<PAGE>
Rule 424(b)(2)
Registration No. 33-63627
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 8, 1995
[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
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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."
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."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY 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>
(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 an Agent acting in its capacity as
agent of from .125% to .750%, depending upon the Note maturity, of the
principal amount of any Note sold with a maturity of up to 30 years.
Commissions on agency sales of Notes with maturities of more than 30 years
will be determined at the time of sale. The Company may also sell Notes to
an Agent acting in its capacity 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 $1,579,155.
(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."
CS First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan Securities Inc.
The date of this Prospectus Supplement is November 8, 1995.
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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. As of July 31, 1995, the aggregate
amount of outstanding indebtedness to which the Notes will rank pari passu,
including medium-term notes, commercial paper and commercial bank notes, was
$3,781,628,000. 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 July 31, 1995, the aggregate amount of
outstanding indebtedness of subsidiaries of the Company was $301,619,000.
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. As of July 31, 1995, there
were $1,486,000,000 aggregate principal amount of medium-term notes
outstanding. 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 the Notes, the
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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, Window 2, 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, Window 2, 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 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
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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"). 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
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.
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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 deadlines 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 deadline 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 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
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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. 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
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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 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"
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("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.
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 Deposit." 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
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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 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
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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.
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 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 USPRIME1 Page (as defined below) as
such bank's prime rate or base lending
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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
USPRIME1 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 USPRIME1 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 USPRIME1 Page" means the display designated as page "USPRIME1"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the USPRIME1 page on that service for the purpose of displaying prime rates or
base lending rates of major United States banks).
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 provide 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
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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.
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, as amended (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.
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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 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 third 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),
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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 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
"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).
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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 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 foreign currencies have been volatile and such volatility may be
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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 provide 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.
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
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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 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 Treasury regulations applicable to original issue discount
obligations (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
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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 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 its issue price if 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
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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 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
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at the time of acquisition of the Foreign Currency Note. With respect to a
United States Holder that does not elect to amortize bond premium, the amount
of the bond premium will constitute a capital loss when the Note matures,
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.
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
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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.
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
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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 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
S-22
<PAGE>
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 CS First
Boston Corporation, 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 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-23
<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 REPRESEN-TATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER , 1995
<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, 7 World Trade Center, Thirteenth Floor, New York, New York
10048. 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, 1995;
and (2) Quarterly Report on Form 10-Q for the period ended July 31, 1995. 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 3,000
clients, including many of the world's largest corporations, as
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<PAGE>
well as government agencies and affinity groups. Its primary business service
segments consist of vehicle management, real estate, and mortgage banking.
Vehicle management services consist primarily of the management, purchase,
leasing and resale of vehicles for corporate clients and government agencies,
including fuel and cost management programs and other fee-based services for
their vehicle fleets in the United States, Europe and Canada. Real estate
services consist primarily of the purchase, management and resale of homes for
transferred employees of corporate clients, financial institutions and
government agencies 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>
THREE MONTHS YEAR ENDED APRIL 30,
ENDED ------------------------
JULY 31, 1995 1995 1994 1993 1992 1991
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges....... 1.51 1.60 1.64 1.47 1.34 1.25
</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.
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 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.
3
<PAGE>
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 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:
4
<PAGE>
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, 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 is owned, directly or indirectly, by the Company, or one or more
other Subsidiaries or by the Company and one or more other 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 Global
Security may not be transferred except as a whole by the depositary for such
Global Security to a nominee of
5
<PAGE>
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
to secure Debt incurred to finance all or a portion of the purchase price
thereof or such cost of construction no more than one year after the later of,
the acquisition, completion of construction or commencement of operation of
such property or assets; 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, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any of the
above, with certain restrictions; 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 under any of clauses (ii) through
(ix) of "Limitations on Liens" 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
6
<PAGE>
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. Thereafter, all such obligations
of the predecessor corporation shall terminate. 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 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, or any installment of principal or interest, 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 due and payable upon acceleration; (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) modify the provisions
relating to modification or amendment of the Indenture or to waiver of
compliance with or defaults of certain restrictive provisions of the
Indenture, except to increase the percentage in principal amount of
Outstanding Debt Securities required, or to provide that certain other
provisions of the Indenture cannot be modified or amended without the Consent
of the Holder of each Outstanding Debt Security affected thereby.
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
7
<PAGE>
(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 Exchange Act 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 premium, if any,
or interest on or Redemption Price (if called for redemption) of 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 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
8
<PAGE>
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.
LEGAL MATTERS
The validity of each issue of Debt Securities will be passed upon for the
Company by Piper & Marbury L.L.P. 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 L.L.P. currently own 775 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, 1995, which are
incorporated by reference in this Prospectus, have been audited by KPMG Peat
Marwick LLP, 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 LLP and the authority of said
firm as experts in accounting and auditing.
9
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMA-
TION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUP-
PLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICI-
TATION 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 SO-
LICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, IN ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE 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
----
<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes....................................................... S-2
Special Provisions Relating to Foreign Currency Notes...................... S-12
Certain Federal Income Tax Considerations.................................. S-16
Supplemental Plan of Distribution.......................................... S-23
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....................................................... 8
Legal Matters.............................................................. 9
Experts.................................................................... 9
</TABLE>
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[LOGO OF PHH CORPORATION APPEARS HERE]
$2,000,000,000
PHH Corporation
Medium-Term Notes
PROSPECTUS SUPPLEMENT
CS First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan Securities Inc.
November 8, 1995
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