<PAGE>
Filed pursuant to Rule 424(b)(2)
SEC File No. 33-64105
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED NOVEMBER 17, 1995)
$849,500,000
COLUMBIA/HCA HEALTHCARE CORPORATION
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
--------------
Columbia/HCA Healthcare Corporation (the "Company") may offer from time to
time $849,500,000 aggregate initial offering price, or the equivalent thereof
in one or more foreign or composite currencies, of its Medium-Term Notes Due
Nine Months or More from Date of Issue (the "Notes"). Such aggregate initial
offering price is subject to reduction as a result of the sale by the Company
of other Debt Securities described in the accompanying Prospectus. Each Note
will mature on any day nine months or more from the date of issue, as
specified in the applicable pricing supplement hereto (each, a "Pricing
Supplement"), and may be subject to redemption at the option of the Company or
repayment at the option of the Holder thereof, in each case, in whole or in
part, prior to its Stated Maturity Date, as set forth therein and specified in
the applicable Pricing Supplement. The Notes, other than Foreign Currency
Notes, will be issued in minimum denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable Pricing
Supplement, while Foreign Currency Notes will be issued in the minimum
denominations specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating
rates (the "Floating Rate Notes"). The applicable Pricing Supplement will
specify whether a Floating Rate Note is a Regular Floating Rate Note, a
Floating Rate/Fixed Rate Note or an Inverse Floating Rate Note and whether the
rate of interest thereon is determined by reference to one or more of the CD
Rate, the CMT Rate, the Commercial Paper Rate, the Federal Funds Rate, LIBOR,
the Prime Rate or the Treasury Rate (each, an "Interest Rate Basis"), or any
other interest rate basis or formula, as adjusted by any Spread and/or Spread
Multiplier. Interest on each Floating Rate Note will accrue from its date of
issue and will be payable in arrears monthly, quarterly, semiannually or
annually, as specified in the applicable Pricing Supplement, and on the
Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, the rate of interest on each Floating Rate Note will be reset
daily, weekly, monthly, quarterly, semiannually or annually, as set forth
therein and specified in the applicable Pricing Supplement. Interest on each
Fixed Rate Note will accrue from its date of issue and, unless otherwise
specified in the applicable Pricing Supplement, will be payable semiannually
in arrears on June 15 and December 15 of each year and on the Maturity Date.
The Notes may also be issued with original issue discount, and such Notes may
or may not pay any interest. See "Description of Notes."
The interest rate, or the formula for the determination of any such interest
rate, applicable to each Note and the other variable terms thereof as
described herein will be established by the Company on the date of issue of
such Note and will be set forth therein and specified in the applicable
Pricing Supplement. Interest rates, interest rate formulae and such other
variable terms are subject to change by the Company, but no change will affect
any Note already issued or as to which an offer to purchase has been accepted
by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as set forth in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (or such other depositary as
is identified in the applicable Pricing Supplement) (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee.
Interests in the Global Securities will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary (with
respect to its participants ("Participants")) and the Participants (with
respect to beneficial owners).
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
THE PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1)(2) AND COMMISSIONS(2)(3) COMPANY(2)(3)(4)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............... 100% .125%-.750% 99.875%-99.250%
- --------------------------------------------------------------------------------------------------------
Total.................. $849,500,000 $1,061,875-$6,371,250 $848,438,125-$843,128,750
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise indicated in a Pricing Supplement, Notes will be issued
at 100% of their principal amount.
(2) In the case of Notes not denominated in United States dollars, such Notes
will have the equivalent denomination in the Specified Currency.
(3) The Company will pay a commission to Goldman, Sachs & Co., Lehman
Brothers, Lehman Brothers Inc. (including its affiliate Lehman Government
Securities Inc.), Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers
Inc, each as agent (collectively, the "Agents"), in the form of a discount
ranging from .125% to .750% of the principal amount of any Note sold
through the Agents (or in the case of Notes with a stated maturity in
excess of 30 years, such commission as shall be agreed upon between the
Company and the applicable Agent at the time of sale), depending upon the
maturity of the Note. The Company may also sell Notes to an Agent, acting
as principal, for resale to one or more investors or other purchasers
(acting as principal for purposes of resale) at varying prices related to
prevailing market prices at the time of resale, as determined by such
Agent, or, if so agreed, at a fixed public offering price. Unless
otherwise specified in the applicable Pricing Supplement, any Note sold to
an Agent as principal will be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage equal to the
commission applicable to an agency sale of a Note of identical maturity
and may be resold by such Agent. See "Plan of Distribution."
(4) Before deducting expenses payable by the Company estimated at $300,000,
including reimbursement of the Agents' expenses.
--------------
The Notes are being offered on a continual basis by the Company through the
Agents, who have agreed to use their reasonable best efforts to solicit
purchases of the Notes. The Company also may arrange for the Notes to be sold
through other agents, dealers or underwriters or may sell the Notes directly
to investors on the Company's own behalf in those jurisdictions where it is
authorized to do so. The Company also may sell Notes to an Agent, acting as
principal, for resale to one or more investors or other purchasers (acting as
principal for purposes of resale) at varying prices related to prevailing
market prices at the time of resale, as determined by such Agent, or, if so
agreed, at a fixed public offering price. The Notes will not be listed on any
securities exchange, and there can be no assurance that the Notes will be sold
or that there will be a secondary market for the Notes. The Company reserves
the right to withdraw, cancel or modify the offer made hereby without notice.
The Company, or the Agents that solicit any offer, may reject such offer in
whole or in part. See "Plan of Distribution."
--------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
The date of this Prospectus Supplement is July 2, 1996.
<PAGE>
IN CONNECTION WITH THE OFFERING OF NOTES, THE AGENTS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities under an Indenture,
dated as of December 15, 1993, as supplemented from time to time (the
"Indenture"), between the Company and The First National Bank of Chicago, as
trustee (the "Trustee"). The following summary of certain provisions of the
Notes and of the Indenture supplements, and to the extent inconsistent
therewith replaces, the summaries of certain provisions of the Debt Securities
set forth in the accompanying Prospectus. Such summary does not purport to be
complete and is qualified in its entirety by reference to the Indenture, a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the accompanying Prospectus constitute a
part. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture or the Notes, as the case may be. The term
"Debt Securities," as used in this Prospectus Supplement, refers to all debt
securities issued and issuable from time to time under the Indenture and
includes the Notes. The following description of Notes will apply to each Note
offered hereby unless otherwise specified in the applicable Pricing
Supplement.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of the Company and will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding. The Indenture does not limit the
aggregate principal amount of Debt Securities that may be issued thereunder,
and Debt Securities may be issued thereunder from time to time in one or more
series up to the aggregate principal amount from time to time authorized by
the Company for each series. Prior to the date of this Prospectus Supplement,
the Company had issued $3,936,189,000 aggregate principal amount of Debt
Securities under the Indenture. The Company may, from time to time, without
the consent of the Holders of the Notes, provide for the issuance of Notes or
other Debt Securities under the Indenture in addition to the $849,500,000
aggregate initial offering price of Notes offered hereby and the other Debt
Securities previously issued.
The Notes are currently limited to $849,500,000 aggregate initial offering
price, or the equivalent thereof in one or more foreign or composite
currencies. The Notes will be offered on a continuous basis and will mature on
any day nine months or more from their dates of issue, as specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, interest-bearing Notes will either be Fixed Rate Notes or
Floating Rate Notes as specified in the applicable Pricing Supplement. The
Notes may also be issued with original issue discount ("Discount Notes") and
such Notes may or may not bear any interest.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in United States dollars and payments of principal of, and
premium, if any, and interest on, the Notes will be made in United States
dollars. The Notes may also be denominated in currencies or composite
currencies other than United States dollars ("Foreign Currency Notes") (the
currency or composite currency in which a Note is denominated, whether United
States dollars or otherwise, is herein referred to as the "Specified
Currency"). See "Special Provisions and Risks Relating to Foreign Currency
Notes--Payments of Principal and Premium, if any, and Interest."
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency in
which such Notes are denominated. At the present time, there are limited
facilities in the United States for the conversion of United States dollars
into foreign currencies or composite currencies and vice versa, and commercial
banks do not generally
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<PAGE>
offer non-United States dollar checking or savings account facilities in the
United States. If requested on or prior to the fifth Business Day (as defined
below) preceding the date of delivery of the Foreign Currency Notes, or by
such other day as determined by an Agent, the Agent is prepared to arrange for
the conversion of United States dollars into the Specified Currency to enable
the purchasers to pay for such Notes. Each such conversion will be made by the
Exchange Rate Agent on such terms and subject to such conditions, limitations
and charges as the Agent may from time to time establish in accordance with
its regular foreign exchange practices. All costs of exchange will be borne by
the purchasers of the Foreign Currency Notes. See "Special Provisions and
Risks Relating to Foreign Currency Notes."
Interest rates offered by the Company with respect to the Notes may differ
depending upon the aggregate principal amount of Notes purchased in any
transaction, and the Company expects generally to distinguish, with respect to
such offered rates, between purchases that are for less than, and purchases
that are equal to or greater than, $200,000. Interest rates, interest rate
formulae and other variable terms of the Notes are subject to change by the
Company from time to time, but no such change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the
applicable Pricing Supplement.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency of the Company
maintained by the Company for such purpose in the Borough of Manhattan, the
City of New York. No service charge will be made by the Company or the Trustee
for any such registration of transfer or exchange of Notes, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith (other than exchanges
pursuant to the Indenture not involving any transfer).
Payments of principal of, and premium, if any, and interest on, Book-Entry
Notes will be made by the Company through the Trustee to the Depositary. See
"Book-Entry Notes." In the case of Certificated Notes, payment of principal
and premium, if any, due on the Stated Maturity Date or any prior date on
which the principal, or an installment of principal, of a Note becomes due and
payable, whether by the declaration of acceleration, call for redemption at
the option of the Company, repayment at the option of the Holder or otherwise
(the Stated Maturity Date or such prior date, as the case may be, is herein
referred to as the "Maturity Date") of each Certificated Note will be made in
immediately available funds upon presentation thereof at the office or agency
of the Company maintained by the Company for such purpose in the Borough of
Manhattan, the City of New York (or, in the case of any repayment on an
Optional Repayment Date, upon presentation of such Certificated Note in
accordance with the provisions described below). Payment of interest due on
the Maturity Date of each Certificated Note will be made to the person to whom
payment of the principal and premium, if any, shall be made. Payment of
interest due on each Certificated Note on any Interest Payment Date (as
defined below) (other than the Maturity Date) will be made at the office or
agency of the Company referred to above and maintained for such purpose or, at
the option of the Company, may be made by check mailed to the address of the
Holder entitled thereto as such address shall appear in the Security Register
of the Company. Notwithstanding the foregoing, a Holder of $10,000,000 (or the
equivalent thereof with respect to the Specified Currency applicable to a
Foreign Currency Note) or more in aggregate principal amount of Notes (whether
having identical or different terms and provisions) will be entitled to
receive interest payments on any Interest Payment Date (other than the
Maturity Date) by wire transfer of immediately available funds if appropriate
wire transfer instructions have been received in writing by the Trustee not
less than 15 days prior to such Interest Payment Date. Such wire instructions,
upon receipt by the Trustee, shall remain in effect until revoked by such
Holder. For
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<PAGE>
special payment terms applicable to Foreign Currency Notes, see "Special
Provisions and Risks Relating to Foreign Currency Notes--Payment of Principal
and Premium, if any, and Interest."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or executive order to close in
the City of New York; provided, however, that, with respect to Foreign
Currency Notes the payment of which is to be made in a Specified Currency
other than United States dollars, such day is also not a day on which banking
institutions are authorized or required by law or executive order to close in
the principal financial center of the country of such Specified Currency (or,
in the case of the European Currency Unit ("ECU"), is not a day designated as
an ECU Non-Settlement Day by the ECU Banking Association or otherwise
generally regarded in the ECU interbank market as a day on which payments in
ECUs shall not be made); provided, further, that, with respect to Notes as to
which LIBOR is an applicable Interest Rate Basis, such day is also a London
Business Day (as defined below). "London Business Day" means any day (i) if
the Index Currency (as defined below) is other than ECU, on which dealings in
such Index Currency are transacted in the London interbank market or (ii) if
the Index Currency is ECU, that is not designated as an ECU Non-Settlement Day
by the ECU Banking Association or otherwise generally regarded in the ECU
interbank market as a day on which payments in ECUs shall not be made.
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity Date only if an Initial
Redemption Date is specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to redemption at the option of the
Company on any date on and after the applicable Initial Redemption Date in
whole or from time to time in part in increments of $1,000 or the minimum
denomination specified in such Pricing Supplement (provided that any remaining
principal amount thereof shall be at least $1,000 or such minimum
denomination), at the applicable Redemption Price (as defined below) on notice
given not more than 60 nor less than 30 days prior to the date of redemption
and in accordance with the provisions of the Indenture. "Redemption Price,"
with respect to a Note, means an amount equal to the sum of (i) the Initial
Redemption Percentage specified in such Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction, if applicable) multiplied by the
unpaid principal amount or the portion to be redeemed plus (ii) accrued
interest to the date of redemption. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial
Redemption Date by an amount equal to the applicable Annual Redemption
Percentage Reduction, if any, until the Redemption Price is equal to 100% of
the unpaid principal amount thereof or the portion thereof to be redeemed.
REPAYMENT AT THE OPTION OF THE HOLDER
If so specified in the applicable Pricing Supplement, the Notes will be
repayable by the Company in whole or from time to time in part at the option
of the Holders thereof on their respective Optional Repayment Dates specified
in such Pricing Supplement. If no Optional Repayment Date is specified with
respect to a Note, such Note will not be repayable at the option of the Holder
thereof prior to the Stated Maturity Date. Any repayment in part will be in
increments of $1,000 or the minimum denomination specified in the applicable
Pricing Supplement (provided that any remaining principal amount thereof shall
be at least $1,000 or such minimum denomination). Unless otherwise specified
in the applicable Pricing Supplement, the repayment price for any Note to be
repaid means an amount equal to the sum of (i) 100% of the unpaid principal
amount thereof or the portion thereof plus (ii) accrued interest to the date
of repayment. For any Note to be repaid, such Note must be received, together
with the form thereon entitled "Option to Elect Repayment" duly completed, by
the Trustee at its Corporate Trust Office (or such other address of which the
Company shall from time to time notify the Holders) not more than 60 nor less
than 30 days prior to the date of repayment. Exercise of such repayment option
by the Holder will be irrevocable.
S-4
<PAGE>
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary
or the Depositary's nominee, the option for repayment may be exercised by the
applicable Participant that has an account with the Depositary, on behalf of
the beneficial owners of the Global Security or Securities representing such
Book-Entry Notes, by delivering a written notice substantially similar to the
above mentioned form to the Trustee at its Corporate Trust Office (or such
other address of which the Company shall from time to time notify the
Holders), not more than 60 nor less than 30 days prior to the date of
repayment. Notices of elections from Participants on behalf of beneficial
owners of the Global Security or Securities representing such Book-Entry Notes
to exercise their option to have such Book-Entry Notes repaid must be received
by the Trustee by 5:00 p.m., New York City time, on the last day for giving
such notice. In order to ensure that a notice is received by the Trustee on a
particular day, the beneficial owner of the Global Security or Securities
representing such Book-Entry Notes must so direct the applicable Participant
before such participant's deadline for accepting instructions for that day.
Different firms may have different deadlines for accepting instructions from
their customers. Accordingly, beneficial owners of the Global Security or
Securities representing Book-Entry Notes should consult the Participants
through which they own their interest therein for the respective deadlines for
such Participants. All notices shall be executed by a duly authorized officer
of such Participant (with signature guaranteed) and shall be irrevocable. In
addition, beneficial owners of the Global Security or Securities representing
Book-Entry Notes shall effect delivery at the time such notices of election
are given to the Depositary by causing the applicable Participant to transfer
such beneficial owner's interest in the Global Security or Securities
representing such Book-Entry Notes, on the Depositary's records, to the
Trustee. See "Book-Entry Notes."
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and any other securities laws or regulations in connection with any such
repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from its date of issue at the rate per annum, in the case
of a Fixed Rate Note, or pursuant to the interest rate formula, in the case of
a Floating Rate Note, in each case as specified in the applicable Pricing
Supplement, until the principal thereof is paid or duly made available for
payment. Interest payments in respect of the Notes will equal the amount of
interest accrued from and including the immediately preceding Interest Payment
Date in respect of which interest has been paid or duly made available for
payment (or from and including the date of issue, if no interest has been paid
with respect to the applicable Note) to but excluding the related Interest
Payment Date or the Maturity Date, as the case may be.
Interest will be payable in arrears, unless otherwise specified in the
applicable Pricing Supplement, on each Interest Payment Date specified in the
applicable Pricing Supplement on which an installment of interest is due and
payable and on the Maturity Date. Unless otherwise specified in the applicable
Pricing Supplement, the first payment of interest on any Note originally
issued between a Record Date (as defined below) and the related Interest
Payment Date or on an Interest Payment Date will be made on the Interest
Payment Date immediately following the next succeeding Record Date to the
Holder on such next succeeding Record Date. Unless otherwise specified in the
applicable Pricing Supplement, a "Record Date" shall be the fifteenth calendar
day (whether or not a Business Day) immediately preceding the related Interest
Payment Date.
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<PAGE>
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Payment Dates" for the Fixed Rate Notes will be June 15 and December
15 of each year and the Maturity Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
on the basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest will accrue
on such payment for the period from and after such Interest Payment Date or
the Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing
Supplement will specify certain terms with respect to which each Floating Rate
Note is being delivered, including: whether such Floating Rate Note is a
"Regular Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse
Floating Rate Note," Fixed Rate Commencement Date and Fixed Interest Rate, as
applicable, Interest Rate Basis or Bases, Initial Interest Rate, Interest
Reset Period and Dates, Record Dates, Interest Payment Period and Dates, Index
Maturity, maximum interest rate and minimum interest rate, if any, and Spread
and/or Spread Multiplier, if any, and if one or more of the applicable
Interest Rate Bases is LIBOR, the Index Currency and the Designated LIBOR
Page, as described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, will bear interest at the rate determined by reference
to the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date, the rate
at which interest on such Regular Floating Rate Note shall be payable shall
be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the period from
the date of issue to the first Interest Reset Date will be the Initial
Interest Rate and (z) the interest rate in effect commencing on the Fixed
Rate Commencement Date to the Maturity Date shall be the Fixed Interest
Rate, if such rate is specified in the applicable Pricing Supplement or, if
no such Fixed Interest Rate is so specified, the interest rate in effect
thereon on the day immediately preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the applicable Pricing Supplement minus the rate
determined by reference to the applicable Interest Rate Basis of Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided,
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<PAGE>
however, that, unless otherwise specified in the applicable Pricing
Supplement, the interest rate thereon will not be less than zero.
Commencing on the first Interest Reset Date, the rate at which interest on
such Inverse Floating Rate Note is payable shall be reset as of each
Interest Reset Date; provided, however, that the interest rate in effect
for the period from the date of issue to the first Interest Reset Date will
be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to
maturity of the instrument or obligation with respect to which the related
Interest Rate Basis or Bases will be calculated.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating
Rate Note shall bear interest in accordance with the terms described in such
Addendum and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or
in the applicable Pricing Supplement, the interest rate in effect on each day
shall be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date (as defined below)
immediately preceding such Interest Reset Date or (ii) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Federal Funds Rate, (v) LIBOR, (vi) the Prime Rate, (vii) the
Treasury Rate, or (viii) such other Interest Rate Basis or interest rate
formula as may be set forth in the applicable Pricing Supplement; provided,
however, that with respect to a Floating Rate/Fixed Rate Note, the interest
rate commencing on the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement or, if no such Fixed Interest Rate is so specified, the
interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes that reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month; (iv) quarterly, the third Wednesday of March,
June, September and December of each year; (v) semiannually, the third
Wednesday of the two months specified in the applicable Pricing Supplement and
(vi) annually, the third Wednesday of the month specified in the applicable
Pricing Supplement; provided, however, that, with respect to Floating
Rate/Fixed Rate Notes, the fixed rate of interest in effect for the period
from the Fixed Rate Commencement Date to the Maturity Date shall be the Fixed
Interest Rate or, if no such Fixed Interest Rate is specified, the interest
rate in effect on the day immediately preceding the Fixed Rate Commencement
Date, as specified in the applicable Pricing Supplement. If any Interest Reset
Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Reset Date will be postponed to the next
succeeding day that is a Business Day, except that in the case of a Floating
Rate Note as to which LIBOR is an applicable Interest Rate Basis, if such
Business Day falls in the next succeeding calendar month, such Interest Reset
Date will be the immediately preceding Business Day.
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The interest rate applicable to each Interest Reset Period commencing on the
Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the applicable Interest Determination Date on or prior
to the Calculation Date (as defined below). The "Interest Determination Date"
with respect to the CD Rate, the CMT Rate, the Commercial Paper Rate, the
Federal Funds Rate and the Prime Rate will be the second Business Day
immediately preceding the applicable Interest Reset Date; and the "Interest
Determination Date" with respect to LIBOR will be the second London Business
Day immediately preceding the applicable Interest Reset Date. With respect to
the Treasury Rate, the "Interest Determination Date" will be the day in the
week in which the applicable Interest Reset Date falls on which day Treasury
Bills (as defined below) are normally auctioned (Treasury Bills are normally
sold at an auction held on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday); provided,
however, that if an auction is held on the Friday of the week preceding the
applicable Interest Reset Date, the Interest Determination Date will be such
preceding Friday; and provided, further, that if an auction falls on the
applicable Interest Reset Date, then the Interest Reset Date will instead be
the first Business Day following such auction. The "Interest Determination
Date" pertaining to a Floating Rate Note the interest rate of that is
determined by reference to two or more Interest Rate Bases will be the most
recent Business Day that is at least two Business Days prior to the applicable
Interest Reset Date for such Floating Rate Note on which each Interest Rate
Basis is determinable. Each Interest Rate Basis will be determined on such
date, and the applicable interest rate will take effect on the applicable
Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period and (ii) a minimum numerical limitation, or
floor, on the rate at which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on Floating Rate
Notes will in no event be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes that reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement and (iv) annually, on the third Wednesday of the month of
each year specified in the applicable Pricing Supplement (each, an "Interest
Payment Date") and, in each case, on the Maturity Date. If any Interest
Payment Date for any Floating Rate Note (other than the Maturity Date) would
otherwise be a day that is not a Business Day, such Interest Payment Date will
be postponed to the next succeeding day that is a Business Day, except that in
the case of a Floating Rate Note as to which LIBOR is an applicable Interest
Rate Basis, if such Business Day falls in the next succeeding calendar month,
such Interest Payment Date will be the immediately preceding Business Day. If
the Maturity Date of a Floating Rate Note falls on a day that is not a
Business Day, the required payment of principal, premium, if any, and/or
interest will be made on the next succeeding Business Day as if made on the
date such payment was due, and no interest shall accrue on such payment for
the period from and after the Maturity Date to the date of such payment on the
next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation on Floating Rate Notes will be rounded,
in the case of United States dollars, to the nearest cent or, in the case of a
Specified Currency other than United States dollars, to the nearest unit (with
one-half cent or unit being rounded upward).
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With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, in the case of Notes for which the Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Federal Funds Rate, LIBOR or the Prime
Rate, or by the actual number of days in the year in the case of Notes for
which the Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for Notes for which the interest rate is calculated with reference to two or
more Interest Rate Bases will be calculated in each period in the same manner
as if only one of the applicable Interest Rate Bases applied as specified in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, The First
National Bank of Chicago, will be the "Calculation Agent." Upon request of the
Holder of any Floating Rate Note, the Calculation Agent will disclose the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next succeeding
Interest Reset Date with respect to such Floating Rate Note. Unless otherwise
specified in the applicable Pricing Supplement, the "Calculation Date," if
applicable, pertaining to any Interest Determination Date will be the earlier
of (i) the tenth calendar day after such Interest Determination Date, or, if
such day is not a Business Day, the next succeeding Business Day or (ii) the
Business Day immediately preceding the applicable Interest Payment Date or the
Maturity Date, as the case may be.
CD Rate. CD Rate Notes will bear interest at the rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate
on such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates" or any successor publication ("H.15(519)") under the
heading "CDs (Secondary Market)," or, if not published by 3:00 p.m., New York
City time, on the related Calculation Date, the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index
Maturity specified in the applicable Pricing Supplement as published by the
Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 p.m. Quotations for U.S. Government Securities" or any successor
publication ("Composite Quotations") under the heading "Certificates of
Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 p.m., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 a.m., New York City time, on such
CD Rate Interest Determination Date, of three leading nonbank dealers in
negotiable United States dollar certificates of deposit in the City of New
York (which may include the Agent or its affiliates) selected by the
Calculation Agent for negotiable certificates of deposit of major United
States money market banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement in an amount that is representative for a single
transaction in that market at that time; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the CD Rate determined as of such CD Rate Interest
Determination Date will be the CD Rate in effect on such CD Rate Interest
Determination Date.
CMT Rate Notes. CMT Rate Notes will bear interest at the rates (calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if
any) specified in such CMT Rate Notes and any applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption ". . . Treasury Constant Maturities . . . Federal Reserve Board
Release H.15 . . . Mondays Approximately 3:45 p.m.," under the column for the
Designated CMT Maturity Index (as defined below) for (i) if the Designated CMT
Telerate Page is 7055, the rate on such CMT Rate Interest Determination Date
and (ii) if the Designated CMT Telerate Page is 7052, for the week, or the
month, as applicable, ended immediately preceding the week in which the
related CMT Rate Interest Determination Date occurs. If such rate is no longer
displayed on the relevant page, or if not displayed by 3:00 p.m., New York
City time, on the related Calculation Date, then the CMT Rate for such CMT
Rate Interest Determination Date will be such treasury constant maturity rate
for the Designated CMT Maturity Index as published in the relevant H.15(519).
If such rate is no longer published, or if not published by 3:00 p.m., New
York City time, on the related Calculation Date, then the CMT Rate for such
CMT Rate Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index (or other United States Treasury
rate for the Designated CMT Maturity Index) for the CMT Rate Interest
Determination Date with respect to such Interest Reset Date as may then be
published by either the Board of Governors of the Federal Reserve System or
the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated
CMT Telerate Page and published in the relevant H.15(519). If such information
is not provided by 3:00 p.m., New York City time, on the related Calculation
Date, then the CMT Rate for the CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity, based on
the arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 p.m., New York City time, on the CMT Rate Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a
"Reference Dealer") in the City of New York (which may include the Agent or
its affiliates) selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for the most
recently issued direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the Designated
CMT Maturity Index and a remaining term to maturity of not less than such
Designated CMT Maturity Index minus one year. If the Calculation Agent cannot
obtain three such Treasury Note quotations, the CMT Rate for such CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 p.m., New York City time, on
the CMT Rate Interest Determination Date of three Reference Dealers in the
City of New York (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for Treasury Notes with an original maturity of the number of
years that is the next highest to the Designated CMT Maturity Index and a
remaining term to maturity closest to the Designated CMT Maturity Index and in
an amount of at least $100 million. If three or four (and not five) of such
Reference Dealers are quoting as described above, then the CMT Rate will be
based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided, however,
that if fewer than three Reference Dealers selected by the Calculation Agent
are quoting as described herein, the CMT Rate will be the CMT Rate in effect
on such CMT Rate Interest Determination Date. If two Treasury Notes with an
original maturity as described in the third preceding sentence have remaining
terms to maturity equally close to the Designated CMT Maturity Index, the
quotes for the Treasury Note with the shorter remaining term to maturity will
be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page
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on that service for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519)), for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519). If no such page is specified in the
applicable Pricing Supplement, the Designated CMT Telerate Page shall be 7052,
for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will
be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at the
rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date relating to
a Commercial Paper Rate Note or any Floating Rate Note for which the interest
rate is determined with reference to the Commercial Paper Rate (a "Commercial
Paper Rate Interest Determination Date"), the Money Market Yield (as defined
below) on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Commercial Paper." In the event that such rate is not published
by 3:00 p.m., New York City time, on the related Calculation Date, then the
Commercial Paper Rate will be the Money Market Yield on such Commercial Paper
Rate Interest Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an
Index Maturity of 30 days or 90 days, respectively). If by 3:00 p.m., New York
City time, on the related Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the Commercial Paper Rate on
such Commercial Paper Rate Interest Determination Date will be calculated by
the Calculation Agent and will be the Money Market Yield of the arithmetic
mean of the offered rates at approximately 11:00 a.m., New York City time, on
such Commercial Paper Rate Interest Determination Date of three leading
dealers of commercial paper in the City of New York (which may include the
Agent or its affiliates) selected by the Calculation Agent for commercial
paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized statistical rating organization;
provided, however, that if the dealers so selected by the Calculation Agent
are not quoting as mentioned in this sentence, the Commercial Paper Rate
determined as of such Commercial Paper Rate Interest Determination Date will
be the Commercial Paper Rate in effect on such Commercial Paper Rate Interest
Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
D X 360
Money Market Yield = ------------ X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in
the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to
a Federal Funds Rate Note or any Floating Rate Note for which the interest
rate is determined with reference to the Federal Funds Rate (a "Federal Funds
Rate Interest Determination Date"), the rate on such date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if
not published by 3:00 p.m., New York City time, on the related Calculation
Date, the rate on such Federal Funds Rate Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If by 3:00 p.m., New York City time, on the related Calculation Date
such rate is not published in either H.15(519) or Composite Quotations, then
the Federal Funds Rate on such Federal Funds Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the rates for the last transaction in overnight United States dollar federal
funds arranged by three leading brokers of federal funds transactions in the
City of New York (which may include the Agent or its affiliates) selected by
the Calculation Agent prior to 9:00 a.m., New York City time, on such Federal
Funds Rate Interest Determination Date; provided, however, that if the brokers
so selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Federal Funds Rate determined as of such Federal Funds Rate
Interest Determination Date will be the Federal Funds Rate in effect on such
Federal Funds Rate Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in such LIBOR Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date, that appear on the
Designated LIBOR Page specified in the applicable Pricing Supplement as of
11:00 a.m. London time, on such LIBOR Interest Determination Date, if at
least two such offered rates appear (unless, as aforesaid, only a single
rate is required) on such Designated LIBOR Page; or (b) if "LIBOR Telerate"
is specified in the applicable Pricing Supplement or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified as the method for calculating
LIBOR, the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date that appears on the Designated LIBOR Page specified in
the applicable Pricing Supplement as of 11:00 a.m., London time, on such
LIBOR Interest Determination Date. If fewer than two such offered rates
appear, or if no such rate appears, as applicable, LIBOR in respect of the
related LIBOR Interest Determination Date will be determined in accordance
with the provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the applicable Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Interest Determination
Date and in a principal amount that is
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representative for a single transaction in such Index Currency in such
market at such time. If at least two such quotations are provided, LIBOR
determined on such LIBOR Interest Determination Date will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR
determined on such LIBOR Interest Determination Date will be the arithmetic
mean of the rates quoted at approximately 11:00 a.m., in the applicable
Principal Financial Center, on such LIBOR Interest Determination Date by
three major banks in such Principal Financial Center selected by the
Calculation Agent for loans in the Index Currency to leading European
banks, having the Index Maturity designated in the applicable Pricing
Supplement and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time; provided,
however, that if the banks so selected by the Calculation Agent are not
quoting as mentioned in this sentence, LIBOR determined as of such LIBOR
Interest Determination Date will be LIBOR in effect on such LIBOR Interest
Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable
Pricing Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is specified in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
specified in the applicable Pricing Supplement or neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to United
States dollars, Deutsche Marks, Dutch Guilders, Italian Lire, Swiss Francs and
ECUs, the Principal Financial Center shall be the City of New York, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively.
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a
Prime Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Prime Rate (a "Prime Rate Interest
Determination Date"), the rate on such date as such rate is published in
H.15(519) under the heading "Bank Prime Loan." If such rate is not published
prior to 3:00 p.m., New York City time, on the related Calculation Date, then
the Prime Rate shall be the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the Reuters Screen NYMF Page (as
defined below) as such bank's prime rate or base lending rate as in effect for
such Prime Rate Interest Determination Date. If fewer than four such rates but
more than one such rate appear on the Reuters Screen NYMF Page for such Prime
Rate Interest Determination Date, the Prime Rate shall be the arithmetic mean
of the prime rates quoted on the basis of the actual number of days in the
year divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date by four major money center banks in the City of
New York selected by the Calculation Agent. If fewer than two such rates
appear on the Reuters Screen NYMF Page, the Prime Rate will be determined by
the Calculation Agent on the basis of the rates furnished in The City of New
York by three substitute banks or trust companies organized and doing business
under the laws of the United States, or any State thereof, having total equity
capital of at least $500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent
to provide such rate or rates; provided, however, that if the banks or trust
companies selected as aforesaid are not quoting as mentioned in this sentence,
the Prime Rate determined as of such Prime Rate Interest Determination Date
will be the Prime Rate in effect on such Prime Rate Interest Determination
Date.
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"Reuters Screen NYMF Page" means the display designated as page "USPRIME 1"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the USPRIME 1 page on that service for the purpose of displaying prime rates
or base lending rates of major United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate is published in
H.15(519) under the heading "Treasury Bills-auction average (investment)" or,
if not published by 3:00 p.m., New York City time, on the related Calculation
Date, the auction average rate (expressed as a bond equivalent on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the Index
Maturity designated in the applicable Pricing Supplement are not reported as
provided by 3:00 p.m., New York City time, on such Calculation Date, or if no
such auction is held in a particular week, then the Treasury Rate will be
calculated by the Calculation Agent and will be a yield to maturity (expressed
as a bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 p.m., New York City time, on such Treasury
Rate Interest Determination Date, of three leading primary United States
government securities dealers (which may include the Agent or its affiliates)
selected by the Calculation Agent, for the issue of Treasury Bills with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate determined as of such Treasury Rate Interest Determination Date will be
the Treasury Rate in effect on such Treasury Rate Interest Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the Maturity Date or any other variable term
relating thereto, may be modified as specified under "Other Provisions" on the
face thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing
Note will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest
due and payable thereon and then to the reduction of the unpaid principal
amount thereof. Further information concerning additional terms and provisions
of Amortizing Notes will be specified in the applicable Pricing Supplement. A
table setting forth repayment information in respect of each Amortizing Note
will be included in the applicable Pricing Supplement and set forth in each
such Note.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Discount Notes from time to time. Such Discount Notes
may currently pay no interest or interest at a rate that at the time of
issuance is below market rates. In the event of redemption, repayment or
acceleration of maturity in respect of a Discount Note, the amount payable
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to the holder of such Discount Note will be equal to (i) the Amortized Face
Amount (as defined below) as of the date of such event, plus (ii) with respect
to any redemption of a Discount Note, the Initial Redemption Percentage
specified in the applicable Pricing Supplement (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) minus 100% multiplied by the
Issue Price specified in such Pricing Supplement (the "Issue Price"), net of
any portion of such Issue Price which has been paid prior to the date of
redemption, or the portion of the Issue Price (or the net amount)
proportionate to the portion of the unpaid principal amount to be redeemed,
plus (iii) any accrued interest to the date of such event the payment of which
would constitute qualified stated interest payments within the meaning of
Treasury Regulation 1.1273-1(c) under the Internal Revenue Code of 1986, as
amended (the "Code"). The "Amortized Face Amount" of a Discount Note means an
amount equal to (i) the Issue Price thereof plus (ii) the aggregate portions
of the original issue discount (the excess of the amounts considered as part
of the "stated redemption price at maturity" of such Discount Note within the
meaning of Section 1273(a)(2) of the Code, whether denominated as principal or
interest, over the Issue Price) which shall theretofore have accrued pursuant
to Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code)
from the date of issue of such Discount Note to the date of determination,
minus (iii) any amount considered as part of the "stated redemption price at
maturity" of such Discount Note that has been paid from the date of issue to
the date of determination. Certain additional considerations relating to the
offering of any Discount Notes may be set forth in the applicable Pricing
Supplement.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities, the exchange rate of one or more specified
currencies (including a composite currency such as the ECU) relative to an
indexed currency or such other price or exchange rate ("Indexed Notes"), as
set forth in the applicable Pricing Supplement. In certain cases, Holders of
Indexed Notes may receive a principal amount on the Maturity Date that is
greater than or less than the face amount of the Notes depending upon the
relative value on the Maturity Date of the specified indexed item. Information
as to the method for determining the amount of principal, premium, if any,
and/or interest payable in respect of Indexed Notes, certain historical
information with respect to the specified indexed item and tax considerations
associated with an investment in such Indexed Notes will be set forth in the
applicable Pricing Supplement.
BOOK-ENTRY NOTES
The following provisions assume that the Company has established a
depository arrangement with the Depositary with respect to the Book-Entry
Notes. Any additional or differing terms of the depositary arrangements with
respect to the Book-Entry Notes will be described in the applicable Pricing
Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, redemption provisions (if any),
repayment provisions (if any), Stated Maturity Date and other variable terms
will be represented by a single Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary and will be registered in the name of the Depositary or a nominee
of the Depositary. No Global Security may be transferred except as a whole by
a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor of the
Depositary of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided in this section,
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the beneficial owners of the Global Security or Securities representing Book-
Entry Notes will not be entitled to receive physical delivery of Certificated
Notes and will not be considered the Holders thereof for any purpose under the
Indenture, and no Global Security representing Book-Entry Notes shall be
exchangeable or transferable. Accordingly, each person owning a beneficial
interest in a Global Security must rely on the procedures of the Depositary
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest in order to exercise any rights of
a Holder under the Indenture. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to
transfer beneficial interests in a Global Security representing Book-Entry
Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes is exchangeable for Certificated Notes
of like tenor and terms and of differing authorized denominations aggregating
a like amount, only if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the Global Securities, (ii)
the Depositary ceases to be a clearing agency registered under the Exchange
Act, (iii) the Company in its sole discretion determines that the Global
Securities shall be exchangeable for Certificated Notes or (iv) there shall
have occurred and be continuing an Event of Default under the Indenture with
respect to the Notes. Upon any such exchange, the Certificated Notes shall be
registered in the names of the beneficial owners of the Global Security or
Securities representing Book-Entry Notes as provided by the Depositary's
relevant participants (as identified by the Depositary).
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership
nominee). One fully registered Global Security will be issued for each
issue of Book-Entry Notes, each in the aggregate principal amount of such
issue, and will be deposited with the Depositary. If, however, the
aggregate principal amount of any issue exceeds $200,000,000, one Global
Security will be issued with respect to each $200,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. The Depositary holds securities that its Participants
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The Depositary is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the Depositary's system is also
available to others that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participant"). The rules applicable to the Depositary and its Participants
are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for such
Book-Entry Notes on the Depositary's records. The ownership interest of
each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect
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Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Security representing Book-Entry Notes will not receive
Certificated Notes representing their ownership interests therein, except
in the event that use of the book-entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes that are deposited with the Depositary are registered in
the name of the Depositary's nominee, Cede & Co. The deposit of Global
Securities with the Depositary and their registration in the name of Cede &
Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners of the Global Securities
representing the Book-Entry Notes. The Depositary's records reflect only
the identity of the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Global
Securities representing the Book-Entry Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason
to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of the Depositary,
the Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and interest to the Depositary is the responsibility of
the Company or the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry
Notes repaid by the Company, through its Participant, to the Trustee, and
shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global Security
or Securities representing such Book-Entry Notes, on the Depositary's
records, to the Trustee. The requirement for physical delivery of Book-
Entry Notes in connection with a demand for repayment will be deemed
satisfied when the ownership rights in the Global Security or Securities
representing such Book-Entry Notes are transferred by Direct Participants
on the Depositary's records.
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The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
Certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes
to be reliable, but the Company takes no responsibility for the accuracy
thereof.
CERTAIN INVESTMENT CONSIDERATIONS
An investment in Notes indexed, as to principal, premium and/or interest, to
one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant risks
that are not associated with similar investments in a conventional fixed-rate
debt security. If the interest rate of such a Note is so indexed, it may
result in an interest rate that is less than that payable on a conventional
fixed-rate debt security issued at the same time, including the possibility
that no interest will be paid, and, if the principal of and/or premium on such
a Note is so indexed, the amount of principal and/or premium payable in
respect thereof may be less than the original purchase price of such Note if
allowed pursuant to the terms thereof, including the possibility that no such
amount will be paid. The secondary market for such Notes will be affected by a
number of factors, independent of the creditworthiness of the Company and the
value of the applicable currency, commodity or interest rate index, including
the volatility of the applicable currency, commodity or interest rate index,
the time remaining to the maturity of such Notes, the amount outstanding of
such Notes and market interest rates. The value of the applicable currency,
commodity or interest rate index depends on a number of interrelated factors,
including economic, financial and political events, over which the Company has
no control. Additionally, if the formula used to determine the amount of
principal, premium and/or interest payable with respect to such Notes contains
a multiple or leverage factor, the effect of any change in the applicable
currency, commodity or interest rate index will be increased. The historical
experience of the relevant currencies, commodities or interest rate indices
should not be taken as an indication of future performance of such currencies,
commodities or interest rate indices during the term of any Note. The credit
ratings assigned to the Company's medium-term note program are a reflection of
the Company's credit status and, in no way, are a reflection of the potential
impact of the factors discussed above, or any other factors, on the market
value of the Notes. Accordingly, prospective investors should consult their
own financial and legal advisors as to the risks entailed by an investment in
such Notes and the suitability of such Notes in light of their particular
circumstances.
SPECIAL PROVISIONS AND RISKS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than United States dollars or ECUs will not be sold in,
or to residents of, the country issuing the Specified Currency in which the
particular Notes are denominated. The information set forth in this Prospectus
Supplement is directed to prospective purchasers who are United States
residents and, with respect to Foreign Currency Notes, is by necessity
incomplete. The Company disclaims any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal of and premium, if any, and interest on the Notes. Such
persons should consult their own financial and legal advisors with regard to
such matters.
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THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN
FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR
PAYABLE IN A SPECIFIED CURRENCY OTHER THAN UNITED STATES DOLLARS, EITHER AS
SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS
MAY CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN
FOREIGN CURRENCY NOTES. FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE
INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a debt security denominated in
United States dollars. Such risks include, without limitation, the possibility
of significant changes in the rate of exchange between the United States
dollar and the applicable Specified Currency and the possibility of the
imposition or modification of foreign exchange controls by either the United
States or foreign governments. Such risks generally depend on events over
which the Company has no control, such as economic and political events and
the supply and demand for the relevant currencies. In recent years, rates of
exchange between the United States dollar and certain foreign currencies have
been highly volatile and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in the rate that may
occur during the term of any Foreign Currency Note. Depreciation of the
Specified Currency applicable to a Foreign Currency Note against the United
States dollar would result in a decrease in the United States dollar-
equivalent yield of such Note, in the United States dollar-equivalent value of
the principal and premium, if any, payable on the Maturity Date of such Note,
and, generally, in the United States dollar-equivalent market value of such
Note.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to the date on which any
payment of principal of or premium, if any, or interest on a Foreign Currency
Note is due, which could affect exchange rates as well as the availability of
the Specified Currency on such date. Even if there are no exchange controls,
it is possible that the Specified Currency for any particular Foreign Currency
Note would not be available on the applicable payment date due to other
circumstances beyond the control of the Company. In that event, the Company
will make the required payment in respect of such Foreign Currency Note in
United States dollars on the basis of the Market Exchange Rate (as defined
below). See "Payment Currency."
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Notes only in United States dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion
into United States dollars would be determined with reference to the date of
default, the date judgment is rendered or some other date. Under current New
York law, a state court in the State of New York rendering a judgment on a
Foreign Currency Note would be required to render such judgment in the
Specified Currency in which such Foreign Currency Note is denominated, and
such judgment would be converted into United States dollars at the exchange
rate prevailing on the date of entry of the judgment. Accordingly, Holders of
Foreign Currency Notes would bear the risk of exchange rate fluctuations
between the time the amount of the judgment is calculated and the time such
amount is converted from United States dollars into the applicable Specified
Currency.
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PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST
The Company is obligated to make payments of principal of and premium, if
any, and interest on Foreign Currency Notes in the applicable Specified
Currency (or, if such Specified Currency is not at the time of such payment
legal tender for the payment of public and private debts, in such other coin
or currency of the country that issued such Specified Currency as at the time
of such payment is legal tender for the payment of such debts). Any such
amounts paid by the Company will, unless otherwise specified in the applicable
Pricing Supplement, be converted by the Exchange Rate Agent named in the
applicable Pricing Supplement into United States dollars for payment to
Holders. However, unless otherwise specified in the applicable Pricing
Supplement, the Holder of a Foreign Currency Note may elect to receive such
payments in the applicable Specified Currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in the City of New
York received by the Exchange Rate Agent at approximately 11:00 a.m., New York
City time, on the second Business Day preceding the applicable payment date
from three recognized foreign exchange dealers (one of whom may be the
Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the
Company for the purchase by the quoting dealer of the Specified Currency for
United States dollars for settlement on such payment date in the aggregate
amount of the Specified Currency payable to all Holders of Foreign Currency
Notes scheduled to receive United States dollar payments and at which the
applicable dealer commits to execute a contract. All currency exchange costs
will be borne by the Holder of such Foreign Currency Note by deductions from
such payments. If three such bid quotations are not available, payments will
be made in the Specified Currency.
Unless otherwise specified in the applicable Pricing Supplement, a Holder of
a Foreign Currency Note may elect to receive payment of the principal of and
premium, if any, and/or interest on such Note in the Specified Currency by
submitting a written request for such payment to the Trustee at its corporate
trust office in the City of New York on or prior to the applicable Record Date
or at least 15 calendar days prior to the Maturity Date, as the case may be.
Such written request may be mailed or hand delivered or sent by cable, telex
or other form of facsimile transmission. A Holder of a Foreign Currency Note
may elect to receive payment in the applicable Specified Currency for all such
principal, premium, if any, and interest payments and need not file a separate
election for each payment. Such election will remain in effect until revoked
by written notice to the Trustee, but written notice of any such revocation
must be received by the Trustee on or prior to the applicable Record Date or
at least 15 calendar days prior to the Maturity Date, as the case may be.
Holders of Foreign Currency Notes whose Notes are to be held in the name of a
broker or nominee should contact such broker or nominee to determine whether
and how an election to receive payments in the applicable Specified Currency
may be made.
Payments of the principal of and premium, if any, and interest on Foreign
Currency Notes that are to be made in United States dollars will be made in
the manner specified herein with respect to Notes denominated in United States
dollars. See "Description of Notes--General." Payments of interest on Foreign
Currency Notes that are to be made in the applicable Specified Currency on an
Interest Payment Date (other than the Maturity Date) will be made by check
mailed to the address of the Persons entitled thereto as they appear in the
Security Register. Payments of principal of and premium, if any, and interest
on Foreign Currency Notes that are to be made in the applicable Specified
Currency on the Maturity Date will be made by wire transfer of immediately
available funds to an account with a bank designated at least 15 calendar days
prior to the Maturity Date by the applicable Holder, provided, that such bank
has appropriate facilities therefor and that the applicable Note is presented
at the principal corporate trust office of the Trustee in time for the Trustee
to make such payments in such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a
Beneficial Owner of a Global Security or Securities representing Book-Entry
Notes denominated in a Specified Currency other than
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United States dollars that elect to receive payments of principal, premium, if
any, and interest in such Specified Currency must notify the participant
through which its interest is held on or prior to the applicable Record Date
or at least 15 calendar days prior to the Maturity Date, as the case may be,
of such Beneficial Owner's election to receive all or a portion of such
payment in such Specified Currency. Such participant must notify the
Depositary of such election on or prior to the third Business Day after such
Record Date or at least 10 calendar days prior to the Maturity Date, as the
case may be, and the Depositary will notify the Trustee of such election on or
prior to the fifth Business Day after such Record Date or at least 10 calendar
days prior to the Maturity Date, as the case may be. If complete instructions
are received by the participant and forwarded by the participant to the
Depositary, and by the Depositary to the Trustee, on or prior to such dates,
then the Beneficial Owner will receive payments in such Specified Currency.
PAYMENT CURRENCY
If the applicable Specified Currency is not available for the payment of
principal, premium, if any, or interest with respect to a Foreign Currency
Note due to the imposition of exchange controls or other circumstances beyond
the control of the Company, the Company will be entitled to satisfy its
obligations to the Holder of such Foreign Currency Note by making such payment
in United States dollars on the basis of the Market Exchange Rate on the
second Business Day prior to such payment or, if such Market Exchange Rate is
not then available, on the basis of the most recently available Market
Exchange Rate or as otherwise specified in the applicable Pricing Supplement.
The "Market Exchange Rate" for a Specified Currency other than United States
dollars means the noon dollar buying rate in the City of New York for cable
transfer for such Specified Currency as certified for customs purposes by (or
if not so certified, as otherwise determined by) the Federal Reserve Bank of
New York. Any payment made under such circumstances in United States dollars
where the required payment is in a Specified Currency other than United States
dollars will not constitute an Event of Default under the Indenture with
respect to the Notes.
If payment in respect of a Foreign Currency Note is required to be made in
any currency unit (e.g., ECU), and such currency unit is unavailable due to
the imposition of exchange controls or other circumstances beyond the
Company's control, then the Company will be entitled, but not required, to
make any payments in respect of such Note in United States dollars until such
currency unit is again available. The amount of each payment in United States
dollars shall be computed on the basis of the equivalent of the currency unit
in United States dollars, which shall be determined by the Company or its
agent on the following basis. The component currencies of the currency unit
for this purpose (collectively, the "Component Currencies" and each, a
"Component Currency") shall be the currency amounts that were components of
the currency unit as of the last day on which the currency unit was used. The
equivalent of the currency unit in United States dollars shall be calculated
by aggregating the United States dollar equivalents of the Component
Currencies. The United States dollar equivalent of each of the Component
Currencies shall be determined by the Company or such agent on the basis of
the most recently available Market Exchange Rate for each such Component
Currency, or as otherwise specified in the applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in
such single currency equal to the sum of the amounts of the consolidated
Component Currencies expressed in such single currency. If any Component
Currency is divided into two or more currencies, the amount of the original
Component Currency shall be replaced by the amounts of such two or more
currencies, the sum of which shall be equal to the amount of the original
Component Currency.
All determinations referred to above made by the Company or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding
on the Holders of the Foreign Currency Notes.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal
with holders other than original purchasers (except where otherwise
specifically noted). Persons considering the purchase of the Notes should
consult their own tax advisors concerning the application of United States
federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate or trust the income of which is
subject to United States federal income taxation regardless of its source or
(iv) any other person whose income or gain in respect of a Note is effectively
connected with the conduct of a United States trade or business. As used
herein, the term "non-U.S. Holder" means a holder of a Note that is not a U.S.
Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Discount Notes (i.e., Notes issued with
original issue discount).
Original issue discount is defined as the excess of a Note's stated
redemption price at maturity over its issue price. A Note with a de minimis
amount of original issue discount (generally original issue discount that is
less than an amount equal to 1/4 of 1% of the Note's stated redemption price
at maturity multiplied by the number of complete years to its maturity from
its issue date) is treated as having no original issue discount. The issue
price of an issue of Notes equals the first price at which a substantial
amount of such Notes has been sold (ignoring sales to 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 sum of all payments provided by the Note other than qualified
stated interest payments. The term qualified stated interest generally means
stated interest that is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually at a single fixed rate.
In addition, under the applicable regulations (the "OID Regulations"), if a
Note bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of such Note (e.g., Notes with teaser rates
or interest holidays), and if the greater of either the resulting foregone
interest on such Note or any "true" discount on such Note (i.e., the excess of
the Note's stated principal amount over its issue price) equals or exceeds a
specified de minimis amount, then the stated interest on the Note would be
treated as original issue discount rather than qualified stated interest.
Finally, any original issue discount that is ignored because it is less than
the de minimis amount described above is treated as qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's
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regular method of tax accounting). A U.S. Holder of a Discount Note must
include original issue discount in income as ordinary interest for United
States federal income tax purposes as it accrues under a constant yield
method, regardless of such U.S. Holder's regular method of tax accounting or
whether such U.S. Holder has received any cash payments from the Company. In
general, the amount of original issue discount included in income by the
initial U.S. Holder of a Discount Note is the sum of the daily portions of
original issue discount with respect to such Discount Note for each day during
the taxable year (or portion of the taxable year) during which such U.S.
Holder held such Discount Note. The "daily portion" of original issue discount
on any Discount Note is determined by allocating to each day in any accrual
period a ratable portion of the original issue discount allocable to that
accrual period. An accrual period may be of any length and the accrual periods
may vary in length over the term of the Discount Note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or
on the first day of an accrual period. The amount of original issue discount
allocable to each accrual period generally is equal to the difference between
(i) the product of the Discount Note's adjusted issue price at the beginning
of such accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and appropriately adjusted to
take into account the length of the particular accrual period) and (ii) the
amount of any qualified stated interest payments allocable to such accrual
period. The adjusted issue price of a Discount Note at the beginning of any
accrual period is the sum of the issue price of the Discount Note plus the
amount of original issue discount allocable to all prior accrual periods minus
the amount of any prior payments on the Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue discount
in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than the Note's adjusted issue price as of the purchase date and less than or
equal to the sum of all amounts payable on the Discount Note after the
purchase date other than payments of qualified stated interest will be
considered to have purchased the Discount Note at an acquisition premium. The
amount of original issue discount that such a U.S. Holder must include in its
gross income with respect to such Discount Note for any taxable year (or
portion thereof during which the U.S. Holder holds the Discount Note) will be
reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
The treatment of a Floating Rate Note will depend upon whether it qualifies
as a variable rate debt instrument or a contingent payment obligation. A
Floating Rate Note will qualify as a variable rate debt instrument if (a) its
issue price does not exceed the total noncontingent principal payments due
under the Floating Rate Note by more than a specified de minimis amount and
(b) it provides for stated interest, paid or compounded at least annually, at
current values of (i) one or more qualified floating rates, (ii) a single
fixed rate and one or more qualified floating rates, (iii) a single objective
rate or (iv) a single fixed rate and a single objective rate that is a
qualified inverse floating rate. A Floating Rate Note that does not qualify as
a variable rate debt instrument will be issued as a contingent payment
obligation.
A qualified floating rate is any variable rate where variations in the value
of such rate can reasonably be expected to measure contemporaneous variations
in the cost of newly borrowed funds in the currency in which the Floating Rate
Note is denominated. Although a multiple of a qualified floating rate
generally will not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple
that is greater than zero but not more than 1.35 will constitute a qualified
floating rate. A variable rate equal to the product of a qualified floating
rate and a fixed multiple that is greater than zero but not more than 1.35,
increased or decreased by a fixed rate, also will constitute a qualified
floating rate. In addition, under the OID Regulations, two or more qualified
floating rates that can reasonably be expected to have approximately the same
values
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throughout the term of the Floating Rate Note (e.g., two or more qualified
floating rates with values within 25 basis points of each other as determined
on the Floating Rate Note's issue date) will be treated as a single qualified
floating rate. A variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions such as a
maximum numerical limitation (i.e., a cap) or a minimum numerical limitation
(i.e., a floor) will be treated as a qualified floating rate only in the case
of (i) a cap, floor or governor that is fixed throughout the term of the debt
instrument or (ii) a cap, floor or governor that is not reasonably anticipated
as of the issue date to revise the yield on the debt instrument to be
significantly less, more or different than, as the case may be, the expected
yield determined without the restriction. An objective rate is a rate that is
not itself a qualified floating rate but that is determined using a single
fixed formula and is based upon (i) one or more qualified floating rates, (ii)
one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
Floating Rate Note is denominated, (iii) either the yield or changes in the
price of one or more items of actively traded personal property (other than
stock or debt of the issuer or a related party) or (iv) a combination of
objective rates. The OID Regulations also provide that other variable interest
rates may be treated as objective rates if so designated by the IRS in the
future. Notwithstanding the foregoing, a variable rate of interest on a
Floating Rate Note will not constitute an objective rate if it is reasonably
expected that the average value of such rate during the first half of the
Floating Rate Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Floating Rate Note's term. A qualified inverse floating rate is any
objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds. The OID Regulations also provide that if a Floating Rate Note provides
for stated interest at a fixed rate for an initial period of less than one
year followed by a variable rate that is either a qualified floating rate or
an objective rate and if the variable rate on the Floating Rate Note's issue
date is intended to approximate the fixed rate (e.g., the value of the
variable rate on the issue date does not differ from the value of the fixed
rate by more than 25 basis points), then the fixed rate and the variable rate
together will constitute either a single qualified floating rate or objective
rate, as the case may be.
If a Floating Rate Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a variable rate debt instrument, then any stated interest on such
Note that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually will constitute qualified stated
interest and will be taxed accordingly. Thus, a Floating Rate Note that
provides for stated interest at either a single qualified floating rate or a
single objective rate throughout the term thereof and that qualifies as a
variable rate debt instrument generally will not be treated as having been
issued with original issue discount unless the Floating Rate Note is issued at
a "true" discount (i.e., at a price below the Note's stated principal amount)
in excess of the specified de minimis amount. Original issue discount on such
a Floating Rate Note will be allocated to an accrual period using the constant
yield method described above by assuming that the variable rate is a fixed
rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value of the qualified floating rate or qualified
inverse floating rate as of the issue date or (ii) in the case of an objective
rate (other than a qualified inverse floating rate), a fixed rate that
reflects the yield that is reasonably expected for the Floating Rate Note.
In general, any other Floating Rate Note that qualifies as a variable rate
debt instrument will be converted into an equivalent fixed rate debt
instrument for purposes of determining the amount and accrual of original
issue discount and qualified stated interest on the Floating Rate Note. The
OID Regulations generally require that such a Floating Rate Note be converted
into an equivalent fixed rate debt instrument by substituting any qualified
floating rate or qualified inverse floating rate provided for under the terms
of the Floating Rate Note with a fixed rate equal to the value of the
qualified floating rate or qualified inverse floating rate, as the case may
be, as of the Floating Rate Note's issue date. Any objective rate (other than
a qualified inverse floating rate) provided for under the terms of the
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Floating Rate Note is converted into a fixed rate that reflects the yield that
is reasonably expected for the Floating Rate Note. In the case of a Floating
Rate Note that qualifies as a variable rate debt instrument and provides for
stated interest at a fixed rate in addition to either one or more qualified
floating rates or a qualified inverse floating rate, the fixed rate initially
is replaced with a qualified floating rate (or a qualified inverse floating
rate, if the Floating Rate Note provides for a qualified inverse floating
rate). The qualified floating rate or qualified inverse floating rate that
replaces the fixed rate must be such that the fair market value of the
Floating Rate Note as of the Floating Rate Note's issue date is approximately
the same as the fair market value of an otherwise identical debt instrument
that provides for either the qualified floating rate or qualified inverse
floating rate rather than the fixed rate. After the fixed rate has been
replaced with either a qualified floating rate or a qualified inverse floating
rate, the Floating Rate Note is converted into an equivalent fixed rate debt
instrument in the manner described above.
Once the Floating Rate Note is converted into an equivalent fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
equivalent fixed rate debt instrument by applying the general original issue
discount rules to the equivalent fixed rate debt instrument. A U.S. Holder of
the Floating Rate Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the equivalent fixed rate
debt instrument. Appropriate adjustments will be made to the amount of
qualified stated interest or original issue discount assumed to have been
accrued or paid with respect to the equivalent fixed rate debt instrument
during each accrual period in the event that such amounts differ from the
actual amount of interest accrued or paid on the Floating Rate Note during the
accrual period.
A Floating Rate Note that does not qualify as a variable rate debt
instrument will be treated as a contingent payment debt obligation. The
treatment of contingent payment obligations under current law is not entirely
clear. The proper United States federal income tax treatment of Floating Rate
Notes that are treated as contingent payment debt obligations will be more
fully described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable
at the option of the holder prior to their stated maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase Notes with such
features should consult their own tax advisors because the tax consequences of
owning such Notes will depend, in part, on the particular terms and features
of the purchased Notes.
U.S. Holders generally may, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions. This election is only available for debt
instruments acquired on or after April 4, 1994.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based
on daily compounding), through the date of sale or maturity, and a portion of
the deductions otherwise allowable to the U.S. Holder for interest on
borrowings allocable to the Short-Term Note will be deferred until a
corresponding amount of income is realized. U.S. Holders who report income for
United States federal income tax purposes under the accrual method, and
certain other holders
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including banks and dealers in securities, are required to accrue original
issue discount on a Short-Term Note on a straight-line basis unless an
election is made to accrue the original issue discount under a constant yield
method (based on daily compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price
as of the purchase date, the amount of the difference will be treated as
market discount, unless such difference is less than a specified de minimis
amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized
on the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the accrued market discount with respect to such Note
that the U.S. Holder has not previously included in income. Market discount
will be considered to accrue ratably during the period from the date of
acquisition to the maturity date of the Note or, at the election of the U.S.
Holder, under a constant yield method. Notwithstanding the foregoing, a U.S.
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or semiannual compounding basis). Generally, such
currently included market discount is treated as ordinary interest for United
States federal income tax purposes. A U.S. Holder who does not elect to accrue
market discount into income currently will be required to defer the deduction
of all or a portion of the interest paid or accrued on any indebtedness
incurred or maintained to purchase or carry a Note with market discount until
the maturity of the Note or its earlier disposition in a taxable transaction
to the extent such interest deductions exceed interest income includible in
income with respect to the Note.
PREMIUM. Any amount paid by a U.S. Holder to purchase a Note in excess of
the Note's stated redemption price at maturity will constitute amortizable
bond premium. A U.S. Holder may elect to amortize such premium using a
constant yield method over the remaining term of the Note and may offset
interest otherwise required to be included in respect of the Note during any
taxable year by the amount of premium amortizable in such year. Special rules
that may defer the amortization of bond premium may apply to Notes that are
subject to a call option.
DISPOSITION OF A NOTE. A U.S. Holder generally will recognize taxable gain
or loss on the sale, exchange or retirement of a Note in an amount equal to
the difference between the consideration received (less any amount received in
respect of accrued interest, which will be taxable as such) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and any accrued
market discount the U.S. Holder has included in income) and decreased by the
amount of any payments, other than qualified stated interest payments,
received and bond premium amortized with respect to such Note. Except as
discussed above with respect to market discount, any such gain or loss
generally will be long-term capital gain or loss if the Note were held for
more than one year.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Backup withholding at a rate
of 31% and information reporting may apply to payments made to U.S. Holders in
respect of the Notes. This withholding and information reporting generally
applies only if the U.S. Holder (i) fails to furnish its social security or
other taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN,
(iii) fails to report properly interest or dividends or (iv) fails, under
certain circumstances, to provide a certified statement, sign under penalties
of perjury, that the TIN provided is correct and that it is not subject to
backup withholding. Any amount withheld from a payment to a U.S. Holder under
the backup withholding rules is allowable as a credit against such U.S.
Holder's federal income tax liability, provided that certain information is
furnished to the IRS. U.S. Holders of Notes should consult their tax
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advisors as to their qualification for exemption from backup withholding and
information reporting and the procedure for obtaining such an exemption.
Prospective purchasers of Notes will be required to provide the required
information to the Company on a completed Form W-9. A U.S. Holder who does not
provide the Company with its correct TIN also may be subject to penalties
imposed by the IRS.
The Company will report to the U.S. holders of the Notes and the IRS the
amount of any "reportable payments" for each calendar year and the amount of
tax withheld, if any, with respect to payments on the Notes.
NOTES DENOMINATED OR ON WHICH INTEREST IS PAYABLE
IN A FOREIGN CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than United States dollars.
CASH METHOD. A U.S. Holder who uses the cash method of accounting for United
States federal income tax purposes and who receives a payment of interest on a
Note (other than original issue discount or market discount) will be required
to include in income the United States dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of
whether the payment is in fact converted to United States dollars at that
time, and such United States dollar value will be the U.S. Holder's tax basis
in such Foreign Currency.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of accounting for
United States federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
United States dollar value of the amount of interest income (including
original issue discount or market discount and reduced by amortizable bond
premium to the extent applicable) that has accrued and is otherwise required
to be taken into account with respect to a Note during an accrual period. The
United States dollar value of such accrued income will be determined by
translating such income at the average rate of exchange for the accrual period
or, with respect to an accrual period that spans two taxable years, at the
average rate for the partial period within the taxable year. A U.S. Holder may
elect, however, to translate such accrued interest income using the rate of
exchange on the last day of the accrual period or, with respect to an accrual
period that spans two taxable years, using the rate of exchange on the last
day of the taxable year. If the last day of an accrual period is within five
business days of the date of receipt of the accrued interest, a U.S. Holder
may translate such interest using the rate of exchange on the date of receipt.
The above election will apply to other debt obligations held by the U.S.
Holder and may not be changed without the consent of the IRS. A U.S. Holder
should consult a tax advisor before making the above election. A U.S. Holder
will recognize exchange gain or loss (which will be treated as ordinary income
or loss) with respect to accrued interest income on the date such income is
received. The amount of ordinary income or loss recognized will equal the
difference, if any, between the United States dollar value of the Foreign
Currency payment received (determined on the date such payment is received) in
respect of such accrual period and the United States dollar value of interest
income that has accrued during such accrual period (as determined above).
PURCHASE, SALE AND RETIREMENT OF NOTES. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss
in an amount equal to the difference, if any, between such U.S. Holder's tax
basis in the Foreign Currency and the United States dollar fair market value
of the Foreign Currency used to purchase the Note, determined on the date of
purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued
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market discount not previously included in the U.S. Holder's income) and will
be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year.
To the extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described above. If a U.S. Holder receives
Foreign Currency on such a sale, exchange or retirement the amount realized
will be based on the United States dollar value of the Foreign Currency on (i)
the date of receipt of such Foreign Currency in the case of a cash basis U.S.
Holder and (ii) the date of disposition in the case of an accrual basis U.S.
Holder. In the case of a Note that is denominated in Foreign Currency and is
traded on an established securities market, a cash basis U.S. Holder (or, upon
election, an accrual basis U.S. Holder) will determine the United States
dollar value of the amount realized by translating the Foreign Currency
payment at the spot rate of exchange on the settlement date of the sale. A
U.S. Holder's adjusted tax basis in a Note will equal the cost of the Note to
such holder, increased by the amounts of any market discount or original issue
discount previously included in income by the holder with respect to such Note
and reduced by any amortized acquisition or other premium and any principal
payments received by the holder. A U.S. Holder's tax basis in a Note, and the
amount of any subsequent adjustments to such holder's tax basis, will be the
United States dollar value of the Foreign Currency amount paid for such Note,
or of the Foreign Currency amount of the adjustment, determined on the date of
such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss that will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the United States dollar value of the Foreign Currency principal
amount of the Note, determined on the date such payment is received or the
Note is disposed of, and the United States dollar value of the Foreign
Currency principal amount of the Note, determined on the date the U.S. Holder
acquired the Note. Such Foreign Currency gain or loss will be recognized only
to the extent of the total gain or loss realized by the U.S. Holder on the
sale, exchange or retirement of the Note.
ORIGINAL ISSUE DISCOUNT. In the case of a Discount Note or Short-Term Note,
(i) original issue discount is determined in units of the Foreign Currency,
(ii) accrued original issue discount is translated into United States dollars
as described in "--Accrual Method" above and (iii) the amount of Foreign
Currency gain or loss on the accrued original issue discount is determined by
comparing the amount of income received attributable to the discount (either
upon payment, maturity or an earlier disposition), as translated into United
States dollars at the rate of exchange on the date of such receipt, with the
amount of original issue discount accrued, as translated above.
PREMIUM AND MARKET DISCOUNT. In the case of a Note with market discount, (i)
market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the
Note (other than accrued market discount required to be taken into account
currently) is translated into United States dollars at the exchange rate on
such disposition date (and no part of such accrued market discount is treated
as exchange gain or loss) and (iii) accrued market discount currently
includible in income by a U.S. Holder for any accrual period is translated
into United States dollars on the basis of the average exchange rate in effect
during such accrual period, and the exchange gain or loss is determined upon
the receipt of any partial principal payment or upon the sale, exchange,
retirement or other disposition of the Note in the manner described in "--
Accrual Method" above with respect to computation of exchange gain or loss on
accrued interest.
With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the
United States dollar value of the bond premium amortized with respect to a
period, determined on
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the date the interest attributable to such period is received, and the United
States dollar value of the bond premium determined on the date of the
acquisition of the Note.
EXCHANGE OF FOREIGN CURRENCIES. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement
of a Note equal to the United States dollar value of such Foreign Currency,
determined at the time the interest is received or at the time of the sale,
exchange or retirement. Any gain or loss realized by a U.S. Holder on a sale
or other disposition of Foreign Currency (including its exchange for United
States dollars or its use to purchase Notes) will be ordinary income or loss.
CERTAIN UNITED STATES TAX DOCUMENTATION REQUIREMENTS
A non-U.S. Holder will be subject to the 30% United States federal
withholding tax that generally applies to payments of interest on a registered
form debt obligation issued by a United States person, unless one of the
following steps is taken to obtain an exemption from or reduction of the tax:
(1) Exemption for non-U.S. Holders (IRS Form W-8). A non-U.S. Holder (other
than certain persons that are related to the Company through stock
ownership and certain banks as described below in clauses (1)(i), (ii) and
(iii) under "Non-U.S. Holders--Income and Withholding Tax") can generally
obtain an exemption from the withholding tax by providing a properly
completed IRS Form W-8 (Certificate of Foreign Status);
(2) Exemption for non-U.S. Holders with effectively connected income (IRS
Form 4224). A non-U.S. Holder, including a Non-United States corporation or
bank with a United States branch, that conducts a trade or business in the
United States with which interest income on a Note is effectively
connected, can obtain an exemption from the withholding tax by providing a
properly completed IRS Form 4224 (Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States); or
(3) Exemption or reduced rate for non-U.S. Holders entitled to the benefits
of a treaty (IRS Form 1001). A non-U.S. Holder entitled to the benefits of
an income tax treaty to which the United States is a party can obtain an
exemption from or reduction of the withholding tax (depending on the terms
of the treaty) by providing a properly completed IRS Form 1001 (Ownership,
Exemption or Reduced Rate Certificate).
UNITED STATES FEDERAL INCOME TAX REPORTING PROCEDURE. A beneficial owner of
a Note or, in certain cases, its agent, is required to submit the appropriate
IRS Form under applicable procedures to the person through which the owner
directly holds the Note. Each other person through which Notes are held must
submit, on behalf of the beneficial owner, the IRS Form (or in certain cases a
copy thereof) under applicable procedures to the person through which it holds
the Notes, until the IRS Form is received by the United States person who
would otherwise be required to withhold United States federal income tax from
interest on the Notes. Applicable procedures include additional certification
requirements, described below in clause (1)(iv)(B) under "Non-U.S. Holders--
Income and Withholding Tax," if a beneficial owner of a Note provides an IRS
Form W-8 to a securities clearing organization, bank or other financial
institution that holds the Notes on its behalf.
EACH NON-U.S. HOLDER OF A NOTE SHOULD BE AWARE THAT IF IT DOES NOT PROPERLY
PROVIDE THE REQUIRED IRS FORM, OR IF THE IRS FORM (OR, IF PERMISSIBLE, A COPY
OF SUCH FORM) IS NOT PROPERLY TRANSMITTED TO AND RECEIVED BY THE UNITED STATES
PERSON OTHERWISE REQUIRED TO WITHHOLD UNITED STATES FEDERAL INCOME TAX,
INTEREST ON THE NOTE MAY BE SUBJECT TO UNITED STATES WITHHOLDING TAX AT A 30%
RATE. SUCH TAX, HOWEVER, MAY IN CERTAIN CIRCUMSTANCES BE ALLOWED AS A REFUND
OR AS A CREDIT AGAINST SUCH HOLDER'S UNITED STATES FEDERAL INCOME TAX. THE
FOREGOING DOES NOT DEAL WITH ALL ASPECTS OF FEDERAL INCOME TAX WITHHOLDING
THAT MAY BE RELEVANT TO FOREIGN HOLDERS OF THE NOTES. INVESTORS ARE THEREFORE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR SPECIFIC ADVICE CONCERNING THE
OWNERSHIP AND DISPOSITION OF NOTES.
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NON-U.S. HOLDERS
INCOME AND WITHHOLDING TAX. Payments of interest (including original issue
discount) on Notes that are beneficially owned by a non-U.S. Holder will not
be subject to United States federal withholding tax on interest provided that:
(1) (i) the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote,
(ii) the beneficial owner is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code,
(iii) the beneficial owner is not a controlled foreign corporation that
is related to the Company through stock ownership, and
(iv) either
(A) the beneficial owner of the Note certifies to the person
otherwise required to withhold United States federal income tax from
such interest, under penalties of perjury, that it is not a United
States person and its name and address; or
(B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution"), and holds the Notes,
certifies to the Company 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;
(2) the beneficial owner is entitled to the benefits of an income tax
treaty under which the interest is exempt from United States federal
withholding tax and the beneficial owner of the Notes or such owner's agent
provides an IRS Form 1001 claiming the exemption; or
(3) the beneficial owner conducts a trade or business in the United States
to which the interest is effectively connected and the beneficial owner of
the Debentures or such owner's agent provides an IRS Form 4224;
provided that, in each such case, none of the persons receiving the relevant
certification or IRS Form has actual knowledge that the certification or any
statement on the IRS Form is false.
Interest on Notes that is effectively connected with the conduct of a trade
or business in the United States by a holder of Notes who is a non-U.S.
Holder, although exempt from withholding tax, may be subject to United States
federal income tax as if such interest were earned by a United States person.
Generally, a non-U.S. Holder will not be subject to United States federal
income taxes on any amount that constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should
consult its tax advisor in this regard.
Notes owned by an individual who, at the time of death, is neither a citizen
nor domiciliary of the United States will not be subject to United States
federal estate tax as a result of such individual's death if the individual
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote and the
income on the Notes would not have been effectively connected with a United
States trade or business of the individual.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Information reporting on IRS
Form 1099 and backup withholding will not apply to interest payments made by
the Company or a paying agent to a non-U.S. Holder if the IRS Form described
above in clauses (1)(iv), (2) or (3) under "Non-U.S. Holders--Income and
Withholding Tax" has been provided under applicable procedures, provided that
the payer does not have actual knowledge that the certifications are
incorrect.
S-30
<PAGE>
Payments of the proceeds from the sale of Notes to or through the United
States office of a broker will be subject to information reporting and backup
withholding unless the holder or beneficial owner certifies that it is a non-
U.S. Holder under penalties of perjury or otherwise establishes an exemption
from information reporting and backup withholding. Payments of proceeds from
the sale of Notes made to or through a foreign office of a broker generally
will not be subject to information reporting or backup withholding; however,
if such broker is (1) a United States person, (2) a controlled foreign
corporation or (3) a foreign person that derives 50% or more of its gross
income from the conduct of a trade or business in the United States, such
payment will be subject to information reporting (but currently not backup
withholding, although the issue of whether backup withholding should apply is
under consideration by the IRS) unless such broker has documentary evidence in
its records that the holder is a non-U.S. Holder under penalties of perjury or
the holder otherwise establishes an exemption.
Backup withholding is not a separate tax, but is allowed as a refund or
credit against the holder's United States federal income tax, provided the
necessary information is furnished to the IRS. Interest on Notes that is
beneficially owned by a non-U.S. Holder will be reported annually by the
Company on IRS Form 1042S, which must be filed with the IRS and furnished to
such beneficial owner.
PLAN OF DISTRIBUTION
The Notes are being offered on a continual basis by the Company through the
Agents, who have agreed to use their reasonable best efforts to solicit
purchases of the Notes. The Company may appoint additional agents to solicit
sales of the Notes; provided that any such solicitation and sales of the Notes
shall be on the same terms and conditions as the Agents have agreed to. The
Company will pay the Agents a commission, in the form of a discount ranging
from .125% to .750% of the principal amount of the Note sold through it,
depending upon maturity of the Note. Commissions with respect to Notes with
maturities in excess of 30 years that are sold through the Agents will be
negotiated between the Company and the applicable Agent at the time of such
sale. The Company may also sell Notes to any Agent, as principal, at a
discount from the principal amount thereof, and such agent may later resell
such Notes to investors and other purchasers at varying prices related to
prevailing market prices at the time of resale as determined by such Agent,
or, if so agreed, at a fixed public offering price. The Company may arrange
for the Notes to be sold through other agents, dealers or underwriters or may
sell the Notes directly to investors on its own behalf in those jurisdictions
where it is authorized to do so. In the case of sales made directly by the
Company, no commission will be payable.
In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
such Agent 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, and may be resold by the Agent to investors and other
purchasers as described above. After the initial public offering of Notes to
be resold to investors and other purchasers, the public offering price (in the
case of fixed price public offering), concession and discount may be changed.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes in whole or in part. The Agents will
have the right, in their reasonable discretion, to reject any offer to
purchase Notes received by them in whole or in part.
The Company has agreed to indemnify the Agents against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the Agents may be required to make in respect
S-31
<PAGE>
thereof. The Agents may be deemed to be "underwriters" within the meaning of
the Securities Act. The Company has also agreed to reimburse the Agents for
certain expenses.
The Company may offer an additional series of medium-term notes of the
Company outside the United States to prospective non-U.S. Holders. Such other
series of medium-term notes may have terms substantially similar to the terms
of the Notes offered hereby (but will constitute a separate series for
purposes of the Indenture), and will be offered in bearer form only. Such
other series of medium-term notes will reduce correspondingly the principal
amount of Notes that may offered by this Prospectus Supplement and the
Prospectus. In addition, the amount of Notes that may be offered will be
reduced by the aggregate principal amount of any other securities issued by
the Company inside or outside the United States under the Registration
Statement.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Agents that the
Agents intend to make a market in the Notes, as permitted by applicable laws
and regulations. 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.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities pursuant to the Indenture
referred to herein.
VALIDITY OF NOTES
Certain matters with respect to the validity of the Notes offered hereby
will be passed upon for the Company by Stephen T. Braun, Senior Vice President
and General Counsel of the Company, and for any underwriters, dealers or
agents, as the case may be, by Jenkens & Gilchrist, a Professional
Corporation, Dallas, Texas. Jenkens & Gilchrist, a Professional Corporation,
has rendered, and continues to render, certain legal services to the Company.
As of March 31, 1996, Mr. Braun owned approximately 4,115 shares and had
options to purchase 169,500 shares of the Company's Common Stock.
S-32
<PAGE>
PROSPECTUS
COLUMBIA/HCA HEALTHCARE CORPORATION
DEBT SECURITIES
----------------
Columbia/HCA Healthcare Corporation (the "Company") may offer at any time,
or from time to time, its debt securities consisting of debentures, notes
and/or other unsecured evidences of indebtedness (the "Debt Securities") with
an aggregate initial offering price not to exceed $1,549,500,000. The Company
will offer the Debt Securities to the public on terms determined by market
conditions. The Debt Securities may be offered separately or together, in
separate series, in amounts, at prices and on terms to be determined at the
time of sale and to be set forth in supplements to this Prospectus. The Debt
Securities may be sold for U.S. dollars or one or more foreign or composite
currencies and the principal of, premium, if any, and interest, if any, on the
Debt Securities may likewise be payable in U.S. dollars or one or more foreign
or composite currencies.
The Debt Securities will be senior obligations of the Company, unsecured and
unsubordinated to any other existing indebtedness of the Company.
The terms of the Debt Securities, including where applicable the specific
designation, aggregate principal amount, denominations, maturity, rate (which
may be fixed or variable) and time of payment of interest, if any, purchase
price, any terms for mandatory redemption or redemption at the option of the
Company or the holder and any terms for sinking fund payments, the initial
public offering price, and the names of any underwriters or agents, the
principal amounts, if any, to be purchased by underwriters, the compensation,
if any, of such underwriters or agents and any other terms in connection with
the offering and sale of the Debt Securities in respect of which this
Prospectus is being delivered, will be set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement").
The Debt Securities may be issuable in registered definitive form
("Certificated Notes") or may be represented by one or more permanent global
securities ("Global Notes"), as specified in the applicable Prospectus
Supplement. Except in limited circumstances, owners of beneficial interests in
a Global Note will not be entitled to receive physical delivery of
Certificated Notes and will not be considered the holders thereof. See
"Description of the Debt Securities--Book-Entry System."
The Debt Securities may be sold to underwriters, to or through dealers,
acting as principals for their own account or acting as agents, or directly to
other purchasers. The Company may indemnify such underwriters, dealers and
agents against certain liabilities, including liabilities under the Securities
Act of 1933. See "Plan of Distribution."
----------------
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.
----------------
This Prospectus may not be used to consummate sales of the Debt Securities
unless accompanied by a Prospectus Supplement.
November 17, 1995
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, therefore, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; at its New York Regional Office, Seven World Trade Center, New
York, New York 10048; and at its Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained at prescribed rates, by writing to the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
can also be inspected at the New York Stock Exchange, 20 Broad Street, New
York, New York 10005, on which the Company's Common Stock is listed.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments, supplements and exhibits thereto, the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information set forth in the Registration Statement (in
accordance with the rules and regulations of the Commission), and reference is
hereby made to the Registration Statement and related exhibits for further
information with respect to the Company and the Debt Securities.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1994, as
amended (the "Form10-K").
2. The portions of the Proxy Statement for the Annual Meeting of
Stockholders held June 8, 1995 that have been incorporated by
reference in the Form 10-K.
3. Quarterly Reports on Form 10-Q for the interim periods ended March
31, 1995, June 30, 1995, and September 30, 1995.
4. Current Reports on Form 8-K dated February 21, 1995 and April 24,
1995.
5. Registration Statement on Form 8-A dated August 31, 1993.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of this offering shall be deemed
to be incorporated by reference herein and to be a part hereof from the date
of filing of such reports and documents. Any statement set forth herein or in
a document, all or a portion of which is incorporated or deemed to be
incorporated by reference herein, will be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement set forth
herein or in a subsequently filed document deemed to be incorporated by
reference herein modifies or supersedes such statement. Any 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 FURNISH, WITHOUT CHARGE, TO EACH PERSON TO WHOM A
PROSPECTUS AND PROSPECTUS SUPPLEMENT ARE DELIVERED, UPON WRITTEN OR ORAL
REQUEST, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN
BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE THEREIN). REQUESTS FOR SUCH DOCUMENTS
SHOULD BE SUBMITTED IN WRITING TO JOHN M. FRANCK II, SECRETARY, COLUMBIA/HCA
HEALTHCARE CORPORATION, ONE PARK PLAZA, NASHVILLE, TENNESSEE 37203 OR BY
TELEPHONE AT (615) 340-5881.
2
<PAGE>
THE COMPANY
The Company is one of the largest health care services companies in the
United States. At September 30, 1995, the Company operated approximately 319
general, acute care and psychiatric hospitals in approximately 36 states and
two foreign countries. In addition, as part of its comprehensive health care
networks, the Company operates facilities that provide a broad range of
outpatient and ancillary services. At September 30, 1995, the Company operated
more than 100 outpatient centers.
The Company's primary objective is to provide to the markets it serves a
comprehensive array of quality health care services in the most cost-effective
manner possible. The Company's general, acute care hospitals typically provide
a full range of services commonly available in hospitals to accommodate such
medical specialties as internal medicine, general surgery, cardiology,
oncology, neurosurgery, orthopedics and obstetrics, as well as diagnostic and
emergency services. Outpatient and ancillary health care services are provided
by the Company's general, acute care hospitals as well as at freestanding
facilities operated by the Company, including outpatient surgery and
diagnostic centers, rehabilitation facilities, home health care agencies and
other facilities. In addition, the Company operates psychiatric hospitals
which generally provide a full range of mental health care services in
inpatient, partial hospitalization and outpatient settings.
The Company was formed in January 1990 as a Nevada corporation and
reincorporated in Delaware in September 1993. The Company's principal
executive offices are located at One Park Plaza, Nashville, Tennessee 37203,
and its telephone number at such address is (615) 327-9551.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of the Company's consolidated
earnings to fixed charges for the periods presented.
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1995
AND 1994 FOR THE YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
3.71x 3.99x 4.09x 3.33x 2.05x 1.47x 1.65x
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consists of income from continuing operations before minority
interests, income taxes and fixed charges. "Fixed charges" consists of
interest expense, debt amortization costs and one-third of rent expense, which
approximates the interest portion of rent expense.
Statements setting forth the computation of the ratio of earnings to fixed
charges for each of the five years ended December 31 and for the nine months
ended September 30, 1995 and 1994 are filed as exhibits to the Registration
Statement of which this Prospectus is a part.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will be
used for general corporate purposes, which may include, without limitation,
repayment of commercial paper and other indebtedness, additional
capitalization of the Company's subsidiaries and affiliates, capital
expenditures and possible acquisitions, unless a specific determination as to
the use of the proceeds is otherwise described in the accompanying Prospectus
Supplement.
3
<PAGE>
DESCRIPTION OF THE DEBT SECURITIES
The following description summarizes certain general terms and provisions of
the Debt Securities. The particular terms of the Debt Securities, including
the nature of any variations from the following general provisions, will be
described in the Prospectus Supplement relating to such Debt Securities.
The Debt Securities, which will represent senior indebtedness of the
Company, may be issued in one or more series under an Indenture between the
Company and The First National Bank of Chicago, as Trustee (the "Trustee"),
dated as of December 15, 1993 (the "Indenture"). The Indenture has been filed
with the Commission as an exhibit to the Registration Statement and is
incorporated by reference herein.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all provisions of the Indenture, including the definition
therein of certain terms. All article and section references appearing herein
are to articles and sections of the Indenture. Unless otherwise defined
herein, all capitalized terms shall have the definitions set forth in the
Indenture.
GENERAL
Since the Company is a holding company, the rights of the Company to
participate in any distribution of assets of any subsidiary upon its
liquidation or reorganization or otherwise (and thus the ability of holders of
the Debt Securities to benefit from such distribution) are subject to the
prior claims of creditors of that subsidiary, except to the extent that the
Company may itself be a creditor with recognized claims against that
subsidiary. Claims on the Company's subsidiaries by creditors may include
claims of holders of indebtedness and claims of creditors in the ordinary
course of business. Such claims may increase or decrease, and additional
claims may be incurred in the future.
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provides that Debt Securities may
be issued from time to time in series. The Debt Securities will be unsecured
obligations of the Company and will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Company. The Indenture limits the
ability of the Company and its Subsidiaries under certain circumstances to
secure Debt (as hereinafter defined) by mortgages on its Principal Properties
(as hereinafter defined), entering into Sale and Lease-Back Transactions or
issuing Subsidiary Debt or Preferred Stock as more fully described below.
The Prospectus Supplement will describe the following terms of the Debt
Securities being offered: (1) the title of the Debt Securities; (2) any limit
on the aggregate principal amount of the Debt Securities; (3) the date or
dates on which the Debt Securities may be issued and are or will be payable;
(4) the rate or rates per annum (which may be fixed or variable) at which the
Debt Securities will bear interest, if any, or the method by which such rate
or rates shall be determined, and the date or dates from which such interest,
if any, will accrue; (5) the date or dates on which such interest, if any, on
the Debt Securities will be payable and the Regular Record Dates for any such
Interest Payment Dates; and the extent to which, or the manner in which, any
interest payable on a global Debt Security ("Global Notes") on an Interest
Payment Date will be paid if other than in the manner described under "Book-
Entry System" below; (6) each office or agency where, subject to the terms of
the Indenture as described below under "Payment and Paying Agents," the
principal of, and premium, if any, and any interest on the Debt Securities
will be payable and each office or agency where, subject to the terms of the
Indenture as described below under "Denominations, Registration and Transfer,"
the Debt Securities may be presented for registration of transfer or exchange;
(7) the period or periods within which, the price or prices at which, and the
terms and conditions upon which the Debt Securities may be redeemed at the
option of the Company; (8) the obligation, if any, of the Company to redeem,
to repay or purchase the 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 upon which the Debt Securities will be redeemed, repaid or
purchased pursuant to any such obligation; (9) whether the Debt Securities are
to be issued with original issue discount within the meaning of Section
1273(a) of the Internal Revenue Code of 1986, as
4
<PAGE>
amended (the "Code"), and the regulations thereunder; (10) whether the Debt
Securities are to be issued in whole or in part in the form of one or more
Global Notes and, if so, the identity of the depositary, if any, for such
Global Note or Notes; (11) if other than Dollars, the Foreign Currency or
Currencies or Foreign Currency Units in which the principal of, and premium,
if any, and any interest on the Debt Securities shall or may be paid and, if
applicable, whether at the election of the Company and/or the Holder, and the
conditions and manner of determining the exchange rate or rates; (12) any
index used to determine the amount of payment of principal of and premium, if
any, and any interest on the Debt Securities; (13) any addition to, or
modification or deletion of, any Events of Default or covenants provided for
with respect to the Debt Securities; (14) any other detailed terms and
provisions of the Debt Securities which are not inconsistent with the
Indenture (Section 301). Any such Prospectus Supplement will also describe any
special provisions for the payment of additional amounts with respect to the
Debt Securities.
The Debt Securities may be issued as Discount Securities to be sold at a
substantial discount below their principal amount. "Discount Securities" means
any Debt Securities issued with original issue discount for purposes of the
Code. Special United States income tax and other considerations applicable to
Discount Securities will be described in the Prospectus Supplement relating
thereto. Discount Securities may provide for the declaration or acceleration
of the Maturity of an amount less than the principal amount thereof upon the
occurrence of an Event of Default and the continuation thereof (Sections 101,
502).
DENOMINATIONS, REGISTRATION AND TRANSFER
The Debt Securities of a series may be issuable in whole or in part in the
form of one or more Global Notes, as described below under "Book-Entry
System." Unless otherwise provided in an applicable Prospectus Supplement with
respect to a series of Debt Securities, the Debt Securities will be issuable
in fully registered form and in denominations of $1,000 or any multiple
thereof. One or more Global Notes will be issued in a denomination or
aggregate denominations equal to the aggregate principal amount of Outstanding
Debt Securities of the series to be represented by such Global Note or Notes
(Sections 201, 301, 302, 304).
The Debt Securities of any series (other than a Global Note) will be
exchangeable for other Debt Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations.
The Debt Securities may be presented for exchange as provided above, and Debt
Securities (other than a Global Note) may be presented for registration of
transfer (with the form of transfer endorsed thereon duly executed), at the
office of the Security Registrar or co-Security Registrar designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or co-Security Registrar being satisfied with the documents of title
and identity of the person making the request. The Company has appointed the
Trustee as Security Registrar (Section 305).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, and premium, if any, and any interest on the Debt Securities
will be made at the office of such Paying Agent or Paying Agents as the
Company may designate from time to time, except that at the option of the
Company payment of any interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer to an account maintained by the person
entitled thereto (Section 307). Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on the Debt
Securities will be made to the Person in whose name such Debt Security is
registered at the close of business on the Regular Record Date for such
interest (Section 307).
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee will act as the Company's sole Paying Agent through its principal
office in the Borough of Manhattan, The City of New York, with respect to the
Debt Securities. Any Paying Agents outside the United States and other Paying
Agents in the United States
5
<PAGE>
initially designated by the Company for the Debt Securities being offered will
be named in an applicable Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts;
provided, however, the Company will be required to maintain a Paying Agent in
each Place of Payment for such series.
All moneys paid by the Company to the Trustee or a Paying Agent for the
payment of principal of, and premium, if any, and any interest on any Debt
Security which remain unclaimed at the end of two years after such principal,
premium or interest shall have become due and payable will be repaid to the
Company, and the Holder of such Debt Security may thereafter look only to the
Company for payment thereof (Section 1103).
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Notes that will be deposited with or on behalf of a
depositary located in the United States (a "Depositary") identified in the
Prospectus Supplement relating to such series.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
apply to all depositary arrangements.
Unless otherwise specified in an applicable Prospectus Supplement, Debt
Securities that are to be represented by a Global Note to be deposited with or
on behalf of a Depositary will be represented by a Global Note registered in
the name of such Depositary or its nominee. Upon the issuance of a Global Note
in registered form, the Depositary for such Global Note will credit, on its
book-entry registration and transfer system, the respective principal amounts
of the Debt Securities represented by such Global Note to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited shall be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of
beneficial interests in such Global Notes will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Notes will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such Global Note. Ownership of
beneficial interests in Global Notes by persons that hold through participants
will be shown on, and the transfer of that ownership interest within such
participant will be effected only through, records maintained by such
participant. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Note.
So long as the Depositary for a Global Note, or its nominee, is the
registered owner of such Global Note, such Depositary or such nominee, as the
case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Note for all purposes under the
Indenture governing such Debt Securities. Except as set forth below, owners of
beneficial interests in such Global Notes will not be entitled to have Debt
Securities of the series represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Payment of principal of, premium, if any, and any interest on Debt
Securities registered in the name of or held by a Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner or the holder of the Global Note representing such Debt
Securities. None of the Company, the Trustee, any Paying Agent or the Security
Registrar for such Debt Securities will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in a Global Note for such Debt Securities or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
6
<PAGE>
The Company expects that the Depositary for Debt Securities of a series,
upon receipt of any payment of principal, premium or interest in respect of a
permanent Global Note, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Note as shown on the records of such
Depositary. The Company also expects that payments by participants to owners
of beneficial interests in such Global Note held through such participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers registered in
"street name," and will be the responsibility of such participants.
A Global Note may not be transferred except as a whole by the Depositary for
such Global Note to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee
of such successor (Section 304). If a Depositary for Debt Securities of a
series 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 Debt Securities in definitive registered form in exchange
for the Global Note or Notes representing such Debt Securities. In addition,
the Company may at any time and in its sole discretion determine not to have
any Debt Securities represented by one or more Global Notes and, in such
event, will issue Debt Securities in definitive registered form in exchange
for all the Global Notes representing such Debt Securities. In any such
instance, an owner of a beneficial interest in a Global Note will be entitled
to physical delivery in definitive form of Debt Securities of the series
represented by such Global Note equal in principal amount to such beneficial
interest and to have such Debt Securities registered in its name.
LIMITATIONS ON THE COMPANY AND CERTAIN SUBSIDIARIES
Limitations on Mortgages
The Indenture provides that neither the Company nor any Subsidiary of the
Company will issue, assume or guarantee any notes, bonds, debentures or other
similar evidences of indebtedness for money borrowed ("Debt") secured by any
mortgages, liens, pledges or other encumbrances ("Mortgages") upon any
Principal Property (as hereinafter defined) without effectively providing that
the Debt Securities (together with, if the Company so determines, any other
indebtedness or obligation then existing or thereafter created ranking equally
with the Debt Securities) shall be secured equally and ratably with (or prior
to) such Debt so long as such Debt shall be so secured, except that this
restriction will not apply to: (1) Mortgages securing the purchase price or
cost of construction of property (or additions, substantial repairs,
alterations or substantial improvements thereto if the amount of such Debt
does not exceed the cost thereof), provided such Debt and the Mortgages are
incurred within 18 months of the acquisition or completion of construction and
full operation (or within 18 months of the completion of such repairs,
alterations or improvements); (2) Mortgages existing on property at the time
of its acquisition by the Company or a Subsidiary or on the property of a
corporation at the time of the acquisition of such corporation by the Company
or a Subsidiary (including acquisitions through merger or consolidation); (3)
Mortgages to secure Debt on which the interest payments are exempt from
federal income tax under Section 103 of the Code; (4) Mortgages in favor of
the Company or a Consolidated Subsidiary; (5) Mortgages existing on the date
of the Indenture; (6) certain Mortgages to governmental entities; (7)
Mortgages incurred in connection with the borrowing of funds if within 120
days such funds are used to repay Debt in the same principal amount secured by
other Mortgages on Principal Property with an independently appraised fair
market value at least equal to the appraised fair market value of the
Principal Property which secures the new Mortgage; (8) Mortgages incurred
within 90 days (or any longer period, not in excess of one year, as permitted
by law) after acquisition of the related Principal Property arising solely in
connection with the transfer of tax benefits in accordance with Section
168(f)(8) of the Code (or any similar provision adopted hereafter); and (9)
any extension, renewal or replacement of any Mortgage referred to in the
foregoing clauses (1) through (8) provided the amount secured is not increased
(Section 1105).
Limitations on Sale and Lease-Back
The Indenture provides that neither the Company nor any Subsidiary will
enter into any Sale and Lease-Back Transaction with respect to any Principal
Property with any person (other than the Company or a
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Subsidiary) unless either (i) the Company or such Subsidiary would be
entitled, pursuant to the provisions described in clauses (1) through (9)
under "Limitations on Mortgages" above, to incur Debt secured by a Mortgage on
the Principal Property to be leased without equally and ratably securing the
Debt Securities, or (ii) the Company during or immediately after the
expiration of 120 days after the effective date of such transaction applies to
the voluntary retirement of its Funded Debt and/or the acquisition or
construction of Principal Property an amount equal to the greater of the net
proceeds of the sale of the property leased in such transaction or the fair
value in the opinion of the chief financial officer of the Company of the
leased property at the time such transaction was entered into, in each case
net of the principal amount of all debt securities delivered under the
Indenture, including the Debt Securities (Section 1106).
Limitations on Subsidiary Debt and Preferred Stock
The Indenture provides that the Company may not permit any Restricted
Subsidiary (which term includes most of the Company's existing Subsidiaries)
to, directly or indirectly, create, incur, issue, assume or otherwise become
liable with respect to, extend the maturity of or become responsible for the
payment of, as applicable, any Debt or Preferred Stock other than (1) Debt
outstanding on the date of the Indenture; (2) Debt of a Restricted Subsidiary
which represents the assumption by such Restricted Subsidiary of Debt of
another Restricted Subsidiary; (3) Debt or Preferred Stock of any corporation
or partnership existing at the time such corporation or partnership becomes a
Subsidiary; (4) Debt of a Restricted Subsidiary arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations or from guarantees, letters of credit, surety bonds or performance
bonds securing any obligations of the Company or any of its Subsidiaries
incurred or assumed in connection with the disposition of any business,
property or Subsidiary, other than guarantees or similar credit support by any
Restricted Subsidiary of indebtedness incurred by any Person acquiring all or
any portion of such business, property or Subsidiary for the purpose of
financing such acquisition; (5) Debt of a Restricted Subsidiary in respect of
performance, surety and other similar bonds, bankers acceptances and letters
of credit provided by such Restricted Subsidiary in the ordinary course of
business; (6) Debt secured by a Mortgage incurred to finance the purchase
price or cost of construction of property (or additions, substantial repairs,
alterations or substantial improvements thereto), provided that (A) such
Mortgage and the Debt secured thereby are incurred within 18 months of the
later of such acquisition or completion of construction (or such addition,
repair, alteration or improvement) and full operation thereof and (B) such
Mortgage does not relate to any property other than the property so purchased
or constructed (or added, repaired, altered or improved); (7) Permitted
Subsidiary Refinancing Debt (as defined in the Indenture); (8) Debt (including
without limitation, Debt arising from a guarantee) of a Restricted Subsidiary
to the Company or another Subsidiary, but only for so long as held or owned by
the Company or another Subsidiary; or (9) any obligation pursuant to a Sale
and Lease-Back Transaction permitted pursuant to the provisions described
under "Limitations on Sale and Lease-Back" above (Section 1107).
Notwithstanding the foregoing, the Company and any one or more Subsidiaries,
including Restricted Subsidiaries, may, without securing the Debt Securities,
issue, assume or guarantee Debt or Preferred Stock or enter into any Sale and
Lease-Back Transaction that would otherwise be subject to the foregoing
restrictions in an aggregate principal amount which, together with all other
such Debt or Preferred Stock of the Company and its Subsidiaries (not
including Debt or Preferred Stock permitted pursuant to the foregoing
paragraphs) and the aggregate Attributable Debt (as defined below) in respect
of Sale and Lease-Back Transactions does not exceed 15% of Consolidated Net
Tangible Assets (as hereinafter defined) of the Company and its Consolidated
Subsidiaries (Section 1108).
The term Principal Property is defined to mean each acute-care hospital
providing general medical and surgical services (excluding equipment, personal
property and hospitals that primarily provide specialty medical services, such
as psychiatric and obstetrical and gynecological services) owned solely by the
Company and/or one or more of its Subsidiaries and located in the United
States. The term Consolidated Net Tangible Assets is defined to mean the total
amount of assets (less applicable reserves and other properly deductible
items) after deducting therefrom (i) all current liabilities as disclosed on
the consolidated balance sheet of the Company
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(excluding any thereof that 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 any deferred
income taxes that are included in current liabilities), and (ii) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense and
other like intangible assets, all as set forth on the most recent consolidated
balance sheet of the Company and computed in accordance with generally
accepted accounting principles. The term Attributable Debt is defined to mean
(i) as to any capitalized lease obligations, the Debt carried on the balance
sheet in accordance with generally accepted accounting principles, and (ii) as
to any operating leases, the total net minimum rent required to be paid under
such leases during the remaining term thereof discounted at the rate of 1% per
annum over the weighted average yield to maturity of all debt securities
issued and outstanding under the Indenture, including any outstanding Debt
Securities, compounded semi-annually (Section 101).
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Debt Securities of any series: (a) failure to pay principal of or any premium
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 in respect of any Debt Security of
that series when due; (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 the series), continued
for 60 days after written notice as provided in the Indenture; (e) certain
events in bankruptcy, insolvency or reorganization; and (f) any other Event of
Default provided with respect to Debt Securities of that series (Section 501).
If any Event of Default with respect to Debt Securities of any series at any
time Outstanding occurs and is 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 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 aggregate principal amount of
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration (Section 502).
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under
no obligation 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 603). Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority
in aggregate 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).
The Company is required to furnish the Trustee annually with a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance (Section 1109).
MODIFICATION AND WAIVER
Modifications of and amendments to the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate 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 interest, if any, on, any Debt
Security, (b) reduce the principal amount of, or any premium or interest on,
any Debt Security, (c) reduce the
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amount of principal of Discount Securities payable upon acceleration of the
maturity thereof, (d) change the 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, or (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 or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults (Section
1002).
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of each series may, on behalf of all Holders of Debt
Securities of that series, waive any past default under the Indenture with
respect to Debt Securities of that series, except a default in the payment of
principal or any premium or interest or a covenant or provision that cannot be
modified or amended without the consent of the Holders of each Outstanding
Debt Security affected thereby (Section 513).
CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Debt Securities under the Indenture, may consolidate with or merge into, or
transfer or lease its assets substantially as an entirety to any corporation
organized under the laws of any domestic jurisdiction, provided that the
successor corporation assumes the Company's obligations on the Debt Securities
and under the Indenture, that immediately after giving effect to the
transactions no Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met (Section 901).
DEFEASANCE
If so specified in the Prospectus Supplement with respect to the Debt
Securities of any series, the Company, at its option, (i) will be discharged
from any and all obligations in respect of the Debt Securities of such series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, replace stolen, lost or mutilated Debt Securities
of such series, maintain paying agencies and hold moneys for payment in trust)
or (ii) will not be subject to provisions of the Indenture concerning
limitations upon Mortgages, Subsidiary Debt and Preferred Stock, Sale and
Leaseback Transactions, and consolidations, mergers and sales of assets, in
each case if the Company deposits with the Trustee, in trust, money or U.S.
Government Obligations (as defined) which through the payment of interest
thereon and principal thereof in accordance with their terms will provide
money in an amount sufficient to pay all the principal, premium, if any, and
interest on the Debt Securities of such series on the dates such payments are
due in accordance with the terms of such Debt Securities. To exercise any such
option, the Company is required, among other things, to deliver to the Trustee
an opinion of counsel to the effect that (1) the deposit and related
defeasance would not cause the Holders of the Debt Securities of such series
to recognize income, gain or loss for United States income tax purposes and
(2) if the Debt Securities of such series are then listed on any national
securities exchange, such Debt Securities would not be delisted from such
exchange as a result of the exercise of such option (Article Fourteen).
NOTICES
Notices to Holders will be given by mail to the addresses of such Holders as
they appear in the Security Register (Sections 101, 105).
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York (Section 111).
CONCERNING THE TRUSTEE
The Trustee has normal banking relationships with the Company.
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PLAN OF DISTRIBUTION
GENERAL
The Company may sell Debt Securities to or through underwriters or a group
of underwriters, directly to other purchasers, or through dealers or agents.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Each Prospectus Supplement
will describe the method of distribution, and time and place of delivery, of
the offered Debt Securities. The Company also may, from time to time,
authorize dealers, acting as the Company's agents, to solicit offers to
purchase the offered Debt Securities upon the terms and conditions set forth
in any Prospectus Supplement.
In connection with the sale of Debt Securities, underwriters, dealers or
agents 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, 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 and any profit on the resale of
Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter, dealer or agent
will be identified, and any such compensation will be described, in the
Prospectus Supplement relating to the offered Debt Securities.
Under agreements that may be entered into by the Company, underwriters,
dealers and agents that participate in the distribution of Debt Securities may
be entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Each issuance of a series of Debt Securities will constitute a new issue of
securities with no established trading market. In the event that Debt
Securities of a series offered hereunder are not listed on a national
securities exchange, certain broker-dealers may make a market in the Debt
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given that any broker-
dealer will make a market in the Debt Securities of any series or as to the
liquidity of the trading market for such Debt Securities.
DELAYED DELIVERY ARRANGEMENT
If so indicated in the Prospectus Supplement relating to offered Debt
Securities, the Company will authorize dealers 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 Debt Securities shall not at the time of
delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The dealers and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
LEGAL OPINIONS
Certain matters with respect to the validity of the Debt Securities offered
hereby will be passed upon for the Company by Stephen T. Braun, Senior Vice
President and General Counsel of the Company, and for any underwriters,
dealers or agents, as the case may be, by Jenkens & Gilchrist, a Professional
Corporation, Dallas, Texas. Jenkens & Gilchrist, a Professional Corporation,
has rendered, and continues to render, certain legal services to the Company.
As of September 30, 1995, Mr. Braun owned approximately 2,329 shares and had
options to purchase 134,500 shares of the Company's Common Stock.
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EXPERTS
The consolidated financial statements and financial statement schedules of
the Company, incorporated herein by reference in this Prospectus, have been
audited by Ernst & Young LLP, independent auditors, to the extent and for the
periods indicated in their reports thereon. Such consolidated financial
statements and financial statement schedules are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT
OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLE-
MENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE AGENTS. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IM-
PLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUP-
PLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE
IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes....................................................... S-2
Certain Investment Considerations.......................................... S-18
Special Provisions and Risks Relating to Foreign Currency Notes............ S-18
Certain United States Federal Income Tax Considerations.................... S-22
Plan of Distribution....................................................... S-31
Validity of Notes.......................................................... S-32
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Information By Reference.......................... 2
The Company................................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Use of Proceeds............................................................ 3
Description of the Debt Securities......................................... 4
Plan of Distribution....................................................... 11
Legal Opinions............................................................. 11
Experts.................................................................... 12
</TABLE>
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$849,500,000
COLUMBIA/HCA
HEALTHCARE
CORPORATION
MEDIUM-TERM NOTES
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
JULY 2, 1996
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