FILED PURSUANT TO RULE 424(B)(3) AND FILE NO. 333-27715
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED JUNE 5, 1997 AND
PROSPECTUS SUPPLEMENT DATED JUNE 5, 1997)
[PHH LOGO]
$3,000,000,000
PHH CORPORATION
MEDIUM-TERM NOTES
DUE FROM 9 MONTHS TO 40 YEARS FROM DATE OF ISSUE
___________________
PHH Corporation (the "Company") may offer from time to time up to
$3,000,000,000 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 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") 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. 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. 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 the form of one or more fully registered global
notes (a "Global Note") unless otherwise indicated in the applicable Pricing
Supplement, in which case the Notes will be issued in fully registered
certificated form (a "Certificated 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."
SEE "RISK FACTORS" BEGINNING ON PAGE S-3 HEREOF FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
___________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1)(2) COMPANY(2)(3)
-------------- ---------------------- -----------------------------
<S><C>
Per Note................................... 100% .125%-.750% 99.875%-99.250%
Total(4)................................... $3,000,000,000 $3,750,000-$22,500,000 $2,996,250,000-$2,977,500,000
</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 $1,702,591.
(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."
Credit Suisse First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan & Co.
The date of this Prospectus Supplement is September 5, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MADE HEREBY MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH NOTES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF
DISTRIBUTION".
<PAGE>
RECENT DEVELOPMENTS
HFS INCORPORATED/CUC INTERNATIONAL INC. MERGER. On May 27, 1997, HFS
Incorporated, a Delaware corporation ("HFS") and the sole stockholder of the
Company, entered into an Agreement and Plan of Merger (the "Merger Agreement")
with CUC International Inc., a Delaware corporation ("CUC").
Pursuant to the Merger Agreement, HFS will be merged with and into CUC (the
"Merger"), with CUC continuing as the surviving corporation and the sole
stockholder of the Company. The Merger Agreement contains certain covenants by
HFS that generally require the Company to conduct its operations during the
period prior to the Merger in the ordinary course of business consistent with
past practice.
Consummation of the Merger is subject to customary regulatory approvals and
the respective approval of the stockholders of HFS and CUC. The Merger is
expected to be consummated in the Fall of 1997.
STANDARD & POOR'S REAFFIRMATION. On August 7, 1997, Standard & Poor's
Ratings Group ("S&P") reaffirmed its previous A+ senior debt rating for the
Company's debt securities after considering HFS's stated dividend and
intercompany loan policy as stated below under "Dividend Policy." A security
rating is not a recommendation to buy, sell or hold securities and is subject to
revision or withdrawal at any time by S&P. Each rating should be evaluated
independently of any other rating.
DIVIDEND POLICY
HFS owns 100% of the outstanding capital stock of the Company. HFS and the
Company currently operate under policies limiting (a) the payment of dividends
on the Company's capital stock to 40% of net income of the Company on an annual
basis, less the outstanding principal balance of loans from the Company to HFS
as of the date of any proposed dividend payment, and (b) the outstanding
principal balance of loans from the Company to HFS to 40% of net income of the
Company on an annual basis, less the payment of dividends on the Company's
capital stock during such year. The Indenture does not require this policy or
otherwise directly limit the Company's ability to pay dividends or make other
distributions.
SS-1
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 5, 1997
[PHH LOGO]
$3,000,000,000
PHH CORPORATION
MEDIUM-TERM NOTES
DUE FROM 9 MONTHS TO 40 YEARS FROM DATE OF ISSUE
___________________
PHH Corporation (the "Company") may offer from time to time up to
$3,000,000,000 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 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") 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. 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. 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 the form of one or more fully registered global
notes (a "Global Note") unless otherwise indicated in the applicable Pricing
Supplement, in which case the Notes will be issued in fully registered
certificated form (a "Certificated 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."
SEE "RISK FACTORS" BEGINNING ON PAGE S-3 HEREOF FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
___________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1)(2) COMPANY(2)(3)
-------------- ---------------------- -----------------------------
<S><C>
Per Note................................... 100% .125%-.750% 99.875%-99.250%
Total(4)................................... $3,000,000,000 $3,750,000-$22,500,000 $2,996,250,000-$2,977,500,000
</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 $1,702,591.
(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."
Credit Suisse First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan & Co.
The date of this Prospectus Supplement is June 5, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MADE HEREBY MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH NOTES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF
DISTRIBUTION".
<PAGE>
RISK FACTORS
Certain of the Notes issuable under this Prospectus Supplement, any Pricing
Supplement hereto and the attached Prospectus may be payable in one or more
foreign currencies. This Prospectus Supplement, any Pricing Supplement hereto
and the attached Prospectus do not describe all the risks of an investment in
Foreign Currency Notes (defined herein) 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. See "Special Provisions Relating to Foreign Currency
Notes" below.
DESCRIPTION OF NOTES
The following description of the terms of the Medium-Term Notes offered
hereby (the "Notes") of PHH Corporation (the "Company") 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 June 5, 1997 (as
supplemented from time to time, 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 $3,000,000,000 (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 as an exhibit to the Registration Statement
of which the accompanying Prospectus is a part.
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 January 31, 1997, 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
$4,277,109,000. 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 of such subsidiary may be
recognized. As of January 31, 1997, the aggregate amount of outstanding
indebtedness of subsidiaries of the Company (excluding indebtedness of the
subsidiaries to the Company or other subsidiaries) was $392,724,000.
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 January 31, 1997, there
were $1,467,800,000 aggregate principal amount of medium-term notes of the
Company 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.
S-3
<PAGE>
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 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.
The interest rates offered by the Company with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of the
Notes purchased in any single transaction. 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
accompanying Prospectus.
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
S-4
<PAGE>
after a Regular Record Date and before the related Interest Payment Date shall
not be effective with respect to the interest payable on such Interest Payment
Date. Interest will be payable on each date specified in the Note on which an
installment of interest is due and payable (an "Interest Payment Date") and at
Maturity. If the original issue date of a Note is between a Regular Record Date
and the related Interest Payment Date, the initial interest payment will be made
on the Interest Payment Date following the next succeeding Regular Record Date
to the registered Holder on such next succeeding Regular Record Date unless
otherwise specified in the applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement, interest
payments will be in the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including the date of issue, if no interest has
been paid with respect to such Note), to but excluding the applicable Interest
Payment Date (an "Interest Accrual Period"). 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
S-5
<PAGE>
Repayment Date, on notice given by such Holder to the Company not more than 60
nor less than 30 days prior to the Optional Repayment Date.
If a Note is represented by a Global Note, the Depositary's nominee will be
the Holder of such Note and therefore will be the entity through which the
beneficial owners of Global Notes may exercise a right to repayment. In order to
ensure that the Depositary's nominee will timely exercise a right to repayment
with respect to a particular Note, the beneficial owner of such Note must
instruct the broker or other direct or indirect participant through which it
holds an interest in such Note to notify the Depositary of its desire to
exercise a right to repayment. The Depositary would then notify the Trustee.
Different firms have different 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
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other variable terms of the Floating Rate Notes are subject to change by the
Company from time to time, but no such change will affect any Floating Rate Note
theretofore issued or as to which an offer to purchase has been accepted by the
Company.
Unless otherwise specified in an applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semi-annually or annually (each an "Interest Reset Date"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in an
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes which reset daily, each Business Day; in the case of
Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Tuesday of each week (except as provided below); in the case of Floating
Rate Notes which reset monthly, the third Wednesday of each month; in the case
of Floating Rate Notes which reset quarterly, the third Wednesday of each
February, May, August and November; in the case of Floating Rate Notes which
reset semi-annually, the third Wednesday of each of the two months of each year
specified in the applicable Pricing Supplement; and in the case of Floating Rate
Notes which reset annually, the third Wednesday of one month of each year, as
specified in the applicable Pricing Supplement; provided, however, that, unless
otherwise specified in an applicable Pricing Supplement, the interest rate in
effect from the date of issue to the first Interest Reset Date with respect to a
Floating Rate Note will be the Initial Interest Rate (as set forth in the
applicable Pricing Supplement). If any Interest Reset Date for any Floating Rate
Note would otherwise be a day that is not a Business Day for such Floating Rate
Note, the Interest Reset Date for such Floating Rate Note shall be postponed to
the next day that is a Business Day for such Floating Rate Note, except that in
the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Reset Date shall be the immediately preceding
Business Day.
The interest rate applicable to each Interest Accrual Period commencing on
an Interest Reset Date will be the rate determined by reference to the Interest
Determination Date. The Interest Determination Date with respect to (a) a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
(b) a Federal Funds Effective Rate Note (the "Federal Funds Interest
Determination Date"), (c) a CD Rate Note (the "CD Interest Determination Date")
or (d) a Prime Rate Note (the "Prime Interest Determination Date") will be the
second Business Day prior to the Interest Reset Date for such Note. The Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the
"LIBOR Interest Determination Date") will be the second London Banking Day prior
to such Interest Reset Date. The Interest Determination Date pertaining to an
Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Interest Determination Date pertaining to the Interest
Reset Date occurring in the next succeeding week. If an auction date shall fall
on any Interest Reset Date for a Treasury Rate Note, then such Interest Reset
Date shall instead be the first Business Day immediately following such auction
date.
With respect to a Floating Rate Note, accrued interest is calculated by
multiplying the principal amount of a Note by an accrued interest factor. The
accrued interest factor is computed by adding the interest factors calculated
for each day from the date of issue, or from the last date for which interest
has been paid, as the case may be, to the date for which accrued interest is
being calculated. Unless otherwise specified in an applicable Pricing
Supplement, the interest factor for each such day is computed by dividing the
interest rate applicable to such date by 360, in the case of Commercial Paper
Rate Notes, CD Rate Notes, Federal Funds Effective Rate Notes, LIBOR Notes and
Prime Rate Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes.
All percentages resulting from any calculation with respect to Floating
Rate Notes will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation on
Floating Rates Notes will be rounded to the nearest cent with one half cent
being rounded upward. The Calculation Agent will, upon the request of the Holder
of any
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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" ("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
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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:
D x 360
Money Market Yield = ------------- 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 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
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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 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
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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 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
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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
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
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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 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. 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).
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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), 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
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Floor, New York, New York 10005, on or prior to the Regular Record Date or at
least fifteen days prior to Maturity, as the case may be. Such request may be in
writing (mailed or hand delivered) or by cable, telex or other form of facsimile
transmission. A Holder of a Foreign Currency Note may elect to receive payment
in the Specified Currency for all principal, premium, if any, and interest
payments and need not file a separate election for each payment. Such election
will remain in effect until revoked by written notice to the Trustee, 14 Wall
Street, Eighth Floor, New York, New York 10005, but written notice of any such
revocation must be received by the Trustee on or prior to the Regular Record
Date or at least fifteen days prior to Maturity, as the case may be. Holders of
Foreign Currency Notes whose Foreign Currency Notes are to be held in the name
of a broker or nominee should contact such broker or nominee to determine
whether and how an election to receive payments in the Specified Currency may be
made.
Interest on Foreign Currency Notes paid in U.S. dollars will be paid in the
manner specified in the attached Prospectus and this Prospectus Supplement for
interest on Notes denominated in U.S. dollars. Interest on Foreign Currency
Notes paid in the Specified Currency will be paid by a check drawn on an account
maintained at a bank outside the United States, unless other arrangements have
been made. The principal and premium, if any, of Foreign Currency Notes,
together with interest accrued and unpaid thereon, due at Maturity will be paid
in immediately available funds against presentation of such Foreign Currency
Notes at the offices of the Trustee, 14 Wall Street, Eighth Floor, New York, New
York 10005.
PAYMENT CURRENCY
Except as set forth below, if payment in respect of a Foreign Currency Note
is required to be made in a Specified Currency and such currency is unavailable
due to the imposition of exchange controls or other circumstances beyond the
Company's control, or is no longer used by the government of the country issuing
such currency or for the settlement of transactions by public institutions of or
within the international banking community, then all payments due on that due
date in respect of such Foreign Currency Note shall be made in U.S. dollars. The
amount so payable on any date in such Specified Currency shall be converted into
U.S. dollars at the Market Exchange Rate, on the date of such payment. In the
event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Specified Currency is not
a composite currency, on the basis of the most recently available Market
Exchange Rate for such Specified Currency or (ii) if such Specified Currency is
a composite currency, in an amount determined by the Exchange Rate Agent to be
the sum of the results obtained by multiplying the number of units of each
component currency of such composite currency, as of the most recent date on
which such composite currency was used, by the Market Exchange Rate for such
component currency on the second Business Day prior to such payment date (or if
such Market Exchange Rate is not then available, by the most recently available
Market Exchange Rate for such component currency).
If payment in respect of a Foreign Currency Note is required to be made in
ECU and ECU are unavailable due to the imposition of exchange controls or other
circumstances beyond the Company's control, or are no longer used in the
European Monetary System, then all payments due on that date in 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
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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 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
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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 State of
the United States, (iii) an estate the income of which is subject to United
States federal income tax regardless of its source, (iv) any trust if (A) a
court within the United States is able to exercise primary supervision over the
administration of the trust and (B) one or more United States fiduciaries have
the authority to control all substantive decisions of the trust and (v) 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
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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 income 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 of the interest income or disposition of the Note.
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 or accrual method taxpayers. Notice will be given in the
applicable Pricing Supplement when the Company determines that a particular Note
will be a Discount Note. Unless an applicable Pricing Supplement so indicates,
Floating Rate Notes will not be Discount Notes.
United States Holders of Discount Notes having a Stated Maturity of more
than one year from their date of issue will have to include original issue
discount in income before the receipt of cash attributable to such income. The
amount of original issue discount includible in income by a United States Holder
of a Discount Note is the sum of the daily portions of original issue discount
with respect to the Discount Note for each day during the taxable year or
portion of the taxable year in which it holds such Note ("accrued original issue
discount"). The daily portion is determined by allocating to each day in any
"accrual period" a pro rata portion of the original discount allocable to that
accrual period. The amount of original issue discount allocable to an accrual
period is the excess of (a) the product of the Discount Note's adjusted issue
price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
adjusted for the length of such period) over (b) the sum of the qualified stated
interest payments, if any, payable (or treated as payable) on the Discount Note
during the accrual period. Under the OID Regulations, the "accrual period" may
be of any length and may vary in length over the term of the Note, provided that
each accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day or on the first day of an
accrual period. The "adjusted issue price" of the Discount Note at the start of
any accrual period is the sum of the issue price of such Note plus the accrued
original issue discount for each prior accrual period minus any prior payments
on the Note that were not payments of qualified stated interest. The amount of
original issue discount includible in income is adjusted for any United States
Holder which acquires a Discount Note at a premium over its adjusted issue price
(an "acquisition premium"), but at an amount less than or equal to the sum
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of all amounts payable on the instrument after the acquisition date (other than
payments of qualified stated interest). It should be noted that the OID
Regulations require certain modifications to be made to the method for
determining OID in the case of variable rate instruments.
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
issue price (or its tax basis 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 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
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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 of payment or sale or retirement of the
Note.
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 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.
On June 27, 1996, the IRS proposed regulations concerning the tax treatment
of amortizable bond premium. These regulations, if effective, may change the
accounting for amortizable bond premium as described herein. The IRS has
proposed that these regulations become effective for bonds issued on or after
the date that is 60 days after the date such regulations are issued in final
form in the Federal Register. Holders should consult with their own tax advisors
regarding the tax accounting for bond premium relating to the notes.
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.
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<PAGE>
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 described above, 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. 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 will
equal the proceeds of the sale excluding the amount attributable to accrued but
unpaid interest, which is treated as the receipt of an interest payment. 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
(excluding any amount attributable to accrued but unpaid interest). 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 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
S-21
<PAGE>
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 tax or withholding of federal income tax,
provided that in the case of interest or original issue discount, (i) such
interest or original issue discount is not effectively connected with a
trade or business conducted by the United States Alien Holder in the United
States, (ii) the United States Alien Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (iii) the United States
Alien Holder is not a controlled foreign corporation that is related to the
Company through stock ownership, (iv) the United States Alien Holder is not
a bank that acquired the Notes pursuant to a loan agreement made in the
ordinary course of its trade or business, and (v) either (A) the beneficial
owner of the Note certifies to the Company or its agent, under penalties of
perjury, that he is not a United States Holder and provides his name and
address, or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and holds the Note, certifies
to the Company or its agent under penalties of perjury that such statement
has been received from the beneficial owner by it or by a financial
institution and furnishes the payor with a copy thereof;
(b) a United States Alien Holder will not be subject to United States
federal income tax 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 sale 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.
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<PAGE>
Under certain proposed regulations that have not yet become effective,
certification procedures regarding a holder's status may change.
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 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.
On April 22, 1996, the IRS issued proposed regulations relating to (i)
withholding income tax on U.S.-source income paid to Non-U.S. persons, (ii)
claiming Non-U.S. holder status to avoid backup withholding, and (iii) reporting
to the IRS of payments to Non-U.S. persons. The proposed regulations would
substantially revise some aspects of the current system for withholding on and
reporting amounts paid to Non-U.S. Persons. The regulations would unify current
certification procedures and clarify forms and reliance standards. Most forms
are proposed to be combined into a single new Form W-8. In general, the
regulations are proposed to be effective for payments made after December 31,
1997. Certificates issued on or before the date that is 60 days after the
proposed regulations are made final, however, will continue to be valid until
they expire. All proposed regulations are subject to change before adoption in
final form. No reliable prediction can be made as to when, if ever, the proposed
regulations will be made final and, if so, as to their final form.
S-23
<PAGE>
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through Credit
Suisse 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.
In connection with the offering made hereby, the Agents may purchase and
sell the Notes in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover short positions created by
the Agents in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Notes, and short positions created by the Agents
involve the sale by the Agents of a greater principal amount of Notes than they
are required to purchase from the Company. The Agents may also impose a penalty
bid, whereby selling concessions allowed to broker-dealers in respect of the
Notes sold in the offering may be reclaimed by the Agents if such Notes are
repurchased by the Agents in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Notes, which may be higher than the price that might otherwise prevail in the
open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
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-24
<PAGE>
PHH CORPORATION
DEBT SECURITIES
PHH Corporation (the "Company") from time to time may offer up to
$3,000,000,000 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
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 5, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports 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. In addition,
registration statements and certain other filings made with the Commission
through its Electronic Data Gathering Analysis and Retrieval ("EDGAR") system
are publicly available through the Commission's site on the Internet's World
Wide Web, located at http://www.sec.gov. 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 through EDGAR 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, 1996 as
amended by Form 10-K/A filed March 27, 1997; (2) Quarterly Reports on Form 10-Q
as amended by Reports on Form 10-Q/A filed March 27, 1997 for the periods ended
July 31, 1996, October 31, 1996 and January 31, 1997; and (3) Current Reports on
Form 8-K filed November 15, 1996 and May 14, 1997. 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: Treasurer.
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). Effective as of April 30, 1997, the Company became a wholly-owned
subsidiary of HFS Incorporated ("HFS").
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 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,
2
<PAGE>
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.
HFS is a global consumer services company. HFS is the largest franchisor of
hotels and residential real estate brokerage offices and, in addition to the
Company, owns Avis, Inc., the world's second largest rental car system, and owns
Resort Condominiums International, Inc., the largest provider of vacation
timeshare exchanges worldwide.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED APRIL 30,
ENDED ------------------------------------
JANUARY 31, 1997 1996 1995 1994 1993 1992
---------------- ---- ---- ---- ---- ----
<S><C>
Ratio of earnings to fixed charges.......... 1.65 1.53 1.60 1.64 1.47 1.34
</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.
DIVIDEND POLICY
HFS owns 100% of the outstanding capital stock of the Company. HFS and the
Company currently operate under policies limiting the payment of dividends on
the Company's capital stock to 40% of net income of the Company on an annual
basis. The Indenture does not require this policy or otherwise directly limit
the Company's ability to pay dividends or make other distributions.
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.
3
<PAGE>
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.
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
June 5, 1997, between the Company and The First National Bank of Chicago, as
Trustee or (ii) an Indenture dated as of June 5, 1997, between the Company and
The Bank of New York, 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.
4
<PAGE>
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.
Prospective purchasers of the Debt Securities should be aware that the
Indenture does not contain any covenant that would prevent HFS from removing
assets from the Company or any of the Company's subsidiaries, or that would
limit the Company's ability to make advances, pay dividends or make any other
distributions to HFS.
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 used in the Indentures as indicated:
CONSOLIDATED NET WORTH means, at any date of determination, all amounts
which would be included on a balance sheet of the Company and its consolidated
Subsidiaries under stockholders' equity, in accordance with generally accepted
accounting principles in effect from time to time.
DEBT means (i) all debt, obligations and other liabilities of the Company
and its Subsidiaries which are includable as liabilities in a consolidated
balance sheet of the Company and its Subsidiaries, other than (x) accounts
payable and accrued expenses, (y) advances from clients obtained in the ordinary
course of the relocation management services business of the Company and its
Subsidiaries and (z) current and deferred income taxes and other similar
liabilities, plus (ii) without duplicating any items included in Debt pursuant
to the foregoing clause (i), the maximum aggregate amount of all liabilities of
the Company or any of its Subsidiaries under any guaranty, indemnity or similar
undertaking given or assumed of, or in respect of, the indebtedness, obligations
or other liabilities, assets, revenues, income or dividends of any person other
than the Company or one of its Subsidiaries and (iii) all other obligations or
liabilities of the Company or any of its Subsidiaries in relation to the
discharge of the obligations of any person other than the Company or one of its
Subsidiaries.
LIEN means any mortgage, pledge, lien, security interest or encumbrance.
MATERIAL U.S. SUBSIDIARY means any Subsidiary of the Company which together
with its Subsidiaries at the time of determination had assets constituting 10%
or more of consolidated assets, accounts for 10% or more of Consolidated Net
Worth, or accounts for 10% or more of the revenues of the Company and its
consolidated Subsidiaries for the Rolling Period immediately preceding the date
of determination.
ROLLING PERIOD means with respect to any fiscal quarter, such fiscal
quarter and the three immediately preceding fiscal quarters considered as a
single accounting period.
SPECIAL PURPOSE VEHICLE SUBSIDIARY means PHH Caribbean Leasing, Inc. and
any Subsidiary engaged in the fleet-leasing management business which (i) is, at
any one time, a party to one or more lease agreements with only one lessee and
(ii) finances, at any one time, its investment in lease agreements or vehicles
with only one lender, which lender may be the Company.
SUBSIDIARY means, with respect to any person, any corporation, association,
joint venture, partnership or other business entity of which at least a majority
of the voting stock or other ownership interests having ordinary voting power
for the election of directors (or the equivalent) is, at the time as of which
any determination is being made, owned or controlled by such person or one or
more subsidiaries of such person, or by such person and one or more subsidiaries
of such person.
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
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<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 Material U.S. Subsidiary
to, incur any Lien to secure Debt without equally and ratably securing the Debt
Securities except (i) deposits under worker's compensation, unemployment
insurance and social security laws or to secure statutory obligations or surety
or appeal bonds or performance or other similar bonds in the ordinary course of
business, or statutory Liens of landlords, carriers, warehousemen, mechanics and
materialmen and other similar Liens, in respect of liabilities which are not yet
due or which are being contested in good faith by appropriate proceedings, Liens
for taxes not yet due and payable, and Liens for taxes due and payable, the
validity or amount of which is currently being contested in good faith by
appropriate proceedings and as to which foreclosure and other enforcement
proceedings shall not have been commenced (unless fully bonded or otherwise
effectively stayed); (ii) purchase money Liens granted to the vendor or Person
financing the acquisition of property, plant or equipment if (a) limited to the
specific assets acquired and, in the case of tangible assets, other property
which is an improvement to or is acquired for specific use in connection with
such acquired property or which is real property being improved by such acquired
property; and (b) the debt secured by such Lien is the unpaid balance of the
acquisition cost of the specific assets on which the Lien is granted; (iii)
Liens upon real and/or personal property, each of which Liens existed on such
property before the time of its acquisition and was not created in anticipation
thereof; provided that no such Lien shall extend to or cover any property of the
Company or a Material U.S. Subsidiary other than the respective property so
acquired and improvements thereon; (iv) Liens arising out of attachments,
judgments or awards as to which an appeal or other appropriate proceedings for
contest or review are promptly commenced (and as to which foreclosure and other
enforcement proceedings (a) shall not have been commenced (unless fully bonded
or otherwise effectively stayed) or (b) in any event shall be promptly fully
bonded or otherwise effectively stayed); (v) Liens securing Debt of any Material
U.S. Subsidiary of the Company; (vi) Liens covering only the property or other
assets of any Special Purpose Vehicle Subsidiary and securing only the Debt of
any such Special Purpose Vehicle Subsidiary; (vii) mortgage liens existing on
homes acquired by the Company or any of its Material U.S. Subsidiaries in the
ordinary course of their relocation management business; (viii) other Liens
incidental to the conduct of its business or the ownership of its property and
other assets, which do not secure any Debt and did not otherwise arise in
connection with the borrowing of money or the obtaining of advances or credit
and which do not, in the aggregate, materially detract from the value of its
property or other assets or materially impair the use thereof in the operation
of its business; (ix) Liens covering only the property or other assets of any
Subsidiary which principally transacts business outside of the United States;
(x) Liens existing prior to the date of the Indenture and any extensions or
renewals thereof; (xi) Liens incurred in the ordinary course of business to
secure Debt utilized to fund net investment in leases and leased vehicles,
equity advances on homes and other assets under management programs; and (xii)
Liens to secure Debt not otherwise permitted by any of the clauses (i) through
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<PAGE>
(xi) if, at the time any such Liens are incurred, the aggregate amount of Debt
secured by such Liens plus the sum of all outstanding sale-leaseback
transactions permitted under the Indenture does not exceed $125,000,000.
LIMITATIONS ON SALE-LEASEBACK TRANSACTIONS
The Company shall not, and it shall not permit any Subsidiary to, enter
into any arrangement whereby in contemporaneous transactions the Company or any
of its Subsidiaries sells essentially all of its right, title and interest in a
material asset and the Company or any of its Subsidiaries acquires or leases
back the right to use such property except that the Company may enter into
sale-leaseback transactions relating to assets not in excess of $100,000,000 in
the aggregate on a cumulative basis.
RESTRICTIONS ON SALE, CONSOLIDATION OR MERGER
The Company will not and 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 Material U.S. 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 Material U.S. Subsidiary could incur such Debt
and secure it by a Lien on the property of the Company or any Material U.S.
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 (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
7
<PAGE>
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 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
8
<PAGE>
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 Milbank, Tweed, Hadley & McCloy. Milbank,
Tweed, Hadley & McCloy has represented the Company in connection with the merger
of the Company with HFS Incorporated ("HFS").
EXPERTS
The consolidated financial statements and the related financial statement
schedule of PHH Corporation and subsidiaries have been incorporated herein by
reference to the PHH Annual Report on Form 10-K and 10-K/A for the fiscal year
ended April 30, 1996, in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, incorporated herein by reference, given upon the authority
of said firm as experts in accounting and auditing. Their report contains an
explanatory paragraph that states that PHH adopted the provisions of Statement
of Financial Accounting Standards No. 122 "Accounting for Mortgage Servicing
Rights," in 1996.
9
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO
BUY, SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, IN ANY CIRCUMSTANCES, 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.
____________
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Risk Factors........................................................... S-3
Description of Notes................................................... S-3
Special Provisions Relating to Foreign
Currency Notes....................................................... S-13
Certain Federal Income Tax Considerations.............................. S-17
Supplemental Plan of Distribution...................................... S-24
PROSPECTUS
Available Information.................................................. 2
Incorporation of Certain Documents by
Reference............................................................ 2
The Company............................................................ 2
Ratio of Earnings to Fixed Charges..................................... 3
Use of Proceeds........................................................ 3
Description of Debt Securities......................................... 3
Plan of Distribution................................................... 8
Legal Matters.......................................................... 9
Experts................................................................ 9
[PHH LOGO]
$3,000,000,000
PHH CORPORATION
Medium-Term Notes
PROSPECTUS SUPPLEMENT
Credit Suisse First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan & Co.
June 5, 1997
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO
BUY, SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, IN ANY CIRCUMSTANCES, 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.
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
(DATED SEPTEMBER 5, 1997)
Recent Developments.................................................... SS-1
Dividend Policy........................................................ SS-1
PROSPECTUS SUPPLEMENT
Risk Factors........................................................... S-3
Description of Notes................................................... S-3
Special Provisions Relating to Foreign
Currency Notes....................................................... S-13
Certain Federal Income Tax Considerations.............................. S-17
Supplemental Plan of Distribution...................................... S-24
PROSPECTUS
Available Information.................................................. 2
Incorporation of Certain Documents by
Reference............................................................ 2
The Company............................................................ 2
Ratio of Earnings to Fixed Charges..................................... 3
Use of Proceeds........................................................ 3
Dividend Policy........................................................ 3
Description of Debt Securities......................................... 3
Plan of Distribution................................................... 8
Legal Matters.......................................................... 9
Experts................................................................ 9
[PHH LOGO]
$3,000,000,000
PHH CORPORATION
Medium-Term Notes
PROSPECTUS SUPPLEMENT
Credit Suisse First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan & Co.
September 5, 1997
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