<PAGE> 1
Filed Pursuant to Rule 424(b)(2) File No. 033-57659
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 25, 1995
U.S. $200,000,000
WEINGARTEN REALTY INVESTORS
MEDIUM-TERM NOTES, SERIES A
DUE 9 MONTHS OR MORE FROM DATE OF ISSUE
---------------------
The Company may offer from time to time its Medium-Term Notes, Series A,
due 9 months or more from the date of issue, as selected by the purchaser and
agreed to by the Company. The aggregate initial public offering price of the
Notes will not exceed U.S. $200,000,000 or its equivalent in another currency or
composite currency.
The Notes may be denominated in U.S. dollars or in such foreign currencies
or composite currencies as the Company may designate at the time of offering.
The Company will set forth the specific currency or composite currency, interest
rate or formula (if any), issue price and maturity date of any Note in the
applicable Pricing Supplement to this Prospectus Supplement. This Prospectus
Supplement provides information with respect to the Notes, in addition to those
terms set forth in the Prospectus included herewith. Unless otherwise specified
in the applicable Pricing Supplement, Notes denominated in other than U.S.
dollars or ECUs will not be sold in, or to residents of, the country issuing the
Specified Currency. 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. Interest on the Floating Rate 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, CMT Rate or
Eleventh District Cost of Funds Rate, as adjusted by a Spread and/or Spread
Multiplier, if any. 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.
Unless a Redemption Commencement Date is specified in the applicable
Pricing Supplement, the Notes will not be redeemable prior to their Stated
Maturity. If a Redemption Commencement Date is so specified, the Notes will be
redeemable at the option of the Company, as described herein.
The Company will issue the Notes offered hereby in permanent global or
definitive certificated form, as specified in the applicable Pricing Supplement.
A Global Security representing Book-Entry Notes will be registered in the name
of, or a nominee of, The Depository Trust Company, which will act as Depositary.
Beneficial interests in Book-Entry Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary (with
respect to Participants' interests) and its Participants. Except as described
herein under "Description of Notes -- Book-Entry Notes," owners of beneficial
interests in a Global Security will not be considered the Holders thereof and
will not be entitled to receive physical delivery of Notes in definitive form,
and no Global Security will be exchangeable except for another Global Security
of like denomination and terms to be registered in the name of the Depositary or
its nominee. The Notes offered hereby will be issued in registered form in a
minimum denomination of $1,000 and integral multiples thereof or the approximate
equivalent in the Specified Currency. See "Description of Notes".
The Notes may be issued as Senior Securities or Subordinated Securities.
Subordinated Securities will be subordinated to all Senior Debt of the Company.
See "Description of Debt Securities -- Subordination" in the accompanying
Prospectus.
---------------------
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.
---------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
------------- ---------------------- ----------------------------
<S> <C> <C> <C>
Per Note................................................. 100% 0.125% - 0.750% 99.875% - 99.250%
Total(4)................................................. $200,000,000 $250,000 - $1,500,000 $199,750,000 - $198,500,000
</TABLE>
- ---------------
(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) With respect to Notes with maturities of 30 years or less, the Company will
pay the Agents a commission ranging from 0.125% to 0.750%, depending on rank
and 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). With respect to Notes with maturities in excess
of 30 years that are sold through the Agents, the rate of commission will be
negotiated at the time of sale and will be specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, any Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note of
identical rank and maturity, and may be resold by such Agent to investors
and other purchasers at varying prices related to prevailing market prices
at the time of resale to be determined by such Agent or at fixed prices. 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,
including expenses of the Agents to be reimbursed by the Company.
(4) Or its equivalent in any other currency or composite currency.
---------------------
Offers to purchase Notes are being solicited, on a reasonable efforts
basis, from time to time by the Agents on behalf of the Company. Notes may be
sold to the Agents as principal 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. Unless otherwise specified in the applicable Pricing Supplement,
the Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered hereby will be sold or that there will be a
secondary market for the Notes. The Company or the Agents may reject any order
as a whole or in part. See "Supplemental Plan of Distribution".
GOLDMAN, SACHS & CO.
CHEMICAL SECURITIES INC.
MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
---------------------
The date of this Prospectus Supplement is May 10, 1995.
<PAGE> 2
IN CONNECTION WITH THE DISTRIBUTION OF NOTES UNDERWRITTEN BY AN AGENT
ACTING AS PRINCIPAL ON A FIXED-PRICE BASIS, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as "Debt Securities") supplements and, to
the extent inconsistent therewith replaces, the description of the general terms
and provisions of Debt Securities set forth in the Prospectus, to which
description reference is hereby made. The Notes will be issued as a series of
Senior Debt Securities under the Senior Indenture, dated as of May 1, 1995 (the
"Senior Indenture") between the Company and Texas Commerce Bank National
Association as Trustee, or Subordinated Debt Securities under the Subordinated
Indenture, dated as of May 1, 1995 (the "Subordinated Indenture") between the
Company and Texas Commerce Bank National Association as Trustee. The Senior
Indenture and the Subordinated Indenture (being sometimes referred to herein
collectively as "Indentures" and individually as an "Indenture") are filed as
exhibits to the Registration Statement of which the accompanying Prospectus
constitutes a part. Capitalized terms not defined herein have the meanings
assigned to such terms in the Prospectus. Terms of the Notes may be varied in
the related supplement to this Prospectus Supplement (a "Pricing Supplement").
References to interest payments and interest-related information do not apply to
Zero Coupon Notes (as defined below).
The Notes may be issued as Senior Notes or Subordinated Notes.
The Notes constitute separate series for purposes of each of the Senior
Indenture or the Subordinated Indenture, as the case may be, and the aggregate
of Senior Notes and Subordinated Notes is limited in amount as set forth on the
cover page of this Prospectus Supplement. For a description of the rights
attaching to different series of Debt Securities under the applicable Indenture,
see "Description of Debt Securities" in the Prospectus.
The Notes will be unsecured obligations of the Company. The Senior Notes
will rank equally with all other unsecured and unsubordinated indebtedness of
the Company. The Subordinated Notes will be subordinated in right of payment to
the prior payment in full of the Senior Debt of the Company as described under
"Description of Debt Securities -- Subordination" in the Prospectus. At March
31, 1995, the Company's Senior Debt aggregated $252,833,000. The Company had no
subordinated debt outstanding as of such date.
The Company will at all times have appointed and maintain a Paying Agent
(which may be the applicable Trustee) authorized to pay the principal of (and
premium, if any) or interest on any Notes on the Company's behalf and having an
office or agency (the "Paying Agent Office") in the Borough of Manhattan, The
City of New York, where the Notes may be presented or surrendered for payment
and notices, designations, or requests in respect of payments with respect to
Notes may be served. The Company has initially appointed Texas Commerce Bank
National Association as the Paying Agent.
Unless previously redeemed or repaid, a Note will mature on the date
("Stated Maturity") 9 months or more from its date of issue that is specified on
its face and in the applicable Pricing Supplement. The "maturity" of any Note
refers herein to the date on which its principal becomes due and payable,
whether at Stated Maturity, upon redemption, repayment or otherwise.
Each Note will be denominated in a currency, composite currency or basket
of currencies (each a "Specified Currency") as specified on its face and in the
applicable Pricing Supplement, which may include U.S. dollars or any other
currency, composite currency or basket of currencies set forth
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in the applicable Pricing Supplement. Purchasers of the Notes are required to
pay for them by delivery of the requisite amount of the Specified Currency to
the applicable Agent, unless other arrangements have been made. Unless otherwise
specified in the applicable Pricing Supplement, payments on the Notes will be
made in the applicable Specified Currency, provided that, at the election of the
Note Holder and in certain circumstances at the Company's option, payments on
Notes denominated in a Specified Currency other than U.S. dollars ("Foreign
Currency Notes") may be made in U.S. dollars. See "Payment of Principal and
Interest" below and "Certain Investment Considerations Relating to Foreign
Currency Notes." The term "Holder" means, with respect to any Note as of any
time, the person in whose name such Note is registered at such time in the
security register for the Notes maintained by the Company and does not include
the owner of a beneficial interest in a Book-Entry Note as described under
"Book-Entry Notes" below.
Each Note will be represented by either a permanent global Note (a "Global
Security") registered in the name of, or a nominee of, the Depositary (each such
Note represented by a permanent Global Security being referred to herein 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 Notes" below, Book-Entry Notes
will not be issuable in certificated form. So long as the Depositary or its
nominee is the registered holder of any permanent Global Security, the
Depositary or its nominee, as the case may be, will be considered the sole
Holder of the Book-Entry Note or Notes represented by such permanent Global
Security for all purposes under the applicable Indenture and the Notes. For a
further description of the respective forms, denominations, and transfer and
exchange procedures for any such permanent Global Security and the Book-Entry
Notes, refer to "Book-Entry Notes" below and to the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
be sold in individual issues of Notes having such date of issue, interest rate
or interest rate formula, if any, Stated Maturity, and other variable terms as
shall be selected by the initial purchasers and agreed to by the Company. Notes
denominated in U.S. dollars will be initially issued in denominations of $1,000
and integral multiples thereof, and Notes denominated in other than U.S. dollars
will be initially issued in denominations of the amount of the Specified
Currency for such Note equivalent, at the noon buying rate for cable transfers
in The City of New York for such Specified Currency (the "Exchange Rate") on the
first Market Day (as defined below) next preceding the date on which the Company
accepts the offer to purchase such Note, to $1,000 and integral multiples
thereof (or the equivalent thereof in the Specified Currency for each Note).
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction.
Unless otherwise indicated in the applicable Pricing Supplement, each Note,
except any Notes which pay face value only and are issued at a discount (a "Zero
Coupon Note"), will bear interest at a fixed rate or a rate determined by
reference to one or more of the Commercial Paper Rate, the Prime Rate, LIBOR,
the Treasury Rate, the CD Rate, the CMT Rate, the Eleventh District Cost of
Funds Rate or the Federal Funds Rate, as adjusted by the Spread and/or Spread
Multiplier, if any, applicable to such Note. See "Interest Rate." Zero Coupon
Notes will be issued at a discount from the principal amount payable at maturity
thereof, but holders of Zero Coupon Notes will not receive periodic payments of
interest thereon.
The Notes may be issued as Original Issue Discount Notes ("OID Notes"). An
OID Note is a Note, including any Zero Coupon Note, that is issued at a price
lower than the principal amount thereof and that may provide that upon
redemption or acceleration of the maturity thereof an amount less than the
principal amount thereof shall become due and payable. In the event of
redemption or acceleration of the maturity of an OID Note, the amount payable to
the Holder of such OID Note upon such redemption or acceleration will be
determined in accordance with the terms of the OID Note, but generally will be
an amount less than the amount payable at the Stated Maturity of such OID Note.
In addition, a Note issued at a discount may, for U.S. federal income tax
purposes, be
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<PAGE> 4
considered an Original Issue Discount Security (as defined in the accompanying
Prospectus), regardless of the amount payable upon redemption or acceleration of
maturity of such Note. See "United States Taxation."
The Notes will not be subject to any sinking fund and, unless the Company
specifies an initial date on which a Note may be redeemed by the Company (a
"Redemption Commencement Date") in the applicable Pricing Supplement, the Notes
will not be redeemable before their maturity. If the Company does specify a
Redemption Commencement Date for 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 Pricing Supplement, any such Note
shall be redeemable at the Company's option at any time on or after such
specified Redemption Commencement Date 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. If specified in the
applicable Pricing Supplement, Holders may elect to have their Notes redeemed at
one or more optional repayment dates. See "Repayment at the Option of the
Holder" below.
Certificated Notes may be presented for registration of transfer or
exchange at the applicable Paying Agent Office in The City of New York. With
respect to transfers of Book-Entry Notes and exchanges of permanent Global
Securities representing Book-Entry Notes, see "Book-Entry Notes" below.
The applicable Indenture provisions relating to defeasance and covenant
defeasance which are described in the accompanying Prospectus under "Description
of Debt Securities -- Discharge, Defeasance and Covenant Defeasance" will apply
to the Notes.
INTEREST RATE
Each Note, other than a Zero Coupon Note, will bear interest from and
including its date of issue or from and including the most recent Interest
Payment Date (as defined below) 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 below under "Payment of Principal and Interest."
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 (each
term as defined below).
A Floating Rate Note may also have either or both:
(a) a maximum, or ceiling, on the rate of interest that may accrue
during any interest period (a "Maximum Rate"); and
(b) a minimum, or floor, on the rate of interest that may accrue
during any interest period (a "Minimum Rate").
The "Spread" is the number of basis points specified in the applicable
Pricing Supplement as applying to the Interest Rate Basis (as defined below) for
such Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement as applying to the Interest Rate Basis for such
Note.
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"Index Maturity" means, for a Floating Rate Note, the period to maturity of
the interest or obligation on which the interest rate formula is based, as
specified in the applicable Pricing Supplement. Unless otherwise provided in the
applicable Pricing Supplement, Chemical Bank will be the calculation agent (the
"Calculation Agent") for Floating Rate Notes.
"Business Day," as used herein for any particular location, means each
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in such location are authorized or obligated by law,
regulation or executive order to close.
"Market Day" means:
(a) for any Note, other than a LIBOR Note or a Note the repayment in
respect of which is to be made in a Specified Currency other than U.S.
dollars, any Business Day in The City of New York;
(b) for a LIBOR Note, any day on which dealings in deposits in the
Index Currency (as defined below) are transacted in the London interbank
market (a "London Banking Day") which is also a Business Day in The City of
New York;
(c) for a Note the payment in respect of which is to be made in a
Specified Currency other than U.S. dollars, any Business Day in the
Principal Financial Center (as defined below) of the country issuing such
Specified Currency which is also a Business Day in The City of New York;
and
(d) for a Note the payment in respect of which is to be made in
European Currency Units ("ECUs"), any Business Day in The City of New York
which is also not a day that appears as an ECU non-settlement day on the
display designated as "ISDE" on the Reuters Monitor Money Rates Service (or
a day so designated by the ECU Banking Association) or, if ECU non-
settlement days do not appear on that page (and are not so designated), is
not a day on which payments in ECUs cannot be settled in the international
interbank market.
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 one or
more of the following:
(a) the Commercial Paper Rate for "Commercial Paper Rate Notes";
(b) the Prime Rate for "Prime Rate Notes";
(c) LIBOR for "LIBOR Notes";
(d) the Treasury Rate for "Treasury Rate Notes";
(e) the CD Rate for "CD Rate Notes";
(f) the Federal Funds Rate for "Federal Funds Rate Notes";
(g) the CMT Rate for "CMT Rate Notes";
(h) the Eleventh District Cost of Funds Rate for "Eleventh District
Cost of Funds Rate Notes"; or
(i) such other interest rate basis or formula as such Pricing
Supplement sets forth.
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 Interest
Determination Date, and the Interest Reset Dates for such Note.
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The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually, annually, or otherwise (each an "Interest
Reset Date"), as specified in the applicable Pricing Supplement. The Interest
Reset Dates will be:
(a) for Floating Rate Notes which reset daily, each Market Day;
(b) for Floating Rate Notes (other than Treasury Rate Notes) that
reset weekly, the Wednesday of each week;
(c) for Treasury Rate Notes that reset weekly, the Tuesday of each
week, except as provided below;
(d) for Floating Rate Notes (other than Eleventh District Cost of
Funds Rate Notes) that reset monthly, the third Wednesday of each month;
(e) for Eleventh District Cost of Funds Rate Notes that reset monthly,
the first calendar day of the month;
(f) for Floating Rate Notes that reset quarterly, the third Wednesday
of March, June, September and December;
(g) for Floating Rate Notes that reset semi-annually, the third
Wednesday of two months of each year as specified in the applicable Pricing
Supplement;
(h) for Floating Rate Notes that reset annually, the third Wednesday
of the month of each year as specified in the applicable Pricing
Supplement; and
(i) for Floating Rate Notes that reset at intervals other than those
described above, the days specified in the applicable Pricing Supplement;
provided, however, that the interest rate in effect from the date of issue to
the first Interest Reset Date for a Floating Rate Note will be the Initial
Interest Rate (as set forth in the applicable Pricing Supplement). If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Market Day for such Floating Rate Note, the Interest Reset Date for such
Floating Rate Note shall be postponed to the next day that is a Market Day for
such Floating Rate Note (except that for 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).
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"), for a Federal
Funds Rate Note (the "Federal Funds Rate Interest Determination Date") and for a
CMT Rate Note (the "CMT Rate 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 an Eleventh District Cost of Funds Rate
Note (the "Eleventh District Cost of Funds Rate Interest Determination Date")
will be the last working day of the month immediately preceding the applicable
Interest Reset Date on which the Federal Home Loan Bank of San Francisco (the
"FHLB of San Francisco") publishes the FHLB Index (as hereinafter defined). The
Interest Determination Date pertaining to an Interest Reset Date for a LIBOR
Note will be the second London Banking 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 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
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<PAGE> 7
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 (e.g., 9.876541% (or .09876541)
being rounded to 9.87655% (or .0987655)), and all U.S. dollar amounts used in or
resulting from such calculations will be rounded to the nearest cent (with one-
half cent being rounded upwards) and, in the case of a Specified Currency other
than U.S. dollars, to the nearest unit (with one-half unit being rounded
upward).
In addition to any Maximum Rate that may apply to a Floating Rate Note
under 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 U.S. $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 that will become effective on the next Interest Reset Date for
such Floating Rate Note. The Calculation Agent's determination of any interest
rate will be final and binding in the absence of manifest error. Unless
otherwise indicated in the applicable Pricing Supplement, the "Calculation
Date," if applicable, pertaining to an Interest Determination Date will be the
earlier of (i) the tenth calendar day after such Interest Determination Date or,
if any such day is not a Market Day, the next succeeding Market Day and (ii) the
Market Day immediately preceding the applicable Interest Payment Date or the
date of maturity, as the case may be.
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,
"Commercial Paper Rate" means, for 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." If such rate is not published before 3:00 p.m., New York
City time, on the relevant Calculation Date, then the Commercial Paper Rate for
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 for 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 U.S. dollar commercial paper in The City of New York (which
may include the Agents) selected by the Calculation Agent for U.S. dollar
commercial paper of the specified Index Maturity placed for an industrial issuer
whose bond rating is "AA," or the equivalent, from a nationally
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<PAGE> 8
recognized statistical rating agency; provided, however, that if fewer than
three dealers selected by the Calculation Agent are quoting as mentioned in this
sentence, the Commercial Paper Rate for 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:
360 X D
Money Market Yield = 100 X ---------------
360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal and "M" refers to the number of days
in the period for which accrued interest is being calculated.
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 their faces and in the applicable
Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, for 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." If such rate is not published before 3:00 p.m., New York City time,
on the relevant Calculation Date, then the Prime Rate for 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 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) ("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
for 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 four major money center banks in The City of New
York selected by the Calculation Agent. If fewer than four such quotations are
so provided, then the Prime Rate shall be the arithmetic mean of four prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date as furnished in The City of New York by the major money
center banks, if any, that have provided such quotations and by as many
substitute banks or trust companies as necessary in order to obtain four such
prime rate quotations, provided such substitute banks or trust companies are
organized and doing business under the laws of the United States, or any State
thereof, each having total equity capital of at least $500 million and being
subject to supervision or examination by Federal or State authority, selected by
the Calculation Agent to provide such rate or rates; provided, however, that if
the banks or trust companies so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Prime Rate determined as of such
Prime Rate Interest Determination Date will be the Prime Rate in effect on such
Prime Rate Interest Determination Date.
LIBOR NOTES
LIBOR Notes will bear interest at the rates (calculated with reference to
LIBOR and the Spread and/or Spread Multiplier, if any), specified in such LIBOR
Notes and in any applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest
Determination Date"), LIBOR will be either: (a) if "LIBOR Reuters" is
specified in the applicable Pricing Supplement, the arithmetic mean of the
offered rates (unless the specified Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate shall be
used) for deposits in the Index Currency having the Index Maturity
designated in the applicable Pricing Supplement, commencing on the second
London Banking Day immediately following such LIBOR Interest Determination
Date, that appear on the Designated LIBOR Page specified in the applicable
Pricing Supplement as of 11:00 a.m. London time, on such LIBOR Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified
as the method for calculating LIBOR, the rate for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such LIBOR Interest Determination Date that appears on the
Designated LIBOR Page specified in the applicable Pricing Supplement as of
11:00 a.m., London time, on such LIBOR Interest Determination Date. If
fewer than two such offered rates appear, or if no such rate appears, as
applicable, LIBOR in respect of the related LIBOR Interest Determination
Date will be determined in accordance with the provisions described in
clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the applicable Designated LIBOR Page as described in clause (i)
above, the Calculation Agent will request the principal London office of
each of four major reference banks in the London interbank market, as
selected by the Calculation Agent, to provide the Calculation Agent with
its offered quotation for deposits in the Index Currency for the period of
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following such
LIBOR Interest Determination Date, to prime banks in the London interbank
market at approximately 11:00 a.m., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If
at least two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two such quotations are provided, LIBOR determined on such
LIBOR Interest Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 a.m., in the applicable Principal Financial
Center, on such LIBOR Interest Determination Date by three major banks in
such Principal Financial Center (which may include affiliates of the
Agents) selected by the Calculation Agent, for loans in the Index Currency
to leading European banks, having the Index Maturity designated in the
applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined as of such LIBOR Interest Determination Date will be LIBOR in
effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is specified in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is specified
in the applicable Pricing Supplement or neither "LIBOR Reuters" nor
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"LIBOR Telerate" is specified as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency.
"Principal Financial Center" will be the capital city of the country
issuing the Specified Currency in respect of which payment on the Notes is to be
made or, solely with respect to the calculation of LIBOR, of the specified Index
Currency, except that with respect to U.S. dollars, Australian dollars, German
Marks, Dutch Guilders, Italian Lire, Swiss Francs and ECUs, the Principal
Financial Center shall be The City of New York, Sydney, Frankfurt, Amsterdam,
Milan, Zurich and Luxembourg, respectively.
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, "Treasury
Rate" means, for 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 3:00 p.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 otherwise
announced by the United States Department of the Treasury. If 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 relevant Treasury
Rate Interest Determination Date for the specified Index Maturity under the
heading "U.S. Government Securities/Treasury Bills/Secondary Market." If such
rate is not so published by 3:00 p.m., New York City time, on the relevant
Calculation Date, the Treasury Rate for 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 Rate
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
provided above by the Calculation Agent are quoting as mentioned in this
sentence, the Treasury Rate for such Interest Reset Date will be the Treasury
Rate in effect on such Treasury Rate Interest Determination Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread or Spread Multiplier, if any), and will
be payable on the dates, specified on the face of the CMT Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Reset Date, the treasury constant maturity
rate for direct obligations of the United States ("Treasury Notes") on the
relevant CMT Rate Interest Determination Date for the relevant Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Constant Maturities". In the event that such rate is not published by 3:00 p.m.,
New York City time, on the relevant Calculation Date, the CMT Rate will be the
Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates
as of approximately 3:30 p.m., New York City time, on such CMT Rate Interest
Determination Date of three primary United States government
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securities dealers in The City of New York selected by the Calculation Agent for
the issue of Treasury Notes 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 CMT Rate with respect to such Interest Reset Date will be the CMT Rate in
effect on such CMT Rate Interest Determination Date.
"Bond Equivalent Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
D X N
Bond Equivalent Yield = 100 X ---------------
360 - (D X M)
where "D" refers to the per annum rate for Treasury Notes, quoted on a bank
discount basis and expressed as a decimal; "N" refers to 365 or 366, as the case
may be; and "M" refers to, if the Index Maturity approximately corresponds to
the length of the period for which such rate is being determined, the actual
number of days in such period and, otherwise, the actual number of days in the
period from, and including, the Interest Reset Date to, but excluding, the day
that numerically corresponds to that Interest Reset Date (or, if there is not
any such numerically corresponding day, the last day) in the calendar month that
is the number of months corresponding to the specified Index Maturity after the
month in which that Interest Reset Date occurs.
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, "CD Rate"
means, for any Interest Reset Date, the rate for the relevant CD Rate Interest
Determination Date for negotiable U.S. dollar certificates of deposit having the
specified Index Maturity as published in H.15(519) under the heading "CDs
(Secondary Market)." If such rate is not published before 3:00 p.m., New York
City time, on the relevant Calculation Date, then the CD Rate for such Interest
Reset Date shall be the rate on such CD Rate Interest Determination Date for
negotiable U.S. dollar 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
for 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 U.S. $5,000,000;
provided, however, that if fewer than three dealers selected as provided above
by the Calculation Agent are quoting as mentioned in this sentence, the CD Rate
for 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, "Federal
Funds Rate" means, for 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)." If such rate is not
published before 3:00 p.m., New York City time, on the relevant Calculation
Date, then the
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Federal Funds Rate for 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 for 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 by the Calculation Agent are quoting as mentioned in this
sentence, the Federal Funds Rate for such Interest Reset Date will be the
Federal Funds Rate in effect on such Federal Funds Rate Interest Determination
Date.
ELEVENTH DISTRICT COST OF FUNDS RATE NOTES
Eleventh District Cost of Funds Rate Notes will bear interest at the
interest rates (calculated with reference to the Eleventh District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any), and will be payable on
the dates, specified on the face of the Eleventh District Cost of Funds Rate
Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, for any Interest Reset Date, the rate on the
relevant Eleventh District Cost of Funds Rate Interest Determination Date, which
is equal to the monthly weighted average cost of funds for the calendar month
immediately preceding the month in which such Eleventh District Cost of Funds
Rate Interest Determination Date falls, as set forth under the caption "11th
District" on Telerate Page 7058 as of 11:00 a.m., San Francisco time, on such
Eleventh District Cost of Funds Rate Interest Determination Date. If such rate
does not appear on Telerate Page 7058 on such Eleventh District Cost of Funds
Rate Interest Determination Date, then the Eleventh District Cost of Funds Rate
on such Eleventh District Cost of Funds Rate Interest Determination Date shall
be the monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"FHLB Index") by the FHLB of San Francisco as such cost of funds for the
calendar month immediately preceding such Eleventh District Cost of Funds Rate
Interest Determination Date. If the FHLB of San Francisco fails to announce the
FHLB Index on or prior to such Eleventh District Cost of Funds Rate Interest
Determination Date for the calendar month immediately preceding such Eleventh
District Cost of Funds Rate Interest Determination Date, the Eleventh District
Cost of Funds Rate determined as of such Eleventh District Cost of Funds Rate
Interest Determination Date will be the Eleventh District Cost of Funds Rate in
effect on such Eleventh District Cost of Funds Rate Interest Determination Date.
INVERSE FLOATING RATE NOTES
Any Floating Rate Note may be designated in the applicable Pricing
Supplement as an "Inverse Floating Rate Note", in which event the interest rate
on such Floating Rate Note will be equal to (i) in the case of each period
commencing on the date of issue to but excluding the first Interest Reset Date,
the Initial Interest Rate specified in the applicable Pricing Supplement and
(ii) in the case of each period commencing on an Interest Reset Date, a fixed
rate of interest specified in the applicable Pricing Supplement, minus the
interest rate determined by the reference to the Interest Rate Basis specified
in the applicable Pricing Supplement; provided, however, that unless otherwise
specified in the applicable Pricing Supplement, the interest rate thereon will
not be less than zero.
FLOATING RATE/FIXED RATE NOTES
The applicable Pricing Supplement may provide that a Note will be a
Floating Rate Note for a specified portion of its term and a Fixed Rate Note for
the remainder of its term, in which event the interest rate on such Note will be
determined as herein provided as if it were a Floating Rate Note
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and a Fixed Rate Note thereunder for each such respective period, all as
specified in such applicable Pricing Supplement.
INDEXED NOTES
Certain Notes ("Indexed Notes") may be issued with the principal amount
payable at maturity, and/or the amount of interest payable on an Interest
Payment Date, to be determined by reference to one or more currencies (including
baskets of currencies), one or more commodities (including baskets of
commodities), one or more securities (including baskets of securities) and/or
any other index (each, an "Index") as set forth in the applicable Pricing
Supplement. Holders of Indexed Notes may receive a principal amount at maturity
that is greater than or less than the face amount (but not less than zero) of
such Notes depending upon the value at maturity of the applicable Index. With
respect to any Indexed Note, information as to the methods for determining the
principal amount payable at maturity and/or the amount of interest payable on an
Interest Payment Date, as the case may be, as to any one or more currencies
(including baskets of currencies), commodities (including baskets of
commodities), securities (including baskets of securities) or other indices to
which principal or interest is indexed, as to any additional foreign exchange or
other risks or as to any additional tax considerations may be set forth in the
applicable Pricing Supplement. See "Certain Investment Considerations Relating
to Indexed Notes."
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal of (and premium, if any) and interest on all
Book-Entry Notes will be made in accordance with the procedures of the
Depositary and its Participants in effect from time to time as described under
"Book-Entry Notes" below. Unless otherwise specified in the applicable Pricing
Supplement, payments of principal of (and premium, if any) and interest on all
Certificated Notes will be made in the applicable Specified Currency; provided,
however, that payments of principal (and premium, if any) and interest on Notes
denominated in a Specified Currency other than U.S. dollars will nevertheless be
made in U.S. dollars:
(a) with respect to any Certificated Notes, at the option of the
Holders of such Notes under the procedures described in the two following
paragraphs; and
(b) with respect to any Notes, at the Company's option in the case of
imposition of exchange controls or other circumstances beyond the Company's
control as described in the last paragraph under this heading.
Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of principal of (and premium, if
any) and interest on any Certificated Note denominated in a Specified Currency
other than U.S. dollars will be made in U.S. dollars if the registered Holder of
such Note on the relevant Regular Record Date, or at maturity, as the case may
be, has transmitted a written request for such payment in U.S. dollars to the
Paying Agent at the Paying Agent Office in The City of New York on or before
such Regular Record Date, or the date 15 days before maturity, as the case may
be. Such request may be in writing (mailed or hand delivered) or sent by cable,
telex, or other form of facsimile transmission. Any such request made for any
Certificated Note by a registered Holder will remain in effect for any further
payments of principal of (and premium, if any) and interest on such Note payable
to such Holder, unless such request is revoked on or before the relevant Regular
Record Date or the date 15 days before maturity, as the case may be. Holders of
Certificated Notes denominated in a Specified Currency other than U.S. dollars
that are registered in the name of a broker or nominee should contact such
broker or nominee to determine whether and how to elect to receive payments in
U.S. dollars.
Unless otherwise specified in the applicable Pricing Supplement, the U.S.
dollar amount to be received by a Holder of a Note (including a Book-Entry Note)
denominated in a Specified Currency other than U.S. dollars who elects to
receive payment in U.S. dollars will be based on the highest bid
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quotation in The City of New York received by the Exchange Rate Agent (as
defined below) as of 11:00 a.m., New York City time, on the second Market Day
next preceding the applicable payment date from three recognized foreign
exchange dealers (one of which may be the Exchange Rate Agent) for the purchase
by the quoting dealer of the Specified Currency for U.S. dollars for settlement
on such payment date in the aggregate amount of the Specified Currency payable
to all Holders of Notes electing to receive U.S. dollar payments and at which
the applicable dealer commits to execute a contract. If three such bid
quotations are not available on the second Market Day preceding the date of
payment of principal (and premium, if any) or interest for any Note, such
payment will be made in the Specified Currency. All currency exchange costs
associated with any payment in U.S. dollars on any such Note will be borne by
the Holder thereof by deductions from such payment. The Exchange Rate Agent (the
"Exchange Rate Agent") with respect to any Notes denominated in a Specified
Currency other than U.S. dollars will be specified in the applicable Pricing
Supplement.
Interest will be payable to the person in whose name a Note is registered
(which for a permanent Global Security 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 for permanent 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 second such Interest
Payment Date next succeeding its date of issue to the Holder of such Note on the
Regular Record Date relating to such second Interest Payment Date. Unless
otherwise indicated in the applicable Pricing Supplement, the "Regular Record
Date" for any Floating Rate Note shall be the date 15 calendar days before each
Interest Payment Date, whether or not such date shall be a Market Day, and the
"Regular Record Date" for 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:
(a) for Floating Rate Notes that reset daily, weekly or monthly, on
the third Wednesday of each month or on the third Wednesday of March, June,
September and December of each year (as indicated in the applicable Pricing
Supplement);
(b) for Floating Rate Notes that reset quarterly, on the third
Wednesday of March, June, September and December of each year;
(c) for Floating Rate Notes that reset semi-annually, on the third
Wednesday of the two months of each year specified in the applicable
Pricing Supplement;
(d) for Floating Rate Notes that reset annually, on the third
Wednesday of the month specified in the applicable Pricing Supplement; and
(e) for Floating Rate Notes that reset at intervals other than those
described above, on the days 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 for any Interest Payment
Date will include interest accrued to but excluding the applicable Interest
Payment Date or date of maturity as the case may be.
For a Floating Rate Note, accrued interest from (and including) the date of
issue or from (and including) the last date to which interest has been paid is
calculated by multiplying the principal amount of such Floating Rate Note by an
accrued interest factor. Such accrued interest factor is computed by adding the
interest factor calculated for each day from (and including) the date of issue,
or from (and including) 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
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each such day is computed by dividing the interest rate (expressed as a decimal)
applicable to such date by 360 for Commercial Paper Rate Notes, Prime Rate
Notes, LIBOR Notes, CD Rate Notes, Eleventh District Cost of Funds Rate Notes or
Federal Funds Rate Notes, or by the actual number of days in the year for
Treasury Rate Notes or CMT Rate Notes. Interest on Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
Except as provided in the next sentence, a payment on any Note due on any
day that is not a Market Day need not be made on such day, but may be made on
the next succeeding Market Day with the same force and effect as if made on the
due date, and no interest on such payment shall accrue for the period from and
after such date. If an Interest Payment Date (other than at maturity) for any
Floating Rate Note would otherwise fall on a day that is not a Market Day for
such Note, such Interest Payment Date will be postponed to the next succeeding
Market Day (or, for a LIBOR Note, if such day falls in the next calendar month,
the next preceding Market Day).
Payment of the principal of (and premium, if any) and any interest due on
any Certificated Note at maturity to be made in U.S. dollars will be made in
immediately available funds upon surrender of such Note at the Paying Agent
Office in The City of New York, provided that such Certificated Note is
presented to the Paying Agent in time for the Paying Agent to make such payments
in such funds in accordance with its normal procedures. Payments of interest on
any Certificated Note to be made in U.S. dollars 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, if such Holder owns Notes aggregating at least $10
million in principal amount, by wire transfer to such account as may have been
appropriately designated by such Person.
Unless otherwise specified in the applicable Pricing Supplement, payments
of interest and principal (and premium, if any) with respect to any Certificated
Note to be made in a Specified Currency other than U.S. dollars will be made by
wire transfer of immediately available funds to such account with a bank located
in the country issuing the Specified Currency (or, with respect to Certificated
Notes denominated in ECUs, to an ECU account) or other jurisdiction acceptable
to the Company and the Paying Agent as shall have been designated at least five
Business Days prior to the Interest Payment Date or Stated Maturity, as the case
may be, by the registered Holder of such Note on the relevant Regular Record
Date or maturity, provided that, in the case of payment of principal (and
premium, if any) and any interest due at maturity, the Note is presented to the
Paying Agent in time for the Paying Agent to make such payments in such funds in
accordance with its normal procedures. Such designation shall be made by filing
the appropriate information with the Paying Agent at the Paying Agent Office in
The City of New York, and, unless revoked, any such designation made with
respect to any Certificated Note by a registered Holder will remain in effect
with respect to any further payments with respect to such Note payable to such
Holder. If a payment with respect to any such Note cannot be made by wire
transfer because the required designation has not been received by the Paying
Agent on or before the requisite date or for any other reason, a notice will be
mailed to the Holder at its registered address requesting a designation pursuant
to which such wire transfer can be made and, upon the Paying Agent's receipt of
such a designation, such payment will be made within five Business Days of such
receipt. The Company will pay any administrative costs imposed by banks in
connection with making payments by wire transfer, but any tax, assessment or
governmental charge imposed upon payments will be borne by the Holders of the
Certificated Notes in respect of which payments are made.
If the principal of (and premium, if any) or interest on any Note is
payable in other than U.S. dollars and such Specified Currency (other than ECUs)
is not available due to the imposition of exchange controls or other
circumstances beyond the control of the Company, the Company will be entitled to
satisfy its obligations to the Holder of such Note by making such payment
(including any such payment at maturity) in U.S. dollars on the basis of the
most recently available Exchange Rate. If the principal of (and premium, if any)
and interest on any Note is payable in ECUs, and the ECU is not available due to
the imposition of exchange controls or other circumstances beyond the control of
the Company or the ECU is used neither as the unit of account of the European
Communities nor
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as the currency of the European Union, the Company will be entitled to satisfy
its obligations to the Holder of such Note by making such payment (including any
such payment at maturity) as described under "Certain Investment Considerations
Relating to Foreign Currency Notes -- Notes Denominated in ECUs." Any payment
made under such circumstances in such a manner will not constitute an Event of
Default under any Note or the applicable Indenture.
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to Stated Maturity only if a Redemption Commencement
Date is specified in the applicable Pricing Supplement. If so specified, the
Notes will be subject to redemption at the option of the Company on any date on
and after the applicable Redemption Commencement Date in whole or from time to
time in part in increments of $1,000 (or the minimum denomination specified in
such Pricing Supplement), provided that any remaining principal amount of such
Note will be an authorized denomination of such Note, at the applicable
Redemption Price (as defined below) on notice given not more than 60 nor less
than 30 days prior to the date of redemption and in accordance with the
provisions of the applicable Indenture. "Redemption Price," with respect to a
Note, means an amount equal to the sum of (i) 100% of the unpaid principal
amount thereof or the portion thereof to be redeemed (or, if such Note is an OID
Note, the Amortized Face Amount (as defined below) determined as of the date of
redemption as provided below), (ii) the Initial Redemption Percentage specified
in such Pricing Supplement (as adjusted by the Annual Redemption Percentage
Reduction, if applicable, also as specified in the Pricing Supplement)
multiplied by the unpaid principal amount or the portion to be redeemed (or, if
such Note is an OID Note, the Issue Price (as determined under Treasury
Regulation Section 1.1273-2(a)(1)) specified in such Pricing Supplement (the
"Issue Price"), net of any portion of such Issue Price which has been paid prior
to the date of redemption, or the portion of such Issue Price (or such net
amount) proportionate to the portion of the unpaid principal amount to be
redeemed) plus (iii) accrued interest to the date of redemption (or, if such
Note is an OID Note, any accrued interest to the date of redemption the payment
of which would constitute qualified stated interest payments within the meaning
of Treasury Regulation Section 1.1273-1(c) under the Code (as defined below)).
The Initial Redemption Percentage, if any, applicable to a Note shall decline at
each anniversary of the Redemption Commencement Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until it equals zero.
"Amortized Face Amount," with respect to an OID Note, means an amount equal to
the sum of (i) the Issue Price plus (ii) the aggregate of the portions of the
original issue discount (the excess of the amounts considered as part of the
"stated redemption price at maturity" of such Note within the meaning of Section
1273(a)(2) of the Code, whether denominated as principal or interest, over the
Issue Price) which shall theretofore have accrued pursuant to Section 1272 of
the Code (without regard to Section 1272(a)(7) of the Code) from the date of
issue of such Note to the date of determination, minus (iii) any amount
considered as part of the "stated redemption price at maturity" of such Note
which has been paid from the date of issue to the date of determination.
REPAYMENT AT THE OPTION OF THE HOLDER
If so specified in the applicable Pricing Supplement, the Notes will be
repayable by the Company in whole or from time to time in part at the option of
the Holders thereof on their respective Optional Repayment Dates specified in
such Pricing Supplement. If no Optional Repayment Date is specified with respect
to a Note, such Note will not be repayable at the option of the Holder thereof
prior to Stated Maturity. Any repayment in part will be in increments of $1,000
(or the minimum denomination specified in the applicable Pricing Supplement)
provided that any remaining principal amount of such Note will be an authorized
denomination of such Note. Unless otherwise specified in the applicable Pricing
Supplement, the repayment price for any Note to be repaid means an amount equal
to the sum of (i) 100% of the unpaid principal amount thereof or the portion
thereof (or, if such Note is an OID Note, the Amortized Face Amount determined
as of the date of repayment) plus
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<PAGE> 17
(ii) accrued interest to the date of repayment (or, if such Note is an OID Note,
any accrued interest to the date of repayment the payment of which would
constitute qualified stated interest payments within the meaning of Treasury
Regulation Section 1.1273-1(c) under the Code). Information with respect to the
repayment price for Indexed Notes shall be set forth in the applicable Pricing
Supplement. For any Note to be repaid, such Note must be received, together with
the form thereon entitled "Option to Elect Repayment" duly completed, by the
applicable Trustee at its Corporate Trust Office (or such other address of which
the Company shall from time to time notify the Holders) not more than 60 nor
less than 30 days prior to the date of repayment. Exercise of such repayment
option by the Holder will be irrevocable.
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment may be exercised by the
Depositary, acting on behalf of each applicable Participant, who is in turn
acting on behalf of the beneficial owners of the Global Security or Securities
representing such Book-Entry Notes, by delivering a written notice substantially
similar to the above-mentioned form to the applicable Trustee at its Corporate
Trust Office (or such other address of which the Company shall from time to time
notify the Holders) not more than 60 nor less than 30 days prior to the date of
repayment. Such written notice must be received by the Trustee by 5:00 p.m., New
York City time, on the last day for giving such notice. In order to ensure that
such notice is received by the applicable Trustee on a particular day, the
beneficial owner of the Global Security or Securities representing such
Book-Entry Notes must so direct the applicable Participant before such
Participant's deadline for accepting instructions for that day. Different firms
may have different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the Global Security or Securities representing
Book-Entry Notes should consult the Participants through which they own their
interest therein for the respective deadlines for such Participants. All
instructions given to participants from beneficial owners relating to the option
to elect repayment shall be irrevocable. In addition, at the time such
instructions are given such beneficial owners shall cause the applicable
Participant to transfer such beneficial owner's interest in the Global Security
or Securities representing such Book-Entry Notes, on the Depositary's records,
to the applicable Trustee. See "Book-Entry Notes."
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
any other securities laws or regulations in connection with any such repayment.
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.
BOOK-ENTRY NOTES
The following provisions assume that the Company has established a
depository arrangement with The Depository Trust Company with respect to the
Book-Entry Notes. Any additional or differing terms of the depository
arrangements with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, currency of denomination and payment,
redemption provisions (if any), repayment provisions (if any), Stated Maturity
and other variable terms will be represented by a single Global Security. Each
Global Security representing Book-Entry Notes will be deposited with, or on
behalf of, the Depositary and will be registered in the name of the Depositary
or a nominee of the Depositary. No Global Security may be transferred except as
a whole by a nominee of the Depositary to the Depositary or to another nominee
of the Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
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<PAGE> 18
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole Holder of the Book-Entry Notes represented thereby for all purposes under
the applicable Indenture. Except as otherwise provided in this section, the
beneficial owners of the Global Security or Securities representing Book-Entry
Notes will not be entitled to receive physical delivery of Certificated Notes
and will not be considered the Holders thereof for any purpose under the
applicable Indenture, and no Global Security representing Book-Entry Notes shall
be exchangeable or transferable. Accordingly, each person owning a beneficial
interest in a Global Security must rely on the procedures of the Depositary and,
if such person is not a Participant, on the procedures of the Participant
through which such person owns its interest in order to exercise any rights of a
Holder under the applicable Indenture. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in certificated form. Such limits and such laws may impair the ability to
transfer beneficial interests in a Global Security representing Book-Entry
Notes.
Unless otherwise specified in the applicable Pricing Supplement, each
Global Security representing Book-Entry Notes will be exchangeable for
Certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like amount, only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the Global
Securities, (ii) the Depositary ceases to be a clearing agency registered under
the Exchange Act, (iii) the Company in its sole discretion determines that the
Global Securities shall be exchangeable for Certificated Notes, or (iv) there
shall have occurred and be continuing an Event of Default under the applicable
Indenture with respect to the Notes. Upon any such exchange, Certificated Notes
shall be registered in the names of the beneficial owners of the Global Security
or Securities representing Book-Entry Notes as provided by the Depositary's
relevant Participants (as identified by the Depositary).
With respect to any Book-Entry Note denominated in a Specified Currency
other than U.S. dollars, the Depositary currently has elected to have payments
of principal (and premium, if any) and Interest on such Note made in U.S.
dollars unless notified by any of its Participants through which an interest in
such Note is held that it elects to receive such payment of principal (or
premium, if any) or interest in such Specified Currency. Unless otherwise
specified in the applicable Pricing Supplement, a Beneficial Owner of Book-Entry
Notes denominated in a Specified Currency other than U.S. dollars electing to
receive payments of principal or any premium or interest in a currency other
than U.S. dollars must notify the Participant through which its interest is held
on or prior to the applicable Record Date, in the case of a payment of Interest,
and on or prior to the sixteenth day prior to maturity, in the case of principal
or premium, of such Beneficial Owner's election to receive all or a portion of
such payment in such Specified Currency. Such Participant must notify the
Depositary of such election on or prior to the third Business Day after such
Record Date or after such sixteenth day. The Depositary will notify the Paying
Agent of such election on or prior to the fifth Business Day after such Record
Date or after such sixteenth day. If complete instructions are received by the
Participant and forwarded by the Participant to the Depositary and by the
Depositary to the Paying Agent, on or prior to such dates, the Beneficial Owner
will receive payments in the Specified Currency.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully registered securities registered in
the name of Cede & Co. (the Depositary's partnership nominee). One fully
registered Global Security will be issued for each issue of Book-Entry Notes,
each in the aggregate principal amount of such issue, and will be deposited with
the Depositary. If, however, the aggregate principal amount of any issue exceeds
$200,000,000, one Global Security will be issued with respect to each
$200,000,000 of principal amount and an additional Global Security will be
issued with respect to any remaining principal amount of such issue.
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<PAGE> 19
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking 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 Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its direct participants
("Direct Participants") and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the Depositary's system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for such Book-Entry
Notes on the Depositary's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global Security ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from the
Depositary of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which such Beneficial Owner entered into the transaction. Transfers of ownership
interests in a Global Security representing Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners of a Global Security representing
Book-Entry Notes will not receive Notes in certificated form representing their
ownership interests therein, except in the event that use of the book-entry
system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities, representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit of
Global Securities with, or on behalf of, the Depositary and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
Depositary has no knowledge of the actual Beneficial Owners of the Global
Securities representing the Book-Entry Notes; the Depositary'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 the Depositary 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 regulatory requirements as may be in
effect from time to time.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Notes within an issue are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an omnibus proxy (the "Omnibus Proxy") to the
Company as soon as possible after the applicable record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
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<PAGE> 20
whose accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Global Securities
representing the Book-Entry Notes will be made to the Depositary. The
Depositary's practice is to credit Direct Participant's accounts on the
applicable payment date in accordance with their respective holdings shown on
the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on such date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of the Depositary, the applicable Trustee or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, premium, if any, and interest to the Depositary is the
responsibility of the Company or the applicable Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of the Depositary,
and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Company, through its Participant, to the
applicable Trustee, and shall effect delivery of such Book-Entry Notes by
causing the Direct Participant to transfer the Participant's interest in the
Global Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the applicable Trustee. The requirements for physical
delivery of Book-Entry Notes in connection with a demand for repayment will be
deemed satisfied when the ownership rights in the Global Security or Securities
representing such Book-Entry Notes are transferred by Direct Participants on the
Depositary's records.
The Depositary 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 applicable Trustee. Under such circumstances, in
the event that a successor securities depositary is not obtained, Notes in
certificated form are required to be printed and delivered.
The Company may decide to discontinue use of a system of book-entry
transfers through the Depositary (or a successor securities depository). In that
event, Notes in certificated form will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
CERTAIN INVESTMENT CONSIDERATIONS RELATING TO INDEXED NOTES
In addition to potential foreign currency risks as described below under
"Certain Investment Considerations Relating to Foreign Currency Notes," an
investment in Indexed Notes presents certain significant risks not associated
with other types of securities. Certain risks associated with a particular
Indexed Note may be set forth more fully in the applicable Pricing Supplement.
Indexed Notes may present a high level of risk, and investors in certain Indexed
Notes may lose their entire investment.
The treatment of Indexed Notes for U.S. federal income tax purposes is
often unclear due to the absence of any authority specifically addressing the
issues presented by any particular Indexed Note. Accordingly, investors in
Indexed Notes should, in general, be capable of independently evaluating the
federal income tax consequences applicable in their particular circumstances of
purchasing an Indexed Note.
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<PAGE> 21
LOSS OF PRINCIPAL OR INTEREST
The principal amount of an Indexed Note payable at maturity, and/or the
amount of interest payable on an Interest Payment Date, will be determined by
reference to one or more currencies (including baskets of currencies), one or
more commodities (including baskets of commodities), one or more securities
(including baskets of securities) and/or any other index (each an "Index"). The
direction and magnitude of the change in the value of the relevant Index will
determine either or both the principal amount of an Indexed Note payable at
maturity or the amount of interest payable on an Interest Payment Date. The
terms of a particular Indexed Note may or may not include a guaranteed return of
a percentage of the face amount at maturity or a minimum interest rate.
Accordingly, the holder of an Indexed Note may lose all or a portion of the
principal invested in an Indexed Note and may receive no interest thereon.
VOLATILITY
Certain Indices are highly volatile. The expected principal amount payable
at maturity of, or the interest rate on, an Indexed Note based on a volatile
Index may vary substantially from time to time. Because the principal amount
payable at the maturity of, or interest payable on, an Indexed Note is generally
calculated based on the value of the relevant Index on a specified date or over
a limited period of time, volatility in the Index increases the risk that the
return on the Indexed Notes may be adversely affected by a fluctuation in the
level of the relevant Index.
The volatility of an Index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets, any of which could adversely affect the value of an Indexed
Note.
AVAILABILITY AND COMPOSITION OF INDICES
Certain Indices reference several different currencies, commodities,
securities or other financial instruments. The compiler of such an Index
typically reserves the right to alter the composition of the Index and the
manner in which the value of the Index is calculated. Such an alteration may
result in a decrease in the value of or return on an Indexed Note which is
linked to such Index.
An Index may become unavailable due to such factors as war, natural
disasters, cessation of publication of the Index, or suspension of or disruption
in trading in the currency or currencies, commodity or commodities, security or
securities or other financial instrument or instruments comprising or underlying
such Index. If an Index becomes unavailable, the determination of principal of
or interest on an Indexed Note may be delayed or an alternative method may be
used to determine the value of the unavailable Index. Alternative methods of
valuation are generally intended to produce a value similar to the value
resulting from reference to the relevant Index. However, it is unlikely that
such alternative methods of valuation will produce values identical to those
which would be produced were the relevant Index to be used. An alternative
method of valuation may result in a decrease in the value of or return on an
Indexed Note.
Certain Indexed Notes are linked to Indices that are not commonly utilized
or have been recently developed. The lack of a trading history may make it
difficult to anticipate the volatility or other risks to which such a Note is
subject. In addition, there may be less trading in such Indices or instruments
underlying such Indices, which could increase the volatility of such Indices and
decrease the value of or return on Indexed Notes relating thereto.
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<PAGE> 22
CERTAIN INVESTMENT CONSIDERATIONS RELATING TO
FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars or ECUs will not be
sold in, or to residents of, the country issuing the Specified Currency in which
the particular Notes are denominated. The information set forth in this
Prospectus Supplement is directed to prospective purchasers who are U.S.
residents and, with respect to Foreign Currency Notes, is by necessity
incomplete. The Company disclaims any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal of and premium, if any, and interest on the Notes. Such
persons should consult their own financial and legal advisors with regard to
such matters.
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN
FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE
IN A SPECIFIED CURRENCY OTHER THAN U.S. DOLLARS, EITHER AS SUCH RISKS EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY NOTES.
FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a debt security denominated and
payable in U.S. dollars. Such risks include, without limitation, the possibility
of significant changes in the rate of exchange between the U.S. dollar and the
applicable Specified Currency and the possibility of the imposition or
modification of exchange controls by either the United States or foreign
governments. Such risks generally depend on events over which the Company has no
control, such as economic, financial and political events and the supply and
demand for the relevant currencies. In recent years, rates of exchange between
the U.S. dollar and certain foreign currencies have been highly volatile and
such volatility may be expected in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations in the rate that may occur during the term of any
Foreign Currency Note. Depreciation of the Specified Currency applicable to a
Foreign Currency Note against the U.S. dollar would result in a decrease in the
U.S. dollar-equivalent yield of such Note, in the U.S. dollar-equivalent value
of the principal and premium, if any, payable at maturity of such Note, and,
generally, in the U.S. dollar-equivalent market value of such Note.
Governments or monetary authorities have imposed from time to time exchange
controls and may in the future impose or revise exchange controls at or prior to
the date on which any payment of principal of and premium, if any, or interest
on a Foreign Currency Note is due, which could affect exchange rates as well as
the availability of the Specified Currency on such date. Even if there are no
exchange controls, it is possible that the Specified Currency for any particular
Foreign Currency Note would not be available on the applicable payment date due
to other circumstances beyond the control of the Company. In that event, the
Company will make the required payment in respect of such Foreign Currency Note
in U.S. dollars on the basis of the most recently available Exchange Rate. See
"Description of Notes -- Payment of Principal and Interest."
Unless otherwise indicated in the applicable Pricing Supplement, payments
on Notes made in a Specified Currency other than U.S. dollars may be made, at
the Company's option, from an account with a bank located in the country issuing
the Specified Currency (or, with respect to Notes
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<PAGE> 23
denominated in ECUs, from an ECU account). See "Description of Notes -- Payment
of Principal and Interest."
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Notes only in U.S. dollars. It is not clear,
however, whether, in granting such judgment, the rate of conversion into U.S.
dollars would be determined with reference to the date of default, the date
judgment is rendered or some other date. Under current New York law, a state
court in the State of New York rendering a judgment on a Foreign Currency Note
would be required to render such judgment in the Specified Currency in which
such Foreign Currency Note is denominated, and such judgment would be converted
into U.S. dollars at the exchange rate prevailing on the date of entry of the
judgment. Accordingly, Holders of Foreign Currency Notes would bear the risk of
exchange rate fluctuations between the time the amount of the judgment is
calculated and the time such amount is converted from U.S. dollars into the
applicable Specified Currency.
NOTES DENOMINATED IN ECUS
Value of the ECU
Except as otherwise provided below, the value of the ECU for the purpose of
any Notes denominated in ECUs, as referred to in Articles 109G and 109L.4 of the
Treaty establishing the European Community, as amended (the "EC Treaty"), is
equal to the value of the ECU that is at present used as the unit of account of
the European Communities and which is from time to time valued on the basis of
specified amounts of the currencies of the member states of the European
Community as shown below.
Pursuant to Council Regulation (EEC) No. 1971/89 of 19th June, 1989, the
ECU is at present defined as the sum of the following components:
<TABLE>
<S> <C> <C> <C>
0.6242 German mark 0.130 Luxembourg franc
0.08784 Pound sterling 0.1976 Danish krone
1.332 French francs 0.008552 Irish pound
1.8 Italian lire 1.440 Greek drachmas
0.2198 Dutch guilder 6.885 Spanish pesetas
3.301 Belgian francs 1.393 Portuguese escudos
</TABLE>
Article 109G of the EC Treaty, as amended by the Treaty on European Union,
is applicable from November 1, 1993. This Article provides: "The currency
composition of the ECU shall not be changed. From the start of the third stage,
the value of the ECU shall be irrevocably fixed in accordance with Article
109L.4." Changes as to the nature or composition of the ECU may be made by the
European Community in conformity with the provisions of the EC Treaty.
References herein to the ECU shall be deemed to be references to the ECU as so
changed.
Choice of Component Currencies for Future Payments
With respect to any payment date in respect of Notes denominated in ECUs on
which the ECU is not available due to the imposition of exchange controls or
other circumstances beyond the control of the Company or the ECU is used neither
as the unit of account of the European Communities nor as the currency of the
European Union, the Exchange Rate Agent shall, without liability on its part,
choose a component currency of the ECU (the "chosen currency") in which all
payments due on that payment date with respect to such Notes shall be made. The
amount of each payment in the chosen currency shall be computed on the basis of
the equivalent of the ECU in that
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<PAGE> 24
currency, determined as set forth herein as of the fourth Business Day prior to
the date on which such payment is due.
Choice of Component Currency for Payments Already Due
On the first Market Day on which the ECU is not available due to the
imposition of exchange controls or other circumstances beyond the control of the
Company or the ECU is used neither as the unit of account of the European
Communities nor as the currency of the European Union, the Exchange Rate Agent
shall, without liability on its part, choose a component currency of the ECU
(the "chosen currency") in which all payments of principal, interest or other
amounts in respect of Notes denominated in ECUs having a payment date prior
thereto but not yet presented for payment are to be made. The amount of each
payment in the chosen currency shall be computed on the basis of the equivalent
of the ECU in that currency, determined as set forth herein as of such first
Market Day.
Determination of Equivalent in Component Currency
The equivalent of the ECU in the relevant chosen currency as of any date
(the "Day of Valuation") shall be determined on the following basis by the
Exchange Rate Agent. The component currencies of the ECU for this purpose (the
"Components") shall be the currency amounts which were components of the ECU
when the ECU was most recently used as the unit of account of the European
Communities. The equivalent of the ECU in the chosen currency shall be
calculated by first aggregating the U.S. dollar equivalents of the Components
and then, using the rate used for determining the U.S. dollar equivalent of the
Component in the chosen currency as set forth below, calculating the equivalent
in the chosen currency of such aggregate amount in U.S. dollars.
U.S. Dollar Equivalent of Component Currencies
The U.S. dollar equivalent of each of the Components shall be determined by
the Exchange Rate Agent, on the basis of the middle spot delivery quotations
prevailing at 2:30 p.m. (Luxembourg time) on the Day of Valuation of one or more
leading banks, as selected by the Exchange Rate Agent (following consultation,
if practicable, with the Company), in the country of issue of the Component in
question.
No Direct Quotation for Component Currency
If no direct quotations are available for a Component as of a Day of
Valuation from any of the banks selected by the Exchange Rate Agent for this
purpose because foreign exchange markets are closed in the country of issue of
that currency or for any other reason, the most recent direct quotations for
that currency obtained by the Exchange Rate Agent shall be used in computing the
equivalents of the ECU on such Day of Valuation; provided, however, that such
most recent quotations may be used only if they were prevailing in the country
of issue not more than two Market Days before such Day of Valuation. Beyond such
period of two Market Days, the Exchange Rate Agent shall determine the U.S.
dollar equivalent of such Component on the basis of cross rates derived from the
middle spot delivery quotations for such component currency and for the U.S.
dollar prevailing at 2:30 p.m. (Luxembourg time) on such Day of Valuation of one
or more leading banks, as selected by the Exchange Rate Agent (following
consultation, if practicable, with the Company), in a country other than the
country of issue of such Component. Within such period of two Market Days, the
Exchange Rate Agent shall determine the U.S. dollar equivalent of such Component
on the basis of such cross rates if the Exchange Rate Agent judges that the
equivalent so calculated is more representative than the U.S. dollar equivalent
calculated on the basis of such most recent direct quotations. Unless otherwise
specified by the Exchange Rate Agent, if there is more than one market for
dealing in any Component by reason of foreign exchange regulations or for any
other reason, the market to be referred to in respect of such currency shall be
that upon
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which a non-resident issuer of securities denominated in such currency would
purchase such currency in order to make payments in respect of such securities.
EXCHANGE RATE AGENT
All determinations made by the Exchange Rate Agent shall be at its sole
discretion (except to the extent expressly provided herein or in the applicable
Pricing Supplement that any determination is subject to approval by the Company)
and, in the absence of manifest error, shall be conclusive for all purposes and
binding on Holders of the Notes and the Company, and the Exchange Rate Agent
shall have no liability therefor.
UNITED STATES TAXATION
The following general discussion summarizes certain U.S. federal income tax
aspects of the acquisition, ownership and disposition of the Notes. This
discussion is a summary for general information only and does not consider all
aspects of U.S. federal income tax that may be relevant to the purchase,
ownership and disposition of the Notes by a prospective investor in light of the
investor's own circumstances. This discussion also does not address the U.S.
federal income tax consequences of ownership of Notes not held as capital assets
within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), or the U.S. federal income tax consequences to investors
subject to special treatment under the U.S. federal income tax laws, such as
dealers in securities or foreign currency, tax-exempt entities, banks, thrifts,
insurance companies, persons that hold the notes as part of a "straddle" or as a
"hedge" against currency risk or that have a "functional currency" other than
the U.S. dollar, and investors in pass-through entities. In addition, the
discussion is generally limited to the tax consequences to initial Holders. It
does not describe any tax consequences arising out of the tax laws of any state,
local or foreign jurisdiction. This discussion also does not address the special
rules that apply if the Holder receives principal in installment payments or if
the Note is called before the Stated Maturity.
This summary is based upon the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing are subject to change, and any such change could affect the continuing
validity of this discussion.
PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX LAWS, AS WELL AS
THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION TO THEIR PARTICULAR
SITUATIONS. ADDITIONAL U.S. FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO
PARTICULAR NOTES MAY BE SET FORTH IN THE APPLICABLE PRICING SUPPLEMENT.
Special considerations which relate to the U.S. federal income taxation of
payments on Foreign Currency Notes are discussed separately below under the
heading "U.S. Holders -- Foreign Currency Notes." Special considerations
relevant to the U.S. federal income taxation of payments on Notes, the interest
and/or principal of which is indexed to property other than foreign currency and
which is not a "variable rate debt instrument" (discussed below under the
heading "U.S. Holders -- Stated Interest; Original Issue Discount") will be
discussed in the applicable Pricing Supplement. Special considerations relevant
to the U.S. federal income taxation of Notes issued in bearer form will be
discussed in the applicable Pricing Supplement. The discussion below assumes
that the Notes will be treated as debt for U.S. federal income tax purposes.
However, it is possible that some contingent payment arrangements would not be
treated as debt for U.S. federal income tax purposes. Holders should consult
their own tax advisors with respect to whether any contingent payment
obligations are debt.
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U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a note that is (i) a citizen or resident of
the United States, (ii) a corporation organized under the laws of the United
States or any political subdivision thereof or therein, or (iii) an estate or
trust, the income of which is subject to U.S. federal income tax regardless of
the source (a "U.S. Holder"). Certain aspects of U.S. federal income tax
relevant to a holder other than a U.S. Holder are discussed separately below.
Stated Interest; Original Issue Discount
Except as set forth below, interest on a Note will be taxable to a U.S.
Holder as ordinary interest income at the time it accrues or is received in
accordance with such holder's method of accounting for tax purposes. U.S.
Holders of Notes that bear original issue discount ("OID") generally will be
subject to the special tax accounting rules for original issue discount
obligations. U.S. Holders of Notes that bear OID and that mature more than one
year from the date of issuance will generally be required to include OID in
income as it accrues in advance of the receipt of cash attributable to such
income, whether such Holder uses the cash or accrual method of accounting.
On February 2, 1994, the Internal Revenue Service (the "IRS") issued final
regulations (the "OID Regulations") concerning the U.S. federal income tax
treatment of debt instruments issued with OID. In general, the OID regulations
apply to debt instruments issued on or after April 4, 1994. Special rules for
computing OID on a "variable rate debt instrument" are considered below under
the heading "Variable Rate Notes."
In connection with the issuance of the OID Regulations, the IRS issued as a
temporary and proposed regulation an anti-abuse rule which provides that if a
principal purpose in structuring a debt instrument or applying the OID
Regulations is to achieve a result that is unreasonable in light of the purposes
of the applicable statutes, then the commissioner of the IRS can apply or depart
from the OID Regulations as necessary or appropriate to achieve a reasonable
result. Whether a result is unreasonable is determined based on all of the facts
and circumstances. Although the Company does not believe that the Notes were
structured with such a principal purpose, there can be no assurance that the IRS
will agree with such position.
The amount of OID, if any, on a Note in the excess of its "stated
redemption price at maturity" over its "issue price," subject to a statutory de
minimis exception. For this purpose, de minimis OID is OID that is less than
one-quarter of one percent of the stated redemption price at maturity multiplied
by the number of complete years to its maturity from the issue date.
Generally, the issue price of an issue of Notes will be the first price at
which a substantial amount of such Notes has been sold. (For this purpose, sales
to bond houses, brokers or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesales are ignored.) A U.S.
Holder may elect in certain circumstances to decrease the issue price by an
amount equal to the portion of the initial purchase price of the Note equal to
pre-issuance accrued interest.
A Note's stated redemption price at maturity includes all payments required
to be made over the term of the Note other than the payment of "qualified stated
interest," which is defined as interest that is unconditionally payable in cash
or property (other than debt instruments of the issuer) at least annually at a
single fixed rate. If a debt instrument provides for alternate payment schedules
upon the occurrence of one or more contingencies, the determination of whether a
debt instrument provides for qualified stated interest is made by analyzing each
alternative payment schedule (including the stated payment schedule) as if it
were the debt instrument's sole payment schedule. The debt instrument will be
considered to provide for qualified stated interest to the extent of the lowest
fixed rate at which qualified interest would be payable under any payment
schedule.
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Interest is considered unconditionally payable only if late payment (other
than late payment within a reasonable grace period) or nonpayment is expected to
be penalized or reasonable remedies exist to compel payment.
For purposes of determining whether the OID on a Note is de minimis, in the
case of a Note that otherwise has less than the de minimis amount of OID and on
which all stated interest would be qualified stated interest except that for one
or more accrual periods the interest rate is below the rate applicable for the
remaining term of such Note (e.g., Notes with teaser rates or interest
holidays), the Note's stated redemption price at maturity is treated as equal to
the Note's issue price plus the greater of the amount of foregone interest or
the "true" discount (i.e., the excess of the Note's stated principal amount over
its issue price).
A U.S. Holder (whether on the cash or accrual method of accounting) must
include in income for the taxable year the sum of the daily portions of
OID for each day of the taxable year on which the U.S. Holder held the Note
with a Stated Maturity of more than one year. The daily portions of OID are
determined by determining the OID attributable to each accrual period and
allocating a ratable portion of such amount to each day in the accrual period.
The accrual period may be of any length and may vary in length over the term of
the Note, provided that each accrual period is no longer than one year and each
scheduled payment of principal and interest occurs on the final day of an
accrual period or on the first day of an accrual period. In general, OID
allocable to an accrual period equals the product of (i) the adjusted issue
price at the beginning of the accrual period (i.e., the original issue price
plus previously accrued OID minus previous payments other than payments of
qualified stated interest) multiplied by the original yield to maturity of the
Note (determined on the basis of compounding at the end of each accrual period)
minus (ii) the amount of qualified stated interest allocable to the accrual
period.
The OID Regulations provide special rules for determining the amount of OID
allocable to a period when there is unpaid qualified stated interest, for short
initial accrual periods and final accrual periods, and for determining the yield
to maturity for debt instruments subject to certain contingencies as to the
timing of payments, debt instruments that provide for options to accelerate or
defer any payments, and debt instruments with indefinite maturities. Under the
OID Regulations, options to convert debt into stock of the issuer or into stock
or debt of certain related parties or to cash or other property in an amount
equal to the approximate value of such stock or debt are disregarded in
determining OID. Under the Code and the OID Regulations, U.S. Holders generally
will have to include in income increasingly greater amounts of OID in successive
accrual periods.
Variable Rate Notes
The OID Regulations contain special rules for determining the accrual of
OID and the amount of qualified stated interest on a "variable rate debt
instrument." For purposes of these regulations, a variable rate debt instrument
is a debt instrument that: (1) has an issue price that does not exceed total
noncontingent principal payments by more than a specified amount; (2) provides
for stated interest (compounded or paid at least annually) at (a) one or more
"qualified floating rates," (b) a single fixed rate and one or more qualified
floating rates, (c) a single "objective rate," or (d) a single fixed rate and a
single objective rate that is a "qualified inverse floating rate;" and (3)
provides that a qualified floating rate or objective rate in effect at any time
during the term of the instrument is set at a current value of that rate.
For purposes of determining if a Note is a variable rate debt instrument, a
floating rate is a "qualified floating rate" if variations in the rate can
reasonably be expected to measure contemporaneous variations in the cost of
newly borrowed funds in the currency in which the debt instrument is
denominated. A multiple of a qualified floating rate is generally not a
qualified floating rate, unless it is either (a) a product of a qualified rate
times a fixed multiple greater than zero but not more than 1.35 or (b) a
multiple of the type described in (a) increased or decreased by a fixed rate. If
a debt instrument provides for two or more qualified floating rates that can
reasonably be expected to have
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approximately the same value throughout the term of the instrument, the
qualified floating rates will be considered a single qualified floating rate.
Two or more such rates will be considered to have approximately the same value
throughout the term of the instrument, if the values of the rates on the date of
issuance are within 25 basis points of each other.
An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single fixed formula and that is based on (i) the yield or
changes in the price of one or more items of property that is actively traded
within the meaning of Section 1092 of the Code (other than stock or debt of the
issuer or a related party), (ii) one or more qualified floating rates (but that
is not itself a qualified floating rate), (iii) one or more rates if each rate
would be a qualified floating rate for a debt instrument denominated in a
currency other than the currency in which the debt instrument is denominated, or
(iv) some combination of (i), (ii) or (iii). In addition, the IRS may designate
other variable rates as objective rates. Restrictions on a minimum interest rate
("floor") or maximum interest rate ("cap"), or the amount of increase or
decrease in the stated interest rate ("governor"), generally will not result in
the rate failing to be treated as a qualified floating rate if the restriction
is fixed throughout the term of the instrument and the cap, floor or governor is
"at the money" as of the date of issuance. However, a rate is not an objective
rate if it is reasonably expected that the average value of such rate over the
first half of the instrument's term will be either significantly less or more
than the average value of the rate during the final half of the instrument's
term e.g., if there is a significant front-loading or back-loading of interests.
A "qualified inverse floating rate" is a rate that is equal to a fixed rate
minus a qualified floating rate if variations in the rate can reasonably be
expected inversely to reflect contemporaneous variations in the cost of newly
borrowed funds.
In general, any other debt instrument 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 debt instrument. The OID
Regulations generally require that such a debt instrument 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 debt
instrument 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 debt
instrument's issue date. Any objective rate (other than a qualified inverse
floating rate) provided for under the terms of the debt instrument is converted
into a fixed rate that reflects the yield that is reasonably expected for the
debt instrument. In the case of a debt instrument 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 debt instrument 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 debt instrument as of the debt
instrument'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 debt instrument is then converted into an
"equivalent" fixed rate debt instrument in the manner described above.
Once the debt instrument 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 OID rules to the
"equivalent" fixed rate debt instrument and a U.S. Holder of the debt instrument
will account for such OID and qualified stated interest as if the U.S. Holder
held the "equivalent" fixed rate debt instrument. Each accrual period,
appropriate adjustments will be made to the amount of qualified stated interest
or OID assumed to have been accrued or paid with respect to the "equivalent"
fixed rate debt instrument in the event that such amounts differ from the actual
amount of interest accrued or paid on the debt instrument during the accrual
period.
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Election to Treat all Interest as OID
Under the OID Regulations, a U.S. Holder may elect for a Note acquired
after April 4, 1994 to account for all income on a Note (other than foreign
currency gain or loss), including stated interest, OID, de minimis OID, market
discount, de minimis market discount, amortizable bond premium, or acquisition
premium in the same manner as OID. If this election is made, the U.S. Holder may
be subject to the conformity requirements of Section 171(c) or 1278(b),
respectively, which may require the amortization of bond premium and the accrual
of market discount on other debt instruments held by the same U.S. Holder.
Short-Term Notes
In general, an individual or other cash method U.S. Holder of a Note that
has a Stated Maturity of not more than one year from the date of issuance (a
"short-term Note") is not required to accrue OID unless he or she elects to do
so. Such an election applies to all short-term Notes acquired by the U.S. Holder
during the first taxable year for which the election is made, and all subsequent
taxable years of the U.S. Holder unless the IRS consents to a revocation. U.S.
Holders who report income for U.S. federal income tax purposes on the accrual
method and certain other U.S. Holders and electing cash method U.S. Holders are
required to include OID on such short-term Notes on a straight-line basis,
unless an irrevocable election with respect to any short-term Note is made to
accrue the OID according to a constant interest rate based on daily compounding.
In the case of a U.S. Holder who is not required, and does not elect, to include
OID in income currently, any gain realized on the sale, exchange or retirement
of the short-term Note will be ordinary income to the extent of the OID accrued
on a straight-line basis (or, if elected, according to the constant yield method
based on daily compounding) through the date of sale, exchange or retirement. In
addition, such non-electing U.S. Holders who are not subject to the current
inclusion requirement described above will be required to defer deductions for
any interest paid on indebtedness incurred or continued to purchase or carry
such short-term Notes.
Market Discount
If a Note is acquired at a "market discount," some or all of any gain
realized upon a sale or other disposition, or payment at maturity, or some or
all of a partial principal payment of such Note may be treated as ordinary
income, as described below. For this purpose, "market discount" is the excess
(if any) of the Note's issue price (or, in the case of a subsequent purchaser,
the Note's stated redemption price at maturity) over the purchase price, subject
to a statutory de minimis exception. In the case of a Note issued with OID, in
lieu of using the Note's stated redemption price at maturity, the Note's revised
issue price as of the purchase date is used. Unless a U.S. Holder has elected to
include the market discount in income as it accrues, any gain realized on any
subsequent disposition of such Note (other than in connection with certain
nonrecognition transactions) or payment at maturity, or some or all of any
partial principal payment with respect to such Note, will be treated as ordinary
income to the extent of the market discount that is treated as having accrued
during the period such Note was held.
The amount of market discount treated as having accrued will be determined
either (i) on a ratable basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the Note was held by the
U.S. Holder and the denominator of which is the total number of days after the
date such U.S. Holder acquired the Note up to and including the date of its
maturity, or (ii) if the U.S. Holder so elects, on a constant interest rate
method. A U.S. Holder may make that election with respect to any Note, and such
election is irrevocable.
In lieu of recharacterizing gain upon disposition as ordinary income to the
extent of accrued market discount at the time of disposition, a U.S. Holder of
such Note acquired at a market discount may elect to include market discount in
income currently, through the use of either the ratable inclusion method or the
elective constant interest method. Once made, the election to include
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market discount in income currently applies to all Notes and other obligations
of the U.S. Holder that are purchased at a market discount during the taxable
year for which the election is made, and all subsequent taxable years of the
U.S. Holder, unless the IRS consents to a revocation of the election. If an
election is made to include market discount in income currently, the basis of
the Note in the hands of the U.S. Holder will be increased by the market
discount thereon as it is includable in income.
If the U.S. Holder makes the election to treat as OID all interest on a
debt instrument that has market discount, the U.S. Holder is deemed to have made
the election to accrue currently market discount on all other debt instruments
with market discount. In addition, if the U.S. Holder has previously made the
election to accrue market discount currently, the conformity requirements of
that election are met for debt instruments with respect to which the U.S. Holder
elects to treat all interest as OID.
Unless a U.S. Holder who acquires a Note at a market discount elects to
include market discount in income currently, such U.S. Holder may be required to
defer a portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry such Note.
Premium
If a U.S. Holder purchases a Note issued with OID at an "acquisition
premium," the U.S. Holder reduces the amount of OID includable in income in each
taxable year by that portion of acquisition premium allocable to that year. A
Note is purchased at an acquisition premium if, immediately after the purchase,
the purchaser's adjusted basis in the Note is greater than the adjusted issue
price but not greater than all amounts payable on the instrument after the
purchase date (other than qualified stated interest) (i.e., the Note is not
purchased at a "bond premium"). In general, the reduction in OID allocable to
acquisition premium is determined by multiplying the daily portion of OID by a
fraction the numerator of which is the excess of the U.S. Holder's adjusted
basis in the Note immediately after the acquisition over the adjusted issue
price of the Note and the denominator of which is the excess of the sum of all
amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, over the Note's adjusted issue price. Rather than
apply the above fraction, the U.S. Holder may, as discussed above, elect to
treat all interest, including for this purpose acquisition premium, as OID.
If a U.S. Holder purchases a Note and, immediately after the purchase, the
adjusted basis of the Note exceeds the sum of all amounts payable on the
instrument after the purchase date, other than qualified stated interest, the
Note has "bond premium." A U.S. Holder that purchases a Note at a bond premium
is not required to include OID in income. In addition, a U.S. Holder may elect
to amortize such bond premium over the remaining term of such Note (or, in
certain circumstances, until an earlier call date).
If bond premium is amortized, the amount of interest that must be included
in the U.S. Holder's income for each period ending on an Interest Payment Date
or maturity, as the case may be, will be reduced by the portion of premium
allocable to such period based on the Note's yield to maturity. If such an
election to amortize bond premium is not made, a U.S. Holder must include the
full amount of each interest payment in income in accordance with its regular
method of accounting and will receive a tax benefit from the premium only in
computing its gain or loss upon the sale or other disposition or payment of the
principal amount of the Note.
An election to amortize premium will apply to amortizable bond premium on
all Notes and other bonds, the interest on which is includable in the U.S.
Holder's gross income, held at the beginning of the U.S. Holder's first taxable
year to which the election applies or thereafter acquired, and may be revoked
only with the consent of the IRS. The election to treat all interest, including
for this purpose amortizable premium, as OID is deemed to be an election to
amortize premium under Section 171(c) of the Code for purposes of the conformity
requirements of that section. In addition, if
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the U.S. Holder has already made an election to amortize premium, the conformity
requirements will be deemed satisfied with respect to any Notes for which the
U.S. Holder makes an election to treat all interest as OID.
Sale, Exchange, Redemption or Repayment of the Notes
Upon the disposition of a Note by sale, exchange, redemption, or repayment,
the U.S. Holder will generally recognize gain or loss equal to the difference
between (i) the amount realized on the disposition (other than amounts
attributable to accrued and unpaid interest) and (ii) the U.S. Holder's tax
basis in the Note. A U.S. Holder's tax basis in a Note generally will equal the
cost of the Note (net of accrued interest) to the U.S. Holder increased by
amounts includable in income as OID or market discount (if the holder elects to
include market discount on a current basis) and reduced by any amortized premium
and any payments other than payments of qualified stated interest (or fixed
periodic interest) made on such Note.
Because the Note is held as a capital asset, such gain or loss (except to
the extent that the market discount rules or rules relating to certain short
term OID notes otherwise provide) will generally constitute capital gain or loss
and will be long-term capital gain or loss if the U.S. Holder has held such Note
for longer than one year. In certain circumstances, if an Issuer were found to
have an intention, at the time its debt obligations were issued, to call such
obligations before maturity, gain would be ordinary income to the extent of any
unamortized OID. The OID Regulations clarify that this rule will not apply to
publicly offered debt instruments.
Foreign Currency Notes
The following discussion applies to Foreign Currency Notes, if such Notes
are not denominated in or indexed to a currency that is considered a
"hyperinflationary" currency. Special U.S. tax considerations apply to
obligations denominated in or indexed to a hyperinflationary currency.
In general, a U.S. Holder that uses the cash method of accounting and holds
Foreign Currency Notes will be required to include in income the U.S. dollar
value of the amount of interest income received whether or not the payment is
received in U.S. dollars or converted into U.S. dollars. The U.S. dollar value
of the amount of interest received is the amount of foreign currency interest
paid translated at the spot rate on the date of receipt. The U.S. Holder will
not have exchange gain or loss on the interest payment but may have exchange
gain or loss when it disposes of any foreign currency received.
A U.S. Holder on the accrual method of accounting is generally required to
include in income the U.S. dollar value of interest accrued during the accrual
period. Accrual basis U.S. Holders may determine the amount of income recognized
with respect to such interest in accordance with either of two methods. Under
the first method, the U.S. dollar value of accrued interest is translated at the
average rate for the interest accrual period (or, with respect to an accrual
period that spans two taxable years, the partial period within the taxable
year). For this purpose, the average rate is the simple average of spot rates of
exchange for each Business Day of such period or other average exchange rate for
the period reasonably derived and consistently applied by the U.S. Holder. Under
the second method, a U.S. Holder can elect to accrue interest at the spot rate
on the last day of an accrual period (in the case of a partial accrual period,
the last date of the taxable year) or if the last day of an accrual period is
within five Business Days of the receipt, the spot rate on the date of receipt.
Any such election will apply to all debt instruments held by the U.S. Holder at
the beginning of the first taxable year to which the election applies or
thereafter acquired and will be irrevocable without the consent of the IRS. An
accrual basis U.S. Holder will recognize exchange gain or loss, as the case may
be, on the receipt of a foreign currency interest payment if the exchange rate
on the date payment is received differs from the rate applicable to the previous
accrual of interest income. The foreign currency gain or loss will generally be
treated as U.S. source ordinary income or loss.
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OID on a Note denominated in a foreign currency is determined in foreign
currency and is translated into U.S. dollars in the same manner that an accrual
basis U.S. Holder translates accrued interest. Exchange gain or loss will be
determined when OID is considered paid to the extent the exchange rate on the
date of payment differs from the exchange rate at which the OID was accrued.
The amount of market discount on a Foreign Currency Note includable in
income will generally be determined by computing the market discount in the
foreign currency and translating that amount into U.S. dollars on the spot rate
on the date the Foreign Currency Note is retired or otherwise disposed of. If
the U.S. Holder accrues market discount currently, the amount of market discount
which accrues during any accrual period is determined in the foreign currency
and translated into U.S. dollars on the basis of the average exchange rate in
effect during the accrual period. Exchange gain or loss may be recognized to the
extent that the rate of exchange on the date of the retirement or disposition of
the Note differs from the rate of exchange at which the market discount was
accrued.
Amortizable premium on Foreign Currency Notes is also computed in units of
foreign currency and, if the U.S. Holder elects, will reduce interest income in
units of foreign currency. At the time amortized bond premium offsets interest
income, exchange gain or loss is realized measured by the difference between
exchange rates at that time and at the time of the acquisition of the Note.
In the case of a Note denominated in foreign currency, the cost of the Note
to the U.S. Holder will be the U.S. dollar value of the foreign currency
purchase price translated at the spot rate for the date of purchase (or, in some
cases, the settlement date). The conversion of U.S. dollars to a foreign
currency and the immediate use of that currency to purchase Foreign Currency
Notes generally will not result in a taxable gain or loss for a U.S. Holder. A
U.S. Holder who purchases a Note with previously owned foreign currency
generally will recognize exchange gain or loss on such currency equal to the
difference between the U.S. Holder's tax basis in the currency and the fair
market value of the currency determined on the date of purchase.
With respect to the sale, exchange, retirement, or repayment of a Note
denominated in a foreign currency, the foreign currency amount realized will be
considered to be the payment of accrued but unpaid interest (on which exchange
gain or loss is recognized as described above), accrued but unpaid OID (on which
exchange gain or loss is recognized as described above), and, finally, as a
payment of principal on which (i) gain or loss is computed in foreign currency
and translated on the date of retirement or disposition; and (ii) exchange gain
or loss is separately computed on the foreign currency amount of principal
(reduced by amortizable premium) that is repaid to the extent that the rate of
exchange on the date of retirement or disposition differs from the rate of
exchange on the date the Note was acquired or deemed acquired. Exchange gain or
loss computed on accrued interest, OID, accrued market discount and principal
shall be recognized, however, only to the extent of total gain or loss on the
transaction. For purposes of determining the total gain or loss on the
transaction, a U.S. Holder's tax basis in the Note generally will equal the U.S.
dollar cost of the Note (as determined above) increased by the U.S. dollar
amounts includable in income as accrued interest, OID, or market discount (if
the U.S. Holder elects to include such market discount on a current basis) and
reduced by the U.S. dollar amount of amortized premium and of any payments other
than payments of qualified stated interest. A U.S. Holder will have a tax basis
in any foreign currency received on the sale, exchange or retirement of a Note
equal to the U.S. dollar value of such currency on the date of receipt.
Backup Withholding
A U.S. Holder of a Note may be subject to U.S. backup withholding at the
rate of 31% with respect to interest paid on the Note, unless such U.S. Holder
(i) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. U.S.
S-32
<PAGE> 33
Holders of Notes should consult their tax advisors as to their qualification for
exemption from U.S. backup withholding and the procedure for obtaining such an
exemption. Any amount paid as backup withholding will be creditable against the
U.S. Holder's U.S. federal income tax liability.
Pre-Issuance Accrued Interest
If (i) a portion of the initial purchase price of a Note is attributable to
pre-issuance accrued interest, (ii) the first stated interest payment on the
Note is to be made within one year of the Note's issue date and (iii) the
payment will equal or exceed the amount of pre-issuance accrued interest, then
the U.S. Holder may elect to decrease the issue price of the Note by the amount
of pre-issuance accrued interest. In that event, a portion of the first stated
interest payment will be treated as a return of the excluded pre-issuance
accrued interest and not as an amount payable on the Note.
NON-U.S. HOLDERS
The following is a summary of the U.S. federal income tax consequences of
the ownership and disposition of the Notes by a holder who does not meet the
criteria set forth in the definition of a U.S. Holder (a "Non-U.S. Holder").
This discussion does not consider all aspects of U.S. federal income and estate
taxation that may be relevant to the purchase, ownership or disposition of the
Notes by such Non-U.S. Holder in light of such holder's personal circumstances,
including holding the Notes through a partnership. For example, persons who are
partners in foreign partnerships and beneficiaries of foreign trusts or estates
who are subject to U.S. federal income tax because of their own status, such as
United States residents or foreign persons engaged in a trade or business in the
United States, may be subject to U.S. federal income tax even though the entity
is not subject to income tax on the disposition of its Note.
For purposes of the following discussion, interest (including OID) and gain
on the sale, exchange or other disposition of the Note will be considered "U.S.
trade or business income" if such income or gain is (i) effectively connected
with the conduct of a U.S. trade or business or (ii) in the case of a treaty
resident, attributable to a U.S. permanent establishment (or in the case of an
individual treaty resident, a fixed base) in the United States.
Interest and Original Issue Discount
Generally, any interest or OID paid to a Non-U.S. Holder of a Note that is
not "U.S. trade or business income" will not be subject to U.S. federal income
tax if the interest (or OID) qualifies as "portfolio interest." Generally,
interest on registered Notes will qualify as portfolio interest if (i) the
Non-U.S. Holder does not actually or constructively own 10% or more of the total
voting power of all voting stock of the Company, is not a controlled foreign
corporation with respect to which the Company is a "related person" within the
meaning of the Code and is not a Bank receiving interest described in Section
881(c)(3)(A) of the Code, and (ii) the beneficial owner, under penalty of
perjury, certifies that the beneficial owner is not a United States person and
such certificate provides the beneficial owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest or OID that
do not qualify for the portfolio interest exception and that are not U.S. trade
or business income will be subject to U.S. federal income tax at the rate of 30%
unless a U.S. income tax treaty applies to reduce or eliminate withholding. U.S.
trade or business income will be taxed on a net basis at regular U.S. rates
rather than the 30% gross rate. To claim the benefit of a tax treaty or to claim
exemption from withholding because the income is U.S. trade or business income,
the Non-U.S. Holder must provide a properly executed Form 1001 or Form 4224, as
applicable, prior to the payment of interest or OID. The Forms 1001 and 4224
must be periodically updated.
S-33
<PAGE> 34
Indexed Notes
The IRS has stated that it is considering various issues relating to the
treatment of Non-U.S. Holders of contingent payment debt obligations, including
"the possibility of tax avoidance that may arise when a contingent payment debt
obligation is structured with payments that approximate the yield on an equity
security or an index and the proper characterization of gain recognized by a
foreign holder on the disposition of a debt instrument in certain cases"
(including coordination with the rules for taxation of foreign investment in
U.S. real property). Subject to certain exceptions, recently enacted legislation
provides that the portfolio interest exception from withholding tax does not
apply to certain payments of contingent interest if: (1) the amount of interest
is determined by reference to (i) receipts, sales or other cash flows of the
Company or a related person, (ii) any income or profits of the Company or a
related person, (iii) any change in the value of any property of the Company or
a related person, or (iv) any dividends, partnership distributions, or similar
payments made by the Company or a related person; or (2) the interest is
identified in regulations not yet issued as contingent interest for which the
portfolio interest exception should be denied. Gain from the sale of certain
contingent payment debt obligations is also treated as interest under draft
proposed regulations that were released by the IRS but were withdrawn pending
review.
Sale of Notes
Except as described below and subject to the discussion concerning backup
withholding and Indexed Notes, any gain realized by a Non-U.S. Holder on the
sale or exchange of a Note generally will not be subject to U.S. federal income
tax, unless (i) such gain is U.S. trade or business income, (ii) subject to
certain exceptions, the Non-U.S. Holder is an individual who holds the Note as a
capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates.
Federal Estate Tax
Except with respect to Notes that bear contingent interest that is not
eligible for the portfolio interest exception, Notes held (or treated as held)
by an individual who is a Non-U.S. Holder at the time of his death will not be
subject to U.S. federal estate tax provided that the individual does not
actually or constructively own 10% or more of the total voting power of all
voting stock of the Company.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest and OID that is subject to withholding or that is exempt from U.S.
withholding tax pursuant to a tax treaty or the portfolio interest exception.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement with the tax authorities of the
country in which the Non-U.S. Holder resides.
In the case of payments of principal on the Notes by the Company to a
Non-U.S. Holder, the regulations provide that backup withholding and information
reporting will not apply to payments if the Holder certifies to its Non-U.S.
Holder status under penalties of perjury or otherwise establishes an exemption
(provided that neither the Company nor its paying agent has actual knowledge
that the holder is a United States person or that the conditions of any other
exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of Notes to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding unless the owner certifies its
Non-U.S. Holder status under penalty of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
Holder is a U.S. Holder or that the conditions of any other exemption are not,
in fact, satisfied. The payment
S-34
<PAGE> 35
of the proceeds from the disposition of a Note to or through a non-U.S. office
of a non-U.S. broker will not be subject to information reporting or backup
withholding if the broker is not a U.S. related person. For this purpose, a
"U.S. related person" is (i) a "controlled foreign corporation" for U.S. federal
income tax purposes, or (ii) a foreign person 50% or more of whose gross income
from all sources for the three-year period ending with the close of its taxable
year preceding the payment (or for such part of the period that the broker has
been in existence) is derived from activities that are effectively connected
with the conduct of a United States trade or business.
In the case of the payment of proceeds from the disposition of Notes
through a non-U.S. office of a broker that is either a U.S. person or a "U.S.
related person," existing regulations require information reporting on the
payment, unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is a U.S. person or a U.S. related person (absent actual knowledge that the
payee is a U.S. person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that certain required
information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution
Agreement, dated May 10, 1995 (the "Distribution Agreement"), the Notes are
being offered on a continuing basis by the Company through Goldman, Sachs & Co.,
Chemical Securities Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, J.P. Morgan Securities Inc. and NationsBanc Capital Markets,
Inc. (the "Agents"), who have agreed to use reasonable 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 ranging from 0.125% to 0.750% of the principal amount of
Notes, depending upon rank and maturity, for sales made through them as Agents.
Commissions with respect to Notes with stated maturities in excess of 30 years
will be negotiated between the Company and the Agents at the time of such sale.
The Company may also sell Notes to the Agents as principals 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 of this Prospectus Supplement in the case of any
such principal transaction in which no other discount is agreed. 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, or at fixed prices. Unless
otherwise specified in the applicable Pricing Supplement, with respect to the
Notes with Stated Maturities of 30 years or less, 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 they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer may include all or part of the discount to
be received from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical rank and maturity. After the initial public offering of Notes, the
public offering price (in the case of Notes to be resold on a fixed price
basis), concession and discount may be changed.
S-35
<PAGE> 36
The Agents, as agents or principals, as well as any dealers who resell
Notes to investors, 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.
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.
The Agents may be customers of, engage in transactions with, and perform
services for the Company in the ordinary course of business in the future.
Chemical Securities Inc. is an affiliate of Texas Commerce Bank National
Association ("TCB") which is agent bank and a lender to the Company under the
Company's revolving credit facility. TCB will receive its proportionate share of
any repayment by the Company of amounts outstanding under such facility from the
proceeds of the offering of the Notes. TCB is also Trustee under the Senior
Indenture and Paying Agent for the Senior Notes and Trustee under the
Subordinated Indenture and Paying Agent for the Subordinated Notes. In addition,
TCB, or its affiliates, participates on a regular basis in various general
financing and banking transactions for the Company and its affiliates. Mr. Marc
J. Shapiro, the Chairman and Chief Executive Officer of TCB, is a Trust Manager
of the Company.
NationsBanc Capital Markets, Inc. is an affiliate of NationsBank N.A.
("NationsBank"), which is a lender to the Company under the Company's revolving
credit facility and other credit facilities. NationsBank will receive its
proportionate share of any repayment by the Company of amounts outstanding under
such facilities from the proceeds of the offering of the Notes.
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.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Andrews &
Kurth L.L.P., Houston, Texas, and for the Agents by Brown & Wood, New York, New
York. The opinions of Andrews & Kurth L.L.P. and Brown & Wood will be
conditioned upon, and subject to, certain assumptions as to future actions
required to be taken in connection with the issuance and sale of the Notes and
as to other events that may affect the validity of the Notes but which cannot be
ascertained on the date of such opinions.
S-36
<PAGE> 37
PROSPECTUS
WEINGARTEN REALTY INVESTORS
$200,000,000
DEBT SECURITIES, PREFERRED SHARES AND COMMON SHARES
------------------------
Weingarten Realty Investors, a real estate investment trust formed under
Texas law (the "Company"), may from time to time offer in one or more series (i)
its unsecured debt securities (the "Debt Securities"), (ii) its preferred shares
of beneficial interest, par value $.03 per share (the "Preferred Shares"), and
(iii) its common shares of beneficial interest, par value $.03 per share (the
"Common Shares"), with an aggregate public offering price of up to $200,000,000
(or its equivalent in any other currency or composite currency based on the
exchange rate at the time of sale) in amounts, at prices and on terms to be
determined at the time of offering. The Debt Securities, Preferred Shares and
Common Shares (collectively, the "Securities") may be offered, separately or
together, in separate series in amounts, at prices and on terms to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Securities will be subordinated to all existing and future Senior
Debt of the Company, as defined. See "Description of Debt Securities."
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for
redemption at the option of the Company or repayment at the option of the
Holder, terms for sinking fund payments, terms for conversion into Preferred
Shares or Common Shares and any initial public offering price; (ii) in the case
of Preferred Shares, the specific title and stated value, any dividend,
liquidation, redemption, conversion, voting and other rights, and any initial
public offering price; and (iii) in the case of Common Shares, any initial
public offering price. In addition, such specific terms may include limitations
on direct or beneficial ownership and restrictions on transfer of the
Securities, in each case as may be appropriate to preserve the status of the
Company as a real estate investment trust ("REIT") for federal income tax
purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the Securities, their names,
and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the
information set forth, in the applicable Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of such
series of Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The date of this Prospectus is April 25, 1995.
<PAGE> 38
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and New York Regional Office, 7 World Trade Center, New
York, New York 10048. In addition, the Company's Common Shares are listed on the
New York Stock Exchange, Inc. and similar information about the Company can be
inspected and copied at prescribed rates at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities being offered hereby. For
further information with respect to the Company and the Securities offered
hereby, reference is made to the Registration Statement and exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance, reference is
made to the copy of such contract or documents filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-9876) are incorporated in this Prospectus by reference and are made a part
hereof:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
Each document filed subsequent to the date of this Prospectus pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering of all Securities to which this Prospectus relates
shall be deemed to be incorporated by reference in this Prospectus and shall be
a part hereof from the date of filing of such document.
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 herein, in any
accompanying Prospectus Supplement relating to a specific offering of Securities
or in any other subsequently filed document that is also incorporated or 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 or any
accompanying Prospectus Supplement. Subject to the foregoing, all information
appearing in this Prospectus and each accompanying Prospectus Supplement is
qualified in its entirety by the information appearing in the documents
incorporated by reference.
------------------------
UPON WRITTEN OR ORAL REQUEST OF ANY PERSON TO WHOM A PROSPECTUS IS
DELIVERED, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF THE DOCUMENTS
WHICH HAVE BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS. REQUESTS FOR SUCH
DOCUMENTS SHOULD BE DIRECTED TO M. CANDACE DUFOUR, VICE PRESIDENT AND SECRETARY,
WEINGARTEN REALTY INVESTORS, 2600 CITADEL PLAZA DRIVE, HOUSTON, TEXAS 77008,
TELEPHONE (713) 866-6000.
2
<PAGE> 39
THE COMPANY
Weingarten Realty Investors has owned and developed shopping centers and
other commercial real estate since its organization in 1948. The Company's
investment focus has been and continues to be on shopping centers. As of March
3, 1995, Trust Managers and executive officers of the Company controlled
4,184,082 Common Shares or approximately 15.9% of the outstanding Common Shares.
Initially, the Company grew primarily through development of properties,
with 91 of the 161 operating properties having been developed by the Company.
With respect to these projects, the Company acquired the raw land, constructed
buildings and leased the store spaces. The Company generally develops new
projects only when it has leases in place with financially strong and viable
anchor retailers. More recently, the Company has expanded its property base
primarily through acquisitions of properties previously developed by other
parties which satisfy investment criteria similar to those applicable to new
developments. Management believes that the majority of the Company's growth in
the immediate future will continue to result from acquisitions, due to the
continuing over-supply of developed real estate projects, the current lack of
capital for most of the Company's competitors to finance new investments and the
prevailing market discount from reproduction costs for new projects. As part of
its acquisition strategy, the Company seeks under-managed properties in good
locations, the value of which can be enhanced through remerchandising and
renovating. Geographically, the Company considers expansion in areas where it
currently has a presence or where it can acquire within a reasonable time frame
a sufficient number of properties that meet its investment criteria.
An equally important part of the Company's strategy has been to improve the
cash flow and value of its existing portfolio through: (i) maximizing rental
revenues, occupancy and retail sales, (ii) operating the properties in the most
cost effective manner and (iii) renovating and remerchandising the tenant mix
with respect to selected properties.
Management believes that its overall debt structure is conservative. Based
upon the approximately $1 billion market value of the Company's equity at
December 31, 1994, the Company's debt represented less than 23% of its total
market capitalization. The Company's ratio of funds from operations before
interest expense to fixed charges for the year ended December 31, 1994 was
approximately 6.10 to 1.0.
The Company conducts its operations in order to qualify as a REIT under the
Internal Revenue Code of 1986, as amended. The Company's principal executive
offices are located at 2600 Citadel Plaza Drive, Houston, Texas 77008, and its
telephone number is (713) 866-6000. As used herein, the term "Company" refers to
Weingarten Realty Investors and its predecessors unless the context otherwise
specifically requires.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the Company intends to use the majority of the net
proceeds from the sale of Securities offered by the Company to repay debt
(including repayments of amounts drawn on lines of credit for property
acquisitions), make improvements to properties, acquire or develop additional
properties and for working capital. Pending use for the foregoing purposes, such
proceeds may be invested in short-term, interest-bearing time or demand deposits
with financial institutions, cash items or qualified government securities.
3
<PAGE> 40
CERTAIN RATIOS
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges and of funds from operations before interest expense
to fixed charges for the periods shown:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1990 1991 1992 1993 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges........... 1.68x 1.72x 1.89x 3.94x 4.16x
Ratio of Funds from Operations Before
Interest Expense to Fixed Charges.......... 2.42x 2.52x 2.82x 5.83x 6.10x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. The ratios of funds from operations before interest expense to
fixed charges were computed by dividing funds from operations before interest
expense by fixed charges. For these purposes, earnings consist of income before
extraordinary items and fixed charges, and funds from operations before interest
expense consists of net income plus depreciation, amortization and extraordinary
charges, gains and losses on sales of properties and securities. Fixed charges
consist of interest expense (including interest costs capitalized), amortization
of debt costs and the portion of rent expense representing an interest factor.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Securities are to be issued under an indenture (the "Senior
Indenture"), to be entered into between the Company and Texas Commerce Bank
National Association, as Trustee, and the Subordinated Securities are to be
issued under a separate indenture (the "Subordinated Indenture"), also to be
entered into between the Company and Texas Commerce Bank National Association,
as Trustee. The term "Trustee" as used herein shall refer to Texas Commerce Bank
National Association or such other bank as the Company may appoint as trustee
pursuant to the terms of the applicable Indenture, in its or their capacity as
Trustee for the Senior Securities or the Subordinated Securities, as
appropriate. The forms of the Senior Indenture and the Subordinated Indenture
(being sometimes referred to herein collectively as the "Indentures" and
individually as an "Indenture") are filed as exhibits to the Registration
Statement. The Indentures are subject to and governed by the Trust Indenture Act
of 1939, as amended (the "TIA"), and may be supplemented from time to time
following execution. The statements made under this heading relating to the Debt
Securities and the Indentures are summaries of the provisions thereof and do not
purport to be complete and are qualified in their entirety by reference to the
Indentures and such Debt Securities. Parenthetical references below are to the
Indentures and capitalized terms used but not defined herein shall have the
respective meanings set forth in the Indentures.
TERMS
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. The indebtedness
represented by the Subordinated Securities will be subordinated in right of
payment to the prior payment in full of the Senior Debt of the Company as
described under "Subordination."
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in, or pursuant to authority granted by, a
resolution of the Board of Trust Managers of the Company or as established in
one or more indentures supplemental to such Indenture. All Debt Securities of
one series need not be issued at the same time and, unless otherwise provided, a
series may be
4
<PAGE> 41
reopened, without the consent of the Holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series (Section 301
of each Indenture).
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 608 of each Indenture). In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee
(Section 609 of each Indenture), and, except as otherwise indicated herein, any
action described herein to be taken by each Trustee may be taken by each such
Trustee with respect to, and only with respect to, the one or more series of
Debt Securities for which it is Trustee under the applicable Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities which is convertible into Common
Shares or Preferred Shares, or the method by which any such portion shall
be determined;
(4) if convertible, in connection with the preservation of the
Company's status as a REIT, any applicable limitations on the ownership or
transferability of the Common Shares or Preferred Shares into which such
Debt Securities are convertible;
(5) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, the Regular Record Dates for
such Interest Payment Dates, or the method by which such dates shall be
determined, the Persons to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable, where such
Debt Securities may be surrendered for conversion or registration of
transfer or exchange and where notices or demands to or upon the Company in
respect of such Debt Securities and the applicable Indenture may be served;
(9) the period or periods within which, the price or prices at which
and the other terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of the Company, if the
Company is to have such an option;
(10) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which, the price or prices at which and the other terms and
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, as a whole or in part, pursuant to such obligation;
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(11) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(13) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the applicable Indenture;
(14) whether such Debt Securities will be issued in certificated or
book-entry form;
(15) whether such Debt Securities will be in registered or bearer
form, and if in registered form, the denominations thereof if other than
$1,000 and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
(16) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article XIV of the applicable Indenture;
(17) the terms, if any, upon which such Debt Securities may be
convertible into Common Shares or Preferred Shares of the Company and the
terms and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price or rate and the
conversion period;
(18) whether and under what circumstances the Company will pay
Additional Amounts as contemplated in the applicable Indenture on such Debt
Securities in respect of any tax, assessment or governmental charge and, if
so, whether the Company will have the option to redeem such Debt Securities
in lieu of making such payment; and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of each Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") (Section 502 of each Indenture). Special
U.S. federal income tax, accounting and other considerations applicable to
Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest, if any, on any
series of Debt Securities will be payable at the corporate trust office of the
Trustee, provided that, at the option of the Company, payment of interest may be
made by check mailed to the address of the Person entitled thereto as it appears
in the Security Register or by wire transfer of funds to such Person at an
account maintained within the United States (Sections 301, 305, 306, 307 and
1002 of each Indenture).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date")
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for the payment of such Defaulted Interest to be fixed by the applicable
Trustee, notice whereof shall be mailed to each Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the applicable
Indenture (Section 307 of each Indenture).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee referred
to above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer or exchange at the
corporate trust office of the applicable Trustee referred to above. Every Debt
Security surrendered for conversion, registration of transfer or exchange shall
be duly endorsed or accompanied by a written instrument of transfer. No service
charge will be made for any registration of transfer or exchange of any Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith (Section 305 of
each Indenture). If the applicable Prospectus Supplement refers to any transfer
agent (in addition to the applicable Trustee) initially designated by the
Company with respect to any series of Debt Securities, the Company may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts, except that the Company
will be required to maintain a transfer agent in each Place of Payment for such
series. The Company may at any time designate additional transfer agents with
respect to any series of Debt Securities (Section 1002 of each Indenture).
Neither the Company nor any Trustee shall be required to: (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) issue, register the transfer of or exchange any Debt Security
that has been surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Security not to be so repaid (Section 305 of each
Indenture).
MERGER, CONSOLIDATION OR SALE
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other corporation
or trust or entity provided that: (i) either the Company shall be the continuing
entity, or the successor entity (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall expressly assume payment of the principal of (and
premium, if any) and interest, if any, on all of the Debt Securities and the due
and punctual performance and observance of all of the covenants and conditions
contained in each Indenture; (ii) immediately after giving effect to such
transaction and treating any indebtedness that becomes an obligation of the
Company or any Subsidiary as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default
under the Indenture, and no event which, after notice or the lapse of time, or
both, would become such an Event of Default, shall have occurred and be
continuing; and (iii) an officers' certificate and legal opinion covering such
conditions shall be delivered to each Trustee (Sections 801 and 803 of each
Indenture).
CERTAIN COVENANTS
Limitations on Incurrence of Debt. The Company will not, and will not
permit any Subsidiary to, incur any Debt (as defined below) if, immediately
after giving effect to the incurrence of such Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of the
Company and its Subsidiaries on a consolidated basis determined in accordance
with
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generally accepted accounting principles is greater than 60% of the sum of
(without duplication) (i) the Company's Total Assets (as defined below) as of
the end of the calendar quarter covered in the Company's Annual Report on Form
10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed
with the Commission (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Debt and (ii) the
purchase price of any real estate assets or mortgages receivable acquired, and
the amount of any securities offering proceeds received (to the extent such
proceeds were not used to acquire real estate assets or mortgages receivable or
used to reduce Debt), by the Company or any Subsidiary since the end of such
calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Debt (Section 1004 of each Indenture).
In addition to the foregoing limitation on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt secured
by any mortgage, lien, charge, pledge, encumbrance or security interest of any
kind upon any of the property of the Company or any Subsidiary if, immediately
after giving effect to the incurrence of such Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of the
Company and its Subsidiaries on a consolidated basis which is secured by any
mortgage, lien, charge, pledge, encumbrance or security interest on property of
the Company or any Subsidiary is greater than 40% of the Company's Total Assets
(Section 1004 of each Indenture).
In addition to the foregoing limitations on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt if the
ratio of Consolidated Income Available for Debt Service (as defined below) to
the Annual Service Charge (as defined below) for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt is
to be incurred shall have been less than 1.5, on a pro forma basis after giving
effect thereto and to the application of the proceeds therefrom, and calculated
on the assumption that: (i) such Debt and any other Debt incurred by the Company
and its Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other Debt, had
occurred at the beginning of such period; (ii) the repayment or retirement of
any other Debt by the Company and its Subsidiaries since the first day of such
four-quarter period had been incurred, repaid or retired at the beginning of
such period (except that, in making such computation, the amount of Debt under
any revolving credit facility shall be computed based upon the average daily
balance of such Debt during such period); (iii) in the case of Acquired Debt (as
defined below) or Debt incurred in connection with any acquisition since the
first day of such four-quarter period, the related acquisition had occurred as
of the first day of such period with the appropriate adjustments with respect to
such acquisition being included in such pro forma calculation; and (iv) in the
case of any acquisition or disposition by the Company or its Subsidiaries of any
asset or group of assets since the first day of such four-quarter period,
whether by merger, stock purchase or sale, or asset purchase or sale, such
acquisition or disposition or any related repayment of Debt had occurred as of
the first day of such period with the appropriate adjustments with respect to
such acquisition or disposition being included in such pro forma calculation
(Section 1004 of each Indenture).
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its legal existence, rights (charter and statutory) and
franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if it determines that the preservation thereof
is no longer desirable in the conduct of its business (Section 1005 of each
Indenture).
Maintenance of Properties. The Company will cause all of its material
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times (Section 1006 of each Indenture).
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Insurance. The Company will keep, and will cause each of its Subsidiaries
to keep, all of its insurable properties insured against loss or damage in an
amount at least equal to their then full insurable value with insurers of
recognized responsibility and, if such insurer has publicly rated debt, the
rating for such debt must be at least investment grade with a nationally
recognized rating agency (Section 1007 of each Indenture).
Payment of Taxes and Other Claims. The Company will pay or discharge, or
cause to be paid or discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
(Section 1008 of each Indenture).
Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, within 15 days of
each of the respective dates by which the Company would have been required to
file annual reports, quarterly reports and other documents with the Commission
if the Company were so subject, (i) transmit by mail to all Holders of Debt
Securities, as their names and addresses appear in the Security Register,
without cost to such Holders, copies of the annual reports, quarterly reports
and other documents that the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections, (ii) file with the applicable Trustee copies of
the annual reports, quarterly reports and other documents that the Company would
have been required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act if the Company were subject to such Sections and (iii)
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective Holder (Section
1009 of each Indenture).
Maintenance of Value of Unencumbered Assets to Unsecured Debt. The Company
will at all times maintain an Unencumbered Total Asset Value in an amount of not
less than 100% of the aggregate principal amount of all outstanding Debt of the
Company and its Subsidiaries that is unsecured (Section 1013 of each Indenture).
Limited Covenants in the Event of a Highly Leveraged Transaction. Other
than the covenants of the Company included in the Indentures as described above,
there are no covenants in the Indentures that will afford the holders of Debt
Securities protection in the event of a highly leveraged transaction or similar
transaction involving the Company. Restrictions on ownership and transfers of
the Company's Common Shares and Preferred Shares are designed to preserve its
status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Description of Preferred Shares" and "Description of Common
Shares." Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of, or additions
to, the Events of Default or covenants of the Company that are described above,
including any addition of a covenant or other event risk provision or similar
protection.
As used herein,
"Acquired Debt" means Debt of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
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"Annual Service Charge" as of any date means the maximum amount which is
payable in any period for interest on, and original issue discount of, Debt of
the Company and its Subsidiaries and the amount of dividends which are payable
in respect of any Disqualified Stock (as defined below).
"Capital Shares" means, with respect to any Person, any capital shares
(including preferred shares), interests participations or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into or exchangeable for capital shares), warrants or
options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means Funds
from Operations (as defined below) of the Company and its Subsidiaries plus
amounts which have been deducted for interest on Debt of the Company and its
Subsidiaries.
"Debt" of the Company or any Subsidiary means any indebtedness of the
Company, or any Subsidiary, other than contingent liabilities (except to the
extent set forth in (iii) below), in respect of (without duplication) (i)
borrowed money evidenced by bonds, notes, debentures or similar instruments,
(ii) indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or
any security interest existing on property owned by the Company or any
Subsidiary, (iii) the reimbursement obligations, contingent or otherwise, in
connection with any letters of credit actually issued or amounts representing
the balance deferred and unpaid of the purchase price of any property or
services, except any such balance that constitutes an accrued expense or trade
payable, or all conditional sale obligations or obligations under any title
retention agreement, (iv) the principal amount of all obligations of the Company
or any Subsidiary with respect to redemption, repayment or other repurchase of
any Disqualified Stock or (v) any lease of property by the Company or any
Subsidiary as lessee which is reflected on the Company's consolidated balance
sheet as a capitalized lease in accordance with generally accepted accounting
principles to the extent, in the case of items of indebtedness under (i) through
(iii) above, that any such items (other than letters of credit) would appear as
a liability on the Company's consolidated balance sheet in accordance with
generally accepted accounting principles, but does not include any obligation of
the Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor
or otherwise, Debt of another Person (other than the Company or any Subsidiary)
unless and until the Company or such Subsidiary shall become directly liable in
respect thereof.
"Disqualified Stock" means, with respect to any Person, any Capital Shares
of such Person which by the terms of such Capital Shares (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, (ii)
is convertible into or exchangeable or exercisable for Debt or Disqualified
Stock or (iii) is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the Stated Maturity of the Debt Securities.
"Funds from Operations" for any period means net income plus depreciation,
amortization and extraordinary charges, excluding gains and losses on sales of
properties and securities.
"Total Assets" as of any date means the sum of (i) the Company's
Undepreciated Real Estate Assets and (ii) all other assets of the Company
determined in accordance with generally accepted accounting principles (but
excluding goodwill and unamortized debt costs).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Company and its
Subsidiaries on such date, before depreciation and amortization determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Unencumbered Total Asset Value" as of any date shall mean the sum of the
Company's Total Assets which are unencumbered by any mortgage, lien, charge,
pledge, or security interest.
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EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (i) default for
30 days in the payment of any installment of interest on any Debt Security of
such series; (ii) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series at its Maturity; (iii) default in
making any sinking fund payment as required for any Debt Security of such
series; (iv) default in the performance or breach of any other covenant or
warranty of the Company contained in the Indenture (other than a covenant added
to the Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
as provided in the applicable Indenture; (v) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by the
Company (including obligations under leases required to be capitalized on the
balance sheet of the lessee under generally accepted accounting principles but
not including any indebtedness or obligations for which recourse is limited to
property
purchased or property mortgaged) in an aggregate principal amount in excess of
$10,000,000 or under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any indebtedness for
money borrowed by the Company (including such leases but not including such
indebtedness or obligations for which recourse is limited to property purchased)
in an aggregate principal amount in excess of $10,000,000 by the Company,
whether such indebtedness now exists or shall hereafter be created, which
default shall have resulted in such indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become due and
payable or such obligations being accelerated, without such acceleration having
been rescinded or annulled; (vi) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Company or any Significant Subsidiary or either of their properties; and (vii)
any other Event of Default provided with respect to a particular series of Debt
Securities (Section 501 of each Indenture). The term "Significant Subsidiary"
means each significant subsidiary (as defined in Regulation S-X promulgated
under the Securities Act) of the Company.
If an Event of Default under either Indenture with respect to Debt
Securities of any series at the time Outstanding occurs and is continuing, then
in every such case the applicable Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms thereof) of all of the Debt Securities
of that series to be due and payable immediately by written notice thereof to
the Company (and to the applicable Trustee if given by the Holders). However, at
any time after such a declaration of acceleration with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under
either Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable Trustee,
the Holders of not less than a majority in principal amount of Outstanding Debt
Securities of such series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (i) the Company shall have deposited with the applicable
Trustee all required payments of the principal of (and premium, if any) and
interest on the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the applicable Trustee and (ii)
all Events of Default, other than the non-payment of accelerated principal (or a
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then Outstanding under the applicable Indenture, as the
case may be) have been cured or waived as provided in each Indenture (Section
502 of each Indenture). Each Indenture also provides that the Holders of not
less than a majority in principal amount of the Outstanding Debt Securities of
any series (or of all Debt Securities then Outstanding under the applicable
Indenture, as the case may be) may waive any past default with respect to such
series and its consequences, except a default (x) in the payment of the
principal of (or premium, if any) or interest, if any, on any Debt Security of
such series or
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(y) in respect of a covenant or provision contained in the applicable Indenture
that cannot be modified or amended without the consent of the Holders of each
Outstanding Debt Security affected thereby (Section 513 of each Indenture).
Each Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture unless such default
shall have been cured or waived; provided, however, that such Trustee may
withhold notice to the Holders of any Series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium, if any) or interest, if any, on any Debt Security of such series or
in the payment of any sinking fund installment in respect of any Debt Security
of such series) if the Responsible Officers of such Trustee consider such
withholding to be in the interest of such Holders (Section 601 of each
Indenture).
Each Indenture provides that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
applicable Trustee, for 60 days, to act after it has received a written request
to institute proceedings in respect of an Event of Default from the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it (Section
507 of each Indenture). This provision will not prevent, however, any Holder of
Debt Securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any) and interest, if any, on such Debt Securities
at the respective due dates thereof (Section 508 of each Indenture).
Subject to provisions in each Indenture relating to its duties in case of
default, neither Trustee is under an obligation to exercise any of its rights or
powers under such Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under such Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602 of each Indenture). The Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
(or of all Debt Securities then Outstanding under each Indenture, as the case
may be) shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the applicable Trustee, or of
exercising any trust or power conferred upon such Trustee. However, each Trustee
may refuse to follow any direction which is in conflict with any law or the
applicable Indenture, which may involve such Trustee in personal liability or
which may be unduly prejudicial to the Holders of Debt Securities of such series
not joining therein (Section 512 of each Indenture).
Within 120 days after the close of each fiscal year, the Company must
deliver to each Trustee a certificate, signed by one of several specified
officers, stating whether or not such officer has knowledge of any default under
the applicable Indenture and, if so, specifying each such default and the nature
and status thereof (Section 1010 of each Indenture).
MODIFICATION OF THE INDENTURES
Modification and amendment of either Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture which are affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security, (ii)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the Holder
of any such Debt Security, (iii) change the Place of Payment, or the coin or
currency, for payment of principal of, premium, if any, or interest, if any, on
any such Debt Security, (iv) impair the right to institute suit for the
enforcement of any
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payment on or with respect to any such Debt Security, (v) reduce the
above-stated percentage of Outstanding Debt Securities of any series necessary
to modify or amend the applicable Indenture, to waive compliance with certain
provisions thereof or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the applicable Indenture, or (vi)
modify any of the foregoing provisions or any of the provisions relating to the
waiver of certain past defaults or certain covenants, except to increase the
required percentage to effect such action or to provide that certain other
provisions may not be modified or waived without the consent of the Holder of
such Debt Security (Section 902 of each Indenture).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive compliance
by the Company with certain covenants in such Indenture (Section 1012 of each
Indenture).
Modifications and amendments of either Indenture may be made by the Company
and the respective Trustee thereunder without the consent of any Holder of Debt
Securities for any of the following purposes: (i) to evidence the succession of
another Person to the Company as obligor under such Indenture; (ii) to add to
the covenants of the Company for the benefit of the Holders of all or any series
of Debt Securities or to surrender any right or power conferred upon the Company
in such Indenture; (iii) to add Events of Default for the benefit of the Holders
of all or any series of Debt Securities; (iv) to add or change any provisions of
either Indenture to facilitate the issuance of, or to liberalize certain terms
of, Debt Securities in bearer form, or to permit or facilitate the issuance of
Debt Securities in uncertificated form, provided that such action shall not
adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect; (v) to change or eliminate any provisions of
either Indenture, provided that any such change or elimination shall become
effective only when there are no Debt Securities Outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (vi)
to secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series, including the provisions and procedures, if
applicable, for the conversion of such Debt Securities into Common Shares or
Preferred Shares of the Company; (viii) to provide for the acceptance or
appointment of a successor Trustee or facilitate the administration of the
trusts under either Indenture by more than one Trustee; (ix) to cure any
ambiguity, defect or inconsistency in either Indenture, provided that such
action shall not adversely affect the interests of Holders of Debt Securities of
any series issued under such Indenture; or (x) to supplement any of the
provisions of either Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, provided that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series (Section 901 of each Indenture).
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Subordinated Securities will be subordinated to the extent provided in the
Subordinated Indenture in right of payment to the prior payment in full of all
Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but the
obligation of the Company to make payment of the principal of and interest on
the Subordinated Securities will not otherwise be affected (Section 1608 of the
Subordinated Indenture). No payment of principal or interest may be made on the
Subordinated Securities at any time if a default on Senior Debt exists that
permits the holders of such Senior Debt to accelerate its maturity and the
default is the subject of judicial proceedings or the Company receives notice of
the default (Section 1603 of the Subordinated Indenture). After all Senior Debt
is paid in full and until the Subordinated Securities are paid in full, Holders
will be subrogated to the rights of holders of Senior Debt to the extent that
distributions otherwise payable to Holders have been applied to the payment of
Senior Debt (Section 1607 of the Subordinated Indenture). By reason of such
subordination, in the event of a distribution of assets upon insolvency, certain
general creditors of the Company may recover more, ratably, than holders of the
Subordinated Securities.
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Senior Debt is defined in the Subordinated Indenture as the principal of
and interest on, or substantially similar payments to be made by the Company in
respect of, the following, whether outstanding at the date of execution of the
Subordinated Indenture or thereafter incurred, created or assumed: (i)
indebtedness of the Company for money borrowed or represented by purchase-money
obligations, (ii) indebtedness of the Company evidenced by notes, debentures or
bonds, or other securities issued under the provisions of an indenture, fiscal
agency agreement or other instrument, (iii) obligations of the Company as lessee
under leases of property either made as part of any sale and leaseback
transaction to which the Company is a party or otherwise, (iv) indebtedness of
partnerships and joint ventures which is included in the consolidated financial
statements of the Company, (v) indebtedness, obligations and liabilities of
others in respect of which the Company is liable contingently or otherwise to
pay or advance money or property or as guarantor, endorser or otherwise or which
the Company has agreed to purchase or otherwise acquire, and (vi) any binding
commitment of the Company to fund any real estate investment or to fund any
investment in any entity making such real estate investment, in each case other
than (A) any such indebtedness, obligation or liability referred to in clauses
(i) through (vi) above as to which, in the instrument creating or evidencing the
same pursuant to which the same is outstanding, it is provided that such
indebtedness, obligation or liability is not superior in right of payment to the
Subordinated Securities or ranks pari passu with the Subordinated Securities,
(B) any such indebtedness, obligation or liability which is subordinated to
indebtedness of the Company to substantially the same extent as or to a greater
extent than the Subordinated Securities are subordinated, and (C) the
Subordinated Securities (Section 101 of the Subordinated Indenture). At December
31, 1994, Senior Debt aggregated approximately $239 million.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Company may discharge certain obligations to
Holders of any series of Debt Securities issued thereunder that have not already
been delivered to the applicable Trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
applicable Trustee, in trust, funds in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable in an amount sufficient to pay the entire indebtedness on such Debt
Securities in respect of principal (and premium, if any) and interest to the
date of such deposit (if such Debt Securities have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be (Section 401 of each
Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Company may elect either (i) to defease and
be discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402 of each Indenture) or (ii) to be released from its
obligations with respect to such Debt Securities under Sections 1004 to 1009,
inclusive, and Section 1013 of each Indenture (being the restrictions described
under "Certain Covenants") or, if provided pursuant to Section 301 of each
Indenture, its obligations with respect to any other covenant, and any omission
to comply with such obligations shall not constitute a default or an Event of
Default with respect to such Debt Securities ("covenant defeasance") (Section
1403 of each Indenture), in either case upon the irrevocable deposit by the
Company with the applicable Trustee, in trust, of an amount, in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable at Stated Maturity, or Government Obligations
(as defined below), or both, applicable to such Debt Securities which through
the scheduled payment of principal and interest in accordance with their terms
will provide money in an amount sufficient to
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pay the principal of (and premium, if any) and interest on such Debt Securities,
and any mandatory sinking fund or analogous payments thereon, on the scheduled
due dates therefor (Section 1404 of each Indenture).
Such a trust may only be established if, among other things, the Company
has delivered to the applicable Trustee an Opinion of Counsel (as specified in
each Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable U.S. federal income tax law occurring after the date of the Indenture
(Section 1404 of each Indenture).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specified payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101 of each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(i) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of either Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(ii) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate (Section 1405 of
each Indenture). "Conversion Event" means the cessation of use of (i) a
currency, currency unit or composite currency both by the government of the
country which issued such currency and for the settlement of transactions by a
central bank or other public institutions of or within the international banking
community, (ii) the European Currency Unit ("ECU") both within the European
Monetary System and for the settlement of transactions by public institutions of
or within the European Communities or (iii) any currency unit or composite
currency other than the ECU for the purposes of which it was established. Unless
otherwise provided in the applicable Prospectus Supplement, all payments of
principal of (and premium, if any) and interest, if any, on any Debt Security
that is payable in a Foreign Currency that ceases to be used by its government
of issuance shall be made in U.S. dollars (Section 101 of each Indenture).
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In the event that the Company effects covenant defeasance with respect to
any Debt Securities and such Debt Securities are declared due and payable
because of the occurrence of any Event of Default other than the Event of
Default described in clause (iv) under "Events of Default, Notice and Waiver"
with respect to Sections 1004 through 1009, inclusive, and Section 1013 of each
Indenture (which Sections would no longer be applicable to such Debt Securities)
or described in clause (vii) under "Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
applicable Trustee, will be sufficient to pay amounts due on such Debt
Securities at the time of their Stated Maturity but may not be sufficient to pay
amounts due on such Debt Securities at the time of the acceleration resulting
from such Event of Default. However, the Company would remain liable to make
payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Shares or Preferred Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Shares or Preferred
Shares, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the Holders
or the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect to
a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
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DESCRIPTION OF PREFERRED SHARES
GENERAL
The Company is authorized to issue 10,000,000 preferred shares of
beneficial interest, $.03 par value per share (the "Preferred Shares"), of which
no Preferred Shares were outstanding at February 8, 1995.
The following description of the Preferred Shares sets forth certain
general terms and provisions of the Preferred Shares to which any Prospectus
Supplement may relate. The statements below describing the Preferred Shares are
in all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Restated Declaration of Trust, as amended
(the "Declaration of Trust") and Bylaws and applicable statement of designations
(the "Statement of Designations").
TERMS
Subject to the limitations prescribed by the Declaration of Trust, the
Board of Trust Managers is authorized to fix the number of shares constituting
each series of Preferred Shares and the designations, preferences, conversion,
exchange or other rights, participations, voting powers, options, restrictions,
limitations, special rights or relations, limitations as to dividends,
qualifications, terms and conditions of redemption and such other subjects or
matters as may be fixed by resolution of the Board of Trust Managers. The
Preferred Shares will, when issued, be fully paid and nonassessable by the
Company (except as described under "Shareholder Liability" below) and will have
no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
1. The title and stated value of such Preferred Shares;
2. The number of such Preferred Shares offered, the liquidation preference
per share and the offering price of such Preferred Shares;
3. The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Shares;
4. The date from which dividends on such Preferred Shares shall accumulate,
if applicable;
5. The procedures for any auction and remarketing, if any, for such
Preferred Shares;
6. The provision for a sinking fund, if any, for such Preferred Shares;
7. The provision for redemption, if applicable, of such Preferred Shares;
8. Any listing of such Preferred Shares on any securities exchange;
9. The terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares of the Company, including
the conversion price (or manner of calculation thereof);
10. Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
11. A discussion of federal income tax considerations applicable to such
Preferred Shares;
12. The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
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13. Any limitations on issuance of any series of Preferred Shares ranking
senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
14. Any limitations on direct or beneficial ownership and restriction on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Shares will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Shares or other Capital Shares of the Company, and to all
equity securities ranking junior to such Preferred Shares, (ii) on a parity with
all equity securities issued by the Company the terms of which specifically
provide that such equity securities rank on a parity with the Preferred Shares,
and (iii) junior to all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank senior to the
Preferred Shares. The term "equity securities" does not include convertible debt
securities.
DIVIDENDS
Holders of the Preferred Shares of each series will be entitled to receive,
when, as and if declared by the Board of Trust Managers of the Company, out of
assets of the Company legally available for payment, cash dividends at such
rates and on such dates as will be set forth in the applicable Prospectus
Supplement. Each such dividend shall be payable to Holders of record as they
appear on the share transfer books of the Company on such record dates as shall
be fixed by the Board of Trust Managers of the Company.
Dividends on any series of the Preferred Shares may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Trust Managers of the Company
fails to declare a dividend payable on a dividend payment date on any series of
the Preferred Shares for which dividends are noncumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Shares of any series are outstanding, no dividends will be
declared or paid or set apart for payment on the Preferred Shares of the Company
of any other series ranking, as to dividends, on a parity with or junior to the
Preferred Shares of such series for any period unless (i) if such series of
Preferred Shares has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Shares of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Preferred Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Shares of any series and the shares
of any other series of Preferred Shares ranking on a parity as to dividends with
the Preferred Shares of such series, all dividends declared upon Preferred
Shares of such series and any other series of Preferred Shares ranking on a
parity as to dividends with such Preferred Shares shall be declared pro rata so
that the amount of dividends declared per Preferred Share of such series and
such other series of Preferred Shares shall in all cases bear to each other the
same ratio that accrued dividends per share on the Preferred Shares of such
series (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Shares do
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not have a cumulative dividend) and such other series of Preferred Shares bear
to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on Preferred Shares of
such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period and (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, no dividends (other than in Common Shares or other Capital Shares
ranking junior to the Preferred Shares of such series as to dividends and upon
liquidation) shall be declared or paid or set aside for payment or other
distribution shall be declared or made upon the Common Shares, or any other
Capital Shares of the Company ranking junior to or on a parity with the
Preferred Shares of such series as to dividends or upon liquidation, nor shall
any Common Shares, or any other Capital Shares of the Company ranking junior to
or on a parity with the Preferred Shares of such series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any such shares) by the Company (except by conversion into or
exchange for such Capital Shares of the Company ranking junior to the Preferred
Shares of such series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred
Shares will be subject to mandatory redemption or redemption at the option of
the Company, as a whole or in part, in each case upon the terms, at the times
and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred Shares
that shall be redeemed by the Company in each year commencing after a date to be
specified, at a redemption price per share to be specified, together with an
amount equal to all accrued and unpaid dividends thereon (which shall not, if
such Preferred Shares do not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Shares has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Shares shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period and
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends on the Preferred Shares of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of any series of Preferred Shares shall be redeemed unless all
outstanding Preferred Shares of such series are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Shares of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding Preferred Shares of such series, and, unless (i)
if such series of Preferred Shares has
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a cumulative dividend, full cumulative dividends on all outstanding shares of
any series of Preferred Shares have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period and
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends on the Preferred Shares of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, the
Company shall not purchase or otherwise acquire directly or indirectly any
Preferred Shares of such series (except by conversion into or exchange for
Capital Shares of the Company ranking junior to the Preferred Shares of such
series as to dividends and upon liquidation); provided, however, that the
foregoing shall not prevent the purchase or acquisition of Preferred Shares of
such series to preserve the REIT status of the Company or pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding Preferred
Shares of such series.
If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of Preferred Shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) or by lot in a
manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such Preferred
Shares are to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the date upon which the holder's conversion rights, if any, as to
such shares will terminate. If fewer than all of the Preferred Shares of any
series are to be redeemed, the notice mailed to each such holder thereof shall
also specify the number of Preferred Shares to be redeemed from each such
holder. If notice of redemption of any Preferred Shares has been given and if
the funds necessary for such redemption have been set aside by the Company in
trust for the benefit of the holders of any Preferred Shares so called for
redemption, then from and after the redemption date dividends will cease to
accrue on such Preferred Shares, and all rights of the holders of such shares
will terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Shares, excess shares or any other class or
series of Capital Shares of the Company ranking junior to the Preferred Shares
in the distribution of assets upon any liquidation, dissolution or winding up of
the Company, the holders of each series of Preferred Shares shall be entitled to
receive out of assets of the Company legally available for distribution to
shareholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement), plus
an amount equal to all dividends accrued and unpaid thereon (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Shares do not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Shares will have no right or claim to any of
the remaining assets of the Company. In the event that, upon any such voluntary
or involuntary liquidation, dissolution or winding up, the available assets of
the Company are insufficient to pay the amount of the liquidating distributions
on all outstanding Preferred Shares and the corresponding amounts payable on all
shares of other classes or series of Capital Shares of the Company ranking on a
parity with the Preferred Shares in the distribution of assets, then the holders
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of the Preferred Shares and all other such classes or series of Capital Shares
shall share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of Capital Shares ranking junior to
the Preferred Shares upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Shares will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Whenever dividends on any Preferred Shares shall be in arrears for six
consecutive quarterly periods, the holders of such Preferred Shares (voting
separately as a class with all other series of Preferred Shares upon which like
voting rights have been conferred and are exercisable) will be entitled to vote
for the election of two additional Trust Managers of the Company at the next
annual meeting of shareholders and at each subsequent meeting until (i) if such
series of Preferred Shares has a cumulative dividend, all dividends accumulated
on such series of Preferred Shares for the past dividend periods and the then
current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment or (ii) if such series
of Preferred Shares does not have a cumulative dividend, four consecutive
quarterly dividends shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment. In such case, the entire Board of
Trust Managers of the Company will be increased by two Trust Managers.
Unless provided otherwise for any series of Preferred Shares, so long as
any Preferred Shares remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of two-thirds of the shares of each
series of Preferred Shares outstanding at the time, given in person or by proxy,
either in writing or at a meeting (such series voting separately as a class),
(i) authorize or create, or increase the authorized or issued amount of, any
class or series of Capital Shares ranking prior to such series of Preferred
Shares with respect to the payment of dividends or the distribution of assets
upon liquidation, dissolution or winding up or reclassify any authorized Capital
Shares of the Company into any such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares, or (ii) amend, alter or repeal the provisions of the Company's
Declaration of Trust or the Statement of Designations for such series of
Preferred Shares, whether by merger, consolidation or otherwise (an "Event"), so
as to materially and adversely affect any right, preference, privilege or voting
power of such series of Preferred Shares or the holders thereof; provided,
however, with respect to the occurrence of any of the Events set forth in (ii)
above, so long as the Preferred Shares remain outstanding with the terms thereof
materially unchanged, taking into account that upon the occurrence of an Event,
the Company may not be the surviving entity, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights, preferences,
privileges or voting power of holders of Preferred Shares and provided further
that (A) any increase in the amount of the authorized Preferred Shares or the
creation or issuance of any other series of Preferred Shares, or (B) any
increase in the number of authorized shares of such series or any other series
of Preferred Shares, in each case ranking on a parity with or junior to the
Preferred Shares of such series with respect to the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
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The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Shares shall
have been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Shares
are convertible into Common Shares will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
Common Shares into which the Preferred Shares are convertible, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at the option of the holders of the Preferred
Shares or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of such
Preferred Shares.
SHAREHOLDER LIABILITY
As discussed below under "Description of Common Shares -- Shareholder
Liability," the Declaration of Trust provides that no shareholder, including
holders of Preferred Shares, shall be personally liable for the acts and
obligations of the Company and that the funds and property of the Company shall
be solely liable for such acts or obligations. The Declaration of Trust provides
that, to the extent practicable, each written instrument creating an obligation
of the Company shall contain a provision to that effect. By statute, the State
of Texas provides limited liability for shareholders of a REIT organized under
the Texas Real Estate Investment Trust Act (the "REIT Act"). However, certain
jurisdictions may not recognize the limited liability provided shareholders
under the REIT Act and, therefore, a shareholder may be held personally liable
to the extent that such claims are not satisfied by the Company. Because of the
uncertainty that may exist in the laws of certain states in which the Company
owns property or conducts business, wholly owned subsidiary corporations are
utilized to own properties in such states. The Bylaws of the Company provide for
indemnification of shareholders by the Company for any liabilities incurred in
such capacity. The Company carries public liability insurance that the Trust
Managers consider adequate. Thus, any risk of personal liability to shareholders
is limited to situations in which the Company's assets plus its insurance
coverage would be insufficient to satisfy the claims against the Company and its
shareholders. The Company believes that its operations have been conducted and
will continue to be conducted in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Company.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Shares -- REIT
Qualification," for the Company to qualify as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), not more than 50% in value of its
outstanding Capital Shares may be owned, directly or constructively, by five or
fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain other actions to limit the beneficial
ownership, directly or indirectly, by a single person to not more than 9.8% of
the Company's outstanding equity securities, including any Preferred Shares of
the Company. Therefore, the Statement of Designations for each series of
Preferred Shares will contain certain provisions restricting the ownership and
transfer of the Preferred Shares. The applicable Prospectus Supplement will
specify any additional ownership limitation relating to a series of Preferred
Shares.
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DESCRIPTION OF COMMON SHARES
GENERAL
The Common Shares are issued pursuant to the Declaration of Trust. The
Common Shares, par value $.03 per share, are equal with respect to distribution
and liquidation rights, are not convertible, have no preemptive rights to
subscribe for additional Common Shares, are nonassessable (except as described
under "Shareholder Liability" below) and are transferable in the same manner as
shares of a corporation. Each shareholder is entitled to one vote in person or
by proxy for each Common Share registered in his name and has the right to vote
on the election or removal of Trust Managers, amendments to the Declaration of
Trust, proposals to terminate, reorganize, merge or consolidate the Company or
to sell or dispose of substantially all of the Company's property and with
respect to certain business combinations. The Company will have perpetual
existence unless and until dissolved and terminated. Except with respect to the
foregoing matters, no action taken by the shareholders at any meeting shall in
any way bind the Trust Managers. The Common Shares offered by the Company will
be, when issued, fully paid and nonassessable (except as described under
"Shareholder Liability" below).
Several provisions in the Declaration of Trust may have the effect of
deterring a take-over of the Company. These provisions restrict ownership of the
Company's outstanding equity securities by a single person to not more than 9.8%
of such securities to assist in protecting and preserving the qualification of
the Company as a REIT under the Code and include a "fair price" provision that
would deter a "two-stage" take-over transaction by requiring an 80% vote of
outstanding securities entitled to vote thereon for certain defined "business
combinations" with shareholders owning more than 50% of the equity securities
considered for such purposes if the transaction is neither approved by the Board
of Trust Managers nor meets certain price and procedural conditions.
REIT QUALIFICATION
The Company operates in a manner intended to qualify it for treatment as a
REIT under Sections 856 through 860 of the Code. In general, a REIT that
distributes to its shareholders at least 95% of its taxable income (other than
net capital gain) for a taxable year and that meets certain other conditions
will not be taxed on income (including net capital gain) distributed for that
year. If the Company fails to qualify as a REIT in any taxable year, it will be
taxed as a corporation for that year, and distributions to its shareholders will
not be deductible by the Company in computing its taxable income. Under certain
circumstances, the Company also will be disqualified from being treated as a
REIT for the ensuing four taxable years. Failure to qualify as a REIT could
result in the Company incurring indebtedness and perhaps liquidating investments
in order to pay its taxes.
Among the requirements which must be met in order for the Company to
qualify as a REIT is that no more than 50% in value of the outstanding capital
shares, including in some circumstances capital shares into which outstanding
securities (including the Securities) might be converted, may be owned actually
or constructively by five or fewer individuals or certain other entities at any
time during the last half of the Company's taxable year. To assist the Company
in meeting this requirement, the Declaration of Trust limits persons to
ownership of not more than 9.8% of the outstanding equity securities of the
Company, including Common Shares. Convertible securities (whether in registered
or bearer form) are treated as if such securities had been converted in
calculating the ownership limit. The Declaration of Trust provides that any
attempted transfers of Common Shares that would cause a person to exceed the
limit shall be null and void. However, because the Code imposes broad
attribution rules in determining constructive ownership, no assurances can be
given that the restrictions of the Declaration of Trust will be effective in
maintaining the Company's REIT status. Further, owners of more than 6.5% of the
Common Shares as of January 19, 1988 (currently only Stanford Alexander, who at
December 31, 1994 beneficially owned approximately 7.5% of the outstanding
Common Shares) are exempted from the limit. Without shareholder approval, the
Company may issue an unlimited number of securities, warrants,
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rights or other options to purchase Common Shares and other securities
convertible into Common Shares.
SHAREHOLDER LIABILITY
The Declaration of Trust provides that no shareholder shall be personally
liable for the acts and obligations of the Company and that the funds and
property of the Company shall be solely liable for such acts or obligations. The
Declaration of Trust provides that, to the extent practicable, each written
instrument creating an obligation of the Company shall contain a provision to
that effect. By statute, the State of Texas provides limited liability for
shareholders of a REIT organized under the REIT Act. However, certain
jurisdictions may not recognize the limited liability provided shareholders
under the REIT Act and, therefore, a shareholder may be held personally liable
to the extent that such claims are not satisfied by the Company. Because of the
uncertainty that may exist in the laws of certain states in which the Company
owns property or conducts business, wholly-owned subsidiary corporations are
utilized to own properties in such states. The Bylaws of the Company provide for
indemnification of shareholders by the Company for any liabilities incurred in
such capacity. The Company carries public liability insurance that the Trust
Managers consider adequate. Thus, any risk of personal liability to shareholders
is limited to situations in which the Company's assets plus its insurance
coverage would be insufficient to satisfy the claims against the Company and its
shareholders. The Company believes that its operations have been conducted and
will continue to be conducted in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Company.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Common Shares is Society National
Bank, Cleveland, Ohio. The Common Shares are listed on the New York Stock
Exchange (Symbol: WRI).
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters, and also may
sell Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the applicable
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Shares which are listed on the New York Stock Exchange.
Any Common Shares sold pursuant to a Prospectus Supplement will be listed on
such exchange, subject to official notice of issuance. The Company may elect to
list any series of Debt Securities or Preferred Shares on an exchange, but is
not obligated to do so. It is possible that one or more underwriters may make a
market in a series of Securities, but will not be
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obligated to do so and may discontinue any market making at any time without
notice. Therefore, no assurance can be given as to the liquidity of the trading
market for the Securities.
Under agreements the Company may enter into, underwriters, dealers and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company in the ordinary course of
business.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. The obligations of any purchaser under any such contract will be
subject to the condition that the purchase of the Securities shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
LEGAL OPINIONS
The legality of the Securities offered hereby as well as certain federal
income tax matters will be passed upon for the Company by Andrews & Kurth
L.L.P., 4200 Texas Commerce Tower, Houston, Texas 77002. Brown & Wood, One World
Trade Center, New York, New York 10048-0557 will act as counsel to any
underwriters, dealers or agents.
EXPERTS
The consolidated financial statements and related financial statement
schedules incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which is
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN ANY PRICING
SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, OR THE PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE NOTES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT.
ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH NOTES IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
<S> <C>
Description of Notes..................... S-2
Certain Investment Considerations
Relating to Indexed Notes.............. S-20
Certain Investment Considerations
Relating to Foreign Currency Notes..... S-22
United States Taxation................... S-25
Supplemental Plan of Distribution........ S-35
Validity of Notes........................ S-36
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Documents by
Reference.............................. 2
The Company.............................. 3
Use of Proceeds.......................... 3
Certain Ratios........................... 4
Description of Debt Securities........... 4
Description of Preferred Shares.......... 17
Description of Common Shares............. 23
Plan of Distribution..................... 24
Legal Opinions........................... 25
Experts.................................. 25
</TABLE>
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$200,000,000
WEINGARTEN REALTY
INVESTORS
MEDIUM-TERM NOTES,
SERIES A
DUE 9 MONTHS OR MORE
FROM DATE OF ISSUE
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[WEINGARTEN LOGO]
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GOLDMAN, SACHS & CO.
CHEMICAL SECURITIES INC.
MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
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