<PAGE>
RULE NO.424(b)(2)
REGISTRATION NO. 33-57347
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 10, 1995
$150,000,000
THE ROUSE COMPANY
MEDIUM-TERM NOTES
DUE MORE THAN NINE MONTHS FROM DATE OF ISSUE
---------------
The Rouse Company may offer from time to time its Medium-Term Notes in an
aggregate initial offering price of up to $150,000,000. Each Note will mature
on a day more than nine months from its date of issue, as selected by the
initial purchaser and agreed to by the Company. Unless otherwise indicated
herein or in the applicable Pricing Supplement, the Notes will not be
redeemable prior to maturity by the Company and will not be subject to
repayment prior to maturity at the option of the holders thereof and will be
issued in registered form in denominations of $1,000 and any integral multiple
of $1,000 in excess thereof. Each Note will be represented either by a Global
Note registered in the name of The Depository Trust Company, as depositary, or
a nominee thereof, or by a certificate issued in definitive form, as set forth
in the applicable Pricing Supplement. Beneficial interests in Book-Entry Notes
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. Book-Entry Notes will not
be exchangeable for Certificated Notes except under the circumstances
described under "Description of Notes--Book-Entry System" herein.
Interest rates and interest rate formulae are subject to change by the
Company but no such change will affect any Note already issued or which the
Company has agreed to issue. Unless otherwise indicated in the applicable
Pricing Supplement, each Note will bear interest at a fixed rate or at a
floating rate determined by reference to the CD Rate, the Commercial Paper
Rate, the Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate, as
adjusted by the Spread and/or Spread Multiplier, if any, applicable to such
Note. Certain Notes issued at a discount from the principal amount payable at
maturity thereof may provide that holders of such Notes will not receive
periodic payments of interest. See "Description of Notes--Original Issue
Discount Notes".
Unless otherwise indicated in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable each May 15 and November 15 and at maturity
or upon any earlier redemption or repayment, and interest on Floating Rate
Notes will be payable on the dates indicated herein and in the applicable
Pricing Supplement. See "Description of Notes--Interest and Interest Rates".
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR
THE PROSPECTUS TO WHICH THEY RELATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSION(2) COMPANY(2)(3)
--------- ------------- -------------
<S> <C> <C> <C>
Per Note............ 100% .125-1.000% 99.875-99.000%
Total............... $150,000,000 $187,500-$1,500,000 $149,812,500-$148,500,000
</TABLE>
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(1) Unless otherwise indicated in a Pricing Supplement, Notes will be issued
at 100% of their principal amount.
(2) The Company will pay a commission to the Agents from .125% to 1.000% of
the principal amount of any Note, depending upon its maturity, sold
through such Agents (or sold to such Agents as principal in circumstances
in which no other discount is agreed upon). The Company may also sell
Notes to any Agent at a discount for resale to one or more investors or
other purchasers at varying prices related to prevailing market prices at
the time of resale or otherwise, as determined by such Agent. Unless
otherwise indicated in an applicable Pricing Supplement, any Note sold to
an Agent as principal shall be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage equal to the
commission applicable to any agency sale of a note of identical maturity.
See "Plan of Distribution".
(3) Before deducting other expenses payable by the Company, estimated at
$449,725.
---------------
The Notes are being offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. The Company also may sell Notes to any Agent
acting as principal for resale to investors or other purchasers and may sell
Notes directly to investors on its own behalf in jurisdictions where it is
authorized to do so. No commission will be payable nor will a discount be
allowed on any direct sales by the Company. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be listed on any securities
exchange. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or any Agent may reject any
offer to purchase Notes, in whole or in part. See "Plan of Distribution".
GOLDMAN, SACHS & CO.
---------------
The date of this Prospectus Supplement is February 24, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which reference is hereby made. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will have the terms
described below, except that references to interest payments and interest-
related information do not apply to certain Original Issue Discount Notes (as
defined below).
GENERAL
The Pricing Supplement relating to a Note will describe the following terms:
(i) whether such Note is a Fixed Rate Note or a Floating Rate Note (each as
defined below); (ii) the price at which such Note will be issued (the "Issue
Price"); (iii) the date on which such Note will be issued (the "Original Issue
Date"); (iv) the date on which such Note will mature (the "Maturity Date");
(v) if such Note is a Fixed Rate Note, the rate per annum at which such Note
will bear interest, if any; (vi) if such Note is a Floating Rate Note, the
Base Rate, the Initial Interest Rate, the Interest Determination Dates, the
Interest Reset Dates, the Interest Payment Dates, the Index Maturity, the
Spread and/or Spread Multiplier, if any (each as defined below), and any other
terms relating to the particular method of calculating the interest rate for
such Note; (vii) whether such Note is an Original Issue Discount Note or
whether it has been issued with original issue discount for United States
Federal income tax purposes; (viii) whether such Note may be redeemed or
repaid mandatorily or at the option of the Company, or repaid at the option of
the holder, prior to maturity as described under "Optional Redemption" and
"Repayment at the Noteholders' Option; Repurchase" below and, if so, the
provisions relating to such redemption or repayment, including, in the case of
any Original Issue Discount Notes, the information necessary to determine the
amount due upon redemption or repayment; (ix) any relevant material tax
consequences associated with the terms of such Note which have not been
described in "United States Tax Considerations" below; and (x) any other terms
of such Note not inconsistent with the provisions of the Indenture.
The Notes will be issued under an Indenture, dated as of February 24, 1995,
between The Rouse Company (the "Company") and The First National Bank of
Chicago (the "Trustee"), as the same may be amended or supplemented from time
to time (said Indenture referred to herein as the "Indenture"). The following
summaries of certain provisions of 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 Indenture, including the definitions therein of
certain terms. The Notes are limited to an aggregate initial offering price of
$150,000,000.
Each Fixed Rate Note will mature on a day more than nine months from the
date of issue, as specified in the applicable Pricing Supplement, as selected
by the initial purchaser and agreed to by the Company.
Each Floating Rate Note will mature on an Interest Payment Date (as defined
below) more than nine months from the date of issue as specified in the
applicable Pricing Supplement, as selected by the initial purchaser and agreed
to by the Company.
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Unless the applicable Pricing Supplement provides otherwise, the Notes will
be issuable only in registered form in denominations of $1,000 and integral
multiples of $1,000 in excess thereof.
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a global note (a "Book-Entry Note") registered in
the name of The Depository Trust Company, as depositary (the "Depositary") or
a nominee thereof, or a certificate issued in definitive form (a "Certificated
Note").
Payments of principal of, and premium and interest, if any, on Book-Entry
Notes will be made by the Company through the Trustee to the Depositary. See
"--Book-Entry System". In the case of Certificated Notes, payment of principal
of, and premium and interest, if any, on such Notes, at maturity or upon
redemption or repayment will be made in immediately available funds against
presentation of the Notes at the offices of the Trustee currently located at
One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126, unless
otherwise provided in the applicable Pricing Supplement. Transfers of
Certificated Notes will be registrable, and Certificated Notes will be
exchangeable for Certificated Notes bearing identical terms and provisions at
the offices of the Trustee. Notwithstanding the foregoing, and except as
provided below with respect to Book-Entry Notes, payment of interest, other
than interest at maturity or upon redemption or repayment, may, at the option
of the Company, be made by check mailed to the address of the person entitled
thereto as it appears on the security register at the close of business on the
Regular Record Date corresponding to the relevant Interest Payment Date.
Notwithstanding the foregoing, the Depositary, as holder of Book-Entry Notes,
shall be entitled to receive payments of interest by wire transfer of
immediately available funds. Book-Entry Notes will be transferable and
exchangeable only in the manner and to the extent set forth under "--Book-
Entry System" herein.
INTEREST AND INTEREST RATES
Each Note will bear interest at either (a) a fixed rate (the "Fixed Rate
Notes") or (b) a floating rate determined by reference to an interest rate
formula (the "Floating Rate Notes"), which may be adjusted by a Spread and/or
Spread Multiplier. Any Floating Rate Note may also have either or both of the
following: (i) a maximum interest rate limitation, or ceiling, on the rate at
which interest may accrue during any interest period; and (ii) a minimum
interest rate limitation, or floor, on the rate at which interest may accrue
during any interest period. The applicable Pricing Supplement will designate
one of the following interest rate bases as applicable to each Note: (a) a
fixed rate per annum, in which case such Note will be a "Fixed Rate Note"; (b)
the CD Rate, in which case such Note will be a "CD Rate Note"; (c) the
Commercial Paper Rate, in which case such Note will be a "Commercial Paper
Rate Note"; (d) the Federal Funds Rate, in which case such Note will be a
"Federal Funds Rate Note"; (e) LIBOR, in which case such Note will be a "LIBOR
Note"; (f) the Prime Rate, in which case such Note will be a "Prime Rate
Note"; (g) the Treasury Rate, in which case such Note will be a "Treasury Rate
Note"; or (h) such other interest rate formula as is set forth in such Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Note will be equal to (a) in the case of a Fixed Rate
Note, a fixed rate; or (b) in the case of a Floating Rate Note, either (i) the
interest rate determined by reference to the specified interest rate formula
(as specified in the applicable Pricing Supplement), plus or minus the Spread,
if any, and/or (ii) the interest rate determined by reference to the specified
interest rate formula, multiplied by the Spread Multiplier, if any, plus or
minus the Spread, if any. The "Spread" is the number of basis points (one one-
hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate of such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note. The "Base Rate" is the rate specified, or determined according to a
formula specified, in the applicable Pricing Supplement.
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<PAGE>
Each Note will bear interest from its Original Issue Date or, except as
otherwise specified herein with respect to certain Floating Rate Notes, from
the most recent date to which interest on such Note has been paid or duly
provided for, at the annual rate, or at a rate determined pursuant to an
interest rate formula, stated therein, until the principal thereof is paid or
made available for payment. Interest will be payable on each Interest Payment
Date (except for certain Original Issue Discount Notes and except for Notes
originally issued between a Regular Record Date and an Interest Payment Date)
and at maturity or on redemption or repayment.
Interest will be payable to the person in whose name a Note is registered at
the close of business on the Regular Record Date next preceding the Interest
Payment Date; provided, however, that (i) if the Company fails to pay such
interest on such Interest Payment Date, such defaulted interest will be paid
to the person in whose name such Note is registered at the close of business
on the record date to be established for the payment of defaulted interest and
(ii) interest payable at maturity, redemption or repayment will be payable to
the person to whom principal shall be payable. The first payment of interest
on any Note originally issued between a Regular Record Date and an Interest
Payment Date will be made on the Interest Payment Date following the next
succeeding Regular Record Date to the registered owner on such next Regular
Record Date. Interest rates and interest rate formulae are subject to change
by the Company from time to time but no such change will affect any Note
theretofore issued or which the Company has agreed to issue. Unless otherwise
indicated in the applicable Pricing Supplement, the Interest Payment Dates and
the Regular Record Dates for Fixed Rate Notes shall be as described below
under "--Fixed Rate Notes". The Interest Payment Dates for Floating Rate Notes
shall be as indicated in the applicable Pricing Supplement and in such Note,
and, unless otherwise specified in the applicable Pricing Supplement, each
Regular Record Date for a Floating Rate Note will be the fifteenth day
(whether or not a Business Day) next preceding each Interest Payment Date.
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, if
necessary, to the nearest one hundred thousandth of a percentage point, with
five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or
.09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded to the nearest cent (with one-half cent being rounded upward).
The interest rate on the Notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States
Federal law of general application.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest at the annual rate specified therein
and in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, the Interest Payment Dates for the Fixed Rate
Notes will be on May 15 and November 15 of each year and the Regular Record
Dates will be on the last day of April and October of each year. Unless
otherwise specified in the applicable Pricing Supplement, interest on Fixed
Rate Notes will be computed and paid on the basis of a 360-day year of twelve
30-day months. In the event that any Interest Payment Date, the Maturity Date
or redemption or repayment date is not a Business Day (as defined below under
"--Floating Rate Notes"), payment of interest, premium, if any, or principal
payable on Fixed Rate Notes will be made on the next succeeding Business Day
and no interest shall accrue for the period from and after such Interest
Payment Date or the Maturity Date (or any redemption or repayment date) to
such next succeeding Business Day.
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FLOATING RATE NOTES
Except as provided below and unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Date (as defined below) on (a) the third Wednesday of each month or (b) on the
third Wednesday of June and December of each year or (c) on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) in the case of Floating Rate Notes
with a quarterly Interest Reset Date, on the third Wednesday of March, June,
September and December of each year; (iii) in the case of Floating Rate Notes
with a semi-annual Interest Reset Date, on the third Wednesday of two months
of each year, as specified in the applicable Pricing Supplement; and (iv) in
the case of Floating Rate Notes with an annual Interest Reset Date, on the
third Wednesday of one month of each year, as specified in the applicable
Pricing Supplement. If any Interest Payment Date (other than the Maturity Date
or any redemption or repayment date) for any Floating Rate Note would
otherwise be a day that is not a Business Day, the Interest Payment Date for
such Floating Rate Notes shall be postponed to the next day that is a Business
Day and interest shall accrue to such next succeeding Business Day, except
that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding Business Day. If the Maturity Date or any earlier redemption or
repayment date of a Floating Rate Note falls on a day that is not a Business
Day, the required payment of principal, premium, if any, or interest otherwise
payable on such date need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date such payment was due, and no interest shall accrue for the period from
and after the Maturity Date or earlier redemption or repayment date to such
next succeeding Business Day.
"Business Day" means any day that is not a Saturday or Sunday and that is
not a day on which banking institutions are generally authorized or obligated
by law to close in the State of Maryland or The City of New York.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
The applicable Pricing Supplement will specify the issue price, the interest
rate basis, the interest payment period, the Spread or Spread Multiplier, if
any, and the maximum or minimum interest rate limitation (the "Maximum
Interest Rate" or "Minimum Interest Rate"), if any, applicable to each
Floating Rate Note. In addition, such Pricing Supplement will define or
particularize for each Floating Rate Note the following terms, if applicable:
the period to maturity of the instrument or obligation on which the interest
rate formula is based (the "Index Maturity"), Initial Interest Rate (as
defined below), Interest Payment Dates, Regular Record Dates, the Interest
Determination Dates and Interest Reset Dates with respect to such Note.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (each an "Interest Reset Date"),
as specified in the applicable Pricing Supplement. The Interest Reset Date
will be, in the case of Floating Rate Notes which are reset daily, each
Business Day; in the case of Floating Rate Notes which are reset weekly, the
Wednesday of each week (except for Treasury Rate Notes which will be reset the
Tuesday of each week unless otherwise specified); in the case of Floating Rate
Notes which are reset monthly, the third Wednesday of each month; in the case
of Floating Rate Notes which are reset quarterly, the third Wednesday of
March, June, September and December; in the case of Floating Rate Notes which
are reset semi-annually, the third Wednesday of two months of each year, as
specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which are reset annually, the third Wednesday of one month of each
year, as specified in the applicable Pricing Supplement; provided, however,
that (i) the interest rate in effect
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from the Original Issue Date to the first Interest Reset Date with respect to
a Floating Rate Note (the "Initial Interest Rate") will be as set forth in the
applicable Pricing Supplement, (ii) except in the case of Floating Rate Notes
which are reset daily or weekly, the interest rate in effect for the ten
calendar days immediately prior to maturity or redemption or repayment will be
that in effect on the tenth calendar day preceding such maturity, redemption
or repayment date and (iii) in the case of Floating Rate Notes which are reset
daily or weekly, the interest rate in effect for the period beginning on the
second Business Day immediately prior to maturity or redemption or repayment
and ending on such maturity, redemption or repayment date will be that in
effect on the second Business Day preceding such maturity, redemption or
repayment date. If the Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, the Interest Reset Date for
such Floating Rate Note shall be postponed to the next day that is a Business
Day, except that in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for a CD
Rate Note (the "CD Interest Determination Date"), a Commercial Paper Rate Note
(the "Commercial Paper Interest Determination Date"), a Federal Funds Rate
Note (the "Federal Funds Interest Determination Date") or a Prime Rate Note
(the "Prime Interest Determination Date") will be the second Business Day
prior to the Interest Reset Date. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note (the "LIBOR Interest Determination Date") will be
the second London Banking Day preceding such Interest Reset Date. Unless
otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for a Treasury Rate
Note will be the day of the week in which such Interest Reset Date falls on
which Treasury bills would normally be auctioned. Treasury bills are normally
sold at auction on Monday of each week, unless that day is a legal holiday, in
which case the auction is normally held on the following Tuesday, but such
auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be
the Interest Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week. If an auction falls on a day that is an
Interest Reset Date, such Interest Reset Date will be the next following
Business Day.
Unless otherwise indicated in the applicable Pricing Supplement, interest
payments on an Interest Payment Date for a Floating Rate Note will include
interest accrued from, and including, the next preceding Interest Payment Date
in respect of which interest has been paid (or from, and including, the date
of original issue if no interest has been paid with respect to such Floating
Rate Note) to, but excluding, such Interest Payment Date. However, if the
Interest Reset Dates with respect to such Note are daily or weekly, interest
payable on any Interest Payment Date, other than interest payable on any date
on which the principal of such Note is payable, will include interest accrued
only from, and excluding, the next preceding Regular Record Date to which
interest has been paid (or from, and including, the Original Issue Date if no
interest has been paid with respect to such Floating Rate Note) to, and
including, the Regular Record Date preceding the next applicable Interest
Payment Date, except that the interest payment at maturity or upon redemption
or repayment will include interest accrued to, but excluding, such maturity
date or redemption or repayment date, as the case may be. Accrued interest
from the date of issue or from the last date to which interest has been paid
is calculated by multiplying the face amount of a Note by an accrued interest
factor. The accrued interest factor is computed by adding together the
interest factors calculated for each day from the Original Issue Date, or from
the last date to which interest has been paid, to the date for which accrued
interest is being calculated. Unless otherwise specified in the applicable
Pricing Supplement, the interest factor for each such day is computed by
dividing the interest rate applicable to such day by 360, in the cases of CD
Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes
and Prime Rate Notes or by the actual number of days in the year, in the case
of Treasury Rate Notes. The interest rate in effect on each day will be (a) if
such day is an Interest Reset Date, the interest rate with respect
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to the Interest Determination Date pertaining to such Interest Reset Date or
(b) if such day is not an Interest Reset Date, the interest rate with respect
to the Interest Determination Date pertaining to the immediately preceding
Interest Reset Date, subject in either case to any maximum or minimum interest
rate limitation referred to above and to any adjustment by a Spread or a
Spread Multiplier referred to above.
Unless otherwise provided for in the applicable Pricing Supplement, The
First National Bank of Chicago will be the Calculation Agent (the "Calculation
Agent", which term includes any successor calculation agent appointed by the
Company), and for each Interest Reset Date will determine the interest rate as
described below. The Calculation Agent will notify the Trustee of each
determination of the interest rate applicable to any such Floating Rate Note
promptly after such determination is made. The Trustee will, upon the request
of the holder of any Floating Rate Note, provide the interest rate then in
effect and, if applicable, the interest rate which will become effective as a
result of a determination made with respect to the most recent Interest
Determination Date relative to such Note. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date", where 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, the Maturity Date
or repayment or redemption date, as the case may be.
Interest Rates will be determined by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the 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, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected
Interest Rates", or any successor publication of the Board of Governors of the
Federal Reserve System ("H.15(519)") under the heading "CDs (Secondary
Market)", or, if not so published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable
certificates of deposit of the Index Maturity designated in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 p.m. Quotations for U.S. Government
Securities" (the "Composite Quotations") under the heading "Certificates of
Deposit". If such rate is not yet published in either H.15(519) or the
Composite Quotations by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate on such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 a.m., New
York City time, on such Interest Determination Date, for certificates of
deposit in the denomination of $5,000,000 with a remaining maturity closest to
the Index Maturity designated in the Pricing Supplement of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in The City
of New York selected by the Calculation Agent for negotiable certificates of
deposit of major U.S. money center banks of the highest credit standing in the
market for negotiable certificates of deposit; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the rate of interest in effect for the applicable period will be
the same as the CD Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the rate of interest payable
on the CD Rate Notes for which such CD Rate is being determined shall be the
Initial Interest Rate).
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COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the 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, the Money
Market Yield (as defined below) of the rate on that date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial
Paper". In the event that such rate is not published prior to 9:00 a.m., New
York City time, on the Calculation Date, then the Commercial Paper Rate shall
be the Money Market Yield of the rate on such Interest Determination Date for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper". If by 3:00 p.m., New York
City time, on such Calculation Date such rate is not yet available in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate shall be the
Money Market Yield of the arithmetic mean of the offered rates as of 11:00
a.m., New York City time, on such Interest Determination Date of three leading
dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper of the specified Index Maturity, placed
for an industrial issuer whose bond rating is "AA", or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting offered rates
as mentioned in the preceding sentence, the rate of interest in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
MONEY MARKET YIELD = 100 X ((D X 360)/(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 Index Maturity.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any 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 so published by 9:00 a.m., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If such rate is not yet published in either
H.15(519) or the Composite Quotations by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate for such Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight Federal funds as of 11:00 a.m., New York City time,
on such Interest Determination Date arranged by three leading brokers of
Federal funds transactions in The City of New York selected by the Calculation
Agent; provided, however, that if the brokers selected as aforesaid by the
Calculation Agent are not quoting as set forth above, the rate of interest in
effect for the applicable period will be the same as the Federal Funds Rate
for the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the Federal Funds Rate
Notes for which such Federal Funds Rate is being determined shall be the
Initial Interest Rate).
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LIBOR NOTES
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Reset Date will be determined by the Calculation Agent as
follows:
(a) LIBOR will be, as specified in the applicable LIBOR Note, either
(i) the arithmetic mean of the offered rates for deposits in U.S.
dollars having the Index Maturity designated in such LIBOR Note,
commencing on the second London Business Day immediately following that
Interest Determination Date, that appear on the Reuters Screen LIBO
Page as of 11:00 a.m., London time, on that Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen
LIBO Page ("LIBOR Reuters") or (ii) the rate for deposits in U.S.
dollars having the Index Maturity designated in such LIBOR Note,
commencing on the second London Business Day immediately following that
Interest Determination Date, that appears on the Telerate Page 3750, as
of 11:00 a.m., London time, on that Interest Determination Date ("LIBOR
Telerate"). "Reuters Screen LIBO Page" means the display designated as
page "LIBO" on the Reuters Monitor Money Rates Service (or such other
page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates of major banks). "Telerate
Page 3750" means the display designated as page "3750" on the Telerate
Service (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the
British Bankers' Association for the purpose of displaying London
interbank offered rates for U.S. dollar deposits). If neither LIBOR
Reuters nor LIBOR Telerate is specified in such LIBOR Note, LIBOR will
be determined as if LIBOR Telerate had been specified. If fewer than
two offered rates appear on the Reuters Screen LIBO Page, or if no rate
appears on the Telerate Page 3750, as applicable, LIBOR in respect of
that Interest Determination Date will be determined as if the parties
had specified the rate described in (b) below.
(b) With respect to an Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page, as
specified in (a) (i) above, or on which no rate appears on Telerate
Page 3750, as specified in (a) (ii) above, as applicable, LIBOR will be
determined on the basis of the rates at which deposits in U.S. dollars
having the Index Maturity designated in such LIBOR Note are offered at
approximately 11:00 a.m., London time, on that Interest Determination
Date by four major banks in the London interbank market selected by the
Calculation Agent ("LIBOR Reference Banks") to prime banks in the
London interbank market commencing on the second London Business Day
immediately following that Interest Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time. The
Calculation Agent will request the principal London office of each of
the LIBOR Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, LIBOR in respect of that
Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR in respect
of that Interest Determination Date will be the arithmetic mean of the
rates quoted at approximately 11:00 a.m., New York City time, on that
Interest Determination Date by three major banks in The City of New
York selected by the Calculation Agent for loans in U.S. dollars to
leading European banks having the Index Maturity designated in such
LIBOR Note, commencing on the second London Business Day immediately
following that Interest Determination Date and in a principal amount
equal to an amount of not less than $1,000,000 that is representative
of a single transaction in such market at such time; provided, however,
that if the banks selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, LIBOR with respect to such
Interest Determination Date will be the rate of LIBOR in effect on such
date.
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PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set
forth in H.15(519) for such date opposite the caption "Bank Prime Loan". If
such rate is not yet published by 9:00 a.m., New York City time, on the
Calculation Date, the Prime Rate for such Interest Determination Date will be
the arithmetic mean of the rates of interest publicly announced by each bank
named on the display designated as page "NYMF" on the Reuters Monitor Money
Rate Service (or such other page as may replace the NYMF page on such service
for the purpose of displaying prime rates of major New York City banks (the
"Reuters Screen NYMF Page")) as such bank's prime rate or base lending rate as
in effect for such Interest Determination Date as quoted on the Reuters Screen
NYMF Page on such Interest Determination Date, or, if fewer than four such
rates appear on the Reuters Screen NYMF Page for such Interest Determination
Date, the 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 360 as of the close
of business on such Interest Determination Date by at least two of the three
major money center banks in The City of New York selected by the Calculation
Agent from which quotations are requested. If fewer than two quotations are
provided, the Prime Rate shall be calculated by the Calculation Agent and
shall be determined as the arithmetic mean on the basis of the prime rates in
The City of New York by the appropriate number of substitute banks or trust
companies organized and doing business under the laws of the United States, or
any State thereof, in each case having total equity capital of at least
$500,000,000 and being subject to supervision or examination by Federal or
State authority, selected by the Calculation Agent to quote such rate or
rates.
If in any month or two consecutive months the Prime Rate is not published in
H.15(519) and the banks or trust companies selected as aforesaid are not
quoting as mentioned in the preceding paragraph, the "Prime Rate" for such
Interest Reset Period will be the same as the Prime Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Prime Rate Notes for which the
Prime Rate is being determined shall be the Initial Interest Rate). If this
failure continues over three or more consecutive months, the Prime Rate for
each succeeding Interest Determination Date until the maturity or redemption
of such Prime Rate Notes or, if earlier, until this failure ceases, shall be
LIBOR determined as if such Prime Rate Notes were LIBOR Notes, and the Spread,
if any, shall be the number of basis points specified in the applicable
Pricing Supplement as the "Alternate Rate Event Spread".
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such date of direct obligations of the United
States ("Treasury Bills") having the Index Maturity designated in the
applicable Pricing Supplement, as published in H.15(519) under the heading
"Treasury Bills--auction average (investment)" or, if not so published by 9:00
a.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination
Date (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
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applicable Pricing Supplement are not published or reported as provided above
by 3:00 p.m., New York City time, on such Calculation Date or if no such
auction is held on such Interest Determination Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Interest Determination Date, of three leading primary U.S. government
securities dealers selected by the Calculation Agent for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity designated in
the applicable Pricing Supplement; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting bid rates as
mentioned in this sentence, the Treasury Rate for such Interest Reset Date
will be the same as the Treasury Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the Treasury Rate Notes for which the Treasury Rate is
being determined shall be the Initial Interest Rate).
ORIGINAL ISSUE DISCOUNT NOTES
Original Issue Discount Notes are Notes issued at a discount from the
principal amount payable at maturity and which may be considered to be issued
with original issue discount which must be included in income for United
States Federal income tax purposes at a constant rate. Unless otherwise
specified in the applicable Pricing Supplement, if the principal of any
Original Issue Discount Note is declared to be due and payable immediately, it
is anticipated that either (a) as described under "Description of the
Securities--Events of Default" in the accompanying Prospectus, or (b) pursuant
to any redemption, in either such case the amount of principal due and payable
with respect to such Note shall be limited to the Issue Price of such Note
(plus, in the case of a redemption, the premium to par, if any, specified in
the applicable Pricing Supplement), plus the original issue discount amortized
with respect to such Note from the Original Issue Date to the date of
acceleration or redemption, which amortization shall be calculated using the
"constant yield method" (computed in accordance with the rules under the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder, in effect on the date of acceleration or redemption) plus, in the
case of a redemption, the premium, if any, specified in the applicable Pricing
Supplement.
OPTIONAL REDEMPTION
The Pricing Supplement will indicate either that the Notes cannot be
redeemed prior to maturity or will indicate the terms on which the Notes will
be redeemable at the option of the Company. Notice of redemption shall be
provided by mailing a notice of such redemption to each holder by first class
mail, postage prepaid, at least 30 days and not more than 60 days prior to the
date fixed for redemption to the respective address of each holder as that
address appears upon the books of the Company.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its Maturity Date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment.
In order for such a Note to be repaid, the Trustee must receive at least 30
days but not more than 60 days prior to the repayment, (i) the Note with the
form entitled "Option to Elect Repayment" on the reverse of the Note duly
completed or (ii) a telegram, facsimile transmission or a letter from a member
of a national securities exchange or a member of the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States which must set forth the name of the holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid,
the certificate number or a description of the tenor and terms of the Note, a
statement that
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the option to elect repayment is being exercised thereby and a guarantee that
the Note to be repaid, together with the duly completed form entitled "Option
to Elect Repayment" on the reverse of the Note, will be received by the
Trustee not later than the fifth Business Day after the date of such telegram,
facsimile transmission or letter; provided, however, that such telegram,
facsimile transmission or letter from a member of a national securities
exchange or a member of the NASD, or a commercial bank or trust company in the
United States shall only be effective in such case, if such Note and form duly
completed are received by the Trustee by such fifth Business Day. Exercise of
the repayment option by the holder of a Note will be irrevocable. The
repayment option may be exercised by the holder of a Note for less than the
entire principal amount of the Note but, in that event, the principal amount
of the Note remaining outstanding after repayment must be an authorized
denomination.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes purchased by the Company may, at its discretion, be held,
resold or surrendered to the registrar for cancellation.
BOOK-ENTRY SYSTEM
As set forth in the applicable Pricing Supplement, Notes may be issued in
the form of one or more fully registered Book-Entry Notes that will be
deposited with the Depositary or a nominee thereof. In such case, one or more
Book-Entry Notes will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of outstanding Notes to
be represented by such Book-Entry Note. Unless and until it is exchanged in
whole or in part for Notes in definitive form, a Book-Entry Note may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor of the
Depositary or a nominee of such successor.
Upon the issuance of a Book-Entry Note, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts
of the Notes represented by such Book-Entry Note to the accounts of persons
that have accounts with the Depositary ("participants"). The accounts to be
credited shall be designated by any underwriters or agents participating in
the distribution of such Notes. Ownership of beneficial interests in a Book-
Entry Note will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in such Book-Entry
Note will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the Depositary for such Book-Entry Note
(with respect to interests of participants) or by participants or persons that
hold through participants (with respect to interests of persons other than
participants).
So long as the Depositary, or its nominee, is the registered owner of such
Book-Entry Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Book-
Entry Note for all purposes under the Indenture. Except as set forth below,
owners of beneficial interests in a Book-Entry Note will not be entitled to
have the Notes represented by such Book-Entry Note registered in their names,
will not receive or be entitled to receive physical delivery of such Notes in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Principal, premium, if any, and interest payments on Notes represented by a
Book-Entry Note registered in the name of the Depositary or its nominee will
be made to the Depositary or its nominee, as the case may be, as the
registered owner of such Book-Entry Note. None of the Company, the Trustee or
any paying agent for such Notes will have any responsibility or liability for
any aspect of the records relating to or payments made on account of
beneficial ownership interests in such Book-Entry Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
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The Company expects that the Depositary, with respect to any Notes
represented by a Book-Entry Note, upon receipt of any payment of principal,
premium or interest, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Book-Entry Note as shown on the records of the
Depositary. The Company also expects that payments by participants to owners
of beneficial interests in such Book-Entry Note held through such participants
will be governed by standing instructions and customary practices, as is now
the case with the securities held for the accounts of customers registered in
"street names" and will be the responsibility of such participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within
90 days, the Company will issue Notes in definitive form in exchange for each
Book-Entry Note. In addition, the Company may at any time and in its sole
discretion determine not to have any of the Notes represented by one or more
Book-Entry Notes and, in such event, will issue Notes in definitive form in
exchange for all of the Book-Entry Notes representing such Notes.
Upon issuance, all Fixed Rate Book-Entry Notes having the same Original
Issue Date, interest rate, if any, ranking and Maturity Date will be
represented by a single global Note, and all Floating Rate Book-Entry Notes
having the same Original Issue Date, Initial Interest Rate, Base Rate,
Interest Period, Interest Payment Dates, Interest Reset Dates, Index Maturity,
Spread or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, and Maturity Date will be represented by a single
global Note unless, in each such case, such Notes are to be represented by a
master Note. Certificated Notes will not be exchangeable for Book-Entry Notes
and, except under the circumstances described above, Book-Entry Notes will not
be exchangeable for Certificated Notes and will not otherwise be issuable as
Certificated Notes.
GOVERNING LAW AND JUDGMENTS
The Indenture and Notes will be governed by and construed in accordance with
the laws of the State of New York.
UNITED STATES TAX CONSIDERATIONS
The following is a summary of the principal United States Federal income tax
consequences of ownership of Notes. It deals only with Notes held as capital
assets by initial purchasers, and not with special classes of holders, such as
dealers in securities or currencies, banks, tax-exempt organizations, life
insurance companies, persons that hold Notes that are a hedge or that are
hedged against currency risks or that are part of a straddle or conversion
transaction, or persons whose functional currency is not the U.S. dollar.
Moreover, the summary deals only with Notes that are due to mature 30 years or
less from the date on which they are issued. The United States Federal income
tax consequences of ownership of Notes that are due to mature more than 30
years from their date of issue will be discussed in an applicable Pricing
Supplement. The summary is based on the Code, its legislative history,
existing and proposed regulations thereunder, published rulings and court
decisions, all as currently in effect and all subject to change at any time,
perhaps with retroactive effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of ownership of Notes.
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UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest on a Note, whether payable in U.S. dollars or a currency, composite
currency or basket of currencies other than U.S. dollars (a "foreign
currency"), other than interest on a "Discount Note" that is not "qualified
stated interest" (each as defined below under "--Original Issue Discount--
General"), will be taxable to a United States Holder as ordinary income at the
time it is received or accrued, depending on the holder's method of accounting
for tax purposes. A United States Holder is a beneficial owner who or that is
(i) a citizen or resident of the United States, (ii) a domestic corporation or
(iii) otherwise subject to United States Federal income taxation on a net
income basis in respect of the Note.
If an interest payment is denominated in, or determined by reference to, a
foreign currency, the amount of income recognized by a cash basis United
States Holder will be the U.S. dollar value of the interest payment, based on
the exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined
by reference to, a foreign currency in accordance with either of two methods.
Under the first method, the amount of income accrued will be based on the
average exchange rate in effect during the interest accrual period (or, with
respect to an accrual period that spans two taxable years, the part of the
period within the taxable year).
Under the second method, the United States Holder may elect to determine the
amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. Additionally, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Any such election will apply to all
debt instruments held by the United States Holder at the beginning of the
first taxable year to which the election applies or thereafter acquired by the
United States Holder, and will be irrevocable without the consent of the
Internal Revenue Service (the "Service").
In the case of an accrual basis United States Holder, upon receipt of an
interest payment (including a payment attributable to accrued but unpaid
interest upon the sale or retirement of a Note) denominated in, or determined
by reference to, a foreign currency, the United States Holder will recognize
ordinary income or loss measured by the difference between the exchange rate
as determined above and the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars.
ORIGINAL ISSUE DISCOUNT
GENERAL. A Note, other than a Note with a term of one year or less (a
"short-term Note"), will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the Note's "stated redemption price at
maturity" over its issue price is more than a "de minimis amount" (as defined
below). Generally, the issue price of a Note will be the first price at which
a substantial amount of Notes included in the issue of which the Note is a
part is sold to other than bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers. The stated redemption price at maturity of a Note is the total of
all payments provided by the Note that are not payments of "qualified stated
interest". A qualified stated interest payment is generally any one of a
series of stated interest payments on a Note that are unconditionally payable
at least annually at a single fixed rate (with certain exceptions for lower
rates paid during some periods) applied to the
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outstanding principal amount of the Note. Special rules for "Variable Rate
Notes" (as defined below under "--Original Issue Discount--Variable Rate
Notes") are described below under "--Original Issue Discount--Variable Rate
Notes".
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of one percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless
the election described below under "--Election to Treat All Interest as
Original Issue Discount" is made, a United States Holder of a Note with de
minimis original issue discount must include such de minimis original issue
discount in income as stated principal payments on the Note are made. The
includible amount with respect to each such payment (i) will equal the product
of the total amount of the Note's de minimis original issue discount and a
fraction, the numerator of which is the amount of the principal payment made
and the denominator of which is the stated principal amount of the Note and
(ii) is treated as gain recognized on retirement of the Note.
United States Holders of Discount Notes having a maturity of more than one
year from their date of issue must include original issue discount ("OID") in
income calculated on a constant-yield method before the receipt of cash
attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Note. The amount of
OID includible in income by a United States Holder of a Discount Note is the
sum of the daily portions of OID with respect to the Discount Note for each
day during the taxable year or portion of the taxable year on which the United
States Holder holds such Discount Note ("accrued OID"). The daily portion is
determined by allocating to each day in any "accrual period" a pro rata
portion of the OID allocable to that accrual period. Accrual periods with
respect to a Note may be of any length selected by the United States Holder
and may vary in length over the term of the Note as long as (i) no accrual
period is longer than one year and (ii) each scheduled payment of interest or
principal on the Note occurs on either the final or first day of an accrual
period. The amount of OID allocable to an accrual period equals the excess of
(a) the product of the Discount Note's adjusted issue price at the beginning
of the accrual period and such Note's yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (b) the sum of the payments of
qualified stated interest on the Note allocable to the accrual period. The
"adjusted issue price" of a Discount Note at the beginning of any accrual
period is the issue price of the Note increased by (x) the amount of accrued
OID for each prior accrual period and decreased by (y) the amount of any
payments previously made on the Note that were not qualified stated interest
payments. For purposes of determining the amount of OID allocable to an
accrual period, if an interval between payments of qualified stated interest
on the Note contains more than one accrual period, the amount of the qualified
stated interest payment at the end of the interval (including any qualified
stated interest that is payable on the first day of the accrual period
immediately following the interval) is allocated pro rata on the basis of
relative lengths to each accrual period in the interval, and the adjusted
issue price at the beginning of each accrual period in the interval must be
increased by the amount of any qualified stated interest that has accrued
prior to the first day of the accrual period but that is not payable until the
end of the interval. The amount of OID allocable to an initial short accrual
period may be computed using any reasonable method if all other accrual
periods other than a final short accrual period are of equal length. The
amount of OID allocable to the final accrual period is the difference between
(x) the amount payable at the maturity of the Note (other than any payments of
qualified stated interest) and (y) the Note's adjusted issue price as of the
beginning of the final accrual period.
ACQUISITION PREMIUM. A United States Holder that purchases a Note for an
amount less than or equal to the sum of all amounts payable on the Note after
the purchase date other than payments of qualified stated interest but in
excess of its adjusted issue price (any such excess being "acquisition
premium") and that does not make the election described below under "--
Election to Treat All Interest
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as Original Issue Discount" is permitted to reduce the daily portions of OID
by a fraction, the numerator of which is the excess of the United States
Holder's adjusted basis in the Note immediately after its purchase over the
adjusted issue price of the Note, the denominator of which is the excess of
the sum of all amounts payable on the Note after the purchase date, other than
payments of qualified stated interest, over the Note's adjusted issue price.
MARKET DISCOUNT. A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount
for which a United States Holder purchased the Note is less than the Note's
issue price (as determined above under "--Original Issue Discount--General")
and (ii) the Note's stated redemption price at maturity (or, in the case of a
Discount Note, the Note's "revised issue price") exceeds the amount for which
the United States Holder purchased the Note by at least 1/4 of one percent of
such Note's stated redemption price at maturity or revised issue price,
respectively, multiplied by the number of complete years to the Note's
maturity. If such excess is not sufficient to cause the Note to be a market
Discount Note, then such excess constitutes "de minimis market discount". The
Code provides that, for these purposes, the "revised issue price" of a Note
generally equals its issue price, increased by the amount of any OID that has
accrued on the Note.
Any gain recognized on the maturity or disposition of a Market Discount Note
will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a United
States Holder of a Market Discount Note may elect to include market discount
in income currently over the life of the Note. Such an election shall apply to
all debt instruments with market discount acquired by the electing United
States Holder on or after the first day of the first taxable year to which the
election applies. This election may not be revoked without the consent of the
Service.
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on
a constant-yield method. Such an election shall apply only to the Note with
respect to which it is made and may not be revoked. A United States Holder of
a Market Discount Note that does not elect to include market discount in
income currently generally will be required to defer deductions for interest
on borrowings allocable to such Note in an amount not exceeding the accrued
market discount on such Note until the maturity or disposition of such Note.
PRE-ISSUANCE ACCRUED INTEREST. If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the
first stated interest payment on the Note is to be made within one year of the
Note's issue date and (iii) the payment will equal or exceed the amount of
pre-issuance accrued interest, then the United States Holder may elect to
decrease the issue price of the Note by the amount of pre-issuance accrued
interest. In that event, a portion of the first stated interest payment will
be treated as a return of the excluded pre-issuance accrued interest and not
as an amount payable on the Note.
NOTES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION. In general, if
a Note provides for an alternative payment schedule or schedules applicable
upon the occurrence of a contingency or contingencies and the timing and
amounts of the payments that comprise each payment schedule are known as the
issue date, the yield and maturity of the Note are determined by assuming that
the payments will be made according to the Note's stated payment schedule. If,
however, based on all the facts and circumstances as of the issue date, it is
more likely than not that the Note's stated payment schedule will not occur,
then, in general, the yield and maturity of the Note are computed based on the
payment schedule most likely to occur.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company has an unconditional
option or options to redeem a Note, or the Holder has an unconditional option
or options to cause a Note to be repurchased, prior to the Note's stated
maturity, then (i) in the case of an option or options of the Company, the
Company will be deemed to
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exercise or not exercise an option or combination of options in the manner
that minimizes the yield on the Note and (ii) in the case of an option or
options of the Holder, the Holder will be deemed to exercise or not exercise
an option or combination of options in the manner that maximizes the yield on
the Note. For purposes of those calculations, the yield on the Note is
determined by using any date on which the Note may be redeemed or repurchased
as the maturity date and the amount payable on such date in accordance with
the terms of the Note as the principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the
Note is repaid as a result of a change in circumstances and solely for
purposes of the accrual of OID, the yield and maturity of the Note are
redetermined by treating the Note as reissued on the date of the change in
circumstances for an amount equal to the Note's adjusted issue price on that
date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. A United States
Holder may elect to include in gross income all interest that accrues on a
Note using the constant-yield method described above under the heading "--
Original Issue Discount--General", with the modifications described below. For
purposes of this election, interest includes stated interest, OID, de minimis
original issue discount, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium (described
below under "--Notes Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
United States Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing United States Holder, and no payments on the Note will be treated
as payments of qualified stated interest. This election will generally apply
only to the Note with respect to which it is made and may not be revoked
without the consent of the Service. If this election is made with respect to a
Note with amortizable bond premium, then the electing United States Holder
will be deemed to have elected to apply amortizable bond premium against
interest with respect to all debt instruments with amortizable bond premium
(other than debt instruments the interest on which is excludible from gross
income) held by the electing United States Holder as of the beginning of the
taxable year in which the Note with respect to which the election is made is
acquired or thereafter acquired. The deemed election will respect to
amortizable bond premium may not be revoked without the consent of the
Service.
If the election to apply the constant-yield method to all interest on a Note
is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under "--
Original Issue Discount--Market Discount" to include market discount in income
currently over the life of all debt instruments held or thereafter acquired by
such United States Holder.
VARIABLE RATE NOTES. A "Variable Rate Note" is a Note that: (i) has an issue
price that does not exceed the total noncontingent principal payments by more
than the lesser of (1) the product of (x) the total noncontingent principal
payments, (y) the number of complete years to maturity from the issue date and
(z) .015, or (2) 15 percent of the total noncontingent principal payments, and
(ii) provides for stated interest compounded or paid at least annually at (1)
one or more "qualified floating rates", (2) a single fixed rate and one or
more qualified floating rates, (3) a single "objective rate" or (4) a single
fixed rate and a single objective rate that is a "qualified inverse floating
rate".
A qualified floating rate or objective rate in effect at any time during the
term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no
earlier than three months prior to the first day on which that value is in
effect and no later than one year following that first day.
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A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Note is denominated or (ii) it is equal to the product of such a rate and
either (a) a fixed multiple that is greater than zero but not more than 1.35,
or (b) a fixed multiple greater than zero but not more than 1.35, increased or
decreased by a fixed rate. A rate is not a qualified floating rate, however,
if the rate is subject to certain restrictions (including caps, floors,
governors, or other similar restrictions) unless such restrictions are fixed
throughout the term of the Note or are not reasonably expected to
significantly affect the yield on the Note.
An "objective rate" is a rate, other than a qualified floating rate, that is
determined using a single, fixed formula and that is based on (i) one or more
qualified floating rates, (ii) one or more rates each of which would be a
qualified floating rate for a debt instrument denominated in a currency other
than the currency in which the debt instrument is denominated, (iii) the yield
or changes in the price of one or more actively traded items of personal
property other than stock or debt of the issuer or a related party, or (iv) a
combination of objective rates. A variable rate is not an objective rate,
however, if it is reasonable expected that the average value of the rate
during the first half of the 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 Note's term. An objective rate is a "qualified inverse
floating rate" if (i) the rate is equal to a fixed rate minus a qualified
floating rate, and (ii) the variations in the rate can reasonably be expected
to inversely reflect contemporaneous variations in the cost of newly borrowed
funds. Under these rules, Commercial Paper Rate Notes, Prime Rate Notes, LIBOR
Notes, Treasury Rate Notes, CD Rate Notes and Federal Funds Rate Notes will
generally be treated as Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a single
qualified floating rate or objective rate that is unconditionally payable at
least annually, all stated interest on the Note is qualified stated interest
and the amount of OID, if any, is determined under the rules applicable to
fixed rate debt instruments by assuming that the variable rate is a fixed rate
equal to, in the case of a qualified floating rate or qualified inverse
floating rate, the value as of the issue date of the qualified floating rate
or qualified inverse floating rate, or, in the case of any other objective
rate, a fixed rate that reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or objective rate, or at a single fixed rate (other
than at a single fixed rate for an initial period), the amount of interest and
OID accruals on the Note are generally determined by (i) determining a fixed
rate substitute for each variable rate provided under the Variable Rate Note
(generally, the value of each variable rate as of the issue date or, in the
case of an objective rate that is not a qualified inverse floating rate, a
rate that reflects the reasonably expected yield on the Note), (ii)
constructing the equivalent fixed rate debt instrument (using the fixed rate
substitute described above), (iii) determining the amount of qualified stated
interest and OID with respect to the equivalent fixed rate debt instrument,
and (iv) making the appropriate adjustments for actual variable rates during
the applicable accrual period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than
the fixed rate. The qualified floating rate (or qualified inverse floating
rate) replacing the fixed rate must be such that the fair market value of the
Variable Rate Note as of the issue date would be approximately the same as the
fair market value of an otherwise identical debt instrument that provides for
the qualified floating rate (or qualified inverse floating rate) rather than
the fixed rate.
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SHORT-TERM NOTES. In general, an individual or other cash basis United
States Holder of a short-term Note is not required to accrue OID (as specially
defined below for the purposes of this paragraph) for United States Federal
income tax purposes unless it elects to do so (but may be required to include
any stated interest in income as the interest is received). Accrual basis
United States Holders and certain other United States Holders, including
banks, regulated investment companies, dealers in securities, common trust
funds, United States Holders who hold Notes as part of certain identified
hedging transactions, certain pass-thru entities and cash basis United States
Holders who so elect, are required to accrue OID on short-term Notes on either
a straight-line basis or under the constant-yield method (based on daily
compounding), at the election of the United States Holder. In the case of a
United States Holder not required and not electing to include OID in income
currently, any gain realized on the sale or retirement of the short-term Note
will be ordinary income to the extent of the OID accrued on a straight-line
basis (unless an election is made to accrue the OID under the constant-yield
method) through the date of sale or retirement. United States Holders who are
not required and do not elect to accrue OID on short-term Notes will be
required to defer deductions for interest on borrowings allocable to short-
term Notes in an amount not exceeding the deferred income until the deferred
income is realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Note, including stated interest, are
included in the short-term Note's stated redemption price at maturity.
FOREIGN CURRENCY DISCOUNT NOTES. OID for any accrual period on a Note
denominated in a foreign currency will be determined in the foreign currency
and then translated into U.S. dollars in the same manner as stated interest
accrued by an accrual basis United States Holder, as described under "--
Payments of Interest". Upon receipt of an amount attributable to OID (whether
in connection with a payment of interest or the sale or retirement of a Note),
a United States Holder may recognize ordinary income or loss.
NOTES PURCHASED AT A PREMIUM
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium",
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. In the case of a Foreign Currency Note, bond premium
will be computed in units of the foreign currency, and amortizable bond
premium will reduce interest income in units of the foreign currency. At the
time amortized bond premium offsets interest income, exchange gain or loss
(taxable as ordinary income or loss) is realized measured by the difference
between exchange rates at that time and at the time of the acquisition of the
Notes. Any election to amortize bond premium shall apply to all bonds (other
than bonds the interest on which is excludible from gross income) held by the
United States Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the United States Holder, and is
irrevocable without the consent of the Service. See also "--Original Issue
Discount--Election to Treat All Interest as Original Issue Discount".
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the United States Holder's income with respect to the
Note and the amount, if any, of income attributable to de minimis original
issue discount and de minimis market discount included in the United States
Holder's income with respect to the Note, and reduced by (i) the amount of any
payments that are not qualified stated interest payments, and (ii) the amount
of any amortizable bond premium applied to reduce interest on the Note. The
U.S. dollar cost of a Note purchased with a foreign currency will generally be
the U.S. dollar value
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of the purchase price on the date of purchase or, in the case of Notes traded
on an established securities market, as defined in the applicable treasury
regulations promulgated under the Code ("Treasury Regulations"), that are
purchased by a cash basis United States Holder (or an accrual basis United
States Holder that so elects), on the settlement date for the purchase.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on a
sale or retirement and the tax basis of the Note. The amount realized on a
sale or retirement for an amount in foreign currency will be the U.S. dollar
value of such amount on the date of sale or retirement or, in the case of
Notes traded on an established securities market, as defined in the applicable
Treasury Regulations, sold by a cash basis United States Holder (or an accrual
basis United States Holder that so elects), on the settlement date for the
sale. Except to the extent described above under "--Original Issue Discount--
Short-Term Notes" or "--Original Issue Discount--Market Discount" or described
in the next succeeding paragraph or attributable to accrued but unpaid
interest, gain or loss recognized on the sale or retirement of a Note will be
capital gain or loss and will be long-term capital gain or loss if the Note
was held for more than one year.
Gain or loss recognized by a United States Holder on the sale or retirement
of a Note that is attributable to changes in exchange rates will be treated as
ordinary income or loss. However, exchange gain or loss is taken into account
only to the extent of total gain or loss realized on the transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on a Note or on the sale or retirement
of a Note will have a tax basis equal to its U.S. dollar value at the time
such interest is received or at the time of such sale or retirement. Foreign
currency that is purchased will generally have a tax basis equal to the U.S.
dollar value of the foreign currency on the date of purchase. Any gain or loss
recognized on a sale or other disposition of a foreign currency (including its
use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who is a nonresident alien individual, or a foreign corporation,
partnership, estate or trust, provided such individual or foreign corporation,
partnership, estate or trust is not subject to United States Federal income
tax on a net income basis in respect of increase or gain from a Note. This
discussion assumes that the Note is not subject to the rules of Section
871(h)(4)(A) of the Code (relating to interest payments that are determined by
reference to the income, profits, changes in the value of property or other
attributes of the debtor or a related).
Under present United States Federal income and estate tax law and subject to
the discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest (including OID)
by the Company or any of its paying agents to any holder of a Note that is
a United States Alien Holder will not be subject to United States Federal
withholding tax if, in the case of interest or OID, (a) the beneficial
owner of the Note does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, (b) the beneficial owner of the Note is not a controlled
foreign corporation that is related to the Company through stock ownership,
and (c) either (A) the beneficial owner of the Note certifies to the
Company or its agent, under penalties of perjury, that it is not a United
States Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers'
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securities in the ordinary course of its trade or business (a "financial
institution") and holds the Note certifies to the Company or its agent
under penalties of perjury that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof;
(ii) a United States Alien Holder of a Note will not be subject to United
States Federal withholding tax on any gain realized on the sale or exchange
of a Note; and
(iii) a Note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's
gross estate for purposes of the United States Federal estate tax as a
result of the individual's death (a) if the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and (b) the income on the
Note would not have been effectively connected with a United States trade
or business of the individual at the individual's death.
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of
a Note before maturity within the United States to, and to the accrual of OID
on a Discount Note with respect to, non-corporate United States Holders, and
"backup withholding" at a rate of 31% will apply to such payments and to
payments of OID if the United States Holder fails to provide an accurate
taxpayer identification number or to report all interest and dividends
required to be shown on its federal income tax returns.
UNITED STATES ALIEN HOLDERS
Information reporting and backup withholding will not apply to payments of
principal, premium (if any) and interest (including OID) made by the Company
or a paying agent to a United States Alien Holder on a Note if the
certification described in clause (i)(c) under "United States Alien Holders"
above is received, provided that the payor does not have actual knowledge that
the holder is a United States person.
Payments of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Note to or through the United States office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
PLAN OF DISTRIBUTION
Under the terms of the Distribution Agreement, dated as of February 24, 1995
(the "Distribution Agreement"), the Notes are being offered on a continuing
basis by the Company through Goldman, Sachs & Co. and such other agents which
are designated by the Company from time to time (the "Agents"), each of which
has agreed to use its reasonable best efforts to solicit purchases of the
Notes. The Company will pay each Agent a commission ranging (except as
otherwise provided in a Pricing Supplement with respect to certain Original
Issue Discount Notes) from 0.125% to 1.000% of the principal amount of each
Note, depending on its maturity, sold through such Agent. The Company will
have the sole right to accept offers to purchase Notes and may reject any such
offer, in whole or in
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<PAGE>
part. Each Agent shall have the right, in its discretion reasonably exercised,
to reject any offer to purchase Notes received by it, in whole or in part.
The Company also may sell Notes to any Agent, acting as principal, for
resale to one or more investors or other purchasers at varying prices related
to prevailing market prices at the time of such resale or otherwise, as
determined by such Agent. The Agents may sell Notes to any dealer at a
discount and, unless otherwise indicated in the applicable Pricing Supplement,
such discount allowed to any dealer may include all or part of the discount to
be received from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased
by such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
The Notes may also be sold by the Company directly to investors (other than
broker-dealers) in those jurisdictions in which the Company is permitted to do
so. No commission will be paid on Notes sold directly by the Company.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify the Agents against certain liabilities, including liabilities under
the Act. The Company has agreed to reimburse the Agents for certain expenses.
Each of the Agents may from time to time purchase and sell Notes in the
secondary market, but is not 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.
The Agents do not intend to confirm sales to accounts over which they
exercise discretionary authority.
Goldman, Sachs & Co. has rendered financial advisory services to the Company
from time to time and has received customary fees for its services. From time
to time the other Agents and certain of their affiliates have engaged, and may
in the future engage, in transactions with, and perform services for, the
Company and its affiliates in the ordinary course of business.
VALIDITY OF THE NOTES
The validity of the Notes offered hereby will be passed upon for the Company
by Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York, and for the Agents by Sullivan
& Cromwell, New York, New York. Fried, Frank, Harris, Shriver & Jacobson and
Sullivan & Cromwell will rely as to all matters of Maryland law upon the
opinion of Richard G. McCauley, Esq., Senior Vice-President, General Counsel
and Secretary of the Company. The opinions of Fried, Frank, Harris, Shriver &
Jacobson and Sullivan & Cromwell will be conditioned upon, and subject to,
certain assumptions regarding, future action required to be taken by the
Company and the Trustee in connection with the issuance and sale of any
particular Note, the specific forms of the Notes and other matters which may
affect the validity of the Notes but which cannot be ascertained on the date
of such opinions. As of December 31, 1994, Mr. McCauley was the direct owner
of 105,037 shares of the Company's Common Stock (excluding shares of the
Company's Common Stock held in his account under the Company's 401(k) Savings
Plan), certain family members owned 21,295 shares (as to which shares he
disclaims beneficial ownership) and he held options to purchase 112,500
shares, of which options to purchase 39,500 shares were presently exercisable.
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THE ROUSE COMPANY
DEBT SECURITIES
----------------
The Company may from time to time offer Debt Securities consisting of
debentures, notes and/or other unsecured evidences of indebtedness in one or
more series at an aggregate initial offering price not to exceed $150,000,000.
The Debt Securities may be offered as separate series in amounts, at prices
and on terms to be determined at the time of sale. The accompanying Prospectus
Supplement sets forth with regard to the Debt Securities in respect of which
this Prospectus is being delivered the title, aggregate principal amount,
denominations (which may be in United States dollars, in any other currency or
in composite currencies), maturity, rate, if any (which may be fixed or
variable), and time of payment of any interest, any terms for redemption at
the option of the Company or the holder, any terms for sinking fund payments,
any listing on a securities exchange and the initial public offering price and
any other terms in connection with the offering and sale of such Debt
Securities.
The Company may sell Debt Securities to or through underwriters, and also
may sell Debt Securities directly to other purchasers or through agents. The
accompanying Prospectus Supplement sets forth the names of any underwriters or
agents involved in the sale of the Debt Securities in respect of which this
Prospectus is being delivered, the principal amounts, if any, to be purchased
by underwriters and the compensation, if any, of such underwriters or agents.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
----------------
The date of this Prospectus is February 10, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBT
SECURITIES 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.
AVAILABLE INFORMATION
The Rouse Company (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
and information statements and other information filed with the Commission can
be inspected and copied at the Public Reference Room of the Commission, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and its
regional offices located at Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661; and 7 World Trade Center, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Room of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"). This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents filed with the Commission: its Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, its Quarterly Reports on Form 10-
Q for the quarters ended March 31, 1994, June 30, 1994 and September 30, 1994
and its Report by Issuer of Securities Quoted on NASDAQ Interdealer Quotation
System on Form 10-C, filed January 10, 1995.
All other documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Debt Securities shall be
deemed incorporated by reference in this Prospectus and to be a part hereof
from the date of the filing of such documents. See "Available Information."
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered upon request of any
such person, a copy of any or all of the foregoing documents incorporated
herein by reference (other than exhibits to such documents not specifically
incorporated by reference). Written or telephone requests should be directed
to David L. Tripp, Vice President and Director of Investor Relations, The
Rouse Company, 10275 Little Patuxent Parkway, Columbia, Maryland 21044-3456,
Telephone: (410) 992-6000.
2
<PAGE>
THE COMPANY
THE COMPANY AND ITS BUSINESS
The Rouse Company (the "Company" or "Rouse") is one of the largest publicly-
traded real estate companies in the United States. The Company develops,
acquires, owns and manages income-producing properties across the United
States. The Company also develops and sells land, almost exclusively related
to activities in Columbia, Maryland.
OPERATING PROPERTIES
The Company manages a portfolio of operating properties totalling more than
58 million square feet in almost 200 buildings, classified into two business
categories: (i) retail centers and (ii) office, mixed-use and other
properties.
RETAIL CENTERS. At November 30, 1994, the Company managed 77 retail centers
totalling 46,286,000 square feet of space and including 149 department stores
and 20,995,000 square feet of small store gross leasable area (GLA). Included
in the 77 retail centers are eight Columbia village centers (848,000 sq. ft.)
and five centers (636,000 sq. ft. of small shops) that are parts of large,
mixed-use projects. The remaining 64 centers include 55 regional malls
(17,864,000 sq. ft. of mall space) that primarily are in the suburbs of major
metropolitan areas and have three or more department stores attached, and also
include nine specialty retail centers (1,647,000 sq. ft.) that are in the
downtowns of major cities and do not have department stores attached. Major
retail properties owned and managed by the Company include Willowbrook,
Woodbridge Center and Paramus Park in New Jersey and Faneuil Hall Marketplace,
South Street Seaport and Harborplace in the downtowns of Boston, New York and
Baltimore.
The majority of the Company's revenues, Earnings Before Depreciation and
Deferred Taxes (EBDT), and Current Value Shareholders' Equity is derived from
its retail centers, particularly those where the Company has a significant
ownership interest in the centers. The 64 retail centers (excluding eight
Columbia village centers and five mixed-use projects) include 43 centers where
the Company has ownership interests ranging from 37% to 100%. In the remaining
21 centers, the Company's ownership interest is generally 10% or less, and the
Company normally receives fees for management, leasing and development
activities and an incentive participation in the growth of the centers' cash
flows and values.
OFFICE, MIXED-USE AND OTHER PROPERTIES. At November 30, 1994, the Company
managed more than 100 office/industrial buildings totalling approximately
11,990,000 square feet of gross leasable area. Of this total, 1,842,000 square
feet is located in seven buildings which are part of major mixed-use projects
in Phoenix, Baltimore, Seattle and Portland; 3,056,000 square feet is located
in Columbia in projects that are wholly-owned; 728,000 square feet is located
at Owings Mills, Maryland in four buildings that are jointly-owned; 637,000
square feet is located at or near retail centers; and the remaining 5,727,000
square feet is primarily located in the Baltimore-Washington corridor and is
part of a joint venture owned by the Company (5%) and Teachers Insurance and
Annuity Association of America (95%).
The Company owns and manages two hotels, one each in Baltimore and Columbia,
and has an ownership position in a third hotel in Baltimore.
LAND SALES
The Company, through its subsidiaries and affiliates, develops and sells
land primarily in and around Columbia, Maryland, which is a new town launched
by the Company in 1962. Today, Columbia has a population of more than 75,000
and is home to 2,500 businesses which employ 55,000 people. There are
presently approximately 2,000 acres of net saleable land available for
residential, commercial and industrial uses. Subsidiaries of the Company may
develop and own certain projects in Columbia, primarily retail centers and
office buildings.
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DEVELOPMENT
The majority of the Company's operating properties were developed by the
Company or its subsidiaries. At the present time, the Company has publicly
announced that it is developing two major new regional shopping centers (in
Orlando, Florida and Spartanburg, South Carolina); three expansions to
existing retail centers (Oakwood Center in New Orleans, Mall St. Matthews in
Louisville and The Citadel in Colorado Springs); and is investigating
additional new retail center developments, expansions and potential
acquisitions. Any such new retail center developments, expansions or
acquisitions will be funded using cash generated from operations, from the
issuance of additional equity securities or from the proceeds of any
additional indebtedness.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
net proceeds from the issuance of the Debt Securities offered hereby will be
used for general corporate purposes, including the repayment of existing
indebtedness.
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SELECTED FINANCIAL DATA
The following selected financial information of the Company for the years
ended December 31, 1993, 1992 and 1991, and the nine months ended September
30, 1994 and 1993 was derived from the Company's consolidated financial
statements contained in its Annual Report on Form 10-K for the year ended
December 31, 1993 and its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 and is qualified in its entirety by such documents. See
"Incorporation of Certain Documents by Reference." The selected financial
information of the Company for the years ended December 31, 1990 and 1989 was
derived from the audited consolidated financial statements of the Company for
such periods which have not been incorporated herein by reference. Results for
the nine months ended September 30, 1994 and 1993 are unaudited. Results for
the nine months ended September 30, 1994 are not necessarily indicative of
results for the year ended December 31, 1994.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating results:
Revenues from
continuing operations. $ 498,846 $ 472,963 $ 646,805 $ 597,105 $ 573,498 $ 529,570 $ 498,100
Earnings (loss) from
continuing operations. 2,445 (2,031) (1,291) (15,849) 2,424 (1,165) 10,361
Earnings (loss) from
continuing operations
available for common
shareholders (per
share of common
stock)................ (.16) (.22) (.27) (.33) .05 (.07) .16
Earnings before
depreciation and
deferred taxes from
operations (EBDT)..... 67,115 53,066 78,281 52,282 46,820 50,290 57,084
Net cash provided
(used):
By operating
activities............ 79,008 49,245 101,149 66,630 67,226 35,057 60,039
In investing
activities............ (143,272) (123,271) (154,446) (144,836) (96,210) (248,532) (307,128)
By financing
activities............ 41,086 58,215 47,068 98,914 17,271 246,968 167,312
Ratio of earnings to
fixed
charges (1)(2)........ 1.04 -- 1.01 -- -- -- --
Consolidated coverage
ratio (3)............. 1.42 1.34 1.37 1.25 1.24 1.29 1.37
Total assets-cost
basis................. 2,897,922 2,851,397 2,874,982 2,726,281 2,637,452 2,614,877 2,299,615
Total assets-current
value
basis (4)............. -- -- 4,588,636 4,217,819 4,174,093 4,362,153 4,129,645
Debt, capital leases
and redeemable
Preferred stock....... 2,550,453 2,468,975 2,473,596 2,498,983 2,374,527 2,344,095 1,995,769
Shareholders' equity
(deficit):
Historical cost basis.. 80,763 125,029 113,151 (34,848) 17,328 25,339 52,951
Current value basis
(4)................... -- -- 1,525,606 1,188,896 1,274,070 1,470,088 1,730,075
Shareholders' equity
(deficit) per share of
common stock:
Historical cost basis
(5)................... 1.42 2.19 1.98 (.74) .36 .53 1.10
Current value basis
(4)(5)................ -- -- 26.75 25.50 26.60 30.10 34.80
Cash dividends per
share of common stock. .51 .45 .62 .60 .60 .60 .56
Market price per share
of common stock at end
of period (6)......... 19.13 20.25 17.75 18.00 18.25 14.50 26.00
Weighted average common
shares outstanding.... 47,563 47,363 47,411 47,994 48,157 48,019 47,910
Number of common shares
outstanding at end of
period................ 47,568 47,534 47,562 47,292 48,193 48,130 47,973
</TABLE>
- --------
(1) The ratio of earnings to fixed charges is computed by dividing fixed
charges into net earnings (loss) before income taxes, extraordinary loss
and cumulative effect of change in accounting principle, adjusted for
minority interest in earnings, amortization of interest costs previously
capitalized and certain other items, plus fixed charges other than
capitalized interest. Fixed charges include interest costs, the estimated
interest component of rent expense and certain other items.
(2) Total fixed charges exceeded the Company's earnings available for fixed
charges by $66,000 for the nine months ended September 30, 1993,
$29,449,000, $10,347,000, $24,575,000 and $354,000 for the years ended
December 31, 1992, 1991, 1990 and 1989, respectively.
(3) Consolidated coverage ratio is the ratio of EBDT plus consolidated
interest expense to consolidated interest expense. Consolidated interest
expense includes dividends on redeemable Preferred Stock (retired for
financial reporting purposes in 1990), which is included because the stock
was subject to mandatory redemption requirements for cash.
(4) Current value basis financial information is not presented for interim
periods.
(5) Historical cost basis shareholders' equity per share of common stock and
current value basis shareholders' equity per share of common stock assume
the conversion of the Series A Convertible Preferred Stock.
(6) The market price per share of common stock of the Company as of the close
of business on February 8, 1995 was $19.00 per share.
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<PAGE>
DESCRIPTION OF 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 the Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating
to such Offered Debt Securities.
The Offered Debt Securities are to be issued under an Indenture (the
"Indenture") between the Company and The First National Bank of Chicago, as
trustee (the "Trustee"), a copy of which Indenture is filed as an exhibit to
the Registration Statement. The following summaries of certain provisions of
the Indenture and the Debt Securities do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture, including the definitions therein of certain
terms and of those terms made a part thereof by the Trust Indenture Act.
Wherever particular provisions or defined terms of the Indenture are referred
to, such provisions or defined terms are incorporated herein by reference.
Certain defined terms in the Indenture are capitalized herein.
GENERAL
The Debt Securities will be unsecured obligations of the Company.
The Debt Securities to be offered by this Prospectus are limited to
$150,000,000 in aggregate issue price. The Indenture does not limit the amount
of Debt Securities that may be issued thereunder and provides that Debt
Securities may be issued thereunder from time to time in one or more series.
All Debt Securities of one series need not be issued at the same time and,
unless otherwise provided, a series may be reopened, without the consent of
any Holder, for issuances of additional Debt Securities of such series.
(Section 301) The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities.
Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities for the following terms, where applicable, of the Offered Debt
Securities: (1) the title of the Offered Debt Securities or series of which
they are a part; (2) any limit on the aggregate principal amount of the
Offered Debt Securities; (3) the date or dates, or the method or methods, if
any, by which such date or dates shall be determined, on which the principal
of such Offered Debt Securities will be payable; (4) the rate or rates (which
may be fixed or variable) at which the Offered Debt Securities will bear
interest, if any, the date or dates from which such interest will accrue, the
Interest Payment Dates on which any such interest will be payable and the
Regular Record Date for any such interest payable on any Interest Payment
Date; (5) the place or places where the principal of and any premium and
interest on such Offered Debt Securities will be payable; (6) the period or
periods within which, the price or prices at which and the terms and
conditions upon which such Offered Debt Securities may be redeemed, in whole
or in part, at the option of the Company; (7) the obligation, if any, of the
Company to redeem or purchase any of such Offered Debt Securities pursuant to
any sinking fund or analogous provisions or at the option of a Holder thereof,
and the period or periods within which, the price or prices at which and the
terms and conditions on which any of such Offered Debt Securities will be
redeemed or purchased, in whole or in part, pursuant to any such obligation;
(8) the denominations in which such Offered Debt Securities will be issuable,
if other than denominations of $1,000 and any integral multiple thereof; (9)
if other than the currency of the United States of America, the currency,
currencies or currency units in which the principal of or any premium or
interest on such Offered Debt Securities will be payable (and the manner in
which the equivalent of the principal amount thereof in the currency of the
United States of America is to be determined for any purpose, including for
the purpose of determining the principal amount deemed to be Outstanding at
any time); (10) if the amount of payments of principal of or any premium or
interest on such Offered Debt Securities may be determined with reference to
an index or pursuant to a formula, the manner in which such amounts will be
determined; (11) if the principal of or any premium or interest on such
Offered Debt Securities is to be payable, at the election of the Company or a
Holder thereof, in one or more currencies or
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<PAGE>
currency units other than those in which the Offered Debt Securities are
stated to be payable, the currency, currencies or currency units in which
payment of any such amount as to which such election is made will be payable,
and the periods within which and the terms and conditions upon which such
election is to be made; (12) if other than the principal amount thereof, the
portion of the principal amount of such Offered Debt Securities which will be
payable upon declaration of acceleration of the Maturity thereof; (13) if
applicable, that such Offered Debt Securities are defeasible as provided in
the Indenture; (14) whether such Offered Debt Securities will be issuable in
whole or in part in the form of one or more Global Securities and, if so, the
Depositary or Depositaries for such Global Security or Global Securities and
any circumstances other than those described under "Global Securities" in
which any such Global Security may be transferred to, and registered and
exchanged for Securities registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof and in which any such
transfer may be registered; (15) any addition to, or modification or deletion
of, any Events of Default or covenants provided for with respect to the
Offered Debt Securities; (16) the terms, if any, pursuant to which the Offered
Debt Securities will be made subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness of the Company, and the
definition of any such Senior Indebtedness; and (17) any other terms of such
Securities not inconsistent with the provisions of the Indenture. (Section
301)
Unless otherwise indicated in the Prospectus Supplement relating to Offered
Debt Securities, principal of and premium, if any, and interest, if any, on
the Debt Securities will be payable, and the Debt Securities will be
exchangeable and transfers thereof will be registrable, at the office of the
Trustee at its principal executive offices (see "Concerning the Trustee"),
provided that, at the option of the Company, payment of interest may be made
by check mailed to the address of the Person entitled thereto as it appears in
the Security Register. (Sections 301, 305 and 1002). Any payment of principal
and premium, if any, and interest, if any, required to be made on an Interest
Payment Date, Redemption Date or at Maturity which is not a Business Day need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date,
Redemption Date or at Maturity, as the case may be, and no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date or Maturity. (Section 113)
Unless otherwise indicated in the Prospectus Supplement relating to Offered
Debt Securities, the Debt Securities will be issued only in fully registered
form, without coupons, in denominations of $1,000 or any integral multiple
thereof. (Section 302). No service charge will be made for any transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 305)
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities to be offered and sold at a substantial discount from their stated
principal amount. In addition, under Treasury Regulations it is possible that
Debt Securities which are offered and sold at their stated principal amount
would, under certain circumstances, be treated as issued at an original issue
discount for federal income tax purposes. Federal income tax consequences and
other special considerations applicable to any such Original Issue Discount
Securities (or other Debt Securities treated as issued at an original issue
discount) will be described in the Prospectus Supplement relating thereto.
"Original Issue Discount Security" means a security, including any security
that does not provide for the payment of interest prior to Maturity, which is
issued at a price lower than the principal amount thereof and which provides
that upon redemption or acceleration of the Stated Maturity thereof an amount
less than the principal amount thereof shall become due and payable. (Section
101)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depositary or its nominee
identified in the Prospectus Supplement relating to the Offered Debt
Securities. In such a case, one or more Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities.
7
<PAGE>
Unless and until it is exchanged in whole or in part for Debt Securities in
definitive registered form, a Global Security may not be registered for
transfer or exchange except as a whole by the Depositary for such Global
Security to a nominee of such Depositary and except in the circumstances
described in the Prospectus Supplement relating to the Offered Debt
Securities. (Sections 204 and 305). The specific terms of the depositary
arrangement with respect to a series of Debt Securities will be described in
the Prospectus Supplement relating to such series.
CERTAIN COVENANTS
LIMITATION ON THE INCURRENCE OF DEBT. The Company and its consolidated
Subsidiaries may not incur any Debt if, after giving effect to such
Incurrence, the Ratio Calculation is less than 1.1 to 1.
Notwithstanding the foregoing paragraph, the Company and its consolidated
Subsidiaries may incur the following additional Debt without regard to the
foregoing limitation (although the additional Debt so Incurred will be
included in the determination of the Consolidated Coverage Ratio thereafter):
(i) the Debt Securities issued under the Indenture not to exceed an aggregate
issue price of $150,000,000; (ii) intercompany Debt (representing Debt to
which the only parties are the Company and any of its consolidated
Subsidiaries (but only so long as such Debt is held solely by any of the
Company and its consolidated Subsidiaries)); (iii) any drawings or redrawings
under lines of credit existing on the date of the Indenture and any new lines
of credit or replacements, amendments or extensions of existing lines of
credit, provided, however, that the maximum amount that may be drawn under all
lines of credit pursuant to this clause (iii) may not at any time exceed the
maximum amount that may be drawn under all lines of credit that exist as of
the date of the Indenture; (iv) refinancings, renewals, refundings or
extensions of any Debt, in any case in an amount not to exceed the principal
amount of the Debt so refinanced plus any prepayment premium or accrued
interest, provided that (a) such refinancing Debt is either (I) Debt of the
Company that ranks pari passu with or junior to the Debt being refinanced,
(II) Debt of a Subsidiary that the Company or another Subsidiary guarantees or
(III) Debt of a Subsidiary and (b) such refinancing Debt (giving effect to any
right of the holder thereof to require, directly or indirectly, an early
repayment, defeasance or retirement of such Debt) either has a weighted
average life equal to or longer than the remaining weighted average life of
the Debt being refinanced or has a minimum term of five years; (v) third party
Debt of a Subsidiary, including Debt of a Subsidiary that carries a Company
guarantee of repayment, directly relating to the development of projects or
the expansion, renovation or improvement of existing properties; (vi) third
party Debt of a Subsidiary directly relating to the acquisition of assets;
(vii) reimbursement obligations under letters of credit, bankers' acceptances
or similar facilities, provided that at the time of Incurring any additional
obligations pursuant to this clause (vii) the amount of all such obligations,
whether or not currently due, aggregate at any time less than 5% of
Consolidated Net Tangible Assets at such date; (viii) Debt that by its terms
is subordinate in right of payment to any of the other Debt of the Company;
provided however, that, pursuant to clauses (i) through (ix), the aggregate
issue price of such subordinated Debt may not at any time exceed the aggregate
principal amount of such subordinated Debt as of the date of the Indenture
plus $100,000,000; (ix) Attributable Debt; and (x) in addition to Debt
referred to in clauses (i) through (ix) above, Debt in the aggregate principal
amount of $50,000,000 which is to be used only for working capital purposes.
(Section 1008)
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company will not, nor will it
permit any Restricted Subsidiary to, enter into any arrangement with any bank,
insurance company or other lender or investor (not including the Company or
any consolidated Subsidiary) or to which any such lender or investor is a
party, providing for the leasing by the Company or any such Restricted
Subsidiary for a period, including renewals, in excess of three years, of any
Principal Property owned by the Company or such Restricted Subsidiary, which
has been or is to be sold or transferred more than one year after either the
acquisition thereof or the completion of construction and commencement of full
operation thereof by the Company or any such Restricted Subsidiary, to such
lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such Principal Property
(herein referred to as a "Sale/Leaseback Transaction") unless (A) the
aggregate
8
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amount of Attributable Debt for the proposed and all existing Sale/Leaseback
Transactions is less than 10% of Consolidated Net Tangible Assets and (B) if
the Ratio Calculation is less than 1.1 to 1 after giving effect to the
proposed Sale/Leaseback Transaction, the Company and its subsidiaries, within
270 days after the sale or transfer shall have been made by the Company or by
any such Restricted Subsidiary, must apply an amount equal to the net proceeds
of the sale of the Principal Property sold and leased back pursuant to such
arrangement to either (or a combination of) (x) the purchase of property,
facilities or equipment (other than the property, facilities or equipment
involved in such Sale/Leaseback Transaction) or (y) the retirement of Debt of
the Company or a Restricted Subsidiary, including the Debt Securities, which
either has an initial term of greater than 12 months or is a bona fide
acquisition loan or a construction or bridge loan entered in connection with a
construction project or other real estate development. (Section 1009)
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE. The Indenture permits the
Company to consolidate or merge with or into any other entity or entities, or
to sell, convey or lease all or substantially all of its Assets to any other
entity authorized to acquire and operate the same; provided, however, (i) that
the Person (if other than the Company) formed by such consolidation, or into
which the Company is merged or which acquires or leases substantially all of
the Assets of the Company, expressly assumes the Company's obligations on the
Debt Securities and under the Indenture, (ii) that the Company or such
successor entity shall not immediately after such consolidation or merger, or
such sale, conveyance or lease, be in default in the performance of any
covenant or condition of the Indenture, (iii) that the Company or such
successor entity shall not, immediately after giving effect to such
consolidation or merger, or such sale, conveyance or lease, have a Ratio
Calculation of less than 1.1 to 1 and (iv) that certain other conditions are
met. (Section 801)
PROVISION OF FINANCIAL INFORMATION. The Indenture provides that, whether or
not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, the
Company will, to the extent permitted under the Exchange Act, file with the
Commission the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) ("Financial Statements") if the Company were so
subject, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
(i) transmit by mail to all Holders, as their names and addresses appear in
the Security Register, without cost to such Holders and (ii) file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were
subject to such Sections and (y) if filing such documents by the Company with
the Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holder. (Section 1011)
CERTAIN DEFINITIONS
"Asset" means, with respect to one or more transactions occurring within any
12-month period, any asset or group of assets of the Company or its
Subsidiaries (including, but not limited to, all balance sheet items and all
intangible assets including management contracts, goodwill and trade secrets)
with a fair market or book value, whichever is larger, greater than 5% of
Consolidated Net Tangible Assets on the date of such transaction.
"Attributable Debt" shall mean, as to any particular lease under which the
Company or any Restricted Subsidiary is at the time liable, at any date as of
which the amount thereof is to be determined, the lesser of (i) the fair value
of the property subject to such lease (as determined by certain officers of
the Company as set forth in the Indenture) or (ii) the total net amount of
rent required to be paid by the Company under such lease during the remaining
term thereof, discounted from the respective due dates thereof to such date at
the rate of interest per annum equal to 8.5%, compounded semi-annually. The
net amount of rent required to be paid under any such lease for any such
period
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<PAGE>
shall be the amount of the rent payable by the lessee with respect to such
period, after excluding amounts required to be paid on account of maintenance
and repairs, insurance, taxes, assessments, water rates and similar charges.
In the case of any lease which is terminable by the lessee upon the payment of
a penalty, such net amount shall also include the amount of such penalty, but
no rent shall be considered as required to be paid under such lease subsequent
to the first date upon which it may be so terminated.
"Capital Lease Obligations" of any Person means the obligations to pay rent
or other amounts under a lease of (or other Debt arrangements conveying the
right to use) real or personal property of such Person which are required to
be classified and accounted for as a capital lease or a liability on the face
of a balance sheet of such Person in accordance with generally accepted
accounting principles, and the amount of such obligations shall be the
capitalized amount thereof in accordance with generally accepted accounting
principles and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of
a penalty.
"Consolidated Coverage Ratio" of any Person means for any period the ratio
of (i) EBDT for such period plus Consolidated Interest Expense for the same
period for such Person to (ii) Consolidated Interest Expense for the same
period for such Person.
"Consolidated Interest Expense" means with respect to any Person for any
period the Consolidated Interest Expense included in a consolidated income
statement (without deduction of consolidated interest income) of such Person
for such period (based on the accounting principles reflected in the Company's
Consolidated Statement of Operations for the nine months ended September 30,
1994 contained in the Company's Form 10-Q for such period), including, without
limitation or duplication (or, to the extent not so included, with the
addition of) (i) the portion of any rental obligation in respect of any
Capital Lease Obligation allocable to interest expense in accordance with
generally accepted accounting principles; (ii) the amortization of Debt
discounts; (iii) any payments or fees (other than up-front fees) with respect
to letters of credit, bankers' acceptances or similar facilities; (iv) fees
(other than up-front fees) with respect to interest rate swap or similar
agreements, or foreign currency hedge, exchange or similar agreements; (v) the
interest portion of any rental obligation with respect to any Sale/Leaseback
Transaction (determined as if such obligations were treated as a Capital Lease
Obligation); and (vi) any dividends attributable to any equity security which
may be converted into a debt security of the Company at any time or is
mandatorily redeemable for cash within 20 years from its initial issuance.
"Consolidated Net Tangible Assets" shall mean the aggregate amount of assets
(less applicable reserves and other property deductible items) after deducting
therefrom (i) all current liabilities (excluding any thereof which are by
their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is
being computed and excluding current maturities of long-term indebtedness and
Capital Lease Obligations) and (ii) all goodwill, all as shown in the
consolidated balance sheet of the Company and its Subsidiaries as of the end
of the latest fiscal quarter for which consolidated Financial Statements are
available.
"Debt" means (without duplication), with respect to any Person, (i) every
obligation of such Person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, excluding any trade payments and other accrued current
liabilities arising in the ordinary course of business, (iii) every currently
due reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property (but excluding trade accounts payable and other
accrued current liabilities arising in the ordinary course of business which
are not overdue by more than 90 days or which are being contested in good
faith), (v) every Capital Lease Obligation of such Person, (vi) the maximum
fixed redemption or repurchase price of any equity security which may be
converted into a debt security of such Person at
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<PAGE>
any time or is mandatorily redeemable for cash within 20 years from its
initial issuance, and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or for which
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise.
"EBDT" shall mean Earnings Before Depreciation and Deferred Taxes from
Operations for the Company and its consolidated Subsidiaries based on the
accounting principles reflected in the Company's Consolidated Statement of
Operations for the nine months ended September 30, 1994 contained in the
Company's Form 10-Q for such period, and assuming that any dividends paid on
any equity security shall not be deducted in calculating EBDT unless such
equity security may be converted into a debt security at any time or is
mandatorily redeemable for cash within 20 years from its initial issuance.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on
the balance sheet of any such Person (and "incurrence," "incurred,"
"incurrable" and "incurring" shall have meanings correlative to the
foregoing); provided that a change in generally accepted accounting principles
that results in an obligation of such Person that exists at such time becoming
Debt shall not be deemed an incurrence of such Debt.
"Principal Property" shall mean any land, and any building, structure or
other facility, together with the land upon which it is erected and fixtures
comprising a part thereof, in each case the net book value of which on the
date as of which the determination is being made exceeds 2% of Consolidated
Net Tangible Assets at such date; provided, however, that Principal Property
shall not include (i) any building, structure or facility which, in the
opinion of the Board of Directors of the Company, is not of material
importance to the total business conducted by the Company and its Subsidiaries
as an entirety or (ii) any portion of a particular building, structure or
facility which, in the opinion of the Board of Directors of the Company, is
not of material importance to the use or operation of such building, structure
or facility.
"Ratio Calculation" shall mean that, immediately after either the Incurrence
of such Debt or the sale of or other disposal of such Asset, as the case may
be, the Company, or its agent, shall calculate the Consolidated Coverage Ratio
for the four full fiscal quarter period preceding such Incurrence, sale or
disposal for which consolidated Financial Statements are available. In making
such calculation, (a) the Consolidated Interest Expense attributable to
interest on any Debt to be Incurred bearing a floating interest rate shall be
computed on a pro forma basis as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (b) with
respect to any Debt which bears, at the option of the Company, a fixed or
floating rate of interest, the Company shall apply the same rate for purposes
of calculating the Consolidated Coverage Ratio as it chooses to apply to the
Debt. In addition, such calculation shall be performed using the consolidated
Financial Statements which shall be reformulated on a pro forma basis as if
such Debt had been incurred or such Asset had been sold or otherwise disposed
of, as the case may be, at the beginning of such four fiscal quarter period.
Such reformulation shall give effect, as if the relevant event had occurred at
the beginning of such four fiscal quarter period, to any actual use of
proceeds of such Debt being incurred or Asset being sold or disposed of and to
any Incurrences or repayments of Debt and other sales, disposals or
acquisitions of Assets occurring after the end of the last quarter for which
there are consolidated Financial Statements available. If any portion of the
proceeds has not been used, it shall be assumed that such portion of the
proceeds was invested in one-year Treasury bills on the first day of such four
fiscal quarter period.
"Restricted Subsidiary" shall mean any subsidiary of the Company which has a
50% or greater ownership interest in a Principal Property or Properties.
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<PAGE>
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to Debt
Securities of any series: (a) failure to pay principal of or premium, if any,
on any Debt Security of that series when due; (b) failure to pay any interest
on any Debt Security of that series when due, continued for 30 days; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture
solely for the benefit of a series of Debt Securities other than that series),
continued for 60 days after written notice as provided in the Indenture; (e)
certain events in bankruptcy, insolvency or reorganization; (f) a default
under any bond, debenture, note, mortgage, indenture or other evidence of
indebtedness for money borrowed by the Company (or by any Subsidiary, the
repayment of which the Company has guaranteed or for which the Company is
directly responsible or liable as obligor or guarantor) having an aggregate
principal amount outstanding of at least $10,000,000, whether such
indebtedness now exists or shall hereafter be created, which default shall
have resulted in such indebtedness being declared due and payable prior to the
date on which it would otherwise have become due and payable, without such
acceleration having been rescinded or annulled within 10 days after written
notice as provided in the Indenture; and (g) any other Event of Default
provided with respect to Debt Securities of that series. (Section 501). No
Event of Default with respect to a particular series of Debt Securities issued
under the Indenture necessarily constitutes an Event of Default with respect
to any other series of Debt Securities issued thereunder.
The Trustee shall, within 90 days after the occurrence of a default with
respect to Debt Securities of any series, give all holders of Debt Securities
of such series then outstanding notice of all uncured defaults known to it
(the term default to mean the events specified above without grace periods);
provided that, except in the case of a default in the payment of principal of
(and premium, if any, on) or interest on, if any, any Debt Security of any
series, or in the payment of any sinking fund installment with respect to Debt
Securities of any series, the Trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such notice is
in the interest of all holders of Debt Securities of such series then
outstanding. (Trust Indenture Act of 1939)
If an Event of Default with respect to Outstanding Debt Securities of any
series shall occur and be continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the Outstanding Debt Securities of
that series may declare the principal amount (or, if the Debt Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
Debt Securities of that series to be due and payable immediately. At any time
after a declaration of acceleration with respect to Debt Securities of any
series has been made, but before a judgment or decree based on acceleration
has been obtained, the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. (Section 502). For information as to
waiver of defaults, see "Modification and Waiver."
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Indenture provides that the Trustee will be under no obligation, subject
to the duty of the Trustee during the default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. (Section 601). Subject to
such provisions for indemnification of the Trustee, the Holders of a majority
in principal amount of the Outstanding Debt Securities of any series will have
the right to 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 Debt Securities of that series.
(Section 512)
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<PAGE>
The Company will furnish to the Trustee annually a certificate as to
compliance by the Company with all conditions and covenants under the
Indenture. (Section 1004)
DEFEASANCE
The Prospectus Supplement will state if any defeasance provision will apply
to the Offered Debt Securities.
DEFEASANCE AND DISCHARGE
The Indenture provides that, if applicable, the Company will be discharged
from any and all obligations in respect of the Debt Securities of any series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace stolen, lost or mutilated Debt
Securities of such series, to maintain paying agencies and to hold monies for
payment in trust) upon the deposit with the Trustee, in trust, of money and/or
U.S. Government Obligations (as defined) which through the payment of interest
and principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of and any premium and
interest on the Debt Securities of such series on the respective Stated
Maturities in accordance with the terms of the Indenture and the Debt
Securities of such series. Such a trust may only be established if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel
to the effect that the Company has received from, or there has been published
by, the Internal Revenue Service a ruling, or there has been a change in tax
law, in either case to the effect that Holders of the Debt Securities of such
series will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit, defeasance and discharge and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit, defeasance and discharge
had not occurred. (Sections 1302 and 1304)
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The Indenture provides that, if applicable, the Company shall be released
from its obligations with respect to such Debt Securities then outstanding
under Sections 1005 through 1009, inclusive, Section 1011 and Section 801 of
the Indenture and such other obligations as shall be set forth in any
supplemental indenture for the Debt Securities, and the occurrence of an Event
of Default specified in Sections 501(3), 501(4) (with respect to any of
Sections 1005 through 1009, inclusive, Section 1011 and Section 801 and such
other obligations), 501(5) and 501(8) of the Indenture shall be deemed not to
result in an Event of Default, upon the deposit with the Trustee, in trust, of
money and/or U.S. Government Obligations (as defined) which through the
payment of interest and principal in respect thereof in accordance with their
terms will provide money in an amount sufficient to pay the principal of and
any premium and interest on the Debt Securities of such series on the Stated
Maturities in accordance with the terms of the Indenture and the Debt
Securities of such series. The obligations of the Company under the Indenture
and the Debt Securities of such series other than with respect to the
covenants referred to above and the Events of Default other than the Event of
Default referred to above shall remain in full force and effect. Such a trust
may only be established if, among other things, the Company has delivered to
the Trustee an Opinion of Counsel (who may be an employee of or counsel for
the Company) to the effect that the Holders of the Debt Securities of such
series will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain covenants and Events of
Default and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred. In the event the Company exercises
this option with respect to the Debt Securities of any series as described
above and the Debt Securities of such series are declared due and payable
because of the occurrence of any Event of Default, the amount of money and
U.S. Government Obligations on deposit with the Trustee will be sufficient to
pay amounts due on the Debt Securities of such series at the time of their
Stated Maturity but may not be sufficient to pay amounts due on the Debt
Securities of such series at the time of the acceleration resulting from such
Event of Default. However, the Company shall remain liable for such payments.
(Sections 1303 and 1304)
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MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in principal amount
of the Outstanding Debt Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (a) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (b)
reduce the principal amount of, or any premium or interest on, any Debt
Security, (c) reduce the amount of principal of an Original Issue Discount
Security or other Security payable upon acceleration of the Maturity thereof,
(d) change the place or currency of payment of principal of, or any premium or
interest on, any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f) reduce
the percentage in principal amount of Outstanding Debt Securities of any
series, the consent of whose Holders is required for modification or amendment
of the Indenture, (g) reduce the percentage in principal amount of Outstanding
Debt Securities of any series necessary for waiver of certain defaults or (h)
modify such provisions with respect to modification and waiver. (Section 902)
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities
of that series waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture. (Section 1012).
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities
of that series waive any past default under the Indenture with respect to that
series, except a default in the payment of the principal of or premium, if
any, or interest on any Debt Security of that series or in respect of a
provision which under the Indenture cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of that series
affected. (Section 513)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the law of the State of New York, but without regard to
principles of conflicts of law. (Section 112)
CONCERNING THE TRUSTEE
The First National Bank of Chicago, a national banking association duly
organized and existing under the laws of the United States of America, with
its principal offices at One First National Plaza, Suite 0126, Chicago,
Illinois 60670, will act as Trustee for the benefit of the Holders of the Debt
Securities under the Indenture. The Trustee also serves as the trustee under
the indenture in respect of the Company's $120,000,000 8.50% Notes due January
15, 2003. The Company maintains other banking relationships with the Trustee
in the ordinary course of business, including maintaining a line of credit
with and obtaining loans from the Trustee.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters, and also
may sell Debt Securities directly to other purchasers or through agents. Such
underwriters may also act as agents.
The distribution of the Debt Securities, if any, may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
14
<PAGE>
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Debt Securities by them may be deemed to be underwriting
discounts and commissions, under the Act. Any such underwriter or agent will
be identified, and any such compensation received from the Company will be
described, in the Prospectus Supplement accompanying this Prospectus.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled
to indemnification by the Company against certain liabilities, including
liabilities under the Act.
If so indicated in the Prospectus Supplement accompanying this Prospectus,
the Company will authorize underwriters or other persons acting as the
Company's agents to solicit offers by certain institutions to purchase Debt
Securities from the Company pursuant to contracts providing for payment and
delivery on a future date. Institutions with which such contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but
in all cases such institutions must be approved by the Company. The
obligations of any purchaser under any such contract will be subject to the
condition that the purchase of the Offered Debt Securities shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which
such purchaser is subject. The underwriters and such other agents will not
have any responsibility in respect of the validity or performance of such
contracts.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for the Company in the ordinary course
of business.
LEGAL MATTERS
Unless otherwise indicated in the Prospectus Supplement relating to the
Offered Debt Securities, the validity of the Debt Securities will be passed
upon for the Company by Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations), One New York Plaza, New
York, New York, and for the Underwriters by Sullivan & Cromwell, 250 Park
Avenue, New York, New York. Fried, Frank, Harris, Shriver & Jacobson and
Sullivan & Cromwell may rely upon Richard G. McCauley, Esq., Senior Vice-
President, General Counsel and Secretary of the Company, with respect to
certain matters governed by laws of the State of Maryland. As of December 31,
1994, Mr. McCauley was the direct owner of 105,037 shares of the Company's
Common Stock (excluding shares of the Company's Common Stock held in his
account under the Company's 401(k) Savings Plan), certain family members owned
21,295 shares (as to which shares he disclaims beneficial ownership) and he
held options to purchase 112,500 shares, of which options to purchase 39,500
shares were presently exercisable.
EXPERTS
The audited consolidated financial statements and schedules incorporated
herein by reference are incorporated by reference in reliance upon (1) the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated herein by reference, and the authority of that firm as experts in
accounting and auditing, and (2) with respect to the current value basis
financial statements, the report of Landauer Associates, Inc., real estate
counselors and consultants, incorporated herein by reference, and upon the
authority of that firm as experts in real estate consultation. The report of
KPMG Peat Marwick LLP covering the December 31, 1991 financial statements
refers to a change in the Company's method of accounting for income taxes.
15
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND PROSPECTUS SUP-
PLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS AND PROSPECTUS SUP-
PLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OF-
FER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIR-
CUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT ITS DATE.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes....................................................... S-2
United States Tax Considerations........................................... S-13
Plan of Distribution....................................................... S-21
Validity of the Notes...................................................... S-22
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 4
Selected Financial Data.................................................... 5
Description of Debt Securities............................................. 6
Plan of Distribution....................................................... 14
Legal Matters.............................................................. 15
Experts.................................................................... 15
</TABLE>
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$150,000,000
THE ROUSE COMPANY
MEDIUM-TERM NOTES
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
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