<PAGE> 1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 21, 1995
$400,000,000
[LOGO] THE QUAKER OATS COMPANY
MEDIUM-TERM NOTES, SERIES D
DUE FROM 2 YEARS TO 30 YEARS FROM DATE OF ISSUE
------------------------
The Company may offer from time to time its Medium-Term Notes, Series D, due
2 years to 30 years from the date of issue, as selected by the purchaser and
agreed to by the Company, at an aggregate initial public offering price not to
exceed $400,000,000.
The Notes will be denominated in U.S. dollars. The specific interest rate
(if any), index (if any), issue price and maturity date of any Note will be set
forth in the applicable Pricing Supplement to this Prospectus Supplement. See
"Description of Notes".
Unless otherwise specified in the applicable Pricing Supplement, interest on
the Fixed Rate Notes will be payable on each March 15 and September 15 and at
maturity or any earlier redemption or repayment date. Interest on the Floating
Rate Notes or Indexed Notes will be payable on the dates specified therein and
in the applicable Pricing Supplement. Floating Rate Notes will bear interest at
a rate determined by reference to the Commercial Paper Rate, Prime Rate, LIBOR,
Treasury Rate, CD Rate, Federal Funds Rate or other base rate, as adjusted by a
Spread and/or Spread Multiplier, if any, applicable to such Notes. Indexed Notes
may be issued with the principal amount payable at maturity, or the amount of
interest payable on any interest payment date, to be determined by reference to
a currency exchange rate, composite currency, commodity price or other financial
or non-financial index to be set forth in the applicable Pricing Supplement.
Zero Coupon Notes will not bear interest. The Notes may be offered with
provisions for renewal, extension or the reset of interest rates, as indicated
therein and in the applicable Pricing Supplement. The Notes may be sold with
original issuance discount and may provide for amortization as indicated therein
and in the applicable Pricing Supplement.
Unless a Redemption Date or repayment date is specified in the applicable
Pricing Supplement, the Notes will not be redeemable or repayable prior to their
Stated Maturity. If a Redemption Date or repayment date is so specified with
respect to any Note, the Notes will be redeemable at the option of the Company,
or repayable at the option of the Holder, as described herein and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
offered hereby will be issued in definitive or book-entry form in a minimum
denomination of $100,000 and integral multiples of $1,000 in excess thereof. See
"Description of Notes".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(2)(3)
-------------- ----------------------- ---------------------------
<S> <C> <C> <C>
Per Note........................... 100% .250%-.750% 99.750%-99.250%
Total.............................. $400,000,000 $1,000,000-$3,000,000 $399,000,000-$397,000,000
</TABLE>
- ------------
(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) The Company will pay the Agents a commission of from .250% to .750%,
depending on maturity, of the principal amount of any Notes sold through
them as agents (or sold to such Agents as principal in circumstances in
which no other discount is agreed). The Company may sell Notes to any Agent
at a discount or premium for resale to one or more investors at varying
prices related to prevailing market prices at a time of resale, as
determined by such Agent, or at a fixed public offering price. The Company
has agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $300,000 payable by the Company.
------------------------
Offers to purchase Notes are being solicited, on a best efforts basis, from
time to time on a continuing basis by the Agents on behalf of the Company. Notes
may be sold to the Agents on their own behalf at negotiated discounts. The
Company reserves the right to sell Notes directly on its own behalf. The Company
also reserves the right to withdraw, cancel or modify the offering contemplated
hereby without notice. No termination date for the offering of the Notes has
been established. The Company or the Agents may reject any order in whole or in
part. See "Supplemental Plan of Distribution".
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LAZARD FRERES & CO.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
------------------------
The date of this Prospectus Supplement is April 21, 1995.
<PAGE> 2
IN CONNECTION WITH THE DISTRIBUTION OF THE NOTES, THE AGENTS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS IN THE NOTES WITH A VIEW TO STABILIZING OR MAINTAINING
THE MARKET PRICES OF THE NOTES AT LEVELS OTHER THAN THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN ANY
OVER-THE-COUNTER MARKET OR OTHERWISE AND, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
RECENT DEVELOPMENTS
On December 6, 1994, the Company acquired Snapple Beverage Corp.
("Snapple") for $1.7 billion cash, or the equivalent of $14 per share of Snapple
stock. Snapple, with annual sales of nearly $700 million for calendar 1994, is a
leader in the single-serve iced tea and fruit juice drink categories.
On February 6, 1995, the Company announced a definitive agreement to sell
its North American pet food business to H. J. Heinz Company for $725 million.
The North American pet food business's annual sales were approximately $570
million in fiscal 1994. Major brands include Kibbles'n Bits, Cycle, Gravy Train,
and Ken-L Ration. The transaction closed on March 14, 1995.
On February 3, 1995, the Company announced a definitive agreement to sell
its European pet food business to Dalgety PLC for $700 million. The Company's
European pet food business is the second-largest supplier of brand-name pet
foods in Europe with sales of approximately $800 million in fiscal 1994. Major
brands include Bonzo dog food and Felix cat food. On March 13, 1995, the
European Commission approved the purchase of the European pet food business by
Dalgety PLC.
On December 16, 1994, the Company announced a definitive agreement with
Nescalin S.A. de C.V., a subsidiary of Nestle S.A., for the sale of the
Company's Mexican chocolate business, Fabrica de Chocolates La Azteca S.A. de
C.V. ("La Azteca"). The price was undisclosed. La Azteca is the leading
manufacturer and marketer of chocolate products in Mexico with sales of
approximately $100 million in fiscal 1994. Major brands include Carlos V,
Abuelita, Freskas, Larin Seeds and Tin Larin.
On November 18, 1994, the Company acquired from Borden, Inc. the shares of
Adria Produtos Alimentos Ltda. ("Adria"), the leading pasta manufacturer in
Brazil. The price was undisclosed. Adria's annual sales are approximately $75
million. Major brands include Adria, Italianissimo, Soltinho and Raineri.
On March 8, 1995, the Company announced that the pending divestitures of
its European and North American pet food businesses will necessitate further
realignment of physical and human resources for its existing businesses and will
likely result in a charge in the fourth quarter of fiscal 1995. These measures
are to reduce overhead expenditures and will include the elimination of close to
600 positions. The amount of the charge is expected to be approximately $75 to
$90 million, or $0.35 to $0.40 per share.
The divestitures of the European pet food and Mexican chocolate businesses
referred to above are subject to certain conditions precedent, including, with
respect to the Mexican chocolate business, the receipt of appropriate regulatory
approvals. There can be no assurance that either of these divestitures will
close.
On December 18, 1990, Judge Prentice H. Marshall of the United States
District Court for the Northern District of Illinois issued a memorandum opinion
stating that the Court would enter judgment against the Company in favor of
Sands, Taylor & Wood Co. The Court found that the use of the words "thirst aid"
in advertising Gatorade thirst quencher infringed the Plaintiff's rights in the
trademark THIRST-AID. On July 9, 1991, Judge Marshall entered a judgment of
$42.6 million, composed of $31.4 million in principal, plus prejudgment interest
of $10.6 million and fees, expenses and costs of $0.6 million. The order
enjoined use of the phrase "THIRST-AID" in connection with the advertising or
sale of Gatorade thirst quencher in the United States. The Company subsequently
appealed the judgment. On September 2, 1992, the Court of Appeals for the
Seventh Circuit vacated the monetary award component of the District Court's
judgment. The appellate court affirmed the finding of infringement, but found
that the monetary award was an inequitable "windfall" to the Plaintiff. The case
was remanded to the District Court for further proceedings. The Company filed a
S-2
<PAGE> 3
request for rehearing that was denied. The Company also filed a Petition for
Certiorari with the U.S. Supreme Court that was denied. On June 7, 1993, Judge
Marshall issued a judgment on remand of $26.5 million, composed of $20.7 million
in principal, prejudgment interest of $5.4 million and fees, expenses and costs
of $0.4 million. The Company appealed this judgment to the Court of Appeals for
the Seventh Circuit. On September 13, 1994, the Court of Appeals for the Seventh
Circuit rendered an opinion affirming in part and remanding in part the District
Court's judgment on remand of a $26.5 million monetary award. The Court of
Appeals has affirmed the lower court's award of a reasonable royalty, but has
again remanded the case to allow the District Court to explain the basis for and
calculation of its royalty award. On April 11, 1995, Judge Marshall ruled again,
affirming his prior ruling, and the Company plans to appeal again. Management,
with advice from outside legal counsel, has determined that the Court of
Appeals' opinion appears to indicate a range of exposure between $16 million and
$27 million. The Company has recorded a reserve of $18.4 million for this
litigation in the first quarter of fiscal 1995. No amount had previously been
recorded for this matter.
CAPITALIZATION
The following table sets forth the Company's actual capitalization and pro
forma capitalization as of December 31, 1994.
<TABLE>
<CAPTION>
SIGNIFICANT
SUBSIDIARY ALL
CLOSED SIGNIFICANT
TRANSACTION TRANSACTIONS
ACTUAL PRO FORMA(1) PRO FORMA(1)
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(IN MILLIONS OF DOLLARS) 1994 1994 1994
- ------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Short-term debt, including current portion of
long-term debt....................................... $ 1,931.7 $ 1,406.7 $ 944.3
Long-term debt......................................... 1,025.9 1,025.9 1,025.9
Preferred stock(2)..................................... 100.0 100.0 100.0
Treasury preferred stock............................... (4.9) (4.9) (4.9)
Deferred compensation.................................. (78.1) (78.1) (78.1)
Common shareholders' equity:
Common stock(2)...................................... 840.0 840.0 840.0
Reinvested earnings.................................. 867.6 1,196.5 1,487.0
Cumulative exchange adjustment....................... (90.0) (90.0) (90.5)
Deferred compensation................................ (133.1) (133.1) (133.1)
Treasury common stock, at cost....................... (1,031.8) (1,031.8) (1,031.8)
------------ ------------ ------------
Total common shareholders' equity............ $ 452.7 $ 781.6 $ 1,071.6
=========== =========== ===========
Total capitalization and short-term
debt.................................. $ 3,427.3 $ 3,231.2 $ 3,058.8
=========== =========== ===========
</TABLE>
- ---------------
Notes:
(1) Pro forma information provides estimated capitalization as if certain
transactions that had not closed as of December 31, 1994 had taken place as
of December 31, 1994. The pro forma information should be read in
conjunction with the Company's Current Report on Form 8-K filed on December
19, 1994, Amendment No. 1 thereto filed on February 17, 1995 and Current
Reports on Form 8-K filed on March 29, 1995 and April 18, 1995, which
include the detailed information supporting the above pro forma amounts. The
significant subsidiary closed transaction pro forma information reflects the
North American pet food business divestiture, and the related pro forma
adjustments. The all significant transactions pro forma information reflects
the significant subsidiary closed transaction, plus the pending European pet
food business divestiture, and the related pro forma adjustments. The pro
forma information includes estimates that are subject to change once the
pending divestiture transaction has been finalized. The pending divestiture
transaction is subject to certain conditions precedent. There can be no
assurance that the divestiture will close. Pro forma information does not
include the expected restructuring charge of approximately $75 to $90
million, or $.35 to $.40 per share, announced on March 8, 1995.
(2) The Company has authority to issue 400,000,000 shares of common stock with a
par value of $5.00 per share, 1,000,000 shares of preference stock without
par value and 10,000,000 shares of preferred stock without par value.
S-3
<PAGE> 4
SELECTED FINANCIAL DATA
THE QUAKER OATS COMPANY AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes selected financial information of the Company.
Annual income information is derived from the Company's audited financial
statements.
<TABLE>
<CAPTION>
PRO FORMA(1)
SIX MONTHS ENDED DECEMBER PRO FORMA(1)
31, 1994 YEAR ENDED JUNE 30, 1994
-------------------------- ACTUAL ---------------------------
(IN MILLIONS OF DOLLARS, SIGNIFICANT SIX MONTHS ENDED SIGNIFICANT
EXCEPT PER COMMON SHARE SUBSIDIARY ALL ------------------- SUBSIDIARY ALL
DATA AND RATIO OF EARNINGS CLOSED SIGNIFICANT DEC. 31, DEC. 31, CLOSED SIGNIFICANT
TO FIXED CHARGES) TRANSACTIONS TRANSACTIONS 1994(2) 1993 TRANSACTIONS TRANSACTIONS
- -------------------------------------------------- ------------ ------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales from continuing operations............ $3,139.4 $2,716.6 $3,144.3 $2,888.2 $6,082.1 $5,304.2
Income from continuing operations before
cumulative effect of accounting changes....... $ 46.4 $ 44.5 $ 95.8 $ 134.2 $ 189.2 $ 187.3
(Loss) from discontinued operations............. -- --
Cumulative effect of accounting changes(8)...... (4.1) --
-------- --------
Net income...................................... $ 91.7 $ 134.2
-------- --------
PER COMMON SHARE DATA:(9)
Income from continuing operations before
cumulative effect of accounting changes....... $ 0.33 $ 0.32 $ 0.70 $ 0.97 $ 1.37 $ 1.36
(Loss) from discontinued operations.............
Cumulative effect of accounting changes(8)...... (0.03) --
-------- --------
Net income...................................... $ 0.67 $ 0.97
-------- --------
RATIO OF EARNINGS TO FIXED CHARGES(10)............ 2.0X 2.2X 4.2X 5.8X 2.8X 3.1X
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets.................................... $4,819.7 $4,477.7 $5,061.1 $2,805.2 $4,776.4 $4,450.4
Current assets.................................. $1,319.6 $1,129.3 $1,356.9 $ 991.2 $1,451.3 $1,274.5
Current liabilities (excluding short-term
debt)......................................... $1,025.5 $ 889.2 $1,042.1 $ 741.7 $1,169.9 $1,054.6
Short-term debt................................. $1,406.7 $ 944.3 $1,931.7 $ 338.9 $1,206.6 $ 742.8
Long-term debt.................................. $1,025.9 $1,025.9 $1,025.9 $ 708.4 $1,071.7 $1,071.7
Common shareholders' equity..................... $ 781.6 $1,071.6 $ 452.7 $ 437.4 $ 767.8 $1,055.5
<CAPTION>
(IN MILLIONS OF DOLLARS, ACTUAL
EXCEPT PER COMMON SHARE YEAR ENDED JUNE 30,
DATA AND RATIO OF EARNINGS ----------------------------------------------------
TO FIXED CHARGES) 1994(3) 1993(4) 1992(5) 1991(6) 1990(7)
- -------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales from continuing operations............ $5,955.0 $5,730.6 $5,576.4 $5,491.2 $5,030.6
Income from continuing operations before
cumulative effect of accounting changes....... $ 231.5 $ 286.8 $ 247.6 $ 235.8 $ 228.9
(Loss) from discontinued operations............. -- -- -- (30.0) (59.9)
Cumulative effect of accounting changes(8)...... -- (115.5) -- -- --
-------- -------- -------- -------- --------
Net income...................................... $ 231.5 $ 171.3 $ 247.6 $ 205.8 $ 169.0
-------- -------- -------- -------- --------
PER COMMON SHARE DATA:(9)
Income from continuing operations before
cumulative effect of accounting changes....... $ 1.68 $ 1.96 $ 1.63 $ 1.53 $ 1.47
(Loss) from discontinued operations............. -- -- -- (0.20) (0.40)
Cumulative effect of accounting changes(8)...... -- (0.79) -- -- --
-------- -------- -------- -------- --------
Net income...................................... $ 1.68 $ 1.17 $ 1.63 $ 1.33 $ 1.07
-------- -------- -------- -------- --------
RATIO OF EARNINGS TO FIXED CHARGES(10)............ 4.4X 6.8X 5.4X 4.5X 3.8X
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets.................................... $3,043.3 $2,815.9 $3,039.9 $3,060.5 $3,377.4
Current assets.................................. $1,253.6 $1,067.6 $1,256.2 $1,302.5 $1,532.6
Current liabilities (excluding short-term
debt)......................................... $1,002.4 $ 928.2 $ 968.6 $ 871.2 $ 814.3
Short-term debt................................. $ 256.7 $ 176.9 $ 118.9 $ 113.5 $ 375.5
Long-term debt.................................. $ 759.5 $ 632.6 $ 688.7 $ 701.2 $ 740.3
Common shareholders' equity..................... $ 445.8 $ 551.1 $ 842.1 $ 901.0 $1,017.5
</TABLE>
(See footnotes on following page)
S-4
<PAGE> 5
- ---------------
Notes:
(1) Pro forma results present historical financial information as if certain
transactions had taken place in previous periods. The pro forma information
should be read in conjunction with the Company's Current Report on Form 8-K
filed on December 19, 1994, Amendment No. 1 thereto filed on February 17,
1995 and Current Reports on Form 8-K filed on March 29, 1995 and April 18,
1995, which include the detailed information supporting the above pro forma
amounts. The significant subsidiary closed transactions pro forma
information reflects the Snapple acquisition and the North American pet
food business divestiture, and the related pro forma adjustments. The all
significant transactions pro forma information reflects the significant
subsidiary closed transactions, plus the pending European pet food business
divestiture, and the related pro forma adjustments. All pro forma income
statement information presents results as if the transactions occurred at
the beginning of each period. The pro forma balance sheet information
presents financial position as if the transactions that had not closed as
of the balance sheet date had occurred on those dates.
The pro forma results are not necessarily indicative of what actually would
have occurred if the transactions had been completed in accordance with the
described assumptions, nor are they necessarily indicative of future
consolidated results. The divestiture of the European pet food business is
subject to certain conditions precedent. There can be no assurance that the
divestiture will close. Pro forma information does not include the expected
restructuring charge of approximately $75 to $90 million, or $.35 to $.40
per share, announced on March 8, 1995.
(2) Fiscal 1995 results include a pretax provision of $18.4 million for
estimated litigation costs. Results include Snapple from the date of
acquisition, December 6, 1994.
(3) Fiscal 1994 results include a pretax restructuring charge of $118.4
million, or $.55 per share, for workforce reductions, plant consolidations
and product discontinuations and a pretax gain of $9.8 million, or $.07 per
share, for the sale of a business in Venezuela.
(4) Fiscal 1993 results include:
a. a pretax charge of $38.6 million, or $.18 per share, related to the
consolidation of production facilities at a U.S. pet foods plant;
b. a pretax gain of $17.4 million, or $.07 per share, for the sale of two
businesses in Italy;
c. a pretax gain of $10.4 million, or $.06 per share, for the sale of a
business in the United Kingdom; and
d. a pretax charge of $9.7 million, or $.04 per share, for cost reduction
programs in Europe.
(5) Fiscal 1992 results include a pretax gain of $11.0 million on the sale of a
U.S. chocolate business offset by $10.0 million in pretax restructuring
charges, which net to a $.01 per share credit.
(6) Fiscal 1991 results include a pretax charge of $10.0 million, or $.04 per
share, for the closing of a Golden Grain pasta manufacturing facility.
(7) Fiscal 1990 results include a pretax credit of $17.5 million, or $.09 per
share, for the partial reversal of a fiscal 1989 restructuring charge for a
planned European pet foods manufacturing consolidation.
(8) Fiscal 1995 cumulative effect of accounting changes includes an after-tax
charge of $4.1 million, or $.03 per share, for the adoption of FASB
Statement #112, "Employers' Accounting for Postemployment Benefits." Fiscal
1993 cumulative effect of accounting changes includes an after-tax charge
of $125.4 million, or $.86 per share, for the adoption of FASB Statement
#106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and a $9.9 million tax benefit, or $.07 per share, for the
adoption of FASB Statement #109, "Accounting for Income Taxes."
(9) All per share information has been retroactively restated for the November
1994 two-for-one stock split-up.
(10) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income from continuing operations before income taxes and
cumulative effect of accounting changes plus fixed charges. Fixed charges
represent interest (whether expensed or capitalized), amortization of debt
expense and discount or premium relating to any indebtedness (whether
capitalized or expensed) and the portion deemed representative of the
interest factor of rents.
S-5
<PAGE> 6
DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Medium-Term Notes,
Series D offered hereby (the "Notes") (referred to in the Prospectus as the
"Securities") supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Securities set forth
in the Prospectus, to which description reference is hereby made. The terms and
conditions set forth below will apply to each Note unless otherwise specified in
the applicable Pricing Supplement or in the applicable Note. Selected
capitalized terms are defined for the purposes of this Prospectus Supplement in
the Glossary starting at S-30.
The Notes constitute a single series for purposes of the indenture dated as
of May 1, 1989 (the "Indenture") and are limited in amount as set forth on the
cover page hereof, less an amount equal to the aggregate proceeds to the Company
from the sale of any other Securities (as defined in the Prospectus) issued from
time to time, including any other series of medium-term notes. The foregoing
limit, however, may be increased by the Company if in the future it determines
that it may wish to sell additional Notes. For a description of the rights
attaching to different series of Securities under the Indenture, see
"Description of Securities" in the Prospectus.
Unless previously redeemed, a Note will mature on the date ("Stated
Maturity") from 2 years to 30 years from its date of issue that is specified on
the face thereof and in the applicable Pricing Supplement or, if such Note is a
Floating Rate Note and such specified date is not a Market Day with respect to
such Note, the next succeeding Market Day (or, in the case of a LIBOR Note, if
such next succeeding Market Day falls in the next calendar month, the next
preceding Market Day). "Market Day" means (a) with respect to any Note (other
than any LIBOR Note), any Business Day in The City of New York, and (b) with
respect to any LIBOR Note, any such Business Day on which dealings in deposits
in U.S. dollars are transacted in the London interbank market.
Each Note will be represented by either a global security (a "Global
Security") registered in the name of a nominee of the Depositary (each such Note
represented by a Global Security being herein referred to as a "Book-Entry
Note") or a certificate issued in definitive registered form, without coupons (a
"Certificated Note") as set forth in the applicable Pricing Supplement. Except
as set forth under "Book-Entry System" below, Book-Entry Notes will not be
issuable in certificated form. So long as the Depositary or its nominee is the
registered owner of any Global Security, the Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Book-Entry Note
or Notes represented by such Global Security for all purposes under the
Indenture and the Book-Entry Notes. See "Book-Entry System" below.
Unless otherwise indicated in the applicable Pricing Supplement, the
authorized denominations of any Note will be $100,000 and integral multiples of
$1,000 in excess thereof.
Notes will be sold in individual issues of Notes having such interest rate
or interest rate formula, if any, Stated Maturity and date of original issuance
as shall be selected by the initial purchasers and agreed to by the Company.
Unless otherwise indicated in the applicable Pricing Supplement, each Note,
except any Zero Coupon Note, will bear interest at a fixed rate or at a rate
determined by reference to the Commercial Paper Rate, the Prime Rate, LIBOR, the
Treasury Rate, the CD Rate or the Federal Funds Rate, as adjusted by the Spread
and/or Spread Multiplier, if any, applicable to such Note. See "Interest Rate"
below. "Zero Coupon Notes" are Notes that are issued at a discount from the
principal amount payable at maturity thereof and on which Holders do not receive
periodic payments of interest.
The Notes may be issued as Original Issue Discount Notes. See "Description
of Notes -- Original Issue Discount Notes". See also "United States
Taxation -- Tax Consequences to United States Holders -- Original Issue Discount
Notes" for the United States federal tax consequences of holding such Notes.
S-6
<PAGE> 7
The Notes may also be issued as Amortizing Notes. See "Amortizing Notes"
below.
The Notes may be issued as indexed notes, the principal amount of which is
payable at or prior to maturity, the interest on which and/or any premium
payable with respect to which, will be determined by reference to the difference
in the price of a specified security or commodity on certain specified dates, a
securities or commodities index or by some other index or indices ("Indexed
Notes"). See "Indexed Notes" below. Holders of such Notes may receive a
principal amount at maturity that is greater than or less than the face amount
of the Note depending upon the relative values of the applicable reference
currencies, securities and/or indices. Information as to the method for
determining the principal amount payable at maturity, the relative value of the
reference currencies, securities and/or indices and certain additional tax
considerations will be set forth in the applicable Pricing Supplement.
The Notes will constitute unsecured and unsubordinated indebtedness of the
Company and will rank pari passu with the Company's other unsecured and
unsubordinated indebtedness.
The defeasance provisions of the Indenture described under "Description of
Securities -- Defeasance of the Indenture and Securities" in the Prospectus will
apply to the Notes.
Certificated Notes may be presented for registration of transfer or
exchange at the Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York.
INTEREST RATE
Unless otherwise indicated in the applicable Pricing Supplement, each Note,
other than a Zero Coupon Note, will bear interest from its date of issue or from
the most recent Interest Payment Date (or, if such Note is a Floating Rate Note
and the Interest Reset Dates are weekly, from the day following the most recent
Regular Record Date) to which interest on such Note has been paid or duly
provided for at the fixed rate per annum, or at the rate per annum determined
pursuant to the interest rate formula, stated therein and in the applicable
Pricing Supplement until the principal thereof is paid or made available for
payment. Interest will be payable on each Interest Payment Date and at maturity
as specified under "Payment of Principal and Interest" below.
Each Note, other than a Zero Coupon Note, will bear interest at either (a)
a fixed rate (a "Fixed Rate Note") or (b) a variable rate determined by
reference to an interest rate formula (a "Floating Rate Note"), which may be
adjusted by adding or subtracting the Spread and/or multiplying by the Spread
Multiplier. A Floating Rate Note may also have either or both of the following:
(a) a maximum numerical interest rate limitation, or ceiling, on the rate of
interest which may accrue during any interest period (a "Maximum Rate"); and (b)
a minimum numerical interest rate limitation, or floor, on the rate of interest
which may accrue during any interest period (a "Minimum Rate"). The "Spread" is
the number of basis points specified in the applicable Pricing Supplement as
being applicable to the interest rate for such Note and the "Spread Multiplier"
is the percentage specified in the applicable Pricing Supplement as being
applicable to the interest rate for such Note. "Index Maturity" means, with
respect to a Floating Rate Note, the period to maturity of the instrument or
obligation on which the interest rate formula is based, as indicated in the
applicable Pricing Supplement. Unless otherwise provided in the applicable
Pricing Supplement, The First National Bank of Chicago will be the calculation
agent (the "Calculation Agent") with respect to the Floating Rate Notes.
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note.
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis (the "Interest Rate Basis") for such Floating
Rate Note. The Interest Rate Basis for each Floating Rate Note will be: (a) the
Commercial Paper Rate, in which case such Note will be a "Commercial Paper Rate
Note"; (b) the Prime Rate, in which case such Note will be a "Prime Rate Note";
(c) LIBOR, in which case such Note will be a "LIBOR Note"; (d) the Treasury
Rate, in which case such Note will be a "Treasury Rate Note";
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(e) the CD Rate, in which case such Note will be a "CD Rate Note"; (f) the
Federal Funds Rate, in which case such Note will be a "Federal Funds Rate Note";
or (g) such other interest rate formula as is set forth in such Pricing
Supplement. The applicable Pricing Supplement for a Floating Rate Note will
specify the Interest Rate Basis and, if applicable, the Calculation Agent, the
Index Maturity, the Spread and/or Spread Multiplier, the Maximum Rate, the
Minimum Rate, the Initial Interest Rate, the Interest Payment Dates, the Regular
Record Dates, the Calculation Date, the Interest Determination Date and the
Interest Reset Date with respect to such Note.
The rate of interest on each Floating Rate Note will be reset weekly,
monthly, quarterly, semi-annually or annually (each an "Interest Reset Date"),
as specified in the applicable Pricing Supplement. The Interest Reset Date will
be, in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week; 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 semiannually, the
third Wednesday of two months of each year as specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset annually,
the third Wednesday of one month of each year as specified in the applicable
Pricing Supplement; provided, however, that (a) the interest rate in effect from
the date of issue to the first Interest Reset Date with respect to a Floating
Rate Note will be the "Initial Interest Rate" (as set forth in the applicable
Pricing Supplement) and (b) the interest rate in effect for the ten days
immediately prior to maturity of a Note will be that in effect on the tenth day
preceding such maturity. If any Interest Reset Date for any Floating Rate Note
would otherwise be a day that is not a Market Day with respect to such Floating
Rate Note, the Interest Reset Date for such Floating Rate Note shall be
postponed to the next day that is a Market Day with respect to such Floating
Rate Note, except that in the case of a LIBOR Note, if such Market Day is in the
next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, the
Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Rate Interest Determination
Date"), for a Prime Rate Note (the "Prime Rate Interest Determination Date"),
for a CD Rate Note (the "CD Rate Interest Determination Date"), and for a
Federal Funds Rate Note (the "Federal Funds Rate Interest Determination Date")
will be the Interest Reset Date. The Interest Determination Date pertaining to
an Interest Reset Date for a LIBOR Note (the "LIBOR Interest Determination
Date") will be the second Market Day preceding such Interest Reset Date. The
Interest Determination Date pertaining to an Interest Reset Date for a Treasury
Rate Note (the "Treasury Rate Interest Determination Date") will be the day of
the week in which such Interest Reset Date falls on which Treasury bills would
normally be auctioned. Treasury bills are usually sold at auction on the Monday
of each week, unless that day is a legal holiday, in which case the auction is
usually held on the following Tuesday, except that such auction may be held on
the preceding Friday. If, as the result of a legal holiday, an auction is so
held on the following Tuesday, such Tuesday will be the Treasury Rate Interest
Determination Date. If, as the result of a legal holiday, an auction is so held
on the preceding Friday, such Friday will be the Treasury Rate Interest
Determination Date pertaining to the Interest Reset Date occurring in the next
succeeding week. If an auction date shall fall on any Interest Reset Date for a
Treasury Rate Note, then such Interest Reset Date shall instead be the first
Market Day immediately following such auction date.
All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded upwards, if necessary, to the next higher
one hundred-thousandth of a percentage point with five one-millionths of a
percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to
9.87655% (or .0987655)), and all dollar amounts used in or resulting from such
calculations will be rounded to the nearest cent (with one half cent being
rounded upwards).
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In addition to any maximum interest rate which may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on the
Floating Rate Notes will in no event be higher than the maximum rate permitted
by New York law, as the same may be modified by United States law of general
application. Under present New York law the maximum rate of interest is 25% per
annum on a simple interest basis, with certain exceptions. The limit may not
apply to Floating Rate Notes in which $2,500,000 or more has been invested.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective on the next Interest Reset Date with
respect to such Floating Rate Note. The Calculation Agent's determination of any
interest rate will be final and binding in the absence of manifest error.
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 and/or
Spread Multiplier, if any), and will be payable on the dates specified on the
face of the Commercial Paper Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, the
"Calculation Date" pertaining to a Commercial Paper Rate Interest Determination
Date will be the tenth day after such Commercial Paper Rate Interest
Determination Date or, if any such day is not a Market Day, the next succeeding
Market Day.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Reset Date, the
Money Market Yield (calculated as described below) of the per annum rate (quoted
on a bank discount basis) for the relevant Commercial Paper Rate Interest
Determination Date for commercial paper having the specified Index Maturity as
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)") under the heading "Commercial Paper". In the event that such rate
is not published prior to 9:00 A.M., New York City time, on the relevant
Calculation Date, then the Commercial Paper Rate with respect to such Interest
Reset Date shall be the Money Market Yield of such rate on such Commercial Paper
Rate Interest Determination Date for commercial paper having the specified Index
Maturity as published by the Federal Reserve Bank of New York in its daily
statistical release, "Composite 3:30 P.M. Quotations for U.S. Government
Securities" or any successor publication published by the Federal Reserve Bank
of New York ("Composite Quotations") under the heading "Commercial Paper". If by
3:00 P.M., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, the Commercial Paper Rate
with respect to such Interest Reset Date shall be calculated by the Calculation
Agent and shall be the Money Market Yield of the arithmetic mean of the offered
per annum rates (quoted on a bank discount basis), as of 11:00 A.M., New York
City time, on such Commercial Paper Rate Interest Determination Date, of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper of the specified Index Maturity placed
for an industrial issuer whose bond rating is "AA", or the equivalent, from a
nationally recognized rating agency; provided, however, that if fewer than three
dealers selected as aforesaid by the Calculation Agent are quoting as mentioned
in this sentence, the Commercial Paper Rate with respect to such Interest Reset
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
<TABLE>
<S> <C> <C>
Money Market Yield = 100 X 360 X D
-----------------
360 - (DXM)
</TABLE>
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where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period corresponding to the specified Index Maturity.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any),
and will be payable on the dates specified on the face of the Prime Rate Note
and in the applicable Pricing Supplement. Unless otherwise indicated in the
applicable Pricing Supplement, the "Calculation Date" pertaining to a Prime Rate
Interest Determination Date will be the tenth day after such Prime Rate Interest
Determination Date or, if any such day is not a Market Day, the next succeeding
Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Reset Date, the rate set forth for the
relevant Prime Rate Interest Determination Date in H.15(519) under the heading
"Bank Prime Loan". In the event that such rate is not published prior to 9:00
A.M., New York City time, on the relevant Calculation Date, then the Prime Rate
with respect to such Interest Reset Date will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the display
designated as page "NYMF" on the Reuter Monitor Money Rates Service (or such
other page as may replace the NYMF page on that service for the purpose of
displaying prime rates or base lending rates of major United States banks)
("Reuters Screen NYMF Page") as such bank's prime rate or base lending rate as
in effect for such Prime Rate Interest Determination Date as quoted on the
Reuters Screen NYMF Page on such Prime Rate Interest Determination Date. If
fewer than four such rates appear on the Reuters Screen NYMF Page on such Prime
Rate Interest Determination Date, the Prime Rate with respect to such Interest
Reset Date will be the arithmetic mean of the prime rates or base lending rates
(quoted on the basis of the actual number of days in the year divided by a
360-day year) as of the close of business on such Prime Rate Interest
Determination Date by three major banks in The City of New York selected by the
Calculation Agent; provided, however, that if fewer than three banks selected as
aforesaid by the Calculation Agent are quoting as mentioned in this sentence,
the Prime Rate with respect to such Interest Reset Date will be the Prime Rate
in effect on such Prime Rate Interest Determination Date.
LIBOR NOTES
London Inter-Bank Offered Rate ("LIBOR") Notes will bear interest at the
interest rates (calculated with reference to LIBOR and the Spread and/or
Multiplier, if any), and will be payable on the dates specified on the face of
the LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined as of each Interest Determination Date relating to a LIBOR Note as
follows:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will
be, as specified in the applicable Note and Pricing Supplement, either (a)
the arithmetic mean of the offered rates for deposits in U.S. dollars
having the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following that
LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO
page as of 11:00 A.M., London time, on that LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters"), or (b) the rate for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following that
LIBOR Interest Determination Date, that appears on the Telerate Page 3750
as of 11:00 A.M., London time, on that LIBOR Interest Determination Date
("LIBOR Telerate"). "Reuters Screen LIBO Page" means the display designated
as page "LIBO" on the Reuters Monitor Money Rates Service (or such other
page as may replace the LIBO page on that service for the purpose of
displaying
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London interbank offered rates of major banks). "Telerate Page 3750" means
the display designated as page "3750" on the Telerate Service (or such
other page as may replace the 3750 page on that service or such other
service as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified in the
applicable Pricing Supplement, LIBOR will be determined as if LIBOR
Telerate had been specified. If fewer than two offered rates appear on the
Reuters Screen LIBO Page or, if no rate appears on the Telerate Page 3750,
as applicable, LIBOR in respect of that LIBOR Interest Determination Date
will be determined as if the parties had specified the rate described in
(ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page, as
specified in (i)(a) above, or on which no rate appears on Telerate Page
3750, as specified in (i)(b) above, as applicable, LIBOR will be determined
on the basis of the rates at which deposits in U.S. dollars having the
Index Maturity designated in the applicable Pricing Supplement are offered
at approximately 11:00 A.M., London time, on that LIBOR Interest
Determination Date by four major banks in London interbank market selected
by the Calculation Agent ("Reference Banks") to prime banks in the London
interbank market commencing on the second London Banking Day immediately
following that LIBOR Interest Determination Date and in a principal amount
equal to an amount of not less than $1,000,000 that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted at approximately 11:00 A.M., New
York City time, on that LIBOR Interest Determination Date by three major
banks in The City of New York selected by the Calculation Agent for loans
in U.S. dollars to leading European banks having the Index Maturity
designated in the applicable Note and Pricing Supplement commencing on the
second London Banking Day immediately following that LIBOR Interest
Determination Date and in a principal amount equal to an amount of not less
than $1,000,000 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 with respect to such LIBOR Interest Determination Date will
be LIBOR in effect on such date.
If LIBOR with respect to any LIBOR Note is indexed to the offered rate for
deposits in a Specified Currency other than U.S. dollars, the applicable Note
and Pricing Supplement will set forth the method of determining such rate of
interest.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any), and will be payable on the dates specified on the face of the Treasury
Rate Note and in the applicable Pricing Supplement. Unless otherwise indicated
in the applicable Pricing Supplement, the "Calculation Date" with respect to a
Treasury Rate Interest Determination Date will be the tenth day after such
Treasury Rate Interest Determination Date or, if any such day is not a Market
Day, the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Reset Date, the rate for the auction
on the relevant Treasury Rate Interest Determination Date of direct obligations
of the United States ("Treasury bills") having the specified Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Bills/Auction Average (Investment)" or, if not so published by 9:00 A.M., New
York City time, on the relevant Calculation Date, the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) for such auction as
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otherwise announced by the United States Department of the Treasury. In the
event that the results of such auction of Treasury bills having the specified
Index Maturity 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 during
such week, then the Treasury Rate shall be the rate set forth in H.15(519) for
the Treasury Rate Interest Determination Date for the specified Index Maturity
under the heading "U.S. Government Securities/Treasury Bills/Secondary Market".
In the event such rate is not so published by 3:00 P.M., New York City time, on
the relevant Calculation Date the Treasury Rate with respect to such Interest
Reset Date shall be calculated by the Calculation Agent and shall be a yield to
maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates as of approximately 3:30 P.M., New York City time, on
such Treasury Interest Determination Date, of three primary United States
government securities dealers in The City of New York selected by the
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if fewer than
three dealers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Treasury Rate with respect to such Interest
Reset Date will be the Treasury Rate in effect on such Treasury Interest
Determination Date.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any), and
will be payable on the dates specified on the face of the CD Rate Note and in
the applicable Pricing Supplement. Unless otherwise indicated in the applicable
Pricing Supplement, the "Calculation Date" pertaining to a CD Rate Interest
Determination Date will be the tenth day after such CD Rate Interest
Determination Date or, if such day is not a Market Day, the next succeeding
Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Reset Date, the rate for the relevant CD
Rate Interest Determination Date for negotiable certificates of deposit having
the specified Index Maturity as published in H.15(519) under the heading "CDs
(Secondary Market)". In the event that such rate is not published prior to 9:00
A.M., New York City time, on the relevant Calculation Date, then the CD Rate
with respect to such Interest Reset Date shall be the rate on such CD Rate
Interest Determination Date for negotiable certificates of deposit having the
specified Index Maturity as published in Composite Quotations under the heading
"Certificates of Deposit". If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, the CD Rate with respect to such Interest Reset Date shall be
calculated by the Calculation Agent and shall be the arithmetic mean of the
secondary market offered rates, as of 10:00 A.M., New York City time, on such CD
Rate Interest Determination Date, of three leading nonbank dealers of negotiable
U.S. dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money market banks with a remaining maturity closest to the specified Index
Maturity in a denomination of $5,000,000; provided, however, that if fewer than
three dealers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the CD Rate with respect to such Interest Reset Date
will be the CD Rate in effect on such CD Rate Interest Determination Date.
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 and/or
Spread Multiplier, if any), and will be payable on the dates specified on the
face of the Federal Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, the
"Calculation Date" pertaining to a Federal Funds Rate Interest Determination
Date will be the tenth day after such Federal Funds Rate Interest Determination
Date or, if such day is not a Market Day, the next succeeding Market Day.
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Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Reset Date, the rate on the
relevant Federal Funds Rate Interest Determination Date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)". In the
event that such rate is not published prior to 9:00 a.m., New York City time, on
the relevant Calculation Date, then the Federal Funds Rate with respect to such
Interest Reset Date will be the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, the Federal Funds Rate with respect to such Interest Reset Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean of
the rates, as of 9:00 a.m., New York City time, on such Federal Funds Rate
Interest Determination Date, for the last transaction in overnight Federal Funds
arranged by three leading brokers of Federal Funds transactions in The City of
New York selected by the Calculation Agent; provided, however, that if fewer
than three brokers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Federal Funds Rate with respect to such Interest
Reset Date will be the Federal Funds Rate in effect on such Federal Funds Rate
Interest Determination Date.
PAYMENT OF PRINCIPAL AND INTEREST
Interest and, in the case of Amortizing Notes, principal will be payable to
the person in whose name a Note is registered (which in the case of Global
Securities representing Book-Entry Notes will be the Depositary or a nominee of
the Depositary) at the close of business on the Regular Record Date next
preceding each Interest Payment Date; provided, however, that interest payable
at maturity will be payable to the person to whom principal shall be payable
(which in the case of Global Securities representing Book-Entry Notes will be
the Depositary or a nominee of the Depositary). The first payment of interest on
any Note originally issued between a Regular Record Date and an Interest Payment
Date will be made on the Interest Payment Date following the next succeeding
Regular Record Date to the registered owner on such next succeeding Regular
Record Date. Unless otherwise indicated in the applicable Pricing Supplement,
the "Regular Record Date" with respect to any Floating Rate Note shall be the
date 15 calendar days prior to each Interest Payment Date, whether or not such
date shall be a Business Day, and the "Regular Record Date" with respect to any
Fixed Rate Note shall be the March 1 and September 1 next preceding the March 15
and September 15 Interest Payment Dates.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
which reset weekly, on the third Wednesday of March, June, September and
December of each year; in the case of Floating Rate Notes which reset monthly,
on the third Wednesday of each month or on the third Wednesday of March, June,
September and December of each year (as indicated in the applicable Pricing
Supplement); in the case of Floating Rate Notes which reset quarterly, on the
third Wednesday of March, June, September and December of each year; in the case
of Floating Rate Notes which reset semi-annually, on the third Wednesday of the
two months of each year specified in the applicable Pricing Supplement; and in
the case of Floating Rate Notes which reset annually, on the third Wednesday of
the month specified in the applicable Pricing Supplement (each an "Interest
Payment Date"), and in each case, at maturity.
Payments of interest on any Fixed Rate Note or Floating Rate Note with
respect to any Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date; provided, however, that if the Interest
Reset Dates with respect to any Floating Rate Note are weekly, interest payable
on such Note on any Interest Payment Date, other than interest payable on the
date on which principal on any such Note is payable, will include interest
accrued to but excluding the day following the next preceding Regular Record
Date.
With respect to a Floating Rate Note, accrued interest from the date of
issue or from the last date to which interest has been paid is calculated by
multiplying the face amount of such Floating
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<PAGE> 14
Rate Note by an accrued interest factor. Such accrued interest factor is
computed by adding the interest factor calculated for each day from the date of
issue, or from the last date to which interest has been paid, to but excluding
the date for which accrued interest is being calculated. The interest factor
(expressed as a decimal) for each such day is computed by dividing the interest
rate (expressed as a decimal) applicable to such date by 360, in the case of
Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes or
Federal Funds Rate Notes, or by the actual number of days in the year, in the
case of Treasury Rate Notes. Interest on Fixed Rate Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date for any Fixed Rate Note would fall on a day
that is not a Market Day, the interest payment shall be postponed to the next
day that is a Market Day, and no interest on such payment shall accrue for the
period from and after the Interest Payment Date. If the maturity date or any
earlier redemption or repayment date of a Fixed Rate Note would fall on a day
that is not a Market Day, the payment of principal, premium, if any, and
interest otherwise due on such day will be made on the next succeeding Market
Day, and no interest on such payment shall accrue for the period from and after
such maturity, redemption or repayment date, as the case may be.
If any Interest Payment Date for any Floating Rate Note (other than an
Interest Payment Date which is the maturity date or earlier redemption or
repayment date for such Note) would fall on a day that is not a Market Day with
respect to such Floating Rate Note, such Interest Payment Date will be the
following day that is a Market Day with respect to such Floating Rate Note,
except that, in the case of a LIBOR Note, if such Market Day is in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding day that is a Market Day with respect to such LIBOR Note (and interest
shall accrue to, but excluding, such Interest Payment Date as rescheduled). If
the maturity date or any earlier redemption or repayment date of a Floating Rate
Note would fall on a day that is not a Market Day, the payment of principal,
premium, if any, and interest otherwise due on such day will be made on the next
succeeding Market Day, and no interest on such payment shall accrue for the
period from and after such maturity, redemption or repayment date, as the case
may be.
Payment of the principal of (and premium, if any) and any interest due with
respect to any Certificated Note at maturity will be made in immediately
available funds upon surrender of such Note at the Corporate Trust Office of the
Trustee in the Borough of Manhattan, The City of New York, provided that the
Certificated Note is presented to the Trustee in time for the Trustee to make
such payments in such funds in accordance with its normal procedures. Payments
of interest with respect to Certificated Notes other than at maturity will be
made by check mailed to the address of the person entitled thereto as it appears
in the Security Register or by wire transfer to such account as may have been
appropriately designated by such person.
The total amount of any principal, premium, if any, and interest due on any
Global Security representing one or more Book-Entry Notes on any Interest
Payment Date or at maturity will be made available to the Trustee on such date.
As soon as possible thereafter, the Trustee will make such payments to The
Depository Trust Company, New York, New York (the "Depositary"). The Depositary
will allocate such payments to each Book-Entry Note represented by such Global
Security and make payments to the owners or holders thereof in accordance with
its existing operating procedures. Neither the Company nor the Trustee shall
have any responsibility or liability for such payments by the Depositary. So
long as the Depositary or its nominee is the registered owner of any Global
Security, the Depositary or its nominee, as the case may be, will be considered
the sole owner or holder of the Book-Entry Note or Notes represented by such
Global Security for all purposes under the Indenture and the Book-Entry Notes.
The Company understands, however, that under existing industry practice, the
Depositary will authorize the persons on whose behalf it holds a Global Security
to exercise certain rights of holders of Securities. See "Book-Entry System"
below.
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INDEXED NOTES
Notes may be issued as Indexed Notes, the principal amount payable at
Stated Maturity and/or the interest rate to be paid thereon to be determined by
reference to the relationship between two or more currencies, to the price of
one or more specified securities or commodities, to one or more securities or
commodities exchange indices or other indices or by other similar methods or
formulas. The Pricing Supplement relating to such an Indexed Note will describe,
as applicable, the method by which the amount of interest payable on any
Interest Payment Date and the amount of principal payable at Stated Maturity in
respect of such Indexed Note will be determined, certain special tax
consequences of the purchase, ownership or disposition of such Indexed Notes,
certain risks associated with an investment in such Indexed Notes and other
information relating to such Indexed Notes.
Unless otherwise indicated in the applicable Pricing Supplement, the
maximum principal amount payable at Stated Maturity in respect of any Indexed
Note will be an amount equal to twice the face amount thereof and the minimum
principal amount so payable will be zero.
Unless otherwise indicated in the applicable Pricing Supplement, (i) for
the purpose of determining whether Holders of the requisite principal amount of
Securities outstanding under the Indenture have made a demand or given a notice
or waiver or taken any other action, the outstanding principal amount of Indexed
Notes will be deemed to be the U.S. dollar equivalent, determined on the
original issue date ("Original Issue Date") of such Indexed Note, of such
principal (or, in the case of a discounted Indexed Note, the U.S. dollar
equivalent on the Original Issue Date equal to the amount of the principal
thereof that would be due and payable as of the date of such determination upon
a declaration of acceleration of the Stated Maturity thereof) and (ii) if the
payment of principal of and interest on any Indexed Note is accelerated in
accordance with the provisions described under "Description of
Securities -- Events of Default" in the Prospectus, then the Company shall pay
to the Holder of such Indexed Note on the date of acceleration the principal
amount determined by reference to the formula by which the principal amount of
such Indexed Note would be determined on the Stated Maturity thereof, as if the
date of acceleration were the Stated Maturity.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. An "Amortizing
Note" is a Note that pays a level amount in respect of both interest and
principal amortized over the life of the Note. Unless otherwise specified in the
applicable Pricing Supplement, interest on each Amortizing Note will be computed
on the basis of a 360-day year of twelve 30-day months. 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. Further
information concerning additional terms and conditions of any issue of
Amortizing Notes will be provided in the applicable Pricing Supplement. A table
setting forth repayment information in respect of each Amortizing Note will be
included in the applicable Pricing Supplement and set forth on such Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may from time to time offer Original Issue Discount Notes.
"Original Issue Discount Note" means (i) a Note, including any Zero-Coupon Note,
that has a stated redemption price at Maturity that exceeds its Issue Price by
at least 0.25% of its principal amount multiplied by the number of full years
from the Original Issue Date to the Stated Maturity for such Note and (ii) any
other Note designated by the Company as issued with original issue discount for
United States federal income tax purposes. See "United States Taxation -- Tax
Consequences to United States Holders -- Original Issue Discount Notes".
The applicable Pricing Supplement to certain Original Issue Discount Notes
may provide that Holders of such Notes will not receive periodic payments of
interest. For the purpose of determining
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whether Holders of the requisite principal amount of Securities outstanding
under the Indenture have made a demand or given a notice or waiver or taken any
other action, the outstanding principal amount of Original Issue Discount Notes
shall be deemed to be the amount of the principal that would be due and payable
upon declaration of acceleration of the Stated Maturity thereof as of the date
of such determination.
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is an
Original Issue Discount Note, the amount payable on such Note in the event of
Maturity prior to the Stated Maturity shall be the Amortized Face Amount of such
Note as of such Maturity. The "Amortized Face Amount" of an Original Issue
Discount Note shall be an amount equal to the sum of (i) the aggregate principal
amount of such Note multiplied by the Issue Price set forth in the applicable
Pricing Supplement plus (ii) the portion of the difference between the Issue
Price and the principal amount of such Note that has accrued at the yield to
maturity set forth in the Pricing Supplement (computed in accordance with
generally accepted United States bond yield computation principles) to such date
of declaration, but in no event shall the Amortized Face Amount of an Original
Issue Discount Note exceed its principal amount.
INTEREST RATE RESET
If the Company has the option with respect to any Note to reset the
interest rate, in the case of a Fixed Rate Note, or to reset the Spread and/or
Spread Multiplier, in the case of a Floating Rate Note, the Pricing Supplement
relating to such Note will indicate such option, and, if so, (i) the date or
dates on which such interest rate or such Spread and/or Spread Multiplier, as
the case may be, may be reset (each an "Optional Reset Date") and (ii) the basis
or formula, if any, for such resetting.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 days prior to an
Optional Reset Date for such Note. Not later than 40 days prior to such Optional
Reset Date, the Trustee will hand deliver or mail, first class, postage prepaid,
to the Holder of such Note a notice (the "Reset Notice") setting forth (i) the
election of the Company to reset the interest rate, in the case of a Fixed Rate
Note, or the Spread and/or Spread Multiplier, in the case of a Floating Rate
Note, (ii) such new interest rate or such new Spread and/or Spread Multiplier,
as the case may be, and (iii) the provisions, if any, for redemption during the
period from such Optional Reset Date to the next Optional Reset Date or, if
there is no such next Optional Reset Date, to the Stated Maturity of such Note
(each such period a "Subsequent Interest Period"), including the date or dates
on which or the period or periods during which and the price or prices at which
such redemption may occur during such Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to an Optional
Reset Date for a Note, the Company may, at its option, revoke the interest rate,
in the case of a Fixed Rate Note, or the Spread and/or Spread Multiplier, in the
case of a Floating Rate Note, in either case provided for in the Reset Notice
and establish a higher interest rate, in the case of a Fixed Rate Note, or a
higher Spread and/or Spread Multiplier, in the case of a Floating Rate Note, for
the Subsequent Interest Period commencing on such Optional Reset Date by hand
delivering or mailing, first class, postage prepaid, or by causing the Trustee
to hand deliver or mail, first class, postage prepaid, notice of such higher
interest rate or higher Spread and/or Spread Multiplier, as the case may be to
the Holder of such Note. Such notice shall be irrevocable. All Notes with
respect to which the interest rate or Spread and/or Spread Multiplier is reset
on an Optional Reset Date will bear such higher interest rate, in the case of a
Fixed Rate Note, or higher Spread and/or Spread Multiplier, in the case of a
Floating Rate Note.
If the Company elects to reset the interest rate or the Spread and/or
Spread Multiplier of a Note, the Holder of such Note will have the option to
elect repayment of such Note by the Company
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on any Optional Reset Date at a price equal to the principal amount thereof plus
any accrued interest to such Optional Reset Date. In order for a Note to be so
repaid on an Optional Reset Date, the Holder thereof must follow the procedures
set forth under "Redemption and Repayment; Sinking Fund", below, for optional
repayment, except that the period for delivery of such Note or notification to
the Trustee shall be at least 25 but not more than 35 days prior to such
Optional Reset Date and except that a Holder who has tendered a Note for
repayment pursuant to a Reset Notice may, by written notice to the Trustee,
revoke any such tender for repayment until the close of business on the tenth
day prior to such Optional Reset Date.
EXTENSION OF MATURITY
If the Company has the option to extend the Stated Maturity of any Note for
one or more periods (each an "Extension Period") up to but not beyond the date
(the "Final Maturity Date") set forth in the Pricing Supplement relating to such
Note, such Pricing Supplement will indicate such option and the basis or
formula, if any, for setting the interest rate, in the case of a Fixed Rate
Note, or the Spread and/or Spread Multiplier, in the case of a Floating Rate
Note, applicable to any such Extension Period.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 days prior to the
Stated Maturity of such Note in effect prior to the exercise of such option (the
"Original Stated Maturity"). No later than 40 days prior to the Original Stated
Maturity, the Trustee will mail to the Holder of such Note a notice (the
"Extension Notice") relating to such Extension Period, first class, postage
prepaid, setting forth (i) the election of the Company to extend the Stated
Maturity of such Note, (ii) the new Stated Maturity, (iii) in the case of a
Fixed Rate Note, the interest rate applicable to the Extension Period or, in the
case of a Floating Rate Note, the Spread and/or Spread Multiplier applicable to
the Extension Period, and (iv) the provisions, if any, for redemption during the
Extension Period, including the date or dates on which or the period or periods
during which and the price or prices at which such redemption may occur during
the Extension Period. Upon the mailing by the Trustee of an Extension Notice to
the Holder of a Note, the Stated Maturity of such Note shall be extended
automatically as set forth in the Extension Notice, and, except as modified by
the Extension Notice and as described in the next paragraph, such Note will have
the same terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Original
Stated Maturity for a Note, the Company may, at its option, revoke the interest
rate, in the case of a Fixed Rate Note, or the Spread and/or Spread Multiplier,
in the case of a Floating Rate Note, provided for in the Extension Notice and
establish a higher interest rate, in the case of a Fixed Rate Note, or a higher
Spread and/or Spread Multiplier, in the case of a Floating Rate Note, for the
Extension Period by mailing or causing the Trustee to mail notice of such higher
interest rate or higher Spread and/or Spread Multiplier, as the case may be,
first class, postage prepaid, to the Holder of such Note. Such notice shall be
irrevocable. All Notes with respect to which the Stated Maturity is extended
will bear such higher interest rate, in the case of a Fixed Rate Note, or higher
Spread and/or Spread Multiplier, in the case of a Floating Rate Note, for the
Extension Period.
If the Company elects to extend the Stated Maturity of a Note, the Holder
of such Note will have the option to elect repayment of such Note by the Company
at the Original Stated Maturity at a price equal to the principal amount thereof
plus any accrued interest to such date. In order for a Note to be so repaid on
the Original Stated Maturity, the Holder thereof must follow the procedures set
forth under "Redemption and Repayment; Sinking Fund", below, for optional
repayment, except that the period for delivery of such Note or notification to
the Trustee shall be at least 25 but not more than 35 days prior to the Original
Stated Maturity and except that a Holder who has tendered a Note for repayment
pursuant to an Extension Notice may, by written notice hand delivered or mailed,
first class, postage prepaid, to the Trustee revoke any such tender for
repayment until the close of business on the tenth day prior to the Original
Stated Maturity.
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RENEWABLE NOTES
The Company may from time to time offer Notes which will mature on an
Interest Payment Date specified in the applicable Pricing Supplement occurring
in or prior to the twelfth month following the Original Issue Date of such Notes
(the "Initial Maturity Date") unless the term of all or any portion of any such
Note (a "Renewable Note") is renewed in accordance with the procedures described
below.
On the Interest Payment Date occurring in the sixth month (unless a
different interval (the "Special Election Interval") is specified in the
applicable Pricing Supplement) prior to the Initial Maturity Date of a Renewable
Note (the "Initial Renewal Date") and on the Interest Payment Date occurring in
each sixth month (or in the last month of each Special Election Interval) after
such Initial Renewal Date (each, together with the Initial Renewal Date, a
"Renewal Date"), the term of such Renewable Note may be extended to the Interest
Payment Date occurring in the twelfth month (or, if a Special Election Interval
is specified in the applicable Pricing Supplement, the last month in a period
equal to twice the Special Election Interval) after such Renewal Date, if the
Holder of such Renewable Note elects to extend the term of such Renewable Note
or any portion thereof as described below. If a Holder does not elect to extend
the term of any portion of the principal amount of a Renewable Note during the
specified period prior to any Renewal Date, such portion will become due and
payable on the Interest Payment Date occurring in the sixth month (or the last
month in the Special Election Interval) after such Renewal Date (the "New
Maturity Date").
A Holder of a Renewable Note may elect to renew the term of such Renewable
Note, or if so specified in the applicable Pricing Supplement, any portion
thereof, by written notice to such effect, hand delivered or mailed, first
class, postage prepaid, to the Trustee at the Corporate Trust Office not less
than 15 nor more than 30 days prior to such Renewal Date (unless another period
is specified in the applicable Pricing Supplement as the "Special Election
Period"). Such election will be irrevocable and will be binding upon each
subsequent Holder of such Renewable Note. An election to renew the term of a
Renewable Note may be exercised with respect to less than the entire principal
amount of such Renewable Note only if so specified in the applicable Pricing
Supplement and only in such principal amount, or any integral multiple in excess
thereof, as is specified in the applicable Pricing Supplement. Notwithstanding
the foregoing, the term of the Renewable Notes may not be extended beyond the
Stated Maturity specified for such Renewable Notes in the applicable Pricing
Supplement.
If the Holder does elect to renew the term, such Renewable Note must be
presented to the Trustee (or any duly appointed paying agent) simultaneously
with notice of such election (or, in the event notice of such election, together
with a guarantee of delivery within five Business Days, is transmitted on behalf
of a Holder from a member of a national securities exchange, the National
Association of Securities Dealers, Inc. (the "NASD") or a commercial bank or
trust company in the United States, within five Business Days of the date of
such notice). With respect to a Renewable Note that is a Certificated Note, as
soon as practicable following receipt of such Renewable Note the Trustee shall
issue in exchange therefor in the name of such Holder (i) a Note, in a principal
amount equal to the principal amount of such exchanged Renewable Note for which
the election to renew the term thereof was exercised, with terms identical to
those specified on such Renewable Note (except for the Original Issue Date and
the Initial Interest Rate and except that such Note shall have a fixed,
nonrenewable Stated Maturity on the New Maturity Date) and (ii) if such election
is made with respect to less than the full principal amount of such Holder's
Renewable Note, a replacement Renewable Note, in a principal amount equal to the
principal amount of such exchanged Renewable Note for which the election was
made, with terms identical to such exchanged Renewable Note.
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COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "Interest Rate Reset", "Extension of Maturity" and
"Renewable Notes".
REDEMPTION AND REPAYMENT; SINKING FUND
Unless one or more Redemption Dates ("Redemption Dates") are specified in
the applicable Pricing Supplement, the Notes will not be redeemable prior to
their Stated Maturity. If one or more Redemption Dates are so specified with
respect to any Note, the applicable Pricing Supplement will also specify one or
more redemption prices (expressed as a percentage of the principal amount of
such Note) ("Redemption Prices") and the redemption period or periods
("Redemption Periods") during which such Redemption Prices shall apply. Unless
otherwise specified in the applicable Pricing Supplement, any such Note shall be
redeemable at the option of the Company at the specified Redemption Price
applicable to the Redemption Period during which such Note is to be redeemed,
together with interest accrued to the Redemption Date. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will not be subject to
any sinking fund. The Company may redeem any of the Notes that are redeemable
and remain outstanding, either in whole or from time to time in part, upon not
less than 30 nor more than 60 days' notice.
Unless otherwise specified in the applicable Pricing Supplement, Notes
cannot be repaid prior to Stated Maturity. If a Note is repayable at the option
of the Holder on a date or dates specified prior to Stated Maturity, the
applicable Pricing Supplement will set forth the price or prices of such
repayment, together with accrued interest to the date of repayment.
In order for a Note that is repayable at the option of the Holder to be
repaid, the Trustee must receive at least 30 days but not more than 60 days
prior to the repayment date (a) appropriate wire instructions and (b) either (i)
the Note with the form entitled "Option to Elect Repayment" attached to the Note
duly completed or (ii) a telegram, telex, facsimile transmission or letter from
a member of a national securities exchange or the NASD or a commercial bank or
trust company in the United States setting forth the name of the Holder of the
Note, the principal amount of the Note, the portion of the principal amount of
the Note to be repaid, the certificate number or a description of the tenor and
terms of the Note, a statement that the option to elect repayment is being
exercised thereby and a guarantee that the Note to be repaid with the form
entitled "Option to Elect Repayment" attached to the Note duly completed will be
received by the Trustee not later than five Business Days after the date of such
telegram, telex, facsimile transmission or letter and such Note and form duly
completed must be received by the Trustee by such fifth Business Day. Exercise
of the repayment option by the Holder of a Note shall be irrevocable, except as
otherwise described above under "Interest Rate Reset" and "Extension of
Maturity". The repayment option may be exercised by the Holder of a Note for
less than the entire principal amount of the Note provided that the principal
amount of the Note remaining outstanding after repayment is an authorized
denomination. No transfer or exchange of any Note (or, in the event that any
Note is to be repaid in part, the portion of the Note to repaid) will be
permitted after exercise of a repayment option. All questions as to the
validity, eligibility (including time of receipt) and acceptance of any Note for
repayment will be determined by the Trustee, whose determination will be final,
binding and non-appealable.
If a Note is represented by a Global Security, the Depositary's nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Note in
order to ascertain the
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cut-off time by which such an instruction must be given in order for timely
notice to be delivered to the Depositary.
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is an
Original Issue Discount Note, the amount payable on such Note in the event of
redemption or repayment prior to its Stated Maturity shall be the Amortized Face
Amount of such Note, as specified in the applicable Pricing Supplement, as of
the Redemption Date or the date of repayment, as the case may be.
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, may be surrendered to the Trustee
for cancellation.
OTHER PROVISIONS
Any provisions with respect to the determination of an interest rate basis,
the specification of interest rate basis, calculation of the interest rate
applicable to, or the principal payable at Stated Maturity on, any Note, its
Interest Payment Dates or any other matter relating thereto may be modified by
the terms as specified under "Other Provisions" on the face of such Note, or in
an addendum relating thereto if so specified on the face thereof, and in the
applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
The Depository Trust Company ("DTC"), New York, NY, will act as securities
depositary for the Book-Entry Notes. The Book-Entry Notes will be issued as
fully-registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). One fully-registered Global Security will be issued for
each issue of the Notes, each in the aggregate principal amount of such issue,
and will be deposited with DTC. If, however, the aggregate principal amount of
any issue exceeds $200 million, one Global Security will be issued with respect
to each $200 million of principal amount and an additional Global Security will
be issued with respect to any remaining principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants ("Direct Participants") include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to DTC's system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Book-Entry
Notes on DTC's records. The ownership interest of each actual purchaser of each
Book-Entry Note ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
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confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Book-Entry Notes are to be accomplished by entries
made on the books of Participants acting on behalf of the Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Book-Entry Notes, except in the event that use of the book-entry
system for one or more Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Book-Entry Notes; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Book-Entry Notes are credited, which may or may not be the Beneficial Owners.
The Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, DTC's current practice is
to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
Neither DTC nor Cede & Co. will consent to vote with respect to Book-Entry
Notes. Under its usual procedures, DTC will mail an "Omnibus Proxy" to the
Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Principal and interest payments on the Book-Entry Notes will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payable
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case of securities held for the
accounts of customers in bearer form or registered in "street name," and will be
the responsibility of such Participant and not of DTC, or the Company, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and interest to DTC is the responsibility of the
Company or the Agents, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry Notes
purchased or tendered, through its Participant, to the Paying Agent, and shall
effect delivery of such Book-Entry Notes by causing the Direct Participant to
transfer the Participant's interest in the Book-Entry Notes, on DTC's records,
to the Paying Agent. The requirement for physical delivery of Book-Entry Notes
in connection with a demand for purchase or a mandatory purchase will be deemed
satisfied when the ownership rights in the Book-Entry Notes are transferred by a
Direct Participant on DTC's records.
DTC may discontinue providing its services as securities depositary with
respect to the Book-Entry Notes at any time by giving reasonable notice to the
Company or the Agents. Under such circumstances, in the event that a successor
securities depositary is not obtained, Certificated
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Notes will be printed and delivered in exchange for the Book-Entry Notes
represented by the Global Securities held by DTC.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Certificated Notes will be printed and delivered in exchange for the Book-Entry
Notes represented by the Global Securities held by DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Neither the Company, the Trustee, any Paying Agent nor the registrar for
the Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
UNITED STATES TAXATION
The following summary accurately describes the principal United States
federal income tax consequences of ownership and disposition of the Notes to
initial holders purchasing Notes at the Issue Price. This summary is based on
the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"),
administrative pronouncements, judicial decisions and existing and proposed
Treasury Regulations, changes to any of which subsequent to the date of the
Prospectus may affect the tax consequences described herein. This summary
discusses only Notes held as capital assets within the meaning of Section 1221
of the Code. It does not discuss all of the tax consequences that may be
relevant to a holder in light of his particular circumstances or to holders
subject to special rules, such as certain financial institutions, insurance
companies, dealers in securities or foreign currencies, persons holding Notes as
a hedge against, or which are hedged against, currency risks, or United States
Holders whose functional currency (as defined in Code Section 985) is not the
U.S. dollar. Finally, this summary does not discuss Original Issue Discount
Notes (as defined below) which qualify as "applicable high-yield discount
obligations" under Section 163(i) of the Code or the treatment of Indexed Notes
or Renewable Notes. Holders of Original Issue Discount Notes which are
"applicable high-yield discount obligations" and holders of Indexed Notes and
Renewable Notes may be subject to special rules which will be set forth in an
applicable Pricing Supplement. Persons considering the purchase of Notes should
consult their tax advisors with regard to the application of the United States
federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "United States Holder" means an owner of a Note
that (a) is (i) for United States federal income tax purposes a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source or
(b) is not a U.S. Holder and whose income from a Note is effectively connected
with such Holder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States who continue to be subject
to United States federal income tax on a net basis with respect to U.S. source
income.
As used herein, the term "United States Alien Holder" means an owner of a
Note that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or more
of the members of which is, for United States federal income tax purposes, a
nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.
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TAX CONSEQUENCES TO UNITED STATES HOLDERS
Payments of Interest. Payments of "qualified stated interest" (as defined
below) on a Note will generally be taxable to a United States Holder as ordinary
interest income at the time it accrues or is received in accordance with the
United States Holder's method of accounting for federal income tax purposes.
Sale, Exchange or Retirement of the Notes. Upon the sale, exchange or
retirement of a Note, a United States Holder will recognize taxable gain or loss
equal to the difference between the amount realized on the sale, exchange or
retirement (not including any amount attributable to accrued interest not
previously included in income) and such Holder's adjusted tax basis in the Note.
A United States Holder's adjusted tax basis in a Note will equal the cost of the
Note to such Holder, increased by the amount of any original issue discount
previously included in income by the Holder with respect to such Note and
reduced by any amortized premium and any principal payments received by the
Holder and, in the case of an Original Issue Discount Note, by the amounts of
any other payments that do not constitute qualified stated interest payments (as
defined below).
Gain or loss realized on the sale, exchange or retirement of a Note will be
capital gain or loss and will be long-term capital gain or loss if at the time
of sale, exchange or retirement the Note has been held for more than one year.
Under current law, the excess of net long-term capital gains over net short-term
capital losses is taxed at a lower rate than ordinary income for certain
non-corporate taxpayers. The distinction between capital gain or loss and
ordinary income or loss is also relevant for purposes of, among other things,
limitations on the deductibility of capital losses.
Original Issue Discount Notes. For federal income tax purposes, a Note
which is issued for an amount less than its stated redemption price at maturity
will generally be considered to have been issued at an original issue discount
(an "Original Issue Discount Note"). The Issue Price of a Note will equal the
first price to the public (not including bond houses, brokers or similar persons
or organizations acting in the capacity of underwriters or wholesalers) at which
a substantial amount of the Notes is sold. The stated redemption price at
maturity of a Note will equal the sum of all payments required under the Note
other than qualified stated interest payments. "Qualified stated interest
payments" generally means stated interest that is unconditionally payable in
cash or property (other than debt instruments of the issuer) at least annually
during the entire term of the Note at a single fixed rate of interest. However,
if a Note bears interest for one or more accrual periods at a rate below the
rate applicable for the remaining term of such Note (e.g., Notes with teaser
rates or interest holidays), and if neither the resulting foregone interest on
such Note nor any "true" discount on such Note (i.e., the excess of the Note's
stated principal amount over its issue price) equals or exceeds a specified de
minimis amount, then the stated interest on the Note will be treated as
qualified stated interest.
If the difference between a Note's stated redemption price at maturity and
its Issue Price is less than a de minimis amount, i.e., 1/4 of 1% 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
of such Note), then the Note will not be considered to have original issue
discount. Holders of Notes with a de minimis amount of original issue discount
will include such original issue discount in income, as capital gain, on a pro
rata basis as principal payments are made on the Note.
A United States Holder of an Original Issue Discount Note must include
original issue discount in income as ordinary interest for United States Federal
income tax purposes as it accrues under a constant yield method in advance of
receipt of the cash payments attributable to such income, regardless of such
United States Holder's regular method of tax accounting. In general, the amount
of original issue discount included in income by the initial United States
Holder of an Original Issue Discount Note is the sum of the daily portions of
original issue discount with respect to such Original Issue Discount Note for
each day during the taxable year (or portion of the taxable year) on which such
United States Holder held such Original Issue Discount Note. The "daily portion"
of original issue discount on any Original Issue Discount Note is determined by
allocating to each day in any
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accrual period a ratable portion of the original issue discount allocable to
that accrual period. An accrual period may be of any length and the accrual
periods may vary in length over the term of the Original Issue Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The Company will specify the
accrual period it intends to use in the applicable Pricing Supplement, but a
holder is not bound by the Company's choice of accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Original Issue Discount Note's
Adjusted Issue Price (as defined below) 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 appropriately adjusted to take into account the
length of the particular accrual period) and (ii) the amount of any qualified
stated interest payments, if any, allocable to such accrual period. The
"Adjusted Issue Price" of an Original Issue Discount Note at the beginning of
any accrual period is the sum of the Issue Price of the Original Issue Discount
Note, plus the amount of original issue discount allocable to all prior accrual
periods, minus the amount of any prior payments on the Original Issue Discount
Note that were not qualified stated interest payments. Under these rules, United
States Holders generally will have to include in income increasingly greater
amounts of original issue discount in successive accrual periods.
Floating Rate Notes are subject to special rules whereby a Floating Rate
Note will qualify as a "variable rate debt instrument" if (a) its Issue Price
does not exceed the total noncontingent principal payments due under the
Floating Rate Note by more than a specified de minimis amount and (b) it
provides for stated interest, paid or compounded at least annually, at current
values of (i) one or more qualified floating rates, (ii) a single fixed rate and
one or more qualified floating rates, (iii) a single objective rate, or (iv) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Note is denominated. Although a multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple that
is greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, two or more qualified floating rates that can reasonably be expected
to have approximately the same values throughout the term of the Floating Rate
Note (e.g., two or more qualified floating rates with values within 25 basis
points of each other as determined on the Floating Rate Note's issue date) will
be treated as a single qualified floating rate. Notwithstanding the foregoing ,
a variable rate that would otherwise constitute a qualified floating rate but
which is subject to one or more restrictions such as a maximum numerical
limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may,
under certain circumstances, fail to be treated as a qualified floating rate. An
"objective rate" is a rate that is not itself a qualified floating rate but
which is determined using a single fixed formula and which is based upon (i) one
or more qualified floating rates, (ii) one or more rates where each rate would
be a qualified floating rate for a debt instrument denominated in a currency
other than the currency in which the Floating Rate Note is denominated, (iii)
either the yield or changes in the price of one or more items of actively traded
personal property (other than stock or debt of the issuer or a related party) or
(iv) a combination of objective rates. Other variable interest rates may be
treated as objective rates if so designated by the IRS in the future. Despite
the foregoing, a variable rate of interest on a Floating Rate Note will not
constitute an objective rate if it is reasonably expected that the average value
of such rate during the first half of the Floating Rate Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Floating Rate Note's term. A "qualified
inverse floating rate" is an objective rate where such rate is equal to a fixed
rate minus a qualified floating rate, as long as variations in the rate can
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reasonably be expected to inversely reflect contemporaneous variations in the
cost of newly borrowed funds. If a Floating Rate Note provides for stated
interest at a fixed rate for an initial period of less than one year followed by
a variable rate that is either a qualified floating rate or an objective rate
and if the variable rate on the Floating Rate Note's issue date is intended to
approximate the fixed rate (e.g., the value of the variable rate on the issue
date does not differ from the value of the fixed rate by more than 25 basis
points), then the fixed rate and the variable rate together will constitute
either a single qualified floating rate or objective rate, as the case may be.
If a Floating Rate Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof qualifies as a "variable rate debt instrument," then any stated interest
on such Note which is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually will constitute qualified
stated interest and will be taxed accordingly. Thus, a Floating Rate Note that
provides for stated interest at either a single qualified floating rate or a
single objective rate throughout the term thereof and that qualifies as a
"variable rate debt instrument" will generally not be treated as having been
issued with original issue discount unless the Floating Rate Note is issued at a
"true" discount (i.e., at a price below the Note's stated principal amount) in
excess of a specified de minimis amount. Original issue discount on such a
Floating Rate Note arising from "true" discount is allocated to an accrual
period using the constant yield method described above by assuming that the
variable rate is a fixed rate equal to (i) in the case of a qualified floating
rate or qualified inverse floating rate, the value as of the issue date of the
qualified floating rate or qualified inverse floating rate, or (ii) in the case
of an objective rate (other than a qualified inverse floating rate), a fixed
rate that reflects the yield that is reasonably expected for the Floating Rate
Note.
In general, any other Floating Rates Note that qualifies as a "variable
rate debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the Floating Rate Note. Treasury
Regulations generally require that such a Floating Rate Note be converted into
an "equivalent" fixed rate debt instrument by substituting any qualified
floating rate or qualified inverse floating rate provided for under the terms of
the Floating Rate Note with a fixed rate equal to the value of the qualified
floating rate or qualified inverse floating rate, as the case may be, as of the
Floating Rate Note's issue date. Any objective rate (other than a qualified
inverse floating rate) provided for under the terms of the Floating Rate Note is
converted into a fixed rate that reflects the yield that is reasonably expected
for the Floating Rate Note. In the case of a Floating Rate Note that qualifies
as a "variable rate debt instrument" and provides for stated interest at a fixed
rate in addition to either one or more qualified floating rates or a qualified
inverse floating rate, the fixed rate is initially converted into a qualified
floating rate (or a qualified inverse floating rate, if the Floating Rate Note
provides for a qualified inverse floating rate). Under such circumstances, the
qualified floating rate or qualified inverse floating rate that replaces the
fixed rate must be such that the fair market value of the Floating Rate Note as
of the Floating Rate Note's issue date is approximately the same as the fair
market value of an otherwise identical debt instrument that provides for either
the qualified floating rate or qualified inverse floating rate rather than the
fixed rate. Subsequent to converting the fixed rate into either a qualified
floating rate or a qualified inverse floating rate, the Floating Rate Note is
then converted into an "equivalent" fixed rate debt instrument in the manner
described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a United
States Holder of the Floating Rate Note will account for such original issue
discount and qualified stated interest as if the United States Holder held the
"equivalent" fixed rate debt instrument. In each accrual period, appropriate
adjustments will be made to the amount of qualified stated interest or original
issue discount assumed to have been accrued or paid with respect to the
"equivalent" fixed rate debt
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instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Floating Rate Note during the accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument," then the Floating Rate Note would be treated as a contingent
payment debt obligation. It is not entirely clear under current law how a
Floating Rate Note would be taxed is such Note were treated as a contingent
payment debt obligation. Proposed regulations issued on December 15, 1994,
address, among other things, the accrual of original issue discount on, and the
character of gain realized on the sale, exchange or retirement of, debt
instruments providing for contingent payments. Such regulations would apply to
contingent payment debt instruments issued on or after 60 days after the date
final regulations are published. Prospective Holders of Indexed Notes or
Floating Rate Notes that provide for contingent payments should refer to the
discussion regarding taxation in the applicable Pricing Supplement.
United States Holders may generally, upon election (the "Constant Yield
Election"), include in income all interest (including stated interest,
acquisition discount, original issue discount, de minimis original issue
discount, market discount, de minimis market discount, and unstated interest, as
adjusted by any amortizable bond premium or acquisition premium) that accrues on
a debt instrument by using the constant yield method applicable to original
issue discount.
Amortizable Bond Premium. If a United States Holder purchases a Note for
an amount that is greater than the amount payable at maturity, such Holder will
be considered to have purchased such Note with "amortizable bond premium" equal
in amount to such excess, and may elect (in accordance with applicable Code
provisions) to amortize such premium, using a constant yield method, over the
remaining term of the Note (where such Note is not optionally redeemable prior
to its maturity date). If such Note may be optionally redeemed prior to maturity
after the Holder has acquired it, the amount of amortizable bond premium is
determined with reference to the amount payable on maturity or, if it results in
a smaller premium attributable to the period of earlier redemption date, with
reference to the amount payable on the earlier redemption date. A Holder who
elects to amortize bond premium must reduce his tax basis in the Note by the
amount of the premium amortized in any year. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the taxpayer and may be revoked only with the consent of the
Internal Revenue Service.
If a Holder makes a Constant Yield Election for a Note with amortizable
bond premium, such election will result in a deemed election to amortize bond
premium for all of the Holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service with
respect to debt instruments acquired after revocation.
Extension of Maturity and Reset of Interest Rate. While not free from
doubt, proposed regulations promulgated by the Internal Revenue Service suggest
that the reset of the interest rate on, or the extension of the maturity of, a
Note pursuant to its original terms should not be viewed as a taxable exchange.
Defeasance. Under the terms of the Indenture, the Company may satisfy and
discharge its obligations with respect to a series of Notes by meeting the
following two conditions. First, the Company must deposit or cause to be
deposited with the Trustee an aggregate amount, as trust funds, in money and
securities sufficient to pay and discharge the principal and premium, if any,
of, and interest, if any, on the Notes to the date of maturity or redemption of
such outstanding series of Notes. Any securities so deposited or caused to be
deposited must be securities of the government that issued the currency in which
the Notes are denominated or securities of government agencies backed by the
full faith and credit of such government. Second, the Company must have paid or
caused to be paid all of the sums payable by it under the Indenture with respect
to such series. In the event of any such defeasance, Holders of such Notes would
be able to look only to such trust fund for payment of principal and premium, if
any, and interest, if any, on their Notes until maturity.
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Such defeasance may be treated as a taxable exchange of the related Notes
for an issue of obligations of the trust or a direct interest in the cash and
securities held in the trust. In that case Holders of such Notes would recognize
gain or loss as if the trust obligations or the cash or securities deposited, as
the case may be, had actually been received by them in exchange for their Notes.
Such Holders thereafter might be required to include in income a different
amount than would be includable in the absence of defeasance. Prospective
investors are urged to consult their own tax advisors as to the specific
consequences of defeasance.
Backup Withholding and Information Reporting. Certain noncorporate United
States Holders may be subject to backup withholding at a rate of 31% on payments
of principal, premium and interest (including the accrual of original issue
discount, if any) on, and the proceeds of disposition of, a Note. Backup
withholding will apply only if the Holder (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, would be his Social
Security number, (ii) furnishes an incorrect TIN, (iii) is notified by the
Internal Revenue Service that it has failed to properly report payments of
interest and dividends or (iv) under certain circumstances, fails to certify,
under penalty of perjury, that it has furnished a correct TIN and has not been
notified by the Internal Revenue Service that it is subject to backup
withholding for failure to report interest and dividend payments. United States
Holders should consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such Holder's United States federal
income tax liability and may entitle such Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) payments of principal, interest (including original issue
discount, if any) and premium on the Notes by the Company or any paying
agent to any United States Alien Holder will not be subject to United
States federal withholding tax, provided that, in the case of interest, (i)
such Holder does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote, is not a controlled foreign corporation related, directly or
indirectly, to the Company through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code and (ii)
the beneficial owner thereof fulfills the statement requirement set forth
in Section 871(h) or Section 881(c) of the Code;
(b) a United States Alien Holder of a Note will not be subject to
United States federal income tax on gain realized on the sale, exchange or
other disposition of such Note, unless (i) such Holder is an individual who
is present in the United States for 183 days or more in the taxable year of
disposition, and either (a) such individual has a "tax home" (as defined in
Code Section 911(d)(3)) in the United States (unless such gain is
attributable to a fixed place of business in a foreign country maintained
by such individual and has been subject to foreign tax of at least 10%) or
(b) the gain is attributable to an office or other fixed place of business
maintained by such individual in the United States or (ii) such gain is
effectively connected with the conduct by such Holder of a trade or
business in the United States; and
(c) a Note or coupon held by an individual who is not a citizen or
resident of the United States at the time of his death will not be subject
to United States federal estate tax as a result of such individual's death,
provided that the individual does not own, actually or constructively, 10%
or more of the total combined voting power of all classes of stock of the
Company entitled to vote and, at the time of such individual's death,
payments with respect to such Note would
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not have been effectively connected to the conduct by such individual of a
trade or business in the United States.
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
exemption from withholding tax described in paragraph (a) above, either the
beneficial owner of the Note or a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") and that is holding
the Note on behalf of such beneficial owner, file a statement with the
withholding agent to the effect that the beneficial owner of the Note is not a
United States Holder. Under temporary United States Treasury Regulations, such
requirement will be fulfilled if the beneficial owner of a Note certifies on
Internal Revenue Service Form W-8, under penalties of perjury, that it is not a
United States Holder and provides its name and address, and any Financial
Institution holding the Note on behalf of the beneficial owner, files a
statement with the withholding agent to the effect that it has received such a
statement from the Holder (and furnishes the withholding agent with a copy
thereof).
If a United States Alien Holder of a Note is engaged in a trade or business
in the United States, and if interest (including original issue discount) on the
Note is effectively connected with the conduct of such trade or business, the
United States Alien Holder, although exempt from the withholding tax discussed
in the preceding paragraph, will generally be subject to regular United States
income tax on interest (including any original issue discount) and on any gain
realized on the sale, exchange or other disposition of a Note in the same manner
as if it were a United States Holder. See "Tax Consequences To United States
Holders" above. In lieu of the certificate described in the preceding paragraph,
such a Holder will be required to provide to the Company a properly executed
Internal Revenue Service Form 4224 in order to claim an exemption from
withholding tax. In addition, if such United States Alien 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
certain adjustments. For purposes of the branch profits tax, interest (including
original issue discount) on and any gain recognized on the sale, exchange or
other disposition of a Note will be included in the earnings and profits of such
United States Alien Holder if such interest is effectively connected with the
conduct by the United States Alien Holder of a trade or business in the United
States.
Backup Withholding and Information Reporting. Under current United States
federal income tax law, a 31% backup withholding tax and information reporting
requirements apply to certain payments of principal, premium and interest
(including original issue discount) made to, and to the proceeds of sale before
maturity by, certain noncorporate United States persons. Under current Treasury
Regulations, backup withholding will not apply to payments of principal, premium
or interest if the certifications required by Sections 871(h) and 881(c) are
received, provided in each case that the Company or paying agent, as the case
may be, does not have actual knowledge that the payee is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker generally
will not be subject to backup withholding. However, if such broker is a United
States person, a controlled foreign corporation for United States tax purposes
or a foreign person 50% or more of whose gross income is effectively connected
with a United States trade or business for a specified three-year period,
information reporting will be required unless the broker has in its records
documentary evidence that the beneficial owner is not a United States person and
certain other conditions are met or the beneficial owner otherwise establishes
an exemption. Under proposed Treasury Regulations, backup withholding may apply
to any payment which such broker is required to report if such broker has actual
knowledge that the payee is a United States person. Payments to or through the
United States office of a broker will be subject to backup withholding and
information reporting unless the Holder certifies, under penalties of perjury,
that it is not a United States person or otherwise establishes an exemption.
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United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Any amounts withheld
from a payment to a United States Alien Holder under the backup withholding
rules will be allowed as a credit against such Holder's United States federal
income tax liability and may entitle such Holder to a refund, provided that the
required information is furnished to the United States Internal Revenue Service.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Sales Agency
Agreement, the Notes are being offered on a continuing basis by the Company
through Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Lazard Freres & Co.,
Lehman Brothers Inc. (including its affiliate, Lehman Government Securities
Inc.), Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (the
"Agents"), who have agreed to use best efforts to solicit purchases of the
Notes. The Company will have the sole right to accept offers to purchase Notes
and may reject any proposed purchase of Notes in whole or in part. The Agents
shall have the right, in their discretion reasonably exercised, to reject any
offer to purchase Notes, in whole or in part. The Company will pay the Agents a
commission of from .250% to .750% of the principal amount of Notes, depending
upon maturity, for sales made through them as Agents.
The Company may also sell Notes to the Agents as principal for their own
accounts at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page hereof in the case of any such principal transaction
in which no other discount is agreed. Unless otherwise indicated in the
applicable Pricing Supplement, any Note sold to the Agents as principal will be
purchased by the Agents at a price equal to 100% of the principal amount thereof
less a percentage equal to the commission applicable to any agency sale of a
Note of identical maturity. Such Notes may be resold at prevailing market
prices, or at prices related thereto, at the time of such resale, as determined
by the Agents. The Company reserves the right to sell Notes directly on its own
behalf. No commission will be payable on any Notes sold directly by the Company.
In addition, the Agents may offer the Notes that it has purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount or with commissions equal to all or part of the discounts and
commissions received from the Company. After the initial public offering of
Notes to be resold to investors and other purchasers on a fixed public offering
price basis, the public offering price, concession and discount may be changed.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Act. The Company has agreed to reimburse the Agents for
certain expenses.
The Agents may sell to or through dealers who may resell to investors, and
the Agents may pay all or part of their discount or commission to such dealers.
Such dealers may be deemed to be "underwriters" within the meaning of the Act.
Unless otherwise indicated in the applicable Pricing Supplement, payment of the
purchase price of Notes will be required to be made in immediately available
funds in The City of New York. Goldman, Sachs & Co., Bear, Stearns & Co. Inc.,
Lazard Freres & Co., Lehman Brothers, Lehman Brothers Inc. (including its
affiliate, Lehman Government Securities Inc.), Morgan Stanley & Co. Incorporated
and Salomon Brothers Inc may be customers of, engage in transactions with, and
perform services for the Company in the ordinary course of business.
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The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
GLOSSARY
Set forth below are definitions, or the locations elsewhere of definitions,
of some of the terms used in this Prospectus Supplement.
"Book-Entry Note" means a Note represented by a Global Security registered
in the name of a nominee of The Depository Trust Company, New York, New York.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
that is not a day on which banking institutions in The City of New York and the
City of Chicago generally are authorized or obligated by law or executive order
to close.
"Calculation Agent" means the agent appointed by the Company to calculate
interest rates for Floating Rate Notes. Unless otherwise provided in a Pricing
Supplement, the Calculation Agent will be The First National Bank of Chicago.
"Calculation Date" means the date on which the Calculation Agent is to
calculate an interest rate for a Floating Rate Note, which is the applicable
date set forth below, unless otherwise indicated in the applicable Pricing
Supplement:
CD Rate -- Tenth day after the related CD Rate Interest Determination
Date or, if any such day is not a Market Day, the next succeeding Market
Day.
Commercial Paper Rate -- Tenth day after the related Commercial Paper
Rate Interest Determination Date or, if any such day is not a Market Day,
the next succeeding Market Day.
Federal Funds Rate -- Tenth day after the related Federal Funds
Interest Determination Date or, if any such day is not a Market Day, the
next succeeding Market Day.
LIBOR -- The LIBOR Interest Determination Date.
Prime Rate -- Tenth day after the related Prime Rate Interest
Determination Date or, if any such day is not a Market Day, the next
succeeding Market Day.
Treasury Rate -- Tenth day after the related Treasury Rate Interest
Determination Date or, if any such day is not a Market Day, the next
succeeding Market Day.
"Certificated Note" means a Note that is represented by a certificate
issued in definitive registered form, without coupons.
"CD Rate" means the rate calculated as set forth under the heading
"Description of Notes -- CD Rate Notes", unless otherwise indicated in the
applicable Pricing Supplement.
"Commercial Paper Rate" means the rate calculated as set forth under the
heading "Description of Notes -- Commercial Paper Rate Notes", unless otherwise
indicated in the applicable Pricing Supplement.
"Composite Quotations" means the daily statistical release entitled
"Composite 3:30 P.M. Quotations for U.S. Government Securities" or any successor
publication, published by The Federal Reserve Bank of New York.
"Corporate Trust Office" means the principal office of the Trustee in the
Borough of Manhattan, The City of New York, at which at any particular time its
corporate trust business shall be principally administered. On the date of this
Prospectus Supplement, the Corporate Trust Office is located at 14 Wall Street,
8th Floor, New York, NY 10005, Attention: Corporate Trust Administration.
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"Federal Funds Rate" means the rate calculated as set forth under the
heading "Description of Notes -- Federal Funds Rate Notes", unless otherwise
indicated in the applicable Pricing Supplement.
"Fixed Rate Note" shall have the meaning set forth under the heading
"Description of Notes -- Interest Rate".
"Floating Rate Note" shall have the meaning set forth under the heading
"Description of Notes -- Interest Rate".
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519), Selected Interest Rates" or any successor publication,
published by the Board of Governors of the Federal Reserve System.
"Index Maturity" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as indicated in the applicable Pricing Supplement.
"Indexed Note" means any Note, the principal amount of which is payable at
or prior to maturity and on which the interest and/or any premium payable with
respect to which will be determined by reference to the difference in the price
of a specified security or commodity on certain specified dates, a securities or
commodities index or by some other index or indices.
"Initial Interest Rate" means the interest rate in effect from the date of
issue to the first Interest Reset Date with respect to a Floating Rate Note.
"Interest Determination Date" means the date as of which the interest for a
Floating Rate Note is to be calculated, to be effective as of the appropriate
Interest Reset Date and calculated on the related Calculation Date (except in
the case of Prime Rate and LIBOR, which are calculated on the related Prime Rate
Interest Determination Date and LIBOR Interest Determination Date,
respectively). The Interest Determination Dates for any Floating Rate Note will
be indicated in the applicable Pricing Supplement.
"Interest Payment Date" shall have the meaning set forth under the heading
"Description of Notes -- Payment of Principal and Interest".
"Interest Reset Date" means the date on which a Floating Rate Note will
begin to bear interest at the variable interest rate determined as of any
Interest Determination Date.
"Issue Price" means, with respect to any Note, the first price to the
public (not including bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters or wholesalers) at which a substantial
amount of the Notes are sold.
"LIBOR" means the rate calculated as set forth under the heading
"Description of Notes -- LIBOR Notes", unless otherwise indicated in the
applicable Pricing Supplement.
"Market Day" means (a) with respect to any Note (other than any LIBOR
Note), any Business Day in The City of New York, and (b) with respect to any
LIBOR Note, any such Business Day on which dealings in deposits in U.S. dollars
are transacted in the London interbank market.
"Maximum Rate" means the maximum numerical interest rate limitation, or
ceiling, on the rate of interest which may accrue during any interest period.
"Minimum Rate" means the minimum numerical interest rate limitation, or
floor, on the rate of interest which may accrue during any interest period.
"Original Issue Discount Note" shall have the meaning set forth under the
heading "Description of Notes -- Original Issue Discount Notes", except that for
United States federal tax purposes, the term shall have the meaning set forth
under "United States Taxation -- Tax Consequences to United States
Holders -- Original Issue Discount Notes".
S-31
<PAGE> 32
"Participant" means a person that has an account with the Depositary.
"Prime Rate" means the rate calculated as set forth under the heading
"Description of Notes -- Prime Rate Notes", unless otherwise indicated in the
applicable Pricing Supplement.
"Regular Record Date" means (a) with respect to any Floating Rate Note, the
date 15 calendar days prior to each Interest Payment Date, whether or not such
date shall be a Business Day, and (b) with respect to any Fixed Rate Note, the
January 1 and July 1 next preceding the January 15 and July 15 Interest Payment
Dates.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London interbank offered
rates of major banks).
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
"Spread" means the number of basis points specified in the applicable
Pricing Supplement as being applicable to the interest rate for a particular
Floating Rate Note.
"Spread Multiplier" means the percentage specified in the applicable
Pricing Supplement as being applicable to the interest rate for a particular
Floating Rate Note.
"Treasury Rate" means the interest rate calculated as set forth under the
heading "Description of Notes -- Treasury Rate Notes", unless otherwise
indicated in the applicable Pricing Supplement.
S-32
<PAGE> 33
PROSPECTUS
THE QUAKER OATS COMPANY [LOGO]
DEBT SECURITIES
The Quaker Oats Company (the "Company") from time to time may offer its debt
securities (the "Securities"), in one or more series, up to an amount resulting
in net proceeds to the Company of approximately $600,000,000. The Company has
previously issued $200,000,000 of such Securities in the form of Medium-Term
Notes, Series C.
When a particular series of Securities is offered, a supplement to this
Prospectus will be delivered (the "Prospectus Supplement") together with this
Prospectus setting forth the terms of the Securities, including, where
applicable, the specific designation, aggregate principal amount, denominations,
currency of payments, maturity, rate (which may be fixed or variable) and time
of payment of interest, any terms for redemption at the option of the Company or
the holder, any terms for sinking fund payments, the initial public offering
price, the names of, and the principal amounts to be purchased by, underwriters
and the compensation of such underwriters, any listing of the Securities on a
securities exchange and the other terms in connection with the offering and sale
of such Securities.
The Company may sell the Securities to or through underwriters, and also may
sell the Securities directly to other purchasers or through agents or dealers.
See "Plan of Distribution". Such underwriters, agents or dealers may include
Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Lazard Freres & Co., Lehman
Brothers, Morgan Stanley & Co. Incorporated or Salomon Brothers Inc or may be a
group of underwriters, agents or dealers represented by firms including Goldman,
Sachs & Co., Bear, Stearns & Co. Inc., Lazard Freres & Co., Lehman Brothers,
Morgan Stanley & Co. Incorporated or Salomon Brothers Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LAZARD FRERES & CO.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
THE DATE OF THIS PROSPECTUS IS APRIL 21, 1995.
<PAGE> 34
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus or any Prospectus Supplement, in connection with the offering
contained herein, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or any
underwriter or agent. This Prospectus and any Prospectus Supplement do not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the registered securities to which it relates or any of
such securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus or any
Prospectus Supplement nor any sale made hereunder and thereunder shall, under
any circumstances, create an implication that there has been no change in the
information herein or therein set forth since the date hereof or thereof or that
such information is correct as of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices: Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Room 3190, Washington, D. C. 20549,
at prescribed rates. In addition, such material can be inspected at the offices
of the New York, Pacific, and Chicago Stock Exchanges, on which the Company's
Common Stock is listed.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act"). This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-12) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1994.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1994 and December 31, 1994.
3. The Company's Current Report on Form 8-K filed on December 19, 1994,
Amendment No. 1 thereto filed on February 17, 1995 and Current
Reports on Form 8-K filed on March 29, 1995 and April 18, 1995.
4. All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Securities shall be deemed
to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents.
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<PAGE> 35
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to such person to whom a Prospectus
is delivered, upon written or oral request of such person, a copy of any or all
of the documents which are incorporated by reference herein, other than exhibits
to such documents unless such exhibits are specifically incorporated by
reference into such documents. Requests should be directed to: The Quaker Oats
Company, Shareholder Services, 321 North Clark Street, Chicago, Illinois 60610,
Telephone: 1-800-685-6566.
THE COMPANY
The Quaker Oats Company is a worldwide marketer of foods and beverages with
annual sales of $5.9 billion for the year ended June 30, 1994. Quaker's core
businesses are non-carbonated beverages, grain-based products and food service.
In the United States, the Company is one of the leading manufacturers of
sports beverages, hot cereals, single-serve iced teas and fruit juice drinks,
value-added rice and pasta products, rice cakes, pancake mixes and syrups,
granola bars and cornmeal and is among the five largest manufacturers of
ready-to-eat cereals. In addition to these products, the Company markets a line
of over 400 products for the food service market.
The Company and its subsidiaries own a number of trademarks under which the
Company markets its grocery products. Among the most important of these are
Quaker, Quaker Toasted Oatmeal, Cap'n Crunch and Life for breakfast cereals;
Gatorade and Snapple for beverages; Rice-A-Roni, Noodle Roni and Near East for
value-added side dishes; Quaker and Aunt Jemima for mixes, syrup, frozen
breakfast products and corn goods; and Quaker and Chewy for grain-based snacks.
The Company's International Grocery Products business is diversified, both
geographically and by product line. The Company is the leading producer of
sports beverages and hot cereals in many countries.
The Company was incorporated in New Jersey in 1901. Its executive offices
are located at 321 North Clark Street, Chicago, Illinois 60610. The Company's
telephone number is (312) 222-7111. The Company has plant facilities throughout
the U.S., as well as in Western Europe, Canada, Latin America, Asia and
Australia.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Securities offered hereby may be used to repay certain of the Company's
short-term promissory notes. In addition, the proceeds may be lent to the
Company's subsidiaries or used to repay existing long-term debt, finance capital
expenditures, finance acquisitions, repurchase equity securities of the Company
or its subsidiaries or for other general corporate purposes. Pending such uses,
the net proceeds may be invested in short-term marketable securities.
3
<PAGE> 36
DESCRIPTION OF SECURITIES
The Securities will be unsecured obligations issued under an indenture (the
"Indenture") between the Company and The First National Bank of Chicago, as
trustee (the "Trustee"). The following summaries do not purport to be complete
and are subject to the detailed provisions of the Indenture, a copy of which is
incorporated by reference as an exhibit to the Registration Statement. Wherever
particular provisions of the Indenture or terms defined therein are referred to,
such provisions are incorporated by reference as part of the statements made
herein and such statements are qualified in their entirety by such reference.
Capitalized terms used below and not otherwise defined are used as defined in
the Indenture. Section references in italics are to the Indenture.
GENERAL
The Securities will rank equally with all other unsecured and
unsubordinated debt of the Company. The Indenture does not limit the amount of
debt, either secured or unsecured, which may be issued by the Company under the
Indenture or otherwise.
Securities may be issued from time to time in amounts the proceeds of which
aggregate up to $600,000,000, and will be offered independently or together to
the public on terms determined by market conditions at the time of sale. The
Securities may be issued in one or more series with the same or various
maturities and may be sold at par, a premium or an original issue discount.
Securities sold at an original issue discount may bear no interest or interest
at a rate which is below market rates.
Reference is made to the Prospectus Supplement for the following terms of
the Securities offered hereby (to the extent such terms are applicable to such
Securities): (i) designation, aggregate principal amount and denomination; (ii)
currency or units based on or relating to currencies in which Securities are
denominated and in which principal of, premium, if any, and any interest will or
may be payable; (iii) the date of maturity; (iv) interest rate or rates (or
method by which such rate will be determined), if any; (v) the dates on which
any such interest will be payable; (vi) the place or places where the principal
of and interest, if any, on the Securities will be payable; (vii) any redemption
or sinking fund provisions; (viii) whether the Securities will be issuable in
registered form or bearer form or both and, if Securities in bearer form are
issuable, restrictions applicable to the exchange of one form for another and to
the offer, sale and delivery of Securities in bearer form; (ix) whether and
under what circumstances the Company will pay additional amounts on Securities
held by a person who is not a U.S. person (as defined below) in respect of any
tax, assessment or governmental charge withheld or deducted and, if so, whether
the Company will have the option to redeem such Securities rather than pay such
additional amounts; (x) any other specific terms of the Securities, including
any terms which may be required by or advisable under United States laws or
regulations. For purposes of this Prospectus, "U.S. person" means a citizen,
national or resident of the United States of America, its territories,
possessions and all areas subject to its jurisdiction (the "United States"), a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust the income of which is subject to United States federal income tax
regardless of its source.
Securities may be presented for exchange, and registered Securities may be
presented for transfer, in the manner, at the places and subject to the
restrictions set forth in the Securities and the Prospectus Supplement. Such
services will be provided without charge, other than any tax or other
governmental charge payable in connection therewith, but subject to the
limitations provided in the Indenture. Securities in bearer form and the
coupons, if any, appertaining thereto will be transferable by delivery.
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<PAGE> 37
CERTAIN RESTRICTIONS ON THE COMPANY
Limitations on Liens
The Company covenants that it will not, nor will it permit any Domestic
Subsidiary (defined as a subsidiary of the Company other than one which neither
transacts any substantial portion of its business nor regularly maintains any
substantial portion of its fixed assets within the United States nor is engaged
primarily in financing the operations of the Company or its subsidiaries, or
both, outside the United States) to incur, issue, assume or guarantee any Debt
(defined as notes, bonds, debentures or other indebtedness for money borrowed)
secured by any mortgage on, pledge of or lien ("Mortgage") on any Principal
Property (defined as any manufacturing plant or warehouse, owned or leased by
the Company or any Domestic Subsidiary, which is located within the United
States and the gross book value of which exceeds 1 1/2% of Consolidated Net
Tangible Assets (defined as all assets less reserves, current liabilities and
intangibles, subject to certain exceptions set forth in the Indenture), other
than plants or warehouses which, in the opinion of the Company's Board of
Directors, are not material to the total business of the Company and its
subsidiaries as an entirety), or upon shares of stock or Debt of any Domestic
Subsidiary, without effectively providing that the Securities shall be secured
equally and ratably with (or prior to) such secured Debt, so long as such
secured Debt shall be so secured. The foregoing restrictions shall not apply to
Debt secured by (i) Mortgages on property, shares of stock or Debt of any
corporation existing at the time such corporation became a Domestic Subsidiary;
(ii) Mortgages in favor of the Company or any Domestic Subsidiary; (iii)
Mortgages on property of the Company or a Domestic Subsidiary in favor of the
United States of America or any State thereof or in favor of any other country
to secure partial, progress, advance or other payments pursuant to any contract
or statute and any other Mortgages incurred or assumed in connection with the
issuance of any industrial revenue or private activity bonds; (iv) Mortgages on
property, shares of stock or Debt existing at the time of the acquisition
thereof and certain purchase money mortgages; (v) Mortgages existing on the
first date on which a Security is authenticated by the Trustee under the
Indenture; (vi) Mortgages on any property, shares of stock or Debt not
constituting a Principal Property; or (vii) extensions, renewals or replacements
(or successive extensions, renewals or replacements), as a whole or in part, of
any Mortgage referred to in the foregoing clauses (i) to (vi), inclusive
(Section 3.6). See "Exempted Debt" below.
Exempted Debt
The Indenture provides that, notwithstanding the foregoing provisions, the
Company may, and may permit Domestic Subsidiaries to, incur, issue, assume or
guarantee Debt secured by Mortgages not excepted in the covenants above without
equally and ratably securing the Securities; provided, however, that, after so
incurring such Debt, the aggregate of all such secured Debt plus all
Attributable Debt of the Company and its Domestic Subsidiaries in respect of
sale and leaseback transactions would not exceed 10% of Consolidated Net
Tangible Assets, as set forth on the most recent balance sheet of the Company
and its consolidated subsidiaries. "Attributable Debt" is defined in the
Indenture as the total net amount of rent required to be paid under a lease for
the remaining term of such lease, discounted at the rate per annum borne by the
Securities compounded semiannually; provided, however, that for the purposes of
limitations on the Company and its Domestic Subsidiaries there shall not be any
Attributable Debt in respect of a sale and leaseback if (i) such sale and
leaseback is entered into in connection with the issuance of industrial revenue
or private activity bonds; (ii) the Company or Domestic Subsidiary applies an
amount equal to the net proceeds of the sale or transfer of a Principal Property
leased pursuant to such sale and leaseback to investment in another Principal
Property within one year prior to or subsequent to such sale or transfer; (iii)
such sale and leaseback was entered into prior to the date such corporation (a)
became a Domestic Subsidiary, (b) was merged or consolidated with the Company or
a Domestic Subsidiary or (c) sold or otherwise disposed of its properties
substantially as an entirety to the Company or a Domestic Subsidiary.
5
<PAGE> 38
Limitations on Sales and Leasebacks
The Company covenants that it will not, nor will it permit any Domestic
Subsidiary to, enter into any arrangement with any bank, insurance company or
other lender or investor providing for the leasing by the Company or any
Domestic Subsidiary of any Principal Property (except for temporary leases of a
term of not more than five years), which Principal Property has been or is to be
sold or transferred to such lender or investor, unless (i) the Company or such
Domestic Subsidiary could create Debt secured by a Mortgage on the Principal
Property to be leased in an amount equal to the Attributable Debt in such
arrangement without equally and ratably securing the Securities or (ii) the
Company shall apply an amount equal to the greater of the net proceeds of the
sale or the fair market value of the Principal Property at the time of entering
into such arrangement to the retirement of Funded Debt (defined as indebtedness
for money borrowed maturing more than 12 months after the date of the most
recent balance sheet of the Company and its consolidated subsidiaries), subject
to certain exceptions set forth in the Indenture (Section 3.7).
Consolidation; Merger; Sale of Assets
The Company covenants that it will not merge or consolidate with any other
corporation or sell or convey all or substantially all of its assets to any
person, unless (i) either the Company shall be the continuing corporation or the
successor corporation or the person which acquires the assets of the Company
shall be a corporation or entity organized under the laws of the United States
or any State thereof and shall expressly assume the obligations of the Company
under the Indenture, the Securities and the Coupons, if any, and (ii) the
Company or such successor corporation, or entity as the case may be, shall not,
immediately after such merger or consolidation, or such sale or conveyance, be
in default in the performance of any covenants or conditions of the Indenture
(Section 9.1).
EVENTS OF DEFAULT
An Event of Default with respect to any series of Securities is defined in
the Indenture as being: (a) default for 30 days in payment of interest on such
series; (b) default in any payment of principal or premium, if any, on any
Security of such series either at maturity, upon redemption, by declaration or
otherwise; (c) default in payment of any sinking fund instalment on any Security
of such series; (d) default by the Company in the performance of any other of
the covenants or agreements with respect to that series which shall not have
been remedied for a period of 90 days (or other period, if any, provided) after
notice; (e) certain events of bankruptcy, insolvency or reorganization of the
Company or (f) any other Event of Default provided in a supplemental indenture
or resolution of the Board of Directors under which such series of Securities is
issued or in the form of Security for such series. No Event of Default with
respect to any particular series of Securities necessarily constitutes an Event
of Default with respect to any other series of Securities. In case an Event of
Default described in (a), (b), (c) or (d) (if such Event of Default is with
respect to less than all series of Securities then Outstanding) above shall
occur and be continuing with respect to any series of Securities, the Trustee or
the Holders of not less than 25% in aggregate principal amount of the Securities
of such series then Outstanding (each such series acting as a separate class)
may declare the principal (or, in the case of discounted Securities, the amount
specified in the terms thereof) of the Securities of such series and the
interest accrued thereon, if any, to be due and payable. In case an Event of
Default described in (d) (if such Event of Default is with respect to all series
of Securities then Outstanding) or (e) above shall occur and be continuing, the
Trustee or the Holders of not less than 25% in aggregate principal amount of all
Securities then Outstanding (treated as one class) may declare the principal
(or, in the case of discounted Securities, the amount specified in the terms
thereof) of all Outstanding Securities and the interest accrued thereon, if any,
to be due and payable (Section 5.1). Any Event of Default with respect to a
particular series of Securities may be waived by the Holders of a majority in
aggregate principal amount of the Outstanding Securities of such series (or of
all the Outstanding Securities, as the
6
<PAGE> 39
case may be), except in each case a failure to pay principal or premium, if any,
or interest on such Security (Section 5.10).
The Indenture provides that the Trustee may withhold notice to the Holders
of any default with respect to any series of Securities (except in payment of
principal of or interest or premium on the Securities) if the Trustee considers
it in the interest of Holders to do so (Section 5.11).
The Holders of a majority in principal amount of the Securities of any
series then Outstanding shall have the right to direct the time, method and
place of conducting any proceedings for any remedy available to the Trustee
under the Indenture, provided that the Holders of Securities shall have offered
to the Trustee reasonable indemnity against expenses and liabilities (Sections
5.6 and 5.9). The Indenture requires the annual filing by the Company with the
Trustee of a certificate as to the absence of certain defaults under the
Indenture (Section 3.5).
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than 66 2/3% in principal amount of
the Securities of all series affected by a supplement to the Indenture (voting
as one class) at the time Outstanding, to supplement the Indenture or any
supplemental indenture or modify the rights of the Holders of the Securities
provided that no such supplement or modification shall (i) extend the final
maturity of any Security or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof, or change the currency in which the Security is
payable or (ii) reduce the aforesaid percentage of Securities, without the
consent of the Holders of which is required for any such modification (Section
8.2).
The Indenture also contains provisions permitting the Company and the
Trustee to enter into supplemental indentures without the consent of the Holders
of any series of Securities (a) to convey, transfer, assign, mortgage or pledge
to the Trustee as security for the Securities any property or assets, (b) to
evidence the succession of another corporation to the Company, subject to and
upon compliance with the provisions of the Indenture, and the assumption by such
successor corporation of the covenants, agreements and obligations in the
Securities and in the Indenture, (c) to evidence and provide for a successor
Trustee under the Indenture with respect to one or more series of Securities,
(d) to add to the covenants of the Company, (e) to cure any ambiguity or to
correct or supplement any provision in the Indenture that may be defective, (f)
to establish the form or terms of Securities of any series and the Coupons, if
any, appertaining thereto and (g) to provide for uncertificated registered
Securities for any series (Section 8.1).
DEFEASANCE OF THE INDENTURE AND SECURITIES
If the Company meets the following two conditions with respect to a series
of Securities, then the Indenture will cease to be of further effect with
respect to such series (except as to the Company's obligations to compensate,
reimburse and indemnify the Trustee pursuant to the Indenture with respect to
such series), and the Company will be deemed to have satisfied and discharged
the Indenture with respect to such series (Section 10.1). First, the Company
must deposit or cause to be deposited with the Trustee an aggregate amount, as
trust funds, in money and securities sufficient to pay and discharge the
principal and premium, if any, of, and interest, if any, on the Securities to
the date of maturity or redemption of such outstanding series of Securities. Any
securities so deposited or caused to be deposited must be securities of the
government that issued the currency in which the Securities are denominated or
securities of government agencies backed by the full faith and credit of such
government. Second, the Company must have paid or caused to be paid all of the
sums payable by it under the Indenture with respect to such series. In the event
of any such defeasance, holders of such Securities would be able to look only to
such trust fund for payment of principal and premium, if any, and interest, if
any, on their Securities until maturity.
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<PAGE> 40
Such defeasance may be treated as a taxable exchange of the related
Securities for an issue of obligations of the trust or a direct interest in the
cash and securities held in the trust. In that case holders of such Securities
would recognize gain or loss as if the trust obligations or the cash or
securities deposited, as the case may be, had actually been received by them in
exchange for their Securities. Such holders thereafter might be required to
include in income a different amount than would be includable in the absence of
defeasance. Prospective investors are urged to consult their own tax advisors as
to the specific consequences of defeasance.
CONCERNING THE TRUSTEE
The First National Bank of Chicago is the Trustee under the Indenture and
is also the trustee of the Series A, Series B and Series C Medium-Term Notes of
the Company. The Company has banking relationships with the Trustee in the
ordinary course of business.
PLAN OF DISTRIBUTION
The Company may sell the Securities being offered hereby: (i) directly to
purchasers; (ii) to dealers; (iii) to both investors and dealers through a
specific bidding or auction process or otherwise; (iv) through underwriters; (v)
through agents; or (vi) through a combination of any such methods of sale. If a
bidding or auction process is utilized, it will be described in the Prospectus
Supplement.
Offers to purchase Securities may be solicited directly by the Company or
by agents designated by the Company from time to time. Any such agent, which may
be deemed to be an underwriter as that term is defined in the Securities Act,
involved in the offer or sale of the Securities in respect of which this
Prospectus is delivered will be named in, and any commissions payable by the
Company to such agent will be set forth in, a Prospectus Supplement. Unless
otherwise indicated in such Prospectus Supplement, any such agent will be acting
on a best efforts basis.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
public at varying prices to be determined by such dealer at the time of resale.
In the case of a sale to a dealer, the Company will provide a Prospectus
Supplement stating the name of such dealer, the amount of Securities purchased
and the price paid.
If an underwriter or underwriters are utilized in the sale, the names of
the underwriters and the terms of the transaction will be set forth in a
Prospectus Settlement, which will be used by the underwriters to make resales of
the Securities in respect of which this Prospectus is delivered to the public.
Dealers, underwriters or agents may be entitled under agreements which may
be entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act. Such
dealers, underwriters or agents may be customers of, engage in transactions
with, or perform services for, the Company in the ordinary course of business.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
EXPERTS
The audited financial statements incorporated by reference in this
Prospectus and elsewhere in the Registration Statement, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
8
<PAGE> 41
LEGAL OPINIONS
Certain legal matters relating to the Securities to be offered hereby will
be passed upon for the Company by R. Thomas Howell, Jr., Vice President, General
Corporate Counsel and Corporate Secretary of the Company, and for the
underwriters, if any, by Davis Polk & Wardwell, 450 Lexington Avenue, New York,
New York 10017. Mr. Howell owns shares of common stock of the Company and owns
options to purchase shares of such stock.
9
<PAGE> 42
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT AND
ANY PRICING SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREAFTER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recent Developments.................... S-2
Capitalization......................... S-3
Selected Financial Data................ S-4
Description of Notes................... S-6
United States Taxation................. S-22
Supplemental Plan of Distribution...... S-29
Glossary............................... S-30
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
The Company............................ 3
Use of Proceeds........................ 3
Description of Securities.............. 4
Plan of Distribution................... 8
Experts................................ 8
Legal Opinions......................... 9
</TABLE>
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$400,000,000
THE QUAKER OATS COMPANY
MEDIUM-TERM NOTES, SERIES D
DUE FROM 2 YEARS TO 30 YEARS FROM DATE OF ISSUE
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GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LAZARD FRERES & CO.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
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