<PAGE>
RULE NO. 424(b)(3)
REGISTRATION NOS. 33-89748
333-7947
PROSPECTUS SUPPLEMENT
(To Prospectus Dated September 6, 1996)
U.S. $6,600,000,000
DEAN WITTER, DISCOVER & CO.
MEDIUM-TERM NOTES SERIES I
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
---------------
Dean Witter, Discover & Co. (the "Company") may offer from time to time up to
U.S. $6,600,000,000 aggregate initial offering price or its equivalent in
foreign currencies (based on the applicable exchange rate at the time of
offering), of its Medium-Term Notes Series I (the "Notes"). Each Note
will mature from 9 months to 30 years from the date of issue and may
be subject to redemption at the option of the Company or repayment
at the option of the Holder thereof, in each case, in whole or in
part, prior to maturity, as set forth therein and specified in a
pricing supplement to this Prospectus Supplement (a "Pricing
Supplement"). The Notes may be denominated in U.S. dollars or
in such foreign currencies as may be designated by the
Company at the time of offering. The specific currencies,
interest rates (including whether fixed or floating),
maturity dates and other variable terms of the Notes
will be set forth in Pricing Supplements.
---------------
Purchasers of the Notes are required to pay for the Notes in the currency
specified in the Pricing Supplement (the "Specified Currency") by
delivery of the requisite amount of the Specified Currency to the
Agent, unless other arrangements have been made. Principal of
and interest on the Notes are generally payable by the
Company in the Specified Currency.See "Currency
Exchange and Other Information", "Description of Notes"
and "Foreign Currency Risks."
---------------
Except as described herein, interest on Fixed Rate Notes will be payable
on April 1 and October 1 of each year (or on either of such dates or
on such other dates as specified therein and in the applicable
Pricing Supplement) and at maturity. Interest on Floating
Rate Notes will be payable on the dates specified
therein and in the applicable Pricing Supplement.
---------------
The Notes will be issued only in a minimum denomination of U.S. $1,000 or the
equivalent thereof in the Specified Currency and (except as otherwise
specified in the applicable Pricing Supplement) will be represented by one
or more global securities (each, a "Global Note") registered in the name
of a nominee of The Depository Trust Company ("DTC") or another
depositary (DTC or such other depositary, if any, described in an
applicable Pricing Supplement is herein referred to as the
"Depositary"). Unless otherwise specified in the applicable Pricing
Supplement, an interest in a Global Note will be shown on, and
transfers thereof will be effected only through, records
maintained by the Depositary and its participants. Notes will
be issued in fully registered, certificated form to owners of
beneficial interest therein or their nominees, rather than
to the Depositary's nominee, only as specified in the
applicable Pricing Supplement, or under the limited
circumstances described herein. See "Description of
Notes--General" and "Description of Notes--Book-Entry
Notes."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
THE PROSPECTUS OR ANY OTHER SUPPLEMENT THERETO. ANY REPRESENTA-
TION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
PRICE TO PUBLIC(1) AGENT'S COMMISSIONS(2) PROCEEDS TO COMPANY(1)(2)(3)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
PER NOTE 100% .125%-.750% 99.875%-99.250%
TOTAL(4) $6,600,000,000 $8,250,000-$49,500,000 $6,591,750,000-$6,550,500,000
</TABLE>
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- -------------------------------------------------------------------------------
(1) Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be issued at 100% of their principal amount.
(2) The Company will pay to Dean Witter Reynolds Inc. (the "Agent") a
commission ranging from .125% to .750%, depending on maturity, of the
principal amount of any Note sold through the Agent. The Agent, acting as
principal, may also purchase Notes at a discount for resale to investors
or other purchasers at varying prices related to prevailing market prices
at the time of resale or, if so agreed, at a fixed public offering price.
Unless otherwise indicated in the applicable Pricing Supplement, any Note
sold to the Agent as principal will be purchased by the Agent at a price
equal to 100% of the principal amount thereof less a percentage equal to
the commission applicable to any agency sale of a Note of identical
maturity. No commission will be payable on any Note sold directly by the
Company. The Company has agreed to indemnify the Agent against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting estimated expenses of $2,250,000 payable by the Company,
including $100,000 of estimated expenses of the Agent to be reimbursed by
the Company.
(4) Or the equivalent thereof in other currencies, including composite
currencies.
This Prospectus Supplement and the accompanying Prospectus may be used by
the Agent in connection with offers and sales of the Notes in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale or otherwise. The Agent may act as principal or agent in such
transactions.
---------------
DEAN WITTER REYNOLDS INC.
September 6, 1996
<PAGE>
The Notes are being offered on a continuous basis by the Company through the
Agent. The Agent has agreed to use its reasonable efforts to solicit offers
to purchase Notes from time to time on behalf of the Company. Notes may be
sold to the Agent, as principal, for resale to one or more investors and
other purchasers in negotiated transactions, at fixed public offering
prices or at varying prices determined at the time of resale. The Agent
may act as agent for sales of Notes, or may offer the Notes it has
purchased as principal, to or through dealers, and such dealers may
receive compensation from the Agent. The Company reserves the right to
sell the Notes directly on its own behalf. Unless otherwise specified
in an applicable Pricing Supplement, the Notes will not be listed on
any securities exchange and there can be no assurance that the
Notes offered by this Prospectus Supplement 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 offering
contemplated hereby without notice. No termination date for the
offering of the Notes has been established. The Company or the
Agent may reject any order. See "Plan of Distribution."
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained or
incorporated by reference in this Prospectus Supplement, any accompanying
Pricing Supplement and the accompanying Prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized. Neither this Prospectus Supplement, any accompanying Pricing
Supplement nor the accompanying Prospectus constitutes an offer to sell
or the solicitation of an offer to buy any securities other than the
registered securities to which it relates or an offer to sell or the
solicitation of an offer to buy such securities in any jurisdiction
to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this
Prospectus Supplement, any accompanying Pricing Supplement or
the accompanying Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there
has been no change in the affairs of the Company since the
date hereof or that the information is correct as of any
time subsequent to its date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Currency Exchange and Other Information.................................... S- 3
Prior Sales................................................................ S- 3
Description of Notes....................................................... S- 3
Foreign Currency Risks..................................................... S-18
Certain United States Federal Income Tax Considerations.................... S-20
Plan of Distribution....................................................... S-28
PROSPECTUS
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
The Company................................................................ 4
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 4
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 11
Legal Opinions............................................................. 12
Experts.................................................................... 12
</TABLE>
S-2
<PAGE>
CURRENCY EXCHANGE AND OTHER INFORMATION
The Notes shall be denominated in the Specified Currency and, unless
otherwise specified in the applicable Pricing Supplement, purchasers are
required to pay for such Notes in the Specified Currency. Currently, there are
limited facilities in the United States for conversion of U.S. dollars into
foreign currencies, and vice versa, and banks generally do not offer non-U.S.
dollar checking or savings account facilities in the United States. However, if
requested by a prospective purchaser of Notes denominated in a Specified
Currency other than U.S. dollars, the Agent will arrange for the conversion of
U.S. dollars into such Specified Currency to enable the purchaser to pay for
such Notes. Such requests must be made on or before the fifth Business Day (as
defined below) preceding the date of delivery of the Notes, or by such other
date as determined by the Agent. Each such conversion will be made by the Agent
on such terms and subject to such conditions, limitations and charges as the
Agent may from time to time establish in accordance with its regular foreign
exchange practice. All costs of exchange will be borne by the relevant
purchaser of the Notes. Principal and interest payments in respect of the Notes
will be made in the Specified Currency unless such Specified Currency is
unavailable due to circumstances beyond the control of the Company. See
"Foreign Currency Risks" and "Description of Notes."
References herein to "U.S. dollars" or "U.S.$" or "$" are to the currency of
the United States of America.
PRIOR SALES
The Company commenced offering the Notes on November 19, 1993. As of
September 6, 1996, the Company has sold $3,255,275,000 principal amount of
Notes.
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 Notes and the Indenture, dated as of
February 24, 1993 (the "Indenture"), between the Company and The First National
Bank of Chicago, as trustee (the "Trustee"), set forth in the accompanying
Prospectus (in which the Notes are referred to as "Debt Securities") under the
heading "Description of Debt Securities," to which description reference is
hereby made. Capitalized terms set forth below that are not otherwise defined
herein have the meanings specified in the Indenture and/or the Notes. Except as
otherwise specified in the applicable Pricing Supplement, the Notes will have
the terms described below.
GENERAL
The authorized denominations of Notes denominated in U.S. dollars will be
U.S. $1,000 and any larger amount in integral multiples of $1,000. Unless
otherwise specified in the applicable Pricing Supplement, the authorized
denominations of Notes denominated in a Specified Currency other than U.S.
dollars will be the equivalent, as determined by the Market Exchange Rate (as
defined below) on the Business Day immediately preceding the date on which the
Company accepts an offer to purchase such Notes, of U.S. $1,000, or such other
minimum denomination as may be required from time to time by any relevant
central bank or equivalent governmental body, however designated, or by any
laws or regulations applicable to the Notes or to such Specified Currency and
any larger amount in integral multiples of such minimum denomination. The
Market Exchange Rate on a given date for a given Specified Currency is the noon
buying rate in New York City for cable transfers for such Specified Currency as
certified for customs purposes by the Federal Reserve Bank of New York on such
date; provided, however, that in the case of European Currency Units, Market
Exchange Rate means, unless otherwise agreed by the Company and the Agent, the
rate of exchange determined by the Council of European Communities (or any
successor thereto) as published on such date or the most recently available
date in the Official Journal of the European Communities (or any successor
publication).
S-3
<PAGE>
The Notes mature from nine months to thirty years from the date of issue, as
selected by the purchaser and agreed to by the Company, except as described
below with respect to Notes ("Short-Term Notes") issued in connection with an
election by a Holder to terminate the automatic extension of maturity of
certain Notes ("Renewable Notes"). The Notes will constitute a single series of
Debt Securities under the Indenture. An unlimited aggregate principal amount of
Debt Securities may be issued under the Indenture. The aggregate principal
amount of Notes that may be offered hereunder will be reduced by the aggregate
initial public offering price of any other Debt Securities issued after the
date hereof by the Company pursuant to the accompanying Prospectus.
The Notes are issuable in registered form only, without coupons, as book-
entry Notes (each, a "Book-Entry Note") initially represented by one or more
Global Notes registered in the name of a nominee of the Depositary, except that
Notes in fully registered, certificated form ("Certificated Notes") will be
issued to, and registered in the name of, owners of beneficial interests
therein or their nominees if so specified in the applicable Pricing Supplement
or under the limited circumstances described under "Book-Entry Notes." All
Book-Entry Notes having the same terms, including, but not limited to, Interest
Payment Dates (as defined below), interest rate, Maturity Date (as defined
below), and redemption provisions may be represented by a single Global Note. A
beneficial interest in a Global Note will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary and its
participants. Payments of principal and interest on Book-Entry Notes will be
made by the Trustee to the Depositary. See "Book-Entry Notes."
Except with respect to Renewable Notes, for which both an Initial Maturity
Date and a Final Maturity Date (as such terms are defined below) will be
specified in the applicable Pricing Supplement, and unless previously redeemed
or repaid, a Note will mature on the date that is specified on the face thereof
and in the applicable Pricing Supplement (the "Maturity Date").
Unless otherwise specified in the applicable Pricing Supplement, Renewable
Notes will mature on an Interest Payment Date specified in the applicable
Pricing Supplement occurring in or prior to the twelfth month following the
month in which the Notes were initially issued (the "Initial Maturity Date")
unless the maturity of all or any portion of such Notes is extended in
accordance with the procedures described below. On the Interest Payment Date
occurring in the sixth month (unless a different interval (the "Special
Election Interval") is specified in the applicable Pricing Supplement) prior to
the Initial Maturity Date (the "Initial Maturity Extension Date") and on the
Interest Payment Date occurring in the sixth month of each six-month period (or
the last month of each Special Election Interval) after the Initial Maturity
Extension Date (each, together with the Initial Maturity Extension Date, a
"Maturity Extension Date"), the maturity of the Renewable Notes will be
extended to the Interest Payment Date occurring in the twelfth month (or, if a
Special Election Interval is specified in the applicable Pricing Supplement,
the last month in a period equal to twice the Special Election Interval) after
such Maturity Extension Date, unless a Holder thereof elects to terminate the
automatic extension of the maturity of the Renewable Notes held by such Holder
or any portion thereof having a principal amount of $1,000 (or the minimum
denomination of the Specified Currency if other than U.S. dollars) or any
integral multiple of $1,000 (or the minimum denomination of the Specified
Currency if other than U.S. dollars) in excess thereof by delivering a notice
to such effect to the Trustee not less than 15 nor more than 30 days prior to
such Maturity Extension Date (unless another period is specified in the
applicable Pricing Supplement as the "Special Election Period"). Such election
may only be exercised with respect to less than the entire principal amount of
any Renewable Note if the principal amount of such Renewable Note (and each
Book-Entry Note) for which such election is not exercised is at least $1,000
(or the minimum denomination of the Specified Currency if other than U.S.
dollars) or any larger amount that is an integral multiple of $1,000 (or the
minimum denomination of the Specified Currency if other than U.S. dollars).
Notwithstanding the foregoing, the maturity of the Renewable Notes may not be
extended beyond the final Maturity Date (the "Final Maturity Date") specified
for such Notes in the applicable Pricing Supplement.
S-4
<PAGE>
If a Holder elects to terminate the automatic extension of the maturity of
any portion of the principal amount of the Renewable Notes during the specified
period prior to any Maturity Extension Date, such portion will become due and
payable on the Interest Payment Date occurring in the sixth month (or the last
month in the Special Election Interval) after such Maturity Extension Date (the
"Extended Maturity Date"). As soon as practicable following receipt of
specified documentation with respect to such election (and, in the case of a
Renewable Note represented in the form of a Certificated Note, such Renewable
Note), the Trustee shall issue in exchange therefor in the name of such Holder
(i) a Short-Term Note for the principal amount of such exchanged Renewable Note
for which the election to terminate the automatic extension of maturity was
exercised with terms identical to those of such Renewable Note (other than with
respect to maturity) and (ii) if such election is made with respect to less
than the full principal amount of such Holder's Renewable Note, a replacement
Renewable Note for the principal amount of such exchanged Renewable Note for
which no election was made.
Termination of the automatic extension of maturity of all or a portion of a
Renewable Note may be revoked by the Holder thereof provided that the principal
amount of each portion of such Renewable Note or a Short-Term Note issued in
exchange therefor (and each Book-Entry Note) (i) to which the revocation
relates and (ii) to which the revocation does not relate, is at least $1,000
(or the minimum denomination of the Specified Currency if other than U.S.
dollars) or any larger amount that is an integral multiple of $1,000 (or the
minimum denomination of the Specified Currency if other than U.S. dollars).
Such revocation may be made by delivering a notice to such effect to the
Trustee on any day following delivery to the Trustee of the election to
terminate the automatic extension of maturity and not less than 60 days prior
to the Extended Maturity Date. If the revocation relates to a Short-Term Note
which has been issued, as soon as practicable following the Trustee's receipt
of specified documentation with respect to such revocation (and in the case of
a revocation relating to a Short-Term Note represented in the form of a
Certificated Note which has been issued, such Short-Term Note), the Trustee
shall issue in exchange therefor in the name of such Holder (i) a Renewable
Note for the principal amount of such exchanged Short-Term Note to which the
revocation relates with terms identical to such Holder's original Renewable
Note and (ii) if such revocation is made with respect to less than the full
principal amount of such Short-Term Note, a replacement Short-Term Note for the
principal amount of such exchanged Short-Term Note for which no revocation was
made.
The Notes will be unsecured obligations of the Company and, except as
described in an applicable Pricing Supplement, will be identical except for
currency denomination, interest rate, Interest Payment Dates, Maturity Date,
issue date and applicable redemption or repayment provisions. Unless otherwise
specified in an applicable Pricing Supplement, the Notes will not be subject to
any sinking fund and, unless a redemption commencement date (a "Redemption
Commencement Date") or one or more redemption dates (each, a "Redemption Date")
are specified in the applicable Pricing Supplement, will not be redeemable
prior to their Maturity Date. If a Redemption Commencement Date is so specified
with respect to any Note, the applicable Pricing Supplement will also specify
one or more redemption prices (expressed as a percentage of the principal
amount of such Note to be redeemed) (each, a "Redemption Price") and the
redemption period or periods during which each Redemption Price shall apply. In
addition, if a Redemption Commencement Date is so specified, any such Note
shall be redeemable in whole or in part at the option of the Company (whether
or not any other Note is concurrently redeemed) on any Business Day on or after
such specified Redemption Commencement Date at the specified Redemption Price
applicable to the redemption period during which such Note is to be redeemed,
together with interest accrued to the redemption date. If one or more
Redemption Dates are specified in a Pricing Supplement with respect to any
Note, such Pricing Supplement also will specify one or more Redemption Prices,
the Redemption Date or Dates for which such Redemption Prices shall apply, and,
unless the Pricing Supplement relates to Renewable Notes, the notice period
during which the option to redeem may be exercised and the methods by which a
notice of redemption may be delivered. Renewable Notes for which one or more
Redemption Dates are so specified will be redeemable, as a whole or from time
to time in part, at the option of the Company
S-5
<PAGE>
upon not less than 30 days nor more than 60 days notice, delivered by certified
mail, return receipt requested, or by courier to the applicable Holders of such
Notes, except that, notwithstanding the foregoing, redemption of Global Notes
(and notice thereof) shall also be made in accordance with applicable
procedures of the Depositary. Short-Term Notes issued in exchange for
Renewable Notes will be redeemable, at the option of the Company, on the
Redemption Dates and in accordance with the redemption provisions of the
Renewable Notes for which such Short-Term Notes were exchanged.
Notes will be sold in individual issues of Notes having such currency
denomination, interest rate or interest rate formula, Interest Payment Dates,
Maturity Date and date of original issuance, applicable redemption or repayment
provisions and other variable terms as shall be selected by the initial
purchasers and agreed to by the Company. Each Note will bear interest at a
fixed rate or at a rate determined by reference to the Commercial Paper Rate,
the Prime Rate, LIBOR, the Treasury Rate, the CD Rate, the Federal Funds Rate
or other interest rate basis or formula, as adjusted by the Spread and/or
Spread Multiplier, if any, applicable to such Note (as such terms are defined
below). See "--Interest Rate."
The term "Business Day" as used herein means each Monday, Tuesday, Wednesday,
Thursday and Friday which is (a) not a legal holiday for banking institutions
in The City of New York, and (b) with respect to Notes denominated in a
Specified Currency other than U.S. dollars, any such day that is not a legal
holiday for banking institutions in the Principal Financial Center (as defined
below) of the country of the Specified Currency, and (c) with respect to LIBOR
Notes, is also a London Business Day (as defined below). A "London Business
Day" is any day on which dealings in deposits in U.S. dollars are transacted in
the London interbank market. "Principal Financial Center" will generally be the
capital city of the country of the Specified Currency, except that with respect
to U.S. dollars, Deutsche marks, and European Currency Units, the Principal
Financial Center shall be The City of New York, Frankfurt and Luxembourg,
respectively.
INTEREST RATE
Unless otherwise set forth in an applicable Pricing Supplement, each Note
will bear interest from, and including, (a) the most recent Interest Payment
Date to which interest on such Note has been paid or duly provided for (or, if
such Note is a Floating Rate Note and the Interest Reset Dates (as defined
below) are daily or weekly, unless otherwise specified in an applicable Pricing
Supplement, from, but excluding, the Regular Record Date (as defined below)
immediately preceding the Interest Payment Date on which interest on such Note
has been paid or duly provided for) or (b) its date of issue (if no interest
has been paid with respect to such Note), at the fixed rate per annum, or at
the rate per annum determined pursuant to the interest rate formula, stated
therein and in the applicable Pricing Supplement until the principal thereof is
paid or made available for payment in accordance with the terms thereof.
Interest will be payable on each Interest Payment Date and at maturity as
specified below under "Payment of Principal and Interest."
Each Note will bear interest at either (a) a fixed rate (a "Fixed Rate Note")
or (b) a variable rate (a "Floating Rate Note") determined by reference to the
specified Interest Rate Basis (as defined below), which will be adjusted by
adding or subtracting any applicable Spread and/or multiplying by any
applicable Spread Multiplier. A Floating Rate Note may also have either or both
of the following: (a) a maximum numerical interest rate limitation, or ceiling,
on the rate of interest which may accrue during any interest period (a "Maximum
Rate"); and (b) a minimum numerical interest rate limitation, or floor, on the
rate of interest which may accrue during any interest period (a "Minimum
Rate"). The "Spread" is the number of basis points, if any, specified in the
applicable Pricing Supplement as being applicable to the interest rate for such
Floating Rate Note and the "Spread Multiplier" is the percentage, if any,
specified in the applicable Pricing Supplement as being applicable to the
interest rate for such Floating Rate Note. "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 provided in the applicable Pricing
Supplement, The First National Bank of Chicago will be the calculation agent
(the "Calculation Agent") with respect to Floating Rate Notes.
S-6
<PAGE>
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note.
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis (the "Interest Rate Basis") for such Floating
Rate Note. The Interest Rate Basis for each Floating Rate Note will be one or
more of the following: (a) the Commercial Paper Rate, in which case such
Floating Rate Note will be a "Commercial Paper Rate Note"; (b) the Prime Rate,
in which case such Floating Rate Note will be a "Prime Rate Note"; (c) LIBOR,
in which case such Floating Rate Note will be a "LIBOR Note"; (d) the Treasury
Rate, in which case such Floating Rate Note will be a "Treasury Rate Note"; (e)
the CMT Rate, in which case such Floating Rate Note will be a "CMT Rate Note";
(f) the CD Rate, in which case such Floating Rate Note will be a "CD Rate
Note"; (g) the Federal Funds Rate, in which case such Floating Rate Note will
be a "Federal Funds Rate Note"; or (h) such other interest rate basis or
formula as is set forth in such Pricing Supplement. The applicable Pricing
Supplement for a Floating Rate Note will specify the Interest Rate Basis and,
if applicable, the Calculation Agent, the Index Maturity, the Spread, the
Spread Multiplier, the Maximum Rate, the Minimum Rate, the Interest Payment
Dates, the Regular Record Dates, the Interest Reset Dates and other variable
terms of such Note.
The rate of interest on each Floating Rate Note will be determined as of the
Interest Determination Date and reset daily, weekly, monthly, quarterly, semi-
annually or annually (such type of 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 (i) in
the case of Floating Rate Notes which reset daily, each Business Day; (ii) in
the case of Floating Rate Notes (other than Treasury Rate Notes) which reset
weekly, the Wednesday of each week; (iii) in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week (except as provided below); (iv)
in the case of Floating Rate Notes which reset monthly, the third Wednesday of
each month; (v) in the case of Floating Rate Notes which reset quarterly, the
third Wednesday of March, June, September and December; (vi) in the case of
Floating Rate Notes which reset semi-annually, the third Wednesday of two
months of each year as specified in the applicable Pricing Supplement; and
(vii) 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. Unless otherwise indicated in the applicable Pricing Supplement,
the interest rate in effect with respect to a Floating Rate Note on each day
that is not an Interest Reset Date will be the interest rate determined as of
the Interest Determination Date pertaining to the immediately preceding
Interest Reset Date, and the interest rate in effect on any day that is an
Interest Reset Date will be the interest rate determined as of the Interest
Determination Date pertaining to such Interest Reset Date; provided, however,
that (a) the interest rate in effect from the date of original issuance of a
Floating Rate Note to but excluding the first Interest Reset Date with respect
to such Floating Rate Note will be the Initial Interest Rate set forth in the
applicable Pricing Supplement or determined on the Initial Interest
Determination Date set forth in the applicable Pricing Supplement and (b) the
interest rate in effect for the ten days immediately prior to maturity,
redemption or repayment of a Note will be the interest rate in effect on the
tenth day preceding such maturity, redemption or repayment. If any Interest
Reset Date for any Floating Rate Note would otherwise be a day that is not a
Business Day with respect to such Floating Rate Note, the Interest Reset Date
for such Floating Rate Note shall be postponed to the next day that is a
Business Day with respect to 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 shall be the immediately preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for a Commercial Paper
Rate Note (the "Commercial Paper Interest Determination Date"), for a Prime
Rate Note (the "Prime Interest Determination Date"), for a CMT Rate Note (the
"CMT Interest Determination Date"), for a CD Rate Note (the "CD Interest
Determination Date") and for a Federal Funds Rate Note (the "Federal Funds
Interest Determination Date") will be the second Business Day preceding such
Interest Reset Date. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset
Date for a LIBOR Note (the "LIBOR Interest Determination Date")
S-7
<PAGE>
will be the second London Business Day next preceding the 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 normally sold at auction on the Monday of each
week, unless that day is a legal holiday, in which case the auction is normally
held on the following Tuesday, except that such auction may be held on the
preceding Friday. If, as the result of a legal holiday, an auction is so held
on the preceding Friday, such Friday will be the Treasury Interest
Determination Date pertaining to the Interest Reset Date occurring in the next
succeeding week. If an auction date shall fall on any Interest Reset Date for a
Treasury Rate Note, then such Interest Reset Date shall instead be the first
Business Day immediately following such auction date.
Unless otherwise specified in a Pricing Supplement, all percentages resulting
from any calculation on Floating Rate Notes will be rounded, if necessary, to
the nearest one-hundred thousandth of a percentage point, with five one-
millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544)
being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or
resulting from such calculation on Floating Rate Notes will be rounded to the
nearest cent or, in the case of Notes denominated in currencies other than U.S.
dollars, the nearest unit (with one-half cent or unit being rounded upwards).
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective on the next Interest Reset Date with
respect to such Floating Rate Note. The Calculation Agent's determination of
any interest rate will be final and binding in the absence of manifest error.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," if applicable, pertaining to any Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day preceding the applicable Interest Payment
Date or Maturity Date (or date of redemption or repayment), as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any), and will be payable on the dates, specified on the
face of the Commercial Paper Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (calculated as described below) of the rate on that date for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement as such rate is published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15(519), Selected Interest Rates" or
any successor publication of the Board of Governors of the Federal Reserve
System ("H.15(519)") under the heading "Commercial Paper." In the event that
such rate is not published by 9:00 A.M., New York City time, on the relevant
Calculation Date, then the Commercial Paper Rate with respect to such Interest
Determination Date shall be the Money Market Yield of such rate on such
Commercial Paper Interest Determination Date for commercial paper having the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release,
"Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication published by the Federal Reserve Bank of New York
("Composite Quotations") under the heading "Commercial Paper." If by 3:00 P.M.,
New York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite
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Quotations, then the Commercial Paper Rate with respect to such Interest
Determination Date shall be calculated by the Calculation Agent and shall be
the Money Market Yield of the arithmetic mean of the offered per annum 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,
after consultation with the Company, for commercial paper of the specified
Index Maturity placed for an industrial issuer whose bond rating is "AA," or
the equivalent, from a nationally recognized rating agency; provided, however,
that if fewer than three dealers selected as aforesaid by the Calculation Agent
are quoting as mentioned in this sentence, the Commercial Paper Rate with
respect to such Interest Determination Date will be the Commercial Paper Rate
in effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded upwards
to the nearest one hundred-thousandth of a percentage point) calculated in
accordance with the following formula:
Money Market Yield = D X 360 X 100
-----------------
360-(D X M )
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 interest is being calculated.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any),
and will be payable on the dates, specified on the face of the Prime Rate Note
and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date, the rate set forth for
the relevant Prime Interest Determination Date in H.15(519) for such date
opposite the caption "Bank Prime Loan." In the event that such rate is not
published by 9:00 A.M., New York City time, on the relevant Calculation Date,
then the Prime Rate with respect to such Interest Determination Date will be
the arithmetic mean of the rates of interest publicly announced by each bank
that appears on the display designated as page "NYMF" on the Reuter Monitor
Money Rates Service (or such other page as may replace the NYMF page on that
service for the purpose of displaying prime rates or base lending rates of
major United States banks) ("Reuters Screen NYMF Page") as such bank's prime
rate or base lending rate as in effect for such Prime Interest Determination
Date as quoted on the Reuters Screen NYMF Page on such Prime Interest
Determination Date. If fewer than four such rates appear on the Reuters Screen
NYMF Page on such Prime Interest Determination Date, the Prime Rate with
respect to such Interest Determination Date will be the arithmetic mean of the
prime rates or base lending rates (quoted on the basis of the actual number of
days in the year divided by a 360-day year) as of the close of business on such
Prime 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, after
consultation with the Company, from which quotations are requested. If fewer
than two quotations are quoted as aforesaid, the Prime Rate for such Prime
Interest Determination Date shall be calculated by the Calculation Agent and
shall be the arithmetic mean of the prime rates quoted in The City of New York
on such date 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 U.S.$500 million and being
subject to supervision or examination by a Federal or State authority, selected
by the Calculation Agent, after consultation with the Company, to quote such
rate or rates; provided, however, that if the Prime Rate is not published in
H.15(519) and the banks or trust companies selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate with respect to such
Interest Determination Date will be the interest rate otherwise in effect on
such Prime Interest Determination Date.
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LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any), and will
be payable on the dates, specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR" with
respect to any Interest Determination Date will be determined by the
Calculation Agent in accordance with the following provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be,
as specified in the applicable Pricing Supplement, either: (a) the
arithmetic mean of the offered rates for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO
Page as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters"), or (b) the rate for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, that appears on Telerate Page 3750 as of
11:00 A.M., London time, on such LIBOR Interest Determination Date ("LIBOR
Telerate"). "Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuters Monitor Money Rates Service (or such other page as
may replace page LIBO on that service for the purpose of displaying London
interbank offered rates of major banks). "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or such other
page as may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified in the
applicable Pricing Supplement, LIBOR will be determined as if LIBOR
Telerate had been specified. If fewer than two offered rates appear on the
Reuters Screen LIBO Page, or if no rate appears on Telerate Page 3750, as
applicable, LIBOR in respect of such LIBOR Interest Determination Date will
be determined as if the parties had specified the rate described in (ii)
below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page, as specified
in (i)(a) above, or on which no rate appears on Telerate Page 3750, as
specified in (i)(b) above, as applicable, LIBOR will be determined on the
basis of the rates at which deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing Supplement are offered at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination
Date by four major banks (the "Reference Banks") in the London interbank
market selected by the Calculation Agent, after consultation with the
Company, to prime banks in the London interbank market, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date and in a principal amount equal to an amount of not less
than $1,000,000 that is representative for a single transaction in such
market at such time. The Calculation Agent will request the principal
London office of each of the Reference Banks to provide a quotation of its
rate. If at least two such quotations are provided, LIBOR in respect of
such LIBOR Interest Determination Date 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 at approximately 11:00 A.M., New York City time, on such
LIBOR Interest Determination Date by three major banks in The City of New
York selected by the Calculation Agent, after consultation with the
Company, for loans in U.S. dollars to leading European banks having the
Index Maturity designated in the applicable Pricing Supplement, commencing
on the second London Business Day immediately following such LIBOR Interest
Determination Date and in a principal amount equal to an amount of not
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less than $1,000,000 that is representative for a single transaction in
such market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such Interest Determination Date will be
the interest rate otherwise in effect on such LIBOR Interest Determination
Date.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any), and will be payable on the dates, specified on the face of the Treasury
Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date, the rate for the
most recent auction on such date of direct obligations of the United States
("Treasury bills") having the Index Maturity designated in the applicable
Pricing Supplement as published in H.15(519) under the heading "U.S. Government
Securities/Treasury bills/auction average (investment)" or, if not so published
by 9:00 A.M., New York City time, on the relevant Calculation Date, the auction
average rate (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) for such auction as
otherwise announced by the United States Department of the Treasury. In the
event such rate is not so published by 3:00 P.M., New York City time, on the
relevant Calculation Date, the Treasury Rate with respect to such Interest
Determination Date shall be calculated by the Calculation Agent and shall be a
yield to maturity (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic
mean of the secondary market bid rates as of approximately 3:30 P.M., New York
City time, on such Treasury Interest Determination Date, of three primary
United States government securities dealers in The City of New York selected by
the Calculation Agent, after consultation with the Company, for the issue of
Treasury bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if
fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Treasury Rate with respect to such
Interest Determination Date will be the Treasury Rate in effect on such
Treasury Interest Determination Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any) and
will be payable on the dates specified on the face of the CMT Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the rate equal to
the yield as published in H.15(519) for such date in the row "U.S. Government
Securities--Treasury Constant Maturities," for the relevant Index Maturity and
appearing under the date that is the CMT Interest Determination Date in such
column. In the event that such rate is not published in H.15(519) for the
applicable Interest Determination Date by 3:30 p.m., on the relevant
Calculation Date, the CMT Rate will be calculated by the Calculation Agent and
will be a yield to maturity (expressed as a bond equivalent and as a decimal
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point with five one-millionths of a percentage point rounded up) based on the
arithmentic mean of the secondary market offer prices as of approximately 3:30
P.M. (New York City time) on such Calculation Date of three leading primary
United States government securities dealers in The City of New York selected by
the Calculation Agent, after consultation with the Company, for the most
recently issued "on-the-run" Treasury Note, for any Treasury Note with a
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remaining term to maturity closest to the Index Maturity. If there are two
Treasury Notes with remaining terms to maturity equally close to the Index
Maturity, the quotes for the Treasury Note with the shorter remaining term to
maturity will be used. If only two of such dealers are quoting as described
aforesaid, then the CMT Rate will be based on the arithmentic mean of the offer
prices obtained. If only one of the dealers provides an offer price, the CMT
Rate will be such offer price provided to the Calculation Agent.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the CD Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published 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 relevant Calculation Date, then the CD
Rate with respect to such Interest Determination Date will be the rate on such
CD Interest Determination Date for negotiable certificates of deposit having
the Index Maturity designated 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 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 of negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent, after consultation
with the Company, 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 designated in the applicable
Pricing Supplement in a denomination of U.S. $5,000,000; provided, however,
that if the three dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the CD Rate with respect to such
Interest Determination Date will be the CD Rate in effect on such CD Interest
Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any), and will be payable on the dates, specified on the face of
the Federal Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
such date for Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)." In the event that such rate is not published prior
to 9:00 A.M., New York City time, on the relevant Calculation 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, 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 of the
rates, as of 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date, for the last transaction
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in overnight Federal Funds arranged by three leading brokers of Federal Funds
transactions in The City of New York selected by the Calculation Agent, after
consultation with the Company; 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 Interest Determination
Date will be the Federal Funds Rate in effect on such Federal Funds Interest
Determination Date.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of, premium, if any, and interest on the Notes is payable by
the Company in the Specified Currency. Interest payable on any Interest Payment
Date (other than Defaulted Interest) shall be payable to the person who is the
registered Holder at the close of business on the immediately preceding Regular
Record Date. Cede will initially be the registered Holder of Global Notes. See
"Book-Entry Notes." The "Regular Record Date" with respect to any Floating Rate
Note shall be the date 15 calendar days prior to each Interest Payment Date,
whether or not such date shall be a Business Day, and, unless otherwise
specified in the applicable Pricing Supplement, the "Regular Record Date" with
respect to any Fixed Rate Note shall be the March 15 next preceding any April 1
Interest Payment Date or the September 15 next preceding any October 1 Interest
Payment Date or the date 15 calendar days prior to any other Interest Payment
Date, whether or not such date shall be a Business Day. Interest payable upon
redemption, repayment or at maturity (other than a redemption, repayment or
maturity occurring on an Interest Payment Date, in which case, interest will be
paid to the person who is the registered Holder at the close of business on the
immediately preceding Regular Record Date) will be paid to the same person to
whom the principal amount is payable. The first payment of interest on any Note
originally issued between a Regular Record Date and an Interest Payment Date
will be made on the Interest Payment Date following the next succeeding Regular
Record Date to the registered owner on such next succeeding Regular Record
Date.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable: (i) in the case of Fixed Rate Notes, on April 1 and October 1
of each year (or on either of such dates or on such other dates as are
specified in the applicable Pricing Supplement); (ii) in the case of Floating
Rate Notes which reset daily, weekly or monthly, on the third Wednesday of each
month or on the third Wednesday of March, June, September and December of each
year (as indicated in the applicable Pricing Supplement); (iii) in the case of
Floating Rate Notes which reset quarterly, on the third Wednesday of March,
June, September and December of each year; (iv) in the case of Floating Rate
Notes which reset semi-annually, on the third Wednesday of the two months of
each year specified in the applicable Pricing Supplement; and (v) in the case
of Floating Rate Notes which reset annually, on the third Wednesday of the
month specified in the applicable Pricing Supplement (each an "Interest Payment
Date"); and, in each case, at maturity or earlier redemption.
If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment shall be made on the next day that is
a Business Day, and no interest on such payment shall accrue for the period
from and after the Interest Payment Date. If the Maturity Date (or date of
redemption or repayment) of any Fixed Rate Note falls on a day that is not a
Business Day, the related payment of principal, premium, if any, or interest
will be made on the next succeeding Business Day with the same force and effect
as if made on the Maturity Date (or date of redemption or repayment), and no
interest on such payment shall accrue for the period from and after the
Maturity Date (or date of redemption or repayment).
If any Interest Payment Date for any Floating Rate Note would otherwise fall
on a day that is not a Business Day with respect to such Note, such Interest
Payment Date will be postponed to the next succeeding Business Day (or, in the
case of a LIBOR Note, if such day falls in the next calendar
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month, such Interest Payment Date will be the next preceding Business Day) and
interest on such payment shall continue to accrue until such Business Day on
which interest is actually paid. If the Maturity Date (or date of redemption or
repayment) of a Floating Rate Note falls on a day that is not a Business Day,
the payment of principal, premium, if any and interest will be made on the next
succeeding Business Day with the same force and effect as if made on the
Maturity Date (or date of redemption or repayment), and no interest on such
payment shall accrue for the period from and after such Maturity Date (or date
of redemption or repayment).
Payments of interest on any Note (except Floating Rate Notes that reset daily
or weekly) with respect to any Interest Payment Date or Maturity Date (or date
of redemption or repayment) will include interest accrued from and including
the next preceding Interest Payment Date (or, if no interest has been paid, the
date of issuance of such Note) to but excluding such Interest Payment Date or
Maturity Date (or date of redemption or repayment). If the Interest Reset Dates
with respect to any Floating Rate Note are daily or weekly, unless otherwise
specified in the applicable Pricing Supplement, interest payable on such
Floating Rate Note on any Interest Payment Date will include interest accrued
from but excluding the last date through which interest has been accrued and
paid (or if no interest has been paid, from and including the date of issuance
of such Note) to and including the Regular Record Date immediately preceding
such Interest Payment Date and interest payable on such Floating Rate Note at
maturity (or date of redemption or repayment) will include interest accrued to,
but excluding, the Maturity Date (or date of redemption or repayment).
With respect to a Floating Rate Note, accrued interest will be calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Unless otherwise specified in the applicable Pricing Supplement, such
accrued interest factor will be computed by adding the interest factors
calculated for each day in the period for which accrued interest is being
calculated. The interest factor (expressed as a decimal, rounded if necessary
to the nearest one hundred thousandth of a percentage point) for each such day
will be computed by dividing the interest rate (expressed as a decimal)
applicable to such date by 360, in the case of Commercial Paper Rate Notes,
Prime Rate Notes, LIBOR Notes, CD Rate Notes or Federal Funds Rate Notes, or by
the actual number of days in the year, in the case of CMT Rate Notes or
Treasury Rate Notes. Interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
With respect to Certificated Notes, payments of interest will be made by wire
transfer to any Holder of $10,000,000 or more in aggregate principal amount of
Certificated Notes having the same Interest Payment Date, and, subject to
certain conditions set forth in the next paragraph, payments of principal will
be made by wire transfer to any Holder of $10,000,000 or more in aggregate
principal amount of Certificated Notes having the same Maturity Date or date of
redemption or repayment, if the Holder thereof shall have designated in writing
to the Trustee an account with a bank located in the country issuing the
Specified Currency or such other country as shall be satisfactory to the
Company and the Trustee. If any payment of interest is to be made by wire
transfer, such information must be received by the Trustee, acting as paying
agent (the "Paying Agent", which expression includes any additional or
successor paying agent appointed by the Company in accordance with the
Indenture), at its corporate trust office in The City of New York on or prior
to the Regular Record Date for an Interest Payment Date. The Paying Agent will,
subject to applicable laws and regulations and until it receives notice to the
contrary, make such payment to such Holder by wire transfer to the designated
account. If a payment of interest on a Certificated Note is not made by wire
transfer for any reason, payment will be made by check. Checks for payment of
interest on an Interest Payment Date will be mailed to the Holder at the
address of such Holder appearing on the Security Register on the applicable
Regular Record Dates. See "--Payment Currency" and "Currency Exchange and Other
Information" and "Foreign Currency Risks."
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To receive payment upon redemption or repayment or at maturity of a U.S.
dollar denominated Certificated Note, a Holder must make presentation and
surrender of such Note on or before the redemption date, repayment date or
Maturity Date, as applicable. Payment will be by check unless proper wire
transfer instructions are on file with the Paying Agent or are received at
presentment. To receive payment upon redemption or repayment or at maturity of
a Note denominated in a Foreign Currency, a Holder must make presentation and
surrender not less than two Business Days prior to the redemption date or
Maturity Date, as applicable.
The Company will pay any administrative costs imposed by banks in connection
with sending payments by wire transfer, but any tax, assessment or governmental
charge imposed upon payments will be borne by the Holders of the Notes in
respect of which payments are made.
For further information concerning payments of principal and interest on
Book-Entry Notes, see "Book-Entry Notes."
PAYMENT CURRENCY
If the principal of or interest on any Note is payable in a Specified
Currency other than U.S. dollars and such Specified Currency is not available
due to the imposition of exchange controls or other circumstances beyond its
control, the Company will be entitled to satisfy its obligations to Holders of
the Notes by making such payment in U.S. dollars on the basis of the most
recently available Market Exchange Rate. Any payment made under such
circumstances in U.S. dollars where the required payment is in a Specified
Currency other than U.S. dollars will not constitute a default under the
Indenture. See "Foreign Currency Risks--Payment Currency."
REPAYMENT AND REPURCHASE
If the applicable Pricing Supplement so indicates, the Notes will be subject
to repayment at the option of the Holders thereof in accordance with the terms
of such Notes on their respective optional repayment dates, if any, fixed at
the time of sale and specified in the applicable Pricing Supplement (the
"Optional Repayment Dates"). If no Optional Repayment Date is specified with
respect to a Note in the applicable Pricing Supplement, such Note will not be
repayable at the option of the Holder prior to the Maturity Date. Unless
otherwise specified in the applicable Pricing Supplement, on any Optional
Repayment Date with respect to any Note, such Note will be repayable in whole
or in part in integral multiples of $1,000 (or in integral multiples of the
minimum denomination of the Specified Currency if other than U.S. dollars)
(provided that any remaining principal amount of such Note shall not be less
than the minimum denomination of such Note) at the option of the Holder thereof
at a repayment price equal to 100% of the principal amount to be repaid,
together with interest thereon payable to the date of repayment.
Unless otherwise specified in the applicable Pricing Supplement, in order for
a Note to be repaid at the option of the Holder, the Trustee must receive the
Note, at least 30 days but not more than 60 days prior to the repayment date,
with the section entitled "Option to Elect Repayment" on the Note duly
completed.
With respect to a Global Note, the Depositary's nominee will be the Holder of
such Global Note and therefore will be the only entity that can exercise a
right to repayment. In order to ensure that the Depositary's nominee will
timely exercise a right to repayment with respect to a particular beneficial
interest in the Global Note, the beneficial owner of such interest must
instruct the broker or other direct or indirect participant through which it
holds a beneficial interest in such Global Note to notify the Depositary of its
desire to exercise a right to repayment. Different firms have different cut-off
times for accepting instructions from their customers and, accordingly, each
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beneficial owner should consult the broker or other direct or indirect
participant through which it holds an interest in a Global Note in order to
ascertain the cut-off time by which such an instruction must be given in order
for timely notice to be delivered to the Depositary.
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be
held or resold or surrendered to the Trustee for cancellation.
ORIGINAL ISSUE DISCOUNT NOTES
Notes may be issued at a price less than their redemption price at maturity
("Original Issue Discount Notes"). Such Original Issue Discount Notes may
currently pay no interest or interest at a rate which at the time of issuance
is below market rates. Certain additional considerations relating to any
Original Issue Discount Notes may be described in the Pricing Supplement
relating thereto. In addition, some Original Issue Discount Notes may be
treated as if they were issued with original issue discount for federal income
tax purposes ("Discount Notes"). See "Certain United States Federal Income Tax
Considerations" for a discussion of the federal income tax treatment of
Discount Notes.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the determination of an Interest Rate Basis,
the specification of an Interest Rate Basis, calculation of the interest rate
applicable to, or the principal payable at maturity on, any Note, its Interest
Payment Date 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
addendum relating thereto if so specified on the face thereof, and in the
applicable Pricing Supplement.
BOOK-ENTRY NOTES
Book-Entry Notes will be represented by one or more Global Notes deposited
with, or on behalf of, the Depositary and registered in the name of the
Depositary or a nominee of the Depositary. Unless otherwise specified in the
applicable Pricing Supplement, DTC will be the Depositary.
So long as the Depositary for a Global Note, or a nominee of the Depositary,
is the registered owner of the Global Note, the Depositary or its nominee, as
the case may be, will be considered the sole owner or Holder of the Book-Entry
Notes represented by such Global Note for all purposes under the Indenture.
Except as provided below, owners of beneficial interests in Book-Entry Notes
represented by a Global Note will not be considered the owners or Holders
thereof under the Indenture, will not be entitled to have Book-Entry Notes
represented by such Global Note registered in their names and will not be
entitled to physical delivery of Notes in certificated form evidencing their
respective beneficial interests therein. A Global Note may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any nominee to a successor of the Depositary
or a nominee of such successor.
Payments of principal of and any premium and interest on Book-Entry Notes
represented by a Global Note registered in the name of a Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner of the Global Note. Neither the Company, the Trustee, any
Paying Agent nor the Registrar will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in Book-Entry Notes represented by a Global Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
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The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal, premium, if any, or interest, if any, in respect of a
Global Note, will credit immediately participants' (as defined below) accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Note as shown on the records of such
Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in Book-Entry Notes represented
by such Global Note held through such participants will be governed by standing
customer instructions and customary practices, as is now 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 participants.
If the Depositary with respect to any Global Note is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the Company within 90 days of such time, the Company will
issue Certificated Notes in exchange for each Book-Entry Note represented by
such Global Note. In addition, the Company may at any time and in its sole
discretion determine not to have the Notes represented by a Global Note and, in
such event, will issue Certificated Notes in exchange for the Book-Entry Notes
represented by such Global Note. In either instance, an owner of a beneficial
interest in a Book-Entry Note will be entitled to have a Certificated Note or
Notes equal in principal amount to such beneficial interest registered in its
name and will be entitled to physical delivery of such Note or Notes.
DTC has advised the Company and the Agent as follows: DTC is a limited-
purpose trust company organized under the laws of the State of New York, 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 Securities Exchange
Act of 1934. DTC was created to hold securities for persons that have accounts
with DTC ("participants") and to facilitate the clearance and the settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movements of securities certificates. DTC's
participants include securities brokers and dealers (including the Agent),
banks, trust companies, clearing corporations, and certain other organizations,
some of whom (and /or their representatives) own DTC. Access to DTC's book-
entry system is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants
may beneficially own securities held by DTC only through participants.
DTC has also advised the Company and the Agent that, upon the issuance by the
Company of Book-Entry Notes represented by a Global Note, DTC will credit on
its book-entry registration and transfer system the respective principal
amounts of the Book-Entry Notes represented by such Global Note to the accounts
of participants. The accounts to be credited shall be designated by the Agent
or by the Company if such Notes are offered and sold directly by the Company.
Ownership of beneficial interests in Book-Entry Notes represented by a Global
Note registered in the name of DTC or its nominee will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in Book-Entry Notes represented by a Global Note
registered in the name of DTC or its nominees will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to beneficial interests of participants), or
by participants or persons that may hold interests through participants (with
respect to beneficial interests or persons other than participants). The laws
of some states may require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws may
impair the ability to transfer beneficial interests in Book-Entry Notes.
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FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes indexed, as to principal or interest or both, to one
or more values of currencies (including exchange rates between currencies)
entails significant risks that are not associated with similar investments in a
conventional fixed-rate debt security. If the interest rate of a Note is so
indexed, it may result in an interest rate that is less than that payable on a
conventional fixed-rate debt security issued at the same time, including the
possibility that no interest will be paid, and, if the principal amount of such
a Note is so indexed, the principal amount payable at maturity may be less than
the original purchase price of such Note if allowed pursuant to the terms of
such Note, including the possibility that no principal will be paid. The
secondary market for such Notes will be affected by a number of factors,
independent of the creditworthiness of the Company and the value of the
applicable currency including the volatility of the applicable currency, the
time remaining to the maturity of such Notes, the amount outstanding of such
Notes and market interest rates. The value of the applicable currency depends
on a number of interrelated factors, including economic, financial and
political events, over which the Company has no control. Additionally, if the
formula used to determine the principal amount or interest payable with respect
to such Notes contains a multiple or leverage factor, the effect of any change
in the applicable currency may be increased. The historical experience of the
relevant currencies should not be taken as an indication of future performance
of such currencies during the term of any Note. Accordingly, prospective
investors should consult their own financial and legal advisors as to the risks
entailed by an investment in such Notes and the suitability of such Notes in
light of their particular circumstances.
The Notes will provide that, in the event of an official redenomination of a
foreign currency (including, without limitation, an official redenomination of
a foreign currency that is a composite currency), the obligations of the
Company with respect to payments on Notes denominated in such currency shall,
in all cases, be deemed immediately following such redenomination to provide
for the payment of that amount of redenominated currency representing the
amount of such obligations immediately before such redenomination. The Notes do
not provide for any adjustment to any amount payable under the Notes as a
result of (a) any change in the value of a foreign currency relative to any
other currency due solely to fluctuations in exchange rates or (b) any
redenomination of any component currency of any composite currency (unless such
composite currency is itself officially redenominated).
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a foreign currency for making payments with respect to a Note denominated in
such currency. There can be no assurance that exchange controls will not
restrict or prohibit payments of principal or interest in any currency or
currency unit. Even if there are not actual exchange controls, it is possible
that, with respect to any particular Note, the foreign currency for such Note
will not be available to the Company to make payments of interest and principal
then due because of circumstances beyond the control of the Company. In that
event, the Company will make such payments in the manner set forth below under
"--Payment Currency."
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT, AND THE
APPLICABLE PRICING SUPPLEMENT WILL NOT, DESCRIBE ALL THE RISKS OF AN INVESTMENT
IN NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A
SPECIFIED CURRENCY (INCLUDING ANY COMPOSITE CURRENCY) OTHER THAN U.S. DOLLARS
OR AN INVESTMENT IN CURRENCY INDEXED NOTES, AND THE COMPANY DISCLAIMS ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE DATE OF THE APPLICABLE PRICING
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SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE
RISKS ENTAILED IN AN INVESTMENT IN NOTES DENOMINATED IN SPECIFIED CURRENCIES
OTHER THAN U.S. DOLLARS OR AN INVESTMENT IN CURRENCY INDEXED NOTES; SUCH NOTES
ARE NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers of Notes who are U.S. Holders, as that term is defined
below, and the Company disclaims any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase or holding of, or receipt
of payments of principal, premium or interest in respect of, Notes. Such
persons should consult their own financial and legal advisers with regard to
such matters.
The Pricing Supplement relating to Notes denominated in a Specified Currency
other than U.S. dollars will contain information concerning historical exchange
rates for such Specified Currency against the U.S. dollar or other relevant
currency, a description of such currency or currencies and any exchange
controls affecting such currency or currencies. The information therein
concerning exchange rates is furnished as a matter of information only and
should not be regarded as indicative of the range of or trend in fluctuations
in currency exchange rates that may occur in the future.
PAYMENT CURRENCY
Except as set forth in the applicable Pricing Supplement, if payment on a
Note is required to be made in a Specified Currency other than U.S. dollars and
such currency is unavailable due to the imposition of exchange controls or
other circumstances beyond the Company's control or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions of or within the international banking
community, then any payments with respect to such Note shall be made in U.S.
dollars until such currency is again available or so used. The amount so
payable on any date in such foreign currency shall be converted into U.S.
dollars on the basis of the Market Exchange Rate on the last date such
Specified Currency was available. See "Description of Notes--Payment Currency."
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into
two or more currencies, the amount of that original component currency as a
component shall be replaced by the amounts of such two or more currencies
having an aggregate value on the date of division equal to the amount of the
former component currency immediately before such division.
FOREIGN CURRENCY JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York applicable to instruments made and to be performed wholly
within such jurisdiction. Courts in the United States customarily have not
rendered judgments for money damages denominated in any currency other than
U.S. dollars. If a Note is denominated in a Specified Currency other than U.S.
dollars, any judgment under New York law will be rendered in the foreign
currency of the underlying obligation and converted into U.S. dollars at a rate
of exchange prevailing on the date of default, the date the judgment was
rendered, or some other appropriate date.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under the laws of any
other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
Original Issue Discount. The following summary is a general discussion of the
United States Federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Discount Notes. The following summary is based
upon final Treasury regulations (the "OID Regulations") released by the
Internal Revenue Service ("IRS") on January 27, 1994, as amended on June 11,
1996, under the original issue discount provisions of the Internal Revenue Code
of 1986, as amended (the "Code").
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as defined below) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone
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interest on such Note or any "true" discount on such Note (i.e., the excess of
the Note's stated principal amount over its issue price) equals or exceeds a
specified de minimis amount, then the stated interest on the Note would be
treated as original issue discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is
the sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes are subject to special rules
whereby a Floating Rate Note will qualify as a "variable rate debt instrument"
if (a) its issue price does not exceed the total noncontingent principal
payments due under the Floating Rate Note by more than a specified de minimis
amount, (b) it provides for stated interest, paid or compounded at least
annually, at current values of (i) one or more qualified floating rates, (ii) a
single fixed rate and one or more qualified floating rates, (iii) a single
objective rate, or (iv) a single fixed rate and a single objective rate that is
a qualified inverse floating rate and (c) the Floating Rate Note does not
provide for contingent principal payments.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Note is denominated. Although a multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple
that is greater than .65 but not more
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than 1.35 will constitute a qualified floating rate. A variable rate equal to
the product of a qualified floating rate and a fixed multiple that is greater
than .65 but not more than 1.35, increased or decreased by a fixed rate, will
also constitute a qualified floating rate. In addition, under the OID
Regulations, two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the
Floating Rate Note (e.g., two or more qualified floating rates with values
within 25 basis points of each other as determined on the Floating Rate Note's
issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the Note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based on objective financial or economic
information. A rate will not qualify as an objective rate if it is based on
information that is within the control of the issuer (or a related party) or
that is unique to the circumstances of the issuer (or a related party), such as
dividends, profits, or the value of the issuer's stock (although a rate does
not fail to be an objective rate merely because it is based on the credit
quality of the issuer). A "qualified inverse floating rate" is any objective
rate where such rate is equal to a fixed rate minus a qualified floating rate,
as long as variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the qualified floating rate. The OID
Regulations also provide that if a Floating Rate Note provides for stated
interest at a fixed rate for an initial period of one year or less followed by
a variable rate that is either a qualified floating rate or an objective rate
and if the variable rate on the Floating Rate Note's issue date is intended to
approximate the fixed rate (e.g., the value of the variable rate on the issue
date does not differ from the value of the fixed rate by more than 25 basis
points), then the fixed rate and the variable rate together will constitute
either a single qualified floating rate or objective rate, as the case may be.
If a Floating Rate Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and if
the interest on such Note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually, then all stated
interest on the Note will constitute qualified stated interest and will be
taxed accordingly. Thus, a Floating Rate Note that provides for stated interest
at either a single qualified floating rate or a single objective rate
throughout the term thereof and that qualifies as a "variable rate debt
instrument" under the OID Regulations will generally not be treated as having
been issued with original issue discount unless the Floating Rate Note is
issued at a "true" discount (i.e., at a price below the Note's stated principal
amount) in excess of a specified de minimis amount. The amount of qualified
stated interest and the amount of original issue discount, if any, that accrues
during an accrual period on such a Floating Rate Note is determined under the
rules applicable to fixed rate debt instruments by assuming that the variable
rate is a fixed rate equal to (i) in the case of a qualified floating rate or
qualified inverse floating rate, the value, as of the issue date, of the
qualified floating rate or qualified inverse floating rate, or (ii) in the case
of an objective rate (other than a qualified inverse floating rate), a fixed
rate that reflects the yield that is reasonably expected for the Floating Rate
Note. The qualified stated interest allocable to an accrual period is increased
(or decreased) if the interest actually paid during an accrual period exceeds
(or is less than) the interest assumed to be paid during the accrual period
pursuant to the foregoing rules.
In general, any other Floating Rate Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the Floating Rate Note. The OID
Regulations generally require that such a Floating Rate Note be converted into
an "equivalent" fixed rate debt instrument by substituting any qualified
floating rate or qualified
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inverse floating rate provided for under the terms of the Floating Rate Note
with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Floating Rate
Note's issue date. Any objective rate (other than a qualified inverse floating
rate) provided for under the terms of the Floating Rate Note is converted into
a fixed rate that reflects the yield that is reasonably expected for the
Floating Rate Note. In the case of a Floating Rate Note that qualifies as a
"variable rate debt instrument" and provides for stated interest at a fixed
rate in addition to either one or more qualified floating rates or a qualified
inverse floating rate, the fixed rate is initially converted into a qualified
floating rate (or a qualified inverse floating rate, if the Floating Rate Note
provides for a qualified inverse floating rate). Under such circumstances, the
qualified floating rate or qualified inverse floating rate that replaces the
fixed rate must be such that the fair market value of the Floating Rate Note as
of the Floating Rate Note's issue date is approximately the same as the fair
market value of an otherwise identical debt instrument that provides for either
the qualified floating rate or qualified inverse floating rate rather than the
fixed rate. Subsequent to converting the fixed rate into either a qualified
floating rate or a qualified inverse floating rate, the Floating Rate Note is
then converted into an "equivalent" fixed rate debt instrument in the manner
described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Floating Rate Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Floating Rate Note during the accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Floating Rate Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Floating Rate Note would be taxed if such Note were treated as a
contingent payment debt obligation. U.S. Holders should be aware that on June
11, 1996, the Treasury Department issued final regulations (the "CPDI
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In general, the CPDI Regulations would
cause the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character
of income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States Federal income tax law.
Specifically, the CPDI Regulations generally require a U.S. Holder of such an
instrument to include future contingent and noncontingent interest payments in
income as such interest accrues based upon a projected payment schedule.
Moreover, in general, under the CPDI Regulations, any gain recognized by a U.S.
Holder on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any loss
realized could be treated as ordinary loss as opposed to capital loss
(depending upon the circumstances). The CPDI Regulations apply to debt
instruments issued on or after August 13, 1996. The proper United States
Federal income tax treatment of Floating Rate Notes that are treated as
contingent payment debt obligations will be more fully described in the
applicable Pricing Supplement. Furthermore, any other special United States
Federal income tax considerations, not otherwise discussed herein, which are
applicable to any particular issue of Notes will be discussed in the applicable
Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their
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stated maturity (a "put option"). Notes containing such features may be subject
to rules that differ from the general rules discussed above. Investors
intending to purchase Notes with such features should consult their own tax
advisors, since the original issue discount consequences will depend, in part,
on the particular terms and features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based on
daily compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original
issue discount on a Short-Term Note on a straight-line basis unless an election
is made to accrue the original issue discount under a constant yield method
(based on daily compounding).
Market Discount. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its revised issue price as
of the purchase date (which generally approximates adjusted issue price), such
U.S. Holder will be treated as having purchased such Note at a "market
discount," unless such market discount is less than a specified de minimis
amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income
to the extent of the lesser of (i) the amount of such payment or realized gain
or (ii) the market discount which has not previously been included in income
and is treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless
the U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
S-24
<PAGE>
Premium. If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess
of its stated redemption price at maturity, special rules would apply which
could result in a deferral of the amortization of some bond premium until later
in the term of the Note. Any election to amortize bond premium applies to all
taxable debt instruments acquired by the U.S. Holder on or after the first day
of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be long-term
capital gain or loss if the Note were held for more than one year.
NOTES DENOMINATED OR ON WHICH INTEREST IS PAYABLE IN A FOREIGN CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY.
Cash Method. A U.S. Holder who uses the cash method of accounting for United
States Federal income tax purposes and who receives a payment of interest on a
Note (other than original issue discount or market discount) will be required
to include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the U.S. Holder's tax basis in such Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
U.S. dollar value of the amount of interest income (including original issue
discount or market discount and reduced by amortizable bond premium to the
extent applicable) that has accrued and is otherwise required to be taken into
account with respect to a Note during an accrual period. The U.S. dollar value
of such accrued income will be determined by translating such income at the
average rate of exchange for the accrual period or, with respect to an accrual
period that spans two taxable years, at the average rate for the partial period
within the taxable year. A U.S. Holder may elect, however, to translate such
accrued interest income using the rate of exchange on the last day of the
accrual period or, with respect to an accrual period that spans two taxable
years, using the rate of exchange on the last day of the taxable year. If the
last day of an accrual period is within five business days of the date of
receipt of the accrued interest, a U.S. Holder may translate such interest
using the rate of exchange on the date of receipt. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above
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<PAGE>
election. A U.S. Holder will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest income on
the date such income is received. The amount of ordinary income or loss
recognized will equal the difference, if any, between the U.S. dollar value of
the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss
in an amount equal to the difference, if any, between such U.S. Holder's tax
basis in the Foreign Currency and the U.S. dollar fair market value of the
Foreign Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income)
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year.
To the extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or the
Note is disposed of (or deemed disposed of as a result of a material change in
the terms of the Note). In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the
U.S. dollar value of the amount realized by translating the Foreign Currency
payment at the spot rate of exchange on the settlement date of the sale. A U.S.
Holder's adjusted tax basis in a Note will equal the cost of the Note to such
holder, increased by the amounts of any market discount or original issue
discount previously included in income by the holder with respect to such Note
and reduced by any amortized acquisition or other premium and any principal
payments received by the holder. A U.S. Holder's tax basis in a Note, and the
amount of any subsequent adjustments to such holder's tax basis, will be the
U.S. dollar value of the Foreign Currency amount paid for such Note, or of the
Foreign Currency amount of the adjustment, determined on the date of such
purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that is
attributable to fluctuations in currency exchange rates will be ordinary income
or loss which will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain
or loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount. In the case of a Discount Note or ShortTerm Note,
(i) original issue discount is determined in units of the Foreign Currency,
(ii) accrued original issue discount is translated into U.S. dollars as
described in "Payments of Interest in a Foreign Currency--Accrual Method" above
and (iii) the amount of Foreign Currency gain or loss on the accrued original
issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate
S-26
<PAGE>
of exchange on the date of such receipt, with the amount of original issue
discount accrued, as translated above.
Premium and Market Discount. In the case of a Note with market discount, (i)
market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account
currently) is translated into U.S. dollars at the exchange rate on such
disposition date (and no part of such accrued market discount is treated as
exchange gain or loss) and (iii) accrued market discount currently includible
in income by a U.S. Holder for any accrual period is translated into U.S.
dollars on the basis of the average exchange rate in effect during such accrual
period, and the exchange gain or loss is determined upon the receipt of any
partial principal payment or upon the sale, exchange, retirement or other
disposition of the Note in the manner described in "Payments of Interest in a
Foreign Currency--Accrual Method" above with respect to computation of exchange
gain or loss on accrued interest.
With respect to a Note acquired with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the U.S.
dollar value of the bond premium amortized with respect to a period, determined
on the date the interest attributable to such period is received, and the U.S.
dollar value of the bond premium determined on the date of the acquisition of
the Note.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation
("Portfolio Interest Exemption"), the last United States payor in the chain of
payment prior to payment to a non-U.S. Holder (the "Withholding Agent") must
have received in the year in which a payment of interest or principal occurs,
or in either of the two preceding calendar years, a statement that (i) is
signed by the beneficial owner of the Note under penalties of perjury, (ii)
certifies that such owner is not a U.S. Holder and (iii) provides the name and
address of the beneficial owner. The statement may be made on an IRS Form W-8
or a substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof. An
applicable tax treaty also may reduce or eliminate United States withholding
tax on interest payments to Non-U.S. Holders that do not qualify for the
Portfolio Interest Exemption. Non-U.S. Holders should consult their own tax
advisors in this regard.
S-27
<PAGE>
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through the Agent,
which has agreed to use its reasonable efforts to solicit purchases of the
Notes. The Company will pay the Agent a commission ranging from .125% to .750%
of the principal amount of Notes sold through the Agent, depending on the
maturity of the Notes sold. The Company has also agreed to reimburse the Agent
for certain of its expenses.
The Company may also sell the Notes to the Agent, as principal, for resale to
one or more investors and other purchasers in negotiated transactions, at fixed
public offering prices or at varying prices determined at the time of resale.
The Company reserves the right to sell Notes directly on its own behalf in
those jurisdictions where it is authorized to do so. No commission will be
payable on any sales made directly by the Company.
S-28
<PAGE>
The Agent may act as an agent for sales of Notes, or may offer the Notes they
have purchased as principal, to or through dealers and, unless otherwise
specified in the applicable Pricing Supplement, such dealers may receive
compensation in the form of discounts, concessions or commissions from the
Agent not in excess of the discount or commission received by the Agent from
the Company.
Unless otherwise indicated in the applicable Pricing Supplement, any Note
sold to the Agent as principal will be purchased by the Agent at a price equal
to 100% of the principal amount thereof less a percentage equal to the
commission applicable to an agency sale of a Note of identical maturity, and
may be resold by the Agent to investors and other purchasers 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 or
may be resold to or through certain dealers as described above. After an
initial public offering of Notes purchased by the Agent as principal to be
resold to investors and other purchasers, the public offering price (in the
case of a fixed price public offering), the concession and the discount may be
changed. The applicable Pricing Supplement may set forth further information
with respect to the distribution of the Notes.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes. The Agent will have the right, in
its sole discretion, to reject any offer received by it. Payment of the
purchase price of Notes will be required to be made in immediately available
funds.
The Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agent against certain liabilities, including
liabilities under the Securities Act.
The Notes are a new issue of securities with no established trading market.
The Agent has informed the Company that it intends to make a market in the
Notes, but is under no obligation to do so and such market making may be
discontinued at any time. No assurance can be given as to the liquidity of a
trading market for the Notes.
The Agent has in the past performed, and is currently performing, investment
banking services for the Company and certain of its affiliates and may receive
fees in connection with such services.
The Agent is a wholly owned subsidiary of the Company. The arrangements
between the Company and the Agent for the offering of the Notes and the Agent's
market-making activities with respect to the Notes will be conducted in
compliance with the requirements of Conduct Rule 2720 of the National
Association of Securities Dealers, Inc.
S-29
<PAGE>
DEAN WITTER, DISCOVER & CO.
DEBT SECURITIES
----------------
Dean Witter, Discover & Co. (the "Company") intends to sell from time to time
up to U.S. $3,344,725,000.00 aggregate principal amount (or net proceeds in
the case of securities issued at an original issue discount), or its
equivalent in such foreign currencies or units of two or more currencies,
based on the applicable exchange rate at the time of offering, as shall
be designated by the Company at the time of offering, of its debt
securities ("Debt Securities"). The Debt Securities may be offered
as separate series in amounts, at prices and on terms to be
determined at the time of sale.
The Debt Securities will be unsecured obligations and will rank pari passu
with all other unsecured and unsubordinated indebtedness of the Company.
Each issue of Debt Securities may vary, where applicable, as to aggregate
principal amount, maturity date, public offering or purchase price,
interest rate or rates, if any, and timing of payments thereof,
provisions for redemption, sinking fund requirements, if any,
currencies of denomination or currencies otherwise applicable thereto
and any other variable terms and method of distribution. The
accompanying Prospectus Supplement (the "Prospectus Supplement")
sets forth the specific terms with regard to the Debt Securities
in respect of which this Prospectus is being delivered.
----------------
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Debt Securities may be sold through underwriting syndicates represented
by one or more managing underwriters, which may include Dean Witter Reynolds
Inc., by underwriters without a syndicate, through agents designated from time
to time, or directly to purchasers. The names of any such managing
underwriters, underwriters or agents of the Company involved in the sale of
the Debt Securities in respect of which this Prospectus is being delivered and
any applicable commissions or discounts are set forth in the accompanying
Prospectus Supplement with respect to such Debt Securities. Debt Securities
may not be sold by the Company or any underwriter without delivery of a
Prospectus Supplement describing such issue of Debt Securities and the method
and terms of offering thereof.
This Prospectus and the accompanying Prospectus Supplement may be used by
Dean Witter Reynolds Inc., which is a wholly owned subsidiary of the Company,
in connection with offers and sales of Debt Securities in market-making
transactions at negotiated prices at the time of sale or otherwise. Dean
Witter Reynolds Inc. may act as principal or agent in such transactions.
----------------
DEAN WITTER REYNOLDS INC.
September 6, 1996
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
The Company................................................................ 4
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 4
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 11
Legal Opinions............................................................. 12
Experts.................................................................... 12
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and New York Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Copies of such
material and other information concerning the Company may also be inspected at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005 and the Pacific Stock Exchange, Inc., 301 Pine Street, San
Francisco, California 94104. In addition, the Commission maintains a site on
the World Wide Web portion of the Internet that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
and June 30, 1996 and Current Reports on Form 8-K dated January 4, 1996,
January 8, 1996, January 23, 1996, April 18, 1996 and July 18, 1996 are hereby
incorporated by reference in this Prospectus.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any subsequently filed document which also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of such person, a copy of any or all documents that have been or will
be incorporated in this Prospectus by reference, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents. Requests for such copies should be directed to Investor
Relations, Dean Witter, Discover & Co., Two World Trade Center, New York, New
York 10048, Telephone No. (800) 733-2307.
IN CONNECTION WITH THE OFFERING OF CERTAIN OF THE SECURITIES, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICES OF SUCH OFFERED SECURITIES OR OTHER SECURITIES OF THE COMPANY
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
THE COMPANY
The Company is a diversified financial services organization that provides a
broad range of nationally marketed credit and investment products, with a
primary focus on individual customers. The Company has two principal lines of
business: credit services and securities. Its credit services business ("Credit
Services") consists primarily of the issuance, marketing and servicing of
general purpose credit cards. Credit Services is the single largest domestic
issuer of general purpose credit cards as measured by number of accounts and
cardmembers. Discover (R) Card is the Company's most widely held proprietary
general purpose credit card and generated a majority of Credit Services
revenues and net income in 1995. The Company's securities business is conducted
primarily through its wholly owned subsidiaries, Dean Witter Reynolds Inc.
("DWR") and Dean Witter InterCapital Inc. ("InterCapital"). DWR is a full-
service securities firm that engages in a wide variety of securities
activities, with a particular focus on serving the investment needs of its
individual clients through over 8,500 Account Executives as of December 31,
1995. DWR is among the largest members of the New York Stock Exchange and is a
member of other major securities, futures and options exchanges in the United
States. InterCapital, with total assets of $84.6 billion under management and
administration as of June 30, 1996, is one of the largest asset management
operations in the United States.
The Company was incorporated under the laws of the State of Delaware in 1981.
Its principal executive offices are located at Two World Trade Center, New
York, New York 10048; its telephone number is (212) 392-2222.
USE OF PROCEEDS
Except as may be otherwise set forth in the Prospectus Supplement
accompanying this Prospectus, the net proceeds to be received by the Company
from the sale or sales of the Debt Securities will be used for general
corporate purposes, which may include the repayment of indebtedness, working
capital, capital expenditures and the repurchase of shares of the Company's
common stock. Funds not required immediately for such purposes may be invested
temporarily in short-term marketable securities. The Company anticipates that
it will raise additional funds from time to time through equity or debt
financings, including borrowings under revolving credit agreements.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, FISCAL YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
2.0 1.9 2.1 2.2 1.7 1.5
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes and fixed charges and in 1992
includes a cumulative effect of change in method of accounting for
postretirement benefits. Additionally, "earnings" in 1992 excludes a
nonrecurring gain of $32.1 million from the initial public offering of 25.7% of
SPS Transaction Services, Inc. "Fixed charges" consist of interest costs,
including interest on deposits, and that portion of rent expense estimated to
be representative of the interest factor.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture")
between the Company and The First National Bank of Chicago (the "Trustee"). The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all provisions of the Indenture, a copy of which is filed as an exhibit to the
Registration Statement. The following provisions will apply to Debt Securities
unless otherwise provided in the Prospectus Supplement for such Debt
Securities. All capitalized terms appearing herein and not otherwise defined
herein have the meanings specified in the Indenture.
GENERAL
The Indenture provides that Debt Securities may be issued thereunder, without
limitation as to aggregate principal amount, in one or more series, by the
Company from time to time upon satisfaction of certain conditions precedent,
including the delivery by the Company to the Trustee of certified resolutions
of the Board of Directors of the Company which fix or provide for the
establishment of terms of such Debt Securities (in the event that such Debt
Securities are not provided for in a supplemental indenture), including: (1)
the aggregate principal amount of such Debt Securities; (2) the date or dates
on which such Debt Securities will mature; (3) the rate or rates per annum
(which may be fixed or variable) at which such Debt Securities will bear
interest, if any; (4) the dates on which such interest, if any, will be
payable; (5) the provisions for redemption of such Debt Securities, if any, the
redemption price and any remarketing arrangements relating thereto; (6) the
sinking fund requirements, if any, with respect to such Debt Securities; (7)
whether such Debt Securities are denominated or provide for payment in United
States dollars or a foreign currency or units of two or more of such foreign
currencies; (8) the form (registered or bearer or both) in which such Debt
Securities may be issued and any restrictions applicable to the exchange of one
form for another and to the offer, sale and delivery of such Debt Securities in
either form; (9) whether and under what circumstances the Company will pay
additional amounts ("Additional Amounts") in respect of such Debt Securities
held by a person who is not a U.S. person (as defined in the Prospectus
Supplement, as applicable) in respect of specified taxes, assessments or other
governmental charges and whether the Company has the option to redeem the
affected Debt Securities rather than pay such Additional Amounts; (10) whether
such Debt Securities are to be issued in global form; (11) any deletions from,
modifications of or additions to the provisions of the Indenture; and (12) the
title of the Debt Securities and the series of which such Debt Securities shall
be a part. Reference is made to the Prospectus Supplement for the terms of the
Debt Securities being offered thereby.
The provisions of the Indenture provide the Company with the ability to issue
Debt Securities with terms different from those of Debt Securities previously
issued and to "reopen" a previous issue of a series of Debt Securities and
issue additional Debt Securities of such series.
The Debt Securities will be unsecured and will rank pari passu with all other
unsecured and unsubordinated indebtedness of the Company. The Company's assets
consist primarily of receivables from its subsidiaries and the common stock of
its direct subsidiaries, and the Company conducts no substantial business or
operations itself. Accordingly, the right of the Company, and hence the right
of creditors of the Company (including the Holders of the Debt Securities), to
participate in any distribution of the assets of any subsidiary of the Company
upon its liquidation or reorganization will be subject to the prior claims of
creditors of such subsidiary, except to the extent that claims of the Company
itself as a creditor of such subsidiary may be recognized. Creditors of the
Company (including Holders of the Debt Securities) may be limited in their
ability to participate in any proceeding related to a liquidation or
reorganization of any such subsidiary. In addition,
5
<PAGE>
dividends, loans and advances from certain subsidiaries to the Company are
restricted by legal requirements, including (in the case of DWR) net capital
requirements under the Exchange Act and under rules of certain exchanges and
other regulatory bodies and (in the case of Greenwood Trust Company and other
bank subsidiaries) by banking regulations.
Principal and interest, premium and Additional Amounts, if any, will be
payable in the manner, at the places and subject to the restrictions set forth
in the Indenture, the Debt Securities and the Prospectus Supplement relating
thereto, provided that payment of any interest and any Additional Amounts may
be made at the option of the Company by check mailed to the Holders of
registered Debt Securities at their registered addresses.
Debt Securities may be presented for exchange, and registered Debt Securities
may be presented for transfer, in the manner, at the place and subject to the
restrictions set forth in the Indenture, the Debt Securities and the Prospectus
Supplement relating thereto. Debt Securities in bearer form and the coupons, if
any, pertaining thereto will be transferable by delivery. 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.
Debt Securities may bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate will be sold at a discount below
their stated principal amount. Special United States federal income tax
considerations applicable to any such discounted Debt Securities or to certain
Debt Securities issued at par which are treated as having been issued at a
discount for United States federal income tax purposes will be described in the
relevant Prospectus Supplement.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on any
interest payment date, to be determined by reference to one or more currency
exchange rates, commodity prices, equity indices or other factors. Holders of
such Debt Securities may receive a principal amount on any principal payment
date, or a payment of interest on any interest payment date, that is greater
than or less than the amount of principal or interest otherwise payable on such
dates, depending upon the value on such dates of the applicable currency,
commodity, equity index or other factor. Information as to the methods for
determining the amount of principal or interest payable on any date, the
currencies, commodities, equity indices or other factors to which the amount
payable on such date is linked and certain additional tax considerations will
be set forth in the applicable Prospectus Supplement.
GLOBAL SECURITIES
Except as provided in the Prospectus Supplement relating thereto, registered
Debt Securities will be issued in global form ("Book-Entry Securities"). Book-
Entry Securities will be issued in the form of one or more fully registered
global Debt Securities which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of the
Depositary's nominee (each, a "Registered Global Security"). Except as set
forth below, a Registered Global Security may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor of the Depositary or a nominee of
such successor.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the
6
<PAGE>
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary was created to hold securities of its
participants ("Participants") and to facilitate the settlement of securities
transactions among its Participants in such securities through electronic book-
entry changes in accounts of the Participants, thereby eliminating the need for
physical movement of securities certificates. The Depositary's Participants
include securities brokers and dealers, banks, trust companies, clearing
companies and certain other organizations. The Depositary is owned by a number
of its Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the Depositary's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("Indirect Participants").
Purchases of Book-Entry Securities must be made by or through Participants,
which will receive a credit for such Book-Entry Securities on the records of
the Depositary. The ownership interest of each actual purchaser of each Book-
Entry Security represented by a Registered Global Security ("Beneficial Owner")
is in turn to be recorded on the Participants' or Indirect Participants'
records. Beneficial Owners will not receive written confirmation from the
Depositary of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements or their holdings, from the Participant or Indirect Participant
through which such Beneficial Owner entered into the transaction. Ownership of
beneficial interests in a Registered Global Security will be limited to
Participants or persons that may hold interests through Participants.
Beneficial interests in a Registered Global Security will be shown on, and the
transfer thereof will be effected only through, records maintained by the
Depositary (with respect to beneficial interests of Participants) or by
Participants or persons that may hold interests through Participants (with
respect to beneficial interests held through Participants). The laws of some
states may require that certain purchasers of securities take physical delivery
of such securities in certificated form. Such limits and such laws may impair
the ability to transfer beneficial interests in a Registered Global Security.
For a Registered Global Security, so long as the Depositary or its nominee is
the registered owner of a Registered Global Security, the Depositary or its
nominee, as the case may be, will be considered the sole owner or Holder of the
Debt Securities represented by such Registered Global Security for all purposes
under the Indenture. Except as provided below, owners of beneficial interests
in a Registered Global Security will not be entitled to have Debt Securities
represented by such Registered 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 Indenture. Accordingly, each person owning a beneficial interest in a
Registered Global Security must rely on the procedures of the Depositary and,
if such person is not a Participant, on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a Holder
under the Indenture. The Company understands that under existing industry
practices, in the event that the Company requests any action of Holders or that
an owner of a beneficial interest in such a Registered Global Security desires
to give or take any action which a Holder is entitled to give or take under the
Indenture, the Depositary would authorize the Participants holding the relevant
beneficial interests to give or take such action, and such Participants would
authorize Beneficial Owners owning through such Participants to give or take
such action or would otherwise act upon the instructions of Beneficial Owners.
Conveyance of notices and other communications by the Depositary to
Participants, by Participants to Indirect Participants, and by 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.
7
<PAGE>
Principal and interest payments on Debt Securities issued in book-entry form
and represented by one or more Registered Global Securities will be made by the
Company to the Depositary or its nominee, as the case may be, as the registered
owner of the related Registered Global Security or Securities. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Registered Global Securities, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Depositary, upon receipt of any payment
of principal or interest in respect of the Registered Global Securities, will
credit immediately the accounts of the related Participants with payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interests in such Registered Global Securities as shown on the
records of the Depositary. The Company also expects that payments by
Participants to owners of beneficial interests in the Registered Global
Securities will be governed by standing customer instructions and customary
practices, as is now 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 Participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue Debt Securities in certificated form that will be
exchanged for each Registered Global Security. In addition, the Company may at
any time determine not to have Debt Securities represented by the Registered
Global Security or Securities. In any such instance, owners of beneficial
interests in such Registered Global Securities will be entitled to physical
delivery in certificated form of Debt Securities equal in principal amount to
such beneficial interest and to have such Debt Securities registered in its
name. Debt Securities so issued in certificated form will be issued in
denominations of $1,000 or any larger amount that is an integral multiple
thereof and will be issued in registered form only, without coupons.
The Debt Securities of a series may also be issued in the form of one or more
bearer global Debt Securities that will be deposited with a common depositary
for the Euroclear System and Cedel Bank, S.A., or with a nominee for such
depositary identified in the Prospectus Supplement relating to such series.
MERGER AND CONSOLIDATION
Nothing contained in the Indenture or in any of the Debt Securities shall
prevent any consolidation or merger of the Company with or into any other
Person or Persons (whether or not affiliated with the Company), or successive
consolidations or mergers in which the Company or its successor or successors
shall be a party or parties, or shall prevent any conveyance, transfer or lease
of the property of the Company as an entirety, or substantially as an entirety,
to any other Person (whether or not affiliated with the Company); provided,
however, that:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the entity 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 shall be a corporation organized and existing
under the laws of the United States of America, any state thereof or the
District of Columbia and shall expressly assume the due and punctual
payment of the principal of, any premium and interest on and any Additional
Amounts with respect to all the Debt Securities and the performance of
every other covenant of the Indenture on the part of the Company to be
performed or observed;
8
<PAGE>
(2) immediately after giving effect to such transaction, no event which,
after notice or lapse of time, would become an event of default under the
Indenture (an "Event of Default"), shall have occurred and be continuing;
and
(3) either the Company or the successor Person shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, stating
that such consolidation, merger, conveyance, transfer or lease and such
supplemental indenture comply with the Indenture and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
Except as provided above or as may otherwise be provided in the accompanying
Prospectus Supplement, there are no "event risk" or similar provisions of the
Indenture or the Debt Securities that are intended to afford protection to
Holders in the event of a merger or other significant corporate event involving
the Company.
Upon any consolidation or merger or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety to any Person
in accordance with the provisions of the Indenture described above, the
successor Person will succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture and thereafter,
except in the case of a lease to another Person, the Company shall be released
from all obligations and covenants under the Indenture and the Debt Securities.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the Company
and the Trustee with the consent of the Holders of 51% in principal amount of
the Outstanding Debt Securities of each series issued pursuant to the Indenture
and affected thereby, provided that no such modification or amendment may,
without the consent of the Holder of each Outstanding Debt Security affected
thereby, (a) change the Stated Maturity of, or any installment of interest or
Additional Amounts payable on, any Debt Security or any premium payable on the
redemption thereof, or change the Redemption Price; (b) reduce the principal
amount of, or the interest or Additional Amounts payable on, any Debt Security
or reduce the amount of principal which could be declared due and payable prior
to the Stated Maturity; (c) change the place or currency of any payment of
principal of, or any premium, interest or Additional Amounts on, any Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Debt Securities of any series, the consent
of whose Holders is required to modify or amend the Indenture; or (f) modify
the foregoing requirements or reduce the percentage in principal amount of
Outstanding Debt Securities necessary to waive any past default to less than a
majority. Except with respect to certain fundamental provisions, the Holders of
at least a majority in principal amount of Outstanding Debt Securities of any
series may, with respect to such series, waive past defaults under the
Indenture and waive compliance by the Company with certain provisions of the
Indenture.
EVENTS OF DEFAULT
Unless otherwise set forth in the Prospectus Supplement, the following will
be Events of Default with respect to Debt Securities of any series issued under
the Indenture: (a) default in the payment of any interest on or any Additional
Amounts payable in respect of any Debt Security of that series when due,
continued for 30 days; (b) default in the payment of any principal of or
premium, if any, on any Debt Security of that series when due; (c) default in
the deposit of any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) default in the performance, or breach, of any
other covenant or warranty of the Company contained in the Indenture or the
Debt Securities for the benefit of such series, continued for 60 days after
written
9
<PAGE>
notice thereof has been given to the Company by either the Trustee or the
Holders of at least 25% in principal amount of the Outstanding Debt Securities
of such series as provided in the Indenture; (e) certain events of bankruptcy,
insolvency or reorganization of the Company or a Principal Subsidiary (defined
below); and (f) any other Event of Default provided with respect to Debt
Securities of that series. The Trustee or the Holders of 25% in principal
amount of the Outstanding Debt Securities of that series may declare the
principal amount (or such lesser amount as may be provided for in the Debt
Securities of that series) of all Outstanding Debt Securities of that series
and the interest accrued thereon and Additional Amounts payable in respect
thereof, if any, to be due and payable immediately if an Event of Default with
respect to Debt Securities of such series shall occur and be continuing at the
time of declaration. At any time after a declaration of acceleration has been
made with respect to Debt Securities of any series but before a judgment or
decree for payment of money due has been obtained by the Trustee, the Holders
of a majority in principal amount of the Outstanding Debt Securities of that
series may rescind any declaration of acceleration and its consequences, if all
payments due (other than those due as a result of acceleration) have been made
and all Events of Default have been remedied or waived. Any Event of Default
with respect to Debt Securities of any series may be waived by the Holders of a
majority in principal amount of all Outstanding Debt Securities of that series,
except in a case of failure to pay principal of or premium, if any, or interest
or Additional Amounts, if any, on any Debt Security of that series for which
payment has not been subsequently made or in respect of a covenant or provision
which cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security of such series affected.
The Holders of a majority in principal amount of the Outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to Debt Securities of such series,
provided that such direction shall not be in conflict with any rule of law or
the Indenture. Before proceeding to exercise any right or power under the
Indenture at the direction of such Holders, the Trustee shall be entitled to
receive from such Holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction.
The Company will be required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Indenture.
LIMITATION ON LIENS
The Indenture provides that the Company may not at any time directly or
indirectly create, assume, incur, or suffer to be created, assumed or incurred
or suffer to exist any mortgage, pledge, encumbrance or lien (except for
certain liens specifically permitted by the Indenture) by which there may be
issued, or by which there may be secured or evidenced, any indebtedness of the
Company or any Principal Subsidiary for money borrowed (except for any bona
fide option or agreement to sell), upon (1) any shares of capital stock of any
Principal Subsidiary (other than directors' qualifying shares) or (2) any
shares of capital stock owned by the Company of a subsidiary of the Company
that owns, directly or indirectly, capital stock of any of the Principal
Subsidiaries (other than directors' qualifying shares) without, in each case,
making effective provision whereby the Debt Securities (and any other
indebtedness of the Company or such Subsidiary entitled to the benefit of a
covenant similar to this covenant, subject to applicable priorities of payment)
will be secured equally and ratably with any and all other obligations thereby
secured. The Indenture defines "Principal Subsidiaries" to mean each of
Greenwood Trust Company and DWR, so long as they continue, directly or
indirectly, to be subsidiaries of the Company, and any subsidiary of the
Company succeeding to any substantial part of the business now conducted by any
of such corporations.
10
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (i) through underwriters or dealers;
(ii) directly to one or more purchasers; or (iii) through agents. Any such
underwriters, dealers or agents in the United States may include DWR, a wholly-
owned subsidiary of the Company, and any such underwriters, dealers or agents
outside the United States may include Dean Witter International Ltd., a wholly-
owned subsidiary of the Company. The Prospectus Supplement with respect to the
Debt Securities being offered thereby sets forth the terms of the offering of
such Debt Securities, including the name or names of any underwriters, the
purchase price of such Debt Securities and the proceeds to the Company from
such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial offering price, any discounts or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which such Debt Securities may be listed. Only underwriters so
named in the Prospectus Supplement shall be deemed to be underwriters in
connection with the Debt Securities offered thereby.
If underwriters are used in the sale, the Debt 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 price
or at varying prices determined at the time of sale or at negotiated prices.
Such Debt Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. The obligations of the underwriters to purchase such Debt Securities
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Debt Securities of the series offered by the
Company's Prospectus Supplement if any of such Debt Securities are purchased.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Debt Securities may also be sold directly by the Company or though agents
designated by the Company from time to time. Any agent involved in the offering
and sale of the Securities will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement. Unless
otherwise indicated in the Prospectus Supplement, any such agent is acting
solely as an agent for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain institutional
investors to purchase Debt Securities providing for payment and delivery on a
future date specified in the Prospectus Supplement. There may be limitations on
the minimum amount which may be purchased by any such institutional investor or
on the portion of the aggregate principal amount of the particular Debt
Securities which may be sold pursuant to such arrangements. Institutional
investors to which such offers may be made, when authorized, include commercial
and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and such other institutions as may be
approved by the Company. The obligations of any such purchasers pursuant to
such delayed delivery and payment arrangements will not be subject to any
conditions except (i) the purchase by an institution of the particular Debt
Securities shall not at the time of delivery be prohibited under the laws of
any jurisdiction of the United States to which such institution is subject, and
(ii) if the particular Debt Securities are being sold to underwriters, the
Company shall have sold to such underwriters the total principal amount of such
Debt Securities less the principal amount thereof covered by such arrangements.
Underwriters will not have any responsibility in respect of the validity of
such arrangements or the performance of the Company or such institutional
investors thereunder.
Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Company and any profit on the resale of Debt
Securities by them may be deemed to be underwriting
11
<PAGE>
discounts and commissions, under the Securities Act of 1933, as amended (the
"Act"). Under arrangements which may be entered into by the Company and as may
be described in the Prospectus Supplement with respect to the Debt Securities
being issued, underwriters, dealers and agents who participate in the
distribution of such Debt Securities may be entitled to indemnification by the
Company against certain civil liabilities, including liabilities under the Act,
or to contribution with respect to payments that the underwriters, dealers or
agents may be required to make with respect thereto. Underwriters, dealers and
agents may engage in transactions with, or perform services for, the Company
and its subsidiaries in the ordinary course of their respective businesses.
The Debt Securities may or may not be listed on a national securities
exchange. If at the time of issuance it is intended that any Debt Securities
shall be listed on a national securities exchange, such exchange shall be
identified in the Prospectus Supplement with respect to such Debt Securities.
There is no assurance that a secondary market will develop for the Debt
Securities or, if it does develop, that it will continue.
The distribution of Debt Securities will conform to the requirements set
forth in the applicable sections of Conduct Rule 2720 of the National
Association of Securities Dealers, Inc.
LEGAL OPINIONS
The validity of the Debt Securities will be passed upon for the Company by
Brown & Wood, New York, New York and for the underwriters, dealers or agents,
if any, by Kirkland & Ellis, New York, New York.
EXPERTS
The consolidated financial statements and related supplemental schedules of
the Company and its subsidiaries incorporated in this Prospectus by reference
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports incorporated by reference herein, and have been so
incorporated by reference in reliance upon such reports given upon the
authority of that firm as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in any such Quarterly Report on
Form 10-Q and incorporated by reference herein, they did not audit and they do
not express an opinion on such interim financial information. Accordingly, the
degree of reliance on their report on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Securities
Act of 1933 for their reports on the unaudited interim financial information
because those reports are not "reports" or a "part" of the registration
statement prepared or certified by an accountant within the meaning of Sections
7 and 11 of the Act.
12
<PAGE>
DEAN WITTER, DISCOVER & CO.
U.S. $6,600,000,000
MEDIUM-TERM NOTES SERIES I
PROSPECTUS SUPPLEMENT
DEAN WITTER REYNOLDS INC.
SEPTEMBER 6, 1996
