<PAGE>
Rule 424(b)(2)
Pricing Supplement dated Registration Statement
October 29, 1997 No. 333-30295
(To Prospectus dated July 9, 1997 and
Prospectus Supplement dated July 10, 1997)
The Pep Boys - Manny, Moe & Jack
Medium-Term Notes - Series A CUSIP No. 713281AC7
- -------------------------------------------------------------------------------
Trade Date: October 29, 1997 Interest Rate: 6.71%
Principal Amount: $35,000,000.00 Interest Payment Date(s):
Currency: US DOLLAR May 3 & November 3
Issue Price: 100% Regular Record Date(s):
Selling Agent's Discount or Commission: April 19 & October 20
0.55% Maturity Date: November 3, 2004
Original Issue Date:
November 3, 1997
Net Proceeds to Issuer: $34,807,500.00
- -------------------------------------------------------------------------------
Form: X Book Entry
---
Certificated
---
Redemption: The notes will be redeemable by the Company at any
time prior to Maturity with a Make-Whole Premium,
unless one of the below is checked:
X The Notes cannot be redeemed prior to maturity
---
The Notes may be redeemed prior to
---maturity without a
Make-Whole Premium
Redemption Commencement Date:
Initial Redemption Percentage:
Annual Redemption Percentage Reduction:
X The Notes cannot be repaid prior to maturity
Repayment: ---
The Notes can be repaid prior to maturity at
---the option of the holder
Optional Repayment Price:
Optional Repayment Date:
Discount Note:
X No
---
Yes
---
Total Amount of OID: Original Yield to Maturity:
Initial Accrual Period OID:
Method Used to Determine Yield for Initial
Accrual Period:
Approximate Exact
--- ---
Option to Reset Interest: X No
---
Yes, at the option of the Company
---
Optional Reset Date(s):
<PAGE>
X No
Option to Extend Maturity: ---
Yes, at the option of the Company
---
Extension Period(s): Number of Extension
Periods:
Final Maturity:
Indexed Note: X No Yes (see additional terms attached)
--- ---
Amortizing Note: X No Yes (see additional terms attached)
--- ---
Agent X Principal
Capacity: --- ---
The Notes are being offered at varying prices
---related to prevailing If as Principal:
market prices at the time of resale.
X The Notes are being offered at a fixed initial
---public offering price of 100% of Principal
Amount.
The Notes are being reoffered to dealers with a
---reallowance not to exceed % of the Commission
or fee.
Additional Terms: Notwithstanding anything to the contrary in the Prospectus or
Prospectus Supplement to which this Pricing Supplement relates, PNC Bank,
National Association (the "Trustee") or an agent of the Trustee will serve as
the Payment Agent for the Notes.
CREDIT SUISSE FIRST BOSTON
<PAGE>
File No. 333-30295
Filed Pursuant to Rule 424(b)(2)
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus dated July 9, 1997)
U.S. $150,000,000
[GRAPHIC OMITTED]
Medium-Term Notes, Series A
Due Nine Months or more from Date of Issue
------------------
The Pep Boys -- Manny, Moe & Jack (the "Company") may offer from time to
time its Medium-Term Notes, Series A (the "Notes") in an aggregate
principal amount not to exceed $150,000,000 (or, if any Notes are to be
Original Issue Discount Notes, Foreign Currency Notes or
Indexed Notes (as each such term is defined under "Description
of the Notes"), such principal amount as shall result in an
initial aggregate offering price equivalent to no more
than $150,000,000), subject to reduction as a result of the sale
of other Debt Securities. See "Description of the Notes" and
"Supplemental Plan of Distribution of the Notes".
Each Note will mature on a date nine months or more from its date of original
issuance ("Issue Date"), as selected by the initial purchaser and agreed to by
the Company which Stated Maturity may be subject to extension at the option of
the Company or the Holder thereof. See "Description of the Notes -- Extension
of Maturity" and "-- Renewable Notes".
Unless otherwise indicated in the applicable Pricing Supplement to this
Prospectus Supplement, interest on Fixed Rate Notes will be payable on each
February 15 and August 15 and at Maturity. Interest on Floating Rate Notes will
be payable on the dates specified therein and in the applicable Pricing
Supplement. Notes may be issued as Original Issue Discount Notes, including
Zero Coupon Notes, which will not bear interest prior to Maturity. Notes may be
issued as Amortizing Notes, with payments of principal and interest made in
equal installments over the life of the Note.
(Continued on next 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>
====================================================================================
Distributor's
Price to Commissions or Proceeds
Public(1) Discounts (2) to Company(2)(3)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note ...... 100% .125% -.750% 99.875% - 99.250%
- ------------------------------------------------------------------------------------
Total(4) ...... $150,000,000 $187,500--$1,125,000 $149,812,500--$148,875,000
====================================================================================
</TABLE>
(1) Unless otherwise indicated in the applicable Pricing Supplement, each Note
will be issued at 100% of its principal amount. If so indicated in the
applicable Pricing Supplement, Notes may be resold by the Distributor,
acting as principal, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices or
at a fixed public offering price.
(2) The Company will pay a commission (or grant a discount) to Credit Suisse
First Boston Corporation (the "Distributor") of .125% to .750% of the
principal amount of any Note, depending on its Stated Maturity, sold
through the Distributor, acting as agent (or sold to the Distributor as
principal in circumstances in which no other discount is agreed; provided,
however, that commissions (or discounts) with respect to Notes with a
Stated Maturity more than thirty years from date of issue will be
negotiated at the time of sale). See "Supplemental Plan of Distribution of
the Notes".
(3) Before deducting other expenses payable by the Company estimated at U.S.
$300,000, including expenses of the Distributor to be reimbursed by the
Company.
(4) Or the equivalent thereof in other currencies or currency units.
<PAGE>
------------------
The Notes are being offered on a continuing basis by the Company through
the Distributor, which has agreed to use reasonable efforts to solicit offers
to purchase the Notes. The Company also may sell Notes to the Distributor on
its own behalf at negotiated discounts for resale to investors and other
purchasers at varying prices related to prevailing market prices at the time of
resale or, if so agreed, at a fixed public offering price. Unless otherwise
specified in the applicable Pricing Supplement, any Note sold to the
Distributor as principal will be purchased by the Distributor at a price equal
to 100% of the principal amount thereof less a percentage equal to or less than
the commission applicable to an agency sale of a Note having an identical
Stated Maturity and may be resold by the Distributor. The Company reserves the
right to sell Notes directly on its own behalf. The Company also reserves the
right to withdraw, cancel or modify the offer made hereby without notice. The
Company or the Distributor may reject any offer to purchase Notes, in whole or
in part. The Notes will not be listed on any securities exchange, unless
otherwise indicated in the applicable Pricing Supplement, 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. See "Supplemental Plan of
Distribution of the Notes".
------------------
Credit Suisse First Boston
The date of this Prospectus Supplement is July 10, 1997.
<PAGE>
(continued from previous page)
If so indicated in the applicable Pricing Supplement to this Prospectus
Supplement, the Notes will be subject to optional redemption or will obligate
the Company to repay at the option of the Holder thereof. Unless otherwise
specified in an applicable Pricing Supplement, the Notes will not be subject to
any sinking fund or analogous provisions.
The interest rate or interest rate formula, if any, currency or currency
unit, issue price, Stated Maturity, any sinking fund, redemption or repayment
provisions, and other terms for each Note will be established by the Company at
the date of issuance of such Note and will be indicated in a Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes
will be represented by a permanent Global Security or Securities, registered in
the name of The Depository Trust Company, as Depositary, or a nominee of the
Depositary (a "Book-Entry Note"). Beneficial interests in Book-Entry Notes will
only be evidenced by, and transfers thereof will only be effected through,
records maintained by the Depositary and its participants. Except as described
under "Description of the Notes -- Book-Entry Notes", owners of beneficial
interests in a Book-Entry Note will not be entitled to receive physical
delivery of Notes in definitive form and will not be considered the Holders
thereof. Unless otherwise indicated in the applicable Pricing Supplement, the
Notes will be issued in fully registered form in denominations of $1,000 and
integral multiples of $1,000 or, in the case of Foreign Currency Notes, in such
minimum denominations not less than the equivalent of $1,000 and such other
denomination or denominations in excess thereof as shall be set forth in the
applicable Pricing Supplement. See "Description of the Notes -- Foreign
Currency Notes".
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION OF THE NOTES."
---------------------
S-2
<PAGE>
THE COMPANY
The Pep Boys -- Manny, Moe & Jack (together with its subsidiaries, the "Pep
Boys" or the "Company") is a leading automotive aftermarket retail and service
chain. The Company is engaged principally in the retail sale of automotive parts
and accessories, automotive maintenance and service and the installation of
parts. Pep Boys operates its business through its chain of 620 stores (as of May
3, 1997) located in 33 states, the District of Columbia and Puerto Rico, of
which 357 stores are owned and 263 stores are leased. Pep Boys believes it is
best positioned to gain market share and to increase shareholder value by
serving the "do-it-yourself," "do-it-for-me" and "buy-for-resale" customer
segments with the highest quality merchandise and service at the best value.
The Company operates approximately 11,995,000 gross square feet of retail
space, including an aggregate of 5,503 service bays. The Company's typical
Supercenter is a free standing, "one-stop" shopping automotive warehouse that
features approximately 12 state-of-the-art service bays. Each Supercenter
carries an average of approximately 27,000 stock-keeping units and serves the
automotive aftermarket needs of the "do-it-yourself", the "do-it-for-me" and
the "buy-for-resale" customer segments. Late in 1996, a new Supercenter
prototype was introduced that averages approximately 18,200 square feet. The
Company intends to continue to utilize this new prototype in 1997. While the
overall size of the Supercenter will be reduced, the number of stock-keeping
units offered will not decrease. Pep Boys believes that the operation of
service bays in its Supercenter stores differentiates it from most of its
competitors by providing its customers with the ability to purchase parts and
have them installed at the same location.
PARTS USA stores generally operate in certain urban locations that the
Company believes will be better served by stores with an extensive selection of
parts and accessories (an average of approximately 26,000 stock-
keeping units per store) but without tires or service bays. PARTS USA stores
primarily serve the automotive aftermarket needs of the "do-it-yourself" and
the "buy-for-resale" customer segments. New PARTS USA stores will average
approximately 8,100 square feet.
The Company is positioning certain Supercenters and PARTS USA stores to
deliver high quality parts to the professional installer. This will strengthen
the Company's position in the "buy-for-resale" category by allowing the Company
to further penetrate its markets while providing a valuable service to the
professional mechanic.
During fiscal years 1993, 1994 and 1995, the Company added a net of 29, 49
and 71 stores, respectively. In fiscal 1996, the Company added a net of 98
stores which includes 56 Supercenters and 44 PARTS USA stores, and closed two
older stores. As of May 3, 1997, the Company had 537 Supercenters and 83 PARTS
USA stores.
Although the Company's competition varies by geographical area, the
Company believes that it generally has a favorable competitive position in
terms of price, depth and breadth of merchandise, quality of personnel and
customer service. The Company believes that it provides customers with among
the lowest prices in each of its markets. Pep Boys employs an
everyday-low-price strategy which it believes provides its customers better
value and consistency on a day-to-day basis and improves inventory management.
In addition, Pep Boys believes that it carries among the largest selection of
parts, accessories and chemicals in the automotive aftermarket retail industry,
with approximately 27,000 SKUs per Supercenter. The Company also believes it
provides a high level of customer service through its well-trained and
knowledgeable employees. The Company's advertising strategy consists primarily
of television advertising and multi-page catalogs, supplemented with radio
advertising and various in-store promotions.
The Company utilizes electronic parts catalogs, enabling employees to
reference and access parts instantly while noting price, related items and
in-stock position. In addition, the Company monitors product sales by SKU
through its point-of-sale system which utilizes bar code slot scanning. This
system enables the Company to monitor its gross margins and set minimum and
maximum inventory levels for each store. The Company's centralized buying
system and a perpetual inventory-automatic replenishment system orders
additional inventory from one of the Company's warehouses when a store's
inventory on hand falls below the minimum level set for each SKU.
The Pep Boys -- Manny, Moe & Jack, a Pennsylvania corporation, was
incorporated in 1925. The Company's executive offices are located at 3111 West
Allegheny Avenue, Philadelphia, Pennsylvania 19132, telephone (215) 229-9000.
S-3
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data for the five years ended February 1, 1997
(except for "Number of retail outlets," "Ratio of earnings to fixed charges"
and "Total square footage") were derived from audited financial statements. The
financial statements for the three years ended February 1, 1997, which have
been audited by Deloitte & Touche LLP, independent auditors, are incorporated
by reference herein. The selected financial data for the 13-week periods ended
May 3, 1997 and May 4, 1996, respectively, have been derived from unaudited
financial statements and reflect, in the opinion of the Company, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the information for such periods. The results of operations in
the 13-week period ended May 3, 1997 are not necessarily indicative of the
operating results for the full year. The selected financial data should be read
in conjunction with the financial statements and other information contained in
the Company's Annual Report on Form 10-K for the year ended February 1, 1997,
the Company's Quarterly Report on Form 10-Q for the quarter ended May 3, 1997.
<TABLE>
<CAPTION>
13 Weeks Ended
----------------------------
May 3, 1997 May 4, 1996
------------- ------------
<S> <C> <C>
Statement of Earnings Data
Merchandise sales ......... $ 410,321 $ 364,250
Service revenue ............ 78,957 64,364
---------- ----------
Total revenues ............ 489,278 428,614
Gross profit from merchan-
dise sales 125,598 108,520
Gross profit from service
revenue ..................... 16,344 12,781
---------- ----------
Total gross profit ......... 141,942 121,301
Selling, general and admin-
istrative expenses 97,837 81,707
Operating profit ............ 44,105 39,594
Nonoperating income ......... 1,253 464
Interest expense ............ 8,908 8,128
Earnings before income
taxes and cumulative
effect of change in
accounting principle ...... 36,450 31,930
Income taxes ............... 13,304 11,814
Earnings before cumulative
effect of change in
accounting principle ...... 23,146 20,116
Cumulative effect of change
in accounting principle ... -- --
Net earnings ............... 23,146 20,116
Earnings per share before
cumulative effect of
change in accounting
principle .................. .37 .33
Cumulative effect of change
in accounting principle ... -- --
Net earnings per share ...... .37 .33
Balance Sheet Data
Working capital ............ $ 160,643 $ 147,263
Total assets ............... 1,850,979 1,510,090
Long-term debt (includes all
convertible debt) ......... 555,848 472,508
Stockholders' equity ...... 798,642 684,766
Other Statistics
Ratio of earnings to fixed
charges(1) ............... 3.8x 3.9x
Depreciation and amortiza-
tion $ 18,715 $ 15,310
Capital expenditures ...... $ 59,302 $ 32,413
Common shares outstand-
ing 63,203,031 62,237,087
Number of retail outlets ... 620 518
Total square footage ......... 11,995,000 10,416,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------------------
Feb. 1, 1997 Feb. 3, 1996 Jan. 28, 1995 Jan. 29, 1994 Jan. 30, 1993
-------------- -------------- --------------- --------------- --------------
(dollar amounts in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data
Merchandise sales ......... $1,554,757 $1,355,008 $1,211,536 $ 1,076,543 $ 1,008,191
Service revenue ............ 273,782 239,332 195,449 164,590 147,403
---------- ---------- ---------- ----------- -----------
Total revenues ............ 1,828,539 1,594,340 1,406,985 1,241,133 1,155,594
Gross profit from merchan-
dise sales 484,494 411,133 364,378 307,861 272,412
Gross profit from service
revenue ..................... 53,025 44,390 32,417 27,457 24,528
---------- ---------- ---------- ----------- -----------
Total gross profit ......... 537,519 455,523 396,795 335,318 296,940
Selling, general and admin-
istrative expenses 350,419 296,089 247,872 214,710 194,160
Operating profit ............ 187,100 159,434 148,923 120,608 102,780
Nonoperating income ......... 2,435 2,090 3,490 3,601 3,015
Interest expense ............ 30,306 32,072 25,931 19,701 20,180
Earnings before income
taxes and cumulative
effect of change in
accounting principle ...... 159,229 129,452 126,482 104,508 85,615
Income taxes ............... 58,405 47,958 46,474 38,996 31,036
Earnings before cumulative
effect of change in
accounting principle ...... 100,824 81,494 80,008 65,512 54,579
Cumulative effect of change
in accounting principle ... -- -- (4,300) -- --
Net earnings ............... 100,824 81,494 75,708 65,512 54,579
Earnings per share before
cumulative effect of
change in accounting
principle .................. 1.62 1.34 1.32 1.06 .90
Cumulative effect of change
in accounting principle ... -- -- (.07) -- --
Net earnings per share ...... 1.62 1.34 1.25 1.06 .90
Balance Sheet Data
Working capital ............ $ 70,691 $ 39,868 $ 121,858 $ 92,518 $ 104,622
Total assets ............... 1,818,365 1,500,008 1,291,019 1,078,518 967,813
Long-term debt (includes all
convertible debt) ......... 455,665 367,043 380,787 253,000 209,347
Stockholders' equity ...... 778,091 665,460 586,253 547,759 509,763
Other Statistics
Ratio of earnings to fixed
charges(1) ............... 4.7x 4.1x 4.7x 4.9x 4.3x
Depreciation and amortiza-
tion $ 65,757 $ 53,456 $ 44,402 $ 39,125 $ 36,674
Capital expenditures ...... $ 245,246 $ 205,913 $ 185,072 $ 135,165 $ 78,025
Common shares outstand-
ing 63,119,491 62,084,021 61,501,679 61,060,055 60,669,102
Number of retail outlets ... 604 506 435 386 357
Total square footage ......... 11,761,000 10,255,000 8,900,000 7,771,000 7,039,000
</TABLE>
- ------------
(1) Computed by dividing earnings by fixed charges. "Earnings" consist of
earnings before income taxes and cumulative effect of change in accounting
principle plus fixed charges (exclusive of capitalized interest costs).
"Fixed charges" consist of interest costs (including capitalized interest
costs) plus one-third of rental expense (which amount is considered
representative of the interest factor in rental expense).
S-4
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements the description of the general terms and conditions of Debt
Securities set forth under the heading "Description of Debt Securities" in the
Prospectus, to which description reference is hereby made. The terms and
conditions set forth herein will apply to each Note unless otherwise specified
in the applicable Pricing Supplement. Capitalized terms not defined under this
heading or in the Glossary contained in this Prospectus Supplement have the
meanings assigned to them in the Prospectus or the Indentures.
General
The Notes offered hereby will be issued under the Indentures referred to
in the accompanying Prospectus between the Company and PNC Bank, National
Association, as Trustee (the "Trustee"). The Notes constitute a single series
for purposes of the Indentures, limited to an aggregate principal amount not to
exceed $150,000,000 (or, if any Notes are to be Original Issue Discount Notes
or are to be denominated in one or more foreign currencies or currency units
("Foreign Currency Notes") or with amounts payable in respect of principal of
or any premium or interest on the Notes to be determined by reference to the
value, rate or price of one or more specified indices ("Indexed Notes"), such
principal amount as shall result in an aggregate initial offering price
equivalent to no more than $150,000,000). The foregoing limit may be increased
by the Company if in the future it determines that it may wish to sell
additional Notes. The aggregate principal amount of Notes offered hereby may be
reduced by an amount equal to the aggregate initial offering price of any other
Debt Securities (as defined in the accompanying Prospectus) sold by the
Company. See "Supplemental Plan of Distribution of the Notes". For a
description of the rights attaching to different series of Securities
(including the Notes) under the Indentures, see "Description of Debt
Securities" in the Prospectus.
The Stated Maturity of each Note will be any day nine months or more from
its Issue Date, as selected by the initial purchaser and agreed to by the
Company. The applicable Pricing Supplement will also indicate whether a Note is
subject to an optional extension beyond its Stated Maturity as described under
"--Extension of Maturity" and "--Renewable Notes" below.
The Notes will be issuable only in fully registered form and, unless
otherwise indicated in the applicable Pricing Supplement, only in denominations
of $1,000 and integral multiples of $1,000 or, in the case of Foreign Currency
Notes, in such minimum denomination not less than the equivalent of $1,000 and
such other denomination or denominations in excess thereof as shall be set
forth in the applicable Pricing Supplement. See "--Foreign Currency Notes"
below.
Unless specified otherwise in the applicable Pricing Supplement, Notes
will initially be represented by a Book-Entry Note. See "--Book-Entry Notes"
below.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of and any
premium and interest on the Notes will be made in U.S. dollars in the manner
indicated in the accompanying Prospectus and this Prospectus Supplement. If any
of the Notes are to be denominated in one or more currencies or currency units
other than U.S. dollars, additional information pertaining to the terms of such
Notes and other matters relevant to the Holders thereof will be described in
the applicable Pricing Supplement. See "--Foreign Currency Notes" below and
"Special Considerations Relating to Foreign Currency Notes and Indexed Notes".
In addition, Notes may be issued as Original Issue Discount Notes
(including Zero Coupon Notes), as Indexed Notes or as Amortizing Notes. See
"--Original Issue Discount Notes", "--Indexed Notes" and "--Amortizing Notes"
below.
Payments of principal of, and any premium and interest on, Book-Entry
Notes (except Zero Coupon Notes) will be made to the Depositary, or its
nominee, as the Holder thereof, in accordance with arrangements then in effect
between the Trustee and the Depositary. Unless otherwise indicated in an
applicable Pricing Supplement, payments of principal of, and any premium and
interest on, Certificated Notes denominated and payable in U.S. dollars will be
made in immediately available funds at the Corporate Trust Office of the
Trustee or at the office of an agent of the Trustee designated by the Company
in the Borough of Manhattan, The City of New York,
S-5
<PAGE>
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; except that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or by wire transfer to an account
maintained by such Holder with a bank located in the United States, provided
such Holder shall have provided in writing to the Trustee, on or prior to the
relevant Regular Record Date, appropriate payment instructions. Notwithstanding
the foregoing, the Holder of $10,000,000 or more in aggregate principal amount
of Notes denominated and payable in U.S. dollars and having the same Interest
Payment Date shall be entitled to receive such payments by wire transfer of
immediately available funds to an account maintained by such Holder with a bank
located in the United States, provided that the Holder shall have provided in
writing to the Trustee, on or prior to the relevant Regular Record Date,
appropriate payment instructions. With respect to payments on Foreign Currency
Notes, see "--Foreign Currency Notes" below.
Certificated Notes may be presented for registration of transfer or
exchange at the Corporate Trust Office of the Trustee or at the office of an
agent of the Trustee designated by the Company in the Borough of Manhattan, The
City of New York. No service charge will be made for any registration of
transfer or exchange of Certificated Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. With respect to registration of transfer and
exchange of Book-Entry Notes see "--Book-Entry Notes" below and "Description of
Debt Securities -- Global Securities" in the accompanying Prospectus.
Interest rates, interest rate bases and various other variable terms of
the Notes described herein are subject to change by the Company from time to
time, but no such change will affect any Note already issued or as to which an
offer to purchase has been accepted by the Company.
Interest
Each interest-bearing Note will bear interest from and including its Issue
Date or from and including the most recent Interest Payment Date with respect
to which interest on such Note (or any predecessor Note) has been paid or duly
provided for to but excluding, the relevant Interest Payment Date at the fixed
rate per annum, or at the rate per annum determined pursuant to the interest
rate formula, stated therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest payments, if
any, will be in the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including the date of issue, if no interest has
been paid with respect to such Note) to, but excluding, the applicable Interest
Payment Date or Maturity, as the case may be.
The Notes (including any Zero Coupon Note) may be issued with original
issue discount as defined for United States federal income tax purposes.
Holders of Notes issued with original issue discount may be required to include
amounts of accrued interest in gross income for federal income tax purposes in
advance of the receipt of the cash to which such income is attributable. See
"United States Taxation -- Original Issue Discount".
Interest, if any, will be payable in arrears on each Interest Payment Date
and at Maturity. Interest will be payable generally to the Person (which, in
the case of a Book-Entry Note, shall be the Depositary) in whose name a Note
(or any predecessor Note) is registered 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 (which, in the case
of a Book-Entry Note, shall be the Depositary) to whom principal shall be
payable. Unless otherwise indicated in the applicable Pricing Supplement, the
first payment of interest on any Note originally issued between a Regular
Record Date and an Interest Payment Date will be made on the next succeeding
Interest Payment Date following the Issue Date of such Note to the Holder of
record on the Regular Record Date with respect to such succeeding Interest
Payment Date. With respect to payments of interest on Book-Entry Notes, see
"--Book-Entry Notes" below.
Each interest-bearing Note will bear interest at either a fixed rate (a
"Fixed Rate Note") or a variable rate determined by reference to an interest
rate formula (a "Floating Rate Note"), which may be adjusted by adding or
subtracting the Spread and/or multiplying by the Spread Multiplier as indicated
in the applicable Pricing Supplement.
S-6
<PAGE>
Fixed Rate Notes
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Note. Unless
otherwise indicated in the applicable Pricing Supplement, the Interest Payment
Dates with respect to Fixed Rate Notes (other than Amortizing Notes) shall be
February 15 and August 15 of each year and at Maturity and the Regular Record
Dates for such Notes shall be the February 1 and August 1 next preceding the
relevant Interest Payment Dates. Unless otherwise indicated 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 Market Day, the related payment of principal, premium, if
any, or interest will be made on the next succeeding Market Day 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
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis for such Floating Rate Note. Such basis may be
determined by reference to one or more of the following: (a) the CD Rate, in
which case such Note will be a CD Rate Note, (b) the CMT Rate, in which case
such Note will be a CMT Rate Note, (c) the Commercial Paper Rate, in which case
such Note will be a Commercial Paper Rate Note, (d) the Federal Funds Rate, in
which case such Note will be a Federal Funds Rate Note, (e) LIBOR, in which
case such Note will be a LIBOR Note, (f) the Prime Rate, in which case such
Note will be a Prime Rate Note, (g) the Treasury Rate, in which case such Note
will be a Treasury Rate Note, or (h) such other interest rate basis or formula
as may be agreed to between the Company and the purchaser and set forth in the
applicable Pricing Supplement. In addition, a Floating Rate Note may bear
interest at the lowest or highest or average of two or more interest rate
formulae. The applicable Pricing Supplement for a Floating Rate Note also will
specify the Spread and/or Spread Multiplier, if any, and the maximum or minimum
interest rate limitation, if any, applicable to each Note. In addition, such
Pricing Supplement will define or particularize for each Floating Rate Note the
following terms, if applicable: Calculation Agent (which may be the Trustee or
a Distributor), Calculation Date, Initial Interest Rate, Interest Payment
Dates, Regular Record Dates, Index Maturity, Interest Determination Dates and
Interest Reset Dates with respect to such Note. See "Glossary" for definitions
of certain of the foregoing terms.
The rate of interest on a Floating Rate Note in effect on any day will be
(a) if such day is an Interest Reset Date with respect to such Floating Rate
Note, the interest rate on such Floating Rate Note determined as of the
Interest Determination Date pertaining to such Interest Reset Date, or (b) if
such day is not an Interest Reset Date with respect to such Floating Rate Note,
the interest rate on such Floating Rate Note determined as of the Interest
Determination Date pertaining to the immediately preceding Interest Reset Date
with respect to such Floating Rate Note; provided, however, that the interest
rate in effect from the Issue Date of a Floating Rate Note (or that of a
predecessor Note) to but excluding the first Interest Reset Date with respect
to such Floating Rate Note will be the Initial Interest Rate (as set forth in
the applicable Pricing Supplement). Subject to applicable provisions of law and
except as described herein, the rate of interest on a Floating Rate Note
beginning on any Interest Reset Date with respect thereto will be the rate of
interest determined by the Calculation Agent as of the Interest Determination
Date pertaining to such Interest Reset Date in accordance with the applicable
provisions described below.
The Interest Reset Date for each Floating Rate Note will be daily, weekly,
monthly, quarterly, semi-annually or annually, as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Reset Date will be, in the case of Floating Rate Notes
which reset daily, each Market Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) which reset weekly, the Wednesday of each week; in
the case of Treasury Rate Notes which reset weekly, except as provided in the
following paragraph, the Tuesday of each week; in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes which reset
semi-annually, the third Wednesday of two months of each year, as indicated in
the applicable Pricing Supplement; and in the case of Floating Rate
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Notes which reset annually, the third Wednesday of one month of each year, as
indicated in the applicable Pricing Supplement. If any Interest Reset Date for
any Floating Rate Note would otherwise be a day that is not a Market Day with
respect to such Note, such Interest Reset Date shall be the next succeeding
Market Day with respect to such Note, except that if such Note is a LIBOR Note
and the next succeeding Market Day falls in the next succeeding calendar month,
such Interest Reset Date shall be the immediately preceding Market Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
CD Rate Note (the "CD Rate Interest Determination Date"), a CMT Rate Note (the
"CMT Rate Interest Determination Date"), a Commercial Paper Rate Note (the
"Commercial Paper Interest Determination Date"), a Federal Funds Rate Note (the
"Federal Funds Interest Determination Date"), or a Prime Rate Note (the "Prime
Rate Interest Determination Date") will be the second Market Day preceding the
Interest Reset Date with respect to such Note. The Interest Determination Date
pertaining to an Interest Reset Date for a LIBOR Note (the "LIBOR Interest
Determination Date") will be the second London Business Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note (the "Treasury Interest Determination
Date") will be the day on which Treasury bills are auctioned for the week in
which such Interest Reset Date falls, or if no auction is held for such week,
the Monday of such week (or if Monday is a legal holiday, the next succeeding
Market Day) and the Interest Reset Date will be the Market Day immediately
following such Treasury Interest Determination Date. Treasury bills are usually
sold at auction on Monday of each week, unless that day is a legal holiday, in
which case the auction is usually held on the following Tuesday, except that
such auction may be held on the preceding Friday. If an auction for such week
is held on Monday or the preceding Friday, such Monday or preceding Friday
shall be the Treasury Interest Determination Date for such week, and the
Interest Reset Date for such week shall be the Tuesday of such week (or, if
such Tuesday is not a Market Day, the next succeeding Market Day). If the
auction for such week is held on any day of such week other than Monday, then
such day shall be the Treasury Interest Determination Date and the Interest
Reset Date for such week shall be the next succeeding Market Day.
A Floating Rate Note may have either or both of the following: (a) a
maximum numerical interest rate limitation, or ceiling, on the rate of interest
which may accrue during any interest period; and (b) a minimum numerical
interest rate limitation, or floor, on the rate of interest which may accrue
during any interest period. In addition to any maximum interest rate which may
be applicable to any Floating Rate Note, the interest rate on such Floating
Rate Note will in no event be higher than the maximum rate permitted by New
York law, as the same may be modified by United States law of general
application. Under present New York law the maximum rate of interest, with
certain exceptions, is 25% per annum on a simple interest basis. The limit may
not apply to Notes in which $2,500,000 or more has been invested.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, the Interest Payment Date will be, in the case of Floating
Rate Notes which reset daily, weekly or monthly, the third Wednesday of each
month or on the third Wednesday of March, June, September and December of each
year (as indicated in the applicable Pricing Supplement); in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December of each year; in the case of Floating Rate Notes which
reset semi-annually, the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of the month specified in
the applicable Pricing Supplement. If, pursuant to the preceding sentence, an
Interest Payment Date with respect to any Floating Rate Note (other than an
Interest Payment Date at Maturity) would otherwise be a day that is not a
Market Day with respect to such Note, such Interest Payment Date shall be the
next succeeding Market Day with respect to such Note, except that if such Note
is a LIBOR Note and the next succeeding Market Day falls in the next succeeding
calendar month, such Interest Payment Date shall be the immediately preceding
Market Day. If the Maturity of a Floating Rate Note falls on a day that is not
a Market Day, the payment of principal, premium, if any, and interest will be
made on the next succeeding Market Day, and no interest on such payment shall
accrue from and after such Maturity. Unless otherwise indicated in the
applicable Pricing Supplement, the Regular Record Date with respect to Floating
Rate Notes shall be the date 15 calendar days prior to each Interest Payment
Date, whether or not such date shall be a Market Day.
Unless otherwise specified in the applicable Pricing Supplement, the
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, is
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calculated by multiplying the face amount of such Floating Rate Note by an
accrued interest factor. Such accrued interest factor is computed by adding the
interest factor calculated for each day in such period 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 date for which accrued interest
is being calculated. Unless otherwise specified in the Note and the applicable
Pricing Supplement, the interest factor for each such day is computed by
dividing the interest rate applicable to such date by 360 (or, in the case of
Treasury Rate Notes or CMT Rate Notes, by the actual number of days in the
year). The interest factor for Notes for which two or more interest rate
formulae are applicable will be calculated in each period in the same manner as
if only the lowest, highest or average of, as the case may be, such interest
rate formulae applied.
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, if
necessary, 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) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544)
being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or
resulting from such calculation on Floating Rate Notes will be rounded to the
nearest cent or, in the case of Foreign Currency Notes, the nearest unit (with
one-half cent or five one-thousandths of a unit being rounded upwards).
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective as of the next Interest Reset Date
for such Floating Rate Note. All determinations and calculations made by the
Calculation Agent will, absent manifest error, be conclusive and binding on the
Holders and the Company.
CD Rate Notes. Each CD Rate Note will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified on the face of such CD Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any 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 in H.15(519) under
the heading "CDs (Secondary Market)", or any successor publication or heading.
In the event that such rate is not published prior to 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CD Rate Interest Determination
Date, then the CD Rate shall be the rate on such CD Rate Interest Determination
Date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published in Composite Quotations under
the heading "Certificates of Deposit", or any successor publication or heading.
If by 3:00 P.M., New York City time, on such Calculation Date such rate is not
yet published in either H.15(519) or Composite Quotations (or in any successor
publications), the CD Rate for that CD Interest Determination Date shall be
calculated by the Calculation Agent and shall be the arithmetic mean of the
secondary market offered rates, as of 10:00 A.M., New York City time, on that
CD Rate Interest Deter mination Date, of three leading nonbank dealers of
negotiable U.S. dollar certificates of deposit in The City of New York selected
by the Calculation Agent (which may include the Distributor or its affiliates)
for negotiable certificates of deposit of major United States money market
banks with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement in a denomination of $5,000,000; provided,
however, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the CD Rate 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)
specified in such CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT
Rate" means, with respect to any CMT Rate Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption ". . . Treasury
Constant Maturities . . . Federal Reserve Board Release H.15 . . . Mondays
Approximately 3:45 P.M.", or any successor caption, under the column for the
Designated CMT Maturity Index for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. In the event such rate is no longer displayed on the
relevant page, or is not displayed prior to 3:00 P.M., New York City time, on
the related Calcu-
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lation 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) or any successor publication. If
such rate is no longer published, or is not published by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate 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) or any successor publication. If such
information is not provided by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for the CMT Rate Interest Determination
Date will be calculated by the Calculation Agent and will be a yield to
maturity, based on the arithmetic mean of the secondary market closing offer
side prices as of approximately 3:30 P.M., New York City time, on the CMT Rate
Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include the Distributor
or its 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 $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 third 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.
Commercial Paper Rate Notes. Each Commercial Paper Rate Note will bear
interest at the interest rate (calculated with reference to the Commercial
Paper Rate and the Spread and/or Spread Multiplier, if any) specified on the
face of such Commercial Paper Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate on such date for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement as pub lished in H.15(519) under the
heading "Commercial Paper", or any successor publication or heading. In the
event that such rate is not published prior to 3:00 P.M., New York City time,
on the Calculation Date pertaining to such Commercial Paper Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such Commercial Paper Interest Determination Date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published in Composite Quotations under the heading "Commercial
Paper", or any successor publication or heading. If by 3:00 P.M., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations (or in any successor publications), the
Commercial Paper Rate for that Commercial Paper Interest Determination Date
shall be the Money Market Yield of the arithmetic mean, as calculated by the
Calculation Agent on such Calculation Date, of the offered rates, as of 11:00
A.M., New York City time, on that Commercial Paper Interest Determination Date,
of three leading dealers of commercial paper in The City of New
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York selected by the Calculation Agent (which may include the Distributor or
its affiliates) for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement placed for an industrial issuer whose bond rating
is "AA", or the equivalent, from a nationally recognized rating agency;
provided, however, that if fewer than three dealers selected as aforesaid by
the Calculation Agent are quoting as mentioned in this sentence, the Commercial
Paper Rate will be the Commercial Paper Rate in effect on such Commercial Paper
Interest Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360 X 100
-------
360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
Federal Funds Rate Notes. Each Federal Funds Rate Note will bear interest
at the interest rate (calculated with reference to the Federal Funds Rate and
the Spread and/or Spread Multiplier, if any) specified on the face of such
Federal Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds as published in H.15(519) under
the heading "Federal Funds (Effective)", or any successor publication or
heading. In the event that such rate is not published prior to 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Federal Funds
Interest Determination Date, then the Federal Funds Rate will be the rate on
such Federal Funds Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate", or any successor
publication or heading. If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations (or in any successor publications), the Federal Funds Rate
for that Federal Funds Interest Determination Date shall be the arithmetic
mean, as calculated by the Calculation Agent on such Calculation Date, of the
rates for the last transaction in overnight Federal Funds arranged by three
leading brokers of Federal Funds transactions in The City of New York (which
may include the Distributor or its 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 fewer than three
brokers selected as aforesaid by the Calculation Agent are quoting as mentioned
in this sentence, the Federal Funds Rate will be the Federal Funds Rate in
effect on such Federal Funds Interest Determination Date.
LIBOR Notes. Each LIBOR Note will bear interest at the interest rate
(calculated with reference to LIBOR and the Spread and/or Spread Multiplier, if
any) specified on the face of such LIBOR Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined in accordance with the following provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will be
either (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the Designated
LIBOR Page by its terms provides only for a single rate in which case such
single rate shall be used) for deposits in the Index Currency having the
Index Maturity specified in such Pricing Supplement, commencing on the
applicable Interest Reset Date, that appear (or, if only a single rate is
required as aforesaid, appears) on the Designated LIBOR Page as of 11:00
A.M., London time, on such LIBOR Interest Determination Date, or (b) if
"LIBOR Telerate" is specified in the applicable Pricing Supplement or if
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Pricing Supplement as the method for calculating LIBOR, the rate for
deposits in the Index Currency having the Index Maturity specified in such
Pricing Supplement, commencing on such Interest Reset Date, that appears on
the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two such offered rates so
appear, or if no such rate so appears, as applicable, LIBOR on such LIBOR
Interest Determination Date will be determined in accordance with the
provisions described in clause (ii) below.
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(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in clause (i) above, the Calculation
Agent will request the principal London office of each of four major
reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity specified in the applicable Pricing Supplement, commencing on the
applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time, If
at least two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., in the applicable Principal Financial Center,
on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
specified in the applicable Pricing Supplement and in a principal amount
that is representative for a single transaction in such Index Currency in
such market at such time; provided, however, that if the banks so selected
by the Calculation Agent are not quoting as mentioned in this sentence,
LIBOR determined as of such LIBOR Interest Determination Date will be LIBOR
in effect on such LIBOR Interest Determination Date.
Prime Rate Notes. Each Prime Rate Note will bear interest at the interest
rate (calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified on the face of such Prime Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Note as of any Prime Rate Interest
Determination Date, the rate set forth on such date in H.15(519) under the
heading "Bank Prime Loan", or any successor publication or heading. In the
event that such rate is not published prior to 3:00 P.M., New York City time,
on such Prime Rate Interest Determination Date, then the Prime Rate will be
determined by the Calculation Agent and will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the Reuters
Screen USPRIME1 Page, or any successor screen or page, as such bank's prime
rate or base lending rate as in effect for that Prime Rate Interest
Determination Date. If fewer than four such rates appear on the Reuters Screen
USPRIME1 Page for the Prime Rate Interest Determination Date, the Prime Rate
will be the arithmetic mean of the announced 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 at least two of
three major money center banks in The City of New York selected by the
Calculation Agent. If fewer than two such quotations are provided, the Prime
Rate shall be determined on the basis of the rates furnished in The City of New
York by the appropriate number of substitute banks or trust companies organized
and doing business under the laws of the United States, or any state thereof,
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 selected as aforesaid are not quoting as mentioned in this sentence, the
Prime Rate will be the Prime Rate then in effect on such Prime Rate Interest
Determination Date.
Treasury Rate Notes. Each Treasury Rate Note will bear interest at the
interest rate (calculated with reference to the Treasury Rate and the Spread
and/or Spread Multiplier, if any) specified on the face of such Treasury Rate
Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
from the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Pricing Supplement as published in H.15(519) under the heading, "U.S.
Government Securities/Treasury Bills -- Auction Average (Investment)", or any
successor publication or heading, or, if not so published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Treasury 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) for such auction as otherwise announced by the United States Department
of the Treasury. In the event
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that the results of the auction of Treasury bills having the Index Maturity
specified in the applicable Pricing Supplement are not published or reported as
provided above by 3:00 P.M., New York City time, on such date, or if no such
auction is held in a particular week, then the Treasury Rate shall be the rate
as published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills/Secondary Market", or any successor publication or
heading. In the event that such rate is not so published by 3:00 P.M., New York
City time, on the relevant Calculation 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, as calculated by the
Calculation Agent on such Calculation Date, of the secondary market bid rates
as of approximately 3:30 P.M., New York City time, on such Treasury Interest
Determination Date, of three leading primary United States government
securities dealers in The City of New York selected by the Calculation Agent
(which may include the Distributor or its affiliates), for the issue of
Treasury bills with a remaining maturity closest to the specified Index
Maturity; provided, however, that if fewer than three of the dealers selected
as aforesaid by the Calculation Agent are quoting as mentioned in this
sentence, the Treasury Rate will be the Treasury Rate in effect on such
Treasury Interest Determination Date.
Original Issue Discount Notes
Notes may be issued as Original Issue Discount Notes (including Notes
("Zero Coupon Notes") with respect to which no interest is payable prior to
Maturity). An Original Issue Discount Note is a Note which is issued at a price
lower than the principal amount thereof and which provides that upon redemption
or acceleration of the Maturity thereof an amount less than the principal
thereof shall become due and payable. In the event of redemption or
acceleration of the Maturity of an Original Issue Discount Note, the amount
payable to the Holder of such Note upon such redemption or acceleration will be
determined in accordance with the terms of the Note, but will be an amount less
than the amount payable at the Stated Maturity of such Note. In addition, a
Note issued at a discount may, for United States federal income tax purposes,
be considered an original issue discount note, regardless of the amount payable
upon redemption or acceleration of Maturity of such Note. See "United States
Taxation -- Original Issue Discount".
Foreign Currency Notes
Notes may be issued as Foreign Currency Notes, with the principal and any
premium and interest documented and payable in a foreign currency or currency
unit (the "Specified Currency"). Unless otherwise indicated in the applicable
Pricing Supplement, a Foreign Currency Note will not be sold in, or to a
resident of, the country of the Specified Currency in which such Note is
denominated.
The Company is obligated to make payments of principal of and any premium
and interest on Foreign Currency Notes in the Specified Currency (or, if such
Specified Currency is not at the time of such payment legal tender in the
country which issued such Specified Currency for the payment of public and
private debts, in such other coin or currency as at the time of such payment is
legal tender for the payment of such debts). Any such amounts paid by the
Company will, unless otherwise specified in the applicable Pricing Supplement,
be converted by the Exchange Rate Agent to U.S. dollars for payment to Holders.
Principal of, and any premium and interest on, a Foreign Currency Note paid in
U.S. dollars will be paid in the manner described herein, in the accompanying
Prospectus and in the applicable Pricing Supplement with respect to Notes
denominated and payable in U.S. dollars.
Unless otherwise specified in the applicable Pricing Supplement, any U.S.
dollar amount to be received by a Holder of a Foreign Currency Note will be
based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent at approximately 11:00 A.M., New York City time, on the
second Market Day preceding the applicable payment date from three recognized
foreign exchange dealers (one of which may be the Exchange Rate Agent or the
Distributor) selected by the Exchange Rate Agent and approved by the Company
for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to all Holders of Foreign Currency Notes scheduled
to receive U.S. dollar payments and at which the applicable dealer commits to
execute a contract. If three such bid quotations are not available, payments
will be made in the Specified Currency. All currency exchange costs will be
borne by the Holder of the Foreign Currency Note by deductions from such
payments.
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Unless otherwise specified in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payments of principal of and
any premium and interest on such Note in the Specified Currency (a "Specified
Currency Payment Election") by delivery of a written request for such payment
(including, in the case of an election with respect to payments at Maturity,
appropriate wire transfer instructions) to the Corporate Trust Office of the
Trustee or at the office of an agent of the Trustee designated by the Company
in the Borough of Manhattan, The City of New York, on or prior to the relevant
Regular Record Date or the fifteenth day prior to Maturity, as the case may be.
Such request may be in writing (mailed or hand delivered) or by cable, telex or
other form of facsimile transmission. A Holder of a Foreign Currency Note may
elect to receive payment in the Specified Currency for all payments of
principal and any premium and interest and need not file a separate election
for each payment. Such election will remain in effect until revoked by written
notice to the Trustee, but written notice of any such revocation must be
received by the Trustee on or prior to the relevant Regular Record Date or the
fifteenth day prior to Maturity, as the case may be.
Interest on a Foreign Currency Note paid in the Specified Currency will be
paid by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register. All checks payable in a
Specified Currency will be drawn on a bank located outside the United States.
Payments at Maturity of principal of and any premium and interest on Foreign
Currency Notes in the Specified Currency will be made by wire transfer to an
account with a bank located in the country of the Specified Currency (or, in
the case of European Currency Units ("ECUs"), Brussels), as shall have been
designated at least fifteen days prior to Maturity by the Holder, provided that
the Note is presented at the Corporate Trust Office of the Trustee or at the
office of an agent of the Trustee designated by the Company in the Borough of
Manhattan, The City of New York, in time for such Paying Agent to make such
payments in such funds in accordance with its normal procedures.
Holders of Foreign Currency Notes whose Notes are to be held in the name
of a broker or nominee should contact such broker or nominee to determine
whether and how to make a Specified Currency Payment Election. In general,
unless otherwise specified in the applicable Pricing Supplement, a beneficial
owner of Book-Entry Notes denominated in a Specified Currency electing to
receive payments of principal or any premium or interest in the Specified
Currency must notify the participant through which its interest is held on or
prior to the applicable Regular Record Date, in the case of a payment of
interest, and on or prior to the fifteenth day prior to Maturity, in the case
of a payment of principal or premium, of such beneficial owner's election to
receive all or a portion of such payment in a Specified Currency. Such
participant must notify the Depositary of such election on or prior to the
third Business Day after such Regular Record Date.
If a Specified Currency is not available for the payment of principal or
any premium or interest with respect to a Foreign Currency Note 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 Foreign Currency Notes by making such payment in U.S. dollars on the basis
of the Market Exchange Rate on the second Market 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 "Foreign Currency Risks -- Exchange Rates
and Exchange Controls" in the accompanying Prospectus. Any payment made under
such circumstances in U.S. dollars where the required payment is in other than
U.S. dollars will not constitute an Event of Default under the Indentures.
If payment in respect of a Note is required to be made in any currency
unit (e.g., ECU), and such currency unit is unavailable due to the imposition
of exchange controls or other circumstances beyond the Company's control, then
the Company will be entitled, but not required, to make any payments in respect
of such Note in U.S. dollars until such currency unit is again available. The
amount of each payment in U.S. dollars shall be computed on the basis of the
equivalent of the currency unit in U.S. dollars, which shall be determined by
the Company or its agent on the following basis. The component currencies of
the currency unit for the purpose (the "Component Currencies" or, individually,
a "Component Currency") shall be the currency amounts that were components of
the currency unit as of the last day on which the currency unit was used. The
equivalent of the currency unit in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Component Currencies. The U.S.
dollar equivalent of each of the Component Currencies shall be determined by
the Company or such agent on the basis of the most recently available Market
Exchange Rate for each such Component Currency, or as otherwise indicated in
the applicable Pricing Supplement.
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If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by the Company or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the Holders of Notes.
The authorized denominations of Foreign Currency Notes will be indicated
in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
purchasers are required to pay for Foreign Currency Notes in the currency or
currency unit specified in the applicable Pricing Supplement (the "Specified
Currency"). At the present time 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 banks do not generally offer non-U.S. dollar checking
or savings account facilities in the United States. If requested on or prior to
the fifth Market Day preceding the date of delivery of the Notes, or by such
other day as determined by Credit Suisse First Boston Corporation is prepared
to arrange for the conversion of U.S. dollars into the Specified Currency to
enable the purchasers to pay for the Notes. Each such conversion will be made
by Credit Suisse First Boston Corporation on such terms and subject to such
conditions, limitations and charges as Credit Suisse First Boston Corporation
may from time to time establish in accordance with its regular foreign exchange
practices. All costs of exchange will be borne by the purchasers of the Foreign
Currency Notes.
Indexed Notes
Notes may be issued as Indexed Notes, with the amount payable at Maturity,
the amount of interest payable on an Interest Payment Date, or both, to be
determined by reference to currencies, currency units, commodity prices,
financial or non-financial indices or other factors, as indicated in the
applicable Pricing Supplement. Holders of Indexed Notes may receive a principal
amount at Maturity that is greater than or less than the face amount of such
Notes depending upon the fluctuation of the relative value, rate or price of
the specified index. Specific information pertaining to the method for
determining the principal amount payable at Maturity, historical information
with respect to the specified indexed item or items and the face amount of the
Indexed Note and any additional tax considerations will be described in the
applicable Pricing Supplement.
Amortizing Notes
The Company may from time to time offer Amortizing Notes, with payments of
principal and interest made in equal installments over the life of the Note.
Payments of principal of and interest on Amortizing Notes will be made in equal
installments at such periodic intervals as are specified in the applicable
Pricing Supplement and at Maturity. A table setting forth payment information
in respect of each Amortizing Note will be included in the applicable Pricing
Supplement and set forth in such 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 conditions of any issue of
Amortizing Notes will be provided in the applicable Pricing Supplement.
Extension of Maturity
An applicable Pricing Supplement will indicate whether the Company has the
option to extend the Stated Maturity of such Note (other than an Amortizing
Note) for one or more periods up to but not beyond a date set forth in such
Pricing Supplement. If the Company has such option with respect to any such
Note, the procedures relating thereto will be as set forth in the applicable
Pricing Supplement.
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Renewable Notes
An applicable Pricing Supplement will indicate whether such Note (other
than an Amortizing Note) will mature unless the term of all or any portion of
such Note is renewed in accordance with the procedures described in such
Pricing Supplement.
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 thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
Sinking Fund
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to any sinking fund or analogous provisions. If the Company
will be obligated to redeem or repurchase Notes pursuant to any such provision,
the applicable Pricing Supplement will indicate the period or periods within
which and the price or prices at which the applicable Notes will be redeemed or
repurchased, in whole or in part, pursuant to such obligation and the other
detailed terms and provisions of such obligation.
Redemption (Option of Company)
Except in the case of Notes which shall be redeemable as described under
"Renewable Notes", if one or more Redemption Dates (or range of Redemption
Dates) is specified in the applicable Pricing Supplement, the Notes described
therein will be subject to redemption, in whole or in part, as specified in
such Pricing Supplement, on any such date (or during any such range of dates)
at the option of the Company upon not less than 30 days' or more than 60 days'
notice, at the Redemption Price or Prices specified in the applicable Pricing
Supplement, together with interest accrued to the Redemption Date; provided,
however, that installments of interest whose Stated Maturity is on or prior to
the date fixed for redemption will be payable to the Holder of such Note, or
one or more predecessor Notes, registered as such at the close of business on
the relevant Record Date. If less than the entire principal amount of a Note is
redeemed, the principal amount of such Note that remains outstanding after such
redemption shall be an authorized denomination (which shall not be less than
the minimum authorized denomination) for the Notes. If less than all Notes of
like tenor are to be redeemed, the Notes to be redeemed shall be selected by
the Trustee by such method as the Trustee shall deem fair and appropriate.
Repayment (Option of Holder)
Except in the case of Notes which may be extended by the Company, which
shall be repayable at the option of the Company as described under "Extension
of Maturity", if one or more Repayment Dates (or range of such dates) is
specified in the applicable Pricing Supplement, the Notes described therein
will be subject to repayment, in whole, or from time to time in part, as
specified in such Pricing Supplement, on any such date (or during any such
range) or, if such date is not a Market Day, on the first Market Day following
such date, at the election of the Holder at the Repayment Price determined as
set forth in the applicable Pricing Supplement, together with interest accrued
to the Repayment Date; provided, however, that interest installments of
interest whose Stated Maturity is on or prior to the date fixed for repayment
will be payable to the Holder of such Note, or one or more predecessor Notes,
registered as such at the close of business on the relevant Record Date.
Unless otherwise specified in the applicable Pricing Supplement, in order
to exercise such an election, a Holder must, unless a different notice period
is specified in the applicable Pricing Supplement, give to the Trustee not less
than 30 days' nor more than 60 days' notice. Unless otherwise specified in the
applicable Pricing Supplement, any such notice shall consist of either (i) the
Note with the form entitled "Option to Elect Repayment" duly completed, or (ii)
a telegram, facsimile transmission or a letter from a member of a national
securities exchange, or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company in the United States, setting forth the
name of the Holder, the principal amount of the Note, the principal amount of
the Note to be repaid, the certificate number or a description of the tenor and
terms of the Note, a statement that the option to elect repayment is being
exercised thereby and a guarantee that such Note, together
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with the duly completed form entitled "Option to Elect Repayment", will be
received by the Trustee not later than the fifth Business Day after the date of
such telegram, facsimile transmission or letter; provided, however, that such
telegram, facsimile transmission or letter shall only be effective if such Note
and such form, duly completed, are received by the Trustee by such fifth
Business Day.
Unless otherwise specified in the applicable Pricing Supplement, exercise
of a repayment option by a Holder will be irrevocable. Such option may be
exercised with respect to less than the entire principal amount of a Note,
provided that the portion remaining Outstanding after such repayment is an
authorized denomination.
If a Note is represented by a Book-Entry Note the Depositary's nominee
will be the Holder thereof entitled to exercise a right to repayment. In order
to ensure that the Depositary's nominee will timely exercise a right to
repayment with respect to a particular Note, the beneficial owner of an
interest in such Note must instruct the broker or other direct or indirect
participant through which it holds an interest in such Note to notify the
Depositary of its desire to exercise a right to repayment. Different firms have
different cut-off times for accepting instructions from their customers and,
accordingly, each such beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a
Book-Entry Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary.
While the Book-Entry Notes are represented by the Global Securities held
by or on behalf of the Depositary, and registered in the name of the Depositary
or the Depositary's nominee, the option for repayment may be exercised by the
applicable participant that has an account with the Depositary, on behalf of
the beneficial owners of the Global Security or Securities representing such
Book-Entry Notes, by delivering a written notice substantially similar to the
above-mentioned forms to the Trustee at its Corporate Trust Office (or such
other address of which the Company shall from time to time notify the Holders),
not more than 60 days nor less than 30 days prior to the date of repayment.
Notices of elections from participants on behalf of beneficial owners of the
Global Security or Securities representing such Book-Entry Notes to exercise
their option to have such Book-Entry Notes repaid must be received by the
Trustee by 5:00 P.M., New York City time, on the last day for giving such
notice. In order to ensure that a notice is received by the Trustee on a
particular day, the beneficial owner of the Global Security or Securities
representing such Book- Entry Notes must so direct the applicable participant
before such participant's deadline for accepting instructions for that day.
Different firms may have different deadlines for accepting instructions from
the customers. Accordingly, beneficial owners of the Global Security or
Securities representing Book-Entry Notes should consult the participants
through which they own their interest therein for the respective deadlines for
such participants. All notices shall be executed by a duly authorized officer
of such participant (with signature guaranteed) and shall be irrevocable. In
addition, beneficial owners of the Global Security or Securities representing
Book-Entry Notes shall effect delivery at the time such notices of election are
given to the Depositary by causing the participant to transfer such beneficial
owner's interest in the Global Security or Securities representing such
Book-Entry Notes, on the Depositary's records, to the Trustee. See "Book-Entry
Notes".
Repurchase
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may, at its discretion, be
held, resold or surrendered to the Trustee for cancellation.
Book-Entry Notes
Upon issuance, all Book-Entry Notes of like tenor and having the same
Issue Date will be represented by one or more fully registered securities in
permanent global form (each a "Global Note"). See "Description of Securities --
Global Securities" in the Prospectus. Each Global Note representing Book-Entry
Notes will be deposited with, or on behalf of, The Depository Trust Company, as
Depositary (the "Depositary"), located in the Borough of Manhattan, The City of
New York, and will be registered in the name of the Depositary or a nominee of
the Depositary.
Ownership of beneficial interests in a Global Note representing Book-Entry
Notes will be limited to institutions that have accounts with the Depositary or
its nominee ("participants") or persons that may hold interests through
participants. The Company has been advised by the Depositary that upon receipt
of any payment of principal of or any premium or interest in respect of a
Global Note, the Depositary will credit, on its book-entry
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registration and transfer system, accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Note as shown on the records of the Depositary. Ownership
of beneficial interests by participants in such a Global Note will be evidenced
only by, and the transfer of that ownership interest will be effected only
through, records maintained by the Depositary or its nominee for such Global
Note. Ownership of beneficial interests in such Global Note by persons that
hold through participants will be evidenced only by, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may impair the ability to transfer beneficial
interests to such Global Note.
Payment of principal of and any premium and interest on Book-Entry Notes
represented by any Global Note registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and Holder of the Global Note representing
such Book-Entry Notes. Payments by participants to owners of beneficial
interests in a 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 registered in "street name", and
will be the sole responsibility of such participants. Neither the Company, the
Trustee, nor any agent of the Company or the Trustee will have any
responsibility or liability for any aspect of the Depositary's records or any
participant's records relating to or payments made on account of beneficial
ownership interests in a Global Note representing such Book-Entry Notes or for
maintaining, supervising or reviewing any of the Depositary's records or any
participant's records relating to such beneficial ownership interests.
No Global Note described above may be transferred except as a whole by the
Depositary for such permanent global Note to a nominee of the Depositary or by
a nominee of the Depositary to the Depositary or another nominee of the
Depositary.
No Global Note may be exchanged in whole or in part for Notes registered,
and no transfer of a Global Note in whole or in part may be registered, in the
name of any Person other than the Depositary for such Global Note or any
nominee of such Depositary unless (i) the Depositary has notified the Company
that it is unwilling or unable to continue as Depositary for such Global Note
or has ceased to be qualified to act as such as required by the Indentures,
(ii) there shall have occurred and be continuing an Event of Default with
respect to the Notes represented by such Global Note or (iii) there shall exist
such circumstances, if any, in addition to or in lieu of those described above
as may be described in the applicable Prospectus Supplement.
Any Global Note that is exchangeable pursuant to the preceding sentence
shall be exchangeable in whole for definitive Notes in registered form of any
authorized denomination and of like tenor and aggregate principal amount. Such
Notes shall be registered in the name or names of such person or persons as the
Depositary shall instruct the Trustee. It is expected that such instructions
may be based upon directions received by the Depositary from its participants
with respect to ownership of beneficial interests in such Global Note.
As long as the Depositary, or its nominee, is the registered Holder of a
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Note and the Notes
represented thereby for all purposes under the Notes and the Indentures. Except
in the limited circumstances referred to above, owners of beneficial interests
in a Global Note will not be entitled to have such Global Note or any Notes
represented thereby registered in their names, will not receive or be entitled
to receive physical delivery of certificated Notes in exchange therefor and
will not be considered to be the owners or Holders of such Global Note or any
Notes represented thereby for any purpose under the Notes or the Indentures.
Accordingly, each person owning a beneficial interest in such Global Note must
rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person
owns its interest, to exercise any rights of a Holder under the Indentures.
The Company understands that, under existing industry practices, in the
event that the Company requests any action of Holders or an owner of a
beneficial interest in such Global Note desires to give or take any action that
a Holder is entitled to give or take under the Indentures, the Depositary would
authorize the participants holding the relevant beneficial interests to give or
take such action, and such participants would authorize beneficial owners
owning through such participants to give or take such action or would otherwise
act upon the instructions of beneficial owners owning through them.
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The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its participants in such
securities through electronic computerized 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 Distributor), banks, trust companies,
clearing corporations, and certain other organizations, some of whom (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.
Regarding the Trustee
The Trustee is PNC Bank, National Association.
SPECIAL CONSIDERATIONS RELATING TO
FOREIGN CURRENCY NOTES AND INDEXED NOTES
Foreign Currency Notes
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES
THAT RESULT FROM SUCH NOTES BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY
UNIT EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS
SUCH RISKS MAY CHANGE FROM TIME TO TIME. ANY ADDITIONAL MATERIAL FOREIGN
CURRENCY RISKS PERTAINING TO A PARTICULAR NOTE DENOMINATED IN A FOREIGN
CURRENCY WILL BE DISCLOSED IN THE PRICING SUPPLEMENT REGARDING SUCH NOTE.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED IN AN INVESTMENT IN FOREIGN CURRENCY NOTES AND AS TO ANY
MATTERS THAT MAY AFFECT THE PURCHASE OR HOLDING OF A FOREIGN CURRENCY NOTE OR
THE RECEIPT OF PAYMENTS OF PRINCIPAL OF AND ANY PREMIUM AND INTEREST ON A
FOREIGN CURRENCY NOTE IN A SPECIFIED CURRENCY. FOREIGN CURRENCY NOTES ARE NOT
AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
Certain considerations relating to Foreign Currency Notes are set forth
under "Foreign Currency Risks -- Exchange Rates and Exchange Controls" in the
accompanying Prospectus. Specific information pertaining to the foreign
currency or currency unit in which a particular Foreign Currency Note is
denominated, including historical exchange rates and a description of the
currency and any exchange controls, will be described in the applicable Pricing
Supplement. Such information contained therein shall be furnished as a matter
of information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the future.
Indexed Notes
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN INDEXED NOTES,
INCLUDING RISKS WHICH MAY BE ASSOCIATED WITH ECONOMIC, FINANCIAL OR POLITICAL
EVENTS OVER WHICH NEITHER THE COMPANY NOR THE DISTRIBUTOR HAVE ANY CONTROL,
EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH
RISKS MAY CHANGE FROM TIME TO TIME.
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An investment in Notes indexed, as to principal (and premium, if any) 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 investments in a conventional fixed-rate debt
security. For example, Indexed Notes that are indexed as to interest may bear
interest at a rate lower than the prevailing market interest rate for
fixed-rate Notes or may not bear interest, and the principal (and premium, if
any) payable at Maturity with respect to Indexed Notes that are indexed with
respect to principal (and premium, if any) may be less than the face amount or
initial purchase price thereof or may be zero. Special considerations
independent of the creditworthiness of the Company and the value of the
applicable currency, commodity or interest rate index, including economic,
financial and political events over which the Company has no control also may
affect the secondary market for Indexed Notes. Additionally, if the formula
used to determine the amount of principal (and premium, if any) or any 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. Any credit ratings assigned to the Company's
medium-term note program are a reflection of the Company's credit status and in
no way are a reflection of the potential impact of the factors discussed above,
or any other factors, on the market value of the Notes. Prospective purchasers
should consult their own financial and legal advisors as to the risks entailed
in an investment in Indexed Notes, the suitability of an investment in Indexed
Notes in light of their particular circumstances, and all other matters that
may affect the purchase or holding of an Indexed Note.
UNITED STATES TAXATION
The following is a summary of the principal United States federal income
tax consequences of the ownership of Notes. It deals only with Notes held as
capital assets by initial purchasers, and not with special classes of holders,
such as dealers in securities or currencies, banks, tax-exempt organizations,
life insurance companies, persons that hold Notes that are a hedge or that are
hedged against currency risks or that are part of a straddle or conversion
transaction, or persons whose functional currency is not the U.S. dollar. The
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
its legislative history, existing and proposed regulations thereunder,
published rulings and court decisions, all as currently in effect and all
subject to change at any time, perhaps with retroactive effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of the ownership of Notes.
United States Holders
Payments of Interest
Interest on a Note, whether payable in U.S. dollars or a Specified
Currency, other than interest on a "Discount Note" that is not "qualified
stated interest" (each as defined below under "Original Issue Discount --
General"), will be taxable to a United States Holder as ordinary income at the
time it is received or accrued, depending on the holder's method of accounting
for tax purposes. A United States Holder is a beneficial owner who or that is
(i) a citizen or resident of the United States, (ii) a domestic corporation or
(iii) otherwise subject to United States federal income taxation on a net
income basis in respect of the Note.
If an interest payment is denominated in or determined by reference to a
Specified Currency, the amount of income recognized by a cash basis United
States Holder will be the U.S. dollar value of the interest payment, based on
the exchange rate in effect on the date of receipt. If the interest payment is
converted into U.S. dollars by the Exchange Rate Agent, as discussed under
"Description of Notes -- Foreign Currency Notes" above, the amount of income
recognized by a cash basis holder will be the U.S. dollar amount into which the
payment is converted.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined by
reference to, a Specified Currency in accordance with either of two methods.
Under the first method, the amount of income accrued will be based on the
average exchange rate in effect during the interest accrual period (or, with
respect to an accrual period that spans two taxable years, the part of the
period within the taxable year). Upon receipt of the interest payment
(including a payment attributable to accrued but unpaid interest upon the sale
or retirement of a Note) denominated in, or determined by reference to, a
Specified Currency, the United States Holder will recognize ordinary income or
loss measured by
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the difference between the U.S. dollar value determined on the basis of the
average exchange rate used to accrue interest income and U.S. dollar value
determined by reference to the exchange rate on the basis of which the Exchange
Rate Agent converted the interest payment into U.S. dollars, or, if the payment
was not so converted, the exchange rate in effect on the date of receipt.
Under the second method, the United States Holder may elect to determine
the amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. Additionally, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Upon receipt of an interest payment
(including payment attributable to accrued but unpaid interest upon the sale or
retirement of a Note) denominated in, or determined by reference to, a
Specified Currency, the United States Holder will recognize ordinary income or
loss measured by the difference, if any, between the U.S. dollar value
determined on the basis of the exchange rate used to accrue the interest and
the U.S. dollar value determined by reference to the exchange rate on the basis
of which the Exchange Rate Agent converted the interest payment into U.S.
dollars, or, if the payment was not so converted, the exchange rate in effect
on the date of receipt. Any such election will apply to all debt instruments
held by the United States Holder at the beginning of the first taxable year to
which the election applies or thereafter acquired by the United States Holder,
and will be irrevocable without the consent of the Internal Revenue Service
(the "Service").
Original Issue Discount
General. A Note, other than a Note with a term of one year or less (a
"short-term Note"), will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the Note's "stated redemption price at
maturity" over its issue price is more than a de minimis amount (as defined
below). Generally, the issue price of a Note will be the first price at which a
substantial amount of Notes included in the issue of which the Note is a part
is sold to the public (other than 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 total of
all payments provided by the Note that are not payments of "qualified stated
interest." A qualified stated interest payment is generally any one of a series
of stated interest payments on a Note that are unconditionally payable at least
annually at a single fixed rate (with certain exceptions for lower rates paid
during some periods) applied to the outstanding principal amount of the Note.
Special rules for "Variable Rate Notes" (as defined below under "Original Issue
Discount -- Variable Rate Notes") are described below under "Original Issue
Discount -- Variable Rate Notes."
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless
the election described below under "Election to Treat All Interest as Original
Issue Discount" is made, a United States Holder of a Note with de minimis
original issue discount must include such de minimis original issue discount in
income as stated principal payments on the Note are made. The includible amount
with respect to each such payment will equal the product of the total amount of
the Note's de minimis original issue discount and a fraction, the numerator of
which is the amount of the principal payment made and the denominator of which
is the stated principal amount of the Note.
United States Holders of Discount Notes having a maturity of more than one
year from their date of issue must include original issue discount ("OID") in
income calculated on a constant-yield method before the receipt of cash
attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Note. The amount of
OID includible in income by a United States Holder of a Discount Note is the
sum of the daily portions of OID with respect to the Discount Note for each day
during the taxable year or portion of the taxable year on which the United
States Holder holds such Discount Note ("accrued OID"). The daily portion is
determined by allocating to each day in any "accrual period" a pro rata portion
of the OID allocable to that accrual period. Accrual periods with respect to a
Note may be of any length selected by the United States Holder and may vary in
length over the term of the Note as long as (i) no accrual period is longer
than one year and (ii) each scheduled payment of interest or principal on the
Note occurs on
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either the final or first day of an accrual period. The amount of OID allocable
to an accrual period equals the excess of (a) the product of the Discount
Note's adjusted issue price at the beginning of the accrual period and such
Note's yield to maturity (determined on the basis of compounding at the close
of each accrual period and properly adjusted for the length of the accrual
period) over (b) the sum of the payments of qualified stated interest on the
Note allocable to the accrual period. The "adjusted issue price" of a Discount
Note at the beginning of any accrual period is the issue price of the Note
increased by (x) the amount of accrued OID for each prior accrual period and
decreased by (y) the amount of any payments previously made on the Note that
were not qualified stated interest payments. For purposes of determining the
amount of OID allocable to an accrual period, if an interval between payments
of qualified stated interest on the Note contains more than one accrual period,
the amount of qualified stated interest payable at the end of the interval
(including any qualified stated interest that is payable on the first day of
the accrual period immediately following the interval) is allocated pro rata on
the basis of relative lengths to each accrual period in the interval, and the
adjusted issue price at the beginning of each accrual period in the interval
must be increased by the amount of any qualified stated interest that has
accrued prior to the first day of the accrual period but that is not payable
until the end of the interval. The amount of OID allocable to an initial short
accrual period may be computed using any reasonable method if all other accrual
periods other than a final short accrual period are of equal length. The amount
of OID allocable to the final accrual period is the difference between (x) the
amount payable at the maturity of the Note (other than any payment of qualified
stated interest) and (y) the Note's adjusted issue price as of the beginning of
the final accrual period.
Acquisition Premium. A United States Holder that purchases a Note for an
amount 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 but in
excess of its adjusted issue price (any such excess being "acquisition
premium") and that does not make the election described below under "Election
to Treat All Interest as Original Issue Discount" is permitted to reduce the
daily portions of OID by a fraction, the numerator of which is the excess of
the United States Holder's adjusted basis in the Note immediately after its
purchase over the adjusted issue price of the Note, and the denominator of
which is the excess of the sum of all amounts payable on the Note after the
purchase date, other than payments of qualified stated interest, over the
Note's adjusted issue price.
Market Discount. A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount for
which a United States Holder purchased the Note is less than the Note's issue
price (as determined above under "Original Issue Discount -- General") and (ii)
the Note's stated redemption price at maturity or, in the case of a Discount
Note, the Note's "revised issue price," exceeds the amount for which the United
States Holder purchased the Note by at least 1/4 of 1 percent of such Note's
stated redemption price at maturity or revised issue price, respectively,
multiplied by the number of complete years to the Note's maturity. If such
excess is not sufficient to cause the Note to be a Market Discount Note, then
such excess constitutes "de minimis market discount." The Code provides that,
for these purposes, the revised issue price of a Note generally equals its
issue price, increased by the amount of any OID that has accrued on the Note.
Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a United States
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Note. Such an election shall apply to all debt
instruments with market discount acquired by the electing United States Holder
on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the Service.
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount
using a constant-yield method. Such an election shall apply only to the Note
with respect to which it is made and may not be revoked. A United States Holder
of a Market Discount Note that does not elect to include market discount in
income currently generally will be required to defer deductions for interest on
borrowings allocable to such Note in an amount not exceeding the accrued market
discount on such Note until the maturity or disposition of such Note.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within one year of the
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Note's issue date and (iii) the payment will equal or exceed the amount of
pre-issuance accrued interest, then the United States Holder may elect to
decrease the issue price of the Note by the amount of pre-issuance accrued
interest. In that event, a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as an
amount payable on the Note.
Notes Subject to Contingencies Including Optional Redemption. If a Note
provides for an alternative payment schedule or schedules applicable upon the
occurrence of a contingency or contingencies (other than a remote or incidental
contingency), whether such contingency relates to payments of interest or of
principal, if the timing and amount of the payments that comprise each payment
schedule are known as of the issue date and if one of such schedules is
significantly more likely than not to occur, the yield and maturity of the Note
are determined by assuming that the payments will be made according to that
payment schedule. If there is no single payment schedule that is significantly
more likely than not to occur (other than because of a mandatory sinking fund),
the Note will be subject to the general rules that govern contingent payment
obligations. These rules will be discussed in an applicable Pricing Supplement.
Notwithstanding the general rules for determining yield and maturity in
the case of Notes subject to contingencies, if the Company has an unconditional
option or options to redeem a Note, or the Holder has an unconditional option
or options to cause a Note to be repurchased, prior to the Note's stated
maturity, then (i) in the case of an option or options of the Company, the
Company will be deemed to exercise or not exercise an option or combination of
options in the manner that minimizes the yield on the Note and (ii) in the case
of an option or options of the Holder, the Holder will be deemed to exercise or
not exercise an option or combination of options in the manner that maximizes
the yield on the Note. For purposes of those calculations, the yield on the
Note is determined by using any date on which the Note may be redeemed or
repurchased as the maturity date and the amount payable on such date in
accordance with the terms of the Note as the principal amount payable at
maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the
Note is repaid as a result of a change in circumstances and solely for purposes
of the accrual of OID, the yield and maturity of the Note are redetermined by
treating the Note as reissued on the date of the change in circumstances for an
amount equal to the Note's adjusted issue price on that date.
Election to Treat All Interest as Original Issue Discount. A United
States Holder may elect to include in gross income all interest that accrues on
a Note using the constant-yield method described above under the heading
"Original Issue Discount -- General," with the modifications described below.
For purposes of this election, interest includes stated interest, OID, de
minimis original issue discount, market discount, de minimis market discount
and unstated interest, as adjusted by any amortizable bond premium (described
below under "Notes Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
United States Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing United States Holder, and no payments on the Note will be treated
as payments of qualified stated interest. This election will generally apply
only to the Note with respect to which it is made and may not be revoked
without the consent of the Service. If this election is made with respect to a
Note with amortizable bond premium, then the electing United States Holder will
be deemed to have elected to apply amortizable bond premium against interest
with respect to all debt instruments with amortizable bond premium (other than
debt instruments the interest on which is excludible from gross income) held by
the electing United States Holder as of the beginning of the taxable year in
which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Service.
If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
Variable Rate Notes. A "Variable Rate Note" is a Note that: (i) has an
issue price that does not exceed the total noncontingent principal payments by
more than the lesser of (1) the product of (x) the total noncontingent
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principal payments, (y) the number of complete years to maturity from the issue
date and (z) .015, or (2) 15 percent of the total noncontingent principal
payments, and (ii) provides for stated interest compounded or paid at least
annually at (1) one or more "qualified floating rates," (2) a single fixed rate
and one or more qualified floating rates, (3) a single "objective rate" or (4)
a single fixed rate and a single objective rate that is a "qualified inverse
floating rate."
A qualified floating rate or objective rate in effect at any time during
the term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no
earlier than 3 months prior to the first day on which that value is in effect
and no later than 1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Note is denominated or (ii) it is equal to the product of such a rate and
either (a) a fixed multiple that is greater than 0.65 but not more than 1.35,
or (b) a fixed multiple greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate. If a Note provides for two or more qualified
floating rates that (i) are within 0.25 percent of each other on the issue date
or (ii) can reasonably be expected to have approximately the same values
throughout the term of the Note, the qualified floating rates together
constitute a single qualified floating rate. A rate is not a qualified floating
rate, however, if the rate is subject to certain restrictions (including caps,
floors, governors, or other similar restrictions) unless such restrictions are
fixed throughout the term of the Note or are not reasonably expected to affect
significantly the yield on the Note.
An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single, fixed formula and that is based on objective
financial or economic information that is not within the control of or unique
to the circumstances of the issuer or a related party. A variable rate is not
an objective rate, however, if 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. An objective rate is a
"qualified inverse floating rate" if (i) the rate is equal to a fixed rate
minus a qualified floating rate, and (ii) the variations in the rate can
reasonably be expected to inversely reflect contemporaneous variations in the
cost of newly borrowed funds.
If interest on a Note is stated at a fixed rate for an initial period of
one year or less followed by either a qualified floating rate or an objective
rate for a subsequent period and (i) the fixed rate and the qualified floating
rate or objective have values on the issue date of the Note that do not differ
by more than 0.25 percent or (ii) the value of the qualified floating rate or
objective rate is intended to approximate the fixed rate, the fixed rate and
the qualified floating rate or objective rate constitute a single qualified
floating rate or objective rate. Under these rules, Commercial Paper Rate
Notes, Prime Rate Notes, CD Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes, LIBOR Notes and Treasury Rate Notes will generally be treated as
Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a
single qualified floating rate or objective rate and the interest is
unconditionally payable in cash or in property (other than the issuer's debt
instruments) or will be constructively received, all stated interest on the
Note is qualified stated interest and the amount of OID, if any, on the Note is
determined by using, 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, in the case of any other objective
rate, a fixed rate that reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or objective rate, or at a single fixed rate (other
than at a single fixed rate for an initial period), the amount of interest and
OID accruals on the Note are generally determined by (i) determining a fixed
rate substitute for each variable rate provided under the Variable Rate Note
(generally, the value of each variable rate as of the issue date or, in the
case of an objective rate that is not a qualified inverse floating rate, a rate
that reflects the reasonably expected yield on the Note), (ii) constructing the
equivalent fixed rate debt instrument (using the fixed rate substitute
described above), (iii) determining the amount of qualified stated interest and
OID with respect to the equivalent fixed rate debt instrument, and (iv) making
the appropriate adjustments for actual variable rates during the applicable
accrual period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
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single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the
Variable Rate Note as of the issue date would be approximately the same as the
fair market value of an otherwise identical debt instrument that provides for
the qualified floating rate (or qualified inverse floating rate) rather than
the fixed rate.
Short-Term Notes. In general, an individual or other cash basis United
States Holder of a short-term Note is not required to accrue OID (as specially
defined below for the purposes of this paragraph) for United States federal
income tax purposes unless it elects to do so (but may be required to include
any stated interest in income as the interest is received). Accrual basis
United States Holders and certain other United States Holders, including banks,
regulated investment companies, dealers in securities, common trust funds,
United States Holders who hold Notes as part of certain identified hedging
transactions, certain pass-through entities and cash basis United States
Holders who so elect, are required to accrue OID on short-term Notes on either
a straight-line basis or under the constant-yield method (based on daily
compounding), at the election of the United States Holder. In the case of a
United States Holder not required and not electing to include OID in income
currently, any gain realized on the sale or retirement of the short-term Note
will be ordinary income to the extent of the OID accrued on a straight-line
basis (unless an election is made to accrue the OID under the constant-yield
method) through the date of sale or retirement. United States Holders who are
not required and do not elect to accrue OID on short-term Notes will be
required to defer deductions for interest on borrowings allocable to short-term
Notes in an amount not exceeding the deferred income until the deferred income
is realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Note, including stated interest, are included
in the short-term Note's stated redemption price at maturity.
Foreign Currency Discount Notes. OID for any accrual period on a Discount
Note that is a Foreign Currency Note will be determined in the Specified
Currency and then translated into U.S. dollars in the same manner as stated
interest accrued by an accrual basis United States Holder, as described above
under "Payments of Interest." Upon receipt of an amount attributable to OID
(whether in connection with a payment of interest or the sale or retirement of
a Note), a United States Holder may recognize ordinary income or loss.
Notes Purchased at a Premium
A United States Holder that purchases a Note for an amount in excess of
its principal amount may elect to treat such excess as "amortizable bond
premium," in which case the amount required to be included in the United States
Holder's income each year with respect to interest on the Note will be reduced
by the amount of amortizable bond premium allocable (based on the Note's yield
to maturity) to such year. In the case of a Foreign Currency Note, bond premium
will be computed in units of Specified Currency, and amortizable bond premium
will reduce interest income in units of the Specified Currency. At the time
amortized bond premium offsets interest income, exchange gain or loss (taxable
as ordinary income or loss) is realized measured by the difference between
exchange rates at that time and at the time of the acquisition of the Notes.
Any election to amortize bond premium shall apply to all bonds (other than
bonds the interest on which is excludible from gross income) held by the United
States Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the United States Holder, and is irrevocable
without the consent of the Service. See also "Original Issue Discount --
Election to Treat All Interest as Original Issue Discount."
Purchase, Sale and Retirement of the Notes.
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the United States Holder's income with respect to the Note
and the amount, if any, of income attributable to de minimis original issue
discount and de minimis market discount included in the United States Holder's
income with respect to the Note, and reduced by (i) the amount of any payments
that are not qualified stated interest payments, and (ii) the amount of any
amortizable bond premium applied to reduce interest on the Note. The U.S.
dollar cost of a Note purchased with a Specified Currency will generally be the
U.S. dollar value of the purchase price on the date of purchase or, in the case
of Notes traded on an established securities market, as defined in the
applicable Treasury Regulations, that are purchased by a cash basis United
States Holder (or an accrual basis United States Holder that so elects), on the
settlement date for the purchase.
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A United States Holder will generally recognize gain or loss on the sale
or retirement of a Note equal to the difference between the amount realized on
the sale or retirement and the tax basis of the Note. The amount realized on a
sale or retirement for an amount in Specified Currency will be the U.S. dollar
value of such amount on (i) the date payment is received in the case of a cash
basis United States Holder, (ii) the date of disposition in the case of an
accrual basis United States Holder or (iii) in the case of Notes traded on an
established securities market, as defined in the applicable Treasury
Regulations, sold by a cash basis United States Holder (or an accrual basis
United States Holder that so elects), on the settlement date for the sale.
Except to the extent described above under "Original Issue Discount --
Short-Term Notes" or "Original Issue Discount -- Market Discount" or described
in the next succeeding paragraph or attributable to accrued but unpaid
interest, gain or loss recognized on the sale or retirement of a Note will be
capital gain or loss and will be long-term capital gain or loss if the Note was
held for more than one year.
Gain or loss recognized by a United States Holder on the sale or
retirement of a Note that is attributable to changes in exchange rates will be
treated as ordinary income or loss. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
Exchange of Amounts in Other Than U.S. Dollars
Specified Currency received as interest on a Note or on the sale or
retirement of a Note will have a tax basis equal to its U.S. dollar value at
the time such interest is received or at the time of such sale or retirement.
Specified Currency that is purchased will generally have a tax basis equal to
the U.S. dollar value of the Specified Currency on the date of purchase. Any
gain or loss recognized on a sale or other disposition of a Specified Currency
(including its use to purchase Notes or upon exchange for U.S. dollars) will be
ordinary income or loss.
Indexed, Renewable, Extendible and Amortizing Notes
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Indexed Notes that are
not subject to the rules governing Variable Rate Notes and with respect to any
Renewable, Extendible or Amortizing Notes.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
holder who or that is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of a Note.
This discussion assumes that the Note is not subject to the rules of Section
871(h)(4)(A) of the Code (relating to interest payments determined by reference
to the income, profits, changes in the value of property or other attributes of
the debtor or a related party).
Under present United States federal income and estate tax law and subject
to the discussion of backup with holding below:
(i) payments of principal, premium (if any) and interest (including OID)
by the Company or any of its paying agents to a United States Alien Holder
of a Note will not be subject to United States federal withholding tax if,
in the case of interest or OID, (a) the beneficial owner of the Note does
not actually or constructively own 10 percent or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (b)
the beneficial owner of the Note is not a controlled foreign corporation
that is related to the Company through stock ownership, and (c) either (A)
the beneficial owner of the Note certifies to the Company or its agent,
under penalties of perjury, that it is not a United States Holder and
provides its name and address or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution") and
holds the Note certifies to the Company or its agent under penalties of
perjury that such statement has been received from the beneficial owner by
it or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof;
(ii) a United States Alien Holder of a Note will not be subject to
United States federal income tax on any gain realized on the sale or
exchange of a Note, unless such Holder is an individual who is present in
the United States for 183 days or more in the taxable year of disposition
and certain conditions are met; and
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(iii) a Note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's
gross estate for purposes of the United States federal estate tax as a
result of the individual's death if the individual did not actually or
constructively own 10 percent or more of the total combined voting power of
all classes of stock of the Company entitled to vote and the income on the
Note would not have been effectively connected with a United States trade
or business of the individual at the individual's death.
Recently proposed Internal Revenue Service Treasury regulations (the
"Proposed Regulations") would provide alternative methods for satisfying the
certification requirement described in clause (i)(c) above. The Proposed
Regulations also would require, in the case of Notes held by a foreign
partnership, that (x) the certification described in clause (i)(c) above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Proposed Regulations are proposed to be effective for payments
made after December 31, 1997. There can be no assurance that the Proposed
Regulations will be adopted or as to the provisions that they will include if
and when adopted in temporary or final form.
Backup Withholding and Information Reporting
United States Holders
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of a
Note before maturity within the United States to, and to the accrual of OID on
a Discount Note with respect to, non-corporate United States Holders, and
"backup withholding" at a rate of 31 percent will apply to such payments and to
payments of OID if the United States Holder fails to provide an accurate
taxpayer identification number or to report all interest and dividends required
to be shown on its federal income tax returns.
United States Alien Holders
Information reporting and backup withholding will not apply to payments of
principal, premium (if any) and interest (including OID) made by the Company or
a paying agent to a United States Alien Holder on a Note if the certification
described in clause (i)(c) under "United States Alien Holders" above is
received, provided that the payor does not have actual knowledge that the
holder is a United States person.
Payments of the proceeds from the sale by a United States Alien Holder of
a Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50 percent or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payments. Payments
of the proceeds from the sale of a Note to or through the United States office
of a broker is subject to information reporting and backup withholding unless
the holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
S-27
<PAGE>
SUPPLEMENTAL PLAN OF DISTRIBUTION OF THE NOTES
Under the terms of a Distribution Agreement, dated July 10, 1997 (the
"Distribution Agreement"), the Notes are offered on a continuing basis by the
Company through the Distributor, which has agreed to use reasonable efforts to
solicit purchases of the Notes. Unless otherwise disclosed in the applicable
pricing supplement, the Company will pay a commission, or grant a discount, to
the Distributor. The Company will pay the Distributor a commission of from
.125% to .750% of the principal amount of each Note, depending on its Stated
Maturity, sold through the Distributor, as agent; provided, however, that
commissions with respect to Notes with a Stated Maturity of more than thirty
years will be negotiated between the Company and the Distributor at the time of
sale. The Company will have the sole right to accept offers to purchase Notes
and may reject any such offer, in whole or in part. The Distributor shall have
the right, in its discretion reasonably exercised, without notice to the
Company, to reject any offer to purchase Notes received by it, in whole or in
part.
The Company also may sell Notes to the Distributor, acting as principal,
at a discount to be agreed upon at the time of sale except that, if no other
discount is agreed, the Company may pay a commission (or grant a discount)
equivalent to that set forth on the cover page of this Prospectus Supplement.
Such Notes may be resold at market prices prevailing at the time of resale, at
prices related to such prevailing market prices, at a fixed offering price or
at negotiated prices, as determined by the Distributor. The Company also may
sell Notes to the Distributor or to a group of underwriters for whom the
Distributor acts as representative, at a discount to be agreed at the time of
sale for resale to one or more investors or purchasers at a fixed offering
price or at varying prices prevailing at the time of resale, at prices related
to such prevailing market prices at the time of such resale or at negotiated
prices. Notes purchased by the Distributor or by a group of underwriters may be
resold to certain securities dealers for resale to investors or to certain
other dealers. Dealers may receive compensation in the form of discounts,
concessions or commissions from the Distributor and/or commissions from the
purchasers for whom they may act as agents. Unless otherwise specified in the
applicable pricing supplement, any concessions allowed by the Distributor to
any such dealer shall not be in excess of the commission or discount received
by the Distributor from the Company. 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, concession and discount may be changed.
The Company has reserved the right to sell Notes directly on its own
behalf and to accept (but not solicit) offers to purchase Notes through
additional distributors on substantially the same terms and conditions
(including commission rates) as would apply to purchases of Notes pursuant to
the Distribution Agreement. In addition, the Company has reserved the right to
appoint additional agents for the purpose of soliciting offers to purchase
Notes. Such additional distributors or agents, as the case may be, will be
named in the applicable Pricing Supplement. No commission will be payable on
any Notes sold directly by the Company.
The Distributor and any dealers to whom the Distributor may sell Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act of
1933 (the "Act"). The Company has agreed to indemnify the Distributor against
certain liabilities, including civil liabilities under the Act, or contribute
to payments which the Distributor may be required to make in respect thereof.
The Company has agreed to reimburse the Distributor for certain expenses.
Unless otherwise indicated in the applicable Pricing Supplement, payment
of the purchase price of Notes, other than Foreign Currency Notes, will be
required to be made in funds immediately available in The City of New York.
With respect to payment of the purchase price of Foreign Currency Notes, see
"Description of the Notes--Foreign Currency Notes" herein.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
The Distributor, may engage in over-allotment, stabilizing transactions,
syndicate covering transactions in accordance with Regulation M under the
Exchange Act. Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering
S-28
<PAGE>
transactions involve purchases of the Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Distributor to reclaim a selling concession from a
syndicate member when the Notes originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Notes to be higher than it would
otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.
Credit Suisse First Boston Corporation engages in transactions with and
performs services for the Company in the ordinary course of business.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for the Company by Willkie
Farr & Gallagher, New York, New York, and for the Distributor by Dewey
Ballantine, New York, New York. The opinions of Willkie Farr & Gallagher and
Dewey Ballantine may be conditioned upon, and subject to certain assumptions
regarding, future action required to be taken by the Company and the Trustee in
connection with the issuance and sale of any particular Note, the specific
terms of Notes and other matters which may affect the validity of Notes but
which cannot be ascertained on the date of such opinions.
S-29
<PAGE>
GLOSSARY
Set forth below are definitions, or the locations elsewhere of
definitions, of some of the terms used in this Prospectus Supplement.
"Calculation Agent" means the agent appointed by the Company to calculate
interest rates for Floating Rate Notes.
"Calculation Date" pertaining to any Interest Determination Date means,
unless otherwise specified in the applicable pricing supplement, the earlier of
(i) the tenth calendar day after such Interest Determination Date or, if such
day is not a Market Day, the next succeeding Market Day or (ii) the Market Day
immediately preceding the applicable Interest Payment Date or the Maturity
Date, as the case may be.
"CD Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Floating Rate Notes -- CD Rate Notes", unless
otherwise indicated in the applicable Pricing Supplement.
"CMT Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Floating Rate Notes -- CMT Rate Notes," unless
otherwise indicated in an applicable Pricing Supplement.
"Commercial Paper Rate" means the rate calculated as set forth under the
heading "Description of the Notes -- Floating Rate Notes -- Commercial Paper
Rate Notes", unless otherwise indicated in the applicable Pricing Supplement.
"Composite Quotations" means the daily statistical release entitled
"Composite 3:30 P.M. Quotations for U.S. Government Securities", or any
successor publication, published by the Federal Reserve Bank of New York.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service, or any successor service, on the page designated in the applicable
Pricing Supplement (or any other page as may replace such page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)), for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page 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 two years.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service (or any successor service) on the page
specified in such Pricing Supplement (or any other page as may replace such
page on such service) for the purpose of displaying the London interbank rates
of major banks for the applicable Index Currency.
"Exchange Rate Agent" means the agent appointed by the Company to convert
principal and any premium and interest payments in respect of Foreign Currency
Notes into U.S. dollars.
"Federal Funds Rate" means the rate calculated as set forth under the
heading "Description of the Notes -- Floating Rate Notes -- Federal Funds Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
"Fixed Rate Note" shall mean Notes bearing interest as described under the
heading "Description of the Notes -- Interest -- Fixed Rate Notes".
"Floating Rate Notes" shall mean Notes bearing interest as described under
the heading "Description of the Notes -- Interest -- Floating Rate Notes".
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519), Selected Interest Rates", or any successor publication,
published by the Board of Governors of the Federal Reserve System.
S-30
<PAGE>
"Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Index Maturity" means, with respect to a Floating Rate Note, the period
to maturity of the instrument or obligation on which the interest rate formula
is based, as indicated in the applicable Pricing Supplement.
"Initial Interest Rate" means the rate at which Floating Rate Note will
bear interest from and including its Issue Date (or that of a predecessor Note)
to but excluding the first Interest Reset Date, as indicated in the applicable
Pricing Supplement.
"Interest Determination Date" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Interest Reset Date and calculated on the related Calculation Date
(except in the case of LIBOR, which is calculated on the related LIBOR Interest
Determination Date).
"Interest Reset Date" means the date on which a Floating Rate Note will
begin to bear interest at the variable interest rate determined as of any
Interest Determination Date. See the third paragraph under the heading
"Description of the Notes -- Floating Rate Notes" for the applicable Interest
Reset Dates for such Notes. The Reset Dates with respect to any Floating Rate
Note will also be set forth in the applicable Pricing Supplement and in such
Note.
"LIBOR" means the rate calculated as set forth under the heading
"Description of the Notes -- Floating Rate Notes -- LIBOR Notes", unless
otherwise indicated in the applicable Pricing Supplement.
"London Business Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Market Day" means (a) with respect to any Note (unless otherwise provided
in this definition), any day that is a Business Day in The City of New York,
(b) with respect to LIBOR Notes only, any Business Day in New York that is also
a London Market Day, (c) with respect to Foreign Currency Notes (other than
Foreign Currency Notes denominated in European Currency Units ("ECUs")) only,
any day that is a Business Day both in New York and in the principal financial
center in the country of the Specified Currency and (d) with respect to Foreign
Currency Notes denominated in ECU, any date that is a Business Day in The City
of New York that is designated as an ECU settlement day by the ECU Banking
Association in Paris or otherwise generally regarded in the ECU interbank
market as a day in which payments in ECU are made.
"Market Exchange Rate" for any Specified Currency means the noon buying
rate in The City of New York for cable transfers for such Specified Currency as
certified for customs purposes by (or if not so certified as otherwise
determined by) the Federal Reserve Bank of New York.
"Maturity", when used with respect to any Note, means the date on which
the principal of such Note or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Prime Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Floating Rate Notes -- Prime Rate Notes", unless
otherwise indicated in the applicable Pricing Supplement.
"Principal Financial Center" means the capital city of the country issuing
the Index Currency, except that with respect to United States 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.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
"Specified Currency" shall have the meaning set forth under the heading
"Description of the Notes -- Foreign Currency Notes".
S-31
<PAGE>
"Spread" means the number of basis points specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
"Spread Multiplier" means the percentage specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
"Stated Maturity", when used with respect to any Note or any installment
of principal thereof or interest thereon, means the date specified in such Note
as the fixed date on which the principal of such Note or such installment of
principal or interest is due and payable.
"Treasury Rate" means the interest rate calculated as set forth under the
heading "Description of the Notes -- Floating Rate Notes -- Treasury Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
S-32
<PAGE>
PROSPECTUS
[GRAPHIC OMITTED]
Debt Securities
----------
The Pep Boys -- Manny, Moe & Jack (the "Company") may from time to time
offer its debt securities (the "Debt Securities") on terms to be determined at
the time of sale. The Debt Securities may consist of one or more series of
unsecured debt securities, which may be either senior debentures, notes, bonds
and/or other evidences of indebtedness ("Senior Securities") or subordinated
debentures, notes, bonds and/or other evidences of indebtedness ("Subordinated
Securities"). The Debt Securities may be offered, separately or together, in
separate series, in amounts, at prices and on terms to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement"). The aggregate public
offering price of the securities to be offered by this Prospectus shall not
exceed $150,000,000 (or its equivalent in one or more foreign currencies,
currency units or composite currencies).
The Prospectus Supplement accompanying this Prospectus will set forth,
with respect to the particular series or issue of Debt Securities for which
this Prospectus and the Prospectus Supplement are being delivered: the terms of
any Debt Securities offered, the specific designation, aggregate principal
amount, authorized denominations, maturity, rate (or manner of calculation
thereof) and time of payment of interest, if any, any redemption or repayment
terms, the currency or currencies, currency unit or units or composite currency
or currencies in which the Debt Securities shall be denominated or payable, any
index, formula or other method pursuant to which principal, premium or interest
may be determined and the form of the Debt Securities (which may be in
registered, bearer or global form), and any initial public offering price, the
net proceeds to the Company and the other specific terms of such offering of
Debt Securities.
The Senior Securities offered pursuant to this Prospectus will rank
equally with all other unsecured and unsubordinated obligations of the Company.
The Subordinated Securities offered by this Prospectus will be subordinated to
all existing and future Senior Indebtedness (as defined) of the Company. See
"Description of Debt Securities."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------
The Debt Securities may be offered directly, through agents designated
from time to time, to or through dealers or to or through underwriters. Such
agents or underwriters may act alone or with other agents or underwriters. Any
such agents, dealers or underwriters will be set forth in a Prospectus
Supplement. If an agent of the Company, or a dealer or underwriter, is involved
in the offering of the Debt Securities, the agent's commission, dealer's
purchase price, underwriter's discount and net proceeds to the Company, as the
case may be, will be set forth in, or may be calculated from, the Prospectus
Supplement. Any underwriters, dealers or agents participating in the offering
may be deemed "underwriters" within the meaning of the Securities Act of 1933,
as amended.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement. Any statement contained in this
Prospectus will be deemed to be modified or superseded by any inconsistent
statement contained in any accompanying Prospectus Supplement.
----------
The date of this Prospectus is July 9, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information concerning the Company may
be inspected, and copies of such material may be obtained at prescribed rates,
at the Commission's Public Reference Section, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the Commission's Regional Offices
at Seven World Trade Center, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Room 1400, Chicago, Illinois 60661-2511. In addition, the
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission, such as the Company. The address of the Commission's Web
site is http:/www.sec.gov. The Company's Common Stock is listed on the New York
Stock Exchange (the "NYSE"). Reports, proxy statements and other information
concerning the Company may be inspected at the offices of the NYSE at 20 Broad
Street, New York, New York 10005.
This Prospectus contains forward-looking statements that involve risks and
uncertainties, including risks associated with the automotive aftermarket
retail and service industries and other risks detailed from time to time in the
Company's filings with the Commission.
This Prospectus constitutes part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement and
the exhibits and schedules thereto, in accordance with the rules and
regulations of the Commission. For further information concerning the Company
and the Debt Securities offered hereby, reference is made to the Registration
Statement and the exhibits and schedules filed therewith, which may be
inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and copies of which may be obtained from the
Commission at prescribed rates. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended February 1,
1997 and the Company's Quarterly Report on Form 10-Q for the quarter ended May
3, 1997, each as filed with the Commission pursuant to the Exchange Act, are
incorporated into this Prospectus by reference.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of this offering shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents. Any statement incorporated herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such document). Requests for such documents
should be submitted in writing to Mr. Michael J. Holden, Executive Vice
President and Chief Financial Officer, The Pep Boys -- Manny, Moe & Jack, 3111
West Allegheny Avenue, Philadelphia, Pennsylvania 19132, telephone (215)
229-9000.
2
<PAGE>
THE COMPANY
The Pep Boys -- Manny, Moe & Jack (together with its subsidiaries, the "Pep
Boys" or the "Company") is a leading automotive aftermarket retail and service
chain. The Company is engaged principally in the retail sale of automotive parts
and accessories, automotive maintenance and service and the installation of
parts. Pep Boys operates its business through its chain of 620 stores (as of May
3, 1997) located in 33 states, the District of Columbia and Puerto Rico, of
which 357 stores are owned and 263 stores are leased. Pep Boys believes it is
best positioned to gain market share and to increase shareholder value by
serving the "do-it-yourself," "do-it-for-me" and "buy-for-resale" customer
segments with the highest quality merchandise and service at the best value.
The Company operates approximately 11,995,000 gross square feet of retail
space, including an aggregate of 5,503 service bays. The Company's typical
Supercenter is a free standing, "one-stop" shopping automotive warehouse that
features approximately 12 state-of-the-art service bays. Each Supercenter
carries an average of approximately 27,000 stock-keeping units and serves the
automotive aftermarket needs of the "do-it-yourself", the "do-it-for-me" and
the "buy-for-resale" customer segments. Late in 1996, a new Supercenter
prototype was introduced that averages approximately 18,200 square feet. The
Company intends to continue to utilize this new prototype in 1997. While the
overall size of the Supercenter will be reduced, the number of stock-keeping
units offered will not decrease. Pep Boys believes that the operation of
service bays in its Supercenter stores differentiates it from most of its
competitors by providing its customers with the ability to purchase parts and
have them installed at the same location.
PARTS USA stores generally operate in certain urban locations that the
Company believes will be better served by stores with an extensive selection of
parts and accessories (an average of approximately 26,000 stock-keeping units
per store) but without tires or service bays. PARTS USA stores primarily serve
the automotive aftermarket needs of the "do-it-yourself" and the
"buy-for-resale" customer segments. New PARTS USA stores will average
approximately 8,100 square feet.
The Company is positioning certain Supercenters and PARTS USA stores to
deliver high quality parts to the professional installer. This will strengthen
the Company's position in the "buy-for-resale" category by allowing the Company
to further penetrate its markets while providing a valuable service to the
professional mechanic.
During fiscal years 1993, 1994 and 1995, the Company added a net of 29, 49
and 71 stores, respectively. In fiscal 1996, the Company added a net of 98
stores which includes 56 Supercenters and 44 PARTS USA stores, and closed two
older stores. As of May 3, 1997, the Company had 537 Supercenters and 83 PARTS
USA stores.
Although the Company's competition varies by geographical area, the
Company believes that it generally has a favorable competitive position in
terms of price, depth and breadth of merchandise, quality of personnel and
customer service. The Company believes that it provides customers with among
the lowest prices in each of its markets. Pep Boys employs an
everyday-low-price strategy which it believes provides its customers better
value and consistency on a day-to-day basis and improves inventory management.
In addition, Pep Boys believes that it carries among the largest selection of
parts, accessories and chemicals in the automotive aftermarket retail industry,
with approximately 27,000 SKUs per Supercenter. The Company also believes it
provides a high level of customer service through its well-trained and
knowledgeable employees. The Company's advertising strategy consists primarily
of television advertising and multi-page catalogs, supplemented with radio
advertising and various in-store promotions.
The Company utilizes electronic parts catalogs, enabling employees to
reference and access parts instantly while noting price, related items and
in-stock position. In addition, the Company monitors product sales by SKU
through its point-of-sale system which utilizes bar code slot scanning. This
system enables the Company to monitor its gross margins and set minimum and
maximum inventory levels for each store. The Company's centralized buying
system and a perpetual inventory-automatic replenishment system orders
additional inventory from one of the Company's warehouses when a store's
inventory on hand falls below the minimum level set for each SKU.
The Pep Boys -- Manny, Moe & Jack, a Pennsylvania corporation, was
incorporated in 1925. The Company's executive offices are located at 3111 West
Allegheny Avenue, Philadelphia, Pennsylvania 19132, telephone (215) 229-9000.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges on a historical basis for each of the five years in the period ended
February 1, 1997.
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------------------------------------
Jan. 30, 1993 Jan. 29, 1994 Jan. 28, 1995 Feb. 3, 1996 Feb. 1, 1997
--------------- --------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges .................. 4.3x 4.9x 4.7x 4.1x 4.7x
</TABLE>
For purposes of computing historical ratios of earnings to fixed charges,
earnings are divided by fixed charges. "Earnings" represent the aggregate of
(a) earnings before income taxes and changes in accounting principle and (b)
fixed charges (exclusive of capitalized interest costs). "Fixed charges"
represent interest costs including capitalized interest costs, plus one-third
of rental expense (which amount is considered representative of the interest
factor in rental expense).
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement
accompanying this Prospectus, proceeds from the sale of the Debt Securities
will be used by the Company for working capital, for the repayment of debt or
for other general corporate purposes, and initially may be temporarily invested
in short-term securities.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain
general terms and provisions of the Indentures under which the Debt Securities
are to be issued. The particular terms of each issue of Debt Securities, as
well as any modifications or additions to such general terms that may apply in
the case of such Debt Securities, will be described in the Prospectus
Supplement relating to such Debt Securities. Accordingly, for a description of
the terms of a particular issue of Debt Securities, reference must be made to
both the Prospectus Supplement relating thereto and to the following
description.
The Indentures
Senior Securities, if issued in the future, will be issued under an
Indenture between the Company and PNC Bank, National Association, as Trustee
(the "Senior Indenture"). Subordinated Securities, if issued in the future,
will be issued under an Indenture between the Company and PNC Bank, National
Association, as Trustee (the "Subordinated Indenture"). The Senior Indenture
and the Subordinated Indenture are sometimes referred to herein collectively as
the "Indentures" and individually as an "Indenture."
The Indentures have been filed as exhibits to the Registration Statement
of which this Prospectus is a part. Each Indenture is available for inspection
at the corporate trust office of the Trustee at 1600 Market Street, 30th Floor,
Philadelphia, Pennsylvania 19103. The following description of the Indentures
and summaries of certain provisions thereof do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all
provisions of the respective Indentures. All section references appearing
herein are to sections of the applicable Indenture or Indentures, and
capitalized terms defined in the Indentures are used herein as therein defined
(unless otherwise defined herein).
There is no requirement that future issues of debt securities of the
Company be issued under either of the Indentures, and the Company is free to
employ other indentures or documentation, containing provisions different from
those included in the Indentures or applicable to one or more issues of Debt
Securities, in connection with future issues of such other debt securities.
General Terms of Debt Securities
Each Indenture provides that the Debt Securities issued thereunder may be
issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time in or pursuant to authority
granted by a resolution of the Board of Directors of the Company or as
established in one or more indentures supplemental to such Indenture (Section
301 of the Indentures). Each Indenture also provides that there may be more
than one Trustee under such Indenture, each with respect to one or more series
of Debt Securities. Any Trustee under either Indenture may resign or be removed
with respect to one or more series of Debt Securities issued under such
Indenture, and a successor Trustee may be appointed to act with respect to such
series (Section 608 of the Indentures).
In the event that two or more persons are acting as Trustee with respect
to different series of Debt Securities issued under the same Indenture, each
such Trustee shall be a Trustee of a trust under such Indenture separate and
apart from the trust administered by any other such Trustee (Section 609 of the
Indentures), and, except as otherwise indicated herein, any action described
herein to be taken by the Trustee may be taken by each such Trustee with
respect to, and only with respect to, the one or more series of Debt Securities
for which it is Trustee under such Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities to be offered for the following terms thereof: (1) the title of
such Debt Securities; (2) any limit on the aggregate principal amount of such
Debt Securities; (3) the purchase price of such Debt Securities (expressed as a
percentage of the principal amount); (4) the date or dates, or the method for
determining such date or dates, on which the principal (and premium, if any) of
such Debt Securities will be payable; (5) the rate or rates (which may be fixed
or variable), or the method by which such rate or rates shall be determined, at
which such Debt Securities will bear interest, if any; (6) the date or dates
from which any such interest will accrue, the Interest Payment Dates on which
any such interest will be payable, the Regular Record Dates for such Interest
Payment Dates and the basis upon which interest shall be calculated if other
than that of a 360 day year of twelve 30-day months; (7) the place or places
where the principal of (and premium, if any) and interest, if any, on such Debt
Securities will be payable
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and such Debt Securities may be surrendered for registration of transfer or
exchange; (8) the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities may be redeemed,
as a whole or in part, at the option of the Company, if the Company is to have
such an option; (9) the obligation, if any, of the Company to redeem or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which, the price or prices at which and the terms and conditions upon
which such Debt Securities will be redeemed or purchased, as a whole or in
part, pursuant to such obligation; (10) if other than U.S. dollars, the
currency or currencies in which such Debt Securities are denominated and
payable, which may be a foreign currency or units of two or more foreign
currencies or a composite currency or currencies, and the terms and conditions
relating thereto; (11) whether the amount of payments of principal of (and
premium, if any) or interest, if any, on such Debt Securities may be determined
with reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit or
units or composite currency or currencies) and the manner in which such amounts
shall be determined; (12) any additions, modifications or deletions in the
terms of such Debt Securities with respect to the Events of Default set forth
in the respective Indentures; (13) the terms, if any, upon which such Debt
Securities may be convertible into Common Stock or Preferred Stock of the
Company and the terms and conditions upon which such conversion will be
effected, including the initial conversion price or rate, the conversion period
and any other provision in addition to or in lieu of those described herein;
(14) whether such Debt Securities will be issued in certificated or book-entry
form; (15) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000 and
any integral multiple thereof; (16) the applicability, if any, of the
defeasance and covenant defeasance provisions of Article Fourteen of the
applicable Indenture; and (17) any other terms of such Debt Securities not
inconsistent with the provisions of the respective Indentures (Section 301 of
the Indentures).
Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be offered and sold at a substantial discount from the
principal amount thereof. Special U.S. federal income tax, accounting and other
considerations applicable thereto will be described in the applicable
Prospectus Supplement.
Unless otherwise provided with respect to a series of Debt Securities, the
Debt Securities will be issued only in registered form without coupons in
denominations of $1,000 and integral multiples thereof (Section 302 of the
Indentures).
Debt Securities may be issued, from time to time, with the principal
amount payable on any principal payment date, or the amount of interest payable
on an interest payment date, to be determined by reference to one or more
currency exchange rates, commodity prices, equity indices or other factors.
Holders of such Debt Securities may receive a principal amount on any
principal date, or a payment of interest on any interest payment date, that is
greater than or less than the amount of principal or interest otherwise payable
on such dates, depending upon the value on such dates of the applicable
currencies, commodities, equity indices or other factors. Information as to the
methods for determining the amount of principal or interest payable on any
date, the currencies, commodities, equity indices or other factors to which the
amount payable on such date is linked and certain additional Federal income tax
considerations will be set forth in the Prospectus Supplement relating thereto.
Certificated Securities
Except as may be set forth in the applicable Prospectus Supplement, Debt
Securities will not be issued in certificated form. If, however, Debt
Securities are to be issued in certificated form, no service charge will be
made for any transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305 of the Indentures).
Book-Entry Debt Securities
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (each, a "Global Security") that will be
deposited with, or on behalf of, a depository identified in the Prospectus
Supplement. Global Securities may be issued in either registered or bearer form
and in either temporary
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or permanent form. Unless otherwise provided in the Prospectus Supplement, Debt
Securities that are represented by a Global Security will be issued in
denominations of $1,000 and any integral multiple thereof, and will be issued
in registered form only, without coupons. Payments of principal of, premium, if
any, and interest on Debt Securities represented by a Global Security will be
made by the Company to the Trustee under the applicable Indenture, and then
forwarded to the depository.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York ("DTC"), that
such Global Securities will be registered in the name of DTC's nominee, and
that the following provisions will apply to the depository arrangements with
respect to any such Global Securities. Additional or differing terms of the
depository arrangements will be described in the Prospectus Supplement relating
to a particular series of Debt Securities issued in the form of Global
Securities.
So long as DTC or its nominee is the registered owner of a Global
Security, DTC or its nominee, as the case may be, will be considered the sole
Holder of the Debt Securities represented by such Global Security for all
purposes under the applicable Indenture. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have Debt
Securities represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Debt Securities in
certificated form and will not be considered the owners or Holders thereof
under the applicable Indenture. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in a Global Security.
If DTC is at any time unwilling or unable to continue as depository or if
at any time DTC ceases to be a clearing agency registered under the Exchange
Act if so required by applicable law or regulation, and, in either case, a
successor depository is not appointed by the Company within 90 days, the
Company will issue individual Debt Securities in certificated form in exchange
for the Global Securities. In addition, the Company may at any time, and in its
sole discretion, determine not to have any Debt Securities represented by one
or more Global Securities, and, in such event, will issue individual Debt
Securities in certificated form in exchange for the relevant Global Securities.
In any such instance, an owner of a beneficial interest in a Global Security
will be entitled to physical delivery of individual Debt Securities in
certificated form of like tenor and rank, equal in principal amount to such
beneficial interest and to have such Debt Securities in certificated form
registered in its name. Unless otherwise provided in the Prospectus Supplement,
Debt Securities so issued in certificated form will be issued in denominations
of $1,000 or any integral multiple thereof, and will be issued in registered
form only, without coupons.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Debt Securities. The Debt
Securities will be issued as fully registered securities registered in the name
of Cede & Co. (DTC's partnership nominee).
DTC is limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing company" within the meaning
of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC holds
securities that its participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable
to DTC and its Participants are on file with the Commission.
Purchases of Debt Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Debt
Securities on DTC's records. The ownership interest of each actual purchaser of
each Debt Security ("Beneficial Owner") is in turn recorded on the Direct and
Indirect Participants' records.
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A Beneficial Owner does not receive written confirmation from DTC of its
purchase, but such Beneficial Owner is expected to receive a written
confirmation providing details of the transaction, as well as periodic
statements of its holdings, from the Direct or Indirect Participant through
which such Beneficial Owner entered into the transaction. Transfers of
ownership interests in Debt Securities are accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
do not receive certificates representing their ownership interests in Debt
Securities, except in the event that use of the book-entry system for the Debt
Securities is discontinued.
To facilitate subsequent transfers, the Debt Securities are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt
Securities with DTC and their registration in the name of Cede & Co. will
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Debt Securities; DTC records reflect only the identity
of the Direct Participants to whose accounts Debt Securities are credited,
which may or may not be the Beneficial Owners. The Participants remain
responsible for keeping account of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners are governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Debt Securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. consents or votes with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Debt Securities are credited on the record date
(identified on a list attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Debt Securities
are made to DTC. DTC's practice is to credit Direct Participants' accounts on
the payable date in accordance with their respective holdings as shown on DTC's
records unless DTC has reason to believe that it will not receive payment of
the payable date. Payments by Participants to Beneficial Owners are governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and are the responsibility of such Participant and not of DTC, the
applicable Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and interest to DTC is the responsibility of the Company or
the applicable Trustee, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Debt Securities at any time by giving reasonable notice to the
Company or the applicable Trustee. Under such circumstances, in the event that
a successor securities depository is not appointed, Debt Security certificates
are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Debt Security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
Unless stated otherwise in the Prospectus Supplement, the underwriters or
agents with respect to a series of Debt Securities issued as Global Securities
will be Direct Participants in DTC.
None of the Company, any underwriter or agent, the applicable Trustee or
any applicable paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in a Global Security, or for maintaining, supervising or reviewing
any records relating to such beneficial interest.
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Merger
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into any other
corporation, provided that (a) either the Company shall be the continuing
corporation, or the successor corporation (if other than the Company) formed by
or resulting from any such consolidation or merger or which shall have received
the transfer of such assets shall be a corporation organized and existing under
the laws of the United States or a State thereof and shall expressly assume
payment of the principal of (and premium, if any) and interest on all the Debt
Securities and the performance and observance of all the convenants and
conditions of the applicable Indenture; and (b) the Company or such successor
corporation shall not immediately thereafter be in default under the applicable
Indenture (Section 801 of the Indentures).
The Indenture would not necessarily afford holders of the Debt Securities
protection in the event of a highly leveraged transaction involving the
Company, such as a leveraged buyout.
Limitations on Liens; Restrictions on Sale and Leaseback Transactions
Limitations on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, issue, assume or guarantee any Indebtedness secured
by any mortgage, security interest, pledge, lien or other encumbrance upon, or
any interest or title of any lessor, lender or other secured party to, or under
any Capital Lease with respect to, any Operating Property or Operating Asset of
the Company or any Restricted Subsidiary, whether such assets are now owned or
hereafter acquired (herein referred to as a "Mortgage" or "Mortgages"), without
in any such case effectively providing that the Debt Securities (together with,
if the Company shall so determine, any other Indebtedness ranking equally with
the Debt Securities) shall be secured equally and ratably with such
Indebtedness, except that the foregoing restrictions shall not apply to: (a)
Mortgages incurred or created in the ordinary course of business not arising in
connection with Indebtedness that do not in the aggregate materially impair the
use or value of the properties or assets of the Company and its Restricted
Subsidiaries taken as a whole, (b) Mortgages existing as of the date of the
Indenture, (c) Mortgages (other than Capital Leases) to secure the payment of
all or any part of the purchase price or construction costs in respect of
property or properties acquired by the Company or a Restricted Subsidiary after
the date of the Indenture securing Indebtedness incurred prior to, at the time
of, or within 360 days after, the acquisition of any such property or the
completion of any such construction and which secures Indebtedness not in
excess of the amount expended in the acquisition and improvements thereof, (d)
Mortgages upon any property or assets owned by any Restricted Subsidiary when
it becomes a Restricted Subsidiary, (e) Mortgages upon any property or assets
of any corporation existing at the time such corporation is merged into or
consolidated with the Company or any Restricted Subsidiary, or at the time of a
sale, lease or other disposition of the properties of an entity as an entirety
or substantially as an entirety to the Company or any Restricted Subsidiary,
(f) Mortgages upon any property when the property is acquired by the Company or
a Restricted Subsidiary, (g) Mortgages to secure the payment of all or any part
of the cost of improvements to any property owned by the Company or a
Restricted Subsidiary, (h) the extension, renewal or replacement of any
Mortgage permitted by subparagraph (b), (c), (d), (e), (f) or (g) above, but
only if the principal amount of Indebtedness secured by the Mortgage
immediately prior thereto is not increased and the Mortgage is not extended to
other property, (i) Mortgages for certain taxes or other governmental charges,
(j) Mortgages arising out of any final judgment for the payment of money
aggregating not in excess of $10,000,000, (k) Mortgages arising out of any
legal proceeding or final judgment which is being contested in good faith,
provided enforcement of any such lien has been stayed, (l) easements or similar
encumbrances, the existence of which do not materially impair the use of the
property subject thereto and (m) Mortgages securing Indebtedness of a
Restricted Subsidiary to the Company or to another Restricted Subsidiary.
(Section 1004(a)) Notwithstanding the foregoing, the Company or any Restricted
Subsidiary may create or assume Mortgages in addition to those permitted above,
and renew, extend or replace such Mortgages provided that at the time of such
creation, assumption, renewal, extension or replacement, and after giving
effect thereto, Exempted Debt does not exceed 15% of Consolidated Net Tangible
Assets. (Section 1004(b))
Restrictions on Sale and Leaseback Transactions. The Company will not, nor
will it permit any Restricted Subsidiary to, enter into any arrangement with
any person providing for the leasing by the Company or any Restricted
Subsidiary of any Operating Property or Operating Asset, whether now owned or
hereafter acquired, which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such persons
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with the intention of taking back a lease on such property (a "Sale and
Leaseback Transaction") unless (a) such transaction involves a lease or right
to possession or use for a temporary period not to exceed three years following
such sale, by the end of which it is intended that the use of such property by
the lessee will be discontinued, (b) the Company or a Restricted Subsidiary
would, on the effective date of such transaction, be entitled to issue, assume
or guarantee indebtedness secured by a Mortgage on such property at least equal
in an amount to the Attributable Debt in respect thereof, without equally and
ratably securing the Notes as set forth in the Indenture, or (c) if the
proceeds of such sale (i) are equal to or greater than the fair market value of
such property and (ii) are applied within 360 days after the receipt of the
proceeds of sale or transfer to either the purchase or acquisition of fixed
assets or equipment used in the operation of the business or the construction
of improvements on real property or to the repayment of Senior Funded Debt of
the Company or any Restricted Subsidiary. The preceding restriction shall not
apply to any Sale and Leaseback Transaction between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries. (Section 1005(a)) The
Company or any Restricted Subsidiary may enter into Sale and Leaseback
Transactions in addition to those permitted above, and without any obligation
to retire any Senior Funded Debt of the Company or a Restricted Subsidiary,
provided that, at the time of entering into such Sale and Leaseback
Transactions, and after giving effect thereto, Exempted Debt does not exceed
15% of Consolidated Net Tangible Assets. (Section 1005(b))
Waiver of Certain Covenants. The Company may omit in respect of any series
of Debt Securities issued under the Senior Indenture, in any particular
instance, to comply with any covenant or condition set forth under "Limitations
on Liens" and "Restrictions on Sale and Leaseback Transactions" above, if
before or after the time for such compliance the Holders of at least a majority
in principal amount of the Debt Securities at the time outstanding of such
series either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived
and, until such waiver shall become effective, the obligations of the Company
and the duties of the Senior Trustee in respect of any such covenant or
condition shall remain in full force and effect (Section 1005 of the Senior
Indenture).
Subordinated Indenture. The Subordinated Indenture does not contain the
limitations on liens and restrictions on sale and leaseback transactions
contained in the Senior Indenture.
Certain Definitions
Set forth below are certain significant terms which are defined in Section
101 of the Indenture:
"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
at the time of determination, the present value (discounted at the actual rate
of interest of such transaction) of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such Sale and
Leaseback Transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Capital Lease" means any lease of property which, in accordance with
generally accepted accounting principles, should be capitalized on the lessee's
balance sheet or for which the amount of the asset and liability thereunder as
if so capitalized should be disclosed in a note to such balance sheet.
"Consolidated" when used with respect to any of the terms defined in the
Indenture, refers to such terms as reflected in a consolidation of the accounts
of the Company and its Restricted Subsidiaries in accordance with generally
accepted accounting principles.
"Exempted Debt" means the sum of the following items outstanding as of the
date Exempted Debt is being determined: (i) Indebtedness for money borrowed of
the Company and its Restricted Subsidiaries incurred after the date of the
Indenture and secured by liens created or assumed or permitted to exist
pursuant to Section 1004(b) (excluding Indebtedness incurred in connection with
pollution control financings and industrial revenue bond financings) and (ii)
Attributable Debt of the Company and its Restricted Subsidiaries in respect of
all Sale and Leaseback Transactions entered into pursuant to Section 1005(b).
"Funded Debt" means Indebtedness, whether incurred, assumed or guaranteed,
which matures more than one year from the date of creation thereof, or which is
extendable or renewable at the sole option of the obligor so that it may become
payable more than one year from such date.
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"Indebtedness" of any person means, without duplication, indebtedness for
borrowed money and all indebtedness under purchase money mortgages or other
purchase money liens or conditional sales or similar title retention
agreements, in each case where such indebtedness has been created, incurred,
assumed or guaranteed by such person or where such person is otherwise liable
therefor, and indebtedness for borrowed money secured by any mortgage, pledge
or other lien or encumbrance upon property owned by such person even though
such person has not assumed or become liable for the payment of such
indebtedness.
"Investment" means and includes any investment in stock, evidences of
indebtedness, loans or advances, however made or acquired, but shall not
include accounts receivable of the Company or of any Restricted Subsidiary
arising from transactions in the ordinary course of business, or any evidences
of indebtedness, loans or advances made in connection with the sale to any
Restricted Subsidiary of accounts receivable of the Company or any Restricted
Subsidiary arising from transactions in the ordinary course of business of the
Company or any Restricted Subsidiary.
"Net Tangible Assets" means the total amounts of assets (less depreciation
and valuation reserves and other reserves and items deductible from gross book
value of specific asset accounts under generally accepted accounting
principles) which under generally accepted accounting principles would be
included on a balance sheet after deducting therefrom (a) all liability items
except Funded Debt, Capitalized Lease Obligations, stockholders' equity and
reserves for deferred income taxes and (b) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, which in each such case would be so included on such balance
sheet.
"Operating Assets" means all merchandise inventories, furniture, fixtures
and equipment (including all transportation and warehousing equipment but
excluding office equipment and data processing equipment) owned or leased
pursuant to Capital Leases by the Company or a Restricted Subsidiary.
"Operating Property" means all real property and improvements thereon
owned or leased pursuant to Capital Leases by the Company or a Restricted
Subsidiary and constituting, without limitation, any store, warehouse, service
center or distribution center wherever located, provided that such term shall
not include any store, warehouse, service center or distribution center which
the Company's Board of Directors declares by resolution not to be of material
importance to the business of the Company and its Restricted Subsidiaries.
"Restricted Subsidiaries" means all Subsidiaries other than Non-Restricted
Subsidiaries. "Non-Restricted Subsidiaries" means (a) any Subsidiary so
designated by the Board of Directors of the Company in accordance with the
Indenture and (b) any other Subsidiary of which the majority of the voting
stock is owned directly or indirectly by one or more Non-Restricted
Subsidiaries. The Indenture provides that, subject to certain restrictions, the
Company's Board of Directors may change the designations of Restricted
Subsidiaries and Non-Restricted Subsidiaries. Initially the Company will have no
Non-Restricted Subsidiaries.
"Senior Funded Debt" means all Funded Debt, except Funded Debt the payment
of which is subordinated to the payment of the Notes.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having voting power under ordinary circumstances for the
election of directors of said corporation is at the time owned by the Company,
or by the Company and one or more Subsidiaries, or by any one or more
Subsidiaries.
Events of Default, Notice and Waiver
Senior Indenture. The Senior Indenture provides that the following events
are Events of Default with respect to any series of Debt Securities issued
thereunder; (a) default for 30 days in the payment of any installment of
interest on any Debt Security of such series; (b) default in the payment of the
principal of (or premium, if any, on) any Debt Security of such series at its
Maturity; (c) default in making a sinking fund payment required for any Debt
Security of such series; (d) default in the performance of any other covenant
of the Company in the Senior Indenture (other than a covenant included in the
Senior Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
as provided in the Senior Indenture; (e) certain events of default resulting in
the acceleration of the maturity of the related indebtedness aggregating in
excess of $10,000,000 under any mortgages, indentures (including the
Indentures)
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or instruments under which the Company may have issued, or by which there may
have been secured or evidenced, any other indebtedness (including Debt
Securities of any other series) of the Company, but only if such indebtedness
is not discharged or such acceleration is not rescinded or annulled; (f)
certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Company or its
property; and (g) any other Event of Default provided with respect to a
particular series of Debt Securities (Section 501 of the Senior Indenture).
The Senior Trustee may withhold notice to the Holders of any series of
Debt Securities of any default with respect to such series (except a default in
the payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if the Responsible Officers of the
Senior Trustee consider such withholding to be in the interest of such Holders
(Section 601 of the Senior Indenture).
If an Event of Default under the Senior Indenture with respect to Debt
Securities of any series issued thereunder at the time Outstanding occurs and
is continuing, then in every such case the Senior Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of that
series may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms thereof) of all of the Debt Securities
of that series to be due and payable immediately by written notice thereof to
the Company (and to the Senior Trustee if given by the Holders). However, at
any time after such a declaration of acceleration with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Senior Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the Senior Trustee
prior to the Stated Maturity thereof, the Holders of a majority in principal
amount of Outstanding Debt Securities of such series (or of all Debt Securities
then Outstanding under the Senior Indenture, as the case may be) may, subject
to certain conditions, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal (or specified
portion thereof), with respect to Debt Securities of such series (or of all
Debt Securities then Outstanding under the Senior Indenture, as the case may
be) have been cured or waived as provided in the Senior Indenture (Section 502
of the Senior Indenture). The Senior Indenture also provides that the Holders
of not less than a majority in principal amount of the Outstanding Debt
Securities of any series issued thereunder (or of all Debt Securities then
Outstanding under the Senior Indenture, as the case may be) may, subject to
certain limitations, waive any past default with respect to such series and its
consequences (Section 513 of the Senior Indenture). Reference is made to the
Prospectus Supplement relating to any series of Debt Securities issued under
the Senior Indenture which are Original Issue Discount Securities for the
particular provisions relating to acceleration of a portion of the principal
amount of such Original Issue Discount Securities upon the occurrence of an
Event of Default and the continuation thereof. Within 120 days after the close
of each fiscal year, the Company must file with the Senior Trustee a statement,
signed by specified officers, stating whether or not such officers have
knowledge of any default under the Senior Indenture and, if so, specifying each
such default and the nature and status thereof (Section 1006 of the Senior
Indenture).
Subject to provisions in the Senior Indenture relating to its duties in
case of default, the Senior Trustee is under no obligation to exercise any of
its rights or powers under the Senior Indenture at the request or direction or
any Holders of any series of Debt Securities then Outstanding under the Senior
Indenture, unless such Holders shall have offered to the Senior Trustee
reasonable security or indemnity (Section 602 of the Senior Indenture). Subject
to such provisions for indemnification and certain limitations contained in the
Senior Indenture, the Holders of not less than a majority in principal amount
of the Outstanding Debt Securities of any series issued thereunder (or of all
Debt Securities then Outstanding under the Senior Indenture, as the case may
be) shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Trustee, or of exercising any
trust or power conferred upon the Senior Trustee (Section 512 of the Senior
Indenture).
Subordinated Indenture. The Subordinated Indenture provides that the
following events are the only Events of Default with respect to any series of
Debt Securities issued thereunder; (a) default for 30 days in the payment of
any installment of interest on any Debt Security of such series; (b) default in
the payment of the principal of (or premium, if any, on) any Debt Security of
such series at its Maturity; (c) default in making a sinking fund payment
required for any Debt Security of such series; (d) default in the performance
of any other
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<PAGE>
covenant of the Company in the Subordinated Indenture (other than a covenant
included in the Subordinated Indenture solely for the benefit of a series of
Debt Securities issued thereunder other than such series), continued for 60
days after written notice as provided in the Subordinated Indenture; (e)
certain events of default resulting in the acceleration of the maturity of the
related indebtedness aggregating in excess of $10,000,000 under any mortgages,
indentures (including the Indentures) or instruments under which the Company
may have issued, or by which there may have been secured or evidenced, any
other indebtedness (including Debt Securities of any other series) of the
Company, but only if such indebtedness is not discharged or such acceleration
is not rescinded or annulled; (f) certain events relating to the bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator or
trustee of the Company or its property; and (g) any other Event of Default
provided with respect to a particular series of Debt Securities (Section 501 of
the Subordinated Indenture).
As with the Senior Indenture, the Subordinated Trustee may withhold notice
to the Holders of any series of Debt Securities issued under the Subordinated
Indenture of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if the Responsible Officers of the
Subordinated Trustee consider such withholding to be in the interest of such
Holders (Section 601 of the Subordinated Indenture).
If an Event of Default under the Subordinated Indenture with respect to
Debt Securities of any series issued thereunder at the time Outstanding occurs
and is continuing, then in every such case the Subordinated Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms thereof) of all of the
Debt Securities of that series to be due and payable immediately by written
notice thereof to the Company (and to the Subordinated Trustee if given by the
Holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the Subordinated Indenture, as the case may be) has been
made, but before a judgment or decree for payment of the money due has been
obtained by the Subordinated Trustee prior to the Stated Maturity thereof, the
Holders of a majority in principal amount of Outstanding Debt Securities of
such series (or of all Debt Securities then Outstanding under the Subordinated
Indenture, as the case may be) may, subject to certain conditions, rescind and
annul such acceleration if all Events of Default with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Subordinated Indenture, as the case may be) have been cured or waived as
provided in such Indenture (Section 502 of the Subordinated Indenture). The
Subordinated Indenture also provides that the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of such series
issued thereunder (or of all Debt Securities then Outstanding under the
Subordinated Indenture, as the case may be) may, subject to certain
limitations, waive any past default with respect to such series and its
consequences (Section 513 of the Subordinated Indenture). Reference is made to
the Prospectus Supplement relating to any series of Debt Securities issued
under the Subordinated Indenture which are Original Issue Discount Securities
for the particular provisions relating to acceleration of a portion of the
principal amount of such Original Issue Discount Securities upon the occurrence
of an Event of Default and the continuation thereof. Within 120 days after the
close of each fiscal year, the Company must file with the Subordinated Trustee
a statement signed by specified officers, stating whether or not such officers
have knowledge of any default under the Subordinated Indenture, and, if so,
specifying each such default and the nature and status thereof (Section 1006 of
the Subordinated Indenture).
Subject to provisions in the Subordinated Indenture relating to its duties
in case of default, the Subordinated Trustee is under no obligation to exercise
any of its rights or powers under the Subordinated Indenture at the request or
direction of any Holders of any series of Debt Securities then Outstanding
under the Subordinated Indenture, unless such Holders shall have offered to the
Subordinated Trustee reasonable security or indemnity (Section 602 of the
Subordinated Indenture). Subject to such provisions for indemnification and
certain limitations contained in the Subordinated Indenture, the Holders of not
less than a majority in principal amount of the Outstanding Debt Securities of
any series issued thereunder (or of all Debt Securities then Outstanding under
the Subordinated Indenture, as the case may be) shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Subordinated Trustee, or of exercising any trust or power
conferred upon the Subordinated Trustee (Section 512 of the Subordinated
Indenture).
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Modification of the Indentures
Senior Indenture. Modifications and amendments of the Senior Indenture may
be made only with the consent of the Holders of not less than a majority in
aggregate principal amount of each series of Outstanding Debt Securities under
the Senior Indenture which are affected by the modification or amendment;
provided that no such modification or amendment may, without the consent of the
Holder of each such Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of interest (or premium, if
any) on, any such Debt Security; (b) reduce the principal amount of, or the
rate or amount of interest on, or any premium payable on redemption of, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration of
acceleration of the Maturity thereof or would be provable in bankruptcy, or
adversely affect any right of repayment of the Holder of any such Debt
Security; (c) change the Place of Payment, or the coin or currency, for payment
of principal of, premium, if any, or interest on any such Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; or (e) reduce the above-stated
percentage of Outstanding Debt Securities of any series necessary to modify or
amend the Senior Indenture or to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder (Section 902 of the
Senior Indenture).
Subordinated Indenture. Modifications and amendments of the Subordinated
Indenture may be made only with the consent of the Holders of not less than a
majority in aggregate principal amount of each series of Outstanding Debt
Securities under the Subordinated Indenture which are affected by the
modification or amendment; provided that no such modification or amendment may,
without the consent of the Holder of each such Debt Security affected thereby,
(a) change the Stated Maturity of the principal of, or any installment of
interest (or premium, if any) on, any such Debt Security; (b) reduce the
principal amount of, or the rate or amount of interest on, or any premium
payable on redemption of, any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon declaration of acceleration of the Maturity thereof or would be provable
in bankruptcy, or adversely affect any right of the repayment of the Holder of
any such Debt Security; (c) change the Place of Payment, or the coin or
currency, for payment of principal of, premium, if any, or interest on any such
Debt Security; (d) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Debt Security; (e) reduce the
above-stated percentage of Outstanding Debt Securities of any series necessary
to modify or amend the Subordinated Indenture or to waive compliance with
certain provisions thereof or certain defaults and consequences thereunder; or
(f) subordinate the indebtedness evidenced by any such Debt Security to any
indebtedness of the Company other than Senior Indebtedness (as defined in the
Subordinated Indenture) (Section 902 of the Subordinated Indenture).
Defeasance and Covenant Defeasance
The Indentures provide that, if the provisions of Article Fourteen are
made applicable to the Debt Securities of or within any series and any related
coupons pursuant to Section 301 of either Indenture, the Company may elect
either (a) to defease and be discharged from any and all obligations with
respect to such Debt Securities and any related coupons (except for the
obligation to pay Additional Amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange
of such Debt Securities and any related coupons, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities and any related coupons,
to maintain an office or agency in respect of such Debt Securities and any
related coupons and to hold moneys for payment in trust) ("defeasance")
(Section 1402 of the Indentures) or (b) to be released from its obligations
with respect to such Debt Securities and any related coupons under Sections
1004 and 1005 of the Senior Indenture (being the restrictions described under
"Limitation on Liens" and "Restrictions on Certain Dispositions," respectively)
or, if provided pursuant to Section 301 of either Indenture, its obligations
with respect to any other covenant, and any omission to comply with such
obligations shall not constitute a default or an Event of Default with respect
to such Debt Securities and any related coupons ("covenant defeasance")
(Section 1403 of the Indentures), in either case upon the irrevocable deposit
by the Company with the relevant Trustee (or other qualifying trustee), in
trust, of an amount, in such currency or currencies, currency unit or units or
composite currency or currencies in which such Debt Securities and any related
coupons are then specified as payable at Stated Maturity, or Government
Obligations (as defined below), or both, applicable to such Debt Securities and
any related coupons (with such applicability being determined on the basis of
the currency, currency unit or composite currency in
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<PAGE>
which such Debt Securities are then specified as payable at Stated Maturity)
which through the payment of principal and interest in accordance with their
terms will provide money in an amount sufficient to pay the principal of (and
premium, if any) and interest, if any, on such Debt Securities and any related
coupons, and any mandatory sinking fund or analogous payments thereon, on the
scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company
has delivered to the relevant Trustee an Opinion of Counsel (as specified in
the Indentures) to the effect that the Holders of such Debt Securities and any
related coupons will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance under clause (a) above, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable United States federal
income tax law occurring after the date of the Indenture (Section 1404 of the
Indentures).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 101 of the
Indentures).
Unless otherwise provided in the applicable Prospectus Supplement, if
after the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the terms of such Debt Security to receive payment in a
currency, currency unit or composite currency other than that in which such
deposit has been made in respect of such Debt Security, or (b) the currency,
currency unit or composite currency in which such deposit has been made in
respect of any Debt Security of such series ceases to be used by its government
of issuance, the indebtedness represented by such Debt Security shall be deemed
to have been, and will be, fully discharged and satisfied through the payment
of the principal of (and premium, if any) and interest, if any, on such Debt
Security as they become due out of the proceeds yielded by converting the
amount so deposited in respect of such Debt Security into the currency,
currency unit or composite currency in which such Debt Security becomes payable
as a result of such election or such cessation of usage based on the applicable
Market Exchange Rate (Section 1405 of the Indentures). Unless otherwise
provided in the applicable Prospectus Supplement, all payments of principal of
(and premium, if any) and interest, if any, and Additional Amounts, if any, on
any Debt Security that is payable in a foreign currency, currency unit or
composite currency that ceases to be used by its government of issuance shall
be made in U.S. dollars (Section 412 of the Indentures).
In the event the Company effects covenant defeasance with respect to any
Debt Securities and any related coupons and such Debt Securities and any
related coupons are declared due and payable because of the occurence of any
Event of Default other than the Event of Default described in clause (d) under
"Events of Default, Notice and Waiver" with respect to Sections 1004 and 1005
of the Senior Indenture (which Sections would no longer be applicable to such
Debt Securities or any related coupons) or described in clause (d) or (g) under
"Events of Default, Notice and Waiver" with respect to any other covenant with
respect to which there has been defeasance, the amount in such currency,
currency unit or composite currency in which such Debt Securities and any
related coupons are payable, and Government Obligations on deposit with the
relevant Trustee, will be sufficient to pay amounts due on such Debt Securities
and any related coupons at the time of
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<PAGE>
their Stated Maturity but may not be sufficient to pay amounts due on such Debt
Securities and any related coupons at the time of the accleration resulting
from such Event of Default. However, the Company would remain liable to make
payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series and any related coupons.
Senior Securities
Senior Securities are to be issued under the Senior Indenture. Each series
of Senior Securities will constitute Senior Indebtedness and will rank equally
with each other series of Senior Securities and other Senior Indebtedness. All
subordinated debt (including, but not limited to, all Subordinated Securities
issued under the Subordinated Indenture) will be subordinated to the Senior
Securities and other Senior Indebtedness.
Subordination of Subordinated Securities
Subordinated Indenture. The payment of the principal of (and premium, if
any) and interest on the Subordinated Securities will be subordinated as set
forth in the Subordinated Indenture to the Senior Indebtedness of the Company,
whether outstanding on the date of the Subordinated Indenture or thereafter
incurred (Section 1701 of the Subordinated Indenture). At May 3, 1997, the
aggregate Senior Indebtedness of the Company was approximately $421.9 million.
The Indenture does not prohibit or limit the incurring of additional Senior
Indebtedness by the Company.
Ranking. No class of Subordinated Securities is subordinated to any other
class of subordinated debt securities. See "Subordination Provisions" below.
Subordination Provisions. In the event (a) of any distribution of assets
of the Company upon any dissolution, winding up, liquidation or reorganization
of the Company, whether in bankruptcy, insolvency, reorganization or
receivership proceedings or upon an assignment for the benefit of creditors or
any other marshalling of the assets and liabilities of the Company or
otherwise, except a distribution in connection with a merger or consolidation
or a conveyance or transfer of all or substantially all of the properties of
the Company which complies with the requirements of Article Eight of the
Subordinated Indenture, or (b) that a default shall have occurred and be
continuing with respect to the payment of principal of (or premium, if any) or
interest on any Senior Indebtedness, or (c) that the principal of the
Subordinated Securities of any series issued under the Subordinated Indenture
(or in the case of Original Issue Discount Securities, the portion of the
principal amount thereof referred to in Section 502 of the Subordinated
Indenture) shall have been declared due and payable pursuant to Section 502 of
the Subordinated Indenture, and such declaration shall not have been rescinded
and annulled as provided in said Section 502, then:
(1) in a circumstance described in the foregoing clause (a) or (b), the
holders of all Senior Indebtedness and in the circumstance described in the
foregoing clause (c), the holders of all Senior Indebtedness outstanding at
the time the principal of such Subordinated Securities issued under the
Subordinated Indenture (or in the case of Original Issue Discount
Securities, such portion of the principal amount) shall have been so
declared due and payable, shall first be entitled to receive payment of the
full amount due thereon in repsect of principal, premium (if any) and
interest, or provision shall be made for such payment in money or money's
worth, before the Holders of any of the Subordinated Securities are
entitled to receive any payment on account of the principal of (or premium,
if any) or interest on the indebtedness evidenced by the Subordinated
Securities;
(2) if upon any payment or distribution contemplated in clause (1) after
giving effect to the subordination provisions contemplated therein there
shall remain any amounts of cash, property or securities of the Company
available for payment or distribution in respect of Subordinated
Securities, then the amount of such cash, property or securities shall be
shared ratably among the Holders of all Subordinated Securities issued
under the Subordinated Indenture and any subordinated indebtedness ranking
on a parity therewith;
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<PAGE>
(3) any payment by, or distribution of assets of, the Company of any
kind or character, whether in cash, property or securities (other than
certain subordinated securities of the Company issued in a reorganization
or readjustment), to which the Holders of any of the Subordinated
Securities would be entitled except for the provisions of Article Seventeen
of the Subordinated Indenture shall be paid or delivered by the person
making such payment or distribution directly to the holders of Senior
Indebtedness (as provided in clauses (1) and (2) above), or on their
behalf, ratably according to the aggregate amounts remaining unpaid on
account of such Senior Indebtedness, to the extent necessary to make
payment in full of all Senior Indebtedness (as provided in clauses (1) and
(2) above) remaining unpaid after giving effect to any concurrent payment
or distribution (or provision therefor) to the holders of such Senior
Indebtedness, before any payment or distribution is made to or in respect
of the Holders of the Subordinated Securities;
(4) in the event that, notwithstanding the foregoing, any payment by, or
distribution of assets of, the Company of any kind or character is received
by the Holders of any of the Subordinated Securities issued under the
Subordinated Indenture before all Senior Indebtedness is paid in full, such
payment or distribution shall be paid over to the holders of such Senior
Indebtedness or on their behalf, ratably as aforesaid, for application to
the payment of all such Senior Indebtedness remaining unpaid until all such
Senior Indebtedness shall have been paid in full, after giving effect to
any concurrent payment or distribution (or provision therefor) to the
holders of such Senior Indebtedness.
By reason of such subordination in favor of the holders of Senior
Indebtedness in the event of insolvency, certain general creditors of the
Company, including holders of Senior Indebtedness, may recover more, ratably,
than the Holders of the Subordinated Securities.
Definition of Senior Indebtedness
Senior Indebtedness is defined in the Subordinated Indenture to mean (i)
the principal of and premium, if any, and unpaid interest on indebtedness for
money borrowed, (ii) purchase money and similar obligations, (iii) obligations
under capital leases, (iv) guarantees, assumptions or purchase commitments
relating to, or other transactions as a result of which the Company is
responsible for the payment of, such indebtedness of others, (v) renewals,
extensions and refunding of any such indebtedness, (vi) interest or obligations
in respect of any such indebtedness accruing after the commencement of any
insolvency or bankruptcy proceedings; and (vii) obligations associated with
derivative products such as interest rate and currency exchange contracts,
foreign exchange contracts, commodity contracts, and similar arrangements,
unless, in each case, the instrument by which the Company incurred, assumed or
guaranteed the indebtedness or obligations described in clauses (i) through
(vii) hereof expressly provides that such indebtedness or obligation is
subordinate or junior in right of payment to any other indebtedness or
obligations of the Company.
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PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of the following ways (or
in any combination thereof): (i) through underwriters or dealers; (ii) directly
to a limited number of purchasers or to a single purchaser; or (iii) through
agents. The Prospectus Supplement with respect to any Debt Securities will set
forth the terms of the offering of such Debt Securities, including the name or
names of any underwriters, dealers or agents and the respective amounts of such
Debt Securities underwritten or purchased by each of them, the public offering
price of such Debt Securities and the proceeds to the Company from such sale,
any discounts, commissions or other items constituting compensation from the
Company and any discounts, commissions or concessions allowed or reallowed or
paid to dealers and any securities exchanges on which such Debt Securities may
be listed.
If underwriters are used in the sale of any Debt Securities, such Debt
Securities will be acquired by the underwriters for their own account and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Such Debt Securities may be either offered to the public
through underwriting syndicates represented by managing underwriters, or
directly by underwriters.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a reasonable efforts
basis for the period of its appointment. Any underwriters, dealers or agents
participating in the offering may be deemed "underwriters" within the meaning
of the Securities Act of 1933, as amended.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain purchasers to
purchase Debt Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the agents or underwriters may be required to
make in respect thereof.
The Debt Securities may or may not be listed on a national securities
exchange. No assurances can be given that there will be a market for the Debt
Securities.
LEGAL MATTERS
The validity of the authorization and issuance of the Debt Securities
offered hereby is being passed upon for the Company by Willkie Farr &
Gallagher, New York, New York.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended February 1, 1997 have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
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No dealer, agent, salesperson or any other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus, Prospectus Supplement and any Pricing Supplement in
connection with the offer contained herein and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or by any Distributor. This Prospectus, Prospectus
Supplement and any Pricing Supplement shall not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the securities
described in this Prospectus, Prospectus Supplement or any Pricing Supplement
or an offer to sell or the solicitation of an offer to buy any of the
securities offered hereby in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus, Prospectus
Supplement or any Pricing Supplement nor any sale made hereunder or thereunder
shall, under any circumstances, create any implication that the information
contained herein or therein is correct as of any time subsequent to their
respective dates.
-----------------------------------
TABLE OF CONTENTS
Page
----
Prospectus Supplement
The Company .............................. S-3
Selected Financial Data .................. S-4
Description of the Notes .................. S-5
Special Considerations Relating to Foreign
Currency Notes and Indexed Notes ...... S-19
United States Taxation .................. S-20
Supplemental Plan of Distribution of the
Notes ................................. S-28
Validity of the Notes ..................... S-29
Glossary ................................. S-30
Prospectus
Available Information ..................... 2
Incorporation of Certain Documents by
Reference .............................. 2
The Company .............................. 3
Ratios of Earnings to Fixed Charges ...... 4
Use of Proceeds ........................... 4
Description of Debt Securities ............ 5
Plan of Distribution ..................... 18
Legal Matters ........................... 18
Experts ................................. 18
<PAGE>
================================================================================
[GRAPHIC OMITTED]
U.S. $150,000,000
Medium-Term Notes,
Series A
PROSPECTUS SUPPLEMENT
Credit Suisse First Boston
================================================================================
