<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 33-63577
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 4, 1995)
LOGO
$3,000,000,000
MEDIUM TERM SENIOR NOTES, SERIES I
AND
MEDIUM TERM SUBORDINATED NOTES, SERIES A
DUE FROM 9 MONTHS TO 20 YEARS FROM DATE OF ISSUE
Associates Corporation of North America may offer from time to time its
Medium Term Senior Notes, Series I (the "Senior Notes") and Medium Term
Subordinated Notes, Series A (the "Subordinated Notes") in a combined initial
public offering price or purchase price of up to $3,000,000,000, subject to
change. The Senior Notes and Subordinated Notes are collectively referred to
herein as the "Notes". Each Note will mature on any business day from nine
months to twenty years from the date of issue, as selected by the purchaser and
agreed to by the Company. Unless otherwise provided in the applicable Pricing
Supplement, the Notes will not be subject to any sinking fund or to redemption
prior to maturity and the Notes will be issued only in fully registered form in
denominations of $100,000, or any amount in excess thereof which is an integral
multiple of $1,000.
Each Note will be represented either by a Global Security registered in the
name of a nominee of The Depository Trust Company, as Depositary (a "Book-Entry
Note"), or by a certificate issued in definitive form (a "Certificated Note"),
as set forth in the applicable Pricing Supplement. Beneficial interests in
Global Securities representing Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Book-Entry Notes will not be issuable as Certificated Notes,
except under the circumstances described herein.
The interest rate on, or interest rate formula for, each Note will be
established by the Company at the date of issue of such Note and will be set
forth therein and specified in the applicable Pricing Supplement. Interest rates
and interest rate formulas are subject to change by the Company, but no change
will affect any Notes already issued or as to which an offer to purchase has
been accepted by the Company. Unless otherwise specified in the applicable
Pricing Supplement, the Notes will bear interest at a fixed rate ("Fixed Rate
Notes") or at a floating rate ("Floating Rate Notes") determined by reference to
the CD Rate, the Commercial Paper Rate, the Federal Funds Rate, LIBOR or the
Treasury Rate as adjusted by the Spread or Spread Multiplier, if any, applicable
to such Notes. Interest rates offered by the Company with respect to the Notes
may differ depending upon the aggregate principal amount of Notes subject to
purchase in any single transaction, and the Company expects generally to
distinguish, with respect to such offered rates, between purchases which are for
less than, and purchases which are for an amount equal to or greater than,
$100,000. See "Description of Notes."
The Interest Payment Dates for each Fixed Rate Note will be May 1 and
November 1 of each year and at maturity and for each Floating Rate Note will be
established by the Company on the date of issue and will be set forth therein
and in the applicable Pricing Supplement. See "Description of Notes -- Payment".
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, THE PROSPECTUS, OR ANY PRICING SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(2)(3)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Per Note.......................... 100% Not to exceed .600% Not less than 99.400%
- ----------------------------------
Total............................. $3,000,000,000 Not to exceed $18,000,000 Not less than $2,982,000,000
- ----------------------------------
</TABLE>
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(1) Unless otherwise specified in the applicable Pricing Supplement, Notes will
be issued at 100% of their principal amount.
(2) The Company will pay to AFC Securities Inc., Bear, Stearns & Co. Inc., CS
First Boston Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc and UBS Securities LLC, each as Agent
(collectively, the "Agents"), a commission, which may be in the form of a
discount, not to exceed .600% of the principal amount of any Note sold
through such Agent, depending upon such Note's maturity. In addition, the
Company may sell Notes to Agents who are acting as dealers, at a discount
negotiated at the time of sale and specified in the applicable Pricing
Supplement, for resale to investors at varying prices as determined by such
Agent at the time of resale. See "Plan of Distribution".
(3) Assuming Notes are issued at 100% of their principal amount and before
deducting other expenses payable by the Company estimated at $2,900,241,
including reimbursement of certain of the Agents' expenses.
---------------------
The Notes are being offered on a continuous basis for sale directly by the
Company in those jurisdictions where it is authorized to do so and through the
Agents, each of whom has agreed to use its best efforts to solicit purchases of
the Notes. The Notes may also be sold by the Company to any Agent, as principal,
at a discount, for resale to investors. The Company has reserved the right to
sell the Notes through one or more additional agents. The Notes will not be
listed on any securities exchange, and there can be no assurance that any or all
of the Notes offered hereby 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 its Agents may
reject any order in whole or in part.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY 10, 1996
<PAGE> 2
SUMMARY FINANCIAL INFORMATION
The following summary of certain financial information of the Company and
its consolidated subsidiaries has been derived principally from information
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, available as described under "Documents Incorporated by
Reference", and is qualified in its entirety by the detailed information and
financial statements set forth therein.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
--------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUE AND EARNINGS
Revenue --
Finance charges................................ $2,753.2 $2,931.9 $3,250.7 $3,866.7 $4,805.3
Insurance premiums............................. 202.5 209.9 242.2 293.5 325.1
Investment and other income.................... 163.3 182.8 196.7 227.7 254.0
-------- -------- -------- -------- --------
3,119.0 3,324.6 3,689.6 4,387.9 5,384.4
Expenses --
Interest expense............................... 1,278.5 1,222.8 1,291.8 1,509.7 1,979.8
Operating expenses............................. 705.4 807.4 979.6 1,191.6 1,417.8
Provision for losses on finance receivables.... 423.7 504.0 468.9 569.9 729.7
Insurance benefits paid or provided............ 91.1 100.0 114.9 144.1 135.7
-------- -------- -------- -------- --------
2,498.7 2,634.2 2,855.2 3,415.3 4,263.0
-------- -------- -------- -------- --------
Earnings Before Provision for Income Taxes and
Cumulative Effect of Changes in Accounting
Principles..................................... 620.3 690.4 834.4 972.6 1,121.4
Provision for Income Taxes....................... 219.6 240.7 310.7 369.1 413.3
-------- -------- -------- -------- --------
Earnings Before Cumulative Effect of Changes in
Accounting Principles.......................... 400.7 449.7 523.7 603.5 708.1
Cumulative Effect of Changes in Accounting
Principles(a).................................. -- (10.0) -- -- --
-------- -------- -------- -------- --------
Net Earnings..................................... $ 400.7 $ 439.7 $ 523.7 $ 603.5 $ 708.1
======= ======= ======= ======= =======
Ratio of Earnings to Fixed Charges(b)............ 1.48 1.56 1.64 1.64 1.56
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
- ---------------
(a) The Company recorded a one-time cumulative effect of changes in accounting
principles related to the adoption, effective January 1, 1992, of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions", and SFAS No. 109, "Accounting for Income Taxes".
(b) For purposes of computing the Ratio of Earnings to Fixed Charges, "earnings"
represent earnings before provision for income taxes and cumulative effect
of changes in accounting principles, plus fixed charges. "Fixed Charges"
represent interest expense and a portion of rentals representative of an
implicit interest factor for such rentals.
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<PAGE> 3
SUMMARY FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1994 1995
----------- -----------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA
Assets:
Cash and Cash Equivalents.......................................... $ 361.1 $ 309.2
Investments in Debt and Equity Securities
Bonds and Notes................................................. 567.6 872.1
Stocks.......................................................... 41.9 12.6
----------- -----------
Total Investments in Debt and Equity Securities............ 609.5 884.7
Finance Receivables, net of unearned finance income
Consumer Finance................................................ 21,159.8 24,609.2
Commercial Finance.............................................. 9,815.9 11,759.1
----------- -----------
Total Net Finance Receivables.............................. 30,975.7 36,368.3
Allowance for Losses on Finance Receivables........................ (932.4) (1,109.2)
Insurance Policy and Claims Reserves............................... (545.6) (602.8)
Other Assets....................................................... 1,218.9 1,173.5
----------- -----------
Total Assets............................................... $31,687.2 $37,023.7
========= =========
Liabilities and Stockholders' Equity:
Notes Payable, unsecured short-term
Commercial paper................................................ $11,640.5 $12,732.7
Bank loans...................................................... 571.4 702.0
Long-Term Debt, unsecured due within one year
Senior.......................................................... 1,973.1 2,611.3
Subordinated.................................................... -- --
Capital......................................................... 0.1 0.1
Accounts Payable and Accruals...................................... 726.0 833.5
Long-Term Debt, unsecured
Senior.......................................................... 12,848.3 15,558.4
Subordinated.................................................... 141.2 141.2
Capital......................................................... 0.5 0.5
----------- -----------
Total Long-Term Debt....................................... 12,990.0 15,700.1
Stockholders' Equity............................................... 3,786.1 4,444.0
----------- -----------
Total Liabilities and Stockholders' Equity................. $31,687.2 $37,023.7
========= =========
</TABLE>
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<PAGE> 4
DESCRIPTION OF NOTES
The following description 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 set forth in the Prospectus, to which
description reference is hereby made. The following description of the Notes
will apply to such Notes unless otherwise specified in the applicable Pricing
Supplement.
GENERAL
The Senior Notes will constitute a single series to be issued under an
indenture dated as of November 1, 1995 (the "Senior Indenture") between the
Company and The Chase Manhattan Bank (National Association) ("Chase"), as
Trustee, and the Subordinated Notes will constitute a separate series to be
issued under an indenture dated as of November 1, 1995 (the "Subordinated
Indenture") between the Company and Chase. The Senior Indenture and the
Subordinated Indenture are collectively referred to herein as the "Indentures".
Neither series is limited as to aggregate principal amount. The Company has
authorized the offering and sale pursuant to this Prospectus Supplement of up to
$3,000,000,000 combined aggregate initial public offering price or purchase
price of Senior Notes and Subordinated Notes, subject to increase from time to
time as may be authorized by the Company as an extension of previous offerings
of Notes. No Subordinated Notes have been issued prior to the date of this
Prospectus Supplement. For the purpose of determining the amount issued, the
principal amount of any Original Issue Discount Note (defined below) means the
price at which such Note is issued.
Notes may be issued as discounted securities (bearing no interest or
interest at a rate which at the time of issuance is below market rates), at a
price below their stated principal amount, which provide that upon redemption or
acceleration of the maturity thereof an amount less than the principal amount
thereof shall become due and payable, or which for United States Federal income
tax purposes would be considered original issue discount notes ("Original Issue
Discount Notes"). See "Taxation of Original Issue Discount Notes".
Reference is made to the applicable Pricing Supplement for the following
terms and other information with respect to a Note being offered thereby: (1)
the public offering price, if other than 100% of the principal amount; (2) the
rate per annum at which a Fixed Rate Note will bear interest, if applicable; (3)
the rates at which a Floating Rate Note will bear interest, if applicable,
determined by reference to an interest rate basis and a Spread or a Spread
Multiplier (each defined below), if any, and any limits on such interest rates;
(4) the maturity of such Note; (5) any provisions of such Note relating to
redemption, sinking fund or repayment prior to the date on which such Note will
mature; (6) if such Note is an Indexed Note (as defined below), the manner in
which the interest on, or the principal amount payable at stated maturity of,
such Note will be determined; (7) whether such Note will be issued initially as
a Book-Entry Note or a Certificated Note; (8) the name of any agent or dealer
involved in the offering or sale of such Note; and (9) any other terms of such
Note not inconsistent with the provisions of the Indenture.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note in fully registered form without coupons. Except as set forth
below under "Book-Entry Notes", Book-Entry Notes will not be issuable in
certificated form. Unless otherwise specified in the applicable Pricing
Supplement, the authorized denominations of the Notes will be $100,000 or any
larger amount that is an integral multiple of $1,000.
The Senior Notes will constitute part of the Superior Indebtedness of the
Company and rank pari passu with all outstanding senior debt. See "Description
of Debt Securities -- Senior Securities" in the Prospectus.
The Subordinated Notes will be subordinate and junior in right of payment
to all Superior Indebtedness of the Company. See "Description of Debt
Securities -- Subordinated Securities" in the Prospectus. At December 31, 1995,
Superior Indebtedness aggregated approximately $32.1 billion.
S-4
<PAGE> 5
"Business Day" means any day that is not a Saturday or Sunday and that, in
The City of New York (and, with respect to LIBOR Notes, the City of London), is
not a day on which banking institutions are generally authorized or obligated by
law to close. "London Business Day" means any day on which dealings in deposits
in U.S. dollars are transacted in the London interbank market.
PAYMENT
Each Note will bear interest from the date of issue at the rate per annum
stated, or calculated pursuant to the interest rate formula set forth, therein,
until the principal thereof is paid or made available for payment. Interest will
be payable on each Interest Payment Date, and principal and interest due at
maturity or, if applicable, upon redemption, will be payable upon presentation
of the Notes. Interest, if any, due other than at maturity or, if applicable,
upon redemption, will be payable by check or by wire transfer (except as
described below), at the option of the Company.
Interest on Fixed Rate Notes will be payable on May 1 and November 1 of
each year and upon maturity. Except as provided below, interest on Floating Rate
Notes will be payable, in the case of Notes with a daily, weekly or monthly
Interest Reset Date (as defined below), on the third Wednesday of each month or
on the third Wednesday of March, June, September and December, as specified in
the applicable Pricing Supplement; in the case of Notes with a quarterly
Interest Reset Date, on the third Wednesday of March, June, September and
December; in the case of Notes with a semi-annual Interest Reset Date, on the
third Wednesday of the two months specified in the applicable Pricing
Supplement; and in the case of Notes with an annual Interest Reset Date, on the
third Wednesday of the month specified in the applicable Pricing Supplement.
Each date on which interest is payable on a Note is referred to herein as an
"Interest Payment Date." Any payment required to be made in respect of a Note on
a date that is not a Business Day need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
such date, and no additional interest shall accrue for the period from and after
such date; provided, however, that in the case of an Interest Payment Date for a
LIBOR Note, if such next succeeding Business Day is in the next succeeding
calendar month, such Interest Payment Date shall be the immediately preceding
Business Day.
Interest payable on any Interest Payment Date will be payable to the person
in whose name such Note is registered at the close of business 15 calendar days
prior to such Interest Payment Date (the "Record Date") or, in the case of
Global Securities representing Book-Entry Notes, by wire transfer to The
Depository Trust Company, New York, New York (the "Depositary") or its nominee,
or such other depositary as is specified in the Pricing Supplement; provided,
however, that interest payable on the Interest Payment Date occurring at
maturity or earlier redemption, will be payable to the person to whom principal
shall be payable. Notwithstanding the foregoing, the first payment of interest
on any Note originally issued between a Record Date and an Interest Payment Date
or on an Interest Payment Date will be made on the Interest Payment Date
following the next succeeding Record Date to the registered owner on such next
Record Date.
Interest payments for Floating Rate Notes (except in the case of Floating
Rate Notes which reset daily or weekly) will include accrued interest from the
date of issue or from the last date in respect of which interest has been paid,
as the case may be, to, but excluding, the Interest Payment Date, or maturity
date, as the case may be. In the case of Floating Rate Notes which reset daily
or weekly, interest payments will include accrued interest from the date of
issue or from but excluding the last date in respect of which interest has been
paid, as the case may be, to, and including, the date which is 15 calendar days
immediately preceding such Interest Payment Date, except that at maturity or
earlier redemption, the interest payable will include interest accrued to, but
excluding, the maturity date or earlier redemption date. Accrued interest will
be calculated by multiplying the principal amount of a Note by an accrued
interest factor. This accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which accrued
interest is
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<PAGE> 6
being calculated. The interest factor (expressed as a decimal calculated to
seven decimal places without rounding) for each such day will be computed by
dividing the interest rate applicable to such day by 360, in the case of CD Rate
Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes and LIBOR Notes
(each defined below), or by the actual number of days in the year, in the case
of Treasury Rate Notes (defined below). 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 (as defined below) 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 below and to any adjustment by a
Spread or a Spread Multiplier referred to below; provided, however, that (i) the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date with respect to a Floating Rate Note will be the Initial
Interest Rate specified in the applicable Pricing Supplement; and (ii) the
interest rate in effect for the ten calendar days immediately prior to maturity
will be that in effect on the tenth calendar day preceding such maturity.
INTEREST RATES
Fixed Rate Notes will bear interest at a fixed rate or rates. Floating Rate
Notes will bear interest at rates determined by reference to the interest rate
basis specified in the applicable Pricing Supplement (i) plus or minus (as
specified in the applicable Pricing Supplement) the Spread, if any, or (ii)
multiplied by the Spread Multiplier, if any. The "Spread" is the number of basis
points 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 "Index
Maturity" for any Floating Rate Note is the period until maturity of the
instrument or obligation from which the interest rate is calculated. 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 will designate one of the
following interest rate bases as applicable to each Floating Rate Note: (a) the
CD Rate (a "CD Rate Note"), (b) the Commercial Paper Rate (a "Commercial Paper
Rate Note"), (c) the Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR
(a "LIBOR Note"), (e) the Treasury Rate (a "Treasury Rate Note"), or (f) such
other interest rate basis as is set forth in such Pricing Supplement.
Fixed Rate Notes will bear interest from the date of issue at the annual
interest rate or rates specified on the face thereof and in the applicable
Pricing Supplement. Interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (each an "Interest Reset
Date"), as specified in the applicable Pricing Supplement. The Interest Reset
Date will be, in the case of Floating Rate Notes which reset daily, such
Business Day; in the case of Floating Rate Notes (other than Treasury Rate
Notes) which reset weekly, Wednesday of each week; in the case of Treasury Rate
Notes which reset weekly, Tuesday of each week; in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes which reset
semi-annually, the third Wednesday of the two months specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset annually,
the third Wednesday of the month specified in the applicable Pricing Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Reset 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 Reset
Date shall be the immediately preceding Business Day.
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<PAGE> 7
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes and Federal Funds Rate Notes will be
the Monday next preceding such Interest Reset Date, unless such Monday is not a
Business Day, in which case the Interest Determination Date will be the first
Business Day next preceding such Monday. The Interest Determination Date
pertaining to an Interest Reset Date for a LIBOR Note will be the second London
Business Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note 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 normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that such auction may be held on
the preceding Friday. If, as the result of a legal holiday, an auction is so
held on the preceding Friday, such Friday will be the Interest Determination
Date pertaining to the Interest Reset Date occurring in the next succeeding
week.
The "Calculation Date," where applicable, pertaining to an Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date or if any such day is not a Business Day, the next
succeeding Business Day, or (ii) the Business Day preceding the applicable
Interest Payment Date or Maturity Date (or date of redemption or repayment) as
the case may be. Unless otherwise specified in the applicable Pricing
Supplement, Chase shall be the calculation agent (the "Calculation Agent") with
respect to the Notes.
The appropriate Trustee will, upon the request of the holder of any
Floating Rate Note, provide the interest rate then in effect and, if different,
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 Company will notify the appropriate Trustee of each determination
of the interest rate applicable to any such Notes promptly after such
determination is made.
The interest rate on the Notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States law
of general application. In addition, the applicable Pricing Supplement will
define or particularize for each Floating Rate Note the following terms, if
applicable: Index Maturity, Initial Interest Rate, Interest Payment Dates and
Interest Reset Dates with respect to such Note.
CD Rate Notes
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
in the CD Rate Notes and in the applicable Pricing Supplement.
"CD Rate" means, with respect to any Interest Determination Date, the rate
on such date for negotiable certificates of deposit having the Index Maturity
designated 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
of the Federal Reserve System ("H.15(519)") under the heading "CDs (Secondary
Market)" or, if not so published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable certificates
of deposit of the Index Maturity designated in the applicable Pricing Supplement
as published by the Federal Reserve Bank of New York in its daily statistical
release, "Composite 3:30 p.m. Quotations for the U.S. Government Securities"
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, then the CD Rate on such
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean
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<PAGE> 8
(rounded to the nearest one-hundredth of a percent, with five one-thousandths of
a percent rounded upwards) of the secondary market offered rates as of 10:00
a.m., New York City time, on such 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 center banks of the highest credit standing
(in the market for negotiable certificates of deposit) with a remaining maturity
closest to the Index Maturity designated in the 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 will be the CD Rate in effect on such Interest
Determination Date.
CD Rate Notes, like other Notes, are not deposit obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation.
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in the Commercial Paper Rate Notes and in the
applicable Pricing Supplement.
"Commercial Paper Rate" means with respect to any Interest Determination
Date, the Money Market Yield (as defined below) of the rate on that date for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement as published in H.15(519), under the heading "Commercial Paper." In
the event that such rate is not published by 9:00 a.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield of the rate on that
Interest Determination Date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement as published in 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 Composite
Quotations, the Commercial Paper Rate for that Interest Determination Date shall
be calculated by the Calculation Agent and shall be the Money Market Yield of
the arithmetic mean (rounded to the nearest one-hundredth of a percent, with
five one-thousandths of a percent rounded upwards) of the offered rates of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent as of 11:00 a.m., New York City time, on that Interest
Determination Date, 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 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
will be the Commercial Paper Rate in effect on such Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded to
the nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upwards) calculated in accordance with the following formula:
<TABLE>
<C> <C> <S>
D X 360
Money Market Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
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Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
"Federal Funds Rate" means, with respect to any Interest Determination
Date, the rate on that day for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)" or, if not so published by 9:00 a.m., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not yet published by 3:00 p.m.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate for such Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean
(rounded to the nearest one-hundredth of a percent, with five one-thousandths of
a percent rounded upwards) of the rates for the last transaction in overnight
Federal Funds arranged by three leading brokers of Federal Funds transactions in
The City of New York selected by the Calculation Agent as of 11:00 a.m., New
York City time, on such Interest Determination Date; provided, however, that if
the brokers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate will be the Federal Funds
Rate in effect on such Interest Determination Date.
LIBOR Notes
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in the
LIBOR Notes and in the applicable Pricing Supplement.
"LIBOR" will be determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date, LIBOR will be
determined as follows: (A) if the method of calculation of LIBOR for a
LIBOR Note is specified on the face thereof to be "LIBOR-Reuters" or if no
method of calculation of LIBOR is specified, LIBOR for such Interest
Determination Date will be determined on the basis of the offered rates for
deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following that Interest Determination Date, which appear on the
Reuters Screen LIBO Page as of 11:00 a.m., London time, on that Interest
Determination Date. If at least two such offered rates appear on the
Reuters Screen LIBO Page (as defined below), the rate in respect of that
Interest Determination Date will be the arithmetic mean (rounded upwards,
if necessary, to the nearest one-sixteenth of a percent) of such offered
rates as determined by the Calculation Agent, or (B) if the method of
calculation of LIBOR for a LIBOR Note is specified on the face thereof to
be "LIBOR-Telerate", LIBOR for such Interest Determination Date will be the
rate for deposits in U.S. dollars having the Index Maturity specified in
the applicable Pricing Supplement which appears on the Telerate Page 3750
or such other page as may replace Telerate Page 3750 on that service for
the purpose of displaying London interbank offered rates of major banks
(the "Telerate Page") as of 11:00 A.M., London time, on the Interest
Determination Date. If fewer than two offered rates appear, in the case of
alternative (A) above, or if such rate does not appear on the Telerate
Page, in the case of alternative (B) above, the rate for that Interest
Determination Date will be determined as if the parties had specified the
rate described in (ii) below. "Reuters Screen LIBO Page" means the display
designated as Page "LIBO" on the Reuters Monitor Money Rates Service (or
such other page as may replace the LIBO page on that service for the
purpose of displaying London interbank offered rates of major banks).
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<PAGE> 10
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page or if the
rate for deposits does not appear on the Telerate Page as applicable and as
specified in (i) above, LIBOR will be determined on the basis of the rates
at which deposits in U.S. dollars are offered by four major banks in the
London interbank market selected by the Calculation Agent at approximately
11:00 a.m., London time, on that Interest Determination Date to prime banks
in the London interbank market having the Index Maturity designated in the
Pricing Supplement commencing on the second London Business Day immediately
following that Interest Determination Date and in a principal amount equal
to an amount of not less than U.S. $1 million that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London Office of each of such banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR
in respect of that Interest Determination Date will be the arithmetic mean
(rounded upwards, if necessary, to the nearest one-sixteenth of a percent)
of such quotations. If fewer than two quotations are provided, LIBOR in
respect of that Interest Determination Date will be the arithmetic mean
(rounded upwards, if necessary, to the nearest one-sixteenth of a percent)
of the rates quoted by three major banks in The City of New York selected
by the Calculation Agent at approximately 11:00 a.m., New York City time,
on that Interest Determination Date for loans in U.S. dollars to leading
European banks, having the Index Maturity designated in the applicable
Pricing Supplement commencing on the second London Business Day immediately
following that Interest Determination Date and in a principal amount equal
to an amount of not less than U.S. $1 million that is representative for a
single transaction in such market at such time; provided, however, that if
the banks selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR will be LIBOR in effect on such Interest
Determination Date.
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any), specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such Interest Determination Date of direct
obligations of the United States ("Treasury bills") having the Index Maturity
designated in the applicable Pricing Supplement as published in H.15(519) under
the heading "Treasury bills -- auction average (investment)" or, if not so
published by 9:00 a.m., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the auction average rate (expressed as a
bond equivalent, rounded to the nearest one-hundredth of a percent, with five
one-thousandths of a percent rounded upwards, 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 the results of
the auction of Treasury bills having the Index Maturity designated in the
applicable Pricing Supplement are not published or reported as provided above by
3:00 p.m., New York City time, on such Calculation Date or if no such auction is
held on such Interest Determination Date, then the Treasury Rate shall be
calculated by the Calculation Agent and shall be a yield to maturity (expressed
as a bond equivalent, rounded to the nearest one-hundredth of a percent, with
five one-thousandths of a percent rounded upwards, 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 Interest Determination Date, of three leading primary United
States 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 will be the Treasury Rate in
effect on such Interest Determination Date.
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Indexed Notes
The Notes may be issued, from time to time, as Notes the principal amount
of which, payable at maturity, and/or the interest payable on each Interest
Payment Date will be determined by reference to currencies, currency units,
commodity prices, financial or non-financial indices or other factors (the
"Indexed Notes"), as indicated in the applicable Pricing Supplement. Holders of
Indexed Notes may receive a principal amount at maturity that is greater than or
less than the face amount of such Notes depending upon the fluctuation of the
relative value, rate or price of the specified index. Specific information
pertaining to the method for determining the principal amount payable at
maturity, a historical comparison of the relative value, rate or price of the
specified index and the face amount of the Indexed Note and certain additional
United States federal tax considerations will be described in the applicable
Pricing Supplement.
TRANSACTION AMOUNT
Interest rates offered by the Company with respect to the Notes may differ
depending upon the aggregate principal amount of Notes purchased in any
transaction. The Company expects generally to distinguish, with respect to such
offered rates, between purchases which are for less than, and purchases which
are equal to or greater than, $100,000. Such different rates may be offered
concurrently at any time. The Company may also concurrently offer Notes having
different variable terms (as are described herein or in any Prospectus
Supplement) to different investors, and such different offers may depend upon
whether an offered purchase is for an aggregate principal amount of Notes equal
to or greater than, or for an amount less than, $100,000.
REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund, and will not be redeemable at the
option of the Company or repayable at the option of the Holder prior to
maturity.
BOOK-ENTRY NOTES
The Notes may be issued in whole or in part in the form of one or more
Global Securities registered in the name of a nominee of the Depositary. Upon
issuance, all Book-Entry Notes having the same Issue Date, Maturity Date, rank
(Senior or Subordinated), redemption provisions, repayment provisions, Interest
Payment Period and Dates and, in the case of Fixed Rate Notes, the interest
rate, or, in the case of Floating Rate Notes, Base Rate, Initial Interest Rate,
Index Maturity, Interest Reset Period and Dates, Spread or Spread Multiplier, if
any, Minimum Interest Rate, if any, and Maximum Interest Rate, if any, will be
represented by a single Global Security. Each Global Security representing
Book-Entry Notes will be deposited with, or on behalf of, the Depositary or such
other depositary as is specified in the Pricing Supplement and registered in the
name of the Depositary or such other depositary (or its nominee). Book-Entry
Notes will not be exchangeable for Certificated Notes and, except under the
circumstances described below, will not otherwise be issuable as Certificated
Notes. Unless and until it is exchanged in whole or in part for the individual
Notes represented thereby, a Global Security may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor of the Depositary or a nominee of
such successor.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit the accounts of persons held with it with
the respective principal amounts of the Notes represented by such Global
Security. Such accounts shall be designated by the Agents with respect to such
Notes or by the Company if such Notes are offered and sold directly by the
Company. Ownership of beneficial interests in a Global Security will be limited
to persons that have accounts with the Depositary or its nominee ("partici-
S-11
<PAGE> 12
pants") or persons that may hold interests through participants. Ownership of
beneficial interests in such Global Security will be shown on, and the transfer
of that ownership will be effected only through, records maintained by the
Depositary or its nominee (with respect to interests of participants) for such
Global Security and on the records of participants (with respect to interests of
persons other than participants). The laws of some states require that certain
purchasers of securities take physical delivery of such securities. Such limits
and such laws may impair the ability to transfer beneficial interests in a
Global Security.
So long as the Depositary, or its nominee, is the registered owner of such
Global Security, the Depositary 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 provided below, owners
of beneficial interests in a Global Security will not be entitled to have any of
the individual Notes represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Notes and
will not be considered the owners or Holders thereof under the Indenture.
Principal, premium, if any, and interest payments on Notes registered in
the name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security
representing such Notes. Neither the Company, the appropriate Trustee, any
Paying Agent nor the Securities Registrar for such 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 the Global
Security for such Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that the Depositary for any Notes or its nominee, upon
receipt of any payment of principal, premium or interest, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Security for such Notes as shown on the records of the Depositary or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities registered in "street name", and will be the responsibility of
such participants.
If the Depositary for any Notes is at any time unwilling or unable to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days, the Company will issue individual Notes in exchange for
the Global Security representing such Notes. In addition, the Company may at any
time and in its sole discretion determine not to have the Notes represented by
Global Securities and, in such event, will issue individual Notes in exchange
for all the Global Securities representing such Notes. Further, an owner of a
beneficial interest in a Global Security may, on terms acceptable to the Company
and the Depositary, receive individual Notes. (The Depositary has advised the
Company that it does not intend to accept any such terms.) In any such instance,
an owner of a beneficial interest in a Global Security will be entitled to
physical delivery of individual Notes with the same terms as such represented by
such Global Security equal in principal amount to such beneficial interest and
to have such Notes registered in its name. Unless otherwise specified in the
applicable Pricing Supplement, individual Notes so issued will be issued in
denominations of $100,000 and any larger amount that is an integral multiple of
$1,000.
The Depositary has advised the Company and the Agents as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. The Depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Agents), banks, trust
compa-
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nies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
CONCERNING THE TRUSTEE
Chase serves as trustee with respect to two series of Debt Securities
issued under an indenture dated as of December 1, 1985 and three other series of
Debt Securities previously issued under the Senior Indenture. Chase acts as
depository for funds of, extends credit to, and performs other banking services
for, the Company in the normal course of business.
TAXATION OF ORIGINAL ISSUE DISCOUNT NOTES
The following summary is a general discussion of the tax consequences
resulting from ownership of Original Issue Discount Notes by U.S. persons (i.e.,
(1) citizens or residents of the United States, (2) corporations, partnerships
or other entities created or organized in or under the laws of the United States
or any political subdivision thereof and (3) estates or trusts that are subject
to U.S. Federal income taxation on income regardless of its source). It does not
discuss all tax consequences that may be relevant to a particular Holder in
light of his circumstances.
An Original Issue Discount Note possesses original issue discount ("OID")
to the extent its "stated redemption price at maturity" exceeds its "issue
price," which is, generally, the first price at which a substantial amount of
such Notes has been sold. For this purpose, the stated redemption price of a
Note at maturity equals the total of all payments provided for under the Note
other than "qualified stated interest." "Qualified stated interest" is taxable
as paid or accrued to or by a Holder in accordance with such Holder's method of
accounting. As described below, except with respect to Notes bearing de minimis
amounts of OID, OID is treated as accruing on a constant yield basis throughout
the term of a Note and is taxed currently, regardless of when paid.
Pursuant to Treasury regulations (the "Regulations"), "qualified stated
interest" includes interest unconditionally payable at least annually at a
single fixed rate. In the case of a "variable rate debt instrument", such
qualified stated interest is specially computed. A variable rate debt instrument
is one that meets certain criteria and that provides for interest at (i) one or
more qualified floating rates (described below), (ii) a single fixed rate and
one or more qualified floating rates, (iii) a single objective rate (described
below), or (iv) a single fixed rate and a single objective rate that is a
qualified inverse floating rate. A "qualified floating rate" includes a floating
rate, variations of which can be expected to measure contemporaneous variations
in the cost of newly borrowed funds, but does not generally include a multiple
of a qualified floating rate. An "objective rate" includes a rate based on the
price of actively traded property or on an index of the prices of such property,
and, in addition, includes a rate that is based on a qualified floating rate but
that is not itself a qualified floating rate (for instance, a multiple of a
qualified floating rate). Restrictions on the maximum or minimum stated interest
rate will not generally result in a rate failing to be a qualified floating rate
or an objective rate, as the case may be, but may do so under certain
circumstances. If interest on such an instrument is payable at a single
qualified floating rate or a single objective rate, then all such interest
payments are payments of qualified stated interest. The Company believes that
current payments of interest on Floating Rate Notes for which the applicable
Pricing Supplement specifies an interest rate contained in clause (a), (b), (c),
(d) or (e) of page S-6 under "Description of Notes -- Interest Rates" constitute
payments of qualified stated interest pursuant to the Regulations. Such Notes
may nevertheless have OID to the extent that the stated redemption price thereof
at maturity exceeds the issue price thereof.
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The OID to be reported as taxable income each year with respect to Fixed
Rate Notes is determined in the following manner under Section 1272 of the
Internal Revenue Code of 1986, as amended (the "Code"). The amount of OID
attributable to each "accrual period" (a period that may be of any length not
longer than one year and that may vary during the term of the Note, provided
that each scheduled payment of principal or interest occurs at the end of an
accrual period) is computed by multiplying the "adjusted issue price" of the
Note at the beginning of the accrual period by the yield of such Note and
subtracting the amount of any qualified stated interest allocable to the accrual
period. The yield is determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period. The
"adjusted issue price" of the Note at the beginning of any accrual period is the
Note's issue price increased by the amount of OID attributable to all prior
accrual periods and decreased by the amount of any payments previously made on
the Note other than payments of qualified stated interest. For purposes of
computing the amount of OID to be included in the taxable income of a Holder for
a taxable year, the total amount of OID computed for each accrual period is
allocated ratably on a daily basis over the accrual period. The daily portions
attributable to the period of time the Note is owned by the Holder during the
tax year are includible in the Holder's gross income for the year. Similarly,
the OID to be reported as taxable income each year with respect to Floating Rate
Notes is allocated to an accrual period under Code Section 1272 according to the
constant yield method described above with respect to Fixed Rate Notes, except
that the allocation of OID to an accrual period must be made by assuming that
the Note provides for qualified stated interest payments at the end of each
accrual period based on a reasonable fixed rate.
Floating Rate Notes that do not constitute variable rate debt instruments
under the Regulations will be subject to special tax treatment. Certain payments
of interest on such Notes may constitute "contingent" payments and be treated as
interest taxable to the Holder in the year in which such payment becomes fixed,
while other payments may be treated as payments pursuant to one or more options
or property rights, and be taxable according to their substance. If any Notes
specify an interest rate under clause (f) of page S-6 under "Description of
Notes -- Interest Rates", the federal income tax consequences to Holders will be
described in the applicable Pricing Supplement.
Although Notes with a maturity of one year or less ("Short Term Notes")
will be treated as having been issued with OID, a Holder generally will not be
required to accrue such OID (unless the Holder elects otherwise) if the Holder
of a Short Term Note is a cash basis taxpayer and if the Short Term Note is not
subject to Code Section 1281 (which requires current inclusion in income of
"acquisition discount" on certain short-term obligations). The Holder will have
taxable interest income in the year in which the Short Term Note matures. If the
Short Term Note is an obligation to which Code Section 1281 applies (as
described below), the Holder must accrue the OID attributable to such Short Term
Note. For a Short Term Note, the OID is equal to the excess of the total amount
payable at maturity over the Holder's tax basis for such Note. Current inclusion
in income is required of an amount equal to the daily portions of the OID for
each day during the taxable year during which the Note is held. Such daily
portion is to be determined on the basis of ratable accrual of the OID or on a
constant interest basis compounded daily. A Holder of a Short Term Note subject
to Code Section 1281 can, with respect to nongovernment obligations, elect to
accrue acquisition discount instead of OID, under the rules of Code Section
1281.
A Short Term Note will be subject to the provisions of Code Section 1281 if
the Note is (1) held by a taxpayer using an accrual method of accounting, (2)
held primarily for sale to customers in the ordinary course of a taxpayer's
trade or business, (3) held by a bank (as defined in Code Section 581), (4) held
by a regulated investment company or a common trust fund, (5) identified by a
taxpayer under Code Section 1256(e)(2) as being part of a hedging transaction,
or (6) a stripped bond or stripped coupon held by the person who stripped the
bond or coupon (or by any other person whose basis is determined by reference to
the
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<PAGE> 15
basis in the hands of such person). In addition, there are special rules which
apply to "pass-through entities" such as a partnership, S corporation, or trust.
The tax basis of any Note in the hands of a Holder will be increased by
amounts of OID included in the income of the Holder under Code Sections 1272 or
1281 and decreased by the amount of any payment to a Holder other than a payment
of qualified stated interest.
Holders are urged to consult own tax advisors with regard to whether the
Notes will be considered to have been issued with original discount and the
effect of original issue discount treatment on their particular situations.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company through
the Agents, each of whom has agreed to use its best efforts to solicit purchases
of the Notes. The Notes may also be sold by the Company to any Agent, as
principal, at a discount for resale to investors at varying prices related to
prevailing market prices at the time of resale, as determined by such Agent. The
Company has reserved the right to sell the Notes through one or more additional
agents. Any such additional agent will be identified in any Pricing Supplement
relating to any Notes sold by any such additional agent. The Notes may also be
sold by the Company directly on its own behalf in those jurisdictions where it
is authorized to do so. The Company will pay each Agent a commission not to
exceed .600% of the principal amount of any Note sold through such Agent,
depending upon such Note's maturity. No commission will be payable to any Agent
on the Notes sold directly to purchasers by the Company. The Company has agreed
to reimburse the Agents for certain expenses.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds.
The Company reserves the right to withdraw, cancel or modify the offer
without notice and may reject orders in whole or in part whether placed directly
with the Company or through any Agent. Each Agent will have the right, in its
discretion reasonably exercised, to reject any proposed purchase of Notes in
whole or in part.
The Agents may from time to time purchase and sell Notes in the secondary
market, but are not obligated to do so. The Agents may make markets in the Notes
as permitted by applicable law and regulations, but are not obligated to do so
and may discontinue any market making at any time without notice. There can be
no assurance that there will be a secondary market for the Notes.
AFC Securities Inc., an affiliate of the Company, is a broker/dealer which
sells debt obligations of certain affiliates.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933 (the "Act"). The Company has agreed to indemnify each
Agent against certain liabilities, including liabilities under the Act, or
contribute to payments such Agent may be required to make in respect thereof.
LEGAL OPINIONS
The legality of the Notes will be passed upon for the Company by its
Assistant General Counsel, Timothy M. Hayes, 250 Carpenter Freeway, Irving, TX
75062-2729, and for the Agents by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a
limited liability partnership including professional corporations, 125 West 55th
Street, New York, New York 10019.
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PROSPECTUS
<TABLE>
<S> <C>
(LOGO) LOGO
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Debt Securities
Warrants to Purchase Debt Securities
---------------------
The Company from time to time may issue in one or more series its unsecured
debt securities ("Debt Securities"), which may either be senior (the "Senior
Securities") or subordinated (the "Subordinated Securities") in priority of
payment, and warrants ("Warrants") to purchase Debt Securities (the Debt
Securities and the Warrants being herein collectively called the "Securities")
for proceeds up to $7,900,000,000, or the equivalent thereof if any of the
Securities are denominated in a foreign currency or a foreign currency unit. The
Debt Securities of each series will be offered on terms determined at the time
of sale. The Debt Securities and Warrants may be sold for U.S. dollars, foreign
currencies or foreign currency units, and the principal of and any interest on
the Debt Securities may be payable in U.S. dollars, foreign currencies or
foreign currency units. The specific designation, priority, aggregate principal
amount, the currency or currency unit for which the Securities may be purchased,
the currency or currency unit in which the principal and any interest is
payable, the rate (or method of calculation) and time of payment of any
interest, authorized denominations, maturity, offering price, any redemption
terms or other specific terms of the Securities in respect of which this
Prospectus is being delivered are set forth in the accompanying Prospectus
Supplement ("Prospectus Supplement"). With regard to the Warrants, if any, in
respect of which this Prospectus is being delivered, the Prospectus Supplement
sets forth a description of the Debt Securities for which each Warrant is
exercisable and the offering price, if any, exercise price, duration,
detachability and other terms of the Warrants.
The Securities may be sold through underwriters or dealers or may be sold
by the Company directly or through agents designated from time to time. The
names of any underwriters or agents involved in the sale of the Securities in
respect to which this Prospectus is being delivered and their compensation are
set forth in the Prospectus Supplement.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 4, 1995
<PAGE> 17
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
---------------------
The following information, which is being disclosed pursuant to Florida
law, is accurate as of the date of this Prospectus: Autolatina-Comercio,
Negocios e Participacoes Ltda., a Brazilian company ("Autolatina"), is a joint
venture between Ford Motor Company ("Ford", the indirect parent corporation of
the Company), and Volkswagen AG in which Ford has a 49% ownership interest.
Autolatina occasionally sells vehicles to persons located in Cuba. Each such
sale is made pursuant to a specific license granted to Ford by the U.S.
Department of Treasury. The last such sale, which involved one medical supply
vehicle, was made to Cubanacan in April 1991. Current information concerning
Autolatina's or its Ford-related affiliates' business dealings with the
government of Cuba or with persons located in Cuba may be obtained from the
State of Florida Department of Banking and Finance at The Capitol Building,
Suite 1401, Tallahassee, Florida 32399-0350 (telephone number 904-488-0545).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports and other information can be inspected and copied at the offices of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; 500 West Madison
Street, Chicago, Illinois 60661; and 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such reports and other information concerning the Company also
may be inspected at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005, on which certain of the Company's debt securities are
listed. This Prospectus does not contain all information set forth in the
Registration Statement and Exhibits thereto which the Company has filed with the
Commission under the Securities Act of 1933 and to which reference is hereby
made.
The Company intends to publish annual reports with financial information
that has been examined and reported upon, with an opinion expressed, by an
independent certified public accountant. These reports will not be distributed
to holders of the Securities but will be available to them upon request.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994, its Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995, June 30, 1995 and September 30, 1995, its Current Reports on Form 8-K
dated January 16, 1995, February 10, 1995, March 13, 1995, March 22, 1995, April
10, 1995, May 10, 1995, June 7, 1995, July 10, 1995, August 25, 1995, September
15, 1995, October 16, 1995, October 27, 1995 and November 17, 1995, filed with
the Commission pursuant to the Securities Exchange Act of 1934, are hereby
incorporated by reference. All documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the date hereof and prior to the termination of the offering of the Securities
offered hereby shall be deemed to be incorporated by reference herein and to be
a part hereof from the date of filing such documents.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST BY SUCH PERSON, A COPY OF
ANY OR ALL OF THE DOCUMENTS DESCRIBED ABOVE, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS. REQUESTS SHOULD BE ADDRESSED TO: ASSOCIATES CORPORATION OF NORTH
AMERICA, P.O. BOX 660237, DALLAS, TX 75266-0237, ATTENTION: SECRETARY (TEL.
214-541-4000).
2
<PAGE> 18
THE COMPANY
Associates Corporation of North America ("Associates" or the "Company"), a
Delaware corporation, is a wholly-owned subsidiary and the principal operating
unit of Associates First Capital Corporation ("First Capital"). First Capital is
an indirect subsidiary of Ford Motor Company. Unless the context otherwise
requires, reference to Associates or to the Company includes the Company and all
its subsidiaries.
At December 31, 1994, Associates had 1,473 branch offices in the United
States. As of September 30, 1994, Associates was the second largest independent
finance company in the United States.
Associates primary business activities are consumer finance, commercial
finance and insurance underwriting. The consumer finance operation is engaged in
making and investing in residential real estate-secured loans to individuals,
making secured and unsecured installment loans to individuals, purchasing
consumer retail installment obligations, investing in credit card receivables,
financing manufactured housing purchases, and providing other consumer financial
services. The commercial finance operation is principally engaged in the
purchase of time sales obligations and leases, direct leases and secured direct
loans, and sales of other financial services, including automobile club,
mortgage banking and relocation services. The insurance operation is engaged in
underwriting credit life and credit accident and health, property, casualty and
accidental death and dismemberment insurance, principally for customers of the
finance operations of Associates.
The principal executive offices of the Company are located at 250 East
Carpenter Freeway, Irving, TX 75062-2729 and its mailing address is P.O. Box
660237, Dallas, TX 75266-0237 (tel. 214-541-4000).
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of Associates for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 NINE MONTHS
- ---------------------------------------- ENDED
1990 1991 1992 1993 1994 SEPTEMBER 30, 1995
- ---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
1.46 1.48 1.56 1.64 1.64 1.57
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, the term
"earnings" represents earnings before provision for income taxes, and cumulative
effect of changes in accounting principles, plus fixed charges. "Fixed charges"
represent interest expense and a portion of rentals representative of an
implicit interest factor for such rentals.
APPLICATION OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, the net proceeds from the sale of the Securities will be added
to the general funds of the Company and will be used initially to repay
commercial paper borrowings incurred in the ordinary course of the financing
activities of the Company. The Company expects from time to time to continue to
incur short-term and long-term debt and to effect other financings, the amounts
of which cannot now be determined.
3
<PAGE> 19
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will constitute either senior or subordinated debt of
the Company. The Debt Securities will be issued under one or more separate
indentures described below for Senior Securities (each, a "Senior Indenture") or
for Subordinated Securities (each, a "Subordinated Indenture"), in each case
between the Company and a banking institution organized under the laws of the
United States of America or of any State thereof (each, a "Trustee"). The Senior
Indentures and the Subordinated Indentures are hereinafter collectively referred
to as the "Indentures". The following summary of certain provisions of the
Indentures does not purport to be complete and is qualified in its entirety by
reference to the applicable Indenture, which is filed as an exhibit to the
Registration Statement. All article and section references appearing herein are
to articles and sections of the applicable Indenture, and all capitalized terms
have the meanings specified in such Indenture.
None of the Indentures limits the amount of Debt Securities which may be
issued thereunder, and each Indenture provides that Debt Securities may be
issued thereunder up to the aggregate principal amount authorized from time to
time by the Company and may be denominated in any currency or currency unit
designated by the Company. The Indentures do not contain any covenant or other
provision that is specifically intended to afford any Holder special protection
in the event of a highly leveraged transaction. Reference is made to the
Prospectus Supplement which accompanies this Prospectus for the following terms
and other information to the extent applicable with respect to the Debt
Securities being offered thereby: (1) the designation, aggregate principal
amount, authorized denominations and priority of such Debt Securities; (2) the
percentage of the principal amount at which such Debt Securities will be issued;
(3) the currency, currencies or currency units for which the Debt Securities may
be purchased and the currency, currencies or currency units in which the
principal of and any interest on such Debt Securities may be payable; (4) the
date on which such Debt Securities will mature; (5) the rate per annum at which
such Debt Securities will bear interest, if any, or the method of determination
of such rate; (6) the dates on which such interest, if any, will be payable; (7)
whether such Debt Securities are to be issued in whole or in part in the form of
one or more global securities (each a "Global Security") and, if so, the
identity of a depositary (the "Depositary") for such Global Security or
Securities; and (8) any redemption terms or other specific terms.
If any of the Securities are sold for foreign currencies or foreign
currency units or if the principal of or any interest on any series of Debt
Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such issue of Securities and such currencies or currency units
will be set forth in the Prospectus Supplement relating thereto.
The Debt Securities may be issued in fully registered form without coupons
("Fully Registered Securities"), or in a form registered as to principal only
with coupons or in bearer form with coupons. Unless otherwise specified in the
Prospectus Supplement, the Debt Securities will be only Fully Registered
Securities (sec.sec.3.01, 3.02). In addition, Debt Securities of a series may be
issuable in the form of one or more Global Securities, which will be denominated
in an amount equal to all or a portion of the aggregate principal amount of such
Debt Securities (sec.2.04). See "Global Securities" below.
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Federal income tax
consequences and special considerations applicable to any such series will be
described in the Prospectus Supplement relating thereto.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, the Depositary identified in the Prospectus Supplement relating to such
series. Unless and until it is exchanged in whole or in part for Debt Securities
in individually certificated form, a Global Security may not be transferred
except as a whole to a nominee of the Depositary for such Global Security, or by
a nominee of such Depositary to such Depositary, or to a successor of such
Depositary or a nominee of such successor (sec.2.04).
4
<PAGE> 20
The specific terms of the depositary arrangement with respect to any series
of Debt Securities and the rights of and limitations on owners of beneficial
interests in a Global Security representing all or a portion of a series of Debt
Securities will be described in the Prospectus Supplement relating to such
series.
CERTAIN RESTRICTIVE PROVISIONS
None of the Indentures limits the amount of other debt which may be issued
by the Company or the amount of dividends or other payments which may be paid
with respect to, or the redemption or acquisition of, its equity securities by
the Company or its subsidiaries, but each Indenture contains a covenant that
neither the Company nor any Finance or Insurance Subsidiary will create or incur
any mortgage, pledge, or charge of any kind on any of its properties, except
for: intercompany mortgages or pledges from subsidiary to parent corporation or
to any other Finance or Insurance Subsidiary; purchase money liens or leases;
acquisitions of subsidiaries, the physical properties or assets of which are
subject to liens; liens created in the ordinary course of business by
subsidiaries for money borrowed if such subsidiaries operate in foreign
countries or prior to becoming a subsidiary had borrowed on a secured basis;
sale and leaseback arrangements upon any real property; renewals or refundings
of any of the foregoing; and certain other minor exceptions. Each Indenture also
contains a covenant restricting certain transactions by the Company or its
Subsidiaries with any Controlling Person or Controlling Person Subsidiary
(sec.6.02).
A restriction contained in the Company's 4 3/4% Senior Notes due August 1,
1996 generally limits payments of cash dividends on the Company's common stock
in any year to not more than 50% of consolidated net earnings for such year,
subject to certain exceptions. Unless otherwise set forth in the Prospectus
Supplement relating to any series of Debt Securities, no such restriction will
be contained in any series of Debt Securities issued under the Indentures.
MODIFICATION OF INDENTURES
Each Indenture, the rights and obligations of the Company and the rights of
the Holders may be modified with respect to one or more series of Debt
Securities issued under such Indenture with the consent of the Holders of not
less than 66 2/3% in principal amount of the Outstanding Debt Securities of each
such series affected by the modification or amendment. No modification of the
terms of payment of principal or interest, and no modification reducing the
percentage required for modification is effective against any Holder without his
consent. No modification of the Senior Indentures subordinating the indebtedness
evidenced by any series of Senior Securities issued thereunder to any other
indebtedness of the Company is effective against any Holder of a Senior Security
issued thereunder without his consent, and no modification of the Subordinated
Indenture subordinating the indebtedness evidenced by any series of Subordinated
Securities issued thereunder to any indebtedness of the Company other than
Superior Indebtedness is effective against any Holder of Subordinated Securities
without his consent. For the purpose of these provisions, a holder of an
unexpired Warrant shall be deemed to be the Holder of the principal amount of
Debt Securities issuable upon exercise of such Warrant (sec.sec.6.03, 12.01).
EVENTS OF DEFAULT
Each Indenture provides that the following are Events of Default with
respect to any series of Debt Securities issued thereunder: default in the
payment of the principal of any Debt Security of such series when and as the
same shall be due and payable; default in making a sinking fund payment, if any,
when and as the same shall be due and payable by the terms of the Debt
Securities of such series; default for 30 days in the payment of any installment
of interest on any Debt Security of such series; default for 60 days after
notice in the performance of any other covenant in respect of the Debt
Securities of such series contained in the Indenture; certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or its property; default for 30 days in the
payment of any installment of interest on any evidence of indebtedness
(including any other series of Debt Securities issued under the same Indenture)
issued, assumed or guaranteed by the Company or default in the payment of any
principal of any such evidence of indebtedness; and any other Event of Default
provided in the applicable Board Resolution or supplemental indenture under
which such series of Debt Securities is issued (sec.8.01). An Event of Default
with respect to a particular series of Debt Securities issued under an Indenture
does not necessarily constitute an Event of Default with respect to any other
series of Debt Securities issued under such Indenture. The
5
<PAGE> 21
appropriate Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except in the payment of
principal or interest) if it considers such withholding in the interests of such
Holders.
If an Event of Default with respect to any series of Debt Securities shall
have occurred and be continuing, the appropriate Trustee or the Holders of not
less than 25% in aggregate principal amount of the Debt Securities of such
series may declare the principal, or in the case of discounted Debt Securities,
such portion thereof as may be described in the Prospectus Supplement
accompanying this Prospectus, of all the Debt Securities of such series to be
due and payable immediately (sec.8.01).
Within four months after the close of each fiscal year, the Company must
file with each Trustee a certificate, signed by specified officers, stating
whether or not such officers have knowledge of any default, and, if so,
specifying each such default and the nature thereof (sec.6.02).
Subject to provisions relating to its duties in case of default, a Trustee
shall be under no obligation to exercise any of its rights or powers under the
applicable Indenture at the request, order or direction of any Holders, unless
such Holders shall have offered to such Trustee reasonable indemnity (sec.9.03).
Subject to such provisions for indemnification, the Holders of a majority in
principal amount of the Debt Securities of any series may direct the time,
method and place of conducting any proceeding for any remedy available to the
appropriate Trustee, or exercising any trust or power conferred upon such
Trustee, with respect to the Debt Securities of such series (sec.8.06).
PAYMENT AND TRANSFER
Principal of, premium, if any, and interest, if any, on Fully Registered
Securities are to be payable at the Corporate Trust Office of the Trustee under
the applicable Indenture or any other office maintained by the Company for such
purposes, provided that payment of interest, if any, will be made, unless
otherwise provided in the applicable Prospectus Supplement, by check mailed to
the persons in whose names such Securities are registered at the close of
business on the day or days specified in the Prospectus Supplement accompanying
this Prospectus (sec.sec.3.08, 3.11). The principal of, premium, if any, and
interest, if any, on Debt Securities in other forms will be payable in such
manner and at such place or places as may be designated by the Company and
specified in the applicable Prospectus Supplement (sec.3.11).
Fully Registered Securities may be transferred or exchanged at the
Corporate Trust Office of the Trustee under the applicable Indenture or at any
other office or agency maintained by the Company for such purposes, subject to
the limitations in the applicable Indenture, without the payment of any service
charge except for any tax or governmental charge incidental thereto. Provisions
with respect to the transfer and exchange of Debt Securities in other forms will
be set forth in the applicable Prospectus Supplement (sec.3.05).
SENIOR SECURITIES
SUPERIOR INDEBTEDNESS
The Senior Securities will constitute part of the Superior Indebtedness of
the Company and will rank pari passu with all outstanding senior debt. The
outstanding Subordinated Indebtedness and Capital Indebtedness have been
subordinated, as to payment of principal, premium, if any, and interest, if any,
to all other liabilities of the Company, including the Senior Securities.
SUBORDINATED SECURITIES
SUBORDINATION
The Subordinated Securities will be subordinate and junior in right of
payment in all respects to all Superior Indebtedness of the Company, whether
outstanding at the date of the Subordinated Indenture or incurred after such
date. The term "Superior Indebtedness" is defined to mean (i) all obligations of
the Company which in accordance with generally accepted accounting principles
are classified as liabilities on the Company's balance sheet and (ii) guaranties
of, endorsements and other contingent obligations in respect of, or to purchase
or otherwise acquire, indebtedness of others, except other Subordinated
Indebtedness and Capital Indebtedness (sec.15.01 of the Subordinated Indenture).
"Subordinated Indebtedness" is defined to mean all Indebtedness of the Company
which is subordinate and junior in right of payment to Superior
6
<PAGE> 22
Indebtedness, but does not include "Capital Indebtedness", which is defined to
be Indebtedness subordinate and junior to Subordinated Indebtedness and Superior
Indebtedness (sec.1.01 of the Subordinated Indenture). At September 30, 1995,
Superior Indebtedness aggregated approximately $30.9 billion. The amount of
additional Superior Indebtedness which the Company may issue is not subject to
any limitation.
Upon any distribution of assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company, the
holders of all Superior Indebtedness will first be entitled to receive payment
in full of principal of and interest, if any, on such Superior Indebtedness
before the Holders of Subordinated Securities are entitled to receive any
payment on Subordinated Securities. In the event that any Subordinated Security
is declared due and payable because of the occurrence of an Event of Default,
under circumstances when the provisions of the foregoing sentence are not
applicable, the Trustee under the Subordinated Indenture or the Holders of
Subordinated Securities shall be entitled to payment only after there shall
first have been paid in full the Superior Indebtedness outstanding at the time
such Subordinated Security so becomes due and payable because of such Event of
Default (Article Fifteen of the Subordinated Indenture).
CONCERNING THE TRUSTEES
Business and other relationships (including other trusteeships) between the
Company and its affiliates and each Trustee under any Indenture pursuant to
which any of the Debt Securities to which the Prospectus Supplement accompanying
this Prospectus are described in such Prospectus Supplement.
In the event Subordinated Debt Securities are issued pursuant to a
Subordinated Indenture with a Trustee which is also a Trustee for Senior Debt
Securities pursuant to a Senior Indenture, the occurrence of any default under
such Subordinated Indenture or such Senior Indenture could create a conflicting
interest for the respective Trustee under the Trust Indenture Act of 1939, as
amended (the "1939 Act"). If such default has not been cured or waived within 90
days after such Trustee has or acquires a conflicting interest, such Trustee
generally is required by the 1939 Act to eliminate such conflicting interest or
resign as Trustee with respect to the Debt Securities issued under such Senior
Indenture or such Subordinated Indenture. In the event of the Trustee's
resignation, the Company shall promptly appoint a successor trustee with respect
to the affected securities.
DESCRIPTION OF WARRANTS
The following statements with respect to the Warrants are summaries of, and
subject to, the detailed provisions of a Warrant Agreement (the "Warrant
Agreement") to be entered into by the Company and a warrant agent to be selected
at the time of issue (the "Warrant Agent"), a form of which is filed as an
exhibit to the Registration Statement.
GENERAL
The Warrants, evidenced by Warrant certificates (the "Warrant
Certificates"), may be issued under the Warrant Agreement independently or
together with any Debt Securities offered by any Prospectus Supplement and may
be attached to or separate from such Debt Securities. If Warrants are offered,
the Prospectus Supplement will describe the terms of the Warrants, including the
following: (i) the offering price, if any; (ii) the designation, aggregate
principal amount, and terms of the Debt Securities purchasable upon exercise of
the Warrants; (iii) if applicable, the designation and terms of the Debt
Securities with which the Warrants are issued and the number of Warrants issued
with each such Debt Security; (iv) if applicable, the date on and after which
the Warrants and the related Debt Securities will be separately transferable;
(v) the principal amount of Debt Securities purchasable upon exercise of one
Warrant and the price at which such principal amount of Debt Securities may be
purchased upon such exercise; (vi) the date on which the right to exercise the
Warrants shall commence and the date on which such right shall expire; (vii)
federal income tax consequences; (viii) whether the Warrants represented by the
Warrant Certificates will be issued in registered or bearer form; and (ix) any
other terms of the Warrants.
7
<PAGE> 23
Warrant Certificates may be exchanged for new Warrant Certificates of
different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Warrant Agent or
any Co-Warrant Agent, which will be listed in the Prospectus Supplement, or at
such other office as may be set forth therein. Warrantholders do not have any of
the rights of Holders of Debt Securities (except to the extent that the consent
of Warrantholders may be required for certain modifications of the terms of the
Indenture and the series of Debt Securities issuable upon exercise of the
Warrants) and are not entitled to payments of principal of and interest, if any,
on such Debt Securities.
EXERCISE OF WARRANTS
Warrants may be exercised by surrendering the Warrant Certificate at the
corporate trust office of the Warrant Agent or at the corporate trust office of
the Co-Warrant Agent, if any, with the form of election to purchase on the
reverse side of the Warrant Certificate properly completed and executed, and by
payment in full of the exercise price, as set forth in the Prospectus
Supplement. Upon the exercise of Warrants, the Warrant Agent or Co-Warrant
Agent, if any, will, as soon as practicable, deliver the Debt Securities in
authorized denominations in accordance with the instructions of the exercising
Warrantholder and at the sole cost and risk of such holder. If less than all of
the Warrants evidenced by the Warrant Certificate are exercised, a new Warrant
Certificate will be issued for the remaining amount of Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities: (i) through underwriters or dealers;
(ii) directly to one or more purchasers; or (iii) through agents. The Prospectus
Supplement with respect to the Securities being offered thereby sets forth the
terms of the offering of such Securities, including the name or names of any
underwriters, the purchase price of such Securities and the proceeds to the
Company from such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers, and any securities exchange
on which such Securities may be listed. Only underwriters so named in the
Prospectus Supplement are deemed to be underwriters in connection with the
Securities offered thereby.
If underwriters are used in the sale, the 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
obligations of the underwriters to purchase such Securities will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all the Securities of the series offered by the Company's Prospectus Supplement
if any of such Securities 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.
Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offering
and sale of the Securities in respect of which this Prospectus is delivered is
named, and any commissions payable by the Company to such agent are set forth,
in the Prospectus Supplement. Unless otherwise indicated in the Prospectus
Supplement, any such agent is acting on a best efforts basis for the period of
its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain institutional
investors to purchase Securities providing for payment and delivery on a future
date specified in the Prospectus Supplement. There may be limitations on the
minimum amount which may be purchased by any such institutional investor or on
the portion of the aggregate principal amount of the particular Securities which
may be sold pursuant to such arrangements. Institutional investors to which such
offers may be made, when authorized, include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and such other institutions as may be approved by the
Company. The obligations of any such purchasers pursuant to such delayed
delivery and payment arrangements will not be subject to any conditions except
(i) the purchase by an institution of the particular Securities shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if the particular
Securities are being sold to
8
<PAGE> 24
underwriters, the Company shall have sold to such underwriters the total
principal amount of such Securities less the principal amount thereof covered by
such arrangements. Underwriters will not have any responsibility in respect of
the validity of such arrangements or the performance of the Company or such
institutional investors thereunder.
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 engage in transactions with, or
perform services for, the Company in the ordinary course of business.
LEGAL OPINIONS
The legality of the Securities will be passed upon for the Company by
Thomas E. Dale or Timothy M. Hayes, each an Assistant General Counsel, 250
Carpenter Freeway, Irving, TX 75062-2729, and for any underwriters by LeBoeuf,
Lamb, Greene & MacRae, L.L.P., a limited liability partnership including
professional corporations, 125 West 55th Street, New York, New York 10019.
EXPERTS
The consolidated balance sheets as of December 31, 1994 and 1993 and the
consolidated statements of earnings, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994,
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
9
<PAGE> 25
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NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS AND ANY PRICING SUPPLEMENT IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS AND SUCH
PRICING SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
AGENT. THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS AND ANY PRICING SUPPLEMENT
SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT AND
PROSPECTUS AND SUCH PRICING SUPPLEMENT OR AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary Financial Information........ S-2
Description of Notes................. S-4
Taxation of Original Issue Discount
Notes.............................. S-13
Plan of Distribution................. S-15
Legal Opinions....................... S-15
PROSPECTUS
Available Information................ 2
Documents Incorporated
By Reference....................... 2
The Company.......................... 3
Application of Proceeds.............. 3
Description of Debt Securities....... 4
Description of Warrants.............. 8
Plan of Distribution................. 9
Legal Opinions....................... 10
Experts.............................. 10
</TABLE>
$3,000,000,000
LOGO
MEDIUM TERM
SENIOR NOTES, SERIES I
AND
MEDIUM TERM
SUBORDINATED NOTES, SERIES A
PROSPECTUS SUPPLEMENT
DATED
MAY 10, 1996
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