<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 23, 1997
$217,692,000
NORTHERN INDIANA PUBLIC SERVICE COMPANY
MEDIUM-TERM NOTES, SERIES E
DUE FROM 1 YEAR TO 30 YEARS FROM DATE OF ISSUE
----------
Northern Indiana Public Service Company (the "Company") may offer from time
to time up to $217,692,000 aggregate principal amount of its Medium-Term Notes,
Series E (collectively, the "Notes" and, individually, a "Note"), on terms
determined at the time of sale. Each Note will mature one year to 30 years from
the issue date as specified in the applicable Pricing Supplement. The Notes
will bear interest at a fixed or floating rate as set forth in the applicable
Pricing Supplement. The specific principal amounts, interest rates, initial
public offering price, maturity, any redemption terms or other specific terms
of any Notes offered, in respect of which this Prospectus is being delivered,
will be set forth in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will be denominated
in United States dollars and issued in minimum denominations of $1,000 or any
amount in excess thereof that is an integral multiple of $1,000. See
"Description of Notes."
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note will be payable semiannually on each March 15 and
September 15, and at maturity or upon earlier redemption, if any. Interest on
each Floating Rate Note will be payable monthly, quarterly, semiannually or
annually as specified in the applicable Pricing Supplement, or as otherwise
specified in the applicable Pricing Supplement, and at maturity or upon earlier
redemption, if any. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be subject to any sinking fund.
Each Note will be issued in fully registered certificated form (a
"Certificated Note") or in book-entry form (a "Book-Entry Note"), as set forth
in the applicable Pricing Supplement. Beneficial interests in Book-Entry Notes
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary or its participants. Except in the limited
circumstances described under "Description of Notes--Book-Entry Notes," owners
of beneficial interests in a Book-Entry Note will not be entitled to receive
physical delivery of Certificated Notes representing interests therein and will
not be considered the Holders thereof.
----------
SEE "RISK FACTORS" COMMENCING ON PAGE 4 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED
HEREBY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(1)(2) COMPANY(1)(3)
--------- ----------------- -------------
<S> <C> <C> <C>
Per Note............ 100% .150%-.750% 99.850%-99.250%
Total(4)............ $217,692,000 $326,538-$1,632,690 $217,365,462-$216,059,310
</TABLE>
- -----
(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) The Company will pay the Agents a commission of from .150% to .750%,
depending on maturity, of the principal amount of any Notes sold through
them as agents (or sold to such Agents as principal in circumstances where
no other discount is agreed). The Company has agreed to indemnify the
Agents against certain liabilities, including liabilities under the
Securities Act of 1933. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company estimated at $231,468.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
----------
Offers to purchase Notes may be solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Company. Notes may be sold to
the Agents as principal on their own behalf at negotiated discounts. The
Company reserves the right to sell Notes directly on its own behalf. The
Company also reserves the right to withdraw, cancel or modify the offering
contemplated hereby without notice. No termination date for the offering of the
Notes has been established. The Company or the Agents may reject any order as a
whole or in part. See "Plan of Distribution."
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
----------
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a registration statement on Form S-3 (including any amendments thereto,
the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Notes. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain portions of which have been omitted
pursuant to the rules of the SEC. Statements made in this Prospectus as to the
content of any contract, agreement or other document are not necessarily
complete. With respect to each such contract, agreement or other document
filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description
of the matter involved, and each such statement is qualified in its entirety
by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Reports, proxy statements and other information filed by the Company with the
SEC may be inspected and copied at the public reference facilities maintained
by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the SEC's Regional Offices located at Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York,
New York 10048. Copies of such materials may be obtained from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Such material may also be accessed electronically by
means of the SEC's home page on the Internet at http://www.sec.gov. Certain of
the Company's securities are traded on the New York Stock Exchange ("NYSE")
and the American Stock Exchange ("ASE"), and such reports, proxy statements
and other information can also be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005 and at the offices of the ASE, 89
Trinity Place, New York, New York 10006.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the SEC (File No.1-4125) by the Company
pursuant to the Exchange Act are hereby incorporated by reference and made a
part of this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997; and
3. All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Notes.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Nina M. Rausch,
Secretary, Northern Indiana Public Service Company, 5265 Hohman Avenue,
Hammond, Indiana 46320 (telephone (219) 853-5199).
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document that
also is or is deemed to be incorporated by reference in this Prospectus
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
----------------
CERTAIN PERSONS PARTICIPATING IN OFFERINGS OF NOTES MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH NOTES, AND THE IMPOSITION OF PENALTY BIDS, DURING AND AFTER SUCH
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
2
<PAGE>
THE COMPANY
The Company, an Indiana corporation organized on August 2,1912, is a public
utility operating company engaged in supplying electrical energy and natural
gas to the public in 30 counties in the northern part of Indiana, serving an
area of about 12,000 square miles with a population of approximately
2,188,000. At March 31, 1997, the Company supplied approximately 412,300
customers with electricity and approximately 654,800 customers with natural
gas. For the twelve month period ended March 31, 1997, approximately 58% of
its revenues were derived from the sale of electricity and approximately 42%
from the sale and transportation of natural gas. The principal executive
offices of the Company are located at 5265 Hohman Avenue, Hammond, Indiana
46320, and its telephone number is (219) 853-5200.
The Company is a subsidiary of NIPSCO Industries, Inc. ("Industries"), an
Indiana corporation incorporated on September 22, 1987. The holding company
structure was established in order to separate utility from non-utility
investments and activities, and to improve capital allocation and managerial
accountability and provide flexibility to diversify. The Notes are not
obligations of, or guaranteed by, Industries.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
12 MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------
1997 1996 1995 1994 1993 1992
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges........................ 3.84x 3.87x 3.75x 3.45x 3.37x 2.85x
</TABLE>
For the purpose of calculating the ratios of earnings to fixed charges,
"earnings" consist of income from continuing operations before income taxes,
and "fixed charges" consist of interest on all indebtedness, amortization of
debt expense, and the percentage of rental expense on operating leases deemed
representative of the interest factor.
A statement setting forth the computation of ratio of earnings to fixed
charges is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
USE OF PROCEEDS
The Company will use $102,436,000 of the net proceeds to repay short-term
debt incurred, and to reimburse its treasury for cash used, to pay the
following securities at maturity:
$22,436,000 First Mortgage Bonds, Series N, 4 5/8%, due May 15, 1995;
$25,000,000 Medium-Term Note, Series D, Variable Rate, due July 25, 1996;
$25,000,000 Medium-Term Note, Series D, Variable Rate, due July 26, 1996;
and
$30,000,000 Medium-Term Note, Series D, Variable Rate, due July 26, 1996.
The remaining $115,256,000 of the net proceeds will be added to working
capital and used to pay at maturity the following debt securities:
$25,747,000 First Mortgage Bonds, Series O, 6 3/8%, due September 1, 1997;
$15,000,000 Medium-Term Noted, Series D, Variable Rate, due July 25, 1997;
$15,000,000 Medium-Term Note, Series D, Variable Rate, due July 28, 1997;
$10,000,000 Medium-Term Note, Series D, Variable Rate, due July 28, 1997;
$14,509,000 First Mortgage Bonds, Series P, 6 7/8%, due October 1, 1998;
$20,000,000 Medium-Term Note, Series B, 5.83%, due April 6, 1998;
$10,000,000 Medium-Term Note, Series B, 5.88%, due April 6, 1998; and
$5,000,000 Medium-Term Note, Series B, 5.95%, due April 13, 1998.
3
<PAGE>
RISK FACTORS
This Prospectus does not describe all of the risks of an investment in the
Notes, whether resulting from Notes being denominated or payable in or
determined by reference to a currency or composite currency other than United
States dollars or to one or more interest rate, currency or other indices or
formulas, or otherwise. The Company and the Agents disclaim any responsibility
to advise prospective investors of such risks as they exist at the date of this
Prospectus or as they change from time to time. Prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in the Notes and the suitability of investing in the Notes in light
of their particular circumstances. Foreign Currency Notes (as defined under
"Description of Notes--General") are not an appropriate investment for
investors who are unsophisticated with respect to foreign currency transactions
or transactions involving the applicable interest rate or currency index or
other indices or formulas. Prospective investors should carefully consider,
among other factors, the matters described below.
STRUCTURE RISKS
An investment in Notes that are indexed, as to principal, premium, if any,
and/or interest, if any, to one or more interest rate, currency (including
exchange rates and swap indices between currencies or composite currencies) or
other indices or formulas, either directly or inversely, entails significant
risks that are not associated with similar investments in a conventional fixed
rate or floating rate debt security. Such risks include, without limitation,
the possibility that such indices or formulas may be subject to significant
changes, that no interest will be payable in respect of such Notes or will be
payable at a rate lower than one applicable to a conventional fixed rate or
floating rate debt security issued by the Company at the same time, that
repayment of the principal and/or premium, if any, in respect of such Notes may
occur at times other than those expected by the holders of the Notes
("Holders"), and that the Holders could lose all or a substantial portion of
principal and/or premium, if any, payable with respect to such Notes on the
Maturity Date (as defined under "Description of Notes--General"). Such risks
depend on a number of interrelated factors, including economic, financial and
political events, over which the Company has no control. Additionally, if the
formula used to determine the amount of principal, premium, if any, and/or
interest, if any, payable with respect to such Notes contains a multiplier or
leverage factor, the effect of any change in the applicable index or indices or
formula or formulas will be magnified. In recent years, values of certain
indices and formulas have been highly volatile and such volatility may be
expected to continue in the future. Fluctuations in the value of any particular
index or formula that have occurred in the past are not necessarily indicative,
however, of fluctuations that may occur in the future.
Any optional redemption feature of the Notes might affect the market value of
such Notes. Since the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, Holders generally will not be
able to reinvest the redemption proceeds in a comparable security at an
effective interest rate as high as the current interest rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the liquidity of the
secondary market if one develops. See "Plan of Distribution."
The secondary market, if any, for the Notes will be affected by a number of
factors independent of the creditworthiness of the Company and the value of the
applicable index or indices or formula or formulas, including the complexity
and volatility of each such index or formula, the method of calculating the
principal, premium, if any, and/or interest, if any, in respect of such Notes,
the time remaining to the maturity of such Notes, the outstanding amount of
such Notes, any redemption features of such Notes, the amount of other debt
securities linked to such index or formula and the level, direction and
volatility of market interest rates generally. Such factors also will affect
the market
4
<PAGE>
value of such Notes. In addition, certain Notes may be designed for specific
investment objectives or strategies and, therefore, may have a more limited
secondary market and experience more price volatility than conventional debt
securities. Holders may not be able to sell such Notes readily or at prices
that will enable them to realize their anticipated yield. No investor should
purchase Notes unless such investor understands and is able to bear the risk
that such Notes may not be readily saleable, that the value of such Notes will
fluctuate over time and that such fluctuations may be significant.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a debt security denominated and
payable in United States dollars. Such risks include, without limitation, the
possibility of significant changes in the rate of exchange between the United
States dollar and the Specified Currency (as defined under "Description of
Notes--General") and the possibility of the imposition or modification of
exchange controls by the applicable governments or monetary authorities. Such
risks generally depend on factors over which the Company has no control, such
as economic, financial and political events and the supply and demand for the
applicable currencies or composite currencies. In addition, if the formula used
to determine the amount of principal, premium, if any, and/or interest, if any,
payable with respect to Foreign Currency Notes contains a multiplier or
leverage factor, the effect of any change in the applicable currencies or
composite currencies will be magnified. In recent years, rates of exchange
between the United States dollar and foreign or composite currencies have been
highly volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations that may occur in the
future. Depreciation of the Specified Currency applicable to a Foreign Currency
Note against the United States dollar would result in a decrease in the United
States dollar-equivalent yield of such Foreign Currency Note, in the United
States dollar-equivalent value of the principal and premium, if any, payable on
the Maturity Date of such Foreign Currency Note, and, generally, in the United
States dollar-equivalent market value of such Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and may
in the future impose or revise, exchange controls at or prior to the date on
which any payment of principal of, or premium, if any, or interest, if any, on,
a Foreign Currency Note is due, which could affect exchange rates as well as
the availability of the Specified Currency on such date. Even if there are no
exchange controls, it is possible that the Specified Currency would not be
available on the applicable payment date due to other circumstances beyond the
control of the Company. In such cases, the Company will be entitled to satisfy
its obligations in respect of such Foreign Currency Note in United States
dollars. See "Special Provisions Relating to Foreign Currency Notes--
Availability of Specified Currency."
CREDIT RATINGS
The credit ratings assigned to the Company's medium-term note program may not
reflect the potential impact of all risks related to structure and other
factors on the value of the Notes. Accordingly, prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in the Notes and the suitability of investing in such Notes in light
of their particular circumstances.
5
<PAGE>
DESCRIPTION OF NOTES
The Notes will be issued under an Indenture dated as of March 1, 1988
between the Company and Manufacturers Hanover Trust Company, as Trustee,
supplemented by a First Supplemental Indenture dated as of December 1, 1991
(the "Indenture"), under which The Chase Manhattan Bank, as successor to
Manufacturers Hanover Trust Company, is currently serving as Trustee (the
"Trustee"). The statements under this heading do not purport to be complete
and are subject to the detailed provisions of the Indenture, a copy of which
is filed as an exhibit to the Registration Statement of which this Prospectus
is a part. Wherever particular provisions of the Indenture or terms defined
therein are referred to, such provisions or definitions are incorporated by
reference as a part of the statements made and the statements are qualified in
their entirety by such reference.
GENERAL
The following description of the Notes sets forth certain general terms and
provisions of the Notes and such description will apply to the Notes unless
otherwise provided in the applicable Pricing Supplement. The particular terms
of the Notes offered by this Prospectus and each Pricing Supplement, including
the specific principal amounts, interest rates or interest rate formula,
purchase price, initial public offering price, maturity and any other specific
terms of any Notes in respect of which this Prospectus is being delivered will
be set forth in the applicable Pricing Supplement.
All Notes issued and to be issued under the Indenture will be unsecured
general obligations of the Company and will rank pari passu with all other
unsecured and unsubordinated indebtedness of the Company from time to time
outstanding. The Indenture does not limit the aggregate principal amount of
indebtedness that may be issued thereunder and indebtedness may be issued
thereunder from time to time in one or more series up to the aggregate
principal amount from time to time authorized by the Company for each series.
The Company may, from time to time, without the consent of the Holders,
provide for the issuance of other indebtedness under the Indenture in addition
to the $217,692,000 aggregate principal amount of Notes offered hereby.
The Notes are limited to up to $217,692,000 aggregate principal amount, or
the equivalent thereof in one or more foreign or composite currencies. Each
Note will mature on a day one year to 30 years from its date of issue (the
"Stated Maturity Date"), as specified in the applicable Pricing Supplement,
unless the principal thereof (or any installment of principal thereof) becomes
due and payable prior to the Stated Maturity Date, whether by the declaration
of acceleration of maturity, notice of redemption at the option of the
Company, notice of the Holder's option to elect repayment or otherwise (the
Stated Maturity Date or such prior date, as the case may be, is herein
referred to as the "Maturity Date" with respect to the principal 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. The
Company may also issue Discount Notes, Indexed Notes and Amortizing Notes (as
such terms are hereinafter defined).
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 thereof 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, in respect thereof may be made in, one or more
foreign or composite currencies ("Foreign Currency Notes"). See "Special
Provisions Relating to Foreign Currency Notes--Payment of Principal, Premium
and Interest". The currency or composite currency in which a particular Note
is denominated (or, if such currency or composite currency is no longer legal
tender for the payment of public and private debts, such other currency or
composite currency of the relevant country which is then legal tender for the
payment of such debts) is herein referred to as the "Specified Currency" with
respect to such Note. References herein to "United States dollars", "U.S.
dollars" or "$" are to the lawful currency of the United States of America
(the "United States").
6
<PAGE>
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 or composite currencies and
vice versa, and commercial banks do not generally offer non-United States
dollar checking or savings account facilities in the United States. The Company
believes that, unless otherwise specified in the applicable Pricing Supplement,
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 hereinafter defined) preceding the date of delivery of
such Foreign Currency Note, or by such other day as determined by such Agent.
Each such conversion will be made by such Agent on such terms and subject to
such conditions, limitations and charges as such Agent may from time to time
establish in accordance with its regular foreign exchange practices. All costs
of exchange will be borne by the purchaser of each such Foreign Currency Note.
See "Special Provisions Relating to Foreign Currency Notes."
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other factors, the aggregate principal amount of Notes
purchased in any single transaction. Notes with different variable terms other
than interest rates may also be offered concurrently to different investors.
Interest rates or formulas and other terms of the Notes are subject to change
by the Company 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 the
Company.
Each Note will be issued as a Book-Entry Note represented by one or more
fully registered Global Notes or as a fully registered 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, while the minimum denominations of each Foreign
Currency Note will be specified in the applicable Pricing Supplement.
Payments of principal of, and premium, if any, and interest, if any, on,
Book-Entry Notes will be made by the Company through the Trustee to the
Depositary. See "--Book-Entry Notes." In the case of Certificated Notes,
payment of principal and premium, if any, due on the Maturity Date will be made
in immediately available funds upon presentation and surrender thereof (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 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. 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
thereof and premium, if any, thereon shall be made. Payment of interest, if
any, due on a Certificated Note on any Interest Payment Date (as hereinafter
defined) other than the Maturity Date will be made by check mailed to the
address of the Holder entitled thereto as such address shall appear in the
Security Register of the Company. Notwithstanding the foregoing, a Holder of
$10,000,000 (or, if the Specified Currency is other than United States dollars,
the equivalent thereof in such Specified Currency) or more in aggregate
principal amount of Certificated Notes (whether having identical or different
terms and provisions) 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 appropriate wire transfer instructions have been
received in writing by the Trustee not less than 15 days prior to such Interest
Payment Date. Any such wire transfer instructions received by the Trustee shall
remain in effect until revoked by such Holder. For special payment terms
applicable to Foreign Currency Notes, see "Special Provisions Relating to
Foreign Currency Notes--Payment of Principal, Premium, if any, and Interest, if
any."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in
The City of New York; provided, however, that, with respect to Foreign Currency
Notes, such day is also not a day on which banking institutions are authorized
or required by law, regulation or executive order to close in the Principal
Financial Center (as hereinafter defined) of the country issuing the Specified
Currency (unless the Specified Currency is European Currency Units
7
<PAGE>
("ECU"), in which case such day is also not a day that appears as an ECU non-
settlement day on the display designated as "ISDE" on the Reuter Monitor Money
Rates Service (or is not a day designated as an ECU non-settlement day by the
ECU Banking Association) or, if ECU non-settlement days do not appear on that
page (and are not so designated), a day that is not a day on which payments in
ECU cannot be settled in the international interbank market); provided,
further, that, with respect to Notes as to which LIBOR is an applicable
Interest Rate Basis, such day is also a London Business Day (as hereinafter
defined). "London Business Day" means a day on which dealings in the Designated
LIBOR Currency (as hereinafter defined) are transacted in the London interbank
market.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency (except as described in the immediately
preceding paragraph with respect to ECU) or (ii) the capital city of the
country to which the Designated LIBOR Currency, if applicable, relates (or, in
the case of ECU, Luxembourg), except, in each case, that with respect to United
States dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch
guilders, Italian lire and Swiss francs, the "Principal Financial Center" shall
be The City of New York, Sydney, Toronto, Frankfurt, Amsterdam, Milan (solely
in the case of clause (i) above) and Zurich, respectively, unless otherwise
specified in the applicable Pricing Supplement.
Book-Entry Notes may be transferred or exchanged only through the Depositary.
See "--Book-Entry Notes." Registration of transfer or exchange of Certificated
Notes will be made at the office or agency maintained by the Company for such
purpose in the Borough of Manhattan, The City of New York, currently the
corporate trust office of the Trustee. No service charge will be made by the
Company or the Trustee for any such registration of transfer or exchange of the
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith (other
than exchanges pursuant to the Indenture not involving any transfer).
The indenture provides that the Notes may be issued at various times, may
have differing maturity dates and other terms and may bear interest at
differing rates.
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 March 15 and September 15 of
each year or on such other date(s) specified in the applicable Pricing
Supplement (each, an "Interest Payment Date"
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with respect to Fixed 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 (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds
Rate, (vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such
other Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement. 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:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note" or an "Inverse Floating Rate Note", or as having an
Addendum attached or having "Other/Additional Provisions" apply, 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.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the period, if
any, from the date of issue to the Initial Interest Reset Date will be the
Initial Interest Rate and (z) the interest rate in effect for the period
commencing on the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement or, if no such
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Fixed Interest Rate is specified, the interest rate in effect thereon on
the day immediately preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed
Interest Rate minus the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if
any, and/or (b) multiplied by the applicable Spread Multiplier, if any;
provided, however, that, unless otherwise specified in the applicable
Pricing Supplement, the interest rate thereon will not be less than zero.
Commencing on the Initial Interest Reset Date, the rate at which interest
on such Inverse Floating Rate Note shall be payable shall be reset as of
each Interest Reset Date; provided, however, that the interest rate in
effect for the period, if any, from the date of issue to the Initial
Interest Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Interest Rate 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 Interest Rate Bases will be multiplied to determine
the applicable interest rate on such Floating Rate Note. The "Index Maturity"
is the period to maturity of the instrument or obligation with respect to which
the related Interest Rate Basis or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate with respect to each Interest Rate Basis will be determined in accordance
with the applicable provisions below. Except as set forth above or in the
applicable Pricing Supplement, the interest rate in effect on each day shall be
(i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as hereinafter defined) immediately preceding
such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating
Rate Notes as to which the Eleventh District Cost of Funds Rate is an
applicable Interest Rate Basis, which will reset on the first calendar day of
the month); (iv) quarterly, the third Wednesday of March, June, September and
December of each year; (v) semiannually, the third Wednesday of the two months
specified in the applicable Pricing Supplement; and (vi) annually, the third
Wednesday of the month specified in the applicable Pricing Supplement;
provided, however, that, with respect to Floating Rate/Fixed Rate Notes, the
rate of interest thereon will not reset after the applicable Fixed Rate
Commencement Date. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Reset Date will be
postponed to the next succeeding Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis and
such Business Day falls in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined by the Calculation
Agent as of the applicable Interest
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Determination Date and calculated on or prior to the Calculation Date (as
hereinafter defined), 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
hereinafter defined); and the "Interest Determination Date" with respect to
LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date, unless the Designated LIBOR Currency is British
pounds sterling, in which case the "Interest Determination Date" will be the
applicable Interest Reset Date. With respect to the Treasury Rate, the
"Interest Determination Date" will be the day in the week in which the
applicable Interest Reset Date falls on which day Treasury Bills (as
hereinafter defined) are normally auctioned (Treasury Bills are normally sold
at an auction held on Monday of each week, unless that day is a legal holiday,
in which case the auction is normally held on the following Tuesday, except
that such auction may be held on the preceding Friday); provided, however, that
if an auction is held on the Friday of the week preceding the applicable
Interest Reset Date, the "Interest Determination Date" will be such preceding
Friday; provided, further, that if 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 New York
law, as the same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, on the third Wednesday of the month of
each year specified in the applicable Pricing Supplement (each, an "Interest
Payment Date" 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
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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 or composite currency, to the
nearest unit (with one-half cent or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Floating Rate Notes for which an applicable
Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise
specified in the applicable Pricing Supplement, the interest factor for
Floating Rate Notes for which the interest rate is calculated with reference to
two or more Interest Rate Bases will be calculated in each period in the same
manner as if only the applicable Interest Rate Basis specified in the
applicable Pricing Supplement applied.
Unless otherwise specified in the applicable Pricing Supplement, The Chase
Manhattan Bank 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 by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Certificates
of Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the secondary
market offered rates as of 10:00 A.M., New York City time, on such CD Rate
Interest Determination Date, of three leading nonbank dealers in negotiable
United States dollar certificates of deposit in The City of New York (which may
include the Agents or their 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
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market at that time; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
determined as of such CD Rate Interest Determination Date will be the CD Rate
in effect on such CD Rate Interest Determination Date.
CMT RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption ". . . Treasury Constant
Maturities....Federal Reserve Board Release H.15..... Mondays Approximately 3:45
P.M.,'' under the column for the Designated CMT Maturity Index for (i) if the
Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
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 displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index as published in H.15(519). If such rate is no longer published
or is not published by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate on such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated CMT
Maturity Index) for the CMT Rate Interest Determination Date with respect to
such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in
H.15(519). If such information is not provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate on the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean of the secondary
market 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 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
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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 the Dow Jones Telerate
Service (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). If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052 for the most recent
week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will
be calculated 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
hereinafter defined) on such date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper." In the event that such rate is
not published by 3:00 P.M., New York City time, on the related Calculation
Date, then the Commercial Paper Rate on such Commercial Paper Rate Interest
Determination Date will be the Money Market Yield of the rate for commercial
paper having the Index Maturity specified in the applicable Pricing Supplement
as published in Composite Quotations under the heading "Commercial Paper"
(with an Index Maturity of one month or three months being deemed to be
equivalent to an Index Maturity of 30 days or 90 days, respectively). If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the Commercial
Paper Rate on such Commercial Paper Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the Money Market Yield of the
arithmetic mean of the offered rates at approximately 11:00 A.M., New York
City time, on such Commercial Paper Rate Interest Determination Date of three
leading dealers of 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 an industrial issuer 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:
D x 360
Money Market Yield = --------------- x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the 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
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Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Eleventh District Cost of Funds Rate Interest Determination Date falls, as
set forth under the caption "11th District" on Telerate Page 7058 as of 11:00
A.M., San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds
Rate Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates for the last transaction in
overnight United States dollar federal funds arranged by three leading brokers
of federal funds transactions in The City of New York (which may include the
Agents or their 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:
(i) With respect to any Interest Determination Date relating to a Floating
Rate Note for which the interest rate is determined with reference to LIBOR (a
"LIBOR Interest Determination Date"), LIBOR will be either: (a) if "LIBOR
Reuters" is specified in the applicable Pricing Supplement, the arithmetic mean
of the offered rates (unless the Designated LIBOR Page by its terms provides
only for a single rate, in which case such single rate shall be used) for
deposits in the Designated LIBOR Currency having the Index Maturity specified
in such Pricing Supplement, commencing on the applicable Interest Reset Date,
that appear (or, if only a single rate is required as aforesaid, appears) on
the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest
Determination Date, or (b) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the rate for deposits in the Designated LIBOR Currency having the Index
Maturity specified in such Pricing Supplement, commencing on such Interest
Reset Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London
time, on such LIBOR Interest Determination Date. If fewer than
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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 clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
Designated LIBOR Page as specified in clause (i) above, the Calculation Agent
will request the principal London offices of each of four major reference banks
(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 or composite currency
specified in the applicable Pricing Supplement as to which LIBOR shall be
calculated or, if no such currency or composite currency is specified in the
applicable Pricing Supplement, United States dollars.
"Designated LIBOR Page" means (a) 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 (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate"
is specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the display on the Dow Jones Telerate 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.
PRIME RATE. Unless otherwise specified in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating to
a Floating Rate Note for which the interest rate is determined with reference
to the Prime Rate (a "Prime Rate Interest Determination Date"), the rate on
such date as such rate is published in H.15(519) under the heading "Bank Prime
Loan." If such rate is not published prior to 3:00 P.M., New York City time, on
the related Calculation Date, then the Prime Rate shall be the arithmetic mean
of the rates of interest publicly announced by each bank that appears on the
Reuters Screen USPRIME1 Page (as hereinafter defined) as such bank's prime rate
or base lending rate as in effect for such Prime Rate Interest Determination
Date. If fewer than four such rates appear on the Reuters Screen USPRIME1 Page
for such Prime Rate Interest Determination Date, then the Prime Rate shall be
the arithmetic mean of the prime rates or base lending rates quoted on the
basis of the actual number of days in the year divided by a 360-day year as of
the close of business on such Prime Rate Interest Determination Date by four
major money
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center banks (which may include affiliates of the Agents) in The City of New
York selected by the Calculation Agent. If fewer than four such quotations are
so provided, then the Prime Rate shall be the arithmetic mean of four prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date as furnished in The City of New York by the major money
center banks, if any, that have provided such quotations and by a reasonable
number of substitute banks or trust companies (which may include affiliates of
the Agents) to obtain four such prime rate quotations, provided such substitute
banks or trust companies are organized and doing business under the laws of the
United States, or any State thereof, each having total equity capital of at
least $500 million and being subject to supervision or examination by Federal
or State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks or trust companies so selected by
the Calculation Agent are not quoting as mentioned in this sentence, the Prime
Rate determined as of such Prime Rate Interest Determination Date will be the
Prime Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display on the Reuters Monitor Money
Rates Service (or any successor service) on the "USPRIME1" page (or such other
page as may replace such page on such service) for the purpose of displaying
prime rates or base lending rates of major United States banks.
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable
Pricing Supplement, as such rate is published in H.15(519) under the heading
"Treasury Bills-auction average (investment)" or, if not published by 3:00
P.M., New York City time, on the related Calculation Date, the auction average
rate of such Treasury Bills (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the Auction of Treasury Bills having the Index
Maturity specified in the applicable Pricing Supplement are not reported as
provided by 3:00 P.M., New York City time, on the related Calculation Date, or
if no such Auction is held, then the Treasury Rate will be calculated by the
Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on such Treasury Rate
Interest Determination Date, of three leading primary United States government
securities dealers (which may include the Agents or their affiliates) selected
by the Calculation Agent, for the issue of Treasury Bills with a remaining
maturity closest to the Index Maturity specified in the applicable Pricing
Supplement; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate determined as of such Treasury Rate Interest Determination Date will be
the Treasury Rate in effect on such Treasury Rate Interest Determination Date.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Stated Maturity Date, any redemption or repayment provisions or any other
term relating thereto, may be modified and/or supplemented as specified under
"Other/Additional Provisions" on the face thereof or in an Addendum relating
thereto, if so specified on the face thereof and described in the applicable
Pricing Supplement.
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DISCOUNT NOTES
The Company may offer Notes ("Discount Notes") from time to time that have an
Issue Price (as specified in the applicable Pricing Supplement) that is less
than 100% of the principal amount thereof (i.e. par) 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." Unless otherwise specified in the applicable Pricing
Supplement, 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 hereinafter defined),
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 Internal Revenue Code of 1986, as amended (the "Code"), 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
The Company may from time to time 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 (including a
composite currency such as the ECU) 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
The Company may from time to time offer Notes ("Amortizing Notes") with the
amount of principal thereof and interest thereon payable in installments over
the term of such Notes. Unless otherwise
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specified in the applicable Pricing Supplement, interest on each Amortizing
Note will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement,
including a table setting forth repayment information for such Amortizing
Notes.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest at the same rate or pursuant to the same formula,
having the same date of issuance, redemption provisions, if any, stated
maturity and other terms will be represented by a single global Note (a "Global
Note"). Each Global Note representing Book-Entry Notes will be deposited with,
or on behalf of, The Depository Trust Company or such other depositary as is
specified in the applicable Pricing Supplement (the "Depositary"; unless
otherwise specified in the applicable Pricing Supplement, the Depositary shall
be The Depository Trust Company and as hereinafter used the term Depositary
means The Depository Trust Company), which is located in the Borough of
Manhattan, The City of New York, and will be registered in the name of the
Depositary or a nominee of the Depositary.
Upon the issuance of a Global Note, the Depositary for such Global Note or
its nominee will credit the accounts of persons held with it with the
respective principal or face amounts of the Book-Entry Note represented by such
Global Note. Such accounts shall be designated by the Agents with respect to
Book-Entry Notes or by the Company if such Notes are offered and sold directly
by the Company. Ownership of beneficial interests in a Global Note will be
limited to Participants (as defined below). Ownership of beneficial interests
by Participants in a Global Note will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depositary for such Global Note. Ownership of beneficial interests in such
Global Note by persons that hold through Participants will be shown on, and the
transfer of that ownership interest within such Participant will be effected
only through, records maintained by such Participants. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Note.
Payments of principal of and any premium and interest on Book-Entry Notes
represented by any such Global Note will be made to the Depositary or its
nominee, as the case may be, as the sole registered owner and the sole Holder
of the Book-Entry Notes represented thereby for all purposes under the
Indenture. None of the Company, the Trustee or any agent of the Company or the
Trustee will have any responsibility or liability for any aspect of the
Depositary's records relating to or payments made on account of beneficial
ownership interests in a Global Note representing any Book-Entry Notes or for
maintaining, supervising or reviewing any of the Depositary's records relating
to such beneficial ownership interests.
No Global Note described above may be transferred except as a whole by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor of the
Depositary or a nominee of such successor.
A Global Note representing Book-Entry Notes is exchangeable for definitive
Notes in registered form, bearing interest at the same rate or pursuant to the
same formula, having the same date of issuance, redemption provisions, if any,
stated maturity and other terms and of differing denominations aggregating a
like amount, only if (a) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for such Global Note or if at any
time the Depositary ceases to be a clearing agency registered under the
Exchange Act, (b) the Company in its sole discretion determines that all such
Global Notes shall be exchangeable for definitive Notes in registered form, or
(c) an Event of Default with respect to the Notes represented by such Global
Note has occurred and is continuing. Any
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Global Note that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive Notes in registered form, bearing interest at the
same rate or pursuant to the same formula, having the same date of issuance,
redemption provisions, if any, stated maturity and other terms and of
denominations aggregating a like amount. Such definitive Notes shall be
registered in the names of the owners of the beneficial interests in such
Global Note as provided by the Depositary's relevant Participants (as
identified by the Depositary holding such Global Note).
So long as the Depositary for a Book-Entry Note, or its nominee, is the
registered owner of such Book-Entry Note, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Note
represented by such Book-Entry Note for the purposes of receiving payments on
the Notes, receiving notices and for all other purposes under the Indenture and
the Notes. Beneficial interests in Book-Entry Notes will be evidenced only by,
and transfers thereof will be effected only through, records maintained by the
Depositary (with respect to Participants' interests) and its Participants (with
respect to beneficial owners' interests). Except as provided above, owners of
beneficial interests in such Global Note will not be entitled to receive
physical delivery of Notes in definitive form and will not be considered the
Holders thereof for any purpose under the Indenture, and except as provided
above, no Global Note representing Book-Entry Notes shall be exchangeable.
Accordingly, each person owning a beneficial interest in such Global Note must
rely on the procedures of the Depositary and, if such person is not a
Participant, on the procedures of the Participant through which such person
owns its interest, to exercise any rights of a Holder under the Indenture.
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 Note will be issued for each issue of Book-Entry Notes, each
in the aggregate principal amount of such issue, and will be deposited with the
Depositary. If, however, the aggregate principal amount of any issue exceeds
$200,000,000, one Global Note will be issued with respect to each $200,000,000
of principal amount and an additional Global Note will be issued with respect
to any remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants of the Depositary ("Direct
Participants") include securities brokers and dealers (including the Agents),
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 SEC.
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 Note ("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
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purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct Participants or Indirect Participants through which
such Beneficial Owners entered into the transactions. Transfers of ownership
interests in a Global Note representing Book-Entry Notes are to be accomplished
by entries made on the books of Participants acting on behalf of Beneficial
Owners.
To facilitate subsequent transfers, all Global Notes 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 Notes
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 Notes 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 Notes representing the Book-Entry Notes. Under its usual procedures,
the Depositary mails an Omnibus Proxy to the Company as soon as possible after
the applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting
or voting rights to those Direct Participants to whose accounts the Book-Entry
Notes are credited on the applicable record date (identified in a listing
attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the Global
Notes representing the Book-Entry Notes will be made in immediately available
funds to the Depositary. The Depositary's practice is to credit Direct
Participants' accounts on the applicable payment date in accordance with their
respective holdings shown on the Depositary's records unless the Depositary has
reason to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of the Depositary, the Trustee or
the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to the Depositary is the responsibility of the Company and
the Trustee, disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct 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 the Company, through its Participant, to the Trustee, and
shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global Note or Notes
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 Note or Notes representing such Book-Entry Notes
are transferred by Direct Participants on the Depositary's records.
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The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances, in
the event that a successor securities depository is not obtained, Certificated
Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
REPURCHASE
The Company may at any time purchase Notes at any price or prices on the open
market or otherwise. Notes so purchased by the Company may be held or resold
or, at the discretion of the Company, may be surrendered to the Trustee for
cancellation.
EVENTS OF DEFAULT
The following constitute Events of Default under the Indenture with respect
to the Notes (parenthetical references to certain applicable sections of the
Indenture as in effect on the date hereof have been set forth below for
convenience of reference): (1) default in the payment of principal of any Note
when due and the continuation of such default for a period of three Business
Days thereafter; (2) default in the payment of interest on any Note when due
and the continuation thereof for a period of 30 days; (3) default in the
deposit of any sinking fund payment (if any) on any Note when due and
continuance of such default for a period of three Business Days thereafter; (4)
default in the performance or breach of any other covenant or warranty of the
Company in the Indenture (other than a covenant or warranty included in the
Indenture solely for the benefit of one or more series of debt securities other
than the Notes) and the continuation thereof for 60 days after written notice
to the Company as provided in the Indenture; (5) default in the payment of
principal or interest on, or acceleration of, securities of any other series
issued under the Indenture or any other mortgage, indenture or instrument or
other evidence of indebtedness of the Company for borrowed money, in an
aggregate amount exceeding $5,000,000, which default is not cured or
acceleration not rescinded or annulled, or indebtedness not discharged, within
90 days after written notice to the Company as provided in the Indenture; and
(6) certain events of bankruptcy, insolvency or reorganization (Section 501).
No Event of Default with respect to the Notes necessarily constitutes an Event
of Default with respect to other debt securities issued under the Indenture.
If an Event of Default with respect to the Notes occurs and is continuing,
either the Trustee or the Holders of at least 33 percent in aggregate principal
amount of the outstanding Notes may declare the principal amount of all Notes
to be due and payable immediately. At any time after the declaration of
acceleration with respect to the Notes has been made, but before a judgment or
decree based on acceleration has been obtained, the Holders of a majority in
principal amount of the outstanding Notes may, under certain circumstances,
rescind and annul such acceleration (Section 502).
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity (Section 603). Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority in
principal amount of the outstanding Notes will have the right to direct the
time, method and place of conducting any proceeding for any remedy
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available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Notes (Section 512). The right of a Holder of any
Note to institute a proceeding with respect to the Indenture is subject to
certain conditions precedent, but each Holder has an absolute right to receive
payment of principal, premium, if any, and interest when due and to institute
suit for the enforcement of any such payment (Sections 507 and 508). The
Indenture provides that the Trustee, within 90 days after the occurrence of a
default with respect to the Notes, is required to give the Holders of the Notes
notice of such default, unless cured or waived; provided that, except in the
case of default in the payment of principal or of interest on any Note, the
Trustee may withhold such notice if it determines it is in the interest of such
Holders to do so (Section 602).
The Company will be required to furnish annually to the Trustee a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance (Section 1009).
CERTAIN COVENANTS OF THE COMPANY
Although the Indenture contains certain covenants, described below, with
respect to consolidations, mergers, or conveyances involving the Company, these
covenants do not focus on the debt incurred in any such transaction and do not
otherwise afford protection to holders of Notes in the event of a highly
leveraged transaction that is not in violation of the covenants. The Company
does not currently intend to include any covenants or other provisions
affording such protection in the Notes.
LIMITATION OF LIENS.
The Company will not, and will not permit any Subsidiary to, issue, assume or
guarantee any debt for money borrowed (herein referred to as "Debt") if such
Debt is secured by any mortgage, security interest, pledge, lien or other
encumbrance (herein referred to as a "mortgage") upon any property of the
Company or any Subsidiary or indebtedness issued by any Subsidiary and owned by
the Company or any other Subsidiary, whether owned at the date of the Indenture
or thereafter acquired, without effectively securing the Notes equally and
ratably with (or prior to) such Debt. The foregoing restriction does not apply
to: (i) mortgages to secure Debt issued under the Indenture; (ii) "permitted
liens" as defined in the Indenture; (iii) mortgages on any property acquired,
constructed or improved after the date of the Indenture which are created or
assumed within 120 days after such acquisition or completion of such
construction or improvement (or within six months thereafter pursuant to a firm
commitment for financing arrangements entered into within such 120-day period)
to secure or provide for the payment of the purchase price or cost thereof
incurred after the date of the Indenture, or existing mortgages on property
acquired, provided such mortgages shall not apply to any property theretofore
owned by the Company or a Subsidiary other than theretofore unimproved real
property; (iv) existing mortgages of a corporation merged with or into the
Company or a Subsidiary; (v) mortgages of any corporation existing at the time
it becomes a Subsidiary; (vi) mortgages securing Debt owed by a Subsidiary to
the Company or to another Subsidiary; (vii) mortgages in favor of domestic or
foreign governmental bodies to secure advances or other payments pursuant to
any contract or statute or to secure indebtedness incurred to finance the
purchase price or cost of constructing or improving the property subject to
such mortgages, including mortgages to secure Debt of the pollution control or
industrial revenue bond type; (viii) mortgages to secure loans to the Company
or any Subsidiary maturing within 12 months and made in the ordinary course of
business; (ix) mortgages existing on the date of the Indenture; (x) mortgages
on any property to secure all or part of the cost of exploration, drilling or
development thereof or to secure Debt incurred to provide funds for any such
purpose; or (xi) mortgages for extending, renewing or replacing Debt secured by
any mortgage referred to in the foregoing clauses (i) to (x) inclusive or in
this clause (xi), provided, however, that the principal amount of Debt secured
thereby shall not exceed the principal amount of Debt so secured at the time of
such extension, renewal or replacement and that the mortgage for such
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extension, renewal or replacement shall be limited to the original property or
indebtedness. Furthermore, such restriction does not apply to the issuance,
assumption or guarantee by the Company or any Subsidiary of Debt secured by a
mortgage which would otherwise be subject to the foregoing restriction up to an
aggregate amount which, together with all other secured Debt (not including
secured Debt permitted under the foregoing exceptions), does not exceed 5% of
Consolidated Net Tangible Assets (Section 1008).
CONSOLIDATION, MERGER, SALE OR CONVEYANCE.
The Indenture provides that the Company may, without the consent of the
Holders of the Notes, consolidate with, or sell or convey all or substantially
all of its property and assets to, or merge into another corporation, only if
in any such case (i) if the Company is not the continuing corporation, the
successor corporation shall assume by a supplemental indenture the Company's
obligations under the Indenture and (ii) immediately after giving effect to
such transaction no Event of Default, and no event which after notice or lapse
of time would become an Event of Default, shall have happened and be continuing
(Section 801). If, upon any consolidation or merger of the Company with or into
any other corporation, or upon any sale or conveyance of all or substantially
all of its property and assets to another corporation, any property of the
Company or any Subsidiary or any indebtedness issued by any Subsidiary then
owned by the Company or any other Subsidiary would thereupon become subject to
a mortgage, other than the permitted mortgages referred to under "Limitations
on Liens" above, the Company, prior to or concurrently with such consolidation,
merger, sale or conveyance, will by a supplemental indenture secure the Notes
equally and ratably with any other indebtedness of the Company or such
Subsidiary entitled thereto, by a direct lien, on such property of the Company
or any Subsidiary or such indebtedness issued by a Subsidiary, prior to all
liens other than any theretofore existing thereon (Section 801).
CERTAIN DEFINITIONS.
Certain terms defined in the Indenture are summarized below. All accounting
terms not specifically defined in the Indenture are to be construed in
accordance with generally accepted accounting principles and practices in use
on the date of the Indenture.
"Consolidated Net Tangible Assets" means the total amount of assets appearing
on the consolidated balance sheet of the Company and its Subsidiaries less
(without duplication) the following: (1) current liabilities; (2) reserves for
depreciation and other asset valuation reserves but excluding reserves for
deferred Federal income taxes; (3) intangible assets such as goodwill,
trademarks, trade names, patents and unamortized debt discount and expense; and
(4) appropriate adjustments on account of minority interests of other persons
holding common stock in any Subsidiary of the Company (Section 101).
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency (Section 101).
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the securities of each series then outstanding under the Indenture affected
by such supplemental indenture (each such series voting as a single class), to
execute supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of the Indenture or modifying the rights of
the holders of securities of such series,
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except that no such supplemental indenture may (i) change the stated maturity
of any securities outstanding under the Indenture, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the method of calculating the rate of interest
thereon or on any overdue principal amount, or reduce amount thereof, or reduce
any amount payable upon any redemption thereof, or (ii) reduce the aforesaid
percentage of securities of any series outstanding under the Indenture, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each security so affected (Section 902).
The Indenture also permits the Company and the Trustee to amend the Indenture
in certain circumstances without the consent of the holders of the securities
outstanding under the Indenture to evidence the merger of the Company or the
replacement of the Trustee with respect to the securities of one or more series
and for certain other purposes (Section 901).
LISTING
The Notes will not be listed on any national or regional securities exchange.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus is directed
to prospective purchasers who are United States residents and, with respect to
Foreign Currency Notes, is by necessity incomplete. The Company 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, the Company
is 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 the Company in the Specified Currency will be converted
by the exchange rate agent named 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 hereinafter described, 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 the Company for
the purchase by the quoting dealer of the Specified Currency for United States
dollars for settlement on such payment date in the aggregate amount of 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.
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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 Note 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 herein 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 prior to the
Maturity Date by each Holder thereof, provided that such bank has appropriate
facilities therefor and that the applicable Foreign Currency Note is presented
and surrendered at the 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, in time for the Trustee to make such
payments in such funds in accordance with its normal procedures.
AVAILABILITY OF SPECIFIED CURRENCY
Except as set forth below, 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 thereof due to the imposition of exchange
controls or other circumstances beyond the control of the Company, the Company
will be entitled to satisfy its obligations to the Holder of such Foreign
Currency Note by making such payment in United States dollars on the basis of
the Market Exchange Rate, computed by the Exchange Rate Agent, on the second
Business Day prior to such payment or, if such Market
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Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate, or as otherwise specified in the applicable
Pricing Supplement.
If the Specified Currency for a Foreign Currency Note is a composite currency
that is not available for the required payment of principal, premium, if any,
and/or interest, if any, in respect thereof due to the imposition of exchange
controls or other circumstances beyond the control of the Company, the Company
will be entitled to satisfy its obligations to the Holder of such Foreign
Currency Note by making such payment in United States dollars on the basis of
the equivalent of the composite currency in United States dollars. The
component currencies of the composite currency for this purpose (the "Component
Currencies") shall be the currency amounts that were components of the
composite currency as of the last day on which the composite currency was used.
The equivalent of the composite currency in United States dollars shall be
calculated by aggregating the United States dollar equivalents of the Component
Currencies. The United States dollar equivalent of each of the Component
Currencies shall be determined by the Exchange Rate Agent on the basis of the
Market Exchange Rate on the second Business Day prior to the required payment
or, if such Market Exchange Rate is not then available, on the basis of the
most recently available Market Exchange Rate for each such Component Currency,
or as otherwise specified in the applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a 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
Under current New York law, a state court in the State of New York rendering
a judgment in respect of a Foreign Currency Note would be required to render
such judgment in the Specified Currency, and such foreign currency judgment
would be converted into United States dollars at the exchange rate prevailing
on the date of entry of such judgment. Accordingly, the Holder of such Foreign
Currency Note would be subject to exchange rate fluctuations between the date
of entry of such foreign currency judgment and the time the amount of such
foreign currency judgment is paid to such Holder in United States dollars and
converted by such Holder into the Specified Currency. It is not certain,
however, whether a non-New York state court would follow the same rules and
procedures with respect to conversions of foreign currency judgments.
The Company will indemnify the Holder of any Note against any loss incurred
by such Holder as a result of any judgment or order being given or made for any
amount due under such Note and such judgment or order requiring payment in a
currency or composite currency (the "Judgment Currency")
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other than the Specified Currency, and as a result of any variation between (i)
the rate of exchange at which the Specified Currency amount is converted into
the Judgment Currency for the purpose of such judgment or order, and (ii) the
rate of exchange at which the Holder of such Note, on the date of payment of
such judgment or order, is able to purchase the Specified Currency with the
amount of the Judgment Currency actually received by such Holder, as the case
may be.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under the laws of any
other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST
Payments of interest on a Note generally will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting).
ORIGINAL ISSUE DISCOUNT
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("Original Issue
Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service
("IRS") on January 27, 1994, as amended on June 11, 1996, under the original
issue discount provisions of the Code.
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as hereinafter defined) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales
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to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers). The stated
redemption price at maturity of a Note is the sum of all payments provided by
the Note other than "qualified stated interest" payments. The term "qualified
stated interest" generally means stated interest that is unconditionally
payable in cash or property (other than debt instruments of the issuer) at
least annually at a single fixed rate. In addition, under the OID Regulations,
if a Note bears interest for one or more accrual periods at a rate below the
rate applicable for the remaining term of such Note (e.g., Notes with teaser
rates or interest holidays), and if the greater of either the resulting
foregone interest on such Note or any "true" discount on such Note (i.e., the
excess of the Note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the stated interest on the Note
would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note must include
original issue discount in income as ordinary interest for United States
Federal income tax purposes as it accrues under a constant yield method in
advance of receipt of the cash payments attributable to such income, regardless
of such U.S. Holder's regular method of tax accounting. In general, the amount
of original issue discount included in income by the initial U.S. Holder of an
Original Issue Discount Note is the sum of the daily portions of original issue
discount with respect to such Original Issue Discount Note for each day during
the taxable year (or portion of the taxable year) on which such U.S. Holder
held such Original Issue Discount Note. The "daily portion" of original issue
discount on any Original Issue Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Original Issue
Discount Note, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Original Issue Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and (ii) the amount of any qualified stated interest
payments allocable to such accrual period. The "adjusted issue price" of an
Original Issue Discount Note at the beginning of any accrual period is the sum
of the issue price of the Original Issue Discount Note plus the amount of
original issue discount allocable to all prior accrual periods minus the amount
of any prior payments on the Original Issue Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
Note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount Note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross income
with respect to such Original Issue Discount Note for any taxable year (or
portion thereof in which the U.S. Holder holds the Original Issue Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the
total noncontingent principal payments due under the Variable Note
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by more than a specified de minimis amount and (b) it provides for stated
interest, paid or compounded at least annually, at current values of (i) one or
more qualified floating rates, (ii) a single fixed rate and one or more
qualified floating rates, (iii) a single objective rate, or (iv) a single fixed
rate and a single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the Note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon objective financial or economic
information. A rate will not qualify as an objective rate if it is based on
information that is within the control of the issuer (or a related party) or
that is unique to the circumstances of the issuer (or a related party), such as
dividends, profits or the value of the issuer's stock (although a rate does not
fail to be an objective rate merely because it is based on the credit quality
of the issuer). A "qualified inverse floating rate" is any objective rate where
such rate is equal to a fixed rate minus a qualified floating rate, as long as
variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. The OID Regulations
also provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of one year or less followed by a variable rate that
is either a qualified floating rate or an objective rate and if the variable
rate on the Variable Note's issue date is intended to approximate the fixed
rate (e.g., the value of the variable rate on the issue date does not differ
from the value of the fixed rate by more than 25 basis points), then the fixed
rate and the variable rate together will constitute either a single qualified
floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and if
interest on such Note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually, then all stated
interest on such Note will constitute qualified stated interest and will be
taxed accordingly. Thus, a Variable Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations will generally not be treated as having been issued with
original issue discount unless the Variable Note is issued at a "true" discount
(i.e., at a price below the Note's stated principal amount) in excess of a
specified de minimis amount. The amount of qualified stated interest and the
amount of original issue discount, if any, that accrues during an accrual
period on such Variable Note is determined under the rules applicable to fixed
rate debt instruments by assuming that the variable rate is a fixed rate equal
to (i) in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or (ii) in the case of an objective rate
(other than a qualified inverse floating rate), a fixed rate that reflects the
yield that is reasonably expected for the Variable Note. The qualified stated
interest allocable to an accrual period is increased
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(or decreased) if the interest actually paid during an accrual period exceeds
(or is less than) the interest assumed to be paid during the accrual period
pursuant to the foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable Note.
In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate
or a qualified inverse floating rate, the Variable Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. U.S. Holders should be aware that on June 11, 1996 the
Treasury Department issued final regulations (the "CPDI Regulations")
concerning the proper United States Federal income tax treatment of contingent
payment debt instruments. In general, the CPDI Regulations would cause the
timing and character of income, gain or loss reported on a contingent payment
debt instrument to differ substantially from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States Federal income tax law.
Specifically, the CPDI Regulations generally require a U.S. Holder of such an
instrument to include future contingent and noncontingent interest payments in
income as such interest accrues based upon a projected payment schedule.
Moreover, in general, under the CPDI Regulations, any gain recognized by a U.S.
Holder on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any loss
realized could be treated as ordinary loss as opposed to capital loss
(depending upon the circumstances). The CPDI Regulations apply to debt
instruments issued on or after August 13, 1996. The proper United States
Federal income tax treatment of Variable Notes that are treated as contingent
payment debt obligations will be more fully described in the applicable Pricing
Supplement. Furthermore, any other
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special United States Federal income tax considerations, not otherwise
discussed herein, which are applicable to any particular issue of Notes will be
discussed in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
SHORT-TERM NOTES
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with original issue discount. In general,
an individual or other cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the Short-
Term Note will be deferred until a corresponding amount of income is realized.
U.S. Holders who report income for United States Federal income tax purposes
under the accrual method, and certain other holders including banks and dealers
in securities, are required to accrue original issue discount on a Short-Term
Note on a straight-line basis unless an election is made to accrue the original
issue discount under a constant yield method (based on daily compounding).
MARKET DISCOUNT
If a U.S. Holder purchases a Note, other than an Original Issue Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of an Original Issue Discount Note, for an amount that is less than its
adjusted issue price as of the purchase date, such U.S. Holder will be treated
as having purchased such Note at a "market discount," unless such market
discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of an Original Issue Discount Note,
any payment that does not constitute qualified stated interest) on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the lesser of (i) the amount of such payment
or realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time of
such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on the basis
of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed
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to the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
PREMIUM
If a U.S. Holder purchases a Note for an amount that is greater than the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest, such U.S. Holder will be considered to have
purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess
of its stated redemption price at maturity, special rules would apply which
could result in a deferral of the amortization of some bond premium until later
in the term of the Note. Any election to amortize bond premium applies to all
taxable debt instruments then owned and thereafter acquired by the U.S. Holder
on or after the first day of the first taxable year to which such election
applies and may be revoked only with the consent of the IRS.
DISPOSITION OF A NOTE
Except as discussed above, upon the sale, exchange or retirement of a Note, a
U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or composite currency
other than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY
CASH METHOD. A U.S. Holder who uses the cash method of accounting for United
States Federal income tax purposes and who receives a payment of interest on a
Note (other than original issue discount or market discount) will be required
to include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the U.S. Holder's tax basis in such Foreign Currency.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
U.S. dollar value of the amount of interest income (including original
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issue discount or market discount and reduced by amortizable bond premium to
the extent applicable) that has accrued and is otherwise required to be taken
into account with respect to a Note during an accrual period. The U.S. dollar
value of such accrued income will be determined by translating such income at
the average rate of exchange for the accrual period or, with respect to an
accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. A U.S. Holder may elect, however, to
translate such accrued interest income using the rate of exchange on the last
day of the accrual period or, with respect to an accrual period that spans two
taxable years, using the rate of exchange on the last day of the taxable year.
If the last day of an accrual period is within five business days of the date
of receipt of the accrued interest, a U.S. Holder may translate such interest
using the rate of exchange on the date of receipt. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above election. A U.S. Holder will recognize exchange gain or
loss (which will be treated as ordinary income or loss) with respect to accrued
interest income on the date such income is received. The amount of ordinary
income or loss recognized will equal the difference, if any, between the U.S.
dollar value of the Foreign Currency payment received (determined on the date
such payment is received) in respect of such accrual period and the U.S. dollar
value of interest income that has accrued during such accrual period (as
determined above).
PURCHASE, SALE AND RETIREMENT OF NOTES
A U.S. Holder who purchases a Note with previously owned Foreign Currency
will recognize ordinary income or loss in an amount equal to the difference, if
any, between such U.S. Holder's tax basis in the Foreign Currency and the U.S.
dollar fair market value of the Foreign Currency used to purchase the Note,
determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income)
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year.
To the extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or the
Note is disposed of (or deemed disposed of as a result of a material change in
the terms of such Note). In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the
U.S. dollar value of the amount realized by translating the Foreign Currency
payment at the spot rate of exchange on the settlement date of the sale. A U.S.
Holder's adjusted tax basis in a Note will equal the cost of the Note to such
holder, increased by the amounts of any market discount or original issue
discount previously included in income by the holder with respect to such Note
and reduced by any amortized acquisition or other premium and any principal
payments received by the holder. A U.S. Holder's tax basis in a Note, and the
amount of any subsequent adjustments to such holder's tax basis, will be the
U.S. dollar value of the Foreign Currency amount paid for such Note, or of the
Foreign Currency amount of the adjustment, determined on the date of such
purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that is
attributable to fluctuations in currency exchange rates will be ordinary income
or loss which will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates will equal the
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difference between the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date such payment is received or the Note
is disposed of, and the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date the U.S. Holder acquired the Note.
Such Foreign Currency gain or loss will be recognized only to the extent of the
total gain or loss realized by the U.S. Holder on the sale, exchange or
retirement of the Note.
ORIGINAL ISSUE DISCOUNT
In the case of an Original Issue Discount Note or Short-Term Note, (i)
original issue discount is determined in units of the Foreign Currency, (ii)
accrued original issue discount is translated into U.S. dollars as described in
"Payments of Interest in a Foreign Currency--Accrual Method" above and (iii)
the amount of Foreign Currency gain or loss on the accrued original issue
discount is determined by comparing the amount of income received attributable
to the discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
PREMIUM AND MARKET DISCOUNT
In the case of a Note with market discount, (i) market discount is determined
in units of the Foreign Currency, (ii) accrued market discount taken into
account upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note (other than accrued
market discount required to be taken into account currently) is translated into
U.S. dollars at the exchange rate on such disposition date (and no part of such
accrued market discount is treated as exchange gain or loss) and (iii) accrued
market discount currently includible in income by a U.S. Holder for any accrual
period is translated into U.S. dollars on the basis of the average exchange
rate in effect during such accrual period, and the exchange gain or loss is
determined upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note in the manner described
in "Payments of Interest in a Foreign Currency--Accrual Method" above with
respect to computation of exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the U.S.
dollar value of the bond premium amortized with respect to a period, determined
on the date the interest attributable to such period is received, and the U.S.
dollar value of the bond premium determined on the date of the acquisition of
the Note.
EXCHANGE OF FOREIGN CURRENCIES
A U.S. Holder will have a tax basis in any Foreign Currency received as
interest or on the sale, exchange or retirement of a Note equal to the U.S.
dollar value of such Foreign Currency, determined at the time the interest is
received or at the time of the sale, exchange or retirement. Any gain or loss
realized by a U.S. Holder on a sale or other disposition of Foreign Currency
(including its exchange for U.S. dollars or its use to purchase Notes) will be
ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a non-
U.S. Holder (the "Withholding Agent") must have received in the
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year in which a payment of interest or principal occurs, or in either of the
two preceding calendar years, a statement that (i) is signed by the beneficial
owner of the Note under penalties of perjury, (ii) certifies that such owner is
not a U.S. Holder and (iii) provides the name and address of the beneficial
owner. The statement may be made on an IRS Form W-8 or a substantially similar
form, and the beneficial owner must inform the Withholding Agent of any change
in the information on the statement within 30 days of such change. If a Note is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should
consult its tax advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
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PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company to
or through Goldman, Sachs & Co., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated (the
"Agents"). The Agents, individually or in a syndicate, may purchase Notes, as
principal, from the Company 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 the Company and an Agent, such Agent may also utilize its reasonable
efforts on an agency basis to solicit offers to purchase the Notes at 100% of
the principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Company will pay a commission to an Agent, ranging from
.150% to .750% of the principal amount of each Note, depending upon its stated
maturity, sold through such Agent as an agent of the Company. The Company may
also sell Notes directly to purchasers in those jurisdictions in which it is
permitted to do so and in certain circumstances may engage other agents to act
on the same terms as the Agents. No commission will be payable by the Company
on Notes sold directly by the Company.
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 the Company
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 the 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.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject offers in whole or in part (whether placed
directly with the Company or through an Agent). Each Agent will have the right,
in its discretion reasonably exercised, to reject in whole or in part any offer
to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date
of settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. 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.
During and after offerings of Notes, the Agents may purchase and sell the
offered Notes in the open market. These transactions may include over-allotment
and stabilizing transactions, and purchases to cover short positions created in
connection with such offerings. Stabilizing transactions consist of certain
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the Notes; and short positions involve the sale by the Agents
of a greater number of Notes than they are required to purchase in connection
with such offerings. The Agents also may impose penalty bids, whereby selling
concessions allowed to other broker-dealers in respect of the Notes sold in
such offerings for their account may be reclaimed by the Agents if such Notes
are repurchased by the Agents in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market prices of
such Notes, which may be higher than the prices that might otherwise
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prevail in the open market. These transactions may be effected in the over-
the-counter market or otherwise, and these activities, if commenced, may be
discontinued at any time.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act. The Company has agreed to indemnify the Agents against, and to
provide contribution with respect to, certain liabilities, including
liabilities under the Securities Act. The Company has 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 the Company and certain of its affiliates.
LEGAL OPINIONS
The legality of the Notes offered hereby will be passed upon for the Company
by Schiff Hardin & Waite, 7200 Sears Tower, Chicago, Illinois 60606. Certain
legal matters relating to the Notes offered hereby will be passed upon for the
Agents by Sonnenschein Nath & Rosenthal, 8000 Sears Tower, Chicago, Illinois
60606.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference herein from the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 and the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1997 have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and is included herein in reliance upon the
authority of said firm as experts in giving said reports.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY PRICING
SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT CONSTITUTE ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THEY RELATE OR ANY
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY PRICING SUPPLEMENT NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information...................................................... 2
Documents Incorporated by Reference........................................ 2
The Company................................................................ 3
Ratios of Earnings to Fixed Charges........................................ 3
Use of Proceeds............................................................ 3
Risk Factors............................................................... 4
Description of Notes....................................................... 6
Special Provisions Relating to Foreign Currency Notes...................... 25
Certain United States Federal Income Tax Considerations.................... 28
Plan of Distribution....................................................... 37
Legal Opinions............................................................. 38
Experts.................................................................... 38
</TABLE>
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$217,692,000
NORTHERN INDIANA PUBLIC
SERVICE COMPANY
MEDIUM-TERM NOTES, SERIES E
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LOGO
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
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