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FILED PURSUANT TO RULE NO. 424(B)(3)
FILE NUMBER 333-44049
Prospectus Supplement to Prospectus dated January 22, 1998.
$100,000,000
Wisconsin Central Transportation Corporation
[LOGO]
Medium-Term Notes, Series A
Due from 9 Months to 30 Years
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TERMS OF SALE
The following terms may apply to the Series A Medium-Term Notes which
Wisconsin Central Transportation Corporation may sell at one or more times.
The final terms for each Series A Medium-Term Note will be included in a
pricing supplement. Wisconsin Central Transportation Corporation will receive
between $99,875,000 and $99,250,000 of the proceeds from the sale of the
Series A Medium-Term Notes, after paying the agents commissions of between
$125,000 and $750,000.
. Certificated or book-entry form
. Mature 9 months to 30 years
. Subject to redemption at the
. Fixed or floating interest option of Wisconsin Central
rate, or non-interest bearing Transportation Corporation or
Notes. The floating interest repayment at the option of the
rate formulas may be based on: holder
. LIBOR . May be amortized or subject to a
sinking fund
. Commercial Paper Rate
. Interest paid semiannually on
. Prime Rate Fixed Rate Notes, unless
otherwise stated in the pricing
supplement
. Treasury Rate
. CD Rate . Interest paid daily, weekly,
monthly, quarterly, semiannually
or annually on Floating Rate
Notes
. Federal Funds Rate
. CMT Rate
. Minimum denominations of $1,000
and any multiple of $1,000
. Any other interest rate index
or interest rate formula set
forth in a pricing supplement
. Same day settlement and payment
in immediately available funds
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Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
---------------
Wisconsin Central Transportation Corporation may sell the Series A Medium-
Term Notes directly or through one or more agents or dealers, including the
agents listed below. The agents are not required to sell any specific number
or amount of the Series A Medium-Term Notes. They will use their reasonable
efforts to sell the Series A Medium-Term Notes offered.
Goldman, Sachs & Co.
Banc of America Securities LLC
Chase Securities Inc.
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Prospectus Supplement dated September 15, 1999.
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ABOUT THIS PROSPECTUS SUPPLEMENT AND PRICING SUPPLEMENT
This prospectus supplement sets forth certain terms of the Series A Medium-
Term Notes that we may offer and supplements the prospectus that is attached to
the back of this prospectus supplement. This prospectus supplement supersedes
the prospectus to the extent it contains information that is different from the
information in the prospectus.
Each time we offer notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes we are offering and the terms of the offering. The
pricing supplement will supersede this prospectus supplement or the prospectus
to the extent it contains information that is different from the information
contained in this prospectus supplement or the prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement and the accompanying prospectus and pricing
supplement in making your investment decision. You should also read and
consider the information contained in the documents identified in "Documents
Incorporated by Reference" in the prospectus.
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Please note that in this Prospectus Supplement, references to the terms
Company, we, our and us refer only to Wisconsin Central Transportation
Corporation and not to its consolidated subsidiaries (except in the case of
the description provided below under the heading "Consolidated Ratio of
Earnings to Fixed Charges").
THE COMPANY
The Company is a holding company which conducts a transportation business
and operates approximately 2,855 route miles of railway serving Wisconsin,
Illinois, Minnesota, Michigan's Upper Peninsula and Ontario through its
principal operating subsidiaries, Wisconsin Central Ltd., Fox Valley & Western
Ltd., Sault Ste. Marie Bridge Company and Algoma Central Railway Inc. The
Company, through its Wisconsin Central International, Inc. subsidiary, also
holds a 24% equity interest in Tranz Rail Holdings Limited, whose subsidiaries
operate approximately 2,400 route miles of railway nationwide in New Zealand, a
40% equity interest in English Welsh and Scottish Railway Holdings Limited
("EWS"), whose subsidiaries operate railways in Great Britain, and a 33% equity
interest in Australian Transport Network Limited, whose subsidiaries operate
approximately 450 route miles of railway statewide in Tasmania, Australia. The
Company's common stock is publicly traded in the United States on the NASDAQ
National Market under the symbol "WCLX".
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratio of earnings to fixed charges for each of
the six-month periods ended June 30, 1998 and 1999 and for each of the years
ended December 31, 1994 through 1998 is as follows:
<TABLE>
<CAPTION>
For the
Six
Months
Ended For the Year Ended
June 30, December 31,
--------- ------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
(1).............................. 3.3 3.5(2) 3.7(2) 3.3 2.1(3) 3.3 3.2
</TABLE>
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(1) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income before income taxes, equity in net income of affiliates,
extraordinary items and cumulative effect of accounting changes plus
interest expense, amortization of financing costs, the interest portion of
fixed rent expense and any income received (but not undistributed amounts)
from less-than-fifty-percent-owned persons. Fixed charges include interest
expense (whether expensed or capitalized), amortization of financing costs
and the interest portion of fixed rent expense.
(2) Includes $5.4 million related to the March 1998 sale of the Company's
rights under a five-year transportation agreement, which is discussed in
Note 13 to the Consolidated Financial Statements in the 1998 Annual Report
on Form 10-K incorporated by reference in this Prospectus Supplement ("1998
Consolidated Financial Statements"). Without the effect of this item, the
ratio of earnings to fixed charges for 1998 would have been 3.5 and the
ratio of earnings to fixed charges for the six-month period ended June 30,
1998 would have been 3.1.
(3) Includes $15.8 million of disputed switching charges and related interest
and $2.5 million of insurance deductibles for the Weyauwega derailment,
which are discussed in Note 17 to the 1998 Consolidated Financial
Statements. Without the effects of these items, the ratio of earnings to
fixed charges for 1996 would have been 2.9.
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USE OF PROCEEDS
Net proceeds from our sale of the Series A Medium-Term Notes ("Notes") may
be used for general corporate purposes, for payment of outstanding
indebtedness under our revolving credit facilities and for additional
investments in international rail operations. A portion of our revolving
credit indebtedness was applied to our purchase of additional shares of EWS in
June and August 1999. The Company paid $31.6 million in these share
acquisitions which increased our EWS ownership from 33% to 40%. Our revolving
credit facilities allow us to choose various floating interest rate and
maturity options. At June 30, 1999, $169.6 million was outstanding under the
revolving credit facilities with an average maturity of 21 days and an average
interest rate of 5.37%.
DESCRIPTION OF THE NOTES
Interrelationship Between Provided Documents
The following description of the terms of the Notes (referred to in the
accompanying Prospectus as "Debt Securities") supplements, and to the extent
inconsistent replaces, the description of the general terms and provisions
provided in the accompanying Prospectus under the caption "Description of Debt
Securities". Capitalized terms not otherwise defined in this Prospectus
Supplement have the meanings assigned to them in the accompanying Prospectus.
We will issue a pricing supplement in connection with each offering of the
Notes. Each pricing supplement will contain the specific information and terms
for that offering. The pricing supplement may add, update or change
information contained in this Prospectus Supplement or the accompanying
Prospectus. It is important to consider the information contained in the
applicable pricing supplement, this Prospectus Supplement and the accompanying
Prospectus before making an investment decision.
The Notes Will Be Issued Under an Indenture
As required by U.S. federal law for all bonds and notes of companies that
are publicly offered, the Notes are governed by a document called an
indenture. The indenture dated as of April 21, 1998 ("Indenture") is a
contract between us and The Bank of New York, which acts as trustee
("Trustee"). The Trustee has two main roles:
. First, the Trustee can enforce your rights against us if we default.
There are limitations on the extent to which the Trustee acts on your
behalf. For a description of your rights under the Indenture, see
"Description of Debt Securities" in the accompanying Prospectus.
. Second, the Trustee performs administrative duties for us, such as
sending you interest payments and notices.
Amount of the Notes We May Offer
Under the Indenture, we may offer the Notes on a continuous basis in
amounts not to exceed an aggregate principal amount of $100,000,000. The total
amount of Notes which may be offered by means of this Prospectus Supplement
may be reduced due to our sales of other debt securities.
Types of Notes
We may issue one or more of the following types of Notes:
Fixed Rate Notes
This type of Note will bear interest at a fixed rate. Zero Coupon Notes,
which bear no interest and are instead issued at a price lower than the
principal amount, are Fixed Rate Notes. If your Note is a Fixed Rate Note, we
will specify the rate in your pricing supplement.
Floating Rate Notes
This type of Note will bear interest at a rate that is determined by
reference to one of various interest rate formulas. In some cases, the rates
may also be adjusted by adding or subtracting a
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spread or multiplying by a spread multiplier and may be subject to a minimum
rate or a maximum rate. The various interest rate formulas and these other
features are described below under the heading "Interest Rates--Floating Rate
Notes". If your Note is a Floating Rate Note, we will specify the interest rate
formula and any adjustments in your pricing supplement.
Original Issue Discount Notes
Fixed Rate Notes and Floating Rate Notes may be Original Issue Discount
Notes (referred to in the accompanying Prospectus as "Original Issue Discount
Debt Securities"). This type of Note is issued at a price lower than its
principal amount and provides that, upon redemption or acceleration of its
maturity, an amount less than its principal amount will be payable. A Note
issued at a discount to its principal may, for U.S. federal income tax
purposes, be considered a Discount Note (defined below under the heading
"Certain United States Federal Income Tax Considerations"--U.S. Holders--
Original Issue Discount"), regardless of the amount payable upon redemption,
repayment or acceleration of maturity. For a brief description of the United
States federal income tax consequences of owning an Original Issue Discount
Note, see the description provided below under the heading "Certain United
States Federal Income Tax Considerations".
How the Notes Rank Against Other Debt
The Notes will not be secured by any property or assets of the Company or
its subsidiaries. Therefore, by owning a Note, you are one of our unsecured
creditors.
The Notes will not be subordinated to any of our other debt obligations.
This means that, in a bankruptcy or liquidation proceeding against us, the
Notes would rank equally in right of payment with all other unsecured and
unsubordinated debt of the Company.
Denominations and Currency of the Notes
We will issue the Notes in denominations of $1,000 and any multiple of
$1,000. The purchase price of the Notes must be paid in United States dollars
and all amounts that become due and payable under the Notes will be payable in
United States dollars.
Stated Maturity and Maturity of the Notes
The date on which the principal amount of your Note is scheduled to become
due is called the stated maturity of the principal. The stated maturity for
your Note will be specified on the Note's face and in the applicable pricing
supplement. The principal may become due sooner, if your Note is redeemed by
the Company or repaid at the option of the holder. The date on which the
principal of your Note becomes due and payable, whether at stated maturity,
upon redemption by the Company, upon repayment at the option of the holder or
otherwise, is called the maturity of the principal.
Redemption at the Option of the Company
Unless we specify otherwise in the applicable pricing supplement, the Notes
will not be entitled to the benefit of any sinking fund. This means we will not
deposit money on a regular basis into any separate custodial account to repay
the Notes.
Unless we specify otherwise in the applicable pricing supplement, the Notes
will not be redeemable at our option. If the Notes are redeemable at our
option, the pricing supplement will include the applicable redemption price.
Please note, however, that unless specified otherwise in the pricing
supplement, the redemption price for Original Issue Discount Notes will be
based on the Amortized Face Amount of the Notes, as described below under the
heading "Repayment at the Option of the Holder".
If we are going to redeem Notes, we will mail notice of the redemption to
the holders at least 30 days but not more than 60 days before the redemption
date.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the Notes called for
redemption.
Repayment at the Option of the Holder
If your Note is repayable prior to its stated maturity at the option of the
holder, we will indicate in your pricing supplement that the Note is repayable
prior to its stated maturity at the option of the holder on a specified date or
dates.
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Unless we state otherwise in the applicable pricing supplement, such Note will
be repayable at a price equal to 100% of the principal amount of the Note,
together with the unpaid interest accrued to the date of repayment. On and
after the date of repayment, interest will cease to accrue on any Notes
tendered for repayment.
Unless we specify otherwise in the applicable pricing supplement, an
Original Issue Discount Note which is redeemed at the option of the Company
(as described above under the heading "Redemption at the Option of the
Company") or repaid at the option of the holder (as described in this
subsection) will be redeemed or repaid at a price equal to a specified
percentage of the face amount of the Note. Such price shall be equal to the
Amortized Face Amount as of the date of redemption or repayment. The
"Amortized Face Amount" of an Original Issue Discount Note will be the amount
equal to
. the issue price specified in the applicable pricing supplement;
plus
. that portion of the difference between the issue price and the principal
amount of the Note that has accrued at the yield to maturity specified in
the applicable pricing supplement (computed in accordance with generally
accepted United States bond yield computation principles) by such date of
redemption or repayment, as the case may be.
In no case, however, shall the Amortized Face Amount of an Original Issue
Discount Note exceed its principal amount.
To exercise a right to repayment, the holder must deliver to the Trustee at
least 30 days, but not more than 60 days, prior to the repayment date
specified in the applicable pricing supplement:
. the Note with the form entitled "Option of Holder to Elect Repayment" on
the reverse of the Notes duly completed; or
. a facsimile transmission or letter from a member of a national securities
exchange, the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States which contains all
of the following information:
1) the name of the holder of the Note;
2) the principal amount of the Note;
3) the principal amount of the Note to be repaid (which shall not be less
than $1,000);
4) the certificate number or a description of the tenor and terms of the
Note; and
5) a statement that the option to elect repayment is being exercised and
a guarantee that the Note to be repaid, with the form entitled "Option
of Holder to Elect Repayment" on the reverse of the Note duly
completed, will be received by the Trustee not later than five
business days after the date of such facsimile transmission or letter;
provided that, such facsimile transmission or letter will only be
effective if the Note and duly completed form are received by the
Trustee within the five day period.
Exercise of a repayment option will be irrevocable unless waived by the
Company. The holder may exercise a repayment option for less than the entire
principal amount of a Note so long as the principal amount of the Note which
will remain outstanding after repayment is an authorized denomination. The
Trustee will refer all questions as to the validity, eligibility (including
time of receipt) and acceptance of any Note for repayment to the Company. Our
determinations relating to such questions will be final and binding.
If your Note is represented by Global Debt Securities, as described below
under the heading "Book-Entry, Delivery and Form", the Depositary's nominee
will be the sole holder of your Note. Therefore, the Depositary's nominee will
be the only entity that can exercise a right to repayment. In order to ensure
that the Depositary's nominee will timely exercise a right to repayment with
respect to your Note, you must instruct the broker or other direct or indirect
participant through which you hold an interest in the Note to notify the
Depositary of your desire to exercise a right to repayment. Different firms
have different deadlines
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for accepting instructions from their customers. Accordingly, you should
consult the broker or other direct or indirect participant through which you
hold an interest in the Note in order to determine the deadline by which such
instruction must be given in order for timely notice to be delivered to the
Depositary.
If applicable, we will comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934 ("Exchange Act") and other securities laws or
regulations in connection with such repayment.
We may at any time purchase Notes at any price in the open market or
otherwise. We may, at our discretion, hold, resell or surrender such Notes to
the Trustee for cancellation.
Use of Agents
We may sell the Notes through Goldman, Sachs & Co., Banc of America
Securities LLC and Chase Securities Inc. (collectively the "Agents"). For each
individual issue of Notes, we will have agreed with the relevant Agent upon the
interest rate or interest rate basis (described below), if any, the stated
maturity and the date of original issuance.
Defeasance and Covenant Defeasance
The Notes will be subject to defeasance and covenant defeasance as
described in the accompanying Prospectus under the caption "Description of Debt
Securities--Defeasance of Offered Debt Securities or Certain Covenants in
Certain Circumstances".
Interest Rates
This subsection describes the different kinds of interest rates that may
apply to your Note, if it bears interest.
Fixed Rate Notes
Each Fixed Rate Note, except any Zero Coupon Note, will bear interest from
its original issue date or from the most recent date to which interest on the
Note has been paid or made available for payment. Interest will accrue on the
principal of a Fixed Rate Note at the fixed yearly rate specified in the
applicable pricing supplement, until the principal is paid or made available
for payment. Unless we specify otherwise in the applicable pricing supplement,
interest on a Fixed Rate Note will be payable semiannually in arrears on the
interest payment dates stated in the pricing supplement and at maturity. Each
payment of interest due on an interest payment date or the date of maturity
will include interest accrued from and including the last date to which
interest has been paid or from the issue date if none has been paid to but
excluding the payment date or the date of maturity. We will compute interest on
Fixed Rate Notes on the basis of a 360-day year of twelve 30-day months. We
will pay interest on each interest payment date and at maturity as described
below under the heading "Payment Mechanics".
Floating Rate Notes
In this subsection, we use several
specialized terms relating to the
manner in which floating interest
rates are calculated. These terms
appear in bold, italicized type the
first time they appear, and we
define these terms in "Special Rate
Calculation Terms" at the end of
this subsection.
Also, please remember that the
specific terms of your Note as
described in your pricing
supplement will supplement and, if
applicable, may modify or replace
the general terms regarding the
floating interest rates described
in this subsection. The statements
we make in this subsection may not
apply to your Note.
Each Floating Rate Note will bear interest from its original issue date or
from the most recent date to which interest on the Note has been paid or made
available for payment. Interest will accrue on the principal of a Floating Rate
Note at the yearly rate determined pursuant to the interest rate formula
specified in the applicable pricing supplement, until the principal is paid or
made available for payment. We will pay interest on each interest payment date
and at maturity as described below under the heading "Payment Mechanics".
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Base Rates. We currently expect to issue Floating Rate Notes that bear
interest at rates based on one or more of the following base rates:
. LIBOR;
. commercial paper rate;
. prime rate;
. treasury rate;
. CD rate;
. federal funds rate; and
. CMT rate.
We describe each of these base rates in further detail below. If you purchase
a Floating Rate Note, we will specify the type of base rate that applies to
your Note in your pricing supplement.
LIBOR Notes. If you purchase a LIBOR Note, your Note will bear interest at
a base rate equal to LIBOR, which will be the London interbank offered rate
for deposits in U.S. dollars. In addition, the applicable LIBOR base rate will
be adjusted by the spread or spread multiplier, if any, specified in your
pricing supplement. LIBOR will be determined in the following manner:
. LIBOR will be either:
1) the offered rate appearing on the Telerate LIBOR page; or
2) the arithmetic mean of the offered rates appearing on the Reuters
screen LIBOR page unless that page by its terms cites only one rate,
in which case that rate;
in either case, as of 11:00 A.M., London time, on the relevant LIBOR interest
determination date, for deposits having the relevant issue maturity beginning
on the relevant interest reset date. We will indicate the issue maturity and
the reference page that apply to your LIBOR Note in your pricing supplement.
If we do not specify a reference page in your pricing supplement, the Telerate
LIBOR page will apply to your LIBOR Note:
. If Telerate LIBOR page applies and the rate described above does not
appear on that page, or if Reuters screen LIBOR page applies and fewer
than two of the rates described above appear on that page, or no rate
appears on any page on which only one rate normally appears, then LIBOR
will be determined on the basis of the rates, at approximately 11:00
A.M., London time, on the relevant LIBOR interest determination date, at
which deposits of the following kind are offered to prime banks in the
London interbank market by four major banks in that market selected by
the calculation agent: deposits having the relevant issue maturity,
beginning on the relevant interest reset date, and in a representative
amount. The calculation agent will request the principal London office of
each of these banks to provide a quotation of its rate. If at least two
quotations are provided, LIBOR for the relevant LIBOR interest
determination date will be the arithmetic mean of the quotations.
. If fewer than two quotations are provided as described above, LIBOR for
the relevant LIBOR interest determination date will be the arithmetic
mean of the rates for loans of the following kind to leading European
banks quoted, at approximately 11:00 A.M., New York City time, on that
LIBOR interest determination date, by three major banks in New York City
selected by the calculation agent: loans having the relevant issue
maturity, beginning on the relevant interest reset date, and in a
representative amount.
. If fewer than three of the major banks in New York City selected by the
calculation agent are quoting as described above, LIBOR for the new
interest period will be LIBOR in effect for the prior interest period. If
the initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
Commercial Paper Rate Notes. If you purchase a Commercial Paper Rate Note,
your Note will bear interest at a base rate equal to the commercial paper rate
adjusted by the spread or spread multiplier, if any, specified in your pricing
supplement.
The commercial paper rate will be the money market yield of the rate, for
the relevant interest determination date, for commercial paper
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having the index maturity specified in your pricing supplement, as published in
H.15(519) under the heading "Commercial Paper-- Nonfinancial". If the
commercial paper rate cannot be determined as described above, the following
procedures will apply:
. If the rate described above does not appear in H.15(519) at 3:00 P.M.,
New York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from that source at
that time), then the commercial paper rate will be the rate, for the
relevant interest determination date, for commercial paper having the
index maturity specified in your pricing supplement, as published in H.15
daily update or any other recognized electronic source used for
displaying that rate, under the heading "Commercial Paper--Nonfinancial".
. If the rate described above does not appear in H.15(519), H.15 daily
update or another recognized electronic source at 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the commercial paper rate will be the money market
yield of the arithmetic mean of the following offered rates for U.S.
dollar commercial paper that has the relevant index maturity and is
placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency: the rates offered
as of 11:00 A.M., New York City time, on the relevant interest
determination date, by three leading U.S. dollar commercial paper dealers
in New York City selected by the calculation agent.
. If fewer than three dealers selected by the calculation agent are quoting
as described above, the commercial paper rate for the new interest period
will be the commercial paper rate in effect for the prior interest
period. If the initial base rate has been in effect for the prior
interest period, however, it will remain in effect for the new interest
period.
Prime Rate Notes. If you purchase a Prime Rate Note, your Note will bear
interest at a base rate equal to the prime rate adjusted by the spread or
spread multiplier, if any, specified in your pricing supplement.
The prime rate will be the rate, for the relevant interest determination
date, published in H.15(519) under the heading "Bank Prime Loan". If the prime
rate cannot be determined as described above, the following procedures will
apply:
. If the rate described above does not appear in H.15(519) at 3:00 P.M.,
New York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from that source at
that time), then the prime rate will be the rate, for the relevant
interest determination date, as published in H.15 daily update or another
recognized electronic source used for the purpose of displaying that
rate, under the heading "Bank Prime Loan".
. If the rate described above does not appear in H.15(519), H.15 daily
update or another recognized electronic source at 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), then the prime rate will be the arithmetic mean of
the following rates as they appear on the Reuters screen US PRIME 1 page:
the rate of interest publicly announced by each bank appearing on that
page as that bank's prime rate or base lending rate, as of 11:00 A.M.,
New York City time, on the relevant interest determination date.
. If fewer than four of these rates appear on the Reuters screen US PRIME 1
page, the prime rate will be the arithmetic mean of the prime rates or
base lending rates, as of the close of business on the relevant interest
determination date, of three major banks in New York City selected by the
calculation agent. For this purpose, the calculation agent will use rates
quoted on the basis of the actual number of days in the year divided by a
360-day year.
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. If fewer than three banks selected by the calculation agent are quoting
as described above, the prime rate for the new interest period will be
the prime rate in effect for the prior interest period. If the initial
base rate has been in effect for the prior interest period, however, it
will remain in effect for the new interest period.
Treasury Rate Notes. If you purchase a Treasury Rate Note, your Note will
bear interest at a base rate equal to the treasury rate adjusted by the spread
or spread multiplier, if any, specified in your pricing supplement.
The treasury rate will be the rate for the auction, on the relevant
treasury interest determination date, of treasury bills having the index
maturity specified in your pricing supplement, as that rate appears on Telerate
page 56 or 57 under the heading "Investment Rate". If the treasury rate cannot
be determined in this manner, the following procedures will apply:
. If the rate described above does not appear on either page at 3:00 P.M.,
New York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from that source at
that time), the treasury rate will be the bond equivalent yield of the
rate, for the relevant interest determination date, for the type of
treasury bill described above, as published in H.15 daily update, or
another recognized electronic source used for displaying that rate, under
the heading "U.S. Government Securities/Treasury Bills/Auction High".
. If the rate described in the prior paragraph does not appear in H.15
daily update or another recognized electronic source at 3:00 P.M., New
York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the treasury rate will be the bond equivalent
yield of the auction rate, for the relevant treasury interest
determination date and for treasury bills of the kind described above, as
announced by the U.S. Department of the Treasury.
. If the auction rate described in the prior paragraph is not so announced
by 3:00 P.M., New York City time, on the relevant interest calculation
date, or if no such auction is held for the relevant week, then the
treasury rate will be the bond equivalent yield of the rate, for the
relevant treasury interest determination date and for treasury bills
having a remaining maturity closest to the specified index maturity, as
published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills/Secondary Market".
. If the rate described in the prior paragraph does not appear in H.15(519)
at 3:00 P.M., New York City time, on the relevant interest calculation
date (unless the calculation is made earlier and the rate is available
from one of those sources at that time), then the treasury rate will be
the rate, for the relevant treasury interest determination date and for
treasury bills having a remaining maturity closest to the specified index
maturity, as published in H.15 daily update, or another recognized
electronic source used for displaying that rate, under the heading "U.S.
Government Securities/Treasury Bills/Secondary Market".
. If the rate described in the prior paragraph does not appear in H.15
daily update or another recognized electronic source at 3:00 P.M., New
York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the treasury rate will be the bond equivalent
yield of the arithmetic mean of the following secondary market bid rates
for the issue of treasury bills with a remaining maturity closest to the
specified index maturity: the rates bid as of approximately 3:30 P.M.,
New York City time, on the relevant treasury interest determination date,
by three primary U.S. government securities dealers in New York City
selected by the calculation agent.
. If fewer than three dealers selected by the calculation agent are quoting
as described
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in the prior paragraph, the treasury rate in effect for the new interest
period will be the treasury rate in effect for the prior interest period.
If the initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
CD Rate Notes. If you purchase a CD Rate Note, your Note will bear interest
at a base rate equal to the CD rate adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
The CD rate will be the rate, on the relevant interest determination date,
for negotiable U.S. dollar certificates of deposit having the index maturity
specified in your pricing supplement, as published in H.15(519) under the
heading "CDs (Secondary Market)". If the CD rate cannot be determined in this
manner, the following procedures will apply:
. If the rate described above does not appear in H.15(519) at 3:00 P.M.,
New York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from that source at
that time), then the CD rate will be the rate, for the relevant interest
determination date, described above as published in H.15 daily update, or
another recognized electronic source used for displaying that rate, under
the heading "CDs (Secondary Market)".
. If the rate described above does not appear in H.15(519), H.15 daily
update or another recognized electronic source at 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the CD rate will be the arithmetic mean of the
following secondary market offered rates for negotiable U.S. dollar
certificates of deposit of major U.S. money center banks with a remaining
maturity closest to the specified index maturity, and in a representative
amount: the rates offered as of 10:00 A.M., New York City time, on the
relevant interest determination date, by three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in New York City, as
selected by the calculation agent.
. If fewer than three dealers selected by the calculation agent are quoting
as described above, the CD rate in effect for the new interest period
will be the CD rate in effect for the prior interest period. If the
initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
Federal Funds Rate Notes. If you purchase a Federal Funds Rate Note, your
Note will bear interest at a base rate equal to the federal funds rate
adjusted by the spread or spread multiplier, if any, specified in your pricing
supplement.
The federal funds rate will be the rate for U.S. dollar federal funds on
the relevant interest determination date, as published in H.15(519) under the
heading "Federal Funds (Effective)", as that rate is displayed on Telerate
page 120. If the federal funds rate cannot be determined in this manner, the
following procedures will apply:
. If the rate described above is not displayed on Telerate page 120 at 3:00
P.M., New York City time, on the relevant interest calculation date
(unless the calculation is made earlier and the rate is available from
that source at that time), then the federal funds rate, for the relevant
interest determination date, will be the rate described above as
published in H.15 daily update, or another recognized source used for
displaying that rate, under the heading "Federal Funds (Effective)".
. If the rate described above is not displayed on Telerate page 120 and
does not appear in H.15(519), H.15 daily update or another recognized
electronic source at 3:00 P.M., New York City time, on the relevant
interest calculation date (unless the calculation is made earlier and the
rate is available from one of those sources at that time), the federal
funds rate will be the arithmetic mean of the rates for the last
transaction in overnight, U.S. dollar federal funds arranged, before
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9:00 A.M., New York City time, on the relevant interest determination
date, by three leading brokers of U.S. dollar federal funds transactions
in New York City selected by the calculation agent.
. If fewer than three brokers selected by the calculation agent are quoting
as described above, the federal funds rate in effect for the new interest
period will be the federal funds rate in effect for the prior interest
period. If the initial base rate has been in effect for the prior
interest period, however, it will remain in effect for the new interest
period.
CMT Rate Notes. If you purchase a CMT Rate Note, your Note will bear
interest at a base rate equal to the CMT rate adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
The CMT rate will be the following rate displayed on the designated CMT
Telerate page under the heading " . . . Treasury Constant Maturities . . .
Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 P.M.",
under the column for the designated CMT index maturity:
. If the designated CMT Telerate page is Telerate page 7051, the rate for
the relevant interest determination date; or
. If the designated CMT Telerate page is Telerate page 7052, the weekly or
monthly average, as specified in your pricing supplement, for the week
that ends immediately before the week in which the relevant interest
determination date falls, or for the month that ends immediately before
the month in which the relevant interest determination date falls, as
applicable.
If the CMT rate cannot be determined in this manner, the following procedures
will apply:
. If the applicable rate described above is not displayed on the relevant
designated CMT Telerate page at 3:00 P.M., New York City time, on the
relevant interest calculation date (unless the calculation is made
earlier and the rate is available from that source at that time), then
the CMT rate will be the applicable treasury constant maturity rate
described above-- i.e., for the designated CMT index maturity and for
either the relevant interest determination date or the weekly or monthly
average, as applicable as published in H.15(519).
. If the applicable rate described above does not appear in H.15(519) at
3:00 P.M., New York City time, on the relevant interest calculation date
(unless the calculation is made earlier and the rate is available from
one of those sources at that time), then the CMT rate will be the
treasury constant maturity rate, or other U.S. treasury rate, for the
designated CMT index maturity and with reference to the relevant interest
determination date, that:
1) is published by the Board of Governors of the Federal Reserve System,
or the U.S. Department of the Treasury, and
2) is determined by the calculation agent to be comparable to the
applicable rate formerly displayed on the designated CMT Telerate
page and published in H.15(519).
. If the rate described in the prior paragraph does not appear at 3:00
P.M., New York City time, on the relevant interest calculation date
(unless the calculation is made earlier and the rate is available from
one of those sources at that time), then the CMT rate will be the yield
to maturity of the arithmetic mean of the following secondary market
offered rates for the most recently issued treasury notes having an
original maturity of approximately the designated CMT index maturity and
a remaining term to maturity of not less than the designated CMT index
maturity minus one year, and in a representative amount: the offered
rates, as of approximately 3:30 P.M., New York City time, on the relevant
interest determination date, of three primary U.S. government securities
dealers in New York City selected by the calculation agent. In selecting
these offered rates, the calculation agent will request quotations
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from five of these primary dealers and will disregard the highest
quotation (or, if there is equality, one of the highest) and the lowest
quotation (or, if there is equality, one of the lowest). Treasury notes
are direct, noncallable, fixed rate obligations of the U.S. government.
. If the calculation agent is unable to obtain three quotations of the kind
described in the prior paragraph, the CMT rate will be the yield to
maturity of the arithmetic mean of the following secondary market offered
rates for treasury notes with an original maturity longer than the
designated CMT index maturity, with a remaining term to maturity closest
to the designated CMT index maturity and in a representative amount: the
offered rates, as of approximately 3:30 P.M., New York City time, on the
relevant interest determination date, of three primary U.S. government
securities dealers in New York City selected by the calculation agent. In
selecting these offered rates, the calculation agent will request
quotations from five of these primary dealers and will disregard the
highest quotation (or, if there is equality, one of the highest) and the
lowest quotation (or, if there is equality, one of the lowest). If two
treasury notes with an original maturity longer than the designated CMT
index maturity have remaining terms to maturity that are equally close to
the designated CMT index maturity, the calculation agent will obtain
quotations for the treasury note with the shorter remaining term to
maturity.
. If fewer than five but more than two of these primary dealers are quoting
as described in the prior paragraph, then the CMT rate for the relevant
interest determination date will be based on the arithmetic mean of the
offered rates so obtained, and neither the highest nor the lowest of
those quotations will be disregarded.
. If two or fewer primary dealers selected by the calculation agent are
quoting as described above, the CMT rate in effect for the new interest
period will be the CMT rate in effect for the prior interest period. If
the initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
Spread or Spread Multiplier. In some cases, the base rate for a Floating
Rate Note may be adjusted:
. by adding or subtracting a specified number of basis points, called the
spread, with one basis point being 0.01%; or
. by multiplying the base rate by a specified percentage, called the spread
multiplier.
If you purchase a Floating Rate Note, we will specify in your pricing
supplement whether a spread or spread multiplier will apply to your Note and,
if so, the amount of the spread or spread multiplier.
Maximum and Minimum Rates. The actual interest rate, after being adjusted
by the spread or spread multiplier, may also be subject to either or both of
the following limits:
. a maximum rate, meaning a specified upper limit that the actual interest
rate in effect at any time may not exceed; and
. a minimum rate, meaning a specified lower limit that the actual interest
rate in effect at any time may not fall below.
If you purchase a Floating Rate Note, we will specify in your pricing
supplement whether a maximum rate and/or minimum rate will apply to your Note
and, if so, it will specify those rates.
Whether or not a maximum rate applies, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by applicable
law.
Interest Reset Dates. The rate of interest on a Floating Rate Note will be
reset by the calculation agent daily, weekly, monthly, quarterly, semiannually
or annually. The date on which the interest rate resets and the reset rate
becomes effective is called the interest reset date. Unless
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we specify otherwise in the applicable pricing supplement, the interest reset
date will be as follows:
. For Floating Rate Notes that reset daily, each business day.
. For Floating Rate Notes that reset weekly and are not Treasury Rate
Notes, the Wednesday of each week.
. For Treasury Rate Notes that reset weekly, the Tuesday of each week,
except as otherwise described below in the last paragraph under the
heading "Interest Determination Dates".
. For Floating Rate Notes that reset monthly, the third Wednesday of each
month.
. For Floating Rate Notes that reset quarterly, the third Wednesday of
March, June, September and December of each year.
. For Floating Rate Notes that reset semiannually, the third Wednesday of
each of two months of each year specified in the applicable pricing
supplement.
. For Floating Rate Notes that reset annually, the third Wednesday of one
month of each year as specified in the applicable pricing supplement.
For a Floating Rate Note, the interest rate in effect on any particular day
will be the interest rate determined with respect to the latest interest reset
date that occurs on or before that day. However, there are several exceptions
to the reset provisions described above.
The base rate in effect from the original issue date to the first interest
reset date will be the initial base rate. For Floating Rate Notes that reset
daily or weekly, the base rate in effect for each day following the second
business day prior to an interest payment date to, but excluding, the interest
payment date, and for each day following the second business day prior to the
maturity to, but excluding, the maturity, will be the base rate in effect on
that second business day.
If any interest reset date for a Floating Rate Note would otherwise be a
day that is not a business day, the interest reset date will be postponed to
the next day that is a business day. For a LIBOR Note, however, if that
business day is in the next succeeding calendar month, the interest reset date
will be the immediately preceding business day.
Interest Determination Dates. The interest rate that takes effect on an
interest reset date will be determined by the calculation agent by reference to
a particular date called an interest determination date. Unless we specify
otherwise in the applicable pricing supplement:
. For all Floating Rate Notes other than LIBOR Notes and Treasury Rate
Notes, the interest determination date relating to a particular interest
reset date will be the second business day before the interest reset
date.
. For LIBOR Notes, the interest determination date relating to a particular
interest reset date will be the second London business day preceding the
interest reset date. We refer to an interest determination date for a
LIBOR Note as a LIBOR interest determination date.
. For Treasury Rate Notes, the interest determination date relating to a
particular interest reset date, which we refer to as a treasury interest
determination date, will be the day of the week in which the interest
reset date falls on which treasury bills (direct obligations of the U.S.
government) would normally be auctioned. Treasury bills are usually sold
at auction on the Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following
Tuesday, except that the auction may be held on the preceding Friday. If
as the result of a legal holiday an auction is held on the preceding
Friday, that Friday will be the treasury interest determination date
relating to the interest reset date occurring in the next succeeding
week. If the auction is held on a day that would otherwise be an interest
reset date, then the interest reset date will instead be the first
business day following the auction date.
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Interest Calculation Dates. As described above, the interest rate that
takes effect on a particular interest reset date will be determined by
reference to the corresponding interest determination date. Except for LIBOR
Notes, however, the determination of the rate will actually be made on a day no
later than the corresponding interest calculation date. The interest
calculation date will be the earlier of the following:
. the tenth calendar day after the interest determination date or, if that
tenth calendar day is not a business day, the next succeeding business
day; and
. the business day immediately preceding the interest payment date or the
maturity, whichever is the day on which the next payment of interest will
be due.
The calculation agent need not wait until the relevant interest calculation
date to determine the interest rate if the rate information needed to make the
determination is available from the relevant sources sooner.
Interest Payment Dates. The interest payment dates for a Floating Rate Note
will depend on when the interest rate is reset and, unless we specify otherwise
in the applicable pricing supplement, will be as follows:
. For Floating Rate Notes that reset daily, weekly or monthly, the third
Wednesday of each month or the third Wednesday of March, June, September
and December of each year, as specified in the applicable pricing
supplement.
. For Floating Rate Notes that reset quarterly, the third Wednesday of
March, June, September and December of each year.
. For Floating Rate Notes that reset semiannually, the third Wednesday of
the two months of each year specified in the applicable pricing
supplement.
. For Floating Rate Notes that reset annually, the third Wednesday of the
month specified in the applicable pricing supplement.
Regardless of these rules, if a Note is originally issued after the regular
record date and before the date that would otherwise be the first interest
payment date, the first interest payment date will be the date that would
otherwise be the second interest payment date. We have defined the term
"regular record date" below under the heading "Payment Mechanics".
In addition, the following special provision will apply to a Floating Rate
Note with regard to any interest payment date other than one that falls on the
date of maturity. If the interest payment date would otherwise fall on a day
that is not a business day, then the interest payment date will be the next day
that is a business day. However, if the Floating Rate Note is a LIBOR Note and
the next business day falls in the next calendar month, then the interest
payment date will be advanced to the next preceding day that is a business day.
In all cases, an interest payment date that falls on the date of maturity will
not be changed.
Calculation of Interest. Calculations relating to Floating Rate Notes will
be made by the calculation agent, an institution that we appoint as our agent
for this purpose. We will specify in the applicable pricing supplement the name
of the institution that we have appointed to act as the calculation agent for
the Note as of the original issue date. We may appoint a different institution
to serve as calculation agent from time to time after the original issue date
of the Note without your consent and without notifying you of the change.
For each Floating Rate Note, the calculation agent will determine, on the
corresponding interest calculation or determination date, as applicable, the
interest rate that takes effect on each interest reset date. In addition, the
calculation agent will calculate the amount of interest that has accrued during
each interest period. The interest period is the period from and including the
original issue date, or the last date to which interest has been paid or made
available for payment, to but excluding the payment date. For each interest
period, the calculation agent will calculate the amount of accrued interest by
multiplying the face amount of the Floating Rate Note by an accrued interest
factor for the interest period. This factor will equal the sum of the interest
factors calculated for each day during the interest period. The interest factor
for each day will be expressed as a
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decimal and will be calculated by dividing the interest rate (also expressed as
a decimal) applicable to that day:
. by 360, in the case of LIBOR Notes, Commercial Paper Rate Notes, Prime
Rate Notes, CD Rate Notes and Federal Funds Rate Notes; or
. by the actual number of days in the year, in the case of Treasury Rate
Notes and CMT Rate Notes.
Upon the request of the holder of any Floating Rate Note, the calculation
agent will provide for that Note the interest rate then in effect and, if
determined, the interest rate that will become effective on the next interest
reset date. The calculation agent's determination of any interest rate, and its
calculation of the amount of interest for any interest period, will be final
and binding in the absence of manifest error.
All percentages resulting from any calculation relating to a Note will be
rounded upward or downward, as appropriate, to the nearer one hundred-
thousandth of a percentage point (e.g., 9.876541% (or .09876541) being rounded
down to 9.87654% (or .0987654) and 9.876545% (or .09876545) being rounded up to
9.87655% (or .0987655)). All amounts used in or resulting from any calculation
relating to a Floating Rate Note will be rounded upward or downward, as
appropriate, to the nearest cent.
In determining the base rate that applies to a Floating Rate Note during a
particular interest period, the calculation agent may obtain rate quotes from
various banks or dealers active in the relevant market, as described under the
heading "Base Rates". Those reference banks and dealers may include the
calculation agent itself and its affiliates, as well as any Agent and its
affiliates.
Special Rate Calculation Terms. In this subsection entitled "Description of
the Notes--Interest Rates--Floating Rate Notes", we use several terms that have
special meanings relevant to calculating floating interest rates. These terms
are as follows:
"Bond equivalent yield" means a yield expressed as a percentage and
calculated in accordance with the following formula:
bond D * N
equivalent = ------------- * 100
yield 360 - (D * M)
where:
. ""D'' means the annual rate for treasury bills quoted on a bank discount
basis and expressed as a decimal;
. ""N'' means 365 or 366, as the case may be; and
. ""M'' means the actual number of days in the applicable interest reset
period.
"Business day" means, for any Note, a day that meets all the following
applicable requirements:
. for all Notes, is a Monday, Tuesday, Wednesday, Thursday or Friday that
is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close;
and
. if the Note is a LIBOR Note, is also a London business day.
"Calculation agent" means the agent appointed by the Company as described
above under the heading "Description of the Notes-- Interest Rates--Floating
Rate Notes--Calculation of Interest".
"Designated CMT index maturity" means the index maturity for a CMT Rate
Note and will be the original period to maturity of a U.S. treasury security
(either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in the applicable pricing
supplement. If no such original maturity period is so specified, the designated
CMT index maturity will be 2 years.
"Designated CMT Telerate page" means the Telerate page specified in the
applicable pricing supplement that displays treasury constant maturities as
reported in H.15(519). If no Telerate page is so specified, then the applicable
page will be Telerate page 7052. If Telerate page 7052 applies, but we do not
specify in the applicable pricing supplement whether the weekly or monthly
average applies, the weekly average will apply.
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"H.15(519)" means the weekly statistical release entitled "Federal Reserve
statistical release H.15(519)", or any successor publication, published by the
Board of Governors of the Federal Reserve System.
"H.15 daily update" means the daily update of H.15(519) available through
the worldwide-web site of the Board of Governors of the Federal Reserve System,
at http://www.bog.frb.fed.us/ releases/h15/update, or any successor site or
publication.
"Index maturity" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable pricing supplement.
"Initial Base Rate" means, with respect to a Floating Rate Note, the base
rate in effect from the original issue date to the first interest reset date.
We will specify the initial base rate in the applicable pricing supplement.
"London business day" means any day on which dealings in U.S. dollars are
transacted in the London interbank market.
"Money market yield" means a yield expressed as a percentage and calculated
in accordance with the following formula:
money D * 360
market = ------------- * 100
yield 360 - (D * M)
where:
. ""D'' means the annual rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and
. ""M'' means the actual number of days in the relevant interest reset
period.
"Representative amount" means an amount that, in the calculation agent's
judgment, is representative of a single transaction in the relevant market at
the relevant time.
"Reuters screen LIBOR page" means the display on the Reuters Monitor Money
Rates Service, or any successor service, on the page designated as "LIBOR" or
any replacement page or pages on which London interbank rates of major U.S.
banks are displayed.
"Reuters screen US PRIME I page" means the display on the "US PRIME I" page
on the Reuters Monitor Money Rates Service, or any successor service, or any
replacement page or pages on that service, for the purpose of displaying prime
rates or base lending rates of major U.S. banks.
"Telerate LIBOR page" means Telerate page 3750 or any replacement page or
pages on which London interbank rates of major banks for U.S. dollars are
displayed.
"Telerate page" means the display on Bridge Telerate, Inc., or any
successor service, on the page or pages specified in this Prospectus Supplement
or the applicable pricing supplement, or any replacement page or pages on that
service.
When we use the terms designated CMT Telerate page, H.15(519), H.15 daily
update, Reuters screen LIBOR page, Reuters screen US PRIME 1 page, Telerate
LIBOR page or Telerate page, if we refer to a particular heading or headings on
any of those pages, those references include any successor or replacement
heading or headings as determined by the calculation agent.
Payment Mechanics
The following actions, when required, should occur at the principal
corporate trust office of the Trustee, 101 Barclay Street, Floor 21 West, New
York, New York 10286, Attention: Corporate Trust Trustee Administration:
. payment of the principal of, interest on and premium, if any, on the
Notes;
. registration of transfer of the Notes; and
. presentation of the Notes for exchange.
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So long as the Notes are represented by Global Debt Securities, we will pay
any interest payable on the Notes to Cede & Co., the nominee of The Depository
Trust Company ("DTC"), as the registered owner of the Global Debt Securities.
We will make such payment by wire transfer of immediately available funds on
each of the applicable interest payment dates, not later than 2:30 p.m., New
York City time. If the Notes are no longer represented by Global Debt
Securities, we may, at our option, pay any interest payable by check mailed to
the address of the person entitled to such payment.
We will not impose a service charge for any transfer or exchange of Notes,
but we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with such transfer or exchange.
Unless we specify otherwise in the applicable pricing supplement, the
regular record date relating to an interest payment date for any Fixed Rate
Note or any Floating Rate Note will be the 15th calendar day before that
interest payment date, in each case whether or not the record date is a
business day. For the purpose of determining the holder at the close of
business on a regular record date when business is not being conducted, the
close of business will mean 5:00 P.M., New York City time, on that day.
Book-Entry, Delivery and Form
The Notes will be represented by Global Debt Securities which will be
deposited with, or on behalf of, DTC, as Depositary, and registered in the name
of Cede & Co., the nominee of DTC.
DTC has advised the Company and the Agents as follows: DTC is a limited-
purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participating organizations ("participants") and to
facilitate the clearance and settlement of securities transactions, such as
transfers and pledges, among its participants in such securities through
electronic computerized book-entry changes in accounts of the participants,
thereby eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the Agents),
banks, trust companies, clearing corporations and certain other organizations,
some of whom (and/or their representatives) own DTC. Access to DTC's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants
may beneficially own securities held by DTC only through participants.
Unless and until they are exchanged in whole or in part for certificated
notes in definitive form, the Global Debt Securities may not be transferred
except as a whole. When transferred as a whole, the Global Debt Securities may
be transferred as follows:
. by DTC to a nominee of DTC;
. by a nominee of DTC to DTC or another nominee of DTC; or
. by DTC or any nominee of DTC to a successor depository or a nominee of
such successor depository.
For a further description of DTC's procedures with respect to the Notes,
see the accompanying Prospectus under the heading "Description of Debt
Securities--Global Debt Securities".
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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 interest
rate 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 created or organized in or
under the laws of the United States or of any political subdivision thereof,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, (iv) a trust if a United States court can
exercise primary supervision over the trust's administrator and one or more
U.S. Holders are authorized to control all substantial decisions of the trust
or (v) 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 beneficial owner of a Note that
is not a U.S. Holder.
U.S. Holders
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting).
Original Issue Discount
The following summary is a general discussion of the United States federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("OID Notes"). The
following summary is based upon final Treasury regulations ("OID Regulations")
released by the Internal Revenue Service ("IRS") on January 27, 1994, as
amended on June 11, 1996, under the original issue discount provisions of the
Code.
For United States federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as hereinafter defined) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in 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 Agent, 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 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
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exceeds a specified de minimis amount, then the stated interest on the Note
would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an OID Note must include original issue discount
in income as ordinary interest for United States federal income tax purposes as
it accrues under a constant yield method in advance of receipt of the cash
payments attributable to such income, regardless of such U.S. Holder's regular
method of tax accounting. In general, the amount of original issue discount
included in income by the U.S. Holder of an OID Note is the sum of the daily
portions of original issue discount with respect to such OID Note for each day
during the taxable year (or portion of the taxable year) on which such U.S.
Holder held such OID Note. The "daily portion" of original issue discount on
any OID 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 OID Note, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs either on the final day of an accrual period or on the first day of an
accrual period. The amount of original issue discount allocable to each accrual
period is generally equal to the difference between (i) the product of the OID
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 an OID Note at the beginning of any accrual period is the sum of the issue
price of the OID Note plus the amount of original issue discount allocable to
all prior accrual periods minus the amount of any prior payments on the OID
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 an OID Note for an amount that is greater than
its adjusted issue price as of the purchase date and less than or equal to the
sum of all amounts payable on the OID Note after the purchase date other than
payments of qualified stated interest, will be considered to have purchased the
OID Note at an "acquisition premium." Under the acquisition premium rules, the
amount of original issue discount which such U.S. Holder must include in its
gross income with respect to such OID Note for any taxable year (or portion
thereof in which the U.S. Holder holds the OID Note) will be reduced (but not
below zero) by the portion of the acquisition premium properly allocable to the
period.
Under the OID Regulations, Floating Rate Notes ("Variable Notes") are
subject to special rules whereby a Variable 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 Variable Note by more than a
specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 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 .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates
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that can reasonably be expected to have approximately the same values
throughout the term of the Variable Note (e.g., two or more qualified floating
rates with values within 25 basis points of each other as determined on the
Variable Note's issue date) will be treated as a single qualified floating
rate. Notwithstanding the foregoing, a variable rate that would otherwise
constitute a qualified floating rate but which is subject to one or more
restrictions such as a maximum numerical limitation (i.e., a cap) or a minimum
numerical limitation (i.e., a floor) may, under certain circumstances, fail to
be treated as a qualified floating rate under the OID Regulations unless such
cap or floor is fixed throughout the term of the Note. An "objective rate" is a
rate that is not itself a qualified floating rate but which is determined using
a single fixed formula and which is based upon objective financial or economic
information. A rate will not qualify as an objective rate if it is based on
information that is within the control of the issuer (or a related party) or
that is unique to the circumstances of the issuer (or a related party), such as
dividends, profits or the value of the issuer's stock (although a rate does not
fail to be an objective rate merely because it is based on the credit quality
of the issuer). 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 qualified floating rate. The OID Regulations
also provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of one year or less followed by a variable rate that
is either a qualified floating rate or an objective rate and if the variable
rate on the Variable 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 Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and if
interest on such Note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually, then all stated
interest on such Note will constitute qualified stated interest and will be
taxed accordingly. Thus, a Variable Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations will generally not be treated as having been issued with
original issue discount unless the Variable Note is issued at a "true" discount
(i.e., at a price below the Note's stated principal amount) in excess of a
specified de minimis amount. The amount of qualified stated interest and the
amount of original issue discount, if any, that accrues during an accrual
period on such Variable Note is determined under the rules applicable to fixed
rate debt instruments by assuming that the variable rate is a fixed rate equal
to (i) in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or (ii) in the case of an objective rate
(other than a qualified inverse floating rate), a fixed rate that reflects the
yield that is reasonably expected for the Variable Note. The qualified stated
interest allocable to an accrual period is increased (or decreased) if the
interest actually paid during an accrual period exceeds (or is less than) the
interest assumed to be paid during the accrual period pursuant to the foregoing
rules.
In general, any other Variable 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 Variable Note. The OID Regulations
generally require that such a Variable 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 Variable
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 Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable Note.
In the case of a Variable
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Note that qualifies as a "variable rate debt instrument" and provides for
stated interest at a fixed rate in addition to either one or more qualified
floating rates or a qualified inverse floating rate, the fixed rate is
initially converted into a qualified floating rate (or a qualified inverse
floating rate, if the Variable Note provides for a qualified inverse floating
rate). Under such circumstances, the qualified floating rate or qualified
inverse floating rate that replaces the fixed rate must be such that the fair
market value of the Variable Note as of the Variable Note's issue date is
approximately the same as the fair market value of an otherwise identical debt
instrument that provides for either the qualified floating rate or qualified
inverse floating rate rather than the fixed rate. Subsequent to converting the
fixed rate into either a qualified floating rate or a qualified inverse
floating rate, the Variable Note is then converted into an "equivalent" fixed
rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. U.S. Holders should be aware that on June 11, 1996 the
Treasury Department issued final regulations ("CPDI Regulations") concerning
the proper United States federal income tax treatment of contingent payment
debt instruments. In general, CPDI Regulations would cause the timing and
character of income, gain or loss reported on a contingent payment debt
instrument to substantially differ from the timing and character of income,
gain or loss reported on a contingent payment debt instrument under general
principles of current United States federal income tax law. Specifically, the
CPDI Regulations generally require a U.S. Holder of such an instrument to
include future contingent and noncontingent interest payments in income as such
interest accrues based upon a projected payment schedule. Moreover, in general,
under the CPDI Regulations, any gain recognized by a U.S. Holder on the sale,
exchange, or retirement of a contingent payment debt instrument will be treated
as ordinary income and all or a portion of any loss realized could be treated
as ordinary loss as opposed to capital loss (depending upon the circumstances).
The CPDI Regulations apply to debt instruments issued on or after August 13,
1996. The proper United States federal income tax treatment of Variable Notes
that are treated as contingent payment debt obligations will be more fully
described in the applicable pricing supplement. Furthermore, any other special
United States federal income tax considerations, not otherwise discussed
herein, which are applicable to any particular issue of Notes will be discussed
in the applicable pricing supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity ("call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity ("put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable
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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.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with original issue discount. In general,
an individual or other cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the Short-
Term Note will be deferred until a corresponding amount of income is realized.
U.S. Holders who report income for United States federal income tax purposes
under the accrual method, and certain other holders including banks and dealers
in securities, are required to accrue original issue discount on a Short-Term
Note on a straight-line basis unless an election is made to accrue the original
issue discount under a constant yield method (based on daily compounding).
Market Discount
If a U.S. Holder purchases a Note, other than an OID 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 an OID Note, for an
amount that is less than its adjusted issue price as of the purchase date, such
U.S. Holder will be treated as having purchased such Note at a "market
discount," unless such market discount 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 an OID Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income
to the extent of the lesser of (i) the amount of such payment or realized gain
or (ii) the market discount which has not previously been included in income
and is treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless
the U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
Premium
If a U.S. Holder purchases a Note for an amount that is greater than the
sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for
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the taxable year. However, if the Note may be optionally redeemed after the
U.S. Holder acquires it at a price in excess of its stated redemption price at
maturity, special rules would apply which could result in a deferral of the
amortization of some bond premium until later in the term of the Note. Any
election to amortize bond premium applies to all taxable debt instruments then
owned and thereafter acquired by the U.S. Holder on or after the first day of
the first taxable year to which such election applies and may be revoked only
with the consent of the IRS.
Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a Note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States federal withholding
taxes on payments of principal, premium (if any) or interest (including
original issue discount, if any) on a Note, provided that the non-U.S. Holder
is not (i) directly or indirectly a 10% or greater shareholder (by voting
power) of the Company, (ii) a controlled foreign corporation related, directly
or indirectly, to the Company, or (iii) a bank receiving interest described in
Section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
either: (i) the beneficial owner of the Note must certify, under penalties of
perjury, to the Company or paying agent, as the case may be, that such Holder
is a non-U.S. Holder and provide such non-U.S. Holder's name and address, or
(ii) 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 Note, must certify, under
penalties of perjury, that such certificate has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnish the payor with a copy thereof. The foregoing
certificates are effective with respect to interest paid for the remainder of
the calendar year after issuance of the certificate and for the two succeeding
calendar years. Under temporary Treasury Regulations, a beneficial owner may
use an IRS Form W-8 to provide the foregoing certificate.
On October 6, 1997, the IRS issued regulations ("Withholding Regulations")
addressing federal income tax withholding procedures which will affect payments
to non-U.S. Holders. The Withholding Regulations currently provide that they
will become effective for all payments after December 31, 1998, regardless of
when the instrument pursuant to which the payments are made was issued.
However, the IRS has announced that the effective date of the Withholding
Regulations will be extended to payments after December 31, 2000. The following
is not intended to be a complete discussion of the Withholding Regulations, and
prospective purchasers of Notes are urged to consult with their tax advisors
regarding the federal income tax withholding consequences of the purchase,
holding or disposition of Notes.
The Withholding Regulations add additional rules to those above which are
intended to simplify the compliance procedures for withholding agents. Under
one such simplified procedure, a withholding agent will be allowed to rely on a
withholding certificate furnished by a "qualified intermediary" without the
need to obtain the beneficial owner certificate described above. A "qualified
intermediary" includes any of the following persons, or any other person
acceptable to the IRS, if such person has entered into a withholding agreement
with the IRS: (i) a foreign financial institution or foreign clearing
organization (other than a U.S. branch or office of such institution or
organization), and (ii) a foreign branch or office of a U.S. financial
institution or clearing organization.
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Under the Withholding Regulations, the beneficial owner of a Note, rather
than the nominal or legal owner, will be treated as the payee for purposes of
the withholding requirements. In the case of payments made to an entity
classified as a foreign partnership, the partners generally will be required to
provide the required withholding certification. However, a payment to a United
States partnership will be treated as a payment to a United States payee, even
if the partnership has one or more foreign partners.
The IRS is also in the process of replacing a number of current tax
certification forms, including Forms W-8 and 4224, with a single, revised IRS
Form W-8. Under the Withholding Regulations, a certification pursuant to the
new IRS Form W-8 will remain valid until the end of the third calendar year
following the year in which the certification is signed. Transition rules in
the Withholding Regulations currently provide that existing certification forms
held by a payor on December 31, 1998 will remain valid until the earlier of the
expiration under current law or December 31, 1999. However, in connection with
the announced change in the effective date of the Withholding Regulations, the
IRS has announced that these dates will be amended to provide that certificates
held on December 31, 1999 will remain effective until the earlier of their
expiration date under current law or December 31, 2000.
If a non-U.S. Holder is engaged in a trade or business in the United States
and interest (including original issue discount) on the Note is effectively
connected with such trade or business, the non-U.S. Holder will be subject to
United States federal income tax on such interest in the same manner as if it
were a U.S. Holder. To avoid withholding tax, the non-U.S. Holder will be
required to provide an IRS Form 4224 in lieu of the certification described
above. If such non-U.S. Holder engaged in a trade or business in the United
States is a foreign corporation, it may additionally be subject to a branch
profits tax equal to 30% (or such rate as provided by an applicable income tax
treaty) of its effectively connected earnings and profits (including interest
and gain on a Note if effectively connected with the non-U.S. Holder's United
States trade or business) for the taxable year.
Generally, a non-U.S. Holder will not be subject to federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
Backup Withholding
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller
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certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status would be made normally
on an IRS Form W-8 under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Company and Goldman, Sachs & Co., Banc of America Securities LLC and
Chase Securities Inc. ("Agents") have entered into a distribution agreement
with respect to the Notes. Subject to certain conditions, the Agents have
agreed to use their reasonable efforts to solicit purchases of the Notes. The
Company has the right to accept offers to purchase Notes and may reject any
proposed purchase of the Notes. The Agents may also reject any offer to
purchase Notes. The Company will pay the Agents a commission on any Notes sold
through the Agents. The commission will range from 0.125% to 0.750% of the
principal amount of the Notes, depending on the maturity of the Notes.
The Company may also sell Notes to the Agents who will purchase the Notes
as principals for their own accounts. Any such sale will be made at a discount
within the range of discounts set forth on the cover page of this Prospectus
Supplement if no other discount is agreed. Any Notes the Agents purchase as
principal may be resold at the market price or at other prices determined by
the Agents at the time of resale. The Company may also sell Notes directly on
its own behalf. No commissions will be paid on Notes sold directly by the
Company.
The Agents may resell any Notes they purchase to other brokers or dealers
at a discount which may include all or part of the discount the Agents received
from the Company. The Agents will purchase the Notes at a price equal to 100%
of the principal amount less a discount. Unless otherwise stated the discount
will equal the applicable commission on an agency sale of Notes of the same
maturity. If all the Notes are not resold at the initial offering price, the
Agents may change the resale price and the other selling terms.
In connection with the offering, the Agents may purchase and sell Notes in
the open market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales. Short
sales involve the sale by the Agents of a greater number of Notes than they are
required to purchase in the offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or retarding a
decline in the market price of the Notes while the offering is in progress.
The Agents also may impose a penalty bid. This occurs when a particular
Agent repays to the Agents a portion of the underwriting discount received by
it because the Agents have repurchased Notes sold by or for the account of such
Agent in stabilizing or short covering transactions.
These activities by the Agents may stabilize, maintain or otherwise affect
the market price of the Notes. As a result, the price of the Notes may be
higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the Agents at any time.
These transactions may be effected in the over-the-counter market or otherwise.
The Agents, whether acting as agents or principals, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 ("Act"). The
Company has agreed to indemnify the several Agents against certain liabilities,
including liabilities under the Act.
The Agents may sell to dealers who may resell to investors and the Agents
may pay all or part of the discount or commission they receive from the Company
to the dealers. Such dealers may be deemed to be "underwriters" within the
meaning of the Act.
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The Notes are a new issue of securities with no established trading market
and will not be listed on a securities exchange. No assurance can be given as
to the liquidity of the trading market for the Notes.
The Company estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$150,000.
Unless otherwise indicated in the applicable pricing supplement, the
purchase price of the Notes will be required to be paid in immediately
available funds in New York, New York.
The Agents may be customers of, engage in transactions with and perform
services for the Company in the ordinary course of business. In addition,
affiliates of Banc of America Securities LLC and Chase Securities Inc. are
lenders to the Company under its revolving credit facilities. The Company may
use more than 10% of the net proceeds from the sale of the Notes to repay
aggregate indebtedness owed by it to the affiliate of Banc of America
Securities LLC or the affiliate of Chase Securities Inc. Accordingly, this
offering is being made in compliance with the requirements of Conduct Rule
2710(c)(8) of the National Association of Securities Dealers, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
The Securities and Exchange Commission ("Commission") allows us to
"incorporate by reference" the information we file with them, which means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference is an important part of
this Prospectus Supplement and the accompanying Prospectus, and information
that we file later with the Commission will automatically update and supersede
this information. We incorporate by reference the documents listed below and
any future filings made with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act until we sell all the Notes.
. Annual Report on Form 10-K for the fiscal year ended December 31, 1998;
. Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1999 and June 30, 1999; and
. Current Report on Form 8-K filed July 9, 1999.
You may obtain a copy of any filings referred to above, at no cost, by
writing or telephoning us at the following address and phone number: Wisconsin
Central Transportation Corporation, P.O. Box 5062, Rosemont, Illinois 60017-
5062, Attn.: Investor Relations, telephone number: 847-318-4600.
VALIDITY OF THE NOTES
The validity of the Notes offered hereby will be passed upon for the
Company by McLachlan, Rissman & Doll, Chicago, Illinois and for the Agents by
Sullivan & Cromwell, New York, New York.
S-27
<PAGE>
PROSPECTUS
$250,000,000
WISCONSIN CENTRAL TRANSPORTATION CORPORATION
[LOGO]
----------------
DEBT SECURITIES
----------------
Wisconsin Central Transportation Corporation (the "Company") from time to
time may offer its debt securities consisting of debentures, notes and/or other
unsecured evidences of indebtedness (the "Debt Securities") in one or more
series and in amounts, at prices and on terms to be determined at the time of
the offering. The principal amount of the Debt Securities offered hereby will
not exceed $250,000,000 (or the equivalent in foreign currency or currency
units, or if Debt Securities are issued at a discount, such greater principal
amount as will result in proceeds of $250,000,000).
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, denominations, which may include
securities denominated in U.S. dollars, in any other currency or in composite
currencies such as the European Currency Unit, date or dates on which principal
is payable, interest rate or rates (which may be fixed or variable) and time of
payment of interest, if any, terms for redemption at the option of the Company,
terms for any repayment of principal amount at the option of the holder (which
option may be conditional), terms for any sinking fund payments, the initial
public offering price, purchase price and net proceeds to the Company are set
forth in the accompanying Prospectus Supplement. This Prospectus may not be
used to consummate the sale of Debt Securities unless accompanied by a
Prospectus Supplement.
The Company may sell Debt Securities to or through one or more underwriters
for public offering and sale by them or may sell Debt Securities to investors
directly or through agents. The accompanying Prospectus Supplement sets forth
the names of any underwriters or agents involved in the sale of the Debt
Securities in respect of which this Prospectus is being delivered, the
principal amounts, if any, to be purchased by such underwriters and the
compensation, if any, of such underwriters or agents. 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.
----------------
The date of this Prospectus is January 22, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy material and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
material and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C., as well as 500 West Madison Street, Suite 1400,
Chicago, Illinois, and 7 World Trade Center, Suite 1300, New York, New York,
and copies can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information that are filed through
the Commission's Electronic Data Gathering, Analysis and Retrieval System. This
Web site can be accessed at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
and any Prospectus Supplement do not contain all of the information set forth
in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to such Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Debt Securities. Any statements
contained herein concerning the provisions of any document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission or
incorporated by reference herein are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified
in its entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, June 30 and September 30, 1997;
(c) The Company's Report on Form 8-K dated January 27, 1997 and filed
February 5, 1997; and
(d) The Company's Amendment No. 1 on Form 10-K/A filed on September 30,
1997 as an amendment to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.
All other documents 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 the offering of the Debt Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in any
Prospectus Supplement or in a document incorporated or deemed to be
incorporated by reference herein or therein shall be deemed to be modified or
superseded for purposes of this Prospectus and any Prospectus Supplement to the
extent that a statement contained herein or in any other subsequently filed
document which is incorporated or deemed to be incorporated by reference herein
or in any Prospectus Supplement modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or any Prospectus
Supplement.
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<PAGE>
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of such person, a copy of any or all of the documents referred to above
which have been or may be incorporated in this Prospectus by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should
be directed to the Company at P.O. Box 5062, Rosemont, Illinois 60017-5062,
Attn: Investor Relations, telephone (847) 318-4600.
THE COMPANY
The Company is a railroad holding company which operates a regional North
American rail system in Wisconsin, the Upper Peninsula of Michigan,
northeastern Illinois, eastern Minnesota and Ontario and also owns minority
interests in, and participates in the management of, rail operations in Great
Britain and Australia and rail and ferry operations in New Zealand.
The Company was incorporated under the laws of the State of Delaware in
1987. It conducts its business through its wholly-owned consolidated
subsidiaries, Wisconsin Central Ltd., Fox Valley & Western Ltd., WCL Railcars,
Inc., Sault Ste. Marie Bridge Company, Wisconsin Central International, Inc.,
WC Canada Holdings, Inc. and Algoma Central Railway Inc. The principal offices
of the Company are located at One O'Hare Centre, Suite 9000, 6250 N. River
Road, Rosemont, Illinois 60018, telephone (847) 318-4600.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will
be used by the Company as set forth in a Prospectus Supplement relating to such
Debt Securities.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratio of earnings to fixed charges for the nine-
month periods ended September 30, 1996 and 1997 and for each of the years ended
December 31, 1992 through December 31, 1996 are as follows:
<TABLE>
<CAPTION>
For the
Nine-Months
Ended
September For the Year Ended
30, December 31,
------------ ------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges (1).................. 3.4 1.8(2) 2.1(2) 3.3(3) 3.2 2.7 2.0
</TABLE>
- --------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income before income taxes, equity in net income of affiliates,
extraordinary items and cumulative effect of accounting changes plus
interest expense, amortization of financing costs, the interest portion of
fixed rent expense and any income received (but not undistributed amounts)
from less-than-fifty-percent-owned persons. Fixed charges include interest
expense (whether expensed or capitalized), amortization of financing costs
and the interest portion of fixed rent expense.
(2) Includes the $15.8 million of disputed Baltimore and Ohio Chicago Terminal
Railroad Company ("BOCT") switching charges and related interest and the
$2.5 million of insurance deductibles for the Weyauwega derailment, which
are discussed in Note 15 to the Consolidated Financial Statements in the
1996 Annual Report on Form 10-K incorporated by reference herein (the "1996
Consolidated Financial Statements"). Without the effects of these items,
the 1996 ratio of earnings to fixed charges would have been 2.9 and the
ratio of earnings to fixed charges for the nine-months ended September 30,
1996 would have been 2.9.
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<PAGE>
(3) Includes the $3.0 million retroactive property tax assessment plus related
interest of $0.7 million discussed in Note 15 to the 1996 Consolidated
Financial Statements. Without the effect of these items, the 1995 ratio of
earnings to fixed charges would have been 3.5.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (as amended or
supplemented from time to time, the "Indenture") between the Company and The
Bank of New York, as Trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement. The statements herein relating to the
Debt Securities and the following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all the provisions of the Indenture,
including the definitions therein of certain terms, and the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). Wherever particular sections
or defined terms of the Indenture are referred to in this Prospectus or in a
Prospectus Supplement, such sections or defined terms are incorporated herein
or therein by reference.
The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement (the "Offered Debt Securities") and the extent, if
any, to which such general terms and provisions may not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating
to such Offered Debt Securities (the "Applicable Prospectus Supplement").
General
The Indenture does not limit the 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. The Debt Securities will be unsecured and
unsubordinated obligations of the Company and will rank equally and ratably
with other unsecured and unsubordinated obligations of the Company.
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest on the Debt Securities will be
payable, and the transfer of Debt Securities will be registrable, at the office
or agency to be maintained by the Company in The City of New York and at any
other office or agency maintained by the Company for such purpose. (Sections
301, 305 and 1002) The Debt Securities will be issued only in fully registered
form without coupons and, unless otherwise indicated in the Applicable
Prospectus Supplement, in denominations of $1,000 or integral multiples
thereof. (Section 302) No service charge will be made for any registration of
transfer or exchange of the Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith. (Section 305)
The Applicable Prospectus Supplement will describe the terms of the Offered
Debt Securities, including: (1) the title of the Offered Debt Securities; (2)
any limit on the aggregate principal amount of the Offered Debt Securities; (3)
the Person or entity to whom any interest on any Offered Debt Security shall be
payable, if other than the Person or entity in whose name that Security (or one
or more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest; (4) the date or dates on which the
principal of and premium, if any, on the Offered Debt Securities is payable or
the method of determination thereof; (5) the rate or rates at which the Offered
Debt Securities shall bear interest, if any, or the method of calculating such
rate or rates of interest, the date or dates from which any such interest shall
accrue or the method by which such date or dates shall be determined, the
Interest Payment Dates on which any such interest shall be payable and the
Regular Record Date for interest payable on any Interest Payment Date; (6) the
place or places where the principal of, premium, if any, and interest on the
Offered Debt Securities shall be payable; (7) the period or periods within
which, the price or prices at which, the currency or currencies (including
currency units) in which and the other terms and
4
<PAGE>
conditions upon which the Offered Debt Securities may be redeemed, in whole or
in part, at the option of the Company; (8) the obligation, if any, of the
Company to redeem or purchase the Offered Debt Securities pursuant to any
sinking fund or analogous provisions or at the option of a Holder thereof and
the period or periods within which, the price or prices at which and the other
terms and conditions upon which the Offered Debt Securities shall be redeemed
or purchased, in whole or in part, pursuant to such obligation; (9) if other
than denominations of $1,000 and any integral multiple thereof, the
denominations in which the Offered Debt Securities shall be issuable; (10) the
currency, currencies or currency units in which payment of the principal of and
any premium and interest on any Offered Debt Securities shall be payable if
other than the currency of the United States of America and the manner of
determining the equivalent thereof in the currency of the United States of
America; (11) if the amount of payments of principal of or any premium or
interest on any Offered Debt Securities may be determined with reference to an
index, formula or other method, the index, formula or other method by which
such amounts shall be determined; (12) if the principal of or any premium or
interest on any Offered Debt Securities is to be payable, at the election of
the Company or a Holder thereof, in one or more currencies or currency units
other than that or those in which the Debt Securities are stated to be payable,
the currency, currencies or currency units in which payment of the principal of
and any premium and interest on the Offered Debt Securities as to which such
election is made shall be payable, and the periods within which and the other
terms and conditions upon which such election is to be made; (13) if other than
the principal amount thereof, the portion of the principal amount of the
Offered Debt Securities which shall be payable upon declaration of acceleration
of the maturity thereof or the method by which such portion may be determined;
(14) the applicability of the provisions described under "--Defeasance of
Offered Debt Securities or Certain Covenants in Certain Circumstances"; (15) if
the Offered Debt Securities will be issuable only in the form of one or more
Global Debt Securities as described under "--Global Debt Securities", the
Depositary or its nominee with respect to the Offered Debt Securities and the
circumstances under which the Global Debt Security may be registered for
transfer or exchange or authenticated and delivered in the name of a Person or
entity other than the Depositary or its nominee; and (16) any other terms of
the Offered Debt Securities. (Section 301)
Debt Securities may be issued under the Indenture as Original Issue
Discount Debt Securities to be offered and sold at a substantial discount below
their stated principal amount. Special federal income tax, accounting and other
considerations applicable thereto will be described in the Applicable
Prospectus Supplement. "Original Issue Discount Debt Security" means any Debt
Security which provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity thereof
upon the occurrence and continuance of an Event of Default. (Section 101)
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units, if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, material U.S. federal income tax considerations and other
information with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the Applicable Prospectus
Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest, if any, on any series of Debt Securities,
material U.S. federal income tax, accounting and other considerations
applicable thereto will be described in the Applicable Prospectus Supplement.
Global Debt Securities
The following description of Global Debt Securities will apply to any
series of Debt Securities except as otherwise provided in the Applicable
Prospectus Supplement.
The Debt Securities of a series may be issued in the form of one or more
Global Debt Securities that will be deposited with or on behalf of a
Depositary, which will be a clearing agent registered under the
5
<PAGE>
Exchange Act. Global Debt Securities will be registered in the name of the
Depositary or a nominee of the Depositary, will be deposited with such
Depositary or nominee or a custodian therefor and will bear a legend regarding
the restrictions on exchanges and registration of transfer thereof and any such
other matters as may be provided for pursuant to the Indenture. Unless and
until it is exchanged in whole or in part for Debt Securities in definitive
certificated form, a Global Debt Security may not be transferred or exchanged
except as a whole by the Depositary for such Global Debt Security 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 Depositary for such series or a nominee of such successor
Depositary, or except in the circumstances described in the Applicable
Prospectus Supplement. (Section 305)
Upon the issuance of any Global Debt Security, and the deposit of such
Global Debt Security with or on behalf of the Depositary for such Global Debt
Security, the Depositary will credit on its book-entry registration and
transfer system the respective principal amounts of the Debt Securities
represented by such Global Debt Security to the accounts of institutions
("participants") that have accounts with the Depositary. The accounts to be
credited will be designated by the underwriters or agents engaging in the
distribution 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 a Global Debt Security will be limited to participants or Persons that may
hold interests through participants. Ownership of beneficial interests in a
Global Debt Security will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the Depositary for such Global
Debt Security or by its nominee. Ownership of beneficial interests in such
Global Debt Security by Persons who hold such beneficial interests through
participants will be shown on, and the transfer of such beneficial interests
within such participants will be effected only through, records maintained by
such participants. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in such a Global Debt Security.
So long as the Depositary for a Global Debt Security, or its nominee, is
the owner of such Global Debt Security, such Depositary or such nominee, as the
case may be, will be considered the sole owner or Holder of the Debt Security
represented by such Global Debt Security for all purposes under the Indenture.
Accordingly, each Person owning a beneficial interest in such Global Debt
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, to exercise any rights of a Holder under such
Indenture. The Company understands that under existing industry practices, if
it requests any action of Holders or if an owner of a beneficial interest in a
Global Debt Security desires to give or take any instruction or action which a
Holder is entitled to give or take under the Indenture, the Depositary would
authorize the participants holding the relevant beneficial interests to give or
take such instruction or action, and such participants would authorize
beneficial owners owning through such participants to give or take such
instruction or action or would otherwise act upon the instructions of
beneficial owners holding through them.
Unless otherwise specified in the Applicable Prospectus Supplement,
payments with respect to principal of, premium, if any, and interest, if any,
on the Debt Securities represented by a Global Debt Security registered in the
name of the Depositary or its nominee will be made to such Depositary or its
nominee, as the case may be, as the registered owner of such Global Debt
Security. The Company expects that the Depositary for any Debt Securities
represented by a Global Debt Security, upon receipt of any payment of principal
or interest in respect of such Global Debt Security, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Debt Security as shown on the
records of the Depositary. The Company also expects that payments by
participants to owners of beneficial interests in such Global Debt Security
held through such participants will be governed by standing instructions and
customary practices, as is the case with
6
<PAGE>
securities in bearer form held for the accounts of customers or registered in
"street name", and will be the responsibility of such participants. None of the
Company, the Trustee or any agent of the Company or the Trustee shall have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial interests in any Global Debt Security,
or for maintaining, supervising or reviewing any records relating to such
beneficial interests.
A Global Debt Security shall be exchangeable for Debt Securities in
certificated registered form, of like tenor and of an equal aggregate principal
amount, only if (a) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Debt Security or if at any
time the Depositary ceases to be a clearing agency registered under the
Exchange Act, (b) the Company in its sole discretion determines that such
Global Debt Security shall be exchangeable for Debt Securities in certificated
registered form or (c) there shall have occurred and be continuing an Event of
Default with respect to the Debt Securities. Any Global Debt Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for Debt
Securities registered in the name or names of such Person or Persons as the
Depositary shall instruct the Trustee. It is expected that such instructions
may be based upon directions received by the Depositary from its participants
with respect to ownership of beneficial interests in such Global Debt Security.
Certain Definitions
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"Consolidated Net Tangible Assets" means the total amount of assets of the
Company and its Subsidiaries (less applicable depreciation, amortization and
other valuation reserves) after deducting therefrom (i) all current liabilities
of the Company and its Subsidiaries (excluding current maturities of long-term
Indebtedness and any Indebtedness which by its terms is renewable or extendible
beyond 12 months at the option of the borrower) and (ii) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expenses and other
like intangibles, all as set forth on the most recent consolidated balance
sheet of the Company and its Subsidiaries and determined in accordance with
"generally accepted accounting principles" ("GAAP").
"Indebtedness" of any Person means, without duplication, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures of similar instruments or letters of credit (or reimbursement
agreements with respect thereto) or representing the balance deferred and
unpaid of the purchase price of any property (including pursuant to capital
leases), except any such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness would appear as
a liability upon a balance sheet of such Person prepared on a consolidated
basis in accordance with GAAP (but does not include contingent liabilities that
appear only in a footnote to a balance sheet), and shall also include, to the
extent not otherwise included, the guaranty of items which would be included
within this definition.
"Lien" means any lien, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
"Subsidiary" of any specified Person means any corporation, association or
other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
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<PAGE>
Covenants
Consolidation, Merger, Conveyance, Transfer or Lease
The Company shall not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of its assets to, any other Person
unless (i) the resulting, surviving or transferee Person is organized under the
laws of a domestic jurisdiction and assumes by supplemental indenture all of
the obligations of the Company under the Debt Securities and the Indenture,
(ii) immediately after giving effect to the transaction, no Event of Default,
and no event that, after notice or lapse of time or both, would become an Event
of Default, shall have occurred and be continuing, and (iii) the Company
delivers to the Trustee (A) an officers' certificate and (B) an opinion of
counsel attesting to compliance with Section 801 of the Indenture.
When a successor Person assumes all of the obligations of its predecessor
under the Debt Securities and the Indenture, the predecessor will be released
from those obligations.
Limitations on Liens
The Indenture will provide that, with respect to each series of Debt
Securities, the Company will not, nor will it permit any of its Subsidiaries
to, create, incur, or permit to exist, any Lien on any of their respective
properties or assets, whether now owned or hereafter acquired, or upon any
income or profits therefrom, in order to secure any Indebtedness of the
Company, without effectively providing that such series of Debt Securities
shall be equally and ratably secured until such time as such Indebtedness is no
longer secured by such Lien, except: (i) Liens existing as of the closing date
of the offering (or if Debt Securities of such series are issued from time to
time, the first offering) with respect to such series (the "Closing Date");
(ii) Liens granted after the Closing Date on any assets or properties of the
Company or any of its Subsidiaries securing Indebtedness of the Company created
in favor of the Holders of such series; (iii) Liens securing Indebtedness of
the Company which is incurred to extend, renew or refinance Indebtedness which
is secured by Liens permitted to be incurred under the Indenture; provided that
such Liens do not extend to or cover any property or assets of the Company or
any of its Subsidiaries other than the property or assets securing the
Indebtedness being refinanced and that the principal amount of such
Indebtedness does not exceed the principal amount of the Indebtedness being
refinanced; (iv) Liens on property, shares of stock or indebtedness of a
corporation existing at the time such corporation is merged into, consolidated
with or acquired by the Company or a Subsidiary or at the time of a sale, lease
or other disposition of the properties of such corporation (or division
thereof) as an entirety or substantially as an entirety to the Company or a
Subsidiary; (v) Liens on property to secure all or part of the cost of
acquisition, construction, development or improvement of such property, or to
secure Indebtedness incurred to provide funds for any such purpose, provided
that the commitment of the creditor to extend the credit secured by any such
Lien shall have been obtained not later than 24 months after the later of (a)
the completion of the acquisition, construction, development or improvement of
such property or (b) the placing in operation of such property or of such
property as so constructed, developed or improved; and (vi) Liens created in
substitution of or as replacements for any Liens permitted by the preceding
clauses (i) through (v), provided that, based on a good faith determination of
an officer of the Company, the property or asset encumbered under any such
substitute or replacement Lien is substantially similar in nature and value to
the property or asset encumbered by the otherwise permitted Lien which is being
replaced. (Section 1001)
Notwithstanding the foregoing, the Company and any Subsidiary of the
Company may, without securing any series of Debt Securities, create, incur or
permit to exist Liens which would otherwise be prohibited by the restrictions
described in the preceding paragraph, if after giving effect thereto, the
aggregate amount of all such Indebtedness secured by such a Lien of the Company
and any Subsidiary of the Company then outstanding, would not exceed 10% of
Consolidated Net Tangible Assets.
8
<PAGE>
Events of Default
Any one of the following events will constitute an Event of Default under
the Indenture with respect to Debt Securities of any series: (a) failure to pay
any interest on any Debt Security of that series when due, which failure
continues for a period of 30 days; (b) failure to pay principal of or any
premium on any Debt Security of that series when due; (c) failure to deposit
any sinking fund payment, when due, in respect of any Debt Security of that
series; (d) failure to perform, or breach of, any covenant or warranty of the
Company in the Indenture with respect to Debt Securities of that series
continued for 90 days after written notice as provided in the Indenture; (e) a
default under any indebtedness for money borrowed by the Company or any
Subsidiary if (A) such default either (1) results from the failure to pay the
principal of any such indebtedness at its stated maturity or (2) relates to an
obligation other than the obligation to pay the principal of such indebtedness
at its stated maturity and results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable, (B) the principal amount of such indebtedness, together with
the principal amount of any other such indebtedness in default for failure to
pay principal at stated maturity or the maturity of which has been so
accelerated, aggregates $20 million or more at any one time outstanding and (C)
such indebtedness is not discharged, or such acceleration is not rescinded or
annulled, within 10 business days after written notice as provided in the
Indenture; (f) certain events of bankruptcy, insolvency or reorganization of
the Company as provided in the Indenture; or (g) any other Event of Default
provided in the Indenture with respect to Debt Securities of that series.
(Section 501)
If an Event of Default (other than an Event of Default described in Clause
(f) of the preceding paragraph) with respect to the Debt Securities of any
series at the time Outstanding shall occur and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series may accelerate the maturity of all
Debt Securities of that series; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of that series may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the nonpayment of
accelerated principal, have been cured or waived as provided in the Indenture.
If an Event of Default described in Clause (f) of the immediately preceding
paragraph occurs, the Outstanding Debt Securities will ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. (Section 502)
Reference is made to the Applicable Prospectus Supplement relating to any
series of Offered Debt Securities that are Original Issue Discount Debt
Securities for the particular provisions relating to the amount payable in
respect of such series of Original Issue Discount Debt Securities upon the
occurrence of an Event of Default and the continuation thereof.
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 of Debt Securities, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Section 603)
Subject to such provisions for the indemnification of the Trustee and to
certain other conditions, 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)
No Holder of Debt Securities of any series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless such Holder shall have previously given to the Trustee written notice of
a continuing Event of Default and unless the Holders of at least 25% in
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt
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<PAGE>
Securities of that series a direction inconsistent with such request and shall
have failed to institute such proceeding within 60 days. (Section 507) However,
such limitations do not apply to a suit instituted by a Holder of Debt
Securities for enforcement of payment of the principal of and premium, if any,
or interest on such Debt Securities on or after the respective due dates
expressed in such Debt Securities. (Section 508)
The Company is required to furnish to the Trustee annually 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 1005)
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of the Holders of any of the Debt
Securities in order (i) to evidence the succession of another entity to the
Company and the assumption of the covenants and obligations of the Company
under the Debt Securities and the Indenture by such successor to the Company;
(ii) to add to the covenants of the Company for the benefit of the Holders of
all or any series of Debt Securities or to surrender any right or power
conferred on the Company by the Indenture; (iii) to add additional Events of
Default with respect to any series of Debt Securities; (iv) to add to or change
any provisions to such extent as may be necessary to permit or facilitate the
issuance of Debt Securities in bearer form or to facilitate the issuance of
Global Debt Securities; (v) to add to, change or eliminate any provision
affecting only Debt Securities not yet issued; (vi) to secure the Debt
Securities; (vii) to establish the form or terms of Debt Securities of any
series; (viii) to evidence and provide for successor Trustees or to add or
change any provisions to such extent as may be necessary to provide for or
facilitate the appointment of a separate Trustee or Trustees for specific
series of Debt Securities; (ix) to permit payment in respect of Debt Securities
in bearer form in the United States to the extent allowed by law; (x) to cure
any ambiguity, to correct or supplement any mistaken or inconsistent provisions
or to make any other provisions with respect to matters or questions arising
under the Indenture, provided that any such action (other than in respect of a
mistaken provision) does not adversely affect in any material respect the
interests of any Holder of Debt Securities of any series then outstanding.
(Section 901)
Modifications and amendments of the Indenture also 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 issued under the Indenture and affected by the modification or
amendments; provided, however, that no such modification or amendment may,
without the consent of the Holders of all Debt Securities affected thereby, (i)
change the Stated Maturity of the principal of, or any installment of principal
of or interest on, any Debt Security; (ii) reduce the principal amount of, the
premium, if any, or the interest on any Debt Security (including in the case of
an Original Issue Discount Debt Security or Indexed Security the amount payable
upon acceleration of the maturity thereof ); (iii) change the place or currency
of payment of principal of, premium, if any, or interest on any Debt Security;
(iv) impair the right to institute suit for the enforcement of any payment on
any Debt Security on or after the Stated Maturity thereof (or in the case of
redemption, on or after the Redemption Date); or (v) 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 902)
The Holders of at least a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all Holders of Debt
Securities of that series, waive compliance by the Company with certain
restrictive provisions of the Indenture. (Section 1009) The Holders of not less
than a majority in aggregate principal amount of the Outstanding Debt
Securities of any series may, on behalf of all Holders of Debt Securities of
that series, waive any past default under the Indenture, except a default in
the payment of principal, premium or interest or in respect of a covenant or
provision of the Indenture that cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of such series affected
thereby. (Section 513)
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<PAGE>
Defeasance of Offered Debt Securities or Certain Covenants in Certain
Circumstances
Defeasance and Discharge
The Indenture provides that the terms of any series of Debt Securities may
provide that the Company, at the Company's option, 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, to replace stolen, lost or mutilated Debt Securities of such
series, to maintain paying agencies and to hold moneys for payment in trust)
upon the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations which, through the payment of interest and principal thereof in
accordance with their terms, will provide money in an amount sufficient to pay
any installment of principal (and premium, if any) and interest on, and any
mandatory sinking fund payments in respect of, the Debt Securities of such
series on the Stated Maturity of such payments in accordance with the terms of
the Indenture and such Debt Securities. Such discharge may only occur if, among
other things, the Company has delivered to the Trustee an opinion of counsel to
the effect that the Company has received from, or there has been published by,
the United States Internal Revenue Service a ruling, or there has been a change
in tax law, in either case to the effect that such discharge will not be
deemed, or result in, a taxable event with respect to Holders of the Debt
Securities of such series. (Sections 1302 and 1304)
Defeasance of Certain Covenants
The Indenture provides that the terms of any series of Debt Securities may
provide the Company with the option to omit to comply with the restrictive
covenants described in this Prospectus under "Covenants" and any other
covenants made applicable to any series of Debt Securities as described in the
Applicable Prospectus Supplement. The Company, in order to exercise such
option, will be required to deposit with the Trustee money and/or U.S.
Government Obligations which, through the payment of interest and principal
thereof in accordance with their terms, will provide money in an amount
sufficient to pay principal (and premium, if any) and interest on, and any
mandatory sinking fund payments in respect of, the Debt Securities of such
series on the Stated Maturity of such payments in accordance with the terms of
the Indenture and such Debt Securities. The Company will also be required to
deliver to the Trustee an opinion of counsel to the effect that the deposit and
related covenant defeasance will not cause the Holders of the Debt Securities
of such series to recognize income, gain or loss for federal income tax
purposes. (Sections 1303 and 1304)
In the event the Company exercises this option and the Debt Securities of
such series are declared due and payable because of the occurrence of any Event
of Default, the amount of money and U.S. Government Obligations on deposit with
the Trustee will be sufficient to pay amounts due on the Debt Securities of
such series at the time of their Stated Maturity but may not be sufficient to
pay amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Company shall
remain liable for such payments.
The Applicable Prospectus Supplement will state if any defeasance
provisions will apply to the Offered Debt Securities.
Concerning the Trustee
The Bank of New York, a New York banking corporation, is the Trustee under
the Indenture. The Trustee may resign at any time or may be removed by the
Holders of at least a majority in aggregate principal amount of the Outstanding
Debt Securities. If the Trustee resigns, is removed or becomes incapable of
acting as Trustee or if a vacancy occurs in the office of the Trustee for any
cause, a successor Trustee shall be appointed in accordance with the provisions
of the Indenture.
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<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through one or more underwriters
or dealers and also may sell Debt Securities to other investors directly or
through 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,
or at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Debt Securities by them may be deemed to be underwriting
discounts and commissions, under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company
will be described, in the Applicable Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
If so indicated in the Applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Debt Securities from the
Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Offered Debt Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriter and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
VALIDITY OF THE DEBT SECURITIES
The validity of the Debt Securities and certain other legal matters will be
passed upon for the Company by Schiff Hardin & Waite, Chicago, Illinois and
McLachlan, Rissman & Doll, Chicago, Illinois, and, unless otherwise indicated
in a Prospectus Supplement relating to Offered Debt Securities, by Sullivan &
Cromwell, New York, New York, counsel for the underwriters or agents.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and 1995 and for each of the years in the three-year period ended December
31, 1996 have been incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 in
reliance on the report of KPMG Peat Marwick LLP, independent certified public
accountants, which report is incorporated herein by reference, and upon their
authority as experts in accounting and auditing.
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus
supplement and the accompanying prospectus. You must not rely on any
unauthorized information or representations. This prospectus supplement and
the accompanying prospectus is an offer to sell only the Notes offered hereby,
but only under circumstances and in jurisdictions where it is lawful to do so.
The information contained in this prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Company................................................................ S-3
Consolidated Ratio of Earnings to Fixed Charges............................ S-3
Use of Proceeds............................................................ S-4
Description of the Notes................................................... S-4
Certain United States Federal Income Tax Considerations.................... S-19
Supplemental Plan of Distribution.......................................... S-26
Documents Incorporated by Reference........................................ S-27
Validity of the Notes...................................................... S-27
Prospectus
Available Information...................................................... 2
Documents Incorporated by Reference........................................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Consolidated Ratio of Earnings to Fixed Charges............................ 3
Description of Debt Securities............................................. 4
Plan of Distribution....................................................... 12
Validity of the Debt Securities............................................ 12
Experts.................................................................... 12
</TABLE>
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$100,000,000
Wisconsin Central
Transportation Corporation
Medium-Term Notes, Series A
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PROSPECTUS SUPPLEMENT
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Goldman, Sachs & Co.
Banc of America Securities LLC
Chase Securities Inc.
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