PROSPECTUS SUPPLEMENT
(To Prospectus dated June 2, 1997)
$7,000,000,000
Morgan Stanley, Dean Witter, Discover & Co.
GLOBAL MEDIUM-TERM NOTES, SERIES C
GLOBAL UNITS, SERIES C
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Due More Than Nine Months from Date of Issue
--------------
Morgan Stanley, Dean Witter, Discover & Co. (the "Company") may
offer from time to time, either alone or as part of a Unit, its Global
Medium-Term Notes, which are issuable in one or more series and may be offered
and sold in the United States, outside the United States or both in and
outside the United States simultaneously. Global Medium-Term Notes issued as
part of a Unit will be issued in conjunction with one or more Universal
Warrants, Purchase Contracts or any combination thereof. See "Description of
Units." The Global Medium-Term Notes, Series C (the "Notes"), and the Global
Units, Series C, each consisting of one or more Series C Notes and one or more
Universal Warrants, Purchase Contracts or any combination thereof (the "Units"
and together with the Series C Notes, the "Program Securities"), offered by
this Prospectus Supplement are offered primarily in the United States at an
aggregate initial public offering price of up to $7,000,000,000, or the
equivalent thereof in other currencies, including composite currencies such as
the ECU (the "Specified Currency"). See "Important Currency Exchange
Information." Such aggregate offering price is subject to reduction as a
result of the sale by the Company of certain other Debt Securities, including
the sale of the Company's Global Medium-Term Notes, Series D and Series E and
Global Units, Series D and Series E outside the United States and of certain
Warrants, Preferred Stock, Purchase Contracts and Units. See "Plan of
Distribution."
The Notes may be issued as Senior Indebtedness or Subordinated
Indebtedness. Subordinated Indebtedness will be subordinate to all Senior
Indebtedness. See "Description of Debt Securities -- Subordinated Debt" in
the accompanying Prospectus. The interest rate on each Note will be either a
fixed rate established by the Company at the date of issue of such Note, which
may be zero in the case of certain Original Issue Discount Notes, or a
floating rate as set forth therein and specified in the applicable Pricing
Supplement. Such interest rates may be determined by reference to the prices
of certain securities or commodities. A Fixed Rate Note may pay a level
amount in respect of both interest and principal amortized over the life of
the Note (an "Amortizing Note"). Each Note will mature on any day more than
nine months from the date of issue, as set forth in the applicable Pricing
Supplement. See "Description of Notes." Unless otherwise specified in the
applicable Pricing Supplement, the Notes may not be redeemed by the Company or
be repayable at the option of the holder prior to maturity and will be issued
in fully registered form in denominations of $1,000 (or, in the case of Notes
not denominated in U.S. dollars, the equivalent thereof in the Specified
Currency, rounded to the nearest 1,000 units of the Specified Currency) or any
amount in excess thereof which is an integral multiple of $1,000 (or, in the
case of Notes not denominated in U.S. dollars, 1,000 units of the Specified
Currency). Any terms relating to Notes being denominated in foreign
currencies or composite currencies will be as set forth in the applicable
Pricing Supplement.
Universal Warrants included in Units will entitle the holders
thereof to purchase or sell (a) securities of an entity unaffiliated with the
Company, a basket of such securities, an index or indices of such securities
or any combination of the above, (b) currencies or composite currencies or (c)
commodities. The Company may satisfy its obligations, if any, with respect to
any Universal Warrants by delivering the underlying securities, currencies or
commodities or, in the case of underlying securities or commodities, the cash
value thereof, as set forth in the applicable Pricing Supplement. A Universal
Warrant issued as part of a Unit may not be separated from the other
securities comprising such Unit prior to such Warrant's expiration date unless
otherwise specified in the applicable Pricing Supplement.
Purchase Contracts included in Units will require the holders
thereof to purchase or sell (a) securities of an entity unaffiliated with the
Company, a basket of such securities, an index or indices of such securities
or any combination of the above, (b) currencies or composite currencies or (c)
commodities. A Purchase Contract issued as part of a Unit may not be
separated from the other securities comprising such Unit prior to such
Purchase Contract's settlement date, unless otherwise specified in the
applicable Pricing Supplement. The applicable Pricing Supplement will also
specify the methods by which the holders may purchase or sell such securities,
currencies or commodities and any acceleration, cancellation or termination
provisions or other provisions relating to the settlement of a Purchase
Contract.
Each Program Security will be represented either by a Global
Program Security registered in the name of a nominee of The Depository Trust
Company, as Depositary (a "Book-Entry Program Security"), or by a certificate
issued in definitive form (a "Certificated Program Security"), as set forth in
the applicable Pricing Supplement. Interests in Global Program Securities
representing Book-Entry Program Securities will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary
(with respect to participants' interests) and its participants. Book-Entry
Program Securities will not be issuable as Certificated Program Securities
except under the circumstances described in the accompanying Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
Price to Agent's Proceeds to
Public(1) Commissions(2) Company(2)(3)
-------------- ------------------------ -------------------------------
<S> <C> <C> <C>
Per Note or Unit....... 100.000% .125%-.750% 99.875% -99.250%
Total(4)............... $7,000,000,000 $8,750,000 - $52,500,000 $6,991,250,000 - $6,947,500,000
</TABLE>
- ------------
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount and Units will be sold
at 100% of the principal amount of the Notes included therein.
(2) Unless otherwise specified in the applicable Pricing Supplement, the
commission payable to an Agent for each Program Security sold through
the Agent will range from .125% to .750% of the Price to Public of such
Program Security; provided, however, that commissions with respect to
Program Securities having a maturity of 30 years or greater will be
negotiated. The Company may also sell Program Securities to an Agent,
as principal, at negotiated discounts, for resale to investors and
other purchasers.
(3) Before deducting expenses payable by the Company estimated at $3,703,000.
(4) Or the equivalent thereof in other currencies, including composite
currencies.
--------------
Offers to purchase the Program Securities are being solicited
from time to time by Morgan Stanley & Co. Incorporated ("MS & Co.") and Dean
Witter Reynolds Inc. ("DWR"), wholly owned subsidiaries of the Company (each
an "Agent" and, together, the "Agents"), on behalf of the Company. The Agents
have agreed to use reasonable efforts to solicit purchases of such Program
Securities. The Company may also sell Program Securities to an Agent acting
as principal for its own account or otherwise as determined by such Agent. No
termination date for the offering of the Program Securities has been
established. The Company or the Agents may reject any order in whole or in
part. The Program Securities will not, unless otherwise noted in the
applicable Pricing Supplement, be listed on any securities exchange, and there
can be no assurance that the Program Securities offered hereby will be sold or
that there will be a secondary market for the Program Securities. See "Plan
of Distribution."
This Prospectus Supplement and the accompanying Prospectus may
be used by the Agents in connection with offers and sales of the Program
Securities in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale or otherwise. The Agents may act
as principal or agent in such transactions.
--------------
MORGAN STANLEY DEAN WITTER
June 2, 1997
No dealer, salesman or any other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus Supplement, any Pricing Supplement and the accompanying
Prospectus in connection with the offer contained in this Prospectus
Supplement, any Pricing Supplement and the accompanying Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or by the Agents. This Prospectus
Supplement, any Pricing Supplement and the accompanying Prospectus do not
constitute an offer to sell or a solicitation of an offer to buy Securities by
anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such offer
or solicitation.
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Important Currency Exchange
Information................................................................S-3
Description of
Notes......................................................................S-4
Description of
Units.....................................................................S-24
Foreign Currency
Risks.....................................................................S-31
United States Federal
Taxation..................................................................S-33
Plan of
Distribution..............................................................S-45
Legal
Matters...................................................................S-46
Prospectus
Available
Information..................................................................2
Incorporation of Certain Documents by
Reference....................................................................2
The
Company......................................................................4
Use of
Proceeds.....................................................................4
Consolidated Ratios of Earnings to Fixed Charges and Earnings to Fixed
Charges and Preferred Stock Dividends......................................5
Description of Debt Securities...............................................5
Description of Warrants.....................................................11
Description of Purchase Contracts...........................................14
Description of Units........................................................14
Limitations on Issuance of Bearer Securities and Bearer Debt Warrants.......14
Description of Capital Stock................................................15
Global Securities...........................................................28
Plan of Distribution........................................................30
Legal Matters...............................................................31
Experts.....................................................................31
ERISA Matters for Pension Plans and Insurance Companies.....................32
--------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
PROGRAM SECURITIES OR ANY SECURITIES THE PRICES OF WHICH MAY BE USED TO
DETERMINE PAYMENTS ON SUCH PROGRAM SECURITIES. SPECIFICALLY, THE AGENTS
SPECIFIED IN THE RELEVANT PRICING SUPPLEMENT MAY OVERALLOT IN CONNECTION
WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE PROGRAM SECURITIES OR
ANY SECURITIES THE PRICES OF WHICH MAY BE USED TO DETERMINE PAYMENTS ON
SUCH PROGRAM SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION" HEREIN AND IN THE RELEVANT PRICING
SUPPLEMENT.
--------------
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Program Securities in
U.S. dollars, and payments of principal, premium, if any, and interest on
Notes or payments with respect to Units or any security comprised by such Unit
will be made in U.S. dollars, unless otherwise provided in the applicable
Pricing Supplement. Currently, there are limited facilities in the United
States for the conversion of U.S. dollars into foreign currencies and vice
versa. In addition, most banks do not currently offer non-U.S. dollar
denominated checking or savings account facilities in the United States.
Accordingly, unless otherwise specified in a Pricing Supplement or unless
alternative arrangements are made (and subject, in the case of Book-Entry
Program Securities, to any additional procedures that may be required),
payment of principal, premium, if any, and interest on Notes (or any payment
with respect to a Unit or any security constituting such Unit) in a Specified
Currency other than U.S. dollars will be made to an account at a bank outside
the United States. See "Description of Notes," "Description of Units" and
"Foreign Currency Risks."
If the applicable Pricing Supplement provides for payments of
principal of and interest on a non-U.S. dollar denominated Note (or any
payment with respect to a Unit or any security constituting such Unit) to be
made in U.S. dollars or for payments of principal of and interest on a U.S.
dollar denominated Note (or any payment with respect to a Unit or any security
constituting such Unit) to be made in a Specified Currency other than U.S.
dollars, the conversion of the Specified Currency into U.S. dollars or U.S.
dollars into the Specified Currency, as the case may be, will be handled by MS
& Co., in its capacity as Exchange Rate Agent, or such other Exchange Rate
Agent identified in the Pricing Supplement. The costs of such conversion will
be borne by the holder of the Note or Unit through deductions from such
payments.
References herein to "U.S. dollars" or "U.S.$" or "$" are to
the currency of the United States of America.
--------------
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes
offered hereby supplements the description of the general terms and provisions
of the Debt Securities set forth in the Prospectus, to which reference is
hereby made. In particular, as used under this caption, the term "Company"
means Morgan Stanley, Dean Witter, Discover & Co. The particular terms of the
Notes sold pursuant to any pricing supplement (a "Pricing Supplement") will be
described therein. The terms and conditions set forth in "Description of
Notes" will apply to each Note unless otherwise specified in the applicable
Pricing Supplement and in such Note. The Notes described herein may be offered
either alone or as part of a Unit. See "Description of Units."
If any Note is not to be denominated in U.S. dollars, the
applicable Pricing Supplement will specify the currency or currencies,
including composite currencies such as the European Currency Unit (the "ECU"),
in which the principal, premium, if any, and interest, if any, with respect to
such Note are to be paid, along with any other terms relating to the non-U.S.
dollar denomination, including exchange rates for the Specified Currency as
against the U.S. dollar at selected times during the last five years, and any
exchange controls affecting such Specified Currency. See "Foreign Currency
Risks."
General
The Notes may be issued either alone or as part of a Unit,
under the Senior Debt Indenture ("Senior Notes") or the Subordinated Debt
Indenture ("Subordinated Notes"). The Notes issued under each Indenture,
together with the Company's Global Medium-Term Notes, Series D, and its Global
Medium-Term Notes, Series E, referred to below under "Plan of Distribution,"
will constitute a single series under such Indenture, together with any
medium-term notes of the Company issued in the future under such Indenture
which are designated by the Company as constituting a single series of
securities with the Notes and the Global Medium-Term Notes, Series D, and
Global Medium-Term Notes, Series E, for purposes of such Indenture. Neither
Indenture limits the amount of additional indebtedness that the Company may
incur. At February 28, 1997, the Company had approximately $13.7 billion
aggregate principal amount of medium-term notes outstanding under the Senior
Debt Indenture and approximately $82.5 million aggregate principal amount of
medium-term notes outstanding under the Subordinated Debt Indenture. Such
aggregate principal amounts may be increased from time to time as authorized
by, or pursuant to authority delegated by, the Board of Directors of the
Company. For the purpose of this paragraph, (i) the principal amount of any
Original Issue Discount Note (as defined below) means the Issue Price (as
defined below) of such Note and (ii) the principal amount of any Note issued
in a foreign currency or composite currency means the U.S. dollar equivalent
on the date of issue of the Issue Price of such Note.
Notes issued under the Senior Debt Indenture will rank pari
passu with all other Senior Indebtedness of the Company and with all other
unsecured and unsubordinated indebtedness of the Company, subject to certain
statutory exceptions in the event of liquidation upon insolvency. Notes issued
under the Subordinated Debt Indenture will rank pari passu with all other
subordinated indebtedness of the Company and, together with such other
subordinated indebtedness, will be subordinated in right of payment to the
prior payment in full of the Senior Indebtedness of the Company. See
"Description of Debt Securities -- Subordinated Debt" in the Prospectus. At
February 28, 1997, the Company had outstanding approximately $32.5 billion of
Senior Indebtedness, approximately $1.3 billion of subordinated indebtedness
and approximately $999 million of Capital Units. Each Capital Unit consists of
a subordinated debenture of Morgan Stanley Finance plc, a subsidiary of the
Company, guaranteed by the Company on a subordinated basis and a related
purchase contract issued by the Company requiring the holder to purchase one
depositary share representing ownership of a fraction or multiple of a share
of the Company's preferred stock.
Fixed Rate Notes, Amortizing Notes and Original Issue Discount
Notes will mature on any day more than nine months from the date of issue, as
set forth in the applicable Pricing Supplement. Floating Rate Notes (including
Renewable Notes, as defined below) will mature on an Interest Payment Date (as
defined below) more than nine months from the date of issue, as set forth in
the applicable Pricing Supplement. Except as may be specified for Notes
denominated in foreign or composite currencies or as otherwise provided in the
applicable Pricing Supplement, the Notes will be issued only in fully
registered form in denominations of $1,000 or any amount in excess thereof
which is an integral multiple of $1,000.
Unless otherwise provided in the applicable Pricing Supplement,
Notes denominated in a Specified Currency other than U.S. dollars will be
issued in denominations of the equivalent of $1,000 (rounded to an integral
multiple of 1,000 units of such Specified Currency), or any amount in excess
thereof which is an integral multiple of 1,000 units of such Specified
Currency, as determined by reference to the noon dollar buying rate in New
York City for cable transfers of such Specified Currency published by the
Federal Reserve Bank of New York (the "Market Exchange Rate") on the Business
Day (as defined below) immediately preceding the date of issuance; provided,
however, that in the case of ECUs, the Market Exchange Rate shall be the rate
of exchange determined by the Commission of the European Communities (or any
successor thereto) as published in the Official Journal of the European
Communities, or any successor publication, on the Business Day immediately
preceding the date of issuance.
The Notes will be offered on a continuing basis, and each Note
will be issued, either alone or as part of a Unit, initially as either a
Book-Entry Note or a Certificated Note. Except as set forth in the Prospectus
under "Description of Debt Securities -- Registered Global Securities,"
Book-Entry Notes will not be issuable as Certificated Notes. See "Book-Entry
System" below.
The Notes may be presented for payment of principal, premium,
if any, and interest, transfer of the Notes will be registrable and the Notes
will be exchangeable at the agency in the Borough of Manhattan, The City of
New York, maintained by the Company for such purpose; provided that Book-Entry
Notes will be exchangeable only in the manner and to the extent set forth
under "Description of Debt Securities -- Registered Global Securities" in the
Prospectus. On the date hereof, the agent for the payment, transfer and
exchange of the Notes (the "Paying Agent") is The Chase Manhattan Bank
(formerly known as Chemical Bank), acting through its corporate trust office
at 450 West 33rd Street, New York, New York 10001.
The applicable Pricing Supplement will specify the price (the
"Issue Price") of each Note to be sold pursuant thereto, the interest rate or
interest rate formula, ranking, maturity, currency or composite currency,
principal amount and any other terms on which each such Note will be issued.
As used herein, the following terms shall have the meanings set
forth below:
"Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New York
and (i) with respect to LIBOR Notes (as defined below), that is also a London
Banking Day, (ii) with respect to Notes denominated in a Specified Currency
other than U.S. dollars, Australian dollars or ECUs, in the principal financial
center of the country of the Specified Currency, (iii) with respect to Notes
denominated in Australian dollars, in Sydney and (iv) with respect to Notes
denominated in ECUs, that is not a non-ECU clearing day, as determined by the
ECU Banking Association in Paris.
An "Interest Payment Date" with respect to any Note shall be a
date on which, under the terms of such Note, regularly scheduled interest
shall be payable.
"London Banking Day" means any day on which dealings in
deposits in the relevant Index Currency (as defined below) are transacted in
the London interbank market.
"Original Issue Discount Note" means any Note that provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to the relevant
Indenture.
The "Record Date" with respect to any Interest Payment Date
shall be the date 15 calendar days prior to such Interest Payment Date,
whether or not such date shall be a Business Day.
Payment Currency
If the Notes are denominated in a Specified Currency other than
U.S. Dollars, and the holder does not elect (in whole or in part) to receive
payment in U.S. dollars pursuant to the next succeeding paragraph, payment of
interest, principal or any premium with regard to such Notes will be made by
wire transfer of immediately available funds to an account maintained by the
holder thereof with a bank located outside the United States if appropriate
wire transfer instructions have been received by the Paying Agent in writing
not less than 15 calendar days prior to the applicable payment date; provided
that, if such wire transfer instructions are not received, such payments will
be made by check payable in such Specified Currency mailed to the address of
the person entitled thereto as such address shall appear in the Note register;
and provided, further, that payment of the principal of the Notes, any premium
and the interest due at maturity (or on any redemption or repayment date) will
be made upon surrender of the Notes at the office or agency of the Paying
Agent.
If so specified in the applicable pricing Supplement, the
holder of Notes denominated in a Specified Currency other than U.S. dollars
may elect to receive all or a portion of payments on such Notes in U.S.
dollars by transmitting a written request to the Paying Agent, on or prior
to the Record Date or at least ten Business Days prior to the maturity date
or any redemption or repayment date, as the case may be. Such election
shall remain in effect unless such request is revoked by written notice to
the Paying Agent as to all or a portion of payments on such Notes at least
five Business Days prior to such Record Date or at least ten days prior to
the maturity date or any redemption or repayment date, as the case may be.
If the holder elects to receive in U.S. dollars all or a
portion of payments of principal, premium, if any, or interest on Notes
denominated in a Specified Currency other than U.S. dollars, the Exchange Rate
Agent will convert the Specified Currency into U.S. dollars based on the
highest bid quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 A.M., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign
exchange dealers (one of which may be the Exchange Rate Agent unless the
Exchange Rate Agent is an affiliate of the Company) for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on
such payment date in the aggregate amount of the Specified Currency payable to
the holders of Notes and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments will be made in
the Specified Currency. All currency exchange costs will be borne by the
holders of Notes by deductions from such payments.
Except as set forth below, if the principal of, premium, if
any, or interest on, any Note is payable in a Specified Currency other than
U.S. dollars and such Specified Currency is not available to the Company for
making payments thereof due to the imposition of exchange controls or other
circumstances beyond the control of the Company or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions within the international banking
community, then the Company will be entitled to satisfy its obligations to
holders of the Notes by making such payments in U.S. dollars on the basis of
the Market Exchange Rate on the date of such payment or, if the Market
Exchange Rate is not available on such date, as of the most recent practicable
date; provided, however, that if such Specified Currency is replaced by the
Euro (as described under "Special Provisions Relating to Notes Denominated in
ECU" below), the payment of principal of, premium, if any, or interest on any
Note denominated in such currency shall be effected in Euro in conformity with
legally applicable measures taken pursuant to, or by virtue of, the treaty
establishing the European Community (the "EC"), as amended by the treaty on
European Union (as so amended, the "Treaty"). Any payment made under such
circumstances in U.S. dollars (or, if applicable, Euro) where the required
payment is in a Specified Currency other than U.S. dollars will not constitute
an Event of Default.
Special Provisions Relating to Notes Denominated in ECU
Valuation of the ECU
Subject to the provisions under "Payment in a Component
Currency" below, the value of the ECU, in which the Notes may be denominated
or may be payable, is equal to the value of the ECU that is from time to time
used as the unit of account of the EC and which is at the date hereof valued
on the basis of specified amounts of the currencies of 12 of the 15 member
states of the EC. Under Article 109G of the Treaty, the currency composition
of the ECU may not be changed. Other changes to the ECU may be made by the EC
in conformity with EC law, in which event the ECU will change accordingly.
From the start of the third stage of European monetary union, the value of the
ECU as against the currencies of member states participating in the third
stage will be irrevocably fixed and the ECU will become a currency in its own
right, replacing all or some of the currencies of the 15 member states of the
EC (as of the date of this Prospectus Supplement, such currencies include the
Austrian shilling, Belgian franc, Danish krone, Dutch guilder, Finnish markka,
French franc, German mark, Greek drachma, Irish pound, Italian lira,
Luxembourg franc, Portuguese escudo, Spanish peseta, Swedish krona and pound
sterling). In contemplation of the third stage, the European Council meeting
in Madrid on December 16, 1995 decided that the name of the new currency will
be the Euro and that, in accordance with the Treaty, substitution of the Euro
for the ECU will be at the rate of one Euro for one ECU. From the start of the
third stage of European monetary union, all payments in respect of the Notes
denominated or payable in ECU will be payable in Euro at the rate then
established in accordance with the Treaty.
Payment in a Component Currency
With respect to each due date for the payment of principal of,
or interest on, the Notes on or after the first business day in Brussels on
which the ECU ceases to be used as the unit of account of the EC and has not
become a currency in its own right replacing all or some of the currencies of
the member states of the EC, the Company shall choose a substitute currency
(the "Chosen Currency"), which may be any currency which was, on the last day
on which the ECU was used as the unit of account of the EC, a component
currency of the ECU or U.S. dollars, in which all payments due on or after
that date with respect to the Notes and coupons shall be made. Notice of the
Chosen Currency so selected shall, where practicable, be published in the
manner described in "Notices" below. The amount of each payment in such Chosen
Currency shall be computed on the basis of the equivalent of the ECU in that
currency, determined as described below, as of the fourth business day in
Brussels prior to the date on which such payment is due.
On the first business day in Brussels on which the ECU ceases
to be used as the unit of account of the EC and has not become a currency in
its own right replacing all or some of the currencies of the member states of
the EC, the Company shall select a Chosen Currency in which all payments with
respect to Notes and coupons having a due date prior thereto but not yet
presented for payment are to be made. Notice of the Chosen Currency so
selected shall, where practicable, be published in the manner described in
"Notices" below. The amount of each payment in such Chosen Currency shall be
computed on the basis of the equivalent of the ECU in that currency,
determined as described below, as of such first business day.
The equivalent of the ECU in the relevant Chosen Currency as of
any date (the "Day of Valuation") shall be determined by, or on behalf of, the
Exchange Rate Agent on the following basis. The amounts and components
composing the ECU for this purpose (the "Components") shall be the amounts and
components that composed the ECU as of the last date on which the ECU was used
as the unit of account of the EC. The equivalent of the ECU in the Chosen
Currency shall be calculated by, first, aggregating the U.S. dollar
equivalents of the Components; and then, in the case of a Chosen Currency
other than U.S. dollars, using the rate used for determining the U.S. dollar
equivalent of the Components in the Chosen Currency as set forth below,
calculating the equivalent in the Chosen Currency of such aggregate amount in
U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be
determined by, or on behalf of, the Exchange Rate Agent on the basis of the
middle spot delivery quotations prevailing at 2:30 P.M., Brussels time, on the
Day of Valuation, as obtained by, or on behalf of, the Exchange Rate Agent
from one or more major banks, as selected by the Company, in the country of
issue of the component currency in question.
If for any reason no direct quotations are available for a
Component as of a Day of Valuation from any of the banks selected for this
purpose, in computing the U.S. dollar equivalent of such Component, the
Exchange Rate Agent shall (except as provided below) use the most recent
direct quotations for such Component obtained by it or on its behalf, provided
that such quotations were prevailing in the country of issue not more than two
Business Days before such Day of Valuation. If such most recent quotations
were so prevailing in the country of issue more than two Business Days before
such Day of Valuation, the Exchange Rate Agent shall determine the U.S. dollar
equivalent of such Component on the basis of cross rates derived from the
middle spot delivery quotations for such component currency and for the U.S.
dollar prevailing at 2:30 P.M., Brussels time, on such Day of Valuation, as
obtained by, or on behalf of, the Exchange Rate Agent from one or more major
banks, as selected by the Company, in a country other than the country of
issue of such component currency. Notwithstanding the foregoing, the Exchange
Rate Agent shall determine the U.S. dollar equivalent of such Component on the
basis of such cross rates if the Company or such agent judges that the
equivalent so calculated is more representative than the U.S. dollar
equivalent calculated as provided in the first sentence of this paragraph.
Unless otherwise specified by the Company, if there is more than one market
for dealing in any component currency by reason of foreign exchange
regulations or for any other reason, the market to be referred to in respect
of such currency shall be that upon which a nonresident issuer of securities
denominated in such currency would purchase such currency in order to make
payments in respect of such securities.
Payments in the Chosen Currency will be made at the specified
office of a paying agent in the country of the Chosen Currency or, if none, or
at the option of the holder, at the specified office of any Paying Agent
either by a check drawn on, or by transfer to an account maintained by the
holder with, a bank in the principal financial center of the country of the
Chosen Currency.
All determinations referred to above made by, or on behalf of,
the Company or by, or on behalf of, the Exchange Rate Agent shall be at such
entity's sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes and coupons.
Notes Denominated in the Currencies of EC Member States
If, pursuant to the Treaty, all or some of the currencies of
the member countries of the EC are replaced by the Euro, the payment of
principal of, premium, if any, or interest on, the Notes denominated in such
currencies shall be effected in Euro in conformity with legally applicable
measures taken pursuant to, or by virtue of, the Treaty.
Interest and Principal Payments
Interest will be payable to the person in whose name the Note
is registered at the close of business on the applicable Record Date; provided
that the interest payable upon maturity, redemption or repayment (whether or
not the date of maturity, redemption or repayment is an Interest Payment Date)
will be payable to the person to whom principal is payable. The initial
interest payment on a Note will be made on the first Interest Payment Date
falling after the date the Note is issued; provided, however, that payments of
interest (or, in the case of an Amortizing Note, principal and interest) on a
Note issued less than 15 calendar days before an Interest Payment Date will be
paid on the next succeeding Interest Payment Date to the holder of record on
the Record Date with respect to such succeeding Interest Payment Date. See
"United States Federal Taxation -- Discount Notes" below.
U.S. dollar payments of interest, other than interest payable
at maturity (or on the date of redemption or repayment, if a Note is redeemed
or repaid by the Company prior to maturity), will be made by check mailed to
the address of the person entitled thereto as shown on the Note register. U.S.
dollar payments of principal, premium, if any, and interest upon maturity,
redemption or repayment will be made in immediately available funds against
presentation and surrender of the Note. Notwithstanding the foregoing, (a) the
Depositary (as defined below), as holder of Book-Entry Notes, shall be
entitled to receive payments of interest by wire transfer of immediately
available funds and (b) a holder of $10,000,000 (or the equivalent) or more in
aggregate principal amount of Certificated Notes having the same Interest
Payment Date shall be entitled to receive payments of interest, other than
interest due at maturity or on any date of redemption or repayment, by wire
transfer of immediately available funds upon written request to the Paying
Agent not later than 15 calendar days prior to the applicable Interest Payment
Date.
Unless otherwise specified in the applicable Pricing
Supplement, a beneficial owner of Book-Entry Notes denominated in a Specified
Currency electing to receive payments of principal or any premium or interest
in a currency other than U.S. dollars must notify the participant through
which its interest is held on or prior to the applicable Record Date, in the
case of a payment of interest, and on or prior to the sixteenth day prior to
maturity (or the date of redemption or repayment if a Note is redeemed or
repaid prior to maturity), in the case of principal or premium of such
beneficial owner's election to receive all or a portion of such payment in a
Specified Currency. Such participant must notify the Depositary of such
election on or prior to the third Business Day after such Record Date, in the
case of a payment of interest, and on or prior to the twelfth Business Day
prior to maturity (or the date of redemption or repayment if a Note is
redeemed or repaid prior to maturity) in the case of a payment of principal or
premium. The Depositary will notify the Paying Agent of such election on or
prior to the fifth Business Day after such Record Date, in the case of a
payment of interest, and on or prior to the tenth Business Day prior to
maturity (or the date of redemption or repayment if a Note is redeemed or
repaid prior to maturity) in the case of a payment of principal or premium. If
complete instructions are received by the participant and forwarded by the
participant to the Depositary, and by the Depositary to the Paying Agent, on
or prior to such dates, the beneficial owner will receive payments in the
Specified Currency by wire transfer of immediately available funds to an
account maintained by the payee with a bank located outside the United States;
otherwise the beneficial owner will receive payments in U.S. dollars.
Certain Notes, including Original Issue Discount Notes, may be
considered to be issued with original issue discount, which must be included
in income for United States federal income tax purposes at a constant yield.
See "United States Federal Taxation -- Discount Notes" below. Unless otherwise
specified in the applicable Pricing Supplement, if the principal of any
Original Issue Discount Note is declared to be due and payable immediately as
described under "Description of Debt Securities -- Events of Default" in the
Prospectus, the amount of principal due and payable with respect to such Note
shall be limited to the aggregate principal amount of such Note multiplied by
the sum of its Issue Price (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from the date of
issue to the date of declaration, which amortization shall be calculated using
the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration). Special
considerations applicable to any such Notes will be set forth in the
applicable Pricing Supplement.
Fixed Rate Notes
Each Fixed Rate Note will bear interest from the date of
issuance at the annual rate stated on the face thereof, except as described
below under "Extension of Maturity," until the principal thereof is paid or
made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, such interest will be computed on the basis of a 360-day
year of twelve 30-day months. Unless otherwise specified in the applicable
Pricing Supplement, payments of interest on Fixed Rate Notes other than
Amortizing Notes will be made semiannually on each March 1 and September 1 and
at maturity or upon any earlier redemption or repayment. Payments of principal
and interest on Amortizing Notes, which are securities on which payments of
principal and interest are made in equal installments over the life of the
security, will be made either quarterly on each March 1, June 1, September 1
and December 1 or semiannually on each March 1 and September 1, as set forth
in the applicable Pricing Supplement, and at maturity or upon any earlier
redemption or repayment. Payments with respect to Amortizing Notes will be
applied first to interest due and payable thereon and then to the reduction of
the unpaid principal amount thereof. A table setting forth repayment
information in respect of each Amortizing Note will be provided to the original
purchaser and will be available, upon request made to the Company, to
subsequent holders.
Interest on Fixed Rate Notes will accrue from and including the
most recent Interest Payment Date to which interest has been paid or duly
provided for, or, if no interest has been paid or duly provided for, from and
including the date of issuance, until but excluding the date the principal
thereof has been paid or duly made available for payment (except as provided
below). If any Interest Payment Date for any Fixed Rate Note would fall on a
day that is not a Business Day, the interest payment shall be postponed to 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 would fall on a
day that is not a Business Day, the payment of interest and principal (and
premium, if any) may be made on the next succeeding Business Day, and no
interest on such payment shall accrue for the period from and after the
maturity date (or date of redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued
interest from and including the date of issue or from and including the last
date in respect of which interest has been paid, as the case may be, to, but
excluding, the Interest Payment Date or the date of maturity or earlier
redemption or repayment, as the case may be. The interest rates the Company
will agree to pay on newly issued Fixed Rate Notes are subject to change
without notice by the Company from time to time, but no such change will
affect any Fixed Rate Notes theretofore issued or that the Company has agreed
to issue.
Floating Rate Notes
Each Floating Rate Note will bear interest from the date of
issuance until the principal thereof is paid or made available for payment at
a rate determined by reference to an interest rate basis or formula (the "Base
Rate"), which may be adjusted by a Spread and/or Spread Multiplier (each as
defined below). The applicable Pricing Supplement will designate one or more
of the following Base Rates as applicable to each Floating Rate Note: (a) the
CD Rate (a "CD Rate Note"), (b) the Commercial Paper Rate (a "Commercial Paper
Rate Note"), (c) the Federal Funds Rate (a "Federal Funds Rate Note"), (d)
LIBOR (a "LIBOR Note"), (e) the Prime Rate (a "Prime Rate Note"), (f) the
Treasury Rate (a "Treasury Rate Note"), (g) the Constant-Maturity Treasury
Rate (a "CMT Rate Note") or (h) such other Base Rate or interest rate formula
as is set forth in such Pricing Supplement and in such Floating Rate Note. The
"Index Maturity" for any Floating Rate Note is the period of maturity of the
instrument or obligation from which the Base Rate is calculated and will be
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, the interest rate on each Floating Rate Note will be calculated by
reference to the specified Base Rate (i) plus or minus the Spread, if any,
and/or (ii) multiplied by the Spread Multiplier, if any. The "Spread" is the
number of basis points (one one-hundredth of a percentage point) specified in
the applicable Pricing Supplement to be added to or subtracted from the Base
Rate for such Floating Rate Note, and the "Spread Multiplier" is the
percentage specified in the applicable Pricing Supplement to be applied to the
Base Rate for such Floating Rate Note.
As specified in the applicable Pricing Supplement, a Floating
Rate Note may also have either or both of the following: (i) a maximum
limitation, or ceiling, on the rate of interest which may accrue during any
interest period ("Maximum Interest Rate"); and (ii) a minimum limitation, or
floor, on the rate of interest that may accrue during any interest period
("Minimum Interest Rate"). In addition to any Maximum Interest Rate that may
be applicable to any Floating Rate Note pursuant to the above provisions, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by New York law, as the same may be modified by United
States law of general application. Under current New York law, the maximum
rate of interest, subject to certain exceptions, for any loan in an amount
less than $250,000 is 16% and for any loan in the amount of $250,000 or more
but less than $2,500,000 is 25% per annum on a simple interest basis. These
limits do not apply to loans of $2,500,000 or more.
Unless otherwise specified in the applicable Pricing
Supplement, the rate of interest on each Floating Rate Note will be reset
daily, weekly, monthly, quarterly, semiannually or annually (such period being
the "Interest Reset Period" for such Note, and the first day of each Interest
Reset Period being an "Interest Reset Date"), as specified in the applicable
Pricing Supplement; provided, however, that (a) the interest rate in effect
from the date of issue to the first Interest Reset Date with respect to a
Floating Rate Note will be the initial interest rate set forth in the
applicable Pricing Supplement (the "Initial Interest Rate") and (b) unless
otherwise specified in the applicable Pricing Supplement, the interest rate in
effect for the ten calendar days immediately prior to maturity, redemption or
repayment will be that in effect on the tenth calendar day preceding such
maturity, redemption or repayment date. The determination of the rate of
interest at which a Floating Rate Note will be reset on any Interest Reset
Date will be made on the Interest Determination Date (as defined below)
pertaining to such Interest Reset Date. If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding Business Day,
except that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date shall be the immediately
preceding Business Day.
Interest on Floating Rate Notes will be payable as specified in
the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, if any Interest Payment Date (other than the
maturity date or any earlier redemption or repayment date) for any Floating
Rate Note would fall on a day that is not a Business Day with respect to such
Floating Rate Note, such Interest Payment Date will be the following 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 Payment Date shall be the immediately preceding day that
is a Business Day with respect to such LIBOR Note. If the maturity date or any
earlier redemption or repayment date of a Floating Rate Note would fall 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, and no interest on
such payment shall accrue for the period from and after such maturity,
redemption or repayment date, as the case may be.
Unless otherwise specified in the applicable Pricing
Supplement, interest payments for Floating Rate Notes shall be the amount of
interest accrued from and including the date of issue or from and including
the last date to which interest has been paid to, but excluding, the Interest
Payment Date or maturity date or date of redemption or repayment.
With respect to a Floating Rate Note, accrued interest shall be
calculated by multiplying the principal amount of such Floating Rate Note by
an accrued interest factor. Such accrued interest factor will be computed by
adding the interest factors calculated for each day in the period for which
interest is being paid. Unless otherwise specified in the applicable Pricing
Supplement, the interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360, in the case of CD Rate Notes,
Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime
Rate Notes or by the actual number of days in the year, in the case of Treasury
Rate Notes and CMT Rate Notes. All percentages used in or resulting from any
calculation of the rate of interest on a Floating Rate Note will be rounded,
if necessary, to the nearest one hundred-thousandth of a percentage point
(.0000001), with five one-millionths of a percentage point rounded upward, and
all dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent, with one-half cent rounded upward.
The interest rate in effect on any Interest Reset Date will be the applicable
rate as reset on such date. The interest rate applicable to any other day is
the interest rate from the immediately preceding Interest Reset Date (or, if
none, the Initial Interest Rate).
The applicable Pricing Supplement shall specify a calculation
agent (the "Calculation Agent") with respect to any issue of Floating Rate
Notes. 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 that will become effective on the next Interest
Reset Date with respect to such Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest
Reset Date for CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate
Notes, Prime Rate Notes and CMT Rate Notes will be the second Business Day
next preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a LIBOR Note will be the second
London Banking Day preceding such Interest Reset Date, except that the Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note for
which the Index Currency is pounds sterling will be such Interest Reset Date.
The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, but such auction may be held on the preceding Friday. If, as the
result of a legal holiday, an auction is so held on the preceding Friday, such
Friday will be the Interest Determination Date pertaining to the Interest
Reset Date occurring in the next succeeding week. If an auction falls on a day
that is an Interest Reset Date, such Interest Reset Date will be the next
following Business Day.
Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," where applicable, pertaining to an
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, with respect to any
principal amount to be redeemed or repaid, any redemption or repayment date),
as the case may be.
Interest rates will be determined by the Calculation Agent as
follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the CD Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "CD Rate" means, with respect to any Interest Determination Date,
the rate on such date for negotiable certificates of deposit having the Index
Maturity designated in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication of the Board
of Governors of the Federal Reserve System ("H.15(519)") under the heading
"CDs (Secondary Market)," or, if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the CD Rate will be the rate on such Interest Determination Date for
negotiable certificates of deposit of the Index Maturity designated in the
applicable Pricing Supplement as published by the Federal Reserve Bank of New
York in its daily statistical release "Composite 3:30 P.M. Quotations for U.S.
Government Securities" (the "Composite Quotations") under the heading
"Certificates of Deposit." If such rate is not yet published in either
H.15(519) or the Composite Quotations by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate
on such Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such Interest Determination Date for
certificates of deposit in an amount that is representative for a single
transaction at that time with a remaining maturity closest to the Index
Maturity designated in the Pricing Supplement of three leading nonbank dealers
in negotiable U.S. dollar certificates of deposit in The City of New York
selected by the Calculation Agent for negotiable certificates of deposit of
major United States money center banks; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as set forth
above, the "CD Rate" in effect for the applicable period will be the same as
the CD Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the rate of interest payable on the CD Rate
Notes for which such CD Rate is being determined shall be the Initial Interest
Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest
rate (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any, and subject to the Minimum Interest Rate and
the Maximum Interest Rate, if any) specified in the Commercial Paper Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date, the Money Market Yield (as defined below) of the rate on
such date for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement, as such rate shall be published in H.15(519),
under the heading "Commercial Paper." In the event that such rate is not
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, then the Commercial Paper Rate shall be
the Money Market Yield of the rate on such Interest Determination Date for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper." If by 3:00 P.M., New York
City time, on such Calculation Date such rate is not yet available in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate shall be the
Money Market Yield of the arithmetic mean of the offered rates as of 11:00
A.M., New York City time, on such Interest Determination Date of three leading
dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper of the specified Index Maturity, placed
for an industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting offered rates
as mentioned in this sentence, the Commercial Paper Rate in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance
with the following formula:
D x 360
Money Market Yield = --------------- x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the Index Maturity.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest
rate (calculated with reference to the Federal Funds Rate and the Spread
and/or Spread Multiplier, if any, and subject to the Minimum Interest Rate and
the Maximum Interest Rate, if any) specified in the Federal Funds Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, the "Federal Funds Rate" means, with respect to any Interest
Determination Date, the rate on such date for Federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)," or, if not so
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Federal Funds Rate will be the rate
on such Interest Determination Date as published in the Composite Quotations
under the heading "Federal Funds/Effective Rate." If such rate is not yet
published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate for such Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic
mean of the rates for the last transaction in overnight Federal funds, as of
11:00 A.M., New York City time, on such Interest Determination Date, arranged
by three leading brokers of Federal funds transactions in The City of New York
selected by the Calculation Agent; provided, however, that if the brokers
selected as aforesaid by the Calculation Agent are not quoting as set forth
above, the "Federal Funds Rate" in effect for the applicable period will be the
same as the Federal Funds Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
payable on the Federal Funds Rate Notes for which such Federal Funds Rate is
being determined shall be the Initial Interest Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated
with reference to LIBOR and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "LIBOR" for each Interest Determination Date will be determined by
the Calculation Agent as follows:
(i) As of the Interest Determination Date, the Calculation Agent will
determine (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the
specified Designated LIBOR Page (as defined below) by its terms provides
only for a single rate, in which case such single rate shall be used)
for deposits in the London interbank market in the Index Currency for
the period of the Index Maturity, each as designated in the applicable
Pricing Supplement, commencing on the second London Banking Day
immediately following such Interest Determination Date, which appear on
the Designated LIBOR Page at approximately 11:00 A.M., London time, on
such Interest Determination Date, if at least two such offered rates
appear (unless, as aforesaid, only a single rate is required) on such
Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement, the rate for deposits in the Index
Currency for the period of the Index Maturity, each as designated in the
applicable Pricing Supplement, commencing on the second London Banking
Day following such Interest Determination Date (or, if pounds sterling
is the Index Currency, commencing on such Interest Determination Date),
that appears on the Designated LIBOR Page at approximately 11:00 A.M.,
London time, on such Interest Determination Date. If fewer than two
offered rates appear (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement and calculation of LIBOR is based on the arithmetic
mean of the offered rates), or if no rate appears (if the applicable
Pricing Supplement specifies either (x) "LIBOR Reuters" and the
Designated LIBOR Page by its terms provides only for a single rate or
(y) "LIBOR Telerate"), LIBOR in respect of that Interest Determination
Date will be determined as if the parties had specified the rate
described in (ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement and calculation of LIBOR is based on the
arithmetic mean of the offered rates) or no rate appears (if the
applicable Pricing Supplement specifies either (x) "LIBOR Reuters" and
the Designated LIBOR Page by its terms provides only for a single rate
or (y) "LIBOR Telerate"), the Calculation Agent will request the
principal London offices of each of four major reference banks in the
London interbank market, as selected by the Calculation Agent (after
consultation with the Company), to provide the Calculation Agent with
its offered quotations for deposits in the Index Currency for the period
of the specified Index Maturity, commencing on the second London Banking
Day immediately following such Interest Determination Date (or, if
pounds sterling is the Index Currency, commencing on such Interest
Determination Date), to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such Interest Determination
Date and in a principal amount equal to an amount of not less than $1
million (or the equivalent in the Index Currency, if the Index Currency
is not the U.S. dollar) that is representative of a single transaction in
such Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of rates quoted at approximately 11:00
A.M. (or such other time specified in the applicable Pricing
Supplement), in the applicable principal financial center for the
country of the Index Currency on such Interest Determination Date, by
three major banks in such principal financial center selected by the
Calculation Agent (after consultation with the Company) on such Interest
Determination Date for loans in the Index Currency to leading European
banks, for the period of the specified Index Maturity commencing on the
second London Banking Day immediately following such Interest
Determination Date (or, if pounds sterling is the Index Currency,
commencing on such Interest Determination Date) and in a principal
amount of not less than $1 million (or the equivalent in the Index
Currency, if the Index Currency is not the U.S. dollar) that is
representative of a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting rates as mentioned in
this sentence, "LIBOR" for such Interest Reset Period will be the same
as LIBOR for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on
the LIBOR Notes for which LIBOR is being determined shall be the Initial
Interest Rate).
"Index Currency" means the currency (including composite
currencies) specified in the applicable Pricing Supplement as the currency for
which LIBOR shall be calculated. If no such currency is specified in the
applicable Pricing Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is
designated in the applicable Pricing Supplement, the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
rates of major banks for the applicable Index Currency, or (b) if "LIBOR
Telerate" is designated in the applicable Pricing Supplement, the display on
the Dow Jones Telerate Service for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency. If neither
LIBOR Reuters nor LIBOR Telerate is specified in the applicable Pricing
Supplement, LIBOR for the applicable Index Currency will be determined as if
LIBOR Telerate (and, if the U.S. dollar is the Index Currency, Page 3750) had
been specified.
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 subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Prime Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination
Date, the rate set forth in H.15(519) for such date opposite the caption "Bank
Prime Loan." If such rate is not yet published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Prime Rate for such Interest Determination Date will be the arithmetic
mean of the rates of interest publicly announced by each bank named on the
Reuters Screen USPRIME1 Page (as defined below) as such bank's prime rate or
base lending rate as in effect for such Interest Determination Date as quoted
on the Reuters Screen USPRIME1 Page on such Interest Determination Date, or,
if fewer than four such rates appear on the Reuters Screen USPRIME1 Page for
such Interest Determination Date, the rate shall be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Interest Determination Date
by at least two of the three major money center banks in The City of New York
selected by the Calculation Agent from which quotations are requested. If fewer
than two quotations are provided, the Prime Rate shall be calculated by the
Calculation Agent and shall be determined as the arithmetic mean on the basis
of the prime rates in The City of New York by the appropriate number of
substitute banks or trust companies organized and doing business under the
laws of the United States, or any State thereof, in each case having total
equity capital of at least $500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent
to quote such rate or rates; provided, however, that if the banks or trust
companies selected as aforesaid by the Calculation Agent are not quoting rates
as set forth above, the "Prime Rate" in effect for such Interest Reset Period
will be the same as the Prime Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the Prime Rate Notes for which such Prime Rate is being
determined shall be the Initial Interest Rate). "Reuters Screen USPRIME1 Page"
means the display designated as Page "USPRIME1" on the Reuters Monitor Money
Rates Service (or such other page as may replace the USPRIME1 Page on that
service for the purpose of displaying prime rates or base lending rates of
major United States banks).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Treasury Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, the "Treasury Rate" means, with respect to any Interest
Determination Date, the rate for the auction held on such date of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
designated in the applicable Pricing Supplement, as published in H.15(519)
under the heading "Treasury Bills--auction average (investment)" or, if not so
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the auction average rate on such Interest
Determination Date (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that
the results of the auction of Treasury Bills having the Index Maturity
designated in the applicable Pricing Supplement are not published or reported
as provided above by 3:00 P.M., New York City time, on such Calculation Date
or if no such auction is held on such Interest Determination Date, then the
Treasury Rate shall be calculated by the Calculation Agent and shall be a
yield to maturity (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) calculated using
the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Interest Determination Date, of three
leading primary United States government securities dealers selected by the
Calculation Agent for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting bid rates as mentioned in this sentence, the "Treasury
Rate" for such Interest Reset Date will be the same as the Treasury Rate for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the Treasury Rate Notes
for which the Treasury Rate is being determined shall be the Initial Interest
Rate).
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate
(calculated with reference to the CMT Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the CMT Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date, the rate
displayed for the Index Maturity designated in such CMT Rate Note on the
Designated CMT Telerate Page (as defined below) under the caption "...
Treasury Constant Maturities ... Federal Reserve Board Release H.15 " under
the column for the Designated CMT Maturity Index (as defined below) for (i) if
the Designated CMT Telerate Page is 7055, the rate on such Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
week or the month, as applicable, ended immediately preceding the week in
which the related Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 P.M., New
York City time, on the related Calculation Date, then the CMT Rate for such
Interest Determination Date will be such Treasury Constant Maturity rate for
the Designated CMT Maturity Index as published in the relevant H.15(519). If
such rate is no longer published, or if not published by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with
respect to the related Interest Reset Date as may then be published by either
the Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided
by 3:00 P.M., New York City time, on the related Calculation Date, then the
CMT Rate for the Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic
mean of the secondary market closing offer side prices as of approximately
3:30 P.M., New York City time, on the Interest Determination Date reported,
according to their written records, by three leading primary United States
government securities dealers (each, a "Reference Dealer") in The City of New
York (which may include an Agent or other affiliates of the Company) selected
by the Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent, after consultation with the Company, and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury notes") with an original maturity of approximately the
Designated CMT Maturity Index and remaining term to maturity of not less than
such Designated CMT Maturity Index minus one year. If the Calculation Agent
cannot obtain three such Treasury notes quotations, the CMT Rate for such
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 P.M., New York City time,
on the Interest Determination Date of three Reference Dealers in The City of
New York (from five such Reference Dealers selected by the Calculation Agent,
after consultation with the Company, and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation
(or, in the event of equality, one of the lowest)), for Treasury notes with an
original maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in an amount of at least $100,000,000. If
three or four (and not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean of the
offer prices obtained and neither the highest nor the lowest of such quotes
will be eliminated; provided, however, that if fewer than three Reference
Dealers selected by the Calculation Agent are quoting as described herein, the
CMT Rate for such Interest Reset Date will be the same as the CMT Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the CMT Rate Notes for which the
CMT Rate is being determined shall be the Initial Interest Rate). If two
Treasury notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the quotes for the Treasury note with the shorter remaining
term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow
Jones Telerate Service on the page designated in an applicable Pricing
Supplement (or any other page as may replace such page on that service for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519)),
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519). If no such page is specified in the applicable Pricing Supplement,
the Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to
maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30
years) specified in an applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the
applicable Pricing Supplement, the Designated CMT Maturity Index shall be two
years.
Renewable Notes
The Company may also issue from time to time variable rate
renewable notes (the "Renewable Notes") that will bear interest at the
interest rate (calculated with reference to a Base Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Renewable Notes and in the
applicable Pricing Supplement. Renewable Notes are Book-Entry Floating Rate
Notes.
The Renewable Notes will mature on an Interest Payment Date as
specified in the applicable Pricing Supplement (the "Initial Maturity Date"),
unless the maturity of all or any portion of the principal amount thereof is
extended in accordance with the procedures described below. On the Interest
Payment Dates in March and September in each year (unless different Interest
Payment Dates are specified in the applicable Pricing Supplement) (each such
Interest Payment Date, an "Election Date"), the maturity of the Renewable
Notes will be extended to the Interest Payment Date occurring twelve months
after such Election Date (unless a different extension period is specified in
the applicable Pricing Supplement), unless the holder thereof elects to
terminate the automatic extension of the maturity of the Renewable Notes or of
any portion thereof having a principal amount of $1,000 or any multiple of
$1,000 in excess thereof by delivering a notice to such effect to the Paying
Agent not less than nor more than a number of days to be specified in the
applicable Pricing Supplement prior to such Election Date. Such option may be
exercised with respect to less than the entire principal amount of the
Renewable Notes; provided that the principal amount for which such option is
not exercised is at least $1,000 or any larger amount that is an integral
multiple of $1,000. Notwithstanding the foregoing, the maturity of the
Renewable Notes may not be extended beyond the Final Maturity Date, as
specified in the applicable Pricing Supplement (the "Final Maturity Date"). If
the holder elects to terminate the automatic extension of the maturity of any
portion of the principal amount of the Renewable Notes and such election is
not revoked as described below, such portion will become due and payable on
the Interest Payment Date falling six months (unless another period is
specified in the applicable Pricing Supplement) after the Election Date prior
to which the holder made such election.
Unless otherwise specified in the applicable Pricing
Supplement, an election to terminate the automatic extension of maturity may
be revoked as to any portion of the Renewable Notes having a principal amount
of $1,000 or any multiple of $1,000 in excess thereof by delivering a notice
to such effect to the Paying Agent on any day following the effective date of
the election to terminate the automatic extension of maturity and prior to the
date 15 days before the date on which such portion would otherwise mature.
Such a revocation may be made for less than the entire principal amount of the
Renewable Notes for which the automatic extension of maturity has been
terminated; provided that the principal amount of the Renewable Notes for
which the automatic extension of maturity has been terminated and for which
such a revocation has not been made is at least $1,000 or any larger amount
that is an integral multiple of $1,000. Notwithstanding the foregoing, a
revocation may not be made during the period from and including a Record Date
to but excluding the immediately succeeding Interest Payment Date.
An election to terminate the automatic extension of the
maturity of the Renewable Notes, if not revoked as described above by the
holder making the election or any subsequent holder, will be binding upon such
subsequent holder.
The Renewable Notes may be redeemed in whole or in part at the
option of the Company on the Interest Payment Dates in each year specified in
the applicable Pricing Supplement, commencing with the Interest Payment Date
specified in the applicable Pricing Supplement, at a redemption price of 100%
of the principal amount of the Renewable Notes to be redeemed, together with
accrued and unpaid interest to the date of redemption. Notwithstanding
anything to the contrary in this Prospectus Supplement, notice of redemption
will be provided by mailing a notice of such redemption to each holder by
first-class mail, postage prepaid, at least 180 days and not more than 210
days prior to the date fixed for redemption.
Renewable Notes may also be issued, from time to time, with the
Spread or Spread Multiplier to be reset by a remarketing agent in remarketing
procedures (the "Remarketing Procedures") to be specified in such Renewable
Notes and in the applicable Pricing Supplement. A description of the
Remarketing Procedures, the terms of the remarketing agreement between the
Company and the remarketing agent and the terms of any additional agreements
with other parties that may be involved in the Remarketing Procedures will be
set forth in the applicable Pricing Supplement.
Exchangeable Notes
Notes may be issued, from time to time, that are optionally or
mandatorily exchangeable into the securities of an entity unaffiliated with
the Company, into a basket of such securities, into an index or indices of such
securities or into any combination of the above, as may be set forth in the
applicable Pricing Supplement (the "Exchangeable Notes"). The Exchangeable
Notes may or may not bear interest or be issued with original issue discount
or at a premium.
Unless otherwise specified in the applicable Pricing
Supplement, optionally Exchangeable Notes (the "Optionally Exchangeable
Notes") will entitle the holder of such a Note, during a period, or at
specific times, to exchange such Note for the underlying security, basket of
securities or index or indices of securities (or combination thereof) at a
specified rate of exchange. If so specified in the applicable Pricing
Supplement, Optionally Exchangeable Notes will be redeemable at the option of
the Company prior to maturity. If the holder of an Optionally Exchangeable
Note does not elect to exchange such Note prior to maturity or any applicable
redemption date, such holder will receive the principal amount of such Note.
Unless otherwise specified in the applicable Pricing
Supplement, mandatorily Exchangeable Notes (the "Mandatorily Exchangeable
Notes") do not entitle the holder of such a Note to exchange such Note prior to
maturity; at maturity, the holder is required to exchange such Note for the
underlying security, basket of securities or index or indices of securities
(or combination thereof) at a specified rate of exchange, and, therefore, the
holder of a Mandatorily Exchangeable Note may receive less than the principal
amount of such Note at maturity. If so indicated in the applicable Pricing
Supplement, the specified rate at which a Mandatorily Exchangeable Note may
be exchanged may vary depending on the value of the underlying security,
basket of securities or index or indices (or combination thereof) so that,
upon exchange, the holder participates in a percentage, which may be less than,
equal to, or greater than 100% of the change in value of the underlying
security, basket of securities or index or indices (or combination thereof).
Upon exchange, at maturity or otherwise, the holder of an
Exchangeable Note may receive, at the specified exchange rate, either the
underlying security or the securities constituting the relevant basket or
index or indices at the specified exchange rate or the cash value of such
underlying security or securities, as may be specified in the applicable
Pricing Supplement. The underlying security or securities constituting any
basket, index or indices may be the securities of either U.S. or foreign
entities or both, and the Exchangeable Notes may or may not provide for
protection against fluctuations in the rate of currency exchange between the
currency in which such Note is denominated and the currency or currencies in
which the market prices of such underlying security or securities are quoted,
as may be specified in the applicable Pricing Supplement. Exchangeable Notes
may have other terms, which will be specified in the applicable Pricing
Supplement.
If an Optionally Exchangeable Note is represented by a
Registered Global Security, the Depositary's nominee will be the holder of
such Note or any interest therein and therefore will be the only entity that
can exercise a right to exchange. In order to ensure that the Depositary's
nominee will timely exercise a right to exchange with respect to a particular
Note or any portion thereof, the beneficial owner of such Note must instruct
the broker or other direct or indirect participant through which it holds an
interest in such Note to notify the Depositary of its desire to exercise a
right to exchange. Different firms have different deadlines for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other direct or indirect participant through
which it holds an interest in a Note in order to ascertain the deadline for
such an instruction in order for timely notice to be delivered to the
Depositary.
Payments upon Acceleration of Maturity
If the principal amount payable at maturity of any Exchangeable
Note is declared due and payable prior to maturity, the amount payable (unless
otherwise specified in the applicable Pricing Supplement) with respect to (i)
an Optionally Exchangeable Note will equal the face amount of such Note plus
accrued interest, if any, to but excluding the date of payment, provided that
if a holder shall have exchanged an Optionally Exchangeable Note prior to such
time without having received the amount due upon such exchange, the amount
payable shall be the amount due upon exchange and shall not include any
accrued but unpaid interest, and (ii) a Mandatorily Exchangeable Note will
equal an amount determined as if the date of such declaration were the
maturity date plus accrued interest, if any, to but excluding the date of
payment.
Currency Linked Notes
Notes 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 the
value of one or more currencies (or composite currencies) as compared to the
value of one or more other currencies (or composite currencies) ("Currency
Linked Notes"). Information as to the one or more currencies (or composite
currencies) to which the principal amount payable on any principal payment
date or the amount of interest payable on any interest payment date is
indexed, the currency in which the face amount of the Currency Linked Note is
denominated (the "Denominated Currency"), the currency in which principal on
the Currency Linked Note will be paid (the "Payment Currency"), specific
historic exchange rate information, any currency risks relating to the
specific currencies selected, and certain additional tax considerations, if
any, will be set forth in the applicable Pricing Supplement. The Denominated
Currency and the Payment Currency may be the same currency or different
currencies. Unless otherwise specified in the applicable Pricing Supplement,
interest on Currency Linked Notes will be paid in the Denominated Currency
based on the face amount of the Currency Linked Note at the rate per annum and
on the dates set forth in the applicable Pricing Supplement. Currency Linked
Notes may include, but are not limited to, Notes of the types described below.
Principal Exchange Rate Linked Securities (PERLS)
PERLS are Currency Linked Notes pursuant to which the principal
amount payable on any principal payment date equals the Payment Currency
equivalent at such date of a fixed amount of a designated currency (or
composite currency) (the "Indexed Currency"). Generally, the fixed amount of
Indexed Currency to which the principal of a PERLS will be linked will be
approximately equal in value to the face amount of the PERLS in the Denominated
Currency based on the exchange rate between the Indexed Currency and the
Denominated Currency in effect at the time of pricing. The Denominated
Currency, the Indexed Currency and the Payment Currency will be identified in
the applicable Pricing Supplement. In addition, the fixed amount of the
Indexed Currency to which the principal of the PERLS is linked will be set
forth in the applicable Pricing Supplement for a specific representative face
amount of the PERLS as well as for the aggregate face amount of all PERLS
forming part of the same issue (the "Conversion Reference Amount").
Holders of PERLS may receive an amount of principal greater
than, less than or equal in value to the face amount of the PERLS, depending
on the change, if any, in the relative exchange rates of the Denominated
Currency, the Payment Currency and the Indexed Currency from the issue date to
the date that is two Exchange Rate Days (as defined below) preceding the
maturity date.
The Payment Currency equivalent of any Indexed Currency amount
on any date will be determined by an exchange rate agent (identified in the
applicable Pricing Supplement) based on the arithmetic mean of the quotations
obtained by such agent from reference dealers (identified in the applicable
Pricing Supplement) at 11:00 A.M., New York City time, on the second Exchange
Rate Day preceding such date for the purchase by the reference dealers of the
Conversion Reference Amount of the Indexed Currency with the Payment Currency
for settlement on such date; provided that if there is no cross-exchange rate
available in New York City between the Indexed Currency and the Payment
Currency, the quotations will be calculated by the exchange rate agent at the
time referred to above using the U.S. dollar equivalent of the Indexed
Currency and the Payment Currency as the basis for comparing the values of
such currencies; and provided further that if the Payment Currency and the
Indexed Currency are identical, then the Payment Currency equivalent of any
Indexed Currency amount will be such amount.
"Exchange Rate Day" means, with respect to any currency
conversion, any day other than a Saturday or Sunday or a day on which banking
institutions in New York City are authorized or required by law or executive
order to close and that is a business day in each of the cities designated in
the Pricing Supplement for the currencies being converted and, in the case of
conversions involving ECUs, that is not a non-ECU clearing day, as determined
by the ECU Banking Association in Paris.
Reverse Principal Exchange Rate Linked Securities (Reverse
PERLS)
Reverse PERLS are Currency Linked Notes pursuant to which the
principal amount payable on any principal payment date equals the Payment
Currency equivalent at such date of a fixed amount of a designated currency (or
composite currency) (the "First Indexed Currency") minus the Payment Currency
equivalent at maturity of a fixed amount of another designated currency (or
composite currency) (the "Second Indexed Currency"); provided that the minimum
principal amount payable at maturity will be zero. Generally, the fixed amount
of the First Indexed Currency to which the principal of a Reverse PERLS will
be linked will be approximately equal in value to twice the face amount of the
Reverse PERLS in the Denominated Currency, and the fixed amount of the Second
Indexed Currency to which the principal of a Reverse PERLS will be linked will
be approximately equal in value to the face amount of the Reverse PERLS in the
Denominated Currency, in each case based on the exchange rate between each
Indexed Currency and the Denominated Currency in effect at the time of pricing.
Holders of Reverse PERLS may receive an amount of principal
greater than, less than (with a minimum of zero) or equal in value to the face
amount of the Reverse PERLS, depending on the change, if any, in the relative
exchange rates of the Denominated Currency, the Payment Currency and the First
and Second Indexed Currencies from the issue date to the date that is two
Exchange Rate Days preceding the maturity date.
The Denominated Currency, the First and Second Indexed
Currencies and the Payment Currency will be identified in the applicable
Pricing Supplement. In addition, the fixed amounts of the First and Second
Indexed Currencies to which the principal of the Reverse PERLS is linked will
be set forth in the applicable Pricing Supplement for a specific
representative face amount of the Reverse PERLS as well as for the aggregate
face amount of all Reverse PERLS forming part of the same issue (respectively,
the "First Conversion Reference Amount" and the "Second Conversion Reference
Amount").
The Payment Currency equivalent of any First Indexed Currency
amount on any date will be determined by an exchange rate agent (identified in
the applicable Pricing Supplement) based on the arithmetic mean of the
quotations obtained by such agent from reference dealers (identified in the
applicable Pricing Supplement) at 11:00 A.M., New York City time, on the
second Exchange Rate Day preceding such date for the purchase by the reference
dealers of the First Conversion Reference Amount of the First Indexed Currency
with the Payment Currency for settlement on such date; provided that if there
is no cross-exchange rate available in New York City between the First Indexed
Currency and the Payment Currency, the quotations will be calculated by the
exchange rate agent at the time referred to above using the U.S. dollar
equivalent of the First Indexed Currency and the Payment Currency as the basis
for comparing the values of such currencies; provided further that if the First
Indexed Currency and the Payment Currency are identical, then the Payment
Currency equivalent of any First Indexed Currency amount will be such amount.
The Payment Currency equivalent of any Second Indexed Currency
amount on any date will be determined by an exchange rate agent (identified in
the applicable Pricing Supplement) based on the arithmetic mean of the
quotations obtained by such agent from the reference dealers (identified in
the applicable Pricing Supplement) at 11:00 A.M., New York City time, on the
second Exchange Rate Day preceding such date for the sale by the reference
dealers of the Second Conversion Reference Amount of the Second Indexed
Currency for the Payment Currency for settlement on such date; provided that
if there is no cross-exchange rate available in New York City between the
Second Indexed Currency and the Payment Currency, the quotations will be
calculated by the exchange rate agent at the time referred to above using the
U.S. dollar equivalent of the Second Indexed Currency and the Payment Currency
as the basis for comparing the values of such currencies; provided further
that if the Second Indexed Currency and the Payment Currency are identical,
then the Payment Currency equivalent of any Second Indexed Currency amount
will be such amount.
Multicurrency Principal Exchange Rate Linked Securities
(Multicurrency PERLS)
Multicurrency PERLS are Currency Linked Notes pursuant to which
the principal amount payable on any principal payment date equals the Payment
Currency equivalent at such date of a fixed amount of a designated currency
(or composite currency) (the "First Indexed Currency") plus or minus the
Payment Currency equivalent at maturity of a fixed amount of a second
designated currency (or composite currency) (the "Second Indexed Currency")
plus or minus the Payment Currency equivalent at maturity of a fixed amount of
a third designated currency (or composite currency) (the "Third Indexed
Currency"); provided that the minimum principal amount payable at maturity
will be zero. Generally, the added and subtracted fixed amounts of the First,
Second and Third Indexed Currencies (each, an "Indexed Currency") to which the
principal of a Multicurrency PERLS will be linked will have an aggregate value
approximately equal to the face amount of the Multicurrency PERLS in the
Denominated Currency based on exchange rates between each Indexed Currency and
the Denominated Currency in effect at the time of pricing.
Holders of Multicurrency PERLS may receive an amount of
principal greater than, less than (with a minimum of zero) or equal in value
to the face amount of the Multicurrency PERLS, depending on the change, if
any, in the relative exchange rates for the Denominated Currency, the Payment
Currency and the First, Second and Third Indexed Currencies from the issue
date to the date that is two Exchange Rate Days preceding the maturity date.
The Denominated Currency, each Indexed Currency, the Payment
Currency and whether the fixed amounts of the Second and Third Indexed
Currencies are to be added or subtracted to determine the principal amount
payable at maturity of the Multicurrency PERLS will be set forth in the
applicable Pricing Supplement. In addition, the fixed amounts of the First,
Second and Third Indexed Currencies to which the principal of the Multicurrency
PERLS is linked will be set forth in the applicable Pricing Supplement for a
specific representative face amount of the Multicurrency PERLS as well as for
the aggregate face amount of all Multicurrency PERLS forming part of the same
issue (respectively, the "First Conversion Reference Amount," the "Second
Conversion Reference Amount" and the "Third Conversion Reference Amount," each
a "Conversion Reference Amount"). As used herein, "Added Indexed Currency"
means the First Indexed Currency and any other Indexed Currency that is added
to determine the principal amount payable at maturity of the Multicurrency
PERLS and a "Subtracted Indexed Currency" means an Indexed Currency that is
subtracted to determine the principal amount payable at maturity of the
Multicurrency PERLS.
The Payment Currency equivalent of any Added Indexed Currency
amount on any date will be determined by an exchange rate agent (identified in
the applicable Pricing Supplement) based on the arithmetic mean of the
quotations obtained by such agent from reference dealers (identified in the
applicable Pricing Supplement) at 11:00 A.M., New York City time, on the
second Exchange Rate Day preceding such date for the purchase by the reference
dealers of the applicable Conversion Reference Amount of the Added Indexed
Currency with the Payment Currency for settlement on such date; provided that
if there is no cross-exchange rate available in New York City between the
Added Indexed Currency and the Payment Currency, the quotations will be
calculated by the exchange rate agent at the time referred to above using the
U.S. dollar equivalent of the Added Indexed Currency and the Payment Currency
as the basis for comparing the values of such currencies; provided further
that if the Added Indexed Currency and the Payment Currency are identical,
then the Payment Currency equivalent of any Added Indexed Currency amount will
be such amount.
The Payment Currency equivalent of any Subtracted Indexed
Currency amount on any date will be determined by an exchange rate agent
(identified in the applicable Pricing Supplement) based on the arithmetic mean
of the quotations obtained by such agent from reference dealers (identified in
the applicable Pricing Supplement) at 11:00 A.M., New York City time, on the
second Exchange Rate Day preceding such date for the sale by the reference
dealers of the applicable Conversion Reference Amount of the Subtracted
Indexed Currency for the Payment Currency, for settlement on such date;
provided that if there is no cross-exchange rate available in New York City
between the Subtracted Indexed Currency and the Payment Currency, the
quotations will be calculated by the exchange rate agent at the time referred
to above using the U.S. dollar equivalent of the Subtracted Indexed Currency
and the Payment Currency as the basis for comparing the values of such
currencies; provided further that if the Subtracted Indexed Currency and the
Payment Currency are identical, then the Payment Currency equivalent of any
Subtracted Indexed Currency amount will be such amount.
Payments upon Acceleration of Maturity
If the principal amount payable at maturity of any PERLS,
Reverse PERLS or Multicurrency PERLS is declared due and payable prior to
maturity, the amount payable with respect to such Note will be paid in the
Denominated Currency and will equal the face amount of such Note plus accrued
interest to but excluding the date of payment.
Notes Linked to Commodity Prices, Single Securities, Baskets of Securities or
Indices
Notes 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 commodity prices, securities of entities unaffiliated with the Company,
baskets of such securities or indices and on such other terms as may be set
forth in the relevant Pricing Supplement.
Extension of Maturity
The Pricing Supplement relating to each Fixed Rate Note (other
than an Amortizing Note or a Currency Linked Note) will indicate whether the
Company has the option to extend the maturity of such Fixed Rate Note for one
or more periods of one or more whole years (each, an "Extension Period") up to
but not beyond the date (the "Final Maturity Date") set forth in such Pricing
Supplement. If the Company has such option with respect to any such Fixed Rate
Note (an "Extendible Note"), the following procedures will apply, unless
modified as set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an
Extendible Note by notifying the Paying Agent of such exercise at least 45 but
not more than 60 days prior to the maturity date originally in effect with
respect to such Note (the "Original Maturity Date") or, if the maturity date
of such Note has already been extended, prior to the maturity date then in
effect (an "Extended Maturity Date"). No later than 38 days prior to the
Original Maturity Date or an Extended Maturity Date, as the case may be (each,
a "Maturity Date"), the Paying Agent will mail to the holder of such Note a
notice (the "Extension Notice") relating to such Extension Period, first-class
mail, postage prepaid, setting forth (a) the election of the Company to extend
the maturity of such Note; (b) the new Extended Maturity Date; (c) the
interest rate applicable to the Extension Period; and (d) the provisions, if
any, for redemption during the Extension Period, including the date or dates
on which, the period or periods during which and the price or prices at which
such redemption may occur during the Extension Period. Upon the mailing by the
Paying Agent of an Extension Notice to the holder of an Extendible Note, the
maturity of such Note shall be extended automatically, and, except as modified
by the Extension Notice and as described in the next paragraph, such Note will
have the same terms it had prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New
York City time, on the twentieth calendar day prior to the Maturity Date then
in effect for an Extendible Note (or, if such day is not a Business Day, not
later than 10:00 A.M., New York City time, on the immediately succeeding
Business Day), the Company may, at its option, revoke the interest rate
provided for in the Extension Notice and establish a higher interest rate for
the Extension Period by causing the Paying Agent to send notice of such higher
interest rate to the holder of such Note by first-class mail, postage prepaid,
or by such other means as shall be agreed between the Company and the Paying
Agent. Such notice shall be irrevocable. All Extendible Notes with respect to
which the Maturity Date is extended in accordance with an Extension Notice
will bear such higher interest rate for the Extension Period, whether or not
tendered for repayment.
If the Company elects to extend the maturity of an Extendible
Note, the holder of such Note will have the option to require the Company to
repay such Note on the Maturity Date then in effect at a price equal to the
principal amount thereof plus any accrued and unpaid interest to such date. In
order for an Extendible Note to be so repaid on such Maturity Date, the holder
thereof must follow the procedures set forth below under "Repayment at the
Noteholders' Option; Repurchase" for optional repayment, except that the
period for delivery of such Note or notification to the Paying Agent shall be
at least 25 but not more than 35 days prior to the Maturity Date then in
effect and except that a holder who has tendered an Extendible Note for
repayment pursuant to an Extension Notice may, by written notice to the Paying
Agent, revoke any such tender for repayment until 3:00 P.M., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
(or, if such day is not a Business Day, until 3:00 P.M., New York City time,
on the immediately succeeding Business Day).
Book-Entry System
Upon issuance, all Fixed Rate Book-Entry Notes having the same
Issue Date, interest rate, if any, amortization schedule, if any, ranking,
maturity date and other terms, if any, will be represented by a single Global
Note, and all Floating Rate Book-Entry Notes having the same Issue Date,
Initial Interest Rate, Base Rate, Interest Reset Period, Interest Payment
Dates, Index Maturity, Spread and/or Spread Multiplier, if any, Minimum
Interest Rate, if any, Maximum Interest Rate, if any, ranking, maturity date
and other terms, if any, will be represented by a single Global Note. Each
Global Note representing Book-Entry Notes will be deposited with, or on behalf
of, The Depository Trust Company, New York, New York (the "Depositary"), and
registered in the name of a nominee of the Depositary. Certificated Notes will
not be exchangeable for Book-Entry Notes (or interests therein) and, except
under the circumstances described in the Prospectus under "Description of Debt
Securities -- Registered Global Securities," Book-Entry Notes (or interests
therein) will not be exchangeable for Certificated Notes and will not
otherwise be issuable as Certificated Notes.
A further description of the Depositary's procedures with
respect to Global Notes representing Book-Entry Notes is set forth in the
Prospectus under "Description of Debt Securities -- Global Securities." The
Depositary has confirmed to the Company, the Agent and each Trustee that it
intends to follow such procedures.
Optional Redemption
If applicable, the Pricing Supplement will indicate the terms
on which the Notes will be redeemable at the option of the Company. Notice of
redemption will be provided by mailing a notice of such redemption to each
holder by first-class mail, postage prepaid, at least 30 days and not more
than 60 days prior to the date fixed for redemption to the respective address
of each holder as that address appears upon the books maintained by the Paying
Agent. Unless otherwise specified in an applicable Pricing Supplement, the
Notes, except for Amortizing Notes, will not be subject to any sinking fund.
Repayment at the Noteholders' Option; Repurchase
If applicable, the Pricing Supplement relating to each Note
will indicate that the Note will be repayable at the option of the holder on a
date or dates specified prior to its maturity date and, unless otherwise
specified in such Pricing Supplement, at a price equal to 100% of the
principal amount thereof, together with accrued interest to the date of
repayment, unless such Note was issued with original issue discount, in which
case the Pricing Supplement will specify the amount payable upon such
repayment.
In order for such a Note to be repaid, the Paying Agent must
receive at least 15 days but not more than 30 days prior to the repayment date
(i) the Note with the form entitled "Option to Elect Repayment" on the reverse
of the Note duly completed or (ii) a telegram, telex, facsimile transmission
or a letter from a member of a national securities exchange, or the National
Association of Securities Dealers, Inc. (the "NASD") or a commercial bank or
trust company in the United States setting forth the name of the holder of the
Note, the principal amount of the Note, the principal amount of the Note to be
repaid, the certificate number or a description of the tenor and terms of the
Note, a statement that the option to elect repayment is being exercised
thereby and a guarantee that the Note to be repaid, together with the duly
completed form entitled "Option to Elect Repayment" on the reverse of the
Note, will be received by the Paying Agent not later than the fifth Business
Day after the date of such telegram, telex, facsimile transmission or letter;
provided, however, that such telegram, telex, facsimile transmission or letter
shall only be effective if such Note and form duly completed are received by
the Paying Agent by such fifth Business Day. Except in the case of Renewable
Notes or Extendible Notes, and unless otherwise specified in the applicable
Pricing Supplement, exercise of the repayment option by the holder of a Note
will be irrevocable. The repayment option may be exercised by the holder of a
Note for less than the entire principal amount of the Note but, in that event,
the principal amount of the Note remaining outstanding after repayment must be
an authorized denomination.
If a Note is represented by a Registered Global Security, the
Depositary's nominee will be the holder of such 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 Note, the beneficial owner of such Note must instruct the broker
or other direct or indirect participant through which it holds an interest in
such 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 beneficial owner
should consult the broker or other direct or indirect participant through
which it holds an interest in a 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 relevant Trustee for
cancellation.
DESCRIPTION OF UNITS
The following description of the Units offered hereby,
including the designation and the terms of the Notes, Universal Warrants and
Purchase Contracts that may be included in a Unit, supplements the description
of the Units, Universal Warrants and Purchase Contracts set forth in the
Prospectus, to which reference is hereby made. In particular, the terms of the
Universal Warrants and Purchase Contracts offered hereby relate solely to
Universal Warrants and Purchase Contracts issued in conjunction with Notes as
part of a Unit. The terms and conditions of Notes issued as part of a Unit are
set forth above under "Description of Notes."
The particular terms of the Units, including the terms of the
Notes, Universal Warrants and Purchase Contracts that may be included in a
Unit, offered pursuant to any Pricing Supplement will be described therein.
The terms and conditions set forth in the Prospectus under "Description of
Units," "Description of Warrants," "Description of Purchase Contracts" and
"Description of Debt Securities" and those set forth below under "-- General,"
"-- Certain Provisions of the Unit Agreement," "-- Purchase Contracts," "--
Universal Warrants" and "-- Certain Provisions of the Universal Warrant
Agreement" and above under "Description of Notes" will apply to each Unit and
to any Universal Warrant, Purchase Contract or Note included in such Unit,
respectively, unless otherwise specified in the applicable Pricing Supplement.
General
The Company may issue from time to time Units that may include,
in addition to Notes, one or more Universal Warrants or Purchase Contracts.
Reference is made to the applicable Pricing Supplement for (i) the designation
and the terms of the Units and of the Notes, Universal Warrants, Purchase
Contracts, or any combination thereof, comprising such Units, including
whether and under what circumstances such Notes, Universal Warrants or
Purchase Contracts may be traded separately, (ii) a description of any
additional terms of the Unit Agreement (as defined below) and (iii) a
description of any additional provisions for the issuance, payment,
settlement, transfer or exchange of the Units (or of the securities comprised
by such Units).
Unless otherwise specified in the applicable Pricing
Supplement, Units will be issued only in fully registered form, in
denominations of a single Unit and any integral multiple thereof, with face
amounts as indicated in the applicable Pricing Supplement. The Units will be
issued pursuant to the Unit Agreement dated as of June 2, 1997 (the "Unit
Agreement") among the Company, The Chase Manhattan Bank, as Unit Agent (the
"Unit Agent"), as Collateral Agent (the "Collateral Agent"), and as Trustee
and Paying Agent under the Senior Debt Indenture and as Warrant Agent under
the Universal Warrant Agreement, and the holders from time to time of the
Units. Each Unit will be issued as either a Book-Entry Unit or a Certificated
Unit, and any security comprised by such Unit shall be in the corresponding
form.
Book-Entry System. Upon issuance, all Book-Entry Units
comprising the same securities and having the same issue date and other terms,
if any, will be represented by a single registered global Unit (a "Registered
Global Unit"). Each Registered Global Unit representing Book-Entry Units (and
each Registered Global Security (as defined in the Prospectus under "Global
Securities") comprised by such Registered Global Unit) will be deposited with,
or on behalf of, the Depositary, and registered in the name of a nominee of
the Depositary. Unless otherwise specified in the applicable Pricing
Supplement, Certificated Units will not be exchangeable for Book-Entry Units
(or interests therein) and, except under the circumstances described in the
Prospectus under "Global Securities," Book-Entry Units (or interests therein)
will not be exchangeable for Certificated Units and will not otherwise be
issuable as Certificated Units.
If a Book-Entry Unit represented by a Registered Global Unit
(i) includes a Universal Warrant entitling the holder to exercise the
Universal Warrant to purchase or sell Warrant Property (as defined below),
(ii) includes any Note or Purchase Contract that entitles the holder thereof
to redeem, accelerate or take any other action with respect to such Note or
Purchase Contract or (iii) otherwise entitles the holder of the Unit to take
any action with respect to the Unit or any security comprised by such Unit,
the Depositary's nominee will be the only entity that can exercise such right.
In order to ensure that the Depositary's nominee will timely exercise a right
conferred by a Unit (or by the securities comprised by such Unit) with respect
to a particular Unit (or any security comprised by such Unit) or any portion
thereof, the beneficial owner of such Unit must instruct the broker or other
direct or indirect participant through which it holds an interest in such Unit
to notify the Depositary of its desire to exercise any such right. Different
firms have different deadlines for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Unit in
order to ascertain the deadline for such an instruction in order for timely
notice to be delivered to the Depositary.
A further description of the Depositary's procedures with
respect to Registered Global Securities (including Registered Global Units and
the other Registered Global Securities comprised by such Units) representing
Book-Entry Securities is set forth in the Prospectus under "Global
Securities." The Depositary has confirmed to the Company, the Unit Agent, the
Collateral Agent, the Paying Agent, the Warrant Agent and each Trustee that it
intends to follow such procedures.
Payments with respect to Units and Securities Comprised by
Units. At the office of the Unit Agent in the Borough of Manhattan, The City
of New York, maintained by the Company for such purpose, (i) the Units,
accompanied by each of the securities comprised by such Unit (unless the
applicable Pricing Supplement indicates that any such securities are separable
from such Unit), may be presented for payment or delivery of Warrant Property
or Purchase Contract Property (as defined below) or any other amounts due with
respect thereto, (ii) transfer of the Units will be registrable and (iii) the
Units will be exchangeable, provided that Book-Entry Units will be
exchangeable only in the manner and to the extent set forth under "Global
Securities" in the Prospectus. On the date hereof, the agent for the payment,
transfer and exchange of the Units is The Chase Manhattan Bank, as Unit Agent,
acting through its corporate trust office at 450 West 33rd Street, New York,
New York 10001. No service charge will be made for any registration of
transfer or exchange of the Units (or of any security comprised by such Unit)
or interest therein, except for any tax or other governmental charge that may
be imposed in connection therewith.
Certain Provisions of the Unit Agreement
Under the terms of the Unit Agreement, each holder of a
definitive Unit and each beneficial owner of a Book-Entry Unit, by its
acceptance thereof, (i) consents to and agrees to be bound by the terms of the
Unit Agreement and (ii) appoints the Unit Agent as its authorized agent to
execute, deliver and perform any Purchase Contract included in such Unit in
which such holder or beneficial owner has an interest on behalf of such holder
or beneficial owner, as the case may be. Under the terms of the Unit
Agreement, each holder of a definitive Unit and each beneficial owner of a
Book-Entry Unit, by acceptance thereof, irrevocably agrees to be a party to
and be bound by the terms of any Purchase Contract included in such Unit in
which such holder or beneficial owner has an interest. Upon the registration
of transfer of a Unit, the transferee will assume the obligations of the
transferor under any Purchase Contract included in such Unit and under any
other security comprised by such Unit in which such holder or beneficial owner
has an interest, and the transferor will be released from such obligations.
Pursuant to the terms of the Unit Agreement, the Company has consented to the
transfer of any such obligations to the transferee, to the assumption of such
obligations by the transferee and the release of the transferor, if such
transfer is made in accordance with the provisions of the Unit Agreement.
Remedies. The Unit Agreement provides that upon the
acceleration of the Notes comprised by any Units, the obligations of the
Company and the holders under any Purchase Contracts comprised by such Units
may also be accelerated upon the request of the holders of not less than 25%
of all the Purchase Contracts, on behalf of all such holders, that constitute
a part of Units that comprise such accelerated Notes. No holder of any Unit or
interest therein shall have any right by virtue of or by availing itself of
any provision of the Unit Agreement to institute any action or proceeding at
law or in equity or in bankruptcy or otherwise upon or under or with respect
to the Unit Agreement, or for the appointment of a trustee, receiver,
liquidator, custodian or other similar official, unless such holder shall have
given written notice to the Unit Agent and the Company of the occurrence and
continuance of a default thereunder and, (i) in the case of an Event of
Default under the Notes or the Senior Debt Indenture, unless the procedures
(including notice to the Trustee and the Company) described in Article Five of
the Senior Debt Indenture have been complied with and (ii) in the case of
certain defaults under any Purchase Contracts included in such Unit, unless
the holders of not less than 25% of the affected Purchase Contracts comprised
by all Units then outstanding shall have made written request upon the Unit
Agent to institute such action or proceeding in its own name as Unit Agent
under the Unit Agreement and shall have offered to the Unit Agent such
reasonable indemnity as it may require, and the Unit Agent for 60 days after
its receipt of such notice, request and offer of indemnity shall have failed
to institute any such action or proceedings and no direction inconsistent with
such request shall have been given to the Unit Agent pursuant to the Unit
Agreement in writing by the holders of a majority of the outstanding affected
Units. If such conditions have been satisfied, any holder of an affected Unit
may then (but only then) institute such action or proceeding. Notwithstanding
the above, the holder of any Unit or Purchase Contract will have the
unconditional right to purchase or sell, as the case may be, Purchase Contract
Property pursuant to such Purchase Contract and to institute suit for the
enforcement of such right.
Except as may be described in a Pricing Supplement applicable
to a particular series of Units, there are no covenants or other provisions in
the Unit Agreement providing for a put or increased interest or otherwise that
would afford holders of Units additional protection in the event of a
recapitalization transaction, a change of control of the Company or a highly
leveraged transaction.
Modification. The Unit Agreement and the terms of the Purchase
Contracts and the Purchase Contract Certificates may be amended by the Company
and the Unit Agent, without the consent of the holders, for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective
or inconsistent provision therein or in any other manner which the Company may
deem necessary or desirable and which will not adversely affect the interests
of the affected holders in any material respect.
The Unit Agreement will contain provisions permitting the
Company and the Unit Agent, with the consent of the holders of not less than a
majority of all series of Units at the time outstanding under such Unit
Agreement and affected thereby (voting as one class), to modify the rights of
the holders of the Units of each series so affected or the terms of any
Purchase Contracts included in any such series of Units and the terms of the
Unit Agreement relating to the Purchase Contracts of each series so affected,
except that no such modification may, without the consent of the holder of
each outstanding Unit affected thereby, (i) impair the right to institute suit
for the enforcement of any Purchase Contract, (ii) materially adversely affect
the holders' rights under any Purchase Contract or Unit or (iii) reduce the
aforesaid percentage of outstanding Units issued under the Unit Agreement, the
consent of the holders of which is required for the modification or amendment
of the provisions of the Unit Agreement relating to any such Purchase
Contracts or for any waiver of compliance with certain provisions of the Unit
Agreement or waiver of certain defaults relating to any such Purchase
Contracts. Modifications of any Notes comprised by Units may only be made in
accordance with the Senior Debt Indenture, as described in the Prospectus
under "Description of Debt Securities -- Modification of the Indentures."
Modifications of any Universal Warrants comprised by Units may only be made in
accordance with the terms of the Universal Warrant Agreement as described
below under "Certain Provisions of the Universal Warrant Agreement."
Title. The Company, the Unit Agent and any agent of the Company
or the Unit Agent will treat the registered owner of any Unit or Purchase
Contract as the owner thereof (whether or not the Note constituting a part of
such Unit shall be overdue and notwithstanding any notice to the contrary) for
the purpose of making payment, the performance of any Purchase Contracts
included in any series of Units and for all other purposes.
Replacement of Unit Certificates or Purchase Contract
Certificates. Any mutilated certificate evidencing a definitive Unit or
Purchase Contract will be replaced at the expense of the holder upon surrender
of such certificate to the Unit Agent. Certificates that have been destroyed,
lost or stolen will be replaced at the expense of the holder upon delivery to
the Company and the Unit Agent of evidence of the destruction, loss or theft
thereof satisfactory to the Company and the Unit Agent. In the case of a
destroyed, lost or stolen certificate, an indemnity satisfactory to the Unit
Agent and the Company may be required at the expense of the holder of the
Units or Purchase Contracts evidenced by such certificate before a replacement
will be issued.
The Unit Agreement provides that, notwithstanding the
foregoing, no such replacement certificate need be delivered (i) during the
period beginning 15 days before the day of mailing of a notice of redemption
or of any other exercise of any right held by the Company with respect to the
Unit (or any security comprised by such Unit) evidenced by the mutilated,
destroyed, lost or stolen certificate and ending on the day of the giving of
such notice, (ii) if such mutilated, destroyed, lost or stolen certificate
evidences any security selected or called for redemption or other exercise of
a right held by the Company or (iii) at any time on or after the date of
settlement or redemption, as applicable, with respect to any Purchase Contract
included in the Unit (or at any time on or after the last exercise date with
respect to any Universal Warrant included in the Unit) evidenced by such
mutilated, destroyed, lost or stolen certificate, except with respect to any
Units that remain or will remain outstanding following such date of settlement
or redemption or such last exercise date.
Governing Law. The Unit Agreement, the Units and the Purchase
Contracts will be governed by, and construed in accordance with, the laws of
the State of New York.
Purchase Contracts
The Company may, pursuant to the Unit Agreement, issue from
time to time, as part of a Unit with one or more Notes or Universal Warrants,
Purchase Contracts for the purchase or sale of (a) securities of an entity
unaffiliated with the Company, a basket of such securities, and index or
indices of such securities or any combination of the above, (b) currencies or
composite currencies or (c) commodities (collectively, "Purchase Contract
Property"). The applicable Pricing Supplement will specify whether or not a
Purchase Contract issued as part of a Unit may be separated from the other
securities comprised by such Unit prior to such Purchase Contract's settlement
date. Purchase Contracts may not be so separated prior to the 91st day after
the issuance of a Unit, unless otherwise specified in the applicable Pricing
Supplement. The applicable Pricing Supplement will also specify the methods by
which the holders may purchase or sell such Purchase Contract Property and any
acceleration, cancellation or termination provisions or other provisions
relating to the settlement of a Purchase Contract. The Unit Agreement will not
be qualified as an indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), the Unit Agent will not be required to qualify as
a trustee thereunder and the holders of Units and Purchase Contracts will not
have the benefits of the protections of the Trust Indenture Act. However, any
Notes issued as part of a Unit will be issued under an indenture qualified
under the Trust Indenture Act and the trustee thereunder will have qualified
as a trustee under the Trust Indenture Act.
The Purchase Contracts may be issued in fully registered global
or definitive form, as specified in the applicable Pricing Supplement. In each
case, the form of the Purchase Contract included in a Unit will correspond to
the form of the Unit and of the Note and any Universal Warrant included in
such Unit. See "Global Securities" in the Prospectus.
Under circumstances specified in the applicable Pricing
Supplement, payments in respect of principal of Notes that are part of Units
that include Purchase Contracts requiring the holders to purchase Purchase
Contract Property may be applied by the Unit Agent in satisfaction of the
obligations of the holders of the Units under the related Purchase Contracts
(unless a holder has delivered cash in respect of its obligations under such
Purchase Contract). Upon settlement of any such Purchase Contract, the
Purchase Contract Property will be delivered only upon presentation and
surrender of the certificates evidencing Units at the office of the Unit
Agent. If a holder delivers cash in settlement of its obligations under a
Purchase Contract that is part of a Unit, the related Note that is a part of
such Unit will remain outstanding if the maturity extends beyond the relevant
settlement date and, as more fully described in the applicable Pricing
Supplement, the holder will receive a registered Certificated Note or an
interest in a registered Global Note.
In order to secure the observance and performance of the
covenants and agreements of the holders of Purchase Contracts contained in the
Unit Agreement and in such Purchase Contracts, holders of Purchase Contracts
acting through the Unit Agent, as their attorney-in-fact, shall be deemed to
grant, sell, convey, assign, transfer and pledge unto The Chase Manhattan
Bank, in its capacity as Collateral Agent, for the benefit of the Company, as
collateral security for the performance when due by such holders of their
respective obligations under the Unit Agreement and under such Purchase
Contracts, a security interest in and to, and a lien upon and right of set-off
(the "Pledge") against, all of their right, title and interest in and to (i)
the Notes that are part of Units that include such Purchase Contracts, or such
other property as may be specified in the applicable Pricing Supplement (the
"Pledged Items"); (ii) all additions to and substitutions for such Pledged
Items as may be permissible, if so specified in the applicable Pricing
Supplement; (iii) all income, proceeds and collections received or to be
received, or derived or to be derived, at any time from or in connection with
(i) and (ii) above; and (iv) all powers and rights owned or thereafter
acquired under or with respect to the Pledged Items. All payments with respect
to any Pledged Items received by the Collateral Agent shall be paid by the
Collateral Agent, unless such payments have been released from the Pledge
pursuant to the Unit Agreement, to the Company in satisfaction of the
respective obligations of the holders of the Units of which such Pledged Items
are a part under the Purchase Contracts forming a part of such Units.
Unless otherwise specified in the applicable Pricing
Supplement, in the event that a holder does not elect to deliver cash in
settlement of its obligations under a Purchase Contract that is part of a Unit
and fails to present and surrender the certificate evidencing the Units held
by such holder to the Unit Agent when required, the Purchase Contract Property
to be purchased by such holder under the Purchase Contracts evidenced thereby
shall be registered in the name of, and together with any distributions
thereon shall be held by, the Unit Agent in trust for the benefit of such
holder until such certificate is presented and surrendered or the holder
provides satisfactory evidence that such certificate has been destroyed, lost
or stolen, together with any indemnity that may be required by the Unit Agent
or the Company in respect thereof. In the event that a certificate is not
presented (or such evidence and indemnity are not provided) on or prior to the
date two years after the relevant settlement date with respect to the related
Purchase Contract, any payments received by the Unit Agent in respect of the
Purchase Contract Property delivered in respect of the Units evidenced by such
certificate will be paid by the Unit Agent to the Company and such holder will
thereafter be required to look solely to the Company for payment thereof. The
Unit Agent will have no obligation to invest or to pay interest on any amounts
held by the Unit Agent pending distribution, as described above.
Unsecured Obligations of the Company. The Purchase Contracts
are unsecured contractual obligations of the Company and will rank pari passu
with the Company's other unsecured contractual obligations and with the
Company's unsecured and unsubordinated debt. Most of the assets of the Company
are owned by its subsidiaries. Therefore, the Company's rights and the rights
of its creditors, including holders of Purchase Contracts, to participate in
the distribution of assets of any subsidiary upon such subsidiary's
liquidation or recapitalization will be subject to the prior claims of such
subsidiary's creditors, except to the extent that the Company may itself be
a creditor with recognized claims against the subsidiary. In addition,
dividends, loans and advances from certain subsidiaries to the Company are
restricted by legal requirements, including (in the case of MS & Co. and 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.
Universal Warrants
The Company may issue from time to time, as part of a Unit with
one or more Notes or Purchase Contracts, Universal Warrants to purchase or
sell (a) securities of an entity unaffiliated with the Company, a basket of
such securities, an index or indices of such securities or any combination of
the above, (b) currencies or composite currencies or (c) commodities
(collectively, "Warrant Property"). The Company may satisfy its obligations,
if any, with respect to any Universal Warrants by delivering the Warrant
Property or, in the case of underlying securities or commodities, the cash
value thereof, as set forth in the applicable Pricing Supplement. The
applicable Pricing Supplement will specify whether or not a Universal Warrant
issued as part of a Unit may be separated from the other securities comprised
by such Unit prior to such Universal Warrant's expiration. Universal Warrants
may not be so separated prior to the 91st day after the issuance of a Unit,
unless otherwise specified in the applicable Pricing Supplement.
The Universal Warrants comprising part of a Unit will be issued
under the Universal Warrant Agreement dated as of June 2, 1997 (the "Universal
Warrant Agreement") between the Company and The Chase Manhattan Bank, as
Warrant Agent (the "Warrant Agent"), and may be issued in one or more series
as set forth in the applicable Pricing Supplement. The following summaries of
certain provisions of the Universal Warrant Agreement and Universal Warrants
do not purport to be complete and such summaries are subject to the detailed
provisions of such Universal Warrant Agreement to which reference is hereby
made for a full description of such provisions, including the definition of
certain terms used herein, and for other information regarding the Universal
Warrants.
Reference is made to the applicable Pricing Supplement for the
following terms of and information relating to any Universal Warrants: (i) the
specific designation and aggregate number of and the price at which the
Universal Warrants will be issued; (ii) the currency or composite currency for
which the Universal Warrants may be purchased; (iii) the date on which the
right to exercise the Universal Warrants shall commence and the date on which
such right shall expire or, if the Universal Warrants are not continuously
exercisable throughout such period, the specific date or dates on which they
will be exercisable; (iv) the identity of any depositaries, execution or
paying agents, transfer agents, registrars or determination or other agents in
respect of the Universal Warrants; (v) whether such Universal Warrants are put
Warrants or call Warrants; (vi) (a) the specific Warrant Property (and the
amount thereof) purchasable or saleable upon exercise of each Universal
Warrant; (b) the price at which and the currency or composite currency with
which such Warrant Property may be purchased or sold upon such exercise (or
the method of determining the same); (c) whether such exercise price may be
paid in cash, by the exchange of any other security offered with such
Universal Warrants or both and the method of such exercise; and (d) whether
the exercise of such Universal Warrants is to be settled in cash or by
delivery of the underlying securities or commodities or both; and (vii) any
other terms of the Universal Warrants.
Unless otherwise specified in the applicable Pricing
Supplement, the Universal Warrants may be issued in fully registered global or
definitive form, as specified in the applicable Pricing Supplement. In each
case, the form of the Universal Warrant included in a Unit will correspond to
the form of the Unit and of any other securities included in such Unit. See
"Global Securities" in the Prospectus.
At the option of the holder, upon request confirmed in writing
and subject to the terms of the Universal Warrant Agreement, Universal
Warrants in definitive form may be presented for exchange and for registration
of transfer (with the form of transfer endorsed thereon duly executed), but
only in connection with the transfer of the applicable Unit and each of the
securities comprised by such Unit, unless otherwise specified in the applicable
Pricing Supplement, at the corporate trust office of the Warrant Agent (or any
other office indicated in the Pricing Supplement relating to the Units
comprising such Universal Warrants) without service charge and upon payment
of any taxes and other governmental charges as described in the Universal
Warrant Agreement. Such transfer or exchange will be effected only if the
Warrant Agent is satisfied with the documents of title and identity of the
person making the request.
Certain Provisions of the Universal Warrant Agreement
Modifications. The Universal Warrant Agreement and the terms of
the Universal Warrants and the Universal Warrant Certificates may be amended
by the Company and the Warrant Agent, without the consent of the holders, for
the purpose of curing any ambiguity, or of curing, correcting or supplementing
any defective or inconsistent provision therein or in any other manner which
the Company may deem necessary or desirable and which will not adversely
affect the interests of the affected holders in any material respect.
The Company and the Warrant Agent may also modify or amend the
Universal Warrant Agreement and the terms of the Universal Warrants, with the
consent of the owners of not less than a majority in number of the then
outstanding unexercised Universal Warrants affected, provided that no such
modification or amendment that changes the exercise price of the Universal
Warrants, reduces the amount receivable upon exercise, cancellation or
expiration, shortens the period of time during which the Universal Warrants
may be exercised or otherwise materially and adversely affects the rights of
the owners of the Universal Warrants or reduces the percentage of outstanding
Universal Warrants, the consent of whose owners is required for modification
or amendment of the Universal Warrant Agreement or the terms of the Universal
Warrants, may be made without the consent of the owners affected thereby.
Merger, Consolidation, Sale or Other Disposition. If at any
time there shall be a merger or consolidation of the Company or a transfer of
substantially all of its assets, as permitted under the applicable Indentures,
the successor corporation thereunder shall succeed to and assume all
obligations of the Company under the Universal Warrant Agreement and the
Universal Warrant Certificates. The Company shall thereupon be relieved of any
further obligation under the Universal Warrant Agreement and the Universal
Warrants. The Company shall notify the Warrantholders of the occurrence of any
such event. See "Description of Debt Securities -- Certain Covenants" in the
Prospectus.
Enforceability of Rights of Warrantholders; Governing Law. The
Warrant Agent will act solely as an agent of the Company in connection with
the Universal Warrant Certificates and will not assume any obligation or
relationship of agency or trust for or with any holders of Universal Warrant
Certificates or beneficial owners of Universal Warrants. Any holder of
Universal Warrant Certificates and any beneficial owner of Universal Warrants
may, without the consent of the Warrant Agent, any other holder or beneficial
owner, enforce by appropriate legal action, on its own behalf, its right to
exercise the Universal Warrants evidenced by such Universal Warrant
Certificates, in the manner provided therein and in the Universal Warrant
Agreement. No holder of any Universal Warrant Certificate or beneficial owner
of any Universal Warrants shall be entitled to any of the rights of a holder
of the Warrant Property purchasable upon exercise of such Universal Warrants.
The Universal Warrants and the Universal Warrant Agreement will be governed
by, and construed in accordance with, the laws of the State of New York.
Unsecured Obligations of the Company. The Universal Warrants
are unsecured contractual obligations of the Company and will rank pari passu
with the Company's other unsecured contractual obligations and with the
Company's unsecured and unsubordinated debt. Most of the assets of the Company
are owned by its subsidiaries. Therefore, the Company's rights and the rights
of its creditors, including Warrantholders, to participate in the distribution
of assets of any subsidiary upon such subsidiary's liquidation or
recapitalization will be subject to the prior claims of such subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary. In addition, dividends, loans and
advances from certain subsidiaries to the Company are restricted by legal
requirements, including (in the case of MS & Co. and 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.
FOREIGN CURRENCY RISKS
Exchange Rates and Exchange Controls
An investment in Notes, Units or any of the securities
constituting such Units that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either
the U.S. or foreign governments. Such risks generally depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange between U.S. dollars and certain foreign currencies have been
highly volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in such rate that may
occur during the term of any Note, Unit or security included in such Unit.
Depreciation against the U.S. dollar of the currency in which a Note, Unit or
security included in such Unit is payable would result in a decrease in the
effective yield of such Note below its coupon rate or in the payout of such
Unit (or security included therein) and, in certain circumstances, could
result in a loss to the investor on a U.S. dollar basis. In addition,
depending on the specific terms of a Currency Linked Note, changes in exchange
rates relating to any of the currencies involved may result in a decrease in
its effective yield and, in certain circumstances, could result in a loss of
all or a substantial portion of the principal of a Note to the investor.
Fluctuations in the rates of exchange between U.S. dollars and
any other currency (i) in which payment of the exercise price of a Universal
Warrant is to be made, (ii) in which the Warrant Property is denominated or
(iii) that is to be purchased or sold by exercise of such Universal Warrant
(or between any of the currencies noted in clauses (i) through (iii) above)
may change the value of such Universal Warrant or of the Unit comprising such
Universal Warrant and could result in a loss to the investor even if the spot
price of the Warrant Property were such that the Universal Warrant appeared to
be "in the money." Similarly, currency fluctuations between U.S. dollars, the
currency in which the purchase price is denominated, the currency in which the
Purchase Contract Property is denominated or, if applicable, the currency to
be purchased or sold pursuant to such Purchase Contract could adversely affect
the value of any Purchase Contract or of the Unit comprising such Purchase
Contract and could result in a loss to the investor.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN FINANCIAL AND
LEGAL ADVISORS AS TO ANY SPECIFIC RISKS ENTAILED BY AN INVESTMENT BY SUCH
INVESTOR IN NOTES, UNITS OR ANY OF THE SECURITIES CONSTITUTING SUCH UNITS THAT
ARE DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, FOREIGN
CURRENCY. SUCH NOTES, UNITS OR OTHER SECURITIES INCLUDED IN SUCH UNITS ARE NOT
AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT
TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents, 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, holding or receipt of payments of
principal of, premium, if any, and interest on the Notes (or of any payment
due with respect to a Unit). Such persons should consult their own counsel
with regard to such matters.
Foreign exchange rates can either float or be fixed by
sovereign governments. Exchange rates of most economically developed nations
are permitted to fluctuate in value relative to the U.S. dollar. National
governments, however, rarely voluntarily allow their currencies to float
freely in response to economic forces. From time to time governments use a
variety of techniques, such as intervention by a country's central bank or
imposition of regulatory controls or taxes, to affect the exchange rate of
their currencies. Governments may also issue a new currency to replace an
existing currency or alter the exchange rate or relative exchange
characteristics by devaluation or revaluation of a currency. Thus, a special
risk in purchasing non-U.S. dollar denominated Notes or Currency Linked Notes
(or Universal Warrants or Purchase Contracts where the exercise or purchase
price and the underlying property is denominated in currencies differing from
one another or from U.S. dollars) is that their U.S. dollar-equivalent yields
or payouts could be affected by governmental actions, which could change or
interfere with theretofore freely determined currency valuation, fluctuations
in response to other market forces, and the movement of currencies across
borders. There will be no adjustment or change in the terms of such Notes,
Units or any securities constituting such Units in the event that exchange
rates should become fixed, or in the event of any devaluation or revaluation
or imposition of exchange or other regulatory controls or taxes, or in the
event of other developments affecting the U.S. dollar or any applicable
Specified Currency.
Governments have imposed from time to time, and may in the
future impose, exchange controls that could affect exchange rates as well as
the availability of a specified foreign currency (or of securities denominated
in such currency) at the time of payment of principal of, premium, if any, or
interest on a Note (or of any payment due with respect to a Unit or any
security constituting a Unit). Even if there are no actual exchange controls,
it is possible that the Specified Currency for any particular Note not
denominated in U.S. dollars (or the applicable currency for any payment with
respect to a Unit (or any of the securities constituting such Unit) would not
be available when payments on such Note are due, including as a result of the
replacement of such Specified Currency by a single European currency (expected
to be named the Euro). In that event, the Company would make required payments
in U.S. dollars on the basis of the Market Exchange Rate on the date of such
payment, or if such rate of exchange is not then available, on the basis of
the Market Exchange Rate as of the most recent practicable date; provided,
however, that, if the Specified Currency for any Note (or the applicable
currency for any payment with respect to a Unit (or any of the securities
constituting such Unit) is not available because it has been replaced by the
Euro, the Company would make such payments in Euro in conformity with legally
applicable measures taken pursuant to, or by virtue of, the Treaty. See
"Description of Notes -- Payment Currency."
With respect to any Note, Unit or security included in such
Unit denominated in a foreign currency or currency unit, or the payment of, or
in respect to, any Note, Unit or security included in such Unit which is
related to the value of, a foreign currency or currency unit, the applicable
Pricing Supplement will include information with respect to applicable current
exchange controls, if any, and historic exchange rate information on such
currency or currency unit. The information contained therein shall constitute
a part of this Prospectus Supplement and is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the future.
Governing Law and Judgments
The Notes, Units, Universal Warrants and Purchase Contracts
will be governed by and construed in accordance with the laws of the State of
New York. If a court in the United States were to grant a judgment in an
action based on Notes denominated in a Specified Currency other than U.S.
dollars or on any Units, Universal Warrants and Purchase Contracts denominated
in any such currency, it is likely that such court would grant judgment only
in U.S. dollars. If the court were a New York court, however, such court would
grant a judgment in the Specified Currency or currency in respect of which any
payment on a Unit, Universal Warrant, or Purchase Contract was due. Such
judgment would then be converted into U.S. dollars at the rate of exchange
prevailing on the date of entry of the judgment.
UNITED STATES FEDERAL TAXATION
In the opinion of Brown & Wood LLP, counsel to the Company, the
following summary accurately describes the principal United States federal
income tax consequences of ownership and disposition of the Notes and of Units
consisting of Notes and certain Universal Warrants or Purchase Contracts. This
summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), and existing and proposed Treasury regulations, revenue rulings,
administrative interpretations and judicial decisions (all as currently in
effect and all of which are subject to change, possibly with retroactive
effect). Except as specifically set forth herein this summary deals only with
Notes and Units purchased by a United States Holder (as defined below) on
original issuance and held as capital assets within the meaning of Section
1221 of the Code. It does not discuss all of the tax consequences that may be
relevant to holders in light of their particular circumstances or to holders
subject to special rules, such as persons other than United States Holders,
insurance companies, dealers in securities or foreign currencies, persons
holding the Notes or Units as part of a hedging transaction, "straddle,"
conversion transaction, or other integrated transaction, or United States
Holders whose functional currency (as defined in Section 985 of the Code) is
not the U.S. dollar. Persons considering the purchase of the Notes or Units
should consult with their own tax advisors with regard to the application of
the United States federal income tax laws to their particular situations as
well as any tax consequences arising under the laws of any state, local or
foreign jurisdiction.
As used herein, the term "United States Holder" means a
beneficial owner of a Note or Unit who or 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 the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust if both: (A) a United States court
is able to exercise primary supervision over the administration of the trust,
and (B) one or more United States trustees or fiduciaries have the authority
to control all substantial decisions of the trust.
Notes
Payments of Interest on the Notes
Interest paid on a Note (whether in U.S. dollars or in other
than U.S. dollars), that is not a Discount Note or an Exchangeable Note, will
generally be taxable to a United States Holder as ordinary interest income at
the time it accrues or is received, in accordance with the United States
Holder's method of accounting for federal income tax purposes.
Special rules governing the treatment of interest paid with
respect to Discount Notes, including certain Notes that pay interest annually
that are issued less than 15 calendar days before an Interest Payment Date,
Notes that mature one year or less from their date of issuance and Notes
issued for an amount less than their stated redemption price at maturity, are
described under "Discount Notes" below. Special rules governing the treatment
of interest paid with respect to Exchangeable Notes are described under
"Optionally Exchangeable Notes" and "Mandatorily Exchangeable Notes" below.
Discount Notes
The following discussion is a summary of the principal United
States federal income tax consequences of the ownership and disposition of
Discount Notes (as defined below) by United States Holders. Additional rules
applicable to Discount Notes that are denominated in a Specified Currency
other than the U.S. dollar, or have payments of interest or principal
determined by reference to the value of one or more currencies or currency
units other than the U.S. dollar, are described under "Foreign Currency Notes"
below.
A Note that has an "issue price" that is less than its "stated
redemption price at maturity" will generally be considered to have been issued
bearing original issue discount ("OID") for United States federal income tax
purposes (a "Discount Note"), unless such difference is less than a specified
de minimis amount. The issue price of each Note in an issue of Notes issued
for cash generally will equal the first price at which a substantial amount
of such Notes is sold to the public (ignoring sales to bond houses, brokers,
or similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers). Such issue price does not change even if
part of the issue is subsequently sold at a different price. The stated
redemption price at maturity of a Note is the total of all payments required
to be made under the Note other than "qualified stated interest" payments. The
term "qualified stated interest" is defined as stated interest that is
unconditionally payable at least annually at a single fixed rate of interest.
In addition, qualified stated interest generally includes stated interest with
respect to a variable rate debt instrument that is unconditionally payable at
least annually at a single qualified floating rate or a rate that is
determined using a single fixed formula that is based on objective financial
or economic information. A rate is a qualified floating rate if variations in
the rate can reasonably be expected to measure contemporaneous fluctuations in
the cost of newly borrowed funds in the currency in which the Note is
denominated.
No payment of interest on a Note that matures one year or less
from its date of issuance will be considered qualified stated interest and
accordingly such a Note will be treated as a Discount Note.
A United States Holder of a Discount Note is required to
include qualified stated interest with respect to the Note in income at the
time it is received or accrued, in accordance with such holder's method of
accounting.
In addition, United States Holders of Discount Notes that
mature more than one year from the date of issuance will be required to
include OID in income for United States federal income tax purposes as it
accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash payments attributable to such income, but
such holders will not be required to include separately in income cash payments
received on such Notes, even if denominated as interest, to the extent they do
not constitute qualified stated interest. The amount of OID includible in
income for a taxable year by a United States Holder of a Discount Note will
generally equal the sum of the "daily portions" of the total OID on the
Discount Note for each day during the taxable year in which such holder held
the Discount Note ("accrued OID"). Generally, the daily portion of OID is
determined by allocating to each day in any "accrual period" a ratable portion
of the OID allocable to such accrual period. The term "accrual period" means
an interval of time of one year or less; provided that each scheduled payment
of principal or interest either occurs on the final day of an accrual period
or the first day of an accrual period. The amount of OID allocable to an
accrual period will be the excess of (a) the product of the "adjusted issue
price" of the Discount Note at the beginning of such accrual period and its
"yield to maturity" (adjusted to reflect the length of the accrual period)
over (b) the amount of any qualified stated interest allocable to the accrual
period. The "adjusted issue price" of a Discount Note at the beginning of an
accrual period will equal the issue price thereof plus the amount of OID
previously includible in the gross income of any United States Holder (without
reduction for any premium or amortized acquisition premium, as described
below), less any payments made on such Discount Note (other than qualified
stated interest) on or before the first day of the accrual period. The "yield
to maturity" of the Discount Note will be computed on the basis of a constant
annual interest rate compounded at the end of each accrual period. Under the
foregoing rules, United States Holders of Discount Notes will generally be
required to include in income increasingly greater amounts of OID in
successive accrual periods. Special rules will apply for calculating OID for
initial short or final accrual periods.
Notes that pay interest annually that are issued less than 15
calendar days before an Interest Payment Date may be treated as Discount
Notes. United States Holders intending to purchase such Notes should refer to
the applicable Pricing Supplement.
Certain of the Discount Notes may be redeemable prior to
maturity at the option of the Company (a "call option") and/or repayable prior
to maturity at the option of the holder (a "put option"). Discount Notes
containing either or both of such features may be subject to rules that differ
from the general rules discussed above. Holders intending to purchase Discount
Notes with either or both of such features should carefully examine the
applicable Pricing Supplement and should consult with their own tax advisors
with respect to either or both of such features since the tax consequences
with respect to OID will depend, in part, on the particular terms and the
particular features of the purchased Note.
In general, a United States Holder who uses the cash method of
tax accounting and who holds a Discount Note that matures one year or less
from the date of its issuance (a "short-term Discount Note") is not required
to accrue OID for United States federal income tax purposes unless such holder
elects to do so. United States Holders who report income for United States
federal income tax purposes on the accrual method and certain other holders,
including banks and dealers in securities, are required to include OID (or
alternatively acquisition discount) on such short-term Discount Notes on a
straight-line basis, unless an election is made to accrue the OID according to
a constant yield method based on daily compounding. In the case of a United
States Holder who is not required, and does not elect, to include OID in
income currently, any gain realized on the sale, exchange or retirement of a
short-term Discount Note will be ordinary interest income to the extent of the
OID accrued on a straight-line basis (or, if elected by such holder, under the
constant yield method) through the date of sale, exchange or retirement. In
addition, such non-electing United States Holders who are not subject to the
current inclusion requirement described in the second sentence of this
paragraph may be required to defer the deduction of all or a portion of any
interest paid on indebtedness incurred to purchase short-term Discount Notes
until such OID is included in such holder's income.
If the amount of OID with respect to a Note is less than the
specified de minimis amount (generally, 0.0025 multiplied by the product of
the stated redemption price at maturity and the number of complete years to
maturity), the amount of OID is treated as zero and all stated interest is
treated as qualified stated interest. A United States Holder will be required
to treat any stated principal payment on a Note as capital gain to the extent
of the product of the total amount of de minimis OID and a fraction, the
numerator of which is the amount of the principal payment made and the
denominator of which is the stated principal amount of the Note.
United States Holders are permitted to elect to include all
interest on a Note using the constant yield method. For this purpose, interest
includes stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount, and unstated interest, as adjusted by
any amortizable bond premium or acquisition premium. Special rules apply to
elections made with respect to Notes with amortizable bond premium or market
discount and United States Holders considering such an election should consult
their own tax advisors. The election cannot be revoked without the approval of
the Internal Revenue Service.
Market Discount and Premium
If a United States Holder purchases a Note (other than a
Discount Note or an Exchangeable Note) for an amount that is less than its
issue price (or, with respect to a subsequent purchaser, its stated redemption
price at maturity or, in the case of a Discount Note, its adjusted issue
price), the amount of the difference will be treated as "market discount" for
United States federal income tax purposes, unless such difference is less than
a specified de minimis amount.
Under the market discount rules of the Code, a United States
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 that
has not previously been included in income and is treated as having accrued on
such Note at the time of such payment or disposition. If such Note is disposed
of in a nontaxable transaction (other than a nonrecognition transaction
described in Code Section 1276(c)), the amount of gain realized on such
disposition for purposes of the market discount rules shall be determined as
if such holder had sold the Note at its then fair market value. 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 United States Holder
elects to accrue on the basis of a constant interest rate.
A United States 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 such Note until the maturity of
the Note or its earlier disposition (except for certain nonrecognition
transactions). A United States Holder may elect to include market discount in
income currently as it accrues (on either a ratable or a constant interest
rate 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. Such an election will apply to all debt
instruments acquired by the United States Holder on or after the first day of
the first taxable year to which such election applies and may be revoked only
with the consent of the Internal Revenue Service.
A United States Holder who purchases a Discount Note for an
amount that is greater than its adjusted issue price, but less than or equal
to the sum of all amounts payable on the Note after the purchase date (other
than qualified stated interest), will be considered to have purchased such
Note at an "acquisition premium" within the meaning of the Code. Under the
acquisition premium rules of the Code, the amount of OID which such holder
must include in its gross income with respect to such Note for any taxable
year will be reduced by a fraction the numerator of which is the excess of the
cost of the Note over its adjusted issue price and the denominator of which
is the excess of the sum of all amounts payable on the Note after the purchase
date (other than qualified stated interest) over the adjusted issue price.
A United States Holder who purchases a Discount Note for an
amount that is greater than the sum of all amounts payable on the Note after
the purchase date (other than qualified stated interest) will be considered to
have purchased such Note at a "premium" within the meaning of the OID
Regulations. In such case, the holder is not required to include any OID in
gross income.
If a United States Holder purchases a Note (other than an
Exchangeable Note) for an amount that is greater than the amount payable at
maturity (or on the earlier call date, in the case of a Note that is
redeemable at the option of the Company), such holder will be considered to
have purchased such Note with "amortizable bond premium" equal in amount to
such excess, and may elect (in accordance with applicable Code provisions) to
amortize such premium, using a constant yield method over the remaining term
of the Note and to offset interest otherwise required to be included in income
in respect of such Note during any taxable year by the amortized amount of
such excess for such taxable year. However, if such Note may be optionally
redeemed after the United States 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 such Note. Any election to amortize bond premium applies to all
debt instruments acquired by the United States Holder on or after the first
day of the first taxable year to which such election applies and may be
revoked only with the consent of the Internal Revenue Service.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a United
States Holder will generally recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement and
such holder's adjusted tax basis in the Note. For these purposes, the amount
realized on the sale, exchange or retirement of a Note (other than an
Exchangeable Note) does not include any amount attributable to accrued
interest (or, in the case of a Discount Note, accrued qualified stated
interest), which will be taxable as such unless previously taken into account.
A United States Holder's adjusted tax basis in a Note (other than an
Exchangeable Note) generally will equal the cost of the Note to such holder,
increased by the amounts of any market discount, OID and de minimis OID
previously included in income by the holder with respect to such Note and
reduced by any amortized bond premium and any principal payments received by
the United States Holder and, in the case of a Discount Note, by the amounts
of any other payments that do not constitute qualified stated interest.
Subject to the discussion under "Foreign Currency Notes" and
"Optionally Exchangeable Notes" below, gain or loss recognized on the sale,
exchange or retirement of a Note will be capital gain or loss (except to the
extent of any accrued market discount or, in the case of a short-term Discount
Note, any accrued OID which the United States Holder has not previously
included in income), and will generally be long-term capital gain or loss if
at the time of sale, exchange or retirement the Note has been held for more
than one year.
A United States Holder generally will not recognize gain or
loss upon the election (or revocation of such election) or failure to elect to
terminate the automatic extension of maturity of a Renewable Note.
Foreign Currency Notes
The following discussion summarizes the principal United States
federal income tax consequences to a United States Holder of the ownership and
disposition of Notes (other than the Currency Linked Notes described above)
that are denominated in a Specified Currency other than the U.S. dollar or the
payments of interest or principal on which are payable in one or more
currencies or currency units other than the U.S. dollar (a "Foreign Currency
Note").
The rules discussed below will generally not apply to a United
States Holder that enters into a "qualified hedging transaction." A qualified
hedging transaction is an integrated economic transaction consisting of a
qualifying debt instrument, such as a Foreign Currency Note, and a "section
1.988-5(a) hedge," as defined in section 1.988-5(a)(4) of the Treasury
regulations. Generally, such an integrated economic transaction, if identified
as such by either the United States Holder or the Internal Revenue Service, is
treated as a single transaction for United States federal income tax purposes,
the effect of which is to treat such a holder as owning a synthetic debt
instrument that is subject to rules applicable to Discount Notes. The rules
with respect to a qualified hedging transaction are extremely complex and
special rules may apply in certain circumstances, and persons that are
considering hedging the currency risk are urged to consult with their own tax
advisors with respect to the application of these rules.
A United States Holder who uses the cash method of accounting
and who receives a payment of interest with respect to a Foreign Currency Note
(other than a Discount Note (except to the extent any qualified stated interest
is received) in which OID is accrued on a current basis) 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 United States Holder's tax basis in the foreign
currency.
A United States Holder (to the extent the above paragraph is
not applicable) will be required to include in income the U.S. dollar value of
the amount of interest income (including OID or market discount and reduced by
premium, acquisition premium and amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into
account with respect to a Foreign Currency 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. The average rate of exchange
for the accrual period (or partial period) is the simple average of the
exchange rates for each business day of such period (or other method if such
method is reasonably derived and consistently applied). A United States Holder
may elect to determine the U.S. dollar value of such accrued income by
translating such income at the spot rate on the last day of the interest
accrual period (or, in the case of a partial accrual period, the spot rate on
the last day of the taxable year) or, if the date of receipt is within five
business days of the last day of the interest accrual period, the spot rate on
the date of receipt. Such United States Holder will recognize ordinary gain or
loss with respect to accrued interest income on the date such income is
received. The amount of ordinary gain or loss recognized will equal the
difference between the U.S. dollar value of the foreign currency payments
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).
A United States Holder will have a tax basis in any foreign
currency received on the sale, exchange or retirement of a Foreign Currency
Note equal to the U.S. dollar value of such foreign currency, determined at the
time of such sale, exchange or retirement. Any gain or loss realized by a
United States Holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase Foreign
Currency Notes) will be ordinary income or loss.
A United States Holder's tax basis in a Foreign Currency Note,
and the amount of any subsequent adjustment to such holder's tax basis, will
be the U.S. dollar value of the foreign currency amount paid for such Foreign
Currency Note, or of the foreign currency amount of the adjustment, determined
on the date of such purchase or adjustment. A United States Holder who
converts U.S. dollars to a foreign currency and immediately uses that currency
to purchase a Foreign Currency Note denominated in the same currency
ordinarily will not recognize gain or loss in connection with such conversion
and purchase. However, a United States Holder who purchases a Foreign Currency
Note with previously owned foreign currency will recognize ordinary income or
loss in an amount equal to the difference, if any, between such holder's tax
basis in the foreign currency and the U.S. dollar fair market value of the
Foreign Currency Note on the date of purchase. For purposes of determining the
amount of any gain or loss recognized by a United States Holder on the sale,
exchange or retirement of a Foreign Currency Note, the amount realized upon
such sale, exchange or retirement will be the U.S. dollar value of the foreign
currency received, determined on the date of sale, exchange or retirement.
Gain or loss realized upon the sale, exchange or retirement of
a Foreign Currency Note will be ordinary income or loss to the extent it is
attributable to fluctuations in currency exchange rates. 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 such
Note, determined on the date such payment is received or such Note is disposed
of, including any payment with respect to accrued interest, and the U.S.
dollar value of the foreign currency principal amount of such Note, determined
on the date such United States Holder acquired such Note, and the U.S. dollar
value of accrued interest received (determined by translating such interest at
the average exchange rate for the accrual period). The foreign currency
principal amount of a Foreign Currency Note generally equals the United States
Holder's purchase price in units of foreign currency. Such foreign currency
gain or loss will be recognized only to the extent of the total gain or loss
recognized by a United States Holder on the sale, exchange or retirement of
the Foreign Currency Note.
The source of exchange gain or loss will be determined by
reference to the residence of the holder or the "qualified business unit" of
the holder on whose books the Note is properly reflected. Any gain or loss
recognized by such a United States Holder in excess of such foreign currency
gain or loss will be capital gain or loss (except to the extent of any accrued
market discount or, in the case of a short-term Discount Note, any accrued
OID), and generally will be long-term capital gain or loss if the holding
period of the Foreign Currency Note exceeds one year.
Any gain or loss that is treated as ordinary income or loss, as
described above, generally will not be treated as interest income or expense
except to the extent provided by administrative pronouncements of the Internal
Revenue Service.
OID, market discount, premium, acquisition premium and
amortizable bond premium of a Foreign Currency Note are to be determined in
the relevant foreign currency. The amount of such discount or premium that is
taken into account currently under general rules applicable to Notes other
than Foreign Currency Notes is to be determined for any accrual period in the
relevant foreign currency and then translated into the United States Holder's
functional currency on the basis of the average exchange rate in effect during
such accrual period. The amount of accrued market discount (other than market
discount that is included in income on a current basis) taken into account
upon the receipt of any partial principal payment or upon the sale, exchange,
retirement or other disposition of a Foreign Currency Note will be the U.S.
dollar value of such accrued market discount (determined on the date of
receipt of such partial principal payment or upon the sale, exchange,
retirement or other disposition).
Any loss realized on the sale, exchange or retirement of a
Foreign Currency Note with amortizable bond premium by a United States Holder
who has not elected to amortize such premium will be a capital loss to the
extent of such bond premium. If such an election is made, amortizable bond
premium taken into account on a current basis shall reduce interest income in
units of the relevant foreign currency. Exchange gain or loss is realized on
such amortized bond premium with respect to any period by treating the bond
premium amortized in such period as a return of principal.
The Code and the applicable regulations do not discuss the tax
consequences of an issuance of a Foreign Currency Note that is denominated in,
or has payments of interest or principal determined by reference to, a
so-called hyperinflationary currency or more than one currency. On March 17,
1992, Treasury regulations were proposed with regard to debt instruments
denominated in a hyperinflationary currency and certain debt instruments
denominated in more than one currency. These proposed regulations are proposed
to be effective for transactions entered into on or after the date such
regulations are finalized.
A Foreign Currency Note will be considered to be a debt
instrument denominated in a hyperinflationary currency if it is denominated in
a Specified Currency of a country in which there is cumulative inflation of at
least 100% during the 36 calendar month period ending on the last day of the
preceding calendar year. Under the proposed regulations, a United States
Holder that acquires a Foreign Currency Note that is denominated in a
hyperinflationary currency will recognize gain or loss for its taxable year
determined by reference to the change in exchange rates between the first day
of the taxable year (or the date the Note was acquired, if later) and the last
day of the taxable year (or the date the Note was disposed of, if earlier).
Such gain or loss will reduce or increase the amount of interest income
otherwise required to be taken into account. Special rules apply to the extent
such loss exceeds the amount of interest income otherwise taken into account.
Under the proposed regulations, a Foreign Currency Note will be
considered to be a "dual currency debt instrument" if (i) the qualified stated
interest is denominated in or determined by reference to a single currency,
(ii) the stated redemption price at maturity is denominated in or determined
by reference to a different currency, and (iii) the amount of all payments in
each currency is fixed on the issue date. A Foreign Currency Note (other than
a dual currency debt instrument) will be considered to be a "multicurrency
debt instrument" if payments are to be made in more than one currency and the
amount of all payments in each currency is fixed on the issue date. A dual
currency debt instrument will be treated as two hypothetical debt instruments,
a zero coupon bond denominated in the currency of the stated redemption price
at maturity and an installment obligation denominated in the currency of the
qualified stated interest. A multicurrency debt instrument will be treated
similarly and separated into component hypothetical debt instruments in each
currency. The OID and foreign currency rules discussed above will apply to
each hypothetical debt instrument. The proposed regulations do not apply to any
Foreign Currency Note that is denominated in, or has payments of interest or
principal determined by reference to, more than one currency except to the
extent the Note meets the definition of a dual currency debt instrument or
multicurrency debt instrument.
Optionally Exchangeable Notes
The following discussion summarizes the principal United States
federal income tax consequences to a United States Holder of the ownership and
disposition of Optionally Exchangeable Notes.
Unless otherwise noted in the applicable Pricing Supplement,
Optionally Exchangeable Notes will be treated as "contingent payment debt
instruments" for United States federal income tax purposes. As a result, the
Optionally Exchangeable Notes will generally be subject to the OID provisions
of the Code and the Treasury regulations issued thereunder and a United States
Holder will be required to accrue interest income on the Optionally
Exchangeable Notes as set forth below.
At the time the Optionally Exchangeable Notes are issued, the
Company will be required to determine a "comparable yield" for the Optionally
Exchangeable Notes that takes into account the yield at which the Company
could issue a fixed rate debt instrument with terms similar to those of the
Optionally Exchangeable Notes (including the level of subordination, term,
timing of payments and general market conditions, but excluding any adjustments
for liquidity or the riskiness of the contingencies with respect to the
Optionally Exchangeable Notes). The comparable yield may be greater than or
less than the stated interest rate, if any, with respect to the Optionally
Exchangeable Notes.
Solely for purposes of determining the amount of interest
income that a United States Holder will be required to accrue, the Company
will be required to construct a "projected payment schedule" in respect of the
Optionally Exchangeable Notes representing a series of payments the amount and
timing of which would produce a yield to maturity on the Optionally
Exchangeable Notes equal to the comparable yield. NEITHER THE COMPARABLE YIELD
NOR THE PROJECTED PAYMENT SCHEDULE CONSTITUTES A REPRESENTATION BY THE COMPANY
REGARDING THE ACTUAL AMOUNT THAT THE OPTIONALLY EXCHANGEABLE NOTES WILL PAY.
For United States federal income tax purposes, a United States Holder is
required to use the comparable yield and the projected payment schedule
established by the Company in determining interest accruals and adjustments
in respect of an Optionally Exchangeable Note, unless such United States
Holder timely discloses and justifies the use of other estimates to the
Internal Revenue Service.
Based on the comparable yield and the issue price of the Optionally
Exchangeable Notes, a United States Holder of an Optionally Exchangeable Note
(regardless of accounting method) will be required to accrue as OID the sum
of the daily portions of interest on the Optionally Exchangeable Note for each
day in the taxable year on which the holder held the Optionally Exchangeable
Note, adjusted upward or downward to reflect the difference, if any, between
the actual and the projected amount of any contingent payments on the
Optionally Exchangeable Note (as set forth below). The daily portions of
interest in respect of an Optionally Exchangeable Note are determined by
allocating to each day in an accrual period the ratable portion of interest on
the Optionally Exchangeable Note that accrues in the accrual period. The
amount of interest on an Optionally Exchangeable Note that accrues in an
accrual period is the product of the comparable yield on the Optionally
Exchangeable Note (adjusted to reflect the length of the accrual period) and
the adjusted issue price of the Optionally Exchangeable Note. The adjusted
issue price of an Optionally Exchangeable Note at the beginning of the first
accrual period will equal its issue price and for any accrual period
thereafter will be (x) the sum of the issue price of such Optionally
Exchangeable Note and any interest previously accrued thereon by a holder
(disregarding any positive or negative adjustments) minus (y) the amount of
any projected payments on the Optionally Exchangeable Note for previous
accrual periods.
A United States Holder will be required to recognize interest
income equal to the amount of any positive adjustment (i.e., the excess of
actual payments over projected payments) in respect of an Optionally
Exchangeable Note for a taxable year. A negative adjustment (i.e., the excess
of projected payments over actual payments) in respect of an Optionally
Exchangeable Note for a taxable year (i) will first reduce the amount of
interest in respect of the Optionally Exchangeable Note that a United States
Holder would otherwise be required to include in income in the taxable year
and (ii) to the extent of any excess, will give rise to an ordinary loss equal
to that portion of such excess as does not exceed the excess of (A) the amount
of all previous interest inclusions under the Optionally Exchangeable Note
over (B) the total amount of the United States Holder's net negative
adjustments treated as ordinary loss on the Exchangeable Note in prior taxable
years. A net negative adjustment is not subject to the two percent floor
limitation imposed on miscellaneous deductions under Section 67 of the Code.
Any negative adjustment in excess of the amounts described above in (i) and
(ii) will be carried forward to offset future interest income in respect of
the Optionally Exchangeable Note or to reduce the amount realized on a sale,
exchange or retirement of the Optionally Exchangeable Note. Where a United
States Holder purchases an Optionally Exchangeable Note at a price other than
the issue price thereof, the difference between the purchase price and the
issue price will generally be treated as a positive or negative adjustment, as
the case may be, and allocated to the daily portions of interest or projected
payments with respect to the Optionally Exchangeable Note over its remaining
term.
Upon a sale, exchange or retirement of an Optionally
Exchangeable Note, a United States Holder will generally recognize taxable
gain or loss equal to the difference between the amount realized on the sale,
exchange or retirement and such holder's tax basis in the Optionally
Exchangeable Note. If the Company delivers property (other than cash) to a
holder in retirement of an Optionally Exchangeable Note, the amount realized
will equal the fair market value of the property, determined at the time of
such retirement, plus the amount of cash, if any, received in lieu of
property. A United States Holder's tax basis in an Optionally Exchangeable
Note will equal the cost thereof, increased by the amount of interest income
previously accrued by the holder in respect of the Optionally Exchangeable
Note (disregarding any positive or negative adjustments) and decreased by the
amount of all prior projected payments in respect of the Optionally
Exchangeable Note. A United States Holder generally will treat any gain as
interest income, and any loss as ordinary loss to the extent of the excess of
previous interest inclusions over the total negative adjustments previously
taken into account as ordinary losses, and the balance as capital loss.
A United States Holder will have a tax basis in any property
(other than cash) received upon the retirement of an Optionally Exchangeable
Note equal to the fair market value of such property, determined at the time
of such retirement. Any gain or loss realized by a United States Holder on a
sale or exchange of such property will generally be capital gain or loss and
will generally be long-term capital gain or loss if the sale or exchange occurs
more than one year after the retirement of the Exchangeable Note.
Mandatorily Exchangeable Notes
Under current United States federal income tax law, it is
unclear how a Mandatorily Exchangeable Note will be treated. Prospective
purchasers of Mandatorily Exchangeable Notes are urged to review the
applicable Pricing Supplement and consult with their tax advisors.
PERLS, Reverse PERLS and Multicurrency PERLS
The following discussion relates to PERLS, Reverse PERLS and
Multicurrency PERLS that bear current coupons consistent with or greater than
comparable dollar denominated debt obligations. In other cases, holders should
refer to the discussion relating to taxation in the applicable Pricing
Supplement.
Although no authority exists that addresses instruments having
characteristics similar to such instruments and the conclusions herein are
therefore not entirely free from doubt, Brown & Wood LLP advises that such
PERLS, Reverse PERLS and Multicurrency PERLS should constitute debt
obligations for United States federal income tax purposes and that no portion
of the issue price should be allocated to the foreign currency feature. The
Company intends to treat PERLS, Reverse PERLS and Multicurrency PERLS as
indebtedness of the Company and such characterization is binding on all United
States Holders, except for holders who disclose a different position on their
United States federal income tax return. In any case, the Company's treatment
is not binding upon the Internal Revenue Service or the courts, and there can
be no assurance that it will be accepted.
The Treasury regulations under the OID provisions of the Code
state that a debt instrument will not be treated as a contingent debt
instrument merely because some or all of the payments are denominated in or
determined by reference to the value of one or more foreign currencies. It
should be noted, however, that the foreign currency regulations do not yet
address the treatment of instruments like PERLS, Reverse PERLS or
Multicurrency PERLS and the proposed regulations do not address the treatment
of such instruments except insofar as they meet the definitions of dual
currency debt instruments and multicurrency debt instruments. It is possible
that such regulations (or other authority), when issued, could result in tax
consequences that differ from those described herein, and that such authority
could apply with retroactive effect. See discussion under "Foreign Currency
Notes" for a summary of other federal income tax principles that may apply to
United States Holders of PERLS, Reverse PERLS and Multicurrency PERLS.
Notes Linked to Commodity Prices, Single Securities, Baskets of
Securities or Indices
The United States federal income tax consequences to a United
States Holder of the ownership and disposition of Notes that have principal or
interest determined by reference to commodity prices, securities of entities
unaffiliated with the Company, baskets of such securities or indices will vary
depending upon the exact terms of the Notes and related factors. Unless
otherwise noted in the applicable Pricing Supplement, such Notes will be
subject to the same United States federal income tax treatment as Optionally
Exchangeable Notes.
Units
The following discussion addresses the treatment of a Unit
consisting of (i) a Note and one or more Universal Warrants entitling the
holder thereof to purchase securities of an entity unaffiliated with the
Company, a basket of such securities, an index or indices of such securities
or any combination of the above or commodities (each, a "Warrant Unit"), or
(ii) a Note and one or more Purchase Contracts requiring the holder thereof to
purchase securities of an entity unaffiliated with the Company, a basket of
such securities, an index or indices of such securities or any combination of
the above or commodities (each, a "Purchase Unit"). Other Units and certain
Warrant Units and Purchase Units with special terms and conditions may be
subject to United States federal income tax consequences that differ from
those described below. United States Holders intending to purchase such Units
should refer to the discussion relating to United States federal income
taxation in the applicable Pricing Supplement.
Warrant Units
While not free from doubt, based on certain representations
made by the Company it is the opinion of Brown & Wood LLP that, in the case of
a Warrant Unit, the Note and the Universal Warrants should be treated as
separate instruments and, pursuant to the terms of the Unit Agreement, the
Company and each United States Holder will be obligated (in the absence of an
applicable administrative ruling or judicial determination to the contrary) to
follow this treatment. Except as otherwise stated, the following discussion
assumes that the Notes and Universal Warrants comprising Warrant Units will be
respected as separate instruments. Under this treatment, the issue price of
the Warrant Unit (determined in a similar manner as the issue price of a Note)
will be allocated between the Note and the Universal Warrants based on their
relative fair market values. This allocation will be set forth in the
applicable Pricing Supplement and will be based on the Company's judgment as
to the relative value of the Note and the Universal Warrants at the time of
original issue. No assurance can be given, however, that the Internal Revenue
Service will not challenge the Company's allocation. Unless otherwise noted in
the applicable Pricing Supplement, the Note component of a Warrant Unit will
be treated as having been issued with OID.
The determination by the Company of the issue price of a Note
and one or more Universal Warrants comprising a Warrant Unit will be binding
on a holder thereof, unless such holder discloses the use of a different
allocation on a statement attached to such holder's Federal income tax return
for the taxable year that includes the acquisition date of the Warrant Unit.
If a holder acquires a Warrant Unit at a price different from that on which
the Company's allocation is based, such holder may be treated as having
acquired the Note component thereof for an amount greater or less than the
amount allocated to the Note by the Company as set forth above, thereby
potentially resulting in "acquisition premium" or "market discount."
Upon the exercise of a Universal Warrant, a United States
Holder will not recognize gain or loss (except with respect to cash, if any,
received on such exercise) and will have a tax basis in the property acquired
pursuant to such exercise equal to such holder's tax basis in the Universal
Warrant (as described above) plus the exercise price of the Universal Warrant.
The holding period for any property so acquired will commence on the day after
the date of exercise of the Universal Warrant. If any cash is received in lieu
of the right to receive a fractional interest in property pursuant to a
Universal Warrant, a United States Holder will recognize gain or loss the
amount and character of which will be determined as if such holder had
received such property and then immediately sold it for cash. If cash is
received in full settlement of the right to receive property pursuant to a
Universal Warrant, a United States Holder will recognize gain or loss in the
same manner as on a sale or exchange of a Universal Warrant (see discussion
below). On the sale of property received upon exercise of a Universal Warrant,
a United States Holder will recognize gain or loss equal to the difference
between the amount realized upon the sale and such holder's tax basis in the
property (which will generally equal the exercise price of the Universal
Warrant plus the portion of the issue price of the Warrant Unit that was
allocated to the Universal Warrant). Such gain or loss will generally be
capital gain or loss and will be long-term capital gain or loss if, at the
time of sale or exchange, the property was held for more than one year.
A United States Holder of a Universal Warrant will recognize
gain or loss on the sale or exchange of the Universal Warrant (including if
the Universal Warrant expires unexercised or is settled entirely in cash) in an
amount equal to the difference between the amount realized and such holder's
tax basis in the Universal Warrant (as described above). Such gain or loss
will generally be capital gain or loss and will be long-term capital gain or
loss if, at the time of sale or exchange, the Universal Warrant was held for
more than one year. On a sale or exchange of a Warrant Unit, the amount
realized on the sale or exchange will be allocated between the Note and the
Universal Warrants comprising the Warrant Unit based on the relative fair
market value of the Note and the Universal Warrants.
Unless otherwise noted in the applicable Pricing Supplement, a
Note issued as part of a Warrant Unit will be taxable in the same manner as if
it had been issued separately. See discussion under "Notes" above.
It is also possible that a Warrant Unit could be characterized
as a single debt instrument. Under that characterization, the Warrant Unit
would constitute a contingent payment debt instrument and would be subject to
the OID provisions of the Code and the Treasury regulations issued thereunder.
For a description of the treatment of contingent payment debt instruments, see
discussion under "Optionally Exchangeable Notes" above.
Purchase Unit
Under current United States federal income tax law, it is
unclear whether a Purchase Unit will be treated, in whole or in part, as a
forward contract, as indebtedness of the Company, as one or more options or
other derivative instruments, or as a combination thereof. No statutory,
judicial or administrative authority definitively addresses the
characterization for United States federal income tax purposes of a Purchase
Unit or instruments similar to a Purchase Unit. As a result, significant
aspects of the United States federal income tax treatment of an investment in
a Purchase Unit are uncertain. No ruling has been or will be requested from
the Internal Revenue Service with respect to the Purchase Units and no
assurance can be given that the Internal Revenue Service or a court will agree
with the analysis set forth herein. ACCORDINGLY, PROSPECTIVE INVESTORS IN A
PURCHASE UNIT SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE TAX
CONSEQUENCES OF INVESTMENTS IN THE PURCHASE UNIT IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES.
Unless otherwise noted in the applicable Pricing Supplement,
the Company and each United States Holder, pursuant to the terms of the Unit
Agreement, will be obligated (in the absence of an applicable administrative
ruling or judicial determination to the contrary) to treat a Note and one or
more Purchase Contracts comprising the Purchase Unit as separate instruments.
Under this characterization, the issue price of the Purchase Unit (determined
in a similar manner as the issue price of a Note) will be allocated between
the Note and the Purchase Contracts based on their relative fair market
values. This allocation will be based on the Company's judgment as to the
relative value of the Note and the Purchase Contracts at the time of original
issue. Unless otherwise noted in the applicable Pricing Supplement, the
Company will not allocate any of the issue price of a Purchase Unit to the
Purchase Contracts. No assurance can be given, however, that the Internal
Revenue Service will not challenge the Company's allocation. In the event that
a portion of the issue price of a Purchase Unit is allocated to the Purchase
Contracts, the applicable Note may be treated as having been issued with OID.
The determination by the Company of the issue price of a Note
and one or more Purchase Contracts comprising a Purchase Unit will be binding
on a holder thereof, unless such holder discloses the use of a different
allocation on a statement attached to such holder's Federal income tax return
for the taxable year that includes the acquisition date of the Purchase Unit.
If a holder acquires a Purchase Unit at a price different from that on which
the Company's allocation is based, such holder may be treated as having
acquired the Note component thereof for an amount greater or less than the
amount allocated to the Note by the Company as set forth above, thereby
potentially resulting in "acquisition premium" or "market discount."
In addition, under this characterization of a Purchase Unit, a
United States Holder would recognize no gain or loss upon the performance of a
Purchase Contract, other than short-term capital gain or loss with respect to
any cash received in lieu of the right to receive a fractional interest in
property, in an amount equal to the difference between the cash received in
lieu of the property being purchased and the portion of the purchase price
paid for such property pursuant to the Purchase Contract. A United States
Holder will generally have a tax basis in the property received pursuant to a
Purchase Contract equal to the amount paid therefor. If cash is received in
full settlement of the right to receive property pursuant to a Purchase
Contract, a United States Holder will recognize gain or loss to the extent
that the purchase price under the Purchase Contract differs from the amount of
cash received. For these purposes, the purchase price under a Purchase
Contract generally consists of the portion, if any, of the United States
Holder's original purchase price for the Purchase Unit allocated to such
Purchase Contract plus the amount of the additional payment to be made upon
performance. The Company believes that the character of such gain or loss will
be determined in the same manner as on a sale or exchange of a Purchase
Contract.
If a United States Holder sells or otherwise disposes of a
Purchase Contract prior to maturity, such holder generally would, under the
characterization described above, recognize gain or loss equal to the
difference between the amount realized on the sale or other disposition and
the United States Holder's tax basis in the Purchase Contract (which generally
would be zero, as described above). Such gain or loss generally would be
capital gain or loss and would be long-term capital gain or loss if the United
States Holder has held the Purchase Contract for more than one year at the
time of disposition. On a sale or exchange of a Purchase Unit, the amount
realized on the sale or exchange will be allocated between the Note and the
Purchase Contracts comprising the Purchase Unit based on the relative fair
market value of the Note and the Purchase Contracts.
Under the above characterization, a Note issued as part of a
Purchase Unit would be taxable in the same manner as if it had been issued
separately. See discussion under "Notes" above.
Although counsel does not believe that it is more likely, it is
possible that a Purchase Unit would be treated as a single debt instrument,
the principal amount of which is wholly dependent upon the future value of the
property subject to the Purchase Contract. In such case, the Purchase Unit
would constitute a contingent payment debt instrument and would be subject to
the OID provisions of the Code and the Treasury regulations issued thereunder.
For a description of the treatment of contingent payment debt instruments, see
discussion under "Optionally Exchangeable Notes" above.
It is also possible that a Purchase Unit could be characterized
in a manner that results in tax consequences different from those described
above. Under such alternative characterizations, it is possible, for example,
that (i) a United States Holder could be taxable upon the receipt pursuant to
the Purchase Contract of property with a value in excess of the principal
amount of the Note, rather than upon the sale of such property, (ii) gain
could be treated as ordinary income, instead of capital gain, (iii) a portion
of the issue price of the Purchase Unit could be allocated to the forward
Purchase Contract and a United States Holder could be required to accrue OID
equal to that amount, or (iv) payments of stated interest could be viewed in
part as an option premium or other fee income.
Backup Withholding
Certain "backup" withholding and information reporting
requirements may apply to payments on, and to proceeds of the sale before
maturity of, the Notes and Units. The Company, its agent, a broker, the
relevant Trustee or any paying agent, as the case may be, will generally
withhold tax at a rate of 31% from any such payments to a United States Holder
who fails to furnish his taxpayer identification number (social security number
or employer identification number), to certify that such holder is not subject
to backup withholding, or to otherwise comply with the applicable requirements
of the backup withholding rules. Certain holders (including, among others,
corporations) are generally not subject to the backup withholding and
information reporting requirements.
Any amounts withheld under the backup withholding rules from a
payment to a United States Holder would be allowed as a refund or a credit
against such holder's United States federal income tax provided that the
required information is furnished to the Internal Revenue Service.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION
OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX
LAWS.
PLAN OF DISTRIBUTION
The Program Securities are being offered on a continuing basis
by the Company exclusively through the Agents, who have agreed to use
reasonable efforts to solicit offers to purchase such Program Securities. The
Company will have the sole right to accept offers to purchase Program
Securities and may reject any such offer in whole or in part. The Agents will
have the right to reject any offer to purchase Program Securities solicited by
it in whole or in part. Payment of the purchase price of the Program
Securities will be required to be made in immediately available funds. Unless
otherwise specified in the applicable Pricing Supplement, the Company will pay
an Agent, in connection with sales of Program Securities resulting from a
solicitation made or an offer to purchase received by such Agent, a commission
ranging from . 125% to .750% of the initial offering price of the Program
Securities to be sold, depending upon the maturity of the Program Securities;
provided, however, that commissions with respect to Program Securities having
a maturity of 30 years or greater will be negotiated.
The Company may also sell Program Securities to an Agent as
principal for its own account at discounts to be agreed upon at the time of
sale. Such Program Securities may be resold to investors and other purchasers
at a fixed offering price or at prevailing market prices, or prices related
thereto at the time of such resale or otherwise, as determined by such Agent
and specified in the applicable Pricing Supplement. An Agent may offer the
Program Securities it has purchased as principal to other dealers. Such Agent
may sell the Program Securities to any dealer at a discount and, unless
otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
such Agent from the Company. After the initial public offering of Program
Securities that are to be resold by an Agent to investors and other purchasers
on a fixed public offering price basis, the public offering price, concession
and discount may be changed.
Each of the Agents may be deemed to be an "underwriter" within
the meaning of the Securities Act of 1933 (the "Securities Act"). The Company
and the Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Company has also agreed to reimburse the Agents
for certain expenses.
Unless otherwise provided in the applicable Pricing Supplement,
the Company does not intend to apply for the listing of the Program Securities
on a national securities exchange, but has been advised by the Agents that they
intend to make a market in the Program Securities (or, if separable, any other
securities comprised by Units), as permitted by applicable laws and
regulations. The Agents are not obligated to do so, however, and the Agents may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Program Securities
(or, if separable, any other securities comprised by any Units).
MS & Co. and DWR are wholly owned subsidiaries of the Company.
Each offering of Program Securities will be conducted in compliance with the
requirements of Rule 2720 of the NASD regarding an NASD member firm's
distributing the securities of an affiliate. Following the initial
distribution of any Program Securities, each of the Agents may offer and sell
such Program Securities (or, if separable, any other securities comprised by
any Units) in the course of its business as a broker-dealer. An Agent may act
as principal or agent in such transactions. This Prospectus Supplement may be
used by the Agents in connection with any such transactions. Such sales, if
any, will be made at varying prices related to prevailing market prices at the
time of sale or otherwise. The Agents are not obligated to make a market in
any Program Securities (or any other securities comprised by Units) and may
discontinue any market-making activities at any time without notice.
Neither of the Agents nor any dealer utilized in the initial
offering of Program Securities will confirm sales to accounts over which it
exercises discretionary authority without the prior specific written approval
of its customer.
In order to facilitate the offering of the Program Securities,
the Agents may engage in transactions that stabilize, maintain or otherwise
affect the price of the Program Securities or any other securities the prices
of which may be used to determine payments on such Program Securities.
Specifically, the Agents may overallot in connection with any offering of
Program Securities, creating a short position in the Program Securities for
their own accounts. In addition, to cover overallotments or to stabilize the
price of the Program Securities or of any such other securities, the Agents
may bid for, and purchase, the Program Securities or any such other securities
in the open market. Finally, in any offering of the Program Securities through
a syndicate of underwriters, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Program
Securities in the offering if the syndicate repurchases previously distributed
Program Securities in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Program Securities above independent
market levels. The Agents are not required to engage in these activities, and
may end any of these activities at any time.
Concurrently with the offering of Program Securities through
the Agents as described herein, the Company may issue other Debt Securities
pursuant to the Indentures referred to herein or Units similar to those
described herein. Such Debt Securities may include medium-term notes ("Global
Medium-Term Notes, Series D," and "Global Medium-Term Notes, Series E,"
collectively referred to as "Euro Medium-Term Notes") and units ("Global
Units, Series D" and "Global Units, Series E") that may have terms
substantially similar to the terms of the Program Securities offered hereby
and that may be offered concurrently with the offering of the Program
Securities, on a continuing basis outside the United States by the Company
pursuant to a distribution agreement (the "Euro Distribution Agreement") with
Morgan Stanley & Co. International Limited, Dean Witter International Ltd. and
certain other affiliates of the Company, as agents for the Company, the terms
of which are substantially similar to the terms of the distribution agreement
(the "U.S. Distribution Agreement") with the Agents, except for certain
selling restrictions specified in the Euro Distribution Agreement. Any Euro
Medium-Term Notes, Series D or Series E, Global Units, Series D or Series E,
sold pursuant to such Euro Distribution Agreement, and any Debt Securities,
Debt Warrants or pre-paid purchase contracts issued by the Company pursuant to
the Indentures or any preferred stock, warrants or purchase contracts issued
by the Company, will reduce the aggregate offering price of Program Securities
that may be offered by this Prospectus Supplement, any Pricing Supplement and
the Prospectus.
LEGAL MATTERS
The validity of the Notes, Units, Universal Warrants and
Purchase Contracts will be passed upon for the Company by Brown & Wood LLP or
other counsel who is satisfactory to the Agents and who may be an officer of
the Company. Certain legal matters relating to the Notes, Units, Universal
Warrants and Purchase Contracts will be passed upon for the Agents by Davis
Polk & Wardwell. Davis Polk & Wardwell has in the past represented Morgan
Stanley Group Inc., a predecessor of the Company, and continues to represent
the Company on a regular basis and in a variety of matters, including in
connection with its merchant banking and leveraged capital activities.
