<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-0791
REGISTRATION NO. 33-44661
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION AND HAS BECOME EFFECTIVE. THIS PRICING +
+SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND PROSPECTUS SUPPLEMENT SHALL +
+NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR +
+SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PRICING SUPPLEMENT DATED JANUARY 3, 1997
PRICING SUPPLEMENT NO. 1
(To Prospectus Supplement dated January , 1997
and Prospectus dated December 11, 1996)
$ ,000,000
POLAROID CORPORATION
[LOGO]
$ ,000,000 % NOTES DUE JANUARY 15, 20
$ ,000,000 % NOTES DUE JANUARY 15, 20
INTEREST PAYABLE JANUARY 15 AND JULY 15
------------
Interest on the $ ,000,000 % Notes due January 15, 20 (the "20
Notes") and the $ ,000,000 % Notes due January 15, 20 (the "20 Notes",
and together with the 20 Notes, the "Notes") of Polaroid Corporation (the
"Company") will be payable semiannually on January 15 and July 15 of each year,
commencing July 15, 1997. The Notes may not be redeemed prior to maturity and
are not subject to any sinking fund.
The 20 Notes and the 20 Notes each will be represented by one or more
global Securities (each a "Global Security" or "Book-Entry Note") registered in
the name of a nominee of The Depository Trust Company (the "U.S. Depositary").
Beneficial interests in Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the U.S.
Depositary and by its participants. Except as described in the accompanying
Prospectus Supplement, owners of beneficial interests in Notes will not be
entitled to physical delivery of individual certificates for their Notes in
definitive form. See "Description of Notes--Book-Entry System" in the
Prospectus Supplement. The Notes will trade in the U.S. Depositary's Same-Day
Funds Settlement System until maturity, and secondary market trading activity
in the Notes will therefore settle in immediately available funds. See "Certain
Terms of the Notes--Same-Day Settlement and Payment" in this Pricing
Supplement.
The Notes are part of the series of Debt Securities of the Company designated
"Medium-Term Notes, Series A" described in the accompanying Prospectus and
Prospectus Supplement. The Notes will constitute unsecured and unsubordinated
indebtedness of the Company and will rank on a parity with the Company's other
unsecured and unsubordinated indebtedness.
------------
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 PRICING SUPPLEMENT OR THE PROSPECTUS
SUPPLEMENT OR PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 20 Note.......................... % % %
- --------------------------------------------------------------------------------
Total.................................. $ $ $
- --------------------------------------------------------------------------------
Per 20 Note........................... % % %
- --------------------------------------------------------------------------------
Total................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from January , 1997 to date of delivery.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of
1933, as amended.
(3) Before deducting expenses payable by the Company estimated at $ .
------------
The Notes offered by this Pricing Supplement are offered by the Underwriters,
subject to prior sale, withdrawal, cancellation, or modification of the offer
without notice, to delivery to and acceptance by the Underwriters and to
certain further legal conditions. It is expected that delivery of the Notes
will be made through the facilities of The Depository Trust Company on or about
January , 1997.
LEHMAN BROTHERS J.P. MORGAN & CO.
------------
ABN AMRO SECURITIES (USA) INC.
CREDIT LYONNAIS SECURITIES (USA) INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
January , 1997
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RECENT DEVELOPMENTS
On October 30, 1996, the Company announced the sale, which was completed on
November 26, 1996, of its Helios medical diagnostic imaging equipment product
line to Sterling Dry Imaging Systems, Inc. ("SDIS"), a new subsidiary of SDI
Holding Corp. ("Sterling"). The Company has also acquired a minority
investment in Sterling and SDIS. Earlier in 1996, Sterling, through another
subsidiary, had acquired the medical diagnostic imaging business of E.I.
duPont de Nemours, and therefore the Helios transaction constitutes a product
line extension by Sterling.
In connection with the Helios sale, the Company received a cash payment of
$29.5 million and 10% of the Common Stock of SDIS. The Company retains the
Helios film product line and has entered into a long-term requirements
contract to manufacture and supply Helios medical diagnostic film exclusively
to SDIS. The Company and SDIS have also entered into a laser diode supply
agreement, a technology research and development agreement and related
arrangements intended to support SDIS in developing and expanding the Helios
medical diagnostic imaging equipment product line. The Company has also agreed
to a non-competition restriction. The Company expects to record a pre-tax
charge of $25.0 million in the fourth quarter of 1996 for severance, inventory
and fixed assets write offs and other costs related to the Helios transaction.
As part of this transaction, the Company is investing $35.0 million ($20.0
million at closing and $15.0 million one year later) in SDIS 12.5% preferred
stock (nonvoting). The SDIS preferred stock will begin to accrue dividends,
which may be in the form of further shares of such preferred stock, when SDIS
accumulates $15.0 million of tangible net worth as defined on a GAAP basis.
The SDIS preferred stock does not have a scheduled redemption date. While the
Company believes SDIS currently has limited common equity, the ultimate value
of SDIS stock will depend on its future results.
Further, the Company has also purchased 50,000 shares of Sterling
Convertible Preferred Stock (convertible into 50,000 shares of Sterling Common
Stock) at a cost of $150 per share. The Company has also been granted the
right to purchase a total of 25,000 shares of Sterling Common Stock (which it
intends to exercise) at a cost of $250 per share from Sterling and Sterling
stockholders.
The Company believes the potential value of these transactions will be
primarily reflected in its equity in Sterling and SDIS, which are privately
owned companies, rather than through the sale of Helios film under the film
supply contract.
In addition to the disposition of assets of Helios, the Company expects to
record a pre-tax charge of approximately $15.0 million in the fourth quarter
of 1996 to write down parts and capital equipment under development for a
printer project and other costs. The Company has shifted its strategy relating
to the development of desktop printers for the home and office market to
emphasize alliances with leading printer manufacturers.
A Current Report on Form 8-K describing the Helios transaction, including
unaudited pro forma condensed consolidated financial information with respect
to the Helios transaction, and the write-down relating to the printer project
and other costs was filed on December 11, 1996, by the Company with the
Securities and Exchange Commission and is incorporated by reference in the
accompanying Prospectus.
PS-2
<PAGE>
On December 20, 1996, the Company gave notice that it is purchasing its 8%
Convertible Subordinated Debentures Due 2001 (the "Debentures"). The purchase
of the Debentures will cost the Company approximately $144.0 million and is
expected to occur on January 22, 1997. See the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 29, 1996, incorporated by
reference in the accompanying Prospectus, for additional information regarding
the Debentures. The Company intends to use a portion of the proceeds of the
sale of the Notes to fund the purchase of the Debentures. See "Use of
Proceeds."
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Notes
principally (i) for the payment at maturity of $150,000,000 aggregate
principal amount of the Company's 7 1/4% Notes due January 15, 1997 (the "7
1/4% Notes"), (ii) for the purchase, which is expected to occur on January 22,
1997, of the Debentures, at a cost of approximately $144,000,000, and (iii)
the balance of such net proceeds, if any, for general corporate purposes.
After giving effect to the issuance of the Notes, both the Notes and the 7
1/4% Notes will be outstanding until a portion of the proceeds of the Notes is
applied to retire the 7 1/4% Notes. Accordingly, the Company and the lenders
under the Company's bank credit agreements have amended the covenants in such
credit agreements to permit the issuance of the Notes in advance of the
payment of the 7 1/4% Notes.
CERTAIN TERMS OF THE NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES SUPPLEMENTS,
AND TO THE EXTENT INCONSISTENT THEREWITH SUPERSEDES, THE DESCRIPTIONS OF THE
GENERAL TERMS AND PROVISIONS OF THE SERIES OF DEBT SECURITIES OF THE COMPANY
DESIGNATED "MEDIUM-TERM NOTES, SERIES A" (THE "MEDIUM-TERM NOTES") SET FORTH
UNDER "DESCRIPTION OF NOTES" IN THE PROSPECTUS SUPPLEMENT AND UNDER
"DESCRIPTION OF THE DEBT SECURITIES" IN THE PROSPECTUS. CERTAIN CAPITALIZED
TERMS USED HEREIN WITHOUT DEFINITION ARE DEFINED IN THE PROSPECTUS SUPPLEMENT
AND PROSPECTUS.
Each of the 20 Notes and the 20 Notes will bear interest at the rate set
forth with respect thereto on the cover page of this Pricing Supplement from
January , 1997, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for. The Interest Payment Dates for
the Notes will be January 15 and July 15 of each year, commencing July 15,
1997. The Regular Record Date with respect to each Interest Payment Date will
be the January 1 or July 1, as the case may be, immediately preceding such
Interest Payment Date.
The Stated Maturity of the 20 Notes will be January 15, 20 . The Stated
Maturity of the 20 Notes will be January 15, 20 . The Notes may not be
redeemed prior to maturity and are not subject to any sinking fund. The
Original Issue Date of the Notes will be January , 1997. Each of the 20
Notes and the 20 Notes will be issued in the form of Global Securities. All
principal of and interest on the Notes will be payable in U.S. Dollars. The
interest rates on the Notes are not subject to reset by the Company, the Notes
are not subject to repayment at the option of the Holder, and the Stated
Maturities of the Notes are not subject to extension by the Company. The Notes
will not be "Amortizing Notes," "Original Issue Discount Notes" or "Reset
Notes" (as such terms are used in the Prospectus Supplement).
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal of and interest on Global
Securities will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, while the
Notes are registered in the name of the U.S. Depositary or its nominee, the
Notes will trade in the U.S. Depositary's Same-Day Funds Settlement System,
and secondary market trading activity in the Notes will therefore be required
by the U.S. Depositary to settle in immediately available funds. No assurance
can be given as to the effect, if any, of settlement in immediately available
funds on trading activity in the Notes.
PS-3
<PAGE>
OFFERING AND SALE
The Company has entered into Purchase Agreements, each dated January ,
1997 (the "Purchase Agreements"), with respect to the Notes with Lehman
Brothers Inc., J.P. Morgan Securities Inc., ABN AMRO Securities (USA) Inc.,
Credit Lyonnais Securities (USA) Inc. and First Chicago Capital Markets, Inc.
(the "Underwriters"). Subject to the terms and conditions set forth in the
respective Purchase Agreements, the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase, the principal amounts of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITERS OF 20 NOTES OF 20 NOTES
------------ ---------------- ----------------
<S> <C> <C>
Lehman Brothers Inc. ...................... $ $
J.P. Morgan Securities Inc. ...............
ABN AMRO Securities (USA) Inc. ............
Credit Lyonnais Securities (USA) Inc.......
First Chicago Capital Markets, Inc. .......
------------ ------------
Total.................................... $ ,000,000 $ ,000,000
============ ============
</TABLE>
The Purchase Agreements provide that the obligations of the Underwriters to
pay for and accept delivery of the Notes are subject to the approval of
certain legal matters by their counsel and to certain other conditions. The
Underwriters are committed to take and pay for all of the 20 Notes, if any of
the 20 Notes are taken, and to take and pay for all of the 20 Notes, if any
of the 20 Notes are taken. The sale of each issue of the Notes is not
conditioned on the sale of the other issue of the Notes.
The Underwriters propose to offer each of the 20 Notes and the 20 Notes
in part directly to the public at the initial public offering price with
respect thereto set forth on the cover page of this Pricing Supplement, and in
part to certain dealers at such price less a concession not in excess of %
of the principal amount of the 20 Notes or not in excess of % of the
principal amount of the 20 Notes, as the case may be. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of % of the
principal amount of the 20 Notes or the 20 Notes, as the case may be, to
certain brokers and dealers. After the Notes are released for sale to the
public, the offering prices and other selling terms may from time to time be
varied by the Underwriters.
The Notes are new issues of securities with no established trading market.
Prior to the date hereof, no Medium-Term Notes have been sold pursuant to the
Distribution Agreement dated as of January , 1997, between the Company and
the agents named therein. The Company has been advised by each Underwriter
that it presently intends to make a market in the Notes, although none of the
Underwriters is obligated to do so and may discontinue any market-making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes, or that an active trading market for the Notes
will develop. If an active public market does not develop, the market prices
and liquidity of the Notes may be adversely affected.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Underwriters and their affiliates have performed and may in the future
perform investment banking, commercial banking and other financial services
for the Company and certain of its affiliates in the ordinary course of
business. An affiliate of J.P. Morgan Securities Inc. is the agent bank and a
lender under each of the Company's $150,000,000 Credit Agreement dated as of
August 24, 1994, as amended (the "August 1994 Credit Agreement"), and the
Company's $130,022,336 Credit Agreement dated as of November 29, 1994, as
amended (the "November 1994 Credit Agreement"). Affiliates of ABN AMRO
Securities (USA) Inc. and First Chicago Capital Markets, Inc. are lenders
under the August 1994 Credit Agreement. Affiliates of ABN AMRO Securities
(USA) Inc. and Credit Lyonnais Securities (USA) Inc. are lenders under the
November 1994 Credit Agreement.
PS-4
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION AND HAS BECOME EFFECTIVE. THIS PROSPECTUS +
+SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND PRICING SUPPLEMENT SHALL NOT +
+CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL +
+THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED JANUARY 3, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 11, 1996)
$500,000,000
POLAROID CORPORATION
[LOGO]
MEDIUM-TERM NOTES, SERIES A
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
------------
Polaroid Corporation (the "Company") may offer from time to time its Medium-
Term Notes, Series A (the "Notes"), having an aggregate initial offering price
not to exceed $500,000,000 (or the equivalent thereof in foreign currencies or
currency units), subject to reduction under certain circumstances as a result
of the sale of other Debt Securities of the Company under the Prospectus to
which this Prospectus Supplement relates. The Notes will rank pari passu with
the Company's other unsecured, unsubordinated indebtedness. The Indenture does
not limit the amount of indebtedness the Company may incur pari passu with or
senior to the Notes. The Notes will be offered in varying maturities nine
months or more from their dates of issue and may be subject to redemption at
the option of the Company or repayment at the option of the Holder, in each
case, in whole or in part prior to the maturity date (as further defined below,
the "Stated Maturity") thereof as set forth in a Pricing Supplement to this
Prospectus Supplement (a "Pricing Supplement"). Each Note will be denominated
in U.S. dollars unless other currencies or currency units are designated in the
applicable Pricing Supplement (the "Multi-Currency Notes"). See "Multi-Currency
Notes" and "Risk Factors--Foreign Currency Risks." The currency or currency
unit in which a Note is denominated, whether U.S. dollars or otherwise, is
referred to herein as the "Specified Currency". The Notes may be issued as
"Amortizing Notes," "Original Issue Discount Notes," "Reset Notes," "Currency
Indexed Notes" or "Commodity Indexed Notes." See "Description of Notes."
Each Note will bear interest at a fixed rate (a "Fixed Rate Note"), which may
be zero in the case of certain Notes issued at a price representing a discount
from the principal amount payable at maturity (a "Zero-Coupon Note"), or at a
variable rate (a "Floating Rate Note") determined by reference to the
Commercial Paper Rate, CD Rate, Federal Funds Rate, CMT Rate, 11th District
Cost of Funds Rate, Kenny Rate, LIBOR, Prime Rate or Treasury Rate or such
other interest rate formula (the "Interest Rate Basis") as may be indicated in
the applicable Pricing Supplement, as adjusted by a Spread or Spread
Multiplier, if any, applicable to such Notes. See "Description of Notes."
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable semi-annually on each January 15 and July 15
(each an "Interest Payment Date" with respect to such Fixed Rate Notes) and at
Stated Maturity. Interest on Floating Rate Notes will be payable on the dates
indicated in the applicable Pricing Supplement (each an "Interest Payment Date"
with respect to such Floating Rate Notes).
All Notes will be issued in registered form. No Notes will be issued in
bearer form. Each Note will be represented by a global Security (a "Global
Security" or "Book-Entry Note") registered in the name of a nominee of The
Depository Trust Company ("DTC") or another depositary (DTC or such other
depositary as is indicated in the applicable Pricing Supplement is referred to
herein as the "U.S. Depositary"), unless the applicable Pricing Supplement
indicates that certificates will be issued in definitive form (a "Certificated
Note"). Beneficial interests in Book-Entry Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the U.S.
Depositary and its participants. Owners of beneficial interests in Book-Entry
Notes will be entitled to physical delivery of Certificated Notes only under
the limited circumstances described herein. See "Description of Notes--Book-
Entry System." Unless otherwise indicated in the applicable Pricing Supplement,
Notes denominated in U.S. dollars will be issued in denominations of $1,000 and
any integral multiple thereof. If Notes are to be issued in a foreign currency
or units of a foreign composite currency, the authorized denominations and
currency exchange rate information will be set forth in the applicable Pricing
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 SUPPLEMENT, ANY
PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Agents' Commission
Price to Public(1) or Discount(2) Proceeds to Company(2)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note...... 100% .125%-.750% 99.250%-99.875%
- -------------------------------------------------------------------------------
Total......... $500,000,000 $625,000-$3,750,000 $496,250,000-$499,375,000
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes will
be sold at 100% of their principal amounts.
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc. or J.P. Morgan
Securities Inc. (each an "Agent," and, collectively, the "Agents") a
commission ranging from .125% to .750% of the principal amount of any Note,
depending on its Stated Maturity, sold through such Agent. The commission
on any Note with a maturity more than 30 years from date of issue will be
negotiated at the time of sale. Any Agent, acting as principal, may also
purchase Notes at a discount for resale to one or more investors or one or
more broker-dealers (acting as principal for purposes of resale) at varying
prices related to prevailing market prices at the time of resale, as
determined by such Agent, or, if so agreed, at a fixed public offering
price. The Company has agreed to reimburse the Agents for certain expenses.
The Company has agreed to indemnify the Agents against certain liabilities,
including liabilities under applicable federal and state securities laws.
(3) Before deducting offering expenses payable by the Company estimated at
$500,000.
-----------
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
offers to purchase the Notes. The Company has reserved the right to sell Notes
directly to investors on its own behalf, and on such sales no commissions will
be paid. The Notes will not be listed on any securities exchange, and there can
be no assurance that the Notes will be sold or that there will be a secondary
market for the Notes. The Company reserves the right to withdraw, cancel or
modify the offer made hereby without notice. The Company or the Agent that
solicits an offer to purchase may reject any such offer to purchase Notes in
whole or in part. See "Supplemental Plan of Distribution."
LEHMAN BROTHERS J.P. MORGAN & CO.
January , 1997
<PAGE>
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY SUPPLEMENTS AND, TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE
DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES (AS
DEFINED IN THE ACCOMPANYING PROSPECTUS) SET FORTH UNDER THE HEADING
"DESCRIPTION OF THE DEBT SECURITIES" IN THE ACCOMPANYING PROSPECTUS, TO WHICH
DESCRIPTION REFERENCE IS HEREBY MADE. THE PROVISIONS OF THE NOTES SUMMARIZED
HEREIN WILL APPLY TO EACH NOTE UNLESS OTHERWISE INDICATED IN THE APPLICABLE
PRICING SUPPLEMENT. CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN HAVE THE
MEANINGS SPECIFIED IN THE PROSPECTUS OR, IF NOT DEFINED THEREIN, IN THE
INDENTURE OR THE NOTES.
GENERAL
The Notes offered hereby will be issued under the Indenture referred to in
the accompanying Prospectus. The summary contained herein of certain
provisions of the Notes does not purport to be complete and is qualified in
its entirety by reference to the provisions of the Indenture and the Notes,
the form of each of which has been filed as an exhibit to the Registration
Statement (the "Registration Statement"), of which the accompanying Prospectus
is a part, to which exhibits reference is hereby made.
The Notes constitute a single series for purposes of the Indenture and are
limited to an aggregate initial offering price of U.S. $500,000,000 (or the
equivalent thereof in the applicable Specified Currency, calculated on the
applicable trade date). Unless otherwise indicated in the applicable Pricing
Supplement, currency amounts in this Prospectus Supplement, the accompanying
Prospectus and any Pricing Supplement are stated in United States dollars
("$", "dollars" or "U.S. $").
The Notes will constitute unsecured and unsubordinated indebtedness of the
Company and will rank pari passu with the Company's other unsecured and
unsubordinated indebtedness.
The Notes are offered on a continuing basis and each Note will mature on a
Business Day (as defined below) nine months or more from its date of issue, as
selected by the initial purchaser and agreed to by the Company, and may be
subject to redemption at the option of the Company or repayment at the option
of the Holder prior to Maturity. See "Redemption and Repayment" below.
Floating Rate Notes will mature on an Interest Payment Date specified in the
Pricing Supplement applicable thereto.
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 any interest on the Notes will be made in U.S. dollars. If any of the
Notes are to be denominated other than in U.S. dollars, or if the principal
of, or premium, if any, or any interest on any of the Notes is to be payable
at the option of the Holder or the Company in a currency or currency unit
other than that in which such Notes are denominated, the applicable Pricing
Supplement will provide additional information, including authorized
denominations and applicable exchange rate information pertaining to the terms
of such Notes and certain other matters of interest to the Holders thereof.
See "Multi-Currency Notes."
Each Note will be issued initially as a Book-Entry Note unless the
applicable Pricing Supplement indicates such issuance as a Certificated Note.
Except as set forth under "Book-Entry System" below, Book-Entry Notes will not
be issuable in certificated form. Unless otherwise specified in the applicable
Pricing Supplement or as provided below with respect to Multi-Currency Notes,
Notes will be issued in denominations of $1,000 and any integral multiple
thereof.
Payments of interest and principal (and premium, if any) to Beneficial
Owners (as defined below) of Book-Entry Notes are expected to be made in
accordance with the U.S. Depositary's and its participants' procedures in
effect from time to time as described below under "Book-Entry System."
S-2
<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, payments of
interest and, in the case of Amortizing Notes, principal, with respect to any
Certificated Note (other than interest and, in the case of Amortizing Notes,
principal payable at Stated Maturity) will be made by mailing a check to the
Holder at the address of such Holder appearing on the Security Register for
the Notes on the applicable Regular Record Date (as defined below).
Notwithstanding the foregoing, at the option of the Company, all payments of
interest and, in the case of Amortizing Notes, principal on the Notes may be
made by wire transfer of immediately available funds to an account at a bank
located within the United States as designated by each Holder not less than 15
calendar days prior to the applicable Interest Payment Date. A Holder of
$10,000,000 or more in aggregate principal amount of Notes of like tenor and
terms with the same Interest Payment Date may demand payment by wire transfer
but only if appropriate payment instructions have been received in writing by
the Trustee, not less than 15 calendar days prior to the applicable Interest
Payment Date. In the event that payment is so made in accordance with
instructions of the Holder, such wire transfer shall be deemed to constitute
full and complete payment of such interest and principal on the Notes. Payment
of the principal of (and premium, if any) and interest due with respect to any
Certificated Note at Maturity will be made in immediately available funds upon
surrender of such Note at the office designated for that purpose in the
Borough of Manhattan, The City of New York accompanied by wire transfer
instructions, provided that the Certificated Note is presented to the Trustee
in time for the Trustee to make such payments in such funds in accordance with
its normal procedures.
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is
an Original Issue Discount Note, the amount payable on such Note in the event
the principal thereof is declared to be due and payable immediately as
described in the accompanying Prospectus under "Description of the Debt
Securities--Events of Default, Notice and Waiver" or in the event of the
redemption or repayment thereof prior to its Stated Maturity shall be the
Amortized Face Amount of such Note as of the date of declaration, redemption
or repayment, as the case may be. The "Amortized Face Amount" of an Original
Issue Discount Note shall be the amount equal to (i) the principal amount of
such Note multiplied by the Issue Price (expressed as a percentage) set forth
in the applicable Pricing Supplement plus (ii) the portion of the difference
between the dollar amount determined pursuant to the preceding clause (i) and
the principal amount of such Note that has accreted at the yield to maturity
set forth in the Pricing Supplement (computed in accordance with generally
accepted United States bond yield computation principles) to such date of
declaration, redemption or repayment, but in no event shall the Amortized Face
Amount of an Original Issue Discount Note exceed its principal amount.
The Pricing Supplement relating to each Note will describe, among other
things, the following items: (i) the Specified Currency with respect to such
Note (and, if such Specified Currency is other than U.S. dollars, certain
other terms relating to such Note, including the authorized denominations);
(ii) the price (expressed as a percentage of the aggregate principal amount
thereof) at which such Note will be issued (the "Issue Price"); (iii) the date
on which such Note will be issued (the "Original Issue Date"); (iv) the date
on which such Note will mature (the "Stated Maturity") and whether the Stated
Maturity may be extended by the Company, and if so, the Extension Periods and
the Final Maturity Date (each as defined below); (v) whether such Note is a
Fixed Rate Note or a Floating Rate Note; (vi) if such Note is a Fixed Rate
Note, the rate per annum at which such Note will bear interest, if any, the
Interest Payment Date or Dates, if different from those set forth below under
"Fixed Rate Notes" and whether such rate may be changed by the Company prior
to Stated Maturity; (vii) if such Note is a Floating Rate Note, the Initial
Interest Rate, the Interest Rate Basis, the Interest Reset Dates, the Interest
Payment Dates, the Index Maturity, the maximum interest rate, if any, the
minimum interest rate, if any, the Spread, if any, the Spread Multiplier, if
any (all as defined herein), and any other terms relating to the particular
method of calculating the interest rate for such Note, and whether any such
Spread and/or Spread Multiplier may be changed by the Company prior to Stated
Maturity; (viii) whether such Note is an Original Issue Discount Note, and if
so, the yield to maturity; (ix) whether such Note is a Currency Indexed Note
or a Commodity Indexed Note and if so, the specific terms thereof; (x) whether
such Note is an Amortizing Note (as defined below), and if so, the basis or
formula for the amortization of principal and/or interest and the payment
dates for such periodic principal payments; (xi) the regular record date or
dates (each a "Regular Record Date") if other than as set forth below; (xii)
whether such Note may be redeemed at the option of the Company, or
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repaid at the option of the Holder, prior to Stated Maturity and, if so, the
provisions relating to such redemption or repayment; (xiii) whether such Note
will be issued initially as a Book-Entry Note or a Certificated Note; and
(xiv) any other terms of such Note not inconsistent with the provisions of the
Indenture.
Certificated Notes may be presented for registration of transfer or exchange
at the office of State Street Bank and Trust Company, N.A. designated for that
purpose in the Borough of Manhattan, The City of New York.
All percentages resulting from any calculation with respect to any 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 any Notes will be rounded to the nearest cent with one half cent being
rounded upward.
As used herein, "Business Day" means, unless otherwise specified in the
applicable Pricing Supplement, any Monday, Tuesday, Wednesday, Thursday or
Friday that in The City of New York is not a day on which banking institutions
are authorized or required by law, regulation or executive order to close and,
with respect to Notes as to which LIBOR (as defined below) is the applicable
Interest Rate Basis (as defined below), is also a London Business Day,
provided, however, that with respect to any Specified Currency, such day is
also not a day on which banking institutions are authorized or required by
law, regulation or executive order to close in the principal financial center
of the country of such Specified Currency (or, in the case of ECUs, is not a
day designated as an ECU Non-Settlement Day by the ECU Banking Association in
Paris or otherwise generally regarded in the ECU interbank market as a day on
which payments on ECUs shall not be made). As used herein, "London Business
Day" means any day (a) if the Designated LIBOR Currency (as defined below) is
other than the ECU, on which dealings in deposits in such Designated LIBOR
Currency are transacted in the London interbank market or (b) if the
Designated LIBOR Currency is the ECU, that is not designated as an ECU Non-
Settlement Day by the ECU Banking Association in Paris or otherwise generally
regarded in the ECU interbank market as a day on which payments on ECUs shall
not be made.
The Notes are referred to in the accompanying Prospectus as a series of
"Debt Securities." For a description of the rights attaching to different
series of Debt Securities under the Indenture, see "Description of the Debt
Securities" in the Prospectus. Unless otherwise indicated in the applicable
Pricing Supplement, the Notes will have the terms described below.
PAYMENT OF PRINCIPAL AND INTEREST PAYABLE IN A SPECIFIED CURRENCY OTHER THAN
U.S. DOLLARS
The principal of and any premium and interest on each Note are payable by
the Company in the Specified Currency for such Note. If the Specified Currency
for a Note is other than U.S. dollars, the Company will (unless otherwise
specified in the applicable Pricing Supplement) arrange to convert all
payments in respect of such Note into U.S. dollars for payment to Holders in
the manner described in the following paragraph. If the applicable Pricing
Supplement and such Note so indicate, the Holder of a Note having a Specified
Currency other than U.S. dollars may elect, by delivery of a written notice to
the Trustee not later than fifteen calendar days prior to the applicable
payment date, to receive all payments in respect of such Note in the Specified
Currency, except under the circumstances described under "Multi-Currency
Notes--Payment Currency" below. Such election will remain in effect until
revoked by written notice to such Trustee received not later than fifteen
calendar days prior to the applicable payment date.
In the case of a Note having a Specified Currency other than U.S. dollars,
the amount of any U.S. dollar payment in respect of such Note will be
determined by the Exchange Rate Agent based on the highest firm bid quotation
expressed in U.S. dollars received by the Exchange Rate Agent at approximately
11:00 a.m., New York City time, on the second Business Day preceding the
applicable payment date (or, if no such rate is quoted on such date, the last
date on which such rate was quoted), from three (or, if three are not
available, then two)
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recognized foreign exchange dealers in The City of New York (one of which may
be an Agent and another of which may be the Exchange Rate Agent) selected by
the Exchange Rate Agent and approved by the Company, for the purchase by the
quoting dealer, for settlement on such payment date, of the aggregate amount
of such Specified Currency payable on such payment date in respect of all
Notes denominated in such Specified Currency. All currency exchange costs will
be borne by the Holders of such Notes by deductions from such payments. If no
such bid quotations are available, such payments will be made in such
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 such payment will be made as described under "Multi-
Currency Notes--Payment Currency" below.
INTEREST AND INTEREST RATES
Each Note (other than a Zero-Coupon Note) will bear interest from and
including its Original Issue Date or from and including the most recent
Interest Payment Date with respect to which interest on such Note has been
paid or duly provided for, at a fixed rate per annum or at a rate per annum
determined pursuant to an Interest Rate Basis, stated therein and in the
applicable Pricing Supplement, that may be adjusted by a Spread and/or Spread
Multiplier, until the principal thereof is paid or made available for payment.
Unless otherwise set forth in the applicable Pricing Supplement, interest will
be payable on each Interest Payment Date and at Maturity. "Maturity" means the
date on which the principal of a Note becomes due and payable in full in
accordance with its terms and the terms of the Indenture, whether at Stated
Maturity, upon acceleration, redemption, repayment or otherwise. Interest
(other than defaulted interest which may be paid on a special record date)
will be payable to the Holder at the close of business on the Regular Record
Date next preceding each Interest Payment Date; provided, however, that (a)
the first payment of interest on any Note originally issued between a Regular
Record Date and the next Interest Payment Date will be made on the Interest
Payment Date following the next succeeding Regular Record Date to the Holder
of record as of such next succeeding Regular Record Date, and (b) interest
payable at the Maturity of any Note will be payable to the person to whom the
principal of such Note is payable.
Interest rates, interest rate formulae and other variable terms of the Notes
are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has
been accepted by the Company. Unless otherwise indicated in the applicable
Pricing Supplement, the Interest Payment Dates and the Regular Record 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, and unless otherwise indicated in the
applicable Pricing Supplement, each Regular Record Date for a Floating Rate
Note will be the fifteenth day (whether or not a Business Day) preceding each
Interest Payment Date.
Each Note (other than a Zero-Coupon Note) will bear interest at either (a) a
fixed rate or (b) a floating rate determined by reference to an Interest Rate
Basis which may be adjusted by a Spread and/or Spread Multiplier. 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. The applicable Pricing Supplement relating to each Note will
designate either a fixed rate of interest per annum on the applicable Fixed
Rate Note or one or more of the following Interest Rate Bases as applicable to
the relevant Floating Rate Note: (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 Rate, in which
case such Note will be a "Federal Funds 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," (g) the CMT Rate, in which case such Note
will be a "CMT Rate Note," (h) the 11th District Cost of Funds Rate, in which
case such Note will be an "11th District Cost of Funds Rate Note," (i) the
Kenny Rate, in which case such Note will be a "Kenny Rate Note," or (j) such
other Interest Rate Basis as is set forth in such Pricing Supplement.
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Notwithstanding the determination of the interest rate as provided below,
the interest rate on the Notes for any interest period shall not be greater
than the maximum interest rate, if any, or less than the minimum interest
rate, if any, specified in the applicable Pricing Supplement. The interest
rate on the Notes will in no event be higher than the maximum rate permitted
by New York or other applicable law, as the same may be modified by United
States law of general application. Under present New York law, the maximum
rate of interest is 25% per annum on a simple interest basis. This limit may
not apply to Notes in which $2,500,000 or more has been invested.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note (other than a Zero-Coupon Note) will bear interest from its date of
issue at the annual rate stated on the face thereof, as specified in the
applicable Pricing Supplement. Payments of interest on any Fixed Rate Note
with respect to any Interest Payment Date will include interest accrued from
and including the Original Issue Date, or from and including the next
preceding Interest Payment Date to which interest has been paid or duly
provided for, as the case may be, to but excluding the applicable Interest
Payment Date or Maturity. Fixed Rate Notes may bear one or more annual rates
of interest during the periods or under the circumstances specified therein
and in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
and paid on the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Payment Dates for Fixed Rate Notes (other than Amortizing Notes) will
be semi-annual on each January 15 and July 15 and at Maturity, and the Regular
Record Dates will be each January 1 and July 1 (whether or not a Business
Day). Unless otherwise specified in the applicable Pricing Supplement,
payments of principal and interest on Fixed Rate Amortizing Notes will be made
either quarterly on each January 15, April 15, July 15 and October 15, or
semi-annually on each January 15 and July 15, as set forth in the applicable
Pricing Supplement, and at Maturity. Unless otherwise specified in the
applicable Pricing Supplement, Regular Record Dates with respect to Fixed Rate
Amortizing Notes will be the 15th day (whether or not a Business Day) next
preceding each Interest Payment Date. If any Interest Payment Date or the
Maturity for any Fixed Rate Note is a day that is not a Business Day, all
payments to be made on such day will be made on the next succeeding Business
Day with the same force and effect as if made on the due date, and no
additional interest shall be payable as a result of such delayed payment.
Payments with respect to Fixed Rate Amortizing Notes will be applied first
to interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in
respect of each Fixed Rate Amortizing Note will be provided to the original
purchaser thereof and will be available, upon request, to subsequent Holders.
FLOATING RATE NOTES
The interest rate on each Floating Rate Note will be equal to either (i) the
interest rate calculated by reference to the specified Interest Rate Basis
plus or minus the Spread, if any, or (ii) the interest rate calculated by
reference to the specified Interest Rate Basis multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points (one basis
point equals one-hundredth of a percentage point) specified in the applicable
Pricing Supplement as being applicable to such Note, and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement
as being applicable to such Note. The applicable Pricing Supplement will
specify the Interest Rate Basis and the Spread 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 will contain
particulars as to the Calculation Agent (unless otherwise specified in the
applicable Pricing Supplement, the Trustee (in such capacity, the "Calculation
Agent")), Index Maturity, Original Issue Date, interest rate in effect for the
period from the Original Issue Date to the first Interest Reset Date set forth
in the applicable Pricing Supplement (the "Initial Interest Rate"), Interest
Determination Dates, Interest Payment Dates, Regular Record Dates and Interest
Reset Dates with respect to such Note.
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Except as provided below or in the applicable Pricing Supplement, interest
on Floating Rate Notes, including Floating Rate Amortizing Notes, will be
payable, (i) in the case of Floating Rate Notes that reset daily, weekly or
monthly, on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year, as specified on the face
thereof and in the applicable Pricing Supplement; (ii) in the case of Floating
Rate Notes, including Floating Rate Amortizing Notes, that reset quarterly, on
the third Wednesday of March, June, September and December of each year; (iii)
in the case of Floating Rate Notes, including Floating Rate Amortizing Notes,
that reset semi-annually, on the third Wednesday of each of two months of each
year specified on the face thereof and in the applicable Pricing Supplement;
and (iv) in the case of Floating Rate Notes, including Floating Rate
Amortizing Notes, that reset annually, on the third Wednesday of one month of
each year specified on the face thereof and in the applicable Pricing
Supplement (each such day being an "Interest Payment Date") and, in each case,
at Maturity. If any Interest Payment Date, other than Maturity, for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Payment Date shall be postponed to the next day that is a Business
Day, except that in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Payment Date shall be the
immediately preceding Business Day. If the Maturity for any Floating Rate Note
falls on a day that is not a Business Day, payment of principal, premium, if
any, and interest with respect to such Note will be made on the next
succeeding Business Day with the same force and effect as if made on the due
date, and no additional interest shall be payable as a result of such delayed
payment.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (such period being the "Reset
Period" for such Note, and the first day of each Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement. The
Interest Reset Dates 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 (with the exception of monthly
reset 11th District Cost of Funds Rate Notes, which will reset on the first
calendar day of the month); in the case of Floating Rate Notes which reset
quarterly, the third Wednesday of each March, June, September and December; in
the case of Floating Rate Notes which reset semi-annually, the third Wednesday
of the two months of each year specified in the applicable Pricing Supplement;
and in the case of Floating Rate Notes which reset annually, the third
Wednesday of one month of each year specified in the applicable Pricing
Supplement. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day 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 in effect on each day will be (a) if such day is an
Interest Reset Date, the interest rate with respect to the Interest
Determination Date pertaining to such Interest Reset Date, or (b) if such day
is not an Interest Reset Date, the interest rate with respect to the Interest
Determination Date pertaining to the next preceding Interest Reset Date,
subject in either case to any maximum or minimum interest rate limitation
referred to above and to any adjustment by a Spread or a Spread Multiplier
referred to above; provided, however, that the interest rate in effect for the
period from and including the Original Issue Date to but excluding the first
Interest Reset Date with respect to a Floating Rate Note shall be the Initial
Interest Rate specified in the applicable Pricing Supplement.
The interest rate for each Reset Period will be the rate determined by the
Calculation Agent on the Calculation Date (as defined below) pertaining to the
Interest Determination Date pertaining to the Interest Reset Date for such
Reset Period. Unless otherwise specified in the applicable Pricing Supplement,
the "Interest Determination Date" pertaining to an Interest Reset Date for (a)
a Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), (b) a Federal Funds Rate Note (the "Federal Funds Interest
Determination Date"), (c) a CD Rate Note (the "CD Interest Determination
Date"), (d) a Prime Rate Note (the "Prime Interest Determination Date"), (e) a
CMT Rate Note (the "CMT Interest Determination Date"), or (f) a Kenny Rate
Note (the "Kenny Rate Interest Determination Date") will be the second
Business Day prior to
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such Interest Reset Date. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset
Date for an 11th District Cost of Funds Rate Note (the "11th District Interest
Determination Date") will be the last Business Day of the month immediately
preceding such Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined
below). Unless otherwise specified in the applicable Pricing Supplement, the
Interest Determination Date pertaining to an Interest Reset Date for a LIBOR
Note (the "LIBOR Interest Determination Date") will be the second London
Business Day immediately preceding such Interest Reset Date. Unless otherwise
specified in the applicable Pricing Supplement, 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 a 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 Reset Period commencing 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. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date" pertaining to any
Interest Determination Date shall be the earlier of (i) the tenth calendar day
after the Interest Determination Date or, if such day is not a Business Day,
the next succeeding Business Day, or (ii) the Business Day preceding the
applicable Interest Payment Date or Maturity, as the case may be.
"Index Maturity" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, payments
with respect to Floating Rate Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in
respect of each Floating Rate Amortizing Note will be provided to the original
purchaser thereof and will be available, upon request, to subsequent Holders.
Unless otherwise indicated in the applicable Pricing Supplement, interest on
Floating Rate Notes will accrue from and including the date of issue or from
and including the immediately preceding Interest Payment Date in respect of
which interest has been paid or duly provided for, as the case may be, to but
excluding the Interest Payment Date or Maturity, as the case may be. With
respect to Floating Rate Notes, accrued interest is calculated by multiplying
the face amount of a Note by an accrued interest factor. This accrued interest
factor is computed by adding the interest factors calculated for each day from
and including the date of issue, or from and including the last date to which
interest has been paid or duly provided for, to but excluding the date for
which accrued interest is being calculated. The interest factor for each such
day (unless otherwise specified) is computed by dividing the interest rate
applicable to such day by 360, in the case of Commercial Paper Rate Notes, CD
Rate Notes, 11th District Cost of Funds Rate Notes, Federal Funds 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 or CMT Rate Notes, or by 365 days in the
case of Kenny Rate Notes.
The Calculation Agent shall calculate the interest rate on the Floating Rate
Notes, as provided below. The Calculation Agent will, upon the request of the
Holder of any Floating Rate Note, provide the interest rate then in effect
and, if then determined, 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. The Trustee shall act as the
initial Calculation Agent for the Notes. For purposes of calculating the rate
of interest payable on Floating Rate Notes, the Company will enter into an
agreement with the Calculation Agent. The Calculation Agent's determination of
any interest rate shall be final and binding in the absence of manifest error.
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Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified 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) of the rate on
such date for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" or any successor publication of the Board of Governors ("H.15(519)")
under the heading "Commercial Paper." 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 Commercial Paper Interest Determination Date, then the
Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date shall be the Money Market Yield of the rate on such
Commercial Paper Interest Determination Date for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Commercial
Paper." If by 3:00 P.M., New York City time, on such Calculation Date such
rate is not yet published in either H.15(519) or Composite Quotations, then
the Commercial Paper Rate for such Commercial Paper Interest Determination
Date shall be calculated by the Calculation Agent and shall be the Money
Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New
York City time, on such Commercial Paper Interest Determination Date of three
leading dealers of commercial paper in The City of New York 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 immediately
prior to 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 X 100
Money Market Yield =
360--(D X M)
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which accrued interest is being calculated.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified 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
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "CDs (Secondary Market)." 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 CD Interest Determination Date, then the CD Rate with
respect to such CD Interest Determination Date shall be the rate on such CD
Interest Determination Date for negotiable certificates of deposit having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit." If by 3:00
P.M., New York City time, on such Calculation Date such rate is not published
in either H.15(519) or Composite Quotations, then the CD Rate
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on such CD Interest Determination Date shall be calculated by the Calculation
Agent and shall be the arithmetic mean of the secondary market offered rates
as of 10:00 A.M., New York City time, on such CD Interest Determination Date
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent for
negotiable certificates of deposit of major United States money market banks
(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 immediately prior to such CD
Interest Determination Date.
CMT Rate Notes
Each CMT Rate Note will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the rate displayed
on the Designated CMT Telerate Page (as defined below) under the caption ". .
. Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . .
Mondays Approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page
is 7055, the rate on such CMT Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the applicable CMT Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such CMT Interest Determination Date, then the CMT Rate for
such CMT Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index as published in the relevant
H.15(519). If such rate is no longer published, or if not published by 3:00
P.M., New York City time, on the Calculation Date pertaining to such CMT
Interest Determination Date, then the CMT Rate for such CMT Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided
by 3:00 P.M., New York City time, on the Calculation Date pertaining to such
CMT Interest Determination Date, then the CMT Rate for the CMT Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time,
on the CMT Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York selected by the
Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an
original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury
Note quotations, the CMT Rate for such CMT Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on the CMT Interest Determination
Date of three Reference Dealers in The City of New York (from five such
Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the
next highest to the Designated CMT Maturity Index and a remaining term to
maturity closest to the Designated CMT Maturity Index and in an amount of at
least
S-10
<PAGE>
$100,000,000. If three or four (and not five) of such Reference Dealers are
quoting as described above, then the CMT Rate will be based on the arithmetic
mean of the offer prices obtained and neither the highest nor the lowest of
such quotes will be eliminated; provided, however, that if fewer than three
Reference Dealers selected by the Calculation Agent are quoting as described
herein, the CMT Rate will be the CMT Rate in effect on such CMT Interest
Determination Date. If two Treasury Notes with an original maturity as
described in the third preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the
Treasury Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as published in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as published in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
Treasury Notes (either one, two, three, five, seven, ten, twenty or thirty
years) specified in the applicable Pricing Supplement with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Pricing Supplement, the Designated CMT Maturity Index shall be two
years.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds as published in H.15(519) under
the heading "Federal Funds (Effective)." 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 Federal Funds Interest Determination Date, then the Federal
Funds Rate with respect to such Federal Funds Interest Determination Date
shall be the rate on such Federal Funds Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If by 3:00 P.M., New York City time, on such Calculation Date such rate
is not published in either H.15(519) or Composite Quotations, then the Federal
Funds Rate with respect to such Federal Funds Interest Determination Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean
(each as rounded, if necessary, to the nearest one hundred-thousandth of a
percent) of the rates as of 9:00 A.M., New York City time, on such Federal
Funds Interest Determination Date for the last transaction in overnight
Federal Funds arranged by three leading brokers of Federal Funds transactions
in The City of New York selected by the Calculation Agent; provided, however,
that if the brokers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Federal Funds Rate with respect to
such Federal Funds Interest Determination Date will be the Federal Funds Rate
in effect immediately prior to such Federal Funds Interest Determination Date.
11th District Cost of Funds Rate Notes
Each 11th District Cost of Funds Rate Note will bear interest at the
interest rate (calculated with reference to the 11th District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any) specified in the 11th
District Cost of Funds Rate Note and in the Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any 11th District Interest
Determination Date, the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding such 11th District Interest
Determination Date as set forth under the caption "11th District" on Telerate
Page 7058 as of 11:00 A.M., San Francisco time, on such 11th District Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related 11th
S-11
<PAGE>
District Interest Determination Date, the 11th District Cost of Funds Rate for
such 11th District Interest Determination Date shall be the monthly weighted
average cost of funds paid by member institutions of the Eleventh Federal Home
Loan Bank District that was most recently announced (the "Index") by the FHLB
of San Francisco as such cost of funds for the calendar month immediately
preceding the date of such announcement. If the FHLB of San Francisco fails to
announce such rate for the calendar month immediately preceding such 11th
District Interest Determination Date, then the 11th District Cost of Funds
Rate for such 11th District Interest Determination Date will be the 11th
District Cost of Funds Rate then in effect on such 11th District Interest
Determination Date.
Kenny Rate Notes
Each Kenny Rate Note will bear interest at the interest rate (calculated
with reference to the Kenny Rate and the Spread and/or Spread Multiplier, if
any) specified in the applicable Kenny Rate Note and in the Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Kenny
Rate" means, with respect to any Kenny Rate Interest Determination Date, the
high grade weekly index (the "Weekly Index") on such date made available by
Kenny Information Systems ("Kenny") to the Calculation Agent. The Weekly Index
is, and shall be, based upon 30 day yield evaluations at par of bonds, the
interest on which is exempt from Federal income taxation under the Internal
Revenue Code of 1986, as amended (the "Code"), of not less than five high
grade component issuers selected by Kenny which shall include, without
limitation, issuers of general obligation bonds. The specific issuers included
among the component issuers may be changed from time to time by Kenny in its
discretion. The bonds on which the Weekly Index is based shall not include any
bonds on which the interest is subject to a minimum tax or similar tax under
the Code, unless all tax-exempt bonds are subject to such tax. In the event
Kenny ceases to make available such Weekly Index, a successor indexing agent
will be selected by the Calculation Agent, such index to reflect the
prevailing rate for bonds rated in the highest short-term rating category by
Moody's Investors Service, Inc. and Standard & Poor's Corporation in respect
of issuers most closely resembling the high grade component issuers selected
by Kenny for its Weekly Index, the interest on which is (A) variable on a
weekly basis, (B) exempt from Federal income taxation under the Code, and (C)
not subject to a minimum tax or similar tax under the Code, unless all tax-
exempt bonds are subject to such tax. If such successor indexing agent is not
available, the rate for any Kenny Rate Interest Determination Date shall be
67% of the rate determined if the Treasury Rate option had been originally
selected.
LIBOR Notes
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in the LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
means, with respect to any LIBOR Interest Determination Date, the rate
determined in accordance with the following provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will be
either: (a) if "LIBOR Reuters" is specified in the Note and the applicable
Pricing Supplement, the arithmetic mean of the offered rates (unless the
specified Designated LIBOR Page (as defined below) by its terms provides
only for a single rate, in which case such single rate shall be used) for
deposits in the Designated LIBOR Currency (as defined below) having the
Index Maturity designated in the Note and the applicable Pricing
Supplement, commencing on the second London Business Day immediately
following the LIBOR Interest Determination Date, which appear on the
Designated LIBOR Page specified in the Note and the applicable Pricing
Supplement as of 11:00 A.M., London time, on that LIBOR Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the Note and the applicable
Pricing Supplement, the rate for deposits in the Designated LIBOR Currency
(as defined below) having the Index Maturity designated in the Note and the
applicable Pricing Supplement, commencing on the second London Business Day
S-12
<PAGE>
immediately following such LIBOR Interest Determination Date, which appears
on the Designated LIBOR Page specified in the Note and the applicable
Pricing Supplement as of 11:00 A.M. London time on that LIBOR Interest
Determination Date. Notwithstanding the foregoing, if fewer than two
offered rates appear on the Designated LIBOR Page with respect to LIBOR
Reuters (unless the specified Designated LIBOR Page with respect to LIBOR
Reuters by its terms provides only for a single rate, in which case such
single rate shall be used), or if no rate appears on the Designated LIBOR
Page with respect to LIBOR Telerate, whichever may be applicable, LIBOR in
respect of the related LIBOR Interest Determination Date will be determined
as if the parties had specified the rate described in clause (ii) below.
(ii) With respect to any LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Designated LIBOR Page with respect to
LIBOR Reuters (unless the Designated LIBOR Page by its terms provides only
for a single rate, in which case such single rate shall be used), or if no
rate appears on the Designated LIBOR Page with respect to LIBOR Telerate,
as the case may be, the Calculation Agent will request the principal London
office of each of four major banks in the London interbank market selected
by the Calculation Agent to provide the Calculation Agent with its offered
rate quotation for deposits in the Designated LIBOR Currency (as defined
below) for the period of the Index Maturity designated in the Note and the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, to prime
banks in the London interbank market as of 11:00 A.M., London time, on such
LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in such Designated LIBOR Currency
in such market at such time. If at least two such quotations are provided,
LIBOR determined on such LIBOR Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted as of 11:00 A.M. in the
applicable Principal Financial Center (as defined below), on such LIBOR
Interest Determination Date by three major banks in such Principal
Financial Center selected by the Calculation Agent for loans in the
Designated LIBOR Currency to leading banks, commencing on the second London
Business Day immediately following such LIBOR Interest Determination Date,
having the Index Maturity designated in the Note and the applicable Pricing
Supplement in a principal amount that is representative for a single
transaction in such Designated LIBOR Currency in such market at such time;
provided, however, that if the banks so selected by the Calculation Agent
are not quoting as mentioned in this sentence, LIBOR determined on such
LIBOR Interest Determination Date will be LIBOR in effect on such LIBOR
Interest Determination Date.
"Designated LIBOR Currency" means, with respect to any LIBOR Note, the
currency (including a composite currency), if any, designated in the Note and
the applicable Pricing Supplement as the Designated LIBOR Currency. If no such
currency is designated in the Note and the applicable Pricing Supplement, the
Designated LIBOR Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) the display on the Reuters Monitor
Money Rates Service for the purpose of displaying the London interbank rates
of major banks for the applicable Designated LIBOR Currency (if "LIBOR
Reuters" is designated in the Note and the applicable Pricing Supplement), or
(b) the display on the Dow Jones Telerate Service for the purpose of
displaying the London interbank rates of major banks for the applicable
designated LIBOR Currency (if "LIBOR Telerate" is designated in the Note and
the applicable Pricing Supplement). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the Note and applicable Pricing Supplement, LIBOR for
the applicable Designated LIBOR Currency will be determined as if LIBOR
Telerate (and, if the U.S. dollar is the Designated LIBOR Currency, page 3750)
had been chosen.
"Principal Financial Center" means, with respect to any LIBOR Note, unless
otherwise specified in the Note and the applicable Pricing Supplement, the
capital city of the country that issues as its legal tender the Designated
LIBOR Currency of such Note, except that with respect to U.S. dollars and
ECUs, the Principal Financial Center shall be The City of New York and
Brussels, respectively.
S-13
<PAGE>
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified 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 with respect to such Prime Interest Determination
Date shall be the arithmetic mean of the rates of interest publicly announced
by each bank that appears on the Reuters Screen USPRIME 1 Page 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 appear on the Reuters Screen
USPRIME 1 Page for the Prime Interest Determination Date, the Prime Rate with
respect to such Prime Interest Determination Date shall be the arithmetic mean
of the prime rates quoted on the basis of the actual number of days in the
year divided by 360 as of the close of business on such Prime Interest
Determination Date by at least two of the three major money center banks in
The City of New York selected by the Calculation Agent. If fewer than two
quotations are provided, the Prime Rate with respect to such Prime Interest
Determination Date shall be determined on the basis of the rates furnished in
The City of New York by the appropriate number of substitute banks or trust
companies organized and doing business under the laws of the United States, or
any state thereof, having total equity capital of at least U.S. $500 million
and being subject to supervision or examination by Federal or state authority,
selected by the Calculation Agent to provide such rate or rates; provided,
however, that if the appropriate number of substitute banks or trust companies
selected as aforesaid are not quoting as mentioned in this sentence, the Prime
Rate with respect to such Prime Interest Determination Date will be the Prime
Rate in effect immediately prior to such Prime Interest Determination Date.
"Reuters Screen USPRIME 1 Page" means the display designated as page "USPRIME
1" on the Reuters Monitor Money Rate Service (or such other page as may
replace the USPRIME 1 page on the service for the purpose of displaying the
prime rate or base lending rate of major banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier,
if any) specified 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 specified in the applicable
Pricing Supplement as published in H.15(519) under the heading, "Treasury
bills--auction average (investment)" or, if not so published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Treasury Interest
Determination Date, the average auction rate (expressed as a bond equivalent,
on the basis of a year of 365 or 366 days, as applicable, and applied on a
daily basis) as otherwise announced by the United States Department of the
Treasury. In the event that such rate is not available by 3:00 P.M., New York
City time, on the Calculation Date pertaining to such Treasury Interest
Determination Date, or if no such auction is held in a particular week, then
the Treasury Rate with respect to such Treasury Interest Determination Date
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 P.M., New York City time,
on such Treasury Interest Determination Date, of three leading primary U.S.
government 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 immediately
prior to such Treasury Interest Determination Date.
S-14
<PAGE>
CURRENCY INDEXED NOTES
General
The Company may from time to time offer Notes, the principal amount payable
at Maturity and/or the interest rate of which is determined by a formula which
makes reference to the rate of exchange between one currency ("Currency I")
and another currency ("Currency II;" together with Currency I, the "Selected
Currencies," both as specified in the applicable Pricing Supplement), neither
of which need be the Specified Currency of such Notes (the "Currency Indexed
Notes"). Unless otherwise specified in the applicable Pricing Supplement,
Holders of Currency Indexed Notes will be entitled to receive (i) an amount in
respect of principal equal to the principal amount of the Currency Indexed
Notes plus an adjustment, which may be negative or positive, based on the
change in the relationship between Selected Currencies or (ii) an amount of
interest calculated at the stated rate of interest on the Currency Indexed
Notes plus an adjustment, which may be negative or positive, based on the
change in the relationship between the Selected Currencies, in each case
determined as described below under "Payment of Principal and Interest." As
specified in the applicable Pricing Supplement, the exchange rate designated
as the base exchange rate (the "Base Exchange Rate") will be the initial rate
at which Currency I can be exchanged for Currency II and from which the change
in such exchange rate will be measured.
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, the payment
of principal at Maturity and interest on each Interest Payment Date (until the
payment thereof is paid or made available for payment) will be payable in the
Specified Currency in amounts calculated in the manner described below.
Unless otherwise specified in the applicable Pricing Supplement, principal
at Maturity, if indexed, will be payable in an amount equal to the principal
amount of the Currency Indexed Note, plus or minus an amount determined by
reference to the difference between the Base Exchange Rate specified in the
applicable Pricing Supplement and the rate at which Currency I can be
exchanged for Currency II on the second Business Day prior to the Maturity
(the "Determination Date") of such Currency Indexed Note, as determined by the
determination agent specified in the applicable Pricing Supplement (the
"Determination Agent"). Unless otherwise specified in the applicable Pricing
Supplement, the interest payable on any Interest Payment Date, if indexed,
will be payable in an amount equal to the stated interest rate of the Currency
Indexed Note, plus or minus a rate adjustment determined by reference to the
difference between the Base Exchange Rate specified in the applicable Pricing
Supplement and the rate at which Currency I can be exchanged for Currency II
on the second Business Day prior to the Interest Payment Date (the "Indexed
Interest Determination Date") of such Currency Indexed Note, as determined by
the Determination Agent, applied to the average principal amount outstanding
of such Note for the period being measured. For the purpose of this section,
such rate of exchange on the Determination Date or the Indexed Interest
Determination Date, as the case may be, will be the average of quotations for
settlement on the Maturity Date or the relevant Interest Payment Date, as the
case may be, obtained by the Determination Agent from three reference dealers
in The City of New York at approximately 11:00 A.M., New York City time, on
either the Determination Date or the relevant Indexed Interest Determination
Date, as the case may be.
The formulas to be used by the Determination Agent to determine the
principal amount and/or the stated interest rate of a Currency Indexed Note
payable at Maturity or on any Interest Payment Date will be specified in the
applicable Pricing Supplement by reference to the appropriate formula and will
be as follows:
Principal
A. If principal is to increase when the Spot Rate exceeds the Base Exchange
Rate, and if principal is to decrease when the Spot Rate is less than the Base
Exchange Rate, the formula to determine the principal amount of a Currency
Indexed Note payable at Maturity shall equal:
<TABLE>
<S> <C>
Principal Amount + (Principal Amount x F x [Spot Rate--Base Exchange Rate])
--------------------------------
Spot Rate
</TABLE>
S-15
<PAGE>
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will sell
Currency I in exchange for a single unit of Currency II.
B. If principal is to increase when the Base Exchange Rate exceeds the Spot
Rate, and if principal is to decrease when the Base Exchange Rate is less than
the Spot Rate, the formula to determine the principal amount of a Currency
Indexed Note payable at Maturity shall equal:
<TABLE>
<S> <C>
Principal Amount + (Principal Amount x F x [Base Exchange Rate--Spot Rate])
--------------------------------
Spot Rate
</TABLE>
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will
purchase Currency I in exchange for a single unit of Currency II.
Interest
A. If interest is to increase when the Spot Rate exceeds the Base Exchange
Rate, and if interest is to decrease when the Spot Rate is less than the Base
Exchange Rate, the formula to determine the interest rate payable on any
Interest Payment Date on a Currency Indexed Note shall equal:
<TABLE>
<S> <C>
Stated Interest Rate + F x (Spot Rate--Base Exchange Rate)
-------------------------------
Spot Rate
</TABLE>
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will sell
Currency I in exchange for a single unit of Currency II.
B. If interest is to increase when the Base Exchange Rate exceeds the Spot
Rate, and if interest is to decrease when the Base Exchange Rate is less than
the Spot Rate, the formula to determine the interest rate payable on any
Interest Payment Date on a Currency Indexed Note shall equal:
<TABLE>
<S> <C>
Stated Interest Rate + F x (Base Exchange Rate--Spot Rate)
-------------------------------
Spot Rate
</TABLE>
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will
purchase Currency I in exchange for a single unit of Currency II.
In each of the above formulas "F" will be the leverage factor, if any, used
in such formula.
AN INVESTMENT IN NOTES INDEXED, AS TO PRINCIPAL OR INTEREST OR BOTH, TO ONE
OR MORE VALUES OF CURRENCY INDICES (INCLUDING EXCHANGE RATES BETWEEN
CURRENCIES) 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
COMPANY AND THE VALUE OF THE APPLICABLE CURRENCY INDEX, INCLUDING THE
VOLATILITY OF THE APPLICABLE CURRENCY 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 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 INDEX MAY BE INCREASED. THE HISTORICAL EXPERIENCE OF THE
RELEVANT CURRENCY INDICES SHOULD NOT BE TAKEN AS AN INDICATION OF FUTURE
PERFORMANCE OF SUCH CURRENCY INDICES DURING THE TERM OF ANY NOTE. THE CREDIT
RATINGS ASSIGNED TO THE NOTES ARE A REFLECTION OF THE COMPANY'S CREDIT STATUS
AND IN NO WAY ARE A REFLECTION OF THE POTENTIAL IMPACT OF THE FACTORS
DISCUSSED ABOVE, OR ANY OTHER FACTORS, ON THE MARKET VALUE OF THE NOTES.
ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH NOTES AND THE
SUITABILITY OF SUCH NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
S-16
<PAGE>
COMMODITY INDEXED NOTES
The Company may from time to time offer Notes, the principal amount payable
at Maturity and/or the interest rate of which is determined by a formula which
makes reference to the price or prices of specified commodities ("Commodity
Indexed Notes"). The Pricing Supplement relating to a Commodity Indexed Note
will set forth the method by which the amount of interest payable and the
amount payable at Stated Maturity in respect of such Commodity Indexed Note
will be determined, the tax consequences to holders of Commodity Indexed
Notes, a description of certain risks associated with investments in Commodity
Indexed Notes and other information relating to such Commodity Indexed Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may from time to time offer Original Issue Discount Notes. The
Pricing Supplement applicable to certain Original Issue Discount Notes may
provide that Holders of such Notes will not receive periodic payments of
interest. For purposes of determining whether Holders of the requisite
principal amount of Notes outstanding under the Indenture have made a demand
or given a notice or waiver or taken any other action, the outstanding
principal amount of Original Issue Discount Notes shall be deemed to be the
amount of the principal that would be due and payable upon declaration of
acceleration of the Stated Maturity thereof as of the date of such
determination. See "General."
"Original Issue Discount Note" means, (i) a Note that has a stated
redemption price at Maturity that exceeds its issue price by at least 0.25% of
its stated redemption price at maturity multiplied by the number of full years
from the Original Issue Date to the Stated Maturity for such Notes and (ii)
any other Note designated by the Company as issued with original issue
discount for U.S. Federal income tax purposes.
AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Note
("Amortizing Notes"). Interest on each Amortizing Note will be computed as set
forth in the applicable Pricing Supplement. Unless otherwise specified in such
Pricing Supplement payments with respect to Amortizing Notes will be applied
first to interest due and payable thereon and then to the reduction of the
unpaid principal amount thereof. A table setting forth repayment information
with respect to each Amortizing Note will be provided to the original
purchaser of such Note and will be available upon request to the subsequent
Holders thereof.
RESET NOTES
The Pricing Supplement relating to each Note as to which the Company has the
option with respect to such Note to reset the interest rate, in the case of a
Fixed Rate Note, or to reset the Spread and/or Spread Multiplier, in the case
of a Floating Rate Note (in each case, a "Reset Note"), will indicate (i) the
date or dates on which such interest rate or such Spread and/or Spread
Multiplier, as the case may be, may be reset (each an "Optional Interest Reset
Date") and (ii) the basis or formula, if any, for such resetting.
The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 45 but not more than 60 calendar days prior
to an Optional Interest Reset Date for such Note. If the Company so notifies
the Trustee of such exercise, the Trustee will send, not later than 40
calendar days prior to such Optional Interest Reset Date, by telegram, telex,
facsimile transmission, hand delivery or letter (first class, postage prepaid)
to the Holder of such Note a notice (the "Reset Notice") indicating (i) that
the Company has elected to reset the interest rate, in the case of a Fixed
Rate Note, or the Spread and/or Spread Multiplier, in the case of a Floating
Rate Note, (ii) such new interest rate or such new Spread and/or Spread
Multiplier, as the case may be, and (iii) the provisions, if any, for
redemption during the period from such Optional Interest Reset Date to the
next Optional Interest Reset Date or, if there is no such next Optional
Interest Reset Date, to the Stated Maturity of such Note (each such period a
"Subsequent Interest Period"), including the date or dates on which or the
period or periods during which and the price or prices at which such
redemption may occur during such Subsequent Interest Period.
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Notwithstanding the foregoing, not later than 20 calendar days prior to an
Optional Interest Reset Date for a Note, the Company may, at its option,
revoke the interest rate, in the case of a Fixed Rate Note, or the Spread
and/or Spread Multiplier, in the case of a Floating Rate Note, provided for in
the Reset Notice and establish a higher interest rate, in the case of a Fixed
Rate Note, or a Spread and/or Spread Multiplier resulting in a higher interest
rate, in the case of a Floating Rate Note, for the Subsequent Interest Period
commencing on such Optional Interest Reset Date by causing the Trustee to send
by telegram, telex, facsimile transmission, hand delivery or letter (first
class, postage prepaid) notice of such higher interest rate or Spread and/or
Spread Multiplier resulting in a higher interest rate, as the case may be, to
the Holder of such Note. Such notice shall be irrevocable. All Notes with
respect to which the interest rate or Spread and/or Spread Multiplier is reset
on an Optional Interest Reset Date will bear such higher interest rate, in the
case of a Fixed Rate Note, or Spread and/or Spread Multiplier resulting in a
higher interest rate, in the case of a Floating Rate Note, whether or not
tendered for repayment as provided in the next paragraph.
If the Company elects prior to an Optional Interest Reset Date to reset the
interest rate or the Spread and/or Spread Multiplier of a Note, the Holder of
such Note will have the option to elect repayment of such Note by the Company
on such Optional Interest Reset Date at a price equal to the principal amount
thereof plus any accrued interest to such Optional Interest Reset Date. In
order for a Note to be so repaid on an Optional Interest Reset Date, the
Holder thereof must follow the procedures set forth below under "Redemption
and Repayment" for optional repayment, except that the period for delivery of
such Note or notification to the Trustee shall be at least 25 but not more
than 35 calendar days prior to such Optional Interest Reset Date. A Holder who
has tendered a Note for repayment following receipt of a Reset Notice may
revoke such tender for repayment by written notice to the Trustee received
prior to 5:00 P.M., New York City time, on the tenth calendar day prior to
such Optional Interest Reset Date.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note as to which the Company has the
option to extend the Stated Maturity of such Note for one or more periods of
from one to five whole years (each an "Extension Period") up to but not beyond
the date (the "Final Maturity Date"), will set forth each applicable Extension
Period and the Final Maturity Date.
The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 45 but not more than 60 calendar days prior
to the Stated Maturity of such Note in effect prior to the exercise of such
option (the "Original Stated Maturity Date"). If the Company so notifies the
Trustee of such exercise, the Trustee will send, not later than 40 calendar
days prior to the Original Stated Maturity Date, by telegram, telex, facsimile
transmission, hand delivery or letter (first class, postage prepaid), to the
Holder of such Note a notice (the "Extension Notice") relating to such
Extension Period, indicating (i) that the Company has elected to extend the
Stated Maturity of such Note, (ii) the new Stated Maturity, (iii) in the case
of a Fixed Rate Note, the interest rate applicable to the Extension Period or,
in the case of a Floating Rate Note, the Spread and/or Spread Multiplier
applicable to the Extension Period, and (iv) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which
or the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the sending by the
Trustee of an Extension Notice to the Holder of a Note, the Stated Maturity of
such Note shall be extended automatically, and, except as modified by the
Extension Notice and as described in the next two paragraphs, such Note will
have the same terms as prior to the sending of such Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior to the
Original Stated Maturity Date of a Note, the Company may, at its option,
revoke the interest rate, in the case of a Fixed Rate Note, or the Spread
and/or Spread Multiplier, in the case of a Floating Rate Note, provided for in
the Extension Notice and establish a higher interest rate, in the case of a
Fixed Rate Note, or a Spread and/or Spread Multiplier resulting in a higher
interest rate, in the case of a Floating Rate Note, for the Extension Period
by causing the Trustee to send by telegram, telex, facsimile transmission,
hand delivery or letter (first class, postage prepaid) notice of such higher
interest rate or Spread and/or Spread Multiplier resulting in a higher
interest rate, as the case may be, to the
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Holder of such Note. Such notice shall be irrevocable. All Notes with respect
to which the Stated Maturity is extended will bear such higher interest rate,
in the case of a Fixed Rate Note, or Spread and/or Spread Multiplier resulting
in a higher interest rate, in the case of a Floating Rate Note, for the
Extension Period, whether or not tendered for repayment as provided in the
next paragraph.
If the Company elects to extend the Stated Maturity of a Note, the Holder of
such Note will have the option to elect repayment of such Note by the Company
on the Original Stated Maturity Date at a price equal to the principal amount
thereof plus any accrued and unpaid interest to such date. In order for a Note
to be so repaid on the Original Stated Maturity Date, the Holder thereof must
follow the procedures set forth below under "Redemption and Repayment" for
optional repayment, except that the period for delivery of such Note or
notification to the Trustee shall be at least 25 but not more than 35 calendar
days prior to the Original Stated Maturity Date. A Holder who has tendered a
Note for repayment following receipt of an Extension Notice may revoke such
tender for repayment by written notice to the Trustee received prior to 5:00
P.M., New York City time, on the tenth calendar day prior to the Original
Stated Maturity Date.
RENEWABLE NOTES
The applicable Pricing Supplement will indicate that a Note (other than an
Amortizing Note) will mature at its Original Stated Maturity Date unless the
term of all or any portion of any such Note is renewed by the Holder in
accordance with the procedures, if any, described in such Pricing Supplement.
COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "Reset Notes," "Extension of Maturity" and "Renewable
Notes."
REDEMPTION AND REPAYMENT
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity only if an Initial
Redemption Date is specified in the applicable Pricing Supplement ("Initial
Redemption Date"). If so specified, the Notes will be subject to redemption at
the option of the Company on any date on and after the applicable Initial
Redemption Date in whole or from time to time in part in increments of $1,000
or the minimum denomination specified in such Pricing Supplement (provided
that any remaining principal amount thereof shall be an authorized
denomination), at the applicable Redemption Price (as defined below) on notice
given not more than 60 nor less than 30 days prior to the date of redemption
and in accordance with the provisions of the Indenture. "Redemption Price,"
with respect to a Note, means an amount equal to the sum of (i) the Initial
Redemption Percentage specified in such Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction, if applicable (as specified in such
Pricing Supplement)) multiplied by the unpaid principal amount or the portion
to be redeemed plus (ii) unpaid interest accrued on the principal amount
thereof to be redeemed to the date of redemption. The Initial Redemption
Percentage, if any, applicable to a Note shall decline at each anniversary of
the Initial Redemption Date by an amount equal to the applicable Annual
Redemption Percentage Reduction, if any, until the Redemption Price is equal
to 100% of the unpaid principal amount thereof or the portion thereof to be
redeemed.
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to Stated Maturity or that such Note will be
repayable at the option of the Holder on a date or dates specified prior to
Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
In order for a Note that is repayable at the option of the Holder to be
repaid prior to Stated Maturity, the Paying Agent (initially, the Company has
appointed the Trustee as Paying Agent) must receive at least 30 but not more
than 45 calendar days prior to the repayment date (i) the Note with the form
entitled "Option to Elect
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Repayment" on the reverse of the Note duly completed or (ii) a telegram,
telex, facsimile transmission, hand delivery or letter (first class, postage
prepaid) from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States setting forth the name of the Holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid,
the certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid with the form entitled "Option to Elect
Repayment" on the reverse of the Note duly completed will be received by the
Trustee not later than five Business Days after the date of such telegram,
telex, facsimile transmission, hand delivery or letter (first class, postage
prepaid). If the procedure described in clause (ii) of the preceding sentence
is followed, such Note and form duly completed must be received by the Trustee
by such fifth Business Day. Exercise of the repayment option by the Holder of
a Note shall be irrevocable, except that a Holder who has tendered a Note for
repayment may revoke such tender for repayment by written notice to the Paying
Agent received prior to the close of business on the tenth calendar day prior
to the repayment date. The repayment option may be exercised by the Holder of
a Note for less than the entire principal amount of the Note provided that the
principal amount of the Note remaining outstanding after such repayment is an
authorized denomination.
While the Book-Entry Notes are represented by the Global Security or
Securities held by or on behalf of the U.S. Depositary, and registered in the
name of the U.S. Depositary or the U.S. Depositary's nominee, the option for
repayment may be exercised only by the U.S. Depositary or its nominee, as the
registered Holder of such Notes. Nevertheless, the U.S. Depositary has advised
the Company that under its current practices, such option may be exercised by
the applicable Participant (as defined herein) that has an account with the
U.S. Depositary, on behalf of the beneficial owners of the Global Security or
Securities representing such Book-Entry Notes, by delivering a written notice
substantially similar to the above mentioned form to the Trustee, not more
than 60 nor less than 30 days prior to the date of repayment. Notices of
elections from Participants on behalf of beneficial owners of the Global
Security or Securities representing such Book-Entry Notes to exercise their
option to have such Book-Entry Notes repaid must be received by the Trustee by
5:00 P.M., New York City time, on the last day for giving such notice. In
order to ensure that a notice is received by the Trustee on a particular day,
the beneficial owner of the Global Security or Securities representing such
Book-Entry Notes must so direct the applicable Participant before such
Participant's deadline for accepting instructions for that day. Different
firms may have different deadlines for accepting instructions from their
customers. Accordingly, beneficial owners of the Global Security or Securities
representing Book-Entry Notes should consult the Participants through which
they own their interest therein for the respective deadlines for such
Participants. All notices shall be executed by a duly authorized officer of
such Participant (with signatures guaranteed) and shall be irrevocable. In
addition, beneficial owners of the Global Security or Securities representing
Book-Entry Notes shall effect delivery at the time such notices of election
are given to the U.S. Depositary by causing the applicable Participant to
transfer such beneficial owner's interest in the Global Security or Securities
representing such Book-Entry Notes, on the U.S. Depositary's records, to the
Trustee. See "Book-Entry System."
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended, and any other
securities laws or regulations in connection with any such repayment.
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, surrendered to the Trustee for
cancellation.
OTHER PROVISIONS
Any provisions with respect to the determination of an Interest Rate Basis,
the specifications of Interest Rate Basis, calculation of the interest rate
applicable to, or the principal payable at Maturity on, any Note, its Interest
Payment Dates or any other matter relating thereto may be modified by the
terms as specified under "Other Provisions" on the face of such Note, or in an
Annex relating thereto if so specified on the face thereof, and in the
applicable Pricing Supplement.
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BOOK-ENTRY SYSTEM
Unless otherwise specified in the applicable Pricing Supplement, the
following provisions will apply to all Book-Entry Notes:
DTC will act as securities depositary for the Book-Entry Notes. The Book-
Entry Notes will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One fully-registered Global Security will
be issued for each issue of the Notes, in the aggregate principal amount of
such issue, and will be deposited with DTC. If, however, the aggregate
principal amount of any issue exceeds the maximum principal amount authorized
by DTC, one Global Security will be issued with respect to such maximum
principal amount and an additional Global Security will be issued with respect
to any remaining principal amount of such issue. Unless and until it is
exchanged in whole or in part for Notes in definitive registered form, a
Global Security may not be transferred except as a whole by DTC to another
nominee of DTC or to a successor depositary or a nominee of such successor.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC holds securities that its participants ("Participants") deposit with DTC.
DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants ("Direct Participants") include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to DTC's system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Book-Entry Notes under DTC's system must be made by or through
Direct Participants, which will receive a credit for the Book-Entry Notes on
DTC's records. The ownership interest of each actual purchaser of each Book-
Entry Note (the "Beneficial Owner") is in turn to be recorded on the Direct
and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well
as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
the Beneficial Owners. Because DTC can act only on behalf of Participants and
persons that may hold through Participants, the ability of an owner of a
beneficial interest in a Global Security to pledge Notes to persons or
entities that do not participate in the book-entry and transfer system of DTC,
or otherwise take actions in respect of such Notes, may be limited. In
addition, the laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair a purchaser's ability to transfer beneficial
interests in a Global Security.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Global Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge
of the actual Beneficial Owners of the Book-Entry Notes; DTC's records reflect
only the identity of the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
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So long as DTC or its nominee is the registered owner of a Global Security,
DTC or such nominee, as the case may be, will be considered the sole owner or
Holder of the Notes represented by such Global Security for all purposes under
the Indenture. Except as set forth below, owners of beneficial interests in a
Global Security will not be entitled to have Notes represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Certificated Notes and will not be considered the owners
or Holders of such Notes under the Indenture.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co., as the Holder of the Book-
Entry Notes. If less than all of the Book-Entry Notes within an issue are
being redeemed, DTC's current practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Book-Entry
Notes. Under its usual procedures, DTC will mail an "Omnibus Proxy" to the
Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Principal and interest payments on the Book-Entry Notes will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case of securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility
of the Company, disbursement of such payments to Direct Participants shall be
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants. Owners
of beneficial interests in a Global Security that hold through DTC may
experience some delay in the receipt of interest payments since DTC will
forward payments to Participants, which in turn will forward them to persons
that hold through Participants or to such owners.
A Beneficial Owner shall give notice to elect to have its Book-Entry Notes
purchased or tendered, through its Participant, to the Paying Agent, and shall
effect delivery of such Book-Entry Notes by causing the Direct Participant to
transfer the Participant's interest in the Book-Entry Notes, on DTC's records,
to the Paying Agent. The requirement for physical delivery of Book-Entry Notes
in connection with a demand for purchase or a mandatory purchase will be
deemed satisfied when the ownership rights in the Book-Entry Notes are
transferred by a Direct Participant on DTC's records.
If DTC is at any time unwilling or unable to continue as depositary or if
DTC ceases to be a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act, and, in either case, a successor depositary
is not appointed by the Company within 90 days, the Company will issue
individual Certificated Notes in exchange for Book-Entry Notes represented by
Global Securities. In addition, the Company may at any time, and in its sole
discretion, determine not to have all or a portion of any Book-Entry Note
represented by Global Securities and in such event will issue individual
Certificated Notes in exchange for the Book-Entry Note or portion thereof no
longer to be represented by Global Securities. If the Notes are Book-Entry
Notes represented by one or more Global Securities and if an Event of Default
with respect to the Notes shall have occurred and be continuing, the Company
will issue individual Certificated Notes in exchange for such Book-Entry
Notes.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Certificated Notes will be printed and delivered in exchange for the Book-
Entry Notes represented by the Global Securities held by DTC.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Neither the Company, the Trustee, any Paying Agent nor the registrar for the
Notes will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DISCHARGE AND DEFEASANCE
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be subject to discharge and defeasance as described under "Description of
the Debt Securities-Satisfaction and Discharge; Defeasance" in the Prospectus.
FOREIGN CURRENCY RISKS
THE PROSPECTUS, INCLUDING THIS PROSPECTUS SUPPLEMENT, DOES NOT DESCRIBE ALL
RISKS OF AN INVESTMENT IN MULTI-CURRENCY NOTES THAT RESULT FROM SUCH NOTES
BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY UNIT, EITHER AS SUCH RISKS
EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE
FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL
AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN MULTI-CURRENCY
NOTES AND AS TO ANY MATTERS THAT MAY AFFECT THE PURCHASE OR HOLDING OF A
MULTI-CURRENCY NOTE OR THE RECEIPT OF PAYMENTS OF PRINCIPAL OF AND ANY PREMIUM
AND INTEREST ON A MULTI-CURRENCY NOTE IN A SPECIFIED CURRENCY OTHER THAN U.S.
DOLLARS. MULTI-CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS
WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
An investment in Multi-Currency Notes entails significant risks that are not
associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of
significant changes in the rate of exchange between the U.S. dollar and the
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 economic and political events and the supply
and demand for the relevant currencies over which the Company has no control.
In recent years, rates of exchange between the U.S. dollar and certain foreign
currencies have been highly volatile and such volatility may be expected in
the future. The exchange rate between the U.S. dollar and a foreign currency
or currency unit is at any moment a result of the supply of and demand for
such currencies, and changes in the rate result over time from the interaction
of many factors, among which are rates of inflation, interest rate levels,
balances of payments and the extent of governmental surpluses or deficits in
the countries of such currencies. These factors are in turn sensitive to the
monetary, fiscal and trade policies pursued by such governments and those of
other countries important to international trade and finance. 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 Multi-Currency Note. Depreciation of the Specified
Currency applicable to a Multi-Currency Note against the U.S. dollar would
result in a decrease in the U.S. dollar-equivalent yield of such Note, in the
U.S. dollar-equivalent value of the principal repayable at Maturity of such
Note and, generally, in the U.S. dollar-equivalent market value of such Note.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed noncommunist nations are
permitted to fluctuate in value relative to the U.S. dollar. Sovereign
governments, however, rarely voluntarily allow their currencies to float
freely in response to economic forces. In fact, such governments use a variety
of techniques, such as intervention by a country's central bank or
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imposition of regulatory controls or taxes, to affect the exchange rate of
their currencies. Governments may also issue a new currency to replace an
existing currency or alter the exchange rate or relative exchange
characteristics by devaluation or revaluation of a currency. Thus, a special
risk in purchasing Notes that are denominated in a foreign currency or
currency unit is that their U.S. dollar-equivalent yields could be affected by
governmental actions which could change or interfere with a theretofore freely
determined currency valuation, by fluctuations in response to other market
forces and by the movement of currencies across borders. There will be no
adjustment or change in the terms of the Multi-Currency Notes in the event
that exchange rates should become fixed, or in the event of any devaluation or
revaluation or imposition of exchange or other regulatory controls or taxes,
or in the event of other developments, affecting the U.S. dollar or any
applicable currency or currency unit.
Unless otherwise indicated in the applicable Pricing Supplement, Multi-
Currency Notes will not be sold in, or to residents of, the country issuing
the Specified Currency in which particular Multi-Currency Notes are
denominated. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents, and the
Company disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, premium, if any, and interest on Multi-Currency Notes.
The Pricing Supplement with respect to any issue of Multi-Currency Notes,
containing information on the applicable Specified Currency (including
information with respect to applicable current foreign exchange controls, if
any), will be delivered and will become part of this Prospectus and Prospectus
Supplement. The information 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.
MULTI-CURRENCY NOTES
PAYMENT CURRENCY
Except as set forth below, if payment in respect of a Note is required to be
made in a Specified Currency other than U.S. dollars 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 in respect of such Note shall be made in U.S. dollars until such
currency is again available or so used. The amounts so payable on any date in
such currency shall be converted in U.S. dollars on the basis of the Market
Exchange Rate on the second Business Day prior to such payment, or if such
market exchange rate is not then available, on the basis of the most recently
available Market Exchange Rate for such currency or as otherwise indicated in
the applicable Pricing Supplement. Any payment in respect of such Note made
under such circumstances in U.S. dollars will not constitute an Event of
Default under the Indenture.
If payment in respect of a Note is required to be made in ECU and ECU are no
longer used in the European Monetary System, then all payments in respect of
such Note shall be made in U.S. dollars until ECU are again so used. The
amount of each payment in U.S. dollars shall be computed on the basis of the
equivalent of ECU in U.S. dollars, determined as described below, as of the
second Business Day prior to the date on which such payment is due.
The equivalent of ECU in U.S. dollars as of any date shall be determined by
the Trustee for such Note on the following basis. The component currencies of
ECU for this purpose (the "Components") shall be the currency amounts that
were components of 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 such
Trustee or such Exchange Rate Agent, as the case may be, on the basis of the
most recently available Market Exchange Rates for such Components or as
otherwise indicated in the applicable Pricing Supplement.
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If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a
Component shall be divided or multiplied in the same proportion. If two or
more component currencies are consolidated into a single currency, the amounts
of those currencies as Components shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that currency as a
Component shall be replaced by amounts of such two or more currencies, each of
which shall be 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 Trustee for the Notes or
the Exchange Rate Agent, as the case may be, shall be at its sole discretion
and shall, in the absence of manifest error, be conclusive for all purposes
and binding on holders of Notes.
JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. A judgment for money damages by courts in the United
States, including money damages based on an obligation expressed in a foreign
currency, will ordinarily be rendered only in U.S. dollars. New York statutory
law provides that in an action based on an obligation expressed in a currency
other than U.S. dollars 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 exchange rate prevailing on the
date of entry of the judgment or decree.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary deals only with Notes held as capital assets and does
not deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal
with holders other than original purchasers (except where otherwise
specifically noted). This summary is based upon United States Federal tax laws
and regulations as now in effect and as currently interpreted and does not
take into account possible changes in such tax laws or interpretations, any of
which may be applied retroactively. Persons considering the purchase of the
Notes should consult their own tax advisors concerning the application of
United States Federal income tax laws to their particular situations as well
as any consequences of the purchase, ownership and disposition of the Notes
arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation created or organized under
the laws of the United States or of any political subdivision thereof, (iii) a
person otherwise subject to United States Federal income taxation on its
worldwide income regardless of its source or (iv) any other person whose
income or gain in respect of a Note is effectively connected with the conduct
of a United States trade or business. As used herein, the term "non-U.S.
Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note, including qualified stated interest as
defined below under "Original Issue Discount", generally will be taxable to a
U.S. Holder as ordinary interest income at the time such payments are accrued
or are received (in accordance with the U.S. Holder's regular method of tax
accounting).
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Original Issue Discount
For United States Federal income tax purposes, original issue discount
("OID")is the excess of the stated redemption price at maturity of a Note over
its issue price, if such excess equals or exceeds a de minimis amount
(generally 1/4 of 1% of the Note's stated redemption price at maturity
multiplied by the number of complete years to maturity from its issue date or,
in the case of an Amortizing Note, by the weighted average maturity). The
stated redemption price at maturity of a Note is the sum of all payments
provided by the Note other than "qualified stated interest" payments.
"Qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of
the issuer) at least annually at a single fixed rate (or at certain floating
rates) that appropriately takes into account the length of the interval
between stated interest payments.
Original issue discount is includible in income as ordinary interest for
United States Federal income tax purposes as it accrues under a constant yield
method in advance of receipt of the cash payments attributable to such income,
regardless of such U.S. Holder's regular method of tax accounting. In general,
the amount of OID included in income by the initial U.S. Holder of an Original
Issue Discount Note (a "Discount Note") is the sum of the daily portions of
OID for each day during the taxable year (or portion of the taxable year) on
which such U.S. Holder held such Discount Note. The "daily portion" is
determined by allocating the OID for an accrual period equally to each day in
that accrual period. The "accrual period" for a Discount Note 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 on the first day of an accrual period. The amount
of OID for an accrual period is generally equal to the excess of (i) the
product of the Discount Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity over (ii) the amount of any qualified
stated interest payments allocable to such accrual period. The "adjusted issue
price" of a Discount Note at the beginning of any accrual period is the sum of
the issue price of the Discount Note plus the amount of OID allocable to all
prior accrual periods minus the amount of any prior payments on the Discount
Note that were not qualified stated interest payments. Under these rules, U.S.
Holders generally will have to include in income increasingly greater amounts
of OID in successive accrual periods.
Floating Rate Notes and Indexed Notes ("Variable Notes") are subject to
special rules. A Variable Note that provides for stated interest at one or
more qualified floating rates, a single fixed rate and one or more qualified
floating rates, a single objective rate, or a single fixed rate and a single
objective rate that is a qualified inverse floating rate throughout the term
thereof generally will qualify as a "variable rate debt instrument". In
general, the amount and accrual of OID and qualified stated interest on such a
Variable Note is calculated by converting it into a debt instrument with an
appropriate fixed rate and then applying the general OID rules.
If a Variable Note does not qualify as a "variable rate debt instrument",
then the Variable Note would be treated as a contingent payment debt
obligation. A U.S. Holder of such an instrument generally must include future
contingent and noncontingent interest payments in income as such interest
accrues based upon a projected payment schedule. Moreover, in general, any
gain recognized by a U.S. Holder on the sale, exchange, or retirement of a
contingent payment debt instrument will be treated as ordinary income and a
portion of any loss realized could be treated as ordinary loss as opposed to
capital loss (depending upon the circumstances).
The proper United States Federal income tax treatment of Variable Notes that
are treated as contingent payment debt obligations will be more fully
described in the applicable Pricing Supplement. Investors considering the
purchase of Variable Notes should consult their own tax advisors.
Certain of the Notes (i) may be redeemable at the option of the Issuers
prior to their stated maturity (a "call option") and/or (ii) may be repayable
at the option of the holder prior to their stated maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase Notes with such
features should consult their own tax advisors, since the OID consequences
will depend, in part, on the particular terms and features of the purchased
Notes more fully described in the applicable Pricing Supplement.
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U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount, and unstated interest, as adjusted by
any amortizable bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to OID obligations,
subject to certain limitations and exceptions. The election is to be made for
the taxable year in which the U.S. Holder acquired the Note, and may not be
revoked without the consent of the Internal Revenue Service (the "IRS").
The Issuer will report to holders the amount of interest paid and OID
accrued each year.
Short-Term Notes
Special rules apply with respect to OID on Notes that mature one year or
less from the date of issuance ("Short-Term Notes"). In general, a cash basis
U.S. Holder of a Short-Term Note is not required to include OID in income as
it accrues for United States Federal income tax purposes unless it elects to
do so. Accrual basis U.S. Holders and certain other U.S. Holders, including
banks, regulated investment companies, dealers in securities, and cash basis
U.S. Holders who so elect, are required to include OID in income as it accrues
on Short-Term Notes on either a straight-line basis or under the constant
yield method (based on daily compounding), at the election of the U.S. Holder.
In the case of U.S. Holders not required and not electing to include OID on
Short-Term Notes in income currently, any gain realized on the sale or
retirement of Short-Term Notes will be ordinary income to the extent of the
OID accrued on a straight-line basis (unless an election is made to accrue the
OID under the constant yield method) through the date of sale or retirement.
U.S. Holders who are not required and do not elect to include OID on Short-
Term Notes in income as it accrues will be required to defer deductions for
interest on borrowings allocable to Short-Term Notes in an amount not
exceeding the deferred income until the deferred income is realized. For
purposes of determining the amount of OID subject to these rules, no interest
payments on a Short-Term Note are qualified stated interest, but instead such
interest payments are included in the Short-Term Note's stated redemption
price at maturity.
Any U.S. Holder of a Short-Term Note can elect to apply rules in the
preceding paragraph taking into account the amount of "acquisition discount",
if any, with respect to the Note (rather than the OID with respect to such
Note). Acquisition discount is the excess of the stated redemption price at
maturity of the Short-Term Note over the U.S. Holder's purchase price
therefor.
Market Discount
If a U.S. Holder purchases a Note, other than a Discount Note, for an amount
that is less than its issue price (or, in the case of a subsequent purchaser,
its stated redemption price at maturity) or, in the case of a Discount Note,
for an amount that is less than its adjusted issue price as of the purchase
date, such U.S. Holder will be treated as having purchased such Note at a
"market discount," unless such market discount is less than a specified de
minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized
on the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time
of such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on the basis
of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note
or certain earlier dispositions, because a current deduction is only allowed
to the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in
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income currently as it accrues (on either a ratable or semiannual compounding
basis), in which case the rules described above regarding the treatment as
ordinary income of gain upon the disposition of the Note and upon the receipt
of certain cash payments and regarding the deferral of interest deductions
will not apply. Generally, such currently included market discount is treated
as ordinary interest for United States Federal income tax purposes. Such an
election will apply to all debt instruments acquired by the U.S. Holder on or
after the first day of the first taxable year to which such election applies
and may be revoked only with the consent of the IRS.
Premium
If a U.S. Holder purchases a Note for an amount that is greater than the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest, such U.S. Holder will be considered to have
purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable
year by the amortized amount of such excess for the taxable year. However, if
the Note may be optionally redeemed after the U.S. Holder acquires it at a
price in excess of its stated redemption price at maturity, special rules
would apply which could result in a deferral of the amortization of some bond
premium until later in the term of the Note. Any election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the U.S. Holder on or after the first day of the first taxable
year to which such election applies and may be revoked only with the consent
of the IRS.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal
to the stated redemption price at maturity will be considered to have
purchased the Discount Note at an "acquisition premium". Under the acquisition
premium rules, the amount of OID which such U.S. Holder must include in its
gross income with respect to such Discount Note for any taxable year (or
portion thereof in which the U.S. Holder holds the Discount Note) will be
reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a Note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any OID included in income (and accrued market discount or
acquisition discount, if any, if the U.S. Holder has included such discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
Extendible Notes, Reset Notes and Renewable Notes
Certain of the Notes may provide that (i) the holder may extend the maturity
of a Note (a "Renewable Note"), and/or (ii) the Company may extend the
maturity of a Note (an "Extension of Maturity"), and/or (iii) the Company has
the option to reset the interest rate, the Spread, or the Spread Multiplier (a
"Reset Note"). Notes containing such features may be subject to rules that
differ from the general rules discussed above. Investors considering the
purchase of Notes with such features should consult their own tax advisors and
the applicable Pricing Supplement regarding the tax consequences of the
holding and disposition of such Notes.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY ("Foreign Currency Notes")
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
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Payments of Interest in a Foreign Currency
The U.S. dollar value, determined on date of receipt, of a Foreign Currency
payment of interest on a Note (other than OID or market discount) will be
includible in the income of a cash method U.S. Holder regardless of whether
the payment is converted to U.S. dollars.
The U.S. dollar value of interest income (including OID or market discount
and reduced by amortizable bond premium to the extent applicable) that has
accrued and is otherwise required to be taken into account with respect to a
Note during an accrual period will be includible in income of an accrual basis
U.S. Holder. Such U.S. dollar value will be determined by translating such
income at the average rate of exchange for the accrual period or, with respect
to an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. A U.S. Holder may elect, however, to
translate such accrued interest income using the rate of exchange on the last
day of the accrual period or, with respect to an accrual period that spans two
taxable years, using the rate of exchange on the last day of the taxable year.
If the last day of an accrual period is within five business days of the date
of receipt of the accrued interest, a U.S. Holder may translate such interest
using the rate of exchange on the date of receipt. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above election. A U.S. Holder will recognize exchange gain
or loss (which will be treated as ordinary income or loss) with respect to
accrued interest income on the date such income is received. The amount of
ordinary income or loss recognized will equal the difference, if any, between
the U.S. dollar value of the Foreign Currency payment received (determined on
the date such payment is received) in respect of such accrual period and the
U.S. dollar value of interest income that has accrued during such accrual
period (as determined above).
Sale and Retirement of Notes
A U.S. Holder's tax basis in a Foreign Currency Note will be the U.S. dollar
value of the Foreign Currency amount paid for such Foreign Currency Note
determined at the time of such purchase. To the extent the amount realized on
sale, exchange or retirement of a Foreign Currency Note represents accrued but
unpaid interest, such amounts must be taken into account as interest income,
with exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement, the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or
the Note is disposed of (or deemed disposed of as a result of a material
change in the terms of such Note). In the case of a Note that is denominated
in Foreign Currency and is traded on an established securities market, a cash
basis U.S. Holder (or, upon election, an accrual basis U.S. Holder) will
determine the U.S. dollar value of the amount realized by translating the
Foreign Currency payment at the spot rate of exchange on the settlement date
of the sale.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense.
Original Issue Discount
In the case of a Foreign Currency Discount Note, (i) OID is determined in
units of the Foreign Currency, (ii) accrued OID is translated into U.S.
dollars in the same manner as interest income accrued by an accrual basis U.S.
Holder, described in "Payments of Interest in a Foreign Currency" above, and
(iii) the amount of Foreign Currency gain or loss on the accrued OID is
determined by comparing the amount of income received attributable to the
discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of OID accrued, as translated above.
Premium and Market Discount
In the case of a Foreign Currency Note with market discount, (i) market
discount is determined in units of the Foreign Currency, (ii) accrued market
discount taken into account upon the receipt of any partial principal
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payment or upon the sale, exchange, retirement or other disposition of the
Note (other than accrued market discount required to be taken into account
currently) is translated into U.S. dollars at the exchange rate on such
disposition date (and no part of such accrued market discount is treated as
exchange gain or loss) and (iii) accrued market discount currently includible
in income by a U.S. Holder for any accrual period is translated into U.S.
dollars on the basis of the average exchange rate in effect during such
accrual period, and the exchange gain or loss is determined upon the receipt
of any partial principal payment or upon the sale, exchange, retirement or
other disposition of the Note in the manner described in "Payments of Interest
in a Foreign Currency" above with respect to computation of exchange gain or
loss on accrued interest by an accrual basis U.S. Holder.
With respect to a Foreign Currency Note acquired with amortizable bond
premium, such premium is determined in the relevant Foreign Currency and
reduces interest income in units of the Foreign Currency. At the time
amortized bond premium offsets interest income, a U.S. Holder may realize
ordinary income or loss, measured by the difference between exchange rates at
that time and at the time of the acquisition of the Notes.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including OID, if any)
on a Note, unless such non-U.S. Holder is a direct or indirect 10% or greater
shareholder of the relevant Issuer, a controlled foreign corporation for U.S.
tax purposes that is related to such Issuer (directly or indirectly) through
stock ownership or a bank receiving interest described in section 881(c)(3)(A)
of the Code. To qualify for the exemption from taxation, the last United
States payor in the chain of payment prior to payment to a non-U.S. Holder
(the "Withholding Agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar
years, a statement that (i) is signed by the beneficial owner of the Note
under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. Recently proposed
Treasury Regulations would provide alternative methods for satisfying these
certification requirements, and are proposed to be effective for payments made
after December 31, 1997.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
relevant Issuers or, at the time of such individual's death, payments in
respect of the Notes would have been effectively connected with the conduct by
such individual of a trade or business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Notes to a U.S. Holder must be reported to the
IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding for
those non-U.S. Holders who are not exempt recipients.
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In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-
U.S. Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or (ii) the seller certifies its non-
U.S. status (and certain other conditions are met). Certification of the
registered owner's non-U.S. status normally would be made on an IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
purchases of the Notes. The Company will pay each Agent a commission of from
.125% to .750% of the principal amount of each Note, depending upon its Stated
Maturity (or a commission to be negotiated at the time of sale with respect to
any Note with a maturity more than 30 years from date of issue), sold through
such Agent. The Company will have the sole right to accept offers to purchase
Notes and may reject any such offer in whole or in part. Each Agent will have
the right, in its discretion reasonably exercised, to reject in whole or in
part any offer to purchase Notes received by such Agent. The Company also may
sell Notes to any Agent, acting as principal, at a discount to be agreed upon
at the time of sale, for resale to one or more investors or to one or more
broker-dealers (acting as principal for purposes of resale) at varying prices
related to prevailing market prices at the time of resale, as determined by
such Agent, or, if so agreed, at a fixed public offering price. Unless
otherwise indicated in the applicable Pricing Supplement, any Note purchased
by an Agent as principal will be purchased at 100% of the principal amount
thereof less a percentage equal to the commission applicable to an agency sale
of a Note having an identical Stated Maturity. Unless otherwise indicated in
the applicable Pricing Supplement, if any Note is resold by an Agent to any
broker-dealer at a discount, such discount will not be in excess of the
discount or commission received by such Agent from the Company. After the
initial public offering of the Notes, the public offering price (in the case
of Notes to be resold on a fixed public offering price basis), the concession
and the discount may be changed. The Company may appoint additional Agents
from time to time. The Company also reserves the right to sell the Notes
directly to investors on its own behalf in those jurisdictions where it is
authorized to do so or as otherwise provided in the applicable Pricing
Supplement. In such circumstances, 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. In the case of sales made directly by the Company, no
commission will be payable by the Company.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Act, or to contribute to the Agents such payments as each Agent may be
required to make in respect thereof. The Company has agreed to reimburse the
Agents for certain expenses of the Agents, including, but not limited to, the
fees and expenses of counsel to the Agents.
The Company has been advised by each Agent that such Agent may from time to
time purchase and sell Notes in the secondary market, but that it is not
obligated to do so. There can be no assurance that there will be a secondary
market for the Notes or liquidity in such secondary market if one develops.
From time to time, each Agent may make a market in the Notes, but no Agent is
obligated to do so, and an Agent may discontinue any market making at any
time.
From time to time, the Agents and their affiliates may engage in
transactions with and perform services, including investment banking services,
for the Company and its affiliates in the ordinary course of business.
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LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Cravath,
Swaine & Moore, New York, New York, and for the Agents by Simpson Thacher &
Bartlett (a partnership which includes professional corporations), New York,
New York. Thomas M. Lemberg, Esq., Senior Vice President, General Counsel and
Secretary of the Company, will pass on certain other matters for the Company.
Mr. Lemberg, an officer and full-time employee of the Company, is expected to
acquire options to purchase shares of Common Stock of the Company.
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$500,000,000
POLAROID CORPORATION
DEBT SECURITIES
Polaroid Corporation (the "Company") may offer from time to time its
unsecured debt securities consisting of notes, debentures or other evidences
of indebtedness (the "Debt Securities") at an aggregate initial offering price
of not more than $500,000,000 or, if applicable, the equivalent thereof in one
or more foreign currencies or currency units. The Debt Securities may be
offered as separate series in amounts, at prices and on terms to be determined
in light of market conditions at the time of sale and set forth in a
Prospectus Supplement or Prospectus Supplements.
The terms of each series of Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, authorized
denominations, maturity, rate or rates (or method of calculation) and time or
times of payment of any interest, any terms for optional or mandatory
redemption or early payment or payment of additional amounts or any sinking
fund provisions, the currency or currencies or currency unit or currency units
in which principal, premium, if any, or interest, if any, is payable, any
initial public offering price, the proceeds to the Company and any other
specific terms in connection with the offering and sale of such series and any
listing on a securities exchange will be set forth in a Prospectus Supplement
or Prospectus Supplements. Debt Securities may be issued with amounts payable
in respect of principal of or any premium or interest on the Debt Securities
determined by reference to the value, rate or price of one or more specified
indices.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The Debt Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. See
"Plan of Distribution". If any agents of the Company or any underwriters are
involved in the sale of any Debt Securities in respect of which this
Prospectus is being delivered, the names of such agents or underwriters and
any applicable commissions or discounts will be set forth in a Prospectus
Supplement.
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is December 11, 1996
<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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048; and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained by mail from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Common Stock of the Company is listed on the New York
Stock Exchange and such reports, proxy statements and other information can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005. The Registration Statement has been, and
amendments thereto will be, filed with the Commission through the Electronic
Data Gathering, Analysis and Retrieval ("EDGAR") system. Registration
statements, reports, proxy statements and other information filed through the
EDGAR system with respect to the Company are publicly available through the
Commission's Web site (http://www.sec.gov).
The Company has filed with the Commission a Registration Statement on Form
S-3 (which also constitutes a post-effective amendment to an earlier
Registration Statement on Form S-3 relating to a portion of the Debt
Securities offered hereby) (herein together with all amendments and exhibits
thereto, called the "Registration Statement") under the Securities Act of 1933
with respect to the securities offered by this Prospectus. This Prospectus
does not contain all of the information set forth or incorporated by reference
in the Registration Statement and the exhibits and schedules relating thereto,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the securities offered by this Prospectus, reference is made to
the Registration Statement and the exhibits filed or incorporated as a part
thereof, which are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission or may be
examined without charge at the offices of the Commission. Statements contained
in this Prospectus as to the contents of any documents referred to are not
necessarily complete, and, in each such instance, are qualified in all
respects by reference to the applicable documents filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended December
31, 1995, dated March 19, 1996;
(b) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1996, dated May 13, 1996;
(c) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1996, dated August 8, 1996;
(d) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 29, 1996, dated November 12, 1996;
(e) the Company's Current Report on Form 8-K, dated January 16, 1996;
(f) the Company's Current Report on Form 8-K, dated February 8, 1996;
(g) the Company's Current Report on Form 8-K, dated July 19, 1996; and
(h) the Company's Current Report on Form 8-K, dated December 11, 1996.
2
<PAGE>
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of securities hereunder shall be deemed to be incorporated by
reference in this Prospectus and to be a part of this Prospectus from the date
of the filing thereof. Any statement contained 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 other subsequently filed document 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 hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, at the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated by reference in this Prospectus
(other than certain exhibits). Requests for such copies should be directed to:
Polaroid Corporation, 549 Technology Square, Cambridge, MA 02139, Attention:
Thomas M. Lemberg, Esq., telephone (617) 386-2000.
THE COMPANY
The Company designs, manufactures and markets worldwide a variety of
products primarily in instant image recording fields. These include instant
photographic cameras and films, electronic imaging recording devices,
conventional films and light polarizing filters and lenses. The principal
products of the Company are used in amateur and professional photography,
industry, science, medicine and education.
The Company's principal executive offices are located at 549 Technology
Square, Cambridge, MA 02139. The Company's telephone number is (617) 386-2000.
References herein to the Company shall mean Polaroid Corporation and its
subsidiaries, unless the context requires otherwise.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information and statements provided by the Company may
contain "forward-looking statements" as defined by the Private Securities
Litigation Reform Act of 1995 (the "Act"). The Company desires to take
advantage of the "safe harbor" provisions of the Act. The Company therefore
cautions investors that actual results may differ materially from those
projected or suggested in any forward-looking statement as the result of a
wide variety of factors, which include but are not limited to the factors and
conditions set forth below. Many of the important factors below have been
discussed in the documents filed by the Company with the Commission that are
incorporated by reference into this Prospectus. See "Incorporation of Certain
Documents by Reference".
The Company sells and markets its products worldwide. The worldwide market
for imaging products, particularly products in electronic and medical imaging,
is highly competitive in price, quality, service and product performance. The
Company has competitors worldwide, ranging from large corporations to smaller
and more specialized companies. The most significant competitors, Eastman
Kodak Company and Fuji Photo Film Co., Ltd., are considerably larger than the
Company and thus have more resources. The impact of these factors can cause
varied results.
The Company is affected by retail demand for its products, particularly in
the United States and Europe. Additional factors including fluctuation of
foreign exchange rates, economic factors, political activity, changes in laws
and regulations, particularly in the environmental arena, could affect the
Company's results of operations. The Company believes that developing markets,
such as Russia and China, in total present particularly attractive
opportunities. However, such markets tend to be considerably less stable than
more established markets and there can be no assurance that developing markets
will produce favorable results for the Company. For the first nine months of
1996, sales in Russia have declined and cannot be predicted with any
certainty.
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<PAGE>
The Company anticipates that price competition from conventional film and
other imaging technologies will place continued pressure on instant products.
Furthermore, the profits of the Company's instant photography business have
generally derived from the sale of the film, not from the sale of the cameras.
The Company is continuing to develop digital imaging products for
photographic, medical and graphic arts applications, but the large development
costs have produced ongoing losses. The profits of the Company's basic instant
photography business have been higher than the Company's total profit from
operations due to the operating losses of these digital imaging businesses.
Markets for digital imaging products are increasing rapidly and over time may
erode either the growth or the absolute size of the Company's instant
photography business. The markets for digital imaging products are highly
competitive and there is no assurance that the Company will attain the level
of success in these markets that it has achieved with respect to instant
photography. Included in the digital imaging losses are costs associated with
the Company's new coating facility which was brought on-line in 1994 and is
operating at low levels of production capacity manufacturing Helios film. The
Company is consolidating its coating facilities, shifting capacity from some
of its oldest to its newer, more efficient facilities. The timing and impact
of this consolidation are uncertain. The future prospects of the Company's
digital imaging businesses are uncertain and they are likely to continue to
affect the Company's financial results adversely for the next few years. The
Company's ability to reduce its digital imaging losses is also dependent on
its ability to develop new products in a timely manner and to market them
effectively. The Company continues to study the different areas of its
businesses, including their cost structures, and is exploring prospects for
aligning itself in various business relationships to improve financial
results.
RATIOS OF EARNINGS TO FIXED CHARGES
During the past five years, there has been some reduction in the Company's
coverage ratios as set forth in the following table:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31 ENDED
------------------------------ SEPTEMBER 29,
1991 1992 1993 1994 1995 1996
------- ---- ------ ---- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges(a)....................... 15.5(b) 3.0 2.3(c) 3.3 --(d) 1.1(e)
</TABLE>
- --------
(a) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings/(loss) before income taxes
and cumulative effect of changes in accounting principles plus fixed
charges (excluding capitalized interest)) by fixed charges. Fixed charges
consist of interest expense (including amortization of deferred financing
costs), the portion of rental expense that is representative of the
interest factor (deemed by the Company to be one-third) and capitalized
interest.
(b) In 1991 the Company received a pre-tax litigation settlement of $924.5
million. Excluding the settlement, the ratio of earnings to fixed charges
was 3.1.
(c) In 1993 the Company recorded a pre-tax special charge for restructuring
and other expenses of $44.0 million. Excluding the pre-tax special charge,
the ratio of earnings to fixed charges was 2.9.
(d) Earnings were insufficient to cover fixed charges by $206.2 million after
giving effect to the pre-tax special charge for restructuring and other
expenses of $247.0 million. Excluding the pre-tax special charge, the
ratio of earnings to fixed charges was 1.6.
(e) In the first nine months of 1996, the Company recorded a pre-tax special
charge for restructuring and other expenses of $110.0 million. Excluding
the pre-tax special charge, the ratio of earnings to fixed charges
was 3.5.
4
<PAGE>
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes, which may include capital expenditures,
possible acquisitions, repurchase of the Company's stock, payment of other
debt and such other purposes as may be stated in any Prospectus Supplement.
The Company expects that it will, on a recurring basis, engage in additional
financings in character and amount to be determined as the need arises.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (the "Indenture") to
be entered into between the Company and State Street Bank and Trust Company,
as Trustee (the "Trustee"), the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Debt Securities
may be issued from time to time in one or more series. The particular terms of
each series, or of Debt Securities forming a part of a series, which are
offered by a Prospectus Supplement, will be described in such Prospectus
Supplement. The following statements are subject to the detailed provisions of
the Indenture; whenever particular provisions of the Indenture are referred
to, such provisions are incorporated by reference as a part of the statement
made, and the statement is qualified in its entirety by such reference.
Whenever a defined term is referred to and not defined under "Description of
the Debt Securities", the definition thereof is contained in the Indenture.
GENERAL
The Indenture provides for the issuance from time to time of Debt Securities
in an unlimited aggregate principal amount and an unlimited number of series.
The Debt Securities are unsecured and will rank pari passu with all other
unsecured and nonsubordinated debt of the Company.
Reference is made to the applicable Prospectus Supplement for the following
terms of the series of Debt Securities offered thereby: (i) the title of the
Debt Securities of such series; (ii) any limit upon the aggregate principal
amount of such Debt Securities; (iii) the person to whom the interest on a
Debt Security of any series will be payable if not the person in whose name
that Debt Security is registered on the regular record date; (iv) the date or
dates on which such Debt Securities will mature or the method of determination
of such date or dates; (v) the rate or rates, or the method of determination
thereof, at which such Debt Securities will bear interest, if any, the date or
dates from which such interest will accrue, the date or dates such interest
will be payable and, for Registered Debt Securities (as defined below), the
Regular Record Dates; (vi) the place or places where the principal of,
premium, if any, and interest, if any, on, such Debt Securities will be
payable; (vii) the periods, prices and terms and conditions upon which any
such Debt Security may be redeemed, in whole or in part, at the option of the
Company; (viii) any terms for redemption or repurchase pursuant to any sinking
fund or analogous provision or at the option of a Holder; (ix) any terms for
conversion of the Debt Securities into other securities of the Company or any
other corporation at the option of a holder; (x) any terms for the attachment
to such Debt Securities of warrants, options or other rights to purchase or
sell stock or other securities of the Company; (xi) if other than the
principal amount thereof, the portion of the principal amount of such Debt
Securities that will be payable upon acceleration of maturity (Debt Securities
subject to such provisions being referred to as "Original Issue Discount
Securities"); (xii) any deletions or modifications of, or additions to, the
Events of Default or covenants of the Company under the Indenture with respect
to such Debt Securities (including whether the covenants described below under
"Certain Covenants of the Company" will not apply to such Debt Securities);
(xiii) if other than U.S. dollars, the currency, currencies or currency unit
or units in which such Debt Securities will be denominated and in which the
principal of, premium, if any, and interest, if any, on, such Debt Securities
will be payable; (xiv) whether, and the terms and conditions on which, the
Company or a Holder may elect that,
5
<PAGE>
or the other circumstances under which, payment of principal of, premium, if
any, or interest, if any, on, such Debt Securities is to be made in a currency
or currencies or currency unit or units other than that in which such Debt
Securities are denominated; (xv) any manner of determining the amount of
principal of, premium, if any, or interest, if any, on, any such Debt
Securities to be determined with reference to an index based on a currency or
currency unit or units other than that in which such Debt Securities are
stated to be payable or an index based on any other method; (xvi) whether such
Debt Securities will be issued in fully registered form without coupons
("Registered Debt Securities") or in bearer form with or without coupons
("Bearer Debt Securities"), or any combination thereof, whether such Debt
Securities will be issued in the form of one or more global securities (each a
"Global Debt Security") and whether such Debt Securities are to be issuable in
temporary global form or definitive global form; (xvii) if such Debt
Securities are to be issued upon the exercise of warrants, the time, manner
and place for such Debt Securities to be authenticated and delivered; (xviii)
whether and under what circumstances the Company will pay additional amounts
to any holder of such Debt Securities who is not a United States person (as
defined below under "Temporary Global Securities") in respect of any tax,
assessment or governmental charge withheld or deducted and, if so, whether and
on what terms the Company will have the option to redeem such Debt Securities
rather than pay any additional amounts; and (xix) any other terms of any of
such Debt Securities not inconsistent with the Indenture. (Sections 202 and
301)
Unless otherwise specified in the applicable Prospectus Supplement, (x) the
Debt Securities will be Registered Debt Securities and (y) Debt Securities
denominated in U.S. dollars will be issued, in the case of Registered Debt
Securities, in denominations of $1,000 or an integral multiple thereof and, in
the case of Bearer Debt Securities, in denominations of $5,000. Debt
Securities may bear legends required by United States Federal tax law and
regulations. (Section 401)
If any of the Debt Securities are sold for any foreign currency or currency
unit or if the principal of, or premium, if any, or interest, if any, on, any
of the Debt Securities is payable in any foreign currency or currency unit,
the restrictions, elections, tax consequences, specific terms and other
information with respect to such Debt Securities and such foreign currency or
currency unit will be set forth in the Prospectus Supplement relating thereto.
CERTAIN COVENANTS OF THE COMPANY
Certain Definitions Applicable to Covenants
The term "Subsidiary" of the Company will be defined in the Indenture as a
corporation at least a majority of whose outstanding Voting Stock shall at the
time be owned, directly or indirectly, by the Company and/or one or more
Subsidiaries of the Company.
The term "Restricted Subsidiary" will be defined as a Subsidiary of the
Company substantially all the property of which is located, or substantially
all of the business of which is carried on, within the United States of
America and which owns a Principal Property, excluding, however, a Subsidiary
of the Company which is primarily engaged in (a) the development and sale or
financing of real property or (b) financing, or assisting in financing, the
acquisition or disposition of products of the Company or a Subsidiary by
dealers, distributors or customers.
The term "Principal Property" will be defined as any real estate or any
manufacturing or processing plant or warehouse owned or leased by the Company
or by any Restricted Subsidiary which is located within the United States of
America and the gross book value of which (without deduction of any
depreciation reserves) on the date as which the determination is being made
exceeds 2% of Consolidated Net Tangible Assets, other than (a) properties
which in the opinion of the Board of Directors are not of material importance
to the Company's business as an entirety or (b) any portion of any particular
property which is found by the Board of Directors not to be of material
importance to the use or operation of such property.
6
<PAGE>
The term "Attributable Debt" will be defined as the total net amount of rent
required to be paid during the remaining term of certain leases, discounted at
the rate per annum borne by the relevant Debt Securities.
The term "Consolidated Net Tangible Assets" will be defined as the total
assets (less applicable reserves and other properly deductible items) on the
balance sheet of the Company, less (a) all current liabilities and (b)
goodwill, trade names, trademarks, patents, organization expenses and other
like intangibles of the Company and its consolidated Subsidiaries. (Section
101)
Restrictions on Secured Debt
If the Company or any Restricted Subsidiary shall incur or guarantee any
indebtedness for money borrowed ("Debt") secured by a mortgage, pledge or lien
("Mortgage") on any Principal Property of the Company or of any Restricted
Subsidiary, or on any shares of stock or Debt of any Restricted Subsidiary,
the Company will secure or cause such Restricted Subsidiary to secure the Debt
Securities equally and ratably with (or, at the Company's option, prior to)
such secured Debt, unless the aggregate amount of all such secured Debt,
together with all Attributable Debt of the Company and its Restricted
Subsidiaries with respect to sale and leaseback transactions involving
Principal Properties (with the exception of such transactions which are
excluded as described in "Restrictions on Sales and Leasebacks" below), would
not exceed 10% of Consolidated Net Tangible Assets. (Section 1104)
The above restrictions will not apply to, and there will be excluded from
secured Debt in any computation under such restrictions, Debt secured by (a)
Mortgages on property of, or on any shares of stock of or Debt of, any
corporation existing at the time such corporation becomes a Restricted
Subsidiary, (b) Mortgages in favor of the Company or a Restricted Subsidiary,
(c) Mortgages in favor of governmental bodies to secure progress or advance
payments, (d) Mortgages on property, shares of stock or Debt existing at the
time of acquisition thereof (including acquisition through merger or
consolidation) and purchase money and construction Mortgages which are entered
into prior to, at the time of or within 180 days after the later of
acquisition or completion of construction, (e) Mortgages securing industrial
revenue or pollution control bonds, and (f) any extension, renewal or
refunding of any Mortgage referred to in the foregoing clauses (a) through (e)
inclusive; provided, that, any such extended, renewed or replaced Mortgage
shall be limited to the same property, stock or Debt that secured the original
Mortgage. (Section 1104)
Restrictions on Sales and Leasebacks
Neither the Company nor any Restricted Subsidiary may enter into any sale
and leaseback transaction involving any Principal Property, unless the
aggregate amount of all Attributable Debt with respect to such transactions
plus all Debt secured by Mortgages on Principal Properties (with the exception
of secured Debt which is excluded as described in "Restrictions on Secured
Debt" above) would not exceed 10% of Consolidated Net Tangible Assets.
(Section 1105)
The restrictions on sale and leaseback transactions will not apply to, and
there shall be excluded from Attributable Debt in any computation under such
restrictions, any sale and leaseback transaction if (a) the lease is for a
period, including renewal rights, of not in excess of three years, (b) the
sale or transfer of the Principal Property is made prior to, at the time of or
within 180 days after its acquisition or construction, (c) the lease secures
or relates to industrial revenue or pollution control bonds, (d) the
transaction is between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries or (e) the Company or such Restricted Subsidiary,
within 180 days after the sale or transfer is completed, applies to the
retirement of Funded Debt (including the Debt Securities) of the Company
ranking on a parity with or senior to all the Debt Securities, or Funded Debt
of a Restricted Subsidiary, or to the purchase of other property which will
constitute a Principal Property of a value at least equal to the value of the
Principal Property leased back, an amount not less than the greater of (i) the
net proceeds of the sale of the Principal Property leased back or (ii) the
fair market value of the Principal Property leased back. The amount to be
applied to the retirement of Funded Debt shall be reduced by the principal
amount of any debentures or notes constituting Funded Debt (including the Debt
Securities) of the Company or a
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<PAGE>
Restricted Subsidiary surrendered to the applicable trustee for cancellation
within such 180-day period or the principal amount of Funded Debt voluntarily
retired within such 180-day period; provided, that, no retirement referred to
in this sentence may be effected by payment at maturity or pursuant to any
mandatory prepayment provision. (Section 1105)
Event Risk
Except for the limitations on Secured Indebtedness and Sale and Leaseback
Transactions described above, the Indenture and Debt Securities do not contain
any covenants or other provisions designed to afford holders of the Debt
Securities protection in the event of a highly leveraged transaction involving
the Company.
Limitation on Merger, Consolidation and Certain Sales of Assets
The Company will covenant that it will not merge into or consolidate with
any other corporation, or convey or transfer its properties and assets
substantially as an entirety to, any person unless (a) the successor is a U.S.
corporation, (b) the successor assumes on the same terms and conditions all
the obligations under the Debt Securities and the Indenture and (c)
immediately after giving effect to the transaction, there is no default under
the Indenture. (Section 901) Upon any such merger, consolidation, conveyance
or transfer, the successor will succeed to, and will be substituted in lieu
of, the Company. (Section 902)
EXCHANGE, REGISTRATION AND TRANSFER
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate
principal amount and tenor of different authorized denominations. If Debt
Securities of any series are issuable as both Registered Debt Securities and
Bearer Debt Securities, the Bearer Debt Securities of such series (with all
unmatured coupons, except as provided below, and all matured coupons in
default) will be exchangeable for Registered Debt Securities of the same
series of any authorized denominations and of a like aggregate principal
amount and tenor. If a Bearer Debt Security with coupons appertaining thereto
is surrendered in exchange for a Registered Debt Security after a Regular
Record Date or Special Record Date and before the relevant date for payment of
interest, such Bearer Debt Security shall be surrendered without the coupon
relating to such date for payment of interest and interest will not be payable
on such date in respect of the Registered Debt Security issued in exchange for
such Bearer Debt Security, but will be payable only to the holder of such
coupon when due in accordance with the terms thereof and of the Indenture.
Bearer Debt Securities will not be issued in exchange for Registered Debt
Securities (unless otherwise specified in the applicable Prospectus Supplement
and permitted by applicable rules and regulations). No service charge will be
made for any transfer or exchange of the Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge in connection therewith. (Section 404)
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities (other than Book-Entry Debt Securities (as defined
below under "Definitive Global Securities--U.S. Book-Entry Securities")) may
be presented for registration of transfer (with the form of transfer endorsed
thereon duly executed), at the office of the Security Registrar or at the
office of any additional transfer agent designated by the Company for such
purpose with respect to any series of Debt Securities and referred to in the
applicable Prospectus Supplement. (Sections 404 and 1102) The Trustee will be
the initial Security Registrar under the Indenture. State Street Bank and
Trust Company, N.A., an affiliate of the Trustee, with offices currently
located at 61 Broadway, Concourse Level, New York, New York 10006, will
initially be designated as the office or agency of the Company in the Borough
of Manhattan, The City of New York where Debt Securities may be presented for
registration of transfer or exchange. (Section 404) The Company may at any
time designate, or rescind the designation of, the Security Registrar or any
additional transfer agent or approve a change in the location through which
the Security Registrar or any such transfer agent acts, except that, if Debt
Securities of a series are issuable solely as Registered Debt Securities, the
Company will be required to maintain a transfer agent in each Place of Payment
for such series and, if Debt Securities of a series are issuable as both
Registered Debt Securities and Bearer Debt Securities or solely as Bearer Debt
Securities, the Company will be required to
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<PAGE>
maintain (in addition to the Security Registrar) a transfer agent in a Place
of Payment for such series located outside of the United States. The Company
may at any time designate additional transfer agents with respect to any
series of Debt Securities. (Section 1102)
In the event of any redemption in part of any series of Debt Securities, the
Company will not be required to: (i) issue, register the transfer of, or
exchange, Debt Securities of any series during a period beginning at the
opening of business 15 Business Days before any selection of Debt Securities
of that series to be redeemed and ending at the close of business on (a) if
Debt Securities of the series are issuable only as Registered Debt Securities,
the day of mailing of the relevant notice of redemption and (b) if Debt
Securities of the series are issuable as Bearer Debt Securities, the day of
the first publication of the relevant notice of redemption or, if Debt
Securities of the series are also issuable as Registered Debt Securities and
there is no publication, the day of mailing of the relevant notice of
redemption; (ii) register the transfer of, or exchange, any Registered Debt
Security selected for redemption, in whole or in part, except the unredeemed
portion of any Registered Debt Security being redeemed in part; or (iii)
exchange any Bearer Debt Security selected for redemption, except to exchange
such Bearer Debt Security for a Registered Debt Security of that series and of
like tenor which is simultaneously surrendered for redemption. (Section 404)
For a discussion of restrictions on the exchange, registration and transfer
of Global Debt Securities, see "Global Securities" below.
PAYMENT AND PAYING AGENTS
Payment of principal of, premium, if any, and interest, if any, on,
Registered Debt Securities will be made in the designated currency or currency
unit at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time. At the option of the Company, payment of any
interest on Registered Debt Securities may be made by check mailed to the
address of the person entitled thereto as such address shall appear in the
Security Register. Payment of any installment of interest on any Registered
Debt Security will be made to the person in whose name such Registered Debt
Security is registered at the close of business on the Regular Record Date for
such interest. (Sections 406 and 410.)
Payment of principal of, premium, if any, and interest, if any, on, Bearer
Debt Securities will be made in the designated currency unit at the offices of
such Paying Agents outside the United States as the Company may designate
(subject to any applicable laws) from time to time. On the applicable payment
date therefor, payments of principal of, and premium, if any, on, Bearer Debt
Securities will be made against surrender of such Debt Securities, and payment
of interest on Bearer Debt Securities with coupons appertaining thereto on any
Interest Payment Date will be made only against surrender of the coupon
relating to such Interest Payment Date. (Sections 410 and 1102) No payment
with respect to any Bearer Debt Security will be made at any office or agency
of the Company in the United States or by check mailed to any address in the
United States or by transfer to any account maintained with a bank located in
the United States. Notwithstanding the foregoing, payments of principal of,
premium, if any, and interest, if any, on, Bearer Debt Securities denominated
and payable in U.S. dollars will be made at the office of the Company's Paying
Agent in the Borough of Manhattan, The City of New York, if (but only if)
payment of the full amount thereof in U.S. dollars at all offices or agencies
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions. (Section 1102)
Unless otherwise indicated in the applicable Prospectus Supplement, the
Trustee will be designated as the Company's Paying Agent with respect to Debt
Securities, and the office of State Street Bank and Trust Company, N.A., an
affiliate of the Trustee, will be the office or agency of the Company in the
Borough of Manhattan, The City of New York where Debt Securities that are
issuable solely as Registered Debt Securities and Debt Securities (subject to
the limitations described above in the case of Bearer Debt Securities) that
are issuable solely as Bearer Debt Securities or as both Registered Debt
Securities and Bearer Debt Securities may be presented or surrendered for
payment. Any Paying Agents outside the United States and any other Paying
Agents in the United States initially designated by the Company for the Debt
Securities of a series will be named in the
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applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except
that, if Debt Securities of a series are issuable solely as Registered Debt
Securities, the Company will be required to maintain a Paying Agent in each
Place of Payment for such series and, if Debt Securities of a series are
issuable as both Registered Debt Securities and Bearer Debt Securities or
solely as Bearer Debt Securities, the Company will be required to maintain (i)
a Paying Agent in the Borough of Manhattan, The City of New York for payments
with respect to any Registered Debt Securities of the series (and for payments
with respect to Bearer Debt Securities of the series in the circumstances
described above, but not otherwise), and (ii) a Paying Agent in a Place of
Payment located outside the United States where Debt Securities of such series
and any coupons appertaining thereto may be presented and surrendered for
payment; provided that if the Debt Securities of such series are listed on any
stock exchange located outside the United States and such stock exchange shall
so require, the Company will maintain a Paying Agent in any required city
located outside the United States for the Debt Securities of such series.
(Section 1102)
All moneys deposited with the Trustee or a Paying Agent, or then held by the
Company, in trust for the payment of principal of, premium, if any, and
interest, if any, on, any Debt Security or coupon that remains unclaimed at
the end of two years after such principal, premium or interest shall have
become due and payable will be repaid to the Company, or, if then held by the
Company, discharged from such trust, and the holder of such Debt Security or
coupon will thereafter look only to the Company for payment thereof. (Section
1103)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part as one or
more Global Debt Securities in either registered or bearer form and in either
temporary or definitive form. The Global Debt Security or Securities of a
series will be deposited with, or on behalf of, a depositary located in the
United States (a "U.S. Depositary") or a common depositary located outside the
United States (a "Common Depositary") identified in the Prospectus Supplement
relating to such series for the benefit of Euro-clear and CEDEL S.A. for
credit to the respective accounts of such beneficial owners of interests in
such Debt Securities. All temporary or definitive Global Debt Securities in
bearer form will be deposited with a Common Depositary. (Section 403)
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series issued in global form will be described in the
Prospectus Supplement relating to such series. None of the Company, the
Trustee, any Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Debt
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. (Section 411) The Company anticipates
that the following provisions will apply to all depositary arrangements with a
U.S. Depositary or Common Depositary.
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series that are issuable as Bearer Debt Securities
initially will be represented by one or more temporary Global Debt Securities,
without interest coupons, to be deposited with a Common Depositary in London
for Morgan Guaranty Trust Company of New York, Brussels Office, as operator of
the Euro-clear System ("Euro-clear"), and CEDEL S.A. ("CEDEL") for credit to
the respective accounts of the beneficial owners of such Debt Securities (or
to such other accounts as they may direct). On and after the exchange date
determined as provided in any such temporary Global Debt Security and
described in the applicable Prospectus Supplement, each such temporary Global
Debt Security will be exchangeable for definitive Debt Securities in bearer
form, registered form, definitive global bearer form of any combination
thereof, as specified in the applicable Prospectus Supplement. No Bearer Debt
Security (including a Debt Security in definitive global bearer form)
delivered in exchange for a portion of a temporary Global Debt Security will
be mailed or otherwise delivered to any location in the United States in
connection with such exchange. (Sections 402 and 403)
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Unless otherwise specified in the applicable Prospectus Supplement, interest
on any portion of a temporary Global Debt Security payable in respect of an
Interest Payment Date occurring prior to the issuance of definitive Debt
Securities will be paid to each of Euro-clear and CEDEL with respect to the
portion of the temporary Global Debt Security held for its account upon
delivery to the Trustee of a certificate signed by Euro-clear or CEDEL, as the
case may be, in the form required by the Indenture dated no earlier than such
Interest Payment Date, which certificate must be based on statements provided
to it by its account holders who are beneficial owners of interests in such
temporary Global Debt Security in the form set forth in the Indenture that
such portion is not beneficially owned by a United States person, and has not
been acquired by or on behalf of a United States person or for offer to resell
or for resale to a United States person or any person inside the United States
or, if a beneficial interest in such portion has been acquired by a United
States person, (i) that such person is a financial institution, as defined in
applicable regulations promulgated under the Internal Revenue Code of 1986, as
amended (the "Code"), purchasing for its own account or has acquired such Debt
Security through a financial institution and (ii) that such Debt Securities
are held by a financial institution that has agreed in writing to comply with
the requirements of Section 165(j)(3)(A), (B) or (C) of the Code and the
regulations thereunder and that it did not purchase for offer to resell or for
resale inside the United States. Each of Euro-clear and CEDEL will in such
circumstances credit the interest received by it in respect of such temporary
Global Debt Security to the accounts of the beneficial owners thereof (or to
such other accounts as they may direct). (Section 403)
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or an estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction.
DEFINITIVE GLOBAL SECURITIES
BEARER SECURITIES. If any Debt Securities of a series are issuable in
definitive global bearer form, the applicable Prospectus Supplement will
describe the circumstances, if any, under which beneficial owners of interests
in any such definitive global Bearer Debt Security may exchange such interests
for Debt Securities of such series and of like tenor and principal amount in
any authorized form and denomination. No Bearer Debt Security delivered in
exchange for a portion of a definitive Global Debt Security will be mailed or
otherwise delivered to any location in the United States in connection with
such exchange. (Section 404) Principal of, premium, if any, and interest, if
any, on, a definitive global Bearer Debt Security will be payable in the
manner described in the applicable Prospectus Supplement.
BOOK-ENTRY SECURITIES. If Debt Securities of a series are to be represented
by a definitive global Registered Debt Security to be deposited with or on
behalf of a U.S. Depositary, such Debt Securities ("Book-Entry Debt
Securities") will be represented by a definitive Global Debt Security
registered in the name of the U.S. Depositary or its nominee. Upon the
issuance of a definitive Global Debt Security registered in the name of the
U.S. Depositary, the U.S. Depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of the
Book-Entry Debt Securities represented by such Global Debt Security to the
accounts of institutions that have accounts with such depositary or its
nominee ("participants"). The accounts to be credited shall be designated by
the underwriters or agents for the sale of such Book-Entry Debt Securities or
by the Company, if such Debt Securities are offered and sold directly by the
Company. Ownership of Book-Entry Debt Securities will be limited to
participants or persons that may hold interests through participants.
Ownership of Book-Entry Debt Securities will be shown on, and the transfer of
that ownership will be effected only through, records maintained by the U.S.
Depositary or its nominee for the applicable definitive Global Debt Security
or by participants or persons that hold through participants. So long as the
U.S. Depositary, or its nominee, is the registered owner of such global Debt
Security, such depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Book-Entry Debt Securities
represented by such Global Debt Security for all purposes under the Indenture.
Payment of principal of, premium, if any, and interest, if any, on, Book-Entry
Debt Securities will be made to the U.S. Depositary or its nominee, as the
case may be, as the registered
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owner or the holder of the Global Debt Security representing such Book-Entry
Debt Securities. Owners of Book-Entry Debt Securities will not be entitled to
have such Debt Securities registered in their names in the Security Register,
will not receive or be entitled to receive physical delivery of such Debt
Securities in definitive form and will not be considered the owners or holders
thereof under the Indenture. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws impair the ability to purchase or
transfer Book-Entry Debt Securities.
The Company expects that the U.S. Depositary for Book-Entry Debt Securities
of a series, upon receipt of any payment of principal of, premium, if any, or
interest, if any, on, the related definitive Global Debt Security, will
immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Debt Security as shown on the records of such U.S. Depositary.
The Company also expects that payments by participants to owners of beneficial
interests in such Global Debt Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
participants.
SATISFACTION AND DISCHARGE; DEFEASANCE
At the request of the Company, the Indenture will cease to be in effect as
to the Debt Securities of any series (except for certain obligations to
register the transfer or exchange of such Debt Securities and related coupons,
if any, and hold moneys for payment of such Debt Securities and coupons in
trust) when either (a) all such Debt Securities and coupons have been
delivered to the Trustee for cancellation or (b) all such Debt Securities and
coupons have become due and payable or will become due and payable at their
stated maturity within one year, or are to be called for redemption within one
year, and the Company has deposited with the trustee in trust, money, in the
currency, currencies or currency unit or units in which such Debt Securities
are payable, in an amount sufficient to pay all the principal of, premium, if
any, and interest, if any, on, such Debt Securities on the dates such payments
are due in accordance with the terms of such Debt Securities. (Section 501)
Unless otherwise specified in the applicable Prospectus Supplement, the
Company, at its option, (a) will be Discharged after 91 days from any and all
obligations in respect of any series of Debt Securities (except for certain
obligations to register the transfer of or exchange Debt Securities and
related coupons, replace stolen, lost or mutilated Debt Securities and
coupons, maintain paying agencies and hold moneys for payment in trust) or (b)
need not comply with certain restrictive covenants of the Indenture in respect
of such series (including those described under "Certain Covenants of the
Company"), in each case if the Company deposits irrevocably with the trustee
in trust, money, or, in the case of Debt Securities and coupons denominated in
U.S. dollars, U.S. Government Obligations or, in the case of Debt Securities
and coupons denominated in a foreign currency, Foreign Government Securities,
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money, in an amount sufficient to pay
in the currency or currencies or currency unit or units in which such Debt
Securities are payable all the principal (including any mandatory sinking fund
payments) of, and interest on, such series on the dates such payments are due
in accordance with the terms of such series. Among the conditions to the
Company's exercising any such option, the Company is required to deliver to
the Trustee an opinion of counsel to the effect that the deposit and related
defeasance would not cause the holders of such series to recognize income,
gain or loss for United States Federal income tax purposes and that the
holders of such series will be subject to United States Federal income tax in
the same amounts, in the same manner and at the same times as would have been
the case if such option had not been exercised. (Section 503)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein with
respect to any series of Debt Securities shall have happened and be
continuing, either the Trustee or the holders of 25% in principal amount of
the outstanding Debt Securities of such series (in the case of certain events
of bankruptcy, insolvency and
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reorganization, voting as one class with all other outstanding Debt
Securities) may declare the principal of all the Debt Securities of such
series, together with accrued interest thereon, if any, to be immediately due
and payable by notice in writing to the Company (and to the Trustee if given
by the holders). (Section 602)
Events of Default in respect of any series are defined in the Indenture as
being: default for 30 days in payment of any interest installment when due;
default in payment of principal of, or premium, if any, on, Debt Securities of
such series when due (other than any sinking fund payments) at their stated
maturity, by declaration, when called for redemption or otherwise; default in
the making of any sinking fund payment when due; default for 90 days after
notice to the Company by the Trustee or by holders of 25% in principal amount
of the outstanding Debt Securities of such series in the performance of any
covenant in the Debt Securities of such series or in the Indenture with
respect to Debt Securities of such series; certain events of bankruptcy,
insolvency and reorganization; and any other Event of Default provided with
respect to the Debt Securities of such series, if so specified in the
applicable Prospectus Supplement. No Event of Default with respect to a single
series of indebtedness issued under the Indenture (and any supplemental
indentures) necessarily constitutes an Event of Default with respect to any
other series of indebtedness issued thereunder. (Section 601)
A default under other indebtedness of the Company will not be a default
under the Indenture and a default under one series of Debt Securities will not
necessarily be a default under another series.
The Indenture provides that the trustee will, within 90 days after the
occurrence of a default with respect to the Debt Securities of any series,
give to the holders of the Debt Securities of such series notice of all
uncured and unwaived defaults known to it; provided that, except in the case
of default in the payment of principal of, premium, if any, or interest, if
any, on, or a sinking fund installment, if any, with respect to, any of the
Debt Securities of such series, the Trustee will be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the interest of the holders of the Debt Securities of such series. The
term "default" for the purpose of this provision only means the happening of
any of the Events of Default specified above, except that any grace period or
notice requirement is eliminated. (Section 702)
The Indenture contains provisions entitling the Trustee, subject to the duty
of the Trustee during an Event of Default to act with the required standard of
care, to be indemnified by the holders of the Debt Securities before
proceeding to exercise any right or power under the Indenture at the request
of holders of the Debt Securities. (Section 703)
The Indenture provides that the holders of a majority in principal amount of
the outstanding Debt Securities of any series may in certain circumstances
direct the time, method and place of conducting proceedings for remedies
available to the Trustee or exercising any trust or power conferred on the
Trustee in respect of such series; provided that the Trustee may decline to
follow any such direction if (i) such direction would involve the Trustee in
personal liability or (ii) such direction would be unduly prejudicial to
holders of the Debt Securities of such series not joining in such direction.
(Section 612)
The Indenture includes a covenant that the Company will file annually with
the Trustee an Officers' Certificate stating whether any default exists and
specifying any default that exists. (Section 1106)
In certain cases, the holders of a majority in principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of such series waive any past default or Event of Default with
respect to the Debt Securities of such series or compliance with certain
provisions of the Indenture, except a default (i) not theretofore cured in
payment of the principal of, premium, if any, or interest, if any, on, any of
the Debt Securities of such series; or (ii) in respect of a covenant or
provision of the Indenture which cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of a series affected.
(Section 613) The holders of a majority in principal amount of a series of
outstanding Debt Securities also have certain rights to rescind any
declaration of acceleration with respect to such series after all Events of
Default with respect to such series not arising from such declaration shall
have been cured. (Section 602)
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MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee thereunder may,
without the consent of any holders of Debt Securities, enter into supplemental
indentures for the purposes, among other things, of adding to the Company's
covenants, adding additional Events of Default, establishing the form or terms
of any series of Debt Securities issued under such supplemental indentures or
curing ambiguities or inconsistencies in the Indenture or making other
provisions, provided such other provisions shall not adversely affect the
interests of the holders of any series of Debt Securities in any material
respect. (Section 1001)
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal
amount of the outstanding Debt Securities of all affected series (acting as
one class), to execute supplemental indentures adding any provisions to or
changing or eliminating any of the provisions of the Indenture or modifying
the rights of the holders of the Debt Securities of such series, except that
no such supplemental indenture may, without the consent of the holders of all
the outstanding Debt Securities affected thereby, among other things: (i)
change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Debt Security; (ii) reduce the principal
amount of, the rate of interest on, or any premium payable upon the redemption
of, any Debt Security; (iii) reduce the amount of the principal of an Original
Issue Discount Security that would be due and payable upon acceleration of the
Maturity thereof; (iv) change any Place of Payment where, or the currency or
currencies or currency unit or units in which, any Debt Security or any
premium or interest thereon is payable; (v) impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date); (vi)
affect adversely the terms, if any, of conversion of any Debt Security into
stock or other securities of the Company or of any other corporation; (vii)
reduce the percentage in principal amount of the outstanding Debt Securities
of any series, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences) provided for in the Indenture;
(viii) change any obligation of the Company, with respect to outstanding Debt
Securities of a series, to maintain an office or agency in the places and for
the purposes specified in the Indenture for such series; (ix) modify any of
the foregoing provisions or the provisions for the waiver of certain covenants
and defaults, except to increase any applicable percentage of the aggregate
principal amount of outstanding Debt Securities the consent of the holders of
which is required or to provide with respect to any particular series the
right to condition the effectiveness of any supplemental indenture as to that
series on the consent of the holders of a specified percentage of the
aggregate principal amount of outstanding Debt Securities of such series or to
provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the holder of each outstanding Debt Security
affected thereby. (Section 1002)
WAIVER OF CERTAIN COVENANTS
The Indenture provides that the Company may omit to comply with the
restrictive covenants described above under "Certain Covenants of the Company"
if the holders of not less than a majority in principal amount of all series
of outstanding Debt Securities affected thereby (acting as one class) waive
compliance with such restrictive covenants. (Section 1107)
MEETINGS
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of any series. (Section 1401) A meeting may be called at any
time by the Trustee under the Indenture, and also, upon request, by the
Company or the holders of at least 10% in principal amount of the outstanding
Debt Securities of such series, in any such case upon notice given in
accordance with "Notices" below. (Section 1402) Persons entitled to vote a
majority in principal amount of the outstanding Debt Securities of a series
will constitute a quorum at a meeting of holders of Debt Securities of such
series, except that in the absence of a quorum, if the meeting was called by
the Company or the Trustee, it may be adjourned for a period of not less than
10 days, and in the absence of a quorum at any such adjourned meeting, the
meeting may be further adjourned for a period of not
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less than 10 days. Except for any consent which must be given by the holder of
each outstanding Debt Security affected thereby, as described above under
"Modification of the Indenture", and subject to the provisions described in
the last sentence under this subheading, any resolution presented at a meeting
or adjourned meeting duly reconvened at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal
amount of the outstanding Debt Securities of that series; provided, however,
that any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which may be made, given or
taken by the holders of a specified percentage, which is equal to or less than
a majority, in principal amount of outstanding Debt Securities of a series may
be adopted at a meeting or an adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the holders of such specified
percentage in principal amount of the outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of holders of
Debt Securities of any series duly held in accordance with the Indenture will
be binding on all holders of Debt Securities of that series and the related
coupons. With respect to any consent, waiver or other action which the
Indenture expressly provides may be given by the holders of a specified
percentage of outstanding Debt Securities of all series affected thereby
(acting as one class), only the principal amount of outstanding Debt
Securities of any series represented at a meeting or an adjourned meeting duly
reconvened at which a quorum is present as aforesaid and voting in favor of
such action will be counted for purposes of calculating the aggregate
principal amount of outstanding Debt Securities of all series affected thereby
favoring such action. (Section 1404)
NOTICES
Except as otherwise provided in the Indenture, notices to holders of Bearer
Debt Securities will be given by publication at least once in a daily
newspaper in The City of New York and in London and in such other city or
cities as may be specified in such Bearer Debt Securities and will be mailed
to such persons whose names and addresses were previously filed with the
Trustee, within the time prescribed for the giving of such notice. Notices to
holders of Registered Debt Securities will be given by first-class mail or by
overnight courier to the addresses of such holders as they appear in the
Security Register. (Section 106)
TITLE
Title to any Bearer Debt Securities and any coupons appertaining thereto
will pass by delivery. The Company, the Trustee and any agent of the Company
or the Trustee may treat the bearer of any Bearer Debt Security or related
coupon and, prior to due presentment for registration of transfer, the
registered owner of any Registered Debt Security (including Registered Debt
Securities in global registered form), as the absolute owner thereof (whether
or not such Debt Security or coupon shall be overdue and notwithstanding any
notice to the contrary) for the purpose of making payment and for all other
purposes. (Section 407)
REPLACEMENT OF SECURITIES COUPONS
Any mutilated Debt Security and any Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
holder upon surrender of such mutilated Debt Security or Debt Security with a
mutilated coupon to the Security Registrar. Debt Securities or coupons that
become destroyed, stolen or lost will be replaced by the Company at the
expense of the holder upon delivery to the Security Registrar of evidence of
the destruction, loss or theft thereto satisfactory to the Company and the
Security Registrar; in the case of any coupon which becomes destroyed, stolen
or lost, such coupon will be replaced (upon surrender to the Security
Registrar of the Debt Security with all appurtenant coupons not destroyed,
stolen or lost) by issuance of a new Debt Security in exchange for the Debt
Security to which such coupon appertains. In the case of a destroyed, lost or
stolen Debt Security or coupon, an indemnity satisfactory to the Security
Registrar and the Company may be required at the expense of the holder of such
Debt Security or coupon before a replacement Debt Security will be issued.
Notwithstanding the foregoing, if such new Debt Security is a Bearer Security,
such Debt Security shall be delivered only outside the United States. (Section
405)
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GOVERNING LAW
The Indenture, the Debt Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York.
CONCERNING THE TRUSTEE
The Company may from time to time maintain lines of credit, and have other
customary banking relationships, with State Street Bank and Trust Company, the
Trustee under the Indenture, State Street Bank and Trust Company, N.A., an
affiliate of the Trustee, or with either of their affiliates. State Street
Bank and Trust Company, as successor to The First National Bank of Boston,
also serves as the indenture trustee with respect to the Company's Indenture
dated as of December 15, 1991, providing for an unlimited amount of debt
securities and under which are issued and outstanding the Company's 7 -1/4%
Notes due January 15, 1997 and 8% Notes due March 15, 1999. Boston EquiServe,
L.P., a joint venture of which the Trustee is an affiliate, serves as Transfer
Agent and Registrar for the Company's Common Stock.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of three ways: (i) through
underwriters, (ii) through agents or (iii) directly to a limited number of
institutional purchasers or to a single purchaser. The Prospectus Supplement
with respect to each series of Debt Securities will set forth the terms of the
offering of the Debt Securities of such series, including the name or names of
any underwriters, the purchase price and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which the Debt Securities of such series may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Debt Securities may be either offered to the public through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. Unless otherwise set forth in the Prospectus Supplement, the
obligations of the underwriters to purchase Debt Securities will be subject to
certain conditions precedent and the underwriters will be obligated to
purchase all the Debt Securities of a series if any are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer
or sale of the Debt Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
best efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents or underwriters to solicit offers by certain types of institutions to
purchase Debt Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commissions
payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engage in transactions with, or perform services for, the Company in the
ordinary course of business.
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Each series of Debt Securities will be a new issue of securities with no
established trading market. Any underwriters to whom Debt Securities are sold
by the Company for public offering and sale may make a market in such Debt
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any Debt Securities.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries as
of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995, have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP dated January 30, 1996 refers to a
change in 1993 in the method of accounting for income taxes and for certain
postretirement and postemployment benefits.
With respect to the unaudited interim financial information for the periods
ended March 31, 1996 and April 2, 1995, June 30, 1996 and July 2, 1995 and
September 29, 1996 and October 1, 1995, incorporated by reference herein, the
independent certified public accountants have reported that they applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate reports included in the Company's
quarterly reports on Form 10-Q for the quarters ended March 31, 1996, June 30,
1996 and September 29, 1996, and incorporated by reference herein, state that
they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. The accountants are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their report on the
unaudited interim financial information because their report is not a "report"
or a "part" of the registration statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of such Act.
17
<PAGE>
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCOR-
PORATED BY REFERENCE IN THIS PRICING SUPPLEMENT, THE PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PRICING SUPPLEMENT,
THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY AGENT OR UNDERWRITER. NEITHER THE DELIVERY OF THIS PRIC-
ING SUPPLEMENT, THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PRICING SUPPLEMENT, THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAK-
ING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRICING SUPPLEMENT
</TABLE>
<TABLE>
<S> <C>
Recent Developments........................................................ PS-2
Use of Proceeds ........................................................... PS-3
Certain Terms of the Notes................................................. PS-3
Offering and Sale ......................................................... PS-4
</TABLE>
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
</TABLE>
<TABLE>
<S> <C>
Description of Notes ...................................................... S-2
Foreign Currency Risks .................................................... S-23
Multi-Currency Notes ...................................................... S-24
United States Federal Income Tax Considerations............................ S-25
Supplemental Plan of Distribution ......................................... S-31
Legal Matters ............................................................. S-32
</TABLE>
<TABLE>
<S> <C>
PROSPECTUS
</TABLE>
<TABLE>
<S> <C>
Available Information....................................................... 2
Incorporation of Certain Documents
by Reference............................................................... 2
The Company................................................................. 3
Ratio of Earnings to Fixed Charges.......................................... 4
Use of Proceeds............................................................. 5
Description of the Securities............................................... 5
Plan of Distribution........................................................ 16
Experts..................................................................... 17
</TABLE>
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$ ,000,000
POLAROID CORPORATION
[LOGO]
$ ,000,000 % NOTES DUE JANUARY 15, 20
$ ,000,000 % NOTES DUE JANUARY 15, 20
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PRICING SUPPLEMENT NO. 1
January , 1997
-----------------
LEHMAN BROTHERS
J.P. MORGAN & CO.
-----------------
ABN AMRO SECURITIES
(USA) INC.
CREDIT LYONNAIS SECURITIES (USA) INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
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