<PAGE> 1
Filed pursuant to Rule 424(b)(3)
Registration No. 033-64049
PROSPECTUS SUPPLEMENT
(To Prospectus Dated November 13, 1995)
U.S. $100,000,000 [UNION TEXAS PETROLEUM LOGO]
UNION TEXAS PETROLEUM HOLDINGS, INC.
MEDIUM-TERM NOTES, SERIES A
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Union Texas Petroleum Holdings, Inc. (the "Company") may offer from time to time
its Medium-Term Notes, Series A (the "Notes"), having an aggregate initial
offering price of up to U.S. $100,000,000 or the equivalent thereof in other
currencies or currency units, as such amount shall be reduced by the aggregate
initial offering price of any other Debt Securities issued by the Company,
whether inside or outside of the United States, pursuant to the Registration
Statement of which the accompanying Prospectus is a part. See "Plan of
Distribution." The Notes may be denominated in U.S. dollars or in such foreign
currencies or currency units as may be designated by the Company (the "Specified
Currency"). The Notes will be unsecured obligations of the Company. As specified
in a pricing supplement (a "Pricing Supplement") to this Prospectus Supplement,
the Notes will mature on any day nine months or more from the date of issue,
which maturity date may be subject to extension as agreed upon by the Company
and the purchaser. The Notes may be redeemed at any time prior to maturity, at
the option of the Company, in whole or in part, at a price (except for Original
Issue Discount Notes) equal to 100% of their principal amount plus accrued
interest plus, with respect to Fixed Rate Notes, a Make-Whole Premium calculated
by reference to the then-prevailing Treasury Yield and the remaining life of the
Notes, but the Notes will not be subject to repayment at the option of the
holder, except to the extent otherwise specified herein or in the applicable
Pricing Supplement. See "Description of Medium-Term Notes, Series
A -- Redemption and Repayment."
(Continued on following page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1)(2) AND COMMISSIONS(2) COMPANY(2)(3)
<S> <C> <C> <C>
Per Note................... 100% .125%-.750% 99.875%-99.250%
Total(4)................... U.S. $100,000,000 U.S. $125,000-$750,000 U.S. $99,875,000-$99,250,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be issued at 100% of their principal amount.
(2) The Company will pay a commission to Salomon Brothers Inc, BA Securities,
Inc., NationsBanc Capital Markets, Inc. and UBS Securities Inc., each as
Agent (collectively, the "Agents"), in the form of a discount, ranging from
.125% to .750% of the principal amount of any Note, depending upon maturity
up to and including 30 years, and as agreed upon at the time of sale for
Notes with maturities greater than 30 years, sold through such Agent, and
may sell Notes to any Agent at a discount for resale to investors or other
purchasers at varying prices related to prevailing market prices at the time
of resale to be determined by such Agent or, if so agreed, at a fixed public
offering price. See "Plan of Distribution." Unless otherwise indicated in
the applicable Pricing Supplement, any Note sold to an Agent as principal
will be purchased by such Agent at a price equal to 100% of the principal
amount thereof less a percentage equal to the commission applicable to an
agency sale of a Note of identical maturity and may be resold by such Agent.
No commission will be payable on any sales made directly by the Company.
(3) Before deducting other expenses payable by the Company estimated at up to
U.S. $350,000 including reimbursement of certain expenses of the Agents.
(4) Or, in the case of Notes not denominated in U.S. dollars, the equivalent
thereof in the Specified Currency.
The Notes are being offered on a continuous basis by the Company through the
Agents, each of whom has agreed to use its reasonable best efforts to solicit
purchases of the Notes. The Company has reserved the right to sell the Notes
directly on its own behalf. The Notes may also be sold to any of the Agents
acting as principal for its own account or for resale to investors or other
purchasers. Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not 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 of the Agents may reject any offer in whole or in part. See "Plan
of Distribution."
SALOMON BROTHERS INC
BA SECURITIES, INC.
NATIONSBANC CAPITAL MARKETS, INC.
UBS SECURITIES INC.
The date of this Prospectus Supplement is November 13, 1995
<PAGE> 2
(Continued from previous page)
The interest rate on, or interest formula for, the Notes will be established by
the Company from time to time and will be set forth therein and specified in the
applicable Pricing Supplement. The Notes will bear interest at fixed rates (the
"Fixed Rate Notes"), which may be zero in the case of certain Notes issued with
original issue discount ("Original Issue Discount Notes"), or at floating rates
(the "Floating Rate Notes"). The applicable Pricing Supplement will specify
whether a Floating Rate Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note and the rate of interest
thereon as determined by reference to one or more of the CD Rate, the CMT Rate,
the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate, the Treasury Rate (each, an "Interest Rate
Basis") or any other interest rate basis or formula as selected by the
purchasers and agreed to by the Company, and as adjusted by the Spread and/or
Spread Multiplier, if any, applicable to such Notes. Unless otherwise specified
in the applicable Pricing Supplement, interest on each Fixed Rate Note will
accrue from its date of issue and will be payable semiannually in arrears on
June 15 and December 15 of each year and at maturity. Unless otherwise specified
in the applicable Pricing Supplement, interest on each Floating Rate Note will
accrue from its date of issue and will be payable in arrears. See "Description
of Medium-Term Notes, Series A -- Payment of Principal and Interest." A Note may
be issued as an amortizing note (an "Amortizing Note") on which a portion or all
of the principal amount is payable prior to maturity in accordance with a
schedule, by application of a formula or by reference to an index. A Note may be
issued as an indexed note (an "Indexed Note") on which the amount of any
interest payment, in the case of an Indexed Rate Note, and/or the principal
amount payable at maturity, in the case of an Indexed Principal Note, will be
determined by reference to the level of prices, or changes in prices, or
differences between prices, of securities, currencies, intangibles, goods,
articles or commodities or by application of a formula. See "Description of
Medium-Term Notes, Series A -- Amortizing Notes" and "-- Indexed Notes."
The Specified Currency, interest rates, interest rate formulae, the Spread
and/or Spread Multiplier, if any, applicable to such Notes, and such other
variable terms are subject to change by the Company, but no such change will
affect any Note theretofore issued or as to which an offer to purchase has been
accepted by the Company.
The Notes will be issued only in fully registered form in denominations of U.S.
$1,000 or the equivalent thereof in the Specified Currency (rounded down to an
integral multiple of 1,000 units of such Specified Currency), or any amount in
excess thereof that is an integral multiple of U.S. $1,000 or 1,000 units of the
Specified Currency. Unless otherwise specified in the applicable Pricing
Supplement, each Note will be represented either by a global note ("Global
Note") deposited with, or on behalf of, The Depository Trust Company, New York,
New York (the "Depositary"), and registered in the name of the Depositary or a
nominee of the Depositary (a "Book-Entry Note"), or by a certificate issued in
definitive form (a "Certificated Note"), as set forth in the applicable Pricing
Supplement. Beneficial interests in Global Notes representing Book-Entry Notes
will be shown on, and transfers will be effected only through, records
maintained by the Depositary with respect to its participants' interests and by
the Depositary's participants. Book-Entry Notes will not be issuable as
Certificated Notes except under the circumstances described under "Description
of Medium-Term Notes, Series A -- Book-Entry System" or as otherwise set forth
on the applicable Pricing Supplement.
The Notes may be issued as Senior Notes or Subordinated Notes. Subordinated
Notes will be subordinated to all Senior Indebtedness of the Company. See
"Description of the Debt Securities" in the accompanying Prospectus.
IN CONNECTION WITH THE OFFERING OF THE NOTES, 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 (and premium, if any) and any interest on such Notes
will be made in the Specified Currency, unless otherwise provided in the
applicable Pricing Supplement. Currently, there are limited facilities in the
United States for the conversion of U.S. dollars into foreign currencies or
currency units, and vice versa, and few banks offer non-U.S. dollar denominated
checking or savings account facilities in the United States. However, if
requested by a prospective purchaser of Notes denominated in a Specified
Currency other than U.S. dollars, the Agent soliciting the offer to purchase
will arrange for the conversion of U.S. dollars into such Specified Currency to
enable the purchaser to pay for such Notes. Such request must be made on or
before the fifth Business Day (as defined below) preceding the date of delivery
of the Notes, or by such other date as determined by such Agent. Each such
conversion will be made by the relevant Agent on such terms and subject to such
conditions, limitations and charges as such Agent may from time to time
establish in accordance with its regular foreign exchange practice. All costs of
exchange will be borne by purchasers of the Notes.
References herein to "U.S. dollars," "dollars," "U.S. $" or "$" are to the
currency of the United States of America.
DESCRIPTION OF MEDIUM-TERM NOTES, SERIES A
The information herein concerning the Notes should be read in conjunction
with the statements under "Description of the Debt Securities" in the
accompanying Prospectus (the "Prospectus"), to which description reference is
hereby made. The particular terms of any Note offered will be described in the
applicable Pricing Supplement. The terms and conditions set forth in this
Prospectus Supplement will apply to each Note unless otherwise specified in the
applicable Pricing Supplement and such Note. Capitalized terms used herein and
not defined have the meanings given to them in the Indenture dated as of March
15, 1995, as amended (the "Senior Indenture"), between the Company and The First
National Bank of Chicago, as trustee, and the Indenture to be entered into (the
"Subordinated Indenture") between the Company and The First National Bank of
Chicago, as trustee. The Senior Indenture and the Subordinated Indenture are
sometimes referred to herein collectively as the "Indentures" and individually
as an "Indenture." The First National Bank of Chicago, as trustee under each of
the Indentures (and any successor thereto under each Indenture), is referred to
herein as the "Trustee."
GENERAL
The Notes are to be issued under Registration Statement No. 33-64049 (the
"Registration Statement") pursuant to which the Company has registered the sale
of Debt Securities (as defined in the Prospectus) having an aggregate initial
offering price of up to U.S. $100,000,000. The Notes issuable pursuant to this
Prospectus Supplement may be issued as Senior Notes or Subordinated Notes. The
Notes constitute separate series of Debt Securities under each of the
Indentures, and the aggregate of Senior Notes and Subordinated Notes offered
hereby is limited to up to U.S. $100,000,000 aggregate initial offering price
(or the equivalent thereof in other currencies or currency units), as such
amount may be reduced by any other Offered Debt Securities (as defined in the
Prospectus) issued by the Company pursuant to the Registration Statement (see
"Plan of Distribution"). For a description of the rights attaching to different
series of Debt Securities under the applicable Indenture, see "Description of
the Debt Securities" in the Prospectus.
Notes will be issued in fully registered form only. Each Note will be
issued initially as either a Book-Entry Note (which is a Book Entry Security as
defined in the Indentures) or a Certificated Note under the applicable
Indenture. Except as set forth under "-- Book-Entry System" below, Book-Entry
Notes will not be issuable as Certificated Notes. It is currently anticipated
that only Notes denominated in U.S. dollars will be issued as Book-Entry Notes.
Notes denominated in U.S. dollars will be issued in denominations of U.S. $1,000
or any amount in excess thereof which is a multiple of U.S. $1,000. Unless
otherwise specified in a Pricing Supplement, Notes denominated in a Specified
Currency other than U.S. dollars will
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be issued in equivalent denominations of the Specified Currency, as determined
by the Company by reference to the Market Exchange Rate (as defined below) on
the applicable issue date, of U.S. $1,000 (rounded down to an integral multiple
of 1,000 units of such Specified Currency), or any amount in excess thereof that
is an integral multiple of 1,000 units of such Specified Currency. "Market
Exchange Rate" means the noon buying rate in The City of New York for cable
transfers of such Specified Currency, as such rate is reported or otherwise made
available by the Federal Reserve Bank of New York on the applicable date;
provided, however, in the case of European Currency Units ("ECUs"), Market
Exchange Rate shall mean 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 trade date for such Notes.
The Company has designated The First National Bank of Chicago, acting
through its principal corporate trust office in The City of New York, as the
registrar and transfer agent for the Notes (the "Registrar," which term includes
any additional or successor Registrar appointed by the Company) and as the
paying agent for the Notes (the "Paying Agent," which term includes any
additional or successor Paying Agent appointed by the Company). The First
National Bank of Chicago is also acting as the authenticating agent for the
Notes (the "Authenticating Agent," which term includes any additional or
successor Authenticating Agent appointed by the Trustee). Unless otherwise
specified in the applicable Pricing Supplement, The First National Bank of
Chicago shall be the calculation agent (the "Calculation Agent") with respect to
the Notes.
The Notes will be unsecured obligations of the Company. The Senior Notes
will rank equally with all other unsecured and unsubordinated indebtedness of
the Company. The Company's obligations under the Notes will not be guaranteed by
any of its subsidiaries. See "Description of the Debt Securities -- Provisions
Applicable Solely to Senior Debt Securities" in the Prospectus. The Subordinated
Notes will be subordinated in right of payment to the prior payment in full of
the Senior Indebtedness of the Company as described under "Description of the
Debt Securities -- Provisions Applicable Solely to Subordinated Debt Securities"
in the Prospectus. At September 30, 1995, the Company's Senior Indebtedness
aggregated U.S. $755 million, and the Company had no subordinated indebtedness.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
be subject to redemption, in whole or in part, prior to maturity at the option
of the Company. The Notes will not be subject to repayment at the option of the
holder prior to maturity or to any sinking fund, except to the extent otherwise
specified in the applicable Pricing Supplement. See "-- Redemption and
Repayment." The discharge and defeasance provisions and the covenant provisions
described in the accompanying Prospectus under "Description of the Debt
Securities" will apply to the Notes.
The Notes will be offered on a continuous basis and will mature on the
Stated Maturity thereof, which may be any day nine months or more from the date
of issue, as selected by the purchaser and agreed to by the Company. Floating
Rate Notes will mature on an Interest Payment Date (as defined below) unless
otherwise specified in the applicable Pricing Supplement.
"Business Day" means any day that is not a Saturday or Sunday and that is
neither a legal holiday nor a day on which banking institutions are generally
authorized or obligated by law or executive order to close in The City of New
York or any other place or places where the principal of (and premium, if any)
and interest on the Notes is payable and (i) with respect to LIBOR Notes (as
defined below), in the City of London and (ii) with respect to Notes denominated
in a Specified Currency other than U.S. dollars, in the Principal Financial
Center (as defined below) of the country issuing the Specified Currency. "London
Business Day" means any day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market. "Principal Financial Center" means
the capital city of the country issuing the Specified Currency in which any
payment in respect of the Notes is to be made, or solely with respect to the
calculation of LIBOR, issuing the specified Index Currency (as defined below),
except that with respect to U.S. dollars, Australian dollars, Deutsche marks,
Dutch guilders, Italian lire, Swiss francs and ECUs, the Principal Financial
Center shall be The City of New York, Sydney, Frankfurt, Amsterdam, Milan,
Zurich and Luxembourg, respectively. "Maturity" or "Maturity Date" means the
date on which the principal of a Note or an installment of principal becomes due
and payable as provided in the applicable Note or
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Indenture, whether at the Stated Maturity or by declaration of acceleration,
call for redemption or otherwise. Unless otherwise specified in the applicable
Pricing Supplement, the Notes will be denominated in U.S. dollars, and payments
of principal of (and premium, if any) and any interest on the Notes will be made
in U.S. dollars.
PAYMENT CURRENCY
If the principal of (and premium, if any) or any interest on any Note is
payable in a Specified Currency other than U.S. dollars and such Specified
Currency is not available to the Company for making payments thereof due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company will be entitled to satisfy its obligations to holders of
the Notes by making such payments (including any such payment at Maturity) in
U.S. dollars on the basis of the Market Exchange Rate on the second Business Day
prior to such payment or, if such Market Exchange Rate is not then available, on
the basis of the most recently available Market Exchange Rate or as otherwise
specified in the applicable Pricing Supplement. Any payment made under such
circumstances in U.S. dollars where the required payment is in a Specified
Currency other than U.S. dollars will not constitute an Event of Default under
the Indenture.
PAYMENT OF PRINCIPAL AND INTEREST
In the case of the Notes denominated in and on which principal (and
premium, if any) and any interest is payable in U.S. dollars, principal (and
premium, if any) and any interest will be payable, and the Notes will be
transferable, at the principal corporate trust office of The First National Bank
of Chicago in The City of New York, which on the date hereof is located at 14
Wall Street, 8th Floor, New York, New York, or at such other place or places as
may be designated pursuant to the Indentures, provided that the Company, at its
option, may pay interest other than interest due at Maturity by check mailed or
delivered to registered holders (which, in the case of Book-Entry Notes
represented by a Global Note, will be the Depositary or a nominee of the
Depositary). Unless otherwise specified in the applicable Pricing Supplement,
any interest on Notes (other than interest at Maturity) payable in a Specified
Currency other than U.S. dollars will be paid by mailing a check or draft in the
Specified Currency drawn on an account at a bank outside of the United States.
If any Notes are denominated in a Specified Currency other than U.S. dollars or
if the principal of (and premium, if any) or any interest on any Notes is
payable in a Specified Currency other than U.S. dollars, the applicable Pricing
Supplement will provide additional information pertaining to the terms of such
Notes and other matters of interest to the holders thereof. At the Maturity of
any Note, the principal thereof, together with any premium and accrued interest
thereon, will be payable in immediately available funds upon presentation and
surrender thereof at the office of the Paying Agent at the above address or at
such other place or places as may be designated pursuant to the Indentures or
the applicable Pricing Supplement, provided that the Note is presented to the
Paying Agent in time for the Paying Agent to make such payments in such funds in
accordance with its normal procedures.
Each Note will bear interest from its date of issue at either (a) a fixed
rate (a "Fixed Rate Note"), which may be zero in the case of certain Original
Issue Discount Notes or (b) rates determined by reference to the interest rate
formula specified in the applicable Pricing Supplement (a "Floating Rate Note"),
until the principal thereof is paid or duly made available for payment. Interest
will be payable in arrears on each Interest Payment Date (as defined below).
Unless otherwise specified in the applicable Pricing Supplement, the first
payment of interest on any Note originally issued between a Regular Record Date
(as defined below) and the related Interest Payment Date or on an Interest
Payment Date will be made on the Interest Payment Date immediately following the
next succeeding Regular Record Date to the holder on such next succeeding
Regular Record Date. "Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes, which is (i) in the case of Fixed Rate
Notes (other than certain Original Issue Discount Notes bearing zero interest),
June 15 and December 15 of each year, unless otherwise specified in the
applicable Pricing Supplement, and at Maturity, and (ii) in the case of Floating
Rate Notes that reset: (i) daily, weekly or monthly, on the third Wednesday of
each
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month or on the third Wednesday of March, June, September and December of each
year, as specified in the applicable Pricing Supplement; (ii) quarterly, on the
third Wednesday of March, June, September and December of each year; (iii)
semiannually, on the third Wednesday of the two months of each year specified in
the applicable Pricing Supplement; and (iv) annually, on the third Wednesday of
the month specified in the applicable Pricing Supplement; and, in each case, on
the Maturity Date, except as otherwise provided herein or in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, a "Regular Record Date" shall be the fifteenth calendar day (whether
or not a Business Day) immediately preceding the related Interest Payment Date.
Interest will be payable to the person in whose name a Note is registered
(which for a Global Note representing Book-Entry Notes will be the Depositary or
a nominee of the Depositary) at the close of business on the Regular Record Date
next preceding each Interest Payment Date; provided, however, that interest
payable at Maturity will be payable to the person to whom principal shall be
payable (which for Global Notes representing Book-Entry Notes, will be the
Depositary or a nominee of the Depositary).
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 the Debt Securities -- Provisions
Applicable to Both Senior and Subordinated Debt Securities -- Events of Default"
in the Prospectus, the amount of principal due and payable with respect to such
Note shall be limited as described in "-- Original Issue Discount Notes."
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note will bear interest from and including the date of issue, or the most
recent date to which interest has been paid or duly provided for, to, but
excluding, the Interest Payment Date or Maturity, as the case may be, at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on
a day that is not a Business Day, the required payment of principal (and
premium, if any) or any interest will be made on the next succeeding Business
Day with the same force and effect as if made on the date such payment was due,
and no interest will accrue on the amount so payable for the period from and
after such Interest Payment Date or Maturity, as the case may be.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note," Fixed Rate Commencement Date and Fixed Interest Rate, as applicable,
Interest Rate Basis or Bases, Initial Interest Rate, Interest Reset Period and
Dates, Regular Record Dates, Interest Payment Period and Dates, Index Maturity,
Maximum Interest Rate and Minimum Interest Rate, if any, and Spread and/or
Spread Multiplier, if any, and if one or more of the applicable Interest Rate
Bases is LIBOR, the Designated LIBOR Page, all as defined and/or described
below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, will bear interest at the rate determined by reference
to the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date, the rate
at which
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interest on such Regular Floating Rate Note shall be payable shall be reset
as of each Interest Reset Date; provided, however, that the interest rate
in effect for the period from the date of issue to the first Interest Reset
Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the applicable
Pricing Supplement, such Floating Rate/Fixed Rate Note will bear interest
at the rate determined by reference to the applicable Interest Rate Basis
or Bases (a) plus or minus the applicable Spread, if any, and/or (b)
multiplied by the applicable Spread Multiplier, if any. Commencing on the
first Interest Reset Date, the rate at which interest on such Floating
Rate/Fixed Rate Note shall be payable shall be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect for the
period from the date of issue to the first Interest Reset Date will be the
Initial Interest Rate and the interest rate in effect commencing on the
Fixed Rate Commencement Date to the Maturity Date shall be the Fixed
Interest Rate, if such rate is specified in the applicable Pricing
Supplement or, if no such Fixed Interest Rate is so specified, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Inverse Floating Rate Note will bear interest equal to the
Fixed Interest Rate specified in the applicable Pricing Supplement minus
the rate determined by reference to the applicable Interest Rate Basis or
Bases (a) plus or minus the applicable Spread, if any and/or (b) multiplied
by the applicable Spread Multiplier, if any; provided, however, that unless
otherwise specified in the applicable Pricing Supplement, the interest rate
thereon during any Interest Reset Period (as defined below) will not be
less than zero. Commencing on the first Interest Reset Date, the rate at
which interest on such Inverse Floating Rate Note is payable shall be reset
as of each Interest Reset Date; provided, however, that the interest rate
in effect for the period from the date of issue to the first Interest Reset
Date will be the Initial Interest Rate.
The "Spread" is the number of basis points (one one-hundredth of a
percentage point) to be added to or subtracted from the related Interest Rate
Basis or Bases applicable to such Floating Rate Note. The "Spread Multiplier" is
the percentage of the related Interest Rate Basis or Bases applicable to such
Floating Rate Note by which such Interest Rate Basis or Bases will be multiplied
to determine the applicable interest rate on such Floating Rate Note. The "Index
Maturity" is the period to maturity of the instrument or obligation with respect
to which the related Interest Rate Basis or Bases will be calculated.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as defined below) immediately preceding such
Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date (or, if none, the Initial Interest
Rate).
The applicable Pricing Supplement will designate one or more of the
following Interest Rate Bases as applicable to each Floating Rate Note: (a) the
CD Rate (a "CD Rate Note"); (b) the CMT Rate (a "CMT Rate Note"); (d) the
Commercial Paper Rate (a "Commercial Paper Rate Note"); (d) the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Note");
(e) the Federal Funds Rate (a "Federal Funds Rate Note"); (f) LIBOR (a "LIBOR
Note"); (g) the Prime Rate (a "Prime Rate Note"); (h) the Treasury Rate (a
"Treasury Rate Note"); or (i) such other interest rate basis or interest rate
formula as is set forth in such Pricing Supplement; provided, however, that with
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respect to a Floating Rate/Fixed Rate Note, the interest rate commencing on the
Fixed Rate Commencement Date to the Maturity Date shall be the Fixed Interest
Rate, if such rate is specified in the applicable Pricing Supplement, or, if no
such Fixed Interest Rate is so specified, the interest rate in effect thereon on
the day immediately preceding the Fixed Rate Commencement Date.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following (in each case expressed as a rate per
annum on a simple interest basis): (i) a maximum numerical interest rate
limitation, or ceiling, on the rate of interest that may accrue during any
interest period (a "Maximum Interest Rate"); and (ii) a minimum numerical
interest rate limitation, or floor, on the rate of interest that may accrue
during any interest period (a "Minimum Interest Rate"). The interest rate on the
Notes will in no event be higher than the maximum rate permitted by applicable
law as the same may be modified by United States law of general application.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes that reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year; (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided, however, that,
with respect to Floating Rate/Fixed Rate Notes, the fixed rate of interest in
effect for the period from the Fixed Rate Commencement Date to the Maturity Date
shall be the Fixed Interest Rate or, if no such Fixed Interest Rate is
specified, the interest rate in effect on the day immediately preceding the
Fixed Rate Commencement Date, as specified in the applicable Pricing Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Reset Date will be postponed to the
next succeeding day that is a Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, if
such Business Day falls in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding Business Day.
The interest rate in effect with respect to a Floating Rate Note from the
date of issue to the first Interest Reset Date (the "Initial Interest Rate")
will be specified in the applicable Pricing Supplement. The interest rate
applicable to each Interest Reset Period commencing on the Interest Reset Date
with respect to such Interest Reset Period will be the rate determined as of the
applicable Interest Determination Date on or prior to the Calculation Date (as
defined below). The "Interest Determination Date" with respect to the CD Rate
Notes, the CMT Rate Notes, the Commercial Paper Rate Notes, the Federal Funds
Rate Notes and the Prime Rate Notes will be the second Business Day immediately
preceding the applicable Interest Reset Date; the "Interest Determination Date"
with respect to the Eleventh District Cost of Funds Rate Notes will be the last
working day of the month immediately preceding the applicable Interest Reset
Date on which the Federal Home Loan Bank of San Francisco publishes the Index
(as defined below); and the "Interest Determination Date" with respect to LIBOR
Notes will be the second London Business Day immediately preceding the
applicable "Interest Reset Date." With respect to Treasury Rate Notes, the
"Interest Determination Date" will be the day in the week in which the
applicable Interest Reset Date falls on which Treasury Bills (as defined below)
are normally auctioned (Treasury Bills are normally sold at an auction held on
Monday of each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that such auction may
be held on the preceding Friday); provided, however, that if an auction is held
on the Friday of the week preceding the applicable Interest Reset Date, the
Interest Determination Date will be such preceding Friday; and provided,
further, that if an auction falls on the applicable Interest Reset
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Date, then the Interest Reset Date will instead be the first Business Day
following such auction. The "Interest Determination Date" pertaining to a
Floating Rate Note, the interest rate of which is determined by reference to two
or more Interest Rate Bases, will be the second Business Day prior to the
applicable Interest Reset Date for such Floating Rate Note on which each
Interest Rate Basis is determinable. Each Interest Rate Basis will be determined
on such date, and the applicable interest rate will take effect on the
applicable Interest Reset Date.
If any Interest Payment Date for any Floating Rate Note (other than the
Maturity Date) would otherwise be a day that is not a Business Day, such
Interest Payment Date will be postponed to the next day that is a Business Day,
except that in the case of a Floating Rate Note that is a LIBOR Note, if such
Business Day falls in the next succeeding calendar month, such Interest Payment
Date shall be the immediately preceding Business Day. If a Maturity Date of a
Floating Rate Note falls on a date that is not a Business Day, the required
payment of interest and principal (and premium, if any) may be made on the next
succeeding Business Day with the same force and effect as if made on the date
such payment was due, and no interest on such payment will accrue for the period
from and after the Maturity Date to the date of such payment on the next
succeeding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue, or from and including the last date to which
interest has been paid or duly provided for, to, but excluding, the Interest
Payment Date or Maturity Date, as the case may be. 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 is the interest rate as reset on
the immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, in the case of CD Rate Notes, Commercial Paper Rate Notes,
Eleventh District Cost of Funds Rate Notes, Federal Funds Rate Notes, LIBOR
Notes or Prime Rate Notes, or by the actual number of days in the year in the
case of CMT Rate Notes or the Treasury Rate Notes. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for Notes for which the
interest rate is calculated with reference to two or more Interest Rate Bases
will be calculated in each period in the same manner as if only one of the
applicable Interest Rate Bases applied as specified in the applicable Pricing
Supplement. All percentages resulting from any calculation on Floating Rate
Notes will be rounded to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all
U.S. dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent.
Upon request of the holder of any Floating Rate Note, the Calculation Agent
will disclose the interest rate then in effect and, if determined, the interest
rate that will become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to such Floating Rate Note. Unless
otherwise specified in the applicable Pricing Supplement, the "Calculation
Date," if applicable, pertaining to any Interest Determination Date will be the
earlier of (i) the tenth calendar day after such Interest Determination Date,
or, if such day is not a Business Day, the next succeeding Business Day or (ii)
the Business Day immediately preceding the applicable Interest Payment Date or
the Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent will determine the interest rate with respect to each Interest
Rate Basis in accordance with the applicable provisions below.
CD Rate Notes. CD Rate Notes will bear interest at the rates (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
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Maximum Interest Rate, if any) specified in such 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 relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates" or any successor publication ("H.15(519)") under the
heading "CDS (Secondary Market)," or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York (which may include one or more of the Agents or
their affiliates) selected by the Calculation Agent for negotiable certificates
of deposit of major United States money market banks for negotiable certificates
of deposit with a remaining maturity closest to the Index Maturity designated in
the applicable Pricing Supplement in an amount that is representative for a
single transaction in that market at that time; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the CD Rate determined as of such CD Rate Interest Determination
Date will be the CD Rate in effect on such CD Rate Interest Determination Date.
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 specified
in the applicable Pricing Supplement, 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 such 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 Rate
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in 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,
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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 United States government securities dealers (each, a "Reference
Dealer") in The City of New York (which may include one or more of the Agents or
their affiliates) selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States ("Treasury
Notes") with an original maturity of approximately the Designated CMT Maturity
Index and a remaining term to maturity of not less than such Designated CMT
Maturity Index minus one year. If the Calculation Agent 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 U.S. $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; provided, however, 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.
"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). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate Notes. Commercial Paper Rate Notes will bear interest
at the interest rates (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 indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as
defined below) on such date of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading Commercial Paper. In the event that such rate is not
published by 3:00 P.M., New York City time, on the related Calculation Date, the
Commercial Paper Rate will be the Money Market Yield on such Commercial Paper
Rate Interest Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New York City
time, on the related Calculation Date such rate is not yet
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published in H.15(519) or Composite Quotations, then the Commercial Paper Rate
on such Interest Determination Date will be calculated by the Calculation Agent
and will be the Money Market Yield of the arithmetic mean of the offered rates
at approximately 11:00 A.M., New York City time, on such Commercial Paper Rate
Interest Determination Date of three leading dealers of commercial paper in The
City of New York (which may include one or more of the Agents or their
affiliates) selected by the Calculation Agent for commercial paper having the
Index Maturity designated in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Commercial Paper Rate will be the Commercial Paper Rate in
effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded to
the nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upwards) calculated in accordance with the following formula:
D X 360
Money Market Yield = --------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Eleventh District Cost of Funds Rate Notes. Eleventh District Cost of Funds
Rate Notes will bear interest at the rates (calculated with reference to the
Eleventh 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 Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Eleventh District Cost of Funds Rate Interest Determination Date falls, as
set forth under the caption "11th District" on Telerate Page 7058 as of 11:00
A.M., San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate for such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average costs of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the Federal Home Loan
Bank of San Francisco as such cost of funds for the calendar month immediately
preceding the date of such announcement. If the Federal Home Loan Bank of San
Francisco fails to announce such rate for the calendar month immediately
preceding such Eleventh District Cost of Funds Rate Interest Determination Date,
then the Eleventh District Cost of Funds Rate determined as of such Eleventh
District Cost of Funds Rate Interest Determination Date will be the Eleventh
District Cost of Funds Rate in effect on such Eleventh District Cost of Funds
Rate Interest Determination Date.
Federal Funds Rate Notes. Federal Funds Rate Notes will bear interest at
the rates (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 such Federal Funds Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for federal funds as
published in
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H.15(519) under the heading "Federal Funds (Effective)" or, if not published by
3:00 P.M., New York City time, on the related Calculation Date, the rate on such
Federal Funds Rate Interest Determination Date as published in Composite
Quotations under the column "Effective Rate" under the heading "Federal Funds."
If by 3:00 P.M., New York City time, on the related Calculation Date such rate
is not published in either H.15(519) or Composite Quotations, then the Federal
Funds Rate on such Federal Funds Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the rates
for the last transaction in overnight United States dollar federal funds
arranged by three leading brokers of federal funds transactions in The City of
New York (which may include one or more of the Agents or their affiliates),
selected by the Calculation Agent, prior to 9:00 A.M., New York City time, on
such Federal Funds Rate Interest Determination Date; provided, however, that if
the brokers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Federal Funds Rate determined as of such Federal Funds Rate
Interest Determination Date will be the Federal Funds Rate in effect on such
Federal Funds Rate Interest Determination Date.
LIBOR Notes. LIBOR Notes will bear interest at the interest rates
(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 indicated in the applicable Pricing Supplement, "LIBOR" will be
determined by the Calculation Agent in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a
LIBOR Note or any Floating Rate Note for which the interest is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be, as specified in the applicable Pricing Supplement, either: (a) the
arithmetic mean of the offered rates for deposits in the Index Currency (as
defined below) having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date, which appear
on the Reuters Screen LIBO Page as of 11:00 A.M., London time, on that
LIBOR Interest Determination Date, if at least two such offered rates
appear on the Reuters Screen LIBO Page, unless such Reuters Screen LIBO
Page by its terms provides only for a single rate, in which case such
single rate shall be used ("LIBOR Reuters"), or (b) the rate for deposits
in the Index Currency having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date, which appears
on the Telerate Page 3750 as of 11:00 A.M., London time, on that LIBOR
Interest Determination Date ("LIBOR Telerate"). "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on the Reuters Monitor Money
Rates Service (or such other page as may replace the LIBO page on that
service for the purpose of displaying London interbank offered rates of
major banks for the applicable Index Currency). "Telerate Page 3750" means
the display designated as page "3750" on the Dow Jones 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 of major banks
for the applicable Index Currency). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if
the U.S. dollar is the Index Currency, page 3750) had been specified. If
fewer than two offered rates appear on the Reuters Screen LIBO Page
(unless, as aforesaid, only a single rate is required), or if no rate
appears on the Telerate Page 3750, as applicable, LIBOR in respect of that
LIBOR Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates (unless, as aforesaid, only a single rate is
required) appear on the Reuters Screen LIBO Page, as specified in (i)(a)
above, or on which no rate appears on Telerate Page 3750, as specified in
(i)(b) above, as applicable, LIBOR will be determined on the basis of the
rates at which deposits in the Index Currency having the Index Maturity
designated in the applicable Pricing Supplement are offered at
approximately 11:00 A.M., London time, on that LIBOR Interest Determination
Date by four
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major banks in the London interbank market selected by the Calculation
Agent ("Reference Banks") to prime banks in the London interbank market,
commencing on the second London Business Day immediately following that
LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time. The Calculation Agent will request the principal
London office of each of the Reference Banks to provide a quotation of its
rate. If at least two such quotations are provided, LIBOR in respect of
that LIBOR Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR in respect of
that LIBOR Interest Determination Date will be the arithmetic mean of the
rates quoted at approximately 11:00 A.M., in the Principal Financial Center
for the country of the Index Currency, on the LIBOR Interest Determination
Date by three major banks in such Principal Financial Center (which may
include affiliates of the Agents) selected by the Calculation Agent for
loans in the Index Currency to leading European banks, having the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR with
respect to such LIBOR Interest Determination Date will be the rate of LIBOR
in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
Prime Rate Notes. Prime Rate Notes will bear interest at the rates
(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 such Prime Rate Notes and the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date"),
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME1 (as defined below) as such bank's prime
rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates but more than one such rate
appear on the Reuters Screen USPRIME1 for such Prime Rate Interest Determination
Date, the Prime Rate shall 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 Prime Rate Interest Determination Date by four major
money center banks in The City of New York selected by the Calculation Agent. If
fewer than two such rates appear on the Reuters Screen USPRIME1, the Prime Rate
will be determined by the Calculation Agent on the basis of the rates furnished
in The City of New York by three substitute banks or trust companies organized
and doing business under the laws of the United States, or any state thereof, in
each case having total equity capital of at least $500 million and being subject
to supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
banks or trust companies selected as aforesaid are not quoting as mentioned in
this sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate Interest
Determination Date.
"Reuters Screen USPRIME1" means the display designated as page "USPRIME1"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the USPRIME1 page on that service for the purpose of displaying prime rates or
base lending rates of major United States banks).
Treasury Rate Notes. Treasury Rate Notes will bear interest at the interest
rates (calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any, and subject to the
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Minimum Interest Rate and the Maximum Interest Rate, if any) specified in the
Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference in the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the auction held on such Treasury
Rate Interest Determination 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 3:00 P.M., New York
City time, on the related Calculation Date pertaining to such Treasury Rate
Interest Determination Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of Treasury Bills having
the Index Maturity designated in the applicable Pricing Supplement are not
published or reported as provided above by 3:00 P.M., New York City time, on
such Calculation Date or if no such auction is held on such Treasury Rate
Interest Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 P.M., New York City time, on such Treasury Rate Interest
Determination Date, of three leading primary United States government securities
dealers (which may include one or more of the Agents or their affiliates)
selected by the Calculation Agent for the issue of Treasury Bills with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement; provided, however, that if the dealers selected as aforesaid
by the Calculation Agent are not quoting as mentioned in this sentence, the
Treasury Rate will be the Treasury Rate in effect on such Treasury Rate Interest
Determination Date.
SUBSEQUENT INTEREST PERIODS
The applicable Pricing Supplement relating to each Note will indicate
whether the Company has the option to reset the interest rate in the case of a
Fixed Rate Note, or the Spread and/or Spread Multiplier in the case of a
Floating Rate Note, and, if so, the date or dates on which such interest rate or
such Spread and/or Spread Multiplier, as the case may be, may be reset (each an
"Optional Reset Date").
If the Company elects to reset the interest rate, Spread and/or Spread
Multiplier of a Note as described above, the holder of such Note will have the
option to elect repayment of such Note by the Company on any Optional Reset Date
at a price equal to the aggregate principal amount thereof outstanding on, plus
any interest accrued to, such Optional Reset Date or, for an Original Issue
Discount Note, as described below under "-- Original Issue Discount Notes." In
order for a Note to be so repaid on an Optional Reset Date, the holder thereof
must follow the procedures set forth below under "-- Redemption and Repayment"
for optional repayment, except that (i) the period for delivery of such Note or
notification to the Trustee will be at least 25 but not more than 35 days prior
to such Optional Reset Date and (ii) a holder who has tendered a Note for
repayment pursuant to a Reset Notice (as defined below) may, by written notice
to the Trustee, revoke any such tender until the close of business on the tenth
day prior to such Optional Reset Date.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 days prior to an
Optional Reset Date for such Note. Not later than 40 days prior to such Optional
Reset Date, the Trustee for such Note will mail, first class, postage prepaid,
or deliver to the holder of such Note a notice (the "Reset Notice"). The Reset
Notice will indicate whether the Company has elected to reset the interest rate
(in the case of a Fixed Rate Note) or the Spread and/or Spread Multiplier (in
the case of a Floating Rate Note) and if so, (i) such new interest rate or such
new Spread and/or Spread Multiplier, as the case may be; and (ii) the
provisions, if any, for redemption during the period from such Optional Reset
Date to the next Optional Reset Date or, if there is no such next Optional Reset
Date, to the Stated Maturity of such Note (each such period a "Subsequent
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Interest Period"), including the date or dates on which or the period or periods
during which and the price or prices at which such redemption may occur during
such Subsequent Interest Period.
Notwithstanding the foregoing, the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the Spread and/or Spread
Multiplier (in the case of a Floating Rate Note) as provided for in the Reset
Notice, and establish a higher interest rate or a Spread and/or Spread
Multiplier that is higher (or lower if the Note is an Inverse Floating Rate
Note) than the interest rate, Spread and/or Spread Multiplier provided for in
the relevant Reset Notice for the Subsequent Interest Period commencing on such
Optional Reset Date, by causing the Trustee to mail or deliver, not later than
20 days prior to an Optional Reset Date for a Note (or, if such day is not a
Business Day, on the immediately succeeding Business Day), notice of such higher
interest rate, or new Spread and/or Spread Multiplier to the holder of such
Note. Such notice will be irrevocable. The Company must notify the Trustee of
its intentions to revoke such Reset Notice at least 20 days prior to such
Optional Reset Date. Each Note with respect to which the interest rate, Spread
and/or Spread Multiplier is reset on an Optional Reset Date and with respect to
which the holder of such Note has not tendered such Note for repayment (or has
validly revoked any such tender) in accordance with applicable procedures will
bear such higher interest rate or new Spread and/or Spread Multiplier for the
Subsequent Interest Period.
EXTENSION OF MATURITY
Unless otherwise stated in the applicable Pricing Supplement, each Note
will mature at the Stated Maturity of such Note. The applicable Pricing
Supplement relating to any Note (other than an Amortizing Note) may indicate
whether the Company has the option to extend the Stated Maturity of such Note
for one or more periods of whole years from one to five (each an "Extension
Period") up to but not beyond the date (the "Final Maturity") set forth in such
Pricing Supplement.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 days prior to the
old Stated Maturity for such Note. Not later than 40 days prior to the old
Stated Maturity of such Note, the Trustee for such Note will mail, first class,
postage prepaid, or deliver to the holder of such Note a notice (the "Extension
Notice"). The Extension Notice will set forth (i) the election of the Company to
extend the Stated Maturity of such Note; (ii) the new Stated Maturity; (iii) in
the case of a Fixed Rate Note, the interest rate applicable to the Extension
Period or, in the case of a Floating Rate Note, the Spread and/or Spread
Multiplier applicable to the Extension Period; and (iv) the provisions, if any,
for redemption during the Extension Period, including the date or dates on which
or the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing or delivering
by such Trustee of an Extension Notice to the holder of a Note, the Stated
Maturity of such Note shall be extended automatically, and, except as modified
by the Extension Notice and as described in the next paragraph, such Note will
have the same terms as prior to the mailing or delivering of such Extension
Notice.
Notwithstanding the foregoing, not later than 20 days prior to the old
Stated Maturity of such Note (or, if such day is not a Business Day, on the
immediately succeeding Business Day), the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the Spread and/or Spread
Multiplier (in the case of a Floating Rate Note) provided for in the Extension
Notice for such Note and establish a higher interest rate (in the case of a
Fixed Rate Note) or a higher Spread and/or Spread Multiplier (or a lower Spread
and/or Spread Multiplier in the case of an Inverse Floating Rate Note) for the
Extension Period, by causing the Trustee for such Note to mail, first class,
postage prepaid, or deliver notice of such higher interest rate or new Spread
and/or Spread Multiplier, as the case may be, to the holder of such Note. Such
notice will be irrevocable. All Notes with respect to which the Stated Maturity
is extended will bear such higher interest rate (in the case of Fixed Rate
Notes) or new Spread and/or Spread Multiplier (in the case of Floating Rate
Notes) for the Extension Period, whether or not tendered for repayment.
If the Company extends the Stated Maturity of a Note, the holder of such
Note will have the option to elect repayment of such Note by the Company on the
old Stated Maturity at a price equal to the
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aggregate principal amount thereof outstanding on, plus interest accrued to,
such date or, for an Original Issue Discount Note as described below under
"-- Original Issue Discount Notes." In order for a Note to be repaid on the old
Stated Maturity once the Company has extended the Stated Maturity thereof, the
holder thereof must follow the procedures set forth below under "-- Redemption
and Repayment" for optional repayment, except that (i) the period for delivery
of such Note or notification to the Trustee for such Note will be at least 25
but not more than 35 days prior to the old Stated Maturity and (ii) a holder who
has tendered a Note for repayment pursuant to an Extension Notice may, by
written notice to the Trustee, revoke any such tender for repayment until the
close of business on the tenth day before the old Stated Maturity.
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 with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement. A table
setting forth repayment information in respect of each Amortizing Note will be
included in the applicable Pricing Supplement and set forth in each such Note.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Original Issue Discount Notes from time to time. Such
Original Issue Discount Notes may currently pay no interest or interest at a
rate that at the time of issuance is below market rates. In the event of
redemption, repayment or acceleration of Maturity in respect of an Original
Issue Discount Note, the amount payable to the holder of such Original Issue
Discount Note will be equal to (i) the Amortized Face Amount (as defined below)
as of the date of such event, plus (ii) with respect to any redemption of an
Original Issue Discount Note, the Initial Redemption Percentage specified in the
applicable Pricing Supplement (as adjusted by the Annual Redemption Percentage
Reduction, if applicable) minus 100% multiplied by the issue price specified in
such Pricing Supplement (the "Issue Price"), net of any portion of such Issue
Price that has been paid prior to the date of redemption, or the portion of the
Issue Price (or the net amount) proportionate to the portion of the unpaid
principal amount to be redeemed, plus (iii) any accrued interest to the date of
such event, the payment of which would constitute qualified stated interest
payments within the meaning of Treasury Regulation Section 1.1273-1(c) under the
Internal Revenue Code of 1986, as amended (the "Code"), plus (iv) with respect
to any redemption of an Original Issue Discount Note, unless otherwise specified
in the applicable Pricing Supplement, the Make-Whole Premium calculated as
described under "-- Redemption and Repayment." The accrued interest described in
clause (iii) above will be computed on the basis of a 360-day year of twelve
30-day months, compounded semiannually.
If any Maturity of an Original Issue Discount Note that bears no interest
falls on a day that is not a Business Day with respect to such Original Issue
Discount Note, the payment due at such Maturity will be made on the following
day that is a Business Day with the same force and effect as if it were made on
the date such payment was due, and no interest shall accrue on the amount so
payable for the period from and after such Maturity.
The "Amortized Face Amount" of an Original Issue Discount Note means an
amount equal to (i) the Issue Price thereof plus (ii) the aggregate portions of
the original issue discount (the excess of the amounts considered as part of the
"stated redemption price at maturity" of such Original Issue Discount Note
within the meaning of Section 1273(a)(2) of the Code, whether denominated as
principal or interest, over the Issue Price) that shall theretofore have accrued
pursuant to Section 1272 of the Code (without regard to Section 1272(a)(7) of
the Code) from the date of issue of such Original Issue Discount Note to the
date of determination, minus (iii) any amount considered as part of the "stated
redemption price at maturity" of such Original Issue Discount Note that has been
paid from the date of
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issue to the date of determination. Certain additional considerations relating
to the offering of any Original Issue Discount Notes may be set forth in the
applicable Pricing Supplement.
If a bankruptcy case is commenced by or against the Company under the
United States Bankruptcy Code (the "Bankruptcy Code"), it is possible that a
portion of the face amount of an Original Issue Discount Note would be treated
as interest and the unamortized portion thereof would be treated as unmatured
interest under Section 502(b)(2) of the Bankruptcy Code. Unmatured interest is
not allowable as part of a claim under Section 502(b)(2) of the Bankruptcy Code.
Although it is impossible to predict what portion, if any, of the face amount of
an Original Issue Discount Note would be treated as unmatured interest, one
possible result is that the bankruptcy court might determine the amount of
unmatured interest on such Note by reference to the amount of amortized original
issue discount of such Note for tax purposes, the unamortized debt discount of
such Note for financial accounting purposes or the Yield to Maturity (if any)
set forth on the face of an Original Issue Discount Note. Each method may yield
a substantially different result.
Holders of Notes with original issue discount will be required to include
the amount of original issue discount in income in accordance with applicable
provisions of the Code and the Treasury Regulations promulgated thereunder. See
"Certain United States Federal Income Tax Considerations -- U.S.
Holders -- Original Issue Discount."
INDEXED NOTES
Notes may be issued with the amount of principal (and premium, if any)
and/or any interest payable in respect thereof to be determined with reference
to the price or prices of specified commodities or stocks, the exchange rate of
one or more specified currencies (including a composite currency such as the
ECU) relative to an indexed currency or other price or exchange rate ("Indexed
Notes"), as set forth in the applicable Pricing Supplement. In certain cases,
holders of Indexed Notes may receive a principal amount on the Maturity Date
that is greater than or less than the face amount of the Notes depending upon
the relative value on the Maturity Date of the specified indexed item.
Information as to the method for determining the amount of principal (and
premium, if any) and/or any interest payable in respect of Indexed Notes,
certain historical information with respect to the specified indexed item and
tax considerations associated with an investment in such Indexed Notes will be
set forth in the applicable Pricing Supplement. See also "Certain Investment
Considerations."
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the Maturity Date or any other variable term
relating thereto, may be modified as specified under "Other Provisions" on the
face of the Note or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Notes issued as Book-Entry Notes having the
same original issue date, interest rate, if any, amortization schedule, if any,
Stated Maturity and other terms, if any, will be represented by a single Global
Note and all Floating Rate Notes issued as Book-Entry Notes having the same
original issue date, Initial Interest Rate, Interest Rate Basis or Bases,
Interest Payment Period, Interest Payment Dates, Interest Reset Period, Interest
Reset Dates, Index Maturity, Spread and/or Spread Multiplier, if any, Minimum
Interest Rate, if any, Maximum Interest Rate, if any, Stated Maturity and other
terms, if any, will be represented by a single Global Note. Each Global Note
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary, and registered in the name of the Depositary or a nominee of the
Depositary. Except under circumstances described below, Book-Entry Notes will
not be exchangeable for Certificated Notes and will not otherwise be issuable in
definitive form. The Depositary currently only accepts Notes that have a
Specified Currency of U.S. dollars.
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The Depositary has advised the Company and the Agents as follows: the
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Depositary was created to hold
securities of its participants ("Participants") and to facilitate the clearance
and settlement of securities transactions among its Participants in such
securities through electronic book-entry changes in accounts of the
Participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's Participants include securities brokers and
dealers (including the Agents), banks, trust companies, clearing corporations
and certain other organizations, some of which (and/or their representatives)
own the Depositary. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly.
Upon the issuance of a Global Note, the Depositary will credit on its
book-entry registration and transfer system the accounts of persons held with it
with the respective principal amounts of the Notes represented by such Global
Note. Such accounts shall be designated by the Agent with respect to such Notes
or by the Company if such Notes are offered and sold directly by the Company.
Ownership of beneficial interests in a Global Note will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Note will be shown on, and the transfer
of that ownership will be effected only through, records maintained by the
Depositary or its nominee (with respect to interests of Participants) and on the
records of Participants (with respect to interests of persons other than
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Note.
So long as the Depositary or its nominee is the registered owner of such
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global Note
for all purposes under the Indentures. Except as provided below, owners of
beneficial interests in a Global Note will not be entitled to have Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Notes in definitive form and will
not be considered the owners or holders thereof under the Indentures.
Principal (and premium, if any) and any interest payments on Notes
registered in the name of the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Global Note representing such Notes. None of the Company, the Trustee, any
Paying Agent or the Registrar for such Notes will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial interests in such Global Note for such Notes or for maintaining,
supervising or reviewing any records relating to such beneficial interests.
The Company expects that the Depositary for the Notes or its nominee, upon
receipt of any payment of principal, premium or interest, will credit
immediately Participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global Note
for such Notes as shown on the records of the Depositary or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interest in such Global Note held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participants.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue Certificated Notes in exchange for the entire
Global Note representing such Notes. In addition, the Company may at any time
and in its sole discretion determine not to have the Notes represented by the
entire Global Note and, in such event, will issue Certificated Notes in exchange
for the entire Global Note representing such Notes. In any such instance, an
owner of a beneficial interest in a Global Note will be entitled to physical
delivery
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of Certificated Notes represented by such Global Note equal in principal amount
to such beneficial interest and to have such Certificated Notes registered in
its name. Certificated Notes will be issued as registered Notes in denominations
of $1,000 or any amount in excess thereof that is an integral multiple of
$1,000, unless otherwise specified by the Company.
REDEMPTION AND REPAYMENT
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be redeemable, at the option of the Company, at any time in whole or from
time to time in part, upon not less than 30 and not more than 60 days' notice
mailed to each holder of Notes to be redeemed at the holder's address appearing
in the Security Register, on any date prior to Maturity at a price (except for
any Original Issue Discount Note) equal to 100% of the unpaid principal amount
to be redeemed plus any accrued interest to the Redemption Date (subject to the
right of holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date) plus, with respect to Fixed Rate Notes, a Make-Whole Premium, if any.
The amount of the Make-Whole Premium with respect to any Note (or portion
thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption
Date, of:
(A) each interest payment that, but for such redemption, would have
been payable on the Note (or portion thereof) being redeemed on each
Interest Payment Date occurring after the Redemption Date (excluding any
accrued interest for the period prior to the Redemption Date); and
(B) the principal amount that, but for such redemption, would have
been payable at the final maturity of the Note (or portion thereof)
being redeemed;
over
(ii) the principal amount of the Note (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in clause
(i) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield (as defined below).
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company; provided,
that if the Company fails to make such appointment at least 10 business days
prior to the Redemption Date, or if the institution so appointed is unwilling or
unable to make such calculation, such calculation will be made by Salomon
Brothers Inc or, if such firm is unwilling or unable to make such calculation,
by an independent investment banking institution of national standing appointed
by the Trustee (in any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Notes, calculated to the nearest 1/12 of a
year (the "Remaining Term"). The Treasury Yield will be determined as of the
third Business Day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent H.15(519). If the H.15(519) sets
forth a weekly average yield for United States Treasury Notes having a constant
maturity that is the same as the Remaining Term, then the Treasury Yield will be
equal to such weekly average yield. In all other cases, the Treasury Yield will
be calculated by interpolation, on a straight-line basis, between the weekly
average yields on the United States Treasury
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Notes that have a constant maturity closest to and greater than the Remaining
Term and the United States Treasury Notes that have a constant maturity closest
to and less than the Remaining Term (in each case as set forth in the
H.15(519)). Any weekly average yields so calculated by interpolation will be
rounded to the nearest 1/100 of 1%, with any figure of 1/200 of 1% or above
being rounded upward. If weekly average yields for United States Treasury Notes
are not available in the H.15(519) or otherwise, then the Treasury Yield will be
calculated by interpolation of comparable rates selected by the Independent
Investment Banker.
If less than all of the Notes with like tenor and terms are to be redeemed,
the Trustee will select the Notes to be redeemed pro rata or by lot. The Trustee
may select for redemption Notes and portions of Notes in amounts of U.S. $1,000
or 1,000 units of the Specified Currency or whole multiples thereof, provided
that if all of the Notes of a holder are to be redeemed, the entire outstanding
amount of Notes held by such holder, even if not a whole multiple of U.S. $1,000
or 1,000 units of the Specified Currency, will be redeemed. With respect to the
redemption of Global Notes, the Depositary advises that if less than all of the
Notes with like tenor and terms are to be redeemed, the particular interests (in
integral multiples of $1,000) in the Global Note representing the Notes to be
redeemed shall be selected by the Depositary's lottery procedures or by such
other method as the Trustee shall deem fair and appropriate at such Redemption
Date. Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be entitled to the benefit of any sinking fund or other mandatory
redemption provisions. Also see "-- Original Issue Discount Notes."
Unless optional repayment date or dates, if any, are fixed at the time of
sale and set forth in the applicable Pricing Supplement and in the applicable
Note (the "Optional Repayment Date"), the Notes will not be subject to repayment
by the Company at the option of the holders thereof prior to the Stated
Maturity. If any Optional Repayment Date is specified in the applicable Pricing
Supplement with respect to any Note, such Note (except any Original Issue
Discount Note) will be repayable on such Optional Repayment Date in whole or in
part in increments of U.S. $1,000 (or 1000 units of the Specified Currency) at
the option of the holder thereof at a price equal to 100% of the principal
amount to be repaid, together with any interest and premium payable thereon to
the Optional Repayment Date, unless otherwise specified in an applicable Pricing
Supplement. See also "-- Original Issue Discount Notes." In order for a Note to
be repaid, the Company must receive at its offices or agencies for that purpose
in The City of New York not more than 60 nor less than 30 days prior to the
Optional Repayment Date, (i) the Note with the form entitled "Option to Elect
Repayment" on the reverse of the Note duly completed, or (ii) a telegram, telex,
facsimile transmission or letter from a member of a national securities exchange
or the National Association of Securities Dealers, Inc. or a commercial bank or
a trust company in the United States of America setting forth the name of the
holder of the Note, the principal amount of the Note, the amount of the Note to
be repaid, a statement that the option to elect repayment is being exercised
thereby and a guarantee that the Note to be repaid with the form entitled
"Option to Elect Repayment" on the reverse of the Note duly completed will be
received by the Company not later than five Business Days after the date of such
telegram, telex, facsimile transmission or letter and such Note and form duly
completed are received by the Company by such fifth Business Day. Any such
notice received by the Company during such period shall be irrevocable. All
questions as to the validity, eligibility (including time of receipt) and
acceptance of any Note for repayment will be determined by the Company, whose
determination will be final and binding.
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended, and any other securities
laws and regulations in connection with any such repayment.
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CERTAIN INVESTMENT CONSIDERATIONS
An investment in Notes indexed, as to principal, premium and/or interest,
to one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant risks that
are not associated with similar investments in a conventional fixed-rate debt
security. If the interest rate of such a Note is so indexed, it may result in an
interest rate that is less than that payable on a conventional fixed-rate debt
security issued at the same time, including the possibility that no interest
will be paid, and, if the principal of and/or premium on such a Note is so
indexed, the amount of principal and/or premium payable in respect thereof may
be less than the original purchase price of such Note if allowed pursuant to the
terms thereof, including the possibility that no such amount will be paid. The
secondary market for such Notes will be affected by a number of factors,
independent of the creditworthiness of the Company and the value of the
applicable currency, commodity or interest rate index, including the volatility
of the applicable currency, commodity or interest rate index, the time remaining
to the maturity of such Notes, the amount outstanding of such Notes and market
interest rates. The value of the applicable currency, commodity or interest rate
index depends on a number of interrelated factors, including economic, financial
and political events, over which the Company has no control. Additionally, if
the formula used to determine the amount of principal, premium and/or interest
payable with respect to such 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 rate indices should not be taken as an indication of
future performance of such currencies, commodities or interest rate indices
during the term of any Note. The 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 Notes. Accordingly, prospective
investors should consult their own financial and legal advisors as to the risks
entailed by an investment in Indexed Notes and the suitability of Indexed Notes
in light of their particular circumstances.
SPECIAL PROVISIONS AND RISKS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than United States dollars or ECUs will not be sold in, or
to residents of, the country issuing the Specified Currency in which the
particular Notes are denominated. The information set forth in this Prospectus
Supplement is directed to prospective purchasers who are United States residents
and, with respect to Note denominated in foreign currencies, is by necessity
incomplete. 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 (and premium, if any) and any interest on the Notes.
Such persons should consult their own financial and legal advisors with regard
to such matters.
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN
NOTES DENOMINATED IN A SPECIFIED CURRENCY OTHER THAN U.S. DOLLARS, EITHER AS
SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY
CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES
DENOMINATED IN SPECIFIED CURRENCIES OTHER THAN U.S. DOLLARS. SUCH NOTES ARE NOT
AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes denominated in Specified Currencies other than U.S.
dollars entails significant risks that are not associated with a similar
investment in a debt security denominated in
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U.S. dollars. Such risks include, without limitation, the possibility of
significant changes in the rate of exchange between the U.S. dollar and the
applicable Specified Currency and the possibility of the imposition or
modification of foreign exchange controls by either the United States or foreign
governments. Such risks generally depend on events over which the Company has no
control, such as economic and political events and the supply and demand for the
relevant currencies. In recent years, rates of exchange between the U.S. dollar
and certain foreign currencies have been highly volatile and such volatility may
be expected in the future. Fluctuations in any particular exchange rate that
have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Note.
Depreciation of the Specified Currency applicable to a Note against the U.S.
dollar would result in a decrease in the U.S. dollar-equivalent yield of such
Note, in the U.S. dollar-equivalent value of the principal and premium, if any,
payable at Maturity of such Note, and, generally, in the U.S. dollar-equivalent
market value of such Note.
Governments have imposed, from time to time, exchange controls and may in
the future impose or revise exchange controls at or prior to the date on which
any payment of principal (or premium, if any) or interest on a Note is due,
which could affect exchange rates as well as the availability of the Specified
Currency on such date. Even if there are no exchange controls, it is possible
that the Specified Currency for any Note would not be available on the
applicable payment date due to other circumstances beyond the control of the
Company. In that event, the Company will make the required payment in respect of
such Note in U.S. dollars on the basis of the Market Exchange Rate on the second
Business Day prior to such payment or, if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate or
as otherwise specified in the applicable Pricing Supplement. See "Description of
Medium-Term Notes, Series A -- Payment Currency."
GOVERNING LAW; JUDGMENTS
The Indentures provide that 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 of the United States, such court could grant judgment relating to such
Notes in the Specified Currency or 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, a state court in the
State of New York rendering a judgment on a Note denominated in a Specified
Currency other than U.S. dollars would be required to render such judgment in
the Specified Currency in which such Note is denominated, and such judgment
would be converted into U.S. dollars at the exchange rate prevailing on the date
of entry of the judgment. Accordingly, holders of Notes denominated in a
Specified Currency other than U.S. dollars would bear the risk of exchange rate
fluctuations between the time the amount of the judgment is calculated and the
time such amount is converted from U.S. dollars into the applicable Specified
Currency.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the ownership and disposition of the Notes is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including changes in effective dates) and possible differing
interpretations. This discussion deals only with Notes held as capital assets
and does not purport to deal with persons in special tax situations, such as
financial institutions, insurance companies, regulated investment companies,
dealers in securities or currencies, persons holding Notes as a hedge against
currency risks or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the U.S. dollar. This discussion also does not
deal with holders other than original purchasers (except where otherwise
specifically noted). Persons considering the purchase of the Notes should
consult their own tax advisors concerning the application of United States
Federal income tax laws to their particular situations as well as any
consequences of the ownership and disposition of the Notes arising under the
laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof or (iii) an estate or trust the income of which is subject
to United States Federal income taxation regardless of its source. As used
herein, the term "non-U.S. Holder" means a holder of a Note that is not a U.S.
Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting).
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the ownership and disposition of
Notes issued with original issue discount ("OID"). The following summary is
based on the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and on certain final and temporary regulations (the "Final OID
Regulations") issued by the U.S. Department of Treasury (the "Treasury") on
January 27, 1994. The Final OID Regulations generally apply to debt instruments
issued on or after April 4, 1994. On December 15, 1994, certain proposed
regulations were issued by the Treasury (the "Proposed OID Regulations") that
interpret the original issue discount provisions of the Code primarily as they
apply to instruments with contingent interest. However, the Proposed OID
Regulations will not apply to instruments issued prior to such Regulations being
published in the Federal Register, which publication has not yet occurred. As a
result, the effect, if any, of the Proposed OID Regulations on a series of Notes
will be discussed in the applicable Pricing Supplement, if such regulations have
been finalized by the time such Pricing Supplement is issued.
For United States Federal income tax purposes, a Note will have OID to the
extent that the Note's stated redemption price at maturity exceeds its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date). The issue price of an
issuance of Notes equals the first offering price at which a substantial amount
of such Notes has been sold (ignoring sales to bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers). The stated redemption price at maturity of a Note is
the sum of all payments due on the Note other than qualified stated interest
payments. "Qualified stated interest" is stated interest that is unconditionally
payable in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate that appropriately accounts for the length of
the interval
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between payments. In addition, under the Final OID Regulations, if a Note bears
interest for one or more accrual periods at a rate below the rate applicable for
the remaining term of such Note (e.g., Notes with teaser rates or interest
holidays), and if the greater of either the resulting foregone interest on such
Note or any "true" discount on such Note (i.e., the excess of the Note's stated
principal amount over its issue price) equals or exceeds a specified de minimis
amount, then the stated interest on the Note would be treated as OID rather than
qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Note issued with OID and a maturity of more than
one year must include OID in income as ordinary income over the term of the
Note, regardless of such U.S. Holder's regular method of tax accounting, or
subject to certain conditions, based on one or more interest indices. In
general, a U.S. Holder must include in gross income the sum of the daily
portions of OID that accrue on the Note for each day during the taxable year (or
portion of the taxable year) on which such U.S. Holder held the Note.
Accordingly, a U.S. Holder of a Note issued with OID will include in income
amounts attributable to OID before receiving cash attributable to that income.
To determine the "daily portion" of OID on any Note with OID, OID accruing
during an accrual period (generally, the period between dates on which interest
is paid) is divided by the number of days in the accrual period. An "accrual
period" may be of any length and the accrual periods may vary in length over the
term of the Note, provided that each accrual period is no longer than one year
and each scheduled payment of principal or interest occurs either on the final
day of an accrual period or on the first day of an accrual period. The amount of
OID accruing during an accrual period is generally determined by using a
constant yield to maturity method, and is equal to the excess of (i) the product
of the Note's adjusted issue price at the beginning of the accrual period and
its yield to maturity (determined on the basis of compounding at the close of
each accrual period and approximately adjusted to take into account the length
of the particular accrual period) over (ii) the amount of any qualified stated
interest payments allocable to the accrual period. The Note's "adjusted issue
price" at the beginning of any accrual period generally equals the sum of the
issue price of the Note plus the aggregate amount of OID accrued on the Note in
all prior accrual periods, reduced by the amount of payments on the Note in
prior accrual periods that were not qualified stated interest payments. Under
these rules, U.S. Holders generally will have to include in income increasingly
greater amounts of OID in successive accrual periods.
A U.S. Holder of a Note with OID that purchases the Note for an amount that
is greater than the Note's adjusted issue price as of the purchase date but less
than or equal to the sum of all amounts payable on the Note after the purchase
date other than payments of qualified stated interest, will be considered to
have purchased the Note at an "acquisition premium." Under the acquisition
premium rules, the amount of OID that such U.S. Holder must include in its gross
income with respect to such Note for any taxable year (or portion thereof in
which the U.S. Holder holds the Note) will be reduced (but not below zero) by
the portion of the acquisition premium properly allocable to the period.
Under the Final OID Regulations, Floating Rate Notes are either treated as
variable rate debt instruments or contingent payment debt obligations and are
subject to special rules. A Note is a "variable rate debt instrument" if (a) its
issue price does not exceed the total noncontingent principal payments due under
the Note by more than a specified de minimis amount and (b) it provides for
stated interest, paid or compounded at least annually, at current values of (i)
one or more qualified floating rates, (ii) a single fixed rate and one or more
qualified floating rates, (iii) a single objective rate, or (iv) a single fixed
rate and a single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any floating rate that can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed
funds in the currency in which the note is denominated (for example, LIBOR).
Although a multiple of a qualified floating rate will generally not constitute a
qualified floating rate, a variable rate equal to the product of a qualified
floating rate and a fixed multiple that is greater than zero but not more than
1.35 will constitute a qualified floating rate. A variable rate equal to the
product of a qualified floating rate and a fixed multiple that is greater than
zero
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<PAGE> 26
but not more than 1.35, increased or decreased by a fixed rate, will also
constitute a qualified floating rate. In addition, under the Final OID
Regulations, two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the note
together will constitute a single qualified floating rate. Two or more qualified
floating rates will be conclusively presumed to meet the requirements of the
preceding sentence if the value of all rates on the issue date are within 25
basis points of each other.
The Final OID Regulations provide that an otherwise qualified floating rate
that has restrictions will not be a qualified floating rate unless the
restrictions fall into one of the following categories: (a) a cap, a floor or a
periodic adjustment restriction (a "governor") that is fixed throughout the term
of the note, (b) a cap or similar restriction that is not reasonably expected as
of the issue date significantly to decrease the yield on the note, (c) a floor
or similar restriction that is not reasonably expected as of the issue date to
significantly increase the yield on the note, or (d) a governor or similar
restriction that is not reasonably expected as of the issue date significantly
to increase or decrease the yield on the note. Floating Rate Notes subject to
caps, floors, or governors that do not meet the above requirements could be
treated as debt instruments providing for contingent payments.
An "objective rate" is a rate other than a qualified floating rate, that is
determined by a single fixed formula and is based on (i) one or more qualified
floating rates, (ii) one or more rates each of which would be a qualified
floating rate for a debt instrument denominated in a currency other than the
currency in which the Note is denominated, (iii) the yield or the changes in the
price of one or more items of actively traded personal property (other than
stock or debt of the issuer or a related party), (iv) a combination of these
objective rates, or (v) other rates designated from time to time by the Internal
Revenue Service (the "IRS"). Despite the foregoing, a variable rate of interest
on a Floating Rate Note will not constitute an objective rate if it is
reasonably expected that the average value of the rate during the first half of
the Floating Rate 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. A "qualified inverse floating rate" is any objective rate
that is equal to a fixed rate minus a qualified floating rate, and that
reasonably can be expected to inversely reflect contemporaneous variations in
the cost of newly borrowed funds disregarding permissible restrictions discussed
above in the definition of a qualified floating rate.
The Final OID Regulations also provide that if a variable rate debt
instrument provides for stated interest 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 and if the variable rate on such instrument's
issue date is intended to approximate the fixed rate, then the fixed rate and
the variable rate together will constitute either a single qualified floating
rate or an objective rate, as the case may be. A fixed rate and a variable rate
will be conclusively presumed to meet the requirements of the preceding sentence
if the value of the variable rate on the issue date does not differ from the
value of the fixed rate by more than 25 basis points.
If a Floating Rate Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof qualifies as a "variable rate debt instrument" under the Final OID
Regulations, then any stated interest on the Floating Rate Note which is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually will constitute qualified stated interest and will be
taxed accordingly. Thus, a Floating Rate Note that provides for stated interest
at either a single qualified floating rate or a single objective rate throughout
the term of the Floating Rate Note and that qualifies as a "variable rate debt
instrument" under the Final OID Regulations will generally not be treated as
having been issued with OID unless the Floating Rate Note is issued at a "true"
discount (i.e., at a price below the Floating Rate Note's stated principal
amount) in excess of a specified de minimis amount. OID on such a Floating Rate
Note arising from "true" discount is allocated to an accrual period using the
constant yield method described above by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date, of the qualified floating
rate or qualified inverse floating rate, or (ii) in the case of an objective
rate (other than a qualified inverse floating rate), a fixed rate that reflects
the yield that is reasonably expected for the Floating Rate Note.
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<PAGE> 27
Special tax considerations (including possible original issue discount) may
arise with respect to Floating Rate Notes providing for (i) one Interest Rate
Basis followed by one or more Interest Rate Bases, (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.
To determine the amount and accrual of OID and qualified stated interest on
any other Floating Rate Note that qualifies as a "variable rate debt
instrument," the Final OID Regulations provide that the Floating Rate Note is to
be converted into a hypothetical "equivalent" fixed rate debt instrument that
has terms identical to the Floating Rate Note, except that the hypothetical
Floating Rate Note has fixed rates substituted for the qualified floating rates
or objective rate provided under the Floating Rate Note. Any objective rate
(other than a qualified inverse floating rate) provided for under the terms of
the Floating Rate Note is converted into a fixed rate that reflects the yield
that is reasonably expected for the Floating Rate Note. In the case of a
Floating Rate Note that qualifies as a "variable rate debt instrument" and
provides for stated interest at a fixed rate in addition to either one or more
qualified floating rates or a qualified inverse floating rate, the fixed rate is
initially converted into a qualified floating rate (or a qualified inverse
floating rate, if the Floating Rate Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Floating Rate Note as of the Floating Rate Note's
issue date is approximately the same as the fair market value of an otherwise
identical debt instrument that provides for either the qualified floating rate
or qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Floating Rate Note is then converted into an
"equivalent" fixed rate debt instrument in the manner described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of OID and qualified
stated interest, if any, are determined for the "equivalent" fixed rate debt
instrument by applying the general OID rules to the equivalent fixed rate debt
instrument. A U.S. Holder of the Floating Rate Note will account for such OID
and qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Appropriate adjustments will be made in each accrual
period in the amount of qualified stated interest or OID assumed to have been
accrued or paid with respect to the "equivalent" fixed rate debt instrument in
the event that such amounts differ from the actual amount of interest accrued or
paid on the Floating Rate Note during the accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument" under the Final OID Regulations, then the Floating Rate Note would
be treated as a contingent payment debt obligation. As mentioned in the
introductory paragraph, it is not entirely clear under current law how a
Floating Rate Note would be taxed if such Note were treated as a contingent
payment debt obligation. The proper United States Federal income tax treatment
of Floating Rate Notes that are treated as contingent payment debt obligations
will be more fully described in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, (i) all of
the Notes may be redeemable at the option of the Company prior to their Stated
Maturity (a "call option") and/or (ii) certain of the Notes may be repayable at
the option of the holder prior to their Stated Maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax
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advisors, since the OID consequences will depend, in part, on the particular
terms and features of the purchased Notes.
Under the Final OID Regulations, the IRS can apply or depart from the Final
OID Regulations as necessary or appropriate to achieve a reasonable result where
a principal purpose in structuring a Note or applying the regulations described
above is to achieve a result that is unreasonable in light of the purpose of the
applicable statutes (which generally are intended to achieve the clear
reflection of income for both borrowers and lenders).
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to OID, subject to
certain limitations and exceptions.
Subsequent Interest Periods and Extension of Maturity
If so specified in the Pricing Supplement relating to an issue of Notes,
the interest rate or Stated Maturity of such Notes may be reset or extended, at
the option of the Company. See "Description of Medium-Term Notes, Series
A -- Subsequent Interest Periods" and "-- Extension of Maturity." The treatment
of a holder of Notes with respect to which such an option has been exercised and
who does not elect to have the Company repay such Notes on the applicable
Optional Reset Date or "old" Stated Maturity date will depend on the terms
established for such Notes by the Company pursuant to the exercise of such
option ("revised terms"). Depending on the particular circumstances, such holder
may be treated as having surrendered such Notes for new Notes with the revised
terms in either a taxable exchange or a recapitalization qualifying for
nonrecognition of gain or loss.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with OID. U.S. Holders that do not use the
accrual method of accounting for tax purposes generally will not be required to
recognize OID on Short-Term Notes until they receive payment on such Notes. U.S.
Holders on the accrual method, regulated investment companies, common trust
funds, and certain others, however, must accrue OID on Short-Term Notes on a
straight-line basis unless they elect to accrue the OID on a constant yield
basis with daily compounding. For this purpose, OID on a Short-Term Note is the
amount by which the total principal and interest payments on such Note exceed
its issue price. U.S. Holders may elect to include OID on Short-Term Notes in
income based on acquisition discount rather than OID. Acquisition discount is
the excess of a Short-Term Note's stated redemption price at maturity over the
U.S. Holder's basis in the Note. Gain recognized on the sale or exchange of a
Short-Term Note by a U.S. Holder that has not accrued OID or acquisition
discount on the Short-Term Note, to the extent attributable to accrued interest
and OID (or acquisition discount), is treated as ordinary income. Such a U.S.
Holder also must defer deductions for net interest expense on any borrowing
attributable to the Short-Term Note to the extent that the expense does not
exceed accrued but unrecognized interest and OID (or acquisition discount) on
the Note.
Amortizing Notes
Payments in respect of interest on an Amortizing Note will be includible as
described under "-- Payments of Interest" above. Amounts received in respect of
principal will reduce the U.S. Holder's basis in such Note. In the case of an
Amortizing Note that is also an Original Issue Discount Note, each payment
(other than a payment of qualified stated interest) is treated first as a
payment of original issue discount to the extent of the original issue discount
that has accrued as of the date of payment and has not been allocated to prior
payments and second as a payment of principal. Payments other than payments of
qualified stated interest reduce the holder's basis in the Note.
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Market Discount
If a U.S. Holder purchases a Note, other than a Note issued with OID, for
an amount that is less than its issue price (or, in the case of a subsequent
purchaser, its stated redemption price at maturity) or purchases a Note issued
with OID for an amount that is less than the Note's adjusted issue price as of
the purchase date, the amount of the difference will be treated as "market
discount". A Note is not treated as purchased at a market discount, however, if
the market discount is less than 1/4 of 1 percent of the stated redemption price
at maturity (or the adjusted issue price in the case of a Note issued with OID)
multiplied by the number of complete years remaining to maturity ("de minimis
market discount").
A U.S. Holder of a Note purchased at a market discount (other than a de
minimis market discount) will be required to treat any partial principal payment
(or, in the case of a Note issued with OID, any payment that does not constitute
qualified stated interest) on, or any gain realized on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the lesser of (i) the amount of such payment or realized gain or (ii) the market
discount that has not previously been included in income and is treated as
having accrued on such Note at the time of such payment or disposition. Market
discount will be considered to accrue ratably during the period from the date of
acquisition to the maturity date of the Note, unless the U.S. Holder elects to
accrue market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
its earlier disposition in a taxable transaction, because a current deduction is
only allowed to the extent the interest expense exceeds an allocable portion of
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. This election to include
market discount in income currently, once made, applies to all market discount
obligations acquired in or after the first taxable year to which the election
applies, and may not be revoked without the consent of the IRS.
Amortizable Bond Premium
If a U.S. Holder purchases a Note for an amount that is greater than its
stated redemption price at maturity, such U.S. Holder will be considered to have
purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may reduce interest on the Note
otherwise required to be included in income during any taxable year by the
amortizable premium allocable to the taxable year. However, if the Note may be
optionally redeemed after the U.S. Holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply that could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. If the U.S. Holder does not make such an election, the premium
will decrease the gain or increase the loss otherwise recognized on disposition
of the Note. Amortized bond premium will reduce the U.S. Holder's basis in the
Note. An election to amortize bond premium will apply to certain other debt
instruments that the U.S. Holder acquired at a premium, and the election may
have different tax consequences depending on when the debt instruments were
issued or acquired.
Disposition of a Note
Except as discussed above and except to the extent that gain or loss is
attributable to accrued but unpaid qualified stated interest or accrued market
discount, upon the sale, exchange or retirement of a Note, a U.S. Holder
generally will recognize taxable gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement of the Note and such
U.S. Holder's adjusted tax
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basis in the Note. A U.S. Holder's adjusted tax basis in a Note generally will
equal such U.S. Holder's initial investment in the Note increased by any OID
included in income (and accrued market discount or acquisition discount, if any,
if the U.S. Holder has included such market discount or acquisition discount in
income) and decreased by the amount of any payments previously received, other
than qualified stated interest payments, and by any amortized bond premium with
respect to such Note. Except as described above with respect to certain
Short-Term Notes or with respect to market discount that has not been included
as income, such gain or loss will be capital gain or loss and generally will be
long-term if the Note were held for more than one year.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to withholding of United States
Federal income tax on payment of principal, premium (if any) or interest
(including OID, if any) on a Note, unless such non-U.S. Holder directly or
indirectly owns at least 10% of the voting power in the Company's stock, or is a
controlled foreign corporation related to the Company or a bank receiving
interest described in section 881(c)(3)(A) of the Code, if the non-U.S. Holder
certifies, on IRS Form W-8 or other substantially similar form, that the Holder
is not a U.S. person. To qualify for the exemption from taxation, the last
United States payor in the chain of payment prior to payment to a non-U.S.
Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
beneficial owner to the organization or institution. The Treasury Department is
considering implementation of further certification requirements aimed at
determining whether the issuer of a debt obligation is related to holders
thereof.
If a non-U.S. Holder of a Note cannot satisfy the requirements of the
"portfolio interest" exception described above, payments of premium (if any) and
interest (including OID, if any) made to such non-U.S. Holder will be subject to
a 30% withholding tax unless the beneficial owner of the Note provides the
Company or its Paying Agent, as the case may be, with a properly executed (1)
IRS Form 1001 (or successor form) claiming an exemption from withholding under
the benefit of a tax treaty or (2) IRS Form 4224 (or successor form) stating
that interest paid on the Note is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or business
in the United States.
If a non-U.S. Holder of a Note is engaged in a trade or business in the
United States and premium (if any) or interest (including OID, if any) on the
Note is effectively connected with the conduct of such trade or business, the
non-U.S. Holder, although exempt from the withholding tax discussed above, will
be subject to United States Federal income tax on such interest and OID, if any,
on a net income basis in the same manner as if it were a U.S. Holder. In
addition, if such holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its effectively connected earnings and profits for
the taxable year, subject to adjustments. For this purpose, such premium (if
any) and interest (including OID, if any) on a Note will be included in such
foreign corporation's earnings and profits.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Additionally, a non-U.S. Holder who is a non-resident alien individual who is
present in the U.S. for 183 days or more during the taxable year when the sale
or exchange occurs may be subject to federal income taxation on the gain
realized on the disposition if certain other conditions are met. In that case,
the capital gain is generally subject to a 30% tax. Certain other exceptions may
be applicable, and a non-U.S.
S-30
<PAGE> 31
Holder should consult its tax advisor in this regard. A Note held by an
individual who is not a citizen or resident of the United States (as defined for
United States Federal estate tax purposes) will not be subject to United States
Federal estate tax as a result of such individual's death, if at the time of
death the individual did not directly or indirectly own 10% or more of the total
combined voting power of the Company's stock, unless such individual held such
Note in connection with the conduct of a United States trade or business.
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").
Payment of Interest. A U.S. 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) or a Note on which market discount is
currently accrued, 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. Such U.S. dollar value will be the U.S. Holder's tax basis in the
foreign currency received. A cash method U.S. 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 U.S. Holder will be
required to include in income the U.S. dollar value of the amount of interest
income (including original issue discount or market discount, but reduced by
acquisition premium and 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. Unless the U.S. Holder makes the
"Spot Rate Convention Election" discussed in the next paragraph, 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 each taxable year. The average rate of exchange for the accrual
period (or partial period) is the simple average of the exchange rates for each
business day of such period (or other method if such method is reasonably
derived and consistently applied). Such U.S. Holder will recognize ordinary gain
or loss with respect to accrued interest income on the date such income is
received. The amount of ordinary gain 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 and the U.S. dollar value of interest income that has accrued
during such accrual period (as determined above).
Spot Rate Convention Election. A U.S. Holder may elect to translate accrued
interest income into U.S. dollars at the exchange rate in effect on the last day
of an accrual period for the original issue discount, market discount or accrued
interest, or in the case of an accrual period that spans two taxable years, at
the exchange rate in effect on the last day of the taxable year. Additionally,
if a payment of such income is actually received within five business days of
the last day of the accrual period or taxable year, an electing U.S. Holder may
instead translate such income into U.S. dollars at the exchange rate in effect
on the day of actual receipt. Any such election will apply to all debt
instruments held by the U.S. Holder at the beginning of the first taxable year
to which the election applies or thereafter acquired by the U.S. Holder, and may
not be revoked without the consent of the IRS.
Purchase, Sale, Exchange or Retirement. A U.S. Holder's tax basis in a
Foreign Currency Note will be the U.S. dollar value of the foreign currency
amount paid for such Foreign Currency Note, determined on the date of such
purchase, plus the foreign currency amount of any adjustment on account of
original issue discount, market discount, acquisition premium or bond premium. A
U.S. Holder who converts U.S. dollars to a foreign currency and immediately uses
that currency to purchase a Foreign Currency Note denominated in the same
currency normally will not recognize gain or loss in connection with such
conversion and purchase. However, a U.S. Holder who purchases a Foreign Currency
Note with
S-31
<PAGE> 32
previously owned foreign currency will recognize ordinary income or loss in an
amount equal to the difference, if any, between such U.S. Holder's tax basis in
the foreign currency and the U.S. dollar fair market value of the Foreign
Currency Note on the date of purchase.
For purposes of determining the amount of any gain or loss recognized by a
U.S. Holder on the sale, exchange or retirement of a Foreign Currency Note, the
amount realized upon such sale, exchange or retirement will be the U.S. dollar
value of the foreign currency received, determined on the date of sale, exchange
or retirement. A U.S. 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.
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. Such gain or loss will not be treated as
interest income or expense. Such foreign currency gain or loss will equal the
difference between (i) the U.S. dollar value of the foreign currency principal
amount of such Foreign Currency Note and any payment with respect to accrued
interest, determined on the date 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 U.S. 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 or with reference to the "Spot Rate
Convention Election" as described above. The foreign currency principal amount
of a Foreign Currency Note generally equals the issue price in foreign currency
of such Note. Such foreign currency gain or loss will be recognized only to the
extent of the total gain or loss realized by a U.S. 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 U.S. Holder
or the "qualified business unit" of the holder on whose books the Note is
properly reflected.
Any gain or loss recognized by such a holder in excess of such foreign
currency gain or loss will be capital gain or loss (except to the extent of any
accrued market discount or, in the case of a short-term Original Issue Discount
Note, any original issue discount to the extent such market discount or original
issue discount has not been previously included in the U.S. Holder's income).
The Section 988 Regulations provide a special rule for purchases and sales
of Foreign Currency Notes traded on an established securities market by a cash
basis 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 basis taxpayer may elect the same treatment
required of cash basis taxpayers with respect to purchases and sales of Foreign
Currency Notes traded on an established securities market provided the election
is applied consistently. Such election cannot be changed without the consent of
the IRS. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of foreign currency (including its exchange for U.S. dollars or its
use to purchase Foreign Currency Notes) will be ordinary income or loss.
Original Issue Discount. Original issue discount for any accrual period on
an Original Issue Discount Note that is a Foreign Currency Note will be
determined in the relevant foreign currency and then translated into U.S.
dollars in the same manner as stated interest accrued by an accrual basis U.S.
Holder, as described above under "Payment of Interest." Upon the receipt of an
amount attributable to original issue discount (whether in connection with a
payment of interest or the sale or retirement of a Note), a U.S. Holder may
recognize ordinary income or loss.
Premium and Market Discount. In the case of a Foreign Currency Note, market
discount will be determined in the relevant foreign currency. The amount of
accrued market discount (other than market discount currently included in income
pursuant to an election by the holder) which is required to be recognized on the
disposition of the Note will be translated into U.S. dollars based on the
exchange rate on the disposition date. No part of such accrued market discount
will be treated as exchange gain or loss. Accrued market discount that a holder
elects to accrue into income currently is translated into U.S. dollars using the
average exchange rate in effect during the accrual period. In such case,
movement in
S-32
<PAGE> 33
the exchange rate between the accrual date and disposition date will result in
exchange gain or loss at the time of the disposition with respect to the amount
of the market discount accrued.
In the case of a Foreign Currency Note, bond premium which the holder
elected to amortize or acquisition premium will be computed in the relevant
foreign currency and will reduce interest income or original issue discount
determined in such foreign currency. Exchange gain or loss will be realized with
respect to amortizable bond premium or acquisition premium by treating the
portion of the premium amortized with respect to any period as a return of
principal. The Section 988 Regulations provide that if a holder does not elect
to amortize bond premium, any loss realized on the sale, exchange or retirement
of a Foreign Currency Note will be capital loss to the extent of such bond
premium.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current U.S. federal income tax law, information reporting
requirements apply to certain payments of principal, premium and interest
(including OID) paid on Notes, and to the proceeds of sales of Notes made to
U.S. Holders, other than certain exempt recipients (such as corporations).
Backup withholding of the United States Federal income tax at a rate of 31% may
apply to payments made in respect of Notes to registered owners who are not
"exempt recipients" or who fail to comply with certain procedures for providing
certain identifying information (such as the registered owner's taxpayer
identification number) in the required manner.
Upon the sale of a Note to (or through) certain brokers, the broker must
withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is an exempt recipient or (ii) the seller provides,
in the required manner, certain identifying information and, in the case of a
non-U.S. Holder, certifies that such seller is a non-U.S. Holder (and certain
other conditions are met). Certification of the registered owner's non-U.S.
status would be made normally on an IRS Form W-8 under penalties of perjury,
although in certain cases it may be possible to submit other documentary
evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company through
Salomon Brothers Inc, BA Securities, Inc., NationsBanc Capital Markets, Inc. and
UBS Securities Inc., as Agents, each of whom has agreed to use its reasonable
best efforts to solicit purchases of the Notes. The Company will pay each Agent
a commission, in the form of a discount ranging from .125% to .750% of the
principal amount of any Note, depending upon maturity of the Note up to and
including 30 years, and as agreed upon at the time of sale for Notes with Stated
Maturities greater than 30 years, sold through such Agent. The Company also may
sell the Notes to one or more of the Agents as principal at a discount for
resale to investors or other purchasers at varying prices related to prevailing
market prices at the time of resale, to be determined by such Agent or, if so
agreed, at a fixed public offering price. In addition, the Company has reserved
the right to sell the Notes directly to investors on its own behalf in those
jurisdictions where it is authorized to do so or as otherwise provided in the
applicable Pricing Supplement. In the case of sales made directly by the
Company, no commission will be payable. The Company has agreed to reimburse the
Agents for certain expenses.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer will not be in excess of the discount to be
received by such Agent from the Company. Unless otherwise indicated in the
applicable Pricing Supplement, any Note sold to an Agent as principal will be
purchased by such Agent at a price equal to 100% of the principal amount thereof
less a percentage equal to the commission applicable to any agency sale of a
Note of identical maturity, and may be resold by the Agent to investors and
other
S-33
<PAGE> 34
purchasers as described above. After the initial public offering of Notes to be
resold to investors and other purchasers on a fixed public offering price basis,
the public offering price (in the case of Notes to be sold at a fixed public
offering price), the concession and the discount may be changed.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes in whole or in part. Each Agent will
have the right, in its discretion reasonably exercised, to reject any offer to
purchase Notes received by it in whole or in part.
The Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the "Act"),
or to contribute to payments such Agent may be required to make in respect
thereof. Each Agent may be deemed to be an "underwriter" within the meaning of
the Act.
Agents or their affiliates in the ordinary course of their business have
engaged and in the future may engage from time to time in transactions with and
perform services for the Company.
Affiliates of each of BA Securities, Inc., NationsBanc Capital Markets,
Inc. and UBS Securities Inc. are agent banks and lenders to the Company under
the Company's Credit Facilities. To the extent that the proceeds hereof are used
to repay such indebtedness, each such affiliate will receive its proportionate
share of any repayment by the Company of amounts outstanding under such Credit
Facilities from the proceeds of the offering of the Notes. Because more than 10%
of the net proceeds of this offering may be paid to such affiliates, each a
member of the National Association of Securities Dealers, Inc. (the "NASD") and
a participant in the distribution of the Notes, this offering is being made
pursuant to the provisions of Article III, Section 44(c)(8) of the NASD Rules of
Fair Practice.
Payment of the purchase price of the Notes will be required to be made in
immediately available funds on the date of settlement.
No Note will have an established trading market when issued. Unless
otherwise specified in the applicable Pricing Supplement, the Notes will not be
listed on any securities exchange. Each of the Agents may from time to time
purchase and sell Notes in the secondary market, but it is not obligated to do
so, and there can be no assurance that there will be a secondary market for the
Notes or liquidity in the secondary market if one develops. From time to time,
each of the Agents may make a market in the Notes.
Concurrently with the offering of Notes described herein, the Company may
issue other Debt Securities described in the accompanying Prospectus pursuant to
the Indentures.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Andrews &
Kurth L.L.P., Houston, Texas, and for the Agents by Simpson Thacher & Bartlett
(a partnership which includes professional corporations), New York, New York.
The opinions of Andrews & Kurth L.L.P. and Simpson Thacher & Bartlett will be
conditioned upon, and subject to, certain assumptions as to future actions
required to be taken in connection with the issuance and sale of the Notes and
as to other events that may affect the validity of the Notes but which cannot be
ascertained on the date of such opinions.
S-34
<PAGE> 35
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS NOT AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN
SUCH STATE. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Important Currency Exchange
Information......................... S-3
Description of Medium-Term Notes,
Series A............................ S-3
Certain Investment Considerations..... S-22
Special Provisions and Risks Relating
to Foreign Currency Notes........... S-22
Certain United States Federal Income
Tax Considerations.................. S-24
Plan of Distribution.................. S-33
Validity of Notes..................... S-34
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of the Debt Securities.... 4
Plan of Distribution.................. 18
Legal Matters......................... 19
Experts............................... 19
</TABLE>
U.S.$100,000,000
UNION TEXAS
PETROLEUM
HOLDINGS, INC.
MEDIUM-TERM NOTES,
SERIES A
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
[UNION TEXAS PETROLEUM LOGO]
SALOMON BROTHERS INC
BA SECURITIES, INC.
NATIONSBANC CAPITAL
MARKETS, INC.
UBS SECURITIES INC.
PROSPECTUS SUPPLEMENT
DATED NOVEMBER 13, 1995
