating to the Notes, may be modified and/or supplemented as
specified under "Other/Additional Provisions" on the face of such Notes or in
an Addendum relating thereto, if so specified on the face of such Notes and
described in the applicable Pricing Supplement.
DISCOUNT NOTES
We may offer Notes ("Discount Notes") that have an Issue Price (as specified
in the applicable Pricing Supplement) that is less than 100% of the principal
amount of the Notes (i.e. par) by more than a percentage equal to the product
of 0.25% and the number of full years to the Stated Maturity Date. Discount
Notes may not bear any interest currently or may bear interest at a rate that
is below market rates at the time of issuance. The difference between the Issue
Price of a Discount Note and par is referred to herein as the "Discount." In
the event of redemption, repayment or acceleration of maturity of a Discount
Note, the amount payable to the Holder of such Discount Note will be equal to
the sum of (i) the Issue Price (increased by any accruals of Discount) and, in
the event of any redemption of such Discount Note (if applicable), multiplied
by the Initial Redemption Percentage (as adjusted by the Annual Redemption
Percentage Reduction, if applicable) and (ii) any unpaid interest accrued
thereon to the date of such redemption, repayment or acceleration of maturity,
as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, for purposes
of determining the amount of Discount that has accrued as of any date on which
a redemption, repayment or acceleration of maturity occurs for a Discount Note,
such Discount will be accrued using a constant yield method. The constant yield
will be calculated using a 30-day month, 360-day year convention, a compounding
period that, except for the Initial Period (as defined in this Prospectus
Supplement), corresponds to the shortest period between Interest Payment Dates
for the applicable Discount Note (with ratable accruals within a compounding
period), a coupon rate equal to the initial coupon rate applicable to such
Discount Note and an assumption that the maturity of such Discount Note will
not be accelerated. If the period from the date of issue to the initial
Interest Payment Date for a Discount Note (the "Initial Period") is shorter
than the compounding period for such Discount Note, a proportionate amount of
the yield for an entire compounding period will be accrued. If the Initial
Period is longer than the compounding period, then such period will be divided
into a regular compounding period and a short period with the short period
being treated as provided in the preceding sentence. The accrual of the
applicable Discount may differ from the accrual of original issue discount for
purposes of the Code (as defined in this Prospectus Supplement) certain
Discount Notes may not be treated as having original issue discount within the
meaning of the Code, and Notes other than Discount Notes may be treated as
issued with original issue discount for federal income tax purposes. See
"United States Federal Income Tax Considerations."
INDEXED NOTES
We may offer Notes ("Indexed Notes") with the amount of principal, premium
and/or interest payable in respect thereof to be determined with reference to
the price or prices of specified commodities or stocks, to the exchange rate of
one or more designated currencies relative to an indexed currency or to other
items, in each case as specified in the applicable Pricing Supplement. In
certain cases, Holders of Indexed Notes may receive a principal payment on the
Maturity Date that is greater than or less than the principal amount of such
Indexed Notes depending upon the relative value on the Maturity Date of the
specified indexed item. Information as to the method for determining the amount
of principal, premium, if any, and/or interest, if any, payable in respect of
Indexed Notes, certain historical information with respect to the specified
indexed item and any material tax considerations associated with an investment
in Indexed Notes will be specified in the applicable Pricing Supplement. See
also "Risk Factors."
AMORTIZING NOTES
We may offer Notes ("Amortizing Notes") with the amount of principal thereof
and interest thereon payable in installments over the term of such Notes.
Unless otherwise specified in the applicable Pricing
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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 on such Amortizing Notes and
then to the reduction of the unpaid principal amount of such Amortizing Notes.
Further information concerning additional terms and provisions of Amortizing
Notes will be specified in the applicable Pricing Supplement, including a table
setting forth repayment information for such Amortizing Notes.
BOOK-ENTRY NOTES
We have 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. If there are any additional or differing terms of
the depositary arrangement with respect to the Book-Entry Notes, we will
describe them in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes of like tenor and terms up to
$200,000,000 aggregate principal amount 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 by such Global Security for all
purposes under the Indenture. Except as otherwise provided below, 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 of the Book-Entry Notes 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 limits and 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 in a
like aggregate principal amount, only if:
. the Depositary notifies us that it is unwilling or unable to continue as
Depositary for the Global Securities or we become aware that the
Depositary has ceased to be a clearing agency registered under the
Exchange Act and, in any such case, we shall not have appointed a
successor to the Depositary within 60 calendar days thereafter;
. we, in our sole discretion, determine that the Global Securities shall be
exchangeable for Certificated Notes; or
. an Event of Default shall have occurred and be continuing with respect to
the Notes under the Indenture.
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
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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 records of
Direct Participants and Indirect Participants. Beneficial Owners will not
receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Direct Participants or Indirect Participants through
which such Beneficial Owner entered into the transaction. Transfers of
ownership interests in a Global Security representing Book-Entry Notes are
to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated Notes
representing their ownership interests therein, except in the event that
use of the book-entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary
are registered in the name of the Depositary's nominee, Cede & Co. The
deposit of Global Securities with, or on behalf of, the Depositary and
their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners
of the Global Securities representing the Book-Entry Notes; the
Depositary's records reflect only the identity of the Direct Participants
to whose accounts such Book-Entry Notes are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to us 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).
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Principal, premium, if any, and/or interest, if any, payments on the
Global Securities representing the Book-Entry Notes will be made in
immediately available funds to the Depositary. The Depositary's practice is
to credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the Depositary's records
unless the Depositary has reason to believe that it will not receive
payment on such date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of the Depositary, the Trustee or us, 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 us and the Trustee, disbursement of
such payments to Direct Participants shall be the responsibility of the
Depositary, and disbursement of such payments to the Beneficial Owners
shall be the responsibility of Direct Participants and Indirect
Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes of like tenor and terms are being
redeemed, the Depositary's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by us, 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 us or to 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.
We 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 we believe to be
reliable, but neither we nor any Agent takes any responsibility for its
accuracy.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
Specified Currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. We and the
Agents disclaim any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any matters
that may affect the purchase, holding or receipt of payments of principal of,
and premium, if any, and interest, if any, on, Foreign Currency Notes. Such
persons should consult their own financial and legal advisors with regard to
such matters. See "Risk Factors--Exchange Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, IF ANY
Unless otherwise specified in the applicable Pricing Supplement, we are
obligated to make payments of principal of, and premium, if any, and interest,
if any, on, a Foreign Currency Note in the Specified Currency. Any such amounts
payable by us in the Specified Currency will be converted by the exchange rate
agent named
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in the applicable Pricing Supplement (the "Exchange Rate Agent") into United
States dollars for payment to Holders unless otherwise specified in the
applicable Pricing Supplement or the Holder of such Foreign Currency Note
elects, in the manner described in this Prospectus Supplement, to receive such
amounts in the Specified Currency.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New
York received by the Exchange Rate Agent at approximately 11:00 A.M., New York
City time, on the second Business Day preceding the applicable payment date
from three recognized foreign exchange dealers (one of whom may be the Exchange
Rate Agent) selected by the Exchange Rate Agent and approved by us 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 such
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. All currency exchange costs will be borne by the
Holders of such Foreign Currency Notes by deductions from such payments. If
three such bid quotations are not available, payments will be made in the
Specified Currency.
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of any payment of principal, premium, if any, and/or interest, if any,
in the Specified Currency by submitting a written request for such payment to
the Trustee at its corporate trust office in The City of New York on or prior
to the applicable Record Date or at least fifteen calendar days prior to the
Maturity Date, as the case may be. Such written request may be mailed or hand
delivered or sent by cable, telex or other form of facsimile transmission.
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of all future payments in the Specified Currency and need not file a
separate election for each payment. Such election will remain in effect until
revoked by written notice to the Trustee, but written notice of any such
revocation must be received by the Trustee on or prior to the applicable Record
Date or at least fifteen calendar days prior to the Maturity Date, as the case
may be. Holders of Foreign Currency Notes 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.
Unless otherwise specified in the applicable Pricing Supplement, if the
Specified Currency is other than United States dollars, a Beneficial Owner of
the related Global Security or Securities which elects to receive payments of
principal, premium, if any, and/or interest, if any, in the Specified Currency
must notify the Participant through which it owns its interest on or prior to
the applicable Record Date or at least fifteen calendar days prior to the
Maturity Date, as the case may be, of such Beneficial Owner's election. Such
Participant must notify the Depositary of such election on or prior to the
third Business Day after such Record Date or at least twelve calendar days
prior to the Maturity Date, as the case may be, and the Depositary will notify
the Trustee of such election on or prior to the fifth Business Day after such
Record Date or at least ten calendar days prior to the Maturity Date, as the
case may be. If complete instructions are received by the Participant from the
Beneficial Owner and forwarded by the Participant to the Depositary, and by the
Depositary to the Trustee, on or prior to such dates, then such Beneficial
Owner will receive payments in the Specified Currency.
Payments of the principal of, and premium, if any, and/or interest, if any,
on, Foreign Currency Notes which are to be made in United States dollars will
be made in the manner specified in this Prospectus Supplement with respect to
Notes denominated in United States dollars. See "Description of Notes--
General." Payments of interest, if any, on Foreign Currency Notes which are to
be made in the Specified Currency on an Interest Payment Date other than the
Maturity Date will be made by check mailed to the address of the Holders of
such Foreign Currency Notes as they appear in the Security Register, subject to
the right to receive such interest payments by wire transfer of immediately
available funds under the circumstances described under "Description of Notes--
General." Payments of principal of, and premium, if any, and/or interest, if
any, on, Foreign Currency Notes which are to be made in the Specified Currency
on the Maturity Date will be made by wire transfer of immediately available
funds to an account with a bank designated at least fifteen calendar days
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prior to the Maturity Date by each Holder, provided that such bank has
appropriate facilities and that the applicable Foreign Currency Note is
presented and surrendered at the office or agency maintained by the Company for
such purpose in the Borough of Manhattan, The City of New York (currently the
corporate trust office of the Trustee located at Wall Street Plaza, 88 Pine
Street, New York, New York 10005) in time for the Trustee to make such payments
in such funds in accordance with its normal procedures.
AVAILABILITY OF SPECIFIED CURRENCY
If the Specified Currency for a Foreign Currency Note is not available for
the required payment of principal, premium, if any, and/or interest, if any, in
respect of such Foreign Currency Note due to the imposition of exchange
controls or other circumstances beyond our control, we will be entitled to
satisfy our obligations to the Holder of such Foreign Currency Note by making
such payment in United States dollars on the basis of the Market Exchange Rate
(as defined in this Prospectus Supplement) computed by the Exchange Rate Agent,
on the second Business Day prior to such payment or, if such Market Exchange
Rate is not then available, on the basis of the most recently available Market
Exchange Rate, or as otherwise specified in the applicable Pricing Supplement.
The "Market Exchange Rate" for a Specified Currency other than United States
dollars means the noon dollar buying rate in The City of New York for cable
transfers 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 in United States dollars under such circumstances where
the required payment is in a Specified Currency other than United States
dollars will not constitute an Event of Default under the Indenture with
respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall be
at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
JUDGMENTS
If an action based on Foreign Currency Notes were commenced in a federal
court of the United States, it is not clear whether such court would grant
judgment relating to such Notes in United States dollars or in the Specified
Currency. Furthermore, if the judgment were rendered in United States dollars,
it is not clear whether 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 our option, 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 bear the risk of
exchange rate fluctuations between the time the amount of the judgment is
calculated and the time the paying agent converts the Specified Currency to
United States dollars for payment of the judgment. Although the Notes will be
governed by and construed in accordance with the laws of the State of Illinois,
it is not certain whether the court of any other jurisdiction would determine
the judgment currency on the basis of Illinois law.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal United States federal income
tax considerations relating to the purchase, ownership and disposition of Notes
to beneficial owners ("holders") purchasing Notes at their original issuance.
This summary is based on the Internal Revenue Code of 1986, as amended (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.
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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 does not
discuss the taxation of notes which qualify as "applicable high yield discount
obligations" under Section 163(i) of the Code. Holders of such obligations may
be subject to special rules which will be set forth in the applicable pricing
supplement, if appropriate. This summary also assumes that a taxpayer obtains
any necessary consent of the Internal Revenue Service (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.
As used herein, the term "United States Holder" means a holder of a Note who
or which is, for United States federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust described in Section
7701(a)(30) of the Code. 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 constitutes
"qualified stated interest" (as defined below). Interest on a Note that
constitutes 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 is
includible in a United States Holder's income under the rules governing
"original issue discount," described below, regardless of such holder's method
of accounting. Notwithstanding the foregoing, 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."
Fixed Rate Notes
Interest on a Fixed Rate Note will constitute "qualified stated interest" if
the interest is unconditionally payable, or will be constructively received
under Section 451 of the Code, in cash or in property (other than our debt
instruments) at least annually at a single fixed rate.
Floating Rate Notes
Interest on a Floating Rate Note that is unconditionally payable, or will be
constructively received under Section 451 of the Code, in cash or in property
(other than our debt instruments) at least annually will constitute "qualified
stated interest" if the Note is a variable rate debt instrument ("VRDI") under
the rules described below and the interest is payable at a single "qualified
floating rate" or single "objective rate"
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(each as defined below). If the Note is a VRDI but the interest is payable
other than at a single qualified floating rate or at a single objective rate,
special rules apply to determine the portion of such interest that constitutes
"qualified stated interest." See "--Taxation of Original Issue Discount--
General Rules for Fixed Rate Notes--Taxation of OID on Floating Rate Notes and
Indexed Notes--Notes that are VRDIs" below.
Definition of a Variable Rate Debt Instrument. A Floating Rate 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 (or, in the case of a Note that provides for payment of any amount other
than qualified stated interest before maturity, its weighted average maturity)
and (ii) 15% of the total noncontingent principal payments.
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.
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 on a Note 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 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 Note's term. The IRS may designate rates other than those specified
above that will be treated as objective rates. As of the date of this
Prospectus Supplement, no such other rates have been designated. 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).
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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 (whether designated as interest or principal)
other than payments of qualified stated interest. The "issue price" and "issue
date" of a Note will be the first price and the first settlement or closing
date (whichever is applicable), 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).
As described more fully below, 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, irrespective of 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.
The amount of OID with respect to a Note will be treated as zero if the OID
is less than an amount equal to .0025 multiplied by the product of the stated
redemption price at maturity and the number of complete years to maturity (or
in the case of a Note that provides for payment of any amount other than
qualified stated interest prior to maturity, the weighted average maturity of
the Note). If the amount of OID with respect to a Note is less than that
amount, the OID that is not included in payments of stated interest is
generally included in income as capital gain as principal payments are made.
The amount includible with respect to a principal payment equals the product of
the total amount of OID and a fraction, the numerator of which is the amount of
such principal payment and the denominator of which is the stated principal
amount of the Note.
Inclusion of OID in Income
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
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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 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
States Holders 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 our option or repayable by us at
the option of the holder, the maturity and the yield to maturity of the Note
are determined by assuming that we 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 us, 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 us 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 us 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 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
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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.
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. Floating Rate Notes or Indexed Notes that are not
VRDIs ("Contingent Notes") are taxable under the rules applicable to contingent
payment debt instruments (the "Contingent Debt Regulations") as follows. First,
we are required to determine, as of the issue date, the comparable yield for
the Contingent Note. The comparable yield is generally the yield at which we
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, we construct a projected schedule of
payments determined under the Contingent Debt 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 Contingent Debt 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
Contingent Debt 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 Contingent
Debt 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.
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We are required to provide each holder of a Contingent Note with the Schedule
described above. If we do 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.
Other Rules
Certain Notes having OID may be redeemed prior to maturity or may be
repayable at the option of the holder. Such Notes may be subject to rules that
differ from the general rules discussed above relating to the tax treatment of
OID. Purchasers of such Notes with a redemption feature should carefully
examine the applicable Pricing Supplement and should consult their tax advisors
with respect to such features since the tax consequences with respect to
interest and OID will depend, in part, on the particular terms and the
particular features of the Note.
The Treasury Regulations relating to the tax treatment of OID contain certain
language ("aggregation rules") stating in general that, with some exceptions,
if more than one type of Note is issued in connection with the same transaction
or related transactions, such Notes may be treated as a single debt instrument
with a single issue price, maturity date, yield to maturity and stated
redemption price at maturity for purposes of calculating and accruing any OID.
Unless otherwise provided in the applicable Pricing Supplement, we do not
expect to treat different types of Notes as being subject to the aggregation
rules for purposes of computing OID.
MARKET DISCOUNT
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 its
adjusted issue price (as defined above), such difference is treated as "market
discount" for federal income tax purposes, unless such difference is less than
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 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. Thus, partial principal payments are treated as
ordinary income to the extent of accrued market discount that has not
previously been included in income. 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 Note-by-Note 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
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which case the interest deferral rule set forth in the preceding sentence does
not apply. Such an election applies to all debt instruments 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 Contingent Debt Regulations). Accordingly, prospective purchasers of
Contingent Notes should consult with their tax advisors with respect to the
application of the market discount 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), using a constant yield method similar to that described above.
In the case of Notes that may be redeemed prior to maturity, the premium is
calculated assuming that we or the United States Holder will exercise or not
exercise redemption rights in a manner that maximizes the United States
Holder's yield. A United States Holder who elects to amortize bond premium must
reduce such holder's tax basis in the Note by the amount of the premium used to
offset qualified stated interest income as set forth above. 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 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.
If a United States Holder purchases a Note with OID 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 (as described above).
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 Contingent Debt Regulations). Accordingly, prospective
purchasers of Contingent Notes should consult with their tax advisors with
respect to the application of the acquisition premium and amortizable bond
premium rules to such Notes.
SHORT-TERM NOTES
In the case of a Note with a maturity of one year or less from its issue date
(a "Short-Term Note"), no interest is treated as qualified stated interest and
therefore all interest is included in OID. United States Holders
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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 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 and
later acquired 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 debt instruments
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.
The application of the foregoing rules may be different in the case of
Contingent Notes. Accordingly, prospective purchasers should consult with their
tax advisors with respect to the application of the market discount,
acquisition premium and amortizable bond premium rules to such Notes.
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 permit the
calculation of a single yield to maturity or could generally constitute a 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, under the Contingent Debt Regulations, 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 such possible integration.
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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 qualified
stated 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, 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. For non-corporate taxpayers, the maximum
tax rate on adjusted net capital gain is 20%. Adjusted net capital gain is
generally the excess of net long-term capital gain (the net gain on capital
assets held for more than 12 months) over net short-term capital loss (the net
loss on capital assets held for 12 months or less). Net short-term capital gain
(net gain on assets held for 12 months or less) is subject to tax at the same
rates as ordinary income. 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.
The application of the foregoing rules may be different in the case of
Contingent Notes. Accordingly, prospective purchasers of Contingent Notes
should consult with their tax advisors with respect to rules governing the
sale, exchange, redemption or retirement of such Notes.
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) 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. Unless the United
States Holder makes the election discussed
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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 day of the
taxable year. Additionally, 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 generally 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. 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).
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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. Treasury 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.
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. Exchange gain or loss with
respect to amortizable bond premium is determined by treating the portion of
premium amortized with respect to any period as a return of principal. With
respect to a United States Holder of a Foreign Currency Note that does not
elect to amortize premium, the amount of premium, if any, is treated as a
capital loss when such Note matures.
The Section 988 Regulations do not discuss the tax consequences of the
acquisition of a Foreign Currency Note that is denominated either in a so-
called hyperinflationary currency or in more than one currency, or that does
not qualify as a VRDI and thus is treated as a Contingent Note. Foreign
Currency Notes containing such features may be subject to rules that differ
from the general rules described above. United States Holders intending to
purchase Foreign Currency Notes with such a feature should examine the
applicable Pricing Supplement and should consult their own tax advisors with
respect to the purchase, ownership and disposition of such a Foreign Currency
Note.
NON-UNITED STATES HOLDERS
As used herein, the term "non-United States Holder" means a holder of a Note
that is, for United States federal income tax purposes, (i) a nonresident alien
individual, (ii) a foreign corporation, (iii) a nonresident alien fiduciary of
a foreign estate or trust or (iv) a foreign partnership one or more of the
members of which is, for United States federal income tax purposes, a
nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.
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 us 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 our stock entitled to vote, (ii)
such holder is not for federal income tax purposes a controlled foreign
corporation related, directly or indirectly, to us 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 us or the paying agent, as the case
may be, that such owner is a non-United States Holder and
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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 us
or the 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.
On October 14, 1997, the IRS published in the Federal Register final
regulations (the "1997 Final Regulations") which affect the United States
taxation of non-United States Holders. The 1997 Final Regulations are currently
expected to become effective for payments after December 31, 1999, regardless
of the issue date of the instrument with respect to which such payments are
made, subject to certain transition rules (see below). 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 1997 Final
Regulations, and prospective purchasers of the Notes are urged to consult their
tax advisors concerning the tax consequences of their acquiring, holding and
disposing of the Notes in light of the 1997 Final Regulations.
The 1997 Final Regulations provide documentation procedures designed to
simplify compliance by withholding agents. The 1997 Final Regulations generally
do not affect the documentation rules described above, but add other
certification options. Under one such option, a withholding agent will be
allowed to rely on an intermediary withholding certificate furnished by a
"qualified intermediary" (as defined below) on behalf of one or more beneficial
owners (or other intermediaries) without having to obtain the beneficial owner
certificate described above. "Qualified intermediaries" include (i) foreign
financial institutions or foreign clearing organizations (other than a United
States branch or United States office of such institution or organization) or
(ii) foreign branches or offices of United States financial institutions or
foreign branches or offices of United States clearing organizations, which, as
to both (i) and (ii), have entered into withholding agreements with the IRS. In
addition to certain other requirements, qualified intermediaries must obtain
withholding certificates, such as revised IRS Form W-8 (see below), from each
beneficial owner. Under another option, an authorized foreign agent of a United
States withholding agent will be permitted to act on behalf of the United
States withholding agent, provided certain conditions are met.
For purposes of the certification requirements, the 1997 Final Regulations
generally 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, rather than persons such as nominees or agents legally entitled
to such payments. In the case of payment to an entity classified as a foreign
partnership under United States tax principles, the partners, rather than the
partnership, generally will be required to provide the required certifications
to qualify for the withholding exemption described above. A payment to a United
States partnership, however, is treated for these purposes as payment to a
United States payee, even if the partnership has one or more foreign partners.
The 1997 Final Regulations provide certain presumptions with respect to
withholding for holders not furnishing the required certifications to qualify
for the withholding exemption described above. In addition, the 1997 Final
Regulations will replace a number of current tax certification forms (including
IRS Form W-8 and IRS Form 4224, discussed below) with a single, revised IRS
Form W-8 (which, in certain circumstances, requires information in addition to
that previously required). Under the 1997 Final Regulations, this Form W-8 will
remain valid until the last day of the third calendar year following the year
in which the certificate is signed.
The 1997 Final Regulations provide transition rules concerning existing
certificates, such as IRS Form W-8 and IRS Form 4224. Valid withholding
certificates that are held on December 31, 1998 will generally remain valid
until the earlier of December 31, 1999 or the date of expiration of the
certificate under the law in effect prior to January 1, 1999. Further,
certificates dated prior to January 1, 1998 will generally remain valid until
the end of 1998, irrespective of the date that their validity expires during
1998. The IRS has announced
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that the 1997 Final Regulations will be amended to provide that valid
withholding certificates that are held on December 31, 1999 will generally
remain valid until the earlier of December 31, 2000 or the expiration of the
certificate under the law in effect prior to January 1, 2000.
Under the 1997 Final Regulations, withholding of United States federal income
tax with respect to accrued OID may apply to payments on a taxable sale or
other disposition of a Note by a non-United States Holder who does not provide
appropriate certification to the withholding agent with respect to such
transaction.
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 a nonresident alien 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.
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 Holders of Notes. In
the case of a non-corporate United States Holder, a 31% backup withholding tax
applies if (i) such holder fails to furnish his or her Taxpayer Identification
Number ("TIN") (which, for an individual, would be his or her Social Security
Number) to the payor in the manner required, (ii) such holder furnishes an
incorrect TIN and the payor is so notified by the IRS, (iii) the payor is
notified by the IRS that such holder has failed properly to report payments of
interest and dividends or (iv) in certain circumstances, such holder 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 a corporation (within
the meaning of Section 7701(a) of the Code and tax-exempt organizations.
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The amount of any backup withholding from a payment to a United States Holder
will be allowed as a credit against such holder's United States federal income
tax liability and may entitle such holder to a refund, provided that the
required information is furnished to the IRS.
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 us or any of our paying agents 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.
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 percent 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.
In general, the 1997 Final Regulations do not significantly alter the
substantive backup withholding and information reporting requirements described
above. As under current law, backup withholding and information reporting will
not apply to (i) payments to a non-United States Holder of principal, premium
and interest (including OID, if any) and (ii) payments to a non-United States
Holder on the sale, exchange or other disposition of a Note, in each case if
such non-United States Holder provides the required certification to establish
an exemption from the withholding of the United States federal income tax or
otherwise establishes an exemption. Similarly, unless the payor has actual
knowledge that the payee is a United States Holder, backup withholding will not
apply to (i) payments of principal, premium and interest (including OID, if
any) made outside the United States to certain offshore accounts and (ii)
payments on the sale, exchange, redemption, retirement or other disposition of
a Note effected outside the United States. However, information reporting may
apply with respect to such payments by a payor that is, for United States
federal income tax purposes, (i) a United States person, (ii) a controlled
foreign corporation, (iii) a United States branch of a foreign bank or foreign
insurance company, (iv) a foreign partnership controlled by United States
persons or engaged in a United States trade or business or (v) a foreign person
50 percent 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,
unless such payor has in its records documentary evidence that the Beneficial
owner is not a United States Holder and certain other conditions are met or the
Beneficial owner otherwise establishes an exemption.
Non-United States Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any amounts
withheld from payment to a non-United States Holder under the backup
withholding rules will be allowed as a credit against such non-United States
Holder's United States federal income tax liability and may entitle such holder
to a refund, provided that the required information is furnished to the
information reporting.
SUPPLEMENTAL PLAN OF DISTRIBUTION
We are offering the Notes on a continuing basis for sale to or through
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P.
Morgan Securities Inc., Salomon Smith Barney Inc. and such other agent or
agents as we may appoint and identify in the applicable Pricing Supplement (the
"Agents"). The Agents, individually or in a syndicate, may purchase Notes, as
principal, from us from time to time for resale to investors and other
purchasers at varying prices relating to prevailing market prices at the time
of resale as determined by the applicable Agent or, if so specified in the
applicable Pricing Supplement, for resale at a fixed offering price. If agreed
to by us and an Agent, such Agent may also utilize its reasonable best efforts
on an agency basis to solicit offers to purchase the Notes at 100% of the
principal amount thereof, unless
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otherwise specified in the applicable Pricing Supplement. We will pay a
commission to an Agent, ranging from .125% to .750% of the principal amount of
each Note, depending upon its stated maturity, sold through such Agent as our
agent. Commissions with respect to Notes with stated maturities in excess of 30
years that are sold through an Agent as our agent will be negotiated at the
time of such sale. We estimate the expenses payable by us of offering and
selling the Notes are approximately $450,000, including reimbursements of
certain of the Agents' expenses.
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 of a Note of
identical maturity. An Agent may sell Notes it has purchased from us as
principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with such purchase. Such Agent may allow,
and such dealers may reallow, a discount to certain other dealers. After the
initial offering of Notes, the offering price (in the case of Notes to be
resold on a fixed offering price basis), the concession and the reallowance may
be changed.
We reserve the right to withdraw, cancel or modify the offer made hereby
without notice and may reject offers in whole or in part (whether placed
directly with us or through an Agent). Each Agent will have the right, in its
discretion reasonably exercised, to reject in whole or in part any offer to
purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date
of settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange, unless otherwise specified
in the applicable Pricing Supplement. The Agents may from time to time purchase
and sell Notes in the secondary market, but the Agents are not obligated to do
so, and there can be no assurance that there will be a secondary market for the
Notes or that there will be liquidity in the secondary market if one develops.
From time to time, the Agents may make a market in the Notes, but the Agents
are not obligated to do so and may discontinue any market-making activity at
any time.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If the Agent creates or the Agents
create, as the case may be, a short position in Notes, i.e., if it sells or
they sell Notes in an aggregate principal amount exceeding that set forth in
the applicable Pricing Supplement, such Agent(s) may reduce that short position
by purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
Notes to be higher than it might be in the absence of such purchases.
Neither we nor any of the Agents makes any representation or prediction as to
the direction or magnitude of any effect that the transactions described in the
immediately preceding paragraph may have on the price of Notes. In addition,
neither we nor any of the Agents makes any representation that the Agents will
engage in any such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). We have 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. We have agreed to reimburse the Agents for certain
other expenses.
In the ordinary course of its business, the Agents and their affiliates have
engaged and may in the future engage in investment and commercial banking
transactions with us and certain of our affiliates.
From time to time, we may issue and sell other securities described in the
accompanying Prospectus, and the amount of Notes offered hereby is subject to
reduction as a result of such sales.
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PROSPECTUS
- --------------------------------------------------------------------------------
TRIBUNE COMPANY
DEBT SECURITIES AND
WARRANTS TO PURCHASE DEBT SECURITIES
- --------------------------------------------------------------------------------
By this prospectus, we may offer in one or more discrete offerings up to
$500,000,000 of our Debt Securities and Warrants to purchase Debt Securities.
The Debt Securities may be issued in one or more series and will be unsecured.
We will determine the terms for the Debt Securities and Warrants at the time of
sale. We will provide the specific terms of the Debt Securities and Warrants in
one or more supplements to this prospectus. You should read this prospectus and
the applicable supplements carefully before you invest.
Our executive offices are located at 435 North Michigan Avenue, Chicago,
Illinois 60611, and our telephone number is (312) 222-9100.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
We may offer the Debt Securities and Warrants in any of the following ways:
. directly to purchasers;
. through agents;
. through dealers; or
. through one or more underwriters or a syndicate of underwriters in an
underwritten offering.
Additional information on our plan of distribution can be found inside under
"Plan of Distribution." We will describe the plan of distribution for any Debt
Securities and Warrants in the applicable prospectus supplements.
- --------------------------------------------------------------------------------
The date of this Prospectus is November 4, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus...................................................... 2
Where You Can Find More Information........................................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Ratios of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................. 4
Description of Warrants.................................................... 11
Plan of Distribution....................................................... 13
Legal Matters.............................................................. 14
Experts.................................................................... 14
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement (No. 333-66077) that we
filed with the Securities and Exchange Commission ("SEC") utilizing a "shelf"
registration process. Under this shelf process, we may offer the Debt
Securities and Warrants described in this prospectus in one or more offerings
with a total aggregate principal amount or initial purchase price not to exceed
$500,000,000. The Debt Securities and the Warrants are collectively called the
"Securities." This prospectus provides you with a general description of the
Securities we may offer. Each time we offer Securities, we will provide you
with a prospectus supplement and, if applicable, a pricing supplement. The
prospectus supplement and any applicable pricing supplement will describe the
specific amounts, prices and terms of the Debt Securities being offered and, in
the case of Warrants, will describe the Debt Securities issuable upon exercise
of the Warrants and the offering price, if any, exercise price, duration or any
other terms of the Warrants. The prospectus supplement and any applicable
pricing supplement may also add, update or change the information in this
prospectus. Please carefully read this prospectus, the applicable prospectus
supplement and any applicable pricing supplement, together with the information
contained in the documents referred to under the heading "Where You Can Find
More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the SEC. You may read and copy any document we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain further information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. In addition, you may inspect our SEC filings 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.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, unless
we update or supersede that information by the information contained in this
prospectus or a prospectus supplement or by information that we file
subsequently that is incorporated by reference into this prospectus. We are
incorporating by reference the following documents that we have filed with the
SEC and our future filings with the SEC under
2
<PAGE>
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until our offering of the Securities is completed:
. Annual Report on Form 10-K for the year ended December 28, 1997 (as
amended by the amended Annual Report on Form 10-K/A dated June 24,
1998);
. Quarterly Reports on Form 10-Q for the quarters ended March 29, 1998
and June 28, 1998; and
. Current Reports on Form 8-K dated July 30, 1998 and August 24, 1998.
This prospectus is part of a registration statement we have filed with the
SEC relating to the Securities. As permitted by SEC rules, this prospectus does
not contain all of the information included in the registration statement and
the accompanying exhibits and schedules we file with the SEC. You may refer to
the registration statement, the exhibits and schedules for more information
about us and our Securities. The registration statement, exhibits and schedules
are also available at the SEC's Public Reference Room or through its web site.
You may obtain a copy of these filings, at no cost, by writing to or
telephoning us at the following address:
Corporate Relations Department
Tribune Company
Suite 600
435 North Michigan Avenue
Chicago, Illinois 60611
Telephone (312) 222-3238.
You should rely only on the information incorporated by reference or provided
in this prospectus and the applicable prospectus supplement, and in any pricing
supplement. We have not authorized anyone to provide you with different
information. You should not assume that the information in this prospectus, any
applicable prospectus supplement or any pricing supplement is accurate as of
any date other than the date on the cover of the document. We are not making an
offer of the Securities in any state in which the offer or sale is not
permitted.
THE COMPANY
Tribune Company is a media company. Through our subsidiaries, we are engaged
in the publishing of newspapers, books, educational materials and information
in print and digital formats and the broadcasting, production and syndication
of information and entertainment principally in metropolitan areas in the
United States. We were founded in 1847 and incorporated in Illinois in 1861. As
a result of a corporate restructuring in 1968, we became a holding company
incorporated in Delaware.
USE OF PROCEEDS
We expect to add substantially all of the net proceeds from the sale of the
Securities to our general funds to be used for general corporate purposes,
including securities repurchase programs, capital expenditures, working
capital, repayment of long-term and short-term debt and the financing of
acquisitions. We may invest funds that we do not immediately require in short-
term marketable securities.
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RATIOS OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges for each of the periods indicated are
as follows:
<TABLE>
<CAPTION>
FIRST HALF FISCAL YEAR ENDED
ENDED JUNE DECEMBER
------------ ------------------------
1998 1997 1997 1996 1995 1994 1993
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges......... 8.0 6.6 6.9 7.1 8.7 8.2 6.4
</TABLE>
For purposes of computing the foregoing ratios: (i) "earnings" consist of
income from continuing operations 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 our guarantees of
the debt of our 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 our guarantees of the debt of our employee stock ownership
plan.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be issued under an Indenture dated as of January 1,
1997 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 we refer to particular provisions of the
Indenture, such provisions are incorporated by reference as a part of the
statements made in this document and such statements are qualified in their
entirety by such reference. References in italics are to section numbers of the
Indenture.
The Indenture does not limit the amount of Debt Securities which we may issue
under the Indenture. It provides that Debt Securities may be issued from time
to time in series. The Debt Securities will be our unsecured obligations and
will rank equally with all of our other unsecured and unsubordinated
indebtedness.
The Prospectus Supplement may contain a description of the following terms of
the Debt Securities:
. the title of the Debt Securities;
. the limit, if any, upon the aggregate principal amount of the Debt
Securities;
. the dates on which or periods during which the 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;
. the rate or rates, if any, or the method of determining the rate or
rates, at which the Debt Securities will bear interest, if any; the
date or dates from which interest will accrue; the dates on which
such interest will be payable; and the regular record dates for the
payment of interest;
. the terms and conditions under which we may be obligated to redeem,
repay or purchase the Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of a holder;
. the terms and conditions upon which we may redeem the Debt
Securities, in whole or in part, at our option;
. if other than denominations of $1,000 and any integral multiple of
$1,000, the denominations in which the Debt Securities will be
issuable;
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. whether the 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;
. provisions, if any, for the defeasance of the Debt Securities;
. if denominated in a currency other than United States dollars, the
currency or composite currency in which the Debt Securities are to be
denominated, or in which payments of the principal, premium, if any,
and interest will be made and the circumstances, if any, when such
currency of payment may be changed;
. if we or a holder have the right to elect that the payments of the
principal, premium, if any, or interest are to be made in a currency
or composite currency other than that in which the Debt Securities
are denominated or stated to be payable, the terms and conditions
upon which such election may be made and how 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 elected to be paid pursuant to such
election will be determined;
. if the payments of principal, premium, if any, or interest may be
determined with reference to a currency or other index, how such
amounts shall be determined;
. whether the Debt Securities will be issued in the form of one or more
global securities and, if so, the identity of the depositary for such
global securities;
. any additional events of default or covenants relating solely to the
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; and
. any other terms of the 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 us 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 that we 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. We will
describe, in the applicable Prospectus Supplement, any 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.
Our subsidiaries hold a substantial portion of our assets. Our right and the
rights of our 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 we may ourselves be a creditor with
recognized claims against such subsidiary. There is no restriction in the
Indenture against our subsidiaries incurring unsecured indebtedness.
Unless otherwise described in the applicable 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 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 applicable Prospectus Supplement may indicate
the
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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 we may, in
certain instances, require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with such transactions.
(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 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 depositary arrangement with respect to any
portion of a particular series of Debt Securities will be described in the
Prospectus Supplement relating to such series. We anticipate that the following
provisions will apply to all depositary arrangements.
Upon the issuance of a global security, the depositary 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 us if we directly offer and sell
such Debt Securities. 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 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 depositary
arrangements and such laws may impair the ability to transfer beneficial
interests in a global security.
So long as the depositary or its nominee is the registered owner of the
global security, 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 of the global security 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. Neither we, the Trustee nor 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.
We expect 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 the records of such depositary or its nominee. We also expect 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.
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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 us within 90 days, we will issue
Debt Securities of such series in definitive form in exchange for such global
security. In addition, we may at any time and in our sole discretion determine
not to have the Debt Securities of a particular series represented by one or
more global securities and, in such event, we 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 we 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 of our assets or those of a Restricted
Subsidiary unless we secure or cause such Restricted Subsidiary to secure the
Debt Securities equally with, or prior to, such secured Indebtedness. This
restriction will not apply to Indebtedness secured by:
. Mortgages on the property of any corporation, which Mortgages existed
at the time such corporation became a Restricted Subsidiary;
. Mortgages in favor of us or a Restricted Subsidiary;
. Mortgages on our property or that of a Restricted Subsidiary in favor
of the United States of America or any State or political
subdivision, or in favor of any other country or any political
subdivision of such country, to secure payment pursuant to any
contract or statute or to secure any indebtedness incurred to finance
all or part of the purchase price or the cost of construction or
improvement of the property subject to such Mortgages;
. Mortgages on any property subsequently acquired by us 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 us or any Restricted Subsidiary upon any property subsequently
acquired by us 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 us or any Restricted Subsidiary, as the case may
be, of the property covered by such Mortgage;
. Mortgages representing the extension, renewal or refunding of any
Mortgage referred to in the foregoing bullet point paragraphs; and
. any other Mortgage, other than Mortgages referred to in the foregoing
bullet point paragraphs, so long as the aggregate of all Indebtedness
secured by Mortgages pursuant to this bullet point paragraph and the
aggregate Value of the Sale and Lease-Back Transactions in existence
at that time (not including those in connection with which we have
voluntarily retired funded debt as provided in the Indenture) does
not exceed 10% of Consolidated Net Tangible Assets. (Section 10.07)
Limitation on Sale and Lease-Back Transactions. The Indenture provides that
neither we nor any Subsidiary will enter into any Sale and Lease-Back
Transaction with respect to any Principal Property unless either:
. we or such Subsidiary would be entitled, under the covenant described
under "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
securing the Debt Securities; or
. we, within four months after the effective date of such transaction,
apply an amount equal to the greater of (x) the net proceeds of the
sale of the property subject to the Sale
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and Lease-Back Transaction and (y) the Value of such Sale and Lease-
Back Transaction, to the voluntary retirement of the Debt Securities
or our other unsubordinated Indebtedness. (Section 10.08)
Certain Definitions.
"Consolidated Net Tangible Assets" is defined in the Indenture to mean total
consolidated assets of us and our Consolidated Subsidiaries, less:
. current liabilities of us and our Consolidated Subsidiaries;
. contracts payable for broadcast rights;
. the net book amount of all intangible assets of us and our
Consolidated Subsidiaries;
. appropriate amounts to account for minority interests of other
persons holding stock in Subsidiaries; and
. investments in Subsidiaries (other than Restricted Subsidiaries)
aggregating in excess of 10% of the Net Worth of us and our
Consolidated Subsidiaries. (Section 10.07)
"Consolidated Subsidiary" is defined in the Indenture to mean a Subsidiary
the accounts of which are consolidated with our accounts for public financial
reporting purposes. (Section 1.01)
"Indebtedness" is defined in the Indenture to mean:
. 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);
. 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
. contingent obligations in respect of, or to purchase or otherwise
acquire, any such indebtedness of others described in the foregoing
bullet point paragraphs, including guarantees and endorsements (other
than for purposes of collection in the ordinary course of business of
any such indebtedness). (Section 10.07)
"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)
"Principal Property" is defined in the Indenture to mean any manufacturing or
printing plant, warehouse, office building, power plant or transmission
facility owned by us or any Subsidiary or any property or right owned by or
granted to us or any Subsidiary and used or held for use in the newspaper,
newsprint, radio or television business conducted by us or any Subsidiary,
except for any such property or right which, in the opinion of our Board of
Directors, is not material to the total business conducted by us and our
Subsidiaries considered as one enterprise. (Section 1.01)
"Restricted Subsidiary" is defined in the Indenture to mean each of our
Subsidiaries as of the date of the Indenture and each Subsidiary thereafter
created or acquired, unless expressly excluded by resolution of our Board of
Directors before, or within 120 days following, such creation or acquisition.
(Section 10.07)
A "Sale and Lease-Back Transaction" is defined in the Indenture as the
leasing by us 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 us or
any such Subsidiary to any party (other than us 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)
"Significant Subsidiary" is defined in the Indenture to mean any Subsidiary:
. which, as of the close of our fiscal year immediately preceding the
date of determination, contributed more than 7% of our and our
Subsidiaries' consolidated gross operating revenues; or
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. the Net Worth of which (determined in a manner consistent with the
manner of determining our and our Subsidiaries' consolidated Net
Worth) as of the close of such immediately preceding fiscal year
exceeded 7% of our and our Subsidiaries' consolidated Net Worth.
(Section 5.01)
"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
us or by one or more other Subsidiaries or by us 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)
"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:
. the net proceeds of the sale or transfer of the property leased
pursuant to such Sale and Lease-Back Transaction; or
. the fair value in the opinion of our Board of Directors of such
property at the time we entered 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)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that we may not consolidate with or merge into any
other corporation, or convey, transfer or lease our properties and assets
substantially as an entirety to any other party, unless, among other things:
. the corporation formed by such consolidation or into which we are
merged or the party which acquires by conveyance or transfer, or
which leases our properties and assets substantially as an entirety,
is organized and existing under the laws of the United States, any
State or the District of Columbia and expressly assumes our
obligations on the Debt Securities and under the Indenture by means
of an indenture supplemental to the Indenture; and
. 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, has happened and is 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:
. default for 30 days in payment of any interest upon the Debt
Securities;
. 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;
. our default in the performance of any other of the covenants or
warranties in the Indenture applicable to us which shall not have
been remedied for a period of 60 days after notice of default; and
. certain events of bankruptcy, insolvency or reorganization of us 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 our Board of Directors, the executive committee or a trust
committee of our Board of Directors or certain 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)
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The Indenture provides that if an Event of Default with respect to Debt
Securities has occurred and is 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, at 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)
We will be required to furnish to the Trustee annually a statement as to our
performance of our 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 have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee under the Indenture with regard to such series.
No holder of any Debt Securities will have any right to institute any
proceedings, judicial or otherwise, with respect to the Indenture or any remedy
under the Indenture unless, among other things, the holder or holders of Debt
Securities 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, we and the Trustee may modify or amend
the Indenture with the consent of the holders of a majority in aggregate
principal amount of the Debt Securities. However, no such modification or
amendment may, without the consent of the holders of all then outstanding Debt
Securities:
. change the due date of the principal of, or any installment of
principal of or interest on, any Debt Securities;
. reduce the principal amount of, or rate of interest on, or any
premium payable on redemption of any Debt Securities;
. reduce the principal amount of any Debt Securities payable upon
acceleration of the maturity of such Debt Securities;
. change the place or the currency of payment of principal of, or any
premium or interest on, any Debt Securities;
. 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);
. reduce the percentage in principal amount of any 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
. 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), we, at our
option, with regard to such series of Debt Securities:
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. 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
. 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 we deposit with the Trustee, in trust, money or U.S. Government Obligations
which through the payment of interest and principal in accordance with their
terms will provide sufficient funds 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, we are required
to deliver to the Trustee:
. 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 our exercise of our 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 we had not exercised such
option, and, if we are 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
. if the Debt Securities are then listed on the New York Stock
Exchange, an opinion of counsel to the effect that the Debt
Securities would not be delisted from the exchange 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 our funds and performs other services for us and transacts other
banking business with us in the normal course of business. Bank of Montreal, an
affiliate of the Trustee, is a commercial lender under our credit facilities.
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
We may offer Warrants together with any series of Debt Securities offered by
a Prospectus Supplement. Any Warrants so offered will be attached to such Debt
Securities and will entitle the holder of the Warrants 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 us 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 our agent under the applicable Warrant Agreement and in
connection with the certificates for the Warrants (the "Warrant Certificates")
of such series, and the Warrant Agent 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.
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The Prospectus Supplement relating to a particular series of Warrants, if
any, may contain the terms of such Warrants, including, where applicable:
. the offering price;
. the currency or currencies in which such Warrants are being offered;
. the designation, aggregate principal amount, currency or currencies,
denominations and other terms of the series of Debt Securities
purchasable upon exercise of such Warrants;
. 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;
. the date on and after which such Warrants and the related series of
Debt Securities will be transferable separately;
. 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;
. the date on which the right to exercise such Warrants shall commence
and the date on which such right shall expire; and
. 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 indicated in the Prospectus Supplement
relating to such Warrants and prior to 5:00 P.M., Chicago time (unless
otherwise indicated in the Prospectus Supplement), on the expiration date set
forth in such Prospectus Supplement. 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), we 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.
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PLAN OF DISTRIBUTION
We may sell the Securities in any of four ways:
. directly to purchasers;
. through agents;
. through dealers; or
. through one or more underwriters or a syndicate of underwriters in an
underwritten offering.
With respect to each series of Securities, the terms of any offering,
including the name or names of any underwriters, dealers or agents, the
purchase price of such Securities and the proceeds to us 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 related Prospectus Supplement. Only underwriters named in the
Prospectus Supplement are deemed to be underwriters in connection with the
Securities offered thereby.
If we sell Securities through underwriters, the underwriters will acquire the
Securities for their own account. The Securities 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 applicable 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.
We may also sell the Securities directly or through agents (which may also
act as principals) which we may designate from time to time. Any agent involved
in the offer or sale of the Securities with regard to which this Prospectus is
delivered will be named, and any commissions we may pay to such agent will be
set forth in, or may be calculated from the information set forth in, the
applicable Prospectus Supplement. Unless otherwise indicated in the applicable
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment. In the case of sales we may directly make,
no commission will be payable.
If so indicated in a Prospectus Supplement, we will authorize agents,
underwriters or dealers to solicit offers by certain specified institutions to
purchase Securities from us at the public offering price set forth in that
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.
Agents and underwriters may be entitled under agreements entered into with us
to indemnification by us against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect
to payments which the agents or underwriters may be required to make with
respect to such liabilities. Agents and underwriters may be customers of,
engage in transactions with, or perform services for us or our 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. We can give no assurance 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.
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LEGAL MATTERS
Certain legal matters relating to the Securities will be passed upon for us
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 28, 1997
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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$500,000,000
TRIBUNE COMPANY
MEDIUM-TERM NOTES, SERIES F
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
NOVEMBER 12, 1998
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