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Filed Pursuant to Rule 424(b)(2)
Registration Number 33-52669
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 23, 1994
[LOGO OF PHH CORPORATION APPEARS HERE]
$2,000,000,000
PHH CORPORATION
MEDIUM-TERM NOTES
DUE FROM 9 MONTHS TO 40 YEARS FROM DATE OF ISSUE
---------------
PHH Corporation (the "Company") may offer from time to time up to
$2,000,000,000 aggregate principal amount, or the equivalent thereof in
foreign currencies or currency units, of its Medium-Term Notes (the "Notes"),
subject to reduction as a result of the concurrent sale of other Debt
Securities of the Company. Each Note may be denominated or payable in U.S.
dollars or in a foreign currency, European Currency Units ("ECU") or such
other currency unit specified in the applicable Pricing Supplement (the
"Specified Currency"). The Notes will mature on any day from 9 months to 40
years from the date of issue, as selected by the initial purchaser and agreed
to by the Company. The specific interest rates and maturities of Notes sold
will be set forth in Pricing Supplements to this Prospectus Supplement.
Interest rates or interest rate formulas are subject to change by the Company
from time to time but no such change will affect any Note theretofore issued
or which the Company has agreed to sell. The Notes may be denominated in U.S.
dollars or in such foreign currencies or currency units or in amounts
determined by reference to an index as may be designated by the Company at the
time of the offering and set forth in a Pricing Supplement. Unless otherwise
indicated in the applicable Pricing Supplement, each Note will bear interest
at a fixed rate (a "Fixed Rate Note") or at a floating rate (a "Floating Rate
Note") determined by reference to the Commercial Paper Rate, the CD Rate, the
Federal Funds Effective Rate, LIBOR, the Treasury Rate, the Prime Rate or such
other base rate or interest rate formula as may be designated in any
accompanying Pricing Supplement. Except as described herein or in the
applicable Pricing Supplement, interest on each Fixed-Rate Note will accrue
from its issue date and will be payable February 15 and August 15 of each year
and at maturity. Interest on each Floating Rate Note will be payable on the
dates indicated therein and in the applicable Pricing Supplement. The Notes
will not be subject to redemption or repayment prior to their stated maturity
unless otherwise specified in the applicable Pricing Supplement. See
"Description of Notes." As of January 31, 1994, the aggregate amount of
outstanding indebtedness of the Company to which the Notes will rank pari
passu, including medium-term notes, commercial paper and commercial bank
loans, was $3,192,231,000. As of that date, there were $1,248,485,000
aggregate principal amount of medium-term notes outstanding.
The Notes will be issued in fully registered certificated form (a
"Certificated Note") or in the form of one or more fully registered global
notes (a "Global Note") in denominations of $1,000 and integral multiples of
$1,000 in excess thereof. Beneficial interest in Global Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
The Depository Trust Company, as depositary (the "Depositary") and its
participants. See "Description of Notes--Global Notes."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1)(2) COMPANY(2)(3)
--------- --------------------- -------------
<S> <C> <C> <C>
Per Note... 100% .125%-.750% 99.875%-99.250%
Total(4)... $2,000,000,000 $2,500,000-$15,000,000 $1,997,500,000-$1,985,000,000
</TABLE>
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(1) Notes may be sold at discounts from their principal amounts, if provided
for in the applicable Pricing Supplements.
(2) The Company will pay a commission to the Agents of from .125% to .750%,
depending upon the Note maturity, of the principal amount of any Note with
a maturity of up to 30 years sold through them as agents. Commissions on
agency sales of Notes with maturities of more than 30 years will be
determined at the time of sale. In addition, the Company may sell Notes to
an Agent as principal at negotiated discounts for resale to investors or
other purchasers at varying prices related to prevailing market prices at
the time of resale, as determined by such Agent. No commission will be
payable on any sales made directly by the Company. The Company has agreed
to indemnify the Agents against certain liabilities, including liabilities
under the Securities Act of 1933, and to reimburse the Agents for certain
expenses.
(3) Before deduction of estimated expenses of the offering of $ .
(4) Or the equivalent thereof in foreign currencies or currency units.
---------------
The Notes are offered on a continuing basis by the Company through the
Agents, as set forth below, which have agreed to use best efforts to solicit
purchases of the Notes. The Company also may sell Notes to any Agent acting as
principal at negotiated discounts for resale to one or more investors or other
purchasers. The Company has the right to sell the Notes directly on its own
behalf and to appoint additional agents under the Distribution Agreement. The
Notes will not be listed on any securities exchange, and there can be no
assurance that the Notes offered by this Prospectus Supplement will be sold or
that there will be a secondary market for the Notes. The Company reserves the
right to withdraw, cancel or modify the offering contemplated hereby without
notice. The Company or the Agents may reject any offer to purchase the Notes
in whole or in part. See "Supplemental Plan of Distribution."
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.
---------------
The date of this Prospectus Supplement is June 23, 1994.
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IN CONNECTION WITH THE DISTRIBUTION OF NOTES UNDERWRITTEN BY AN AGENT ACTING
AS PRINCIPAL, SUCH AGENT MAY OVER-ALLOT OR EFFECT TRANSACTIONS IN THE NOTES
WITH A VIEW TO STABILIZING OR MAINTAINING THE MARKET PRICE OF THE NOTES AT
LEVELS OTHER THAN THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN ANY OVER-THE-COUNTER MARKET OR OTHERWISE AND,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
The following description of the terms of the Medium-Term Notes of PHH
Corporation (the "Company") offered hereby (the "Notes") supplements, and to
the extent inconsistent therewith replaces, insofar as such description relates
to the Notes, the description of the general terms and provisions of the Debt
Securities set forth in the Prospectus, to which description reference is
hereby made. The following description of the Notes will apply unless otherwise
specified in an applicable Pricing Supplement.
GENERAL
The Notes are to be issued under an Indenture dated as of March 1, 1993 (the
"Indenture"), between the Company and The First National Bank of Chicago, as
trustee (the "Trustee"), as described more fully in the Prospectus. The Notes
offered hereby constitute a portion of a single series of Debt Securities for
purposes of the Indenture, unlimited in aggregate principal amount. The
aggregate principal amount in which the Notes offered hereby may be issued is
limited to $2,000,000,000 (or the equivalent thereof in foreign currencies or
currency units), less an amount equal to the gross proceeds from the sales of
other Debt Securities (other than the Notes) pursuant to the Registration
Statement of which the accompanying Prospectus is a part. The statements herein
concerning the Notes and the Indenture do not purport to be complete. They are
qualified in their entirety by reference to the provisions of the Indenture,
including the definitions of certain terms used herein without definition. A
copy of the Indenture has been filed with the Securities and Exchange
Commission.
The Notes will be unsecured obligations of the Company and will rank prior to
all subordinated indebtedness of the Company and on a parity with all other
unsecured indebtedness of the Company. Although the Notes will not be
subordinated in right of payment to any other indebtedness of the Company, the
right of the Company and its creditors, including the holders of Notes, under
general equitable principles, to participate in any distributions of assets of
any subsidiary of the Company upon the Company's liquidation or reorganization
or otherwise is, unless there is a substantive consolidation of the Company
with its subsidiaries, likely to be subject to the prior claims of creditors of
such subsidiary, except to the extent that claims of the Company itself as a
creditor may be recognized. As of January 31, 1994, the aggregate amount of
outstanding indebtedness of subsidiaries of the Company was $437,470,000.
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that Debt Securities may
be issued in one or more series up to the aggregate principal amount which may
be authorized from time to time by the Company. The Company may, from time to
time, without the consent of the holders of the Notes (the "Holders"), provide
for the issuance of additional Notes or other Debt Securities under the
Indenture. As used herein, "Holder" includes the Depositary with respect to
Global Notes.
The Notes will be offered on a continuing basis and will mature on any day
from 9 months to 40 years from the date of issue, as selected by the initial
purchaser and agreed to by the Company (the "Stated Maturity"), and may be
subject to redemption or repayment prior to Stated Maturity at the price or
prices specified in the applicable Pricing Supplement. "Maturity" means, when
used with respect to
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the Notes, the date on which the principal of such Note or an installment of
principal becomes due and payable as therein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
Unless otherwise specified in any applicable Pricing Supplement, each Note
will bear interest at either (a) a fixed rate or (b) a floating rate
determined by reference to an interest rate formula or a Base Rate (as
hereinafter defined), which may be adjusted by adding or subtracting the
Spread and/or multiplying by the Spread Multiplier (as hereinafter defined).
Each Note will be issued initially as either a Global Note or a Certificated
Note and, if denominated in U.S. dollars, in denominations of $1,000 and
integral multiples of $1,000 in excess thereof or, if denominated in any
foreign currency or currency units, the dollar equivalent in such foreign
currency or currency units. For a description of the denominations of Notes
denominated or payable in a Specified Currency other than U.S. dollars (a
"Foreign Currency Note") see "Special Provisions Relating to Foreign Currency
Notes." Certificated Notes may be transferred or exchanged at the offices of
the Trustee, 14 Wall Street, Eighth Floor, New York, New York 10005. Global
Notes may be transferred or exchanged through a participating member of the
Depositary. See "Global Notes" below. 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.
Interest rates or interest rate formulas are subject to change by the
Company from time to time but no such change will affect any Note theretofore
issued or which the Company has agreed to sell.
Unless otherwise indicated in the applicable Pricing Supplement, the
Interest Payment Dates for Fixed Rate Notes shall be as described below under
"Fixed Rate Notes." The Interest Payment Dates for Floating Rate Notes shall
be as indicated in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, each Regular Record Date for a
Fixed Rate Note or a Floating Rate Note will be the fifteenth day (whether or
not a Business Day) next preceding each Interest Payment Date.
The Notes are referred to in the accompanying Prospectus as the "Debt
Securities." For a description of the rights attaching to different series of
Debt Securities under the Indenture, see "Description of Debt Securities" in
the Prospectus attached hereto.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal, premium, if any, and interest on Global Notes will be
made to the Depositary by wire transfer, either in same day funds or in next
day funds. See "--Global Notes" below. In the case of Certificated Notes,
principal, premium, if any, and interest will be payable, the transfer of the
Notes will be registrable, and Notes will be exchangeable for Notes bearing
identical terms and provisions at the offices of the Trustee, 14 Wall Street,
Eighth Floor, New York, New York 10005; provided, however, that payment of
interest, other than interest at Maturity, may be made at the option of the
Company by check mailed to the address of the person in whose name the
applicable Note is registered at the close of business on the relevant Regular
Record Date (as hereinafter defined) as shown on the applicable security
register (which in the case of Global Notes will be a nominee of the
Depositary). Notwithstanding the foregoing, a holder of U.S. $10,000,000 or
more in aggregate principal amount of Notes of like tenor and term (or a
holder of the equivalent thereof in a Specified Currency other than U.S.
dollars) shall be entitled to receive interest payments (other than an
interest payment due at Maturity) by wire transfer of immediately available
funds to a designated account maintained in the United States, but only if
proper instructions have been received in writing by the Trustee on or prior
to the applicable Regular Record Date. Such instructions shall remain in
effect with respect to payments of interest made to such holder on subsequent
Interest Payment Dates unless revoked or changed by written instructions
received by
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the Trustee from such holder, provided that any such written revocation or
change which is received by the Trustee after a Regular Record Date and before
the related Interest Payment Date shall not be effective with respect to the
interest payable on such Interest Payment Date. Interest will be payable on
each date specified in the Note on which an installment of interest is due and
payable (an "Interest Payment Date") and at Maturity. If the original issue
date of a Note is between a Regular Record Date and the related Interest
Payment Date, the initial interest payment will be made on the Interest Payment
Date following the next succeeding Regular Record Date to the registered Holder
on such next succeeding Regular Record Date unless otherwise specified in the
applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement, interest
payments 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 (an "Interest Accrual Period"). However, unless otherwise
specified in an applicable Pricing Supplement, in the case of Floating Rate
Notes on which the interest rate is reset daily or weekly, the interest
payments will include interest from but excluding the second Regular Record
Date preceding the applicable Interest Payment Date (or from and including the
date of issue, if no interest has been paid with respect to such Note) through
and including the Regular Record Date next preceding the applicable Interest
Payment Date, except that the interest payment on Maturity will include
interest accrued to but excluding such date. In the case of Certificated Notes,
payment of principal, premium, if any, and interest payable at Maturity on each
Certificated Note will be paid in immediately available funds against
presentation of the Certificated Note at the offices of the Trustee, 14 Wall
Street, Eighth Floor, New York, New York 10005; provided that the Certificated
Notes are presented to the Trustee in time for the Trustee to make such
payments in such funds in accordance with its normal procedures. Interest
payable at Maturity will be payable to the person to whom the principal of the
Note shall be paid.
"Business Day" means any day, other than a Saturday or Sunday, that meets
each of the following applicable requirements: the day is (a) not a legal
holiday or a day on which banking institutions are authorized or required by
law or regulation to be closed in The City of New York, (b) if the Note is
denominated or payable in a Specified Currency other than U.S. dollars, (i) not
a day on which banking institutions are authorized or required by law or
regulation to close in the major financial center of the country issuing the
Specified Currency (which in the case of ECU shall include the financial center
of each country that issues a component currency of the ECU) and (ii) a day on
which banking institutions in such financial center are carrying out
transactions in such Specified Currency and (c) with respect to LIBOR Notes (as
defined below), also a London Banking Day."London Banking Day" means any day on
which dealings on deposits in U.S. dollars are transacted in the London
interbank market.
REDEMPTION AND REPAYMENT
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be redeemable prior to their Stated Maturity. If so specified in an
applicable Pricing Supplement with respect to a Note or Notes, such Note or
Notes will be redeemable on or after the date set forth in such Pricing
Supplement, either in whole or from time to time in part, at the option of the
Company, at a redemption price (the "Redemption Price") determined in
accordance with the following paragraph, together with interest accrued thereon
to but excluding the date of redemption, on notice given not more than 60 nor
less than 30 days prior to the date of redemption.
The Redemption Price for each Note subject to redemption shall initially be
equal to a certain percentage (the "Initial Redemption Percentage") of the
principal amount of such Note to be redeemed and shall decline at each
anniversary of the Initial Redemption Date with respect to such Note by a
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percentage (the "Annual Redemption Percentage Reduction") of the principal
amount to be redeemed until the Redemption Price is 100% of such principal
amount. The Initial Redemption Percentage and any Annual Redemption Percentage
Reduction with respect to each Note subject to redemption prior to Stated
Maturity will be fixed at the time of sale and set forth in the applicable
Pricing Supplement and in the applicable Note.
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to repayment at the option of the Holders. If so specified
in an applicable Pricing Supplement with respect to a Note or Notes, such Note
or Notes will be subject to repayment at the option of the Holders thereof in
accordance with the terms of the Notes on their respective optional repayment
dates fixed at the time of sale and set forth in the applicable Pricing
Supplement and in the applicable Note (the "Optional Repayment Dates"). On any
Optional Repayment Date with respect to a Note, such Note will be repayable in
whole or in part at the option of the Holder thereof at a price equal to 100%
of the principal amount to be repaid, together with interest thereon payable to
the Optional Repayment Date, on notice given by such Holder to the Company not
more than 60 nor less than 30 days prior to the Optional Repayment Date.
If a Note is represented by a Global Note, the Depositary's nominee will be
the Holder of such Note and therefore will be the entity through which the
beneficial owners of Global Notes may exercise a right to repayment. In order
to ensure that the Depositary's nominee will timely exercise a right to
repayment with respect to a particular Note, the beneficial owner of such Note
must instruct the broker or other direct or indirect participant through which
it holds an interest in such Note to notify the Depositary of its desire to
exercise a right to repayment. The Depositary would then notify the Trustee.
Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other direct or indirect participant through which it holds an
interest in a Global 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.
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to any sinking fund.
FIXED RATE NOTES
Unless otherwise specified in an applicable Pricing Supplement, each Fixed
Rate Note will bear interest from the date of issue at the annual rate stated
on the face thereof, payable semiannually on February 15 and August 15 of each
year and at Maturity, subject to certain exceptions. Unless otherwise specified
in an applicable Pricing Supplement, interest on the Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months. Interest on
the Fixed Rate Notes will be payable generally to the person in whose name the
Note is registered at the close of business on the Regular Record Date.
However, interest payable at Maturity will be payable to the person to whom
principal shall be payable.
If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on a
day that is not a Business Day, the payment will be made on the next Business
Day as if it were 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
Each Floating Rate Note will bear interest at a floating rate determined by
reference to a Base Rate or an interest rate formula specified in the
applicable Pricing Supplement. Any Floating Rate Note may also have either or
both of the following: (i) a maximum numerical interest rate limitation, or
ceiling, on the rate of interest which may accrue during any interest period,
and (ii) a minimum numerical interest
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rate limitation, or floor, on the rate of interest which may accrue during any
interest period. Interest on the Floating Rate Notes will be determined by
reference to a "Base Rate," which may be: (a) the CD Rate in which case such
Note will be a "CD Rate Note," (b) the Commercial Paper Rate in which case such
Note will be a "Commercial Paper Rate Note," (c) the Federal Funds Effective
Rate in which case such Note will be a "Federal Funds Effective Rate Note," (d)
LIBOR in which case such Note will be a "LIBOR Note," (e) the Treasury Rate in
which case such Note will be a "Treasury Rate Note," (f) the Prime Rate in
which case such Note will be a "Prime Rate Note" or (g) such other Base Rate or
interest rate formula as is set forth in such Pricing Supplement. The
applicable Pricing Supplement will specify the interest rate formula or the
Base Rate and the Index Maturity, the Spread and/or Spread Multiplier, if any,
and the maximum or minimum interest rate limitation, if any, applicable to each
Floating Rate Note. In addition, such Pricing Supplement may contain
information concerning the Calculation Agent, Calculation Dates, Initial
Interest Rate, Interest Determination Dates, Interest Payment Period, Interest
Payment Dates, Maturity, Regular Record Dates, Interest Reset Dates, Interest
Reset Period, and, if applicable, the Initial Redemption Dates, the Initial
Redemption Percentage, Annual Redemption Percentage Reduction and Optional
Repayment Date, with respect to such Floating Rate Note. The "Index Maturity"
is the period to maturity of an instrument or obligation with respect to which
the Base Rate is calculated. The "Spread" is the number of basis points above
or below the Base Rate applicable to such Floating Rate Note, and the "Spread
Multiplier" is the percentage of the Base Rate applicable to the interest rate
for such Floating Rate Note. The Spread, Spread Multiplier, Index Maturity and
other variable terms of the Floating Rate Notes are subject to change by the
Company from time to time, but no such change will affect any Floating Rate
Note theretofore issued or as to which an offer to purchase has been accepted
by the Company.
Unless otherwise specified in an applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semi-annually or annually (each an "Interest Reset Date"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
an applicable Pricing Supplement, the Interest Reset Date will be, in the case
of Floating Rate Notes which reset daily, each Business Day; in the case of
Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Tuesday of each week (except as provided below); in the case of Floating
Rate Notes which reset monthly, the third Wednesday of each month; in the case
of Floating Rate Notes which reset quarterly, the third Wednesday of each
February, May, August and November; in the case of Floating Rate Notes which
reset semi-annually, the third Wednesday of each 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 one month of each year,
as specified in the applicable Pricing Supplement; provided, however, that,
unless otherwise specified in an applicable Pricing Supplement, the interest
rate in effect from the date of issue to the first Interest Reset Date with
respect to a Floating Rate Note will be the Initial Interest Rate (as set forth
in the applicable Pricing Supplement). If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is not a Business Day for such
Floating Rate Note, the Interest Reset Date for such Floating Rate Note shall
be postponed to the next day that is a Business Day for such Floating Rate
Note, except that in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Business Day.
The interest rate applicable to each Interest Accrual Period commencing on an
Interest Reset Date will be the rate determined by reference to the Interest
Determination Date. The Interest Determination Date with respect to (a) a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), (b) a Federal Funds Effective Rate Note (the "Federal Funds Interest
Determination Date"), (c) a CD Rate Note (the "CD Interest Determination Date")
or (d) a Prime Rate Note (the "Prime Interest Determination Date") will be the
second Business Day prior to the Interest Reset Date for 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
Banking Day prior to such Interest Reset Date.
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The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note (the "Treasury Interest Determination Date") will be the day
of the week in which such Interest Reset Date falls on which Treasury bills
would normally be auctioned. 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, as the result of a legal holiday, an
auction is so held on the preceding Friday, such Friday will be the Treasury
Interest Determination Date pertaining to the Interest Reset Date occurring in
the next succeeding week. If an auction date shall fall on any Interest Reset
Date for a Treasury Rate Note, then such Interest Reset Date shall instead be
the first Business Day immediately following such auction date.
With respect to a Floating Rate Note, accrued interest is calculated by
multiplying the principal amount of a Note by an accrued interest factor. The
accrued interest factor is computed by adding the interest factors calculated
for each day from the date of issue, or from the last date for which interest
has been paid, as the case may be, to the date for which accrued interest is
being calculated. Unless otherwise specified in an applicable Pricing
Supplement, the interest factor for each such day is computed by dividing the
interest rate applicable to such date by 360, in the case of Commercial Paper
Rate Notes, CD Rate Notes, Federal Funds Effective Rate Notes, LIBOR Notes and
Prime Rate Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes.
All percentages resulting from any calculation with respect to 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 upward
(e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)),
and all dollar amounts used in or resulting from such calculation on Floating
Rates Notes will be rounded to the nearest cent with one half cent being
rounded upward. The Calculation Agent will, upon the request of the Holder of
any Floating Rate Note, provide the interest rate then in effect and the
interest rate which will become effective as a result of a determination made
with respect to the most recent Interest Determination Date with respect to
such Note. Unless otherwise specified in an applicable Pricing Supplement, the
Trustee will be the Calculation Agent for the Floating Rate Notes. Unless
otherwise specified in an applicable Pricing Supplement, the Calculation Date,
where applicable, pertaining to any Interest Determination Date will be the
earlier of (i) the tenth calendar day after such Interest Determination Date or
if any such day is not a Business Day, the next succeeding Business Day and
(ii) the Business Day next preceding the relevant interest Payment Date or
Maturity, as the case may be.
In addition to any specified maximum interest rate which may be applicable to
any Floating Rate Note, the interest rate on the Notes will in no event be
higher than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application. Under current New York
law, the maximum rate of interest on a loan to a corporation is 25% per annum
on a simple interest basis. The limit may not apply to Floating Rate Notes in
which $2,500,000 or more has been invested.
Each Floating Rate Note will bear interest from the date of issue at the
rates determined as described below until the principal thereof is paid or
otherwise made available for payment. Except as provided below, and unless
otherwise indicated in an applicable Pricing Supplement, interest will be
payable, in the case of Floating Rate Notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third Wednesday of
February, May, August and November of each year, as specified in the applicable
Pricing Supplement; in the case of Floating Rate Notes which reset quarterly,
on the third Wednesday of February, May, August and November of each year; in
the case of Floating Rate Notes which reset semi-annually, on 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, on the
third Wednesday of the month specified in the applicable Pricing Supplement
and, in each case, at Maturity.
If any Interest Payment Date, other than an Interest Payment Date occurring
at Maturity, for any Floating Rate Note would fall on a day that is not a
Business Day with respect to such Note, such
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Interest Payment Date will be the following day that is a Business Day with
respect to such Note, except that in the case of a LIBOR Note, if such Business
Day is in the next succeeding calendar month, such Interest Payment Date will
be the immediately preceding day that is a Business Day with respect to such
LIBOR Note. If the Maturity of any Floating Rate Note would fall on a day that
is not a Business Day, the payment of interest and principal (and premium, if
any) may be made on the next succeeding Business Day, and no interest on such
payment will accrue for the period from and after Maturity.
COMMERCIAL PAPER RATE NOTES
A Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the 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) on that date of
the rate for commercial paper having the Index Maturity designated in the
applicable Pricing Supplement as such rate is published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication of the Board of
Governors of the Federal Reserve System ("H.15(519)") under the heading
"Commercial Paper." In the event that such rate is not published by 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such Commercial Paper
Interest Determination Date, then the Commercial Paper Rate shall be the Money
Market Yield (as defined below) on such Commercial Paper Interest Determination
Date of the rate for commercial paper having the Index Maturity designated in
the applicable Pricing Supplement as published by the Federal Reserve Bank of
New York in its daily statistical release, "Composite 3:30 P.M. Quotations for
U.S. Government Securities" ("Composite Quotations") under the heading
"Commercial Paper." If 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, then the Commercial Paper Rate for such Commercial Paper Interest
Determination Date shall be calculated by the Calculation Agent and shall be
the Money Market Yield of the arithmetic mean of the offered rates as of 11:00
A.M., New York City time, on such Commercial Paper Interest Determination Date,
of three leading dealers of commercial paper in New York City selected by the
Calculation Agent for commercial paper having the Index Maturity designated in
the applicable Pricing Supplement placed for an industrial issuer whose bond
rating is "AA," or the equivalent, from a nationally recognized securities
rating agency; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, the
Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date will be the Commercial Paper Rate in effect on such
Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded, if
necessary, to the nearest one hundred-thousandth of a percent) 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 the 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.
CD RATE NOTES
A CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Note and in the applicable Pricing Supplement.
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Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity
designated in the CD Rate Note as published in H.15(519) under the heading "CDs
(Secondary Market)" or, if not so published by 3:00 P.M., New York City time,
on the Calculation Date pertaining to such CD Interest Determination Date, the
CD Rate will be the rate on such CD Interest Determination Date for negotiable
certificates of deposit of the Index Maturity designated in the applicable
Pricing Supplement as published in Composite Quotations under the heading
"Certificates of Deposits." If such rate is not published in either H.15(519)
or Composite Quotations by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such CD Interest Determination Date, the CD Rate will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such CD
Interest Determination Date, of three leading nonbank dealers in negotiable
U.S. dollar certificates of deposit in New York City selected by the
Calculation Agent (after consultation with the Company) for negotiable
certificates of deposit of major United States money market banks of the
highest credit standing (in the market for negotiable certificates of deposit)
with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement in a denomination of $5,000,000; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the CD Rate with respect to such CD
Interest Determination Date will be the CD Rate in effect on such CD Interest
Determination Date.
FEDERAL FUNDS EFFECTIVE RATE NOTES
A Federal Funds Effective Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Effective Rate and the Spread
and/or Spread Multiplier, if any) specified in the Federal Funds Effective Rate
Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Effective Rate" means, with respect to any Federal Funds Interest
Determination Date, the rate on that date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)" or, if not so published
by 9:00 A.M., New York City time, on the Calculation Date pertaining to such
Federal Funds Interest Determination Date, the Federal Funds Effective Rate
will be the rate on such Federal Funds Interest Determination Date as published
in Composite Quotations under the heading "Federal Funds/Effective Rate." If
such rate is not yet published in either H.15(519) or Composite Quotations by
9:00 A.M., New York City time, on the Calculation Date pertaining to such
Federal Funds Interest Determination Date, then the Federal Funds Effective
Rate for such Federal Funds Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight Federal Funds arranged by three leading brokers of
Federal Funds transactions in New York City selected by the Calculation Agent
as of 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date; provided, however, that if the brokers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Federal Funds Effective Rate with respect to such Federal Funds
Interest Determination Date will be the Federal Funds Effective Rate in effect
on such Federal Funds Interest Determination Date.
LIBOR NOTES
A LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in the LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be,
as specified in the applicable Pricing Supplement, either (a) the
arithmetic mean of the offered rates for deposits in
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U.S. dollars having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such LIBOR Interest Determination Date, that appears on the
Reuters Screen LIBO Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date, if at least two such offered rates appear on
the Reuters Screen LIBO Page ("LIBOR Reuters"), or (b) the rate for
deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Banking Day
immediately following such LIBOR Interest Determination Date, that appears
on the Telerate Page 3750 as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date ("LIBOR Telerate"). "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on the Reuters Monitor Money
Rates Service (or such other page as may replace page LIBO on that service
for the purpose of displaying London interbank offered rates of major
banks). "Telerate Page 3750" means the display designated as page "3750" on
the Telerate Service (or such other page as may replace the 3750 page on
that service or such other service or services as may be nominated by the
British Bankers' Association for the purpose of displaying London interbank
offered rates for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable Pricing Supplement, LIBOR will be
determined as if LIBOR Telerate had been specified. If at least two such
offered rates appear on the Telerate Page 3750, the rate in respect of such
LIBOR Interest Determination Date will be the arithmetic mean of such
offered rates as determined by the Calculation Agent. If fewer than two
offered rates appear on the Telerate Page 3750, or if no rate appears on
the Reuters Screen LIBO Page, as applicable, LIBOR in respect of such LIBOR
Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) On any LIBOR Interest Determination Date on which fewer than two
offered rates appear on the Reuters Screen LIBO Page as specified in (i)
(a) above, or on which no rate appears on the Telerate Page 3750, as
specified in (i)(b) above, as applicable, LIBOR will be determined on the
basis of the rates at which deposits in U.S. dollars are offered by four
major banks in the London interbank market selected by the Calculation
Agent (the "Reference Banks") at approximately 11:00 A.M., London time, on
such LIBOR Interest Determination Date to prime banks in the London
interbank market, having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Banking Day immediately
following such LIBOR Interest Determination Date and in a principal amount
equal to an amount of not less than U.S. $1,000,000 that is representative
for a single transaction in such market at such time. The Calculation Agent
will request the principal London office of each of such Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR in respect of such LIBOR Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR in respect of such LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted by three major banks in New York
City selected by the Calculation Agent at approximately 11:00 A.M., New
York City time, on such LIBOR Interest Determination Date for loans in U.S.
dollars to leading European banks, having the Index Maturity designated in
the applicable Pricing Supplement, such loans commencing on the second
London Banking Day immediately following such LIBOR Interest Determination
Date and in a principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks in New York City
selected as aforesaid by the Calculation Agent are not quoting as mentioned
in this sentence, LIBOR with respect to such LIBOR Interest Determination
Date will be LIBOR in effect on such LIBOR Interest Determination Date.
TREASURY RATE NOTES
A Treasury Rate Note will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any)
specified in the Treasury Rate Note and in the applicable Pricing Supplement.
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Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement as published in H.15(519) under the heading Pricing "U.S.
Government Securities--Treasury Bills--auction average (investment)" 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, rounded, if necessary, to the nearest one
hundred-thousandth of a percent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the U.S.
Department of the Treasury. In the event that the result of the auction of
Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement is not otherwise reported as provided above by 3:00 P.M., New York
City time, on such Calculation Date or, if no such auction is held in a
particular week, then the Treasury Rate shall be calculated by the Calculation
Agent and shall be a yield to Stated Maturity (expressed as a bond equivalent
on the basis of a year of 365 or 366 days, as applicable, and applied on a
daily basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on such Treasury Interest
Determination Date, of three leading primary U.S. securities dealers selected
by the Calculation Agent for the issue of Treasury Bills with a remaining
maturity closest to the Index Maturity designated in the applicable Pricing
Supplement; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate with respect to such Treasury Interest Determination Date will be the
Treasury Rate in effect on such Treasury Interest Determination Date.
PRIME RATE NOTES
A Prime Rate Note will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in the Prime Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date relating to a Prime Rate
Note (a "Prime Interest Determination Date"), the rate set forth on such date
in H.15(519) under the heading "Bank Prime Loan." In the event that such rate
is not published prior to 9:00 A.M. New York City time, on the Calculation Date
pertaining to such Prime 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 NYMF Page (as defined below) as such bank's prime rate or base lending
rate as in effect for that Prime Interest Determination Date. If fewer than
four such rates but more than one such rate appear on the Reuters Screen NYMF
Page for the Prime Interest Determination Date, the Prime Rate will be
determined by the Calculation Agent and will be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Prime Interest
Determination Date by four major money center banks in New York City selected
by the Calculation Agent. If fewer than two such rates appear on the Reuters
Screen NYMF Page, the Prime Rate will be determined by the Calculation Agent on
the basis of the rates furnished in New York City 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 U.S. $500,000,000 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 in effect on such Prime Interest Determination Date. "Reuters Screen NYMF
Page" means the display designated as page "NYMF" on the Reuters Monitor Money
Rates Service (or such other page as may replace the NYMF page on that service
for the purpose of displaying prime rates or base lending rates of major United
States banks).
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FOREIGN CURRENCY AND INDEX-LINKED NOTES
If any Note is not to be denominated in U.S. dollars, certain provisions with
respect thereto will be set forth in a foreign currency Pricing Supplement
which will indicate the Specified Currency in which the principal, premium, if
any, and interest with respect to such Note are to be paid, along with any
other terms relating to the Specified Currency. The Pricing Supplement also
will specify specific historic exchange rate information, certain currency
risks relating to the specific currencies selected, certain investment
considerations and certain additional tax considerations.
Amounts due on a Note in respect of principal, premium, if any, and interest
may be determined with reference to (a) a currency exchange rate or rates, (b)
a securities or commodities exchange index, (c) the value of a particular
security or commodity or (d) any other index or indices (any such Note being
herein referred to as an "Index-Linked Note"). The Pricing Supplement relating
to an Index-Linked Note will set forth the method by and terms on which the
amount of principal payable at Stated Maturity (or upon redemption or
repayment, if applicable) and interest, premium or the amortized face amount,
if any, will be determined, the tax consequences to holders of Index-Linked
Notes, a description of certain risks associated with investments in Index-
Linked Notes and other information relating to such Index-Linked Notes.
An investment in Notes indexed, as to principal or interest or both, to one
or more values of currencies (including exchange rates between currencies),
commodities or interest rate indices entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate of such a Note is so indexed, it may result in an interest
rate that is less than that payable on a conventional fixed-rate debt security
issued at the same time, including the possibility that no interest will be
paid, and, if the principal amount of such a Note is so indexed, the principal
amount payable at Maturity may be less than the original purchase price of such
Note if allowed pursuant to the terms of such Note, including the possibility
that no principal will be paid. The secondary market for such Notes will be
affected by a number of factors independent of the creditworthiness of the
issuer and the value of the applicable currency, commodity or interest rate
index, including the volatility of the applicable currency, commodity or
interest rate index, the time remaining to the maturity of such Notes, the
amount outstanding of such Notes and market interest rates. The value of the
applicable currency, commodity or interest rate index depends on a number of
interrelated factors, including economic, financial and political events, over
which the Company has no control. Additionally, if the formula used to
determine the principal amount or interest payable with respect to such Notes
contains a multiple or leverage factor, the effect of any change in the
applicable currency, commodity or interest rate index will be increased. The
historical experience of the relevant currencies, commodities or interest rate
indices should not be taken as an indication of future performance of such
currencies, commodities or interest rate indices during the term of any Note.
The credit ratings assigned to the Company's medium-term note program are a
reflection of the Company's credit status, and are not a reflection of the
potential impact of the factors discussed above, or any other factors, on the
market value of the Notes. Accordingly, prospective investors should consult
their own financial and legal advisors as to the risks entailed by an
investment in such Notes and the suitability of such Notes in light of their
particular circumstances.
GLOBAL NOTES
The Notes may be issued in whole or in part in the form of one or more fully
registered Notes (each, a "Global Note") which will be deposited with, or on
behalf of, the Depositary and registered in the name of the Depositary's
nominee. Except as set forth below, a Global Note may not be transferred except
as a whole by the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any nominee to a successor of the Depositary or a nominee of such
successor. The Depositary currently only accepts securities which have a
specified currency of U.S. dollars.
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The Depositary has advised the Company and the Agents that it is a limited-
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934 (the "Exchange Act"). The Depositary was created to hold securities for
its participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic book-
entry changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations, some of which
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly. Persons who are not
participants may beneficially own securities held by the Depositary only
through participants.
Upon the issuance by the Company of Notes represented by a Global Note, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Notes represented by such Global Note to
the accounts of participants. The accounts to be credited shall be designated
by the Agents or by the Company, if such Notes are offered and sold directly by
the Company.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue Notes in certificated form in exchange for each
Global Note. In addition, the Company may at any time determine not to have
Notes represented by one or more Global Notes, and, in such event, will issue
Notes in certificated form in exchange for the Global Note or Notes
representing such Notes. In any such instance, an owner of a beneficial
interest in a Global Note will be entitled to physical delivery in certificated
form of Notes equal in principal amount to such beneficial interest and to have
such Notes registered in its name. Notes so issued in certificated form will be
issued in denominations of $1,000 or any amount in excess thereof which is an
integral multiple of $1,000 and will be issued in fully registered form only.
For a more complete description of Global Notes, see "Description of Debt
Securities--Global Securities" in the accompanying Prospectus.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium, if
any, and interest on the Notes will be made in U.S. dollars. The following
provisions shall apply to Foreign Currency Notes. Such provisions are in
addition to, and to the extent inconsistent therewith replace, the description
of general terms and provisions of the Notes set forth in the attached
Prospectus and elsewhere in this Prospectus Supplement.
Foreign Currency Notes are issuable in registered form only, without coupons.
The denominations for particular Foreign Currency Notes will be specified in
the applicable Pricing Supplement.
Unless otherwise provided in the applicable Pricing Supplement, payment of
the purchase price of Foreign Currency Notes will be made in immediately
available funds.
Unless otherwise indicated in the applicable Pricing Supplement, all currency
and currency unit amounts used and resulting from calculations relating to
currencies for a Foreign Currency Note will be
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rounded to the nearest one-hundredth of a unit (with five one-thousandths of a
unit being rounded upwards).
CURRENCIES
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in 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 generally do not offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested on or prior to
the fifth Business Day preceding the date of delivery of the Notes, or by such
other day as determined by the Agent which presented the offer to purchase such
Notes to the Company, such Agent is prepared to arrange for the conversion of
U.S. dollars into the Specified Currency set forth in the applicable Pricing
Supplement to enable the purchasers to pay for the Notes. Each such conversion
will be made by the applicable Agent on such terms and subject to such
conditions, limitations and charges as the applicable Agent 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 Notes.
The Foreign Currency Notes provide that, in the event of an official
redenomination of a foreign currency or currency unit, the obligations of the
Company with respect to payments on Notes denominated or payable in such
foreign currency or currency unit shall, in all cases, be deemed immediately
following such redenomination to provide for payment of that amount of
redenominated currency representing the amount of such obligations immediately
before such redenomination. In no event, however, shall any adjustment be made
to any amount payable under the Notes as a result of any change in the value of
such foreign currency or currency unit relative to any other currency due
solely to fluctuations in exchange rates. See "Foreign Currency Risks--Exchange
Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
The principal of, premium, if any, and interest on Foreign Currency Notes are
payable by the Company in the Specified Currency. However, the agent appointed
by the Company (the "Exchange Rate Agent") will convert all payments of
principal of, premium, if any, and interest on Foreign Currency Notes to U.S.
dollars. Unless otherwise specified in the applicable Pricing Supplement, the
Holder of a Foreign Currency Note may elect to receive such payments in the
Specified Currency as described below.
Unless the Holder has elected otherwise or unless otherwise specified in the
applicable Pricing Supplement, payment in respect of a Foreign Currency Note
shall be made in U.S. dollars based upon the exchange rate as determined by the
Exchange Rate Agent based on the quotation for such non-U.S. dollar currency or
composite currency appearing at approximately 11:00 a.m., New York City time,
on the second Business Day preceding the applicable date of payment, on the
bank composite or multi-contributor pages of the Telerate Monitor Foreign
Exchange Service (or, if such service is not then available to the Exchange
Rate Agent, the Reuters Monitor Foreign Exchange Service or, if neither is
available, on a comparable display or in a comparable manner as the Company and
the Exchange Rate Agent shall agree), for the first three banks (or two, if
three are not available), in chronological order, appearing on a list of banks
agreed to by the Company and the Exchange Rate Agent prior to such second
Business Day, which are offering quotes. The Exchange Rate Agent shall then
select from among the selected quotations in a manner specified in the
applicable Pricing Supplement. If fewer than two bids are available, then such
conversion will be based on the Market Exchange Rate (as defined below) as of
the second Business Day preceding the applicable payment date. "Market Exchange
Rate" means the noon U.S. dollar buying rate in The City of New York for cable
transfers of the relevant currency as certified for customs purposes by the
Federal Reserve Bank of New York. If no Market
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Exchange Rate as of the second Business Day preceding the applicable payment
date is available, payments will be made in the Specified Currency, unless such
Specified Currency is unavailable due to the imposition of exchange controls or
to other circumstances beyond the Company's control, in which case payment will
be made as described below under "Special Provisions Relating to Foreign
Currency Notes--Payment Currency." All currency exchange costs will be borne by
the Holders of such Notes by deductions from such payments.
Unless otherwise specified in the applicable Pricing Supplement, a Holder of
Foreign Currency Notes may elect to receive payment of the principal of,
premium, if any, and interest on the Notes in the Specified Currency by
transmitting a written request for such payment to the principal office of the
Trustee, 14 Wall Street, Eighth Floor, New York, New York 10005, on or prior to
the Regular Record Date or at least fifteen days 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 principal,
premium, if any, and interest payments and need not file a separate election
for each payment. Such election will remain in effect until revoked by written
notice to the Trustee, 14 Wall Street, Eighth Floor, New York, New York 10005,
but written notice of any such revocation must be received by the Trustee on or
prior to the Regular Record Date or at least fifteen days prior to Maturity, as
the case may be. Holders of Foreign Currency Notes whose Foreign Currency Notes
are to be held in the name of a broker or nominee should contact such broker or
nominee to determine whether and how an election to receive payments in the
Specified Currency may be made.
Interest on Foreign Currency Notes paid in U.S. dollars will be paid in the
manner specified in the attached Prospectus and this Prospectus Supplement for
interest on Notes denominated in U.S. dollars. Interest on Foreign Currency
Notes paid in the Specified Currency will be paid by a check drawn on an
account maintained at a bank outside the United States, unless other
arrangements have been made. The principal and premium, if any, of Foreign
Currency Notes, together with interest accrued and unpaid thereon, due at
Maturity will be paid in immediately available funds against presentation of
such Foreign Currency Notes at the offices of the Trustee, 14 Wall Street,
Eighth Floor, New York, New York 10005.
PAYMENT CURRENCY
Except as set forth below, if payment in respect of a Foreign Currency Note
is required to be made in a Specified Currency and such currency is unavailable
due to the imposition of exchange controls or other circumstances beyond the
Company's control, or is no longer used by the government of the country
issuing such currency or for the settlement of transactions by public
institutions of or within the international banking community, then all
payments due on that due date in respect of such Foreign Currency Note shall be
made in U.S. dollars. The amount so payable on any date in such Specified
Currency shall be converted into U.S. dollars at the Market Exchange Rate, on
the date of such payment. In the event such Market Exchange Rate is not then
available, the Company will be entitled to make payments in U.S. dollars (i) if
such Specified Currency is not a composite currency, on the basis of the most
recently available Market Exchange Rate for such Specified Currency or (ii) if
such Specified Currency is a composite currency, in an amount determined by the
Exchange Rate Agent to be the sum of the results obtained by multiplying the
number of units of each component currency of such composite currency, as of
the most recent date on which such composite currency was used, by the Market
Exchange Rate for such component currency on the second Business Day prior to
such payment date (or if such Market Exchange Rate is not then available, by
the most recently available Market Exchange Rate for such component currency).
If payment in respect of a Foreign Currency Note is required to be made in
ECU and ECU are unavailable due to the imposition of exchange controls or other
circumstances beyond the Company's control, or are no longer used in the
European Monetary System, then all payments due on that date in
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respect of such Foreign Currency Note shall be made in U.S. dollars. The amount
so payable on any date in ECU shall be converted into U.S. dollars at a rate
determined by the Exchange Rate Agent as of the second Business Day prior to
the date on which such payment is due on the following basis. The component
currencies of the ECU for this purpose (the "Components") shall be the currency
amounts that were components of the ECU as of the last date on which ECU were
used in the European Monetary System. The equivalent of ECU in U.S. dollars
shall be calculated by aggregating the U.S. dollar equivalents of the
Components. The U.S. dollar equivalent of each of the Components shall be
determined by the Exchange Rate Agent on the basis of the most recently
available Market Exchange Rate, or as otherwise indicated in the applicable
Pricing Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into
two or more currencies, the amount of that currency as a Component shall be
replaced by amounts of such two or more currencies, each of which shall have a
value on the date of division equal to the amount of the former component
currency divided by the number of currencies into which that currency was
divided.
All determinations referred to above made by the Exchange Rate Agent shall be
subject to approval by the Company.
FOREIGN CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO AND THE ATTACHED
PROSPECTUS DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN FOREIGN CURRENCY
NOTES AS THEY EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS
MAY CHANGE FROM TIME TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH
NOTES. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. Courts in the United States have not customarily
rendered judgments for money damages denominated or payable in any currency
other than the U.S. dollar. New York statutory law provides, however, that a
court shall render a judgment or decree in the foreign currency of the
underlying obligation and that the judgment or decree shall be converted into
U.S. dollars at the rate of exchange prevailing on the date of the entry of the
judgment or decree.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated and payable
in U.S. dollars. Such risks include, without limitation, the possibility of
significant market changes in rates of exchange between the U.S. dollar and the
various foreign currencies, the possibility of significant changes in rates of
exchange between the U.S. dollar and the various foreign currencies resulting
from official redenomination with respect to a Specified Currency and the
possibility of the imposition or modification of foreign exchange controls by
either the United States or foreign governments. Such risks generally depend on
factors over which the Company has no control, such as economic and political
events and on the supply of and demand for the relevant currencies. In recent
years rates of exchange between the U.S. dollar and certain
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foreign currencies have been volatile and such volatility may be expected in
the future. Fluctuations in any particular exchange rate that have occurred in
the past are not necessarily indicative, however, of fluctuations in the rate
that may occur during the term of any Foreign Currency Note. Depreciation of
the Specified Currency of a Foreign Currency Note against the U.S. dollar would
result in a decrease in the effective yield of such Foreign Currency Note below
its coupon rate, and in certain circumstances could result in a loss to the
investor, on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency at an Interest Payment Date or at Maturity of a Foreign
Currency Note. There can be no assurance that exchange controls will not
restrict or prohibit payments of principal (and premium, if any) or interest in
any Specified Currency other than U.S. dollars. Even if there are no actual
exchange controls, it is possible that on an Interest Payment Date or at
Maturity of a particular Foreign Currency Note, the Specified Currency for such
Foreign Currency Note would not be available to the Company due to
circumstances beyond the control of the Company. In any such event, the Company
will make required payments in U.S. dollars on the basis described herein.
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated or payable in a Specified Currency other than U.S. dollars or ECU
will not be sold in or to residents of the country issuing the Specified
Currency. The information set forth in this Prospectus Supplement and the
applicable Pricing Supplement is directed to prospective purchasers who are
United States residents, and the Company disclaims any responsibility to advise
prospective purchasers who are residents of countries other than the United
States with respect to any matters that may affect the purchase, holding or
receipt of payments of principal (and premium, if any) or interest on the
Notes. Such persons should consult their own counsel with regard to such
matters.
Pricing Supplements relating to Foreign Currency Notes will indicate the
Specified Currency in which the principal, premium, if any, and interest with
respect to such Note are to be paid, along with other terms relating to the
Specified Currency. The Pricing Supplement also will specify specific historic
exchange rate information, certain currency risks relating to the specific
currencies selected, certain investment considerations and certain additional
tax considerations. The information therein concerning exchange rates is
furnished as a matter of information only and should not be regarded as
indicative of the range of or trends in fluctuations in currency exchange rates
that may occur in the future.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences of the ownership of Notes. It deals only with Notes held as
capital assets and not with special classes of Holders, such as dealers in
securities or currencies, life insurance companies, persons holding Notes as a
hedge against currency risks, and United States Holders (as defined below under
"United States Holders") whose functional currency is not the U.S. dollar. In
addition, this summary does not address the federal income tax consequences of
owning Indexed Notes. Such consequences will be addressed in the applicable
Pricing Supplement. The discussion is based upon the Internal Revenue Code of
1986, as amended (the "Code") and regulations, rulings and judicial decisions
thereunder as of the date hereof. Such authorities may be repealed, revoked or
modified so as to produce federal income tax consequences different from those
discussed below. In addition, on January 27, 1994, final original issue
discount regulations (the "OID Regulations") were issued. The OID Regulations
generally apply to debt instruments issued on or after April 4, 1994. Taxpayers
may, however, rely on the OID Regulations for debt instruments issued after
December 21, 1992, and before April 4, 1994. The discussion below assumes that
the OID Regulations are applicable to the Notes.
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PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN THEIR
PARTICULAR SITUATIONS, AS WELL AS ANY CONSEQUENCES UNDER THE LAWS OF ANY OTHER
TAXING JURISDICTION.
UNITED STATES HOLDERS
For purposes of this discussion, a "United States Holder" means (i) a citizen
or resident of the United States, (ii) a partnership or corporation created or
organized in or under the law of the United States or of any State of the
United States, (iii) a trust or estate the income of which is subject to United
States federal income tax regardless of its source, and (iv) any other person
that is subject to United States federal income tax on interest income derived
from a Note as a result of such income being effectively connected with the
conduct by such person of a trade or business within the United States. The
term also includes certain former citizens of the United States whose income
and gain on the Notes will be subject to U.S. income tax.
Payments of Interest
Interest on a Note, whether payable in the Specified Currency or U.S.
dollars, that constitutes "qualified stated interest" (as defined below under
"Original Issue Discount") will be taxable to a United States Holder as
ordinary interest income at the time it is received or accrued, depending on
the Holder's method of accounting for tax purposes. In the case of a United
States Holder of a Foreign Currency Note using a cash method of accounting, the
amount of such interest income for United States federal income tax purposes
("taxable interest") will be determined in the Specified Currency and
translated into U.S. dollars using the spot exchange rate on the date of
receipt, regardless of whether the interest is in fact paid in or converted to
U.S. dollars. In the case of a United States Holder of a Foreign Currency Note
using an accrual method of accounting, the amount of taxable interest will
depend on whether the Holder has made a valid election to use a "spot accrual
convention" pursuant to regulations under the Code. If the Holder has made such
an election, the amount of taxable interest will be measured in the Specified
Currency and translated into U.S. dollars using the spot exchange rate in
effect on the last day of the accrual period (or last day of a partial accrual
period ending on the last day of the Holder's taxable year); or where interest
is paid within five business days of such last day, the exchange rate in effect
on the date of receipt may be used. If the Holder has not made such an
election, the amount of taxable interest will be measured in the Specified
Currency and translated into U.S. dollars using the average exchange rate in
effect during the accrual period. A United States Holder of a Foreign Currency
Note on the accrual method will also recognize ordinary income or loss for
federal income tax purposes ("exchange gain or loss") upon actual or
constructive receipt of accrued interest income and upon the sale, retirement
or other disposition of a Note. Such exchange gain or loss, if any, will be
measured by subtracting the amount of taxable interest accrued in the manner
described above with respect to any accrual period from the U.S. dollar value
of the interest payment received attributable to that accrual period. The U.S.
dollar value of the interest payment received will be determined by translating
the units of Specified Currency received into dollars using the spot exchange
rate in effect on the date of receipt.
Original Issue Discount
General. A Note will generally be treated as having been issued at an
original issue discount (a "Discount Note") if the excess of its "stated
redemption price at maturity" over its issue price (defined as the first price
at which a substantial amount of the Notes are sold for money) equals or
exceeds 1/4 of 1 percent of such Note's stated redemption price at maturity
multiplied by the number of complete years to its Stated Maturity. "Stated
redemption price at maturity" is the total of all payments provided by the Note
that are not payments of "qualified stated interest." Generally, "qualified
stated interest" is stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually in an
amount equal to the product of the outstanding principal amount of the
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Note and, with respect to a Fixed Rate Note, a single fixed rate of interest
(adjusted to account appropriately for any differing lengths of intervals
between payments). Qualified stated interest also includes stated interest on
certain variable rate debt instruments that satisfy certain requirements of the
OID Regulations if the interest is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually. A Floating Rate
Note may or may not qualify as a variable rate debt instrument under the OID
Regulations depending on its interest rate formula and other terms as set forth
in the applicable Pricing Supplement.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to have original issue discount for federal income tax purposes, with
the result that the inclusion of interest in the Holder's income may vary from
the actual cash payments of interest on such Notes, generally accelerating
income for cash method taxpayers. Notice will be given in the applicable
Pricing Supplement when the Company determines that a particular Note will be a
Discount Note. Unless an applicable Pricing Supplement so indicates, Floating
Rate Notes will not be Discount Notes.
United States Holders of Discount Notes having a Stated Maturity of more than
one year from their date of issue will have to include original issue discount
in income before the receipt of cash attributable to such income. The amount of
original issue discount includible in income by a United States Holder of a
Discount Note is the sum of the daily portions of original issue discount with
respect to the Discount Note for each day during the taxable year or portion of
the taxable year in which it holds such Note ("accrued original issue
discount"). The daily portion is determined by allocating to each day in any
"accrual period" a pro rata portion of the original discount allocable to that
accrual period. The amount of original issue discount allocable to an accrual
period is the excess of (a) the product of the Discount Note's adjusted issue
price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
adjusted for the length of such period) over (b) the sum of the qualified
stated interest payments, if any, payable (or treated as payable) on the
Discount Note during the accrual period. Under the OID Regulations, the
"accrual period" may be of any length and may vary in length over the term of
the Note, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs either on the final day or on
the first day of an accrual period. The "adjusted issue price" of the Discount
Note at the start of any accrual period is the sum of the issue price of such
Note plus the accrued original issue discount for each prior accrual period
minus any prior payments on the Note that were not payments of qualified stated
interest. The amount of original issue discount includible in income is
adjusted for any United States Holder which acquires a Discount Note at a
premium over its adjusted issue price (an "acquisition premium"), but at an
amount less than or equal to the sum of all amounts payable on the instrument
after the acquisition date (other than payments of qualified stated interest).
Under the foregoing rules, United States Holders of Discount Notes will have
to include in income increasingly greater amounts of original issue discount in
successive accrual periods and in advance of any payment of cash related
thereto.
At the time the Company issues a Note, it will make a determination based on
the applicable Treasury Regulations and other authorities whether such Note
bears original issue discount. The Company is required to report the amount of
original issue discount accrued on Notes held of record by persons other than
corporations and other exempt Holders.
Optional Redemption of Discount Notes. Under the OID Regulations, if either
the Company or the Holder has an option to redeem, or cause the redemption of,
a Discount Note prior to its Stated Maturity, such option will be presumed to
be exercised if, by utilizing any date on which such Note may be redeemed as
its maturity date and the amount payable on such date in accordance with the
terms of the Note as its stated redemption price at maturity, the yield on such
Note would be (i) in the case of an option of the Company, lower than its yield
to maturity computed without assuming the option to be
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so exercised or (ii) in the case of an option of the Holder, higher than its
yield to maturity computed without assuming the option to be so exercised. If
such option is not in fact exercised when presumed to be exercised, the Note
would be treated solely for original issue discount purposes as if it were
redeemed, and a new Note were issued, on the presumed exercise date for an
amount equal to the adjusted issue price of the original Note on such date.
Notice will be given in an applicable Pricing Supplement when the Company
determines that a particular Note will be deemed to have a maturity date for
federal income tax purposes prior to its Stated Maturity.
Short Term Discount Notes. Under the OID Regulations, a Note that matures one
year or less from the date of its issuance ("short-term Discount Note") will be
treated as having been issued at a discount ("short-term discount") equal to
the excess of the total principal and interest payments on the Note over its
tax basis (or if issue price the United States Holder so elects). In general,
an individual or other cash basis United States Holder of a short-term Discount
Note is not required to accrue short-term discount for United States federal
income tax purposes unless it elects to do so. Accrual basis United States
Holders and certain other United States Holders, including banks and dealers in
securities, are required to accrue the short-term discount on short-term
Discount Notes on a straight-line basis unless an election is made to accrue
the short-term discount under the constant-yield method (based on daily
compounding). In the case of a United States Holder not required and not
electing to include the short-term discount in income currently, any gain
realized on the sale or retirement of the short-term Discount Note will be
ordinary income to the extent of the short-term discount accrued on a straight-
line basis (unless an election is made to accrue the short-term discount 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 the short-term
discount on short-term Discount Notes will be required to defer deductions for
interest on borrowings allocable to short-term Discount Notes in an amount not
exceeding the deferred income until the deferred income is realized.
Foreign Currency Notes. The amount of original issue discount for any accrual
period on a Discount Note that is a Foreign Currency Note will depend on
whether the Holder has made a valid election to use a "spot accrual convention"
pursuant to regulations under the Code. If the Holder has made such an
election, original issue discount will be determined in the Specified Currency
and translated into U.S. dollars using the spot exchange rate in effect on the
last day of the accrual period (or last day of a partial accrual period ending
on the last day of the Holder's taxable year); or where interest is paid within
five business days of such last day, the exchange rate in effect on the date of
receipt may be used. If the Holder has not made such an election, original
issue discount will be determined in the Specified Currency and translated into
U.S. dollars using the average exchange rate in effect during the accrual
period. A United States Holder of a Discount Note that is a Foreign Currency
Note will also recognize ordinary income or loss ("exchange gain or loss") upon
actual or constructive receipt of an amount attributable to original issue
discount (whether in connection with a payment of interest or the sale or
retirement of a Discount Note). Such exchange gain or loss, if any, will be
measured by subtracting the amount of original issue discount with respect to
the accrual period from the U.S. dollar value of the amount received
attributable to that accrual period. The U.S. dollar value of the amount
received will be determined by translating the units of Specified Currency
received into dollars using the spot exchange rate in effect on the date of
receipt.
Notes Issued at a Premium. A United States Holder that purchases a Note for
an amount in excess of the sum of all amounts payable on the Note after the
purchase date other than qualified stated interest will be considered to have
purchased the Note at a "premium" and will not be required to include any
original issue discount in income. A United States Holder may generally elect
to amortize the premium over the remaining term of the Note on a constant-yield
method. The amount amortized in any year will be treated as a reduction of the
United States Holder's interest income from the Note in such year. Any such
election shall apply to all debt instruments (other than debt instruments the
interest on which is excludable from gross income) held by the United States
Holder at the beginning of the
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first taxable year to which the election applies and to any such debt
instruments thereafter acquired by the United States Holder, and is irrevocable
without the consent of the Internal Revenue Service (the "IRS"). Bond premium
on a Note held by a United States Holder that does not make such election will
decrease the gain or increase the loss otherwise recognized on a taxable
disposition of the Note. If a Note is callable by the Company before its Stated
Maturity, the earlier call date will be considered as the Maturity if it
results in a smaller amortizable bond premium attributable to the period of
earlier call date. If a Note is not then called on the earlier call date, any
unamortized bond premium must then be amortized to a succeeding call date or to
Maturity. Certain of the Notes may be callable prior to Stated Maturity.
Holders therefore should consult with their tax advisors to determine whether
this rule will apply to their individual situation.
Bond premium on a Foreign Currency Note will be computed in the applicable
Specified Currency. With respect to a United States Holder that elects to
amortize the premium, the amortizable bond premium will reduce interest income
measured in units of the Specified Currency. At the close of any period in
which a portion of the bond premium is amortized, exchange gain or loss (which
is generally ordinary income or loss) will be realized with respect to such
portion based on the difference between spot rates at the close of such period
and spot rates at the time of acquisition of the Foreign Currency Note. A
United States Holder that does not elect to amortize bond premium will
translate the bond premium, computed in the Specified Currency, into U.S.
dollars at the spot rate on the Note's Maturity and such bond premium will
constitute a capital loss which may be offset or eliminated by exchange gain.
Market Discount. If a United States Holder purchases a Note for an amount
that is less than its "revised issue price" (defined as the sum of the issue
price of the Note and the aggregate amount of the original issue discount, if
any, includible in the gross income of all previous Holders of the Note,
determined without regard to any adjustment for a previous holder's acquisition
premium), the amount of the difference will be treated as "market discount",
unless such difference is less than a de minimis amount. The market discount
provisions of the Code generally require a Holder of a Note acquired at a
market discount to treat as ordinary interest income any gain recognized on the
disposition of such Note to the extent of the "accrued market discount" on such
Note at the time of disposition. If a Holder of a Note makes a gift of such
Note, any accrued market discount will be included in income as if such Holder
had sold the Note for a price equal to its fair market value. In addition, if a
Holder of a Note acquired at a market discount receives a partial principal
payment prior to Maturity, that payment may be treated as ordinary income to
the extent of the accrued market discount on the Note at the time the payment
is received and the accrued market discount on the Note will be reduced by the
amount of ordinary income so recognized. These rules will not apply to the
extent the Holder has, pursuant to an election, included the accrued market
discount in income as it accrued. Once made, the election will apply to all
market discount obligations acquired on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS. The adjusted basis of a Note will be increased by any
accrued market discount that is included in a Holder's income pursuant to the
election.
The amount of market discount that accrues while a Holder holds a Note will
be equal to the amount which bears the same ratio to the market discount on the
Note as the number of days on which the Holder holds the Note bears to the
number of days from the date the Holder acquires the Note through its Stated
Maturity. Alternatively, a Holder of a Note may elect to accrue market discount
on the basis of a constant-yield method, rather than the ratable-accrual method
described in the preceding sentence.
The market discount rules also provide that any Holder of a Note acquired at
a market discount may be required to defer the deduction of a portion of the
interest on any indebtedness incurred or maintained to purchase or carry the
Note until the Note is disposed of in a taxable transaction. This rule will not
apply if the Holder elects to include accrued market discount in income
currently.
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Accrued market discount on Foreign Currency Notes will generally be
determined by translating the market discount determined in the Specified
Currency into U.S. dollars at the spot rate on the date the Foreign Currency
Note is retired or otherwise disposed of. If the United States Holder has
elected to accrue market discount currently, then the amount which accrues is
determined in the Specified Currency and then translated into U.S. dollars on
the basis of the average exchange rate in effect during the accrual period. A
United States Holder will recognize exchange gain or loss with respect to
market discount which is accrued currently upon the sale, retirement or other
disposition of the Foreign Currency Note measured in the same manner as
exchange gain or loss arising upon receipt of accrued interest on a Foreign
Currency Note, as described above.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
Under the OID Regulations, a United States Holder may elect to treat all
interest on any Note as original issue discount and calculate the amount
includible in gross income under the constant-yield method described above. For
the purpose of this election, interest includes stated interest, short-term
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium. If a United States Holder
makes this election for a Note with market discount or amortizable bond
premium, the election is treated as an election under the market discount or
amortizable bond premium provisions, as the case may be, and the electing
United States Holder will be required to include market discount in income
currently or amortize bond premium for all of the Holder's other debt
instruments with market discount or amortizable bond premium, as the case may
be. The election is to be made for the taxable year in which the United States
Holder acquired the Note, and may not be revoked without the consent of the
IRS. United States Holders should consult with their own tax advisors about
this election.
PURCHASE, SALE AND RETIREMENT OF NOTES
A United States Holder's tax basis in a Note will be its U.S. dollar cost
(which, in the case of a Foreign Currency Note, will be the U.S. dollar value
of the purchase price on the date of purchase), increased by the amount of any
original issue discount, short-term discount or market discount included in the
United States Holder's income with respect to the Note and reduced by the
amount of any payments on a Note that are not qualified stated interest
payments and by the amount of any amortizable bond premium applied to reduce
interest on the Note. A United States Holder will generally recognize gain or
loss upon the sale or retirement of a Note equal to the difference between the
amount realized upon the sale or retirement and the tax basis in 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 the date of sale or retirement.
Except (i) to the extent described above with respect to short-term Discount
Notes and Foreign Currency Notes, and (ii) to the extent attributable to
accrued but unpaid interest, market discount or currency gain or loss (as
described in the following paragraph), gain or loss recognized by a United
States Holder on the sale or retirement of a Note will generally be capital
gain or capital loss and such gain or loss 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 Foreign Currency Note that is attributable to changes in exchange rates
will be treated as ordinary income or loss and will be limited to the amount of
overall gain or loss realized on the disposition of the Note. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the principal amount of the Note expressed in
units of the Specified Currency, determined at the spot exchange rate on the
date such payment is received or the Note is disposed of, and the U.S. dollar
value of the amount paid for the Note expressed in units of the Specified
Currency, determined at the spot exchange rate as of the date the Holder
acquired the Note.
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EXCHANGE OF THE SPECIFIED CURRENCY
A United States Holder who purchases a Note with previously owned Specified
Currency will recognize exchange gain or loss at the time of purchase
attributable to the difference at the time of purchase, if any, between his tax
basis in such currency and the fair market value of the Note in U.S. dollars on
the date of purchase. Such gain or loss will be ordinary income or loss.
Specified Currency received as interest on (or original issue discount with
respect to) a Foreign Currency Note or on the sale or retirement of a Note will
have a tax basis equal to its U.S. dollar value determined with reference to
the spot exchange rate at the time such interest is received or at the time of
such sale or retirement. Foreign currencies and currency units which are
purchased will generally have a tax basis equal to their U.S. dollar cost. Any
gain or loss realized on a sale or other disposition of a foreign currency or
currency unit (including its use to purchase the Foreign Currency Notes or upon
exchange for U.S. dollars) will be ordinary income or loss.
UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law and subject to
the discussion of backup withholding below:
(a) payments of principal, premium, if any, and interest (including
original issue discount) on the Notes to any Holder who is not a United
States Holder (a "United States Alien Holder") will not be subject to
United States federal income or withholding of federal income tax, provided
that in the case of interest or original issue discount, (i) such interest
or original issue discount is not effectively connected with a trade or
business conducted by the United States Alien Holder in the United States,
(ii) the United States Alien Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote, (iii) the United States Alien Holder is not a
controlled foreign corporation that is related to the Company through stock
ownership, (iv) the United States Alien Holder is not a bank that acquired
the Notes pursuant to a loan agreement made in the ordinary course of its
trade or business, and (v) either (A) the beneficial owner of the Note
certifies to the Company or its agent, under penalties of perjury, that he
is not a United States Holder and provides his 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 and furnishes
the payor with a copy thereof;
(b) a United States Alien Holder will not be subject to United States
federal income or withholding of federal income tax on gain realized on the
sale, exchange or redemption of a Note unless (i) such gain is effectively
connected with a trade or business conducted by the United States Alien
Holder in the United States or (ii) in the case of a United States Alien
Holder who is an individual and holds a Note as a capital asset, such
Holder is present in the United States for 183 days or more in the taxable
year of sales and certain other requirements are met; and
(c) a Note held by an individual who at the time of death is not a
citizen or resident of the United States will not be subject to United
States federal estate tax as a result of such individual's death if the
individual does not actually or constructively own 10% 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, if received at the time of the
individual's death, would not have been effectively connected with a U.S.
trade or business of the individual.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders
In general, information reporting requirements will apply to payments of
principal and interest on a Note and the proceeds of the sale of a Note before
Maturity within the United States to, and to the
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accrual of original issue discount on a Note with respect to, non-corporate
United States Holders. A 31% "backup withholding" tax will apply to such
payments and to payments with respect to original issue discount 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. The amount of original issue discount required to be reported by
the Company may not be equal to the amount of original issue discount required
to be reported as taxable income by a United States Holder of Discount Notes.
United States Alien Holders
Payment of principal, premium, if any, and interest made within the United
States by the Company or any of its Paying Agents are generally subject to
information reporting and possibly "backup withholding" at a rate of 31%.
Information reporting and backup withholding will not, however, apply to
payments made to a United States Alien Holder on a Note if the certification
described in clause (a)(v) above under "United States Alien Holders" is
received, provided in each case the payor does not have actual knowledge that
the Holder is a United States person.
Payment 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 generally be
subject to information reporting or backup withholding. If, however, the broker
is a United States person, a controlled foreign corporation for United States
tax purposes or a foreign person 50% or more of whose gross income is from a
United States trade or business, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (a) such
broker has documentary evidence in its records that the beneficial owner is not
a U.S. person and certain other conditions are met or (b) the beneficial owner
otherwise establishes an exemption. Temporary Treasury regulations provide that
the Treasury is considering whether backup withholding will apply with respect
to the proceeds of a sale that are not subject to backup withholding under the
current regulations. Under proposed Treasury regulations not currently in
effect, backup withholding will not apply to such payments absent actual
knowledge that the payee is a United States person. Payment of the proceeds
from a sale of a Note 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.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against such holder's U.S. federal income tax liability (any resulting
overpayment being refundable) provided the required information is furnished to
the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through Goldman,
Sachs & Co., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities Inc. (collectively, the "Agents") who
have agreed to use their best efforts to solicit purchases of the Notes, and
may be sold to the Agents for resale to investors and other purchasers at
varying prices related to prevailing market prices at the time of resale, to be
determined by the Agents. The Company reserves the right to sell Notes directly
on its own behalf in those jurisdictions where it is authorized to do so. The
Company will have the sole right to accept offers to purchase Notes and may
reject any proposed purchase of Notes in whole or in part. The Agents will have
the right to reject any proposed purchase of Notes through them in whole or in
part. Payment of the purchase price of Notes will be required to be made in
immediately available funds in The City of New York. The Company will pay the
Agents a commission ranging from .125% to .750% of the principal amount of
Notes with maturities of up to 30 years sold through the Agents, depending upon
the Stated Maturity, and may also sell Notes to the Agents as principals at
negotiated discounts. Commissions on agency sales of Notes with maturities of
S-24
<PAGE>
more than 30 years will be determined at the time of sale. No commission will
be payable on any sales made directly to the public by the Company.
In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer may include all or a portion of the discount to be
received by such Agent from the Company. Unless otherwise indicated in the
applicable Pricing Supplement, any Note sold to an Agent as principal will be
purchased by such Agent at a price equal to 100% of the principal amount
thereof less a percentage equal to the commission applicable to any agency sale
of a Note of identical maturity, and may be resold by the Agent to investors
and other purchasers 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 or may be resold to certain dealers as described
above. After the initial public offering of Notes to be resold to investors and
other purchasers, the public offering price (in the case of a fixed-price
public offering), concession and discount may be changed.
The Agents and any dealers to whom Notes are sold may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"). The Company has agreed to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act, and will
reimburse the Agents for certain expenses.
The Notes are a new issue of securities with no established trading market.
The Agents have informed the Company that they intend to make a market in the
Notes, but are under no obligation to do so and such market making may be
terminated at any time. Therefore, no assurance can be given as to the
existence of a trading market in the Notes in the future.
One or more of the Agents or their affiliates may be customers of, extend
credit to, engage in transactions with or perform services for the Company in
the ordinary course of business.
S-25
<PAGE>
PHH CORPORATION
DEBT SECURITIES
PHH Corporation (the "Company") from time to time may offer up to
$2,000,000,000 aggregate principal amount, or the equivalent thereof in foreign
currencies or currency units, of its debt securities (the "Debt Securities").
The Debt Securities will be offered as separate series in amounts, at prices
and on terms to be determined at the time of sale and to be set forth in
supplements to this Prospectus. The Company may sell Debt Securities to or
through underwriters, and also may sell Debt Securities directly to other
purchasers or through agents. See "Plan of Distribution."
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, denominations, maturity, interest rate
(which may be fixed or variable) and time of payment of interest, if any,
currency denomination, terms for redemption, if any, at the option of the
Company or the holder, terms for sinking or purchase fund payments, if any, the
identity of the Trustee and the Indenture under which the Debt Securities are
being issued, the initial public offering price, the names of, and the
principal amounts, if any, to be purchased by, underwriters or agents, if any,
the compensation of such underwriters or agents and the other terms in
connection with the offering and sale of the Debt Securities in respect of
which this Prospectus is being delivered (the "Offered Debt Securities"), are
set forth in the accompanying Prospectus Supplement, as supplemented from time
to time by Pricing Supplements (as so supplemented, the "Supplement").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SE-
CURITIES 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 DATE OF THIS PROSPECTUS IS JUNE 23, 1994
<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 reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at: Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549; Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661- 2511 and New York Regional
Office, 75 Park Place, Fourteenth Floor, New York, New York 10007. Copies of
such material can be obtained from the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such reports and other information concerning the Company can
also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form S-
3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents of the
Company filed by it with the Commission pursuant to Section 13 of the Exchange
Act: (1) Annual Report on Form 10-K for the fiscal year ended April 30, 1993;
(2) Quarterly Reports on Form 10-Q for the periods ended July 31, 1993, October
31, 1993 and January 31, 1994; and (3) Report on Form 8-K filed May 24, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Debt Securities shall be deemed to be
incorporated by reference in this Prospectus.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any document subsequently filed with the Commission which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any of the
documents incorporated by reference herein (other than exhibits to such
documents). Written or telephone requests should be directed to: PHH
Corporation, 11333 McCormick Road, Hunt Valley, Maryland 21031, Telephone (410)
771-3600, Attention: Secretary.
THE COMPANY
PHH Corporation is a Maryland corporation. The Company's executive offices
are located at 11333 McCormick Road, Hunt Valley, Maryland 21031 (telephone
410-771-3600).
The Company provides a broad range of integrated management services, expense
management programs and mortgage banking services to more than 2,000 clients,
including many of the world's
2
<PAGE>
largest corporations, as well as governmental agencies and associations. Its
primary business service segments consist of vehicle management, relocation and
real estate, and mortgage banking. Vehicle management services consist
primarily of the management, purchase, leasing and resale of vehicles for
corporate clients, including fuel purchase and expense management programs and
other fee-based services for their vehicle fleets in the United States, Europe
and Canada. Relocation and real estate services consist primarily of the
purchase, management and resale of homes for transferred employees of corporate
clients, financial institutions and governmental units in the United States,
Europe and Canada. Services also include related fee-based services which
provide assistance to transferring employees and other fee-based real estate
and consulting services. Mortgage banking services consist primarily of the
origination, sale and servicing of residential first mortgage loans.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED APRIL 30,
ENDED ------------------------
JANUARY 31, 1994 1993 1992 1991 1990 1989
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.... 1.60 1.47 1.34 1.25 1.25 1.27
</TABLE>
The ratios of earnings to fixed charges have been computed by dividing
earnings from continuing operations of the Company and its consolidated
subsidiaries before income taxes and fixed charges by the fixed charges. For
purposes of these ratios, fixed charges consist of interest, the interest
portion of "Costs, including interest, of carrying and reselling homes," and
that portion of rentals deemed representative of the appropriate interest
factor. Interest included in fixed charges consists of the amounts identified
as interest expense in the Company's consolidated statements of income, the
substantial portion of which represents interest on debt incurred to finance
leasing activities and mortgage banking activities, as well as interest costs
associated with home relocation services which are ordinarily recovered through
direct billings to clients and are included with "Costs, including interest, of
carrying and reselling homes" in the Company's consolidated financial
statements. Certain operating lease payment obligations required under
agreements to sell and lease back vehicles are excluded from rentals as the
obligations are equal to the operating lease payments received from clients.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities will be used to finance
assets the Company manages for its clients and for general corporate purposes.
The Company's "Assets Under Management Programs," which currently are
represented by subsidiaries' net investment in leases and leased vehicles,
equity advances on homes and other assets under management programs, represent
the Company's principal financing requirement. Financing for Assets Under
Management Programs is also provided by banks and through the sale of
commercial paper by the Company.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Supplement may relate. The particular terms of the Debt Securities offered by
any Supplement (the "Offered Debt Securities") and the extent, if any, to which
such general provisions may apply to the Debt Securities so offered will be
described in the Supplement relating to such Offered Debt Securities.
The Debt Securities are to be issued under any of three substantially
identical indentures (each, an "Indenture" and collectively, the "Indentures")
between the Company and various trustees (each, a "Trustee" and collectively,
the "Trustees"). A copy of each Indenture has been filed with the Commission as
indicated in the Registration Statement. The following summaries of certain
provisions
3
<PAGE>
of the Indentures do not purport to be complete and are subject to, and
qualified in their entirety by reference to, all the provisions of the
Indentures, including the definitions therein of certain terms. Wherever
reference is made to particular sections or defined terms of the Indentures,
such sections or defined terms are incorporated herein by reference.
GENERAL
The Debt Securities will be unsecured obligations of the Company and will
rank on a parity with all other unsecured and unsubordinated indebtedness of
the Company. The Debt Securities will be issued under (i) an Indenture dated as
of March 1, 1993, between the Company and The First National Bank of Chicago,
as Trustee, (ii) an Indenture dated as of May 1, 1992, between the Company and
The Bank of New York, as Trustee, or (iii) an Indenture dated as of May 1, 1992
between the Company and Chemical Bank, as Trustee.
Unless a different place is specified in the applicable Supplement, principal
of and interest, if any, on the Debt Securities will be payable at the
corporate offices of the applicable Trustee; provided that payment of interest
may be made at the option of the Company by check or draft mailed to the person
entitled thereto.
The Indentures do not limit the aggregate principal amount of the Debt
Securities or of any particular series of Offered Debt Securities and provide
that Debt Securities may be issued thereunder from time to time in one or more
series.
Reference is made to the Supplement relating to the particular series of Debt
Securities offered thereby for the following terms of the Offered Debt
Securities: (1) the title of the Offered Debt Securities and the series of
which the Offered Debt Securities shall be a part; (2) any limit on the
aggregate principal amount of the Offered Debt Securities; (3) the price
(expressed as a percentage of the aggregate principal amount thereof) at which
the Offered Debt Securities will be issued; (4) the date or dates on which the
Offered Debt Securities will mature; (5) the rate or rates (which may be fixed
or variable) per annum at which the Offered Debt Securities will bear interest,
if any; (6) the date from which such interest, if any, on the Offered Debt
Securities will accrue, the dates on which such interest, if any, will be
payable, the date on which payment of such interest, if any, will commence and
the record dates for such interest payment dates, if any; (7) the dates, if
any, on which and the price or prices at which the Offered Debt Securities
will, pursuant to any mandatory sinking fund provisions, or may, pursuant to
any optional sinking fund or to any purchase fund provisions, be redeemed by
the Company, and the other detailed terms and provisions of such sinking and/or
purchase funds; (8) the date, if any, after which and the price or prices at
which the Offered Debt Securities may, pursuant to any optional redemption
provisions, be redeemed at the option of the Company or of the Holder thereof
and the other detailed terms and provisions of such optional redemption; (9)
the denominations in which the Offered Debt Securities are authorized to be
issued; (10) whether the principal and/or interest of the Offered Debt
Securities is denominated in a currency other than United States dollars; (11)
the identity of the Trustee and the Indenture under which the Offered Debt
Securities are issued; and (12) any other terms of the Offered Debt Securities.
Debt Securities bearing no interest or interest at a rate which at the time
of issuance is below market rates may be issued under the Indentures and
offered and sold at a substantial discount from the principal amount thereof.
Special federal income tax, accounting and other considerations applicable
thereto will be described in any Supplement relating to such Debt Securities.
The Debt Securities are not subordinated in right of payment to any other
indebtedness of the Company. However, the right of the Company and its
creditors, including the holders of Debt Securities, under general equitable
principles to participate in any distributions of assets of any subsidiary upon
the Company's liquidation or reorganization or otherwise is, unless there is a
substantive consolidation
4
<PAGE>
of the Company with its subsidiaries, likely to be subject to the prior claims
of creditors of such subsidiary, except to the extent that claims of the
Company itself as a creditor may be recognized.
The Debt Securities will be issued only in fully registered form without
coupons. Offered Debt Securities may be presented at the corporate offices of
the applicable Trustee for registration of transfer or exchange without service
charge, but the Company may require payment to cover taxes or other
governmental charges payable in connection therewith.
CERTAIN DEFINITIONS
The Indentures contain certain restrictions upon actions of the Company and
certain of its subsidiaries and related definitions of terms. The following
terms, among others, are defined in the Indentures as indicated:
Assets Under Management Programs means those assets of the Company or any
Restricted Subsidiary, the value of which for financial reporting purposes
(i) is included in "Assets Under Management Programs" in the Company's most
recent consolidated balance sheet preceding the date of any determination
or (ii) upon any acquisition subsequent to the date of such balance sheet,
would be included in "Assets Under Management Programs" in a consolidated
balance sheet prepared as of the date of such acquisition, all determined
in accordance with generally accepted accounting principles applied on the
basis used from time to time in reports to the Company's stockholders.
Attributed Debt in respect of any Sale-Leaseback Transaction means, as of
the date of any determination, the lesser of (i) the sale price of the
property so leased multiplied by a fraction the numerator of which is the
remaining portion of the base term of the lease included in such
transaction and the denominator of which is the base term of such lease or
(ii) the total obligation (discounted to present value at 18% compounded
semiannually) of the lessee for rental payments (other than amounts
required to be paid on account of property taxes as well as maintenance,
repairs, insurance, water rates and other items which do not constitute
payments for property rights) during the remaining portion of the base term
of the lease included in such transaction.
Consolidated Tangible Net Worth means stockholders' equity of the Company
and consolidated subsidiaries (excluding the cost of any treasury shares),
including any amounts recorded in respect of preferred stock of the
Company, and less goodwill, as reflected in the Company's consolidated
balance sheet determined as of a date within 60 days preceding the date of
any determination, determined in accordance with generally accepted
accounting principles applied on the basis used from time to time in
reports to the Company's stockholders.
Debt means (i) any debt for money borrowed, (ii) any debt evidenced by a
note, debenture or other similar instrument, including purchase money
obligations given in connection with the acquisition of any property or
assets, including securities, (iii) any debt of others described in clauses
(i) and (ii) and guaranteed by the Company or a Restricted Subsidiary or
for which the Company or a Restricted Subsidiary is otherwise liable and
(iv) any amendment, renewal, extension or deferral or refunding of any Debt
described in clauses (i), (ii) and (iii).
Lien means any mortgage, pledge, lien, security interest or encumbrance.
Long-Term Debt means Debt that by its terms matures on a date more than
12 months after the date it was created or Debt that the obligor extends or
renews without the obligee's consent to a date more than 12 months after
the date the Debt was created.
Restricted Subsidiary means a Subsidiary substantially all of the
business of which is carried on within the United States, Canada or the
United Kingdom, or which is incorporated under the laws of any jurisdiction
in the United States, Canada or the United Kingdom.
Sale-Leaseback Transaction means an arrangement whereby the Company or a
Restricted Subsidiary now owns or hereafter acquires a property, transfers
it to a person and leases it back,
5
<PAGE>
except that such term shall not include those arrangements in which the
lease is (i) for a term of three years or less or (ii) between the Company
and a Restricted Subsidiary or between Restricted Subsidiaries.
Subsidiary means a corporation of which at least a majority of the
outstanding stock having voting power under ordinary circumstances to elect
directors shall at the time be owned, directly or indirectly, by the
Company and/or one or more Subsidiaries.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more fully registered global notes (the "Global Securities") that
will be deposited with, or on behalf of, a depositary identified in the
Prospectus Supplement relating to such series. Global Securities will be issued
in registered form and in either temporary or permanent form. Unless and until
it is exchanged for Debt Securities in definitive form, a temporary Global
Security may not be transferred except as a whole by the depositary for such
Global Security to a nominee of such depositary or by a nominee of such
depositary to such depositary or another nominee of such depositary or by such
depositary or any such nominee to a successor of such depositary or a nominee
of such successor.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to any
depositary arrangements.
Upon the issuance of a Global Security, the depositary for such Global
Security or its nominee will credit the accounts of persons held with it with
the respective principal amounts of the Debt Securities represented by such
Global Security. Such accounts shall be designated by the underwriters or
agents with respect to such Debt Securities or by the Company if such Debt
Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to persons that have
accounts with the depositary for such Global Security or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of ownership will be effected only through, records maintained by
the depositary (with respect to participants' interests) for such Global
Security or by participants or persons that hold through participants (with
respect to beneficial owners' interests).
LIMITATIONS ON LIENS
The Company shall not, and it shall not permit any Restricted Subsidiary to,
incur any Lien to secure Debt without equally and ratably securing the Debt
Securities except (i) Liens incurred in the ordinary course of business to
secure Debt utilized to fund Assets Under Management Programs; (ii) Liens
existing prior to the date of the Indentures; (iii) Liens on property, Debt or
shares of stock of a corporation at the time it becomes a Restricted Subsidiary
or it is merged with or acquired by a Restricted Subsidiary or the Company;
provided that any such Lien does not extend to other property of the Company or
a Restricted Subsidiary; (iv) Liens to secure certain intracompany Debt; (v)
Liens on property at the time the Company or a Restricted Subsidiary acquires
the property; provided that any such Lien does not extend to other property of
the Company or a Restricted Subsidiary; (vi) Liens in favor of a government
securing Debt representing payments under contract or statute or Debt incurred
to finance construction of property subject to the Lien; (vii) Liens placed
upon property or assets of the Company or a Restricted Subsidiary
contemporaneously with, or within one year after, the acquisition or completion
of construction and commencement of operation of such property or assets to
secure Debt incurred to finance all or a portion of the purchase price thereof
or such cost of construction; provided that any such Lien does not extend to
other property of the Company or a Restricted Subsidiary; (viii) Liens on
property of a person at the time the person transfers or leases all or
substantially all of its assets to the Company or a Restricted Subsidiary;
provided that any such Lien does not extend to other property of the Company or
a Restricted Subsidiary; (ix) any extension,
6
<PAGE>
renewal or replacement (or successive extensions, renewals or replacements), in
whole or in part, of any of the above; or (x) Liens to secure Debt not
otherwise permitted under clauses (i) through (ix) if, at the time any such
Liens are incurred, the aggregate amount of Debt secured by such Liens plus the
sum of the aggregate Attributed Debt in respect of Sale-Leaseback Transactions
permitted under clause (iii) of "Limitations on Sale-Leaseback Transactions"
and the then outstanding principal amount of Debt permitted under the second
sentence of "Limitations on Certain Advances to Non-Subsidiaries" does not
exceed 10% of Consolidated Tangible Net Worth.
LIMITATIONS ON SALE-LEASEBACK TRANSACTIONS
The Company shall not, and it shall not permit any Restricted Subsidiary to,
enter into a Sale- Leaseback Transaction unless (i) the Company or a Restricted
Subsidiary could create a Lien on the property or asset involved in the Sale-
Leaseback Transaction without equally and ratably securing the Debt Securities,
(ii) the Company or a Restricted Subsidiary within 180 days applies an amount
at least equal to the Attributed Debt in respect of such Sale-Leaseback
Transaction to retire Long-Term Debt of the Company or such Restricted
Subsidiary, provided, however, that the Company or a Restricted Subsidiary may
not receive credit for the retirement of (a) Debt of the Company that is
subordinated to the Debt Securities or Debt of a Subsidiary that is
subordinated to other Debt of such Subsidiary, (b) Debt retired at maturity or
through mandatory redemption or (c) Debt owed to the Company or a Subsidiary or
(iii) the Company or a Restricted Subsidiary could create Liens under clause
(x) of "Limitations on Liens" to secure Debt in a principal amount equal to the
Attributed Debt in respect to such Sale-Leaseback property without equally and
ratably securing the Debt Securities.
LIMITATIONS ON CERTAIN ADVANCES TO NON-SUBSIDIARIES
Neither the Company nor any Subsidiary will have outstanding any claims on
account of funds advanced by the Company or a Subsidiary by way of loans,
which, when made, were made to finance Assets Under Management Programs,
against any person other than a Subsidiary or the Company unless such
Subsidiary or the Company is primarily liable in respect thereof and the assets
so financed would continue to be included in Assets under Management Programs
on the Company's consolidated balance sheet as of the date of any
determination. This restriction will not apply if the principal amount of Debt
represented by claims otherwise prohibited as aforesaid does not exceed the
amount which, in addition to any amounts which at the time of determination had
been incurred under clause (x) of "Limitations on Liens" and clause (iii) of
"Limitations on Sale-Leaseback Transactions", could then be incurred by the
Company or a Restricted Subsidiary in compliance with clause (x) of
"Limitations on Liens."
RESTRICTIONS ON SALE, CONSOLIDATION OR MERGER
The Company will not consolidate with or merge into, or transfer all or
substantially all of its assets to any other corporation unless the resulting,
surviving or transferee corporation assumes all the obligations of the Company
under the Debt Securities and the Indentures. If upon any such consolidation,
merger or transfer any property or assets of the Company or a Restricted
Subsidiary would become subject to a Lien securing Debt, then before the
consolidation, merger or transfer occurs, the Company shall secure the Debt
Securities equally and ratably with or prior to the Debt secured by such Lien;
provided, however, that the Company need not so secure the Debt Securities if
the Company or a Restricted Subsidiary could incur such Debt and secure it by a
Lien on the property of the Company or any Restricted Subsidiary pursuant to
the Indentures (see "Limitations on Liens") without equally and ratably
securing the Debt Securities.
MODIFICATION AND WAIVER
The Company is permitted, with the consent of the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities (as defined in
the Indentures) of each series affected by the
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<PAGE>
modification, to supplement the Indentures to modify the rights of the Holders
of the Debt Securities; provided that no such modification shall, without the
consent of the Holder of each Outstanding Debt Security affected thereby, (i)
change the Stated Maturity of the principal of any Outstanding Debt Security or
change the Redemption Price; (ii) reduce the principal amount of or the rate of
interest on or any premium payable on redemption of any Outstanding Debt
Security; (iii) modify the manner of determination of the rate of interest so
as to affect adversely the interest of a Holder or reduce the amount of the
principal of an Original Issue Discount Debt Security; (iv) change the place or
currency of payment of principal of or interest, if any, on any Debt Security;
(v) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security; or (vi) reduce the percentage in principal
amount of Outstanding Debt Securities of any series necessary to modify or
amend the Indenture or to waive compliance with or defaults of certain
restrictive provisions of the Indenture.
The Holders of a majority in principal amount of an Outstanding series of
Debt Securities may on behalf of all the Holders of such series waive the
compliance with certain covenants or waive any past default except (i) a
default in payment of the principal of (or premium, if any) or interest on any
Debt Security of such series or (ii) a default in respect of a covenant or
provision of the Indenture which cannot be amended or modified without the
consent of the Holder of each Outstanding Debt Security of such series
affected.
EVENTS OF DEFAULT
The following shall constitute events of default with respect to Debt
Securities of any series then Outstanding: (i) default for a period of 30 days
in payment of any interest on the Debt Securities of such series when due; (ii)
default in payment of principal of (or premium, if any, on) the Debt Securities
of such series; (iii) default in the deposit of any sinking fund payment, when
and as due by the terms of a Debt Security of that series; (iv) default in
performance of any other covenant in the applicable Indenture with respect to a
series of Debt Securities, including violations of the covenants described
above relating to limitations on Liens, limitations on Sale-Leaseback
Transactions, limitations on certain advances to non-Subsidiaries and
restrictions on sales of assets and consolidation or merger of the Company,
continued for 90 days after written notice to the Company by the Trustee or by
the Holders of at least 25% in principal amount of the Outstanding Debt
Securities of that series; and (v) certain events of bankruptcy, insolvency or
reorganization.
If an event of default with respect to Debt Securities of any series shall
occur and be continuing, the applicable Trustee or the holders of 25% in
principal amount of the Outstanding Debt Securities of such series may declare
the principal and accrued interest of all of the Debt Securities of that series
to be due and payable immediately. The Company will comply with applicable
tender offer rules under the Securities Exchange Act of 1934 in the event that
the occurrence of an event of default results in the repurchase of Debt
Securities.
Each Indenture provides that the Trustee will, within 90 days after the
occurrence of a default under such Indenture, give to Holders of the series of
Debt Securities with respect to which a default has occurred notice of all
uncured defaults known to it but, except in the case of a default in the
payment of principal (including any sinking fund payment) or interest on a
series of Debt Securities with respect to which such default has occurred, the
Trustee shall be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interest of such
Holders.
Each Indenture contains a provision entitling the Trustee, subject to the
duty of such Trustee during default to act with the required standard of care,
to be indemnified by the Holders of a series of Debt Securities with respect to
which a default has occurred before proceeding to exercise any right or power
under the appropriate Indenture at the request of such Holders. Subject to such
right of indemnification, each Indenture provides that the Holders of a
majority in principal amount of the Outstanding Debt
8
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Securities of such series may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred upon the Trustee.
The Company will be required to furnish to the Trustees annually a statement
as to the fulfillment by the Company of all of its obligations under the
Indentures.
The general provisions of the Indentures do not afford holders of the Debt
Securities protection in the event of a highly leveraged or other transaction
involving the Company that may adversely affect holders of the Debt Securities.
Any covenants or other provisions included in a supplement or amendment to the
Indenture for the benefit of the holders of any particular series of Debt
Securities will be described in the applicable Prospectus Supplement.
CONCERNING THE TRUSTEE
The Company maintains general banking and credit relations with the Trustees
in the ordinary course of business.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters, and also may
sell Debt Securities directly to other purchasers or through agents. The
distribution of the Debt Securities may be effected from time to time in one or
more transactions at a fixed price or prices (which may be changed from time to
time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each Supplement will
describe the method of distribution of the Offered Debt Securities.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters under the
Securities Act and any discounts or commissions received by them and any profit
on the resale of Debt Securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter or
agent will be identified and any such compensation will be described in the
Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
If so indicated in the Supplement, the Company will authorize underwriters or
other persons acting as the Company's agents to solicit offers by certain
institutions to purchase Debt Securities from the Company pursuant to contracts
providing for payment and delivery on a future date. Institutions with which
such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. The obligations of any purchaser under any such contract will not
be subject to any conditions except that (1) the purchase of the Offered Debt
Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject, and (2) if the Offered
Debt Securities are also being sold to dealers acting as principals for their
own account, the dealers shall have purchased such Offered Debt Securities not
sold for delayed delivery. The underwriters and such other agents will not have
any responsibility in respect of the validity or performance of such contracts.
9
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LEGAL MATTERS
The validity of each issue of Debt Securities will be passed upon for the
Company by Piper & Marbury and certain legal matters will be passed upon for
the underwriters or agents by Wachtell, Lipton, Rosen & Katz. Attorneys at the
firm of Piper & Marbury currently own 1,750 shares of the Company's common
stock.
EXPERTS
The financial statements and schedules included in the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1993, which are
incorporated by reference in this Prospectus, have been audited by KPMG Peat
Marwick, independent certified public accountants, to the extent and for the
periods indicated in their report thereon, and are incorporated herein in
reliance upon the report of KPMG Peat Marwick and the authority of said Firm as
experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO
BUY, SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, IN ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED OR INCORPORATED BY REF-
ERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
SUCH INFORMATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes....................................................... S-2
Special Provisions Relating to Foreign Currency Notes...................... S-13
Certain Federal Income Tax Considerations.................................. S-17
Supplemental Plan of Distribution.......................................... S-24
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 2
Ratio of Earnings to Fixed Charges......................................... 3
Use of Proceeds............................................................ 3
Description of Debt Securities............................................. 3
Plan of Distribution....................................................... 9
Legal Matters.............................................................. 10
Experts.................................................................... 10
</TABLE>
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[LOGO OF PHH CORPORATION APPEARS HERE]
$2,000,000,000
PHH CORPORATION
MEDIUM-TERM NOTES
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.
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