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PROSPECTUS SUPPLEMENT [LOGO] RULE 424(b)(2)
Registration No. 33-69746
(To Prospectus dated March 4, 1994)
$200,000,000
ALLERGAN, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------------
Allergan, Inc. (the "Company") may offer from time to time $200,000,000
aggregate initial offering price, or the equivalent thereof in one or more
foreign or composite currencies, of its Medium-Term Notes Due Nine Months or
More from Date of Issue (the "Notes"). Such aggregate initial offering price is
subject to reduction as a result of the sale by the Company of other Debt
Securities described in the accompanying Prospectus. Each Note will mature on
any day nine months or more from the date of issue, as specified in the
applicable pricing supplement hereto (each, a "Pricing Supplement"), and may be
subject to redemption at the option of the Company or repayment at the option of
the Holder thereof, in each case, in whole or in part, prior to its Stated
Maturity Date, as set forth therein and specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating rates
(the "Floating Rate Notes"). The applicable Pricing Supplement will specify
whether a Floating Rate Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note and whether the rate of
interest thereon is determined by reference to one or more of the CD Rate, the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate basis or formula, as adjusted by any Spread
and/or Spread Multiplier. Interest on each Floating Rate Note will accrue from
its date of issue and will be payable in arrears monthly, quarterly,
semiannually or annually, as specified in the applicable Pricing Supplement, and
on the Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, the rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually or annually, as set forth therein and
specified in the applicable Pricing Supplement. Interest on each Fixed Rate Note
will accrue from its date of issue and, unless otherwise specified in the
applicable Pricing Supplement, will be payable semiannually in arrears on
December 15 and June 15 of each year and on the Maturity Date. The Notes may
also be issued with original issue discount, and such Notes may or may not pay
any interest. See "Description of Notes."
The interest rate, or the formula for the determination of any such interest
rate, applicable to each Note and the other variable terms thereof as described
herein will be established by the Company on the date of issue of such Note and
will be set forth therein and specified in the applicable Pricing Supplement.
Interest rates, interest rate formulae and such other variable terms are subject
to change by the Company, but no change will affect any Note already issued or
as to which an offer to purchase has been accepted by the Company.
Each Note, other than a Foreign Currency Note, will be issued in fully
registered book-entry form (a "Book-Entry Note") or in certificated form (a
"Certificated Note"), as set forth in the applicable Pricing Supplement, in
denominations of $1,000 and integral multiples thereof, unless otherwise
specified in the applicable Pricing Supplement. Each Book-Entry Note will be
represented by one or more fully registered global securities (the "Global
Securities") deposited with or on behalf of The Depository Trust Company (or
such other depositary as is identified in the applicable Pricing Supplement)
(the "Depositary") and registered in the name of the Depositary or the
Depositary's nominee. Interests in the Global Securities will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary (with respect to its participants) and the Depositary's participants
(with respect to beneficial owners).
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURI-TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY SUPPLEMENT
HERETO. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<S> <C> <C> <C>
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PRICE TO AGENT'S DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(1)(2) COMPANY(1)(3)
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Per Note................... 100% .125%-.750% 99.875%-99.250%
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Total(4)................... $200,000,000 $250,000-$1,500,000 $199,750,000-$198,500,000
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</TABLE>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated or
J.P. Morgan Securities Inc. (each, an "Agent" and collectively, the
"Agents") will purchase the Notes, as principal, from the Company, for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the
applicable Agent, or, if so specified in the applicable Pricing Supplement,
for resale at a fixed public offering price. 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 of the principal amount equal to the
commission applicable to an agency sale (as described below) of a Note of
identical maturity. If agreed to by the Company and the applicable Agent,
such Agent may utilize its reasonable efforts on an agency basis to solicit
offers to purchase the Notes at 100% of the principal amount thereof, unless
otherwise specified in the applicable Pricing Supplement. The Company will
pay a commission to each such Agent, ranging from .125% to .750% of the
principal amount of a Note, depending upon its stated maturity, sold through
such Agent. Commissions with respect to Notes with stated maturities in
excess of 30 years that are sold through an Agent will be negotiated between
the Company and such Agent at the time of such sale. See "Plan of
Distribution."
(2) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company estimated at $600,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
------------------------
The Notes are being offered on a continuous basis by the Company through the
Agents. The Company has reserved the right to sell the Notes to investors
directly on its own behalf. 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 reserves the right to
cancel or modify the offer made hereby without notice. The Company or an Agent,
if it solicits the offer on an agency basis, may reject any offer to purchase
Notes in whole or in part. See "Plan of Distribution."
------------------------
MERRILL LYNCH & CO. J.P. MORGAN SECURITIES INC.
------------------------
The date of this Prospectus Supplement is March 4, 1994.
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IN CONNECTION WITH THE OFFERING OF NOTES, THE AGENTS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
RECENT DEVELOPMENTS
On December 22, 1993, the Company entered into a five-year credit facility
and a one-year credit facility for $150 million and $50 million, respectively.
As of the date hereof, the Company had no borrowings against these new
facilities. These facilities replaced the Company's previous $200 million credit
facility. Borrowings under the facilities are on a revolving basis and are
subject to certain financial and operating covenants, including a requirement
that the Company maintain certain financial ratios and other customary covenants
for credit facilities of similar kind. As of September 30, 1993, the Company had
commercial paper borrowings of $80 million including $50 million classified as
long-term debt.
DESCRIPTION OF NOTES
The Notes will be issued as a series of senior debt securities under an
Indenture, dated as of March 1, 1994 (the "Indenture"), between the Company and
BankAmerica National Trust Company, as trustee (the "Trustee"). The following
summary of certain provisions of the Notes and of the Indenture does not purport
to be complete and is qualified in its entirety by reference to the Indenture, a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the accompanying Prospectus constitute a
part. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture or the Notes, as the case may be. The term "Debt
Securities," as used in this Prospectus Supplement, refers to all debt
securities issued and issuable from time to time under the Indenture and
includes the Notes. The following description of the Notes will apply to each
Note offered hereby unless otherwise specified in the applicable Pricing
Supplement.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be senior unsecured general obligations of the Company and will
rank pari passu with all other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding. The Indenture does not limit the
aggregate principal amount of Debt Securities which may be issued thereunder and
Debt Securities may be issued thereunder from time to time in one or more series
up to the aggregate principal amount from time to time authorized by the Company
for each series. The Company may, from time to time, without the consent of the
Holders of the Notes, provide for the issuance of Notes or other Debt Securities
under the Indenture in addition to the $200,000,000 aggregate initial offering
price of Notes offered hereby.
The Notes are currently limited to $200,000,000 aggregate initial offering
price, or the equivalent thereof in one or more foreign or composite currencies.
The Notes will be offered on a continuous basis and will mature on any day nine
months or more from their dates of issue, as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
interest-bearing Notes will either be Fixed Rate Notes or Floating Rate Notes as
specified in the applicable Pricing Supplement. The Notes may also be issued
with original issue discount ("Original Issue Discount Notes") and such Notes
may or may not bear any interest.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in United States dollars and payments of principal of, and
premium, if any, and interest on, the Notes will be made in United States
dollars. The Notes may also be denominated in currencies or composite currencies
other than United States dollars ("Foreign Currency Notes") (the currency or
composite currency in which a Note is denominated, whether United States dollars
or otherwise, is herein referred to as the "Specified
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Currency"). See "Special Provisions and Risks Relating to Foreign Currency
Notes -- Payments of Principal and Premium, if any, and Interest."
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency in
which such Notes are denominated. At the present time, there are limited
facilities in the United States for the conversion of United States dollars into
foreign currencies or composite currencies and vice versa, and commercial banks
do not generally offer non-United States dollar checking or savings account
facilities in the United States. If requested on or prior to the fifth Business
Day (as defined below) preceding the date of delivery of the Foreign Currency
Notes, or by such other day as determined by the applicable Agent, such Agent is
prepared to arrange for the conversion of United States dollars into the
Specified Currency to enable the purchasers to pay for such Notes. Each such
conversion will be made by the applicable Agent on such terms and subject to
such conditions, limitations and charges as such Agent may from time to time
establish in accordance with its regular foreign exchange practices. All costs
of exchange will be borne by the purchasers of the Foreign Currency Notes. See
"Special Provisions and Risks Relating to Foreign Currency Notes."
Interest rates, interest rate formulae and other variable terms of the
Notes are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has been
accepted by the Company.
Each Note, other than a Foreign Currency Note, will be issued in fully
registered form as a Book-Entry Note or a Certificated Note in denominations of
$1,000 and integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement. The authorized denominations of Foreign Currency
Notes will be specified in the applicable Pricing Supplement.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency of the Company
maintained by the Company for such purpose in the Borough of Manhattan, The City
of New York. No service charge will be made by the Company or the Trustee for
any such registration of transfer or exchange of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith (other than exchanges
pursuant to the Indenture not involving any transfer).
Payments of principal of, and premium, if any, and interest on, Book-Entry
Notes will be made by the Company through the Trustee to the Depositary. See
"Book-Entry Notes." In the case of Certificated Notes, payment of principal and
premium, if any, due on the Stated Maturity Date or any prior date on which the
principal, or an installment of principal, of a Note becomes due and payable,
whether by the declaration of acceleration, call for redemption at the option of
the Company, repayment at the option of the Holder or otherwise (the Stated
Maturity Date or such prior date, as the case may be, is herein referred to as
the "Maturity Date") of each Certificated Note will be made in immediately
available funds upon presentation thereof at the office or agency of the Company
maintained by the Company for such purpose in the Borough of Manhattan, The City
of New York (or, in the case of any repayment on an Optional Repayment Date,
upon presentation of such Certificated Note in accordance with the provisions
described below). Payment of interest due on the Maturity Date of each
Certificated Note will be made to the person to whom payment of the principal
and premium, if any, shall be made. Payment of interest due on each Certificated
Note on any Interest Payment Date (as defined below) (other than the Maturity
Date) will be made at the office or agency of the Company referred to above
maintained for such purpose or, at the option of the Company, may be made by
check mailed to the address of the Holder entitled thereto as such address shall
appear in the Security Register of the Company. Notwithstanding the foregoing, a
Holder of $10,000,000 (or the equivalent thereof with respect to the Specified
Currency applicable to a Foreign Currency Note) or more in aggregate principal
amount of Notes (whether having identical or different terms and provisions)
will be entitled to receive interest payments on any Interest Payment Date
(other than the Maturity Date) by wire transfer of immediately available funds
if appropriate wire transfer instructions have been received in writing by the
Trustee not less than 15 days prior to such Interest Payment Date. Such wire
instructions, upon receipt by the Trustee, shall remain in effect until revoked
by such Holder. For special payment terms applicable to Foreign
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Currency Notes, see "Special Provisions and Risks Relating to Foreign Currency
Notes -- Payment of Principal and Premium, if any, and Interest".
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law or executive order to close in The City of New
York; provided, however, that, with respect to Foreign Currency Notes the
payment of which is to be made in a Specified Currency other than United States
dollars, such day is also not a day on which banking institutions are authorized
or required by law or executive order to close in the principal financial center
of the country of such Specified Currency (or, in the case of the European
Currency Unit ("ECU"), Brussels); provided, further, that, with respect to Notes
as to which LIBOR is an applicable Interest Rate Basis, such day is also a
London Business Day (as defined below). "London Business Day" means any day (i)
if the Index Currency (as defined below) is other than ECU, on which dealings in
such Index Currency are transacted in the London interbank market or (ii) if the
Index Currency is ECU, that is not designated as an ECU Non-Settlement Day by
the ECU Banking Association in Paris or otherwise generally regarded in the ECU
interbank market as a day on which payments on ECUs shall not be made.
TRANSACTION AMOUNTS
Interest rates offered by the Company with respect to the Notes may differ
depending upon the aggregate principal amount of Notes purchased in any
transaction. The Company expects generally to distinguish, with respect to such
offered rates, between purchases which are for less than, and purchases which
are equal to or greater than, $100,000 (or the equivalent thereof with respect
to the Specified Currency applicable to a Foreign Currency Note). Such different
rates may be offered concurrently at any time. The Company may also concurrently
offer Notes having different variable terms (as are described herein or in the
applicable Pricing Supplement) to different investors, and such different offers
may depend upon whether an offered purchase is for an aggregate principal amount
of Notes at least equal to or for an amount less than $100,000 (or the
equivalent thereof with respect to the Specified Currency applicable to a
Foreign Currency Note).
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 the Stated Maturity Date only if an Initial
Redemption 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 Initial Redemption Date in whole or from
time to time in part in increments of $1,000 (or the minimum denomination
specified in such Pricing Supplement) at the applicable Redemption Price (as
defined below) on notice given not more than 60 nor less than 30 days prior to
the date of redemption and in accordance with the provisions of the Indenture.
"Redemption Price," with respect to a Note, means an amount equal to the sum of
(i) 100% of the unpaid principal amount thereof or the portion thereof to be
redeemed (or, if such Note is an Original Issue Discount Note, the Amortized
Face Amount (as defined below) determined as of the date of redemption as
provided below) or (ii) the Initial Redemption Percentage specified in such
Pricing Supplement (as adjusted by the Annual Redemption Percentage Reduction,
if applicable) multiplied by the unpaid principal amount or the portion to be
redeemed (or, if such Note is an Original Issue Discount Note, the Issue Price
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 Original Issue Discount 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)). Information with respect
to the Redemption Price for Indexed Notes (as defined below) shall be set forth
in the applicable Pricing Supplement. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial Redemption
Date by an amount equal to the applicable Annual Redemption Percentage
Reduction, if any, until it equals zero. "Amortized Face Amount," with respect
to an Original Issue Discount Note, means an amount equal to the sum of (i) the
Issue Price plus (ii) the aggregate of the
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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 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 the
Stated Maturity Date. 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 Original Issue Discount Note, the Amortized Face
Amount determined as of the date of repayment) plus (ii) accrued interest to the
date of repayment (or, if such Note is an Original Issue Discount 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 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
applicable participant that has an account with the Depositary, on behalf of the
beneficial owners of the Global Security or Securities representing such
Book-Entry Notes, by delivering a written notice substantially similar to the
above mentioned form to the Trustee 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. Notices of
elections from participants on behalf of beneficial owners of the Global
Security or Securities representing such Book-Entry Notes to exercise their
option to have such Book-Entry Notes repaid must be received by the Trustee by
5:00 P.M., New York City time, on the last day for giving such notice. In order
to ensure that a notice is received by the Trustee on a particular day, the
beneficial owner of the Global Security or Securities representing such Book-
Entry Notes must so direct the applicable participant before such participant's
deadline for accepting instructions for that day. Different firms may have
different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the Global Security or Securities representing
Book-Entry Notes should consult the participants through which they own their
interest therein for the respective deadlines for such participants. All notices
shall be executed by a duly authorized officer of such participant (with
signature guaranteed) and shall be irrevocable. In addition, beneficial owners
of the Global Security or Securities representing Book-Entry Notes shall effect
delivery at the time such notices of election are given to the Depositary by
causing the 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 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, and any other securities
laws or regulations in connection with any such repayment.
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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.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from its date of issue at the rate per annum, in the case of
a Fixed Rate Note, or pursuant to the interest rate formula, in the case of a
Floating Rate Note, in each case as specified in the applicable Pricing
Supplement, until the principal thereof is paid or duly made available for
payment. Interest will be payable in arrears on each Interest Payment Date
specified in the applicable Pricing Supplement on which an installment of
interest is due and payable and on the Maturity Date. Unless otherwise specified
in the applicable Pricing Supplement, the first payment of interest on any Note
originally issued between a Record Date (as defined below) and the related
Interest Payment Date or on an Interest Payment Date will be made on the
Interest Payment Date immediately following the next succeeding Record Date to
the Holder on such next succeeding Record Date. Unless otherwise specified in
the applicable Pricing Supplement, a "Record Date" shall be the fifteenth
calendar day (whether or not a Business Day) immediately preceding the related
Interest Payment Date.
Fixed Rate Notes
Interest payments on Fixed Rate Notes will equal the amount of interest
accrued from and including the immediately preceding Interest Payment Date in
respect of which interest has been paid (or from and including the date of
issue, if no interest has been paid with respect to such Fixed Rate Note) to but
excluding the related Interest Payment Date or the Maturity Date, as the case
may be. Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Payment Dates" for Fixed Rate Notes will be December 15 and June 15 of
each year and the Maturity Date. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after such Interest Payment Date or the
Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note," Fixed Rate Commencement Date and Fixed Interest Rate, as applicable,
Interest Rate Basis or Bases, Initial Interest Rate, Interest Reset Period and
Dates, Record Dates, Interest Payment Period and Dates, Index Maturity, maximum
interest rate and minimum interest rate, if any, and Spread and/or Spread
Multiplier, if any, and if one or more of the applicable Interest Rate Bases is
LIBOR, the Index Currency and the Designated LIBOR Page, as described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, bear interest at the rate determined by reference to
the applicable Interest Rate Basis or Bases (i) plus or minus the
applicable Spread, if any, and/or (ii) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date, the rate
at which interest on such
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Regular Floating Rate Note shall be payable shall be reset as of each
Interest Reset Date; provided, however, that (i) the interest rate in
effect for the period from the date of issue to the first Interest Reset
Date will be the Initial Interest Rate, and (ii) unless otherwise specified
in the applicable Pricing Supplement, the interest rate in effect for the
10 calendar days immediately prior to the Maturity Date shall be that in
effect on the tenth calendar day preceding the Maturity Date.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the applicable
Pricing Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (i)
plus or minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (i) the interest rate in effect for the period from
the date of issue to the first Interest Reset Date will be the Initial
Interest Rate, (ii) unless otherwise specified in the applicable Pricing
Supplement, the interest rate in effect for the 10 calendar days
immediately prior to the Fixed Rate Commencement Date shall be that in
effect on the tenth calendar day preceding the Fixed Rate Commencement
Date, and (iii) the interest rate in effect commencing on the Fixed Rate
Commencement Date to the Maturity Date shall be the Fixed Interest Rate, if
such rate is specified in the applicable Pricing Supplement or, if no such
Fixed Interest Rate is so specified, the interest rate in effect thereon on
the day immediately preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the applicable Pricing Supplement minus the rate
determined by reference to the applicable Interest Rate Basis or Bases (i)
plus or minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Pricing Supplement, the interest rate
thereon will not be less than zero. Commencing on the first Interest Reset
Date, the rate at which interest on such Inverse Floating Rate Note is
payable shall be reset as of each Interest Reset Date; provided, however,
that (i) the interest rate in effect for the period from the date of issue
to the first Interest Reset Date will be the Initial Interest Rate, and
(ii) unless otherwise specified in the applicable Pricing Supplement, the
interest rate in effect for the 10 calendar days immediately prior to the
Maturity Date shall be that in effect on the tenth calendar day preceding
the Maturity Date.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as defined below) immediately preceding such
Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the Commercial Paper Rate, (iii) the
Eleventh District Cost of Funds Rate, (iv) the Federal Funds Rate, (v) LIBOR,
(vi) the
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Prime Rate, (vii) the Treasury Rate, or (viii) such other Interest Rate Basis or
interest rate formula as may be set forth in the applicable Pricing Supplement;
provided, however, that with respect to a Floating Rate/Fixed Rate Note, the
interest rate commencing on the Fixed Rate Commencement Date to the Maturity
Date shall be the Fixed Interest Rate, if such rate is specified in the
applicable Pricing Supplement or, if no such Fixed Interest Rate is so
specified, the interest rate in effect thereon on the day immediately preceding
the Fixed Rate Commencement Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year, (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided however, that,
with respect to Floating Rate/Fixed Rate Notes, the fixed rate of interest in
effect for the period from the Fixed Rate Commencement Date to the Maturity Date
shall be the Fixed Interest Rate or, if no such Fixed Interest Rate is
specified, the interest rate in effect on the day immediately preceding the
Fixed Rate Commencement Date, as specified in the applicable Pricing Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Reset Date will be postponed to the
next succeeding day that is a Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, if
such Business Day falls in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the applicable Interest Determination Date on or prior to
the Calculation Date (as defined below). The "Interest Determination Date" with
respect to the CD Rate, the Commercial Paper Rate, the Federal Funds Rate and
the Prime Rate will be the second Business Day immediately preceding the
applicable Interest Reset Date; the "Interest Determination Date" with respect
to the Eleventh District Cost of Funds Rate 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 Index (as defined below); and the "Interest Determination Date" with respect
to LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date. With respect to the Treasury Rate, the "Interest
Determination Date" will be the day in the week in which the applicable Interest
Reset Date falls on which day Treasury Bills (as defined below) are normally
auctioned (Treasury Bills are normally sold at an auction held on Monday of each
week, unless that day is a legal holiday, in which case the auction is normally
held on the following Tuesday, except that such auction may be held on the
preceding Friday); provided, however, that if an auction is held on the Friday
of the week preceding the applicable Interest Reset Date, the Interest
Determination Date will be such preceding Friday; and provided, further, that if
an auction falls on the applicable Interest Reset Date, then the Interest Reset
Date will instead be the first Business Day following such auction. The
"Interest Determination Date" pertaining to a Floating Rate Note the interest
rate of which is determined by reference to two or more Interest Rate Bases will
be the most recent Business Day which is at least two Business Days prior to the
applicable Interest Reset Date for such Floating Rate Note on which each
Interest Rate Basis is determinable. Each Interest Rate Basis will be determined
on such date, and the applicable interest rate will take effect on the
applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period and (ii) a minimum numerical
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limitation, or floor, on the rate at which interest may accrue during any
interest period. In addition to any maximum interest rate that may be applicable
to any Floating Rate Note pursuant to the above provisions, the interest rate on
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.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year, (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, the third Wednesday of the month of each
year specified in the applicable Pricing Supplement (each, an "Interest Payment
Date") and, in each case, on the Maturity Date. If any Interest Payment Date for
any Floating Rate Note (other than the Maturity Date) would otherwise be a day
that is not a Business Day, such Interest Payment Date will be postponed to the
next succeeding day that is a Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, if
such Business Day falls in the next succeeding calendar month, such Interest
Payment Date will be the immediately preceding Business Day. If the Maturity
Date of a Floating Rate Note falls on a day that is not a Business Day, the
required payment of principal, premium, if any, and/or interest will be made on
the next succeeding Business Day as if made on the date such payment was due,
and no interest shall accrue on such payment for the period from and after the
Maturity Date to the date of such payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent.
Interest payments on Floating Rate Notes will equal the amount of interest
accrued from and including the immediately preceding Interest Payment Date in
respect of which interest has been paid (or from and including the date of
issue, if no interest has been paid with respect to such Floating Rate Note) to
but excluding the related Interest Payment Date or the Maturity Date, as the
case may be; provided, however, that in the case of Floating Rate Notes on which
the interest rate is reset daily or weekly, interest will, unless otherwise
specified in the applicable Pricing Supplement, accrue from but excluding the
last Record Date to which interest has been paid (or from and including the date
of issue, if no interest has been paid with respect to such Floating Rate Note)
to and including the Record Date immediately preceding the applicable Interest
Payment Date, except that on the Maturity Date, interest will accrue to but
excluding the Maturity Date.
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, in the case of Notes for which the Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Notes for which the Interest Rate Basis is the
Treasury Rate. Unless otherwise specified in the applicable Pricing Supplement,
the interest factor for Notes for which the interest rate is calculated with
reference to two or more Interest Rate Bases will be calculated in each period
in the same manner as if only one of the applicable Interest Rate Bases applied
as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
BankAmerica National Trust Company will be the "Calculation Agent." Upon request
of the Holder of any Floating Rate Note, the Calculation Agent will disclose the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next succeeding
Interest Reset Date with respect to such Floating Rate Note. Unless otherwise
specified in the applicable Pricing Supplement, the "Calculation Date,"
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if applicable, pertaining to any Interest Determination Date will be the earlier
of (i) the tenth calendar day after such Interest Determination Date, or, if
such day is not a Business Day, the next succeeding Business Day or (ii) the
Business Day immediately preceding the applicable Interest Payment Date or the
Maturity Date, as the case may be.
CD Rate. CD Rate Notes will bear interest at the rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates" or any successor publication ("H.15(519)") under the
heading "CDs (Secondary Market)," or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers in negotiable United States dollar certificates
of deposit in The City of New York (which may include the Agents) selected by
the Calculation Agent for negotiable certificates of deposit of major United
States money market banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement in an amount that is representative for a single transaction
in that market at that time; provided, however, that if the dealers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate determined as of such CD Rate Interest Determination Date will be the CD
Rate in effect on such CD Rate Interest Determination Date.
CD Rate Notes, like other Notes, are not deposit obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at
the rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as
defined below) on such date of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper." In the event that such rate is
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the Commercial Paper Rate will be the Money Market Yield on such Commercial
Paper Rate Interest Determination Date of the rate for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement as published
in Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New York City
time, on the related Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate on such
Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The
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City of New York (which may include the Agents) selected by the Calculation
Agent for commercial paper having the Index Maturity designated in the
applicable Pricing Supplement placed for an industrial issuer whose bond rating
is "AA", or the equivalent, from a nationally recognized statistical rating
organization; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate determined as of such Commercial Paper Rate Interest Determination
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
D x 360
Money Market Yield = --------- X 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the Eleventh
District Cost of Funds Rate and the Spread and/or Spread Multiplier, if any)
specified in such Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate 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 any
related Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate for 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 "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding the
date of such announcement. If the FHLB of San Francisco fails to announce such
rate for the calendar month immediately preceding such Eleventh District Cost of
Funds Rate Interest Determination Date, then 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. For this
purpose, Telerate Page 7058 mean page 7058 on the Dow Jones Telerate Service for
the purpose of displaying the Eleventh District Cost of Funds Rate or such other
page as may replace such designated page on that service for the purpose of
displaying the Eleventh District Cost of Funds Rate.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the
rates (calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date, 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 the related Calculation Date such rate is not
published in either H.15(519) or Composite Quotations,
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then the Federal Funds Rate on such Federal Funds Rate Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic mean
of the rates for the last transaction in overnight United States dollar federal
funds arranged by three leading brokers of federal funds transactions in The
City of New York (which may include the Agents) selected by the Calculation
Agent prior to 9:00 A.M., New York City time, on such Federal Funds Rate
Interest Determination Date; provided, however that if the brokers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the
Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
LIBOR. 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.
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 Business 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 Business 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 specified in clause (i)
above, the Calculation Agent will request the principal London offices 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 Business 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 provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
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 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
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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 United States 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 "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 generally be the capital city of the
country of the specified Index Currency, except that with respect to United
States dollars, Dutch Guilders, Italian Lire, Swiss Francs and ECUs, the
Principal Financial Center shall be The City of New York, Amsterdam, Milan,
Zurich and Luxembourg, respectively.
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date"),
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime
rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates but more than one such rate
appear on the Reuters Screen NYMF Page for such Prime Rate Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the 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 by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Prime Rate will be determined by the Calculation
Agent on the basis of the rates furnished in The City of New York by three
substitute banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, having total equity capital of at
least $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 selected as
aforesaid 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.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate is published in
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H.15(519) under the heading "Treasury Bills-auction average (investment)" or, if
not published by 3:00 P.M., New York City time, on the related 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) as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury Bills having the Index Maturity designated in
the applicable Pricing Supplement are not reported as provided by 3:00 P.M., New
York City time, on such Calculation Date, or if no such auction is held in a
particular week, then the Treasury Rate will be calculated by the Calculation
Agent and will 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 leading primary United States government securities dealers
(which may include the Agents) selected by the Calculation Agent, for the issue
of Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such Treasury Rate
Interest Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the Maturity Date or any other variable term
relating thereto, may be modified as specified under "Other Provisions" on the
face thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing Note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement. A table
setting forth repayment information in respect of each Amortizing Note will be
included in the applicable Pricing Supplement and set forth in each such Note.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Original Issue Discount Notes from time to time. Such
Original Issue Discount Notes may currently pay no interest or interest at a
rate which at the time of issuance is below market rates. The amount payable in
the event of the acceleration of maturity of an Original Issue Discount Note
shall be the Amortized Face Amount thereof plus accrued but unpaid qualified
stated interest. See "United States Taxation." Certain additional considerations
relating to the offering of any Original Issue Discount Notes may be set forth
in the applicable Pricing Supplement.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the ECU) relative
to an indexed currency or such other price or exchange rate ("Indexed Notes"),
as set forth in the applicable Pricing Supplement. In certain cases, Holders of
Indexed Notes may receive a principal amount on the Maturity Date that is
greater than or less than the face amount of the Notes depending upon the
relative value on the Maturity Date of the specified indexed item. Information
as to the method for determining the amount of principal, premium and/or
interest payable in respect of Indexed Notes, certain historical information
with respect to the specified indexed item and tax considerations associated
with investment in such Indexed Notes will be set forth in the applicable
Pricing Supplement.
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An investment in Notes indexed, as to principal, premium and/or interest,
to one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant risks that
are not associated with similar investments in a conventional fixed-rate debt
security. If the interest rate of an Indexed Note is so indexed, it may result
in an interest rate that is less than that payable on a conventional fixed-rate
debt security issued at the same time, including the possibility that no
interest will be paid, and, if the principal of and/or premium on an Indexed
Note is so indexed, the amount of principal payable in respect thereof may be
less than the original purchase price of such Indexed Note if allowed pursuant
to the terms thereof, including the possibility that no such amount will be
paid. The secondary market for Indexed Notes will be affected by a number of
factors, independent of the creditworthiness of the Company and the value of the
applicable currency, commodity or interest rate index, including the volatility
of the applicable currency, commodity or interest rate index, the time remaining
to the maturity of such Notes, the amount outstanding of such Notes and market
interest rates. The value of the applicable currency, commodity or interest rate
index depends on a number of interrelated factors, including economic, financial
and political events, over which the Company has no control. Additionally, if
the formula used to determine the amount of principal, premium and/or interest
payable with respect to Indexed Notes contains a multiple or leverage factor,
the effect of any change in the applicable currency, commodity or interest rate
index will be increased. The historical experience of the relevant currencies,
commodities or interest rate indices should not be taken as an indication of
future performance of such currencies, commodities or interest rate indices
during the term of any Indexed Note. Accordingly, prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in Indexed Notes and the suitability of Indexed Notes in light of
their particular circumstances.
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 $150,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, redemption provisions (if any),
repayment provisions (if any), Stated Maturity Date 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 any such nominee to a successor of the
Depositary of such successor. Unless otherwise specified in the applicable
Pricing Supplement, all Book-Entry Notes will be denominated in United States
dollars.
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 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 Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferrable. 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
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 is 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
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or unable to continue as Depositary for the Global Securities, (ii) the
Depositary ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended (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 Indenture with respect to the Notes. Upon any such
exchange, the 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).
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 $150,000,000, one Global
Security will be issued with respect to each $150,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
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 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 Participant"). 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
Certificated Notes 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 the Depositary are registered in
the name of the Depositary's nominee, Cede & Co. The deposit of Global
Securities with 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.
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Conveyance of notices and other communications by the Depositary to
Direct Participants to Indirect Participants, and by Direct Participants
and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, 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 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 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 Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason
to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such Participant and not of the Depositary,
the Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and interest to the Depositary is the responsibility of
the Company or the 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 to elect to have its Book-Entry
Notes repaid by the Company, through its Participant, to the 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 Trustee. The requirement 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
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
Certificated Notes 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, Certificated Notes 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.
SPECIAL PROVISIONS AND RISKS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than United States 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 United States residents
and, with respect to Foreign Currency
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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 UNITED STATES 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 in
United States dollars. Such risks include, without limitation, the possibility
of significant changes in rate of exchange between the United States dollar and
the applicable Specified Currency and the possibility of the imposition or
modification of foreign exchange controls by either the United States or foreign
governments. Such risks generally depend on events over which the Company has no
control, such as economic and political events and the supply and demand for the
relevant currencies. In recent years, rates of exchange between the United
States 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 United States dollar would result in a
decrease in the United States dollar-equivalent yield of such Note, in the
United States dollar-equivalent value of the principal and premium, if any,
payable on the Maturity Date of such Note, and, generally, in the United States
dollar-equivalent market value of such Note.
Governments 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 or 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 United States
dollars on the basis of the Market Exchange Rate (as defined below). See
"Payment Currency."
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 United States dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion into
United States 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 United States 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 United States
dollars into the applicable Specified Currency.
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PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST
The Company is obligated to make payments of principal of and premium, if
any, and interest on Foreign Currency Notes in the applicable Specified Currency
(or, if such Specified Currency is not at the time of such payment legal tender
for the payment of public and private debts, in such other coin or currency of
the country which issued such Specified Currency as at the time of such payment
is legal tender for the payment of such debts). Any such amounts paid by the
Company will, unless otherwise specified in the applicable Pricing Supplement,
be converted by the Exchange Rate Agent named in the applicable Pricing
Supplement into United States dollars for payment to Holders. However, unless
otherwise specified in the applicable Pricing Supplement, the Holder of a
Foreign Currency Note may elect to receive such payments in the applicable
Specified Currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 a.m., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by the Company for the
purchase by the quoting dealer of the Specified Currency for United States
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to all Holders of Foreign Currency Notes scheduled to
receive United States dollar payments and at which the applicable dealer commits
to execute a contract. All currency exchange costs will be borne by the Holder
of such Foreign Currency Note by deductions from such payments. If three such
bid quotations are not available, payments will be made in the Specified
Currency.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payment of the principal of and
premium, if any, and/or interest on such Note in the Specified Currency by
submitting a written request for such payment to the Trustee at its corporate
trust office in The City of New York on or prior to the applicable Record Date
or at least fifteen calendar days prior to the Maturity Date, as the case may
be. Such written request may be mailed or hand delivered or sent by cable, telex
or other form of facsimile transmission. A Holder of a Foreign Currency Note may
elect to receive payment in the applicable Specified Currency for all such
principal, premium, if any, and interest payments and need not file a separate
election for each payment. Such election will remain in effect until revoked by
written notice to the Trustee, but written notice of any such revocation must be
received by the Trustee on or prior to the applicable Record Date or at least
fifteen calendar days prior to the Maturity Date, as the case may be. Holders of
Foreign Currency Notes whose Notes are to be held in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in the applicable Specified Currency may be made.
Payments of the principal of and premium, if any, and interest on Foreign
Currency Notes which are to be made in U.S. dollars will be made in the manner
specified herein with respect to Notes denominated in United States dollars. See
"Description of Notes -- General." Payments of interest on Foreign Currency
Notes which are to be made in the applicable Specified Currency on an Interest
Payment Date (other than the Maturity Date) will be made by check mailed to the
address of the Persons entitled thereto as they appear in the Security Register.
Payments of principal of and premium, if any, and interest on Foreign Currency
Notes which are to be made in the applicable Specified Currency on the Maturity
Date will be made by wire transfer of immediately available funds to an account
with a bank designated at least fifteen calendar days prior to the Maturity Date
by the applicable Holder, provided that such bank has appropriate facilities
therefor and that the applicable Note is presented at the principal corporate
trust office of the Trustee in time for the Trustee to make such payments in
such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of a Global Security or Securities representing Book-Entry
Notes denominated in a Specified Currency other than United States dollars who
elects to receive payments of principal, premium, if any, and interest in such
Specified Currency must notify the participant through which its interest is
held on or prior to the applicable Record Date or at least fifteen calendar days
prior to the Maturity Date, as the case may be, of such beneficial owner's
election to receive all or a portion of such payment in such Specified Currency.
Such participant must notify the
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Depositary of such election on or prior to the third Business Day after such
Record Date or at least 16 calendar days prior to the Maturity Date, as the case
may be, and the Depositary will notify the Trustee of such election on or prior
to the fifth Business Day after such Record Date or at least 16 calendar days
prior to the Maturity Date, as the case may be. If complete instructions are
received by the participant and forwarded by the participant to the Depositary,
and by the Depositary to the Trustee, on or prior to such dates, then the
beneficial owner will receive payments in such Specified Currency.
PAYMENT CURRENCY
If the applicable Specified Currency is not available for the payment of
principal, premium, if any, or interest with respect to a Foreign Currency Note
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 Foreign Currency Note by making such payment in United
States dollars on the basis of the Market Exchange Rate on the second Business
Day prior to such payment or, if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate or
as otherwise specified in the applicable Pricing Supplement. The "Market
Exchange Rate" for a Specified Currency other than United States dollars means
the noon dollar buying rate in the City of New York for cable transfer for such
Specified Currency as certified for customs purposes by (or if not so certified,
as otherwise determined by) the Federal Reserve Bank of New York. Any payment
made under such circumstances in United States dollars where the required
payment is in a Specified Currency other than United States dollars will not
constitute an Event of Default under the Indenture with respect to the Notes.
If payment in respect of a Foreign Currency Note is required to be made in
any currency unit (e.g., ECU), and such currency unit is unavailable due to the
imposition of exchange controls or other circumstances beyond the Company's
control, then the Company will be entitled, but not required, to make any
payments in respect of such Note in United States dollars until such currency
unit is again available. The amount of each payment in United States dollars
shall be computed on the basis of the equivalent of the currency unit in United
States dollars, which shall be determined by the Company or its agent on the
following basis. The component currencies of the currency unit for this purpose
(collectively, the "Component Currencies" and each, a "Component Currency")
shall be the currency amounts that were components of the currency unit as of
the last day on which the currency unit was used. The equivalent of the currency
unit in United States dollars shall be calculated by aggregating the United
States dollar equivalents of the Component Currencies. The United States dollar
equivalent of each of the Component Currencies shall be determined by the
Company or such agent on the basis of the most recently available Market
Exchange Rate for each such Component Currency, or as otherwise specified in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by the Company or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the Holders of the Foreign Currency Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations,
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such as financial institutions, insurance companies, regulated investment
companies, dealers in securities or currencies, persons holding Notes as a hedge
against currency risks or as a position in a "straddle" for tax purposes, or
persons whose functional currency is not the United States dollar. It also does
not deal with holders other than original purchasers (except where otherwise
specifically noted). Persons considering the purchase of the Notes should
consult their own tax advisors concerning the application of United States
Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a holder of a Note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations issued by the Internal Revenue Service ("IRS") on January 27, 1994
under the original issue discount provisions of the Code (the "OID
Regulations"). The OID Regulations, which replaced certain proposed original
issue discount regulations that were issued on December 22, 1992, generally
apply to debt instruments issued on or after April 4, 1994. In addition,
taxpayers may rely on the OID Regulations for debt instruments issued after
December 21, 1992.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date). The issue price of an issue
of Notes equals the first price at which a substantial amount of such Notes has
been sold. The stated redemption price at maturity of a Note is the sum of all
payments provided by the Note other than "qualified stated interest" payments.
The term "qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate. In addition, under the OID
Regulations, if a Note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of such Note (e.g., Notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on such Note or any "true" discount on such Note (i.e., the
excess of the Note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the stated interest on the Note
would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
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allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount in excess of the
sum of all amounts payable on the Note after the purchase date other than
qualified stated interest payments will be considered to have purchased the Note
at a "premium" and will not be required to include any OID in gross income. A
U.S. Holder who purchases a Discount Note for an amount that is greater than its
adjusted issue price as of the purchase date and less than or equal to the sum
of all payments due under the Note after the purchase date other than qualified
stated interest payments will be considered to have purchased the Discount Note
at an "acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross income
with respect to such Discount Note for any taxable year (or portion thereof in
which the U.S. Holder holds the Discount Note) will be reduced (but not below
zero) by the portion of the acquisition premium properly allocable to the
period.
Under the OID Regulations, Floating Rate Notes are subject to special rules
whereby a Floating Rate Note will qualify as a "variable rate debt instrument"
if (a) its issue price does not exceed the total noncontingent principal
payments due under the Floating Rate Note by more than a specified de minimis
amount and (b) it provides for stated interest, paid or compounded at least
annually, at current values of (i) one or more qualified floating rates, (ii) a
single fixed rate and one or more qualified floating rates, (iii) a single
objective rate, or (iv) a single fixed rate and a single objective rate that is
a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Note is denominated. Although a multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple that
is greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Floating Rate Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Floating Rate
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute a
qualified floating rate but which is subject to one or more restrictions such as
a maximum numerical limitation (i.e., a cap) or a minimum numerical limitation
(i.e., a floor) may, under certain circumstances, fail to be treated as a
qualified floating rate under the OID Regulations. An "objective rate" is a rate
that is not itself a qualified floating rate but which is determined using a
single fixed formula and which is based upon (i) one or more qualified floating
rates, (ii) one or more rates where each rate would be a qualified floating rate
for a debt instrument denominated in a currency other than the currency in which
the Floating Rate Note is denominated, (iii) either the yield or changes in the
price of one or more items of certain actively traded personal property or (iv)
a combination of the foregoing rates. The OID Regulations also provide that
other variable interest rates may be treated as objective rates if so designated
by the IRS in the future. Despite the foregoing, a variable rate of interest on
a Floating Rate Note will not constitute an
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objective rate if it is reasonably expected that the average value of such rate
during the first half of the Floating Rate Note's term will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the Floating Rate Note's term. A "qualified
inverse floating rate" is any objective rate where such rate is equal to a fixed
rate minus a qualified floating rate, as long as variations in the rate can
reasonably be expected to inversely reflect contemporaneous variations in the
cost of newly borrowed funds. The OID Regulations also provide that if a
Floating Rate Note provides for stated interest at a fixed rate for an initial
period of less than one year followed by a variable rate that is either a
qualified floating rate or an objective rate and if the variable rate on the
Floating Rate Note's issue date is intended to approximate the fixed rate (e.g.,
the value of the variable rate on the issue date does not differ from the value
of the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a Floating Rate Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof qualifies as a "variable rate debt instrument" under the OID
Regulations, then any stated interest on such Note which is unconditionally
payable in cash or property (other than debt instruments of the issuer) at least
annually will constitute qualified stated interest and will be taxed
accordingly. Thus, a Floating Rate Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations will generally not be treated as having been issued with
original issue discount unless the Floating Rate Note is issued at a "true"
discount (i.e., at a price below the Note's stated principal amount) in excess
of a specified de minimis amount. Original issue discount on such a Floating
Rate Note arising from "true" discount is allocated to an accrual period using
the constant yield method described above.
In general, any other Floating Rate Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the Floating Rate Note. The OID
Regulations generally require that such a Floating Rate Note be converted into
an "equivalent" fixed rate debt instrument by substituting any qualified
floating rate or qualified inverse floating rate provided for under the terms of
the Floating Rate Note with a fixed rate equal to the value of the qualified
floating rate or qualified inverse floating rate, as the case may be, as of the
Floating Rate Note's issue date. Any objective rate (other than a qualified
inverse floating rate) provided for under the terms of the Floating Rate Note is
converted into a fixed rate that reflects the yield that is reasonably expected
for the Floating Rate Note. In the case of a Floating Rate Note that qualifies
as a "variable rate debt instrument" and provides for stated interest at a fixed
rate in addition to either one or more qualified floating rates or a qualified
inverse floating rate, the fixed rate is initially converted into a qualified
floating rate (or a qualified inverse floating rate, if the Floating Rate Note
provides for a qualified inverse floating rate). Under such circumstances, the
qualified floating rate or qualified inverse floating rate that replaces the
fixed rate must be such that the fair market value of the Floating Rate Note as
of the Floating Rate Note's issue date is approximately the same as the fair
market value of an otherwise identical debt instrument that provides for either
the qualified floating rate or qualified inverse floating rate rather than the
fixed rate. Subsequent to converting the fixed rate into either a qualified
floating rate or a qualified inverse floating rate, the Floating Rate Note is
then converted into an "equivalent" fixed rate debt instrument in the manner
described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Floating Rate Note will account for such original issue discount 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 original issue discount 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 Floating Rate Note during the accrual period.
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If a Floating Rate Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Floating Rate Note would be
treated as a contingent payment debt obligation. It is not entirely clear under
current law how a Floating Rate Note would be taxed if such Note were treated as
a contingent payment debt obligation. The proper United States Federal income
tax treatment of Floating Rate Notes that are treated as contingent payment debt
obligations will be more fully described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions. This election is only available for debt instruments
issued on or after April 4, 1994.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, the amount of the difference will be treated as "market
discount," unless such difference is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or realized
gain or (ii) the market discount which has not previously been included in
income and is treated as having accrued on such Note at the time of such payment
or disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount using a constant yield method.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
its earlier disposition in a taxable transaction, because a current deduction is
only allowed to the extent the interest expense exceeds an allocable portion of
market discount.
A U.S. Holder may elect to include market discount in income currently as
it accrues (on either a ratable or constant yield basis), in which case the
rules described above regarding the treatment as ordinary income of
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gain upon the disposition of the Note and upon the receipt of certain cash
payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes.
PREMIUM. If a U.S. Holder purchases a Note for an amount that is greater
than its stated redemption price at maturity, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to such excess. A U.S. Holder may elect to amortize such premium using a
constant yield method over the remaining term of the Note and may offset
interest otherwise required to be included in respect of the Note during any
taxable year by the amortized amount of such excess for the taxable year.
However, if the Note may be optionally redeemed after the U.S. Holder acquires
it at a price in excess of its stated redemption price at maturity, special
rules would apply which could result in a deferral of the amortization of some
bond premium until later in the term of the Note.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note generally will equal such U.S. Holder's
initial investment in the Note increased by any original issue discount included
in income (and accrued market discount, if any, if the U.S. Holder has included
such market discount in income) and decreased by the amount of any payments,
other than qualified stated interest payments, received and amortizable bond
premium taken with respect to such Note. Such gain or loss generally will be
long-term capital gain or loss if the Note was held for more than one year.
NOTES DENOMINATED OR ON WHICH INTEREST IS PAYABLE IN A FOREIGN CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY.
Cash Method. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of accounting
for United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the date of receipt of the
accrued interest, a U.S. Holder may translate such interest using the rate of
exchange on the date of receipt. The above election will apply to other debt
obligations held by the U.S. Holder and may not be changed without the consent
of the IRS. A U.S. Holder should consult a tax advisor before making the above
election. A U.S. Holder will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest income on
the date such income is received. The amount of ordinary income or loss
recognized will equal the difference, if any, between the U.S. dollar value of
the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
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PURCHASE, SALE AND RETIREMENT OF NOTES. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss in
an amount equal to the difference, if any, between such U.S. Holder's tax basis
in the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year. To
the extent the amount realized represents accrued but unpaid interest, however,
such amounts must be taken into account as interest income, with exchange gain
or loss computed as described in "Payments of Interest in a Foreign Currency"
above. If a U.S. Holder receives Foreign Currency on such a sale, exchange or
retirement, the amount realized will be based on the U.S. dollar value of the
Foreign Currency on (i) the date of receipt of such Foreign Currency in the case
of a cash basis U.S. Holder and (ii) the date of disposition in the case of an
accrual basis U.S. Holder. In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the U.S.
dollar value of the amount realized by translating the Foreign Currency payment
at the spot rate of exchange on the settlement date of the sale. A U.S. Holder's
adjusted tax basis in a Note will equal the cost of the Note to such holder,
increased by the amounts of any market discount or original issue discount
previously included in income by the holder with respect to such Note and
reduced by any amortized acquisition or other premium and any principal payments
received by the holder. A U.S. Holder's tax basis in a Note, and the amount of
any subsequent adjustments to such holder's tax basis, will be the U.S. dollar
value of the Foreign Currency amount paid for such Note, or of the Foreign
Currency amount of the adjustment, determined on the date of such purchase or
adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
ORIGINAL ISSUE DISCOUNT. In the case of a Discount Note or Short Term
Note, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency -- Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on the
date of such receipt, with the amount of original issue discount accrued, as
translated above.
PREMIUM AND MARKET DISCOUNT. In the case of a Note with market discount,
(i) market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account currently)
is translated into U.S. dollars at the exchange rate on such disposition date
(and no part of such accrued market discount is treated as exchange gain or
loss) and (iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note in the
manner described in "Payments of Interest in a Foreign Currency -- Accrual
Method" above with respect to computation of exchange gain or loss on accrued
interest.
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With respect to a Note issued with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
EXCHANGE OF FOREIGN CURRENCIES. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of the Company, a controlled foreign corporation
related to the Company or a bank receiving interest described in section
881(c)(3)(A) of the Internal Revenue Code of 1986, as amended ("Code"). To
qualify for the exemption from taxation, the last United States payor in the
chain of payment prior to payment to a non-U.S. Holder (the "Withholding Agent")
must have received in the year in which a payment of interest or principal
occurs, or in either of the two preceding calendar years, a statement that (i)
is signed by the beneficial owner of the Note under penalties of perjury, (ii)
certifies that such owner is not a U.S. Holder and (iii) provides the name and
address of the beneficial owner. The statement may be made on an IRS Form W-8 or
a substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. The Treasury Department is considering implementation of further
certification requirements aimed at determining whether the issuer of a debt
obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt
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recipient or (ii) the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Holder, certifies that
such seller is a non-U.S. Holder (and certain other conditions are met). Such a
sale must also be reported by the broker to the IRS, unless either (i) the
broker determines that the seller is an exempt recipient or (ii) the seller
certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status would be made normally
on an IRS Form W-8 under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Company,
through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and J.P. Morgan Securities Inc. (each, an "Agent" and collectively, the
"Agents"), who will purchase the Notes, as principal, from the Company from time
to time, for resale to investors and other purchasers at varying prices relating
to prevailing market prices at the time of resale as determined by such Agent,
or, if so specified in the applicable Pricing Supplement, for resale at a fixed
public offering price. 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
of the principal amount equal to the commission applicable to an agency sale (as
described below) of a Note of identical maturity. If agreed to by the Company
and the applicable Agent, such Agent may utilize its reasonable efforts on an
agency basis to solicit offers to purchase the Notes at 100% of the principal
amount thereof, unless otherwise specified in the applicable Pricing Supplement.
The Company will pay a commission to each such Agent, ranging from .125% to
.750% of the principal amount of each Note, depending upon its stated maturity,
sold through such Agent. Commissions with respect to Notes with stated
maturities in excess of 30 years that are sold through an Agent will be
negotiated between the Company and such Agent at the time of such sale.
An Agent may sell Notes it has purchased from the Company as principal to
other dealers for resale to investors and other purchasers, and may allow any
portion of the discount received in connection with such purchase from the
Company to such dealers. After the initial public offering of Notes, the public
offering price (in the case of Notes to be resold at a fixed public offering
price), the concession and the discount may be changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part. The Agents will
have the right, in their discretion reasonably exercised, to reject in whole or
in part any offer to purchase Notes received by them on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the applicable Specified Currency in The City of New York on
the date of settlement. See "Description of Notes -- General".
Upon issuance, the Notes will not have an established trading market.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
not be listed on any securities exchange. Each of the Agents may from time to
time purchase and sell Notes in the secondary market, but no Agent is obligated
to do so, and there can be no assurance that there will be a secondary market
for the Notes or liquidity in the secondary market if one develops. From time to
time, each of the Agents may make a market in the Notes, but no Agent is
obligated to do so and may discontinue any market-making activity at any time.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify each of the Agents against certain liabilities (including
liabilities under the Securities Act), or to contribute to payments an Agent may
be required to make in respect thereof. The Company has agreed to reimburse each
of the Agents for certain other expenses.
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In the ordinary course of their respective businesses, affiliates of J.P.
Morgan Securities Inc. have engaged, and may in the future engage, in commercial
banking and investment banking transactions with the Company and affiliates of
the Company.
Concurrently with the offering of Notes described herein, the Company may
issue other Debt Securities described in the accompanying Prospectus pursuant to
the Indenture.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Notes being
offered hereby will be passed upon for the Company by Gibson, Dunn & Crutcher,
Orange County, California. Brown & Wood, Los Angeles, California, will act as
counsel for the Agents.
S-29
<PAGE> 30
PROSPECTUS [LOGO]
ALLERGAN, INC.
SENIOR DEBT SECURITIES
------------------------
Allergan, Inc. (the "Company" or "Allergan") may offer from time to time
its senior unsecured debt securities consisting of notes, debentures or other
evidences of indebtedness (the "Debt Securities"), at an aggregate initial
offering price of not more than $200,000,000 or, if applicable, the equivalent
thereof in any other currency or currencies. The Debt Securities may be offered
as a single series or as two or more separate series in amounts, at prices and
on terms to be determined in light of market conditions at the time of sale and
to be set forth in an accompanying Prospectus Supplement.
The terms of each series of Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, authorized denominations,
maturity, rate or rates and time or times of payment of any interest, any terms
for optional or mandatory redemption or payment of additional amounts or any
sinking fund provisions, any initial public offering price, the proceeds to the
Company and any other specific terms in connection with the offering and sale of
such series will be set forth in a Prospectus Supplement or Prospectus
Supplements. As used herein, Debt Securities shall include securities
denominated in United States dollars or, at the option of the Company if so
specified in an applicable Prospectus Supplement, in any other currency or in
composite currencies or in amounts determined by reference to an index.
The Debt Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. See "Plan
of Distribution." If any agents of the Company or any underwriters are involved
in the sale of any Debt Securities in respect of which this Prospectus is being
delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such sale also will be set forth in a Prospectus
Supplement.
For a discussion of certain United States Federal income tax consequences
to holders of Debt Securities, see "United States Taxation."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is March 4, 1994.
<PAGE> 31
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the Commission's regional offices at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, New York, New York 10048. Copies of such material can be
obtained at prescribed rates upon request from the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on Form
S-3 (including all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto, certain portions of which are omitted as permitted by the
rules and regulations of the Commission. Such additional information may be
obtained from the Commission's principal office in Washington, D.C. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document. A copy of
the Registration Statement and the exhibits and schedules thereto may be
examined without charge at the Commission's principal offices at 450 Fifth
Street N.W., Room 1024, Washington, D.C. 20549, and copies of such materials can
be obtained from the Public Reference Room of the Commission at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the Exchange
Act with the Commission are hereby incorporated herein by reference: (i) Annual
Report on Form 10-K for the fiscal year ended December 31, 1992; and (ii)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1993,
June 30, 1993 and September 30, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein, in a
Prospectus Supplement or in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, in a Prospectus
Supplement or in any other subsequently filed document that also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated in this Prospectus by reference other than exhibits to
such documents, unless such exhibits are also specifically incorporated by
reference herein. Requests for such copies should be directed to Allergan, Inc.,
2525 Dupont Drive, Irvine, California 92715. Attention: General Counsel,
telephone number (714) 752-4500.
------------------------
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars," "U.S.
dollars," or "U.S.$").
2
<PAGE> 32
THE COMPANY
Allergan is a global provider of specialty therapeutic products principally
in the areas of eye and skin care. Its worldwide consolidated revenues are
generated by prescription and non-prescription pharmaceutical products in the
areas of opthalmology and dermatology, intraocular lenses (IOLs) and other
ophthalmic surgical products, and contact lens care products.
The Company's business strategy is to maintain and build upon its worldwide
strength in eye care by pursuing therapeutic opportunities emerging from new and
improved technologies and to expand into other specialty therapeutic areas.
Allergan continues to dedicate substantial financial and human resources to
internal research and development in the ophthalmic field as well as in other
therapeutic areas beyond eye care, such as the use of receptor-selective
retinoid technology to treat skin disorders and cancer, and BOTOX(R) (Botulinum
Toxin Type A) purified neurotoxin complex for the treatment of muscle spasm
disorders. The Company also actively seeks outside product opportunities through
joint ventures, licensing, acquisitions and strategic alliances with both
technology and marketing partners. In addition, the Company continually invests
in its manufacturing processes in order to integrate technological advances that
lower the cost to serve physician and patient healthcare needs on a worldwide
basis.
Allergan's Specialty Pharmaceuticals division develops, manufactures and
markets a broad range of prescription and non-prescription products currently
focused in the areas of ophthalmology and dermatology. Allergan's ophthalmic
pharmaceuticals treat diseases of the eye, including glaucoma, inflammation,
infection and neuromuscular eye disorders.
Allergan's Optical division develops, manufactures and markets contact lens
care products. These products include a broad range of products for the care of
contact lenses, including daily cleaners to remove undesirable film and
deposits, enzymatic cleaners to remove protein deposits and disinfecting
solutions to destroy harmful microorganisms. In November 1992, the Company sold
its contact lens business in North and South America. In August 1993, Allergan
completed the sale of its remaining contact lens business.
Allergan's Surgical division develops, manufactures and markets IOLs and
other ophthalmic surgical products primarily used in the treatment of cataracts.
Allergan was incorporated in California in 1948 and reincorporated in
Delaware in 1977. In 1980, the Company was acquired by SmithKline Beckman
Corporation (then known as "SmithKline Corporation" and herein "SmithKline").
The Company operated as a wholly-owned subsidiary of SmithKline from 1980 until
July 27, 1989. On that date, as part of a transaction by which SmithKline and
the Beecham Group p.1.c. were consolidated to form SmithKline Beecham p.1.c.,
the stockholders of SmithKline received, among other things, 100% of the
outstanding Allergan common stock in the form of a dividend of .5 of a share of
Allergan common stock for each share of SmithKline common stock held. As a
result of the spinoff distribution, the Company emerged as a stand-alone public
company traded on the New York Stock Exchange (Symbol: AGN). The Company's
principal executive offices are located at 2525 Dupont Drive, Irvine, California
92715-1599, and its telephone number is (714) 752-4500.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities for
general corporate purposes, which may include the reduction of outstanding
indebtedness, working capital increases and capital expenditures.
3
<PAGE> 33
RATIOS OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges. For
purposes of calculating the ratio, earnings consist of earnings from continuing
operations before income taxes and minority interest plus fixed charges
(exclusive of capitalized interest costs), less minority interest income. Fixed
charges consist of interest costs (including capitalized interest costs) plus
that portion of rental expense that represents interest:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,(1) YEAR ENDED DECEMBER 31,(2)
- ----------------- --------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
11.8 7.8 9.4 -- (3) 4.8 3.9 (4) 10.6(4)
</TABLE>
- ---------------
(1) Computed based on earnings from continuing operations before income taxes
and minority interest exclusive of earnings of the Company's contact lens
business.
(2) As originally reported before restatement of the Company's contact lens
business.
(3) As a result of the loss incurred, earnings were insufficient to cover fixed
charges by $52.9 million. Included in the loss were nonrecurring charges of
$164.5 million. Excluding the effects of the nonrecurring charges, earnings
would have covered fixed charges by a ratio of 6.8 in 1991.
(4) Excluding the effect of nonrecurring charges incurred in these years, the
ratios would have been 4.4 and 13.4 in 1989 and 1988, respectively.
DESCRIPTION OF THE DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Securities") and the extent
to which such general provision may apply to the Offered Securities will be
described in a Prospectus Supplement relating to such Offered Securities.
The Debt Securities are to be issued under an indenture to be dated as of
March 1, 1994 (the "Indenture"), between the Company and BankAmerica National
Trust Company, as trustee (the "Trustee"). The terms of the Debt Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and holders of the Debt Securities are referred to the Indenture and the
Trust Indenture Act for a statement thereof. A copy of the form of Indenture is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The following summaries of certain provisions of the Debt Securities and
the Indenture do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the Debt
Securities and the Indenture, including the definitions therein of certain terms
which are not otherwise defined in this Prospectus. Wherever particular
provisions or defined terms of the Indenture are referred to, such provisions or
defined terms are incorporated herein by reference. References herein are to
sections in the Indenture. As used in this "Description of the Debt Securities,"
the "Company" refers to Allergan, Inc. and does not include its subsidiaries.
The term "Securities," as used under this caption, refers to all Securities
issued or issuable from time to time under the Indenture and includes the Debt
Securities.
General
The Indenture will not limit the aggregate principal amount of Securities
which may be issued thereunder and Securities may be issued thereunder from time
to time as a single series or in two or more separate series up to the aggregate
principal amount from time to time authorized by the Company for each series. As
of the date of this Prospectus, the Company has authorized the issuance under
the Indenture of up to $200,000,000 aggregate principal amount of the Debt
Securities.
The Securities will be senior unsecured obligations exclusively of the
Company. Since the operations of the Company are currently conducted in
significant part through subsidiaries, the cash flow and the
4
<PAGE> 34
consequent ability to service debt of the Company, including the Securities, are
dependent, in part, upon the earnings of its subsidiaries and the distribution
of those earnings to the Company, whether by dividends, loans or otherwise. The
payment of dividends and the making of loans and advances of the Company by its
subsidiaries may be subject to statutory or contractual restrictions, are
contingent upon the earnings of those subsidiaries and are subject to various
business considerations. Any right of the Company to receive assets of any of
its subsidiaries upon their liquidation or reorganization (and the consequent
right of the holders of the Securities to participate in those assets) will be
effectively subordinated to the claims of that subsidiary's creditors (including
trade creditors), except to the extent that the Company is itself recognized as
a creditor of such subsidiary, in which case the claims of the Company would
still be subordinate to any security interests in the assets of such subsidiary
and any indebtedness of such subsidiary senior to that held by the Company.
The applicable Prospectus Supplement or Prospectus Supplements will
describe, among other things, the following terms of the Offered Securities: (i)
the title of the Offered Securities; (ii) any limit on the aggregate principal
amount of the Offered Securities; (iii) whether the Offered Securities are to be
issuable as Registered Securities or Bearer Securities or both and whether the
Offered Securities may be represented by a Security in temporary or permanent
global form, and if so, the initial Depositary with respect to such temporary or
permanent global Security and whether and the circumstances under which
beneficial owners of interests in any such temporary or permanent global
Security may exchange such interests for Securities of such series and of like
tenor of any authorized form and denomination; (iv) the price or prices at which
the Offered Securities will be issued; (v) the date or dates on which the
principal of the Offered Securities is payable or the method of determination
thereof; (vi) the rate or rates at which the Offered Securities will bear
interest, if any, and the date or dates from which such interest, if any, will
accrue; (vii) the Interest Payment Dates, if any, on which any interest on the
Offered Securities will be payable, and the Regular Record Date for any interest
payable on any Offered Securities which are Registered Securities; (viii) the
right or obligation, if any, of the Company to redeem or purchase Securities of
the series pursuant to any sinking fund or analogous provisions or at the option
of a holder thereof, the conditions, if any, giving rise to such right or
obligation, and the period or periods within which, and the price or prices at
which and the terms and conditions upon which Securities of the series shall be
redeemed or purchased, in whole or part, and any provisions for the remarketing
of such Securities; (ix) the currency or currencies, including composite
currencies, of payment of principal of and interest, if any, on the Offered
Securities, if other than U.S. dollars, and if other than U.S. dollars, whether
the Offered Securities may be satisfied and discharged other than as provided in
Article 8 of the Indenture; (x) if the amount of payments of principal of and
interest, if any, on the Offered Securities is to be determined by reference to
an index, formula or other method, or based on a coin or currency other than
that in which the Offered Securities are stated to be payable, the manner in
which such amounts are to be determined and the calculation agent, if any, with
respect thereto; (xi) if other than the principal amount thereof, the portion of
the principal amount of the Offered Securities which will be payable upon
declaration or acceleration of the Maturity thereof pursuant to an Event of
Default; and (xii) any other terms of the Offered Securities not inconsistent
with the provisions of the Indenture. (Section 2.03(a)). Any such Prospectus
Supplement will also describe any special provisions for the payment of
additional amounts with respect to the Offered Securities. (Sections 2.03(a) and
4.06).
Securities may be issued as Discount Securities, which may be sold at a
discount below their principal amount. Special United States Federal income tax
considerations applicable to Securities issued with original issue discount,
including Discount Securities, are generally described under "United States
Taxation -- Original Issue Discount" and may be described in more detail in any
applicable Prospectus Supplement. In addition, special United States Federal tax
considerations or other restrictions or terms applicable to any Offered
Securities which are issuable in bearer form, offered exclusively to United
States Aliens or denominated in a currency other than United States dollars will
be set forth in a Prospectus Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The Securities of a series may be issued solely as Registered Securities,
solely as Bearer Securities (with or without coupons attached) or as both
Registered Securities and Bearer Securities. (Section 2.03).
5
<PAGE> 35
Securities of a series may be issuable in whole or part in the form of one or
more global Securities, as described below under "Global Securities." (Sections
2.01, 2.02 and 2.03). Unless otherwise indicated in an applicable Prospectus
Supplement, Registered Securities will be issuable in denominations of $1,000
and integral multiples thereof, and Bearer Securities will be issuable in
denominations of $5,000 and $100,000. (Section 2.03(b)).
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Securities of any
series are issuable as both Registered Securities and as Bearer Securities, at
the option of the holder, subject to the terms of the Indenture, Bearer
Securities (accompanied by all unmatured coupons, except as provided below, and
all matured coupons in default) of such series will be exchangeable for
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. Unless otherwise indicated in an
applicable Prospectus Supplement, any Bearer Security surrendered in exchange
for a Registered Security between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest will be surrendered without the
coupon relating to such date for payment of interest and interest will not be
payable in respect of the Registered Security issued in exchange for such Bearer
Security, but will be payable only to the holder of such coupon when due in
accordance with the terms of the Indenture. Bearer Securities may not be issued
in exchange for Registered Securities. (Section 2.08).
Securities may be presented for exchange as provided above, and unless
otherwise indicated in an applicable Prospectus Supplement, Registered
Securities may be presented for registration of transfer, at the office or
agency of the Company designated as Registrar or co-registrar with respect to
any series of Securities and referred to in an applicable Prospectus Supplement,
without service charge and upon payment of any taxes, assessments or other
governmental charges as described in the Indenture. Such transfer or exchange
will be effected on the books of the Registrar or any other transfer agent
appointed by the Company upon such Registrar or transfer agent, as the case may
be, being satisfied with the documents of title and identity of the person
making the request. The Company intends to initially appoint the Trustee as
Registrar. (Section 2.05). If a Prospectus Supplement refers to any transfer
agents (in addition to the Registrar) designated by the Company with respect to
any series of 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, if Securities of a series are issuable
only as Registered Securities, the Company will be required to maintain a
transfer agent in each Place of Payment for such series and, if Securities of a
series are issuable as Bearer Securities, the Company will be required to
maintain (in addition to the Registrar) a transfer agent in a Place of Payment
for such series located outside the United States. The Company may at any time
designate additional transfer agents with respect to any series of Securities.
(Section 4.05).
In the event of any partial redemption of Securities of any series, the
Company will not be required to (i) issue, register the transfer of or exchange
Securities of that series during a period beginning at the opening of business
15 days before any selection of Securities of that series to be redeemed and
ending at the close of business on (a) if Securities of the series are issuable
only as Registered Securities, the day of mailing of the relevant notice of
redemption, and (b) if Securities of the series are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if Securities of the series are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption; (ii) register the transfer of or exchange any Registered Security,
or portion thereof, called for redemption, except the unredeemed portion of any
Registered Security being redeemed in part; or (iii) exchange any Bearer
Security called for redemption, except to exchange such Bearer Security for a
Registered Security of that series and of like tenor and principal amount that
is immediately surrendered for redemption. (Section 2.08).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and interest, if any, on Registered Securities will be made at
the office of such Paying Agent or Paying Agents as the Company may designate
from time to time, except that at the option of the Company payment of principal
or interest may be made by check or by wire transfer to an account maintained by
the payee. (Section 4.01). Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on
6
<PAGE> 36
Registered Securities will be made to the person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest. (Section 2.13).
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and interest, if any, on Bearer Securities will be payable,
subject to any applicable laws and regulations, at the offices of such Paying
Agents outside the United States as the Company may designate from time to time,
or by check or by transfer to an account maintained by the payee outside the
United States. (Section 4.05). Unless otherwise indicated in an applicable
Prospectus Supplement, any payment of interest on any Bearer Securities will be
made only against surrender of the coupon relating to such interest installment.
(Section 4.01).
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee will be designated as the Company's sole Paying Agent for payments with
respect to Securities which are issuable solely as Registered Securities and as
the Company's Paying Agent in the Borough of Manhattan, The City of New York,
for payments with respect to Securities (subject to any limitations described in
any applicable Prospectus Supplement) which are issuable as Bearer Securities.
Any Paying Agents outside the United States and any other Paying Agents in the
United States initially designated by the Company for the Offered Securities
will be named in an applicable Prospectus Supplement. The Company may at any
time designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that, if Securities of a series are issuable only as Registered
Securities, the Company will be required to maintain a Paying Agent in each
Place of Payment for such series and, if Securities of a series are issuable as
Bearer Securities, the Company will be required to maintain (i) a Paying Agent
in the Borough of Manhattan, The City of New York, for payments with respect to
any Registered Securities of the series (and for payments with respect to Bearer
Securities of the series in the circumstances described in the Indenture, but
not otherwise), and (ii) a Paying Agent in a Place of Payment located outside
the United States where Securities of such series and any related coupons may be
presented and surrendered for payment. (Section 4.05).
All moneys paid by the Company to a Paying Agent for the payment of
principal of or interest, if any, on any Security which remains unclaimed at the
end of two years after such principal or interest shall have become due and
payable will be repaid to the Company and the holder of such Security or any
coupon will thereafter look only to the Company for payment thereof. (Section
8.02).
GLOBAL SECURITIES
The Securities of a series may be issued in whole or in part in global
form. (Section 2.01). A Security in global form will be deposited with, or on
behalf of, a Depositary, which will be identified in an applicable Prospectus
Supplement. A global Security may be issued in either registered or bearer form
and in either temporary or permanent form. (Section 2.03). A Security in global
form may not be transferred except as a whole to the Depositary for such
Security or to a nominee or successor of such Depositary. (Section 2.08). If any
Securities of a series are issuable in global form, the applicable Prospectus
Supplement will describe the circumstances, if any, under which beneficial
owners of interests in any such global Security may exchange such interests for
definitive Securities of such series and of like tenor and principal amount in
any authorized form and denomination, the manner of payment of principal of and
interest, if any, on any such global Security and the specific terms of the
depositary arrangement with respect to any such global Security. (Section 2.03).
CERTAIN COVENANTS OF THE COMPANY
Unless otherwise provided in the Securities, the Company will covenant not
to create, assume or suffer to exist any lien on any Restricted Property
(defined below) to secure any debt of the Company, any subsidiary or any other
person, or permit any Subsidiary so to do, without securing the Securities of
any series having the benefit of the covenant equally and ratably with such debt
for so long as such debt shall be so secured, subject to certain exceptions
specified in the Indenture. Exceptions include: (a) existing liens or liens on
facilities of corporations at the time they become subsidiaries; (b) liens
existing on facilities when acquired, or incurred to finance the purchase price,
construction or improvement thereof; (c) certain liens required by contracts
with, and in favor of, governmental entities; and (d) liens otherwise prohibited
by such covenant, securing
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<PAGE> 37
indebtedness which, together with the aggregate amount of outstanding
indebtedness secured by liens otherwise prohibited by such covenant and the
Value (defined below) of certain Sale and Leaseback Transactions (defined
below), does not exceed 10% of the Company's Consolidated Net Tangible Assets
(Section 4.08).
Unless otherwise provided in the Securities, the Company will also covenant
not to, and not to permit any Subsidiary to, enter into any Sale and Leaseback
Transaction covering any Restricted Property unless (a) the Company would be
entitled under the provisions described above to incur debt equal to the Value
of such Sale and Leaseback Transaction, secured by liens on the facilities to be
leased, without equally and ratably securing the Securities of any series having
the benefit of such covenant, or (b) the Company, during the six months
following the effective date of such sale and leaseback transaction, applies to
the voluntary retirement of long-term indebtedness or to the acquisition of
Restricted Property an amount at least equal to the lesser of (a) the net
proceeds of the sale of the Restricted Property leased pursuant to such
arrangement or the fair value of the Restricted Property so leased (whichever
amount is greater) or (b) the Value of the Sale and Leaseback Transaction
(Section 4.09).
Unless otherwise provided in the Securities, the Company will covenant that
no dividend shall be paid or declared nor shall any distributions be made on any
capital stock of the Company (except in shares of, or warrants or rights to
subscribe for or purchase shares of, capital stock of the Company), nor shall
any payment be made by the Company or any subsidiary of the Company to acquire
or retire shares of such stock, at a time when an Event of Default has occurred
and is continuing under the Indenture or, if as a result of such dividend, an
Event of Default shall occur. (Section 4.07).
CERTAIN DEFINITIONS
"Consolidated Tangible Net Assets" means the total of the net tangible
assets of the Company and its Subsidiaries, included in their financial
statements prepared on a consolidated basis in accordance with generally
accepted accounting principles, after eliminating all intercompany items.
"Restricted Property" means (a) any manufacturing facility, or portion
thereof, owned or leased by the Company or any Subsidiary and located within the
continental United States, which, in the opinion of the Board of Directors, is
of material importance to the business of the Company and its Subsidiaries taken
as a whole, but no such manufacturing facility, or portion thereof, shall be
deemed of material importance if its gross book value (before deducting
accumulated depreciation) is less than 2% of Consolidated Tangible Net Assets,
or (b) any shares of capital stock of any Subsidiary owning any such
manufacturing facility. As used in this definition, "manufacturing facility"
means property, plant and equipment used for actual manufacturing such as
quality assurance, engineering, maintenance, staging area for work in process
materials, employees' eating and comfort facilities and manufacturing
administration, and it excludes sales offices, research facilities and
facilities used only for warehousing or general administration.
"Sale and Leaseback Transaction" means any arrangement with any person
pursuant to which the Company or any Subsidiary leases any Restricted Property
that has been or is to be sold or transferred by the Company or the Subsidiary
to such person, other than (1) temporary leases for a term, including renewals
at the option of the lessee, of not more than three years, (2) leases between
the Company and a Subsidiary or between Subsidiaries, (3) leases of a Restricted
Property executed by the time of, or within 12 months after the latest of, the
acquisition, the completion of construction or improvement, or the commencement
of commercial operation of the Restricted Property, and (4) arrangements
pursuant to any provision of law with an effect similar to the former Section
168(f)(8) of the Internal Revenue Code of 1954.
"Subsidiary" means a corporation of which a majority of the Capital Stock
having voting power under ordinary circumstances to elect a majority of the
board of directors of such corporation is owned by (i) the Company, (ii) the
Company and one or more Subsidiaries or (iii) one or more Subsidiaries.
"Value" means, with respect to a Sale and Leaseback Transaction, an amount
equal to the present value of the lease payments with respect to the term of the
lease remaining on the date as of which the amount is being determined, without
regard to any renewal or extension options contained in the lease, discounted at
the
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<PAGE> 38
weighted average interest rate on the Securities of all series (including the
effective interest rate on any original issue discount Securities) which are
outstanding on the effective date of such Sale and Leaseback Transaction and
which have the benefit of Section 4.09.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an entirety
to another person, unless, among other things, (i) the resulting, surviving or
transferee person (if other than the Company) is organized and existing under
the laws of the United States, any state thereof or the District of Columbia and
such person expressly assumes all obligations of the Company under the
Securities and the Indenture, and (ii) the Company or such successor person
shall not immediately thereafter be in Default under the Indenture. Upon the
assumption of the Company's obligations by such a person in such circumstances,
subject to certain exceptions, the Company shall be discharged from all
obligations under the Securities and the Indenture. (Section 5.01).
EVENTS OF DEFAULT
The Indenture provides that, if an Event of Default specified therein shall
have occurred and be continuing, with respect to each series of the Securities
individually, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Outstanding Securities of such series may declare the
principal amount (or, if any of the Securities of such series are Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) of the Securities of such series to be
immediately due and payable. Under certain circumstances, the holders of a
majority in aggregate principal amount of the Outstanding Securities of such
series may rescind such a declaration. (Section 6.02).
Under the Indenture, an Event of Default is defined as, with respect to
each series of Securities individually, any of the following: (i) default in
payment of the principal of any Security of such series; (ii) default in payment
of any interest on any Security of such series when due, continuing for 30 days;
(iii) failure by the Company to comply with its other agreements in the
Securities of such series or the Indenture for the benefit of the holders of
Securities of such series upon the receipt by the Company of notice of such
Default by the Trustee or the holders of at least 25% in aggregate principal
amount of the Outstanding Securities of such series and the Company's failure to
cure such Default within 60 days after receipt by the Company of such notice;
(iv) certain events of bankruptcy or insolvency; (v) acceleration of any
indebtedness of the Company or any of its subsidiaries in excess of $10,000,000,
under the terms of the instrument under which such indebtedness is or may be
outstanding, if such acceleration is not annulled or rescinded, or such
indebtedness shall not have been discharged, within 30 days after written notice
by the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities of such series; and (vi) any other Event of Default set
forth in an applicable Prospectus Supplement. (Section 6.01).
The Trustee shall give notice to holders of the Securities of any
continuing Default known to the Trustee within 90 days after the occurrence
thereof; provided, that the Trustee may withhold such notice, as to any Default
other than a payment Default, if it determines in good faith that withholding
the notice is in the interests of the holders. (Section 7.05).
The holders of a majority in principal amount of the Outstanding Securities
of any series may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the Securities of such series, provided
that such direction shall not be in conflict with any law or the Indenture and
subject to certain other limitations. (Section 6.05). Before proceeding to
exercise any right or power under the Indenture at the direction of such
holders, the Trustee shall be entitled to receive from such holders reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
(Sections 6.06 and 7.01). With respect to each series of Securities, no holder
will have any right to pursue any remedy with respect to the Indenture or the
Securities, unless (i) such holder shall have previously given the Trustee
written notice of a continuing Event of Default with respect to the Securities
of such series; (ii) the holders of at least 25% in aggregate principal amount
of the Outstanding Securities of such series shall
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<PAGE> 39
have made a written request to the Trustee to pursue such remedy; (iii) such
holder or holders have offered to the Trustee reasonable indemnity satisfactory
to the Trustee; (iv) the holders of a majority in aggregate principal amount of
the Outstanding Securities of such series have not given the Trustee a direction
inconsistent with such request within 60 days after receipt of such request; and
(v) the Trustee shall have failed to comply with the request within such 60-day
period. (Section 6.06).
Notwithstanding the foregoing, the right of any holder of any Security or
coupon to receive payment of the principal of and interest in respect of such
Security or payment of such coupon on the Stated Maturity or Maturities
expressed in such Security or coupon or to institute suit for the enforcement of
any such payments shall not be impaired or adversely affected without such
holder's consent. (Section 6.07). The holders of at least a majority in
aggregate principal amount of the Outstanding Securities of any series of
Securities may waive an existing Default with respect to such series and its
consequences, other than (i) any Default in any payment of the principal of or
interest on any Security of such series or (ii) any Default in respect of
certain covenants or provisions in the Indenture which may not be modified
without the consent of the holder of each Outstanding Security of such series
affected as described in "Modification and Waiver," below. (Section 6.04).
MODIFICATION AND WAIVER
The Company and the Trustee may execute a supplemental indenture without
the consent of the holders of the Securities or any related coupons (i) to add
to the covenants, agreements and obligations of the Company for the benefit of
the holders of all the Securities of any series or to surrender any right or
power conferred in the Indenture upon the Company; (ii) to evidence the
succession of another corporation to the Company and the assumption by it of the
obligations of the Company under the Indenture and the Securities; (iii) to
provide that Bearer Securities may be registrable as to principal, to change or
eliminate any restrictions (including restrictions relating to payment in the
United States) on the payment of principal of or interest, if any, on Bearer
Securities, to permit Bearer Securities to be issued in exchange for Registered
Securities, to permit Bearer Securities to be issued in exchange for Bearer
Securities of other authorized denominations or to permit the issuance of
Securities in uncertificated form; (iv) to establish the form or terms of
Securities of any series and any related coupons as permitted by Sections 2.01
and 2.03(a) of the Indenture; (v) to provide for the acceptance of appointment
under the Indenture of a successor Trustee with respect to the Securities of one
or more series and to add to or change any provisions of the Indenture as shall
be necessary to provide for or facilitate the administration of the trusts by
more than one Trustee; (vi) to cure any ambiguity, defect or inconsistency;
(vii) to add to, change or eliminate any provisions (which addition, change or
elimination may apply to one or more series of Securities), provided that any
such addition, change or elimination neither (a) applies to any Security of any
series created prior to the execution of such supplemental indenture and is
entitled to the benefit of such provision nor (b) modifies the rights of the
holder of any such Security with respect to such provision; (viii) to secure the
Securities; or (ix) to make any other change that does not adversely affect the
rights of any Securityholder. (Section 9.01).
With the consent of the holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of the series affected by such
supplemental indenture, the Company and the Trustee may also execute a
supplemental indenture to add provisions to, or change in any manner or
eliminate any provisions of, the Indenture with respect to such series of
Securities or modify in any manner the rights of the holders of the Securities
of such series and any related coupons under the Indenture, provided that no
such supplemental indenture will, without the consent of the holder of each such
Outstanding Security affected thereby (i) change the stated maturity of the
principal of, or any installment of principal or interest on, any such Security
or any premium payable upon redemption thereof, or reduce the amount of
principal of any Security that is a Discount Security and that would be due and
payable upon declaration of acceleration of maturity thereof; (ii) reduce the
principal amount of, or the rate of interest on, any such Security; (iii) change
the place or currency of payment of principal or interest, if any, on any such
Security; (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Security; (v) reduce the above-stated
percentage of holders of Securities of any series necessary to modify or amend
the Indenture; or (vi) modify the foregoing requirements or reduce the
percentage in principal amount of Outstanding
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<PAGE> 40
Securities of any series necessary to waive any covenant or past default.
Holders of not less than a majority in principal amount of the Outstanding
Securities of any series may waive certain past Defaults and may waive
compliance by the Company with certain of the restrictive covenants described
above with respect to the Securities of such series. (Section 9.02).
DISCHARGE
Unless otherwise indicated in an applicable Prospectus Supplement, the
Company may satisfy and discharge obligations under the Indenture with respect
to the Securities of any series by delivering to the Trustee for cancellation
all Outstanding Securities of such series or depositing with the Trustee, after
such Outstanding Securities have become due and payable, cash sufficient to pay
at Stated Maturity all of the Outstanding Securities of such series and paying
all other sums payable under the Indenture with respect to such series. (Section
8.01.)
THE TRUSTEE
The Trustee is a National Banking Association. The Trustee will be
permitted to engage in certain transactions with the Company and its
subsidiaries; provided, however, if the Trustee acquires any conflicting
interest, it must eliminate such conflict or resign. (Section 7.10).
UNITED STATES TAXATION
GENERAL
Set forth below is a summary of certain United States Federal income tax
considerations of importance to the original purchasers of the Debt Securities.
The summary does not discuss all of the aspects of Federal income taxation which
may be relevant to particular investors in light of their personal investment
circumstances, nor does it discuss any foreign, state or local income or other
tax considerations. The summary is based upon the Internal Revenue Code of 1986,
as amended (the "Code"), and on regulations, rulings and decisions that are in
effect as of the date of this Prospectus, all of which are subject to change.
Prospective investors are advised to consult their tax advisors regarding the
Federal, state, local and foreign income and other tax consequences of
purchasing, holding and disposing of the Debt Securities. Special Federal tax
considerations or other restrictions or terms applicable to any Debt Securities
which are issuable in bearer form, offered exclusively to United States Aliens
(as defined below) or denominated in a currency other than United States dollars
will be set forth in a Prospectus Supplement relating thereto. "United States
Alien" means any person who, for Federal income tax purposes, is a foreign
corporation, a non-resident alien individual, a non-resident alien fiduciary of
a foreign estate or trust, or a foreign partnership one or more of the members
of which is, for Federal income tax purposes, a foreign corporation, a
non-resident alien individual or a non-resident alien fiduciary of a foreign
estate or trust.
ORIGINAL ISSUE DISCOUNT
Debt Securities with a term greater than one year may be issued with
original issue discount for Federal income tax purposes. Original issue discount
will arise if the stated principal amount at maturity of a Debt Security exceeds
its issue price by more than a de minimis amount, or if a Debt Security has
certain interest payment characteristics (e.g., interest holidays, interest
payable in additional Debt Securities, stepped rates or rates based on multiple
indices). If a Debt Security is issued with original issue discount, the holder
of the Debt Security will be required to include amounts in gross income for
Federal income tax purposes in advance of the receipt of the cash payment to
which such income is attributable. The amount of original issue discount to be
included in income in any tax period will be determined using a constant yield
to maturity method. Any amounts included in income as original issue discount
will, however, increase a holder's tax basis in the Debt Security.
Any Debt Security issued with original issue discount will bear a legend
setting forth the total amount of original issue discount with respect to such
Debt Security, and the Company will report annually to the
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<PAGE> 41
Internal Revenue Service (the "IRS") and to each holder of such Debt Security
the original issue discount accrued with respect to the Debt Security.
Prospective holders are advised to consult their tax advisors with respect to
the particular original issue discount characteristics of the Debt Security that
is being purchased.
DISPOSITION OF DEBT SECURITIES
In general, an original holder of a Debt Security will recognize gain or
loss on the sale, redemption, exchange or other disposition of the Debt Security
measured by the difference between the amount of cash received (except to the
extent attributable to accrued interest) and the holder's adjusted tax basis in
the Debt Security.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under the backup withholding rules of the Code, holders of Debt Securities
may be subject to backup withholding at the rate of 31 percent with respect to
payments made pursuant to such Debt Securities unless such 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 and certifies under penalties of perjury that the taxpayer identification
number is correct and that the holder is not subject to backup withholding
because of a failure to report all dividends and interest income. Any amount
withheld under these rules will be credited against such holder's federal income
tax liability. The Company may require holders of Debt Securities to establish
exemption from backup withholding or to make arrangements satisfactory to the
Company with respect to the payment of backup withholding.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to one or more underwriters for public
offering and sale by them or may sell Debt Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Offered Securities will be named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company may also offer and sell the Offered Securities in
exchange for one or more of its outstanding issues of Debt Securities. The
Company also may, from time to time, authorize underwriters acting as the
Company's agents to offer and sell the Offered Securities upon the terms and
conditions set forth in any Prospectus Supplement. In connection with the sale
of Offered Securities, underwriters may be deemed to have received compensation
from the Company in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of Offered Securities for whom they may
act as agent. Underwriters may sell Offered 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 (which may be changed
from time to time) from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters under the Securities Act, and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and commissions
under the Securities Act. Underwriters, dealers and agents may be entitled,
under agreements with the Company, to indemnification against and contribution
toward, certain civil liabilities, including liabilities under the Securities
Act, and to reimbursement by the Company for certain expenses.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize agents or dealers acting as the Company's agents to solicit offers by
certain institutions to purchase Offered Securities from the Company at the
public offering price set forth in such Prospectus Supplement pursuant to
Delayed Delivery
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Contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Offered Securities sold
pursuant to Contracts shall not be less nor more than, the respective amounts
stated in such Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Offered Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if the Offered Securities are being sold to underwriters, the Company shall have
sold to such underwriters the total principal amount of the Offered Securities
less the principal amount thereof covered by Contracts.
The Debt Securities may or may not be listed on a national securities
exchange or a foreign securities exchange. No assurances can be given that there
will be a market for the Debt Securities.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Securities being
offered hereby will be passed upon for the Company by Gibson, Dunn & Crutcher.
EXPERTS
The consolidated financial statements and related schedules of the Company
as of and for the year ended December 31, 1992 which are incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1992, have been so incorporated in reliance on the report of KPMG
Peat Marwick, independent accountants, given on the authority of said firm as
experts in auditing and accounting. The consolidated financial statements and
related schedules of the Company as of December 31, 1991 and for the years ended
December 31, 1991 and 1990 which are incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
1992, have been so incorporated in reliance on the report of Coopers & Lybrand,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Any financial statements and schedules hereafter filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and
incorporated by reference in this Prospectus that have been examined and are the
subject of a report by independent accountants will be so incorporated by
reference in reliance upon such reports and upon the authority of such firms as
experts in accounting and auditing to the extent covered by consents filed with
the Commission.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR
THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Recent Developments.................... S-2
Description of Notes................... S-2
Special Provisions and Risks Relating
to Foreign Currency Notes............ S-17
Certain United States Federal Income
Tax Considerations................... S-20
Plan of Distribution................... S-28
Legal Matters.......................... S-29
PROSPECTUS
Available Information.................. 2
Incorporation of Certain Documents
by Reference......................... 2
The Company............................ 3
Use of Proceeds........................ 3
Ratio of Earnings to Fixed Charges..... 4
Description of the Debt Securities..... 4
United States Taxation................. 11
Plan of Distribution................... 12
Legal Matters.......................... 13
Experts................................ 13
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</TABLE>
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$200,000,000
[LOGO]
ALLERGAN, INC.
MEDIUM-TERM NOTES
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.
MARCH 4, 1994
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