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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-4012
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 18, 1996)
$250,000,000
FIRST DATA CORPORATION
MEDIUM-TERM NOTES, SERIES C
DUE FROM NINE MONTHS TO 30 YEARS
FROM DATE OF ISSUE
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First Data Corporation (the "Company") may offer from time to time its
Medium-Term Notes, Series C (the "Notes"), having an aggregate initial offering
price not to exceed $250,000,000, subject to reduction under certain
circumstances as a result of the sale of other Securities of the Company under
the Prospectus to which this Prospectus Supplement relates. The Notes will be
offered in varying maturities from nine months to 30 years from their date of
issue and may be subject to redemption at the option of the Company or
repayment at the option of the Holder (as defined in the accompanying
Prospectus), in each case, in whole or in part prior to the maturity date (as
further defined below, the "Stated Maturity") thereof as specified in a Pricing
Supplement to this Prospectus Supplement (a "Pricing Supplement"). Each Note
will be denominated in U.S. dollars. The Notes may be issued as "Original Issue
Discount Notes," "Amortizing Notes" or "Reset Notes." See "Description of
Notes." (Continued on next page)
LOGO
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRIC-
ING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Agent's Commission
Price to or Proceeds to
Public(1) Discount(2) Company(2)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............. 100% .125%-.750% 99.250%-99.875%
- -------------------------------------------------------------------------------
$248,125,000-
Total................ $250,000,000 $312,500-$1,875,000 $249,687,500
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes will
be sold at 100% of their principal amount.
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc. and Salomon
Brothers Inc (each an "Agent," and, collectively, the "Agents") a
commission ranging from .125% to .750% of the principal amount of any Note,
depending on its Stated Maturity, sold through such Agent. Any Agent,
acting as principal, may also purchase Notes at a discount for resale to
one or more investors or one or more broker-dealers (acting as principal
for purposes of resale) at varying prices related to prevailing market
prices at the time of resale, as determined by such Agent, or, if so
agreed, at a fixed public offering price. The Company has agreed to
reimburse the Agents for certain expenses. The Company has agreed to
indemnify the Agents against certain liabilities, including liabilities
under applicable federal and state securities laws.
(3) Before deducting offering expenses payable by the Company estimated at
$320,000.
------------------
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. The Company has reserved the right to sell Notes
directly to investors on its own behalf, and on such sales no commissions will
be paid. The Notes will not be listed on any securities exchange, and there can
be no assurance that the Notes will be sold or that there will be a secondary
market for the Notes. The Company reserves the right to withdraw, cancel or
modify the offer made hereby without notice. The Company or the Agent that
solicits an offer to purchase may reject any such offer to purchase Notes in
whole or in part. See "Supplemental Plan of Distribution."
------------------
LEHMAN BROTHERS SALOMON BROTHERS INC
September 18, 1996
<PAGE>
(continued from preceding page)
Each Note will bear interest at a fixed rate (a "Fixed Rate Note"), which may
be zero in the case of certain Notes issued at a price representing a discount
from the principal amount payable at maturity (a "Zero-Coupon Note"), or at a
variable rate (a "Floating Rate Note") determined by reference to the
Commercial Paper Rate, CD Rate, CMT Rate, Federal Funds Rate, 11th District
Cost of Funds Rate, Kenny Rate, LIBOR, Prime Rate or Treasury Rate or such
other interest rate formula (the "Interest Rate Basis") as may be specified in
the applicable Pricing Supplement, as adjusted by a Spread and/or Spread
Multiplier, if any, applicable to such Notes. See "Description of Notes."
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes and, in the case of Fixed Rate Amortizing Notes, interest and
principal, will be payable semi-annually on each January 15 and July 15 (each
an "Interest Payment Date" with respect to such Fixed Rate Notes) and at
Maturity (as defined below under "Description of Notes--Interest and Interest
Rates"). Interest on Floating Rate Notes and, in the case of Floating Rate
Amortizing Notes, interest and principal, will be payable on the dates
specified in the applicable Pricing Supplement (each an "Interest Payment Date"
with respect to such Floating Rate Notes) and at Maturity.
Each Note will be represented by either a global security (a "Book-Entry
Note") registered in the name of a nominee of The Depository Trust Company
("DTC") or other depositary (DTC or such other depositary as is specified in
the applicable Pricing Supplement is referred to herein as the "Depositary"),
or a certificate issued in definitive form (a "Certificated Note"), as
specified in the applicable Pricing Supplement. Beneficial interests in Book-
Entry Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary and its participants. Owners of
beneficial interests in Book-Entry Notes will be entitled to physical delivery
of Certificated Notes only under the limited circumstances described herein.
See "Description of Notes--Book-Entry System." Unless otherwise specified in
the applicable Pricing Supplement, Notes will be issued in denominations of
$100,000 and integral multiples of $1,000 in excess thereof.
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IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY SUPPLEMENTS AND, TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE
DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF THE SENIOR SECURITIES (AS
DEFINED IN THE ACCOMPANYING PROSPECTUS) SET FORTH UNDER THE HEADING
"DESCRIPTION OF DEBT SECURITIES" IN THE ACCOMPANYING PROSPECTUS, TO WHICH
DESCRIPTION REFERENCE IS HEREBY MADE. THE PROVISIONS OF THE NOTES SUMMARIZED
HEREIN WILL APPLY TO EACH NOTE UNLESS OTHERWISE SPECIFIED IN THE APPLICABLE
PRICING SUPPLEMENT. CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN HAVE THE
MEANINGS SPECIFIED IN THE ACCOMPANYING PROSPECTUS AND/OR THE SENIOR INDENTURE
(AS DEFINED IN THE ACCOMPANYING PROSPECTUS).
GENERAL
The Notes offered hereby will be issued under the Senior Indenture referred
to in the accompanying Prospectus. The summary contained herein of certain
provisions of the Notes is subject to and is qualified in its entirety by
reference to the provisions of the Senior Indenture and the forms of Notes,
each of which has been filed as an exhibit to the Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Notes, to which exhibits reference is
hereby made.
The Notes constitute a single series for purposes of the Senior Indenture
and are limited to an aggregate initial offering price of $250,000,000. The
Notes will be denominated in U.S. dollars, and payments of principal of,
premium, if any, and any interest on the Notes will be made in U.S. dollars.
Currency amounts in this Prospectus Supplement, the accompanying Prospectus
and any Pricing Supplement are stated in United States dollars ("$", "dollars"
or "U.S. $").
The Notes will constitute unsecured and unsubordinated indebtedness of the
Company and will rank on a parity with the Company's other unsecured and
unsubordinated indebtedness.
The Notes are offered on a continuing basis and will mature on a day from
nine months to 30 years from their date of issue, as selected by the initial
purchaser and agreed to by the Company, and may be subject to redemption at
the option of the Company or repayment at the option of the Holder prior to
Stated Maturity. See "Redemption and Repayment" below. Interest rates offered
by the Company with respect to the Notes may differ depending upon, among
other things, the aggregate principal amount of the Notes purchased in any
single transaction.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth under "Book-Entry System" below and in
the accompanying Prospectus, Book-Entry Notes will not be issuable in
certificated form. Unless otherwise specified in the applicable Pricing
Supplement, Notes will be issued in denominations of $100,000 and integral
multiples of $1,000 in excess thereof.
Payments of interest and principal (and premium, if any) to Beneficial
Owners (as defined below under "Book-Entry System") of Book-Entry Notes are
expected to be made in accordance with the Depositary's and its participants'
procedures in effect from time to time as described below under "Book-Entry
System."
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Payments of interest and, in the case of Amortizing Notes, principal with
respect to any Certificated Note (other than interest and, in the case of
Amortizing Notes, principal payable at Stated Maturity) will be made by
mailing a check to the Holder at the address of the Holder appearing in the
Security Register (as defined in the Senior Indenture) for the Notes on the
applicable Regular Record Date (as defined below). Notwithstanding the
foregoing, at the option of the Company, all payments of interest and, in the
case of Amortizing Notes, principal on the Notes may be made by wire transfer
of immediately available funds to an account designated by each Holder at a
bank located in the United States. Payment of the principal of (and premium,
if any) and interest due with respect to any Certificated Note at Maturity
will be made in immediately available funds upon surrender of such Note
accompanied by wire transfer instructions at the principal office of the
Trustee (as defined in the accompanying Prospectus) in the Borough of
Manhattan, The City of New York, provided that the Certificated Note is
presented to the Trustee in time for the Trustee to make such payment in such
funds in accordance with its normal procedures.
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is
an Original Issue Discount Note, the amount payable on such Note in the event
the principal amount thereof is declared to be due and payable immediately as
described in the accompanying Prospectus under "Description of Debt
Securities--Events of Default" or in the event of redemption or repayment
thereof prior to its Stated Maturity, in lieu of the principal amount due at
the Stated Maturity thereof, will be the Amortized Face Amount of such Note as
of the date of declaration, redemption or repayment, as the case may be. The
"Amortized Face Amount" of an Original Issue Discount Note will be the amount
equal to (i) the principal amount of such Note multiplied by the Issue Price
(as defined below) specified in the applicable Pricing Supplement plus (ii)
the portion of the difference between the dollar amount determined pursuant to
the preceding clause (i) and the principal amount of such Note that has
accreted at the yield to maturity specified in the applicable Pricing
Supplement (computed in accordance with generally accepted United States bond
yield computation principles) to such date of declaration, redemption or
repayment, but in no event will the Amortized Face Amount of an Original Issue
Discount Note exceed its principal amount.
The Pricing Supplement relating to each Note will describe, among other
things, the following items: (i) the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Note will be issued (the
"Issue Price"); (ii) the date on which such Note will be issued (the "Original
Issue Date"); (iii) the date on which such Note will mature (the "Stated
Maturity") and whether the Stated Maturity may be extended by the Company, and
if so, the Extension Periods and the Final Maturity Date (each as defined
below under "Extension of Maturity"); (iv) whether such Note is a Fixed Rate
Note or a Floating Rate Note; (v) if such Note is a Fixed Rate Note, the rate
per annum at which such Note will bear interest, if any, the Interest Payment
Date or Dates, if different from those set forth below under "Fixed Rate
Notes" and whether such rate may be changed by the Company prior to Stated
Maturity; (vi) if such Note is a Floating Rate Note, the Initial Interest
Rate, the Interest Rate Basis, the Interest Reset Dates, the Interest Payment
Dates, the Index Maturity, the maximum interest rate, if any, the minimum
interest rate, if any, the Spread, if any, the Spread Multiplier, if any (all
as defined herein), and any other terms relating to the particular method of
calculating the interest rate for such Note, and whether any such Spread
and/or Spread Multiplier may be changed by the Company prior to Stated
Maturity; (vii) whether such Note is an Original Issue Discount Note, and if
so, the yield to maturity; (viii) whether such Note is an Amortizing Note (as
defined below under "Amortizing Notes"), and if so, the basis or formula for
the amortization of principal and/or interest and the payment dates for such
periodic principal payments; (ix) the regular record date or dates for
determining the person entitled to receive payments of interest, principal and
premium, if any (a "Regular Record Date"), if other than as set forth below;
(x) whether such Note may be redeemed at the option of the Company, or repaid
at the option of the Holder, prior to Stated Maturity and, if so, the
provisions relating to such redemption or repayment; (xi) any sinking fund or
other mandatory redemption provisions with respect to such Note; (xii) whether
such Note will be issued initially as a Book-Entry Note or a Certificated
Note; and (xiii) any other terms of such Note not inconsistent with the
provisions of the Senior Indenture.
Certificated Notes may be presented for registration of transfer or exchange
at the Corporate Trust Office of the Trustee in the Borough of Manhattan, The
City of New York.
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All percentages resulting from any calculation with respect to any Notes
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation
on any Notes will be rounded to the nearest cent with one-half cent being
rounded upward.
As used herein, "Business Day" means, unless otherwise specified in the
applicable Pricing Supplement, any Monday, Tuesday, Wednesday, Thursday or
Friday that in The City of New York is not a day on which banking institutions
are authorized or obligated by law, regulation or executive order to close
and, with respect to Notes as to which LIBOR (as defined below under "Floating
Rate Notes--LIBOR Notes") is the applicable Interest Rate Basis is also a
London Business Day. As used herein, "London Business Day" means any day (a)
if the Designated LIBOR Currency (as defined below under "Floating Rate
Notes--LIBOR Notes") is other than the ECU, on which dealings in deposits in
such Designated LIBOR Currency are transacted in the London interbank market
or (b) if the Designated LIBOR Currency is the ECU, that is not designated as
an ECU Non-Settlement Day by the ECU Banking Association in Paris or otherwise
generally regarded in the ECU interbank market as a day on which payments on
ECUs will not be made.
The Notes are referred to in the accompanying Prospectus as "Debt
Securities" or the "Senior Securities." For a description of the rights
attaching to different series of Senior Securities under the Senior Indenture,
see "Description of Debt Securities" in the Prospectus. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will have the terms
described below.
INTEREST AND INTEREST RATES
Unless otherwise specified in the applicable Pricing Supplement, each Note
(other than a Zero-Coupon Note) will bear interest from and including its
Original Issue Date or from and including the most recent Interest Payment
Date to which interest on such Note has been paid or duly provided for at a
fixed rate per annum or at a rate per annum determined pursuant to an Interest
Rate Basis, stated therein and in the applicable Pricing Supplement, that may
be adjusted by a Spread and/or Spread Multiplier, until the principal thereof
is paid or made available for payment. Unless otherwise specified in the
applicable Pricing Supplement, interest will be payable on each Interest
Payment Date and at Maturity. "Maturity" means the date on which the principal
of a Note or an installment of principal becomes due and payable in accordance
with its terms and the terms of the Senior Indenture, whether at Stated
Maturity, upon acceleration, redemption, repayment or otherwise. Interest
(other than defaulted interest which may be paid to the Holder on a special
record date) will be payable to the Holder at the close of business on the
Regular Record Date next preceding an Interest Payment Date; provided,
however, that the first payment of interest on any Note originally issued
between a Regular Record Date and the next Interest Payment Date will be made
on the Interest Payment Date following the next succeeding Regular Record Date
to the Holder on such next succeeding Regular Record Date.
Interest rates, interest rate formulae and other variable terms of the Notes
are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has
been accepted by the Company. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Payment Dates and the Regular Record Dates
for Fixed Rate Notes will be as described below under "Fixed Rate Notes." The
Interest Payment Dates for Floating Rate Notes will be as specified in the
applicable Pricing Supplement, and unless otherwise specified in the
applicable Pricing Supplement, each Regular Record Date for a Floating Rate
Note will be the fifteenth day (whether or not a Business Day) preceding each
Interest Payment Date.
Each Note (other than a Zero-Coupon Note) will bear interest at either (a) a
fixed rate or (b) a floating rate determined by reference to an Interest Rate
Basis which may be adjusted by a Spread and/or Spread Multiplier. Any Floating
Rate Note may also have either or both of the following: (i) a maximum
interest rate, or ceiling, on the rate of interest which may accrue during any
interest period, and (ii) a minimum interest rate, or floor, on the rate of
interest which may accrue during any interest period. The applicable Pricing
Supplement relating to each Note will designate either a fixed rate of
interest per annum on the applicable Fixed Rate Note or one or
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more of the following Interest Rate Bases as applicable to the relevant
Floating Rate Note: (a) the Commercial Paper Rate, in which case such Note will
be a "Commercial Paper Rate Note," (b) the CD Rate, in which case such Note
will be a "CD Rate Note," (c) the CMT Rate, in which case such Note will be a
"CMT Rate Note," (d) the Federal Funds Rate, in which case such Note will be a
"Federal Funds Rate Note," (e) the 11th District Cost of Funds Rate, in which
case such Note will be an "11th District Cost of Funds Rate Note," (f) the
Kenny Rate, in which case such Note will be a "Kenny Rate Note," (g) LIBOR, in
which case such Note will be a "LIBOR Note," (h) the Prime Rate, in which case
such Note will be a "Prime Rate Note," (i) the Treasury Rate, in which case
such Note will be a "Treasury Rate Note," or (j) such other Interest Rate Basis
or formula as may be specified in such Pricing Supplement.
Notwithstanding the determination of the interest rate as provided below, the
interest rate on the Notes for any interest period shall not be greater than
the maximum interest rate, if any, or less than the minimum interest rate, if
any, specified in the applicable Pricing Supplement. The interest rate on the
Notes will in no event be higher than the maximum rate permitted by New York or
other applicable law, as the same may be modified by United States law of
general application. Under present New York law, the maximum rate of interest
is 25% per annum on a simple interest basis. This limit may not apply to Notes
in which $2,500,000 or more has been invested.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note (other than a Zero-Coupon Note) will accrue interest from and
including its Original Issue Date at the annual rate stated on the face
thereof, as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, payments of interest on any
Fixed Rate Note with respect to any Interest Payment Date or Maturity will
include interest accrued from and including the Original Issue Date, or from
and including the most recent Interest Payment Date to which interest has been
paid or duly provided for, to but excluding such Interest Payment Date or
Maturity. Fixed Rate Notes may bear one or more annual rates of interest during
the periods or under the circumstances specified therein and in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed and paid on the basis
of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Payment Dates for Fixed Rate Notes, including Fixed Rate Amortizing Notes, will
be semi-annually on each January 15 and July 15 and the Regular Record Dates
will be each January 1 and July 1 (whether or not a Business Day). In the case
of Fixed Rate Amortizing Notes, Interest Payment Dates may be quarterly on each
January 15, April 15, July 15 and October 15 if specified in the applicable
Pricing Supplement, and the Regular Record Dates will be each January 1, April
1, July 1 and October 1 (whether or not a Business Day) next preceding each
such Interest Payment Date. If the Interest Payment Date or Maturity for any
Fixed Rate Note is not a Business Day, all payments to be made on such day with
respect to such Note will be made on the next day that is a Business Day with
the same force and effect as if made on the due date, and no additional
interest will be payable on the date of payment for the period from and after
the due date as a result of such delayed payment.
Unless otherwise specified in the applicable Pricing Supplement, payments
with respect to Fixed Rate Amortizing Notes will be applied first to interest
due and payable thereon and then to the reduction of the unpaid principal
amount thereof. A table setting forth repayment information in respect of each
Fixed Rate Amortizing Note will be provided to the original purchaser of such
Note and will be available, upon request, to subsequent Holders.
FLOATING RATE NOTES
The interest rate on each Floating Rate Note will be equal to the interest
rate calculated by reference to the specified Interest Rate Basis (i) plus or
minus the Spread, if any, and/or (ii) multiplied by the Spread Multiplier, if
any. The "Spread" is the number of basis points (one basis point equals one-
hundredth of a percentage point)
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specified in the applicable Pricing Supplement as being applicable to such
Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement as being applicable to such Note. The applicable
Pricing Supplement will specify the Interest Rate Basis and the Spread and/or
Spread Multiplier, if any, and the maximum or minimum interest rate, if any,
applicable to each Floating Rate Note. In addition, such Pricing Supplement
will contain particulars as to the Calculation Agent (unless otherwise
specified in the applicable Pricing Supplement, Norwest Bank Minnesota,
National Association (in such capacity, the "Calculation Agent")), Index
Maturity, Original Issue Date, the interest rate in effect for the period from
the Original Issue Date to the first Interest Reset Date specified in the
applicable Pricing Supplement (the "Initial Interest Rate"), Interest
Determination Dates, Interest Payment Dates, Regular Record Dates, and
Interest Reset Dates with respect to such Note.
Except as provided below or in the applicable Pricing Supplement, the
Interest Payment Dates for Floating Rate Notes, including Floating Rate
Amortizing Notes, will be (i) in the case of 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 on
the face thereof and in the applicable Pricing Supplement; (ii) in the case of
Floating Rate Notes that reset quarterly, the third Wednesday of March, June,
September and December of each year as specified on the face thereof and in
the applicable Pricing Supplement; (iii) in the case of Floating Rate Notes
that reset semiannually, the third Wednesday of each of two months of each
year, as specified on the face thereof and in the applicable Pricing
Supplement; and (iv) in the case of Floating Rate Notes that reset annually,
the third Wednesday of one month of each year, as specified on the face
thereof and in the applicable Pricing Supplement and, in each case, at
Maturity. If any Interest Payment Date, other than Maturity, for any Floating
Rate Note is not a Business Day for such Floating Rate Note, such Interest
Payment Date will be postponed to the next day that is a Business Day for such
Floating Rate Note, except that in the case of a LIBOR Note, if such Business
Day for such Floating Rate Note is in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding London Business Day.
If the Maturity for any Floating Rate Note falls on a day that is not a
Business Day, all payments to be made on such day with respect to such Note
will be made on the next day that is a Business Day with the same force and
effect as if made on the due date, and no additional interest will be payable
on the date of payment for the period from and after the due date as a result
of such delayed payment.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Reset
Period" for such Note, and the first day of each Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Reset Date will be, in the case of Floating Rate Notes which reset daily, each
Business Day for such Floating Rate Note; in the case of Floating Rate Notes
(other than Treasury Rate Notes) which reset weekly, the Wednesday of each
week; in the case of Treasury Rate Notes which reset weekly, the Tuesday of
each week, except as provided below; in the case of Floating Rate Notes which
reset monthly, the third Wednesday of each month (with the exception of
monthly reset 11th District Cost of Funds Rate Notes, which will reset on the
first calendar day of the month); in the case of Floating Rate Notes which
reset quarterly, the third Wednesday of each March, June, September and
December; in the case of Floating Rate Notes which reset semiannually, the
third Wednesday of each of two months of each year, as specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, the third Wednesday of one month of each year, as specified in
the applicable Pricing Supplement; provided, however, that the interest rate
in effect from the Original Issue Date to but excluding the first Interest
Reset Date with respect to a Floating Rate Note will be the Initial Interest
Rate (as specified in the applicable Pricing Supplement). If any Interest
Reset Date for any Floating Rate Note is not a Business Day for such Floating
Rate Note, such Interest Reset Date will be postponed to the next day that is
a Business Day for such Floating Rate Note, except that in the case of a LIBOR
Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date will be the immediately preceding London Business Day.
Each adjusted rate will be applicable on and after the Interest Reset Date to
which it relates to but excluding the next succeeding Interest Reset Date or
until Maturity.
The interest rate for each Reset Period will be the rate determined by the
Calculation Agent on the Calculation Date (as defined below) pertaining to the
Interest Determination Date pertaining to the Interest Reset
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Date for such Reset Period. Unless otherwise specified in the applicable
Pricing Supplement, the "Interest Determination Date" pertaining to an
Interest Reset Date for (a) a Commercial Paper Rate Note (the "Commercial
Paper Interest Determination Date"), (b) a CD Rate Note (the "CD Interest
Determination Date"), (c) a CMT Rate Note (the "CMT Interest Determination
Date"), (d) a Federal Funds Rate Note (the "Federal Funds Interest
Determination Date"), (e) a Kenny Rate Note (the "Kenny Rate Interest
Determination Date") or (f) a Prime Rate Note (the "Prime Interest
Determination Date") will be the second Business Day prior to such Interest
Reset Date. Unless otherwise specified in the applicable Pricing Supplement,
the Interest Determination Date pertaining to an Interest Reset Date for the
11th District Cost of Funds Rate Note (the "11th District Interest
Determination Date") will be the last Business Day of the month immediately
preceding such Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined below
under "11th District Cost of Funds Rate Notes"). Unless otherwise specified in
the applicable Pricing Supplement, the Interest Determination Date pertaining
to an Interest Reset Date for a LIBOR Note (the "LIBOR Interest Determination
Date") will be the second London Business Day immediately preceding each
Interest Reset Date. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset
Date for a Treasury Rate Note (the "Treasury Interest Determination Date")
will be the day of the week in which such Interest Reset Date falls on which
Treasury bills would normally be auctioned. Treasury bills are usually sold at
auction on Monday of each week, unless that day is a legal holiday, in which
case the auction is usually held on the following Tuesday, except that such
auction may be held on the preceding Friday. If an auction is so held on the
preceding Friday, such Friday will be the Treasury Interest Determination Date
pertaining to the Reset Period commencing in the next succeeding week. If an
auction date falls on any Interest Reset Date for a Treasury Rate Note, then
such Interest Reset Date will instead be the first Business Day immediately
following such auction date. Unless otherwise specified in the applicable
Pricing Supplement, the "Calculation Date" pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after the
Interest Determination Date or, if such day is not a Business Day, the next
day that is a Business Day, or (ii) the Business Day preceding the applicable
Interest Payment Date or Maturity, as the case may be.
"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.
Unless otherwise specified in the applicable Pricing Supplement, payments
with respect to Floating Rate Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in
respect of each Floating Rate Amortizing Note will be provided to the original
purchaser of such Note and will be available, upon request, to subsequent
Holders.
Unless otherwise specified in the applicable Pricing Supplement, each
Floating Rate Note will accrue interest from and including its Original Issue
Date at the rate determined as provided in such Note and as specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, payments of interest on any Floating Rate Note with
respect to any Interest Payment Date will include interest accrued from and
including the Original Issue Date, or from and including the most recent
Interest Payment Date to which interest has been paid or duly provided for, to
but excluding the Interest Payment Date or Maturity. With respect to Floating
Rate Notes, accrued interest is calculated by multiplying the face amount of a
Note by an accrued interest factor. This accrued interest factor is computed
by adding the interest factors calculated for each day from and including the
Original Issue Date, or from and including the last date to which interest has
been paid or duly provided for, to but excluding the date for which accrued
interest is being calculated. The interest factor for each such day (unless
otherwise specified) is computed by dividing the interest rate applicable to
such day by 360, in the case of Commercial Paper Rate Notes, CD Rate Notes,
Federal Funds Rate Notes, 11th District Cost of Funds Rate Notes, LIBOR Notes
and Prime Rate Notes or by the actual number of days in the year, in the case
of CMT Rate Notes or Treasury Rate Notes, or by 365 days in the case of Kenny
Rate Notes.
The Calculation Agent will calculate the interest rate on the Floating Rate
Notes, as provided below. The Calculation Agent will, upon the request of the
Holder of any Floating Rate Note, provide the interest rate then
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in effect and, if then determined, the interest rate which will become
effective as a result of a determination made with respect to the most recent
Interest Determination Date with respect to such Note. For purposes of
calculating the rate of interest payable on Floating Rate Notes, the Company
has entered into or will enter into an agreement with the Calculation Agent.
The Calculation Agent's determination of any interest rate shall be final and
binding in the absence of manifest error.
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate on
such date for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" or any successor publication of the Board of Govenors ("H.15(519)")
under the heading "Commercial Paper." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Commercial Paper Interest Determination Date, then the
Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date will be the Money Market Yield of the rate on such
Commercial Paper Interest Determination Date for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Commercial
Paper." If by 3:00 P.M., New York City time, on such on such Calculation Date
such rate is not published in either H.15(519) or Composite Quotations, then
the Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date will be calculated by the Calculation Agent and will be the
Money Market Yield of the arithmetic mean of the offered rates (quoted on a
bank discount basis) as of 11:00 A.M., New York City time, on such Commercial
Paper Interest Determination Date of three leading dealers of commercial paper
in The City of New York selected by the Calculation Agent for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement
placed for an industrial issuer whose bond rating is "AA," or the equivalent,
from a nationally recognized securities rating agency; provided, however, that
if the dealers selected as aforesaid by the Calculation Agent are not quoting
as mentioned in this sentence, the Commercial Paper Rate with respect to such
Commercial Paper Interest Determination Date will be the Commercial Paper Rate
in effect immediately prior to such Commercial Paper Interest Determination
Date.
"Money Market Yield" will be a yield (expressed as a percentage rounded, if
necessary, to the nearest one hundred-thousandth of a percent) calculated in
accordance with the following formula:
DX360
----------
Money Market Yield = X 100
360-(DXM)
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which accrued interest is being calculated.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index
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Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "CDs (Secondary Market)." In the event that such
rate is not published prior to 9:00 A.M., New York City time, on the
Calculation Date pertaining to such CD Interest Determination Date, then the
CD Rate with respect to such CD Interest Determination Date will be the rate
on such CD Interest Determination Date for negotiable certificates of deposit
having the Index Maturity specified in the applicable Pricing Supplement as
published in Composite Quotations under the heading "Certificates of Deposit."
If by 3:00 P.M., New York City time, on such Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, then the CD Rate with
respect to such CD Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on such CD Interest
Determination Date of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money
market banks (in the market for negotiable certificates of deposit) with a
remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement in a denomination of $5,000,000; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the CD Rate with respect to such CD Interest
Determination Date will be the CD Rate in effect immediately prior to such CD
Interest Determination Date.
CMT Rate Notes
Each CMT Rate Note will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the rate displayed
on the Designated CMT Telerate Page (as defined below) under the caption
". . . Treasury Constant Maturities . . . Federal Reserve Board Release H.15
. . . Mondays Approximately 3:45 P.M.," under the column for the Designated
CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate
Page is 7055, such CMT Interest Determination Date and (ii) if the Designated
CMT Telerate Page is 7052, the week, or the month, as specified in the
applicable Pricing Supplement, ended immediately preceding the week in which
the applicable CMT Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such CMT Interest
Determination Date, then the CMT Rate with respect to such CMT Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or if not published by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CMT Interest Determination
Date, then the CMT Rate with respect to such CMT Interest Determination Date
will be such treasury constant maturity rate for the Designated CMT Maturity
Index (or other United States Treasury rate for the Designated CMT Maturity
Index) for the CMT Interest Determination Date with respect to such Interest
Reset Date as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury that
the Calculation Agent determines to be comparable to the rate formerly
displayed on the Designated CMT Telerate Page and published in the relevant
H.15(519). If such information is not provided by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CMT Interest Determination
Date, then the CMT Rate with respect to such CMT Interest Determination Date
will be calculated by the Calculation Agent and will be a yield to maturity,
based on the arithmetic mean of the secondary market closing offer side prices
as of approximately 3:30 P.M., New York City time, on the CMT Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity
of approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent cannot obtain three such Treasury Note quotations,
the CMT Rate with respect to such CMT Interest Determination Date will be
calculated by the
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Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 P.M., New
York City time, on the CMT Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event
of equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and the remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100,000,000. If three or four
(and not five) of such Reference Dealers are quoting as described above, then
the CMT Rate with respect to such CMT Interest Determination Date will be
based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided, however,
that if fewer than three Reference Dealers selected by the Calculation Agent
are quoting as described herein, the CMT Rate will be the CMT Rate in effect
immediately prior to such CMT Interest Determination Date. If two Treasury
Notes with an original maturity as described in the second preceding sentence
have remaining terms to maturity equally close to the Designated CMT Maturity
Index, the quotes for the Treasury Note with the shorter remaining term to
maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as published in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as published in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page will be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
Treasury Notes (either one, two, three, five, seven, ten, twenty or thirty
years) specified in the applicable Pricing Supplement with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Pricing Supplement, the Designated CMT Maturity Index will be two
years.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds as published in H.15(519) under
the heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Federal Funds Interest Determination Date, then the Federal
Funds Rate with respect to such Federal Funds Interest Determination Date will
be the rate on such Federal Funds Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 P.M., New York City time, on such Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate with respect to such Federal Funds Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean (rounded,
if necessary, to the nearest one hundred-thousandth of a percent) of the rates
as of 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date for the last transaction in overnight Federal Funds
arranged by three leading brokers of Federal Funds transactions in The City of
New York selected by the Calculation Agent; provided, however, that if the
brokers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate with respect to such
Federal Funds Interest Determination Date will be the Federal Funds Rate in
effect immediately prior to such Federal Funds Interest Determination Date.
11th District Cost of Funds Rate Notes
Each 11th District Cost of Funds Rate Note will bear interest at the
interest rate (calculated with reference to the 11th District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any) specified in the 11th
District Cost of Funds Rate Note and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any 11th District Interest
Determination Date, the rate equal to the monthly weighted average cost of
funds for the calendar month preceding such 11th District Interest
Determination Date as set forth under the caption "11th District" on Telerate
Page 7058 as of 11:00 A.M., San Francisco time, on such 11th District Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related 11th District Interest Determination Date, the 11th District Cost of
Funds Rate for such 11th District Interest Determination Date will be the
monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Index") by the FHLB of San Francisco as such cost of funds for the calendar
month preceding the date of such announcement. If the FHLB of San Francisco
fails to announce such rate for the calendar month next preceding such 11th
District Interest Determination Date, then the 11th District Cost of Funds
Rate with respect to such 11th District Interest Determination Date will be
the 11th District Cost of Funds Rate then in effect on such 11th District
Interest Determination Date.
Kenny Rate Notes
Each Kenny Rate Note will bear interest at the interest rate (calculated
with reference to the Kenny Rate and the Spread and/or Spread Multiplier, if
any) specified in the Kenny Rate Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Kenny
Rate" means, with respect to any Kenny Rate Interest Determination Date, the
high grade weekly index (the "Weekly Index") on such date made available by
J.J. Kenny Information Systems ("Kenny") to the Calculation Agent. The Weekly
Index is, and will be, based upon 30 day yield evaluations at par of bonds,
the interest on which is exempt from Federal income taxation under the
Internal Revenue Code of 1986, as amended (the "Code"), of not less than five
high grade component issuers selected by Kenny which will include, without
limitation, issuers of general obligation bonds. The specified issuers
included among the component issuers may be changed from time to time by Kenny
in its discretion. The bonds on which the Weekly Index is based will not
include any bonds on which the interest is subject to a minimum tax or similar
tax under the Code unless all tax-exempt bonds are subject to such tax. In the
event Kenny ceases to make available such Weekly Index, a successor indexing
agent will be selected by the Calculation Agent, such index to reflect the
prevailing rate for bonds rated in the highest short-term rating category by
Moody's Investors Service, Inc. and Standard & Poor's Corporation in respect
of issuers most closely resembling the high grade component issuers selected
by Kenny for its Weekly Index, the interest on which is (A) variable on a
weekly basis, (B) exempt from Federal income taxation under the Code and (C)
not subject to a minimum tax or similar tax under the Code unless all tax-
exempt bonds are subject to such tax. If such successor indexing agent is not
available, the Kenny Rate with respect to any Kenny Rate Interest
Determination Date will be 67% of the rate determined as if the Treasury Rate
option had been originally selected.
LIBOR Notes
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in the LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means, with respect to any LIBOR Interest Determination Date, the rate
determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will be
either: (a) if "LIBOR Reuters" is specified in the Note and the applicable
Pricing Supplement, the arithmetic mean of the offered rates (unless the
specified Designated LIBOR Page (as defined below) by its terms provides
only for a single rate, in which case such single rate will be used) for
deposits in the Designated LIBOR Currency (as defined below) having the
Index Maturity specified in the Note and the applicable Pricing Supplement,
commencing
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on the second London Business Day immediately following such LIBOR Interest
Determination Date, which appear on the Designated LIBOR Page specified in
the Note and the applicable Pricing Supplement as of 11:00 A.M., London
time, on that LIBOR Interest Determination Date, if at least two such
offered rates appear (unless, as aforesaid, only a single rate is required)
on such Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in
the Note and the applicable Pricing Supplement, the rate for deposits in
the Designated LIBOR Currency having the Index Maturity specified in the
Note and the applicable Pricing Supplement, commencing on the second London
Business Day immediately following such LIBOR Interest Determination Date,
which appears on the Designated LIBOR Page specified in the Note and the
applicable Pricing Supplement as of 11:00 A.M., London time, on that LIBOR
Interest Determination Date. Notwithstanding the foregoing, if fewer than
two offered rates appear on the Designated LIBOR Page with respect to LIBOR
Reuters (unless the specified Designated LIBOR Page by its terms provides
only for a single rate, in which case such single rate will be used), or if
no rate appears on the Designated LIBOR Page with respect to LIBOR
Telerate, whichever may be applicable, LIBOR with respect to such LIBOR
Interest Determination Date will be determined as if the parties had
specified the rate described in clause (ii) below.
(ii) With respect to any LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Designated LIBOR Page with respect to
LIBOR Reuters (unless the specified Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate will be
used), or if no rate appears on the Designated LIBOR Page with respect to
LIBOR Telerate, as the case may be, the Calculation Agent will request the
principal London office of each of four major banks in the London interbank
market selected by the Calculation Agent to provide the Calculation Agent
with its offered rate quotation for deposits in the Designated LIBOR
Currency for the period of the Index Maturity specified in the Note and the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, to prime
banks in the London interbank market as of 11:00 A.M., London time, on such
LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in such Designated LIBOR Currency
in such market at such time. If at least two such quotations are provided,
LIBOR with respect to such LIBOR Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR with respect
to such LIBOR Interest Determination Date will be the arithmetic mean of
the rates quoted as of 11:00 A.M. in the applicable Principal Financial
Center (as defined below), on such LIBOR Interest Determination Date by
three major banks in such Principal Financial Center selected by the
Calculation Agent for loans in the Designated LIBOR Currency to leading
European banks, commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date having the Index Maturity
specified in the Note and the applicable Pricing Supplement in a principal
amount that is representative for a single transaction in such Designated
LIBOR Currency in such market at such time; provided, however, that if the
banks so selected by the Calculation Agent are not quoting as mentioned in
this sentence, LIBOR with respect to such LIBOR Interest Determination Date
will be LIBOR in effect immediately prior to such LIBOR Interest
Determination Date.
"Designated LIBOR Currency" means, with respect to any LIBOR Note, the
currency (including a composite currency), if any, specified in the Note and
the applicable Pricing Supplement as the Designated LIBOR Currency. If no such
currency is specified in the Note and the applicable Pricing Supplement, the
Designated LIBOR Currency will be U.S. dollars.
"Designated LIBOR Page" means either (a) the display on the Reuters Monitor
Money Rates Service for the purpose of displaying the London interbank rates
of major banks for the applicable Designated LIBOR Currency (if "LIBOR
Reuters" is specified in the Note and the applicable Pricing Supplement), or
(b) the display on the Dow Jones Telerate Service for the purpose of
displaying the London interbank rates of major banks for the applicable
designated LIBOR Currency (if "LIBOR Telerate" is specified in the Note and
the applicable Pricing Supplement). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the Note and the applicable Pricing Supplement, LIBOR
for the applicable Designated LIBOR Currency will be determined as if LIBOR
Telerate (and, if the U.S. dollar is the Designated LIBOR Currency, page 3750)
had been chosen.
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"Principal Financial Center" means, with respect to any LIBOR Note, unless
otherwise specified in the Note and the applicable Pricing Supplement, the
capital city of the country that issues as its legal tender the Designated
LIBOR Currency of such Note, except that with respect to U.S. dollars and
ECUs, the Principal Financial Center will be The City of New York and
Brussels, respectively.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in the Prime Rate Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Interest Determination Date, the rate
on such date as published in H.15(519) under the heading "Bank Prime Loan." In
the event that such rate is not published prior to 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Prime Interest Determination
Date, then the Prime Rate with respect to such Prime Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic
mean of the rates of interest publicly announced by each bank that appears on
the Reuters Screen USPRIME1 as such bank's prime rate or base lending rate as
in effect with respect to such Prime Interest Determination Date. If fewer
than four such rates appear on the Reuters Screen USPRIME1 with respect to
such Prime Interest Determination Date, the Prime Rate with respect to such
Prime Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business
on such Prime Interest Determination Date by at least two of the three major
money center banks in The City of New York selected by the Calculation Agent.
If fewer than two quotations are provided, the Prime Rate with respect to such
Prime Interest Determination Date will be determined on the basis of the rates
furnished in The City of New York by the appropriate number of substitute
banks or trust companies organized and doing business under the laws of the
United States, or any state thereof, having total equity capital of at least
$500,000,000 and being subject to supervision or examination by Federal or
state authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the appropriate number of substitute banks
or trust companies selected as aforesaid are not quoting as mentioned in this
sentence, the Prime Rate with respect to such Prime Interest Determination
Date will be the Prime Rate in effect immediately prior to such Prime Interest
Determination Date.
"Reuters Screen USPRIME1" means the display designated as page "USPRIME1" on
the Reuters Monitor Money Rate Service (or such other page which may replace
the USPRIME1 page on the service for the purpose of displaying the prime rate
or base lending rate of major banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier,
if any) specified in the Treasury Rate Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the
rate for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Pricing Supplement as published in H.15(519) under the heading, "Treasury
bills-auction average (investment)" or, if not so published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Treasury Interest
Determination Date, the average auction rate on such Treasury Interest
Determination Date (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that
such rate is not available by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Treasury Interest Determination Date, or
if no such auction is held in a particular week, then the Treasury Rate with
respect to such Treasury Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent, on the
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basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on such Treasury Interest
Determination Date, of three leading primary U.S. government securities
dealers selected by the Calculation Agent for the issue of Treasury bills with
a remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Treasury Rate with respect to such Treasury Interest
Determination Date will be the Treasury Rate in effect immediately prior to
such Treasury Interest Determination Date.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may from time to time offer Original Issue Discount Notes. The
Pricing Supplement applicable to certain Original Issue Discount Notes may
provide that Holders of such Notes will not receive periodic payments of
interest. For purposes of determining whether Holders of the requisite
principal amount of Notes outstanding under the Senior Indenture have made a
demand or given a notice or waiver or taken any other action, the outstanding
principal amount of Original Issue Discount Notes shall be deemed to be the
amount of the principal that would be due and payable upon declaration of
acceleration of the Stated Maturity thereof as of the date of such
determination. See "General."
"Original Issue Discount Note" means (i) a Note that has a "stated
redemption price at maturity" that exceeds its "issue price" (each as defined
for United States federal income tax purposes) by at least 0.25% of its stated
redemption price at maturity multiplied by the number of complete years from
the Original Issue Date to the Stated Maturity for such Note (or, in the case
of a Note that provides for payment of any amount other than the "qualified
stated interest" prior to maturity, the weighted average maturity of the Note)
and (ii) any other Note designated by the Company as issued with original
issue discount for United States federal income tax purposes.
AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Note
("Amortizing Notes"). Interest on each Amortizing Note will be computed as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, payments with respect to an Amortizing Note
will be applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. A table setting forth
repayment information with respect to each Amortizing Note will be provided to
the original purchaser of such Note and will be available, upon request, to
subsequent Holders.
RESET NOTES
The Pricing Supplement relating to each Note will indicate whether the
Company has the option with respect to such Note to reset the interest rate,
in the case of a Fixed Rate Note, or to reset the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note (in each case, a "Reset
Note"), and, if so, (i) the date or dates on which such interest rate or such
Spread and/or Spread Multiplier, as the case may be, may be reset (each an
"Optional Interest Reset Date") and (ii) the basis or formula, if any, for
such resetting.
The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 45 but not more than 60 calendar days prior
to an Optional Interest Reset Date for such Note. If the Company so notifies
the Trustee of such exercise, the Trustee will send not later than 40 calendar
days prior to such Optional Interest Reset Date, by telegram, telex, facsimile
transmission, hand delivery or letter (first class, postage prepaid) to the
Holder of such Note a notice (the "Reset Notice") indicating (i) that the
Company has elected to reset the interest rate, in the case of a Fixed Rate
Note, or the Spread and/or Spread Multiplier, in the case of a Floating Rate
Note, (ii) such new interest rate or such new Spread and/or Spread Multiplier,
as the case may be, and (iii) the provisions, if any, for redemption during
the period from such Optional Interest Reset Date to the next Optional
Interest Reset Date or, if there is no such next Optional Interest Reset Date,
to the Stated Maturity of such Note (each such period a "Subsequent Interest
Period"), including the date or dates on which
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or the period or periods during which and the price or prices at which such
redemption may occur during such Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 calendar days prior to an
Optional Interest Reset Date for a Note, the Company may, at its option,
revoke the interest rate, in the case of a Fixed Rate Note, or the Spread
and/or Spread Multiplier, in the case of a Floating Rate Note, provided for in
the Reset Notice and establish a higher interest rate, in the case of a Fixed
Rate Note, or a Spread and/or Spread Multiplier resulting in a higher interest
rate, in the case of a Floating Rate Note, for the Subsequent Interest Period
commencing on such Optional Interest Reset Date by causing the Trustee to send
by telegram, telex, facsimile transmission, hand delivery or letter (first
class, postage prepaid) notice of such higher interest rate or Spread and/or
Spread Multiplier resulting in a higher interest rate, as the case may be, to
the Holder of such Note. Such notice will be irrevocable. All Notes with
respect to which the interest rate or Spread and/or Spread Multiplier is reset
on an Optional Interest Reset Date to a higher interest rate or Spread and/or
Spread Multiplier resulting in a higher interest rate will bear such higher
interest rate, in the case of a Fixed Rate Note, or Spread and/or Spread
Multiplier resulting in a higher interest rate, in the case of a Floating Rate
Note, whether or not tendered for repayment as provided in the next paragraph.
If the Company elects prior to an Optional Interest Reset Date to reset the
interest rate or the Spread and/or Spread Multiplier of a Note, the Holder of
such Note will have the option to elect repayment of such Note, in whole but
not in part, by the Company on such Optional Interest Reset Date at a price
equal to the principal amount thereof plus accrued and unpaid interest to but
excluding such Optional Interest Reset Date. In order for a Note to be so
repaid on an Optional Interest Reset Date, the Holder thereof must follow the
procedures set forth below under "Redemption and Repayment" for optional
repayment, except that the period for delivery of such Note or notification to
the Trustee will be at least 25 but not more than 35 calendar days prior to
such Optional Interest Reset Date. A Holder who has tendered a Note for
repayment following receipt of a Reset Notice may revoke such tender for
repayment by written notice to the Trustee received prior to 5:00 P.M., New
York City time, on the tenth calendar day prior to such Optional Interest
Reset Date.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to extend the Stated Maturity of such Note for one or
more periods of from one to five whole years (each an "Extension Period") up
to but not beyond the date (the "Final Maturity Date") specified in such
Pricing Supplement.
The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 45 but not more than 60 calendar days prior
to the Stated Maturity of such Note in effect prior to the exercise of such
option (the "Original Stated Maturity Date"). If the Company so notifies the
Trustee of such exercise, the Trustee will send not later than 40 calendar
days prior to the Original Stated Maturity Date, by telegram, telex, facsimile
transmission, hand delivery or letter (first class, postage prepaid) to the
Holder of such Note a notice (the "Extension Notice") relating to such
Extension Period, indicating (i) that the Company has elected to extend the
Stated Maturity of such Note, (ii) the new Stated Maturity, (iii) in the case
of a Fixed Rate Note, the interest rate applicable to such Extension Period
or, in the case of a Floating Rate Note, the Spread and/or Spread Multiplier
applicable to the Extension Period, and (iv) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which
or the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the sending by the
Trustee of an Extension Notice to the Holder of a Note, the Stated Maturity of
such Note will be extended automatically, and, except as modified by the
Extension Notice and as described in the next two paragraphs, such Note will
have the same terms as prior to the sending of such Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior to the
Original Stated Maturity Date for a Note, the Company may, at its option,
revoke the interest rate, in the case of a Fixed Rate Note, or the Spread
and/or Spread Multiplier, in the case of a Floating Rate Note, provided for in
the Extension Notice and establish a higher interest rate, in the case of a
Fixed Rate Note, or a Spread and/or Spread Multiplier resulting in a higher
interest rate, in the case of a Floating Rate Note, for the Extension Period
by causing the Trustee to
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send by telegram, telex, facsimile transmission, hand delivery or letter
(first class, postage prepaid) notice of such higher interest rate or Spread
and/or Spread Multiplier resulting in a higher interest rate, as the case may
be, to the Holder of such Note. Such notice will be irrevocable. All Notes
with respect to which the Stated Maturity is extended will bear such higher
interest rate, in the case of a Fixed Rate Note, or Spread and/or Spread
Multiplier resulting in a higher interest rate, in the case of a Floating Rate
Note, for the Extension Period, whether or not tendered for repayment as
provided in the next paragraph.
If the Company extends the Stated Maturity of a Note (or an Extension
Period, as applicable), the Holder of such Note will have the option to elect
repayment of such Note, in whole but not in part, by the Company on the
Original Stated Maturity Date (or last day of such Extension Period) at a
price equal to the principal amount thereof plus accrued and unpaid interest
to but excluding such date. In order for a Note to be so repaid on the
Original Stated Maturity Date (or last day of such Extension Period), the
Holder thereof must follow the procedures set forth below under "Redemption
and Repayment" for optional repayment, except that the period for delivery of
such Note or notification to the Trustee will be at least 25 but not more than
35 calendar days prior to the Original Stated Maturity Date (or last day of
such Extension Period). A Holder who has tendered a Note for repayment
following receipt of an Extension Notice may revoke such tender for repayment
by written notice to the Trustee received prior to 5:00 P.M., New York City
time, on the tenth calendar day prior to the Original Stated Maturity Date (or
last day of such Extension Period).
RENEWABLE NOTES
The applicable Pricing Supplement will indicate whether a Note (other than
an Amortizing Note) will mature at its Original Stated Maturity Date unless
the term of all or any portion of any such Note is renewed by the Holder in
accordance with the procedures described in such Pricing Supplement.
COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "Reset Notes," "Extension of Maturity" and "Renewable
Notes."
REDEMPTION AND REPAYMENT
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity only if an Initial
Redemption Date is specified in the applicable Pricing Supplement ("Initial
Redemption Date"). If so specified, the Notes will be subject to redemption at
the option of the Company on any date on and after the applicable Initial
Redemption Date in whole or from time to time in part in increments of $1,000
or the minimum denomination, if any, specified in such Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such minimum denomination) at the applicable Redemption Price (as defined
below). The amount to be paid a Holder upon redemption with respect to a Note
equals the sum of (i) the Initial Redemption Percentage specified in such
Pricing Supplement (as adjusted by the Annual Redemption Percentage Reduction,
if applicable (as specified in such Pricing Supplement)) multiplied by the
unpaid principal amount or the portion to be redeemed (the "Redemption Price")
plus (ii) accrued and unpaid interest to but excluding the date of redemption,
but payments due with respect to such Note prior to the date of redemption
will be payable to the Holder of record of such Note at the close of business
on the relevant Regular Record Date specified in the applicable Pricing
Supplement, all as provided in the Senior Indenture. The Initial Redemption
Percentage, if any, applicable to a Note will decline at each anniversary of
the Initial Redemption Date by an amount equal to the applicable Annual
Redemption Percentage Reduction, if any, until the Redemption Price is equal
to 100% of the unpaid principal amount thereof or the portion thereof to be
redeemed. The Company may exercise such option by causing the Trustee to mail
a notice of such redemption at least 30 but not more than 60 calendar days
prior to the date of redemption in accordance with the provisions of the
Senior Indenture. In the event of redemption of a Note in part only, such Note
will be cancelled and a new Note or Notes representing the unredeemed portion
thereof will be issued in the name of the Holder thereof.
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Unless otherwise specified in the applicable Pricing Supplement, a Note will
not be repayable prior to Stated Maturity at the option of the Holder. If so
specified, a Note will be repayable at the option of the Holder, in whole or
in part, on a date or dates specified prior to Stated Maturity at a price or
prices specified in the applicable Pricing Supplement, plus accrued and unpaid
interest to but excluding the date of repayment. Unless otherwise specified in
the applicable Pricing Supplement, if a Note is repayable in part pursuant to
the preceding sentence, the principal amount of the Note or Notes to be issued
to the Holder for the portion of such Note not being repaid must be $100,000
or an integral multiple of $1,000 in excess thereof.
In order for a Note that is repayable at the option of the Holder to be
repaid prior to Stated Maturity, the Paying Agent (initially, the Company has
appointed the Trustee as Paying Agent) must receive at least 30 but not more
than 45 calendar days prior to the repayment date (i) the Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed
or (ii) a telegram, telex, facsimile transmission, hand delivery or letter
(first class, postage prepaid) from a member of a national securities exchange
or the National Association of Securities Dealers, Inc. or a commercial bank
or trust company in the United States setting forth the name of the Holder of
the Note, the principal amount of the Note, the principal amount of the Note
to be repaid, the certificate number or a description of the tenor and terms
of the Note, a statement that the option to elect repayment is being exercised
thereby and a guarantee that the Note to be repaid with the form entitled
"Option to Elect Repayment" on the reverse of the Note duly completed will be
received by the Paying Agent not later than five Business Days after the date
of such telegram, telex, facsimile transmission, hand delivery or letter and
such Note and form duly completed are received by the Paying Agent by such
fifth Business Day. Exercise of the repayment option by the Holder of a Note
will be irrevocable, except that a Holder who has tendered a Note for
repayment may revoke such tender for repayment by written notice to the Paying
Agent received prior to 5:00 P.M., New York City time, on the tenth calendar
day prior to the repayment date. The repayment option may be exercised by the
Holder of a Note for less than the entire principal amount of the Note
provided that the principal amount of the Note remaining outstanding after
such repayment is an authorized denomination. Upon such partial repayment such
Note will be cancelled and a new Note or Notes for the remaining principal
amount thereof will be issued in the name of the Holder thereof.
While the Book-Entry Notes are represented by the Global Securities (as
defined in the accompanying Prospectus) held by or on behalf of the
Depositary, and registered in the name of the Depositary or its nominee, the
option for repayment may be exercised by the applicable Participant (as
defined below under "Book-Entry System") that has an account with the
Depositary, on behalf of the Beneficial Owners (as defined below) of the
Global Security or Securities representing such Book-Entry Notes, by
delivering a written notice substantially similar to the above-mentioned form
duly completed to the Trustee at its Corporate Trust Office (or such other
address of which the Company will from time to time notify the Holders), at
least 30 but not more than 60 calendar days prior to the date of repayment.
Notices of election from Participants on behalf of Beneficial Owners of the
Global Security or Securities representing such Book-Entry Notes to exercise
their option to have such Book-Entry Notes repaid must be received by the
Trustee by 5:00 P.M., New York City time, on the last day for giving such
notice. In order to ensure that a notice is received by the Trustee on a
particular day, the Beneficial Owner of the Global Security or Securities
representing such Book-Entry Notes must so direct the applicable Participant
before such Participant's deadline for accepting instructions for that day.
Different firms may have different deadlines for accepting instructions from
their customers. Accordingly, Beneficial Owners of the Global Security or
Securities representing Book-Entry Notes should consult the Participants
through which they own their interest therein for the respective deadlines for
such Participants. All notices shall be executed by a duly authorized officer
of such Participant (with signatures guaranteed) and will be irrevocable. In
addition, Beneficial Owners of the Global Security or Securities representing
Book-Entry Notes shall effect delivery at the time such notices of election
are given to the Depositary by causing the applicable Participant to transfer
such Beneficial Owner's interest in the Global Security or Securities
representing such Book-Entry Notes, on the Depositary's records, to the
Trustee. See "Book-Entry System."
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
any other securities laws or regulations in connection with any such
repayment.
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REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation.
OTHER PROVISIONS
Any provisions with respect to the determination of an Interest Rate Basis,
the specifications of an Interest Rate Basis, calculation of the interest rate
applicable to, or the principal payable at Maturity on, any Note, its Interest
Payment Dates or any other matter relating thereto may be modified by the
terms as specified under "Other Provisions" on the face of such Note, or in an
annex relating thereto if so specified on the face thereof, and/or in the
applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
DTC will act as securities depositary for the Book-Entry Notes. The Book-
Entry Notes will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One fully-registered Global
Security will be issued for each issue of the Notes, each in the aggregate
principal amount of such issue, and will be deposited with DTC. If, however,
the aggregate principal amount of any issue exceeds the maximum principal
amount (if any) permitted by DTC, one Global Security will be issued with
respect to such maximum principal amount and an additional Global Security
will be issued with respect to any remaining principal amount of such issue.
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
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
("Direct Participants") include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to DTC's system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under DTC's system must be made by or through
Direct Participants, which will receive a credit for the Book-Entry Notes on
DTC's records. The ownership interest of each beneficial owner of each Book-
Entry Note ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. A Beneficial Owner will not receive written
confirmation from DTC of its purchase, but such Beneficial Owner is expected
to receive a written confirmation providing details of such transaction, as
well as periodic statements of its holdings, from the Direct or Indirect
Participant through which such Beneficial Owner entered into such transaction.
Transfers of ownership interests in the Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
the Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Book-Entry Notes, except in the
event that use of the book-entry system for one or more Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the
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actual Beneficial Owners of the Book-Entry Notes; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the Beneficial Owners. The
Participants remain responsible for keeping account of their holdings on
behalf of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants
and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the Book-
Entry Notes within an issue are being redeemed, DTC's current practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Book-Entry
Notes. Under its usual procedures, DTC will mail an "Omnibus Proxy" to the
issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Principal and interest payments on the Book-Entry Notes will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case of securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participants and not of DTC, the Paying
Agent or the Company, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest to DTC
is the responsibility of the Company or the Paying Agent, disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry Notes
purchased or tendered, through its Participant, to the Paying Agent, and shall
effect delivery of such Book-Entry Notes by causing the Direct Participant to
transfer the Participant's interest in the Book-Entry Notes, on DTC's records,
to the Paying Agent. The requirement for physical delivery of Book-Entry Notes
in connection with a demand for purchase or a mandatory purchase will be
deemed satisfied when the ownership rights in the Book-Entry Notes are
transferred by Direct Participants on DTC's records.
If DTC is at any time unwilling or unable to continue as depositary or if
DTC ceases to be a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act, and, in either case, a successor depositary
is not appointed by the Company within 90 days, the Company will issue
individual Certificated Notes in exchange for Book-Entry Notes represented by
Global Securities. In addition, the Company may at any time, and in its sole
discretion, determine not to have one or more Book-Entry Notes represented by
one or more Global Securities and, in such event, will issue individual
Certificated Notes in exchange for Book-Entry Notes represented by Global
Securities. If the Notes are Book-Entry Notes represented by one or more
Global Securities and if an Event of Default with respect to the Notes shall
have occurred and be continuing, the Company will issue individual
Certificated Notes in exchange for such Book-Entry Notes represented by Global
Securities.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Certificated Notes will be printed and delivered in exchange for the Book-
Entry Notes represented by the Global Securities held by DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
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None of the Company, any Agents, the Trustee, any Paying Agent or the
registrar for the Notes will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DEFEASANCE
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be subject to defeasance and discharge as described under "Description of
Debt Securities-Discharge, Legal Defeasance and Covenant Defeasance" in the
accompanying Prospectus.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the principal United States federal income
tax consequences of the purchase, ownership and disposition of Notes to
beneficial owners ("holders") of Notes purchasing Notes at their original
issuance. This summary is based on the Code, legislative history,
administrative pronouncements, judicial decisions and final, temporary and
proposed Treasury Regulations, changes to any of which subsequent to the date
hereof may affect the tax consequences described herein. Any such change may
apply retroactively. This summary is also based on final Treasury Regulations
(the "1996 OID Regulations") published by the Internal Revenue Service ("IRS")
on June 14, 1996, which set forth rules applicable to "contingent payment debt
instruments."
This summary discusses only the principal United States federal income tax
consequences to those holders holding Notes as capital assets within the
meaning of Section 1221 of the Code. It does not address all of the tax
consequences that may be relevant to a holder in light of the holder's
particular circumstances or to holders subject to special rules (including
pension plans and other tax-exempt investors, banks, thrifts, insurance
companies, real estate investment trusts, regulated investment companies,
dealers in securities, currencies and persons so treated for federal income
tax purposes, persons whose functional currency (as defined in Section 985 of
the Code) is other than the United States dollar, and persons who hold Notes
as part of a straddle, hedging or conversion transaction). This summary does
not discuss the taxation of Notes which qualify as "applicable high yield
discount obligations" under Section 163(i) of the Code. Holders of such
obligations may be subject to special rules which will be set forth in an
applicable Pricing Supplement, if appropriate. Finally, this summary is
subject to the requirement that a taxpayer obtain the consent of the IRS
before changing a method of accounting.
Persons considering the purchase of Notes should consult their tax advisors
with regard to the application of United States federal income tax laws to
their particular situations as well as any tax consequences to them arising
under the laws of any state, local or foreign taxing jurisdiction. State,
local and foreign income tax laws may differ substantially from the
corresponding federal income tax laws, and this discussion does not purport to
describe any aspect of the tax laws of any state, local or foreign
jurisdiction. Therefore, potential investors should consult their own tax
advisors with respect to the various state, local and foreign tax consequences
of an investment in Notes.
As used herein, the term "United States Holder" means a beneficial owner of
a Note who or which is, for United States federal income tax purposes, either
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
of any political subdivision thereof or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. The term also includes certain holders who are former citizens of the
United States whose income and gain from the Notes will be subject to United
States taxation.
TAXATION OF INTEREST
The taxation of interest on a Note will depend on whether it constitutes
"qualified stated interest" (as defined below). Interest on a Note that
constitutes qualified stated interest is includible in a United States
Holder's income as ordinary interest income when actually or constructively
received, if such Holder uses the
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cash method of accounting for federal income tax purposes, or when accrued, if
such Holder uses an accrual method of accounting for federal income tax
purposes. Interest that does not constitute qualified stated interest is
included in a United States Holder's income under the rules described below
under "Original Issue Discount," regardless of such Holder's method of
accounting. Notwithstanding the foregoing, interest that is payable on a Note
with a maturity of one year or less from its issue date (a "Short-Term Note")
is included in a United States Holder's income under the rules described below
under "Short-Term Notes".
Fixed Rate Notes
Interest on a Fixed Rate Note will constitute "qualified stated interest" if
the interest is unconditionally payable, or will be constructively received
under Section 451 of the Code, in cash or in property (other than debt
instruments of the Company) at least annually at a single fixed rate.
Floating Rate Notes
Interest on a Floating Rate Note that is unconditionally payable, or will be
constructively received under Section 451 of the Code, in cash or in property
(other than debt instruments of the Company) at least annually will constitute
"qualified stated interest" if the Note is a "variable rate debt instrument"
("VRDI") under the rules described below and the interest is payable at a
single "qualified floating rate" or single "objective rate" (each as defined
below). If the Note is a VRDI but the interest is payable other than at a
single qualified floating rate or at a single objective rate, special rules
apply to determine the portion of such interest that constitutes "qualified
stated interest". See "Original Issue Discount--Floating Rate Notes that are
VRDIs", below.
Definition of Variable Rate Debt Instrument (VRDI), Qualified Floating Rate
and Objective Rate
A Note is a VRDI if all of the four following conditions are met. First, the
"issue price" of the Note (as described below) must not exceed the total
noncontingent principal payments by more than an amount equal to the lesser of
(i) .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue date (or,
in the case of a Note that provides for payment of any amount other than
qualified stated interest before maturity, its weighted average maturity) and
(ii) 15% of the total noncontingent principal payments.
Second, the Note must provide for stated interest (compounded or paid at
least annually) at (a) one or more qualified floating rates, (b) a single
fixed rate and one or more qualified floating rates, (c) a single objective
rate or (d) a single fixed rate and a single objective rate that is a
"qualified inverse floating rate" (as defined below).
Third, the Note must provide that a qualified floating rate or objective
rate in effect at any time during the term of the Note is set at the value of
the rate on any day that is no earlier than three months prior to the first
day on which that value is in effect and no later than one year following that
first day.
Fourth, the Note may not provide for any principal payments that are
contingent except as provided in the first requirement set forth above.
Subject to certain exceptions, a variable rate of interest on a Note is a
"qualified floating rate" if variations in the value of the rate can
reasonably be expected to measure contemporaneous fluctuations in the cost of
newly borrowed funds in the currency in which the Note is denominated. A
variable rate will be considered a qualified floating rate if the variable
rate equals (i) the product of an otherwise qualified floating rate and a
fixed multiple (i.e., a Spread Multiplier) that is greater than 0.65, but not
more than 1.35 or (ii) an otherwise qualified floating rate (or the product
described in clause (i)) plus or minus a fixed rate (i.e., a Spread). If the
variable rate equals the product of an otherwise qualified floating rate and a
single Spread Multiplier greater than 1.35 or less than or equal to 0.65,
however, such rate will generally constitute an objective rate, described more
fully below. A variable rate will not be considered a qualified floating rate
if the variable rate is subject to a cap, floor, governor (i.e., a restriction
on the amount of increase or decrease in the stated interest rate) or similar
restriction that is
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reasonably expected as of the issue date to cause the yield on the Note to be
significantly more or less than the expected yield determined without the
restriction (other than a cap, floor or governor that is fixed throughout the
term of the Note).
Subject to certain exceptions, an "objective rate" is a rate (other than a
qualified floating rate) that is determined using a single fixed formula and
that is based on objective financial or economic information that is neither
within the control of the issuer (or a related party) nor unique to the
circumstances of the issuer (or a related party). For example, an objective
rate generally includes a rate that is based on one or more qualified floating
rates or on the yield of actively traded personal property (within the meaning
of Section 1092(d)(1) of the Code). For purposes of the preceding sentence, a
foreign currency for which there is an active interbank market is presumed to
be actively traded. Notwithstanding the first sentence of this paragraph, a
rate on a debt instrument is not an objective rate if it is reasonably
expected that the average value of the rate during the first half of the debt
instrument's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the debt
instrument's term. An objective rate is a "qualified inverse floating rate" if
(a) the rate is equal to a fixed rate minus a qualified floating rate and (b)
the variations in the rate can reasonably be expected to reflect inversely
contemporaneous variations in the cost of newly borrowed funds (disregarding
any caps, floors, governors or similar restrictions that would not, as
described above, cause a rate to fail to be a qualified floating rate).
If interest on a Note is stated at a fixed rate for an initial period of
less than one year, followed by a variable rate that is either a qualified
floating rate or an objective rate for a subsequent period, and the value of
the variable rate on the issue date is intended to approximate the fixed rate,
the fixed rate and the variable rate together constitute a single qualified
floating rate or objective rate.
ORIGINAL ISSUE DISCOUNT
Original issue discount ("OID") with respect to a Note is the excess, if
any, of the Note's "stated redemption price at maturity" over the Note's
"issue price". A Note's "stated redemption price at maturity" is the sum of
all payments provided by the Note (whether designated as interest or as
principal) other than payments of qualified stated interest. The "issue price"
of a Note is the first price at which a substantial amount of the Notes in the
issuance that includes such Note is sold for money (excluding sales to bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers).
As described more fully below, United States Holders of Notes with OID that
mature more than one year from their issue date generally will be required to
include such OID in income as it accrues in accordance with the constant yield
method described below, before the receipt of the related cash payments. A
United States Holder's tax basis in a Note is increased by each accrual of OID
and decreased by each payment other than a payment of qualified stated
interest.
The amount of OID with respect to a Note will be treated as zero if the OID
is less than an amount equal to .0025 multiplied by the product of the stated
redemption price at maturity and the number of complete years to maturity (or,
in the case of a Note that provides for payment of any amount other than
qualified stated interest prior to maturity, the weighted average maturity of
the Note). If the amount of OID with respect to a Note is less than that
amount, the OID that is not included in payments of stated interest is
included in income as capital gain as principal payments are made. The amount
includible with respect to a principal payment equals the product of the total
amount of OID and a fraction, the numerator of which is the amount of such
principal payment and the denominator of which is the stated principal amount
of the Note.
Fixed Rate Notes
In the case of OID with respect to a Fixed Rate Note, the amount of OID
includible in the income of a United States Holder for any taxable year is
determined under the constant yield method, as follows. First, the "yield to
maturity" of the Note is computed. The yield to maturity is the discount rate
that, when used in
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computing the present value of all interest and principal payments to be made
under the Note (including payments of qualified stated interest) produces an
amount equal to the issue price of the Note. The yield to maturity is constant
over the term of the Note and, when expressed as a percentage, must be
calculated to at least two decimal places.
Second, the term of the Note is divided into "accrual periods". Accrual
periods may be of any length and may vary in length over the term of the Note,
provided that each accrual period is no longer than one year and that 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.
Third, the total amount of OID on the Note is allocated among accrual
periods. In general, the OID allocable to an accrual period equals the product
of the "adjusted issue price" of the Note at the beginning of the accrual
period and the yield to maturity of the Note, less the amount of any qualified
stated interest allocable to the accrual period. The adjusted issue price of a
Note at the beginning of the first accrual period is its issue price.
Thereafter, the adjusted issue price of the Note is its issue price, increased
by the amount of OID previously includible in the gross income of any holder
and decreased by the amount of any payment previously made on the Note other
than a payment of qualified stated interest. For purposes of computing the
adjusted issue price of a Note, the amount of OID previously includible in the
gross income of any holder is determined without regard to "premium" and
"acquisition premium", as those terms are defined below under "Premium and
Acquisition Premium".
Fourth, the "daily portions" of OID are determined by allocating to each day
in an accrual period its ratable portion of the OID allocable to the accrual
period.
A United States Holder includes in income in any taxable year the daily
portions of OID for each day during the taxable year that such Holder held
Notes. In general, under the constant yield method described above, United
States Holders will be required to include in income increasingly greater
amounts of OID in successive accrual periods.
Floating Rate Notes that are VRDIs
The taxation of OID (including interest that does not constitute qualified
stated interest) on a Floating Rate Note will depend on whether the Note is a
"VRDI", as that term is defined above under "Taxation of Interest-- Definition
of Variable Rate Debt Instrument (VRDI), Qualified Floating Rate and Objective
Rate."
In the case of a VRDI that provides for stated interest at a single
qualified floating rate or single objective rate (and that is unconditionally
payable in cash or in property, other than debt instruments of the issuer, or
that will be constructively received under Section 451 of the Code, at least
annually), all stated interest is qualified stated interest and the amount of
qualified stated interest and the amount of OID, if any, includible in income
during a taxable year are determined under the rules applicable to fixed rate
debt instruments (described above) by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or a
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), the
rate that reflects the yield that is reasonably expected for the debt
instrument. 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.
If a Note that is a VRDI does not provide for interest either at a single
qualified floating rate or at a single objective rate (i.e., provides for
interest at two or more qualified floating rates, at a single fixed rate and
one or more qualified floating rates, or at a single fixed rate and a single
objective rate that is a qualified inverse floating rate), the amount of
interest and OID accruals are determined by constructing an equivalent fixed
rate debt instrument, as follows.
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First, in the case of an instrument that provides for interest at one or
more qualified floating rates or at a qualified inverse floating rate and, in
addition, at a fixed rate, replace the fixed rate with a qualified floating
rate (or qualified inverse floating rate) such that the fair market value of
the instrument, so modified, as of the issue date would be approximately the
same as the fair market value of the unmodified instrument.
Second, determine the fixed rate substitute for each variable rate provided
by the Note. The fixed rate substitute for each qualified floating rate
provided by the Note is the value of that qualified floating rate on the issue
date. If the Note provides for two or more qualified floating rates with
different intervals between interest adjustment dates (for example, the 30-day
Commercial Paper Rate and quarterly LIBOR), the fixed rate substitutes are
based on intervals that are equal in length (for example, the 90-day
Commercial Paper Rate and quarterly LIBOR, or the 30-day Commercial Paper Rate
and monthly LIBOR). The fixed rate substitute for an objective rate that is a
qualified inverse floating rate is the value of the qualified inverse floating
rate on the issue date. The fixed rate substitute for an objective rate (other
than a qualified inverse floating rate) is a fixed rate that reflects the
yield that is reasonably expected for the Note.
Third, construct an equivalent fixed rate debt instrument that has terms
that are identical to those provided under the Note, except that the
equivalent fixed rate debt instrument provides for the fixed rate substitutes
determined in the second step, in lieu of the qualified floating rates or
objective rate provided by the Note.
Fourth, determine the amount of qualified stated interest and OID for the
equivalent fixed rate debt instrument under the rules (described above) for
Fixed Rate Notes. These amounts are taken into account as if the United States
Holder held the equivalent fixed rate debt instrument. See "Taxation of
Interest" and "Original Issue Discount--Fixed Rate Notes", above.
Fifth, make appropriate adjustments for the actual values of the variable
rates. In this step, qualified stated interest or OID allocable to an accrual
period is increased (or decreased) if the interest actually accrued or paid
during the accrual period exceeds (or is less than) the interest assumed to be
accrued or paid during the accrual period under the equivalent fixed rate debt
instrument. The Treasury Regulations are unclear in certain respects as to the
method for making these adjustments.
Floating Rate Notes that are not VRDIs
The tax treatment of Floating Rate Notes that are not VRDIs ("Contingent
Notes") is as follows. First, the Company is required to determine, as of the
issue date, the comparable yield for the Contingent Note. The comparable yield
is generally the yield at which the Company would issue a fixed rate debt
instrument with terms and conditions similar to those of the Contingent Note
(including the level of subordination, term, timing of payments and general
market conditions, but not taking into consideration the riskiness of the
contingencies or the liquidity of the Contingent Note), but not less than the
applicable federal rate announced monthly by the IRS (the "AFR"). In certain
cases where Contingent Notes are marketed or sold in substantial part to tax-
exempt investors or other investors for whom the prescribed inclusion of
interest is not expected to have a substantial effect on their U.S. tax
liability, the comparable yield for the Contingent Note, without proper
evidence to the contrary, is presumed to be the AFR.
Second, solely for tax purposes, the Company constructs a projected schedule
of payments determined under the 1996 OID Regulations for the Contingent Note
(the "Schedule"). The Schedule is determined as of the issue date and
generally remains in place throughout the term of the Contingent Note. If a
right to a contingent payment is based on market information, the amount of
the projected payment is the forward price of the contingent payment. If a
contingent payment is not based on market information, the amount of the
projected payment is the expected value of the contingent payment as of the
issue date. The Schedule must produce the comparable yield determined as set
forth above. Otherwise, the Schedule must be adjusted under the rules set
forth in the 1996 OID Regulations.
Third, under the usual rules applicable to OID and based on the Schedule,
the interest income on the Contingent Note for each accrual period is
determined by multiplying the comparable yield of the Contingent
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Note (adjusted for the length of the accrual period) by the Contingent Note's
adjusted issue price at the beginning of the accrual period (determined under
rules set forth in the 1996 OID Regulations). The amount so determined is then
allocated on a ratable basis to each day in the accrual period that the United
States Holder held the Contingent Note.
Fourth, appropriate adjustments are made to the interest income determined
under the foregoing rules to account for any differences between the Schedule
and actual contingent payments. Under the rules set forth in the 1996 OID
Regulations, differences between the actual amounts of any contingent payments
made in a calendar year and the projected amounts of such payments are
generally aggregated and taken into account, in the case of a positive
difference, as additional interest income, or, in the case of a negative
difference, first as a reduction in interest income for such year and
thereafter, subject to certain limitations, as ordinary loss.
The Company is required to provide each holder of a Contingent Note with the
Schedule described above. If the Company does not create a Schedule or the
Schedule is unreasonable, a United States Holder must set its own projected
payment schedule and explicitly disclose the use of such schedule and the
reason therefor. Unless otherwise prescribed by the IRS, the United States
Holder must make such disclosure on a statement attached to the United States
Holder's timely filed federal income tax return for the taxable year in the
Contingent Note was acquired.
In general, any gain realized by a United States Holder on the sale,
exchange or retirement of a Contingent Note is interest income. In general,
any loss on a Contingent Note accounted for under the method described above
is ordinary loss to the extent it does not exceed such Holder's prior interest
inclusions on the Contingent Note (net of negative adjustments). Special rules
apply in determining the tax basis of a Contingent Note and the amount
realized on the retirement of a Contingent Note.
Other Rules
Certain Notes having OID may be redeemed prior to maturity or may be
repayable at the option of the holder. Such Notes may be subject to rules that
differ from the general rules discussed above relating to the tax treatment of
OID. Purchasers of such Notes with a redemption feature should consult their
tax advisors with respect to such feature since the tax consequences with
respect to original issue discount will depend, in part, on the particular
terms and the particular features of the purchased Note.
The Treasury Regulations relating to the tax treatment of OID contain
certain language ("aggregation rules") stating in general that, with some
exceptions, if more than one type of Note is issued in connection with the
same transaction or related transactions, such Notes may be treated as a
single debt instrument with a single issue price, maturity date, yield to
maturity and stated redemption price at maturity for purposes of calculating
and accruing any OID. Unless otherwise provided in the applicable Pricing
Supplement, the Company does not expect to treat different types of Notes as
being subject to the aggregation rules for purposes of computing OID.
MARKET DISCOUNT
If a United States Holder acquires a Note having a maturity date of more
than one year from the date of its issuance and has a tax basis in the Note
that is, in the case of a Note that does not have OID, less than its stated
redemption price at maturity, or, in the case of a Note that has OID, less
than its adjusted issue price (as defined above), the amount of such
difference is treated as "market discount" for federal income tax purposes,
unless such difference is less than 1/4 of one percent of the stated
redemption price at maturity multiplied by the number of complete years to
maturity (from the date of acquisition).
Under the market discount rules of the Code, a United States Holder is
required to treat any principal payment (or, in the case of a Note that has
OID, any payment that does not constitute a payment of qualified stated
interest) on, or any gain on the sale, exchange, retirement or other
disposition of, a Note as ordinary
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income to the extent of the accrued market discount that has not previously
been included in income. Thus, partial principal payments are treated as
ordinary income to the extent of accrued market discount that has not
previously been included in income. If such Note is disposed of by the United
States Holder in certain otherwise nontaxable transactions, accrued market
discount will be includible as ordinary income by the United States Holder as
if such Holder had sold the Note at its then fair market value.
In general, the amount of market discount that has accrued is determined on
a ratable basis. A United States Holder may, however, elect to determine the
amount of accrued market discount on a constant yield to maturity basis. This
election is made on a bond-by-bond basis and is irrevocable.
With respect to Notes with market discount, a United States Holder may not
be allowed to deduct immediately a portion of the interest expense on any
indebtedness incurred or continued to purchase or to carry such Notes. A
United States Holder may elect to include market discount in income currently
as it accrues, in which case the interest deferral rule set forth in the
preceding sentence will not apply. Such an election will apply to all debt
instruments acquired by the United States Holder on or after the first day of
the first taxable year to which such election applies and is irrevocable
without the consent of the IRS. A United States Holder's tax basis in a Note
will be increased by the amount of market discount included in such Holder's
income under such an election.
In lieu of the foregoing rules, different rules apply in the case of
Contingent Notes where a holder's tax basis in a Contingent Note is less than
the Contingent Note's adjusted issue price (determined under special rules set
out in the 1996 OID Regulations). Accordingly, prospective purchasers of
Contingent Notes should consult with their tax advisors with respect to the
application of such rules to such Notes.
PREMIUM AND ACQUISITION PREMIUM
A United States Holder will be treated as having purchased a Note at a
"premium" (or "amortizable bond premium") if the Note's adjusted basis,
immediately after its purchase by such Holder, exceeds the sum of all amounts
payable on the Note after the purchase date other than payments of qualified
stated interest. United States Holders may elect to amortize the premium over
the remaining term of the Note (where such Note is not callable prior to its
maturity date), as a reduction in the amount of the interest payments
otherwise includible in income, and the United States Holders will not be
required to include in income OID (if any) with respect to any Note purchased
at a premium. If such Note may be called by the Company prior to maturity
after the United States Holder has acquired it, the amount of amortizable bond
premium is determined with reference to either the amount payable at maturity,
or, if it results in a smaller premium attributable to the period through the
earlier call date, with reference to the amount payable on the earlier call
date. If a United States Holder makes this election, the premium will be
allocated among all the interest payments on the Note, on the basis of the
United States Holders's yield to maturity, with compounding at the close of
each accrual period. A United States Holder who elects to amortize premium
must reduce the tax basis of the Note by the amount of the premium amortized
in any year. If this election is made with respect to any Note, it will also
apply to all debt instruments held by the United States Holder at the
beginning of the first taxable year to which the election applies and to all
debt instruments acquired by the United States Holder, and will be binding for
all subsequent taxable years unless the election is revoked with the consent
of the IRS.
On June 27, 1996, the IRS published in the Federal Register proposed
regulations (the "Proposed Premium Regulations") on the amortization of bond
premium. The Proposed Premium Regulations describe the constant yield method
under which such premium is amortized and provide that the resulting offset to
interest income can be taken into account only as a United States Holder takes
the corresponding interest income into account under such holder's regular
accounting method. In the case of instruments that may be redeemed at the
option of the Company or repaid at the option of the holder prior to maturity,
the Proposed Premium Regulations provide that the premium is calculated by
assuming that the issuer will exercise or not exercise its redemption rights
in the manner that maximizes the United States Holder's yield and the United
States Holder will exercise or not
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exercise its repayment option in a manner that maximizes the United States
Holder's yield. The Proposed Premium Regulations are proposed to be effective
for debt instruments acquired on or after the date 60 days after the date
final regulations are published in the Federal Register. However, if a United
States Holder elects to amortize bond premium for the taxable year containing
such effective date, the Proposed Premium Regulations would apply to all the
United States Holder's debt instruments held on or after the first day of that
taxable year. It cannot be predicted at this time whether the Proposed Premium
Regulations will become effective or what, if any, modifications will be made
to them prior to their becoming effective.
If a United States Holder purchases a Note issued with OID at an
"acquisition premium", the amount of OID that the United States Holder
includes in gross income is reduced to reflect the acquisition premium. A Note
is purchased at an acquisition premium if its adjusted basis, immediately
after its purchase, is (a) less than or equal to the sum of all amounts
payable on the Note after the purchase date other than payments of qualified
stated interest and (b) greater than the Note's "adjusted issue price" (as
described above under "Original Issue Discount--Fixed Rate Notes").
If a Note is purchased at an acquisition premium, the United States Holder
reduces the amount of OID otherwise includible in income during an accrual
period by a fraction. The numerator of this fraction is the excess of the
adjusted basis of the Note immediately after its acquisition by the purchaser
over the adjusted issue price of the Note. The denominator of the fraction is
the excess of the sum of all amounts payable on the Note after the purchase
date, other than payments of qualified stated interest, over the Note's
adjusted issue price.
As an alternative to reducing the amount of OID otherwise includible in
income by this fraction, the United States Holder may elect to compute OID
accruals by treating the purchase as a purchase at original issuance and
applying the constant yield method described above.
In lieu of the foregoing rules, different rules apply in the case of
Contingent Notes where a holder's tax basis in a Contingent Note is greater
than the Contingent Note's adjusted issue price (determined under special
rules set out in the 1996 OID Regulations). Accordingly, prospective
purchasers of Contingent Notes should consult with their tax advisors with
respect to the application of such rules to such Notes.
SHORT-TERM NOTES
In the case of a Short-Term Note, no interest is treated as qualified stated
interest, and therefore all interest is included in OID. United States Holders
that report income for federal income tax purposes on an accrual method and
certain other United States Holders, including banks and dealers in
securities, are required to include OID in income on such Short-Term Notes on
a straight-line basis, unless an election is made to accrue the OID according
to a constant yield method based on daily compounding.
Any other United States Holder of a Short-Term Note is not required to
accrue OID for federal income tax purposes, unless it elects to do so. In the
case of a United States Holder that is not required, and does not elect, to
include OID in income currently, any gain realized on the sale, exchange or
retirement of a Short-Term Note is ordinary income to the extent of the OID
accrued on a straight-line basis (or, if elected, according to a constant
yield method based on daily compounding) through the date of sale, exchange or
retirement. In addition, United States Holders that are not required, and do
not elect, to include OID in income currently are required to defer deductions
for any interest paid on indebtedness incurred or continued to purchase or
carry a Short-Term Note in an amount not exceeding the deferred interest
income with respect to such Short-Term Note (which includes both the accrued
OID and accrued interest that are payable but that have not been included in
gross income), until such deferred interest income is realized. A United
States Holder of a Short-Term Note may elect to apply the foregoing rules
(except for the rule characterizing gain on sale, exchange or retirement as
ordinary) with respect to "acquisition discount" rather than OID. Acquisition
discount is the excess of the stated redemption price at maturity of the
Short-Term Note over the United States Holder's basis in the Short-Term Note.
This
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election applies to all obligations acquired by the taxpayer on or after the
first day of the first taxable year to which such election applies, unless
revoked with the consent of the IRS. A United States Holder's tax basis in a
Short-Term Note is increased by the amount included in such Holder's income on
such a Note.
ELECTION TO TREAT ALL INTEREST AS OID
United States Holders may elect to include in gross income all interest that
accrues on a Note, including any stated interest, acquisition discount, OID,
market discount, de minimis OID, de minimis market discount and unstated
interest (as adjusted by amortizable bond premium and acquisition premium), by
using the constant yield method described above under "Original Issue
Discount". Such an election for a Note with amortizable bond premium will
result in a deemed election to amortize bond premium for all debt instruments
owned and later acquired by the United States Holder with amortizable bond
premium and may be revoked only with the permission of the IRS. Similarly,
such an election for a Note with market discount will result in a deemed
election to accrue market discount in income currently for such Note and for
all other bonds acquired by the United States Holder with market discount on
or after the first day of the taxable year to which such election first
applies, and may be revoked only with the permission of the IRS. A United
States Holder's tax basis in a Note will be increased by each accrual of the
amounts treated as OID under the constant yield election described in this
paragraph.
EXTENDIBLE NOTES, RENEWABLE NOTES AND RESET NOTES
If so specified in an applicable Pricing Supplement relating to a Note, the
Company or a holder may have the option to extend the maturity of such Note.
See "Description of Notes--Extension of Maturity" and "Description of Notes--
Renewable Notes." In addition, the Company may have the option to reset the
interest rate, the Spread or the Spread Multiplier with respect to a Note. See
"Description of Notes--Reset Notes" and "Description of Notes--Extension of
Maturity." The treatment of a United States Holder of Notes to which such
options apply will depend, in part, on the terms established for such Notes by
the Company pursuant to the exercise of such option by the Company or a
holder. Upon the exercise of any such option, the United States Holder of such
Notes may be treated for federal income tax purposes as having exchanged such
Notes (the "Old Notes") for new Notes with revised terms (the "New Notes"). If
such holder is treated as having exchanged Old Notes for New Notes, such
exchange may be treated as either a taxable exchange or a tax-free
recapitalization.
Final Treasury Regulations under Section 1001 of the Code, published on June
26, 1996 (the "Final Section 1001 Regulations"), generally provide that the
exercise of an option provided to an issuer or a holder to change a term of a
debt instrument (such as the maturity or the interest rate) in a manner such
as that contemplated for Extendible Notes, Renewable Notes and Reset Notes
will create a deemed exchange of Old Notes for New Notes if such exercise
modifies such terms to a degree that is "economically significant". With
respect to certain types of debt instruments, under the Final Section 1001
Regulations a deemed exchange for tax purposes occurs if the exercise of such
an option alters the annual yield of the debt instrument by more than the
greater of (i) 25 basis points or (ii) 5 percent of the annual yield of the
debt instrument prior to modification. The exercise of an option that changes
the timing of payments under a debt instrument creates a deemed exchange under
the Final Section 1001 Regulations (whether or not the annual yield is
altered) if there is a "material deferral" of scheduled payments. In this
connection, the Final Section 1001 Regulations generally provide that a
deferral of scheduled payments within a safe-harbor period which begins on the
original due date for the first deferred payment and extends for a period not
longer than the lesser of five years or 50 percent of the original term of the
debt instrument will not be considered to be a material deferral.
The Final Section 1001 Regulations apply to alterations in the terms of debt
instruments (including pursuant to the exercise of options such as those
contained in the terms of Extendible Notes, Renewable Notes and Reset Notes)
occurring on or after September 24, 1996, and may be relied upon with respect
to such alterations occurring after December 2, 1992 and before September 24,
1996.
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If the exercise of the option by the Company or a holder is not treated as
an exchange of Old Notes for New Notes, no gain or loss will be recognized by
a United States Holder as a result thereof. If the exercise of the option is
treated as a taxable exchange of Old Notes for New Notes, a United States
Holder will recognize gain or loss equal to the difference between the issue
price of the New Notes and such Holder's tax basis in the Old Notes. However,
if the exercise of the option is treated as a tax-free recapitalization, no
loss will be recognized by a United States Holder as a result thereof and
gain, if any, will be recognized to the extent of the fair market value of the
excess, if any, of the principal amount of securities received over the
principal amount of securities surrendered. In this regard, the meaning of the
term "principal amount" is not clear. Such term could be interpreted to mean
"issue price" with respect to securities that are received and "adjusted issue
price" with respect to securities that are surrendered. Legislation to that
effect has been introduced in the past. It is not possible to determine
whether such legislation will be reintroduced or enacted, and, if enacted,
whether it would apply to a recapitalization occurring prior to the date of
enactment.
The presence of such options may also affect the calculation of interest
income and OID, among other things. For purposes of determining the yield and
maturity of a Note, an issuer of a debt instrument having an unconditional
option or combination of options to require payments to be made on the debt
instrument under an alternative payment schedule or schedules (e.g., an option
to extend or an option to call a debt instrument at a fixed premium) will be
deemed to exercise or not exercise an option or combination of options in a
manner that minimizes the yield on the debt instrument. Conversely, a holder
having such option or combination of such options will be deemed to exercise
or not exercise such option or combination of options in a manner that
maximizes the yield on such debt instrument. If both the issuer and holder
have options, the foregoing rules are applied to the options in the order that
they may be exercised. Thus, the deemed exercise of one option may eliminate
other options that are later in time. If the exercise of such option or
options actually occurs or does not occur, contrary to what is deemed to occur
pursuant to the foregoing rules, then, solely for purposes of the accrual of
OID, the yield and maturity of the debt instrument are redetermined by
treating the debt instrument as reissued on the date of the occurrence or non-
occurrence of the exercise for an amount equal to its adjusted issue price on
that date. Depending on the terms of the options described above, the presence
of such options may instead cause the Notes to be taxable as Contingent Notes
under the 1996 OID Regulations. See "Original Issue Discount--Floating Rate
Notes that are not VRDIs".
THE FOREGOING DISCUSSION OF EXTENDIBLE NOTES, RENEWABLE NOTES AND RESET
NOTES IS PROVIDED FOR GENERAL INFORMATION ONLY. ADDITIONAL TAX CONSIDERATIONS
MAY ARISE FROM THE OWNERSHIP OF SUCH NOTES IN LIGHT OF THE PARTICULAR FEATURES
OR COMBINATION OF FEATURES OF SUCH NOTES AND, ACCORDINGLY, PERSONS CONSIDERING
THE PURCHASE OF SUCH NOTES ARE ADVISED AND EXPECTED TO CONSULT WITH THEIR OWN
LEGAL AND TAX ADVISERS REGARDING THE TAX CONSEQUENCES OF THE OWNERSHIP OF SUCH
NOTES.
INTEGRATION OF NOTES WITH OTHER FINANCIAL INSTRUMENTS
Any United States Holder of Notes that also acquires or has acquired any
financial instrument which, in combination with such Notes, would permit the
calculation of a single yield to maturity or could generally constitute a VRDI
of an equivalent term, may in certain circumstances treat such Notes and such
financial instrument as an integrated debt instrument for purposes of the
Code, with a single determination of issue price and the character and timing
of income, deductions, gains and losses. (For purposes of determining OID,
none of the payments under the integrated debt instrument will be treated as
qualified stated interest.) Moreover, the IRS may require in certain
circumstances that a United States Holder who owns Notes integrate such Notes
with a financial instrument held or acquired by such Holder or a related
party. United States Holders should consult their tax advisors as to the
possible integration of the Notes under the 1996 OID Regulations.
SALE OR EXCHANGE OF NOTES
A United States Holder generally will recognize gain or loss upon the sale
or exchange of a Note equal to the difference between the amount realized upon
such sale or exchange and the United States Holder's adjusted
S-30
<PAGE>
basis in the Note. Such adjusted basis in the Note generally will equal the
cost of the Note, increased by OID, acquisition discount or market discount
previously included in respect thereof, and reduced (but not below zero) by
any payments on the Note other than payments of qualified stated interest and
by any premium that the United States Holder has taken into account. To the
extent attributable to accrued but unpaid interest, the amount realized by the
United States Holder will be treated as a payment of interest. Generally, any
gain or loss will be capital gain or loss if the Note was held as a capital
asset, except as provided under "Market Discount," "Short-Term Notes" and
"Original Issue Discount--Floating Rate Notes that are not VRDIs", above.
Special rules apply in determining the tax basis of a Contingent Note and the
amount realized on the retirement of a Contingent Note. The excess of net
long-term capital gains over net short-term capital losses is taxed at a lower
rate than ordinary income for certain non-corporate taxpayers. The distinction
between capital gain or loss and ordinary income or loss is also relevant for
purposes of, among other things, limitations on the deductibility of capital
losses.
FOREIGN HOLDERS
As used herein, the term "Non-United States Holder" means a holder of a Note
that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or
more of the members of which is, for United States federal income tax
purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of Non-United States Holders. The 1996 Proposed
Regulations are generally proposed to be effective for payments after December
31, 1997, regardless of the issue date of the Note with respect to which such
payments are made, subject to certain transition rules. It cannot be predicted
at this time whether the 1996 Proposed Regulations will become effective as
proposed or what, if any, modifications may be made to them. The discussion
under this heading and under "Backup Withholding and Information Reporting,"
below, is not intended to include a complete discussion of the provisions of
the 1996 Proposed Regulations, and prospective investors are urged to consult
their tax advisors with respect to the effect the 1996 Proposed Regulations
may have if adopted.
In general, Non-United States Holders will not be subject to United States
federal withholding tax with respect to payments of principal and interest
(including OID) on Notes, provided that certain conditions are met. Under
current United States federal income tax law now in effect, and subject to the
discussion of backup withholding in the following section, payments of
principal and interest (including OID) with respect to a Note by the Company
or by any paying agent to any Non-United States Holder will not be subject to
United States federal withholding tax, provided, in the case of interest
(including OID), that (i) such Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (ii) such Holder is not for federal income tax
purposes a controlled foreign corporation related, directly or indirectly, to
the Company through stock ownership, (iii) such Holder is not a bank receiving
interest described in Section 881(c)(3)(A) of the Code and (iv) either (A) the
beneficial owner of the Note certifies, under penalties of perjury, to the
Company or paying agent, as the case may be, that such Holder is a Non-United
States Holder and provides such Holder's name and address, or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note, certifies, under penalties of
perjury, to the Company or paying agent, as the case may be, that such
certificate has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof. A certificate described in this paragraph is
effective only with respect to payments of interest (including OID) made to
the certifying Non-United States Holder after the issuance of the certificate
in the calendar year of its issuance and the two immediately succeeding
calendar years. Under temporary Treasury Regulations, the foregoing
certification may be provided by the beneficial owner of a Note on IRS Form W-
8.
S-31
<PAGE>
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations would not affect the documentation rules described above, but
would add "intermediary certification" options for certain qualifying
withholding agents. Under one such option, a withholding agent would be
allowed to rely on IRS Form W-8 furnished by a financial institution or other
intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution
or intermediary has entered into a withholding agreement with the IRS and thus
is a "qualified intermediary." Under another option, an authorized foreign
agent of the U.S. withholding agent would be permitted to act on behalf of the
U.S. withholding agent, provided certain conditions are met.
For purposes of the certification requirements, the 1996 Proposed
Regulations, if adopted, would treat the partners of a foreign partnership,
rather than the partnership, as the beneficial owners of payments on the Notes
(subject to certain exceptions). The status of an entity as a "partnership"
for this purpose (but not for purposes of determining the application of
treaties) would generally be determined under U.S. tax principles. Thus,
subject to certain exceptions, each partner, rather than the partnership,
would be required to provide the required certifications to qualify for the
withholding exemption described above.
The 1996 Proposed Regulations provide certain presumptions with respect to
withholding for holders not providing the required certifications to qualify
for the withholding exemption described above. In addition, the 1996 Proposed
Regulations would replace a number of current tax certification forms
(including IRS Form W-8 and IRS Form 4224, discussed below) with a single,
restated form (and, in certain circumstances, additional information) and
standardize the period of time for which withholding agents could rely on such
certifications.
Notwithstanding the foregoing, interest described in Section 871(h)(4) of
the Code will be subject to United States withholding tax at a 30% rate (or
such lower rate as may be provided by an applicable treaty). In general,
interest described in Section 871(h)(4) of the Code includes (subject to
certain exceptions) any interest the amount of which is determined by
reference to receipts, sales or other cash flow of the issuer or a related
person, any income or profits of the issuer or a related person, any change in
the value of any property of the issuer or a related person or any dividends,
partnership distribution or similar payments made by the issuer or a related
person. Interest described in Section 871(h)(4) of the Code may include other
types of contingent interest identified by the IRS in future Treasury
Regulations. If the Company issues Notes interest on which is described in
Section 871(h)(4) of the Code, the United States withholding tax consequences
of any such Notes will be described in the applicable Pricing Supplement.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest (including OID) on the Note is effectively
connected with the conduct of such trade or business, the Non-United States
Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest (including OID)
in the same manner as if it were a United States Holder. In lieu of the
certificate described above, such Holder will be required to provide a
properly executed IRS Form 4224 in order to claim an exemption from
withholding tax. In addition, if such Holder is a foreign corporation, it may
be subject to a branch profits tax equal to 30% (or such lower rate as may be
specified by an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose,
interest (including OID) on a Note will be included in the earnings and
profits of such Holder if such interest (including OID) is effectively
connected with the conduct by such Holder of a trade or business in the United
States.
Generally, any gain or income (other than that attributable to accrued
interest or OID) realized upon the sale, exchange, retirement or other
disposition of a Note will not be subject to United States federal income tax
unless (i) such gain or income is effectively connected with a trade or
business in the United States of the Non-United States Holder or (ii) in the
case of a Non-United States Holder who is a nonresident alien individual, the
Non-United States Holder is present in the United States for 183 days or more
in the taxable year of such sale, exchange, retirement or other disposition
and either (a) such individual has a "tax home" (as defined in Section
911(d)(3) of the Code) in the United States or (b) the gain is attributable to
an office or other fixed place of business maintained by such individual in
the United States.
S-32
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, information reporting
requirements apply to interest (including OID) and principal payments made to,
and to the proceeds of sales before maturity by, certain non-corporate United
States Holders. In addition, a 31% backup withholding tax will apply if the
non-corporate United States Holder (i) fails to furnish such holder's Taxpayer
Identification Number ("TIN") (which, for an individual, would be his or her
Social Security Number) to the payor in the manner required, (ii) furnishes an
incorrect TIN and the payor is so notified by the IRS, (iii) is notified by
the IRS that it has failed properly to report payments of interest and
dividends or (iv) in certain circumstances, fails to certify, under penalties
of perjury, that it has not been notified by the IRS that it is subject to
backup withholding for failure properly to report interest and dividend
payments. Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations (within the meaning of Section
7701(a) of the Code) and tax-exempt organizations.
In the case of a Non-United States Holder, under Treasury Regulations,
backup withholding and information reporting will not apply to payments of
principal and interest made by the Company or any paying agent thereof on a
Note with respect to which such holder has provided the required certification
under penalties of perjury that it is a Non-United States Holder or has
otherwise established an exemption, provided that (i) the Company or paying
agent, as the case may be, does not have actual knowledge that the payee is a
United States person and (ii) certain other conditions are satisfied.
In general, if principal or interest payments on a Note are collected
outside the United States by a foreign office of a custodian, nominee or other
agent acting on behalf of a beneficial owner of a Note, such custodian,
nominee or other agent will not be required to apply backup withholding to
such payments made to such beneficial owner and will not be subject to
information reporting. However, if such custodian, nominee or other agent is a
United States person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income is effectively
connected with its conduct of a United States trade or business for a
specified three-year period, such custodian, nominee or other agent may be
subject to certain information reporting (but not backup withholding)
requirements with respect to such payment unless such custodian, nominee or
other agent has in its records documentary evidence that the beneficial owner
is not a United States person and certain conditions are met or the beneficial
owner otherwise establishes an exemption.
Under Treasury Regulations, payments on the sale, exchange or retirement of
a Note effected by or through a foreign office of a broker will not be subject
to backup withholding. However, if such broker is a United States person, a
controlled foreign corporation for United States tax purposes, or a foreign
person 50% or more of whose gross income is effectively connected with its
conduct of a United States trade or business for a specified three-year
period, information reporting (but not backup withholding) will be required
unless such broker has in its records documentary evidence that the beneficial
owner is not a United States person and certain other conditions are met or
the beneficial owner otherwise establishes an exemption.
The 1996 Proposed Regulations would, if adopted, alter the foregoing rules
in certain respects. In particular, the 1996 Proposed Regulations would
provide certain presumptions under which Non-United States Holders may be
subject to information reporting and backup withholding in the absence of
required certification.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a holder under the backup withholding rules will be
allowed as a refund or a credit against such holder's United States federal
income tax, provided that the required information is furnished to the IRS.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding to their particular situations,
the availability of an exemption therefrom, and the procedure for obtaining
such an exemption, if available.
S-33
<PAGE>
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. The Company will pay each Agent a commission of
from .125% to .750% of the principal amount of each Note, depending upon its
Stated Maturity, sold through such Agent. The Distribution Agreement permits
the Company to offer Notes through agents other than the Agents. The name of
any such other agent and the terms of any such offering shall be set forth in
the applicable Pricing Supplement. The Company will have the sole right to
accept offers to purchase Notes and may reject any such offer in whole or in
part. Each Agent will have the right, in its discretion reasonably exercised,
to reject in whole or in part any offer to purchase Notes received by such
Agent. The Company also may sell Notes to any Agent, acting as principal, at a
discount to be agreed upon at the time of sale, for resale to one or more
investors or to one or more broker-dealers (acting as principal for purposes
of resale) at varying prices related to prevailing market prices at the time
of resale, as determined by such Agent, or, if so agreed, at a fixed public
offering price. Unless otherwise specified in the applicable Pricing
Supplement, if any Note is resold by an Agent to any broker-dealer at a
discount, such discount will not be in excess of the discount or commission
received by such Agent from the Company. In addition, unless otherwise
specified in the applicable Pricing Supplement, any Note purchased by an Agent
as principal will be purchased at 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note
having an identical Stated Maturity. After the initial public offering of the
Notes, the public offering price (in the case of Notes to be resold on a fixed
public offering price basis), any concession and the discount may be changed.
The Company also reserves the right to sell Notes directly to investors on its
own behalf in those jurisdictions where it is authorized to do so or as
otherwise provided in the applicable Pricing Supplement. In such
circumstances, the Company will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
In the case of sales made directly by the Company, no commissions will be
paid.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Act, or to contribute to payments each Agent may be required to make in
respect thereof. The Company has agreed to reimburse the Agents for certain of
the Agents' expenses, including, but not limited to, the fees and expenses of
counsel to the Agents.
The Company has been advised by each Agent that it may from time to time
purchase and sell Notes in the secondary market, but that it is not obligated
to do so. There can be no assurance that there will be a secondary market for
the Notes or liquidity in the secondary market if one develops. From time to
time, each Agent may make a market in the Notes.
The Agents and their affiliates may engage in transactions with and perform
services for the Company in the ordinary course of business.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Thomas A.
Rossi, Esq., Associate General Counsel of the Company, and Sidley & Austin,
Chicago, Illinois, and for the Agents by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York. The
opinions of Mr. Rossi, Sidley & Austin and Simpson Thacher & Bartlett will be
conditioned upon, and subject to certain assumptions regarding, future action
required to be taken by the Company and the Trustee in connection with the
issuance and sale of any particular Note, the specific terms of the Notes and
other matters which may affect the validity of the Notes but which cannot be
ascertained on the date of such opinions. Mr. Rossi is an officer and full-
time employee of the Company and the beneficial owner of Common Stock of the
Company.
S-34
<PAGE>
EXPERTS
The financial statements and schedule of the Company appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated by reference in the
accompanying Prospectus. Such report of Ernst & Young LLP, as to the years
ended December 31, 1993 and 1994, is based in part on the report of Deloitte &
Touche LLP, independent auditors. Such consolidated financial statements and
schedule are, and audited financial statements to be included in subsequently
filed documents will be, incorporated by reference in the accompanying
Prospectus in reliance upon the reports of such auditors pertaining to such
financial statements (to the extent covered by consents filed with the
Securities and Exchange Commission) given upon the authority of such firms as
experts in accounting and auditing. With respect to the unaudited consolidated
interim financial information for the three-month periods ended March 31, 1996
and 1995 and the three and six- month periods ended June 30, 1996 and 1995,
incorporated by reference herein, Ernst & Young LLP have reported that they
have applied limited procedures in accordance with professional standards for
a review of such information. However, their separate reports, included in the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
and June 30, 1996, and incorporated herein by reference, state that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted considering the limited nature of the review
procedures applied. The independent auditors are not subject to the liability
provision of Section 11 of the Act for their reports on the unaudited interim
financial information because those reports are not a "report" or a "part" of
the Registration Statement prepared or certified by the auditors within the
meaning of Sections 7 and 11 of the Act.
S-35
<PAGE>
PROSPECTUS
FIRST DATA CORPORATION
SECURITIES
First Data Corporation, a Delaware corporation (the "Company" or "FDC"), may
offer from time to time (i) unsecured debt securities ("Debt Securities")
consisting of debentures, notes and/or other unsecured evidences of
indebtedness in one or more series, (ii) shares of preferred stock, par value
$1.00 per share ("Preferred Stock"), in one or more series, or (iii) shares of
common stock, par value $.01 per share ("Common Stock"), (the Debt Securities,
Preferred Stock and Common Stock are collectively referred to as
"Securities"), or any combination of the foregoing, at an aggregate initial
offering price not to exceed $250,000,000 (or the equivalent thereof if Debt
Securities are denominated in one or more foreign currencies or foreign
currency units), at prices and on terms to be determined at or prior to the
time of sale.
Specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement (as
supplemented by any applicable pricing supplement relating thereto, a
"Prospectus Supplement"), together with the terms of the offering of the
Securities, the initial offering price and the net proceeds to the Company
from the sale thereof. The Prospectus Supplement will set forth, among other
matters, the following with respect to the particular Securities: (i) in the
case of Debt Securities, the specific designation, aggregate principal amount,
ranking as senior debt ("Senior Securities") or subordinated debt
("Subordinated Securities"), authorized denominations, maturity, rate or
method of calculation of interest and dates for payment thereof, any
conversion, redemption, prepayment or sinking fund provisions, and the
currency, currencies or currency units in which principal, premium, if any, or
interest, if any, is payable, (ii) in the case of Preferred Stock, the
designation, number of shares, liquidation preference, initial public offering
price, dividend rate (or method of calculation thereof), dates on which
dividends shall be payable and dates from which dividends shall accrue, any
redemption or sinking fund provisions, any conversion or exchange rights and
(iii) in the case of Common Stock, the number of shares of Common Stock and
the terms of the offering and sale thereof.
----------------
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 Company may sell Securities directly to purchasers or through agents
designated from time to time by the Company or to or through underwriters or a
group of underwriters which may be managed by one or more underwriters. If any
agents of the Company or any underwriters are involved in the sale of
Securities in respect of which this Prospectus is being delivered, the names
of such agents or underwriters and any applicable commission or discount will
be set forth in the applicable Prospectus Supplement. The net proceeds to the
Company from the sale of Securities will be the public offering price of such
Securities less such discount, in the case of an offering through an
underwriter, or the purchase price of such Securities less such commission, in
the case of an offering through an agent, and less, in each case, other
expenses of the Company associated with the issuance and distribution of such
Securities.
----------------
The date of this Prospectus is September 18, 1996.
<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 statements and other information with the
Securities and Exchange Commission (the "Commission"). The Company has filed
with the Commission a registration statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Securities offered hereby. This Prospectus does not
contain all information set forth in the Registration Statement and reference
is hereby made to the Registration Statement and the exhibits thereto for
further information with respect to the Company and the Securities offered
hereby. Such reports, proxy statements, Registration Statement and exhibits
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. 20549, and at its Northeast Regional Office located at 7
World Trade Center, Suite 1300, New York, New York 10048 and Midwest Regional
Office located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549. On May 6, 1996, the Company became
subject to the electronic filing requirements of the Commission. Accordingly,
pursuant to the rules and regulations of the Commission, certain documents,
including annual and quarterly reports and proxy statements, filed by the
Company with the Commission on and after May 6, 1996 have been or will be
filed electronically. The Commission maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
(http://www.sec.gov). Certain of the Company's securities are listed on the
New York Stock Exchange and such reports, proxy statements and other
information may also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report of the Company on Form 10-K for the year ended December
31, 1995, the Quarterly Reports of the Company on Form 10-Q for the periods
ended March 31, 1996 and June 30, 1996, the Current Report of the Company on
Form 8-K reporting events occurring on January 30, 1996, and the registration
statement of the Company on Form 8-A, dated March 24, 1992, are incorporated
by reference into this Prospectus. All documents filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Securities contemplated hereby shall be deemed to be incorporated by reference
into this Prospectus and to be made a part hereof from the respective dates of
filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained herein, in the
accompanying Prospectus Supplement or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
the Registration Statement or this Prospectus.
Copies of the above documents (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents)
may be obtained upon written or oral request without charge from the Company,
5660 New Northside Drive, Atlanta, Georgia 30328 (telephone number (770) 857-
7118), Attention: Investor Relations.
----------------
The following trademarks are mentioned in this Prospectus: "First Data(R)"
and "First Data Corporation(R)" are service marks of First Data Corporation.
The Company is incorporated in Delaware. Its executive offices are located
at 401 Hackensack Avenue, 7th Floor, Hackensack, New Jersey 07601 (telephone
number (201) 525-4702).
2
<PAGE>
THE COMPANY
The Company provides high-quality, high-volume information processing and
related services including: transaction card issuer services and merchant
processing services, payment instruments, investment processing services,
check acceptance and guaranty services, health care administration services,
receivables management services, in-store banking services, teleservices and
imaging, database and other information management services. The Company's
information processing facilities are comprised of integrated networks of
computer hardware, proprietary software and other telecommunications and
operations systems. The Company has data centers which are capable of
servicing a wide range of client groups, enabling it to process transactions
for thousands of clients in a rapid and cost effective manner and to take
advantage of economies-of-scale when adding new clients. The Company regularly
considers acquisition opportunities as well as other forms of business
combinations and divestitures. Historically, the Company has been involved in
numerous transactions of varying magnitudes, for consideration which has
included cash or securities (including Common Stock) or combinations thereof.
The Company continues to evaluate and pursue transaction opportunities as they
arise. No assurance can be given with respect to the timing, likelihood or the
financial or business effect of any possible transaction.
USE OF PROCEEDS
Except as set forth in the Prospectus Supplement for a specific offering of
Securities, the net proceeds from the sale of the Securities will be applied
by the Company for general corporate purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
the Company and its consolidated subsidiaries for the periods indicated. The
Company to date has not issued Preferred Stock; therefore, the ratios of
earnings to combined fixed charges and preferred stock dividends are the same
as the ratios of earnings to fixed charges set forth below.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------- -------------------------------
1996 1995 1995(A) 1994 1993 1992 1991
----- ----- ------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges.......... 6.17x 5.52x 2.03x 6.96x 6.59x 4.25x 4.09x
</TABLE>
The computation of the ratio of earnings to fixed charges is based on
applicable amounts of the Company and its consolidated subsidiaries.
"Earnings" consist of income before income taxes and fixed charges. "Fixed
charges" consist of interest on indebtedness, amortization of debt discount
and expense and an estimated amount of rental expense that is deemed to be
representative of the interest factor.
- --------
(a) Includes a merger, integration and impairment charge of $645.7 million
relating to the Company's October 27, 1995 merger with First Financial
Management Corporation. The pro forma ratio of earnings to fixed charges
without this charge would have been 6.00x.
DESCRIPTION OF DEBT SECURITIES
The Senior Securities are to be issued under an indenture dated as of March
26, 1993, as supplemented from time to time (the "Senior Indenture"), between
the Company and Norwest Bank Minnesota, National Association, as Trustee, and
the Subordinated Securities are to be issued under an indenture dated as of
April 1, 1996, as supplemented from time to time (the "Subordinated
Indenture"), between the Company and The Bank of New York, as Trustee. The
term "Trustee" as used herein shall refer to either Norwest Bank Minnesota,
National Association or The Bank of New York, as appropriate, for Senior
Securities or Subordinated Securities. The Senior Indenture and the
Subordinated Indenture (being referred to herein collectively as the
"Indentures"
3
<PAGE>
and individually as an "Indenture") are filed as exhibits to the Registration
Statement. The Indentures are subject to and governed by the Trust Indenture
Act of 1939, as amended. The statements made under this heading relating to
the Debt Securities and the Indentures are summaries of the provisions
thereof, and are subject to, and are qualified in their entirety by reference
to the Indentures, including the definitions of certain terms therein. Certain
capitalized terms used below but not defined herein have the meanings ascribed
to them in the Indentures. Unless otherwise noted, section references below
are to both Indentures.
GENERAL
The Debt Securities will be unsecured obligations of the Company. The
indebtedness represented by the Senior Securities will rank on a parity with
the Company's other unsecured and unsubordinated indebtedness. The
indebtedness represented by the Subordinated Securities will be subordinated
in right of payment to the prior payment in full of the Senior Indebtedness of
the Company as described under "Subordination" below. The Debt Securities may
be issued in one or more series. The particular terms of the Debt Securities
being offered (the "Offered Debt Securities"), any modifications of or
additions to the general terms of the Debt Securities and any applicable
Federal income tax considerations as described herein that may be applicable
in the case of the Offered Debt Securities will be described in the Prospectus
Supplement relating to the Offered Debt Securities. Accordingly, for a
description of the terms of the Offered Debt Securities, reference must be
made both to the Prospectus Supplement relating thereto and the description of
Debt Securities set forth in this Prospectus.
The Company primarily conducts its operations through its subsidiaries. The
rights of the Company and its creditors, including the Holders (as defined
below under "Certain Definitions") of the Debt Securities, to participate in
the assets of any subsidiary upon the latter's liquidation or reorganization
will be subject to the prior claims of the subsidiary's creditors except to
the extent that the Company may itself be a creditor with recognized claims
against the subsidiary.
Reference is made to the Prospectus Supplement for the terms of a series of
Debt Securities being offered, including: (1) the title of such Debt
Securities and whether they are Senior Securities or Subordinated Securities,
(2) the aggregate principal amount of such Debt Securities, (3) the percentage
of the principal amount at which such Debt Securities will be issued and, if
other than the principal amount thereof, the portion of the principal amount
thereof payable upon declaration of acceleration of the Maturity (as defined
below under "Certain Definitions") thereof, (4) the date or dates on which or
periods during which the Debt Securities of a series may be issued, and the
date or dates on which the principal of (and premium, if any, on) such Debt
Securities will be payable, (5) the rate or rates at which such Debt
Securities will bear interest, if any, or the method by which such rate or
rates shall be determined, the date or dates from which such interest, if any,
shall accrue, the interest payment dates on which such interest will be
payable and, in the case of Registered Securities (as defined below under
"Certain Definitions"), the regular record dates, if any, for the interest
payable on such interest payment dates, (6) the additional offices, if any,
where the principal of (and premium, if any) and interest on Debt Securities
of the series shall be payable, (7) the obligation, if any, of the Company to
redeem, repay or purchase Debt Securities of the series pursuant to any
sinking fund or analogous provisions or at the option of the Holder and the
period or periods within which, or the date or dates on which, the prices at
which and the terms and conditions upon which Debt Securities of the series
shall be redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation, (8) the period or periods within which, or the date or dates on
which, the price or prices at which, and the terms and conditions upon which
Debt Securities of the series may be redeemed, if any, in whole or in part, at
the option of the Company or otherwise, (9) if the coin or currency in which
the Debt Securities shall be issuable is U.S. dollars, the denominations of
such Debt Securities if other than denominations of $1,000 and any integral
multiple thereof, (10) whether the Debt Securities of the series are to be
issued as original issue discount securities ("Discount Securities") and the
amount of discount at which such Debt Securities may be issued and, if other
than the principal amount thereof, the portion of the principal amount of Debt
Securities of the series which shall be payable upon declaration of
acceleration of the Maturity thereof upon an Event of Default (as defined
below under "Events of Default"), (11) provisions, if any, for the defeasance
of
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Debt Securities of the series, (12) whether Debt Securities of the series are
to be issued as Registered Securities or Bearer Securities (as defined below
under "Certain Definitions") or both, and, if Bearer Securities are issued,
whether any interest coupons appertaining thereto ("Coupons") will be attached
thereto, (13) whether provisions for payment of additional amounts or tax
redemptions shall apply and, if such provisions shall apply, such provisions;
and, if Bearer Securities of the series are to be issued, the applicable
procedures and certificates relating to the exchange of temporary Global
Securities for definitive Bearer Securities, (14) if other than U.S. dollars,
the currency, currencies or currency units (the term "currency" as used herein
will include currency units) in which Debt Securities of the series shall be
denominated or in which payment of the principal of (and premium, if any) and
interest on the Debt Securities of the series may be made, (15) if the
principal of (and premium, if any) or interest on Debt Securities of the
series are to be payable, at the election of the Company or a Holder thereof,
in a currency other than that in which the Debt Securities are denominated or
payable without such election, the period or periods within which and the
terms and conditions upon which, such election may be made, (16) the date as
of which any Debt Securities of the series shall be dated, (17) if the amount
of payments of principal of (and premium, if any) or interest on the Debt
Securities of the series may be determined with reference to an index, the
manner in which such amounts shall be determined, (18) if the Debt Securities
of the series are denominated or payable in a foreign currency, any other
terms concerning the payment of principal of (and premium, if any) or any
interest on such Debt Securities, (19) any addition to, or modification or
deletion of, any Events of Default or covenants provided for with respect to
Debt Securities of the series, (20) whether the Debt Securities of the series
shall be issued in whole or in part in the form of one or more Global
Securities and, in such case, the depositary or any common depositary for such
Global Securities; and if the Debt Securities of the series are issuable only
as Registered Securities, the manner in which and the circumstances under
which Global Securities representing Debt Securities of the series may be
exchanged for Registered Securities in definitive form, (21) if the Debt
Securities are Subordinated Securities, whether they will be convertible into
shares of Common Stock and, if so, the terms and conditions, which may be in
addition to or in lieu of the provisions contained in the Subordinated
Indenture, upon which such Debt Securities will be so convertible, and (22)
any other terms not inconsistent with the applicable Indenture. (Section 3.01)
Each Indenture provides that the aggregate principal amount of Debt
Securities that may be issued thereunder is unlimited. The Debt Securities may
be issued in one or more series thereunder, in each case as authorized from
time to time by the Board of Directors of the Company, or any committee
thereof or any duly authorized officers. (Section 3.01)
In the event that Discount Securities are issued, the Federal income tax
consequences and other special considerations applicable to such Discount
Securities will be described in the Prospectus Supplement relating thereto.
The general provisions of the Indentures do not contain any provisions that
would limit the ability of the Company to incur indebtedness or that would
afford holders of Debt Securities protection in the event of a highly
leveraged or similar transaction involving the Company. However, the general
provisions of the Senior Indenture do provide that neither the Company nor any
Subsidiary (as defined below under "Certain Definitions") may subject certain
of its property or assets to any mortgage or other encumbrance unless the Debt
Securities issued under the Senior Indenture are secured equally and ratably
with or prior to such other indebtedness thereby secured. See "Certain
Covenants of Senior Securities" below. Reference is made to the Prospectus
Supplement related to the Offered Debt Securities for information with respect
to any deletions from, modifications of or additions to the Events of Default
or covenants of the Company that are described below, including any addition
of covenants or other provisions providing event risk or similar protection.
All of the Debt Securities of a series need not be issued at the same time,
and may vary as to interest rate, maturity and other provisions and unless
otherwise provided, a series may be reopened for issuance of additional Debt
Securities of such series. (Section 3.01)
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DENOMINATIONS, EXCHANGE, REGISTRATION AND TRANSFER
Unless otherwise specified in the Prospectus Supplement, the Debt Securities
of any series shall be issuable only as Registered Securities in denominations
of $1,000 and any integral multiple thereof and shall be payable only in U.S.
dollars. (Section 3.02) The Indentures also provide that Debt Securities of a
series may be issuable in global form. See "Book-Entry Debt Securities."
Unless otherwise indicated in the Prospectus Supplement, Bearer Securities
will have Coupons attached. (Section 2.01)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of like aggregate principal amount
and of like Stated Maturity (as defined below under "Certain Definitions") and
with like terms and conditions. If so provided in the Prospectus Supplement,
at the option of the Holder thereof, to the extent permitted by law, any
Bearer Security of any series which by its terms is registrable as to
principal and interest may be exchanged for a Registered Security of such
series of like aggregate principal amount and of a like Stated Maturity and
with like terms and conditions, upon surrender of such Bearer Security at the
corporate trust office of the applicable Trustee or at any other office or
agency of the Company designated for the purpose of making any such exchanges.
Subject to certain exceptions, any Bearer Security issued with Coupons
surrendered for exchange must be surrendered with all unmatured Coupons and
any matured Coupons in default attached thereto. (Section 3.05)
Notwithstanding the foregoing, the exchange of Bearer Securities for
Registered Securities will be subject to the provisions of United States
income tax laws and regulations applicable to Debt Securities in effect at the
time of such exchange. (Section 3.05)
Except as otherwise specified in the Prospectus Supplement, in no event may
Registered Securities, including Registered Securities received in exchange
for Bearer Securities, be exchanged for Bearer Securities. (Section 3.05)
Upon surrender for registration of transfer of any Registered Security of
any series at the office or agency of the Company maintained for such purpose,
the Company shall execute, and the applicable Trustee shall authenticate and
deliver, in the name of the designated transferee, one or more new Registered
Securities of the same series of like aggregate principal amount of such
denominations as are authorized for Registered Securities of such series and
of a like Stated Maturity and with like terms and conditions. No service
charge will be made for any transfer or exchange of Debt Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section 3.05)
The Company shall not be required (i) to register, transfer or exchange Debt
Securities of any series during a period beginning at the opening of business
15 days before the day of the transmission of a notice of redemption of Debt
Securities of such series selected for redemption and ending at the close of
business on the day of such transmission, or (ii) to register, transfer or
exchange any Debt Security so selected for redemption in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part.
(Section 3.05)
CERTAIN COVENANTS OF SENIOR SECURITIES
The Senior Indenture contains, among other things, the following covenants:
Limitation Upon Mortgages and Liens. Neither the Company nor a Subsidiary
may create or assume, except in favor of the Company or a Wholly-Owned
Subsidiary (as defined below under "Certain Definitions"), any mortgage,
pledge, lien or encumbrance upon any Principal Facility (as defined below
under "Certain Definitions") or any stock of any Subsidiary or indebtedness of
any Subsidiary to the Company or any other Subsidiary without equally and
ratably securing the Outstanding Senior Securities. This limitation will not
apply to certain permitted encumbrances as described in the Senior Indenture,
including (a) purchase money mortgages entered into within specified time
limits; (b) liens extending, renewing or refunding any liens permitted by
clause (a) of this covenant; (c) liens existing on acquired property; (d)
certain tax, materialmen's, mechanics' and judgment liens, certain liens
arising by operation of law and certain other similar liens; (e) liens in
connection with certain government contracts; (f) certain mortgages, pledges,
liens or encumbrances in favor of any state or
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local government or governmental agency in connection with certain tax-exempt
financings; (g) liens to secure the cost of construction or improvement of any
property entered into within specified time limits; and (h) mortgages,
pledges, liens and encumbrances not otherwise permitted if the sum of the
indebtedness thereby secured plus the aggregate sales price of property
involved in sale and lease back transactions referred to in clause (a) under
"--Limitation Upon Sale and Leaseback Transactions" below does not exceed the
greater of $50,000,000 or 10% of Consolidated Stockholders' Equity (as defined
below under "Certain Definitions"). (Section 12.07 of the Senior Indenture)
Limitation Upon Sale and Leaseback Transactions. The Company and any
Subsidiary will be prohibited from selling any Principal Facility owned on the
date of the Senior Indenture with the intention of taking back a lease
thereof, other than a temporary lease (a lease of not more than 36 months)
with the intent that the use of the property by the Company or such Subsidiary
will be discontinued at or before the expiration of such period, unless (a)
the sum of the sale price of property involved in sale and leaseback
transactions not otherwise permitted plus all indebtedness secured by
mortgages, pledges, liens and encumbrances referred to in clause (g) under "--
Limitation Upon Mortgages and Liens" above does not exceed the greater of
$50,000,000 or 10% of Consolidated Stockholders' Equity; or (b) the greater of
the net proceeds of such sale or the fair market value of such Principal
Facility (which may be conclusively determined by the Board of Directors of
the Company) are applied within 120 days to the optional retirement of
Outstanding Senior Securities or to the optional retirement of other Funded
Debt (as defined below under "Certain Definitions") of the Company ranking on
a parity with the Senior Securities. (Section 12.08 of the Senior Indenture)
In addition, unless otherwise specified in the applicable Prospectus
Supplement, the Senior Securities of each series will contain the following
covenant:
Limitation on Indebtedness of Restricted Subsidiaries. No Restricted
Subsidiary (as defined below under "Certain Definitions") will create, incur,
assume or guarantee any Indebtedness (as defined below under "Certain
Definitions") unless immediately thereafter the aggregate amount of all
Indebtedness of Restricted Subsidiaries (excluding Indebtedness owed to the
Company or a Restricted Subsidiary, including any renewal or replacement
thereof) and the discounted present value of all net rentals payable under
leases covered by the covenant entitled "Limitation Upon Sale and Leaseback
Transactions" (and not expressly excluded therefrom) would not exceed 15% of
Consolidated Stockholders' Equity; provided, however, that, solely, for
purposes of this covenant, Indebtedness shall not include indebtedness
incurred in connection with overdraft or similar facilities related to
settlement, clearing and related activities by a Restricted Subsidiary in the
ordinary course of business consistent with past practice to the extent that
such indebtedness remains outstanding for a period not to exceed 72 hours; and
provided, further, that any indebtedness of a Person (i) existing at the time
such Person becomes a Restricted Subsidiary or is merged with or into the
Company or a Restricted Subsidiary or other entity or (ii) assumed by the
Company or a Subsidiary in connection with the acquisition of all or a portion
of the business of such Person, shall not be deemed to be Indebtedness
created, incurred, assumed or guaranteed by a Restricted Subsidiary or
otherwise deemed to be Indebtedness of a Restricted Subsidiary for the
purposes of this covenant.
EVENTS OF DEFAULT
Under the Indentures, "Event of Default" with respect to the Debt Securities
of any series means any one of the following events (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law, pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body): (1) default in the payment of any interest upon any Debt Security or
any payment with respect to the Coupons, if any, of such series when it
becomes due and payable, and continuance of such default for a period of 30
days; (2) default in the payment of the principal of (and premium, if any, on)
any Debt Security of such series at its Maturity; (3) default in the deposit
of any sinking fund payment, when and as due by the terms of a Debt Security
of such series; (4) default in the performance, or breach of any covenant or
warranty in the applicable Indenture (other than a covenant or
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warranty a default in whose performance or whose breach is elsewhere in the
applicable Indenture specifically dealt with or which expressly has been
included in the applicable Indenture solely for the benefit of Debt Securities
of a series other than such series), and continuance of such default or breach
for a period of 60 days after there has been given to the Company by the
applicable Trustee or to the Company and the applicable Trustee by the Holders
of at least 25% in principal amount of the Outstanding Debt Securities of such
series, a written notice specifying such default or breach and requiring it to
be remedied; (5) in the case of the Senior Indenture, default (i) in the
payment of any scheduled principal of or interest on any Indebtedness of the
Company or any Subsidiary of the Company (other than Senior Securities of such
series), aggregating more than $10,000,000 in principal amount, when due after
giving effect to any applicable grace period or (ii) in the performance of any
other term or provision of any Indebtedness of the Company or any Subsidiary
of the Company (other than Senior Securities of such series) in excess of
$10,000,000 principal amount that results in such Indebtedness becoming or
being declared due and payable prior to the date on which it would otherwise
become due and payable, and such acceleration shall not have been rescinded or
annulled, or such Indebtedness shall not have been discharged, within a period
of 15 days after there has been given to the Company by the applicable Trustee
or to the Company and the applicable Trustee by the Holders of at least 25% in
principal amount of the Outstanding Senior Securities of such series, a
written notice specifying such default or defaults; (6) in the case of the
Subordinated Indenture, default (i) in the payment of any scheduled principal
of or interest on any Indebtedness of the Company or any Subsidiary of the
Company (other than Subordinated Securities of such series), aggregating more
than $10,000,000 in principal amount at the final stated maturity thereof, or
(ii) in the performance of any term or provision of any Indebtedness of the
Company or any Subsidiary of the Company (other than Subordinated Securities
of such series) in excess of $10,000,000 principal amount, including, without
limitation, the payment of any principal of or interest on such Indebtedness
when due after giving effect to any applicable grace period, that results in
such Indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable, and such acceleration
shall not have been rescinded or annulled, or such Indebtedness shall not have
been discharged, within a period of 15 days after there has been given to the
Company by the applicable Trustee or to the Company and the applicable Trustee
by the Holders of at least 25% in principal amount of the Outstanding
Subordinated Securities of such series, a written notice specifying such
default or defaults; (7) in the case of the Senior Indenture, the entry
against the Company or any Subsidiary of the Company of one or more judgments,
decrees or orders by a court from which no appeal may be or is taken for the
payment of money, either individually or in the aggregate, in excess of
$10,000,000, and the continuance of such judgment, decree or order unsatisfied
and in effect for any period of 45 consecutive days after the amount thereof
is due without a stay of execution; (8) certain events of bankruptcy,
insolvency or reorganization with respect to the Company; or (9) any other
Event of Default provided with respect to Debt Securities of that series
pursuant to the applicable Indenture. (Section 5.01)
Each Indenture requires the Company to file with the applicable Trustee,
annually, an officer's certificate as to the Company's compliance with all
conditions and covenants under the applicable Indenture. (Section 12.02) Each
Indenture provides that the applicable Trustee may withhold notice to the
Holders of a series of Debt Securities of any default (except payment defaults
on such Debt Securities) if it considers such withholding to be in the
interest of the Holders of such series of Debt Securities to do so. (Section
6.02)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, then in every case the applicable
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of such series may declare the principal amount
(or, if any Debt Securities of such series are Discount Securities, such
portion of the principal amount of such Discount Securities as may be
specified in the terms of such Discount Securities) of all the Debt Securities
of such series to be due and payable immediately, by a notice in writing to
the Company (and to the applicable Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. Upon payment of such amount in the currency in
which such Debt Securities are denominated (except as otherwise provided in
the applicable Indenture or the Prospectus Supplement), all obligations of the
Company in respect of the payment of principal of the Debt Securities of such
series shall terminate. (Section 5.02)
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Subject to the provisions of each Indenture relating to the duties of the
applicable Trustee, in case an Event of Default with respect to Debt
Securities of a particular series shall occur and be continuing, the
applicable Trustee shall be under no obligation to exercise any of its rights
or powers under such Indenture at the request, order or direction of any of
the Holders of Debt Securities of that series, unless such Holders shall have
offered to the applicable Trustee reasonable indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request. (Section 6.03) Subject to such provisions for the indemnification of
the applicable Trustee, the Holders of a majority in principal amount of the
Outstanding Debt Securities of such series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the applicable Trustee under such Indenture, or exercising any trust or
power conferred on the applicable Trustee with respect to the Debt Securities
of that series. (Section 5.12)
At any time after such a declaration of acceleration with respect to Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the applicable Trustee as
provided in the Indentures, the Holders of a majority in principal amount of
the Outstanding Debt Securities of such series, by written notice to the
Company and the applicable Trustee, may rescind and annul such declaration and
its consequences if (1) the Company has paid or deposited with the applicable
Trustee a sum in the currency in which such Debt Securities are denominated
(except as otherwise provided in the applicable Indenture or the Prospectus
Supplement) sufficient to pay (A) all overdue installments of interest on all
Debt Securities or all overdue payments with respect to any Coupons of such
series, (B) the principal of (and premium, if any, on) any Debt Securities of
such series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed therefor in
such Debt Securities; (C) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest on each Debt Security
of such series or upon overdue payments on any Coupons of such series at a
rate established for such series, and (D) all sums paid or advanced by the
applicable Trustee and the reasonable compensation, expenses, disbursements
and advances of the applicable Trustee, its agents and counsel; and (2) all
Events of Default with respect to Debt Securities of such series, other than
the nonpayment of the principal of Debt Securities of such series which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in the Indentures. No such rescission and waiver will
affect any subsequent default or impair any right consequent thereon. (Section
5.02)
MERGER OR CONSOLIDATION
Each Indenture provides that the Company may not consolidate with or merge
into any other corporation or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless (1) the corporation
formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety (the "successor
corporation") is a corporation organized and existing under the laws of the
United States or any State or the District of Columbia and expressly assumes
by a supplemental indenture the due and punctual payment of the principal of
(and premium, if any) and interest on all the Debt Securities and the
performance of every covenant of the Indentures on the part of the Company to
be performed or observed; (2) immediately after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default, shall have happened and be
continuing; (3) in the case of the Senior Indenture, if, as a result of any
such consolidation or merger or such conveyance, transfer or lease, properties
or assets of the Company would become subject to a mortgage, pledge, lien,
security interest or other encumbrance which would not otherwise be permitted
by the Senior Indenture without making effective provision whereby the
Outstanding Senior Securities and any other indebtedness of the Company then
entitled thereto will be equally and ratably secured with any and all
indebtedness and obligations secured thereby, the Company or such successor
corporation or Person, as the case may be, will take such steps as will be
necessary effectively to secure all Senior Securities equally and ratably with
(or prior to) all indebtedness secured thereby; and (4) the Company has
delivered to the applicable Trustee an officers' certificate and an opinion of
counsel each stating that such consolidation, merger, conveyance, transfer or
lease and such supplemental indenture comply with the applicable Indenture
provisions and that all conditions precedent therein provided for relating to
such transaction have been complied with. (Section 10.01)
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MODIFICATION OR WAIVER
Without the consent of any Holders, the Company and the applicable Trustee,
at any time and from time to time, may modify the applicable Indenture for any
of the following purposes: (1) to evidence the succession of another
corporation to the Company and the assumption by such successor of the
covenants of the Company in the Indentures and in the Debt Securities; (2) to
add to the covenants of the Company, for the benefit of the Holders of all or
any series of Debt Securities and the Coupons, if any, appertaining thereto
(and if such covenants are to be for the benefit of less than all series,
stating that such covenants are expressly being included solely for the
benefit of such series), or to surrender any right or power conferred in the
Indentures upon the Company; (3) to add any additional Events of Default (and
if such Events of Default are to be applicable to less than all series,
stating that such Events of Default are expressly being included solely to be
applicable to such series); (4) to add or change any of the provisions of the
applicable Indenture to such extent as shall be necessary to permit or
facilitate the issuance of Debt Securities of any series in bearer form,
registrable or not registrable, and with or without Coupons, to permit Bearer
Securities to be issued in exchange for Registered Securities, to permit
Bearer Securities to be issued in exchange for Bearer Securities of other
authorized denominations or to permit the issuance of Debt Securities of any
series in uncertificated form, provided that any such action shall not
adversely affect the interests of the Holders of Debt Securities of any series
or any related Coupons in any material respect; (5) to change or eliminate any
of the provisions of the applicable Indenture, provided that any such change
or elimination will become effective only when there is no Outstanding Debt
Security or Coupon of any series created prior to such modification which is
entitled to the benefit of such provision and as to which such modification
would apply; (6) to secure the Debt Securities; (7) to supplement any of the
provisions of the applicable Indenture to such extent as is necessary to
permit or facilitate the defeasance and discharge of any series of Debt
Securities, provided that any such action shall not adversely affect the
interests of the Holders of Debt Securities of such series or any other series
of Debt Securities or any related Coupons in any material respect; (8) to
establish the form or terms of Debt Securities and Coupons, if any, of any
series as permitted by the applicable Indenture; (9) to evidence and provide
for the acceptance of appointment thereunder by a successor Trustee with
respect to one or more series of Debt Securities and to add to or change any
of the provisions of the Indentures as is necessary to provide for or
facilitate the administration of the trusts thereunder by more than one
Trustee; or (10) to cure any ambiguity, to correct or supplement any provision
therein which may be defective or inconsistent with any other provision
therein, or to make any other provisions with respect to matters or questions
arising under the applicable Indenture which will not be inconsistent with any
provision of the applicable Indenture; provided such other provisions shall
not adversely affect the interests of the Holders of Outstanding Debt
Securities or Coupons, if any, of any series created prior to such
modification in any material respect. (Section 11.01)
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of each series affected by such
modification voting separately, the Company and the applicable Trustee may
modify the applicable Indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the applicable
Indenture or of modifying in any manner the rights of the Holders under the
applicable Indenture of such Debt Securities; provided, however, that no such
modification may, without the consent of the Holder of each Outstanding Debt
Security of each such series affected thereby, (1) change the Stated Maturity
of the principal of, or any installment of interest on, any Debt Security, or
reduce the principal amount thereof or the interest thereon or any premium
payable upon redemption thereof, or change the Stated Maturity of or reduce
the amount of any payment to be made with respect to any Coupon, or change the
currency or currencies in which the principal of (and premium, if any) or
interest on such Debt Security is denominated or payable, or reduce the amount
of the principal of a Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof, or adversely affect the
right of repayment or repurchase, if any, at the option of the Holder, or
reduce the amount of, or postpone the date fixed for, any payment under any
sinking fund or analogous provisions for any Debt Security, or impair the
right to institute suit for the enforcement of any payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or limit the obligation of the Company to maintain a paying
agency outside the United States for payments on Bearer Securities, or
adversely affect the right to convert any Subordinated Security into shares of
Common Stock as may be set forth in the Prospectus Supplement; (2) reduce the
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percentage in principal amount of the Outstanding Debt Securities of any
series, the consent of whose Holders is required for any supplemental
indenture, or the consent of whose Holders is required for any waiver of
compliance with certain provisions of the Indentures or certain defaults
thereunder and their consequences provided for in the Indentures; (3) modify
any of the provisions of the applicable Indenture relating to modifications
and waivers of defaults and covenants, except to increase any such percentage
or to provide that certain other provisions of the applicable Indenture cannot
be modified or waived without the consent of the Holder of each Outstanding
Debt Security of each series affected thereby; or (4) in the case of the
Subordinated Indenture, modify any of the provisions relating to the
subordination of the Subordinated Securities in a manner adverse to the
Holders thereof. (Section 11.02)
A modification which changes or eliminates any covenant or other provision
of the applicable Indenture with respect to one or more particular series of
Debt Securities and Coupons, if any, or which modifies the rights of the
Holders of Debt Securities and Coupons of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
the applicable Indenture of the Holders of Debt Securities and Coupons, if
any, of any other series. (Section 11.02)
In the case of the Subordinated Indenture, no modification may adversely
affect the rights of any holder of Senior Indebtedness under the subordination
provisions of the Subordinated Indenture without the consent of such holder.
(Section 11.08 of the Subordinated Indenture)
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
the Debt Securities of any such series waive any past default under the
applicable Indenture with respect to such series and its consequences, except
a default (1) in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series, or in the payment of any sinking
fund installment or analogous obligation with respect to the Debt Securities
of such series, or (2) in respect of a covenant or provision hereof which
pursuant to the second paragraph under "Modification or Waiver" cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security of such series affected. Upon any such waiver, such default will
cease to exist, and any Event of Default arising therefrom will be deemed to
have been cured, for every purpose of the Debt Securities of such series under
the applicable Indenture, but no such waiver will extend to any subsequent or
other default or impair any right consequent thereon. (Section 5.13)
The Company may omit in any particular instance to comply with certain
covenants in the Indentures (including, if so specified in the Prospectus
Supplement, any covenant not set forth in the Indentures but specified in the
Prospectus Supplement to be applicable to the Debt Securities of any series,
except as otherwise provided in the Prospectus Supplement, and in the case of
the Senior Indenture, the covenants relating to the limitation upon mortgages
and liens, the limitation upon sale and leaseback transactions and the
limitation on indebtedness of Restricted Subsidiaries) with respect to the
Debt Securities of any series if before the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Debt
Securities of such series either waive such compliance in such instance or
generally waive compliance with such provisions, but no such waiver may extend
to or affect any term, provision or condition except to the extent expressly
so waived, and, until such waiver becomes effective, the obligations of the
Company and the duties of the applicable Trustee in respect of any such
provision will remain in full force and effect. (Section 12.09)
SUBORDINATION
Upon any distribution of assets of the Company upon the dissolution, winding
up, liquidation or reorganization of the Company, the payment of the principal
of (and premium, if any) and interest on the Subordinated Securities will be
subordinated to the extent provided in the Subordinated Indenture in right of
payment to the prior payment in full of all Senior Indebtedness (as defined
below under "Certain Definitions"), including Senior Securities (Sections
16.01 and 16.02 of the Subordinated Indenture), but the obligation of the
Company to make payment of principal (and premium, if any) or interest on the
Subordinated Securities will not
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otherwise be affected. (Section 16.02 of the Subordinated Indenture) No
payment on account of principal (or premium, if any), sinking fund or interest
may be made on the Subordinated Securities at any time when there is a default
in the payment of principal, premium, if any, sinking fund or interest on
Senior Indebtedness. (Section 16.03 of the Subordinated Indenture) In the
event that, notwithstanding the foregoing, any payment by the Company
described in the foregoing sentence is received by the Trustee under the
Subordinated Indenture or the Holders of any of the Subordinated Securities
before all Senior Indebtedness is paid in full, such payment or distribution
shall be paid over to the holders of such Senior Indebtedness or on their
behalf for application to the payment of all such Senior Indebtedness
remaining unpaid until all such Senior Indebtedness shall have been paid in
full, after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness. Subject to payment in full of Senior
Indebtedness, the Holders of the Subordinated Securities will be subrogated to
the rights of the holders of the Senior Indebtedness to the extent of payments
made to the holders of such Senior Indebtedness out of the distributive share
of the Subordinated Securities. (Section 16.02 of the Subordinated Indenture)
By reason of such subordination, in the event of a distribution of assets
upon insolvency, certain general creditors of the Company may recover more,
ratably, than Holders of the Subordinated Securities. The Subordinated
Indenture provides that the subordination provisions thereof shall not apply
to money and securities held in trusts pursuant to the satisfaction and
discharge and the legal defeasance provisions of the Subordinated Indenture.
(Sections 4.02 and 15.02 of the Subordinated Indenture)
If this Prospectus is being delivered in connection with the offering of a
series of Subordinated Securities, the accompanying Prospectus Supplement or
the information incorporated by reference will set forth the approximate
amount of Senior Indebtedness outstanding as of a recent date.
DISCHARGE, LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The applicable Indenture with respect to the Debt Securities of any series
may be discharged, subject to certain terms and conditions, when (1) either
(A) all Debt Securities and the Coupons, if any, of such series have been
delivered to the applicable Trustee for cancellation, or (B) all Debt
Securities and the Coupons, if any, of such series not theretofore delivered
to the applicable Trustee for cancellation (i) have become due and payable,
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) are to be called for redemption within one year under arrangements
satisfactory to the applicable Trustee for the giving of notice by the
applicable Trustee, and the Company, in the case of (i), (ii) or (iii) of
subclause (B), has irrevocably deposited or caused to be deposited with the
applicable Trustee as trust funds in trust for such purpose an amount in the
currency in which such Debt Securities are denominated sufficient to pay and
discharge the entire indebtedness on such Debt Securities for principal (and
premium, if any) and interest to the date of such deposit (in the case of Debt
Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be; provided, however, in the event a
petition for relief under any applicable Federal or state bankruptcy,
insolvency or other similar law is filed with respect to the Company within 91
days after the deposit and the applicable Trustee is required to return the
deposited money to the Company, the obligations of the Company under the
applicable Indenture with respect to such Debt Securities will not be deemed
terminated or discharged; (2) the Company has paid or caused to be paid all
other sums payable under the applicable Indenture by the Company; (3) the
Company has delivered to the applicable Trustee an officers' certificate and
an opinion of counsel each stating that all conditions precedent therein
provided relating to the satisfaction and discharge of the applicable
Indenture with respect to such series have been complied with; and (4) the
Company has delivered to the applicable Trustee an opinion of counsel or a
ruling of the Internal Revenue Service to the effect that Holders of the Debt
Securities of the series will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit and discharge. (Section 4.01)
If provision is made for the defeasance of Debt Securities of a series, and
if the Debt Securities of such series are Registered Securities and
denominated and payable only in U.S. dollars, then the provisions of each
Indenture relating to defeasance shall be applicable except as otherwise
specified in the Prospectus Supplement
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for Debt Securities of such series. Defeasance provisions, if any, for Debt
Securities denominated in a foreign currency or currencies or for Bearer
Securities may be specified in the Prospectus Supplement. (Section 15.01)
At the Company's option, either (a) the Company shall be deemed to have been
Discharged (as defined below under "Certain Definitions") from its obligations
with respect to Debt Securities of any series ("legal defeasance option") or
(b) the Company shall cease to be under any obligation to comply with certain
provisions of the Indentures relating to mergers and consolidations of the
Company, and in the case of the Senior Indenture, the provisions relating to
limitations upon mortgages and liens, limitations upon sale and leaseback
transactions and the limitation on indebtedness of Restricted Subsidiaries,
with respect to Debt Securities of any series (and, if so specified, any other
obligation of the Company or restrictive covenant added for the benefit of
such series) ("covenant defeasance option") at any time after the applicable
conditions set forth below have been satisfied: (1) the Company shall have
deposited or caused to be deposited irrevocably with the applicable Trustee as
trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of the Debt Securities of such series
(i) money in an amount, or (ii) U.S. Government Obligations (as defined below
under "Certain Definitions") which through the payment of interest and
principal in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in an amount, or
(iii) a combination of (i) and (ii), sufficient, in the opinion (with respect
to (i) and (ii)) of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
applicable Trustee, to pay and discharge each installment of principal
(including any mandatory sinking fund payments) of and premium, if any, and
interest on, the Outstanding Debt Securities of such series on the dates such
installments of interest or principal and premium are due; (2) such deposit
shall not cause the applicable Trustee with respect to the Debt Securities of
that series to have a conflicting interest with respect to the Debt Securities
of any series; (3) such deposit will not result in a breach or violation of,
or constitute a default under, the applicable Indenture or any other agreement
or instrument to which the Company is a party or by which it is bound; (4) if
the Debt Securities of such series are then listed on any national securities
exchange, the Company shall have delivered to the applicable Trustee an
opinion of counsel or a letter or other document from such exchange to the
effect that the Company's exercise of its legal defeasance option or the
covenant defeasance option, as the case may be, would not cause such Debt
Securities to be delisted; (5) no Event of Default or event (including such
deposit) which, with notice or lapse of time or both, would become an Event of
Default with respect to the Debt Securities of such series shall have occurred
and be continuing on the date of such deposit and, with respect to the legal
defeasance option only, no Event of Default under the provisions of the
Indentures relating to certain events of bankruptcy or insolvency or event
which with the giving of notice or lapse of time, or both, would become an
Event of Default under such bankruptcy or insolvency provisions shall have
occurred and be continuing on the 91st day after such date; and (6) the
Company shall have delivered to the applicable Trustee an opinion of counsel
or a ruling of the Internal Revenue Service to the effect that the Holders of
the Debt Securities of such series will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit, defeasance or
Discharge. Notwithstanding the foregoing, if the Company exercises its
covenant defeasance option and an Event of Default under the provisions of the
Indentures relating to certain events of bankruptcy or insolvency or event
which with the giving of notice or lapse of time, or both, would become an
Event of Default under such bankruptcy or insolvency provisions shall have
occurred and be continuing on the 91st day after the date of such deposit, the
obligations of the Company referred to under the definition of covenant
defeasance option with respect to such Debt Securities shall be reinstated.
(Section 15.02)
PAYMENT AND PAYING AGENTS
If Debt Securities of a series are issuable only as Registered Securities,
the Company will maintain in each Place of Payment for such series an office
or agency where Debt Securities of that series may be presented or surrendered
for payment, where Debt Securities of that series may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Debt Securities of that series and the
applicable Indenture may be served. If Debt Securities of a series are
issuable as Bearer Securities, the Company will maintain (A) in the Borough of
Manhattan, The City and State of New York, or, in the case of the Senior
Indenture, in Minneapolis, Minnesota, an office or agency where any Registered
Securities of that series
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may be presented or surrendered for payment, where any Registered Securities
of that series may be surrendered for registration of transfer, where Debt
Securities of that series may be surrendered for exchange, where notices and
demands to or upon the Company in respect of the Debt Securities of that
series and the applicable Indenture may be served and where Bearer Securities
of that series and related Coupons may be presented or surrendered for payment
in the circumstances described in the following paragraph (and not otherwise),
(B) subject to any laws or regulations applicable thereto, in a Place of
Payment for that series which is located outside the United States, an office
or agency where Debt Securities of that series and related Coupons may be
presented and surrendered for payment (including payment of any additional
amounts payable on Debt Securities of that series, if so provided in such
series); provided, however, that if the Debt Securities of that series are
listed on The Stock Exchange of the United Kingdom and the Republic of
Ireland, the Luxembourg Stock Exchange or any other stock exchange located
outside the United States and such stock exchange shall so require, the
Company will maintain a Paying Agent for the Debt Securities of that series in
London, Luxembourg or any other required city located outside the United
States, as the case may be, so long as the Debt Securities of that series are
listed on such exchange, and (C) subject to any laws or regulations applicable
thereto, in a Place of Payment for that series located outside the United
States an office or agency where any Registered Securities of that series may
be surrendered for registration of transfer, where Debt Securities of that
series may be surrendered for exchange and where notices and demands to or
upon the Company in respect of the Debt Securities of that series and the
applicable Indenture may be served. The Company will give prompt written
notice to the applicable Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
applicable Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the corporate trust office of the
applicable Trustee (in the case of Registered Securities) and at the principal
London office of the applicable Trustee (in the case of Bearer Securities),
and the Company has appointed the applicable Trustee as its agent to receive
all presentations, surrenders, notices and demands. (Section 12.03)
No payment of principal, premium or interest on Bearer Securities shall be
made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, that,
if the Debt Securities of a series are denominated and payable in U.S.
dollars, payment of principal of and any premium and interest on Debt
Securities of such series, if so provided in the Prospectus Supplement shall
be made at the office of the Company's Paying Agent in the Borough of
Manhattan, the City and State of New York, or, in the case of the Senior
Indenture, in Minneapolis, Minnesota, if (but only if) payment in U.S. dollars
of the full amount of such principal, premium, interest or additional amounts,
as the case may be, at all offices or agencies outside the United States
maintained for the purpose by the Company in accordance with the applicable
Indenture is illegal or effectively precluded by exchange controls or other
similar restrictions. (Section 12.03)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in global
form that will be deposited with, or on behalf of, a depositary identified in
the Prospectus Supplement. Global securities may be issued in either
registered or bearer form and in either temporary or permanent form (each a
"Global Security"). Payments of principal of (premium, if any) and interest on
Debt Securities represented by a Global Security will be made by the Company
to the applicable Trustee and then by such Trustee to the depositary.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York ("DTC"),
that such Global Securities will be registered in the name of DTC's nominee,
and that the following provisions will apply to the depositary arrangements
with respect to any such Global Securities. Additional or differing terms of
the depositary arrangements will be described in the Prospectus Supplement
relating to a particular series of Debt Securities issued in the form of
Global Securities.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Debt Securities represented by such Global Security for
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all purposes under the applicable Indenture. Except as provided below, owners
of beneficial interests in a Global Security will not be entitled to have Debt
Securities represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Debt Securities in
certificated form and will not be considered the owners or Holders thereof
under the applicable Indenture. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in a Global Security.
If DTC is at any time unwilling or unable to continue as depositary or DTC
ceases to be a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act, and, in either case, a successor depositary
is not appointed by the Company within 90 days, the Company will issue
individual Debt Securities in certificated form in exchange for the Global
Securities. In addition, the Company may at any time, and in its sole
discretion, determine not to have one or more Debt Securities represented by
one or more Global Securities and, in such event, will issue individual Debt
Securities in certificated form in exchange for the relevant Global
Securities. If Registered Securities of any series shall have been issued in
the form of one or more Global Securities and if an Event of Default with
respect to the Debt Securities of such series shall have occurred and be
continuing, the Company will issue individual Debt Securities in certificated
form in exchange for the relevant Global Securities.
The following is based on information furnished by DTC:
DTC will act as securities depositary for Debt Securities represented by one
or more Global Securities. The Debt Securities will be issued as fully-
registered securities registered in the name of Cede & Co. (DTC's partnership
nominee). One fully-registered Global Security will be issued for each issue
of the Debt Securities, each in an aggregate principal amount of such issue,
and will be deposited with DTC. If, however, the aggregate principal amount of
any issue exceeds the maximum principal amount (if any) permitted by DTC, one
Global Security will be issued with respect to such maximum principal amount
and an additional Global Security will be issued with respect to any remaining
principal amount of such issue.
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
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
("Direct Participants") include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to DTC's system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Debt Securities represented by one or more Global Securities
under DTC's system must be made by or through Direct Participants, which will
receive a credit for the Global Securities on DTC's records. The ownership
interest of each beneficial owner of each Global Security ("Beneficial Owner")
is in turn recorded on the Direct and Indirect Participants' records. A
Beneficial Owner will not receive written confirmation from DTC of its
purchase, but such Beneficial Owner is expected to receive a written
confirmation providing details of such transaction, as well as periodic
statements of its holdings, from the Direct or Indirect Participant through
which such Beneficial Owner entered into such transaction. Transfers of
ownership interests in Global Securities are to be accomplished by entries
made on the books of Participants acting on behalf of the Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Global Securities, except in the event that use of the book-entry
system for one or more Global Securities is discontinued.
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To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Debt Securities; DTC records
reflect only the identity of the Direct Participants to whose accounts Global
Securities are credited, which may or may not be the Beneficial Owners. The
Participants remain responsible for keeping account of their holdings on
behalf of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants
and Indirect Participants to Beneficial Owners are governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Global
Securities. Under its usual procedures, DTC will mail an "Omnibus Proxy" to
the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Debt Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Global Securities will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payable
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on the
payable date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of
DTC, the Paying Agent or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of the Company or the Paying Agent,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Global Securities
purchased or tendered, through its Participant, to the Paying Agent, and shall
effect delivery of such Global Securities by causing the Direct Participant to
transfer the Participant's interest in the Global Securities, on DTC's
records, to the Paying Agent. The requirement for physical delivery of Global
Securities in connection with a demand for purchase or a mandatory purchase
will be deemed satisfied when the ownership rights in the Global Securities
are transferred by Direct Participants on DTC's records.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
None of the Company, any underwriter or agent, the applicable Trustee, any
applicable Paying Agent or the registrar of any Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
CONVERSION RIGHTS
The terms and conditions, if any, on which Subordinated Securities being
offered are convertible into Common Stock will be set forth in the Prospectus
Supplement relating thereto. Such terms will include the conversion price, the
conversion period, provisions as to whether conversion will be at the option
of the Holder or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Subordinated Securities.
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THE TRUSTEES UNDER THE INDENTURES
Norwest Bank Minnesota, National Association and The Bank of New York are
two of a number of banks with which the Company maintains ordinary banking
relationships and from which the Company has obtained credit facilities and
lines of credit.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms as used in the
applicable Indenture. Reference is made to the applicable Indenture for the
full definition of all such terms.
"Bearer Security" means any Debt Security (with or without Coupons), which
is payable to bearer and title to which passes by delivery only, but does not
include any coupons. (Section 1.01)
"Consolidated Stockholders' Equity," at any time, means the total
stockholders' equity of the Company and its consolidated subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principles, as of the end of the most recently completed fiscal
quarter of the Company for which financial information is then available.
(Section 1.01 of the Senior Indenture)
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Debt Securities of such series and to have satisfied all the obligations under
the applicable Indenture relating to the Debt Securities of such series,
except (i) the rights of Holders of Debt Securities of such series to receive,
from the trust fund described under "Discharge, Legal Defeasance and Covenant
Defeasance" above, payment of the principal of (and premium, if any) and
interest on such Debt Securities when such payments are due, (ii) the
Company's obligations with respect to the Debt Securities of such series under
the provisions relating to exchanges, transfers and replacement of Debt
Securities, the maintenance of an office or agency of the Company and the
defeasance trust fund and (iii) the rights, powers, trusts, duties and
immunities of the applicable Trustee thereunder. (Section 15.02)
"Funded Debt" means any indebtedness for money borrowed, created, issued,
incurred, assumed or guaranteed which would, in accordance with generally
accepted accounting practice, be classified as long-term debt, but in any
event including all indebtedness for money borrowed, whether secured or
unsecured, maturing more than one year or extendible at the option of the
obligor to a date more than one year, after the date of determination thereof
(excluding any amount thereof included in current liabilities). (Section 1.01
of the Senior Indenture)
"Holder" means, with respect to a Registered Security, the Person in whose
name a Registered Security is registered in the Security Register, and with
respect to a Bearer Security or a Coupon, the bearer thereof. (Section 1.01)
"Indebtedness" means (i) any liability of any Person (a) for borrowed money,
or (b) evidenced by a bond, note, debenture or similar instrument (including
purchase money obligations but excluding trade payables), or (c) for the
payment of money relating to a lease that is required to be classified as a
capitalized lease obligation in accordance with generally accepted accounting
principles, or (d) preferred or preference stock of a Subsidiary of the
Company held by Persons other than the Company or a Subsidiary of the Company;
(ii) any liability of others described in the preceding clause (i) that the
Person has guaranteed, that is recourse to such Person or that is otherwise
its legal liability; and (iii) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types
referred to in clauses (i) and (ii) above; provided, however, that
"Indebtedness" shall not include any liabilities of the kind included opposite
the caption "Liabilities relating to TRS financial instruments sold" on the
Company's audited consolidated balance sheet. (Section 1.01) These liabilities
are currently included opposite the caption "Settlement Obligations" on the
Company's consolidated balance sheet.
"Maturity" when used with respect to any Debt Security means the date on
which the principal of a Debt Security or an installment of principal becomes
due and payable as provided therein or in the Indenture, whether at the Stated
Maturity or by declaration of acceleration, call for redemption, repayment at
the option of the Holder or otherwise. (Section 1.01)
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"Outstanding" when used with respect to Debt Securities, means, as of the
date of determination, all Debt Securities theretofore authenticated and
delivered under the applicable Indenture, except as provided in such
Indenture. (Section 1.01)
"Principal Facility" means the real property, fixtures, machinery and
equipment relating to any facility owned by the Company or any Subsidiary,
except any facility that, in the opinion of the Board of Directors, is not of
material importance to the business conducted by the Company and its
Subsidiaries, taken as a whole. (Section 1.01 of the Senior Indenture)
"Registered Securities" means any Debt Security in the form established
pursuant to Section 2.01 of the applicable Indenture which is registered as to
principal and Interest in the Security Register. (Section 1.01)
"Restricted Subsidiary," at any time, means any Subsidiary which has
revenues, determined on a consolidated basis (with its Subsidiaries) in
accordance with generally accepted accounting principles, equal to or
exceeding 10 percent of the Company's consolidated revenues for the most
recently completed fiscal year of the Company for which financial information
is then available.
"Senior Indebtedness" means the principal of (and premium, if any) and
unpaid interest on (i) Indebtedness of the Company, whether outstanding on the
date of the Subordinated Indenture or thereafter created, incurred, assumed or
guaranteed, for money borrowed (other than the Indebtedness evidenced by the
Subordinated Securities), unless in the instrument creating or evidencing the
same or pursuant to which the same is outstanding it is provided that such
Indebtedness is not senior or prior in right of payment to the Subordinated
Securities or is pari passu or subordinate by its terms in right of payment to
the Subordinated Securities, and (ii) renewals, extensions and modifications
of any such Indebtedness.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation, irrespective of whether or not
at the time stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency, is
at the time, directly or indirectly, owned or controlled by the Company or by
one or more Subsidiaries thereof, or by the Company and one or more
Subsidiaries. (Section 1.01)
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States for the payment of which its full faith and
credit is pledged, or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States the payment of
which is unconditionally guaranteed as a full faith and credit obligation by
the United States, which, in either case under clauses (i) or (ii), are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian
with respect to any such U.S. Government Obligation or a specific payment of
interest on or principal of any such U.S. Government Obligation held by such
custodian for the account of the holder of a depository receipt; provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of interest on or principal of the U.S.
Government Obligation evidenced by such depository receipt. (Section 15.02)
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the outstanding
voting stock (other than directors' qualifying shares) is at the time,
directly or indirectly, owned by the Company, or by one or more Wholly-Owned
Subsidiaries of the Company or by the Company and one or more Wholly-Owned
Subsidiaries. (Section 1.01)
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DESCRIPTION OF CAPITAL STOCK
As of the date of this Prospectus, the Company's authorized capital stock
consists of 600,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock. As of July 1, 1996, approximately 223,909,790 shares of
Common Stock were issued and outstanding. No shares of Preferred Stock are
currently outstanding. The following summary description of the capital stock
of the Company does not purport to be complete and is qualified in its
entirety by reference to the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation") , and to Delaware corporate law. See
"Available Information."
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights
of outstanding Preferred Stock and certain dividend limitations contained in
the Company's outstanding senior promissory notes. Upon the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company available after the
payment of all debts and other liabilities and subject to the prior rights of
any outstanding Preferred Stock. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. All outstanding shares of
Common Stock are duly authorized, validly issued, fully paid and
nonassessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
PREFERRED STOCK
Under the Certificate of Incorporation, the Company may issue, in one or
more classes or series, up to 10,000,000 shares of its Preferred Stock, with
such powers, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions as shall be
designated in resolutions adopted by the Board of Directors or a duly
authorized committee thereof. The Preferred Stock will, when issued, be fully
paid and nonassessable and holders thereof will have no preemptive rights.
The specific terms of any Preferred Stock being offered (the "Offered
Preferred Stock") will be described in the Prospectus Supplement relating to
such Offered Preferred Stock. The following summaries of certain provisions of
the Preferred Stock are subject to, and are qualified in their entirety by
reference to, the Certificate of Incorporation and the Certificate of
Designation relating to the particular class or series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the Offered
Preferred Stock offered thereby for specific terms, including:
(1) The designation of such Preferred Stock.
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the initial offering price of such Preferred
Stock.
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock.
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable.
(5) The procedures for any auction and remarketing, if any, of such
Preferred Stock.
(6) The provision of a sinking fund, if any, for such Preferred Stock.
(7) The provision for redemption, if applicable, of such Preferred Stock.
(8) Any listing of such Preferred Stock on any securities exchange.
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(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into or exchangeable for Common Stock, and
whether at the option of the holder thereof or the Company.
(10) Whether such Preferred Stock will rank senior or junior to or on a
parity with any other class or series of Preferred Stock.
(11) The voting rights, if any, of such Preferred Stock.
(12) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
(13) A discussion of Federal income tax considerations applicable to such
Preferred Stock.
Subject to the Certificate of Incorporation and to any limitations contained
in then outstanding Preferred Stock, the Company may issue additional classes
or series of Preferred Stock, at any time or from time to time, with such
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, as the Board
of Directors or any duly authorized committee thereof shall determine, all
without further action of the stockholders, including holders of then
outstanding Preferred Stock, of the Company.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
Certain provisions of the Certificate of Incorporation and By-laws of the
Company summarized below may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider in its best interest, including those attempts that might
result in a premium over the market price for the shares held by stockholders.
The Certificate of Incorporation or By-laws provide (i) that there shall be
three classes of directors serving staggered terms, (ii) that directors can be
removed from office only for cause and only by the affirmative vote of the
holders of a majority of the then outstanding shares of common stock entitled
to vote generally in an election of directors, (iii) that vacancies on the
Board of Directors may be filled only by the remaining directors and not by
the stockholders, (iv) that the Board of Directors may adopt, amend or repeal
the By-laws of the Company, and (v) for an advance notice procedure for the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors as well as for other stockholder
proposals to be considered at annual meetings of stockholders. In general,
notice of intent to nominate a director or raise business at such meetings
must be received by the Company not less than 60 nor more than 90 days prior
to the anniversary of the previous year's annual meeting, and must contain
certain information concerning the person to be nominated or the matters to be
brought before the meeting and concerning the stockholder submitting the
proposal. The Certificate of Incorporation also provides that any action
required or permitted to be taken by the stockholders of the Company may be
effected only at an annual or special meeting of stockholders, and stockholder
action by written consent in lieu of a meeting is prohibited. The affirmative
vote of the holders of more than 80 percent of the voting power of the Voting
Stock is required to alter, amend or repeal, or adopt any provision
inconsistent with, this provision. In addition, special meetings of
stockholders may be called only by the Chairman of the Board, Chairman of the
Executive Committee, the President or the Secretary of the Company, or any
such officer at the request in writing of the Board of Directors.
The foregoing summary is qualified in its entirety by reference to the
provisions of the Certificate of Incorporation and By-laws.
STATUTORY PROVISIONS
The Company has elected, pursuant to a provision of its Certificate of
Incorporation, not to be governed by Section 203 of the Delaware General
Corporation Law ("DGCL"). Section 203 of the DGCL prohibits certain
transactions between a Delaware corporation and an "interested stockholder,"
which is defined as a person who, together with any affiliates and/or
associates of such person, beneficially owns, directly or indirectly, 15
percent or more of the outstanding voting shares of a Delaware corporation.
This provision prohibits certain business
20
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combinations (defined broadly to include mergers, consolidations, sales or
other dispositions of assets having an aggregate value in excess of 10 percent
of the consolidated assets of the corporation, and certain transactions that
would increase the interested stockholder's proportionate share ownership in
the corporation) between an interested stockholder and a corporation for a
period of three years after the date the interested stockholder acquired its
stock, unless (i) the business combination is approved by the corporation's
board of directors prior to the date the interested stockholder acquired
shares; (ii) the interested stockholder acquired at least 85 percent of the
voting stock of the corporation in the transaction in which it became an
interested stockholder; or (iii) the business combination is approved by a
majority of the board of directors and by the affirmative vote of two-thirds
of the votes entitled to be cast by disinterested stockholders at an annual or
special meeting. A Delaware corporation, pursuant to a provision in its
certificate of incorporation or by-laws, may choose not to be governed by
Section 203 of the DGCL in which case such election becomes effective one year
after its adoption.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Norwest Bank
Minnesota, National Association.
PLAN OF DISTRIBUTION
The Company may sell the Securities in and/or outside the United States: (i)
through underwriters or dealers; (ii) directly to a limited number of
purchasers or to a single purchaser; or (iii) through agents. The Prospectus
Supplement with respect to the Securities being offered (the "Offered
Securities") will set forth the terms of the offering of the Offered
Securities, including the name or names of any underwriters or agents, the
purchase price of the Offered Securities and the proceeds to the Company from
such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Securities, or, if an underwriting
syndicate is used, the managing underwriter or underwriters, will be set forth
on the cover of the applicable Prospectus Supplement. Unless otherwise set
forth in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Offered Securities will be subject to conditions
precedent and the underwriters will be obligated to purchase all of the
Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Securities in respect of
which this Prospectus is delivered, and if so specified in the applicable
Prospectus Supplement, the Company will sell such Offered Securities to the
dealers as principals. The dealers may then resell such Offered Securities to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the applicable Prospectus Supplement.
The Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer
or sale of the Offered Securities in respect to which this Prospectus
is delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the underwriters, dealers or
agents may be required to make in respect thereof. Underwriters, dealers and
agents may be customers of, may engage in transactions with, or perform
services for, the Company in the ordinary course of business.
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LEGAL MATTERS
The legality of the Securities offered hereby will be passed upon for the
Company by Thomas A. Rossi, Esq., Associate General Counsel of the Company.
Mr. Rossi is the beneficial owner of Common Stock of the Company.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report on Form 10-K for the year ended December 31,
1995 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such report of Ernst & Young LLP, as to the years ended December
31, 1993 and 1994, is based in part on the report of Deloitte & Touche LLP,
independent auditors. Such consolidated financial statements and schedule are,
and audited financial statements to be included in subsequently filed
documents will be, incorporated herein by reference in reliance upon the
reports of such auditors pertaining to such financial statements (to the
extent covered by consents filed with the Commission) given upon the authority
of such firms as experts in accounting and auditing. With respect to the
unaudited consolidated interim financial information for the three-month
periods ended March 31, 1996 and 1995 and the three and six-month periods
ended June 30, 1996 and 1995, incorporated by reference herein, Ernst & Young
LLP have reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate reports, included in the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1996 and June 30, 1996, and incorporated herein
by reference, state that they did not audit and they do not express an opinion
on that interim financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted considering the limited
nature of the review procedures applied. The independent auditors are not
subject to the liability provision of Section 11 of the Securities Act for
their reports on the unaudited interim financial information because those
reports are not a "report" or a "part" of the Registration Statement prepared
or certified by the auditors within the meaning of Sections 7 and 11 of the
Securities Act.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT (INCLUDING ANY ACCOMPANYING PRICING SUPPLEMENT) OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT. THIS
PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) AND THE PROSPEC-
TUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COM-
PANY SINCE THE DATE HEREOF OR THEREOF OR THAT INFORMATION HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SINCE ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Description of Notes....................................................... S-3
United States Federal Income Tax Consequences.............................. S-21
Supplemental Plan of Distribution.......................................... S-34
Legal Matters.............................................................. S-34
Experts.................................................................... S-35
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Ratios of Earnings to Fixed Charges........................................ 3
Description of Debt Securities............................................. 3
Description of Capital Stock............................................... 19
Plan of Distribution....................................................... 21
Legal Matters.............................................................. 22
Experts.................................................................... 22
</TABLE>
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$250,000,000
FIRST DATA CORPORATION
MEDIUM-TERM NOTES, SERIES C
LOGO -----------------
PROSPECTUS SUPPLEMENT
September 18, 1996
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LEHMAN BROTHERS
SALOMON BROTHERS INC
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