<PAGE> 1
Filed pursuant to Rule 424(b)(2) under the
Securities Act of 1933, Registration No. 33-50717.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 8, 1993
U.S. $300,000,000
Anadarko Petroleum Corporation
Medium-Term Notes, Series A
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Anadarko Petroleum Corporation (the "Company") may offer from time to time its
Medium-Term Notes, Series A (the "Notes"), having an aggregate initial public
offering price of up to U.S. $300,000,000, or the equivalent thereof in
other currencies, including composite currencies such as the European
Currency Unit (the "Specified Currency"). The amount of Notes that
may be offered and sold by means of this Prospectus Supplement is
subject to reduction as a result of sales of other securities of
the Company. The interest rate on each Note established by the
Company at the date of issue of such Note, which may be zero in
the case of certain Original Issue Discount Notes, will be
either a fixed rate (a "Fixed Rate Note") or a floating rate
(a "Floating Rate Note") as set forth therein and
specified in the applicable Pricing
Supplement.
Interest on each Fixed Rate Note is payable each January 15 and July 15 (unless
otherwise specified in the applicable Pricing Supplement) and at maturity.
Interest on each Floating Rate Note is payable on the dates set forth herein
and in the applicable Pricing Supplement. Each Note will mature on any
day more than nine months from the date of issue, as set forth in the
applicable Pricing Supplement. See "Description of Notes." The
maturity date of any Note may be extended at the option of the
Company if the applicable Pricing Supplement so states. Unless
otherwise specified in the applicable Pricing Supplement, the
Notes may not be redeemed by the Company or the holder prior
to maturity and will be issued in fully registered form in
denominations of U.S. $1,000 (or, in the case of Notes not
denominated in U.S. dollars, the equivalent thereof in the
Specified Currency, rounded down to the nearest 1,000
units of the Specified Currency) or any amount in
excess thereof which is an integral multiple of
U.S. $1,000 (or, in the case of Notes not
denominated in U.S. dollars, 1,000 units of
the Specified Currency).
Notes may be issued in certificated form ("Certificated Notes") or in book-entry
form represented by a permanent global Note or Notes ("Book-Entry Notes"), as
specified in the applicable Pricing Supplement, registered in the name of
The Depository Trust Company (the "Depositary"), or a nominee of the
Depositary. Interests in Book-Entry Notes will only be evidenced by,
and transfers thereof will only be effected through, records
maintained by the Depositary and its participants. Except as
described herein and in the accompanying Prospectus, owners of
beneficial interests in a permanent global Note will not be
entitled to receive physical delivery of Certificated Notes.
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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 SUPPLEMENT HERETO OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Agents' Proceeds to
Public(1) Commissions(2) Company(2)(3)
<S> <C> <C> <C>
Per Note.......................... 100% .125% -- .750% 99.875% -- 99.250%
Total(4).......................... $300,000,000 $375,000 -- $2,250,000 $299,625,000 -- $297,750,000
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes will
be sold at 100% of their principal amount. If the Company issues any Notes
at a discount from or at a premium over the principal amount, the Price to
Public of any Note issued at a discount or premium will be set forth in the
applicable Pricing Supplement.
(2) The commission payable to CS First Boston Corporation, Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, or PaineWebber
Incorporated (each an "Agent") for each Note sold through such Agent will be
computed based upon the Price to Public of such Note and will depend upon
such Note's maturity. Commissions on Notes with maturities greater than
thirty years will be negotiated at the time of sale. The Company may also
sell Notes to any Agent, as principal, at negotiated discounts, for resale
to investors and other purchasers at varying prices relating to the
prevailing market price at the time of resale to be determined by such Agent
or, if so agreed, at a fixed public offering price.
(3) Before deducting expenses payable by the Company estimated at U.S. $200,000.
(4) Or the equivalent thereof in other currencies, including composite
currencies.
------------------
The Notes are being offered on a continuous basis by the Company directly
to certain investors, through the Agents named below, each of which has agreed
to use reasonable efforts to solicit offers to purchase the Notes, or through
other broker-dealers. The Company also may sell Notes to any Agent acting as
principal, or to a group of underwriters for which such Agent acts as
representative, for resale to one or more investors or other purchasers. The
Notes are not expected to be listed on any securities exchange and there can be
no assurance that the Notes offered by this Prospectus Supplement will be sold
or that there will be a secondary market for the Notes. The Company reserves the
right to withdraw, cancel or modify the offer made hereby without notice. The
Company or any Agent may reject any offer to purchase Notes, in whole or in
part. See "Plan of Distribution."
CS First Boston
Merrill Lynch & Co.
PaineWebber Incorporated
The date of this Prospectus Supplement is March 9, 1995.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in the Specified Currency, and
payments of principal of, premium, if any, and interest on such Notes will be
made in the Specified Currency, unless otherwise provided in the applicable
Pricing Supplement. There are limited facilities in the United States for the
conversion of U.S. dollars into foreign currencies and vice versa. In addition,
most banks do not offer non-U.S. dollar denominated checking or savings account
facilities in the United States. Accordingly, unless otherwise specified in a
Pricing Supplement or unless alternative arrangements are made, payment of
principal of, premium, if any, and interest on, Notes in a Specified Currency
will be made to an account at a bank outside the United States. See "Description
of Notes" and "Foreign Currency Risks."
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars,
the conversion of the Specified Currency into U.S. dollars will be handled by
The Chase Manhattan Bank, N.A., in its capacity as Exchange Rate Agent. The
costs of such conversion will be borne by the holder of a Note through
deductions from such payments.
References herein to "U.S. dollars" or "U.S.$" or "$" are to the currency
of the United States of America.
------------------
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used for general
corporate purposes, including the refinancing of outstanding indebtedness and
the financing of capital expenditures.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Senior Debt Securities
set forth in the accompanying Prospectus, to which reference is hereby made. The
particular terms of the Notes sold pursuant to any pricing supplement (a
"Pricing Supplement") will be described therein. The following description does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the description set forth in the Prospectus and the provisions
of the Indenture. The terms and conditions set forth herein will apply to each
Note unless otherwise specified in the applicable Pricing Supplement and in such
Note. Capitalized terms not defined herein have the meanings assigned to such
terms in the accompanying Prospectus and the Indenture.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars, and payment of principal of, and premium,
if any, and interest on, the Notes will be made in U.S. dollars. If any Note is
not to be denominated in U.S. dollars, the applicable Pricing Supplement will
specify the currency or currencies, including composite currencies such as the
European Currency Unit ("ECU"), in which such Note is to be denominated (the
"Specified Currency") and, if different, the currency or currencies in which the
principal, premium, if any, and interest with respect to such Note are to be
paid, along with any other related terms, including exchange rates for such
Specified Currency as against the U.S. dollar at selected times during the last
five years, and any exchange controls or other foreign currency risks relating
to such Specified Currency. See "Foreign Currency Risks."
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<PAGE> 3
GENERAL
The Notes offered hereby will be Senior Debt Securities issued under the
Indenture dated as of March 1, 1995 (as amended from time to time, the
"Indenture") between the Company and The Chase Manhattan Bank, N.A., as Trustee
(the "Trustee"), the terms of which are more fully described in the Prospectus.
The Notes may be issued from time to time and will be limited to U.S.
$300,000,000 aggregate initial offering price or the equivalent thereof in one
or more Specified Currencies. The amount of Notes that may be offered and sold
by means of this Prospectus Supplement is subject to reduction as a result of
sales of other securities of the Company. The Notes will constitute all or part
of a single series under the Indenture. For the purpose of this Prospectus
Supplement, (i) the principal amount of any Original Issue Discount Note (as
defined below) means the Issue Price (as defined below) of such Note and (ii)
the principal amount of any Note issued in a Specified Currency means the U.S.
dollar equivalent on the date of issue of such Note.
The Notes will mature on any day more than nine months from the date of
issue, as set forth in the applicable Pricing Supplement. Except as may be
specified for Notes denominated in Specified Currencies or as otherwise provided
in the applicable Pricing Supplement, the Notes will be issued only in fully
registered form in denominations of U.S. $1,000 or any amount in excess thereof
which is an integral multiple of U.S. $1,000.
Unless otherwise provided in the applicable Pricing Supplement, Notes
denominated in a Specified Currency will be issued in denominations equivalent
to U.S. $1,000 (rounded to an integral multiple of 1,000 units of such Specified
Currency), or any amount in excess thereof which is an integral multiple of
1,000 units of such Specified Currency, as determined by reference to the noon
dollar buying rate in New York City for cable transfers of such Specified
Currency published by the Federal Reserve Bank of New York (the "Market Exchange
Rate") on the Business Day (as defined below) immediately preceding the date of
issuance; except that in the case of ECUs the Market Exchange Rate will be the
rate of exchange determined by the Commission of the European Communities (or
any successor thereto) as published in the Official Journal of the European
Communities, or any successor publication, on the Business Day immediately
preceding the date of issuance.
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a Book-Entry Note or a Certificated Note. Only Notes
payable solely in U.S. dollars may be issued as Book-Entry Notes. Except as set
forth herein or in the accompanying Prospectus under "Description of Debt
Securities -- General Provisions Applicable to Both Indentures -- Global Notes,"
Book-Entry Notes will not be issuable as Certificated Notes.
The Notes may be presented for payment of principal and interest, transfer
of the Notes will be registrable and the Notes will be exchangeable at the
agency in The City of New York, maintained by the Company for such purpose,
except that Book-Entry Notes will be exchangeable only in the manner and to the
extent set forth herein and in the accompanying Prospectus under "Description of
Debt Securities -- General Provisions Applicable to Both Indentures -- Global
Notes." The agent for the payment, transfer and exchange of the Notes (the
"Paying Agent") is The Chase Manhattan Bank, N.A., acting through its corporate
trust office at 4 Chase MetroTech Center, Brooklyn, New York 11245.
The applicable Pricing Supplement will specify the price (the "Issue
Price") of each Note to be sold pursuant thereto (unless such Note is to be sold
at 100% of its principal amount), the interest rate or interest rate formula,
maturity, currency or composite currency and principal amount and any other
terms on which each such Note will be issued. Interest rates offered by the
Company with respect to the Notes may differ depending upon, among other things,
the aggregate principal amount of the Notes purchased in any single transaction.
As used herein the following terms have the meanings set forth below:
"Business Day" means, unless otherwise specified in a further
Prospectus Supplement or a Pricing Supplement, any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions are authorized or required by law or regulation to
close in The City of New York and (i) with respect to LIBOR Notes (as
defined below), in London, (ii) with respect to Notes denominated in a
Specified Currency other than Australian dollars or ECUs, in the financial
center of the country of
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<PAGE> 4
the Specified Currency, (iii) with respect to Notes denominated in
Australian dollars, in Sydney and (iv) with respect to Notes denominated in
ECUs, in Luxembourg and that is not a non-ECU clearing day, as determined
by the ECU Banking Association in Paris.
An "Interest Payment Date" with respect to any Note will be a date on
which, under the terms of such Note, regularly scheduled interest is
payable.
"London Banking Day" means any day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.
"Original Issue Discount Note" means any Note that provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to the
Indenture.
The "Record Date" with respect to any Interest Payment Date will be
the date 15 calendar days prior to such Interest Payment Date, whether or
not such date is a Business Day.
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payments of interest and
principal on a non-U.S. dollar denominated Note to be made, at the option of the
holder of such Note, in U.S. dollars, conversion of the Specified Currency into
U.S. dollars will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to the holders of Notes and at which the applicable
dealer commits to execute a contract. If such bid quotations are not available,
payments will be made in the Specified Currency. All currency exchange costs
will be borne by the holders of Notes by deductions from such payments.
Except as set forth below, if the principal of, premium, if any, or
interest on, any Note is payable in a Specified Currency and such Specified
Currency is not available to the Company for making payments thereof because of
the imposition of exchange controls or other circumstances beyond the control of
the Company or is no longer used by the government of the country issuing such
currency or for the settlement of transactions by public institutions within the
international banking community, then the Company will be entitled to satisfy
its obligations to holders of the Notes by making such payments in U.S. dollars
on the basis of the Market Exchange Rate on the date of such payment or, if the
Market Exchange Rate is not available on such date, on the most recent
practicable date. Any payment made under such circumstances in U.S. dollars
where the required payment is in a Specified Currency will not constitute an
Event of Default. See "Foreign Currency Risks -- Exchange Rates and Exchange
Controls" below.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable because of the imposition of exchange controls or other
circumstances beyond the Company's control or are no longer used in the European
Monetary System, then all payments in respect of such Note will be made in U.S.
dollars until ECUs are again available or so used. The amount of each payment in
U.S. dollars will be computed on the basis of the equivalent of the ECU in U.S.
dollars, determined as described below, as of the second Business Day prior to
the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date will be determined
by the Company or its agent on the following basis. The component currencies of
the ECU for this purpose (the "Components") will be the currency amounts that
were components of the ECU as of the last date on which the ECU was used in the
European Monetary System. The equivalent of the ECU in U.S. dollars will be
calculated on the basis of the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components will be determined by the
Company or such agent on the basis of the most recently available Market
Exchange Rate for such Component.
S-4
<PAGE> 5
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component would be
divided or multiplied in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those currencies as
Components would be replaced by an amount in such single currency equal to the
sum of the appropriate amounts of the consolidated component currencies
expressed in such single currency. If any Component is divided into two or more
currencies, the amount of the original component currency would be replaced by
the appropriate amounts of such two or more currencies, the sum of which would
be equal to the amount of the original component currency.
All determinations referred to above made by the Company or its agent would
be at its sole discretion and would, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date, except that the interest
payable upon maturity, redemption or repayment (whether or not the date of
maturity, redemption or repayment is an Interest Payment Date) will be payable
to the person to whom principal is payable. The initial interest payment on a
Note will be made on the first Interest Payment Date falling after the date the
Note is issued, except that payments of interest on a Note issued less than 15
calendar days before an Interest Payment Date will be paid on the next
succeeding Interest Payment Date to the holder of record on the Record Date with
respect to such succeeding Interest Payment Date. See "United States
Taxation -- Original Issue Discount Notes" below.
U.S. dollar payments of interest, other than interest payable at maturity
(or on the date of redemption or repayment, if a Note is redeemed or repaid by
the Company prior to maturity), will be made by check mailed to the address of
the person entitled thereto as shown on the Note register. U.S. dollar payments
of principal, premium, if any, and interest upon maturity, redemption or
repayment will be made in immediately available funds against presentation and
surrender of the Note. Notwithstanding the foregoing, (a) the Depositary, as
holder of Book-Entry Notes, will be entitled to receive payments of interest by
wire transfer of immediately available funds and (b) a holder of U.S.
$10,000,000 or more in aggregate principal amount of Certificated Notes having
the same Interest Payment Date will be entitled to receive payments of interest
by wire transfer of immediately available funds upon written request to the
Paying Agent not later than 15 calendar days prior to the applicable Interest
Payment Date.
Unless otherwise specified in the applicable Pricing Supplement or unless
alternative arrangements are made, payments of principal of, premium, if any,
and interest on, Notes in a Specified Currency will be made by wire transfer of
immediately available funds to an account maintained by the payee with a bank
located outside the United States if the holder of such Notes provides the
Paying Agent with the appropriate wire transfer instructions not later than 15
calendar days prior to the applicable payment date. If such wire transfer
instructions are not so provided, payments of interest on such Notes (other than
interest payable at maturity or on any redemption or repayment date) will be
made by check payable in such Specified Currency mailed to the address of the
person entitled thereto as such address may appear in the Note register.
Certain Notes, including Original Issue Discount Notes, may be considered
to be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "United States
Taxation -- Original Issue Discount Notes" below. 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 under
"Description of Debt Securities -- General Provisions Applicable to Both
Indentures -- Events of Default" in the Prospectus, the amount of principal due
and payable with respect to such Note will be limited to the aggregate principal
amount of such Note multiplied by the sum of its Issue Price (expressed as a
percentage of the aggregate principal amount) plus the original issue discount
amortized from the date of issue to the date of declaration, which amortization
would be calculated using the "interest method" (computed in accordance with
generally accepted accounting principles in effect on the date of declaration).
Special considerations applicable to any such Notes will be set forth in the
applicable Pricing Supplement.
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<PAGE> 6
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof until the principal thereof is paid or
made available for payment. Such interest will be computed on the basis of a
360-day year of twelve 30-day months. Payments of interest on Fixed Rate Notes
will be made semi-annually on each January 15 and July 15 (unless otherwise
specified in the applicable Pricing Supplement) and at maturity or upon any
earlier redemption or repayment.
If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment will be postponed to the next day that
is a Business Day, and no interest on such payment will accrue for the period
from and after the Interest Payment Date. If the maturity date (or date of
redemption or repayment) of any Fixed Rate Note falls on a day that is not a
Business Day, the payment of interest and principal (and premium, if any) will
be made on the next succeeding Business Day, and no interest on such payment
will accrue for the period from and after the maturity date (or date of
redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from
the date of issue or from the last date in respect of which interest has been
paid, as the case may be, to, but excluding, the Interest Payment Date or the
date of maturity or earlier redemption or repayment, as the case may be. The
interest rates the Company will agree to pay on newly-issued Fixed Rate Notes
are subject to change without notice by the Company from time to time, but no
such change will affect any Fixed Rate Notes theretofore issued or that the
Company has agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate determined
by reference to an interest rate basis (the "Base Rate"), which may be adjusted
by a Spread and/or Spread Multiplier (each as defined below). The applicable
Pricing Supplement will designate one of the following Base Rates as applicable
to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"), (b) the
Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Federal Funds
Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the Prime
Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury Rate Note"), (g)
the J.J. Kenny Rate (a "J.J. Kenny Rate Note"), (h) the 11th District Cost of
Funds Rate (an "11th District Cost of Funds Rate Note"), (i) the CMT Rate (a
"CMT Rate Note") or (j) such other Base Rate 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.
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 (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(i.e., one one-hundredth of one percent) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note.
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 which may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate of
interest which may accrue during any interest period ("Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note 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
New York law, the maximum rate of interest, subject to certain exceptions, for
any loan in an amount less than $250,000 is 16% per annum and for any loan in
the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a
simple interest basis. No limits apply to loans of $2,500,000 or more.
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<PAGE> 7
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 first day of each Interest Reset
Period being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the 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 (except for
monthly reset 11th District Cost of Funds Rate Notes which reset on the first
calendar day of each month), 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
semi-annually, 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, except that the interest rate in effect from
the date of issue to the first Interest Reset Date with respect to a Floating
Rate Note will be the initial interest rate set forth in the applicable Pricing
Supplement (the "Initial Interest Rate"). If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Reset Date will be postponed to the next succeeding Business Day,
except that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date will be the next preceding
Business Day.
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 Floating Rate Notes with a daily, weekly or monthly Interest Reset Date,
each Business Day, the Wednesday of each week or on the third Wednesday of each
month as specified in the applicable Pricing Supplement; (ii) in the case of
Floating Rate Notes with a quarterly Interest Reset Date, on the third Wednesday
of March, June, September and December; (iii) in the case of Floating Rate Notes
with a semi-annual Interest Reset Date, on the third Wednesday of the two months
specified in the applicable Pricing Supplement; and (iv) in the case of Floating
Rate Notes with an annual Interest Reset Date, on the third Wednesday of the
month specified in the applicable Pricing Supplement. If any Interest Payment
Date (including the maturity date or any earlier redemption or repayment date)
for any Floating Rate Note falls on a day that is not a Business Day with
respect to such Floating Rate Note, such Interest Payment Date will be the
following day that is a Business Day with respect to such Floating Rate Note,
except 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 day that is a Business Day with respect to such LIBOR Note.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes will be the amount of interest accrued from the
date of issue or from the last date to which interest has been paid to, but
excluding, the Interest Payment Date.
With respect to a Floating Rate Note, accrued interest will be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. The interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360, in the case of CD Rate Notes,
Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes, Prime Rate
Notes, J.J. Kenny Rate Notes and 11th District Cost of Funds Rate Notes, or by
the actual number of days in the year, in the case of Treasury Rate Notes or CMT
Rate Notes. All percentages used in or resulting from any calculation of the
rate of interest on a Floating Rate Note will be rounded, if necessary, to the
nearest one hundred-thousandth of one percent (.0000001), with five
one-millionths of a percentage point rounded upward, and all dollar amounts used
in or resulting from such calculation on Floating Rate Notes will be rounded to
the nearest cent, with one-half cent rounded upward. The interest rate in effect
on any Interest Reset Date will be the applicable rate as reset on such date.
The interest rate applicable to any other day will be the interest rate from the
immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate).
The applicable Pricing Supplement will specify a 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
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Calculation Agent will provide the interest rate then in effect and, if
determined, the interest rate that will become effective on the next Interest
Reset Date with respect to such Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, Prime Rate
Notes, J.J. Kenny Rate Notes and CMT Rate Notes will be the second Business Day
next preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a LIBOR Note will be the second London
Banking Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for an 11th District Cost of Funds Rate
Note (the "11th District Cost of Funds Rate Interest Determination Date") will
be the last working day of the month immediately preceding such Interest Reset
Date on which the Federal Home Loan Bank ("FHLB") of San Francisco publishes the
Index (as defined below under "-- 11th District Cost of Funds Rate Notes"). The
Interest Determination Date pertaining to an Interest Reset Date for a Treasury
Rate Note will be the day of the week in which such Interest Reset Date falls on
which Treasury bills 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, but such action may
be held on the preceding Friday. If, as the result of a legal holiday, an
auction is so held on the preceding Friday, such Friday will be the Interest
Determination Date pertaining to the Interest Reset Date occurring in the next
succeeding week. If an auction falls on a day that is an Interest Reset Date,
such Interest Reset Date will be the next following Business Day.
The "Calculation Date," where applicable, pertaining to an Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or maturity date as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("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
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" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on 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 10:00 A.M., New York City time, on such
Interest Determination Date for certificates of deposit in the denomination of
$5,000,000 with a remaining maturity closest to the Index Maturity designated in
the Pricing Supplement of three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York (which may include one or
more of the Agents) selected by the Calculation Agent for negotiable
certificates of deposit of major United States money center banks in the market
for negotiable certificates of deposit, except that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as set forth above, the CD
Rate in effect for the
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applicable period will be the same as the CD Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable on the CD Rate Notes for which such CD Rate is being
determined will be the Initial Interest Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement, as such rate will be published in H.15(519), under the heading
"Commercial Paper." In the event that such rate is not published prior to 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate will be the Money Market
Yield of the rate on such Interest Determination Date for commercial paper of
the specified Index Maturity as published in Composite Quotations under the
heading "Commercial Paper." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate will be the Money Market Yield of the
arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on
such Interest Determination Date of three leading dealers of commercial paper in
The City of New York (which may include one or more of the Agents) selected by
the Calculation Agent and approved by the Company for commercial paper of the
specified Index Maturity, placed for an industrial issuer whose bond rating is
"AA," or the equivalent, from a nationally recognized rating agency, except that
if the dealers selected as aforesaid by the Calculation Agent are not quoting
offered rates as set forth above the Commercial Paper Rate in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined will be the Initial
Interest Rate).
"Money Market Yield" will be a yield calculated in accordance with the
following formula:
<TABLE>
<C> <C> <S>
D X 360
Money Market Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Index Maturity.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Federal Funds Rate Notes 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 the Composite Quotations under the heading "Federal Funds/Effective
Rate." If such rate is not yet published in either H.15(519) or the Composite
Quotations by 3:00 P.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 calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal
funds, as of 9:00 A.M., New York City time, on such Interest Determination Date,
arranged by three leading brokers of Federal funds
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transactions in The City of New York (which may include one or more of the
Agents) selected by the Calculation Agent and approved by the Company, except
that if the brokers selected as aforesaid by the Calculation Agent are not
quoting as set forth above, the Federal Funds Rate in effect for the applicable
period will be the same as the Federal Funds Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable on the Federal Funds Rate Notes for which such Federal Funds
Rate is being determined will be the Initial Interest Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Determination Date will be determined by the Calculation Agent
as follows:
(i) As of the Interest Determination Date, the Calculation Agent will
determine (a) the arithmetic mean of the offered rates for deposits in U.S.
dollars for the period of the Index Maturity which appears on the Reuters
Screen LIBO Page at approximately 11:00 A.M., London time, on such Interest
Determination Date if at least two such offered rates appear on the Reuters
Screen LIBO Page ("LIBOR Reuters"), or (b) the rate for deposits in United
States dollars for the period of the Index Maturity that appears on the
Telerate Page 3750 as of 11:00 A.M., London time, on such Interest
Determination Date ("LIBOR Telerate"). "Reuters Screen LIBO Page" means the
display designated as Page "LIBO" on the Reuters Monitor Money Rate Service
(or such other page as may replace the LIBO page on the service for the
purpose of displaying London interbank offered rates of major banks).
"Telerate Page 3750" means the display designated as page "3750" on the
Telerate Service (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the
British Bankers' Association for the purpose of displaying London interbank
offered rates for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable Pricing Supplement, LIBOR will be
determined as if LIBOR Telerate had been specified. If fewer than two
offered rates appear on the Reuters Screen LIBO Page, or if no offered rate
appears on the Telerate Page 3750, as applicable, LIBOR in respect of that
Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below had been specified.
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO
Page or no offered rate appears on Telerate Page 3750, the Calculation
Agent will request the principal London offices of each of four major banks
in the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotations for deposits in
U.S. dollars for the period of the specified Index Maturity 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 equal to an
amount of not less than the U.S. $1 million that is representative of a
single transaction in such market at such time. If at least two such
quotations are provided, LIBOR will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR will be the
arithmetic mean of rates quoted by three major banks in The City of New
York selected by the Calculation Agent (after consultation with the
Company) at approximately 11:00 A.M., New York City time, on such Interest
Determination Date for loans in U.S. dollars to leading European banks, for
the period of the specified Index Maturity and in a principal amount of not
less than U.S. $1 million that is representative for a single transaction
in such market at such time, except that if fewer than three banks selected
as aforesaid by the Calculation Agent are quoting rates as mentioned in
this sentence, the rate of interest in effect for the applicable period
will be the rate of interest in effect on such Interest Determination Date.
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<PAGE> 11
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes 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 set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." 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 Prime Rate for such Interest
Determination Date 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 as quoted on the Reuters Screen NYMF Page on such Interest
Determination Date, or, if fewer than four such rates appear on the Reuters
Screen NYMF Page for such Interest Determination Date, the rate 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 at least two of the three major money center banks in The
City of New York selected by the Calculation Agent from which quotations are
requested. If fewer than two quotations are provided, the Prime Rate will be
calculated by the Calculation Agent and will be determined as the arithmetic
mean on the basis of the prime rates in The City of New York by the appropriate
number of 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 U.S. $500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent and
approved by the Company to quote such rate or rates. "Reuters Screen NYMF Page"
means the display designated as Page "NYMF" on the Reuters Monitor Money Rates
Services (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). If in any month or two consecutive months the Prime Rate is not
published in H.15(519) and the banks or trust companies selected as aforesaid
are not quoting as mentioned in this paragraph, the "Prime Rate" for such
Interest Reset Period will be the same as the Prime Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the rate of interest payable on the Prime Rate Notes for which the Prime Rate is
being determined will be the Initial Interest Rate).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate, if
any) specified in the Treasury Rate Notes 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 date of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement, as published in H.15(519) under the heading "Treasury
Bills -- auction average (investment)" 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 auction average rate on such Interest Determination Date
(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 on such
Interest Determination Date, then the Treasury Rate will be calculated by the
Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using 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 and approved by the Company
for the issue of Treasury Bills with a remaining maturity closest to the Index
Maturity
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<PAGE> 12
designated in the applicable Pricing Supplement, except that if the dealers
selected as aforesaid by the Calculation Agent are not quoting bid rates as set
forth above in this sentence, the Treasury Rate for such Interest Reset Date
will be the same as the Treasury Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the Treasury Rate Notes for which the Treasury Rate is being
determined will be the Initial Interest Rate).
J.J. Kenny Rate Notes
Each J.J. Kenny Rate Note will bear interest at the interest rate
(calculated with reference to the J.J. Kenny Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified on the face of such Note and in the applicable
Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, the "J.J.
Kenny Rate" with respect to any J.J. Kenny Rate Note as of any J.J. Kenny
Interest Determination Date means the rate in the high-grade weekly index (the
"Weekly Index") on such date made available by Kenny Information Systems
("Kenny") to the Calculation Agent. The Weekly Index is, and will be, based upon
30-day yield evaluations at par of bonds, the interest of which is exempt from
Federal income taxation under the Internal Revenue Code of 1986, as amended (the
"Code"), of not less than five high-grade component issuers selected by Kenny,
which include issuers of general obligation bonds. The specific issuers included
among the component issuers may be changed from time to time by Kenny in its
discretion. The bonds on which the Weekly Index is based will not include any
bonds on which the interest is subject to a minimum tax or similar tax under the
Code unless all tax-exempt bonds are subject to such tax. In the event Kenny
ceases to make available such Weekly Index, a successor indexing agent will be
selected by the Calculation Agent and approved by the Company, such index to
reflect the prevailing rate for bonds rated in the highest short-term rating
category by Moody's Investors Service, Inc. and Standard & Poor's Corporation in
respect of issuers most closely resembling the high-grade component issuers
selected by Kenny for the Weekly Index, the interest on which is (A) variable on
a weekly basis, (B) exempt from Federal income taxation under the Code and (C)
not subject to a minimum tax or similar tax under the Code unless all tax-exempt
bonds are subject to such tax. If such successor indexing agent is not
available, the rate for any J.J. Kenny Interest Determination Date will be 67%
of the rate determined if the Treasury Rate option had been originally selected.
The Calculation Agent will calculate the J.J. Kenny Rate in accordance with the
foregoing. At the request of a Holder of a Floating Rate Note bearing interest
at the J.J. Kenny Rate, the Calculation Agent will provide such Holder with the
interest rate that will become effective as of the next Interest Reset Date.
11th District Cost of Funds Rate Notes
11th District Cost of Funds Rate Notes will bear interest at the rates
(calculated with reference to the 11th District Cost of Funds Rate and the
Spread and/or Spread Multiplier, if any, and subject to the Minimum Interest
Rate and the Maximum Interest Rate, if any) specified in such 11th District Cost
of Funds Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any 11th District Cost of
Funds Rate Interest Determination Date, the rate equal to the monthly weighted
average cost of funds for the calendar month immediately preceding the month in
which such 11th District Cost of Funds Rate Interest Determination Date falls,
as set forth under the caption "11th District" on Telerate Page 7058 as of 11:00
A.M., San Francisco time, on such 11th District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related 11th District Cost of Funds Rate Interest Determination Date, the 11th
District Cost of Funds Rate for such 11th District Cost of Funds Rate Interest
Determination Date will be the monthly weighted average cost of funds paid by
member institutions of the 11th FHLB District that was most recently announced
(the "Index") by the FHLB of San Francisco as such cost of funds for the
calendar month immediately preceding the date of such announcement. If the FHLB
of San Francisco fails to announce such rate for the calendar month immediately
preceding such 11th District Cost of Funds Rate Interest Determination Date,
then the 11th District Cost of Funds Rate determined as of such 11th District
Cost of Funds Rate Interest Determination Date will be the 11th District Cost of
Funds Rate in effect on such 11th District Cost of Funds Rate Interest
Determination Date.
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CMT Rate Notes
CMT Rate Notes will bear interest at the rates (calculated with reference
to the CMT Rate and the Spread and/or Spread Multiplier, if any, and subject to
the Minimum Interest Rate and the Maximum Interest Rate, if any) specified in
such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption"...Treasury Constant Maturities...Federal Reserve Board Release
H.15...Mondays Approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be the U.S. Treasury constant maturity rate for the Designated CMT
Maturity Index as published in the relevant H.15(519). If such rate is no longer
published, or if not published by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Interest Determination Date
will be Treasury constant maturity rate for the Designated CMT Maturity Index
(or other U.S. Treasury rate for the Designated CMT Maturity Index) for the CMT
Rate Interest Determination Date with respect to such Interest Reset Date as may
then be published by either the Board of Governors of the Federal Reserve System
or the U.S. Department of the Treasury that the Calculation Agent determines to
be comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for the CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30 P.M.,
New York City time, on the CMT Rate Interest Determination Date reported,
according to their written records, by three leading primary U.S. government
securities dealers (each, a "Reference Dealer") in The City of New York (which
may include the Agent or its affiliates) selected by the Calculation Agent and
approved by the Company) from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index and a remaining term
to maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent cannot obtain three such Treasury Note quotations, the
CMT Rate for such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 P.M., New
York City time, on the CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated, except that if fewer
than three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the Treasury
Note with the shorter remaining term to maturity will be used.
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<PAGE> 14
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page will be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index will be 2 years.
ORIGINAL ISSUE DISCOUNT NOTES
Notes may be issued as Original Issue Discount Notes. In the event of
redemption or acceleration of the Maturity of an Original Issue Discount Note,
the amount payable to the Holder of such Note upon such redemption or
acceleration will be determined in accordance with the terms of the Note, but
will be an amount less than the amount payable at the Stated Maturity of such
Note. In addition, a Note issued at a discount may, for United States federal
income tax purposes, be considered an original issue discount note regardless of
the amount payable upon redemption or acceleration of Maturity of such Note.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
(the "Indexed Notes"), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value, rate
or price of the specified index and the face amount of the Indexed Note and
certain additional United States federal tax considerations will be described in
the applicable Pricing Supplement.
Notes may be issued as Indexed Notes, with the principal amount payable at
Maturity, the amount of interest payable on an Interest Payment Date, or both,
to be determined by reference to currencies, currency units, commodity prices,
financial or non-financial indices or other factors, as indicated in the
applicable Pricing Supplement. Holders of Indexed Notes may receive a principal
amount at Maturity that is greater than or less than the face amount of such
Notes depending upon the fluctuation of the relative value, rate or price of the
specified index. Specific information pertaining to the method for determining
the principal amount payable at Maturity, a historical comparison of the
relative value, rate or price of the specified index and the face amount of the
Indexed Note and any additional tax considerations will be described in the
applicable Pricing Supplement.
This Prospectus Supplement, the accompanying Prospectus and any Pricing
Supplement do not describe all risks of an investment in Indexed Notes,
including risks which may be associated with economic, financial or political
events over which the Company has no control, either as such risks exist at the
date of this Prospectus Supplement or as such risks may change from time to
time. An investment in Notes indexed, as to principal, premium and/or interest,
to one or more values of currencies (including exchanges rates between
currencies), commodities or interest rate indices entails significant risks that
are not associated with investments in a conventional fixed-rate debt security.
For example, Indexed Notes that are indexed as to interest may bear interest at
a rate lower than the prevailing market interest rate for Fixed Rate Notes or
may not bear interest, and the principal (and premium, if any) may be less than
the face amount or initial purchase price thereof or may be zero. Special
considerations independent of the creditworthiness of the Company and the value
of the applicable currency, commodity or interest rate index, including
economic, financial and political events over which the Company has no control,
also may affect the secondary market for Indexed
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<PAGE> 15
Notes. Additionally, if the formula used to determine the amount of principal,
premium and/or interest payable with respect to Indexed Notes contains a
multiple or leverage factor, the effect of any change in the applicable
currency, commodity or interest rate index will be increased. The historical
experience of the relevant currencies, commodities or interest indices should
not be taken as an indication of future performance of such currencies,
commodities or interest rate indices during the term of any Indexed Note. Any
credit ratings assigned to the Company's medium-term note program are a
reflection of the Company's credit status, and in no way, are a reflection of
the potential impact of the factors discussed above, or any other factors, on
the market value of the Indexed Notes. Prospective purchasers should consult
their own financial and legal advisors as to the risks entailed in an investment
in Indexed Notes, the suitability of an investment in Indexed Notes in light of
their particular circumstances, and with other matters that may affect the
purchase or holding of an Indexed Note.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. 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.
Payments of principal and interest on Amortizing Notes, which are securities for
which payments of principal and interest are made in equal installments over the
life of the security, will be made either quarterly on each January 15, April
15, July 15 and October 15 or semiannually on each January 15 and July 15, and
on the Stated Maturity, unless otherwise specified in an 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. Further information concerning additional terms and
conditions of any issue of Amortizing Notes will be provided in the applicable
Pricing Supplement. A table setting forth repayment information in respect of
each Amortizing Note will be included in the applicable Pricing Supplement and
set forth in such Notes.
EXTENSION OF MATURITY
An applicable Pricing Supplement will indicate whether the Company has the
option to extend the Stated Maturity of such Note (other than an Amortizing
Note) for one or more periods up to but not beyond a date set forth in such
Pricing Supplement. If the Company has such an option with respect to any such
Note, the procedures relating thereto will be as set forth in the applicable
Pricing Supplement. If the Company extends the Stated Maturity of a Note, the
holder of such Note may have the option to elect repayment of such Note by the
Company as provided in the applicable Pricing Supplement.
RENEWABLE NOTES
An applicable Pricing Supplement will indicate whether a Note (other than
an Amortizing Note) will mature unless the term of all or any portion of such
Note is renewed in accordance with the procedures described in such Pricing
Supplement.
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, maturity date and other terms, if any, will be represented by one
or more global Notes (the "Global Notes"), and all Floating Rate Book-Entry
Notes having the same Issue Date, Initial Interest Rate, Base Rate, Interest
Reset Period, Interest Payment Dates, Index Maturity, Spread or Spread
Multiplier, if any, Minimum Interest Rate, if any, Maximum Interest Rate, if
any, maturity date and other terms, if any, will be represented by one or more
Global Notes. Each Global Note 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. Certificated Notes will not be exchangeable for Book-Entry
Notes and, except under the circumstances described herein or in the
accompanying Prospectus under "Description of Debt Securities -- General
Provisions Applicable to Both Indentures -- Global Notes," Book-Entry Notes will
not be exchangeable for Certificated Notes and will not otherwise be issuable as
Certificated Notes.
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The following information concerning the Depositary and the Depositary's
system is based on information furnished by the Depositary:
The Depositary will act as securities depository for Book-Entry Notes.
Book-Entry Notes will be issued as fully registered securities registered
in the name of Cede & Co. (the Depositary's partnership nominee). One fully
registered Global Security will be issued for each issue of Book-Entry
Notes, each in the aggregate principal amount of such issue and will be
deposited with the Depositary. If, however, the aggregate principal amount
of any issue exceeds $200 million, one Global Security will be issued with
respect to each $200 million of principal amount and an additional Global
Security will be issued with respect to any remaining principal amount of
such issue.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. The Depositary holds securities
that its participants ("Participants") deposit with the Depositary. The
Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. "Direct Participants" include securities broker and dealers,
banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the Depositary's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules
applicable to the Depositary and its Participants are on file with the
Securities and Exchange Commission.
Purchase of Book-Entry Notes under the Depositary's system must be
made by or through Direct Participants, which will receive a credit for
such Book-Entry Notes on the Depositary's records. The ownership interest
of each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participant's records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmation providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners entered
into the transaction. Transfers of Book-Entry Notes are to be accomplished
by entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners of a Global Security representing Book-Entry
Notes will not receive Certificated Notes representing their ownership
interests therein, except in the event that use of the book-entry system
for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes that are deposited with the Depositary are registered in
the name of the Depositary's nominee, Cede & Co. The deposit of Global
Securities with the Depositary and their registration in the name of Cede &
Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners of Global Securities representing
Book-Entry Notes; the Depositary's records reflect only the identity of the
Direct Participants to whose account such Book-Entry Notes are credited,
which may or may not be the Beneficial Owners. Participants will be
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
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Redemption notices will be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to Global Securities representing Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on Global Securities
representing the Book-Entry Notes will be made through the Paying Agent to
the Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason
to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of the Depositary,
the Trustee, the Paying Agent or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and interest to Direct Participants will be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners will be the responsibility of Direct and Indirect
Participants.
A Beneficial Owner may give notice to elect to have its Book-Entry
Notes repaid by the Company, through its Participant, to the Paying Agent,
and shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global Security
or Global Securities representing such Book-Entry Notes, on the
Depositary's records, to the Paying Agent. The requirement for physical
delivery of Book-Entry Notes in connection with a demand for repayment will
be deemed satisfied when the ownership rights in the Global Security or
Global Securities representing such Book-Entry Notes are transferred by
Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
Certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository.) In
that event, Certificated Notes will be printed and delivered.
OPTIONAL REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be redeemable at the option of the Company. In the event Notes are so
redeemable, notice of redemption will be provided by mailing a notice of such
redemption to each holder by first class mail, postage prepaid, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the
respective address of each holder as that address appears upon the books
maintained by the Paying Agent. Unless otherwise specified in the applicable
Pricing Supplement, the Notes will not be subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
Procedures, if any, relating to repayment of Notes at the option of the
holder will be described in the applicable Pricing Supplement.
The Company may purchase Notes at any price available in the open market or
otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the Trustee for cancellation.
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FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either the
U.S. or foreign governments. Such risks generally depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange 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 against the U.S. dollar of the
currency in which a Note is payable 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. In addition, depending
on the specific terms of a currency linked Note, changes in exchange rates
relating to any of the currencies involved may result in a decrease in its
effective yield and, in certain circumstances, could result in a loss of all or
a substantial portion of the principal of a Note to the investor on a U.S.
dollar basis.
THIS PROSPECTUS SUPPLEMENT, ANY ACCOMPANYING PRICING SUPPLEMENT AND THE
ATTACHED PROSPECTUS DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES
DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN
CURRENCY OR A COMPOSITE CURRENCY AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO
ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS
RELATED TO THE VALUE OF, SPECIFIED CURRENCIES OTHER THAN U.S. DOLLARS. NOTES
DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN
CURRENCY ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are U.S. residents, and the Company disclaims any
responsibility to advise prospective purchasers who are residents of countries
other than the United States with respect to any matters that may affect the
purchase, holding or receipt of payments of principal of, premium, if any, and
interest on the Notes. Such persons should consult their own advisors with
regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of, premium,
if any, or interest on a Note. Even if there are no actual exchange controls, it
is possible that the Specified Currency for any particular Note not denominated
in U.S. dollars would not be available when payments on such Note are due. In
that event, the Company would make required payments in U.S. dollars on the
basis of the Market Exchange Rate on the date of such payment, or if such rate
of exchange is not then available, on the basis of the Market Exchange Rate as
of the most recent practicable date. See "Description of Notes -- Payment
Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein constitutes a part of this
Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
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GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Notes denominated in a Specified
Currency other than U.S. dollars were commenced in a court in the United States,
it is likely that such court would grant judgment relating to the Notes only in
U.S. dollars. It is not clear, however, whether, in granting such judgment, the
rate of conversion into U.S. dollars would be determined with reference to the
date of default, the date judgment is rendered or some other date. Under current
New York law, if an action based on Notes denominated in a Specified Currency
other than U.S. dollars were commenced in a state court in the State of New
York, such court would render or enter a judgment or decree in the Specified
Currency. Such judgment would then be converted into U.S. dollars at the rate of
exchange prevailing on the date of entry of the judgment or decree.
UNITED STATES TAXATION
In the opinion of Davis Polk & Wardwell, tax counsel to the Company, the
following summary accurately describes the principal United States federal
income tax consequences of acquisition, ownership and disposition of the Notes
to Holders (as defined below) who are initial holders and who purchase the Notes
at the "issue price" (as defined below). This summary is based on the Internal
Revenue Code of 1986, as amended to the date hereof (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, including regulations concerning the treatment of debt instruments
issued with original issue discount (the "OID Regulations"), changes to any of
which subsequent to the date of this Prospectus may affect the tax consequences
described herein. This summary discusses only Notes held as capital assets
within the meaning of Section 1221 of the Code. It does not discuss all of the
tax consequences that may be relevant to a holder in light of his particular
circumstances or to holders subject to special rules, such as certain financial
institutions, insurance companies, dealers in securities or foreign currencies,
persons holding Notes as a hedge against, or that are hedged against, currency
risks, or United States Holders whose functional currency (as defined in Code
Section 985) is not the U.S. dollar. Persons considering the purchase of Notes
should consult their tax advisors with regard to the application of the United
States federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "Holder" means a beneficial owner of a Note that
is (i) for United States federal income tax purposes a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Payments of Interest
Interest paid on a Note will generally be taxable to a Holder as ordinary
interest income at the time it accrues or is received in accordance with the
Holder's method of accounting for federal income tax purposes. Under the OID
Regulations, all payments of interest on a Note that matures one year or less
from its date of issuance will be included in the stated redemption price at
maturity of such Note and will be taxed in the manner described below under
"Original Issue Discount Notes." Special rules governing the treatment of
interest paid with respect to Original Issue Discount Notes, including certain
Floating Rate Notes and Indexed Notes, Foreign Currency Notes and Currency
Indexed Notes are described under "Original Issue Discount Notes," "Foreign
Currency Notes" and "Currency Indexed Notes" below.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement (not including any amount attributable to accrued
interest not previously included in income) and such Holder's adjusted tax basis
in the Note. A Holder's adjusted tax basis in a Note will equal the cost of the
Note to such Holder, increased by the amounts of any original issue discount
previously included in income by the Holder with respect to such Note
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and reduced by any amortized premium and any principal payments received by the
Holder and, in the case of an Original Issue Discount Note, by the amounts of
any other payments that do not constitute qualified stated interest (as defined
below).
Subject to the discussion under "Foreign Currency Notes" below, gain or
loss realized on the sale, exchange or retirement of a Note other than a
short-term Original Issue Discount Note (as defined below) 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. See
"Original Issue Discount Notes" below. The excess of net long-term capital gains
over net short-term capital losses is taxed at a lower rate than ordinary income
for certain non-corporate taxpayers. The distinction between capital gain or
loss and ordinary income or loss is also relevant for purposes of, among other
things, limitations on the deductibility of capital losses. A special rule
regarding the treatment of gain realized with respect to certain short-term
Original Issue Discount Notes is described under "Original Issue Discount Notes"
below.
The extension of maturity of a Note pursuant to its original terms is
likely to be treated as a taxable exchange.
Original Issue Discount Notes
A Note that is issued for an amount less than its stated redemption price
at maturity will generally be considered to have been issued at an original
issue discount for federal income tax purposes (an "Original Issue Discount
Note"). The "issue price" of a Note will equal the initial offering price to the
public (not including bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or wholesalers) at
which a substantial amount of the Notes is sold for money. The stated redemption
price at maturity of a Note will equal the sum of all payments required under
the Note other than certain contingent payments and "qualified stated interest."
"Qualified stated interest" is stated interest unconditionally payable as a
series of payments in cash or property (other than debt instruments of the
issuer) at least annually during the entire term of the Note and equal to the
outstanding principal balance of the Note multiplied by a single fixed rate of
interest. In addition, a Floating Rate Note providing for one or more qualified
floating rates of interest, a single fixed rate and one or more qualified
floating rates, a single objective rate, or a single fixed rate and a single
objective rate that is a qualified inverse floating rate will have qualified
stated interest if interest is unconditionally payable at least annually during
the term of the Note at a single qualified floating rate or a single objective
rate. If a Floating Rate Note provides for two or more qualified floating rates
that can reasonably be expected to have approximately the same values throughout
the term of the Note, the qualified floating rates together constitute a single
qualified floating rate. If interest on a Note is stated at a fixed rate for an
initial period of less than one year followed by a variable rate that is either
a qualified floating rate or an objective rate for the subsequent period, and
the value of the variable rate on the issue date is intended to approximate the
fixed rate, the fixed rate and the variable rate together constitute a single
qualified floating rate or objective rate. Two or more rates will be
conclusively presumed to meet the requirements of the preceding sentences if the
values of the applicable rates on the issue date are within 1/4 of 1 percent of
each other. Special tax considerations (including possible original issue
discount) may arise with respect to Floating Rate Notes providing for (i) one
Base Rate followed by one or more other Base Rates, (ii) a single fixed rate
followed by a qualified floating rate or (iii) a Spread Multiplier. Purchasers
of Floating Rate Notes with any of such features should carefully examine the
applicable Pricing Supplement and should consult their tax advisors with respect
to such a feature because the tax consequences will depend, in part, on the
particular terms of the purchased Note. Special rules may apply if a Floating
Rate Note bears interest at an objective rate and it is reasonably expected that
the average value of the rate during the first half of the Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Note's term. Special rules may also
apply if a Floating Rate Note is subject to a cap, floor, governor or similar
restriction that is not fixed throughout the term of the Note and is reasonably
expected as of the issue date to cause the yield on the Note to be significantly
less or more than the expected yield determined without the restriction.
Proposed regulations under the Code issued on December 15, 1994 address,
among other things, the accrual of original issue discount on, and the character
of gain realized on the sale, exchange or retirement of,
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debt instruments providing for contingent payments. Such regulations would apply
to contingent payment debt instruments issued on or after 60 days after the date
final regulations are published. Prospective Holders of Indexed Notes or
Floating Rate Notes that provide for contingent payments should refer to the
discussion regarding taxation in the applicable Pricing Supplement.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the Note will not be considered to have original issue
discount. Holders of Notes with a de minimis amount of original issue discount
will include such original issue discount in income, as capital gain, on a pro
rata basis as principal payments are made on the Note.
A Holder of Original Issue Discount Notes will be required to include any
qualified stated interest payments in income in accordance with the Holder's
method of accounting for federal income tax purposes. A Holder of Original Issue
Discount Notes that mature more than one year from their date of issuance will
be required to include original issue discount in income for federal income tax
purposes as it accrues, in accordance with a constant yield method based on a
compounding of interest, before the receipt of cash payments attributable to
such income. Under this method, Holders of Original Issue Discount Notes
generally will be required to include in income increasingly greater amounts of
original issue discount in successive accrual periods.
Under the OID Regulations, Notes that pay interest annually that are issued
less than 15 calendar days before an Interest Payments Date may be treated as
Original Issue Discount Notes. Purchasers of such Notes should refer to the
discussion relating to taxation in the applicable Pricing Supplement.
Under the OID Regulations, an Original Issue Discount Note that matures one
year or less from its date of issuance will be treated as a "short-term Original
Issue Discount Note". In general, a cash method Holder of a short-term Original
Issue Discount Note is not required to accrue original issue discount for United
States federal income tax purposes unless it elects to do so. Holders who make
such an election, Holders who report income for federal income tax purposes on
the accrual method and certain other Holders, including banks and dealers in
securities, are required to include original issue discount on such short-term
Original Issue Discount Notes in income as it accrues on a straight-line basis,
unless an election is made to accrue the original issue discount according to a
constant yield method based on daily compounding. In the case of a Holder who is
not required and who does not elect to include original issue discount in income
currently, any gain realized on the sale, exchange or retirement of a short-term
Original Issue Discount Note will be ordinary income to the extent of the
original issue discount accrued on a straight-line basis (or, if elected,
according to a constant yield method based on daily compounding) through the
date of sale, exchange or retirement. In addition, such Holders will be required
to defer deductions for any interest paid on indebtedness incurred to purchase
or carry short-term Original Issue Discount Notes in an amount not exceeding the
deferred interest income, until such deferred interest income is recognized.
Under the OID Regulations, a Holder may make an election (the "Constant
Yield Election") to include in gross income all interest that accrues on a Note
(including stated interest, original issue discount, de minimis original issue
discount, and unstated interest, as adjusted by any amortizable bond premium) in
accordance with a constant yield method based on the compounding of interest.
Certain Original Issue Discount Notes may be redeemed prior to maturity or
may be renewed pursuant to their original terms. See "Description of
Notes -- Renewable Notes" above. Original Issue Discount Notes containing such a
feature may be subject to rules that differ from the general rules discussed
above. Purchasers of Original Issue Discount Notes with such a feature should
carefully examine the applicable Pricing Supplement and should consult their tax
advisors with respect to such a feature because the tax consequences with
respect to original issue discount will depend, in part, on the particular terms
and the particular features of the purchased Note.
The OID Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single Holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price, maturity
date, yield to maturity
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and stated redemption price at maturity for purposes of calculating and accruing
any original issue discount. Unless otherwise provided in the related Pricing
Supplement, the Company does not expect to treat any of the Notes as being
subject to the aggregation rules for purposes of computing original issue
discount.
Amortizable Bond Premium
The purchaser of a Note for an amount that is greater than the amount
payable at maturity will be considered to have purchased such Note with
"amortizable bond premium" equal in amount to such excess, and may elect (in
accordance with applicable Code provisions) to amortize such premium, using a
constant yield method, over the term of the Note (where such Note is not
optionally redeemable prior to its maturity date). If such Note may be
optionally redeemed prior to maturity, the amount of amortizable bond premium is
determined with reference to the amount payable on maturity or, if it results in
a smaller premium attributable to the period before the earlier redemption date,
with reference to the amount payable on the earlier redemption date. A Holder
who elects to amortize bond premium must reduce his tax basis in the Note by the
amount of the premium amortized in any year. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the Holder and may be revoked only with the consent of the Internal
Revenue Service.
If a Holder makes a Constant Yield Election for a Note with amortizable
bond premium, such election will result in a deemed election to amortize bond
premium for all of the Holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service with
respect to debt instruments acquired after revocation.
Foreign Currency Notes
The following summary relates to Notes that are denominated in a currency
or currency unit other than the U.S. dollar ("Foreign Currency Notes").
A Holder who uses the cash method of accounting and who receives a payment
of interest in a foreign currency with respect to a Foreign Currency Note (other
than an Original Issue Discount Note on which original issue discount is accrued
on a current basis (except to the extent any qualified stated interest is
received)) will be required to include in income the U.S. dollar value of the
foreign currency payment (determined on the date such payment is received)
regardless of whether the payment is in fact converted to U.S. dollars at that
time, and such U.S. dollar value will be the Holder's tax basis in the foreign
currency. A cash method Holder who receives such a payment in U.S. dollars
pursuant to an option available under such Note will be required to include the
amount of such payment in income upon receipt.
To the extent the above paragraph is not applicable, a Holder will be
required to include in income the U.S. dollar value of the amount of interest
income (including original issue discount but reduced by amortizable bond
premium to the extent applicable) that has accrued and is otherwise required to
be taken into account with respect to a Foreign Currency Note during an accrual
period. The U.S. dollar value of such accrued income will be determined by
translating such income at the average rate of exchange for the accrual period
or, with respect to an accrual period that spans two taxable years, at the
average rate for the partial period within the taxable year. Such Holder will
recognize ordinary income or loss with respect to any such accrued interest
income on the date such income is actually received. The amount of ordinary
income or loss recognized will equal the difference between the U.S. dollar
value of the foreign currency payment received (determined on the date such
payment is received) in respect of such accrual period (or, where a Holder
receives U.S. dollars, the amount of such payment in respect of such accrual
period) and the U.S. dollar value of interest income that has accrued during
such accrual period (as determined above). A Holder may elect to translate
interest income (including original issue discount) into U.S. dollars at the
spot rate on the last day of the interest accrual period (or, in the case of a
partial accrual period, the spot rate on the last date of the taxable year) or,
if the date of receipt is within five business days of the last day of the
interest accrual period, the spot rate on the date of receipt. A Holder that
makes such an election must apply it consistently to all debt instruments from
year to year and may not change the election without the consent of the Internal
Revenue Service.
S-22
<PAGE> 23
Original issue discount and amortizable bond premium of a Foreign Currency
Note are to be determined in the relevant foreign currency.
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a Holder that has not elected to amortize
such premium under Section 171 of the Code will be a capital loss to the extent
of such bond premium. If an election to amortize is made, amortizable bond
premium taken into account on a current basis will reduce interest income in
units of the relevant foreign currency. Exchange gain or loss is realized on
such amortized bond premium with respect to any period by treating the bond
premium amortized in such period as a return of principal.
A Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustment to such Holder's tax basis, will be the U.S. dollar value
of the foreign currency amount paid for such Foreign Currency Note, or of the
foreign currency amount of the adjustment, determined on the date of such
purchase or adjustment. A purchaser of a Foreign Currency Note with previously
owned foreign currency will recognize ordinary income or loss in an amount equal
to the difference, if any, between such Holder's tax basis in the foreign
currency and the U.S. dollar fair market value of the Foreign Currency Note on
the date of purchase.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates generally
will equal the difference between (i) the U.S. dollar value of the foreign
currency principal amount of such Note, and any payment with respect to accrued
interest, determined on the date such payment is received or such Note is
disposed of, and (ii) the U.S. dollar value of the foreign currency principal
amount of such Note, determined on the date such Holder acquired such Note, and
the U.S. dollar value of the accrued interest received, determined by
translating such interest at the average exchange rate for the accrual period.
Such foreign currency gain or loss will be recognized only to the extent of the
total gain or loss realized by a Holder on the sale, exchange or retirement of
the Foreign Currency Note. The source of such foreign currency gain or loss will
be determined by reference to the residence of the Holder or the "qualified
business unit" of the Holder on whose books the Note is properly reflected. Any
gain or loss realized by such a Holder in excess of such foreign currency gain
or loss will be capital gain or loss (except, in the case of a short-term
Original Issue Discount Note, to the extent of any original issue discount not
previously included in the Holder's income).
A Holder will have a tax basis in any foreign currency received on the
sale, exchange or retirement of a Foreign Currency Note equal to the U.S. dollar
value of such foreign currency, determined at the time of such sale, exchange or
retirement. Regulations issued under Section 988 of the Code provide a special
rule for purchases and sales of publicly traded Foreign Currency Notes by a cash
method taxpayer under which units of foreign currency paid or received are
translated into U.S. dollars at the spot rate on the settlement date of the
purchase or sale. Accordingly, no exchange gain or loss will result from
currency fluctuations between the trade date and the settlement of such a
purchase or sale. An accrual method taxpayer may elect the same treatment
required of cash-method taxpayers with respect to the purchases and sale of
publicly traded Foreign Currency Notes if the election is applied consistently.
Such election may not be changed without the consent of the Internal Revenue
Service. Any gain or loss realized by a Holder on a sale or other disposition of
foreign currency (including its exchange for U.S. dollars or its use to purchase
Foreign Currency Notes) will be ordinary income or loss.
Currency Indexed Notes
Notes of which the principal amount payable and/or on which the amount of
interest payable will be determined by reference to foreign currencies or
currency units ("Currency Indexed Notes") should constitute debt obligations of
the Company for United States federal income tax purposes and no portion of the
issue price of the Notes should be separately allocated to the foreign exchange
feature of the Notes. However, the proper treatment of payments of principal of
and interest on such Currency Indexed Notes is uncertain. Holders of Currency
Indexed Notes should consult with their tax advisors as to the federal income
tax consequences of the ownership and disposition of such Notes.
S-23
<PAGE> 24
Backup Withholding and Information Reporting
Certain noncorporate Holders may be subject to backup withholding at a rate
of 31% on payments of principal of, premium, if any, and interest (including the
accrual of original issue discount, if any) on, and the proceeds of disposition
of, a Note. Backup withholding will apply only if the Holder (i) fails to
furnish its Taxpayer Identification Number ("TIN") which, for an individual, is
his Social Security number, (ii) furnishes an incorrect TIN, (iii) is notified
by the Internal Revenue Service that it has failed properly to report payments
of interest and dividends or (iv) under certain circumstances, fails to certify,
under penalty of perjury, that it has furnished a correct TIN and has not been
notified by the Internal Revenue Service that it is subject to backup
withholding for failure to report interest and dividend payments. Holders should
consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption, if
applicable.
The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's U.S. federal income tax liability and
may entitle such Holder to a refund if the required information is furnished to
the Internal Revenue Service.
PLAN OF DISTRIBUTION
Under the terms of a Distribution Agreement between the Company and the
Agents (the "Distribution Agreement"), the Notes are being offered on a
continuing basis by the Company through the Agents, each of which has agreed to
use reasonable efforts to solicit purchases of the Notes. The Company will pay
each Agent a commission of from .125% to .750% of the Price to Public of each
Note, depending on its stated maturity, sold through such Agent. Commissions
with respect to Notes with stated maturities in excess of 30 years sold through
an Agent will be negotiated between the Company and the relevant Agent at the
time of sale. The Company has reserved the right to appoint additional Agents
and sell the Notes directly from time to time on its own behalf or through other
broker-dealers. No commission will be payable on any sales of Notes made
directly by the Company. The Company will have the sole right to accept offers
to purchase Notes and may reject any such offer, in whole or in part. Each Agent
will have the right, in its discretion reasonably exercised, without notice to
the Company, to reject any offer to purchase Notes received by it, in whole or
in part. The Company also may sell Notes to any Agent, acting as principal, or
to a group of underwriters named in the applicable Pricing Supplement for whom
such Agent will act as representative, at a discount to be agreed upon at time
of sale, for resale to one or more investors at varying prices related to
prevailing market prices at the time of such resale, as determined by such
Agent, or to certain securities dealers at the public offering price set forth
on the cover page of the applicable Pricing Supplement less the applicable
concession, expressed as a percentage of the principal amount of the Notes.
Unless otherwise specified in the applicable Pricing Supplement, any Note sold
to an Agent as principal will be purchased by the Agent at a price equal to 100%
of the principal amount thereof less a percentage of the principal amount equal
to the commission applicable to an agency sale of a Note of identical maturity.
The Agents may allow any portion of the discount received from the Company in
connection with the purchase of Notes to one or more dealers. The offering price
and other selling terms for such resales may from time to time be varied by such
Agent.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes, other than Notes payable in a Specified Currency
other than U.S. dollars, will be required to be made in funds immediately
available in The City of New York. With respect to payment of the purchase price
of Notes denominated in a foreign currency, see "Description of Notes -- Payment
Currency."
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company has agreed to
indemnify the Agents against and contribute toward certain liabilities,
including liabilities under the Securities Act. The Company has agreed to
reimburse the Agents for certain expenses.
S-24
<PAGE> 25
In addition to offering Notes through the Agents as described herein, debt
securities of the Company which are medium-term notes and which have terms
substantially similar to the terms of the Notes offered hereby may in the future
be offered, concurrently with the offering of the Notes, on a continuing basis
outside the United States. The Company may also sell other debt and equity
securities from time to time through underwriters or otherwise.
The Agents may engage in transactions with and perform services for the
Company in the ordinary course of business.
S-25
<PAGE> 26
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER OR AGENT. THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY AND THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Important Currency Exchange
Information......................... S-2
Use of Proceeds....................... S-2
Description of Notes.................. S-2
Foreign Currency Risks................ S-18
United States Taxation................ S-19
Plan of Distribution.................. S-24
PROSPECTUS
Available Information................. 2
Incorporation of Documents by
Reference........................... 2
The Company........................... 4
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges
and Preferred Stock Dividends....... 4
Description of Debt Securities........ 5
Description of Capital Stock,
Rights Agreement and Restated
Certificate of Incorporation........ 13
Plan of Distribution.................. 16
Validity of Securities................ 17
Experts............................... 17
</TABLE>
Anadarko Petroleum
Corporation
U.S. $300,000,000
Medium-Term Notes,
Series A
PROSPECTUS SUPPLEMENT
CS First Boston
Merrill Lynch & Co.
PaineWebber Incorporated
March 9, 1995
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