Rule 424B5
Registration Nos. 33-51147, 33-51147-01;
33-34401, 33-34401-01
Prospectus Supplement
(To Prospectus Dated January 27, 1994)
U.S. $1,500,000,000
NYNEX Capital Funding Company
Medium-Term Notes, Series B,
Due Nine Months or More From Date of Issue
Unconditionally Guaranteed as to Payment of Principal, Premium, if any, and
Interest by NYNEX Corporation
NYNEX Capital Funding Company ("Capital Funding") may from time to time offer
its Medium-Term Notes, Series B (the "Notes"), in an aggregate amount
sufficient to result in gross proceeds to Capital Funding of up to U.S.
$1,500,000,000 or the equivalent thereof in other currencies or composite
currencies, including the European Currency Unit ("ECU") (each a "Foreign
Currency"), subject to reduction as a result of the concurrent sale of other
Debt Securities of Capital Funding. The Notes will be offered at varying
maturities of nine months or more from their dates of issue and may be
subject to redemption at the option of Capital Funding or repayment at the
option of the holder prior to maturity. Each Note will be denominated in U.S.
dollars or in units of a Foreign Currency (the "Specified Currency"), as
specified in the applicable pricing supplement (the "Pricing Supplement") to
this Prospectus Supplement. See "Important Currency Information" and
"Currency Risks." The interest rate on each Note may be a fixed rate (a
"Fixed Rate Note"), which may be zero in the case of certain Notes issued at
a price representing a substantial discount from the principal amount payable
upon maturity, or a floating rate (a "Floating Rate Note"). A Floating Rate
Note may be either a Regular Floating Rate Note, a Floating Rate/Fixed Rate
Note or an Inverse Floating Rate Note (each as defined below) and its rate of
interest may be determined by reference to one or more of the Commercial
Paper Rate, the CD Rate, the Federal Funds Rate, LIBOR, the Treasury Rate,
the Prime Rate or any other Base Rate (each as defined below), or interest
rate formula set forth in the applicable Pricing Supplement, as adjusted by
the Spread and/or Spread Multiplier (each as defined below), if any,
applicable to such Note. A Note may provide that amounts in respect of
interest and principal due thereon shall be payable over the life of the Note
according to an amortization schedule (an "Amortizing Note"). The principal
amount payable at maturity and/or any interest or premium on a Note (an
"Indexed Note") may be determined by reference to the relationship between
two or more currencies and/or composite currencies, to the price of one or
more specified securities or commodities or to one or more securities or
commodities exchange indices or other indices or by other similar methods or
formulas and on such other terms as described in the applicable Pricing
Supplement. Capital Funding may also issue a Note (a "Dual Currency Note")
with respect to which Capital Funding has the option of paying principal and
interest due thereon in either the Face Amount Currency or the Optional
Payment Currency (each as defined below). Each Note will be unconditionally
guaranteed as to payment of principal, premium, if any, and interest by NYNEX
Corporation ("NYNEX").
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The Notes will be issued in denominations of U.S. $1,000 or any integral
multiple of U.S. $1,000 or, in the case of Notes denominated in a Foreign
Currency, in the denominations set forth in the applicable Pricing
Supplement. Each Note will be represented by either a global certificate (a
"Book-Entry Note") registered in the name of a nominee of The Depository
Trust Company ("DTC") or other depositary (DTC or such other depositary is
herein referred to as the "Depositary"), or a certificate issued in
definitive form (a "Certificated 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 and its participants. See "Description of Notes--Book-Entry
System."
Except as otherwise indicated herein or in the applicable Pricing Supplement,
interest on each Fixed Rate Note (other than an Amortizing Note) is payable
each March 15 and September 15 and at maturity. Interest on each Floating
Rate Note is payable on the dates set forth therein and in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, principal of and interest on each Amortizing Note will be paid
(i) semiannually each March 15 and September 15, or quarterly each March 15,
June 15, September 15 and December 15, and (ii) at maturity.
The Specified Currency, any applicable interest rate or interest rate
formula, the issue price, the maturity, any interest payment dates, any
redemption or repayment provisions, any amortization provisions, whether a
Note will be a Book-Entry Note or a Certificated Note, whether a Note is an
Indexed Note and certain other terms with respect to each Note will be
established at the date of issue for such Note and set forth therein and in
the applicable Pricing Supplement.
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<PAGE>2 of cover
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
Price to Agent's Proceeds to
Public(1) Commissions(2) Company(2)(3)
<S> <C> <C> <C>
Per Note 100.000% .125%-.750% 99.875%-99.250%
Total (4) U.S.$1,500,000,000 U.S.$1,875,000-U.S.$11,250,000
U.S.$1,498,125,000-U.S.$1,488,750,000
</TABLE>
(1) Each Note will be sold at 100% of its principal amount except as may be
provided in the applicable Pricing Supplement.
(2) Capital Funding will pay a commission to Lehman Brothers, Lehman Brothers
Inc. (including its affiliate Lehman Special Securities Inc.), J.P. Morgan
Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Brothers Inc,
each as Agent (collectively, together with any additional agents appointed
from time to time, the "Agents"), in the form of a discount, ranging from
.125% to .750%, depending upon the maturity of the Note, of the principal
amount of any Note sold through such Agent, except that the commission
payable by Capital Funding to any Agent with respect to Notes with maturities
of 30 years or greater will be negotiated at the time Capital Funding issues
such Notes. Capital Funding may also sell Notes to an Agent as principal at a
discount for resale to investors at varying prices related to prevailing
market prices at the time of resale to be determined by such Agent.
(3) Before deducting other expenses payable by Capital Funding estimated to
be U.S. $758,000, including reimbursement of certain of the Agents' expenses.
Capital Funding has agreed to indemnify each Agent against certain civil
liabilities, including liabilities under the Securities Act of 1933.
(4) Or the equivalent thereof in a Foreign Currency.
The Notes are being offered on a continuous basis by Capital Funding through
the Agents, each of whom has agreed to use its best efforts to solicit offers
to purchase Notes. In addition, Notes may be sold to any Agent, as principal,
for resale to investors. Capital Funding may also sell Notes directly to
investors on its own behalf. The Notes will not be listed on any securities
exchange, and there can be no assurance that the Notes offered hereby will be
sold or that there will be a secondary market for any of the Notes. Capital
Funding reserves the right to withdraw, cancel or modify the offer made
hereby without notice. Capital Funding or the Agent who solicits any offer
may reject such offer in whole or in part. See "Plan of Distribution."
Lehman Brothers
J.P. Morgan Securities Inc.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
The date of this Prospectus Supplement is March 3, 1994.
<PAGE>
DESCRIPTION OF NOTES
The information herein concerning the Notes supplements, and to the extent
inconsistent therewith replaces, the statements set forth under the heading
"Description of Debt Securities and Guarantees" in the Prospectus, to which
reference is hereby made. The following description will apply to a Note
unless otherwise specified in the applicable Pricing Supplement.
General
The Notes constitute a single series of Debt Securities (as defined in the
Prospectus) and are to be issued under the Indenture (as defined in the
Prospectus). The Notes will represent unsecured and unsubordinated
obligations of Capital Funding and will rank on a parity with all other
unsecured and unsubordinated indebtedness of Capital Funding. The Notes are
unconditionally guaranteed as to payment of principal, premium, if any, and
interest by NYNEX, the sole stockholder of Capital Funding.
The Notes are limited to an aggregate amount sufficient to result in gross
proceeds to Capital Funding of up to U.S. $1,500,000,000 or the equivalent
thereof in other currencies or composite currencies, including the European
Currency Unit ("ECU") (each a "Foreign Currency"), subject to reduction as a
result of the concurrent sale of other Debt Securities of Capital Funding.
The Notes will be offered on a continuous basis and will mature on any
Business Day (as defined below) which is nine months or more from the date of
issue, as selected by the purchaser and agreed to by Capital Funding, and may
be subject to redemption at the option of Capital Funding or repayment at the
option of the holder prior to maturity, at the price or prices specified in
the applicable Pricing Supplement.
The interest rate on each Note may be a fixed rate (a "Fixed Rate Note"),
which may be zero (a "Zero-Coupon Note") in the case of certain Notes issued
at a price representing a substantial discount from the principal amount
payable upon maturity, or a floating rate (a "Floating Rate Note"). A
Floating Rate Note may be either a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note (each as defined
below), and its rate of interest may be determined by reference to one or
more of the Commercial Paper Rate, the CD Rate, the Federal Funds Rate,
LIBOR, the Treasury Rate, the Prime Rate or any other Base Rate (each as
defined below) or interest rate formula set forth in the applicable Pricing
Supplement, as adjusted by the Spread and/or Spread Multiplier (each as
defined below), if any, applicable to such Note.
A Note may provide that amounts in respect of interest and principal due
thereon shall be payable over the life of the Note according to an
amortization schedule (an "Amortizing Note").
The principal amount payable at maturity and/or any interest or premium on a
Note (an "Indexed Note") may be determined by reference to the relationship
between two or more currencies and/or composite currencies, to the price of
one or more specified securities or commodities or to one or more securities
or commodities exchange indices or other indices or by other similar methods
or formulas and on such other terms as described in the applicable Pricing
Supplement. An Indexed Note, the principal amount payable at maturity and/or
the interest rate of which is determined by reference to the relationship
between two currencies, two composite currencies or a currency and a
composite currency, is referred to herein as a "Currency Indexed Note." See
"Description of Notes--Currency Indexed Notes" and "-- Other Indexed Notes
and Certain Terms Applicable to All Indexed Notes."
Capital Funding may also issue a Note (a "Dual Currency Note") with respect
to which Capital Funding has the option of paying principal and interest due
thereon in either the Face Amount Currency or the Optional Payment Currency
(each as defined below).
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Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note in fully registered form without coupons. Except as set
forth under "Book-Entry System" below, Book-Entry Notes will not be issuable
in certificated form.
The authorized denominations of Notes denominated in U.S. dollars will be
U.S. $1,000 or any integral multiple of U.S. $1,000. The authorized
denominations of Notes denominated in a Foreign Currency will be set forth in
the applicable Pricing Supplement.
"Business Day" means with respect to any Note, unless otherwise specified in
the applicable Pricing Supplement, any day, other than a Saturday or Sunday,
that meets each of the following applicable requirements: such day is (a) not
a day on which banking institutions in the Borough of Manhattan, The City of
New York are authorized or required by law, regulation or executive order to
close; (b) if the Note is denominated in a Foreign Currency other than the
ECU, (x) not a day on which banking institutions are authorized or required
by law or regulation to close in the principal financial center of the
country issuing the Foreign Currency and (y) a day on which banking
institutions in such principal financial center are carrying out transactions
in such Foreign Currency; (c) if the Note is denominated in ECU, (x) not a
day on which banking institutions are authorized or required by law or
regulation to close in Luxembourg and (y) an ECU clearing day, as determined
by the ECU Banking Association in Paris; and (d) if such Note is a LIBOR
Note, a day on which dealings in deposits in the Specified Currency are
transacted in the London interbank market (a "London Banking Day").
"Original Issue Discount Note" means (i) a Note, including any Zero-Coupon
Note, that has a stated redemption price at maturity that exceeds the initial
offering price to the public at which a substantial amount of an offering is
sold by at least .25% of its principal amount multiplied by the number of
full years from the Original Issue Date to the Stated Maturity (each as
defined below) for such Note, and is designated as a "Discounted Security" in
the terms of such Note, and (ii) any other Note designated by Capital Funding
as issued with original issue discount for United States federal income tax
purposes.
The Pricing Supplement relating to each Note will describe the following
terms: (i) the Specified Currency with respect to such Note (and, if such
Specified Currency is a Foreign Currency), certain other terms relating to
such Note, including the authorized denominations); (ii) the price (generally
expressed as a percentage of the aggregate principal amount thereof) at which
such Note will be issued (the "Issue Price"); (iii) the date on which such
Note will be issued (the "Original Issue Date"); (iv) the date on which such
Note will mature (the "Stated Maturity") and whether the Stated Maturity may
be extended by Capital Funding; (v) whether such Note is a Fixed Rate Note, a
Floating Rate Note, an Amortizing Note, an Indexed Note or a Dual Currency
Note; (vi) if such Note is a Fixed Rate Note, the rate per annum at which
such Note will bear interest, if any, the Interest Payment Dates (as defined
below), and whether such rate may be changed by Capital Funding prior to the
Stated Maturity; (vii) if such Note is a Floating Rate Note, whether it is a
Regular Floating Rate Note, a Floating Rate/Fixed Rate Note or an Inverse
Floating Rate Note, and the Base Rate, the Fixed Interest Rate, if any, the
Initial Interest Rate, the Interest Reset Period, the Interest Reset Dates,
the Interest Payment Dates, the Index Maturity, the Maximum Interest Rate, if
any, the Minimum Interest Rate, if any, the Spread and/or Spread Multiplier,
if any (each as defined herein), the Fixed Rate Commencement Date, if any,
and any other terms relating to the particular method of calculating the
interest rate for such Note, and whether such Spread and/or Spread Multiplier
may be changed by Capital Funding prior to the Stated Maturity; (viii)
whether such Note is an Original Issue Discount Note; (ix) if such Note is an
Amortizing Note, whether payments of principal thereof and interest thereon
will be made quarterly or semiannually and the amortization schedule in
respect thereof; (x) if such Note is an Indexed Note, the specific terms
thereof; (xi) if such Note is a Dual Currency Note, the face amount, the Face
Amount Currency, the Optional Payment Currency, the Designated Exchange Rate,
the Optional Election Dates, the Interest Payment Dates (each as defined
below) and other terms
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thereof; (xii) whether such Note may be redeemed at the option of Capital
Funding, or repaid at the option of the holder, prior to the Stated Maturity,
and, if so, the provisions relating to such redemption or repayment; (xiii)
whether such Note will be issued initially as a Book-Entry Note or a
Certificated Note; and (xiv) any other terms of such Note not inconsistent
with the provisions of the Indenture.
Payment Currency
Unless otherwise specified in the applicable Pricing Supplement, and except
as otherwise described herein with respect to Currency Indexed Notes and Dual
Currency Notes, the Notes will be denominated in U.S. dollars and payments of
principal, premium, if any, and interest will be made in U.S. dollars. The
principal of, premium, if any, and interest on each Note denominated in a
Foreign Currency is payable by Capital Funding in U.S. dollars based on the
equivalent of that Foreign Currency converted into U.S. dollars. If a Note is
denominated in a Foreign Currency, Capital Funding will (unless otherwise
specified in the applicable Pricing Supplement) appoint an agent (the
"Exchange Rate Agent") to determine the exchange rate for converting all
payments in respect of such Note into U.S. dollars in the manner described in
the following paragraph. Unless otherwise specified in the applicable Pricing
Supplement, The Bank of New York, or an affiliate, will act as the Exchange
Rate Agent. Notwithstanding the foregoing, the holder of a Note denominated
in a Foreign Currency may (if the applicable Pricing Supplement and Note so
indicate) elect to receive all such payments in the Foreign Currency by
delivery of a written request to the Trustee (or to any duly appointed Paying
Agent) at the Corporate Trust Office not later than 10 calendar days prior to
the applicable payment date, and such election will remain in effect for such
holder until revoked by written notice to the Trustee (or to any such Paying
Agent) at the Corporate Trust Office received not later than 10 calendar days
prior to the applicable payment date; provided, however, no such election or
revocation may be made with respect to payments on any Note with respect to
which (i) an Event of Default (as defined in the accompanying Prospectus) has
occurred, (ii) Capital Funding or NYNEX has exercised any satisfaction and
discharge or defeasance options or (iii) Capital Funding has given a notice
of redemption. In the event any holder makes any such election pursuant to
the preceding sentence, such election will not be effective on any transferee
of such holder and such transferee shall be paid in U.S. dollars unless such
transferee makes an election pursuant to the preceding sentence; provided,
however, that, unless otherwise specified in the applicable Pricing
Supplement, such election, if in effect while funds are on deposit with the
Trustee to satisfy and discharge such Note in accordance with the provisions
of the Indenture, will be effective on any transferee of such holder. Unless
otherwise specified in the applicable Pricing Supplement, payment of
principal of, premium, if any, and interest on Notes to be made in a Foreign
Currency will be made to an account maintained by the holder of such Notes at
a bank in the country which issues such Foreign Currency (or, if such Foreign
Currency is a composite currency, at a bank outside the United States that
accepts deposits in such Foreign Currency).
Unless otherwise specified in the applicable Pricing Supplement, the amount
of U.S. dollars payable in respect of a Note denominated in a Foreign
Currency will be determined by the Exchange Rate Agent based on the
indicative quotation in The City of New York selected 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 that yields the least number of
U.S. dollars upon conversion of such Foreign Currency. Unless otherwise
specified in the applicable Pricing Supplement, such selection shall be made
from among the quotations appearing on the bank composite or
multi-contributor pages of the Reuters Monitor Foreign Exchange Service or,
if not available, the Telerate Monitor Foreign Exchange Service. If such
quotations are unavailable from either such foreign exchange service, such
selection shall (unless otherwise specified in the applicable Pricing
Supplement) be made from the quotations received by the Exchange Rate Agent
from no more than three nor less than two recognized foreign exchange dealers
in The City of New York selected by the Exchange Rate Agent and approved by
Capital Funding (one of which may be the Exchange Rate Agent)
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for the purchase by the quoting dealer, for settlement on such payment date,
of the aggregate amount of such Foreign Currency payable on such payment date
in respect of all Notes denominated in such Foreign Currency and for which
the applicable dealer commits to execute a contract. If no such bid
quotations are available, payments will be made in the Foreign Currency.
Unless otherwise specified in the applicable Pricing Supplement, if payment
on a Note is required to be made in a Foreign Currency and such currency is
unavailable to Capital Funding for making payments thereof due to the
imposition of exchange controls or other circumstances beyond Capital
Funding's control, or is no longer used by the government of the country
which issued such currency or for the settlement of transactions by public
institutions of or within the international banking community, Capital
Funding will be entitled to make payments with respect to such Note in U.S.
dollars until such Foreign Currency is again available or so used. The amount
so payable on any date in such Foreign Currency shall be converted into U.S.
dollars at a rate determined by the Exchange Rate Agent on the basis of the
noon buying rate in The City of New York for cable transfers in the Foreign
Currency as certified for customs purposes by the Federal Reserve Bank of New
York (the "Market Exchange Rate") for such Foreign Currency on the second
Business Day prior to such payment date, or on such other basis as shall be
specified in the applicable Pricing Supplement. In the event such Market
Exchange Rate is not then available, Capital Funding will be entitled to make
payments in U.S. dollars, (i) if such Foreign Currency is not a composite
currency, on the basis of the most recently available Market Exchange Rate
for such Foreign Currency, or (ii) if such Foreign Currency is a composite
currency, including, without limitation, the ECU, in an amount determined by
the Exchange Rate Agent to be the sum of the results obtained by multiplying
the number of units of each component currency of such composite currency, as
of the most recent date on which such composite currency was used, by the
Market Exchange Rate for such component currency on the second Business Day
prior to such payment date (or if such Market Exchange Rate is not then
available, by the most recently available Market Exchange Rate for such
component currency, or as otherwise specified in the applicable Pricing
Supplement). Any payment in respect of such Note made under such
circumstances in U.S. dollars will not constitute an Event of Default under
the Indenture.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a
component 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 components 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 that original
component currency as a component shall be replaced by the amounts of such
two or more currencies having an aggregate value on the date of division
equal to the amount of the former component currency immediately before such
division.
In the event of an official redenomination of the Specified Currency, the
Denominated Currency, the Indexed Currency, the Face Amount Currency or the
Optional Payment Currency (including without limitation, an official
redenomination of any such currency that is a composite currency), the
obligations of Capital Funding to make payments in or with reference to such
currency shall, in all cases, be deemed immediately following such
redenomination to be obligations to make payments in or with reference to
that amount of redenominated currency representing the amount of such
currency immediately before such redenomination. Except to the extent Indexed
Notes provide for the adjustment of the amount of principal or interest
payable in respect of such Notes pursuant to application of the formulas
described under "Currency Indexed Notes," or any other formula provided for
in the applicable Pricing Supplement, Notes will not provide for any
adjustment to any amount payable under such Notes as a result of (a) any
change in the value of the Specified Currency thereof relative to any other
currency due solely to fluctuations in exchange rates or (b) any
redenomination of any component currency of any composite currency (unless
such composite currency is itself officially redenominated).
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All determinations referred to above made by the Exchange Rate Agent shall be
in its sole discretion (except to the extent expressly provided herein that
any determination is subject to the approval of Capital Funding). In the
absence of manifest error, such determinations shall be conclusive for all
purposes and irrevocably binding upon the holders of the Notes, and the
Exchange Rate Agent shall have no liability therefor.
All currency exchange costs will be borne by the holders of the applicable
Notes by deduction from the payments made thereon.
Payment of Principal and Interest
Until the Notes are repaid or payment thereof is duly provided for, Capital
Funding will, at all times, maintain a paying agent (the "Paying Agent") in
The City of New York, capable of performing the duties described herein to be
performed by the Paying Agent. Capital Funding has initially appointed The
Bank of New York, 101 Barclay Street, New York, NY 10286, as the Paying
Agent. Capital Funding will notify the holders of the Notes, in accordance
with the Indenture, of any change in the Paying Agent or its address.
Unless otherwise specified in the applicable Pricing Supplement, payments in
U.S. dollars of interest on Certificated Notes (other than interest payable
at maturity or upon earlier redemption or repayment) will be made by mailing
a check to the holder at the address of such holder appearing on the Security
Register (as defined in the Prospectus) on the applicable Regular Record Date
(as defined below). Notwithstanding the foregoing, a holder of U.S.
$10,000,000 or more in aggregate principal amount of Notes of like tenor and
terms (or a holder of the equivalent thereof in a Foreign Currency) shall be
entitled to receive such payments in U.S. dollars by wire transfer of
immediately available funds, but only if appropriate payment instructions
have been received in writing by the Paying Agent not less than 15 calendar
days prior to the applicable Interest Payment Date (as defined below).
Beneficial owners of interests in Book-Entry Notes will be paid in accordance
with the Depositary's and its participants' procedures in effect from time to
time as described below under "Book-Entry System." Unless otherwise specified
in the applicable Pricing Supplement, principal, premium, if any, and
interest payable at maturity or upon earlier redemption or repayment in
respect of a Note will be paid in immediately available funds upon surrender
of such Note, accompanied by wire transfer instructions, at the office of the
Paying Agent.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and
payable immediately as described in the Prospectus under "Description of Debt
Securities and Guarantees--Events of Default," the amount of principal due
and payable with respect to such Note shall be limited to an amount equal to
(i) the sum of the aggregate principal amount of such Note multiplied by the
Issue Price (expressed as a percentage of the aggregate principal amount)
plus (ii) the original issue discount accrued from the date of issue to the
date of declaration, which accrual shall be calculated using the "interest
method" computed in accordance with generally accepted accounting principles
in effect on the date of declaration. Unless otherwise specified in the
applicable Pricing Supplement, if the principal of any Indexed Note or Dual
Currency Note is declared to be due and payable immediately as described in
the Prospectus under "Description of Debt Securities and Guarantees--Events
of Default," the amount of principal due and payable with respect to such
Note shall be limited to the respective amounts determined in the manner
described under "Other Indexed Notes and Certain Terms Applicable to All
Indexed Notes" and "Dual Currency Notes."
Each date on which interest is payable on a Note is referred to herein as an
"Interest Payment Date." Unless otherwise specified in the applicable Pricing
Supplement, the "Regular Record Date" with respect to any Interest Payment
Date shall be the date (whether or not a Business Day) 15 calendar days
immediately preceding such Interest Payment Date. Interest payable and
punctually paid or duly provided for on any Interest Payment Date will be
paid to the person in whose name a Note is registered at the close of
business on the Regular Record Date immediately preceding
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such Interest Payment Date; provided, however, that the first payment of
interest (or, in the case of an Amortizing Note, principal and interest) on
any Note with an Original Issue Date between a Regular Record Date and an
Interest Payment Date or on an Interest Payment Date will be made on the
Interest Payment Date following the next succeeding Regular Record Date to
the registered holder on such next succeeding Regular Record Date; provided,
further, that interest, if any, payable at maturity or upon earlier
redemption or repayment will be payable to the person to whom principal shall
be payable.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments on Notes (except Floating Rate Notes on which interest is reset
daily or weekly) shall be the amount of interest accrued from, and including,
the Original Issue Date or the last date to which interest has been paid to,
but excluding, the Interest Payment Date or date of maturity, as the case may
be; provided that, in the case of a Fixed Rate Note, if an Interest Payment
Date or, in the case of any Note, the maturity date that would otherwise fall
on a day that is not a Business Day is postponed as described below, the
interest payable on such date shall accrue to, but exclude, the date that
would have been the Interest Payment Date or maturity date had it been a
Business Day. In the case of a Floating Rate Note on which interest is reset
daily or weekly, interest payments shall be, unless otherwise specified in
the applicable Pricing Supplement, the amount of interest accrued from and
including the Original Issue Date or from and including the last date to
which interest has been paid, as the case may be, to, and including, the
Regular Record Date immediately preceding such Interest Payment Date, except
that at maturity, the interest payable will include interest accrued to, but
excluding, the maturity date.
Unless otherwise specified in the applicable Pricing Supplement, interest on
a Fixed Rate Note shall be calculated on the basis of a 360-day year of
twelve thirty-day months. Unless otherwise specified in the applicable
Pricing Supplement, interest on a Floating Rate Note shall be calculated by
multiplying the principal amount of such Floating Rate Note (or, in the case
of a Currency Indexed Note, unless otherwise specified in the applicable
Pricing Supplement, the Face Amount (as defined below) of such Currency
Indexed Note) by an accrued interest factor. Such accrued interest factor
will be computed by adding the interest factors calculated for each day in
the Interest Reset Period or from the last date from which accrued interest
is being calculated. Unless otherwise specified in the applicable Pricing
Supplement, the interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360, in the case of Commercial Paper
Rate Notes, CD Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime
Rate Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages (or decimal equivalents) resulting from any calculation will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point (or the decimal equivalent, .0000001), with five one-millionths of a
percentage point (or the decimal equivalent, .00000005) being rounded upward,
and all currency or currency unit amounts used in or resulting from such
calculation on the Notes will be rounded to the nearest one-hundredth (.01)
of a unit, with five one-thousandths (.005) of a unit being rounded upward.
The interest rate on the 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 of
interest is 25% per annum on a simple interest basis. This limit may not
apply to Notes in which U.S. $2,500,000 or more has been invested.
Fixed Rate Notes
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum stated on the face thereof until the principal amount thereof
is paid or payment thereof is duly provided for, except as described below
under "Subsequent Interest Periods" and "Extension of Maturity."
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Unless otherwise set forth in the applicable Pricing Supplement, interest on
each Fixed Rate Note (other than an Amortizing Note) will be payable
semiannually on each March 15 and September 15 and at maturity or upon
earlier redemption or repayment. See "Amortizing Notes" below.
If any Interest Payment Date (including, without limitation, a maturity date)
for any Fixed Rate Note would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the next day that is a
Business Day.
Floating Rate Notes
Each Floating Rate Note will bear interest from its Original Issue Date at
the rate per annum stated or the interest rate formula set forth therein and
in the applicable Pricing Supplement, until the principal amount thereof is
paid or payment thereof is duly provided for, except as described below under
"Subsequent Interest Periods" and "Extension of Maturity".
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in
the case of Notes with a daily or weekly Interest Reset Date (as defined
below), on the third Wednesday of March, June, September and December; (ii)
in the case of Notes with a monthly Interest Reset Date, on the third
Wednesday of each month or on the third Wednesday of March, June, September
and December, as specified in the applicable Pricing Supplement; (iii) in the
case of Notes with a quarterly Interest Reset Date, on the third Wednesday of
March, June, September and December; (iv) in the case of Notes with a
semiannual Interest Reset Date, on the third Wednesday of the two months
specified in the applicable Pricing Supplement; (v) in the case of Notes with
an annual Interest Reset Date, on the third Wednesday of the month specified
in the applicable Pricing Supplement; and (vi) in each case, at maturity. If
any Interest Payment Date (including, without limitation, a 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 day that is a
Business Day, provided that in the case of a LIBOR Note, if such Business Day
is in the next succeeding calendar month, such Interest Payment Date will be
the immediately preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. Each applicable Pricing
Supplement will specify certain terms of the Floating Rate Note with respect
to which such Pricing Supplement 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" (as defined below); the Base
Rate or Base Rates, Initial Interest Rate, Interest Reset Dates, Interest
Reset Period, Regular Record Dates, Interest Payment Dates, Index Maturity,
Fixed Rate Commencement Date (as defined below) and Fixed Interest Rate, if
any, Maximum Interest Rate and Minimum Interest Rate, if any, and the
"Spread" and/or "Spread Multiplier", if any, as described below.
The interest rate borne by each Floating Rate Note 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,
such Floating Rate Note will be designated a "Regular Floating Rate Note".
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 Base Rate or Base Rates (a) plus or minus the applicable
Spread, if any, and/or (b) multiplied or arithmetically modified 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 (a) the interest rate in effect for the period from the Original
Issue Date to the initial Interest Reset Date will be the Initial Interest
Rate, and (b) unless otherwise specified in the applicable Pricing
Supplement, the interest rate in effect for the 10 days immediately prior to
the Stated Maturity shall be that in effect on the tenth day preceding the
Stated Maturity.
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(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/Fixed Rate Note will bear interest at the rate
determined by reference to the applicable Base Rate or Base Rates (a) plus or
minus the applicable Spread, if any, and/or (b) multiplied or arithmetically
modified 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 (a) the interest rate in effect for the
period from the Original Issue Date to the initial Interest Reset Date will
be the Initial Interest Rate; (b) unless otherwise specified in the
applicable Pricing Supplement, the interest rate in effect for the 10 days
prior to the Fixed Rate Commencement Date shall be that in effect on the
tenth day preceding the Fixed Rate Commencement Date; and (c) the interest
rate in effect commencing on, and including, the Fixed Rate Commencement Date
to the Stated Maturity shall be the Fixed Interest Rate, if such rate is
specified in the applicable Pricing Supplement, or if no such Fixed Interest
Rate is so specified, the interest rate in effect thereon on the day
immediately preceding the Fixed Rate Commencement Date. "Fixed Rate
Commencement Date" means the date, if any, specified as such in the
applicable Pricing Supplement.
(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 Inverse Floating Rate Note will bear interest equal to the
Fixed Interest Rate specified in the applicable Pricing Supplement minus the
rate determined by reference to the applicable Base Rate or Base Rates (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied or
arithmetically modified by the applicable Spread Multiplier, if any;
provided, however, that 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 is payable shall be reset as of each Interest
Reset Date; provided, however, that (a) the interest rate in effect for the
period from the Original Issue Date to the initial Interest Reset Date will
be the Initial Interest Rate, and (b) unless otherwise specified in the
applicable Pricing Supplement, the interest rate in effect for the 10 days
immediately prior to the Stated Maturity shall be that in effect on the tenth
day preceding the Stated Maturity.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Annex attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Annex
and the applicable Pricing Supplement.
Each Floating Rate Note will bear interest at a rate determined by reference
to one or more interest rate bases (each a "Base Rate"), any of which may be
adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one or more of the following
Base Rates as applicable to each Floating Rate Note: (a) the Commercial Paper
Rate (a "Commercial Paper Rate Note"), (b) the CD Rate (a "CD Rate Note"),
(c) the Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR
Note"), (e) the Treasury Rate (a "Treasury Rate Note"), (f) the Prime Rate (a
"Prime Rate Note") or (g) such other Base Rate or interest rate formula as is
set forth in such Pricing Supplement and in such Floating Rate Note. The
"Index Maturity" for any Floating Rate Note is the period of maturity of the
instrument or obligation from which the Base Rate is calculated and will be
specified in the applicable Pricing Supplement.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest ("Maximum Interest Rate"); and (ii) a
minimum limitation, or floor, on the rate of interest ("Minimum Interest
Rate").
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Interest
Reset Period" for such Note and the
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first date of each Interest Reset Period being an "Interest Reset Date"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Reset Date will be, in the
case of Floating Rate Notes which reset daily, each Business Day; in the case
of Floating Rate Notes (other than Treasury Rate Notes) which reset weekly,
the Wednesday of each week; in the case of Treasury Rate Notes which reset
weekly, the Tuesday of each week (except as provided below); in the case of
Floating Rate Notes which reset monthly, the third Wednesday of each month;
in the case of Floating Rate Notes which reset quarterly, the third Wednesday
of March, June, September and December; in the case of Floating Rate Notes
which reset semiannually, the third Wednesday of two months of each year, as
specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each
year, as specified in the applicable Pricing Supplement; provided, however,
that the interest rate in effect from the Original Issue Date, to the first
Interest Reset Date with respect to a Floating Rate Note will be the Initial
Interest Rate (as set forth in the applicable Pricing Supplement). If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that
is not a Business Day, such Interest Reset Date shall be postponed to the
next succeeding Business Day, except that in the case of a LIBOR Note, if
such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the next preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate or Base Rates (i) plus or minus the Spread, if any,
and/or (ii) multiplied or arithmetically modified by the Spread Multiplier,
if any. The "Spread" is the number of basis points (one one-hundredth of a
percentage point (or the decimal equivalent, .0001)) specified in the
applicable Pricing Supplement as being applicable to the interest rate for
such Floating Rate Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement as being applicable to the
interest rate for such Floating Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate in effect with respect to a Floating Rate Note on each day will be (i)
if such day is an Interest Reset Date, the interest rate with respect to the
Interest Determination Date (as defined below) pertaining to such Interest
Reset Date, or (ii) if such day is not an Interest Reset Date, the interest
rate with respect to the Interest Determination Date pertaining to the next
preceding Interest Reset Date. The interest rate with respect to any Interest
Determination Date shall be calculated by reference to the Base Rate with
respect to such Interest Determination Date (determined as described below),
as adjusted by the applicable provisions described herein, and subject in any
case to any applicable Maximum Interest Rate or Minimum Interest Rate.
Notwithstanding the foregoing, the interest rate in effect from the Original
Issue Date to the first Interest Reset Date set forth in the applicable
Pricing Supplement will be the "Initial Interest Rate" specified in the
applicable Pricing Supplement. The interest rate for each Interest Reset Date
will be determined by the Calculation Agent (as hereinafter defined) as set
forth below.
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date (i) for a
Commercial Paper Rate Note, a CD Rate Note, a Federal Funds Rate Note or a
Prime Rate Note will be the second Business Day next preceding such Interest
Reset Date; (ii) for a LIBOR Note will be the second London Banking Day next
preceding such Interest Reset Date; and (iii) for a Treasury Rate Note will
be the day of the week in which such Interest Reset Date falls on which
Treasury bills of the Index Maturity specified on the face of such Note are
normally auctioned. Treasury bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that such auction may be held
on the preceding Friday. If, as the result of a legal holiday, an auction is
so held on the preceding
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Friday, such Friday will be the Interest Determination Date pertaining to the
Interest Reset Date for such Treasury Rate Note occurring in the next
succeeding week.
The interest rate on a Floating Rate Note with respect to each Interest
Determination Date will be determined by the Calculation Agent as follows:
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in such Commercial Paper Rate Note and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" means, with respect to any Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate on
that date for commercial paper having the Index Maturity designated in the
applicable Pricing Supplement, as such rate is published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication of such Board
("H.15(519)"), under the heading "Commercial Paper." If such rate is not
published by 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, then the Commercial Paper
Rate shall be the Money Market Yield of the rate on the Interest
Determination Date for commercial paper having the Index Maturity designated
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" ("Composite Quotations") under the
heading "Commercial Paper." If such rate is not published by 3:00 p.m., New
York City time, then the Commercial Paper Rate for that Interest
Determination Date shall be calculated by the Calculation Agent and shall be
the Money Market Yield of the arithmetic mean of the offered rates of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent as of 11:00 a.m., New York City time, on that Interest
Determination Date, for commercial paper having the Index Maturity designated
in the applicable Pricing Supplement placed for an industrial issuer whose
bond rating is "AA," or the equivalent, from a nationally recognized rating
agency; provided, however, that, if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the
Commercial Paper Rate will be the Commercial Paper Rate in effect on such
Interest Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield=D X 360 X 100
360 - (D X M)
where "D" refers to the 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 period for which interest is being calculated.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CD
Rate" means, with respect to any Interest Determination Date, the rate on
such date for negotiable certificates of deposit having the applicable Index
Maturity as published in H.15 (519) under the heading "CDs (Secondary
Market)" or, if not so published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable
certificates of deposit of the applicable Index Maturity as published
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in 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 such Calculation Date, then the CD Rate for such
Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the secondary market offered rates as of the
opening of business, New York City time, on such Interest Determination Date,
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent after
consultation with Capital Funding, for negotiable certificates of deposit of
major United States money center banks of the highest credit standing (in the
market for negotiable certificates of deposit) with a remaining maturity
closest to the applicable Index Maturity in a denomination of U.S.
$5,000,000; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate will be the CD Rate in effect on such Interest Determination Date.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate
on such date for Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)" or, if not so published by 9:00 a.m., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the Federal Funds Rate will be the rate on such Interest Determination
Date as published in Composite Quotations under the heading "Federal
Funds/Effective Rate." If such rate is not yet published by 9:00 a.m., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate for such Interest Determination
Date will be the rate on such Interest Determination Date made publicly
available by the Federal Reserve Bank of New York which is equivalent to the
rate which appears in H.15(519) under the heading "Federal Funds
(Effective)"; provided, however, that if such rate is not made publicly
available by the Federal Reserve Bank of New York by 9:00 a.m., New York City
time, on the Calculation Date, the Federal Funds Rate will be the Federal
Funds Rate in effect on such Interest Determination Date.
LIBOR Notes
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in such LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR",
with respect to any Interest Determination Date, will be determined by the
Calculation Agent as follows:
(i) With respect to such Interest Determination Date, LIBOR will be either:
(a) if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated LIBOR
Page (as defined below) by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the LIBOR Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on such Interest Determination Date, that appear on
the Designated LIBOR Page as of 11:00 a.m., London time, on that Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page, or
(b) if "LIBOR Telerate" is specified in the applicable Pricing Supplement,
the rate for deposits in the LIBOR Index Currency having the Index Maturity
designated in the applicable Pricing Supplement, commencing on such Interest
Determination Date, that appears on the Designated LIBOR Page as of 11:00
a.m., London time, on that Interest Determination Date. If fewer than two
offered rates appear (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified
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in the applicable Pricing Supplement), LIBOR with respect to such Interest
Determination Date will be determined as if the parties had specified the
rate described in clause (ii) below.
(ii) With respect to an Interest Determination Date on which fewer than two
offered rates appear (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified in
the applicable Pricing Supplement), the Calculation Agent will request the
principal London office of each of four major reference banks in the London
interbank market, as selected by the Calculation Agent, to provide the
Calculation Agent with its offered quotation for deposits in the LIBOR Index
Currency for the period of the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, to prime banks in the London
interbank market at approximately 11:00 a.m., London time, on such Interest
Determination Date and in a principal amount of not less than U.S. $1,000,000
(or the equivalent in the LIBOR Index Currency, if the LIBOR Index Currency
is not the U.S. dollar) that is representative for a single transaction in
such LIBOR Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two quotations
are provided, LIBOR determined on such Interest Determination Date will be
the arithmetic mean of the rates quoted at approximately 11:00 a.m. (or such
other time specified in the applicable Pricing Supplement), in the applicable
principal financial center for the country of the LIBOR Index Currency on
such Interest Determination Date, by three major banks in such principal
financial center selected by the Calculation Agent for loans in the LIBOR
Index Currency to leading European banks, having the Index Maturity
designated in the applicable Pricing Supplement and in a principal amount of
not less than U.S. $1,000,000 commencing on the second London Banking Day
immediately following such Interest Determination Date (or the equivalent in
the LIBOR Index Currency, if the LIBOR Index Currency is not the U.S. dollar)
that is representative for a single transaction in such LIBOR Index Currency
in such market at such time; provided, however, that if the banks so selected
by the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
in effect for the applicable period will be LIBOR in effect on such Interest
Determination Date.
"LIBOR Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which
LIBOR shall be calculated. If no such currency is specified in the applicable
Pricing Supplement, the LIBOR Index Currency shall be the U.S. dollar.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of
major banks for the applicable LIBOR Index Currency (and, if the U.S. dollar
is the LIBOR Index Currency, Page LIBO), or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable LIBOR Index Currency (and, if the U.S. dollar
is the LIBOR Index Currency, Page 3750). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate had been
specified.
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier,
if any) specified in such Treasury Rate Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such Interest Determination Date of direct
obligations of the United States ("Treasury bills") having the Index
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Maturity designated in the applicable Pricing Supplement as such rate is
published in H.15(519) under the heading "U.S. Government
Securities--Treasury bills--auction average (investment)" or, if such rate is
not so published by 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, then the Treasury Rate shall
be the auction average rate (expressed as a bond equivalent, on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury bills having the Index
Maturity designated in the applicable Pricing Supplement are not published or
reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date or if no such auction is held in a particular week, then the
Treasury Rate for that Interest Determination Date shall be calculated by the
Calculation Agent and shall 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 Interest
Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent for the issue of
Treasury bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate will be the Treasury Rate in
effect on such Interest Determination Date.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in such Prime Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date, the rate on that day
as published in H.15(519) under the heading "Bank Prime Loan" or, if not so
published by 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate will be
determined by the Calculation Agent and will be the arithmetic mean of the
rates of interest publicly announced by each bank named on the Reuters Screen
NYMF Page (as defined below) as such bank's prime rate or base lending rate
as in effect for such Interest Determination Date. If fewer than four such
rates but more than one such rate appear on the Reuters Screen NYMF Page for
such Interest Determination Date, the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean of the prime rates quoted
on the basis of the actual number of days in the year divided by 360 as of
the close of business on such Interest Determination Date by four major money
center banks in The City of New York selected by the Calculation Agent after
consultation with Capital Funding. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Prime Rate will be calculated by the
Calculation Agent and will be the arithmetic mean of the prime rates in
effect for such Interest Determination Date as furnished in The City of New
York by at least three substitute banks or trust companies organized and
doing business under the laws of the United States, or any State thereof, in
each case having total equity capital of at least $500,000,000 and being
subject to supervision or examination by federal or State authority, selected
by the Calculation Agent after consultation with Capital Funding to provide
such rate or rates; provided, however, that if the banks or trust companies
selected as aforesaid are not quoting as mentioned in this sentence, the
Prime Rate for the applicable period will be the Prime Rate in effect on such
Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on the
Reuters Monitor Money Rates Service, or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date" pertaining to any Interest Determination Date will be the
earlier of, either (i) the tenth calendar day after
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such date, or, if such tenth day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest
Payment Date or date of maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, The Bank of
New York will be the calculation agent (the "Calculation Agent") with respect
to any issue of Floating Rate Notes. Upon the request of the holder of any
Floating Rate Note, the Calculation Agent will provide the interest rate then
in effect and, if determined, the interest rate which will become effective
on the next Interest Reset Date with respect to such Floating Rate Note. In
the absence of manifest error, such determinations shall be conclusive for
all purposes and irrevocably binding upon the holders of such Floating Rate
Notes, and the Calculation Agent shall have no liability therefor.
Amortizing Notes
Capital Funding may from time to time offer Amortizing Notes. The terms of
each Amortizing Note will provide that amounts in respect of interest and
principal due thereon will be payable over the life of such Note according to
an amortization schedule.
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Amortizing Note will be computed on the basis of a 360-day year of
twelve 30-day months. Unless otherwise specified in the applicable Pricing
Supplement, 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. Unless otherwise specified in the applicable
Pricing Supplement, amounts in respect of principal and interest on each
Amortizing Note will be payable either semiannually on each March 15 and
September 15, or quarterly on each March 15, June 15, September 15 and
December 15 and at maturity. Further information concerning additional terms
and conditions of any issue of Amortizing Notes will be provided in the
applicable Pricing Supplement. A table setting forth repayment information
with respect to each Amortizing Note will be included in the applicable
Pricing Supplement and set forth in such Note.
Currency Indexed Notes
General
Capital Funding may from time to time offer Notes the principal amount
payable at the Stated Maturity and/or the interest rate of which is
determined by reference to the rate of exchange between the currency or
composite currency in which such Notes (the "Currency Indexed Notes") are
denominated (the "Denominated Currency") and the other currency or composite
currency specified as the Indexed Currency (the "Indexed Currency") in the
applicable Pricing Supplement, or as determined in such other manner as may
be specified in the applicable Pricing Supplement. Unless otherwise specified
in the applicable Pricing Supplement, holders of Currency Indexed Notes will
be entitled to receive (i) an amount exceeding the stated face amount of the
principal (the "Face Amount") of, and/or interest calculated at the stated
rate of interest on, their Currency Indexed Notes if, at the Stated Maturity
or upon the relevant Interest Payment Date, as the case may be, the rate at
which the Denominated Currency can be exchanged for the Indexed Currency
exceeds the rate of such exchange designated as the Base Exchange Rate,
expressed in units of the Indexed Currency per one unit of the Denominated
Currency, in the applicable Pricing Supplement (the "Base Exchange Rate") or
(ii) an amount less than such Face Amount and/or interest calculated at such
stated interest rate if, at the Stated Maturity or upon the relevant Interest
Payment Date, as the case may be, the rate at which the Denominated Currency
can be exchanged for the Indexed Currency is less than such Base Exchange
Rate, in each case determined as described below under "Payment of Principal
and Interest." See "Currency Risks." Information as to the relative
historical value (which information is not necessarily indicative of relative
future value) of the applicable Denominated Currency against the applicable
Indexed Currency, any exchange controls applicable to such Denominated
Currency or Indexed Currency and certain tax consequences to holders of
Currency Indexed Notes will be set forth in the applicable Pricing
Supplement.
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Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, the payment
of principal at the Stated Maturity and interest on each Interest Payment
Date (until the principal thereof is paid or made available for payment) will
be payable in the Denominated Currency (except as otherwise described under
"Payment Currency") in amounts calculated in the manner described below.
"Exchange Rate Day" means any day which is a Business Day in The City of New
York, and if such term is used with reference to a Denominated Currency or
Indexed Currency that is a Foreign Currency, in the principal financial
center of the country of such Denominated Currency or Indexed Currency, as
the case may be.
Unless otherwise specified in the applicable Pricing Supplement, principal at
the Stated Maturity, if indexed, will be payable in an amount equal to the
Face Amount of the Currency Indexed Note, plus or minus an amount determined
by reference to the difference between the Base Exchange Rate specified in
the applicable Pricing Supplement and the rate at which the Denominated
Currency can be exchanged for the Indexed Currency on the second Exchange
Rate Day (the "Determination Date") prior to the Stated Maturity date of such
Currency Indexed Note, as determined by the determination agent specified in
the applicable Pricing Supplement (the "Determination Agent"). Such rate of
exchange shall be based upon the arithmetic mean of the open market spot
offer quotations for the Indexed Currency (spot bid quotations for the
Denominated Currency) obtained by the Determination Agent from the Reference
Dealers in The City of New York at approximately 11:00 a.m., New York City
time, on the Determination Date, for an amount of Indexed Currency equal to
the aggregate Face Amount of such Currency Indexed Notes multiplied by the
Base Exchange Rate, with settlement on the Stated Maturity to be in the
Denominated Currency (such rate of exchange, as so determined and expressed
in units of the Indexed Currency per one unit of the Denominated Currency, is
hereinafter referred to as the "Spot Rate"). If such quotations from the
Reference Dealers are not available on the Determination Date due to
circumstances beyond the control of Capital Funding or the Determination
Agent, the Spot Rate will be determined on the basis of the most recently
available quotations from the Reference Dealers. As used herein, the term
"Reference Dealers" shall mean the three banks or firms specified as such in
the applicable Pricing Supplement, or if any of them shall be unwilling or
unable to provide the requested quotations, such other major money center
bank or banks in The City of New York selected by Capital Funding, in
consultation with the Determination Agent, to act as Reference Dealer or
Dealers in replacement therefor. The principal amount of and interest on the
Currency Indexed Notes determined by the Determination Agent to be payable
will be payable to the holders thereof in the manner set forth herein and in
the applicable Pricing Supplement. In the absence of manifest error, the
determination by the Determination Agent of the Spot Rate and of the amount
of principal and interest payable in respect of Currency Indexed Notes shall
be conclusive for all purposes and irrevocably binding upon the holders of
such Currency Indexed Notes, and the Determination Agent shall have no
liability therefor.
Unless otherwise specified in the applicable Pricing Supplement, on the basis
of the aforesaid determination by the Determination Agent and the formulas
and limitations set forth below, (i) if the Base Exchange Rate equals the
Spot Rate for any Currency Indexed Note, then the principal amount of such
Currency Indexed Note payable at the Stated Maturity would be equal to the
Face Amount of such Currency Indexed Note; (ii) if the Spot Rate exceeds the
Base Exchange Rate (i.e., the Denominated Currency has appreciated against
the Indexed Currency during the term of the Currency Indexed Note), then the
principal amount so payable would be greater than the Face Amount of such
Currency Indexed Note; (iii) if the Spot Rate is less than the Base Exchange
Rate (i.e., the Denominated Currency has depreciated against the Indexed
Currency during the term of the Currency Indexed Note) but is greater than
one-half of the Base Exchange Rate, then the principal amount so payable
would be less than the Face Amount of such Currency Indexed Note; and (iv) if
the Spot Rate is less than or equal to one-half of the Base Exchange
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Rate, then the Spot Rate will be deemed to be one-half of the Base Exchange
Rate and no principal amount of the Currency Indexed Note would be payable at
the Stated Maturity.
With respect to the payment of interest on each Interest Payment Date, if
indexed, the amount will be the Face Amount multiplied by the relevant
interest rate, indexed as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the formulas
to be used by the Determination Agent to determine the principal amount of a
Currency Indexed Note payable at the Stated Maturity will be as follows:
If the Spot Rate equals or exceeds the Base Exchange Rate, the principal
amount of a Currency Indexed Note payable at the Stated Maturity shall equal:
Face Amount + (Face Amount X Spot Rate - Base Exchange Rate
Spot Rate);
and if the Base Exchange Rate exceeds the Spot Rate, the principal amount of
a Currency Indexed Note payable at the Stated Maturity (which shall, in no
event, be less than zero) shall equal:
Face Amount + Face Amount X Base Exchange Rate - Spot Rate
Spot Rate);
provided that, if the Spot Rate is less than or equal to one-half of the Base
Exchange Rate, then the Spot Rate shall be deemed to be one-half of the Base
Exchange Rate and no principal amount of the Currency Indexed Note would be
payable at the Stated Maturity; and provided further that, in no event shall
the principal amount payable at the Stated Maturity be (x) more than twice
the Face Amount, or (y) less than zero.
If any Note is an Original Issue Discount Note, the term "Face Amount" when
used in this Section refers to the "Amortized Face Amount", as defined under
"Redemption and Repayment."
Unless otherwise specified in the applicable Pricing Supplement, in the event
of any redemption or repayment of a Currency Indexed Note prior to its Stated
Maturity, the phrases "Stated Maturity" and "at the Stated Maturity" used
above would refer to the redemption or repayment date of such Currency
Indexed Note.
Other Indexed Notes and Certain Terms Applicable to All Indexed Notes
The Notes may be issued as Indexed Notes, other than Currency Indexed Notes,
the principal amount payable at maturity and/or the interest rate of which
may be determined by reference to the relationship between two or more
currencies, to the price of one or more specified securities or commodities,
to one or more securities or commodities exchange indices or other indices or
by other similar methods or formulas or on such other terms as may be set
forth in the applicable Pricing Supplement (each an "applicable Index"). The
Pricing Supplement relating to such an Indexed Note will describe, as
applicable, the method by which the amount of interest payable on any
Interest Payment Date and the amount of principal payable at maturity in
respect of such Indexed Note will be determined, certain special tax
consequences of the purchase, ownership or disposition of such Indexed Notes,
certain risks associated with an investment in such Indexed Notes and other
information relating to such Indexed Notes.
Unless otherwise specified in the applicable Pricing Supplement, the maximum
principal amount payable at maturity in respect of any Indexed Note will be
an amount equal to twice the face amount thereof and the minimum principal
amount so payable would be zero.
Unless otherwise specified in the applicable Pricing Supplement, (a) for the
purpose of determining whether holders of the requisite principal amount of
Debt Securities outstanding under the Indenture have made a demand or given a
notice or waiver or taken any other action, the
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outstanding principal amount of Indexed Notes will be deemed to be the face
amount thereof and (b) if the payment of principal of and interest on any
Indexed Note is accelerated in accordance with the provisions described under
"Description of Debt Securities and Guarantees--Events of Default" in the
Prospectus, then Capital Funding shall pay to the holder of such Indexed Note
on the date of acceleration the principal amount determined by reference to
the formula by which the principal amount of such Indexed Note would be
determined on the Stated Maturity thereof, as if the date of acceleration
were the Stated Maturity.
An investment in Indexed Notes entails significant risks, including wide
fluctuations in market value as well as in the amounts of payments due
thereunder, that are not associated with a similar investment in a
conventional debt security. Such risks depend on a number of factors,
including supply and demand for a particular security or commodity,
fluctuations in the prices of securities and commodities, in the rates of
exchange between particular currencies and in particular indices, and
economic and political events over which Capital Funding has no control.
Fluctuations in the price of any particular security or commodity, in the
rates of exchange between particular currencies or in particular indices that
have occurred in the past are not necessarily indicative, however, of
fluctuations in the prices or rates of exchange or indices that may occur
during the term of any Indexed Notes. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks
entailed in an investment in Indexed Notes. Indexed Notes are not an
appropriate investment for investors who are unsophisticated with respect to
securities, commodities and/or foreign currency transactions.
Dual Currency Notes
General
Capital Funding may from time to time offer Notes (the "Dual Currency Notes")
with respect to which Capital Funding will have the option of making any
scheduled payment of principal or interest due on such Notes in either the
Face Amount Currency specified in the applicable Pricing Supplement or the
Optional Payment Currency specified therein. Unless otherwise specified in
the applicable Pricing Supplement, if Capital Funding elects on any Option
Election Date specified in the applicable Pricing Supplement to make a
payment in the Optional Payment Currency, the amount payable in such Optional
Payment Currency shall be determined using the Designated Exchange Rate
specified in such Pricing Supplement. A scheduled payment of interest and/or
principal in the Optional Payment Currency may be worth less, at the then
current exchange rate, than such payment in the Face Amount Currency.
Accordingly, a holder of Dual Currency Notes may receive an interest (and, if
applicable, principal) payment on any Interest Payment Date which, at the
then current exchange rate, is less than the amount that would be payable in
the Face Amount Currency, and a principal payment at the Stated Maturity
which, at the then current exchange rate, is less than such holder's
investment denominated in the Face Amount Currency.
Information as to the relative historical value of the applicable Face Amount
Currency against the applicable Optional Payment Currency and any exchange
controls applicable to such Face Amount Currency or Optional Payment Currency
will be set forth in the applicable Pricing Supplement. Historical exchange
rates and changes therein are, however, not necessarily indicative of
exchange rates or changes therein that may occur during the term of any Dual
Currency Note. See "Currency Risks."
The Pricing Supplement for each issuance of Dual Currency Notes will specify,
among other things, the Face Amount of the Dual Currency Notes of such
issuance, the Face Amount Currency and Optional Payment Currency of such
issuance and the Designated Exchange Rate for such issuance, which will be a
fixed exchange rate used for converting amounts denominated in the Face
Amount Currency into amounts denominated in the Optional Payment Currency.
The Pricing Supplement will also specify the Option Election Dates, Interest
Payment Dates and Stated Maturity for the related issuance of Dual Currency
Notes. Unless otherwise specified in the applicable Pricing
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Supplement, each Option Election Date will be not less than 10 days before an
Interest Payment Date or the Stated Maturity and will be the date on which
Capital Funding must elect to make payments due on the related Interest
Payment Date in the Optional Payment Currency (if Capital Funding wishes to
make such election).
Scheduled Payments of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, interest on
the Dual Currency Notes will be payable based on the Face Amount of the Dual
Currency Notes at the rate per annum specified in the applicable Pricing
Supplement on each Interest Payment Date until the principal thereof is paid
or made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, any payment of principal or interest due on any Interest
Payment Date (including, without limitation, any sinking fund redemption
date) or on the Stated Maturity may be made in the Face Amount Currency or,
if Capital Funding so elects, in the Optional Payment Currency. Unless
otherwise specified in the applicable Pricing Supplement, the amounts payable
in the Optional Payment Currency on any Interest Payment Date or at the
Stated Maturity shall be determined by Capital Funding using the Designated
Exchange Rate. Unless otherwise specified in the applicable Pricing
Supplement, if such election is made, notice of such election shall be
provided in accordance with the Indenture within four Business Days after the
Option Election Date and shall state (i) the applicable Interest Payment Date
or the Stated Maturity, as the case may be, and (ii) the Designated Exchange
Rate. Any such notice by Capital Funding with respect to an Interest Payment
Date or the Stated Maturity, as the case may be, once given, may not be
withdrawn with respect to such Interest Payment Date or the Stated Maturity,
as the case may be. If Capital Funding elects on any Option Election Date to
pay the amounts due on the next succeeding Interest Payment Date or on the
Stated Maturity in the Optional Payment Currency, then it shall pay all
amounts (including interest and, if applicable, principal) due with respect
to the affected issuance of Dual Currency Notes in the Optional Payment
Currency on such Interest Payment Date or the Stated Maturity.
Unless otherwise specified in the applicable Pricing Supplement, if Capital
Funding does not elect on an Option Election Date to pay the amount due on
the related Interest Payment Date or on the Stated Maturity in the Optional
Payment Currency, then such payment shall be made in the Face Amount Currency
and no notice of such payment will be published. Unless otherwise specified
in the applicable Pricing Supplement, Capital Funding may make such an
election from time to time at its option, and if Capital Funding has made
such an election with respect to any Interest Payment Date, it need not make
such an election with respect to a subsequent Interest Payment Date or the
Stated Maturity. In such event, amounts payable on such subsequent Interest
Payment Date or on the Stated Maturity shall be paid in the Face Amount
Currency.
For further information regarding certain tax consequences to holders of Dual
Currency Notes, see "Certain United States Federal Income Tax
Consequences--United States Holders--Dual Currency Notes."
Payment Due Upon Optional Redemption or Repayment or Upon Acceleration
Unless otherwise specified in the applicable Pricing Supplement,
notwithstanding any prior election by Capital Funding, if any Dual Currency
Note is redeemed at the option of Capital Funding or repaid at the option of
the holder prior to its Stated Maturity or if the payment of principal of and
interest on any Dual Currency Note is accelerated in accordance with the
provisions described under "Description of Debt Securities and
Guarantees--Events of Default" in the Prospectus, then Capital Funding shall
pay to the holder of such Dual Currency Note, on the redemption date or the
date of repayment or acceleration, an amount equal to the face amount thereof
in the Face Amount Currency plus accrued interest in such currency to but
excluding the redemption date or the date of repayment or acceleration, as
the case may be, minus the Total Option Value (as defined below) multiplied
by a fraction, the numerator of which is the
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face amount of such Dual Currency Note and the denominator of which is the
aggregate face amount of all Dual Currency Notes issued on the same day and
having the same terms as such Dual Currency Note. Notwithstanding any prior
election made by Capital Funding, such payment shall be made in the Face
Amount Currency unless otherwise specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Total
Option Value" of any Dual Currency Note is an amount (calculated as of the
date on which Capital Funding notifies the Trustee that such Dual Currency
Note will be redeemed at the option of Capital Funding, or the date of
repayment at the option of the holder or the date of acceleration, as the
case may be, by the Option Value Calculation Agent (to be designated in the
applicable Pricing Supplement)) equal to the sum of the Option Values
(calculated as of such date by the Option Value Calculation Agent) for all
Interest Payment Dates occurring after the date of calculation up to and
including the Stated Maturity. The "Option Value" for an Interest Payment
Date or the Stated Maturity is the amount calculated by the Option Value
Calculation Agent to be the arithmetic average of the prices quoted on the
date of calculation by three reference banks (which banks shall be selected
by the Option Value Calculation Agent and shall be reasonably acceptable to
Capital Funding) for the right on the Option Election Date immediately
preceding such Interest Payment Date or the Stated Maturity to purchase for
value on such Interest Payment Date or the Stated Maturity from such
reference banks (A) the aggregate amount of the Face Amount Currency due on
such Interest Payment Date or the Stated Maturity with respect to all of the
Dual Currency Notes issued on the same day and having the same terms as such
Dual Currency Note in exchange for (B) the amount of the Optional Payment
Currency that would be received if the amount in clause (A) were converted
into the Optional Payment Currency at the Designated Exchange Rate.
In no event will the payment of principal of any Dual Currency Note upon such
redemption or repayment or upon acceleration be less than zero.
All determinations made by the Option Value Calculation Agent shall be in its
sole discretion (except to the extent it is expressly provided that any
determination is subject to approval by Capital Funding), and, in the absence
of manifest error, shall be conclusive for all purposes and irrevocably
binding upon the holders of Dual Currency Notes, and the Option Value
Calculation Agent shall have no liability therefor.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS
AS TO THE RISKS ENTAILED IN AN INVESTMENT IN DUAL CURRENCY NOTES. DUAL
CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Alternative Provisions for Dual Currency Notes
As an alternative to the above-described provisions, if so specified in the
applicable Pricing Supplement, the terms of an issue of Dual Currency Notes
may provide that Capital Funding shall have a one-time option, exercisable in
whole but not in part with respect to all Dual Currency Notes of such issue
on any one of the dates specified in the applicable Pricing Supplement, of
thereafter making all scheduled payments of principal, premium, if any, and
interest in the Optional Payment Currency. The terms of such an issue would
preclude Capital Funding from making any subsequent election to make
scheduled payments in the Face Amount Currency. In the event that Capital
Funding offers any such issue of Dual Currency Notes, the terms of such issue
(including terms related to payments of principal, premium and interest other
than scheduled payments), which would be applicable in lieu of the
above-described provisions, will be set forth in the applicable Pricing
Supplement.
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Subsequent Interest Periods
If so specified in the Pricing Supplement relating to a particular Note,
Capital Funding will have the option with respect to such Note to reset the
interest rate, in the case of a Fixed Rate Note, or to reset the Spread
and/or Spread Multiplier, in the case of a Floating Rate Note, and, if
Capital Funding has such option, the date or dates on which such interest
rate or such Spread and/or Spread Multiplier, as the case may be, may be
reset (each an "Optional Reset Date"), and, if so specified in the applicable
Pricing Supplement, at such time, Capital Funding may also provide for
different redemption provisions to be effective during the Subsequent
Interest Period (as hereinafter defined) following any repayment pursuant to
the fourth paragraph under this heading.
Capital Funding may exercise such an option with respect to such a Note by
notifying the Trustee of such exercise at least 45 but not more than 60 days
prior to an Optional Reset Date for such Note. Not later than 40 days prior
to such Optional Reset Date, the Trustee will mail to the holder of such Note
a notice (the "Reset Notice"), first class, postage prepaid, setting forth
(i) the election of Capital Funding to reset the interest rate, in the case
of a Fixed Rate Note, or the Spread and/or Spread Multiplier, in the case of
a Floating Rate Note, (ii) such new interest rate or such new Spread and/or
Spread Multiplier, as the case may be, and (iii) the provisions, if any, for
redemption during the period from such Optional Reset Date to the next
Optional Reset Date or, if there is no such next Optional Reset Date, to the
Stated Maturity of such Note (each such period a "Subsequent Interest
Period"), including the date or dates on which or the period during which and
the price or prices at which such redemption may occur during such Subsequent
Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to an Optional
Reset Date for a Note, Capital Funding may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, provided for in the Reset
Notice and establish (i) a higher interest rate, in the case of a Fixed Rate
Note, or (ii) a Spread and/or Spread Multiplier that would result in a higher
interest rate (assuming the same Base Rate), in the case of a Floating Rate
Note, for the Subsequent Interest Period commencing on such Optional Reset
Date by causing the Trustee to mail notice of such higher interest rate or
new Spread and/or Spread Multiplier, as the case may be, first class, postage
prepaid, to the holder of such Note. Such notice shall be irrevocable. All
Notes with respect to which the interest rate or Spread and/or Spread
Multiplier is reset on an Optional Reset Date will bear such higher interest
rate, in the case of a Fixed Rate Note, or Spread and/or Spread Multiplier
that would result in a higher interest rate (assuming the same Base Rate), in
the case of a Floating Rate Note, whether or not tendered for repayment.
If Capital Funding resets the interest rate or the Spread and/or Spread
Multiplier of a Note, the holder of such Note will have the option to elect
repayment of such Note by Capital Funding on an Optional Reset Date at a
price equal to the principal amount thereof plus any accrued interest to such
Optional Reset Date. In order for a Note to be so repaid on an Optional Reset
Date, the holder thereof must follow the procedures set forth below under
"Redemption and Repayment" for optional repayment except that the period for
delivery of such Note or notification to the Trustee shall be at least 25 but
not more than 35 days prior to such Optional Reset Date and except that a
holder who has tendered a Note for repayment pursuant to a Reset Notice may,
by written notice to the Trustee, revoke any such tender for repayment until
the close of business on the tenth day prior to such Optional Reset Date;
provided, however, that if such day is not a Business Day, then such notice
may be given on the next succeeding Business Day.
Extension of Maturity
If so specified in the Pricing Supplement relating to a particular Note
(other than an Amortizing Note), Capital Funding will have the option to
extend the Stated Maturity of such Note for one or more periods of from one
to five whole years (each an "Extension Period") up to but not
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beyond the date (the "Final Maturity") set forth in such Pricing Supplement,
and, if so specified in the applicable Pricing Supplement, at such time,
Capital Funding may reset the interest rate, in the case of a Fixed Rate Note
or the Spread and/or Spread Multiplier, in the case of a Floating Rate Note,
for the Extension Period and may provide for different redemption provisions
to be effective during the Extension Period following any repayment pursuant
to the fourth paragraph under this heading.
Capital Funding may exercise such an option with respect to a Note by
notifying the Trustee of such exercise at least 45 but not more than 60 days
prior to the Stated Maturity of such Note in effect prior to the exercise of
such option (the "Original Stated Maturity"). Not later than 40 days prior to
the Original Stated Maturity, the Trustee will mail to the holder of such
Note a notice (the "Extension Notice"), first class, postage prepaid setting
forth (i) the election of Capital Funding to extend the Stated Maturity of
such Note, (ii) the new Stated Maturity, (iii) in the case of a Fixed Rate
Note, the interest rate applicable to the Extension Period or, in the case of
a Floating Rate Note, the Spread and/or Spread Multiplier applicable to the
Extension Period, and (iv) the provisions, if any, for redemption during the
Extension Period, including the date on which or the period or periods during
which and the price at which such redemption may occur during the Extension
Period. Upon the mailing by the Trustee of an Extension Notice to the holder
of a Note, the Stated Maturity of such Note shall be extended automatically,
and, except as modified by the Extension Notice and as described in the next
paragraph, such Note will have the same terms as prior to the mailing of such
Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Original
Stated Maturity for a Note, Capital Funding, may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, provided for in the
Extension Notice and establish (i) a higher interest rate, in the case of a
Fixed Rate Note, or (ii) a Spread and/or Spread Multiplier that would result
in a higher interest rate (assuming the same Base Rate), in the case of a
Floating Rate Note, for the Extension Period by causing the Trustee to mail
notice of such new interest rate or higher Spread and/or Spread Multiplier,
as the case may be, first class, postage prepaid, to the holder of such Note.
Such notice shall be irrevocable and shall be mailed by the Trustee within
one Business Day after receipt thereof. All Notes with respect to which the
Stated Maturity is extended will bear such higher interest rate, in the case
of a Fixed Rate Note, or Spread and/or Spread Multiplier that would result in
a higher interest rate (assuming the same Base Rate), in the case of a
Floating Rate Note, for the Extension Period, whether or not tendered for
repayment.
If Capital Funding extends the Stated Maturity of a Note, the holder of such
Note will have the option to elect repayment of such Note by Capital Funding
on the Original Stated Maturity at a price equal to the principal amount
thereof plus any accrued interest to such date. In order for a Note to be so
repaid on the Original Stated Maturity, the holder thereof must follow the
procedures set forth below under "Redemption and Repayment" for optional
repayment, except that the period for delivery of such Note or notification
to the Trustee shall be at least 25 but not more than 35 days prior to the
Original Stated Maturity and except that a holder who has tendered a Note for
repayment pursuant to an Extension Notice may, by written notice to the
Trustee, revoke any such tender for repayment until the close of business on
the tenth day prior to the Original Stated Maturity; provided, however, that
if such day is not a Business Day, then such notice may be given on the next
succeeding Business Day.
Redemption and Repayment
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to maturity or that such Note will be
redeemable at the option of Capital Funding on a date or dates specified
prior to maturity at a price or prices set forth in the applicable Pricing
Supplement together with accrued interest to the date of redemption. Unless
otherwise
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specified in the applicable Pricing Supplement, the Notes will not be subject
to any sinking fund. Unless otherwise specified in the applicable Pricing
Supplement, Capital Funding may redeem any of the Notes that are redeemable
and remain outstanding either in whole or from time to time in part, upon not
less than 30 nor more than 60 days notice. If less than all of the Notes of
like tenor and terms are to be redeemed, the Notes to be redeemed shall be
selected by the Trustee by such method as the Trustee shall deem fair and
appropriate.
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to maturity or that such Note will be repayable
at the option of the holder on a date or dates specified prior to maturity at
a price or prices set forth in the applicable Pricing Supplement, together
with accrued interest to the date of repayment.
In order for a Note to be repaid, the Paying Agent must receive at least 30
days but not more than 45 days prior to the repayment date (i) the Note with
the form entitled "Option to Elect Repayment" therein duly completed or (ii)
a telegram, telex, facsimile transmission or letter from a member of a
national securities exchange or the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States
setting forth the name of the holder of the Note, the principal amount of the
Note, the principal amount of the Note to be repaid, the certificate number
or a description of the tenor and terms of the Note, a statement that the
option to elect repayment is being exercised thereby and a guarantee that the
Note to be repaid with the form entitled "Option to Elect Repayment" therein
duly completed will be received by the Paying Agent not later than five
Business Days after the date of such telegram, telex, facsimile transmission
or letter and such Note and form duly completed must be received by the
Paying Agent not later than such fifth Business Day. Exercise of the
repayment option by the holder of a Note shall be irrevocable. The repayment
option may be exercised by the holder of a Note for less than the entire
principal amount of the Note, provided that the principal amount of the Note
remaining outstanding after repayment is an authorized denomination.
If a Note is represented by a Global Security, the Depositary's nominee will
be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's
nominee will timely exercise a right to repayment with respect to a
particular Note, the beneficial owner of such Note must instruct the broker
or other direct or indirect participant through which it holds an interest in
such Note to notify the Depositary of its desire to exercise a right to
repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other direct or indirect participant through
which it holds an interest in a Note in order to ascertain the cut-off time
by which such an instruction must be given in order for timely notice to be
delivered to the Depositary.
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is
an Original Issue Discount Note, the amount payable on such Note in the event
of redemption or repayment prior to its Stated Maturity shall be the
Amortized Face Amount of such Note as of the date of redemption or the date
of repayment, as the case may be. The "Amortized Face Amount" of an Original
Issue Discount Note shall be the amount equal to (i) the Issue Price set
forth in the applicable Pricing Supplement plus (ii) that portion of the
difference between the Issue Price and the principal amount of such Note that
has accrued at the yield to maturity set forth in the Pricing Supplement
(computed in accordance with generally accepted United States bond yield
computation principles) by such date of redemption or repayment, but in no
event shall the Amortized Face Amount of an Original Issue Discount Note
exceed its principal amount. Unless otherwise specified in the applicable
Pricing Supplement, in the event of redemption or repayment at the option of
the holder of any Currency Indexed Note or Dual Currency Note, the amount
payable upon such redemption or repayment shall be the respective amount
determined in the manner described under "Currency Indexed Notes" and "Dual
Currency Notes."
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Book-Entry System
Upon issuance, all Book-Entry Notes having the same Original Issue Date,
Stated Maturity, redemption or repayment provisions, Interest Payment Dates
and, in the case of Fixed Rate Notes, interest rate and amortization
schedule, or, in the case of Floating Rate Notes, Base Rate, Initial Interest
Rate, Interest Payment Dates, Index Maturity, Interest Reset Dates, Fixed
Interest Rate, if any, Spread and/or Spread Multiplier, if any, Minimum
Interest Rate, if any, and Maximum Interest Rate, if any, will be represented
by a single global security (a "Global Security"), or, if so required by the
Depositary, more than one such Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary and registered in the name of a nominee of the Depositary. Except
under circumstances described below, Book-Entry Notes will not be
exchangeable for Certificated Notes and will not otherwise be issuable in
definitive form.
The Depositary has advised Capital Funding that it 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 Securities Exchange Act of 1934, as amended.
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. Direct Participants ("Direct Participants") include securities
brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations. The Depositary is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the NASD. 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. The rules applicable to
the Depositary and its Participants are on file with the Securities and
Exchange Commission.
Upon the issuance of a Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of persons held with
the Depositary with the respective principal amounts of the Notes represented
by such Global Security. Such accounts shall be designated by the Agents with
respect to such Notes or by Capital Funding if such Notes are offered and
sold directly by Capital Funding. Ownership of beneficial interests in a
Global Security will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such
Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary or its nominee
(with respect to interests of Participants) and on the records of
Participants (with respect to interests of persons other than Participants).
The laws of some states 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
Security.
So long as the Depositary, or its nominee, is the registered owner of such
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Security for all purposes under the Indenture. Except as provided below,
owners of beneficial interests in a Global Security will not be entitled to
have Notes represented by such Global Security registered in their names,
will not receive or be entitled to receive physical delivery of Notes in
definitive form and will not be considered the owners or holders thereof
under the Indenture.
Principal, premium, if any, and interest payments on Notes registered in the
name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security
representing such Notes. None of Capital Funding,
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NYNEX, the Trustee, any paying agent nor the Security Registrar for such
Notes will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests in such
Global Security for such Notes or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
Capital Funding expects that the Depositary for the Notes or its nominee,
upon receipt of any payment of principal, premium or interest, will
immediately credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal
amount of the Global Security for such Notes as shown on the records of the
Depositary or its nominee. Capital Funding also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name", and will be the
responsibility of such Participants.
If the Depositary is at any time unwilling or unable to continue as
depositary, or is no longer eligible to act as depositary under the
Indenture, and a successor depositary is not appointed by Capital Funding
within 90 days, Capital Funding will issue Notes in definitive form in
exchange for the entire Global Security representing such Notes. In addition,
Capital Funding may at any time and in its sole discretion determine not to
have the Notes represented by a Global Security and, in such event, will
issue Notes in definitive form in exchange for the Global Securities
representing such Notes. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery in
definitive form of Notes represented by such Global Security equal in
principal amount to such beneficial interest and to have such Notes
registered in its name. Notes so issued in definitive form will be issued as
registered Notes in denominations of U.S. $1,000 or any integral multiple of
U.S. $1,000, unless otherwise specified by Capital Funding.
IMPORTANT CURRENCY INFORMATION
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for each Note in the Specified Currency for such Note.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into Foreign Currencies and vice versa, and most banks do not
currently offer non-U.S. dollar denominated checking or savings account
facilities in the United States. However, if requested by a prospective
purchaser of Notes denominated in a Foreign Currency, any Agent will arrange
for the conversion of U.S. dollars into such Foreign Currency to enable the
purchaser to pay for such Notes. Such requests must be made on or before the
fifth Business Day preceding the date of delivery of the Notes, or by such
other date as may be determined by the Agent. Each such conversion will be
made by the Agent on such terms and subject to such conditions, limitations
and charges as the Agent may from time to time establish in accordance with
its regular foreign exchange practice. All costs of exchange will be borne by
the purchaser of such Notes.
CURRENCY RISKS
Exchange Rates and Exchange Controls
An investment in Notes that are denominated in, or the payment of which is to
be made in or determined with reference to, a Foreign Currency entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks generally depend on factors
over which Capital Funding has no control and include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the Foreign Currency. Currency exchange rates are determined by,
among other factors: changing supply and demand for a particular currency;
trade, fiscal, monetary, foreign investment and exchange control programs and
policies of governments; U.S. and foreign political and economic events and
policies, rates of inflation or interest rates; restrictions on U.S. or
foreign exchanges or markets; changes in balances of payments and trade; and
currency devaluations and regulations. In recent years, rates of exchange
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between U.S. dollars and certain Foreign 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 in such rate that may occur
during the term of any Note.
Depreciation of the Foreign Currency in which a Note is denominated against
the U.S. dollar would result in a decrease in the effective yield of such
Note below its coupon rate and, in certain circumstances, could result in a
loss to the investor on a U.S. dollar basis. Similarly, depreciation of the
Denominated Currency with respect to a Currency Indexed Note against the
applicable Index would result in the principal amount payable with respect to
such Note at the date of maturity being less than the Face Amount of such
Note which, in turn, would decrease the effective yield of such Note below
its applicable interest rate and could also result in a loss to the investor.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the
availability of a Foreign Currency for making payments with respect to a Note
denominated in such currency. There can be no assurance that exchange
controls will not restrict or prohibit payments of principal, premium or
interest in any currency or currency unit. Even if there are no actual
exchange controls, it is possible that on an Interest Payment Date with
respect to, or at the maturity of, any particular Note, the Foreign Currency
for such Note would not be available to Capital Funding to make payments of
interest and principal then due. In that event, Capital Funding will make
such payments in the manner described under "Description of Notes--Payment
Currency." In the event of an official redenomination of the Specified
Currency (including without limitation, an official redenomination of a
Specified Currency that is a composite currency), the obligations of Capital
Funding with respect to payments on Notes denominated in such currency shall
be deemed, in all cases, immediately following such redenomination to provide
for the payment of that amount of redenominated currency specified in the
applicable Pricing Supplement representing the amount of such obligations
immediately before such redenomination. See "Description of Notes--Payment
Currency."
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT AND ANY
PRICING SUPPLEMENT WILL NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES
DENOMINATED IN, OR THE PAYMENT OF WHICH IS TO BE MADE IN OR IS RELATED TO THE
VALUE OF, A FOREIGN CURRENCY AND CAPITAL FUNDING AND NYNEX DISCLAIM ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST
AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE DATE OF ANY PRICING
SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE
RISKS ENTAILED IN AN INVESTMENT IN SUCH NOTES, WHICH ARE NOT AN APPROPRIATE
INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers of Notes who are residents of the United States, and
Capital Funding disclaims any responsibility to advise prospective purchasers
who are residents of countries other than the United States with respect to
any matters that may affect the purchase or holding of, or receipt of
payments of principal, premium or interest in respect of, Notes. Such persons
should consult their own counsel with regard to such matters.
Pricing Supplements relating to Notes denominated in a Foreign Currency will
contain information concerning historical exchange rates for such Foreign
Currency against the U.S. dollar, a description of the currency and any
exchange controls as of the date of the applicable Pricing Supplement
affecting such currency.
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Foreign Currency Judgments
The Notes will be governed by and construed in accordance with the laws of
the State of New York. Courts in the United States customarily have not
rendered judgments for money damages denominated in any currency other than
U.S. dollars. Under New York law, any judgment with respect to a Note
denominated in a Foreign Currency will be rendered in such Foreign Currency
and converted into U.S. dollars at a rate of exchange prevailing on the date
of entry of the judgment or decree. In the event an action based on Notes
denominated in a Foreign Currency were commenced in a court in the United
States outside New York, the currency of judgment and/or applicable exchange
rate may differ. The Indenture provides that if it is necessary for the
purpose of obtaining a judgment in any court to convert any currency into any
other currency, such conversion shall be made at the spot rate of exchange
prevailing on the date Capital Funding or NYNEX makes payment to any person
in satisfaction of the judgment. If, pursuant to any judgment, conversion is
to be made on a date other than the payment date, the Indenture provides that
Capital Funding and NYNEX shall pay any additional amounts necessary to
indemnify such person for any change between the spot rate of exchange
prevailing on the payment date and the spot rate of exchange prevailing on
such other date. Capital Funding and NYNEX will not, however, be required to
pay more in the currency or currency unit due under such Note at the spot
rate prevailing when payment is made than the amount of currency or currency
unit stated to be due under such Note, and Capital Funding and NYNEX will be
entitled to withhold (or be reimbursed for, as the case may be) any excess of
the amount actually realized upon any such conversion over the amount due and
payable on the date of payment.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary, which was prepared by Simpson Thacher & Bartlett,
special tax counsel to Capital Funding, describes certain United States
federal income tax consequences of the ownership of Notes as of the date
hereof. Except where noted, it deals only with Notes held as capital assets
and does not deal with special situations, such as those of dealers in
securities or financial institutions, life insurance companies, United States
Holders (as defined below) whose "functional currency" is not the U.S.
dollar, or persons owning (actually or constructively) ten percent or more of
the combined voting power of all classes of voting stock of NYNEX. In
addition, this summary does not address the federal income tax consequences
of owning Indexed Notes. Such consequences will be addressed in the
applicable Pricing Supplement. Persons considering the purchase, ownership or
disposition of Notes should consult their own tax advisors concerning the
federal income tax consequences in light of their particular situations as
well as any consequences arising under the laws of any other taxing
jurisdiction. Furthermore, the discussion below is based upon the provisions
of the Internal Revenue Code of 1986 (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.
United States Holders
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. A
"Non-United States Holder" is a holder that is not a United States Holder.
Payments of Interest. Except as set forth below, interest on a Note will
generally be taxable to a United States Holder as ordinary income from
domestic sources at the time it is paid or accrued in accordance with the
United States Holder's method of accounting for tax purposes.
Original Issue Discount. The following is a summary of the principal United
States federal income tax consequences of the ownership of Original Issue
Discount Notes (as defined below)
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by United States Holders. Additional rules applicable to Original Issue
Discount Notes which are denominated in or determined by reference to a
Foreign Currency are described under "Foreign Currency Notes" below. The
summary is based upon Treasury regulations which were issued on January 27,
1994 (the "OID Regulations") and are to be effective on April 4, 1994. The
OID Regulations provide, however, that taxpayers generally may rely on them
in determining the federal income tax consequences of owning debt instruments
issued after December 22, 1992 and before their effective date.
A Note may be issued for an amount that is less than its stated redemption
price at maturity (the sum of all payments to be made on the Note other than
"qualified stated interest"). The difference between the stated redemption
price at maturity of the Note and its "issue price", if such difference is at
least 0.25 percent of the stated redemption price at maturity multiplied by
the number of complete years to maturity, will be "original issue discount"
("OID"). (Notes issued with OID shall be referred to as "Original Issue
Discount Notes" in this section.) The "issue price" of each Note in a
particular offering will be the first price at which a substantial amount of
that particular offering is sold. "Qualified stated interest" is stated
interest that is unconditionally payable in cash or in property (other than
debt instruments of the issuer) at least annually and, with respect to a
Fixed Rate Note, at a single fixed rate. Interest is payable at a single
fixed rate only if the rate appropriately takes into account the length of
the interval between payments.
The OID Regulations provide that Notes that may be redeemed prior to their
Stated Maturity at the option of the issuer, or that may be prepaid prior to
their Stated Maturity at the option of the holder, shall be treated from the
time of issuance as having a maturity date for federal income tax purposes on
such redemption or prepayment date if (i) in the case of a redemption at the
option of the issuer, such redemption would result in a lower yield to
maturity or (ii) in the case of a prepayment at the option of the holder,
such prepayment would result in a higher yield to maturity. Notice will be
given in the applicable Pricing Supplement when Capital Funding determines
that a particular Note will be deemed to have a maturity date for federal
income tax purposes prior to its Stated Maturity.
In certain cases, Notes that bear stated interest and that are issued at par
may be deemed to bear OID for federal income tax purposes, with the result
that the inclusion of interest into income for federal income tax purposes
may vary from the actual cash payments of interest made on such Notes,
generally accelerating income for cash method taxpayers. Under the OID
Regulations, a Note may be an Original Issue Discount Note where (a) a
Floating Rate Note provides for a Maximum Interest Rate or a Minimum Interest
Rate that is reasonably expected as of the issue date to cause the yield on
the Note to be less, in the case of a maximum rate, or more, in the case of a
minimum rate, than the expected yield determined without the maximum rate or
the minimum rate, as the case may be; (b) a Floating Rate Note provides for
significant front-loading or back-loading of interest; or (c) a Note bears
interest at a floating rate in combination with one or more floating or fixed
rates. Notice will be given in the applicable Pricing Supplement when Capital
Funding determines that a particular Note will be an Original Issue Discount
Note. Unless an applicable Pricing Supplement so indicates, Floating Rate
Notes will not be Original Issue Discount Notes.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year should be aware that they must, in general,
include OID in income in advance of the receipt of some or all of the related
cash payments. The amount of OID includible in income by the initial United
States Holder of an Original Issue Discount Note is the sum of the daily
portions of OID with respect to the Note for each day during the taxable year
or portion of the taxable year in which such United States Holder held such
Note ("accrued OID"). The daily portion is determined by allocating to each
day in any "accrual period" a pro rata portion of the OID allocable to that
accrual period. The "accrual period" for an Original Issue Discount Note may
be of any length and may vary in length over the term of a Note, provided
that each
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accrual period is no longer than one year and each scheduled payment of
principal or interest occurs on the first day or the final day of an accrual
period. In general, the computation of OID is simplest if accrual periods
correspond to the intervals between payment dates provided by the terms of a
Note. The amount of OID allocable to any accrual period is an amount equal to
the excess (if any) of (a) the product of the 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 properly
adjusted for the length of the accrual period) over (b) the sum of any
qualified stated interest allocable to the accrual period. In determining OID
allocable to an accrual period, if an interval between payments of qualified
stated interest contains more than one accrual period, the amount of
qualified stated interest payable at the end of the interval is allocated on
a pro rata basis to each accrual period in the interval and the adjusted
issue price must be increased by the amount of any qualified stated interest
that has accrued prior to the beginning of the accrual period but is not
payable until a later date. OID allocable to a final accrual period is the
difference between the amount payable at maturity (other than a payment of
qualified stated interest) and the adjusted issue price at the beginning of
the final accrual period. If all accrual periods are of equal length, except
for either an initial shorter accrual period or an initial and a final
shorter accrual period, the amount of OID allocable to the initial accrual
period may be computed under any reasonable method. The "adjusted issue
price" of a Note at the beginning of any accrual period is equal to its issue
price increased by the accrued OID for each prior accrual period and reduced
by any prior payments, or any payments made on the first day of the accrual
period, with respect to such Note that were not qualified stated interest.
Under these rules, a United States Holder will have to include in income
increasingly greater amounts of OID in successive accrual periods. Capital
Funding is required to report the amount of OID accrued on Notes held of
record by persons other than corporations and other exempt holders.
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Original Issue Discount Notes"), under the OID Regulations,
all payments (including all stated interest) will be included in the stated
redemption price at maturity and, thus, United States Holders will generally
be taxable on the discount in lieu of stated interest. The discount will be
equal to the excess of the stated redemption price at maturity over the issue
price of a Short-Term Original Issue Discount Note, unless the United States
Holder elects to compute this discount using tax basis instead of issue
price. However, certain categories of United States Holders (generally
individuals or other cash method taxpayers) are not required to include
accrued discount in their income currently unless they elect to do so. United
States Holders who report income for federal income tax purposes on the
accrual method and certain other United States Holders are required to accrue
discount on such Short-Term Original Issue Discount Notes (as ordinary
income) on a straight-line basis, unless an election is made to accrue the
discount according to a constant yield method based on daily compounding. In
the case of a United States Holder that is not required, and that does not
elect, to include discount in income currently, any gain realized on the
sale, exchange or retirement of the Short-Term Original Issue Discount Note
will be ordinary income to the extent of the discount accrued through the
date of sale, exchange or retirement. In addition, any holder of a Note who
does not elect to currently include accrued discount in income may be
required to defer deductions for a portion of the United States Holder's
interest expenses with respect to any indebtedness incurred or maintained to
purchase or carry such Note.
Market Discount. If a United States Holder purchases a Note for an amount
that is less than its "revised issue price" (defined as the sum of the issue
price of the Note and the aggregate amount of the OID includible, if any,
without regard to the rules for acquisition premium discussed below, in the
gross income of all previous holders of the Note), the amount of the
difference will be treated as "market discount" for federal income tax
purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules, a United States Holder will be required to
treat any principal payment on, or any gain on the sale, exchange, retirement
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or other disposition of, a Note as ordinary income to the extent of 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. In addition, the United States Holder may be required to defer,
until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Any 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
United States Holder elects to accrue on a constant yield method. A United
States Holder of a Note may elect to include market discount in income
currently as it accrues (on either a ratable or constant yield basis), in
which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after
the first taxable year to which the election applies, and may not be revoked
without the consent of the Internal Revenue Service (the "IRS").
Amortization of Premium; Amortizable Bond Premium. A United States Holder who
purchases a Note for an amount that is greater than its adjusted issue price
but equal to or less than the sum of all amounts payable on the Note after
the purchase date other than payments of qualified stated interest will be
considered to have purchased such Note at an "acquisition premium." Under the
acquisition premium rules the amount of OID which such holder must include in
its gross income with respect to such Note for any taxable year will be
reduced by the portion of such acquisition premium properly allocable to such
year.
A United States Holder who purchases a Note for an amount in excess of the
sum of all amounts payable on the Note after the purchase date other than
qualified stated interest will be considered to have purchased the Note at a
"premium" and will not be required to include any OID in income. A United
States Holder generally may elect to amortize the premium over the remaining
term of the Note on a constant yield method. The amount amortized in any year
will be treated as a reduction of the United States Holder's interest income
from the Note. Bond premium on a Note held by a United States Holder that
does not make such an election will decrease the gain or increase the loss
otherwise recognized on disposition of the Note. The election to amortize
premium on a constant yield method once made applies to all debt obligations
held or subsequently acquired by the electing holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Election to Treat All Interest as OID. Under the OID Regulations, a United
States Holder may elect to treat all interest on any Note as OID and
calculate the amount includible in gross income under the constant yield
method described above. For the purposes of this election, interest includes
stated interest, acquisition discount, OID, de minimis OID, market discount,
de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium. If a United States Holder
makes this election for a Note with market discount or amortizable bond
premium, the election is treated as an election under the market discount or
amortizable bond premium provisions, described above, and the electing United
States Holder will be required to amortize bond premium or include market
discount in income currently for all of the holder's other debt instruments
with market discount or amortizable bond premium. The election is to be made
for the taxable year in which the United States Holder acquired the Note, and
may not be revoked without the consent of the IRS. United States Holders
should consult with their own tax advisors about this election.
Sale, Exchange and Retirement of Notes. A United States Holder's tax basis in
a Note will, in general, be the United States Holder's cost therefor,
increased by OID or any discount with respect to a Short-Term Original Issue
Discount Note, included in income by the United States Holder and reduced by
any amortized premium and any cash payments on the Note other than qualified
stated interest. Upon the sale, exchange or retirement of a Note, a United
States Holder
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will recognize capital gain or loss equal to the difference between the
amount realized upon the sale, exchange or retirement and the adjusted tax
basis of the Note. Except as described above with respect to certain
Short-Term Original Issue Discount Notes, and with respect to market discount
that has not previously been included in income, to the extent such market
discount has accrued, and except with respect to gain or loss attributable to
changes in exchange rates as described below with respect to certain Foreign
Currency Notes, such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the Note has been held for more than one year. Under current law, net capital
gains of individuals are, under certain circumstances, taxed at lower rates
than items of ordinary income. The deductibility of capital losses is subject
to limitations.
Extendible and Reset Notes. A Note may provide that Capital Funding has the
option to reset the interest rate or the Spread and/or Spread Multiplier on
an Optional Reset Date or to extend the maturity of a Note on the Stated
Maturity. See "Description of Notes--Subsequent Interest Periods" and
"Extension of Maturity." The treatment of a United States Holder of Notes
with respect to which such an option has been exercised who does not elect to
have Capital Funding repay such Notes on the applicable Optional Reset Date
or Original Stated Maturity is unclear and will depend, in part, on the terms
established for such Notes by Capital Funding pursuant to the exercise of
such option (the "Revised Terms"). Such holder may be treated for federal
income tax purposes as having exchanged such Notes (the "Old Notes") for new
Notes with Revised Terms (the "New Notes"). If the holder is treated as
having exchanged Old Notes for New Notes, such exchange may be treated as
either a taxable exchange or a tax-free recapitalization.
If the exercise of the option by Capital Funding is not treated as an
exchange of Old Notes for New Notes, no gain or loss will be recognized by a
United States Holder as a result thereof. If the exercise of the option is
treated as a taxable exchange of Old Notes for New Notes, a United States
Holder would recognize gain or loss equal to the difference between the issue
price of the New Notes and the holder's tax basis in the Old Notes. If the
exercise of the option is treated as a tax-free recapitalization, no loss
would be recognized by a United States Holder as a result thereof and gain,
if any, would be recognized to the extent of the fair market value of the
excess, if any, of the principal amount of Notes received over the principal
amount of Notes surrendered. In this regard, the meaning of the term
"principal amount" is not clear. Such term could be interpreted to mean
"issue price" with respect to Notes that are received and "adjusted issue
price" with respect to Notes that are surrendered. Legislation to that effect
has been introduced in the past. It is not possible to determine whether such
legislation will be reintroduced, and if so, enacted and, if enacted, whether
it would apply to recapitalizations occurring prior to the date of enactment.
Foreign Currency Notes. The following is a summary of the principal United
States federal income tax consequences to a United States Holder of the
ownership of a Note denominated in a Foreign Currency ("Foreign Currency
Notes"). See "Currency Risks." Persons considering the purchase of Foreign
Currency Notes should consult their own tax advisors with regard to the
application of the United States federal income tax laws to their particular
situations, as well as any consequences arising under the laws of any other
taxing jurisdiction.
If interest payments are made in a Foreign Currency to a United States Holder
who is not required to accrue such interest prior to its receipt, such holder
will be required to include in income the U.S. dollar value of the amount
received (determined by translating the Foreign Currency received at the
"spot rate" for such Foreign Currency on the date such payment is received),
regardless of whether the payment is in fact converted into U.S. dollars. No
exchange gain or loss is recognized with respect to the receipt of such
payment.
A United States Holder who is required to accrue interest on a Foreign
Currency Note prior to receipt of such interest will be required to include
in income for each taxable year the U.S. dollar value of the interest that
has accrued during such year, determined by translating such interest
S-31
<PAGE>
at the average rate of exchange for the period or periods during which such
interest accrued. The average rate of exchange for an interest accrual period
is the simple average of the exchange rates for each Business Day of such
period (or such other average that is reasonably derived and consistently
applied by the holder). An accrual basis holder may elect to translate
interest income at the spot rate on the last day of the accrual period (or
last day of the taxable year in the case of an accrual period that straddles
the holder's taxable year) or on the date the interest payment is received if
such date is within five days of the end of the accrual period. Upon receipt
of an interest payment on such Note, such holder will recognize ordinary
income or loss in an amount equal to the difference between the U.S. dollar
value of such payment (determined by translating any Foreign Currency
received at the "spot rate" for such Foreign Currency on the date received)
and the U.S. dollar value of the interest income that such holder has
previously included in income with respect to such payment. Any such gain or
loss generally will not be treated as interest income or expense, except to
the extent provided in Treasury regulations or administrative pronouncements
of the IRS.
OID on a Note that is also a Foreign Currency Note will be determined for any
accrual period in the applicable Foreign Currency and then translated into
U.S. dollars in the same manner as interest income accrued by a holder on the
accrual basis, as described above. Likewise, a United States Holder will
recognize exchange gain or loss when the OID is paid to the extent of the
difference between the U.S. dollar value of the accrued OID (determined in
the same manner as for accrued interest) and the U.S. dollar value of such
payment (determined by translating any Foreign Currency received at the spot
rate for such Foreign Currency on the date of payment). For this purpose, all
receipts on a Note will be viewed first as the receipt of any stated interest
payments called for under the terms of the Note, second as receipts of
previously accrued OID (to the extent thereof), with payments considered made
for the earliest accrual periods first, and thereafter as the receipt of
principal.
The amount of market discount on a Foreign Currency Note includible in income
will generally be determined by translating the market discount determined in
the Foreign Currency into U.S. dollars at the spot rate on the date the
Foreign Currency Note is retired or otherwise disposed of. If the United
States Holder has elected to accrue market discount currently, then the
amount which accrues is determined in the Foreign Currency and then
translated into U.S. dollars on the basis of the average exchange rate in
effect during such accrual period. A United States Holder will recognize
exchange gain or loss with respect to market discount which is accrued
currently using the approach applicable to the accrual of interest income as
described above.
Bond premium on a Foreign Currency Note will be computed in the applicable
Foreign Currency. With respect to a United States Holder that elects to
amortize the premium, the amortizable bond premium will reduce interest
income in the applicable Foreign Currency. At the time bond premium is
amortized, exchange gain or loss (which is generally ordinary income or loss)
will be realized based on the difference between spot rates at such time and
at the time of acquisition of the Foreign Currency Note. A United States
Holder that does not elect to amortize bond premium will translate the bond
premium, computed in the applicable Foreign Currency, into U.S. dollars at
the spot rate on the maturity date and such bond premium will constitute a
capital loss which may be offset or eliminated by exchange gain.
A United States Holder's tax basis in a Foreign Currency Note will be the
U.S. dollar value of the Foreign Currency amount paid for such Foreign
Currency Note determined at the time of such purchase. A United States Holder
who purchases a Note with previously owned Foreign Currency will recognize
gain or loss at the time of purchase attributable to the difference at the
time of purchase, if any, between his tax basis in the Foreign Currency and
the fair market value of the Note in U.S. dollars on the date of purchase.
Such gain or loss will be ordinary income or loss.
S-32
<PAGE>
For purposes of determining the amount of any gain or loss recognized by a
United States Holder on the sale, exchange or retirement of a Foreign
Currency Note, the amount realized upon such sale, exchange or retirement
will be the U.S. dollar value of the amount realized in Foreign Currency
(other than amounts attributable to accrued but unpaid interest not
previously included in the holder's income), determined at the time of the
sale, exchange or retirement.
A United States Holder will recognize exchange gain or loss attributable to
the movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange or retirement) of a Foreign
Currency Note. Such gain or loss will be treated as ordinary income or loss.
The realization of such gain or loss will be limited to the amount of overall
gain or loss realized on the disposition of a Foreign Currency Note. Under
proposed Treasury regulations issued on March 17, 1992, if a Foreign Currency
Note is denominated in one of certain hyperinflationary currencies, generally
(i) exchange gain or loss would be realized with respect to movements in the
exchange rate between the beginning and end of each taxable year (or such
shorter period) that such Note was held and (ii) such exchange gain or loss
would be treated as an addition or offset, respectively, to the accrued
interest income on (and an adjustment to the holder's tax basis in) the
Foreign Currency Note.
A United States Holder will have a tax basis in any Foreign Currency received
as interest on (or OID with respect to), or received on the sale, exchange or
retirement of a Foreign Currency Note equal to the U.S. dollar value thereof
at the spot rate at the time the holder received such Foreign Currency. Any
gain or loss realized by a United States Holder on a sale, exchange or other
disposition of Foreign Currency will be ordinary income or loss and will not
be treated as interest income or expense, except to the extent provided in
Treasury regulations or administrative pronouncements of the IRS.
Dual Currency Notes. If so specified in an applicable Pricing Supplement
relating to a Foreign Currency Note, Capital Funding may have the option of
making any scheduled payment of principal or interest due on such Foreign
Currency Note in a currency (the "Optional Payment Currency") other than the
Face Amount Currency. In general, payments under Dual Currency Notes will be
taxed pursuant to the rules regarding interest, OID, premium and Foreign
Currency transactions discussed above. However, a United States Holder of a
Dual Currency Note with respect to which Capital Funding's option has been
exercised may be considered to have exchanged a Note denominated in the Face
Amount Currency for a Note denominated in the Optional Payment Currency.
Whether such a deemed exchange will require a United States Holder to
recognize gain or loss will depend on whether the exchange is part of a
recapitalization of Capital Funding. If Capital Funding exercises its option
to make future payments in the Optional Payment Currency as part of a
recapitalization that qualifies for nonrecognition treatment, a United States
Holder of a Dual Currency Note will not recognize gain or loss upon the
exchange and the Holder's basis in the Note will be unchanged. If, however,
Capital Funding's exercise of this option is not part of a recapitalization,
a United States Holder will recognize gain or loss, if any, equal to the
difference between the holder's basis in the Note denominated in the Face
Amount Currency and the value of the Note denominated in the Optional Payment
Currency.
The Treasury has not published any regulations or rulings that provide
guidance with respect to the Dual Currency Notes. The IRS could, however,
promulgate rules under section 988 of the Code (dealing with transactions in
foreign currency) that could affect the tax consequences described above, and
such rules could be applied retroactively.
Non-United States Holders
Under present United States federal income and estate tax law, and subject to
the discussion below concerning backup withholding:
S-33
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(a) no withholding of United States federal income tax will be required
with respect to the payment by Capital Funding, NYNEX or any Paying Agent of
principal or interest (which for purposes of this discussion includes OID) on
a Note owned by a Non-United States Holder, provided, in the case of
interest, that (i) the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
Capital Funding entitled to vote within the meaning of section 871(h)(3) of
the Code and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to Capital Funding through
stock ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on a Note is described in section 881(c)(3)(A) of the Code and (iv)
the beneficial owner satisfies the statement requirement (described generally
below) set forth in section 871(h) and section 881(c) of the Code and the
regulations thereunder;
(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-United States Holder
upon the sale, exchange or retirement of a Note; and
(c) a Note beneficially owned by an individual who at the time of death is
a Non-United States Holder will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Capital Funding entitled to
vote within the meaning of section 871(h)(3) of the Code and provided that
the interest payments with respect to such Note would not have been, if
received at the time of such individual's death, effectively connected with
the conduct of a United States trade or business by such individual.
To qualify for the exemption from withholding tax referred to in (a)(iv)
above, the beneficial owner of such Note, or a financial institution holding
the Note on behalf of such owner, must provide, in accordance with specified
procedures, a paying agent of Capital Funding with a statement to the effect
that the beneficial owner is not a U.S. person, citizen or resident. Pursuant
to current temporary Treasury regulations, these requirements will be met if
(1) the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a U.S. person, citizen or resident
(which certification may be made on an Internal Revenue Service Form W-8 (or
successor form)) or (2) a financial institution holding the Note on behalf of
the beneficial owner certifies, under penalties of perjury, that such
statement has been received by it and furnishes a paying agent with a copy
thereof.
Payments to Non-United States Holders not meeting the requirements of
paragraph (a) above and thus subject to withholding of United States federal
income tax may nevertheless be exempt from such withholding if the beneficial
owner of the Note provides Capital Funding with a properly executed (1)
Internal Revenue Service Form 1001 (or successor form) claiming an exemption
from withholding under the benefit of a tax treaty or (2) Internal Revenue
Service Form 4224 (or successor form) stating that interest paid on the Note
is not subject to withholding tax because it is effectively connected with
the owner's conduct of a trade or business in the United States.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to certain payments
of principal, interest, OID and premium paid on Notes and to the proceeds of
the sale of a Note made to United States Holders other than certain exempt
recipients (such as corporations). A 31 percent backup withholding tax will
apply to such payments if the United States Holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.
No information reporting or backup withholding will be required with respect
to payments made by Capital Funding or any paying agent to Non-United States
Holders if a statement described
S-34
<PAGE>
in (a)(iv) under "Non-United States Holders" has been received and the payor
does not have actual knowledge that the beneficial owner is a United States
person.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, original issue discount or premium on a
Note are paid or collected by a foreign office of a custodian, nominee or
other foreign agent on behalf of the beneficial owner of such Note, or if a
foreign office of a broker (as defined in applicable Treasury regulations)
pays the proceeds of the sale of a Note to the owner thereof. If, however,
such nominee, custodian, agent or broker is, for United States federal income
tax purposes, a U.S. person, a controlled foreign corporation or a foreign
person that derives 50% or more of its gross income for certain periods from
the conduct of a trade or business in the United States, such payments will
not be subject to backup withholding but will be subject to information
reporting, unless (1) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a U.S.
person and certain other conditions are met or (2) the beneficial owner
otherwise establishes an exemption. Temporary Treasury regulations provide
that the Treasury is considering whether backup withholding will apply with
respect to such payments of principal, interest or the proceeds of a sale
that are not subject to backup withholding under the current regulations.
Under proposed Treasury regulations not currently in effect backup
withholding will not apply to such payments absent actual knowledge that the
payee is a United States person.
Payments of principal, interest, OID and premium on a Note paid to the
beneficial owner of a Note by a United States office of a custodian, nominee
or agent, or the payment by the United States office of a broker of the
proceeds of sale of a Note, will be subject to both backup withholding and
information reporting unless the beneficial owner provides a statement
described in (a)(iv) under "Non-United States Holders," and the payor does
not have actual knowledge that the beneficial owner is a United States
person, or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by Capital Funding through
Lehman Brothers, Lehman Brothers Inc. (including its affiliate Lehman Special
Securities Inc.), J.P. Morgan Securities Inc., Morgan Stanley & Co.
Incorporated and Salomon Brothers Inc, each of whom has agreed to use its
best efforts to solicit offers to purchase Notes. Capital Funding will pay
each Agent a commission of .125% to .750% (or, with respect to Notes with
maturities of 30 years or greater, such commission as shall be negotiated
between Capital Funding and the related Agent at the time Capital Funding
issues such Notes) of the principal amount of any Note, depending upon the
maturity of such Note, sold through such Agent. Capital Funding may also sell
the Notes directly to investors on its own behalf. Capital Funding may sell
Notes to any of the Agents acting as principal, at a negotiated discount, for
resale to investors at varying prices related to prevailing market prices at
the time of resale, to be determined by such Agent or, if so agreed, at a
fixed public offering price as determined by such Agent. Unless otherwise
specified in the applicable Pricing Supplement, any such discount will result
in a purchase price to the Agent of the principal amount of the Note 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 resell a Note
purchased by it as principal to another broker-dealer at a discount, provided
such discount does not exceed the commission or discount received by such
Agent from Capital Funding in connection with the original sale of such Note.
In the case of sales made directly by Capital Funding, Capital Funding will
neither pay a commission nor allow a discount. Capital Funding has agreed to
reimburse the Agents for certain expenses in connection with the offering of
the Notes.
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<PAGE>
Capital Funding will have the sole right to accept offers to purchase Notes
and may reject any proposed purchase of Notes in whole or in part. Each Agent
will have the right, in its discretion reasonably exercised, to reject any
offer to purchase Notes received by it in whole or in part.
Capital Funding may appoint one or more additional firms to act as its agents
in connection with the Notes on the same terms as are then applicable to the
Agents. Thereafter, the term Agent shall also refer to such additional firm
or firms. Capital Funding may terminate its arrangements with any or all of
the Agents upon written notice.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each Agent may make a market in the
Notes, but such Agent is not obligated to do so and may discontinue any
market making at any time without notice. There can be no assurance that the
Notes offered hereby will be sold or that there will be a secondary market
for any of the Notes.
Lehman Brothers, Lehman Brothers Inc. (including its affiliate Lehman Special
Securities Inc.), J.P. Morgan Securities Inc., Morgan Stanley & Co.
Incorporated and Salomon Brothers Inc, and certain affiliates thereof engage
or may in the future engage in transactions with and perform services for
each of Capital Funding and NYNEX and certain affiliates thereof in the
ordinary course of business. In addition, in the ordinary course of their
respective businesses, affiliates of J.P. Morgan Securities Inc. have
engaged, and may in the future engage, in commercial banking and investment
banking transactions with Capital Funding and NYNEX and certain affiliates
thereof.
Capital Funding and NYNEX have agreed to indemnify each Agent against certain
civil liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments such Agent may be required to make in respect
thereof. Each Agent may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933. Capital Funding and NYNEX have also agreed to
reimburse the Agents for certain expenses.
S-36
<PAGE>
PROSPECTUS
$1,500,000,000
NYNEX CAPITAL FUNDING COMPANY
Debt Securities
Unconditionally Guaranteed as to Payment
of Principal, Premium, if any, and Interest
by
NYNEX CORPORATION
NYNEX Capital Funding Company ("Capital Funding") may offer from time to time
its debt securities in one or more series in an aggregate amount sufficient
to result in gross proceeds to Capital Funding of up to U.S. $1,500,000,000
or the equivalent thereof in other currencies or composite currencies,
including the European Currency Unit (the "Debt Securities"). The Debt
Securities will be offered in one or more separate series or issues in
amounts, at prices, in currencies or currency units and on terms to be
determined at the time of offering. All Debt Securities will be
unconditionally guaranteed as to payment of principal, premium, if any, and
interest by NYNEX Corporation ("NYNEX").
The Debt Securities will be unsecured and will rank equally with all other
unsecured senior indebtedness of Capital Funding.
Debt Securities of a series may be issuable in registered form without
coupons ("Registered Securities"), in bearer form with or without coupons
attached ("Bearer Securities") or in the form of one or more global
securities (each a "Global Security"). Bearer Securities, subject to certain
exceptions, will not be offered or sold to persons who are within the United
States or to United States persons. See "Limitations on Issuance of Bearer
Securities".
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, authorized denominations, maturity,
rate (or manner of calculation thereof) and time of payment of interest, if
any, and any redemption or repayment terms, the currency, currencies or
currency unit or units in which the Debt Securities shall be payable and any
initial public offering price, the net proceeds to Capital Funding, the names
of, and the principal amount of Debt Securities to be purchased by or
through, underwriters, dealers or agents, if any, the compensation of such
persons and other special terms in connection with the offering and sale of
the applicable series of the Debt Securities in respect of which this
Prospectus is being delivered are set forth in the accompanying Prospectus
Supplement (the "Prospectus Supplement").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI-
TIES 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 ADE-
QUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
January 27, 1994
<PAGE>
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus
or in the Prospectus Supplement in connection with the offer made by this
Prospectus or the Prospectus Supplement and, if given or made, such
information or representations must not be relied upon as having been
authorized by NYNEX, Capital Funding or by any underwriter, dealer or agent.
This Prospectus and the Prospectus Supplement do not constitute an offer to
sell or a solicitation of an offer to buy any of the Debt Securities offered
hereby or thereby in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. This Prospectus and the
Prospectus Supplement do not constitute an offer to sell or a solicitation of
an offer to buy any Debt Securities other than those to which they relate.
The delivery of this Prospectus or the Prospectus Supplement at any time does
not imply that the information herein or therein is correct as of any time
subsequent to its date.
AVAILABLE INFORMATION
NYNEX is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith
files reports and other information with the Securities and Exchange
Commission (the "SEC"). Such reports and other information filed by NYNEX can
be inspected and copied at the public reference facilities of the SEC, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well
as at the following SEC Regional Offices: Seven World Trade Center, New York,
NY 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago IL 60601-2511. Copies can be obtained from the SEC by mail at
prescribed rates. Requests should be directed to the SEC's Public Reference
Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC
20549.
NYNEX and Capital Funding have filed with the SEC Registration Statements on
Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statements") under the Securities Act of 1933, as amended (the
"Securities Act"), covering the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statements, certain parts of which are omitted from the Prospectus in
accordance with the rules and regulations of the SEC. For further
information, reference is made to the Registration Statements.
The SEC Staff advised Capital Funding that the Staff will not raise any
objection if Capital Funding does not file periodic and other reports
pursuant to Sections 13 and 15(d) of the Exchange Act. Based upon such
advice, Capital Funding does not file periodic reports under the Exchange
Act.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
(1) NYNEX's Annual Report on Form 10-K for the year ended December 31, 1992;
(2) NYNEX's Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1993; and
(3) NYNEX's Current Reports on Form 8-K, dates of reports February 16, June
1, October 4, November 10, November 19 and December 24, 1993.
All documents filed pursuant to Section 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 shall be deemed to be incorporated by reference
in this Prospectus and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
2
<PAGE>
Copies of the above documents (excluding exhibits to such documents, unless
such exhibits are specifically incorporated by reference therein) may be
obtained upon written or oral request without charge by each person to whom
this Prospectus is delivered from the Treasurer of NYNEX, 1113 Westchester
Avenue, White Plains, NY 10604 (telephone number 914 644-6400).
NYNEX CORPORATION
NYNEX is a holding company with various subsidiaries engaged in the provision
of telecommunications products and services, information systems, software,
directory publishing and other business services. NYNEX's dominant industry
segment is Telecommunications, which includes New York Telephone Company, New
England Telephone and Telegraph Company and their subsidiaries (collectively,
the "telephone subsidiaries"). The telephone subsidiaries provided NYNEX with
86% of its operating revenues in 1992.
In addition to Telecommunications, NYNEX has wholly-owned subsidiaries in the
following industry segments: Cellular (NYNEX Mobile Communications Company),
Publishing (NYNEX Information Resources Company), Financial Services (NYNEX
Credit Company, NYNEX Capital Funding Company and NYNEX Trade Finance
Company) and Other Diversified Operations (including NYNEX Worldwide Services
Group, Inc., NYNEX Network Systems Company and NYNEX CableComms Limited).
NYNEX was incorporated on October 7, 1983 under the laws of the State of
Delaware and has its principal executive offices at 1113 Westchester Avenue,
White Plains, NY 10604 (telephone number 914 644-6400).
NYNEX CAPITAL FUNDING COMPANY
Capital Funding was established to provide funding to NYNEX and its wholly
owned direct and indirect subsidiaries other than the telephone subsidiaries
(the "non-telephone subsidiaries"). Capital Funding may raise funds through
the offering of Debt Securities in the United States, Europe and other
overseas markets and will lend the net proceeds to NYNEX and/or one or more
non-telephone subsidiaries of NYNEX. Capital Funding will not engage in any
separate business activities. All of the Debt Securities will be
unconditionally guaranteed as to payment of principal, premium, if any, and
interest by NYNEX.
Capital Funding is a wholly owned subsidiary of NYNEX and was incorporated
under the laws of the State of Delaware on January 18, 1990. The principal
executive offices of Capital Funding are located at 1113 Westchester Avenue,
White Plains, NY 10604 (telephone number 914 644-6400).
RISK FACTORS RELATING TO CURRENCIES
Debt Securities denominated or payable in foreign currencies may entail
significant risks. These risks include, without limitation, the possibility
of significant fluctuations in the foreign currency markets, the imposition
or modification of foreign exchange controls and potential illiquidity in the
secondary market. These risks will vary depending upon the currency or
currencies involved. These risks will be more fully described in the
Prospectus Supplement relating thereto.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
NYNEX for the periods indicated:
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
1993 Year Ended December 31,
<S> <C> <C> <C> <C> <C>
(Unaudited) 1992 1991 1990 1989 1988
3.52 3.34 1.93 2.60 2.33 3.28
</TABLE>
For the purpose of this ratio, (i) earnings have been calculated by adding to
earnings before interest expense and income taxes the estimated interest
portion of rentals; and (ii) fixed charges are comprised of interest expense
and the estimated interest portion of rentals.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities will be used to provide
funds for NYNEX and/or non-telephone subsidiaries of NYNEX.
Capital Funding will remit to NYNEX and/or one or more of NYNEX's
non-telephone subsidiaries the cash raised by Capital Funding as soon as
practicable after receipt thereof, but in no event later than six months
after Capital Funding receives such cash. In the interim, Capital Funding
will invest any funds held by it only in securities permitted by Rule
3a-5(a)(6) of the SEC under the Investment Company Act of 1940, as amended.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The Debt Securities of Capital Funding and the Guarantees of NYNEX (the
"Guarantees") are to be issued under an Indenture dated as of April 1, 1990,
as supplemented by a First Supplemental Indenture, and as the same may be
further amended or supplemented (the "Indenture"), from Capital Funding and
NYNEX to The Bank of New York, as Trustee (the "Trustee"). Copies of the
Indenture and any amendments or supplements are filed or incorporated by
reference as exhibits to the Registration Statements. The following
description summarizes certain provisions of the Debt Securities, the
Guarantees and the Indenture and is subject to the detailed provisions of the
Debt Securities, the Guarantees and the Indenture. Whenever any particular
section of the Indenture or any term defined therein is referred to, such
section or definition is incorporated herein by reference, and the statement
in connection with which such reference is made is qualified in its entirety
by such reference.
General
The Indenture does not limit the amount of Debt Securities which can be
issued thereunder and provides that additional Debt Securities may be issued
thereunder up to the aggregate principal amount which may be authorized from
time to time by the Boards of Directors of Capital Funding and NYNEX.
Reference is made to the Prospectus Supplement for the following terms of the
particular series of Debt Securities being offered thereby: (i) the title and
aggregate principal amount of the series; (ii) whether such Debt Securities
are issuable as Registered Securities, Bearer Securities or both; (iii) the
maturity dates or the manner of determination thereof; (iv) the interest rate
or rates or the manner of determination thereof and the dates on and manner
in which, including record dates, interest shall be paid; (v) the places for
payments on, registration of transfer of, or surrender for exchange of, such
Debt Securities; (vi) the periods within which, prices at which, the currency
or currency unit in which, and the other terms and conditions upon which,
such Debt Securities may be redeemed at the option of Capital Funding; (vii)
the obligation, if any, of Capital Funding to redeem or purchase such Debt
Securities pursuant to any sinking fund or analogous provision, or at the
option of the holder thereof, and any related periods, prices, currency or
currency unit and other terms and conditions for any such redemption or
purchase; (viii) the minimum denominations if other than $1,000, in the case
of Registered Securities,
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and $5,000, in the case of Bearer Securities; (ix) the amount payable upon
acceleration, if other than the principal amount of such Debt Securities; (x)
any Events of Default and covenants, whether or not consistent with the
Events of Default or covenants set forth in the Indenture; (xi) any Trustee
other than The Bank of New York; (xii) if other than U.S. Dollars, the
currency or currency unit (including any composite currency) for payments on
such Debt Securities or in which such Debt Securities shall be denominated;
(xiii) whether Capital Funding or the holder of such Debt Security may elect
to change the currency or currency unit of payment, the periods within which
such election may be made, and the terms and conditions of and the manner for
determining the exchange rate relating to any such election; (xiv) the
designation of any agent of Capital Funding for purposes of making
determinations or calculations with respect to such Debt Securities or
otherwise; (xv) the manner, if applicable, for determining payments on such
Debt Securities if payments on such Debt Securities are to be determined by
reference to the relationship between two or more currencies or composite
currencies, to the price of one or more specified securities or commodities
or to one or more securities or commodities exchange indices or other indices
or by other similar methods or formulas ("Indexed Securities"); (xvi) any
provisions for satisfaction and discharge of the Indenture with respect to
such Debt Securities if other than as provided in the Indenture; (xvii) the
date of any Bearer Securities or any Global Security if other than the date
of original issuance of the first of such Debt Securities, if any; (xviii)
the application, if any, to such Debt Securities of the provisions described
below under "Payment of Additional Amounts" and "Defeasance - Defeasance of
Certain Covenants and Certain Events of Default", and, if applicable, any
additional covenants provided for such Debt Securities with which Capital
Funding and NYNEX may omit compliance pursuant to the provisions described
below in the second paragraph under "Meetings, Modification and Waiver" or
upon exercise of the option described below under "Defeasance - Defeasance of
Certain Covenants and Certain Events of Default"; (xix) whether any Global
Securities shall be issued, whether in whole or part or in permanent or
temporary form, and any related Depositary, Global Exchange Agent and
Exchange Date; (xx) the circumstances for any exchange of temporary Global
Securities for definitive securities, whether such securities will be
Registered Securities or Bearer Securities and the terms and conditions
relating to the payment of interest to any clearing organization; (xxi)
applicable subordination provisions, if any; (xxii) if Capital Funding has
the option of making any scheduled payment on such Debt Securities in either
of two currencies ("Dual Currency Securities"), the two currencies in either
of which such payments may be made, and any other special terms with respect
to such Dual Currency Securities; (xxiii) if interest and principal on such
Debt Securities are payable according to an amortization schedule
("Amortizing Securities"), such amortization schedule, and any other special
terms with respect to such Amortizing Securities; and (xxiv) any other terms
of such Debt Securities not inconsistent with the Indenture. (Section 301)
The Debt Securities will be unsecured and, unless otherwise specified in the
applicable Prospectus Supplement, will rank equally with Capital Funding's
other unsecured senior indebtedness.
If the purchase price of any of the Debt Securities is denominated in one or
more foreign currencies or currency units, including any composite currency
(each a "Foreign Currency"), or if the principal of (and premium, if any) or
interest, if any, on any series of Debt Securities is payable in one or more
Foreign Currencies, the restrictions, elections, tax consequences, specific
terms and other information with respect to such issue of Debt Securities and
such Foreign Currencies will be set forth in the applicable Prospectus
Supplement relating thereto.
Some of the Debt Securities may be issued as Discounted Securities (bearing
no interest or interest at a rate which at the time of issuance is below
market rates) to be sold at a substantial discount below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any Discounted Securities will be described in
the Prospectus Supplement relating thereto.
Guarantees
NYNEX will unconditionally guarantee the due and punctual payment of the
principal (and premium, if any) and interest on the Debt Securities when and
as the same shall become due and payable, whether
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at maturity, upon redemption, or otherwise. (Sections 202, 1301 and 1302) The
Guarantees will rank equally with all other unsecured and unsubordinated
obligations of NYNEX. Since NYNEX is a holding company, the right of NYNEX
and, hence, the right of creditors of NYNEX (including the holders of the
Debt Securities) to participate in any distribution of the assets of any
subsidiary of NYNEX, whether upon liquidation, reorganization, or otherwise,
is subject to prior claims of creditors of each such subsidiary, except to
the extent that claims of NYNEX itself as a creditor of a subsidiary may be
recognized. The right of creditors of NYNEX (including the holders of the
Debt Securities) to participate in the distribution of the stock owned by
NYNEX in its telephone subsidiaries would also be subject to approval by the
regulatory commissions having jurisdiction over such subsidiaries (including
the Federal Communications Commission).
Denominations, Registration and Transfer
The Debt Securities of a series will be issuable as Registered Securities,
Bearer Securities or both. Debt Securities of a series may be issuable in the
form of one or more Global Securities, as described below under "Global
Securities". Unless otherwise provided in an applicable Prospectus Supplement
with respect to a series of Debt Securities, Registered Securities
denominated in U.S. dollars will be issued only in denominations of $1,000 or
any integral multiple thereof and Bearer Securities denominated in U.S.
dollars will be issued only in denominations of $5,000 with coupons attached.
A Global Security will be issued in a denomination equal to the aggregate
principal amount of Outstanding Debt Securities of the series represented by
such Global Security. The Prospectus Supplement relating to a series of Debt
Securities denominated in a Foreign Currency will specify the denominations
thereof. (Sections 201, 301, 302 and 305)
In connection with its sale during the "restricted period" as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury regulations
(generally, the first 40 days after the closing date and, with respect to
unsold allotments, until sold), no Bearer Security shall be mailed or
otherwise delivered to any location in the United States (as defined below
under "Limitations on Issuance of Bearer Securities"), and any such Bearer
Security (other than a temporary Global Security in bearer form) may be
delivered only if the person entitled to receive such Bearer Security
furnishes written certification, in the form required by the Indenture, to
the effect that such Bearer Security is not being acquired by or on behalf of
a United States person (as defined below under "Limitations on Issuance of
Bearer Securities"), or, if a beneficial interest in such Bearer Security is
being acquired by or on behalf of a United States person, that such United
States person is a person described in Section 1.163-5(c)(2)(i)(D)(6) of the
United States Treasury regulations or is a financial institution who has
purchased such Bearer Security for resale during the restricted period and
who certifies that it has not acquired such Bearer Security for purposes of
resale directly or indirectly to a United States person or to a person within
the United States or its possessions. See "Global Securities" and
"Limitations on Issuance of Bearer Securities".
Generally, Registered Securities of any series will be exchangeable for other
Registered Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, if Debt
Securities of any series are issuable as both Registered Securities and as
Bearer Securities, at the option of the holder upon request confirmed in
writing, and subject to the terms of the Indenture, Bearer Securities (with
all unmatured coupons, except as provided below, and all matured coupons in
default) of such series will be exchangeable for Registered Securities of the
same series of any authorized denominations and of a like aggregate principal
amount and tenor. Unless otherwise indicated in an applicable Prospectus
Supplement, any Bearer Security surrendered in exchange for a Registered
Security between a Regular Record Date or a Special Record Date and the
relevant date for payment of interest will be surrendered without the coupon
relating to such date for payment of interest and interest will not be
payable on such date for payment of interest in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable
only to the holder of such
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coupon when due in accordance with the terms of the Indenture. (Section 305)
Except as provided in an applicable Prospectus Supplement, Bearer Securities
will not be issued in exchange for Registered Securities.
Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than a Global Security) may be presented for
registration of transfer (with the form of transfer duly executed), at the
office of the Security Registrar or at the office of any transfer agent
designated by Capital Funding for such purpose with respect to any series of
Debt Securities and referred to in the applicable Prospectus Supplement,
without service charge and upon payment of any taxes and other governmental
charges as described in the Indenture. Such transfer or exchange will be
effected upon the Security Registrar or such transfer agent, as the case may
be, being satisfied with the documents of title and identity of the person
making the request. Capital Funding has initially appointed the Trustee as
Security Registrar under the Indenture. (Section 305) If a Prospectus
Supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by Capital Funding with respect to any series
of Debt Securities, Capital Funding may at any time rescind the designation
of any such transfer agent or approve a change in the location through which
any such transfer agent acts, except that, if Debt Securities of a series are
issuable only as Registered Securities, Capital Funding will be required to
maintain a transfer agent in each Place of Payment for such series and, if
Debt Securities of a series are issuable as Bearer Securities, Capital
Funding will be required to maintain (in addition to the Security Registrar)
a transfer agent in a Place of Payment for such series located outside the
United States. Capital Funding may at any time designate additional transfer
agents with respect to any series of Debt Securities. (Section 1002)
In the event of any redemption in part, Capital Funding shall not be required
to (i) issue, register the transfer of or exchange Debt Securities of any
series during a period beginning at the opening of business 15 days before
the day of the mailing of a notice of redemption of Debt Securities of that
series selected to be redeemed and ending at the close of business on (A) if
Debt Securities of the series are issuable only as Registered Securities, the
day of mailing of the relevant notice of redemption and (B) if Debt
Securities of the series are issuable as Bearer Securities, the day of the
first publication of the relevant notice of redemption or, if Debt Securities
of that series are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Security, or portion thereof,
called for redemption; or (iii) exchange any Bearer Security called for
redemption, except to exchange such Bearer Security for a Registered Security
of that series and like tenor which is immediately surrendered for
redemption, except as provided with respect to redemptions discussed under
"Tax Redemption; Special Tax Redemption". (Section 305)
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of (and premium, if any) and interest, if any, on Registered
Securities (other than a Global Security) will be made at the office of such
Paying Agent or Paying Agents as Capital Funding may designate from time to
time, except that at the option of Capital Funding, payment of any interest
may be made (i) by check mailed to the address of the Person entitled thereto
as such address shall appear in the Security Register or (ii) by transfer to
an account maintained by the payee with a bank located inside the United
States. (Sections 305, 307 and 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Securities will be made to the Person in whose name such
Registered Security is registered at the close of business on the Regular
Record Date for such interest payment; provided, however, that interest, if
any, payable at maturity or upon earlier redemption or repayment shall be
payable to the Person to whom principal shall be payable. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of (and premium, if any) and interest, if any, on Bearer Securities
will be payable, subject to any applicable laws and regulations, at the
offices of such Paying Agents outside the United States as Capital Funding
may designate from time to time, except that at the option of Capital
Funding, payment of any interest
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may be made by transfer to an account maintained by the payee outside the
United States. (Sections 307 and 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of interest on Bearer Securities on
any Interest Payment Date will be made only against surrender of the coupon
relating to such Interest Payment Date. (Section 1001) No payment of interest
on a Bearer Security will be made unless on the earlier of the date of the
first such payment by Capital Funding or the date of delivery by Capital
Funding of a definitive Bearer Security, including a permanent Global
Security, a written certification, in the form required by the Indenture, is
provided to Capital Funding stating that on such date the Bearer Security is
not owned by or on behalf of a United States person (as defined below under
"Limitations on Issuance of Bearer Securities"), or, if a beneficial interest
in such Bearer Security is being acquired by or on behalf of a United States
person, that such United States person is a person described in Section
1.163-5(c)(2)(i)(D)(6) of the United States Treasury regulations or is a
financial institution who has purchased such Bearer Security for resale
during the restricted period and who certifies that it has not acquired such
Bearer Security for purposes of resale directly or indirectly to a United
States person or to a person within the United States or its possessions. No
payment with respect to any Bearer Security will be made at any office or
agency of Capital Funding in the United States or by check mailed to any
address in the United States or by transfer to an account maintained in the
United States. Payments will not be made in respect of Bearer Securities or
coupons appertaining thereto pursuant to presentation to Capital Funding or
its designated Paying Agents within the United States or any other demand for
payment to Capital Funding or its designated Paying Agents within the United
States. Notwithstanding the foregoing, payment of principal of (and premium,
if any) and interest, if any, on Bearer Securities denominated and payable in
U.S. dollars will be made at the office of Capital Funding's Paying Agent in
the United States if, and only if, payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
(Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, the
principal office of the Trustee in The City of New York will be designated as
Capital Funding's sole Paying Agent for payments with respect to Debt
Securities which are issuable solely as Registered Securities. Any Paying
Agents outside the United States and any other Paying Agents in the United
States initially designated by Capital Funding for the Debt Securities will
be named in the related Prospectus Supplement. Capital Funding may at any
time designate additional Paying Agents or rescind the designation of any
Paying Agents or approve a change in the office through which any Paying
Agent acts, except that, if Debt Securities of a series are issuable only as
Registered Securities, Capital Funding will be required to maintain a Paying
Agent in each Place of Payment for such series, and if the Debt Securities of
a series may be issuable as Bearer Securities, Capital Funding will be
required to maintain (i) a Paying Agent in a Place of Payment for that series
in the United States for payments with respect to any Registered Securities
of that series (and for payments with respect to Bearer Securities of that
series in the circumstances described above, but not otherwise), (ii) a
Paying Agent in a Place of Payment located outside the United States where
Debt Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment; provided that if the Debt Securities
of such series are listed on the Luxembourg Stock Exchange or any other stock
exchange located outside the United States and such stock exchange shall so
require, Capital Funding will maintain a Paying Agent in Luxembourg or any
other required city located outside the United States, as the case may be,
for the Debt Securities of such series, and (iii) a Paying Agent in a Place
of Payment located outside the United States where (subject to applicable
laws) Registered Securities of such series may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
Capital Funding may be served. (Section 1002)
All moneys paid by Capital Funding to a Paying Agent for the payment of
principal of (and premium, if any) and interest, if any, on any Debt Security
which remain unclaimed at the end of three years after such principal,
premium or interest shall have become due and payable will be repaid to
Capital Funding, and the holder of such Debt Security or any coupon will
thereafter look only to Capital Funding for payment thereof. (Section 1003)
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Global Securities
The Debt Securities of a series may be issued in whole or in part in the form
of one or more Global Securities that will be deposited with, or on behalf
of, a Depositary identified in the Prospectus Supplement relating to such
series. Global Securities may be issued in either registered or bearer form
and in either temporary or permanent form. Unless and until it is exchanged
for Registered Securities in definitive form, a temporary Global Security
representing all or a part of the Registered Securities of a series may not
be transferred except as a whole by the Depositary for such Global Security
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor of such Depositary or a nominee of such
successor. (Section 305)
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the Prospectus Supplement relating to
such series. Capital Funding anticipates that the following provisions will
apply to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit the accounts of persons held with it with
the respective principal amounts of the Debt Securities represented by such
Global Security. Such accounts shall be designated by the underwriters or
agents with respect to such Debt Securities or by Capital Funding if such
Debt Securities are offered and sold directly by Capital Funding. Ownership
of beneficial interests in a Global Security will be limited to persons that
have accounts with the Depositary for such Global Security or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in such Global Security will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depositary or its nominee (with respect to interests of
participants) and on the records of participants (with respect to interests
of persons other than participants). The laws of some states 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 Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture governing such Debt Securities. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities of such series in definitive form and will not be considered
the owners or holders thereof under the Indenture governing such Debt
Securities.
Principal, premium, if any, and interest payments on Debt Securities
registered in the name of a Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Global Security representing such Debt Securities. Neither Capital Funding,
NYNEX, the Trustee for such Debt Securities, any Paying Agent nor the
Security Registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Security for such
Debt Securities or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Capital Funding expects that the Depositary for a series of Debt Securities
or its nominee, upon receipt of any payment of principal, premium or
interest, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of the Global Security for such Debt Securities as shown on
the records of such Depositary or its nominee. Capital Funding also expects
that payments by participants to owners of beneficial interests in such
Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name",
and will be the responsibility of such participants. Receipt by owners of
beneficial interests in a temporary Global Security of payments in respect of
such temporary Global
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Security will be subject, in the case of a temporary Global Security in which
interests are exchangeable for Bearer Securities, to the furnishing of the
certificate described above under "Payment and Paying Agents".
If a Depositary for a series of Debt Securities is at any time unwilling or
unable to continue as depositary or is no longer eligible to act as
depositary under the Indenture, and a successor depositary is not appointed
by Capital Funding within 90 days, Capital Funding will issue Debt Securities
of such series in definitive form in exchange for the entire Global Security
representing such series of Debt Securities. In addition, Capital Funding may
at any time and in its sole discretion determine not to have the Registered
Securities of a series represented by a Global Security and, in such event,
will issue Registered Securities of such series in definitive form in
exchange for the Global Security representing such series of Registered
Securities. Further, if Capital Funding so specifies with respect to the Debt
Securities of a series, an owner of a beneficial interest in a Global
Security representing Debt Securities of such series may, on terms acceptable
to Capital Funding and the Depositary for such Global Security, receive Debt
Securities of such series in definitive form. In any such instance, an owner
of a beneficial interest in a Global Security will be entitled to physical
delivery in definitive form of Debt Securities of the series represented by
such Global Security equal in principal amount to such beneficial interest
and to have such Debt Securities registered in its name (if the Debt
Securities of such series are issuable as Registered Securities). Debt
Securities of such series so issued in definitive form will be issued (a) as
Registered Securities in denominations, unless otherwise specified by Capital
Funding, of $1,000 or any integral multiple of $1,000 if the Debt Securities
of such series are issuable as Registered Securities, (b) as Bearer
Securities in the denomination, unless otherwise specified by Capital
Funding, of $5,000 if the Debt Securities of such series are issuable as
Bearer Securities or (c) as either Registered or Bearer Securities, if the
Debt Securities of such series are issuable in either form. (Section 305)
Notwithstanding the foregoing, no Bearer Security in definitive form
(including an interest in a permanent Global Security in bearer form) will be
delivered unless the beneficial owner thereof has provided the certificate
described above under "Payment and Paying Agents".
Limitations on Issuance of Bearer Securities
In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered, or sold during the restricted period (as
defined under "Denominations, Registration and Transfer") or delivered in
connection with their sale during the restricted period in the United States
or its possessions or to United States persons (each as defined below) except
to the extent permitted under Section 1.163-5(c)(2)(i)(D) of the United
States Treasury regulations (the "D Rules"), and any underwriters, agents and
dealers participating in the offering of Debt Securities must agree that they
will not offer for sale or resale, or sell Bearer Securities in the United
States or its possessions or to United States persons, except to the extent
permitted under the D Rules, nor deliver Bearer Securities within the United
States.
Bearer Securities and any coupons appertaining thereto will bear a legend
substantially to the following effect: "Any United States person who holds
this obligation will be subject to limitations under the United States income
tax laws, including the limitations provided in Sections 165(j) and 1287(a)
of the Internal Revenue Code". Under Sections 165(j) and 1287(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), holders that are
United States persons (as defined below), with certain exceptions, will not
be entitled to deduct any loss on Bearer Securities and must treat as
ordinary income any gain realized on the sale or other disposition (including
the receipt of principal) of Bearer Securities.
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States and an estate or trust
the income of which is subject to United States federal income taxation
regardless of its source, and "United States" means the United States of
America (including the States and the District of Columbia), and its
"possessions" which include Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, Wake Island and Northern Mariana Islands. The term "United
States Alien" means any corporation, partnership, individual or fiduciary
that is, for United States federal income tax purposes, a foreign
corporation, a
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nonresident alien individual, a nonresident fiduciary of a foreign estate or
trust, or a foreign partnership one or more of the members of which is, for
United States federal income tax purposes, a foreign corporation, a
nonresident alien individual or a nonresident fiduciary of a foreign estate
or trust.
Lien On Assets
If at any time, either Capital Funding or NYNEX mortgages, pledges, or
otherwise subjects to any lien the whole or any part of any property or
assets now owned or hereafter acquired by it, except as hereinafter provided,
Capital Funding or NYNEX, as the case may be, will secure the outstanding
Debt Securities, and any other obligations of Capital Funding or NYNEX, as
the case may be, which may be then outstanding and entitled to the benefit of
a covenant similar in effect to this covenant, equally and ratably with the
indebtedness or obligations secured by such mortgage, pledge, or lien, for as
long as any such indebtedness or obligation is so secured. The foregoing
covenant does not apply to the creation, extension, renewal or refunding of
purchase-money mortgages or liens, or other liens to which any property or
asset acquired by Capital Funding or NYNEX, as the case may be, is subject as
of the date of its acquisition by Capital Funding or NYNEX, as the case may
be, or to the making of any deposit or pledge to secure public or statutory
obligations or with any governmental agency at any time required by law in
order to qualify Capital Funding or NYNEX, as the case may be, to conduct its
business or any part thereof or in order to entitle it to maintain
self-insurance or to obtain the benefits of any law relating to workers'
compensation, unemployment insurance, old age pensions or other social
security, or with any court, board, commission, or governmental agency as
security incident to the proper conduct of any proceeding before it. Nothing
contained in the Indenture prevents any Person other than Capital Funding or
NYNEX from mortgaging, pledging, or subjecting to any lien any of its
property or assets, whether or not acquired by such Person from Capital
Funding or NYNEX. (Section 1009)
Tax Redemption; Special Tax Redemption
If and to the extent specified in an applicable Prospectus Supplement, the
Debt Securities of a series will be subject to redemption at any time, as a
whole but not in part, at a redemption price equal to the principal amount
thereof together with accrued and unpaid interest to the date fixed for
redemption, upon publication of a notice as described below, if (x) Capital
Funding determines that (a) as a result of any change in or amendment to the
laws (or any regulations or rulings promulgated thereunder) of the United
States or of any political subdivision or taxing authority thereof or therein
affecting taxation, or any change in official position regarding application
or interpretation of such laws, regulations or rulings (including a holding
by a court of competent jurisdiction), which change or amendment is announced
or becomes effective on or after a date specified in the applicable
Prospectus Supplement, Capital Funding has or will become obligated to pay,
on the next succeeding Interest Payment Date, additional amounts with respect
to any Debt Security of such series as described below under "Payment of
Additional Amounts" or (b) on or after a date specified in the applicable
Prospectus Supplement, any action has been taken by any taxing authority of,
or any decision has been rendered by a court of competent jurisdiction in,
the United States or any political subdivision or taxing authority thereof or
therein, including any of those actions specified in (a) above, whether or
not such action was taken or decision was rendered with respect to Capital
Funding, or any change, amendment, application or interpretation shall be
officially proposed, which, in any such case, in the opinion of legal counsel
to Capital Funding, will result in a material probability that Capital
Funding will become obligated to pay additional amounts with respect to any
Debt Security of such series on the next succeeding Interest Payment Date,
and (y) in any such case Capital Funding in its business judgment determines
that such obligation cannot be avoided by the use of reasonable measures
available to Capital Funding.(Section 1108)
If Capital Funding shall determine that any payment made outside the United
States by Capital Funding or any Paying Agent of principal or interest due in
respect of any Bearer Security (an "Affected
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Security") or any coupon appertaining thereto would, under any present or
future laws or regulations of the United States, be subject to any
certification, information or other reporting requirement of any kind, the
effect of which requirement is the disclosure to Capital Funding, any Paying
Agent or any governmental authority of the nationality, residence or identity
(as distinguished from, for example, status as a United States Alien) of a
beneficial owner of such Affected Security of such series or coupon who is a
United States Alien (other than such a requirement which (a) would not be
applicable to a payment made (i) directly to the beneficial owner or (ii) to
a custodian, nominee or other agent of the beneficial owner, (b) can be
satisfied by such custodian, nominee or other agent certifying to the effect
that such beneficial owner is a United States Alien, provided that in each
case referred to in items (a)(ii) and (b), payment by such custodian, nominee
or other agent to such beneficial owner is not otherwise subject to any such
requirement (other than a requirement which is imposed on a custodian,
nominee or other agent described in (d) of this sentence), (c) would not be
applicable to a payment made by at least one other Paying Agent of Capital
Funding or (d) is applicable to a payment to a custodian, nominee or other
agent of the beneficial owner who is a United States person, a controlled
foreign corporation for United States tax purposes, a foreign person 50% or
more of whose gross income for the three-year period ending with the close of
its taxable year preceding the year of payment is effectively connected with
a United States trade or business, or is otherwise related to the United
States), Capital Funding shall either (x) redeem the Affected Securities of
such series, as a whole, at a redemption price equal to the principal amount
thereof, together with interest accrued to the date fixed for redemption, or
(y) if the conditions of the next succeeding paragraph are satisfied, pay the
additional amounts specified in such paragraph. Capital Funding shall make
such determination and election as soon as practicable and give prompt notice
thereof (the "Determination Notice") stating the effective date of such
certification, information or reporting requirements, whether Capital Funding
has elected to redeem the Affected Securities of such series or to pay the
additional amounts specified in the next succeeding paragraph, and (if
applicable) the last date by which the redemption of the Affected Securities
of such series must take place. If Capital Funding elects to redeem the
Affected Securities of such series, such redemption shall take place on such
date, not later than one year after the publication of the Determination
Notice, as Capital Funding shall elect by notice to the Trustee given not
less than 45 nor more than 75 days before the date fixed for redemption.
Notice of such redemption of the Affected Securities of such series will be
given to the holders thereof not less than 30 nor more than 60 days prior to
the date fixed for redemption. Notwithstanding the foregoing, Capital Funding
shall not redeem the Affected Securities of such series if Capital Funding
subsequently determines, not less than 30 days prior to the date fixed for
redemption, that subsequent payments would not be subject to any such
requirement, in which case Capital Funding shall give prompt notice of such
determination and any earlier redemption notice shall be revoked and of no
further effect. The right of the holders of Affected Securities called for
redemption to exchange such Affected Securities for Registered Securities
(which Registered Securities will remain outstanding following such
redemption) will terminate on the fifteenth day prior to the date fixed for
redemption, and no further exchanges of Affected Securities for Registered
Securities shall be permitted unless Capital Funding shall have made the
subsequent determination and given the notice referred to in the preceding
sentence. (Section 1108)
If and so long as the certification, information or other reporting
requirements referred to in the preceding paragraph would be fully satisfied
by payment of a withholding tax, backup withholding tax or similar charge,
Capital Funding may elect to pay such additional amounts as may be necessary
so that every net payment made outside the United States following the
effective date of such requirements by Capital Funding or any Paying Agent of
principal (or premium, if any) or interest, if any, due in respect of any
Affected Security of such series or any coupon to a holder who certifies that
the beneficial owner is a United States Alien (but without any requirement
that the nationality, residence or identity of such beneficial owner be
disclosed to Capital Funding, any Paying Agent or any governmental
authority), after deduction or withholding for or on account of such
withholding tax, backup withholding tax or similar charge (other than a
withholding tax, backup withholding tax or similar charge which (a) is the
result of a certification, information or other reporting requirement
described in the second parenthetical
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clause of the first sentence of the preceding paragraph or (b) is imposed as
a result of presentation of such Affected Security or coupon for payment more
than 10 days after the date on which such payment becomes due and payable or
on which payment thereof is duly provided for, whichever occurs later), will
not be less than the amount provided for in such Affected Security or coupon
to be then due and payable. In the event Capital Funding elects to pay such
additional amounts, Capital Funding will have the right, at its sole option,
at any time, to redeem the Affected Securities of such series as a whole, but
not in part, at a redemption price equal to the principal amount thereof,
together with accrued and unpaid interest to the date fixed for redemption.
If Capital Funding has made the determination described in the preceding
paragraph with respect to certification, information or other reporting
requirements applicable only to interest and subsequently makes a
determination in the manner and of the nature referred to in such preceding
paragraph with respect to such requirements applicable to principal, Capital
Funding will redeem the Affected Securities of such series in the manner and
on the terms described in the preceding paragraph unless Capital Funding
elects to have the provisions of this paragraph apply rather than the
provisions of the immediately preceding paragraph. If in such circumstances
the Affected Securities of such series are to be redeemed, Capital Funding
shall have no obligation to pay additional amounts pursuant to this paragraph
with respect to principal (or premium, if any) or interest, if any, accrued
and unpaid after the date of the notice of such determination indicating such
redemption, but will be obligated to pay such additional amounts with respect
to interest accrued and unpaid to the date of such determination. If Capital
Funding elects to pay additional amounts pursuant to this paragraph and the
condition specified in the first sentence of this paragraph should no longer
be satisfied, then Capital Funding shall promptly redeem such Affected
Securities in whole but not in part. (Section 1108)
In the event that Capital Funding elects or is required to redeem the Debt
Securities of such series pursuant to the provisions set forth in the
preceding three paragraphs, Capital Funding shall deliver to the Trustee a
certificate, signed by an authorized officer, stating that Capital Funding is
entitled to redeem the Debt Securities of such series pursuant to their
terms.
Notice of intention to redeem the Debt Securities of such series and all
other notices in accordance with the provisions of the preceding paragraphs
will be given in accordance with "Notices" below. In the case of a
redemption, notice will be given once not more than 60 nor less than 30 days
prior to the date fixed for redemption and will specify the date fixed for
redemption.
Payment of Additional Amounts
If and to the extent specified in an applicable Prospectus Supplement,
Capital Funding will, subject to the exceptions and limitations set forth
below, pay to the holder of any Debt Security or coupon who is a United
States Alien such additional amounts as may be necessary in order that every
net payment on such Debt Security or coupon, after withholding by Capital
Funding or any of its Paying Agents for or on account of any present or
future tax, assessment or other governmental charge imposed upon or as a
result of such payment by the United States (or any political subdivision or
taxing authority thereof or therein), will not be less than the amount
provided for in such Debt Security or in such coupon to be then due and
payable. However, Capital Funding will not be required to make any payment of
additional amounts for or on account of:
(1) any tax, assessment or other governmental charge that would not have
been so imposed but for (i) the existence of any present or former connection
between such holder (or between a fiduciary, settlor or beneficiary of, or a
person holding a power over, such holder, if such holder is an estate or
trust, or a member or shareholder of such holder, if such holder is a
partnership or corporation) and the United States, including, without
limitation, such holder (or such fiduciary, settlor, beneficiary, person
holding a power, member or shareholder) being or having been a citizen,
resident or treated as a resident thereof or being or having been engaged in
a trade or business or present therein or having or having had a permanent
establishment therein, or (ii) such holder's present or former status as a
personal holding company, foreign personal holding company, controlled
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foreign corporation or passive foreign investment company with respect to the
United States or as a corporation that accumulates earnings to avoid United
States federal income tax;
(2) any tax, assessment or other governmental charge which would not have
been so imposed but for the presentation by the holder of such Debt Security
or coupon for payment on a date more than 10 days after the date on which
such payment became due and payable or the date on which payment thereof is
duly provided for, whichever occurs later;
(3) any estate, inheritance, gift, sales, transfer, personal property tax
or any similar tax, assessment or other governmental charge;
(4) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment on a Debt Security or coupon if
such payment can be made without such withholding by at least one other
Paying Agent;
(5) any tax, assessment or other governmental charge that is payable
otherwise than by withholding from a payment on a Debt Security or coupon;
(6) any tax, assessment or other governmental charge imposed on a holder of
a Debt Security or coupon that actually or constructively owns 10% or more of
the total combined voting power of all classes of stock of Capital Funding
entitled to vote within the meaning of Section 871(h)(3) of the Code or that
is a controlled foreign corporation related to Capital Funding through stock
ownership;
(7) any tax, assessment or other governmental charge imposed as a result of
the failure to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connection with the United States of the holder or
beneficial owner of a Debt Security or coupon, if such compliance is required
by statute, or by regulation of the United States, as a precondition to
relief or exemption from such tax, assessment or other governmental charge;
(8) any tax, assessment or other governmental charge imposed on the holder
of a Debt Security or a coupon as a result of Section 881(c)(3)(A) of the
Code (relating to banks receiving interest on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of
business); or
(9) any combination of items (1), (2), (3), (4), (5), (6), (7) and (8);
nor will additional amounts be paid with respect to any payment on a Debt
Security or coupon to a holder who is a fiduciary or partnership or other
than the sole beneficial owner of such payment to the extent such payment
would be required by the laws of the United States (or any political
subdivision thereof) to be included in the income for federal income tax
purposes of a beneficiary or settlor with respect to such fiduciary or a
member of such partnership or a beneficial owner who would not have been
entitled to payment of the additional amounts had such beneficiary, settlor,
member or beneficial owner been the holder of such Debt Security or coupon.
(Section 1004)
Mergers and Sales of Assets by Capital Funding and NYNEX
Each of Capital Funding and NYNEX may consolidate with or merge into any
other corporation, and Capital Funding and NYNEX may sell or transfer all or
substantially all of their assets to another corporation, provided, among
other things, that (a) the corporation formed by or resulting from any such
consolidation or merger or the transferee of such assets shall be a
corporation organized and existing under the laws of the United States, any
State thereof or the District of Columbia and shall expressly assume by
supplemental indenture payment of the principal of (and premium, if any) and
interest, if any, on the Debt Securities and the performance and observance
of the Indenture, (b) after giving effect to the transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing, and (c)
certain other conditions are met. (Section 801)
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Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of Capital Funding or NYNEX substantially as an
entirety in accordance with the preceding paragraph, the successor
corporation formed by such consolidation or into which Capital Funding or
NYNEX is merged or to which such conveyance or transfer is made shall be
substituted for Capital Funding or NYNEX, as the case may be, with the same
effect as if such successor corporation had been named as Capital Funding or
NYNEX, as the case may be. Thereafter Capital Funding or NYNEX, as the case
may be, shall be relieved of all obligations and covenants under the
Indenture and Capital Funding or NYNEX, as the case may be, may thereupon or
any time thereafter be dissolved, wound up, or liquidated. (Section 802)
Events of Default
The following events are defined in the Indenture as "Events of Default" with
respect to a series of Debt Securities: (i) default in the payment of any
installment of interest on any Debt Securities of such series and any related
coupons for 30 days after becoming due; (ii) default in the payment of the
principal of (or premium, if any, on) any Debt Securities of such series when
due; (iii) default in the performance of any other covenant for 90 days after
notice; (iv) certain events of bankruptcy, insolvency or reorganization; and
(v) any other Event of Default provided in the terms of the Debt Securities
of such series, any such other Event of Default to be described in the
applicable Prospectus Supplement. (Section 501) If an Event of Default shall
occur and be continuing with respect to a series of Debt Securities, either
the Trustee or the holders of at least 25% in principal amount of the
outstanding Debt Securities of such series may declare the entire principal
amount (or, in the case of Discounted Securities, Dual Currency Securities or
Indexed Securities, such lesser amount as may be provided for in such
Discounted Securities, Dual Currency Securities or Indexed Securities) of all
the Debt Securities of such series to be immediately due and payable.
(Section 502)
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default with respect to a particular series of Debt
Securities, give the holders of the Debt Securities of such series notice of
such default known to it (the term default to mean the events specified above
without grace periods); provided that, except in the case of a default in the
payment of principal of (or premium, if any) or interest, if any, on any of
the Debt Securities of such series, the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding
of such notice is in the interest of the holders of the Debt Securities of
such series. (Section 602)
Capital Funding and NYNEX are each required to furnish the Trustee annually a
statement by certain officers of Capital Funding or NYNEX, as the case may
be, to the effect that to the best of their knowledge Capital Funding or
NYNEX, as the case may be, is not in default in the fulfillment of any of its
obligations under the Indenture or, if there has been a default in the
fulfillment of any such obligation, specifying each such default. (Section
1007)
The holders of a majority in principal amount of a particular series of Debt
Securities outstanding have the right, subject to certain limitations, to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee with respect to such series or exercising any trust
or power conferred on the Trustee, and to waive certain defaults. (Sections
512 and 513) The Indenture provides that in case an Event of Default shall
occur and be continuing, the Trustee shall exercise such of its rights and
powers under the Indenture, and use the same degree of care and skill in its
exercise, as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs. (Section 601) Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the holders of the Debt
Securities unless they shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request. (Section 603)
The Debt Securities will be governed by and construed in accordance with the
laws of the State of New York. Courts in the United States customarily have
not rendered judgments for money damages denominated in any currency other
than U.S. dollars. Under New York law, any judgment with respect
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to a Debt Security or any related coupon denominated in a Foreign Currency
will be rendered in such Foreign Currency and converted into U.S. dollars at
a rate of exchange prevailing on the date of entry of the judgment or decree.
In the event an action based on Debt Securities or related coupons
denominated in a Foreign Currency were commenced in a court in the United
States outside New York, the currency of judgment and/or applicable exchange
rate may differ. The Indenture provides that if it is necessary for the
purpose of obtaining a judgment in any court to convert any currency into any
other currency, such conversion shall be made at a rate of exchange
prevailing on the date Capital Funding or NYNEX makes payment to any person
in satisfaction of the judgment. If pursuant to any judgment, conversion is
to be made on a date other than the payment date, the Indenture provides that
Capital Funding or NYNEX shall pay any additional amounts necessary to
indemnify such person for any change between the rate of exchange prevailing
on the payment date and the rate of exchange prevailing on such other date.
Capital Funding or NYNEX will not, however, be required to pay more in the
currency or currency unit due under such Debt Security or coupon at the spot
rate prevailing when payment is made than the amount of currency or currency
unit stated to be due under such Debt Security or coupon, and Capital Funding
or NYNEX will be entitled to withhold (or be reimbursed for, as the case may
be) any excess of the amount actually realized upon any such conversion over
the amount due and payable on the date of payment. (Section 516)
Defeasance
Satisfaction and Discharge. Except as may otherwise be set forth in the
Prospectus Supplement relating to a series of Debt Securities, the Indenture
provides that Capital Funding and NYNEX shall be discharged from their
obligations under the Debt Securities of such series (with certain
exceptions) at any time prior to the Stated Maturity or redemption thereof
when (a) Capital Funding or NYNEX has irrevocably deposited with the Trustee,
in trust, (i) sufficient funds in the currency, currencies, currency unit or
units in which the Debt Securities of such series are payable to pay the
principal of (and premium, if any) and interest, if any, to Stated Maturity
(or redemption) on, the Debt Securities of such series, or (ii) such amount
of direct obligations of, or obligations the principal of (and premium, if
any) and interest, if any, on which are fully guaranteed by, the government
which issued the currency, and are payable in the currency, in which the Debt
Securities of such series are payable, and which are not subject to
prepayment, redemption or call, as will, together with the predetermined and
certain income to accrue thereon without consideration of any reinvestment
thereof, be sufficient to pay when due the principal of (and premium, if any)
and interest, if any, to Stated Maturity (or redemption) on, the Debt
Securities of such series, or (iii) any combination of funds or government
obligations referred to in (i) or (ii), (b) Capital Funding or NYNEX has paid
all other sums payable with respect to the Debt Securities of such series and
(c) certain other conditions are met. Upon such discharge, the holders of the
Debt Securities of such series shall no longer be entitled to the benefits of
the Indenture, except for certain rights, including registration of transfer
and exchange of the Debt Securities of such series and replacement of
mutilated, destroyed, lost or stolen Debt Securities, and shall look only to
such deposited funds or obligations. (Sections 401 and 403)
To effect the discharge described in the preceding paragraph, Capital Funding
or NYNEX is required to deliver to the Trustee an opinion of legal counsel
(which may be based on a ruling from or published by the Internal Revenue
Service), to the effect that such discharge will not cause holders of Debt
Securities to recognize income, gain or loss for United States federal income
tax purposes, and that such holders of Debt Securities will be subject to
United States federal income tax on the same amount and in the same manner
and at the same time as would have been the case if such discharge had not
occurred.
Defeasance of Certain Covenants and Certain Events of Default. If the terms
of the Debt Securities of any series so provide, Capital Funding and NYNEX
may omit to comply with the restrictive covenants in Section 801
(Consolidation, Merger, Conveyance or Transfer), Section 1009 (Lien on
Assets) and, if so provided in the terms of the Debt Securities of any series
and specified in the applicable Prospectus Supplement, any other covenant
provided for the Debt Securities of such series, and any such omission
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with respect to such covenants shall not be an Event of Default with respect
to such Debt Securities, if (a) Capital Funding or NYNEX deposits or causes
to be deposited with the Trustee for such Debt Securities in trust an amount
of (i) cash in the currency or currency unit in which such Debt Securities
are payable (except as otherwise specified with respect to such Debt
Securities), (ii) government obligations of the type referred to under
"Satisfaction and Discharge" or (iii) a combination of such cash and
government obligations, which amount, in the case of (ii) or (iii), together
with the predetermined and certain income to accrue on any such government
obligations when due (without the consideration of any reinvestment thereof),
is sufficient to pay and discharge when due such Debt Securities and any
related coupons for unpaid principal (and premium, if any) and interest, if
any, to the Stated Maturity or any Redemption Date, as the case may be and
(b) certain other conditions are met. The obligations of Capital Funding and
NYNEX under the Indenture and the Debt Securities other than with respect to
the covenants referred to above shall remain in full force and effect.
(Section 1011)
In the event Capital Funding and NYNEX exercise their option to omit
compliance with certain covenants of the Indenture with respect to the Debt
Securities of any series as described above and the Debt Securities of such
series are declared due and payable because of the occurrence of any Event of
Default, the amount of cash and/or government obligations on deposit with the
Trustee will be sufficient to pay amounts due on the Debt Securities of such
series on their Stated Maturity or Redemption Date, but may not be sufficient
to pay amounts due on such Debt Securities at the time of the acceleration
resulting from such Event of Default. However, Capital Funding and NYNEX
shall remain liable for such payments.
Meetings, Modification and Waiver
Modifications and amendments of the Indenture may be made by Capital Funding,
NYNEX and the Trustee with the consent of the holders of more than 50% in
principal amount of the Outstanding Debt Securities of each series issued
under the Indenture affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of
the holder of each Outstanding Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of principal of or
interest, if any, on any Debt Security, (b) reduce the principal amount of
(or premium, if any) or interest, if any, on any Debt Security, (c) change
any obligation of Capital Funding to pay additional amounts as set forth
under "Payment of Additional Amounts", (d) reduce the amount of principal of
a Discounted Security, an Indexed Security or a Dual Currency Security
payable upon acceleration of the maturity thereof, (e) change the Place of
Payment, (f) change the currency or currency unit of payment of principal of
(or premium, if any) or interest, if any, on any Debt Security, (g) impair
the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date), or (h) reduce the
percentage in principal amount of Outstanding Debt Securities of any series,
the consent of the holders of which is required for modification or amendment
of the Indenture or for waiver of compliance with certain provisions of the
Indenture or for waiver of certain defaults. (Section 902)
The holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of that series and any coupons appertaining thereto waive any
past default under the Indenture with respect to that series, except a
default in the payment of the principal of (or premium, if any) and interest,
if any, on any Debt Security of that series or in respect of a provision
which under the Indenture cannot be modified or amended without the consent
of the holder of each Outstanding Debt Security of that series affected.
(Section 513) The holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series may, on behalf of the holders
of all Debt Securities of such series, waive, insofar as that series is
concerned, compliance by Capital Funding or NYNEX with certain restrictive
provisions of the Indenture. (Section 1010)
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The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series if Debt Securities of that series are issuable as
Bearer Securities. A meeting may be called at any time by the Trustee, and
also, upon request, by Capital Funding or the holders of at least 10% in
principal amount of the Outstanding Debt Securities of such series, in any
such case upon notice given in accordance with "Notices" below. (Section
1402) Any resolution passed or decision taken at any meeting of holders of
Debt Securities of any series duly held in accordance with the Indenture will
be binding on all holders of Debt Securities of that series and the related
coupons. The quorum at any meeting called to adopt a resolution, and at any
reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series. (Section
1404)
Notices
Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Debt Securities, notices to holders of Bearer
Securities will be given by publication in a daily newspaper in the English
language of general circulation in The City of New York and in London, and so
long as such Bearer Securities are listed on the Luxembourg Stock Exchange
and the Luxembourg Stock Exchange shall so require, in a daily newspaper of
general circulation in Luxembourg or, if not practical, elsewhere in Western
Europe. Such publication is expected to be made in The Wall Street Journal,
the Financial Times and the Luxemburger Wort. Notices to holders of
Registered Securities will be given by mail to the addresses of such holders
as they appear in the Security Register. (Sections 101 and 106)
Title
Title to any Bearer Securities and any coupons appertaining thereto will pass
by delivery. Capital Funding, NYNEX, the Trustee and any agent of Capital
Funding, NYNEX or the Trustee may treat the bearer of any Bearer Security and
the bearer of any coupon and the registered owner of any Registered Security
as the absolute owner thereof (whether or not such Debt Security or coupon
shall be overdue and notwithstanding any notice to the contrary) for the
purpose of making payment and for all other purposes. (Section 308)
Governing Law
The Indenture, the Debt Securities and the Guarantees are governed by and
construed in accordance with the laws of the State of New York.
Concerning the Trustee
NYNEX and its subsidiaries have customary banking relationships with The Bank
of New York, which is the Trustee under the Indenture.
PLAN OF DISTRIBUTION
General
Capital Funding may sell the Debt Securities being offered hereby: (i)
directly to purchasers, (ii) through agents, (iii) through underwriters, (iv)
through dealers or (v) through a combination of any such methods of sale.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions either (i) at a fixed price or prices, which may be
changed; (ii) at market prices prevailing at the time of sale; (iii) at
prices related to such prevailing market prices; or (iv) at negotiated
prices.
Offers to purchase Debt Securities may be solicited directly by Capital
Funding or by agents designated by Capital Funding from time to time. Any
such agent, which may be deemed to be an underwriter,
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as that term is defined in the Securities Act, involved in the offer or sale
of the Debt Securities in respect of which this Prospectus is delivered will
be named, and any commissions payable by Capital Funding to such agent will
be set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment. Agents may be customers of, engage in
transactions with, or perform services for, Capital Funding, NYNEX and/or
certain affiliates thereof in the ordinary course of business. An agent may
resell a Debt Security purchased by it as principal to another broker-dealer
at a discount.
If an underwriter or underwriters are utilized in the sale, Capital Funding
and NYNEX will execute an underwriting agreement with such underwriters at
the time of sale to them and the names of the underwriters and the terms of
the transaction will be set forth in the Prospectus Supplement which will be
used by the underwriters to make resales of the Debt Securities.
Except as otherwise indicated in the applicable Prospectus Supplement, if a
dealer is utilized in the sale of the Debt Securities in respect of which
this Prospectus is delivered, Capital Funding will sell such Debt Securities
to the dealer, as principal. The dealer may then resell such Debt Securities
to the public at varying prices to be determined by such dealer at the time
of resale.
Underwriters, dealers, agents and other persons may be entitled, under
agreements which may be entered into with Capital Funding and NYNEX, to
indemnification against, or contribution with respect to, certain civil
liabilities under the Securities Act.
Each underwriter, dealer and agent participating in the distribution of any
Debt Securities that are issuable as Bearer Securities will agree that it
will not offer, sell or deliver, directly or indirectly, Bearer Securities in
the United States or to United States persons (other than qualifying
financial institutions) in connection with the original issuance of such Debt
Securities.
Delayed Delivery Arrangements
If so indicated in the Prospectus Supplement, Capital Funding will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Debt Securities from Capital Funding at the public offering price set forth
in the Prospectus Supplement pursuant to Delayed Delivery Contracts (the
"Contracts") providing for payment and delivery on the date stated in the
Prospectus Supplement. Each Contract will be for an amount not less than, and
unless Capital Funding otherwise agrees, the aggregate principal amount of
Debt Securities sold pursuant to Contracts shall be not less nor more than,
the respective amounts stated in the Prospectus Supplement. Institutions with
whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational
and charitable institutions and other institutions, but shall in all cases be
subject to the approval of Capital Funding. Contracts will be not subject to
any conditions except that the purchase by an institution of the Debt
Securities covered by its Contract shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which
such institution is subject. A commission indicated in the Prospectus
Supplement will be paid to underwriters and agents soliciting purchases of
Debt Securities pursuant to Contracts accepted by Capital Funding.
The place and time of delivery for the Debt Securities in respect of which
this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
EXPERTS
The consolidated financial statements and related financial statement
schedules of NYNEX and its subsidiaries included or incorporated by reference
in NYNEX's Annual Report on Form 10-K for the year ended December 31, 1992,
have been audited by Coopers & Lybrand, independent accountants, as set forth
in the report of such firm. The consolidated financial statements and
financial statement schedules referred to above are incorporated by reference
herein in reliance upon the report of Coopers & Lybrand given upon the
authority of that firm as experts in accounting and auditing.
19
<PAGE>
LEGAL MATTERS
The legality of the Debt Securities and the Guarantees to be offered hereby
will be passed upon for NYNEX by Raymond F. Burke, Executive Vice President
and General Counsel of NYNEX, for Capital Funding by Jay N. Feldman, Counsel
of NYNEX, and for any agent or underwriter, by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), 425 Lexington Avenue,
New York, NY 10017. Simpson Thacher & Bartlett from time to time has acted as
counsel in certain matters for NYNEX and certain of its subsidiaries.
20
<PAGE>
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus Supplement (including the accompanying Pricing Supplement)
and the Prospectus, in connection with the offer contained herein and
therein, and, if given or made, such other information or representa-tions
must not be relied upon as having been authorized by Capital Funding, NYNEX
or the Agents. Neither the delivery of this Prospectus Supplement (including
the accompanying Pricing Supplement) and the Prospectus nor any sale made
hereunder or thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of Capital Funding
or NYNEX since the date as of which information is given in this Prospectus
Supplement (including the accompanying Pricing Supplement) and the
Prospectus. This Prospectus Supplement (including the accompanying Pricing
Supplement) and the Prospectus do not constitute an offer or solicitation by
any person in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
<PAGE>
Table of Contents
Prospectus Supplement
<TABLE>
<CAPTION>
Page
<S> <C>
Description of Notes S-2
Important Currency Information S-25
Currency Risks S-25
Certain United States Federal
Income Tax Consequences S-27
Plan of Distribution S-35
Prospectus
Available Information 2
Incorporation of Documents by
Reference 2
NYNEX Corporation 3
NYNEX Capital Funding Company 3
Risk Factors Relating to
Currencies 3
Ratio of Earnings to Fixed Charges 4
Use of Proceeds 4
Description of Debt Securities and
Guarantees 4
Plan of Distribution 18
Experts 19
Legal Matters 19
</TABLE>
NYNEX CAPITAL
FUNDING COMPANY
$1,500,000,000
Medium-Term Notes,
Series B
Due Nine Months
or More
From Date of Issue
Unconditionally Guaranteed as
to Payment of Principal,
Premium, if any, and Interest by
NYNEX Corporation
[NYNEX LOGO]
Lehman Brothers
J.P. Morgan Securities Inc.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
Prospectus Supplement
Dated March 3, 1994
