Pricing Supplement Dated September 23, 1994 Rule 424(b)(2)
File Nos. 33-34401
33-34401-01
33-51147
33-51147-01
(To Prospectus dated January 27, 1994 and
Prospectus Supplement dated March 3, 1994)
NYNEX CAPITAL FUNDING COMPANY
Medium-Term Notes, Series B
(Fixed Rate)
CUSIP NO. 67077E AW6
Unconditionally Guaranteed as to Payment of Principal, Premium,
if any, and Interest by NYNEX Corporation
Trade Date: September 23, 1994
Principal Amount: $20,000,000
Specified Currency: U.S. Dollars
Option to Elect Payment in Specified Currency
(only applicable if Specified Currency is other than U.S.
Dollars): N/A
Authorized Denominations (only applicable if Specified Currency
is other than U.S. Dollars): N/A
Issue Price: 100%
Selling Agent's Commission: .350%
Interest Rate: See attached Annex.
Interest Payment Dates: See attached Annex.
Stated Maturity: December 15, 1997
Original Issue Date: October 3, 1994
Date of Note, if other than
Original Issue Date: N/A
Net Proceeds to Issuer: $19,930,000
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 PRICING SUPPLEMENT, THE PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Form:
x Book-Entry:
Certificated:
Redemption:
x The Notes cannot be redeemed prior to Stated
Maturity:
<PAGE>
__ The Notes may be redeemed prior to Stated Maturity:
Initial Redemption Date:
Initial Redemption Price: %
Annual Reduction Percentage: %
Extension Provisions:
x The Stated Maturity of the Notes cannot be extended
___ The Stated Maturity of the Notes can be extended
Extension Periods:
Final Maturity:
Repayment:
x The Notes cannot be repaid prior to Stated Maturity
___ The Notes can be repaid prior to Stated Maturity at
the option of the holder of the Note
Repayment Date:
Repayment Price: %
Optional Reset Provisions:
x The interest rate on the Notes cannot be reset
___ The interest rate on the Notes can be reset at the
option of the Company
Optional Reset Dates:
Discounted Security: __ Yes x No
Total Amount of OID:
Yield to Maturity:
Initial Accrual Period
Trustee Notification Dates:
Indexed Note (Other than Currency Indexed): x Yes __ No
Applicable Index: See attached Annex.
Method by which principal and interest
will be determined:
See attached Annex.
Currency Indexed Note: __ Yes x No
Base Exchange Rate:
Determination Agent:
Denominated Currency:
Face Amount:
Indexed Currency:
Dual Currency Note: __ Yes x No
Face Amount Currency:
Optional Payment Currency:
Designated Exchange Rate:
Option Election Dates:
Amortizing Note: __ Yes x No
__ Payments of principal and interest will be made
quarterly
__ Payments of principal and interest will be made
semiannually
<PAGE>
__ Amortization Schedule is attached hereto as Annex A
Other Provisions: See attached Annex.
Annex Attached: x Yes __ No
Lehman Brothers Morgan Stanley & Co.
Incorporated
X J.P. Morgan Salomon Brothers Inc
Securities Inc.
<PAGE>
ANNEX TO PRICING SUPPLEMENT DATED SEPTEMBER 23, 1994 (To
Prospectus dated January 27, 1994 and Prospectus Supplement dated
March 3, 1994)
NYNEX CAPITAL FUNDING COMPANY
Medium-Term Notes, Series B
(Fixed Rate Indexed Note) CUSIP 67077E AW6
Unconditionally Guaranteed as to Payment of Principal, Premium,
if any, and Interest by NYNEX Corporation
_________________________________________________________________
CERTAIN TERMS OF THE NOTES
The following description of certain terms of the Notes
offered hereby (the "Notes") supplements the description of
particular terms of the Notes on the foregoing pages of this
Pricing Supplement. The description of the particular terms of
the Notes in this Pricing Supplement also supplements, and to the
extent inconsistent therewith replaces, the description of the
general terms and provisions of the Company's Medium-Term Notes,
Series B, set forth in the Prospectus dated January 27, 1994 and
the Prospectus Supplement dated March 3, 1994. Investors should
also review carefully the sections below entitled "Certain
Historical Information", "Certain Investment Considerations" and
"Certain United States Federal Income Tax Considerations".
References herein to "$" or "dollars" are to U.S. dollars.
Fixed Rate Interest
The Notes shall bear interest at the fixed rate of 4% per
annum (the "Fixed Rate Interest"), payable on June 15 and
December 15 of each year, commencing December 15, 1994, and at
the Stated Maturity. The Fixed Rate Interest shall otherwise
accrue and be payable at the times and in the amounts and in
accordance with the provisions applicable to Fixed Rate Notes
described in the Prospectus Supplement under the captions
"Description of Notes - Payment of Principal and Interest" and "
- - Fixed Rate Notes".
Payments at Stated Maturity
At the Stated Maturity of any Notes, the holder of such
Notes shall be entitled to receive an amount in cash equal to the
sum of:
(i) the principal amount thereof;
plus
(ii) all accrued and unpaid Fixed Rate Interest on the
principal amount of such Notes to the date of payment;
plus
<PAGE>
(iii) the Additional Interest (defined below), if any,
on such Notes;
plus
(iv) if the Option (defined below) has been effectively
exercised, the Accrual Amount (defined below), if any, in
respect of such Additional Interest.
The amount of the Additional Interest payable at the Stated
Maturity is subject to the limitations described below under
"Limitations on Amounts Payable at Stated Maturity or upon
Acceleration".
Calculation of Additional Interest
The amount of Additional Interest, if any, payable in
respect of any Notes shall be calculated in accordance with the
following definition:
"Additional Interest", with respect to any Notes, means
an amount in dollars equal to the product obtained by
multiplying:
(i) the greater of (A) the excess, if any, of the
Applicable Oil Futures Price (defined below) over
$19.40, or (B) zero,
times
(ii) .0525
times
(iii) the principal amount of such Notes.
The "Applicable Oil Futures Price", used in the above
definition of Additional Interest, refers to either of two prices
depending on whether the Option is exercised, as follows:
(i) If the Option is not exercised at or prior to 3:10
p.m., Eastern Standard Time, on December 8, 1997, then
"Applicable Oil Futures Price" means the "WTI Price"
(defined below); or
(ii) If the Option is exercised at or prior to 3:10
p.m., Eastern Standard Time, on December 8, 1997, then
"Applicable Oil Futures Price" means the "Alternate Oil
Price" (defined below under "The Option").
As used herein:
<PAGE>
(i) the term "WTI Price" means the settlement price
(expressed in dollars per barrel) of the January 1998 WTI
Contract, as established by the New York Mercantile Exchange
or its successor (the "New York Mercantile Exchange"), for
December 8, 1997 that appears on Telerate Page 8810;
provided that if such settlement price does not appear on
Telerate Page 8810 prior to the Stated Maturity, the
Calculation Agent shall obtain such settlement price of the
January 1998 WTI Contract for December 8, 1997 (or if a
Market Condition (defined below) exists on December 8, 1997,
for such later day determined as described below in the
fourth proviso to this clause (i)) from Reuters Page PPNI or
(if not available on Reuters Page PPNI) from The Wall Street
Journal, and such settlement price so obtained shall be the
WTI Price; provided further that if such settlement price
does not appear on Reuters Page PPNI or in The Wall Street
Journal prior to the Stated Maturity, the Calculation Agent
shall obtain a certificate or official notation of the New
York Mercantile Exchange as to such settlement price of the
January 1998 WTI Contract for December 8, 1997 (or if a
Market Condition (defined below) exists on December 8, 1997,
for such later day determined as described below in the
fourth proviso to this clause (i)) and such settlement price
so certified or set forth in such notation shall be the WTI
Price; provided further that if the Calculation Agent shall
be unable to obtain such a certificate or official notation
of the New York Mercantile Exchange prior to the Stated
Maturity, such settlement price of the January 1998 WTI
Contract for December 8, 1997 (or if a Market Condition
exists on December 8, 1997, for such later day determined as
described below in the fourth proviso to this clause (i))
shall be otherwise evidenced to the reasonable satisfaction
of the Calculation Agent, and such settlement price so
evidenced shall be the WTI Price; provided further that, if
a Market Condition shall exist on December 8, 1997, the WTI
Price shall mean the settlement price (expressed in dollars
per barrel) of the January 1998 WTI Contract, as established
by the New York Mercantile Exchange, for the first Exchange
Business Day (defined below) after December 8, 1997 on which
a Market Condition does not exist, that appears on Telerate
Page 8810;
(ii) the term "January 1998 WTI Contract" means the New
York Mercantile Exchange "Light Sweet Crude Oil Futures
Contract" for January 1998, for West Texas Intermediate
crude oil;
(iii) the term "Telerate Page 8810" means the display
designated as "Page 8810" on the Dow Jones Telerate Service
or a successor service or the comparable display of another
service selected by the Calculation Agent (or such other
page as may replace Page 8810 on that service or such
successor service or other service for the purpose of
displaying the official settlement prices of crude oil
<PAGE>
futures contracts, including, without limitation, the
January 1998 WTI Contract); and
(iv) the term "Market Condition" on any day means the
suspension or material limitation of trading in crude oil or
crude oil futures on the New York Mercantile Exchange which
continues for more than two hours on that day or remains in
effect at the close of trading that day, excluding a
limitation of trading hours or trading days resulting from a
change in the regular business hours or trading days of the
New York Mercantile Exchange; provided that a Market
Condition shall be deemed to exist on December 8, 1997, if
for any reason such day is not an Exchange Business Day..
If a Market Condition exists on December 8, 1997, and the
first Exchange Business Day after December 8, 1997 on which a
Market Condition does not exist occurs after the Stated Maturity,
the Additional Interest, if any, shall be payable on the first
Exchange Business Day after the Stated Maturity on which a Market
Condition does not exist, and no Accrual Amount or other interest
shall be payable for the period from the Stated Maturity to the
postponed payment date.
The WTI Price shall be established by the Calculation Agent
(defined below under "Calculation Agent") by delivery to the
Company and the Trustee of a certificate setting forth such price
not later than the second Exchange Business Day (defined below)
prior to the Stated Maturity or if a Market Condition exists on
the Stated Maturity, as soon thereafter as is practicable. As
used herein, "Exchange Business Day" means any day other than a
Saturday or Sunday on which the New York Mercantile Exchange is
open for trading.
The Option
The holder of any Note shall have the option (the "Option")
to elect that any Additional Interest shall be calculated on the
basis of the "Alternate Oil Price" (defined below), rather than
the WTI Price referred to above. However, notwithstanding the
exercise of the Option, the Additional Interest, if any, shall be
payable only at the Stated Maturity or upon acceleration (as
described below under "Payment upon Acceleration"), and not at
the time of exercise of the Option (the "Option Exercise Time").
As used herein:
(i) the term "Alternate Oil Price" means the bid side
price (expressed in dollars per barrel) of the January 1998
WTI Contract, as quoted by J.P. Morgan Securities Inc. or
its successor ("JPM"), as of the Option Exercise Time (or as
soon after such time as such quotation can reasonably be
obtained by the Calculation Agent) (such bid side price so
quoted by JPM being herein called the "JPM Price"); provided
<PAGE>
that (A) if the January 1998 WTI Contract is not listed on
the New York Mercantile Exchange at the Option Exercise Time
and (B) if the JPM Price is not reasonably acceptable to the
holder of the Notes as to which the Option was exercised,
then, with respect to such Notes, "Alternate Oil Price"
shall mean the Average Dealer Price (defined below); and
(ii) the term "Average Dealer Price" means the simple
average of the three bid side prices for the January 1998
WTI Contract remaining out of the bid side prices for the
January 1998 WTI Contract quoted by five petroleum dealers,
as of the Option Exercise Time (or as soon after such time
as such bid side price quotations can reasonably be obtained
by the Calculation Agent), after excluding the highest and
lowest of such five bid side prices (the Average Dealer
Price shall be calculated by the Calculation Agent and
established in a certificate (the "Dealer Price
Certificate") delivered by the Calculation Agent to the
Trustee and the Company not more than three Exchange Days
after the Option Exercise Date, and such five petroleum
dealers shall be selected by the Calculation Agent, shall be
U.S. domestic entities that are unaffiliated with the
Company and shall be designated by the Calculation Agent in
the Dealer Price Certificate).
For purposes of the definition of "Alternate Oil Price", (i)
the January 1998 WTI Contract shall be deemed to be not listed on
the New York Mercantile Exchange at the Option Exercise Time if
the Calculation Agent shall deliver a certificate to that effect
to the Trustee and the Company, and (ii) the JPM Price shall be
deemed to be not reasonably acceptable to the holder of the Notes
as to which the Option was exercised only if such holder shall
deliver a written notice to that effect to the Calculation Agent,
with copies to the Company and the Trustee, within one Exchange
Business Day after the Option Exercise Date, and in the event
that such holder shall fail to give such a notice within the
prescribed time, the JPM Price shall be conclusively deemed to be
reasonably acceptable to such holder.
The Option may be exercised only by the delivery to the
Calculation Agent, with copies to the Company and the Trustee, of
a duly executed and completed "Notice of Exercise" (defined
below) at or after 9:45 a.m., Eastern Standard Time, and at or
prior to 3:10 p.m., Eastern Standard Time, on any Exchange
Business Day on or after the Issue Date and on or before December
8, 1997. Delivery of the Notice of Exercise shall be made by
hand delivery against confirmation of receipt, or by facsimile
transmission.
The time of receipt by the Calculation Agent of the Notice
of Exercise shall be deemed to be the Option Exercise Time. The
date of exercise of the Option is herein called the "Option
Exercise Date". As used herein, the term "Notice of Exercise"
means a written notice, stating the name of the registered holder
<PAGE>
of such Notes, and stating that the Option is being exercised as
to the principal amount of Notes specified therein.
The Option may be exercised by any holder of Notes with
respect to all or any portion of the principal amount of the
Notes held by such holder representing an authorized denomination
of the Notes. Following the exercise of the Option with respect
to any Notes, the Company or the Trustee may require that such
Notes be designated, by separate "CUSIP" number or otherwise, in
such a manner as to distinguish such Notes from any other Notes,
and may require the certificates representing such Notes to be
surrendered to the Trustee for the purpose of affixing a notation
as to the exercise of the Option or such a designation or number,
or for exchange for new certificates bearing such a notation,
designation or number.
For a discussion of the effect of exercising the Option on
trading in the Notes, see "Certain Investment Considerations -
Trading in Notes".
Calculation of Accrual Amount
If the Option is effectively exercised with respect to any
Notes, the holder of such Notes shall be entitled to receive the
"Accrual Amount" (as defined below), representing interest
accrued on the Additional Interest at an interest rate equal to
the 6-Month LIBOR Rate (defined below). The Accrual Amount, if
any, shall be payable only at the Stated Maturity or upon
acceleration, and not at the Option Exercise Time.
As used herein, the term "Accrual Amount" means, at the
Stated Maturity or, in the event of acceleration, on the
Acceleration Payment Date (defined below under "Payments upon
Acceleration"), with respect to any Notes, the amount of interest
accrued on the Additional Interest payable with respect to such
Notes, at an interest rate equal to the 6-Month LIBOR Rate (as
hereinafter defined) from time to time in effect, such interest
to accrue from and including the Option Exercise Date to but
excluding the Stated Maturity or the Acceleration Payment Date,
as the case may be. Such amount of interest shall be compounded
on each Interest Reset Date (as defined below).
The Accrual Amount shall, however, be subject to the terms,
conditions and limitations described below under "Limitations on
Amounts Payable at Stated Maturity or upon Acceleration". The
term "6-Month LIBOR Rate" is defined as follows.
"6-Month LIBOR Rate" means the interest rate, from time
to time in effect, determined as described in the Prospectus
Supplement in the same manner as the interest rate would be
determined for a "Floating Rate Note" with a "Base Rate" of
"LIBOR (Telerate)" for an "Index Maturity" of six months
(with no adjustment for any "Spread" or "Spread Multiplier"
or any "Minimum Interest Rate" or "Maximum Interest Rate")
<PAGE>
if such interest rate were calculated with respect to
"Interest Determination Dates" described in clauses (i) and
(ii) of the next sentence. See "Description of Notes -
Floating Rate Notes" in the Prospectus Supplement. The
interest rate in effect from time to time for purposes
calculating the Accrual Amount with respect to any Notes
shall be calculated on the following basis:
(i) If the Option Exercise Date with respect to such
Notes is not an Interest Reset Date (determined as provided
below), the interest rate in effect from and including the
Option Exercise Date to but excluding the first Interest
Reset Date after the Option Exercise Date shall be
calculated on the following basis: (A) the "Interest
Determination Date" shall be deemed to be the second London
Banking Day next preceding the Option Exercise Date; and (B)
such interest rate in effect shall be the 6-Month LIBOR Rate
with respect to such Interest Determination Date, calculated
in the manner described in the Prospectus Supplement; and
(ii) The interest rate in effect from and including
each Interest Reset Date on or after the Option Exercise
Date to but excluding the next Interest Reset Date or the
Stated Maturity or Acceleration Payment Date (defined
below), as the case may be, shall be determined as described
in the Prospectus Supplement on the following basis: (A) The
Interest Reset Dates shall be deemed to be June 15 and
December 15 of each year, commencing December 15, 1994 and
ending on June 15, 1997; provided that if any such Interest
Reset Date would otherwise be a day that is not a Business
Day, such Interest Reset Date shall be postponed to the next
day that is a Business Day, except that if such Business Day
is in the next succeeding calendar month, such Interest
Reset Date shall be the next preceding Business Day; (B) the
6-Month LIBOR Rate shall be reset on the Interest Reset
Dates set forth in clause (A) above; and (C) the Interest
Determination Date pertaining to each Interest Reset Date
shall be the second London Banking Day next preceding such
Interest Reset Date.
Payments upon Acceleration
If the payment of principal of and interest on the Notes is
accelerated in accordance with the provisions described under
"Description of Debt Securities and Guarantees - Events of
Default" in the Prospectus, then the holder of any Notes shall be
entitled to receive on the date of acceleration (the
"Acceleration Date") an amount in cash equal to the sum of:
(i) the principal amount thereof, plus
(ii) all accrued and unpaid Fixed Rate Interest on the
principal amount of such Notes to the date of payment (the
"Acceleration Payment Date"); plus
<PAGE>
(iii) Additional Interest, if any, on such Notes, and
the Accrual Amount, if any, in respect of such Additional
Interest in amounts determined as described below,
The amounts of Additional Interest, if any, and Accrual
Amount, if any, payable with respect to any Notes shall be as
follows:
(i) if the Option has been exercised as to such Notes
prior to the Acceleration Date, (A) the Additional Interest,
if any, that would have been payable at the Stated Maturity,
and (B) the Accrual Amount based thereon accrued to the
Acceleration Payment Date;
(ii) if the Option has not been exercised as to such
Notes prior to the Acceleration Date and the Acceleration
Date occurs at or prior to 3:10 p.m., Eastern Standard Time,
on December 8, 1997, (A) the Additional Interest, if any,
that would have been payable if the Option were exercised on
the Acceleration Date, and (B) the Accrual Amount based
thereon accrued to the Acceleration Payment Date; or
(iii) if the Option has not been exercised as to such
Notes prior to the Acceleration Date and the Acceleration
Date occurs after 3:10 p.m., Eastern Standard Time, on
December 8, 1997, the Additional Interest, if any, that
would have been payable at the Stated Maturity in the
absence of any exercise of the Option.
In the case of acceleration after December 8, 1997, the WTI
Price shall be established by the Calculation Agent by delivery
to the Company and the Trustee of a certificate setting forth
such price not later than the second Exchange Business Day
immediately after the Acceleration Date.
Limitation on Amounts Payable at
Stated Maturity and Upon Acceleration
The amounts of the payments in respect of any Notes at the
Stated Maturity or upon acceleration, including the respective
amounts of the Additional Interest, if any, and the Accrual
Amount, if any), shall be subject to the following terms,
conditions and limitations:
(i) notwithstanding any computation of Additional
Interest or Accrual Amount with respect to such Notes that
might lead to a contrary result, in all events, the holder
of such Notes shall be entitled to receive, at the Stated
Maturity or upon acceleration, an amount in cash at least
equal to the sum of (A) the principal amount thereof, plus
(B) all accrued and unpaid Fixed Rate Interest on the
principal amount of the Notes to the date of payment.
<PAGE>
(ii) if the Option shall not be effectively exercised
with respect to such Notes at or prior to 3:10 p.m., Eastern
Standard Time, on December 8, 1997, then the Accrual Amount
with respect to such Notes shall be zero;
(iii) in no event shall either the Additional Interest
or the Accrual Amount with respect to such Notes be less
than zero;
(iv) neither the Additional Interest nor the Accrual
Amount with respect to such Notes shall be subject to any
maximum amount limitation; provided that the rate of
interest on any Notes (including Fixed Rate Interest,
Additional Interest, if any, and the Accrual Amount, if any,
in respect of such 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 (see
"Certain Investment Considerations - Maximum Interest Rates
Provided by Law); and
(v) if, at any time on or after the Issue Date and on
or before the earlier of December 8, 1997 or the
Acceleration Date, the Ten Year Constant Maturity Rate (as
hereinafter defined) shall be less than 1% per annum, both
the Additional Interest and the Accrual Amount with respect
to such Notes shall be zero.
The Calculation Agent shall determine at the end of each calendar
quarter during the Term of the Notes and on December 8, 1997 or
the Acceleration Date, as the case may be, whether the Ten Year
Constant Maturity Rate was less than 1% per annum on any Business
Day during such calendar quarter or during the calendar quarter
in which December 8, 1997 or the Acceleration Date occurs).
As used herein, the term "Ten Year Constant Maturity Rate",
on any date, means the Constant Maturity Rate, set forth in the
Federal Reserve Board publication "H.15(519)" under the heading
U.S. Government/Securities/Treasury Constant Maturities" in the
Index Maturity of ten years, or if H.15(519) is no longer
published, the Ten Year Constant Maturity Treasury Rate shall be
the rate set forth on Telerate Page 7055, or its successor page
(as determined by the Calculation Agent) on such date opposite
the Index Maturity of ten years.
Calculation Agent
Morgan Guaranty Trust Company of New York will act as the
calculation agent (the "Calculation Agent") for the Notes,
including, without limitation, for purposes of calculating the
amounts of Additional Interest, if any, and Accrual Amount, if
any, and the 6-Month LIBOR Rate. All determinations made by the
Calculation Agent with respect to the Notes shall be in the sole
discretion of the Calculation Agent and, in the absence of
manifest error, all such determinations shall be conclusive for
<PAGE>
all purposes and irrevocably binding on the Company and the
holders of the Notes, and the Calculation Agent shall have no
liability therefor.
Morgan Guaranty Trust Company of New York is an affiliate of
J.P. Morgan Securities Inc., which acted as Agent in connection
with the sale of the Notes.
CERTAIN HISTORICAL INFORMATION
All information contained in this Pricing Supplement
regarding the prices of crude oil futures contracts was derived
from publicly available sources and prepared by Morgan Guaranty
Trust Company of New York. In addition, the hypothetical amounts
of Additional Interest presented in the table below were
calculated by Morgan Guaranty Trust Company of New York.
The table below sets forth the closing settlement prices
(expressed in dollars per barrel) for the New York Mercantile
Exchange "Light Sweet Crude Oil Contract" for the "First Nearby
Settlement", as of the quarterly dates indicated (generally the
last Exchange Business Day of each quarter) and at August 31,
1994. Based on such prices an investor may compute the
hypothetical Additional Interest for each date that would be
payable at the Stated Maturity if (i) the Option were not
exercised, and (ii) the price shown in the table were the
settlement price (expressed in dollars per barrel) of the January
1998 WTI Contract (as defined under "Payments at Stated Maturity
- - Calculation of Additional Interest"), as established by the New
York Mercantile Exchange, for December 8, 1997.
<TABLE>
<CAPTION>
Closing Settlement Prices for First Available Contract
Settlement
Year Price
<S> <C>
June 30, 1989 $20.27
September 29, 1989 20.13
December 29, 1989 21.82
March 30, 1990 20.28
June 29, 1990 17.07
September 28, 1990 39.51
December 31, 1990 28.44
March 28, 1991 19.63
June 28, 1991 20.56
September 30, 1991 22.23
December 31, 1991 19.12
March 31, 1992 19.44
June 30, 1992 21.60
<PAGE>
September 30, 1992 21.71
December 31, 1992 19.50
March 31, 1993 20.44
June 30, 1993 18.85
September 30, 1993 18.79
December 30, 1993 14.17
March 31, 1994 14.79
June 30, 1994 19.37
August 31, 1994 17.56
</TABLE>
The historical performance of prices for crude oil futures
contracts set forth above and any hypothetical computations of
Additional Interest based on such prices should not be taken as
an indication of future performance, and no assurance can be
given that prices for crude oil futures contracts, during the
years in which the Notes are outstanding, will result in any
payment at Stated Maturity in excess of the principal amount of
the Notes plus Fixed Rate Interest accrued to the date of
payment.
CERTAIN INVESTMENT CONSIDERATIONS
In addition to the risks described in the Prospectus
Supplement under the caption "Description of Notes -- Other
Indexed Notes and Certain Terms Applicable to All Indexed Notes",
the following special considerations may be relevant to a
prospective investor in the Notes.
Payment at Stated Maturity or upon Acceleration
Investors should be aware that if the Applicable Oil Futures
Price does not exceed $19.40 at any time during the Term of the
Notes, or if the holder does not exercise the Option at a time
when the Applicable Oil Futures Price exceeds $19.40 and the
Applicable Oil Futures Price on December 8, 1997 does not exceed
$19.40, then no amount will be payable at Stated Maturity in
excess of (i) the principal amount of the Notes, plus (ii) all
accrued and unpaid Fixed Rate Interest on the principal amount of
the Notes to the date of payment. There can be no assurance that
the Applicable Oil Futures Price will appreciate sufficiently
over the life of the Notes to pay any Additional Interest at the
Stated Maturity or upon acceleration.
Below Market Interest
A holder may receive an aggregate amount of interest which,
taking into account the semi-annual payments of Fixed Rate
Interest at 4% per annum and the amounts of Additional Interest,
if any, and Accrual Amount, if any, is below what the Company
would pay as interest if the Company issued non-callable senior
<PAGE>
debt securities with a maturity similar to that of the Notes. As
previously indicated, it is possible that no amounts of
Additional Interest or Accrual Amount will be payable as interest
at the Stated Maturity or upon acceleration, and that the only
interest payable will be Fixed Rate Interest at 4% per annum.
Although the holders are entitled to receive 100% of the
principal amount of the Notes at Stated Maturity or upon
acceleration, together with Fixed Rate Interest payable semi-
annually, such amount may not fully reflect any opportunity cost
or costs implied by inflation and other factors relating to the
time value of money.
Trading in Notes
The Notes will not be listed on any national securities
exchange. There is no precedent to indicate how the Notes will
trade in the secondary market, and no assurance can be given that
such a trading market will develop or as to the liquidity of any
such market.
It is expected that the secondary market for the Notes will
be affected by a number of interrelated factors independent of
the creditworthiness of the Company. Investors should be aware
that factors other than the level of the prices of crude oil and
crude oil futures contracts are likely to affect the trading
value of the Notes. In general, however, if the prices of crude
oil and crude oil futures contracts increase above their current
levels significantly, the values of the Additional Interest, if
any, and the Accrual Amount, if any, payable in respect of any
Notes may cause the overall effective interest rate on the Notes
to increase above market interest rates. In that event, the
trading price of the Notes is expected to increase. If the
prices of such crude oil and crude oil futures contracts decrease
or remain relatively constant over the life of the Notes, the
trading price of the Notes is expected to decrease.
Investors should also note that, following the exercise of
the Option with respect to any Notes, such Notes will not be
interchangeable with other Notes in the trading market because
the amount of the Additional Interest, if any, and the Accrual
Amount, if any, payable in respect of such Notes will differ from
the corresponding amounts payable in respect of any Notes as to
which the Option has not been exercised or as to which the Option
was exercised at a different time or date. Accordingly, the
trading market for any portion of the Notes may become
progressively more limited as the Option is exercised with
respect to various principal amounts of the Notes.
Maximum Interest Rates
Provided by Law
Prospective investors should note that the rate of interest
on any Notes (including Fixed Rate Interest, Additional Interest,
<PAGE>
if any, and the Accrual Amount, if any, in respect of such 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. Under present New York law, the maximum
rate is 25% per annum on a simple interest basis. This limit may
not apply to Notes in which $2,500,000 or more has been invested.
Suitability
Prospective investors who are considering purchasing the
Notes should reach an investment decision only after carefully
evaluating the suitability of the Notes in the light of their
particular circumstances. Investors should also consider the tax
consequences of investing in the Notes. See "Certain U.S.
Federal Income Tax Considerations" in this Pricing Supplement.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
The following summary describes certain Unnted States
federal income tax consequences of the ownership of Notes as of
the date hereof. Except where noted, it deals only with Notes
held by initial purchasers as capital assets and does not deal
with special situations, such as those of dealers in securities
or currencies, financial institutions, life insurance companies,
persons holding Notes as part of a hedging or conversion
transaction or United States Holders whose "functional currency"
is not the U.S. dollar. Furthermore, the discussion below is
based upon the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities
may be repealed, revoked or modified so as to result in federal
income tax consequences different from those discussed below.
Persons considering the purchase, ownership or disposition of
Notes should consult their own tax advisors concerning the
federal incomectax consequences in light of their particular
situations as well as any consequences arising under the laws of
any other taxing jurisdiction.
As used herein, a "United States Holder" of a Note
means a Holder that is a citizen or resident of the United
States, a corporation, partnership or other entity created or
organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income
of which is subject to United States federal income taxation
regardless of its source.
General
There are no regulations, cases or rulings directly
addressing the treatment of securities similar to the Notes other
than the Proposed Regulations discussed below. Although not free
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from doubt, the Company believes that the Notes should be treated
as debt of the Company for federal income tax purposes.
Accordingly, the Company intendseto treat the Notes as debt for
U.S. federal income tax purposes and file information returns
with the Internal Revenue Service (the "IRS") consistent with
such treatment. The discussion that follows is based on such
approach.
United States Holders
Under general principles of U.S. federal income tax
law, interest is included in income as ordinary income when paid
or accrued, in accordance with a holder's regular method of
accounting. Under these principles, the amounts payable with
respect to a Note as Fixed Rate Interest and the amounts payable
as the Accrual Amount would be taxable to a U.S. Holder as
ordinary interest income on the dates that such amounts are
accrued or received, in accordance with the U.S. Holder's regular
method of accounting.
In accordance with such principles, however,
"contingent interest" on debt is generally not includable in
income bmfore the amount of such interest becomes fixed.
Accordingly, the Company intends to treat amounts payable as
Additional Interest, if any, as contingent interest includable in
income by United States Holders as ordinary income at the Stated
Maturity or, in the case of an accrual basis U.S. Holder that has
exercised the Option, the Option Exercise Time.
There are no regulations, cases or rulings directly
applicable to the treatment of the Notes. The IRS may contend,
however, that the Notes should be treated differently for U.S.
federal income tax purposes from the treatment described above.
Moreover, there can be no assurance that regulations that would
apply different rules to the Notes from those described above
will not come into effect and apply retroactively to the Notes.
In such cases, the timing and character of a United States
Holder's income could be affected.
For example, under certain proposed regulations (the
"Bifurcation Regulations"), a Note ctuld be treated for federal
income tax purposes as two separate instruments: (1) a debt
instrument of the Company with a stated redemption price at
maturity equal to its principal amount (the "noncontingent debt
instrument") and (2) a cash settlement option based upon the
value of the Applicable Oil Futures Price that must be exercised
by delivering the Note (the "property right"). If the
Bifurcation Regulations were to apply to the Notes, the timing of
income could be significantly accelerated. Moreover, the IRS may
contend that rules similar to proposed regulations which were
released to replace the Bifurcation Regulations, but which were
withdrawn (the "Withdrawn Regulations"), should apply to the
Notes. Under the Withdrawn Regulations, United States Holders
would be required to accrue some minimum amount of interest
<PAGE>
income currently over the life of the Note (based on the
estimated value of the Applicable Oil Futures Price) with the
result that all or a portion oo amounts realized by a United
States Holder at the Stated Maturity or on sale of a Note would
be treated as ordinary income and not capital gain.
As described above, however, the Company intends to
treat the Notes as requiring no accrual of contingent interest by
United States Holders prior to the date such amounts are fixed
and the Company will file information returns with the IRS
consistent with such treatment.
A United States Holder's tax basis in a Note will, in
general, be the United States Holder's cost therefor, increased
by any amounts previously included in income by the United States
Holder. Upon the sale or exchange of a Note, a United States
Holder will recognize gain or loss equal to the difference
between the amount realized (less any accrued Fixed Rate Interest
and Accrual Amount, which will be taxable as such) and the
adjusted tax basis of the Note. Although the matter is not free
from doubt, under current law such gain or loss should be treated
as capital gain or loss. It is possible, however, that the IRS
could promulgate regulations that treat all or part of such gain
or loss as ordinary and that such regulations could apply
retroactively to the Notes.
