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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-39273
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 7, 1997)
[ASSOCIATES LOGO]
$1,000,000,000
MEDIUM TERM SENIOR NOTES, SERIES J
AND
MEDIUM TERM SUBORDINATED NOTES, SERIES A
DUE 9 MONTHS OR MORE FROM DATE OF ISSUE
Associates Corporation of North America (the "Company") may offer from time
to time its Medium Term Senior Notes, Series J (the "Senior Notes") and Medium
Term Subordinated Notes, Series A (the "Subordinated Notes"; together with the
Senior Notes, the "Notes") in an aggregate initial offering price of up to U.S.
$1,000,000,000, or the equivalent thereof if any of the Notes are denominated in
other currencies or currency units (the "Specified Currency") as may be
designated by the Company at the time of offering (the "Foreign Currency
Notes"), subject to change. See "Special Provisions Relating to Foreign Currency
Notes" and "Foreign Currency Risks." Each Note will mature on a day nine months
or more from the date of issue, as selected by the initial purchaser and agreed
to by the Company. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be subject to redemption at the option of the
Company or repayment at the option of the holder thereof prior to the Maturity
Date (as defined herein) thereof. Unless otherwise provided in the applicable
Pricing Supplement, the Notes will be issued only in fully registered form in
denominations of $1,000, or any amount in excess thereof which is an integral
multiple of $1,000. Unless otherwise specified in the applicable Pricing
Supplement, Foreign Currency Notes will not be sold in, or to residents of, the
country issuing such Specified Currency.
Each Note will be represented either by one or more Global Securities (as
defined in the Prospectus) registered in the name of The Depository Trust
Company, New York, New York (the "Depositary"), or its nominee (each, 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 or interest rate basis or formula, if any, issue price,
priority, Maturity Date, Specified Currency, redemption and repayment
provisions, if any, and other terms, if any, for each Note will be established
by the Company at the date of issue of such Note and will be set forth in such
Note and specified in the applicable Pricing Supplement. 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 CMT Rate,
the Federal Funds Rate, the 11th District Cost of Funds Rate, the Kenny Rate,
LIBOR, the Prime Rate, the Treasury Rate (each as defined herein), or such other
interest rate basis or formula as may be specified in the applicable Pricing
Supplement, as adjusted by the Spread or Spread Multiplier (each as defined
herein), if any, applicable to such Notes. Fixed Rate Notes may be issued as
Original Issue Discount Notes (as defined herein) at a discount from the
principal amount payable on the Maturity Date thereof, and may include
provisions under which holders of Original Issue Discount Notes do not receive
periodic payments of interest on such Notes ("Zero-Coupon Notes"). Fixed Rate
Notes may be issued as Amortizing Notes (as defined herein), which pay a level
amount in respect of both interest and principal amortized over the life of the
Notes. The principal amount payable upon Maturity (as defined herein) of, or any
interest and premium (if any) on, a Note, or both may be determined by reference
to one or more Specified Currencies or by reference to the price of one or more
specified securities or commodities or to one or more securities or commodities
exchange indices or other indices or by other methods. The Notes may be issued
as Extendible Notes (as defined herein), whose interest rate or interest rate
basis or formula may be adjusted on specified dates and which may be subject to
redemption at certain times at the option of the Company or to repayment at
certain times at the option of the holder. Interest rates and interest rate
bases or formulae 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. Interest rates offered by the Company with respect to
the Notes may differ depending upon, among other things, the aggregate principal
amount of Notes subject to purchase in any single transaction. See "Description
of Notes."
Interest on each Fixed Rate Note other than Zero-Coupon Notes, will be
payable on May 1 and November 1 of each year, unless otherwise specified in the
Notes and in the applicable Pricing Supplement. Interest on each Floating Rate
Note, will be payable on the dates established by the Company on the date of
issue and such dates will be set forth in the Notes 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>
=================================================================================================================================
AGENTS' DISCOUNTS AND
PRICE TO PUBLIC(1) COMMISSIONS(2) PROCEEDS TO COMPANY(2)(3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note......................... 100% Not to Exceed .600% Not less than 99.400%
- ---------------------------------------------------------------------------------------------------------------------------------
Total............................ $1,000,000,000 Not to exceed $6,000,000 Not less than $994,000,000
=================================================================================================================================
</TABLE>
(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 Bear, Stearns & Co. Inc., Lehman Brothers, Lehman
Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, 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 Date. 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 $624,000,
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 the Agents may
reject any order in whole or in part.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS APRIL 29, 1998
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IN CONNECTION WITH AN OFFERING OF NOTES PURCHASED BY AN AGENT AS PRINCIPAL
ON A FIXED OFFERING PRICE BASIS, SUCH AGENT MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF SUCH NOTES. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
References herein to "U.S. Dollars," "U.S. $" or "$" are to the currency of
the United States of America.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
- ----------------------------
1997 1996 1995 1994 1993
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1.56 1.59 1.56 1.64 1.64
</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.
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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 ("Chase"), as trustee (the "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 Notes may be denominated in U.S. dollars
or in such other Specified Currencies as may be designated by the Company at the
time of the offering. The Company has authorized the offering and sale pursuant
to this Prospectus Supplement of up to $1,000,000,000 combined aggregate initial
offering price of Senior Notes and Subordinated Notes, or the equivalent thereof
of any Notes denominated in a Specified Currency other than U.S. dollars, which
amount is subject to change from time to time as may be authorized by the
Company. For purposes of determining the amount issued, the principal amount of
any Foreign Currency Notes will be deemed to be the U.S. dollar equivalent of
the principal amount of such Foreign Currency Notes, determined as of the date
of the original issuance of such Foreign Currency Notes by reference to the
Market Exchange Rate (as defined below) for the applicable Specified Currency.
For purposes of determining the amount issued, the principal amount of any
Original Issue Discount Note (as defined below) means the price at which such
Note is issued.
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, 1997,
Superior Indebtedness aggregated approximately $44.3 billion.
Notes will be offered on a continuing basis and will mature on any day nine
months or more from the date of issue, as selected by the initial purchaser and
agreed to by the Company. The Notes will consist of one or more (a) Fixed Rate
Notes, which may bear an interest rate of zero in the case of Zero-Coupon Notes,
or which may pay a level amount in respect of both interest and principal
amortized over the life of the Notes in the case of Amortizing Notes, (b)
Floating Rate Notes, on which rates are determined, and adjusted periodically,
by reference to an interest rate basis or formula including, without limitation,
CD Rate Notes, Commercial Paper Rate Notes, CMT Rate Notes, Federal Funds Rate
Notes, 11th District Cost of Funds Rate Notes, Kenny Rate Notes, LIBOR Notes,
Prime Rate Notes and Treasury Rate Notes (each as defined below), which basis or
formula may be adjusted by a Spread and/or a Spread Multiplier, (c) Notes
bearing interest as otherwise specified in the applicable Pricing Supplement, or
(d) Extendible Notes on which interest rates or interest rate bases or formulae
may be adjusted on specified dates and may be subject to repayment at certain
times at the option of the holder or to redemption at certain times at the
option of the Company.
Reference is made to the applicable Pricing Supplement for the following
terms and other information with respect to Notes being offered thereby: (1) the
Specified Currency with respect to such Note; (2) the public offering price, if
other than 100% of the principal amount; (3) the rate per annum at which a Fixed
Rate Note will bear interest, if applicable; (4) the rates at which a Floating
Rate Note will bear interest, if applicable, determined by reference to an
interest rate basis or formula and a Spread or a Spread Multiplier, if any, and
any limits on such interest rates; (5) the Maturity Date of such Note and
whether the Maturity Date may be extended by the Company and, if so, the
Extension Periods and the Final Maturity Date (each as defined below); (6) any
provisions of such Note relating to redemption, sinking fund or repayment prior
to the date on which such Notes will mature; (7) whether such Notes are Currency
Indexed Notes or other Indexed
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Notes and, if so, the specific terms thereof; (8) whether such Notes are
Amortizing Notes and, if so, the basis or formula for the amortization of
principal and interest and the payment dates for such periodic principal
payments; (9) whether such Notes will be issued initially as Book-Entry Notes or
Certificated Notes; (10) the name of any Agent or dealer involved in the
offering or sale of such Notes; and (11) any other terms of such Notes not
inconsistent with the provisions of the applicable Indenture.
Notes denominated in U.S. dollars will be issuable in denominations of
$1,000 and integral multiples thereof. Foreign Currency Notes will be issuable
in the denominations specified in the applicable Pricing Supplement. The Notes
will be issued in fully registered form without coupons and, unless otherwise
specified in the applicable Pricing Supplement, will be represented by one or
more Global Securities registered in the name of the Depositary or its nominee.
All Notes issued on the same day and having the same terms (including, without
limitation, the same designation, the same currency, Interest Payment Dates (as
defined below), rate of interest, Maturity Date and redemption or repayment
provisions) may be represented by a single Global Security; provided, however,
that no single Global Security shall exceed U.S. $200,000,000. Payments of
principal of, and interest and premium (if any) on, Notes represented by a
Global Security will be made by the Paying Agent (as defined below) to the
Depositary. See "-- Book-Entry System" below.
Unless otherwise specified in the applicable Pricing Supplement, the
following terms have the meanings set forth below:
"Business Day" means any day other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are
authorized or required by law, regulation or executive order to close in
The City of New York and, with respect to Notes as to which LIBOR (as
defined in "-- Floating Rate Notes -- LIBOR Notes" below) is the applicable
interest rate basis, is also a London Business Day (as defined below);
provided, however, that with respect to any Specified Currency, such day is
also not a day on which banking institutions are authorized or required by
law, regulation or executive order to close in the Principal Financial
Center (as defined below) of the country of such Specified Currency (or, in
the case of European Currency Units ("ECU"), is also not a day that appears
as an ECU non-settlement day on the display designated at "ISDE" in the
Reuters Monitor Money Rates Service (or is not a day designated as an ECU
non-settlement day by the ECU Banking Association in Paris or, if ECU non-
settlement days do not appear on that page (and are not so designated), a
day that is not a day on which payments in ECU cannot be settled in the
international interbank market.
"Calculation Agent" means, unless otherwise specified in the
applicable Pricing Supplement, Chase acting in the capacity of calculation
agent with regard to the Floating Rate Notes and, where applicable, certain
other Notes. The Company may at any time designate additional Calculation
Agents or rescind the designation of Calculation Agents.
"Calculation Date" means, with respect to any Note, the date by which
interest payable on any Interest Payment Date or upon Maturity, as the case
may be, is calculated. Unless otherwise specified in the Floating Rate
Notes and in the applicable Pricing Supplement, 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 date of Maturity, as the case may be.
"Exchange Rate Agent" means, unless otherwise specified in the
applicable Pricing Supplement, Chase acting in the capacity of exchange
rate agent with regard to the Foreign Currency Notes.
"Index Maturity" means, with respect to any Floating Rate Note, the
designated maturity of the instrument(s) or obligation(s) on which the
interest rate is based, as specified in the applicable Pricing Supplement
and in such Note.
"Interest Determination Date" means, for any Interest Reset Date (as
defined in "-- Floating Rate Notes" below) with respect to any Floating
Rate Note, the date for determining the rate of interest that will take
effect on such Interest Reset Date. Unless otherwise specified in such
Floating Rate Note and in
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the applicable Pricing Supplement, the Interest Determination Date will be
as described under "-- Floating Rate Notes" below.
"Interest Payment Date" means, with respect to any Note, each date
(other than at Maturity) on which, under the terms of the Note, interest is
payable. Unless otherwise specified in such Note and in the applicable
Pricing Supplement, the Interest Payment Date will be as described under
"-- Fixed Rate Notes" and "-- Floating Rate Notes" below.
"Lockout Period" means, in the case of Floating Rate Notes which reset
daily or weekly, unless otherwise specified in the applicable Pricing
Supplement, a period of two Business Days immediately prior to each
Interest Payment Date and Maturity during which the Lockout Rate will be in
effect.
"Lockout Rate" means the interest rate in effect on the first day of
the Lockout Period and remaining in effect during the Lockout Period.
"London Business Day" means any day (a) if the Designated LIBOR
Currency (as defined below) is other than the ECU, on which dealings in
deposits in such Designated LIBOR Currency are transacted in the London
interbank market or (b) if the Designated LIBOR Currency is the ECU, that
is not designated as an ECU Non-Settlement Day by the ECU Banking
Association in Paris or otherwise generally regarded in the ECU interbank
market as a day on which payments on ECUs shall not be made.
"Maturity" means (i) the date on which the principal of a Note becomes
due and payable or (ii) in the case of Amortizing Notes, the date on which
all remaining unpaid principal becomes due and payable, in any case, in
accordance with its terms, whether at its Maturity Date or by declaration
of acceleration, call for redemption, put for repayment or otherwise.
"Maturity Date" means, with respect to any Note, the date on which
such Note will mature, as specified in such Note and in the applicable
Pricing Supplement.
"Paying Agent" means, unless otherwise specified in the applicable
Pricing Supplement, Chase acting in the capacity of paying agent with
regard to the Notes. The Company may at any time designate additional
Paying Agents or rescind the designation of Paying Agents or approve a
change in the office through which the Paying Agent acts.
"Record Date" means, unless otherwise specified in the applicable
Pricing Supplement, the date (whether or not a Business Day) that is 15
days prior to such Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of interest on a Floating Rate Note
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percent (.0000001), with five-millionths of a percentage point rounded upward
(e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and
all U.S. dollar amounts used in or resulting from such calculation on a Floating
Rate Note will be rounded to the nearest cent or, in the case of Foreign
Currency Notes, the smallest whole unit of the Specified Currency (with one-half
cent or unit being rounded upwards).
The Notes are referred to in the accompanying Prospectus as a series of
Debt Securities (as defined in the Prospectus). For a description of the rights
attaching to different series of Debt Securities under the applicable Indenture,
see "Description of the Debt Securities" in the Prospectus. Unless otherwise
indicated in the applicable Pricing Supplement, the Notes will have the terms
described below.
PAYMENT
Unless otherwise specified in the applicable Pricing Supplement, the
payment of the principal of, and interest and premium (if any) on, each Note
that is to be made in U.S. dollars (including payments with respect to Foreign
Currency Notes that are to be made in U.S. dollars) will be made in the manner
described below. See "Special Provisions Relating to Foreign Currency
Notes -- Payment Currency" below for a
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description of special provisions relating to the payment of the principal of,
and interest and premium (if any) on, Foreign Currency Notes payable in a
Specified Currency other than U.S. dollars.
Unless otherwise specified in the applicable Pricing Supplement, interest
on Fixed Rate Notes will be payable semi-annually on each Interest Payment Date
and upon Maturity. Unless otherwise specified in the applicable Pricing
Supplement, interest on Floating Rate Notes will be payable on the Interest
Payment Dates set forth below and upon Maturity. Interest payable on each
Interest Payment Date will be paid to the person in whose name the Note is
registered at the close of business on the applicable Record Date; provided,
however, that interest payable upon Maturity will be payable to the person to
whom principal is payable. Unless otherwise specified in the applicable Pricing
Supplement, the first payment of interest on a Note that is originally issued
between a Record Date and an Interest Payment Date or on an Interest Payment
Date will be made on the next succeeding Interest Payment Date to the holder of
record with respect to such next succeeding Interest Payment Date.
Payments of principal of, and interest and premium (if any) on, Notes
represented by Global Securities representing Book-Entry Notes registered in the
name of or held by the Depositary or its nominee will be made to the Depositary
or its nominee, as the case may be, as the registered owner and holder of the
Global Securities representing such Notes. Payments of interest on each Note
(other than Notes represented by Global Securities and Foreign Currency Notes
and other than interest payable to the holder thereof, if any, upon Maturity)
will be made by check mailed to the person in whose name the Note is registered
at the close of business on the applicable Record Date. Except as provided below
or in the applicable Pricing Supplement, payments of principal of, and premium
(if any) on, each Note, and interest (if any) payable to the holder thereof when
the principal of such Note is payable, will be paid upon Maturity in immediately
available funds upon surrender of the Note at the corporate trust office of the
Paying Agent in the Borough of Manhattan, The City of New York. If the Paying
Agent receives a written request from a holder of U.S. $1,000,000 or more (or
its equivalent in the Specified Currency if other than U.S. dollars) in
aggregate principal amount of the Notes not later than the close of business on
(a) a Record Date pertaining to an Interest Payment Date or (b) the fifteenth
day prior to Maturity, the Paying Agent will, subject to applicable laws and
regulations, until it receives notice to the contrary (but, in the case of
payments to be made upon Maturity, only after surrender of the Note or Notes in
the Borough of Manhattan, The City of New York, not later than one Business Day
prior to Maturity), make all U.S. dollar payments to such holder by wire
transfer to the account designated in such written request.
INTEREST RATES
Each Note, except Zero-Coupon Notes, will bear interest from its date of
issue at the fixed rate per annum, or at the floating rate per annum determined
in accordance with the basis or formula, in each case as set forth in such Note
and in the applicable Pricing Supplement. Interest rates or interest rate bases
or formulae offered by the Company are subject to change by the Company from
time to time, but no such change will affect any Notes issued prior to any such
change or as to which an offer to purchase has been accepted by the Company.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, differences in the aggregate principal
amount of the Notes subject to purchase in any single transaction. 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.
FIXED RATE NOTES
Fixed Rate Notes, except Zero-Coupon Notes, will bear interest from the
date of issue at the annual fixed rate or rates specified in such Notes and in
the applicable Pricing Supplement. Interest on Fixed Rate Notes, except
Zero-Coupon Notes, will be payable on the Interest Payment Dates specified in
such Notes and in the applicable Pricing Supplement. Unless otherwise specified
in the applicable Pricing Supplement, the Interest Payment Dates with respect to
Fixed Rate Notes will be May 1 and November 1 of each year. Unless otherwise
specified 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. If an
Interest Payment Date or the date of Maturity with
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respect to a Fixed Rate Note falls on a day that is not a Business Day, the
payment will be made on the next Business Day as if it were made on the date
such payment was due, and no interest will accrue on the amount so payable for
the period from and after the Interest Payment Date or the date of Maturity, as
the case may be. Interest payments on each Fixed Rate Note will include the
amount of interest accrued from and including the last Interest Payment Date to
which interest has been paid (or from and including the date of issuance if no
interest has been paid with respect to such Note) to, but excluding, the
applicable Interest Payment Date or the date of Maturity, as the case may be.
The Company may issue Fixed Rate Notes as discounted securities (bearing no
interest in the case of Zero-Coupon Notes or bearing interest at a rate which at
the time of issuance is below market rates) at an issue price that is lower than
the principal amount thereof or which provide that upon redemption, repayment or
acceleration of the Maturity Date thereof an amount less than the principal
amount thereof shall become due and payable, or which for U.S. federal income
tax purposes would be considered original issue discount notes ("Original Issue
Discount Notes"). Certain information concerning U.S. federal income tax aspects
of Zero-Coupon Notes and Original Issue Discount Notes is set forth below under
"Certain United States Federal Income Tax Considerations" and additional
information may be set forth in the applicable Pricing Supplement.
FLOATING RATE NOTES
Floating Rate Notes will bear interest at rates determined by reference to
the interest rate basis or formula 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. 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 or formulae 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 CMT Rate (a "CMT Rate Note"), (d) the Federal Funds
Rate (a "Federal Funds Rate Note"), (e) the 11th District Cost of Funds Rate (an
"11th District Cost of Funds Rate Note"), (f) the Kenny Rate (a "Kenny Rate
Note"), (g) LIBOR (a "LIBOR Note"), (h) the Prime Rate (a "Prime Rate Note"),
(i) the Treasury Rate (a "Treasury Rate Note"), or (j) such other interest rate
basis or formula as is set forth in such Pricing Supplement.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (each an "Interest Reset
Date"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, the Interest Reset Date will be,
in the case of Floating Rate Notes which reset daily, each Business Day; in the
case of Floating Rate Notes (other than Treasury Rate Notes) which reset weekly,
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Business Day following the date of weekly Treasury bill auction; 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
LIBOR Notes, 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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Except as provided below, and unless otherwise specified in the applicable
Pricing Supplement, the Interest Payment Dates with respect to Floating Rate
Notes will be, in the case of Notes with a daily, weekly or monthly Interest
Reset Date, the third Wednesday of each month or 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, the third Wednesday
of March, June, September and December; in the case of Notes with a semi-annual
Interest Reset Date, 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, the third Wednesday of the month specified in the applicable Pricing
Supplement. If any Interest Payment Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Payment Date shall
be postponed to the next day that is a Business Day; 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.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes will include interest accrued from and
including the date of issue (if no interest has been paid with respect to such
Note) or from and including the last Interest Payment Date to which interest has
been paid to, but excluding, the applicable Interest Payment Date, or the date
of Maturity, as the case may be. 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 being
calculated. The interest factor 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, 11th District Cost of Funds Rate Notes, Federal
Funds Rate Notes, LIBOR Notes and Prime Rate Notes, by the actual number of days
in the year, in the case of CMT Rate Notes and Treasury Rate Notes, or by 365,
in the case of Kenny Rate Notes. The interest rate in effect on each day will be
(a) if such day is an Interest Reset Date, the interest rate with respect to the
Interest Determination Date pertaining to such Interest Reset Date, or (b) if
such day is not an Interest Reset Date, the interest rate with respect to the
Interest Determination Date pertaining to the next preceding Interest Reset
Date, subject in either case to any maximum or minimum interest rate limitation
referred to above and to any adjustment by a Spread or a Spread Multiplier;
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 either the initial interest rate specified in the applicable
Pricing Supplement or if no initial interest rate is so specified, the interest
rate calculated in accordance with the provisions of the Note and (ii) in the
case of Floating Rate Notes which reset daily or weekly, unless otherwise
specified in the applicable Pricing Supplement, the interest rate in effect for
the Lockout Period will be the Lockout Rate. For any Floating Rate Notes for
which a Lockout Period applies, the interest rate on such Floating Rate Notes
for the period from the Interest Payment Date to the next Interest Reset Date
shall be the interest rate that would have been in effect as of the most recent
Interest Reset Date on or prior to the Interest Payment Date had such Lockout
Period not been in effect.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Determination Date pertaining to each Interest Reset Date for CD Rate
Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, Prime Rate Notes,
CMT Rate Notes and Kenny Rate Notes will be the Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to each Interest
Reset Date for 11th District Cost of Funds Rate Notes will be the last day of
the month immediately preceding such Interest Reset Date on which the Federal
Home Loan Bank of San Francisco publishes the Index (as defined below). The
Interest Determination Date pertaining to each Interest Reset Date for LIBOR
Notes will be the second London Business Day preceding such Interest Reset Date.
The Interest Determination Date pertaining to each Interest Reset Date for
Treasury Rate Notes 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.
S-8
<PAGE> 9
The 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
Calculation Agent (if other than the Trustee) will notify the Trustee of each
determination of the interest rate applicable to any such Notes promptly after
such determination is made.
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 that day for certificates of deposit as published on Telerate Page 120 (as
defined below) under the column "Certs of Deposit" under the heading "Daily
Selected Money Market Rates from the Federal Reserve Bank of New York" and
having the Index Maturity designated in the applicable Pricing Supplement or, if
not so published by 3:00 p.m., New York City time, on such Interest
Determination Date, the CD Rate will be 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
("Statistical Release H.15(519)") under the heading "CDs (Secondary Market)" or,
if not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such 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 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 applicable Pricing Supplement in
a denomination of $5,000,000; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the CD Rate will be the CD Rate in effect on such Interest
Determination Date.
"Telerate Page 120" means the display designated as page "120" on Dow Jones
Markets Limited, or any successor service, (the "Telerate Service"), (or such
other page as may replace Telerate Page 120 on that service for the purpose of
displaying money market rates as published in Statistical Release H.15(519)).
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 rate on that day for commercial paper as published on Telerate Page
133 (as defined below) under the column "AA Nonfinancial Comml Paper" under the
heading "Daily Commercial Paper Rates from the Federal Reserve Board" and having
the Index Maturity designated in the applicable Pricing Supplement or, if not so
published by 3:00 p.m., New York City time on such 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
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<PAGE> 10
Pricing Supplement as published in Statistical Release H.15(519), under the
heading "Commercial Paper-Nonfinancial." In the event that such rate is not
published by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such 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.
"Telerate Page 133" means the display designated as page "133" on the
Telerate Service (or such other page as may replace Telerate Page 133 on that
service for the purpose of displaying commercial paper rates as published in
Statistical Release H.15(519)).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C>
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.
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread or Spread Multiplier, if any) specified
in the CMT Rate Notes and in the applicable Pricing Supplement.
"CMT Rate" means, with respect to any Interest Determination Date, the rate
published on the Designated CMT Telerate Page (as defined below) under the
caption " . . . Treasury Constant Maturities . . . Federal Reserve Board Release
H.15 . . ." under the column for the Designated CMT Maturity Index (as defined
below) (i) if the Designated CMT Telerate Page is 7055, the rate on such
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the week, or the month, as applicable, ended immediately preceding the
week in which such Interest Determination Date occurs. If such rate is no longer
displayed on the relevant page, or if not displayed by 3:00 p.m., New York City
time, on such Interest Determination Date, then the CMT Rate for such Interest
Determination Date will be the treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant Statistical Release
H.15(519). If such rate is no longer published, or if not published by 3:00
p.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the CMT Rate for such Interest Determination Date will
be such treasury constant maturity rate for the Designated CMT Maturity Index
(or other United States Treasury rate for the Designated CMT Maturity Index) for
the Interest Determination Date with respect to such Interest Reset Date as may
then be published by either the Board of Governors of the Federal Reserve System
or the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in the relevant Statistical Release H.15(519). If
such information is not provided by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, then the CMT
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to
S-10
<PAGE> 11
maturity, based on the arithmetic mean of the secondary market closing offer
side prices as of approximately 3:30 p.m., New York City time, on such Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a "Reference
Dealer") in The City of New York selected by the Calculation Agent (from five
such Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest), for the most
recently issued direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the Designated CMT
Maturity Index and a remaining term to maturity of not less than such Designated
CMT Maturity Index minus one year. If the Calculation Agent cannot obtain three
such Treasury Note quotations, the CMT Rate for such CMT Interest Determination
Date will be calculated by the Calculation Agent and will be a yield to maturity
based on the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 p.m., New York City time, on such Interest Determination Date
of three Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest), for Treasury Notes with an
original maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in an amount of at least $100,000,000. If
three or four (and not five) of such Reference Dealers are quoting as mentioned
above, then the CMT Rate will be based on the arithmetic mean of the offer
prices obtained and neither the highest nor the lowest of such quotes will be
eliminated; provided, however, that if fewer than three such Reference Dealers
are quoting as mentioned above, the CMT Rate will be the CMT Rate in effect on
such Interest Determination Date. If two Treasury Notes with an original
maturity as described in the third preceding sentence have remaining terms to
maturity equally close to the Designated CMT Maturity Index, the quotes for the
Treasury Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display designated as page "7055"
or "7052" on the Telerate Service, as specified in the applicable Pricing
Supplement (or any other page as may replace such page on that service for the
purpose of displaying "Treasury Constant Maturities" as published in Statistical
Release H.15(519)); provided, however, that if no such page is specified in the
applicable Pricing Supplement, the Designated CMT Telerate Page shall be 7052
for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the Treasury Notes (either one, two, three, five, seven, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated; provided, however, that if no such maturity is
specified in the applicable Pricing Supplement, the Designated CMT Maturity
Index shall be two years.
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 on Telerate Page 120
(as defined below) under the caption "Eff" under the column "Fed Funds
Effective" under the heading "Daily Selected Money Market Rates From The Federal
Reserve" or, if not so published by 3:00 p.m., New York City time, on such
Interest Determination Date, the Federal Funds Rate will be the rate on such
Interest Determination Date as published in Statistical Release H.15(519) under
the column "Effective Rate" under the heading "Federal Funds." If such rate is
not yet published by 3:30 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 of the rates for the last transaction in overnight U.S.
dollar Federal Funds arranged by three leading brokers of Federal Funds
transactions in The City of New York selected by the Calculation Agent as of
9:00 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.
S-11
<PAGE> 12
"Telerate Page 120" means the display designated as page "120" on the
Telerate Service (or such other page as may replace Telerate Page 120 on that
service for the purpose of displaying Federal Funds rates as published in
Statistical Release H.15(519)).
11th District Cost of Funds Rate Notes
11th District Cost of Funds Rate Notes will bear interest at the interest
rates (calculated with reference to the 11th District Cost of Funds Rate and the
Spread or Spread Multiplier, if any) specified in the 11th District Cost of
Funds Rate Notes and in the applicable Pricing Supplement.
"11th District Cost of Funds Rate" means, with respect to any Interest
Determination Date, the rate on that day equal to the monthly weighted average
cost of funds for the calendar month immediately preceding such Interest
Determination Date as published under the caption "The Office of Thrift
Supervision National and 11th District Cost of Funds" under the column heading
"11th" on Telerate Page 7058 (as defined below) as of 11:00 a.m., San Francisco
time, on such Interest Determination Date. If such rate does not appear on
Telerate Page 7058 on any Interest Determination Date, the 11th District Cost of
Funds Rate for such Interest Determination Date shall be the monthly weighted
average cost of funds paid by member institutions of the Eleventh Federal Home
Loan Bank District that was most recently announced (the "Index") by the FHLB of
San Francisco as such cost of funds for the calendar month immediately preceding
the date of such announcement. If the FHLB of San Francisco fails to announce
such rate for the calendar month immediately preceding such Interest
Determination Date, then the 11th District Cost of Funds Rate for such Interest
Determination Date will be the 11th District Cost of Funds Rate then in effect
on such Interest Determination Date.
"Telerate Page 7058" means the display page designated as page "7058" on
the Telerate Service (or such other page as may replace Telerate Page 7058 on
that service for the purpose of displaying the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District).
Kenny Rate Notes
Kenny Rate Notes will bear interest at the interest rates (calculated with
reference to the Kenny Rate and the Spread or Spread Multiplier, if any)
specified in the Kenny Rate Notes and in the applicable Pricing Supplement.
"Kenny Rate" means, with respect to any Interest Determination Date, the
high grade weekly index (the "Weekly Index") on that day made available by Kenny
Information Systems ("Kenny") to the Calculation Agent. The Weekly Index is, and
shall be, based upon 30 day yield evaluations at par of bonds, the interest on
which is exempt from Federal income taxation under the Internal Revenue Code of
1986, as amended (the "Code"), of not less than five high grade component
issuers selected by Kenny, which shall include, without limitation, issuers of
general obligation bonds. The specific issuers included among the component
issuers may be changed from time to time by Kenny in its discretion. The bonds
on which the Weekly Index is based shall not include any bonds on which the
interest is subject to a minimum tax or similar tax under the Code, unless all
tax-exempt bonds are subject to such tax. In the event Kenny ceases to make
available such Weekly Index prior to the Calculation Date, a successor indexing
agent will be selected by the Calculation Agent, such index to reflect the
prevailing rate for bonds rated in the highest short-term rating category by
Moody's Investors Service, Inc. and Standard & Poor's Corporation in respect of
issuers most closely resembling the high grade component issuers selected by
Kenny for its Weekly Index, the interest on which is (a) variable on a weekly
basis, (b) exempt from Federal income taxation under the Code, and (c) not
subject to a minimum tax or similar tax under the Code, unless all tax-exempt
bonds are subject to such tax. If such successor indexing agent is not
available, the rate for any Interest Determination Date shall be 67% of the rate
that would have been determined if the Treasury Rate option had been originally
selected as the interest rate basis for the Notes.
S-12
<PAGE> 13
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 any 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-Telerate" or if no
method of calculation of LIBOR is specified, LIBOR for such Interest
Determination Date will be the rate for deposits in the Designated LIBOR
Currency (as defined below) having the Index Maturity specified in the
applicable Pricing Supplement which appears on Telerate Page 3750 (as
defined below) as of 11:00 a.m., London time, on such Interest
Determination Date, or (B) if the method of calculation of LIBOR for a
LIBOR Note is specified on the face thereof to be "LIBOR-Reuters," LIBOR
for such Interest Determination Date will be determined on the basis of the
offered rates for deposits in the Designated LIBOR Currency having the
Index Maturity designated in the applicable Pricing Supplement, commencing
on the second London Business Day immediately following such Interest
Determination Date, which appear on the Reuters Screen LIBO Page (as
defined below) as of 11:00 a.m., London time, on such Interest
Determination Date. If at least two such offered rates appear on the
Reuters Screen LIBO Page, the rate in respect of that Interest
Determination Date will be the arithmetic mean of such offered rates as
determined by the Calculation Agent. If such rate does not appear on
Telerate Page 3750, in the case of alternative (A) above, or fewer than two
offered rates appear, in the case of alternative (B) above, the rate for
such Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
"Designated LIBOR Currency" means the currency, if any, designated in
a LIBOR Note and the applicable Pricing Supplement as the Designated LIBOR
Currency and, if no currency is so designated, the Designated LIBOR
Currency will be U.S. dollars.
"Telerate Page 3750" means the display designated as page "3750" on
the Telerate Service (or such other page as may replace Telerate Page 3750
on that service for the purpose of displaying London interbank offered
rates).
"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).
(ii) With respect to any Interest Determination Date on which the rate
for deposits does not appear on Telerate Page 3750, or on which fewer than
two offered rates appear on the Reuters Screen LIBO Page, as applicable and
as specified in (i) above, LIBOR will be determined on the basis of the
rates at which deposits in the Designated LIBOR Currency 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 such 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 such Interest
Determination Date and in a principal amount equal to an amount of not less
than U.S. $1 million, or its equivalent in the Designated LIBOR Currency,
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 such 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 such Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
a.m. in the applicable Principal Financial Center on such Interest
Determination Date by three major banks in such Principal Financial Center,
selected by the Calculation Agent, for loans in the Designated LIBOR
Currency to leading banks, commencing on the second London Business Day
immediately following such Interest Determination Date, having the Index
Maturity designated in the applicable Pricing Supplement and in a principal
amount equal to an amount
S-13
<PAGE> 14
of not less than U.S. $1 million, or its equivalent in the Designated LIBOR
Currency, 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.
"Principal Financial Center" means, unless otherwise specified in the
applicable Pricing Supplement, (i) the capital city of the country issuing the
Specified Currency (except as described in the definition of Business Day with
respect to ECU) or (ii) the capital city of the country to which the Designated
LIBOR Currency relates (or, in the case of ECU, Luxembourg), as applicable,
except, in the case of (i) or (ii) above, that with respect to United States
dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders,
Italian lire and Swiss francs, the "Principal Financial Center" shall be The
City of New York, Sydney, Toronto, Frankfurt, Amsterdam, Milan (solely in the
case of the Specified Currency) and Zurich, respectively.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
"Prime Rate" means, with respect to any Interest Determination Date, the
rate published for that day on Telerate Page 125 (as defined below) or, if not
so published by 3:00 p.m., New York City time, on such Interest Determination
Date, the rate on that day published in Statistical Release H.15(519) under the
heading "Bank Prime Loan" or, if not so published prior to 9:00 a.m., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the Prime Rate with respect to such Interest Determination Date will be
the arithmetic mean of the rates of interest publicly announced by each bank
that appears on the Reuters Screen USPRIME1 Page (as defined below) as such
bank's prime rate or base lending rate as in effect for such Interest
Determination Date. If fewer than four such rates appear on the Reuters Screen
USPRIME1 Page for any Interest Determination Date, the Prime Rate with respect
to such Interest Determination Date will be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the year divided by
360 as of the close of business on such Interest Determination Date by at least
two of the three major money center banks in The City of New York selected by
the Calculation Agent. If fewer than two quotations are provided, the Prime Rate
with respect to such Interest Determination Date shall be determined on the
basis of the rates furnished in The City of New York by the appropriate number
of substitute banks or trust companies organized and doing business under the
laws of the United States, or any state thereof, having total equity capital of
at least U.S. $500 million and being subject to supervision or examination by
Federal or state authority, selected by the Calculation Agent to provide such
rate or rates; provided, however, that if the appropriate number of substitute
banks or trust companies selected as aforesaid are not quoting as mentioned in
this sentence, the Prime Rate with respect to such Interest Determination Date
will be the Prime Rate in effect immediately prior to such Interest
Determination Date.
"Telerate Page 125" means the display page designated as page "125" on the
Telerate Service (or such other page as may replace Telerate Page 125 on that
service for the purpose of displaying the prime rate or base lending rate of
major banks).
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuters Monitor Money Rate Service (or such other page as may
replace the USPRIME1 page on that service for the purpose of displaying the
prime rate or base lending rate of major banks).
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.
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<PAGE> 15
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate on that day published on the Designated Treasury Telerate Page (as defined
below) under the column "Avge Invest Yield" under the heading "US Treasury 3Mo
T-Bill Auction Results," if the Designated Treasury Telerate Page is 56 , or
under the heading "US Treasury 6Mo T-Bill Auction Results," if the Designated
Treasury Telerate Page is 57, and having the Index Maturity designated in the
applicable Pricing Supplement or, if not so published by 3:00 p.m., New York
City time, on such 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 Statistical Release H.15(519) under the
heading "Treasury bills -- auction average" (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) 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.
"Designated Treasury Telerate Page" means the display designated as page
"56" or "57" on the Telerate Service, as specified in the applicable Pricing
Supplement (or any other page as may replace such page on that service for the
purpose of displaying U.S. Treasury auction results as published in Statistical
Release H.15(519)); provided, however, that if no such page is specified in the
applicable Pricing Supplement, the Designated Treasury Telerate Page shall be
"56" for the most recent week.
AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Notes
("Amortizing Notes"). Interest on Amortizing Notes will be computed as set forth
in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, payments with respect to Amortizing Notes will be
applied first to interest due and payable thereon and then to the reduction of
the unpaid principal amount thereof. The Company will provide the initial
purchaser repayment information with respect to Amortizing Notes and such
information will be available upon request to the subsequent holders thereof.
RESET NOTES
The Company may from time to time offer Notes ("Reset Notes") as to which
the Company has the option to reset the interest rate, in the case of Fixed Rate
Notes, or to reset the Spread or Spread Multiplier, in the case of Floating Rate
Notes. The applicable Pricing Supplement with respect to Reset Notes will set
forth the date or dates on which the interest rate, Spread or Spread Multiplier,
as the case may be, may be reset, the basis or formula, if any, for such
resetting and other details of the Reset Notes.
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EXTENDIBLE NOTES
The Company may from time to time offer Notes ("Extendible Notes") as to
which the Company has the option to extend the original Maturity Date of such
Notes for one or more periods. The applicable Pricing Supplement will set forth
the number of periods for which the maturity of such Note is extendible, the
date beyond which the final maturity may not be extended, the procedure for
notification to the holders of such Notes of such extension, the procedure, if
any, for holders of such Notes to elect repayment of such Notes in the event of
such extension and other details of the Extendible Notes.
RENEWABLE NOTES
The Company may from time to time offer Notes ("Renewable Notes"), the
original Maturity Date of which will be automatically renewed for such periods
and at such times as are set forth in the applicable Pricing Supplement unless
the holders of such Notes elect to terminate the automatic extension of such
Notes. The applicable Pricing Supplement will set forth the periods and times
for which the maturity of such Notes is to be automatically renewed, the date
beyond which the maturity may not be so renewed, the procedures for holders of
such Notes to elect repayment of such Notes in the event of such renewal and
other details of the Renewable Notes.
COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, Notes may be subject
to all of the provisions, or any combination of the provisions, described above
under "Reset Notes," "Extendible Notes" and "Renewable Notes."
REDEMPTION AND REPAYMENT
Unless otherwise specified in the applicable Pricing Supplement and except
for Extendible Notes and Renewable Notes, 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 the Maturity Date.
FOREIGN CURRENCY, CURRENCY INDEXED AND OTHER INDEXED NOTES
The Company may from time to time offer Foreign Currency Notes, which are
Notes denominated in a Specified Currency other than U.S. dollars, as specified
in the applicable Pricing Supplement. See "Special Provisions Relating to
Foreign Currency Notes" and "Foreign Currency Risks."
The Company may from time to time offer Notes ("Currency Indexed Notes"),
the principal amount of which is payable upon Maturity or the interest rate of
which is determined by reference to the exchange rate of a Specified Currency
relative to another currency or composite currency (the "Indexed Currency") or
to a currency index (the "Currency Index"), each as specified in the applicable
Pricing Supplement. Holders of Currency Indexed Notes may receive a principal
amount upon Maturity that is greater than or less than the face amount of such
Notes depending upon the relative value upon Maturity of the Specified Currency
compared to the Indexed Currency or Currency Index. The applicable Pricing
Supplement will set forth certain information as to the method for determining
the amount of interest payable and the principal amount payable upon Maturity,
the relative value of the Specified Currency compared to the applicable Indexed
Currency or Currency Index, any exchange controls applicable to the Specified
Currency or Indexed Currency, certain tax considerations to holders associated
with an investment in the Currency Indexed Notes, certain risks associated with
an investment in such Currency Indexed Notes and other information relating to
such Currency Indexed Notes, as applicable. See "Special Provisions Relating to
Foreign Currency Notes" and "Foreign Currency Risks."
The Company may from time to time offer indexed Notes ("Indexed Notes,"
which term includes Currency Indexed Notes), the principal amount of which is
payable upon Maturity or interest rate of which is determined by reference to
one or more equity or other indices or formulae or the price of one or more
specified commodities or by such other methods or formulae as may be specified
by the Company in the
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applicable Pricing Supplement. The applicable Pricing Supplement will set forth
certain information as to the method by which the amount of interest payable and
the amount of principal payable upon Maturity in respect of such Indexed Notes
will be determined, certain tax considerations to holders associated with an
investment in such Indexed Notes, certain risks to holders associated with an
investment in such Indexed Notes and other information relating to such Indexed
Notes, as applicable.
An investment in Currency Indexed Notes or in other Indexed Notes, as to
principal or interest or both, to one or more values of commodities or interest
rate indices entails significant risks that are not associated with similar
investments in conventional fixed-rate debt securities. The interest rate on
Currency Indexed Notes and other Indexed Notes may be less than that payable on
conventional fixed-rate debt securities issued at the same time, and a
possibility may exist that no interest will be paid or that negative interest
will accrue, and the principal amount of a Currency Indexed Note or other
Indexed Note payable upon Maturity may be less than the original purchase price
of such Note if allowed pursuant to the terms of such Note, and a possibility
may exist that no principal will be paid, or if such principal amount is
utilized to net against accrued negative interest, the principal amount payable
upon Maturity may be less than the original purchase price of such Note. The
secondary market for Currency Indexed Notes and other Indexed Notes will be
affected by a number of factors, independent of the creditworthiness of the
Company and the value of the applicable currency, commodity or interest rate
index, the time remaining to maturity of such Notes, the amount outstanding of
such Notes and market interest rates. The value of the applicable currency,
commodity or interest rate index depends on a number of interrelated factors,
including economic, financial and political events over which the Company has no
control. Additionally, if the formula used to determine the principal amount or
interest payable with respect to such Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index will be increased. The historical experience of the relevant
currency commodities or interest rate indices should not be taken as an
indication of future performance of such currencies, commodities or interest
rate indices during the term of any Currency Indexed Note or any other Indexed
Note. Accordingly, prospective investors should consult their own financial and
legal advisors as to the risk entailed by an investment in Currency Indexed
Notes and other Indexed Notes and the suitability of such Notes in light of
their particular circumstances.
Unless otherwise specified in the applicable Pricing Supplement, (a) for
the purpose of determining whether holders of the requisite principal amount of
Debt Securities outstanding under the applicable Indenture have made a demand or
given a notice or waiver or taken any other such action, the outstanding
principal amount of Currency Indexed Notes or of other Indexed Notes will be
deemed to be the face amount thereof, and (b) in the event of an acceleration of
the principal amount due on a Currency Indexed Note or any other Indexed Note,
the principal amount payable to the holder of such Note upon acceleration will
be the principal amount determined by reference to the formula by which the
principal amount of such Note would be determined on the Maturity Date thereof,
as if the date of acceleration were the Maturity Date.
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, surrendered to the Trustee for
cancellation.
BOOK-ENTRY SYSTEM
The Notes may be issued in whole or in part in the form of one or more
Global Securities registered in the name of the Depositary or its nominee. Upon
issuance, all Book-Entry Notes having the same date of issuance, Maturity Date,
rank (senior or subordinated), redemption provisions, repayment provisions,
Specified Currency, interest period and Interest Payment Dates and, in the case
of Fixed Rate Notes, interest rate, or, in the case of Floating Rate Notes,
interest rate basis or formula, Initial Interest Rate, Index Maturity, Interest
Reset Dates, Spread or Spread Multiplier, if any, minimum interest rate, if any,
and maximum interest rate, if any, will be represented by one or more Global
Securities. The Depositary has advised the Company and the Agents as follows:
The Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
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Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. The Depositary is owned by a number of its Direct
Participants and by The New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the Depositary's system is also available to others, such as securities
brokers and dealers, banks and trust companies, that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission.
Purchases of the Notes under the Depositary's system must be made by or
through Direct Participants, which will receive a credit for the Notes on the
Depositary's records. The ownership interest of each actual purchaser of a Note
(a "Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from the Depositary of their purchase, but Beneficial Owners are expected to
receive written confirmation providing details of the transaction, as well as
periodic statements of their holdings, from the Direct Participant or Indirect
Participant through which the Beneficial Owners entered into the transaction.
Transfers of ownership interests in the Notes are to be accomplished by entries
made on the books of the Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Global Securities, except in the event that use of the book-entry
system for the Notes is discontinued.
To facilitate subsequent transfers, all Notes deposited by Participants
with the Depositary are registered in the name of the Depositary or its nominee.
The deposit of Notes with the Depositary and their registration in the name of
the Depositary or its nominee effect no change in beneficial ownership. The
Depositary has no knowledge of the actual Beneficial Owners of the Notes; the
Depositary's records reflect only the identity of the Direct Participants to
whose accounts the Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
As long as the Notes are held by the Depositary or its nominee and the
Depositary continues to make its same-day funds settlement system available to
the Company, all payments of principal of and interest on the Notes will be made
by the Company in immediately available funds to the Depositary. The Company has
been advised that the Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason to
believe that it will not receive payment on such date. Payments by Participants
to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of the Depositary, the Trustee or the Company, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and interest to the Depositary is the responsibility
of the Company or the Trustee, disbursement of such payments to the Direct
Participants shall be the responsibility of the Depositary and disbursement of
such payments to Beneficial Owners shall be the responsibility of the Direct and
Indirect Participants.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in the Depositary's Same-Day Funds Settlement system. Accordingly,
the Depositary will require that secondary trading activity in the Notes settle
in immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Notes.
The Company expects that conveyances of notices and other communications by
the Depositary to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct and Indirect Participants to
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Beneficial Owners will be governed by arrangements among them, subject to
statutory or regulatory requirements as may be in effect from time to time. In
addition, neither the Depositary nor its nominee will consent or vote with
respect to the Notes; the Company has been advised that the Depositary's usual
procedure is to mail an omnibus proxy to the Company as soon as possible after
the record date with respect to such consent or vote. The omnibus proxy would
assign consenting or voting rights of the Depositary's nominee to those Direct
Participants to whose accounts the Notes are credited on such record date
(identified in a listing attached to the omnibus proxy).
The Depositary may discontinue providing its services as securities
depositary with respect to the Notes at any time by giving reasonable notice to
the Company or the Trustee. Under such circumstances, if a successor depositary
is not appointed by the Company within 90 days, the Company will issue
Certificated Notes in exchange for all the Global Securities 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 Certificated Notes in exchange for all the Global Securities
representing the Notes. Individual Certificated Notes so issued will be issued
in denominations of $1,000 and any larger amount that is an integral of $1,000
and registered in such names as the Depositary shall direct.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
CONCERNING THE TRUSTEE
Chase serves as trustee with respect to twenty-six other series of Debt
Securities previously issued under the Indentures. In addition, Chase acts as
trustee with respect to various debt securities issued under indentures
originally executed by Manufacturers Hanover Trust Company and Chemical Bank,
respectively. Chase acts as depository for funds of, extends credit to, and
performs other banking services for, the Company in the normal course of
business.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, and interest
and premium (if any) on, the Notes will be made in U.S. dollars. Unless
otherwise specified in the applicable Pricing Supplement, the following
provisions shall apply to Foreign Currency Notes which are in addition to, and
to the extent inconsistent therewith replace, the description of general terms
and provisions of the Notes set forth in the accompanying Prospectus and
elsewhere in this Prospectus Supplement. Foreign Currency Notes will be issued
only in registered form without coupons.
CURRENCIES
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency. At the
present time, there are limited facilities in the United States for conversion
of U.S. dollars into the Specified Currencies and vice versa, and banks offer
non-U.S. dollar checking or savings account facilities in the United States only
on a limited basis. However, if requested by a prospective purchaser of Notes on
or prior to the fifth Business Day preceding the date of delivery of the Notes,
or by such other day as determined by the Exchange Rate Agent who presented such
offer to purchase Notes to the Company, such Exchange Rate Agent is prepared to
arrange for the conversion of U.S. dollars into the Specified Currency set forth
in the applicable Pricing Supplement to enable the purchasers to pay for the
Foreign Currency Notes. Each such conversion will be made by such Exchange Rate
Agent on such terms and subject to such conditions, limitations and charges as
such Exchange Rate Agent may from time to time establish in accordance with its
regular foreign exchange practices. All costs of exchange will be borne by the
purchasers of the Foreign Currency Notes.
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PAYMENT OF PRINCIPAL AND INTEREST
Principal, interest and premium, if any, payments on Foreign Currency Notes
are payable by the Company in the Specified Currency. However, except as
provided below, the Exchange Rate Agent appointed by the Company to convert
principal, interest and premium, if any, payments in respect of Foreign Currency
Notes to U.S. dollars will convert the amount of all payments of principal of,
and interest and premium (if any) on, Foreign Currency Notes to U.S. dollars.
Unless otherwise specified in the applicable Pricing Supplement, each holder of
a Foreign Currency Note may elect to receive such payments in the Specified
Currency as described below.
Any U.S. dollar amount to be received by a holder of a Foreign Currency
Note will be based on the highest bid quotation in The City of New York received
by the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on
the second Business Day preceding the applicable Interest Payment Date from
three recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such Interest Payment Date, in an amount equal to the
aggregate amount of the Specified Currency payable to all holders of Notes not
electing to receive the Specified Currency on such Interest Payment Date and at
which the applicable dealer commits to execute a contract. If such bid
quotations are not available, payments will be made in the Specified Currency.
All currency exchange costs will be borne by the holder of the Foreign Currency
Note by deductions from such payments.
Unless otherwise specified in the applicable Pricing Supplement, each
holder of a Foreign Currency Note may elect to receive payment of the principal
of, and interest and premium (if any) on, the Foreign Currency Note in the
Specified Currency by transmitting a written request for such payment to the
principal offices of the Paying Agent prior to the fifth Business Day after the
Record Date immediately preceding any Interest Payment Date and at least 10
Business Days prior to Maturity in the case of payments to be made upon
Maturity. Such request may be in writing (mailed or hand delivered) or by cable,
telex, or other form of facsimile transmission. Each holder of a Foreign
Currency Note may elect to receive payment in the Specified Currency for all
payments of principal, interest and premium, if any, and need not file a
separate election for each payment. Such election will remain in effect until
revoked by written notice to the Paying Agent, but written notice of any such
revocation must be received by the Paying Agent on or prior to the fifth
Business Day after the Record Date in the case of any payment of interest or at
least 10 Business Days prior to the Maturity Date or the date of redemption or
repayment, if any, in the case of the payment of principal and premium, if any.
Holders of Foreign Currency Notes that are to be held in the name of a broker or
nominee, including Book-Entry Notes, should contact such broker or nominee to
determine whether and how an election to receive payments in the Specified
Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, the
payment of the principal of, and interest and premium, if any, on each Foreign
Currency Note to be made in U.S. dollars will be made in the manner specified
under "Description of the Notes -- Payment." Unless otherwise specified in the
applicable Pricing Supplement, the payment of principal of, and interest and
premium, if any, on each Foreign Currency Note to be made in the Specified
Currency will be made as set forth below. The payment of interest on a Foreign
Currency Note (other than interest payable to the holder thereof, if any, upon
Maturity) to be made in the Specified Currency will be paid by bank draft mailed
to the person in whose name the Note is registered at the close of business on
the applicable Record Date. The principal of and premium, if any, on such
Foreign Currency Note and any interest payable to the holder thereof when the
principal of such Foreign Currency Note is payable will be paid by bank draft
upon surrender of such Note at the corporate trust office of the Paying Agent in
the Borough of Manhattan, The City of New York. Specified Currency drafts will
be drawn on a bank office located outside the United States. If the Paying Agent
receives a written request from a holder of the equivalent of U.S. $1,000,000 or
more in aggregate principal amount of the Foreign Currency Notes not later than
the close of business on a Record Date for an interest payment or the fifteenth
day prior to Maturity, the Paying Agent will, subject to applicable laws and
regulations, until it receives notice to the contrary (but, in the case of
payments to be made upon Maturity, only after the surrender of the Note or Notes
in the borough of Manhattan, The City of New York, not later than one Business
Day prior to
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Maturity), make all Specified Currency payments to such holder by wire transfer
to an account (a) designated in such written request and (b) maintained in the
country of the Specified Currency.
OUTSTANDING FOREIGN CURRENCY NOTES
The principal amount of any Foreign Currency Note payable in a Specified
Currency at any time outstanding for any purpose under the Indentures shall be
deemed to be the U.S. dollar equivalent of the principal amount of such Foreign
Currency Note, determined as of the date of the original issuance of such
Foreign Currency Note by reference to the Market Exchange Rate.
PAYMENT CURRENCY
If a Specified Currency is not available for the payment of principal of,
and interest and premium, if any, with respect to a Foreign Currency Note due to
the imposition of exchange controls or other circumstances beyond the control of
the Company, or is no longer used by the government of the country issuing such
currency or for the settlement of transactions by public authorities of or
within the international banking community, the Company will be entitled to
satisfy its obligations to holders of Foreign Currency Notes by making such
payment in U.S. dollars on the basis of the noon buying rate in The City of New
York for cable transfers of the Specified Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate") on
the Record Date prior to such payment, or if such Market Exchange Rate is not
then available, on the basis of the most recently available Market Exchange Rate
or as otherwise specified in an applicable Pricing Supplement. Any payment made
under such circumstances in U.S. dollars where required payment is in a
Specified Currency will not constitute a default under the Indentures.
If payment on a Foreign Currency Note is required to be made in ECU and ECU
are unavailable due to the imposition of exchange controls or other
circumstances beyond the Company's control, or are no longer used in the
European Monetary System, all payments due on that date with respect to such
Foreign Currency Note shall be made in U.S. dollars. The amount so payable on
any date in ECU shall be converted into U.S. dollars at a rate determined by the
Exchange Rate Agent as of the second Business Day prior to the date on which
such payment is due on the following basis: The component currencies of the ECU
for this purpose (the "Components") shall be the currency amounts that were
components of the ECU as of the last date on which ECU were used in the European
Monetary System. The equivalent of ECU in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Components. The Paying Agent
shall determine the U.S. dollar equivalent of each of the Components on the
basis of the most recently available Market Exchange Rate, or as otherwise
specified in the applicable Pricing Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be multiplied or divided in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall have a value on
the date of division equal to the amount of the former component currency
divided by the number of currencies into which that currency was divided.
All determinations referred to above by the Exchange Rate Agent or Paying
Agent shall be at its sole discretion (except to the extent expressly provided
herein that any determination is subject to approval by the Company) and, in the
absence of manifest error, shall be conclusive for all purposes and binding on
holders of the Notes and the Exchange Rate Agent or Paying Agent, as the case
may be, shall have no liability therefor. Any payment made in U.S. dollars under
the aforementioned circumstances where required payment is in a Specified
Currency will not constitute a default under the Indentures.
JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. A judgment for money damages by courts in the United
States, including money damages based on an obligation
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expressed in a foreign currency, will ordinarily be rendered only in U.S.
dollars. New York statutory law provides that in an action based on an
obligation expressed in a currency other than U.S. dollars a court shall render
a judgment or decree in the foreign currency of the underlying obligation and
that the judgment or decree shall be converted into U.S. dollars at the exchange
rate prevailing on the date of entry of the judgment or decree.
FOREIGN CURRENCY RISKS
THE PROSPECTUS, INCLUDING THIS PROSPECTUS SUPPLEMENT, DOES NOT DESCRIBE ALL
RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES
BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY UNIT, EITHER AS SUCH RISKS
EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM
TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL, TAX AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY
NOTES AND AS TO ANY MATTERS THAT MAY AFFECT THE PURCHASE OR HOLDING OF FOREIGN
CURRENCY NOTES OR THE RECEIPT OF PAYMENTS OF PRINCIPAL OF AND ANY PREMIUM AND
INTEREST ON FOREIGN CURRENCY NOTES IN A SPECIFIED CURRENCY OTHER THAN U.S.
DOLLARS. FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS
WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY OR CURRENCY UNIT
TRANSACTIONS.
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
changes in the rate of exchange between the U.S. dollar and the Specified
Currency and the possibility of the imposition or modification of foreign
exchange controls by either the United States or foreign governments. Such risks
generally depend on economic and political events and the supply and demand for
the relevant currencies over which the Company has no control. In recent years,
rates of exchange between the U.S. dollar and foreign currencies have been
highly volatile and such volatility may be expected in the future. The exchange
rate between the U.S. dollar and a foreign currency or currency unit is at any
moment a result of the supply of and demand for such currencies, and changes in
the rate result over time from the interaction of many factors, among which are
rates of inflation, interest rate levels, balances of payments and the extent of
governmental surpluses or deficits in the countries of such currencies. These
factors are in turn sensitive to the monetary, fiscal and trade policies pursued
by such governments and those of other countries important to international
trade and finance. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations in
the rate that may occur during the term of any Foreign Currency Note.
Depreciation of the Specified Currency applicable to Foreign Currency Notes
against the U.S. dollar would result in a decrease in the U.S. dollar-equivalent
yield of such Notes, in the U.S. dollar-equivalent value of the principal
repayable and, generally, in the U.S. dollar-equivalent market value of such
Notes.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed noncommunist nations are
permitted to fluctuate in value relative to the U.S. dollar. Sovereign
governments, however, rarely voluntarily allow their currencies to float freely
in response to economic forces. In fact, such governments use a variety of
techniques, such as intervention by a country's central bank or imposition of
regulatory controls or taxes, to affect the exchange rate of their currencies.
Governments may also issue a new currency to replace an existing currency or
alter the exchange rate or relative exchange characteristics by devaluation or
revaluation of a currency. Thus, a special risk in purchasing Foreign Currency
Notes is that their U.S. dollar-equivalent yields could be affected by
governmental actions which could change or interfere with a theretofore freely
determined currency valuation, by fluctuations in response to other market
forces and by the movement of currencies across borders. There will be no
adjustment or change in the terms of the Foreign Currency Notes in the event
that exchange rates should become fixed, or in the event of any devaluation or
revaluation or imposition of exchange or other regulatory
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controls or taxes, or in the event of other developments, affecting the U.S.
dollar or any applicable currency or currency unit.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a Specified Currency at a Note's Maturity. Even if there are no actual
exchange controls, it is possible that the Specified Currency for any particular
Note that would otherwise be payable in such Specified Currency would not be
available at such Note's Maturity. In that event, the Company will make required
payments in U.S. dollars on the basis of the Market Exchange Rate on the second
day prior to such payment, or if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate. See
"Special Provisions Relating to Foreign Currency Notes -- Payment Currency".
Unless otherwise indicated in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
Specified Currency in which particular Foreign Currency Notes are denominated.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, and
interest and premium (if any) on, Foreign Currency Notes. Such persons should
consult their own counsel with regards to such matters.
The Pricing Supplement with respect to any issue of Foreign Currency Notes,
containing information on the applicable Specified Currency (including
information with respect to applicable current foreign exchange controls, if
any), will be delivered and will become part of this Prospectus and Prospectus
Supplement. Any such information concerning exchange rates is furnished as a
matter of information only and should not be regarded as indicative of the range
of or trends in fluctuations in currency exchange rates that may occur in the
future.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material United States federal income
tax consequences of the ownership of Notes as of the date hereof. Except where
noted, it deals only with Notes held as capital assets and does not deal with
special situations, such as those of dealers in securities or currencies,
financial institutions, tax-exempt entities, life insurance companies, persons
holding Notes as a part of a hedging, conversion or constructive sale
transaction or a straddle or holder of Notes whose "functional currency" is not
the U.S. dollar. Furthermore, the discussion below is based upon the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in United
states federal income tax consequences different from those discussed below. Any
special United States federal income tax considerations relevant to a particular
issue of the Notes will be provided in the applicable Pricing Supplement.
Persons considering the purchase, ownership or disposition of Notes should
consult their own tax advisors concerning the United States federal income tax
consequences in light of their particular situations as well as any consequences
arising under the laws of any other taxing jurisdiction.
PAYMENTS OF INTEREST
Except as set forth below, interest on a Note will generally be taxable to
a United States Holder as ordinary income from domestic sources at the time it
is paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes. As used herein, a "United States Holder" of a Note
means a holder that is (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is subject to United States federal income taxation regardless of its
source or (iv) a trust which is subject to the supervision of a court within the
United States and the control of a United States person as described in section
7701(a)(30) of the Code. A "Non-United States Holder" is a holder that is not a
United States Holder.
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ORIGINAL ISSUE DISCOUNT
United States Holders of Notes issued with original issue discount ("OID")
will be subject to special tax accounting rules, as described in greater detail
below. United States Holders of such Notes should be aware that they generally
must include OID in gross income in advance of the receipt of cash attributable
to that income. However, United States Holders of such Notes generally will not
be required to include separately in income cash payments received on the Notes,
even if denominated as interest, to the extent such payments do not constitute
qualified stated interest (as defined below). Notes issued with OID will be
referred to as "Original Issue Discount Notes." Notice will be given in the
applicable Pricing Supplement when the Company determines that a particular Note
will be an Original Issue Discount Note.
This summary is based upon the final Treasury regulations addressing debt
instruments issued with OID (the "OID Regulations"). Additional rules applicable
to Original Issue Discount Notes which are denominated in or determined by
reference to a Specified Currency other than the U.S. dollar are described under
"-- Foreign Currency Notes" below. The following discussion does not address
Notes providing for contingent payments other than Notes that bear qualified
stated interest. Investors should carefully examine the applicable Prospectus
Supplement regarding the United States federal income tax consequences of the
holding and disposition of any Notes providing for contingent payments that do
not bear qualified stated interest.
A Note with an "issue price" that is less than its stated redemption price
at maturity (the sum of all payments to be made on the Note other than
"qualified stated interest" will be issued with OID if such difference is at
least 0.25 percent of the stated redemption price at maturity multiplied by the
number of complete years to maturity or, in the case of an Amortizing Note, the
weighted average maturity. The "issue price" of each Note in a particular
offering will be the first price at which a substantial amount of that
particular offering is sold (other than to an underwriter, placement agent or
wholesaler). The term "qualified stated interest" means stated interest that is
unconditionally payable in cash or in property (other than debt instruments of
the issuer) at least annually at a single fixed rate or, subject to certain
conditions, based on one or more interest indices. Interest is payable at a
single fixed rate only if the rate appropriately takes into account the length
of the interval between payments.
In the case of a Note issued with de minimis OID (i.e., discount that is
not OID because it is less than 0.25 percent of the stated redemption price at
maturity multiplied by the number of complete years to maturity), the United
States Holder generally must include such de minimis OID in income as principal
payments on the Notes are made in proportion to the stated principal amount of
the Note. Any amount of de minimis OID that has been included in income shall be
treated as capital gain.
Certain of the Notes may be redeemed prior to their Maturity Date at the
option of the Company and/or at the option of the holder. Original Issue
Discount Notes containing such features may be subject to rules that differ from
the general rules discussed herein. Persons considering the purchase of Original
Issue Discount Notes with such features should carefully examine the applicable
Pricing Supplement and should consult their own tax advisors with respect to
such features since the tax consequences with respect to OID will depend, in
part, on the particular terms and features of the Notes.
United States Holders of Original Issue Discount Notes with a Maturity Date
upon issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income by the initial United States Holder of an Original
Issue Discount Note is the sum of the "daily portions" of OID with respect to
the Note for each day during the taxable year or portion of the taxable year in
which such United States Holder held such Note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The "accrual period"
for an Original Issue Discount Note may be of any length and may vary in length
over the term of the Note, provided that each accrual period is no longer than
one year and each scheduled payment of principal or interest occurs on the first
day or the final day of an accrual period. The amount of OID allocable to any
accrual period is an amount equal to the excess, if any, of (a) the product of
the Note's adjusted issue price at the beginning of such accrual period and its
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted
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for the length of the accrual period) over (b) the sum of any qualified stated
interest allocable to the accrual period. OID allocable to a final accrual
period is the difference between the amount payable at maturity (other than a
payment of qualified stated interest) and the adjusted issue price at the
beginning of the final accrual period. Special rules will apply for calculating
OID for an initial short accrual period. The "adjusted issue price" of a Note at
the beginning of any accrual period is equal to its issue price increased by the
accrued OID for each prior accrual period (determined without regard to the
amortization of any acquisition or bond premium, as described below) and reduced
by any payments made on such Note (other than qualified stated interest) on or
before the first day of the accrual period. Under these rules, a United States
Holder will have to include in income increasingly greater amounts of OID in
successive accrual periods. The Company is required to provide information
returns stating the amount of OID accrued on Notes held of record by persons
other than corporations and other exempt holders.
In the case of an Original Issue Discount Note that is a Floating Rate Note
both the "yield to maturity" and "qualified stated interest" will be determined
solely for purposes of calculating the accrual of OID as though the Note will
bear interest in all periods at a fixed rate generally equal to the rate that
would be applicable to interest payments on the Note on its date of issue or, in
the case of certain Floating Rate Notes, the rate that reflects the yield to
maturity that is reasonably expected for the Note. Additional rules may apply if
interest on a Floating Rate Note is based on more than one interest index.
Persons considering the purchase of Floating Rate Notes should carefully examine
the applicable Pricing Supplement and should consult their own tax advisors
regarding the United States federal income tax consequences of the holding and
disposition of such Notes.
United States Holders may elect to treat all interest on any Note as OID
and calculate the amount includible in gross income under the constant yield
method described above. For the purposes of this election, interest includes
stated interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount and unstated interest, as adjusted by an amortizable
bond premium or acquisition premium. The election is to be made for the taxable
year in which the United States Holder acquired the Note, and may not be revoked
without the consent of the IRS. United States Holders should consult with their
own tax advisors about this election.
SHORT-TERM NOTES
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Notes"), under the OID Regulations all payments (including all
stated interest) will be included in the stated redemption price at maturity
and, thus, United States Holders will generally be taxable on the discount in
lieu of stated interest. The discount will be equal to the excess of the stated
redemption price at maturity over the issue price of a Short-Term Note, unless
the United States Holder elects to compute this discount using tax basis instead
of issue price. In general, individuals and certain other cash method United
States Holders of a Short-Term Note are not required to include accrued discount
in their income currently unless they elect to do so (but may be required to
include any stated interest in income as it is received). United States Holders
that report income for United States federal income tax purposes on the accrual
method and certain other United States Holders are required to accrue discount
on such Short-Term Notes (as ordinary income) on a straight-line basis, unless
an election is made to accrue the discount according to a constant yield method
based on daily compounding. In the case of a United States Holder that is not
required, and does not elect, to include discount in income currently, any gain
realized on the sale, exchange or retirement of the Short-Term Note will
generally be ordinary income to the extent of the discount accrued through the
date of sale, exchange or retirement. In addition, a United States Holder that
does not elect to include currently accrued discount in income may be required
to defer deductions for a portion of the United States Holder's interest expense
with respect to any indebtedness incurred or continued to purchase or carry such
Notes.
MARKET DISCOUNT
If a United States Holder purchases a Note (other than an Original Issue
Discount Note) for an amount that is less than its stated redemption price at
Maturity or, in the case of an Original Issue Discount Note, its adjusted issue
price, the amount of the difference will be treated as "market discount" for
United States
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federal income tax purposes, unless such difference is less than a specified de
minimis amount. Under the market discount rules, a United States Holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. In addition, the United States Holder may be required to defer,
until the Maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder of a Note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies and may not be revoked without the consent of the
United States Internal Revenue Service (the "IRS").
ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a Note for an amount that is greater
than its adjusted issue price but equal to or less than the sum of all amounts
payable on the Note after the purchase date other than payments of qualified
stated interest will be considered to have purchased such Note at an
"acquisition premium." Under the acquisition premium rules, the amount of OID
which such United States Holder must include in its gross income with respect to
such Note for any taxable year will be reduced by the portion of such
acquisition premium properly allocable to such year.
A United States Holder that purchases a Note for an amount in excess of the
sum of all amounts payable on the Note after the purchase date other than
qualified stated interest will be considered to have purchased the Note at a
"premium" and will not be required to include any OID in income. A United States
Holder generally may elect to amortize the premium over the remaining term of
the Note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the United States Holder's interest income from the
Note. Bond premium on a Note held by a United States Holder that does not make
such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Note. The election to amortize premium on a
constant yield method once made applies to all debt obligations held or
subsequently acquired by the electing United States Holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Final Treasury regulations issued on December 30, 1997 provide that, at a
holder's election, premium may be amortized to offset interest income only as a
United States Holder takes the qualified stated interest into account under the
United States Holder's regular accounting method. In the case of instruments
that provide for alternative payment schedules, bond premium is calculated by
assuming that (i) the holder will exercise or not exercise options in a manner
that maximizes the holder's yield and (ii) the issuer will exercise or not
exercise options in a manner that minimizes the holder's yield except with
respect to call options for which the issuer is assumed to exercise such call
options in a manner that maximizes the holder's yield. The final regulations are
effective for debt instruments acquired on or after March 2, 1998. However, if a
United States Holder elects to amortize bond premium for the taxable year
containing March 2, 1998, or any subsequent taxable year, the final regulations
would apply to all the United States Holder's debt instruments held on or after
the first day of that taxable year. Once made, the election cannot be revoked
without the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A United States Holder's tax basis in a Note will, in general, be the
United States Holder's cost therefor, increased by OID, market discount or any
discount with respect to a Short-Term Note previously included in income by the
United States Holder and reduced by an amortized premium and any cash payments
on the
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Note other than qualified stated interest. Upon the sale, exchange, retirement
or other disposition of a Note, a United States Holder will recognize gain or
loss equal to the difference between the amount realized upon the sale,
exchange, retirement or other disposition (less any accrued qualified stated
interest, which will be taxable as such) and the adjusted tax basis of the Note.
Except as with respect to certain Short-Term Notes as described above, with
respect to gain or loss attributable to changes in exchange rates as described
below with respect to certain Foreign Currency Notes or with respect to market
discount as described above, such gain or loss will be capital gain or loss.
Under recently enacted legislation, capital gains of individuals derived in
respect of capital assets held for more than one year are eligible for reduced
rates of taxation which may vary depending upon the holding period of such
capital assets. Prospective investors should consult their own tax advisors with
respect to the tax consequences of the new legislation. The deductibility of
capital losses is subject to limitations.
TAX CONSEQUENCES OF SATISFACTION AND DISCHARGE
In that event the Company discharges its obligations under the Notes,
pursuant to satisfaction and discharge provisions of the Indentures, the IRS may
take the view that such a discharge constitutes the retirement of the Notes and
the issuance of new obligations with the result that United States Holders of
the Notes would recognize any gain or loss realized on such a retirement,
although any such gain would generally not be taxable to Non-United States
Holders under the circumstances outlined below. Furthermore, following
discharge, the Notes might be subject to withholding, backup withholding and/or
information reporting.
EXTENDIBLE NOTES, RESET NOTES AND RENEWABLE NOTES
If so specified in an applicable Pricing Supplement relating to a Note, the
Company or a holder may have the option to extend the Maturity Date of a Note.
See "Description of Notes -- Renewable Notes" and "Description of
Notes -- Extendible Notes." In addition, the Company may have the option to
reset the interest rate, the Spread or the Spread Multiplier. See "Description
of Notes -- Reset Notes." The treatment of a United States Holder of Notes with
respect to which such an option has been exercised may depend, in part, on the
terms established for such Notes by the Company pursuant to the exercise of such
option (the "Revised Terms"). Such United States Holder may be treated for
United States federal income tax purposes as having exchanged such Notes (the
"Old Notes") for new Notes with the Revised Terms (the "New Notes"). If the
exercise of the option by the Company is not treated as an exchange of Old Notes
for New Notes, no gain or loss will be recognized by a United States Holder as a
result thereof. If the exercise of the option is treated as a taxable exchange
of Old Notes for New Notes, a United States Holder would generally recognize
gain or loss equal to the difference between the issue price of the New Notes
and the United States Holder's tax basis in the Old Notes.
The presence of such options may also affect the calculation of OID, among
other things. The OID Regulations provide that, solely for purposes of the
accrual of OID, an issuer of a debt instrument having an option or combination
of options to extend the term of the debt instrument will be presumed to
exercise such option or options in the manner that minimizes the yield on the
debt instrument. Conversely, a holder having a put option, an option to extend
the term of the debt instrument or a combination of such options will be
presumed to exercise such option or options in a manner that maximizes the yield
on the debt instrument. If the exercise of such option or options to extend the
term of the debt instrument actually occurs or the option to put does not occur,
contrary to the presumption made under the OID Regulations (a "change of
circumstances"), then, solely for purposes of the accrual of OID, the debt
instrument is treated as reissued on the date of the change in circumstances for
an amount equal to its adjusted issue price on that date. Persons considering
the purchase of Extendible Notes, Reset Notes or Renewable Notes should
carefully examine the applicable Pricing Supplement and should consult their own
tax advisors regarding the United States federal income tax consequences of the
holding and disposition of such Notes.
FOREIGN CURRENCY NOTES
The following is a summary of the principal United States federal income
tax consequences to a United States Holder of the ownership of a Note (a
"Foreign Currency Note") denominated in a Specified Currency
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other than the U.S. dollar (a "Foreign Currency"). If interest payments are made
in a Foreign Currency to a United States Holder that is not required to accrue
such interest prior to its receipt, such holder will be required to include in
income the U.S. dollar value of the amount received (determined by translating
the Foreign Currency received at the "spot rate" for such Foreign Currency on
the date such payment is received), regardless of whether the payment is in fact
converted into U.S. dollars. No exchange gain or loss is recognized with respect
to the receipt of such payment.
A United States Holder that is required to accrue interest in a Foreign
Currency Note prior to the receipt of such interest will be required to include
in income for each taxable year the U.S. dollar value of the interest that has
accrued during such year, determined by translating such interest at the average
rate of exchange for the period or periods during which such interest accrued.
The average rate of exchange for an interest accrual period is the simple
average of the exchange rates for each business day of such period (or such
other average that is reasonably derived and consistently applied by the
holder.) An accrual basis holder may elect to translate interest income at the
spot rate on the last day of the accrual period (or last day of the taxable year
in the case of an accrual period that straddles the holder's taxable year) or on
the date the interest payment is received if such date is within five days of
the end of the accrual period. Upon receipt of an interest payment on such Note,
such United States Holder will recognize ordinary income or loss in an amount
equal to the difference between U.S. dollar value of such payment (determined by
translating any Foreign Currency received at the "spot rate" for such Foreign
Currency on the date received) and the U.S. dollar value of the interest income
that such United States Holder has previously included in income with respect to
such payment.
OID on a Note that is also a Foreign Currency Note will be determined for
any accrual period in the applicable Foreign Currency and then translated into
U.S. dollars in the same manner as interest income accrued by a holder on the
accrual basis, as described above. Likewise, a United States Holder will
recognize exchange gain or loss when the OID is paid to the extent of the
difference between the U.S. dollar value of the accrued OID (determined in the
same manner as for accrued interest) and the U.S. dollar value of such payment
(determined by translating any Foreign Currency received at the spot rate for
such Foreign Currency on the date of payment). For this purpose, all receipts on
a Note will be viewed first as the receipt of any stated interest payments
called for under the terms of the Note, second as receipts of previously accrued
OID (to the extent thereof), with payments considered made for the earliest
accrual periods first, and thereafter as the receipt of principal.
The amount of market discount on Foreign Currency Notes includible in
income will generally be determined by translating the market discount
determined in the Foreign Currency into U.S. dollars at the spot rate on the
date the Foreign Currency Note is retired or otherwise disposed of. If the
United States Holder has elected to accrue market discount currently, then the
amount which accrues is determined in the Foreign Currency and then translated
into U.S. dollars on the basis of the average exchange rate in effect during
such accrual period. A United States Holder will recognize exchange gain or loss
with respect to market discount which is accrued currently using the approach
applicable to the accrual of interest income as described above.
Bond premium on a Foreign Currency Note will be computed in the applicable
Foreign Currency. With respect to a United States Holder that elects to amortize
the premium, the amortizable bond premium will reduce interest income in the
applicable Foreign Currency. At the time bond premium is amortized, exchange
gain or loss (which is generally ordinary income or loss) will be realized based
on the difference between spot rates at such time and at the time of acquisition
of the Foreign Currency Note. A United States Holder that does not elect to
amortize bond premium will translate the bond premium, computed in the
applicable Foreign Currency, into U.S. dollars at the spot rate on the maturity
date and such bond premium will constitute a capital loss which may be offset or
eliminated by exchange gain.
A United States Holder's tax basis in a Foreign Currency Note will be the
U.S. dollar value of the Foreign Currency amount paid for such Foreign Currency
Note determined at the time of such purchase. A United States Holder that
purchases a Note with previously owned Foreign Currency will recognize exchange
gain or loss at the time of purchase attributable to the difference at the time
of purchase, if any, between his
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tax basis in such Foreign Currency and the fair market value of the Note in U.S.
dollars on the date of purchase. Such gain or loss will be ordinary income or
loss.
For purposes of determining the amount of any gain or loss recognized by a
United States Holder on the sale, exchange, retirement or other disposition of a
Foreign Currency Note, the amount realized upon such sale, exchange, retirement
or other disposition will be the U.S. dollar value of the amount realized in
Foreign Currency (other than amounts attributable to accrued but unpaid interest
not previously included in the holder's income), determined at the time of the
sale, exchange, retirement or other disposition.
A United States Holder will recognize exchange gain or loss attributable to
the movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange, retirement or other disposition) of a
Foreign Currency Note. Such gain or loss will be treated as ordinary income or
loss. The realization of such gain or loss will be limited to the amount of
overall gain or loss realized on the disposition of a Foreign Currency Note.
Under proposed Treasury Regulations issued on March 17, 1992, if a Foreign
Currency Note is denominated in one of certain hyperinflationary currencies,
generally (i) exchange gain or loss would be realized with respect to movements
in the exchange rate between the beginning and end of each taxable year (or such
shorter period) that such Note was held and (ii) such exchange gain or loss
would be treated as an addition or offset, respectively, to the accrued interest
income on (and an adjustment to the holder's tax basis in) the Foreign Currency
Note.
A United States Holder's tax basis in Foreign Currency received as interest
on (or OID with respect to), or received on the sale, exchange, retirement or
other disposition of, a Foreign Currency Note will be the U.S. dollar value
thereof at the spot rate at the time the holder received such Foreign Currency.
Any gain or loss recognized by a United States Holder on a sale, exchange,
retirement or other disposition of Foreign Currency will be ordinary income or
loss and will not be treated as interest income or expense, except to the extent
provided in Treasury Regulations or administrative pronouncements of the IRS.
INDEXED NOTES
The tax treatment of a United States Holder will depend on factors
including the specific index or indices used to determine any indexed payments
on Notes and the amount and timing of any contingent payments of principal and
interest. Persons considering the purchase of Indexed Notes should carefully
examine the applicable Pricing Supplement and should consult their own tax
advisors regarding the United States federal income tax consequences of the
holding and disposition of such Notes.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any paying agent of
principal or interest (which for purposes of this discussion includes OID)
on a Note owned by a Non-United States Holder, provided (i) that the
beneficial owner does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote within the meaning of section 871(h)(3) of the Code and the
regulations thereunder, (ii) the beneficial owner is not a controlled
foreign corporation that is related to the Company through stock ownership,
(iii) the beneficial owner is not a bank whose receipt of interest on a
Note is described in section 881(c)(3)(A) of the code, (iv) the beneficial
owner satisfies the statement requirement (described generally below) set
forth in section 871(h) and section 881(c) of the Code and the regulations
thereunder and (v) such interest is not considered contingent interest
under section 871(h)(4)(A) of the Code and the regulations thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange, retirement or other disposition of a Note;
and
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(c) a Note beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote within the meaning of section 871(h)(3) of the code and provided
that the interest payments with respect to such Note would not have been,
if received at the time of such individual's death, effectively connected
with the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner is
not a United States person. Currently, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an IRS Form W-8 (or successor form)) or (2) a financial institution
holding the Note on behalf of the beneficial owner certifies, under penalties of
perjury, that such statement has been received by it and furnishes a paying
agent with a copy thereof. Under recently finalized Treasury regulations (the
"Final Regulations"), the statement requirement referred to in (a)(iv) above may
also be satisfied with other documentary evidence for interests paid after
December 31, 1998 with respect to an offshore account or through certain foreign
intermediaries.
If a non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of premium, if
any, and interest (including OID) made to such non-United States Holder will be
subject to a 30% withholding tax unless the beneficial owner of the Note
provides the Company or its paying agent, as the case may be, with a properly
executed (1) IRS Form 1001 (or successor form) claiming an exemption from
withholding under the benefit of a tax treaty or (2) IRS Form 4224 (or successor
form) stating that interest paid on the Note is not subject to withholding tax
because it is effectively connected with the beneficial owner's conduct of a
trade or business in the United States. Under the Final Regulations, Non-United
States Holders will generally be required to provide IRS Form W-8 in lieu of IRS
Form 1001 and IRS Form 4224, although alternative documentation may be
applicable in certain situations.
If a non-United States Holder is engaged in a trade or business in the
United States and premium, if any, or interest (including OID) on the Note is
effectively connected with the conduct of such trade or business, the non-United
States Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest and OID on a net
income basis in the same manner as if it were a United States Holder. In
addition, if such holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its effectively connected earnings and profits for
the taxable year, subject to adjustments. For this purpose, such premium, if
any, and interest (including OID) on a Note will be included in such foreign
corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with a trade
or business in the United States of the Non-United States Holder, or (ii) in the
case of a Non-United States Holder who is an individual, such individual is
present in the United States for 183 days or more in a taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on Notes and to the
proceeds of sale of a Note made to United States Holders other than certain
exempt recipients (such as corporations). A 31 percent backup withholding tax
will apply to such payments if the United States Holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-United States
Holders if a statement described in (a)(iv) under "Non-
S-30
<PAGE> 31
United States Holders" has been received and the payor does not have actual
knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, OID or premium on a Note are paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such Note, or if a foreign office of a broker
(as defined in applicable Treasury regulations) pays the proceeds of the sale of
a Note to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for United States federal income tax purposes, a United States
person, a controlled foreign corporation or a foreign person that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, or, after December 31, 1998, if such nominee,
custodian, agent or broker is a foreign partnership, in which one or more United
States persons, in the aggregate, own more than 50% of the income or capital
interests in the partnership or if the partnership is engaged in a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner is not a United States person and certain other conditions
are met or (2) the beneficial owner otherwise establishes an exemption.
Payments of principal, interest, OID and premium on a Note paid to the
beneficial owner of a Note by a United States office of a custodian, nominee or
agent, or the payment by the United States office of a broker of the proceeds of
sale of a Note, will be subject to both backup withholding and information
reporting unless the beneficial owner provides the statement referred to in
(a)(iv) above and the payor does not have actual knowledge that the beneficial
owner is a United States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
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 or,
if so specified in the applicable Pricing Supplement, for resale at a fixed
public offering price. 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. Unless otherwise
specified in the applicable Pricing Supplement, 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 Date. 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.
An Agent may sell Notes it has purchased from the Company as principal to
other dealers for resale to investors, and may allow any portion of the discount
received in connection with such purchases from the Company to such dealers.
After the initial public offering of such Notes, the public offering price (in
the case of Notes to be resold at a fixed public offering price), the concession
and the discount allowed to dealers may be changed.
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.
S-31
<PAGE> 32
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.
In connection with the offering of the Notes purchased by one or more of
the Agents as principal on a fixed price offering basis, such Agent(s) will be
permitted to engage in certain transactions that stabilize the price of the
Notes. Such transactions may consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes. If the Agent or Agents
creates or create, as the case may be, a short position in such Notes (i.e., if
it sells or they sell Notes in an aggregate principal amount exceeding that set
forth in the applicable Pricing Supplement), then such Agent(s) may reduce that
short position by purchasing Notes in the open market. These activities may
stabilize, maintain or otherwise affect the market price of the Notes, which may
be higher than the price that might otherwise prevail in the open market, and
these activities, if commenced, may be effected in the over-the-counter market
or otherwise.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Act, or contribute to payments such Agent may be required to make in respect
thereof.
S-32
<PAGE> 33
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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
Ratio of Earnings to Fixed Charges... S-2
Description of Notes................. S-3
Special Provisions Relating to
Foreign Currency Notes............. S-19
Foreign Currency Risks............... S-22
Certain United States Federal Income
Tax Considerations................. S-23
Plan of Distribution................. S-31
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>
$1,000,000,000
LOGO
MEDIUM TERM
SENIOR NOTES, SERIES J
AND
MEDIUM TERM
SUBORDINATED NOTES, SERIES A
PROSPECTUS SUPPLEMENT
DATED
APRIL 29, 1998
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