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PROSPECTUS SUPPLEMENT
(To Prospectus Dated September 20, 1995)
U.S. $3,000,000,000
LOGO
AT&T CAPITAL CORPORATION
Medium-Term Notes, Series 3
Due Nine Months or More From Date of Issue
_________
AT&T Capital Corporation (the "Company") may offer from time to time its
medium-term notes, which are issuable in one or more series. The Medium-Term
Notes, Series 3 (the "Notes") offered by this Prospectus Supplement are
offered in the United States with an aggregate offering price not exceeding
U.S. $3,000,000,000 or the equivalent thereof in other currencies or currency
units, as such amount shall be reduced by the aggregate offering price of any
other debt securities and the aggregate purchase price of any warrants issued
by the Company, whether inside or outside of the United States (the "Other
Securities"), pursuant to the Registration Statement of which the accompanying
Prospectus is a part (see "Plan of Distribution"). The Notes may be
denominated in U.S. dollars or other currencies or currency units as may be
designated by the Company (the "Specified Currency"). See "Important Currency
Exchange Information". To the extent set forth in the applicable Pricing
Supplement, the Company may redeem any outstanding Notes in whole or from time
to time in part, upon not less than 30 days nor more than 60 days' notice.
See "Description of Medium-Term Notes, Series 3 -- Redemption and Repurchase".
THE NOTES ARE NOT GUARANTEED OR SUPPORTED IN ANY WAY BY AT&T CORP.
("AT&T").
The interest rate on each Note will be either a fixed rate (a "Fixed
Rate Note"), which may be zero in the case of certain Notes issued at a price
representing a substantial discount from the principal amount payable upon
maturity, or a floating rate (a "Floating Rate Note") determined by reference
to one or more of the Commercial Paper Rate, the Federal Funds Rate, the CD
Rate, LIBOR, the Treasury Rate, the Prime Rate, the CMT Rate or any other Base
Rate (each as defined below) or interest rate formula set forth in the Pricing
Supplement (as defined below), as adjusted by the Spread and/or Spread
Multiplier (each as defined below), if any, applicable to such Note. 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"). A Note may be
issued as an indexed note (an "Indexed Note"), the principal amount payable at
maturity of which, or premium or interest on which, will be determined by
reference to the level of a designated stock index or a designated currency or
commodity or other prices or indices or will otherwise be determined by
application of a formula. See "Description of Medium-Term Notes, Series
3 Indexed Notes".
The Specified Currency, interest rate or interest rate formula, reset
provisions, issue price, maturity, interest payment dates, redemption,
repayment, and amortization provisions and certain other terms with respect to
each Note will be established at the time of issuance and set forth in a
pricing supplement to this Prospectus Supplement (a "Pricing Supplement").
Except as otherwise indicated herein or in the applicable Pricing Supplement,
interest on each Fixed Rate Note (other than an Amortizing Note) is payable
each February 15 and August 15 and at maturity. Interest on each Floating
Rate Note is payable on the dates set forth therein and in the applicable
Pricing Supplement.
_________
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, ANY PRICING SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Agent's Discount Proceeds to
Public(1)(2) and Company(2)(3)(4)
Commission(2)(3)
Per Note 100.000% .125%-.750% 99.875%-99.250%
Total U.S.$3,000,000,000 U.S.$3,750,000- U.S.$2,996,250,000-
$22,500,000 $2,977,500,000
(1) Unless otherwise indicated in a Pricing Supplement, Notes will be issued
at 100% of their principal amount.
(2) Or, in the case of Notes not denominated in U.S. dollars, the equivalent
thereof in the Specified Currency.
(3) The Company will pay a commission to Lehman Brothers, Lehman Brothers
Inc. (including its affiliate Lehman Government Securities Inc.), CS
First Boston Corporation, Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, and Salomon Brothers Inc, each as agent
(collectively, the "Agents"), in the form of a discount ranging from
.125% to .750% of the principal amount of any Note sold through the
Agents, depending upon the maturity of the Note, except that the
commission payable by the Company to the Agents with respect to Notes
with maturities of greater than thirty years will be negotiated at the
time the Company issues such Notes. See "Plan of Distribution".
(4) Before deducting expenses payable by the Company estimated at U.S.
$1,400,000, including reimbursement of the Agents' expenses.
_________
The Notes are being offered on a continual basis by the Company through
the Agents, who have agreed to use their reasonable best efforts to solicit
purchases of the Notes. The Company also may arrange for the Notes to be sold
through other agents, dealers or underwriters or may sell the Notes directly
to investors on its own behalf in those jurisdictions where it is authorized
to do so. The Notes will not be listed on any securities exchange, and there
can be no assurance that the Notes will be sold or that there will be a
secondary market for the Notes. The Company reserves the right to withdraw,
cancel or modify the offer made hereby without notice. The Company, or the
Agents which solicit any offer, may reject such offer in whole or in part.
See "Plan of Distribution".
_________
LEHMAN BROTHERS
CS FIRST BOSTON
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
The date of this Prospectus Supplement is October 19, 1995.
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<PAGE> 3 IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in the Specified Currency,
and payments of principal of, premium, if any, and any interest on, such Notes
will be made in the Specified Currency, 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 or
currency units, and vice versa, and few banks offer non-U.S. dollar
denominated checking or savings account facilities in the United States.
However, if requested by a prospective purchaser of Notes denominated in a
Specified Currency other than U.S. dollars, the Agent soliciting the offer to
purchase will arrange for the conversion of U.S. dollars into such Specified
Currency to enable the purchaser to pay for such Notes. Such request must be
made on or before the third Business Day (as defined below) preceding the date
of delivery of the Notes, or by such other date as determined by such Agent.
Each such conversion will be made by the relevant Agent on such terms and
subject to such conditions, limitations and charges as such Agent may from
time to time establish in accordance with its regular foreign exchange
practice. All costs of exchange will be borne by purchasers of the Notes.
References herein to "U.S. dollars" or "U.S. $" or "$" are to the
currency of the United States of America.
DESCRIPTION OF MEDIUM-TERM NOTES, SERIES 3
The information herein concerning the Notes should be read in
conjunction with the statements under "Description of the Debt Securities" in
the Prospectus dated September 20, 1995. The following description of the
Notes will apply unless otherwise specified in the applicable Pricing
Supplement.
GENERAL
The Notes are to be issued under Registration Statement No. 33-61003
(the "Registration Statement"), pursuant to which the Company has registered
debt securities, warrants to purchase debt securities, currency warrants,
index warrants and interest rate warrants having an aggregate purchase price
of $3,000,000,000 (or the equivalent thereof in other currencies or currency
units). The Medium-Term Notes, Series 3, constitute a single series and are to
be issued under an Indenture dated as of July 1, 1993, as amended (the
"Indenture"), between the Company and Chemical Bank, as trustee (the
"Trustee"). Under this Prospectus Supplement, Notes may be issued with an
aggregate offering price of up to U.S. $3,000,000,000 (or the equivalent
thereof in other currencies or currency units), as such amount may be reduced
by any Other Securities issued by the Company pursuant to the Registration
Statement (see "Plan of Distribution"). The Company has previously issued
$2.5 Billion of Medium-Term Notes, Series 1 and $2.5 Billion of Medium-Term
Notes, Series 2, under the Indenture. The Medium-Term Notes, Series 3,
Medium-Term Notes, Series 2, and the Medium-Term Notes, Series 1, constitute
separate series under the Indenture.
The Notes will be offered on a continuing basis. The Notes will mature
on any day nine months or more from the date of issue, as selected by the
purchaser and agreed to by the Company and specified in the applicable Pricing
Supplement. "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 (including any executive order) to
close in The City of New York and (i) with respect to Notes denominated in a
Specified Currency other than U.S. dollars or European Currency Units, in the
Principal Financial Center (as defined below) of the country of the Specified
Currency or (ii) with respect to Notes denominated in European Currency Units,
in Brussels, Belgium or (iii) with respect to LIBOR Notes (as defined below),
that is also a London Banking Day. "London Banking Day" means any day on
which dealings in deposits in the Index Currency (as defined below) are
transacted in the London interbank market. "Principal Financial Center"
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will generally be the capital city of the country of the Specified Currency,
except that with respect to U.S. dollars and Deutsche marks, the Principal
Financial Center shall be the City of New York and Frankfurt, respectively.
A Note may be issued as a zero coupon Note or at a price which is at a
substantial discount from its face value (a "Discount Note"), in which event
such Note will provide that upon redemption or repayment prior to maturity or
acceleration of maturity thereof an amount less than the principal amount
thereof shall become due and payable. If a bankruptcy proceeding is commenced
in respect of the Company, the claim of the holders of Discount Notes may be
limited under section 502(b) of Title 11 of the United States Code to the
initial public offering price of such Notes, plus that portion of the original
issue discount that is amortized from the date of issue to the commencement of
the bankruptcy proceeding plus accrued interest. Accordingly, the holders of
Discount Notes under such circumstances may receive a lesser amount than they
would be entitled to under the express terms of the Indenture.
Notwithstanding anything in the Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is
a Discount Note, the amount payable on such Note in the event of redemption or
repayment prior to its maturity shall be the Amortized Face Amount of such
Note as of the date of redemption or the date of repayment, as the case may
be. The "Amortized Face Amount" of a Discount Note shall be the amount equal
to (i) the issue price set forth in the applicable Pricing Supplement plus
(ii) the portion of the difference between the issue price and the principal
amount of such Note that has accrued at the yield to maturity set forth in the
Pricing Supplement (computed in accordance with generally accepted United
States bond yield computation principles) to such date of redemption or
repayment, but in no event shall the Amortized Face Amount of a Discount Note
exceed its principal amount.
The Pricing Supplement relating to each Note will describe the following
terms: (1) the Specified Currency (and, if such Specified Currency is other
than U.S. dollars, certain other terms relating to such Note); (2) whether
such Note is a Fixed Rate Note, an Amortizing Note, or a Floating Rate Note;
(3) whether such Note is an Original Issue Discount Note; (4) whether such
Note is an Indexed Note and, if so, the special terms thereof; (5) if other
than 100%, the price (generally expressed as a percentage of the aggregate
principal amount thereof) at which such Note will be issued; (6) the date on
which such Note will be issued; (7) the date on which such Note will mature;
(8) if such Note is a Fixed Rate Note, the rate per annum at which such Note
will bear interest; (9) if such Note is a Floating Rate Note, the Base Rate,
the Initial Interest Rate, the Interest Reset Dates, the Interest Payment
Dates, the Index Maturity, the Maximum and Minimum Interest Rates, if any, and
the Spread or Spread Multiplier, if any (all as defined below), and any other
terms relating to the method of calculating interest on such Note; (10) if
such Note is an Amortizing Note, whether payments of principal thereof and
interest thereon will be made quarterly or semiannually, and the repayment
information in respect thereof; (11) the terms of redemption at the option of
the Company, repayment at the option of the holder, or amortization
provisions, if any; and (12) any other terms of such Note not inconsistent
with the provisions of the Indenture.
Notes will be issued in fully registered form only. Each Note to be
issued will initially be represented by either a global security (a
"Book-Entry Note") registered in the name of a nominee of The Depository Trust
Company, as depositary (the "Depositary"), or a certificate issued in
definitive form (a "Certificated Note"). Except as set forth under
"Book-Entry System" below, Book-Entry Notes will not be issuable as
Certificated Notes. Unless otherwise specified in the applicable Pricing
Supplement, Notes denominated in U.S. dollars will be issued in denominations
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that are integral multiples of U.S. $1,000 and Notes denominated in a
Specified Currency other than U.S. dollars will be issued in denominations
that are integral multiples of 1,000 units of such Specified Currency.
The Company has initially designated Chemical Bank, acting through its
principal corporate trust office in New York, New York, as the registrar and
transfer agent for the Notes (the "Registrar", which term includes any
additional or successor Registrar appointed by the Company), as the paying
agent for the Notes (the "Paying Agent," which term includes any additional or
successor Paying Agent appointed by the Company), and as the authenticating
agent for the Notes (the "Authenticating Agent", which term includes any
additional or successor Authenticating Agent appointed by the Company).
The Notes will constitute unsecured and unsubordinated indebtedness of
the Company and will rank on a parity with the Company's other unsecured and
unsubordinated indebtedness. Unless otherwise specified in the applicable
Pricing Supplement, the Notes are not subject to redemption at the option of
the Company or repayment at the option of the holder prior to maturity. The
Notes will not be subject to any sinking fund, except to the extent otherwise
provided in the applicable Pricing Supplement.
In the case of Notes denominated in, and with respect to which principal
and premium, if any, and interest is payable in, U.S. dollars, principal and
premium, if any, and interest will be payable, and the Notes will be
transferable, at the office of the paying agent, Chemical Bank, 450 West 33rd
Street, New York, New York, or at such other place or places as may be
designated pursuant to the Indenture, provided that the Company, at its
option, may pay interest other than interest due at maturity by check mailed
to registered holders (which, in the case of Book-Entry Notes represented by a
global security, will be a nominee of the Depositary). Unless otherwise
specified in the applicable Pricing Supplement, interest on Notes (other than
interest due at maturity) payable in a Specified Currency other than U.S.
dollars will be paid by mailing a check or draft in the Specified Currency
drawn on an account at a bank outside of the United States. If any Notes are
denominated in a Specified Currency other than U.S. dollars or if the
principal of, premium, if any, or interest on any Notes is payable in a
Specified Currency other than U.S. dollars, the applicable Pricing Supplement
will provide additional information pertaining to the terms of such Notes and
other matters of interest to the holders thereof. At the maturity of any
Note, the principal thereof, together with accrued interest thereon, will be
payable in immediately available funds upon surrender thereof at the office of
the Trustee at the above address or at such other place or places as may be
designated pursuant to the Indenture.
Interest rates and interest rate formulas are subject to change by the
Company but no change will affect any Note theretofore issued or as to which
an offer to purchase has been accepted by the Company. Interest rates offered
by the Company with respect to the Notes may differ depending upon, among
other things, the aggregate principal amount of the Notes purchased in any
single transaction.
PAYMENT CURRENCY
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, 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 noon buying rate in New York City for cable transfers of such Specified
Currency as determined by the Federal Reserve Bank of New York (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
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recent Record Date (as defined below). Any payment made under such
circumstances in U.S. dollars where the required payment is in a Specified
Currency other than U.S. dollars will not constitute an Event of Default under
the Indenture.
Under the treaty establishing the European Community (the "EC"), as
amended by the treaty on European Union (the "Treaty"), it is provided that at
or before January 1, 1999, and subject to the fulfilment of certain
conditions, the European Currency Unit, or ECU, may become a currency in its
own right, replacing all or some of the currencies of the 15 member states of
the EC (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United
Kingdom). As of the date hereof the ECU is a composite currency valued on the
basis of specified amounts of the currencies of 12 of the 15 member states of
the EC. If, pursuant to the Treaty, all or some of the currencies of the
member states of the EC are replaced by the ECU as a currency in its own
right, or by an alternative single European currency, the payment of principal
of, or interest on, the Notes denominated in such currencies may be effected
in ECU or such alternative European currency in conformity with legally
applicable measures taken pursuant to, or by virtue of, the Treaty.
PAYMENT OF PRINCIPAL AND INTEREST
Each Floating Rate Note will bear interest from the date of issue at the
rate per annum stated or the interest rate formula set forth therein and in
the applicable Pricing Supplement, until the principal thereof is paid or made
available for payment. Each Fixed Rate Note will bear interest from the date
of issue at the rate or rates per annum stated (calculated on the basis of a
year of twelve thirty-day months) therein and in the applicable Pricing
Supplement, until the principal thereof is paid or made available for payment.
Interest, if any, will be payable on each Interest Payment Date. Interest
will be payable to the person in whose name a Note is registered at the close
of business on the Record Date with respect to the Interest Payment Date
(which, in the case of Book-Entry Notes represented by a global security, will
be a nominee of the Depositary); provided, however, that interest payable at
maturity (whether or not the maturity date is an Interest Payment Date) will
be payable to the person to whom principal shall be payable. Interest on any
Note (or, in the case of an Amortizing Note, principal and interest)
originally issued between a Record Date and an Interest Payment Date will
first be payable on the Interest Payment Date following the next succeeding
Record Date to the registered holder on such next succeeding Record Date of
such Note. The "Record Date" with respect to any Interest Payment Date shall
be the date fifteen calendar days prior to such Interest Payment Date, whether
or not such date shall be a Business Day.
Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes (other than an Amortizing Note) will be payable
on February 15 and August 15 of each year (except as provided above with
respect to Notes issued between a Record Date and an Interest Payment Date)
and at maturity. Unless otherwise specified in the applicable Pricing
Supplement, payments of principal and interest on each Amortizing Note will be
made either semi-annually each February 15 and August 15, or quarterly each
February 15, May 15, August 15 and November 15, and at maturity. Unless
otherwise specified in the applicable Pricing Supplement, 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, to subsequent holders. Except as provided below, unless otherwise
specified in the applicable Pricing Supplement, interest on Floating Rate
Notes will be payable: (i) in the case of Notes with a daily, weekly or
monthly Interest Reset Date, on the third Wednesday of each month or on the
third Wednesday of February, May, August and November, as specified in the
applicable Pricing Supplement; (ii) in the case of Notes with a quarterly
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Interest Reset Date, on the third Wednesday of February, May, August and
November; (iii) in the case of Notes with a semiannual Interest Reset Date, on
the third Wednesday of the two months specified in the applicable Pricing
Supplement; (iv) in the case of Notes with an annual Interest Reset Date, on
the third Wednesday of the month specified in the applicable Pricing
Supplement and (v) in each case, at maturity.
Each date on which interest is payable on a Note is referred to herein
as an "Interest Payment Date". Unless otherwise specified in the applicable
Pricing Supplement, interest payments on Notes shall be the amount of interest
accrued from, and including, the date of issue or the last date to which
interest has been paid to, but excluding, the next succeeding Interest Payment
Date or maturity date, as the case may be. If any Interest Payment Date or
the maturity date of a Fixed Rate Note would otherwise be a day that is not a
Business Day, the required payment of principal, premium, if any, and/or
interest will be made on the next succeeding Business Day as if made on the
date such payment was due, and no interest will accrue on such payment for the
period from and after such Interest Payment Date or the maturity date, as the
case may be, to the date of such payment on the next succeeding Business Day.
If any Interest Payment Date for any Floating Rate Note (other than the
maturity date) would otherwise be a day that is not a Business Day such
Interest Payment Date will be postponed to the next succeeding day that is a
Business Day, except that in the case of a LIBOR Note, if such Business Day
falls in the next succeeding calendar month, such Interest Payment Date will
be the immediately preceding Business Day. If the maturity date of a Floating
Rate Note falls on a day that is not a Business Day, the required payment of
principal, premium, if any, and/or interest will be made on the next
succeeding Business Day as if made on the date such payment was due, and no
interest shall accrue on such payment for the period from and after the
maturity date to the date of such payment on the next succeeding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to a
specified interest rate (the "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 as being applicable to the interest rate
for such Floating Rate Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement as being applicable to the
interest rate for such Floating Rate Note.
The applicable Pricing Supplement will designate one or more of the
following Base Rates as applicable to each Floating Rate Note: (a) the
Commercial Paper Rate (a "Commercial Paper Rate Note"), (b) the Federal Funds
Rate (a "Federal Funds Rate Note"), (c) the Certificate of Deposit Rate (a "CD
Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the Treasury Rate (a "Treasury
Rate Note"), (f) the Prime Rate (a "Prime 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.
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 that may accrue during any interest period (a
"Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the rate
of interest that may accrue during any interest period (a "Minimum Interest
Rate"). In addition to any Maximum Interest Rate which may be applicable to
any Floating Rate Note, 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.
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The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (such period being the
"Interest Reset Period" for such Note and the first date of each Interest
Reset Period, on which such interest rate becomes effective, being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be, in the case of Floating Rate Notes which reset daily, each Business
Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week (except as provided below); in
the case of Floating Rate Notes which reset monthly, the third Wednesday of
each month; in the case of Floating Rate Notes which reset quarterly, the
third Wednesday of February, May, August and November; in the case of Floating
Rate Notes which reset semiannually, the third Wednesday of two months of each
year, as specified in the applicable Pricing Supplement; and in the case of
Floating Rate Notes which reset annually, the third Wednesday of one month of
each year, as specified in the applicable Pricing Supplement; provided,
however, that the interest rate in effect from the date of issue to the first
Interest Reset Date with respect to a Floating Rate Note will be the Initial
Interest Rate (as set forth in the applicable Pricing Supplement). If any
Interest Reset Date for any Floating Rate Note 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 next
preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, Fixed
Rate Notes will bear interest from the date of issue and will be calculated on
the basis of a year of twelve thirty-day months. With respect to a Floating
Rate Note, accrued interest shall be calculated by multiplying the principal
amount of such Floating Rate Note (or, in the case of an Indexed Note, unless
otherwise specified in the applicable Pricing Supplement, the Face Amount (as
defined below under "Indexed Notes") of such Indexed Note) by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the Interest Reset Period or from
the last date from which accrued interest is being calculated.
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 cases of Commercial Paper Rate Notes,
Federal Funds Rate Notes, CD 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. The interest rate applicable to any day that is an
Interest Reset Date is the applicable rate as reset on such date. The
interest rate applicable to any other day is the interest rate for the
immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate, as described below).
Unless otherwise provided in the applicable Pricing Supplement, Chemical
Bank will be the 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 which will become effective on
the next Interest Reset Date with respect to such Floating Rate Note.
All percentages 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
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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 with respect to a Floating Rate Note from
the Issue Date to the first Interest Reset Date (the "Initial Interest Rate")
will be specified in the applicable Pricing Supplement. The interest rate for
each subsequent Interest Reset Date will be determined by the Calculation
Agent as follows. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date" pertaining to any Commercial Paper Interest
Determination Date, Federal Funds Interest Determination Date, CD Interest
Determination Date, Treasury Rate Determination Date, Prime Rate Interest
Determination Date and CMT Rate Interest Determination Date (each as
hereinafter defined) will be the earlier of (i) the tenth calendar day after
such date, or, if such tenth day is not a Business Day, the next succeeding
Business Day and (ii) the Business Day preceding the applicable Interest
Payment Date or date of maturity, as the case may be.
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) specified in the Commercial Paper Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" for each Interest Reset Date will be determined on the
Calculation Date by the Calculation Agent as of the second Business Day prior
to such Interest Reset Date (a "Commercial Paper Interest Determination Date")
and shall be the Money Market Yield (as defined below) on such Commercial
Paper Interest Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement, as such rate
shall be published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication ("H.15(519)"), under the heading "Commercial Paper". In the event
that such rate is not published prior to 9:00 A.M., New York City time, on the
Calculation Date, then the Commercial Paper Rate shall be the Money Market
Yield on such Commercial Paper Interest Determination Date of the rate for
commercial paper of the specified Index Maturity 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" ("Composite Quotations") under the
heading "Commercial Paper". If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the Commercial Paper Rate shall be the Money Market
Yield of the arithmetic mean (each as rounded to the nearest one hundred-
thousandth of a percentage point) of the offered rates as of 11:00 A.M., New
York City time, on such Commercial Paper Interest Determination Date of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper 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 rate of interest in effect for the
applicable period will be the rate of interest in effect on such Commercial
Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded
to the nearest one hundred-thousandth of a percentage point) calculated in
accordance with the following formula:
D x 360
Money Market Yield = _________
360 (D x M) x100
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 period for which interest is being calculated.
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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) 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" for each Interest Reset Date will be determined on the
Calculation Date by the Calculation Agent as of the second Business Day prior
to such Interest Reset Date (a "Federal Funds Interest Determination Date")
and shall be the effective rate for Federal Funds on such Federal Funds
Interest Determination Date 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 Federal Funds Interest
Determination Date, the Federal Funds Rate will be the interest rate on such
Federal Funds Interest Determination Date as published in Composite Quotations
under the heading "Federal Funds/Effective Rate". If such rate is not yet
published by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Federal Funds Interest Determination Date, the Federal Funds Rate for
such Federal Funds Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged by three
leading brokers of federal funds transactions in The City of New York (which
may include an Agent or its affiliates) selected by the Calculation Agent
prior to 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date; provided, however that if the brokers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate determined as of such Federal Funds Interest Determination Date
will be the Federal Funds Rate in effect on such Federal Funds Interest
Determination Date.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CD
Rate" for each Interest Reset Date will be determined on the Calculation Date
by the Calculation Agent as of the second Business Day prior to the Interest
Reset Date (a "CD Interest Determination Date") and shall be the rate for
negotiable certificates of deposit having the Index Maturity designated in the
applicable Pricing Supplement on such CD Interest Determination Date, as such
rate is published in H.15(519) under the heading "CDs (Secondary Market)". If
such rate is not so published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such CD Interest Determination Date, the CD
Rate will be the rate on such CD Interest Determination Date for negotiable
certificates of deposit of the Index Maturity specified in the applicable
Pricing Supplement as published in Composite Quotations under the heading
"Certificates of Deposit". If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet published in Composite Quotations, the
CD Rate for such CD Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on such CD Interest
Determination Date of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money
center banks (in the market for negotiable certificates of deposit) with a
remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement in the denomination of $5,000,000. However, if such dealers
are not so quoting such rates, the CD Rate will be the CD Rate in effect on
such CD Interest Determination Date.
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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) specified
in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Reset Date will be determined by the Calculation Agent as
follows:
(i) With respect to the second London Banking Day prior to such
Interest Reset Date (a "LIBOR Determination Date"), LIBOR will be either: (a)
if "LIBOR Reuters" is specified as the reporting service 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 Index Currency (as defined below) having the Index Maturity designated
in the applicable Pricing Supplement, commencing on such Interest Reset Date,
that appear on the Designated LIBOR Page as of 11:00 A.M., London time, on
that LIBOR 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 as the reporting service
in the applicable Pricing Supplement, the rate for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on such Interest Reset Date, that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on that LIBOR
Determination Date. If fewer than two offered rates appear, or no rate
appears, as applicable, LIBOR in respect of the related LIBOR Determination
Date will be determined as if the parties had specified the rate described in
clause (ii) below.
(ii) With respect to a LIBOR Determination Date on which fewer than two
offered rates appear (unless, as aforesaid, only a single rate is required),
or no rate appears, as the case may be, on the applicable Designated LIBOR
Page as specified in clause (i) above, the Calculation Agent will request the
principal London offices of each of four major reference banks in the London
interbank market, as selected by the Calculation Agent, to provide the
Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity designated in the applicable
Pricing Supplement, commencing on such Interest Reset Date, to prime banks in
the London interbank market at approximately 11:00 A.M., London time, on such
LIBOR Determination Date and in a principal amount of not less than $1,000,000
(or the equivalent in the Index Currency, if the Index Currency is not the
U.S. dollar) that is representative for a single transaction in such Index
Currency in such market at such time. If at least two such quotations are
provided, LIBOR determined on such LIBOR Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such LIBOR Determination Date will be the
arithmetic mean of the 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 LIBOR
Determination Date, by three major banks in such Principal Financial Center
selected by the Calculation Agent for loans in the Index Currency to leading
European banks, having the Index Maturity designated in the applicable Pricing
Supplement and in a principal amount of not less than $1,000,000 (or the
equivalent in the Index Currency, if the Index Currency is not the U.S.
dollar) that is representative for a single transaction in such Index Currency
in such market at such time; provided, however, that if the banks so selected
by the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined on such LIBOR Determination Date will be LIBOR otherwise in effect
on such LIBOR Determination Date.
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"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 designated as
page "LIBO" with respect to the applicable Index Currency on the Reuters
Monitor Money Rates Service (or such other page as may replace page "LIBO" on
such 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 designated as
page "3750" with respect to the applicable Index Currency on the Dow Jones
Telerate Service (or such other page as may replace page "3750" on such
service or such other service as may be nominated by the British Bankers'
Association 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.
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) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" for each Interest Reset Date will be determined on the
Calculation Date by the Calculation Agent as of the Treasury Rate
Determination Date pertaining to such Interest Reset Date and shall be the
rate for the auction held on such Treasury Rate Determination Date of direct
obligations of the United States ("Treasury bills") having the Index Maturity
designated in the applicable Pricing Supplement, as published in H.15(519)
under the heading "U.S. Government Securities Treasury bills auction average
(investment)", or, if not so published by 9:00 A.M., New York City time, on
the Calculation Date pertaining to such Treasury Rate Determination Date, the
auction average rate (expressed as a bond equivalent, on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that
the results of the auction of Treasury bills having the Index Maturity
designated in the applicable Pricing Supplement are not 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 Treasury Rate 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) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
P.M., New York City time, on such Treasury Rate 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 Treasury Rate in effect
on such Interest Reset Date.
The "Treasury Rate Determination Date" pertaining to an Interest Reset
Date will be the day of the week in which such Interest Reset Date falls on
which Treasury bills would normally be auctioned. Treasury bills are normally
sold at auction on Monday of each week, unless that day is a legal holiday, in
which case the auction is normally held on the following Tuesday, except that
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such auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be
the Treasury Rate Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week. If an auction date shall fall on any
day that would otherwise be an Interest Reset Date for a Treasury Rate Note,
then such Interest Reset Date shall instead be the Business Day immediately
following such auction date.
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) specified in the Prime Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement the
"Prime Rate" for each Prime Rate Interest Determination Date will be
determined on the Calculation Date by the Calculation Agent as of such Prime
Rate Interest Determination Date and shall be the rate on such date as
published in H.15(519) under the heading "Bank Prime Loan". If such rate is
not published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Prime Rate Interest Determination Date, the Prime Rate will
be determined by the Calculation Agent and will be the arithmetic mean of the
rates of interest publicly announced by each bank named on the "Reuters Screen
USPRIME1" (as defined below) as such bank's prime rate or base lending rate as
in effect for such Prime Rate Interest Determination Date. "Reuters Screen
USPRIME1" means the display designated as page "USPRIME1" on the Reuters
Monitor Money Rates Service (such term to include such other page as may
replace the page USPRIME1 on that Service for the purpose of displaying prime
rates or base lending rates of major United States banks). If fewer than four
such rates appear on the Reuters Screen USPRIME1 for such Prime Rate Interest
Determination Date, the Prime Rate will be determined by the Calculation Agent
and will be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business
on such Prime Rate Interest Determination Date by at least two major money
center banks in The City of New York selected by the Calculation Agent from a
list of at least three such banks approved by the Company. If fewer than two
such rates are quoted as aforesaid the Prime Rate will be calculated by the
Calculation Agent and will be determined as the arithmetic mean of the prime
rates furnished in The City of New York by an appropriate number (in the
judgment of the Calculation Agent) 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 U.S.$500,000,000
and being subject to supervision or examination by federal or state authority,
selected by the Calculation Agent from a list approved by the Company to
provide such rate or rates; provided that if the banks or trust companies
selected as aforesaid by the Calculation Agent from a list approved by the
Company are not quoting as mentioned in this sentence, the rate of interest in
effect for the applicable period will be the rate of interest in effect on
such Prime Rate Interest Determination Date. The "Prime Rate Interest
Determination Date" pertaining to an Interest Reset Date for Prime Rate Notes
will be the second Business Day prior to such Interest Reset Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the rates (calculated with
reference to the Constant Maturity Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such CMT Rate Notes and the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the"CMT
Rate" for each CMT Rate Interest Determination Date will be determined on the
Calculation Date by the Calculation Agent as of such CMT Rate Interest
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Determination Date and shall be the rate displayed on the Designated CMT
Telerate Page under the caption "... Treasury Constant Maturities ... Federal
Reserve Board Release H.15 ... Mondays Approximately 3:45 P.M.," under the
column for the Designated CMT Maturity Index for (i) if the Designated CMT
Telerate Page is 7055, such CMT Rate Interest Determination Date and (ii) if
the Designated CMT Telerate Page is 7052, the week, or the month, as set forth
in the Pricing Supplement, ended immediately preceding the week in which the
related CMT Rate Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 P.M., New
York City time, on the related Calculation Date, then the CMT Rate for such
CMT Rate Interest Determination Date will be such Treasury Constant Maturity
rate for the Designated CMT Maturity Index as published in H.15(519) for such
date. If such rate is no longer published, or if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, then the CMT Rate for
such CMT Rate Interest Determination Date will be such Treasury Constant
Maturity rate for the Designated CMT Maturity Index (or other United States
Treasury rate for the Designated CMT Maturity Index) for such CMT Rate
Interest Determination 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
H.15(519). If such information is not provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 P.M. (New York City time)
on the CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York selected by the
Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an
original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury
Note quotations, the CMT Rate for such CMT Rate Interest Determination Date
will be calculated by the Calculation Agent and will be a yield to maturity
based on the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M. (New York City time) on the CMT Rate Interest
Determination Date of three Reference Dealers in the City of New York (from
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the
next highest to the Designated CMT Maturity Index and a remaining term to
maturity closest to the Designated CMT Maturity Index and in an amount of at
least $100 million. If three or four (and not five) of such Reference Dealers
are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor
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 Constant Maturity Treasury Rate will be the CMT Rate in
effect on such CMT Rate Interest Determination Date. If two Treasury Notes
with an original maturity as described in the second preceding sentence have
remaining terms to maturity equally close to the Designated CMT Maturity
Index, the quotes for the CMT Rate Note with the shorter remaining term to
maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service on the page designated in the applicable Pricing Supplement
(or any other page as may replace such page on that service for the purpose of
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displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
The "CMT Rate Interest Determination Date" pertaining to an Interest
Reset Date for CMT Rate Notes will be the second Business Day prior to such
Interest Reset Date.
INDEXED NOTES
The Company may from time to time offer Indexed Notes the principal
amount payable at maturity (the "Indexed Principal Amount") of which, or
premium or interest on which, is determined by reference to a measure (the
"Index") which will be related to (i) the rate of exchange between the
Specified Currency for such Note and the other currency or composite currency
(the "Indexed Currency") specified in the applicable Pricing Supplement (such
Indexed Notes, "Currency Indexed Notes"); (ii) the difference in the price of
a specified commodity (the "Indexed Commodity") on specified dates; (iii) the
difference in the level of a specified stock index (the "Stock Index"), which
may be based on U.S. or foreign stocks, on specified dates; or (iv) such other
objective price or economic measures as are described in the applicable
Pricing Supplement. The manner of determining the Indexed Principal Amount of
an Indexed Note, and historical and other information concerning the Indexed
Currency, Indexed Commodity, Stock Index or other price or economic measures
used in such determination, will be set forth in the applicable Pricing
Supplement, together with information concerning tax consequences to the
holders of such Indexed Notes.
If the determination of the Indexed Principal Amount of an Indexed Note
is based on an Index calculated or announced by a third party and such third
party either suspends the calculation or announcement of such Index or changes
the basis upon which such Index is calculated (other than changes consistent
with policies in effect at the time such Indexed Note was issued and permitted
changes described in the applicable Pricing Supplement), then such Index shall
be calculated for purposes of such Indexed Note by an independent calculation
agent named in the applicable Pricing Supplement on the same basis, and
subject to the same conditions and controls, as applied to the original third
party. If for any reason such Index cannot be calculated on the same basis
and subject to the same conditions and controls as applied to the original
third party, then the Indexed Principal Amount of such Indexed Note shall be
calculated in the manner set forth in the applicable Pricing Supplement. Any
determination of such independent calculation agent shall in the absence of
manifest error be binding on all parties.
Unless otherwise specified in the applicable Pricing Supplement,
interest on an Indexed Note will be payable by the Company based on the amount
designated in the applicable Pricing Supplement as the "Face Amount" of such
Indexed Note. The applicable Pricing Supplement will describe whether the
principal amount of the related Indexed Note that would be payable upon
redemption or repayment prior to maturity will be the Face Amount of such
Indexed Note, the Indexed Principal Amount of such Indexed Note at the time of
redemption or repayment, or another amount described in such Pricing
Supplement.
An investment in Notes indexed, as to principal or interest or both, to
one or more values of currencies (including exchange rates between
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currencies), commodities or interest rate indices entails significant risks
that are not associated with similar investments in a conventional fixed-rate
debt security. If the interest rate of such a Note is so indexed, it may
result in an interest rate that is less than that payable on a conventional
fixed-rate debt security issued at the same time, including the possibility
that no interest will paid, and, if the principal amount of such a Note is so
indexed, the principal amount payable at maturity may be less than the
original purchase price of such Note if allowed pursuant to the terms of such
Note, including the possibility that no principal will be paid. The secondary
market for such Notes will be affected by a number of factors, independent of
the creditworthiness of the Company and the value of the applicable currency,
commodity or interest rate index, including the volatility of the applicable
currency, commodity or interest rate index, the time remaining to the maturity
of such Notes, the amount outstanding of such Notes and market interest rates.
The value of the applicable currency, commodity or interest rate index depends
on a number of interrelated factors, including economic, financial and
political events, over which the Company has no control. Additionally, if the
formula used to determine the principal amount or interest payable with
respect to such Notes contains a multiple or leverage factor, the effect of
any change in the applicable currency, commodity or interest rate index may be
increased. The historical experience of the relevant currencies, commodities
or interest rate indices should not be taken as an indication of future
performance of such currencies, commodities or interest rate indices during
the term of any Note. Accordingly, prospective investors should consult their
own financial and legal advisors as to the risks entailed by an investment in
such Notes and the suitability of such Notes in light of their particular
circumstances.
REDEMPTION AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that
such Note cannot be redeemed prior to maturity or that such Note will be
redeemable at the option of the Company on a date or dates prior to such
maturity, and at a price or prices, set forth in the applicable Pricing
Supplement, together with accrued interest to the date of redemption. The
Company may redeem any of the Notes that are redeemable and remain outstanding
either in whole or from time to time in part, upon not less than 30 nor more
than 60 days' notice. If less than all Notes with like tenor and terms are to
be redeemed, the Notes to be redeemed shall be selected by the Trustee by such
method as the Trustee shall deem fair and appropriate. Unless otherwise
indicated in the Pricing Supplement relating to each Note, the Notes will not
be subject to any sinking fund.
The Company may at any time purchase Notes at any price in the open
market or otherwise. Notes so purchased by the Company may, at its
discretion, be held, resold or surrendered to the Trustee for cancellation.
REPAYMENT AT OPTION OF THE HOLDER
If (but only if) the Pricing Supplement relating to any Note indicates
that such Note will be repayable at the option of the holder on a date or
dates prior to maturity, and at a price or prices, set forth in such Pricing
Supplement, together with accrued interest to the date of repayment, then such
Note will be subject to such repayment option.
In order for the repayment option applicable to a Note to be exercised,
the Trustee must receive at least 30 days but no more than 45 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. 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
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amount of the Note to be repaid, the certificate number or a description of
the tenor and terms of the Note, and containing a statement that the option to
elect repayment is being exercised thereby and a guarantee that the Note to be
repaid with the form entitled "Option to Elect Repayment" on the reverse of
the Note duly completed will be received by the Trustee not later than three
Business Days after the date of such telegram, telex, facsimile transmission
or letter and such Note and form duly completed are received by the Trustee by
such third Business Day. The repayment option may be exercised by the holder
of a Note for less than the entire principal amount of the Note, provided that
the principal amount of the Note remaining outstanding after repayment is an
authorized denomination.
BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes having the same Issue Date, maturity
date, redemption or repayment provisions, interest payment dates and, in the
case of Fixed Rate Notes, interest rate and amortization schedule or, in the
case of Floating Rate Notes, Base Rate, Initial Interest Rate, Interest
Payment Dates, Index Maturity, Interest Reset Dates, Spread or Spread
Multiplier, if any, Minimum Interest Rate, if any, and Maximum Interest Rate,
if any, will be represented by a single global security (a "Global Security").
Each Global Security representing Book-Entry Notes will be deposited with, or
on behalf of, the Depositary and registered in the name of a nominee of the
Depositary. Except under circumstances described below, Book-Entry Notes will
not be exchangeable for Certificated Notes and will not otherwise be issuable
in definitive form.
The Depositary has advised the Company that it is a limited-purpose
trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities. Direct Participants ("Direct Participants")
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. The Depositary is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Security
Dealers (the "NASD"). Access to the Depositary's system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly. The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission.
Upon the issuance of a Global Security, the Depositary will credit on
its book-entry registration and transfer system its Participants' accounts
with their respective principal amounts of the Notes represented by such
Global Security. Such accounts shall be designated by the Agent with respect
to such Notes or by the Company if such Notes are offered and sold directly by
the Company. Ownership of beneficial interests in a Global Security will be
limited to Participants or persons that hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depositary or its nominee (with respect to interests of
Participants) and on the records of Participants (with respect to interests of
persons other than Participants). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may
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impair the ability of a purchaser of an interest in a Book-Entry Note to
transfer such interest.
So long as the Depositary or its nominee is the registered owner of such
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Security for all purposes under the Indenture. Except as provided below or as
the Company may otherwise agree in its sole discretion, owners of beneficial
interests in a Global Security will not be entitled to have Notes represented
by such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of Notes in definitive form and will not
be considered the owners or holders thereof under the Indenture.
Principal, premium, if any, and interest payments on Notes registered in
the name of the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the registered owner of the Global
Security representing such Notes. None of the Company, the Trustee, any
paying agent or the registrar for such Notes will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial interests in such Global Security for such Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Company expects that the Depositary for the Notes or its nominee,
upon receipt of any payment of principal, premium or interest, will credit
immediately Participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Security for such Notes as shown on the records of the Depositary or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interest in such Global Security held through such Participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name" (i.e., the name of a securities broker or dealer),
and will be the responsibility of such Participants.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within
90 days, the Company will issue Notes in definitive form in exchange for the
entire Global Security representing such Notes. In addition, the Company may
at any time and in its sole discretion determine not to have the Notes
represented by Global Securities and, in such event, will issue Notes in
definitive form in exchange for the Global Securities representing such Notes.
In any such instance, an owner of a beneficial interest in a Global Security
will be entitled to physical delivery in definitive form of Notes represented
by such Global Security equal in principal amount to such beneficial interest
and to have such Notes registered in its name. Notes so issued in definitive
form will be issued as registered Notes in denominations that are integral
multiples of $1,000 (or of 1,000 units of the applicable Specified Currency,
as the case may be), unless otherwise specified by the Company.
FOREIGN CURRENCY RISKS
GENERAL
An investment in Notes that are denominated in a Specified Currency
other than United States dollars entails significant risks that are not
associated with a similar investment in a security denominated in United
States dollars. Such risks include, without limitation, the possibility of
significant changes in rates of exchange between the United States dollar and
the various foreign currencies and the possibility of the imposition or
modification of foreign exchange controls by either the United States or
foreign governments. Such risks generally depend on economic and political
events over which the Company has no control. In recent years, rates of
exchange between United States dollars and certain foreign currencies have
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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. Depreciation of the currency
specified in a Note against the United States dollar would result in a
decrease in the effective yield of such Note below its coupon rate, and under
certain circumstances could result in a loss to the investor on a United
States dollar basis.
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS DO NOT DESCRIBE
ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED IN A FOREIGN CURRENCY OR A
CURRENCY UNIT AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN SPECIFIED
CURRENCIES OTHER THAN UNITED STATES DOLLARS. SUCH NOTES ARE NOT AN
APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
Notes denominated in foreign currencies other than European Currency
Units will generally not be sold in, or to residents of, the country of the
Specified Currency in which such Notes are denominated.
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 and interest on the Notes. Such persons should consult their own
counsel or financial advisers with regard to such matters.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws
of the State of New York. In the event an action based on Notes denominated
in a Specified Currency other than United States dollars were commenced in a
New York court, such court would render or enter a judgment or decree in the
Specified Currency. Such judgment would then be converted into United States
dollars at the rate of exchange prevailing on the date of entry of the
judgment or decree. The Indenture provides that the rate of exchange to be
used in determining any such judgment shall be the rate at which, in
accordance with normal banking procedures, the Trustee could purchase such
Specified Currency in The City of New York on the day on which final judgment
is entered, unless such day is not a New York Banking Day (as defined in the
Indenture) in which case on the day preceding the day on which final judgment
is entered.
EXCHANGE CONTROLS AND AVAILABILITY OF SPECIFIED CURRENCY
Governments have imposed from time to time, and may in the future
impose, exchange controls which could affect exchange rates as well as the
availability of a Specified Currency at the time of payment of principal of,
and premium, if any, or interest on a Note. In the case of any Note issued in
a Specified Currency that is not currently subject to exchange controls, there
can be no assurance that the absence of exchange controls will continue to
exist. Even if there are no actual exchange controls, it is possible that the
Specified Currency for any particular Note would not be available at such
Note's maturity. In that event, the Company would make required payments in
United States 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 Record Date. See
"Description of Medium-Term Notes, Series 3 -Payment Currency".
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Information concerning exchange rates for the Specified Currency, if
other than United States dollars, in which principal of, premium, if any, and
interest on the Notes is payable, as against the United States dollar at
selected times during the last five years, as well as any exchange controls
affecting such currencies, will be set forth in the applicable Pricing
Supplement.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material United States federal income tax
consequences of the ownership and disposition of Notes constitutes the opinion
of Sidley & Austin, special tax counsel to the Company. This summary is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), administrative pronouncements, judicial decisions and existing and
proposed Treasury Regulations, including final Treasury Regulations concerning
the treatment of debt instruments issued with original issue discount (the
"OID Regulations"), changes to any of which subsequent to the date of this
Prospectus Supplement may affect the tax consequences described herein. These
statements address only the tax consequences to persons holding Notes as
capital assets and do not address the tax consequences of holding Notes to
dealers in securities or currencies, persons holding Notes as a part of a
"hedging transaction" within the meaning of Treasury Regulations, or as a
hedge against, or that are hedged against, currency risks, certain financial
institutions, insurance companies, or United States Holders (as defined below)
whose "functional currency", as defined in section 985 of the Code, is not the
U.S. dollar. Floating Rate Notes bearing interest at a rate determined by
reference to a Base Rate other than the CD Rate, the Commercial Paper Rate,
the Federal Funds Rate, LIBOR, the Prime Rate, the Treasury Rate or the CMT
Rate may be subject to special rules not discussed in this summary. Any
special rules applicable to such Floating Rate Notes, to the extent not
discussed in this summary, will be set forth in an applicable Pricing
Supplement, if appropriate. This summary does not discuss Original Issue
Discount Notes which qualify as "applicable high-yield discount obligations"
under section 163(i) of the Code. Holders of such obligations
may be subject to special rules which will be set forth in an applicable
Pricing Supplement, if appropriate. Persons considering the purchase of Notes
should consult their own tax advisors concerning the application of United
States federal income tax laws, as well as the laws of any state, local or
foreign jurisdictions, to their particular situations.
UNITED STATES HOLDERS
As used herein, a "United States Holder" means a holder of a Note who or
which is, for United States federal income tax purposes, either (i) a citizen
or resident of the United States, (ii) a corporation or partnership created or
organized in or under the laws of the United States or of any political
subdivision thereof or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source. The term
also includes holders of Notes who are former citizens of the United States.
PAYMENTS OF INTEREST. Interest on a Note (whether paid in a foreign currency
or in United States dollars) 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 United
States federal income tax purposes. Special rules governing the treatment of
interest received or accrued with respect to certain Floating Rate Notes,
Foreign Currency Notes (as defined below) and Indexed Notes are described
under "Original Issue Discount Notes", "Foreign Currency Notes" and "Indexed
Notes", respectively, below.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES. Upon the sale, exchange or
retirement of a Note, a United States Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
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or retirement (not including any amount attributable to accrued but unpaid
interest) and such Holder's adjusted tax basis in the Note. A United States
Holder's adjusted tax basis in a Note will equal the cost of the Note to such
Holder, increased by any amounts of market discount and original issue
discount (each as defined below), if any, previously includible in taxable
income by such Holder with respect to such Note and reduced by any amortized
bond premium and any principal payments received by such Holder and, in the
case of an Original Issue Discount Note, by the amounts of any other payments
that do not constitute qualified stated interest (as defined below).
Any gain or loss recognized upon the sale, exchange or retirement of a
Note will generally be capital gain or loss, except that any such gain will be
treated as ordinary income to the extent that such gain represents accrued
market discount not previously included in the United States Holder's income
or, in the case of a short-term Original Issue Discount Note (as defined
below), to the extent of the ratable share of any original issue discount and
except to the extent of any exchange gain or loss with respect to Foreign
Currency Notes (see "Foreign Currency Notes" below). In addition, under
certain proposed Treasury Regulations discussed below under "Indexed Notes",
gain or loss recognized upon the sale, exchange or retirement of certain Notes
that provide for contingent payments may be ordinary.
Under current law, the excess of net long-term capital gains over net
short-term capital losses is taxed at a lower rate than ordinary income for
certain non-corporate taxpayers. The distinction between capital gain or loss
and ordinary income or loss is also relevant for purposes of, among other
things, the limitations on the deductibility of capital losses.
PREMIUM AND MARKET DISCOUNT. If a United States Holder that acquires a Note
having a maturity date of more than one year from the date of its issuance has
a tax basis in the Note that is, in the case of a Note other than an Original
Issue Discount Note, less than its "stated redemption price at maturity" (as
defined below), or, in the case of an Original Issue Discount Note, less than
its "adjusted issue price" (as defined below), 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 principal payment (or, in the case of an Original Issue
Discount Note, any payment that does not constitute a payment of qualified
stated interest) on, or any gain on the sale, exchange, retirement or other
disposition of, a Note as ordinary income to the extent of 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 certain otherwise nontaxable transactions, accrued market
discount will be includible as ordinary income to the United States Holder as
if such Holder had sold the Note at its then fair market value. A United
States Holder may not be allowed to deduct immediately a portion of the
interest expense on any indebtedness incurred or continued to purchase or to
carry such Note.
Any market discount will be considered to accrue on a straight-line
basis during the period from the date of acquisition to the maturity date of
the Note, unless the United States Holder makes an irrevocable election to
compute the accrual on a constant yield basis. A United States Holder may
elect to include market discount in income currently as it accrues (on either
a straight-line or a constant yield basis), in which case the interest
deferral rule set forth in the last sentence of the preceding paragraph will
not apply. Such an election will apply to all bonds acquired by the United
States Holder on or after the first day of the first taxable year to which
such election applies, and may not be revoked without the consent of the
Internal Revenue Service.
If a United States Holder acquires a Note for an amount that is greater
than its stated redemption price at maturity, the United States Holder will be
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considered to have purchased such Note at a premium and may elect to amortize
such premium, using a constant yield method, over the remaining term of the
Note. If such Note is callable prior to its maturity date, the amortizable
bond premium is determined with reference to the amount payable on the call
date, if it results in a smaller amortizable bond premium deduction. A United
States Holder that elects to amortize bond premium must reduce its tax basis
in a Note by the amount of the premium amortized in any year. An election to
amortize bond premium applies to all taxable debt obligations then owned and
thereafter acquired by the Holder and may be revoked only with the consent of
the Internal Revenue Service. Bond premium on a Note held by a United States
Holder that does not make such an election will decrease the gain or increase
the loss otherwise recognized on disposition of a Note.
A United States Holder that purchases an Original Issue Discount Note
for an amount that is greater than its adjusted issue price but less than or
equal to its stated redemption price at maturity will be considered to have
purchased such Note at an "acquisition premium". Rules applicable to such a
Holder are set forth under "Original Issue Discount Notes" below.
ORIGINAL ISSUE DISCOUNT NOTES
The following discussion is a summary of the principal United States
federal income tax consequences to United States Holders of the ownership of
Notes issued at an original issue discount for United States federal income
tax purposes ("Original Issue Discount Notes"). The principal United States
federal income tax consequences to non-United States Holders of the ownership
of Original Issue Discount Notes are described under "Non-United States
Holders" below. Additional rules applicable to Original Issue Discount Notes
that are denominated in a currency other than the U.S. dollar are described
under "Foreign Currency Notes" below.
Under the Code and the OID Regulations, a Note whose "issue price" is
less than its "stated redemption price at maturity" will generally be
considered to have been issued at an original issue discount for United States
federal income tax purposes. United States Holders of Original Issue Discount
Notes that mature more than one year from the date of issuance generally will
be required to include original issue discount in gross income for United
States federal income tax purposes as it accrues, in accordance with a
constant yield method based on a compounding of interest, in advance of
receipt of the cash payments attributable to such income. However, if the
difference between a Note's stated redemption price at maturity and its issue
price is less than 1/4 of 1 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity (or, in the case of a
Note providing for payments prior to maturity other than payments of
"qualified stated interest", the weighted average maturity), the Note will not
be considered to have original issue discount. United States Holders of Notes
with a de minimis amount of original issue discount will be required to
include such original issue discount in income, as capital gain, on a pro rata
basis as principal payments are made on the Notes. Notwithstanding the
foregoing, United States Holders may elect to include in gross income all
interest that accrues on the Notes, including any stated interest, acquisition
discount, original issue discount, market discount, de minimis original issue
discount, de minimis market discount and unstated interest (as adjusted by
amortizable premium and acquisition premium), by using the constant yield
method described below with respect to original issue discount.
The "issue price" of a Note will equal the initial offering price to the
public (not including bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters or wholesalers) at which price a
substantial amount of the Notes is sold. A Note's "stated redemption price at
maturity" is, generally, the principal amount payable at maturity plus any
additional amounts payable under the debt instrument that do not constitute
"qualified stated interest". "Qualified stated interest" is defined to
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include stated interest that is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually during the
entire term of the Note at a single fixed rate. Interest is payable at a
single fixed rate only if the rate takes into account the length of the
interval between payments.
If a Floating Rate Note constitutes a "variable rate debt instrument",
qualified stated interest also includes stated interest that is payable in
cash or property (other than debt instruments of the issuer) at least annually
during the entire term of the Note at a single "qualified floating rate" or a
single "objective rate" (each as defined below). In order to qualify as a
"variable rate debt instrument", a Floating Rate Note must provide for stated
interest, compounded or paid annually, at (i) one or more qualified floating
rates, (ii) a single fixed rate and one or more qualified floating rates,
(iii) a single objective rate or (iv) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate" (as defined below).
In each case, a qualified floating rate or objective rate in effect at any
time during the term of the Note must be set at a "current value" of that
rate, which means the value of the rate on any day during the 15-month period
beginning three months before, and ending one year after, the first day on
which the value is in effect. In addition, the issue price of a variable rate
debt instrument must not exceed the total noncontingent principal payments by
more than a specified amount.
Subject to certain exceptions, a variable rate of interest is a
"qualified floating rate" if variations in the value of the rate can
reasonably be expected to measure contemporaneous fluctuations in the cost of
newly borrowed funds in the currency in which the Note is denominated. A
variable rate will be considered a qualified floating rate if the variable
rate equals (i) the product of an otherwise qualified floating rate and a
fixed multiple (i.e., a Spread Multiplier) that is greater than zero but not
more than 1.35 or (ii) an otherwise qualified floating rate (or the product
described in clause (i) of this sentence) plus or minus a fixed rate (i.e., a
Spread). If the variable rate equals the product of an otherwise qualified
floating rate and a single fixed multiplier greater than 1.35, however, such
rate will generally constitute an objective rate, described more fully below.
A variable rate will not be considered a qualified floating rate if the
variable rate is subject to a maximum interest rate (a "cap"), minimum
interest rate (a "floor") or "governor" (i.e., a restriction on the amount of
increase or decrease in the stated interest rate) or similar restriction that
is reasonably expected as of the issue date to cause the yield on the Note to
be significantly more or less than the expected yield determined without the
restriction (other than a cap, floor or governor that is fixed throughout the
term of the Note).
Subject to certain exceptions, an "objective rate" is defined as a rate
(other than a qualified floating rate) that is based on (i) one or more
qualified floating rates, (ii) one or more rates where each rate would be a
qualified floating rate for a Note denominated in a currency other than the
currency in which the Note is denominated, (iii) the yield or changes in the
price of one or more items of personal property (other than stock or debt of
the Company or a related party) that is actively traded or (iv) a combination
of the foregoing rates described in this sentence. A variable rate of
interest on a Note will not be considered an objective rate if it is
reasonably expected that the average value of the rate during the first half
of the Note's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the Note's
term. A rate is a "qualified inverse floating rate" only if (i) the rate is
equal to a fixed rate minus a qualified floating rate and (ii) variations in
the rate can reasonably be expected inversely to reflect contemporaneous
variations in the cost of newly-borrowed funds.
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On December 16, 1994, proposed Treasury Regulations (the "1994 Proposed
Regulations") were issued that would expand the definition of an objective
rate. Under the 1994 Proposed Regulations, an objective rate would be a rate
that is determined using a single fixed formula that is based on objective
financial or economic information that is neither within the control of the
issuer (or a related party) nor unique to the circumstances of the issuer (or
a related party). Examples of rates that should qualify under the 1994
Proposed Regulations include a rate based on the consumer price index or on
the price level of actively traded property. The definition of objective rate
in the 1994 Proposed Regulations is proposed to be effective for debt
instruments issued on or after the date that is 60 days after the publication
of final Treasury Regulations.
Under these rules, interest paid on Commercial Paper Rate Notes, Federal
Funds Rate Notes, CD Rate Notes, LIBOR Notes, Treasury Rate Notes, Prime Rate
Notes, CMT Rate Notes, other than certain Notes subject to caps, floors or
governors described above, will generally be treated as "qualified stated
interest".
If interest on a Note is stated at a fixed rate for an initial period of
less than one year followed by a variable rate that is either a qualified
floating rate or an objective rate for a subsequent period, and the value of
the variable rate on the issue date is intended to approximate the fixed rate,
the fixed rate and the variable rate together constitute a single qualified
floating rate or objective rate. In addition, in order for payments on the
Note to be payments of qualified stated interest, the qualified floating rate
or objective rate in effect at a given time for a Floating Rate Note must be
set at a value of that rate on any day that is no earlier than three months
prior to the first day on which that value is in effect and no later than one
year following that first day.
If a Note provides for (i) more than one qualified floating rate, (ii) a
single fixed rate and one or more qualified floating rates or (iii) in certain
cases a single fixed rate and a single objective rate, then all or a portion
of the Note's stated interest may be treated as qualified stated interest.
However, in certain instances a portion of that Note's stated interest will
not be so treated, but instead will be included in the Note's stated
redemption price at maturity. As a result, such Notes may be treated as being
issued with original issue discount. The Company does not currently expect to
issue Notes with the terms described in the first sentence of this paragraph.
In the event such Notes are issued, the tax consequences to purchasers thereof
will be discussed in the applicable Pricing Supplement.
United States Holders of Original Issue Discount Notes will be required
to include any payments of qualified stated interest in income at the time
they are accrued or received, in accordance with the Holder's method of
accounting for federal income tax purposes. The amount of original issue
discount includible in income during a taxable year by a United States Holder
of an Original Issue Discount Note that matures more than one year from its
date of issuance will equal the sum of the daily portions of the original
issue discount with respect to the Original Issue Discount Note for each day
during the taxable year on which such Holder held the Original Issue Discount
Note. The daily portion of the original issue discount on any Original Issue
Discount Note is determined by allocating to each day in any "accrual period"
a ratable portion of the original issue discount allocable to such accrual
period. A United States Holder of a Note may use accrual periods that are of
any length and that vary in length over the term of the debt instrument
provided that each accrual period is no longer than one year and that each
scheduled payment of principal or interest occurs either on the final day of
an accrual period or on the first day of an accrual period. The Company will
specify the accrual period it intends to use with respect to Original Issue
Discount Notes in the applicable Pricing Supplement. The original issue
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discount allocable to any accrual period is equal to the excess (if any) of
(a) the product of the Original Issue Discount Note's "adjusted issue price"
at the beginning of such accrual period and its yield to maturity (determined
on the basis of compounding at the close of each accrual period and adjusted
for the length of the accrual period) over (b) the sum of all qualified stated
interest, if any, payable on such Original Issue Discount Note during such
accrual period or allocable to such accrual period. The "adjusted issue price"
of an Original Issue Discount Note at the beginning of the first accrual
period is its issue price, and the "adjusted issue price" at the beginning of
a subsequent accrual period is the issue price increased by the amount of
original issue discount includible in the gross income of any holder (without
reduction for any amortized acquisition premium) with respect to the Original
Issue Discount Note for all prior accrual periods, and decreased by the amount
of any payment previously made on such Note other than a payment of qualified
stated interest. Under these rules, United States Holders of Original Issue
Discount Notes generally will be required to include in income increasingly
greater amounts of original issue discount in successive accrual periods.
Neither the OID Regulations nor other Treasury Regulations (effective or
proposed to be effective on or prior to the date hereof) address the treatment
of Floating Rate Notes that do not qualify as variable rate debt instruments.
Accordingly, as of the date hereof, the tax treatment of such Notes is
unclear. Although the 1994 Proposed Regulations address the tax treatment to
be accorded such Notes, the 1994 Proposed Regulations are proposed to become
effective for debt instruments issued on or after the date that is 60 days
after the publication of final Treasury Regulations. For a discussion of the
1994 Proposed Regulations, see "Indexed Notes" below. In the event Floating
Rate Notes are issued that do not qualify as variable rate debt instruments,
the tax consequences to purchasers thereof will be discussed in the applicable
Pricing Supplement.
In the case of an Original Issue Discount Note that matures one year or
less from the date of its issuance (a "short-term Original Issue Discount
Note"), United States Holders that report income for United States federal
income tax purposes on the accrual method and certain other United States
Holders, including banks and dealers in securities, are required to include
original issue discount on such short-term Original Issue Discount Notes on a
straight-line basis, unless an election is made to accrue the original issue
discount according to a constant yield method based on daily compounding. Any
other United States Holder of a short-term Original Issue Discount Note is not
required to accrue original issue discount for United States federal income
tax purposes, unless it elects to do so. In the case of a United States Holder
that is not required, and does not elect, to include original issue discount
in income currently, any gain realized on the sale, exchange or retirement of
the short-term Original Issue Discount Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis (or, if
elected, according to a constant yield method based on daily compounding)
through the date of sale, exchange or retirement. In addition, such
non-electing United States Holders that are not subject to the current
inclusion requirement described in the first sentence of this paragraph will
be required to defer deductions for any interest paid on indebtedness incurred
or continued to purchase or carry short-term Original Issue Discount Notes in
an amount not exceeding the deferred interest income, until such deferred
interest income is realized.
A subsequent purchaser of an Original Issue Discount Note that purchases
the Note at a cost lower than the remaining stated redemption price at
maturity but greater than its adjusted issue price (i.e. at an "acquisition
premium") will also be required to include in gross income the sum of the
daily portions of original issue discount on that Original Issue Discount
Note. In computing the daily portions of original issue discount with respect
to an Original Issue Discount Note for such a purchaser, however, the daily
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portion for any day is reduced by the amount that would be the daily portion
for such day (computed in accordance with the rules set forth above)
multiplied by a fraction, the numerator of which is the amount, if any, by
which the price paid by the United States Holder for that Note exceeds the
adjusted issue price and the denominator of which is the sum of the daily
portions for that Note for all days beginning on the date after the purchase
date and ending on the stated maturity date.
Certain of the Original Issue Discount Notes may be redeemed prior to
maturity. Original Issue Discount Notes containing such a feature may be
subject to rules that differ from the general rules discussed above. In the
event such Notes are issued, the tax consequences to purchasers thereof will
be discussed in the applicable Pricing Supplement.
The OID Regulations contain certain language (the "aggregation rules")
stating in general that, with some exceptions, if more than one type of Note
is issued in connection with the same transaction or related transactions,
such Notes may be treated together as a single debt instrument with a single
issue price, maturity date, yield to maturity and stated redemption price at
maturity for purposes of calculating and accruing any original issue discount.
Unless otherwise provided in the applicable Pricing Supplement, the Company
does not expect to treat different types of Notes as being subject to the
aggregation rules for purposes of computing original issue discount.
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 Notes to which the contingent payment rules
of the 1994 Proposed Regulations are applicable), payments under which are
denominated in or determined by reference to the value of one or more currency
units other than the U.S. dollar (a "Foreign Currency Note"). The principal
United States federal income tax consequences to a non-United States Holder of
the ownership of Foreign Currency Notes are summarized under "Non-United
States Holders" below.
The following summary is based upon the final Treasury Regulations
issued under section 988 of the Code (the "Section 988 Regulations") and upon
Treasury Regulations proposed on March 17, 1992 (the "Proposed Amendment to
the Section 988 Regulations").
INTEREST INCLUDIBLE IN INCOME UPON RECEIPT. An interest payment on a Foreign
Currency Note that is not required to be included in income by the United
States Holder prior to receipt of such payment will be includible in income by
the United States Holder based on 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.
Such U.S. dollar value will be the United States Holder's tax basis in the
foreign currency received.
INTEREST INCLUDIBLE IN INCOME PRIOR TO RECEIPT. In the case of interest
income on a Foreign Currency Note that is required to be included in income by
the United States Holder prior to receipt of payment, a United States Holder
will be required to include in income the U.S. dollar value of the amount of
interest income that has accrued and is otherwise required to be taken into
account with respect to a Foreign Currency Note during an accrual period.
Unless the United States Holder makes the election discussed in the next
paragraph, 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
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of the exchange rates for each business day of such period (or other method if
such method is reasonably derived and consistently applied). Such United
States Holder will recognize, as ordinary gain or loss, foreign currency
exchange gain or loss with respect to accrued interest income on the date such
income is actually received, reflecting fluctuations in currency exchange
rates between the last day of the relevant accrual period and the date of
payment. The amount of gain or loss recognized will equal the difference
between the U.S. dollar value of the foreign currency payment received in
respect of such accrual period determined based on the exchange rate on the
date such payment is received and the U.S. dollar value of interest income
that has accrued during such accrual period (as determined above).
Under the so-called "spot rate convention election", a United States
Holder may, in lieu of applying the rules described in the preceding
paragraph, elect to translate accrued interest income into U.S. dollars at the
exchange rate in effect on the last day of the relevant accrual period for the
original issue discount, market discount or accrued interest, or in the case
of an accrual period that spans two taxable years, at the exchange rate in
effect on the last day of the taxable year. Additionally, if a payment of
such income is actually received within five business days of the last day of
the accrual period or taxable year, an electing United States Holder may
instead translate such income into U.S. dollars at the exchange rate in effect
on the day of actual receipt. Any such election will apply to all debt
instruments held by the United States Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the
United States Holder, and will be irrevocable without the consent of the
Internal Revenue Service.
PURCHASE, SALE, EXCHANGE OR RETIREMENT. 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 or,
in the case of an adjustment resulting from accrual of original issue discount
or market discount, at the rate at which such original issue discount or
market discount is translated into U.S. dollars under the rules described
above. A United States Holder that converts U.S. dollars to a foreign
currency and immediately uses that currency to purchase a Foreign Currency
Note denominated in the same currency normally will not recognize gain or loss
in connection with such conversion and purchase. However, a United States
Holder that 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 United States Holder's tax basis in the
foreign currency and the U.S. dollar 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
generally will be the U.S. dollar value of the foreign currency received,
determined on the date of sale, exchange or retirement.
For purposes of the foregoing rules, the Section 988 Regulations provide
a special rule for purchases and sales of publicly traded Foreign Currency
Notes by a cash basis taxpayer under which units of foreign currency paid or
received are translated into U.S. dollars at the spot rate on the settlement
date of the purchase or sale. Accordingly, in that case no exchange gain or
loss will result from currency fluctuations between the trade date and the
settlement of such a purchase or sale. An accrual basis taxpayer may elect
the same treatment required of cash basis taxpayers with respect to purchases
and sales of publicly traded Foreign Currency Notes provided the election is
applied consistently. Such election will be irrevocable without the consent
of the Internal Revenue Service.
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The portion of any gain or loss realized upon the sale, exchange or
retirement of a Foreign Currency Note that is attributable to fluctuations in
currency exchange rates will be ordinary income or loss. Such portion will
equal the difference between (i) the U.S. dollar value of the foreign currency
principal amount of such Foreign Currency Note determined on the date such
Note is disposed of and (ii) the U.S. dollar value of the foreign currency
principal amount of such Note determined at the exchange rate on the date such
United States Holder acquired such Note. Any portion of the proceeds of such
sale, exchange or retirement attributable to accrued interest will result in
exchange gain or loss under the rules set forth above. The foreign currency
principal amount of a Foreign Currency Note generally equals, in the case of
the original purchaser, the issue price in foreign currency of such Note, and
in the case of a subsequent purchaser, the holder's purchase price in foreign
currency. Such foreign currency gain or loss will be recognized only to the
extent of the total gain or loss realized by a United States Holder on the
sale, exchange or retirement of the Foreign Currency Note. Any gain or loss
recognized by such a 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 Original Issue Discount Note, any
accrued original issue discount).
A United States Holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a 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.
OTHER MATTERS. 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 in the Section 988 Regulations or by
administrative pronouncements of the Internal Revenue Service.
Market discount, acquisition premium and amortizable bond premium of a
Foreign Currency Note are to be determined in the relevant foreign currency.
The amount of such market discount or acquisition premium that is included in
(or reduces) income currently is to be determined for any accrual period in
the relevant foreign currency and then translated into U.S. dollars on the
basis of the average exchange rate in effect during such accrual period or
with reference to the spot rate convention election as described above.
Exchange gain or loss realized with respect to such accrued market discount or
acquisition premium shall be determined and recognized in accordance with the
rules relating to accrued interest described above. The amount of accrued
market discount (other than market discount that is included in income
currently) 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, and no portion
thereof shall be treated as exchange gain or loss. Exchange gain or loss with
respect to amortizable bond premium is determined by treating the portion of
premium amortized with respect to any period as a return of principal. With
respect to a United States Holder of a Foreign Currency Note that does not
elect to amortize premium under section 171 of the Code, the amount of
premium, if any, will be treated as a capital loss when such Note matures.
The Section 988 Regulations do not discuss the tax consequences of an
issuance of a Foreign Currency Note that is denominated either in a so-called
hyperinflationary currency or in more than one currency, or that is treated
under the OID Regulations as having contingent interest payments. Foreign
Currency Notes containing such features may be subject to rules that differ
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from the general rules discussed above. (See discussion below under "Indexed
Notes".) Under the Proposed Amendment to the Section 988 Regulations, if a
United States Holder acquires a Note denominated in a foreign currency which
is a hyperinflationary currency, such Holder will realize exchange gain or
loss for each taxable year determined by reference to the change in exchange
rates between (i) the later of the first day of the holder's taxable year or
the date on which the Note was acquired and (ii) the earlier of the last day
of the taxable year or the date the Note is disposed of. Generally, any such
gain or loss will increase or decrease interest income (and such loss in
excess of interest income will be treated as ordinary loss) and will be an
adjustment to the functional currency basis of the United States Holder for
purposes of subsequent computations of exchange gain or loss. Under the
Proposed Amendment to the Section 988 Regulations, certain Foreign Currency
Notes providing for payments in more than one currency are separated into two
or more component hypothetical debt instruments, each of which provides for
payments in one of the currencies. United States Holders intending to
purchase Foreign Currency Notes with such a feature should carefully examine
the applicable Pricing Supplement and should consult with their own tax
advisors with respect to such a feature.
INDEXED NOTES
The United States federal income tax consequences to a United States
Holder of the ownership and disposition of Indexed Notes that do not qualify
as variable rate debt instruments under the OID Regulations are uncertain at
this time. Set forth below are the rules that would apply to such Indexed
Notes under the 1994 Proposed Regulations.
In the case of a contingent debt instrument issued for cash or publicly
traded property, the 1994 Proposed Regulations require the issuer to construct
and provide to the holder a projected schedule of payments under the
instrument. The projected payments consist of any noncontingent payments
provided by the debt instrument and the projected amounts of the contingent
payments. Interest income is then accrued on the debt instrument by the
holder under the usual rules applicable to original issue discount
obligations, on the assumption that the projected amounts will actually be
paid. Whenever a contingent payment is fixed at the projected amount, no
further adjustments are required. Whenever a contingent payment is fixed at
an amount that is above (or below) the projected amount, a positive (or
negative) adjustment must be made with respect to the interest income that has
been previously accrued by the holder. The issuer's determination of the
projected payment schedule will be respected unless it is unreasonable. If
the projected payment schedule set by the issuer is unreasonable (or if the
issuer does not create a projected payment schedule), the holder must set the
projected payment schedule. A holder that sets its own projected payment
schedule must explicitly disclose this fact on its income tax return and the
reason why the holder set its own schedule.
In general, any gain realized by the holder on the sale, exchange or
retirement of a contingent debt instrument is interest income under the 1994
Proposed Regulations. Any loss on a contingent debt instrument accounted for
under the method described in the preceding paragraph is ordinary loss to the
extent it does not exceed the holder's prior interest inclusions on the
instrument (net of negative adjustments).
The 1994 Proposed Regulations are proposed to become effective for debt
instruments issued on or after the date that is 60 days after the publication
of final Treasury Regulations, and as of the date hereof, the tax treatment of
Indexed Notes that do not qualify as variable rate debt instruments is
unclear. United States Holders of Indexed Notes should consult the applicable
Pricing Supplement and with their own tax advisors as to the United States
federal income tax consequences of the ownership and disposition of such
Notes.
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CURRENCY INDEXED NOTES. With Respect to Currency Indexed Notes, it is
possible that under section 988 of the Code, to the extent that income, gain,
or loss on such Notes (including income recognized on payments prior to the
maturity date) is attributable to fluctuations in currency exchange rates
during the period in which the United States Holder held such Notes, such
income, gain or loss will be treated as ordinary income or loss rather than
interest income or expense. It is unclear how such treatment would modify the
treatment otherwise required with respect to Currency Indexed Notes by the
contingent payment rules.
The Section 988 Regulations provide that the contingent payment rules
contained in the 1994 Proposed Regulations should not apply to a debt
instrument merely because some or all of the payments are to be determined by
reference to the value of a single foreign currency with no other
contingencies. The Section 988 Regulations do not currently address
obligations such as the Currency Indexed Notes. It is possible, however, that
certain Currency Indexed Notes will constitute "dual currency debt
instruments" or "multi-currency debt instruments" within the meaning of the
Proposed Amendment to the Section 988 Regulations. A dual currency debt
instrument is a debt instrument with respect to which (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 or determined by
reference to another currency and (iii) the amount of all payments in each
currency is fixed on the issue date. A multi-currency debt instrument is a
debt instrument where, under the terms of the instrument, payments are made in
more than one currency and the amount of all payments in each currency is
fixed on the issue date. Currency Indexed Notes treated as dual currency debt
instruments or multi-currency debt instruments may be taxed in accordance with
such regulations and not as contingent debt instruments under the 1994
Proposed Regulations.
Thus, the application, if any, of the contingent payment rules and the
Section 988 rules to the Currency Indexed Notes is unclear. United States
Holders of Currency Indexed Notes should consult the applicable Pricing
Supplement and with their own tax advisors as to the United States federal
income tax consequence of the ownership and disposition of such Notes.
NON-UNITED STATES HOLDERS
As used herein, the term "non-United States Holder" means a holder of a
Note that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or
more of the members of which is, for United States federal income tax
purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust.
Under United States federal income tax law now in effect, and subject to
the discussion of backup withholding in the following section, payments of
principal and interest (including original issue discount) and premium by the
Company or any paying agent to any non-United States Holder of a Note will not
be subject to United States federal withholding tax, provided, in the case of
interest, that (i) such Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote, (ii) such Holder is not for United States federal income tax
purposes a controlled foreign corporation related to the Company through stock
ownership, (iii) such Holder is not a bank receiving interest described in
section 881(c)(3)(A) of the Code, and (iv) either (A) the beneficial owner of
the Note certifies, under penalties of perjury, to the Company or paying
agent, as the case may be, that such Holder is a non-United States Holder and
provides such Holder's name and address, and U.S. taxpayer identification
number, if any, or (B) a securities clearing organization, bank or other
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financial institution that holds customers' securities in the ordinary course
of its trade or business (a "financial institution") and holds the Note,
certifies, under penalties of perjury, to the Company or paying agent, as the
case may be, that such certificate has been received from the beneficial owner
by it or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof. A certificate described in this
paragraph is effective only with respect to payments of interest (including
original issue discount) made to the certifying non-United States Holder after
the issuance of the certificate in the calendar year of its issuance and the
two immediately succeeding calendar years.
Notwithstanding the foregoing, interest described in section 871(h)(4)
of the Code will be subject to United States federal withholding tax at a 30%
rate (or such lower rate provided by an applicable treaty). In general,
interest described in section 871(h)(4) of the Code includes (subject to
certain exceptions) any interest the amount of which is determined by
reference to receipts, sales or other cash flow of the Company or related
person, any income or profits of the Company or a related person, any change
in the value of any property of the Company or related person or any dividend,
partnership distributions or similar payment made by the Company or related
person. Interest described in section 871(h)(4) of the Code may include other
types of contingent interest identified by the Internal Revenue Service in
future Treasury Regulations. The Company does not currently expect to issue
Notes the interest on which is described in section 871(h)(4) of the Code, and
the United States federal withholding tax consequences of any such Note issued
by the Company will be described in the applicable Pricing Supplement.
If a non-United States Holder is engaged in a trade or business in the
United States and interest (including original issue discount) on the Note is
effectively connected with the conduct of such trade or business, the
non-United States Holder, although exempt from the withholding tax discussed
in the two preceding paragraphs, will be subject to United States federal
income tax on such interest and original issue discount in the same manner as
if it were a United States Holder. See "United States Holders" and "Original
Issue Discount Notes" above. In lieu of the certificate described above, such
a Holder will be required to provide to the Company a properly executed
Internal Revenue Service Form 4224 in order to claim an exemption from
withholding tax. In addition, if such a Holder is a foreign corporation, it
may be subject to a branch profits tax equal to 30% (or such lower rate
provided by an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose,
interest (including original issue discount) on a Note will be included in
such effectively connected earnings and profits if such interest and original
issue discount are effectively connected with the conduct by the non-United
States Holder of a trade or business in the United States.
Generally, any gain or income realized upon the sale, exchange,
retirement or other disposition of a Note will not be subject to United States
federal withholding or income tax unless (i) such gain or income is
effectively connected with a trade or business in the United States of the
non-United States Holder or (ii) in the case of a non-United States Holder who
is an individual, the non-United States Holder is present in the United States
for 183 days or more in the taxable year of such sale, retirement or other
disposition and either (a) such individual has a "tax home" (as defined in
section 911(d)(3) of the Code) in the United States or (b) the gain is
attributable to an office or other fixed place of business maintained by such
individual in the United States.
A Note held by an individual who is a non-United States Holder at the
time of death will not be subject to United States federal estate tax on the
Note if (i) the holder does not own, actually or constructively, 10% or more
of the total combined voting power of all classes of stock of the Company
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entitled to vote, (ii)at the time of such individual's death, the interest
payments with respect to the Notes would not have been effectively connected
with a United States trade or business of such Holder and (iii) no portion of
the value of the Note held by such estate is attributable to interest
described in section 871(h)(4) of the Code (as described above).
.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, information
reporting requirements apply to interest and principal payments made to, and
to the proceeds of sales before maturity by, non-corporate United States
Holders. In addition, a 31% backup withholding tax will apply if the
non-corporate United States Holder (i) fails to furnish its Taxpayer
Identification Number ("TIN"), which, for an individual, would be his Social
Security Number, (ii) furnishes an incorrect TIN, (iii) is notified by the
Internal Revenue Service that it has failed properly to report payments of
interest and dividends or (iv) in certain circumstances, fails to certify,
under penalties of perjury, that it has furnished a correct TIN and has not
been notified by the Internal Revenue Service that it is subject to backup
withholding for failure to report interest and dividend payments. Backup
withholding will not apply with respect to payments made to certain exempt
recipients, such as corporations and tax-exempt organizations.
In the case of a non-United States Holder, under current Treasury
Regulations, backup withholding and information reporting will not apply to
payments of principal and interest made by the Company or any paying agent
thereof on a Note with respect to which such Holder has provided the required
certification under penalties of perjury of its non-United States Holder
status or has otherwise established an exemption, provided that the Company or
paying agent, as the case may be, does not have actual knowledge that the
payee is a United States person (as defined in section 7701(a)(30) of the
Code).
In addition, if principal or interest payments are collected outside the
United States by a foreign office of a custodian, nominee or other agent
acting on behalf of a beneficial owner of a Note, such custodian, nominee or
other agent will not be required to apply backup withholding to such payments
made to such beneficial owner and will not be subject to information
reporting. However, if such custodian, nominee or other agent is a United
States person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income is effectively
connected with its conduct of a United States trade or business for a
specified three-year period, such custodian, nominee or other agent may be
subject to certain information reporting requirements with respect to such
payments unless it has in its records documentary evidence that the beneficial
owner is not a United States person and certain conditions are met or the
beneficial owner otherwise establishes an exemption. Under proposed Treasury
Regulations, backup withholding may apply to any payment which such custodian,
nominee or other agent is required to report if such custodian, nominee or
other agent has actual knowledge that the payee is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or
retirement of a Note to or through a foreign office of a broker will not be
subject to backup withholding. However, if such broker is a United States
person, a controlled foreign corporation for United States tax purposes, or a
foreign person 50% or more of whose gross income is effectively connected with
its conduct of a United States trade or business for a specified three-year
period, information reporting will be required unless the broker has in its
records documentary evidence that the beneficial owner is not a United States
person and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Under proposed Treasury Regulations, backup
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withholding may apply to any payment which such broker is required to report
if such broker has actual knowledge that the payee is a United States person.
Payments to or through the United States office of a broker will be subject to
backup withholding and information reporting unless the holder certifies under
penalties of perjury that it is not a United States person or otherwise
establishes an exemption.
Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a refund or a credit against such
holder's United States federal income tax, provided that the required
information is furnished to the Internal Revenue Service.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding to their particular situations,
the availability of an exemption therefrom, and the procedure for obtaining
such an exemption, if available.
PLAN OF DISTRIBUTION
The Notes are being offered on a continual basis by the Company through
Agents, who have agreed to use their reasonable best efforts to solicit
purchases of the Notes. The Company will pay an Agent a commission, in the
form of a discount ranging from .125% to .750% of the principal amount of the
Note sold through it, depending upon maturity of the Note, except that the
commission payable by the Company to the Agents with respect to Notes with
maturities of greater than thirty years will be negotiated at the time the
Company issues such Notes. The Company also may sell the Notes to any Agent,
acting as principal, at a discount for resale to investors or dealers at
varying prices related to prevailing market prices at the time of resale, to
be determined by the Agents or, if so agreed, at a fixed public offering
price. The Agent may sell Notes it has purchased from the Company as
principal to other dealers for resale to investors and other purchasers, and
may allow any portion of the discount received in connection with such
purchase from the Company to such dealers. After the initial public offering
of Notes, the public offering price (in the case of Notes to be resold at a
fixed public offering price), the concession and the discount may be changed.
In addition, the Company may arrange for the Notes to be sold through other
agents, dealers or underwriters or may sell the Notes directly to investors on
its own behalf in those jurisdictions where it is authorized to do so. In the
case of sales made directly by the Company, no commission will be payable.
The Company will have the sole right to accept offers to purchase Notes
and may reject any proposed purchase of Notes in whole or in part. The Agents
will have the right, in their reasonable discretion, to reject any offer to
purchase Notes received by them in whole or in part.
The Company has agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Agents may be required to make in respect thereof. The Agents
may be deemed to be "underwriters" within the meaning of the Securities Act.
The Company may offer an additional series of medium-term notes of the
Company outside the United States to prospective non-United States Holders.
Such other series of medium-term notes may have terms substantially similar to
the terms of the Notes offered hereby (but will constitute a separate series
for purposes of the Indenture), and will be offered in bearer form only. Such
other series of medium-term notes will reduce correspondingly the principal
amount of Notes which may be offered by this Prospectus Supplement and the
Prospectus. In addition, the amount of Notes which may be offered will be
reduced by the aggregate principal amount of any other securities and the
purchase price of any warrants issued by the Company inside or outside the
United States under the Registration Statement.
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Each of the Agents may from time to time purchase and sell Notes in the
secondary market, but is not obligated to do so, and there can be no assurance
that there will be a secondary market for the Notes or liquidity in the
secondary market if one develops. From time to time, each of the Agents may
make a market in the Notes.
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No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in
this Prospectus Supplement or the Prospectus in connection with the offer made
by this Prospectus Supplement and the Prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized. Neither the delivery of this Prospectus Supplement and the
Prospectus nor any sale made hereunder and thereunder shall under any
circumstances create an implication that there has been no change in the
affairs of the Company since the date hereof. This Prospectus Supplement and
the Prospectus do not constitute an offer or solicitation by anyone in any
state in which such offer or solicitation is not authorized or in which the
person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
____
Important Currency Exchange Information . . . . . . . . . . . . . . . S-2
Description of Medium-Term Notes Series 3 . . . . . . . . . . . . . . S-2
Foreign Currency Risks. . . . . . . . . . . . . . . . . . . . . . . . S-17
Material Federal Income Tax Consequences. . . . . . . . . . . . . . . S-19
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . S-32
Prospectus
Available Information . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Documents by Reference . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Ratio of Earnings to Fixed Charges. . . . . . . . . . . . . . . . . . 4
Description of the Debt Securities. . . . . . . . . . . . . . . . . . 4
Description of the Warrants . . . . . . . . . . . . . . . . . . . . . 12
Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Material Federal Income Tax Consequences. . . . . . . . . . . . . . . 22
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . 22
For Florida Residents . . . . . . . . . . . . . . . . . . . . . . . . 23
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
U.S. $3,000,000,000
[LOGO]
AT&T Capital Corporation
Medium-Term Notes Series 3
_______________
PROSPECTUS SUPPLEMENT
Dated October 19, 1995
_______________
Lehman Brothers
CS First Boston
Merrill Lynch & Co.
Salomon Brothers Inc
S-34
<PAGE>
<PAGE> 36
PROSPECTUS
$3,000,000,000
LOGO
AT&T CAPITAL CORPORATION
DEBT SECURITIES, DEBT WARRANTS, CURRENCY WARRANTS,
INDEX WARRANTS, AND INTEREST RATE WARRANTS
___________
AT&T Capital Corporation ("AT&T Capital" or the "Company"), directly,
through agents designated from time to time, or through dealers or
underwriters also to be designated, may offer and sell from time to time, one
or more series of (i) debt securities (the "Debt Securities") of the Company,
(ii) warrants to purchase Debt Securities (the "Debt Warrants"), (iii)
warrants entitling the holders thereof to receive from the Company, upon
exercise, an amount in cash equal to the cash value of the right to purchase
(the "Currency Call Warrants") or to sell (the "Currency Put Warrants" and,
together with the Currency Call Warrants, the "Currency Warrants") a certain
amount of one currency or currency unit for a certain amount of a different
currency or currency unit, all as shall be designated by the Company at the
time of offering, (iv) warrants entitling the holders thereof to receive from
the Company, upon exercise, an amount in cash determined by reference to
decreases (the "Index Put Warrants") or increases (the "Index Call Warrants")
in the level of a specified index (an "Index") which may be based on one or
more U.S. or foreign stocks, bonds or other securities, one or more U.S. or
foreign interest rates, one or more currencies or currency units, or any
combination of the foregoing, or determined by reference to the differential
between any two Indices (the "Index Spread Warrants" and, together with the
Index Put Warrants and the Index Call Warrants, the "Index Warrants") or (v)
warrants entitling the holders thereof to receive from the Company, upon
exercise, an amount in cash determined by reference to decreases (the
"Interest Rate Put Warrants") or increases (the "Interest Rate Call Warrants"
and, together with the Interest Rate Put Warrants, the "Interest Rate
Warrants" and, together with the Index Warrants, the Currency Warrants and the
Debt Warrants, the "Warrants") in the yield or closing price of one or more
specified debt instruments issued either by the United States government or by
a foreign government (the "Sovereign Debt Instrument"), in the interest rate
or interest rate swap rate established from time to time by one or more
specified financial institutions (the "Rate") or in any specified combination
of Sovereign Debt Instruments and/or Rates, for an aggregate offering price of
up to $3,000,000,000, or the equivalent thereof in one or more foreign
currencies or currency units (such amount being the aggregate proceeds to the
Company from all Debt Securities, Debt Warrants, Currency Warrants, Index
Warrants and Interest Rate Warrants (collectively, the "Securities") issued
and the aggregate exercise price of any Debt Securities issuable upon the
exercise of any Debt Warrants). Securities may be offered either together or
separately and in one or more series or amounts, at prices and on terms to be
determined at the time of sale. If this Prospectus is being delivered in
connection with the offering and sale of Debt Securities, the specific
designation, aggregate principal amount, the currency or currency unit for
which the Debt Securities may be purchased and in which the principal and
interest, if any, is payable, the rate (or method of calculation) and time of
payment of interest, if any, authorized denominations, maturity, any
redemption terms, and any other terms in connection with such offering and
sale are set forth in the accompanying Prospectus Supplement (the "Prospectus
Supplement"). If this Prospectus is being delivered in connection with the
offering and sale of Warrants, the specific designation and aggregate number
<PAGE>
<PAGE> 37
thereof, the currency or currency unit for which the Warrants may be purchased
and/or in which the cash settlement value or the exercise price, if
applicable, is payable, the method of calculation of the cash settlement
value, if applicable, the date on which such Warrants become exercisable and
the expiration date, provisions, if any, for the automatic exercise and/or
cancellation prior to the expiration date, and any other terms in connection
with such offering and sale will be set forth in the Prospectus Supplement.
The Company reserves the sole right to accept and, together with its agents
from time to time, to reject in whole or in part any proposed purchase of
Securities to be made directly or through agents. The Debt Securities and
Debt Warrants may be issued in registered or bearer form (in the case of Debt
Securities, with or without interest coupons) or both or, in the case of Debt
Securities, in uncertificated form. The Currency Warrants, Index Warrants and
Interest Rate Warrants will be issued in registered form only. In addition,
all or a portion of the Securities of a series may be issued in temporary or
permanent global form. Debt Securities in bearer form will be offered only
outside the United States to non-United States persons and to offices located
outside the United States of certain United States institutions. See
"Description of Debt Securities --Limitations on Issuance of Bearer Debt
Securities". The initial public offering price, the agent, dealer or
underwriter, if any, in connection with the offering and sale of the
Securities, a discussion of certain federal income taxation consequences to
holders of Securities and, if applicable, a discussion of certain risks
associated with an investment in Securities will be set forth in the
Prospectus Supplement.
THE SECURITIES ARE NOT GUARANTEED OR SUPPORTED IN ANY WAY BY AT&T CORP.
("AT&T").
___________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________
If an agent of the Company or a dealer or an underwriter is involved in
the sale of the Securities in respect of which this Prospectus is being
delivered, the agent's commission or dealer's or underwriter's discount is set
forth in, or may be calculated from, the Prospectus Supplement, and the net
proceeds to the Company from such sale will be the purchase price of such
Securities less such commission in the case of an agent, the purchase price of
such Securities less such discount in the case of a dealer or the public
offering price less such discount in the case of an underwriter, and less, in
each case, the other attributable issuance expenses. The aggregate proceeds to
the Company from all the Securities will be the purchase price of the
Securities sold, less the aggregate of agents' commissions and dealers' and
underwriters' discounts and other expenses of issuance and distribution. The
net proceeds to the Company from the sale of Securities offered pursuant to a
particular Prospectus Supplement are also set forth in such Prospectus
Supplement. See "Plan of Distribution" for possible indemnification
arrangements for the agents, dealers and underwriters.
___________
September 20, 1995
<PAGE>
<PAGE> 38
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
OR THE PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS AND PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS AND
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THOSE TO WHICH THEY RELATE.
___________
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement", which term shall include all amendments, exhibits and schedules
thereto), pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations promulgated thereunder, with respect to
the Securities offered hereby. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and to which reference is
hereby made.
The Company is subject to the information and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports and other information with the
Commission. The Registration Statement, as well as such reports and other
information filed by the Company with the Commission, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports
and other information concerning the Company are also available for inspection
at the offices of The New York Stock Exchange, Inc. (the "NYSE"), 20 Broad
Street, New York, New York 10005.
Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission, reference is made to such exhibit or
other filing for a more complete description of the matter involved, and each
such statement is qualified in its entirety by such reference.
___________
2
<PAGE>
<PAGE> 39
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the
Commission and are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1994; and
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein or in the
accompanying Prospectus Supplement modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
COPIES OF THE ABOVE DOCUMENTS MAY BE OBTAINED UPON REQUEST WITHOUT
CHARGE FROM AT&T CAPITAL CORPORATION, 44 WHIPPANY ROAD, MORRISTOWN, NJ
07962-1983 (TELEPHONE NUMBER 201-397-4444), ATTENTION OF THE TREASURY
DEPARTMENT.
3
<PAGE>
<PAGE> 40
THE COMPANY
General
AT&T Capital Corporation ("AT&T Capital" or the "Company") is one of the
largest equipment leasing and finance companies in the United States based on
the aggregate value of equipment leased or financed. The Company is a
full-service, diversified equipment leasing and finance company that operates
in the United States, Canada, Europe, the Asia/Pacific Region and Mexico.
The Company leases and finances equipment manufactured and distributed
by AT&T Corp. ("AT&T"), its affiliates and numerous other companies. The
Company's customers include many of the nation's largest industrial and
service companies, as well as many small and mid-size business customers and
federal, state and local governments and their agencies.
AT&T Capital, through its various subsidiaries, leases and finances
telecommunications equipment (such as private branch exchanges telephone
systems and voice processing units), general purpose equipment, (such as
office equipment and manufacturing equipment), data center equipment
(including mainframe computers and related equipment), other data processing
equipment (such as personal computers, retail point-of-sale computers,
automatic teller machines and bank transaction processing equipment) and
transportation equipment (primarily vehicles). The Company is the largest
lessor in the United States of telecommunications equipment. The Company also
provides inventory financing for equipment dealers and distributors, Small
Business Administration ("SBA") lending, and asset management and remarketing
services. In addition, the Company offers its customers certain equipment
rental and repair services and certain other asset administration services.
AT&T Capital offers a variety of lease and other finance instruments,
including leases where the Company is the owner of the equipment for tax or
accounting purposes and leases and installment sales arrangements where the
end-user is such owner. At June 30, 1995, 11.4% of the Company's net
investment in leases and finance receivables ("portfolio assets") consisted of
leases where the Company was the owner of the equipment for both tax and
accounting purposes. The Company's portfolio assets, which aggregated
approximately $8.3 billion at June 30, 1995, are diversified across various
types of financed equipment, with telecommunications equipment comprising
approximately 23% of such portfolio assets at such date. At June 30, 1995,
approximately 7% of the Company's portfolio assets were comprised of real
estate assets (including commercial loans collateralized by real estate
generated principally through the Company's small business lending activity,
(e.g., SBA and franchise lending)).
AT&T Capital's portfolio assets are diversified among a large customer
base as well as geographic regions. At June 30, 1995, the Company's 99
largest customers (after AT&T and its affiliates) accounted for approximately
20% of the Company's portfolio assets, and no single customer (with the
exception of AT&T and its affiliates) accounted for more than 1.0% of such
portfolio assets.
A substantial part of the Company's total assets, revenue and net income
are attributable to leasing and financing of AT&T equipment provided to
customers of AT&T and its affiliates. AT&T, its affiliates and employees are
also significant customers of the Company, primarily with respect to data
processing equipment and vehicles leased to them as end-users.
AT&T Capital has an experienced leadership team. Five of the senior
executive officers have been in management positions with the Company for the
last six years and, on a combined basis, have more than 90 years of experience
in the equipment leasing and finance industry.
4
<PAGE>
<PAGE> 41
AT&T Capital has approximately 2,800 employees, each of whom is referred
to within the Company as a "member". In general, the members function using a
team approach, with business conducted on a collaborative rather than
hierarchical basis. The Company believes that its members are skilled and
highly motivated and that the Company's ability to achieve its objectives
depends upon their efforts and competencies.
The Company was incorporated under the laws of Delaware in 1992 as the
successor to a business established in 1985. The Company's principal
executive offices are located at 44 Whippany Road, Morristown, New Jersey
07962, and its telephone number is (201) 397-3000.
Approximately 86% of the Company's outstanding common stock is owned by
AT&T.
USE OF PROCEEDS
The proceeds from the sale of the Securities will be applied to purchase
finance receivables from various AT&T affiliates and from unaffiliated
companies, to finance installment sale and lease agreements with respect to
direct financing programs provided to purchasers of AT&T and non-AT&T
equipment, and to repay debt of the Company and its subsidiaries. Ongoing
purchases of finance receivables and installment sale and lease agreements,
direct financing programs and any future financing arrangements will be
financed from various sources, including the issuance of commercial paper and
the sale of Securities. The amount and timing of the sales of the Securities
will depend on the timing of asset purchases, market conditions and the
availability of other funds to the Company.
The debt to be repaid with the proceeds from such sales consists
generally of medium-term notes and commercial paper. Such debt has various
maturities and bears interest at various fixed rates. At June 30, 1995, the
aggregate principal amount of the Company's outstanding medium-term notes was
approximately $4.1 billion, and the Company had approximately $1.5 billion in
principal amount of commercial paper outstanding at such date. The weighted
average interest rate of such medium-term notes and commercial paper for the
six-month period ended June 30, 1995 was approximately 6.52% and 6.10%,
respectively. The net proceeds of all the outstanding medium-term notes and
commercial paper issued or incurred by the Company within the last year to be
repaid with net proceeds from the sale of Securities have been used by the
Company as working capital for general corporate purposes or to repay
previously outstanding commercial paper or medium-term notes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to
fixed charges (1) for the Company for the years ended December 31, 1990
through 1994, and for the six months ended June 30, 1994 and 1995.
June 30, December 31,
(Unaudited) (Unaudited)
________ ___________
1995 1994 1994 1993 1992 1991 1990
____ ____ ____ ____ ____ ____ ____
1.45 1.47 1.62 1.57 1.44 1.29 1.26
___________
(1)Earnings before income taxes and cumulative effect of accounting change
plus the sum of interest on indebtedness, preferred stock dividends and the
portion of rentals representative of the interest factor divided by the sum of
interest on indebtedness, preferred stock dividends and the portion of rentals
representative of the interest factor. A portion of the Company's
indebtedness to AT&T does not bear interest.
5
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<PAGE> 42
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities are to be issued under the Indenture dated as of
July 1, 1993, as amended (the "Indenture"), between the Company and Chemical
Bank, as Trustee (the "Trustee"). A copy of the Indenture is filed as an
exhibit to the Registration Statement. The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions therein of certain terms. Section
references are to sections of the Indenture, and wherever particular
provisions are referred to, such provisions are incorporated by reference as
part of the statement made, and the statement is qualified in its entirety by
such reference.
The Debt Securities are not guaranteed or supported in any way by AT&T.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provides that the Debt Securities
may be issued from time to time in one or more series. Reference is made to
the Prospectus Supplement which accompanies this Prospectus for a description
of the Debt Securities being offered thereby including:
(1) the title of the series of the Debt Securities;
(2) the aggregate principal amount of such Debt Securities;
(3) the percentage of their principal amount at which such Debt
Securities will be sold;
(4) the date(s) on which such Debt Securities will mature, or whether
such securities are payable on demand;
(5) the rate(s) per annum at which such Debt Securities will bear
interest, if any, or the method of calculating such rate or rates of interest;
(6) the times at which such interest, if any, will be payable;
(7) the terms for redemption, early repayment or amortization, if any;
(8) the denominations in which such Debt Securities are authorized to
be issued;
(9) the coin or currency in which the Debt Securities are denominated,
which may be a composite currency such as the European Currency Unit;
(10) any provision permitting payments of the principal of or any
premium or interest on the Debt Securities in a coin or currency other than
the currency in which the Debt Securities are denominated, including a
non-U.S. dollar denominated currency;
(11) the manner in which the amount of payments of principal of and any
premium or interest on the Debt Securities is to be determined if such
determination is to be made with reference to one or more indices (which will
be based on one or more U.S. or foreign stocks, bonds or other securities, one
or more U.S. or foreign interest rates, one or more commodities, or one or
more equipment leases, third-party loans, tax receipts, real property values,
SWAP receivables, reinsurance contracts, pooled receivables, or any
combination of the foregoing);
(12) whether such Debt Securities are issuable in registered form
("registered Debt Securities") or bearer form (with or without interest
coupons) ("bearer Debt Securities") or both, and whether such Debt Securities
shall be uncertificated;
(13) whether any series of Debt Securities will be represented by one
or more temporary or permanent global Debt Securities ("global Debt
6
<PAGE>
<PAGE> 43
Securities") and, if so, whether any such global Debt Securities will be in
registered or bearer form, the identity of the depository for such global Debt
Security or Securities and the method of transferring beneficial interests in
such global Debt Security or Securities;
(14) if a temporary global Debt Security is to be issued with respect
to a series, the terms upon which interests in such temporary global Debt
Security may be exchanged for interests in a permanent global Debt Security or
for definitive Debt Securities of the series and the terms upon which interest
in a permanent global Debt Security, if any, may be exchanged for definitive
Debt Securities of the series;
(15) information with respect to book-entry procedures, if any;
(16) whether and under what circumstances the Company will pay
additional amounts on any Debt Securities held by a person who is not a U.S.
person in respect of taxes or similar charges withheld and, if so, whether the
Company will have the option to redeem such Debt Securities rather than pay
such additional amounts; and
(17) any other terms, including any terms which may be required by or
advisable under United States laws and regulations or advisable in connection
with the marketing of the Debt Securities of such series, which will not be
inconsistent with the provisions of the Indenture.
Debt Securities of any series may be registered Debt Securities or
bearer Debt Securities or both as specified in the terms of the series.
Additionally, Debt Securities of any series may be represented by a single
global Debt Security registered in the name of a depository's nominee and, if
so represented, beneficial interests in such global Debt Security will be
shown on, and transfers thereof will be effected only through, records
maintained by a designated depository and its participants. Debt Securities of
any series may also be uncertificated. Unless otherwise indicated in the
Prospectus Supplement, no bearer Debt Securities (including Debt Securities in
permanent global bearer form) will be offered, sold, resold or delivered to
any United States person (as defined under "Limitations on Issuance of Bearer
Debt Securities" below) in connection with their original issuance or their
exchange for a portion of a temporary or permanent global Debt Security. For
purposes of this Prospectus, "U.S. person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or of any state thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States Federal income tax purposes
regardless of its source.
Unless otherwise indicated in the Prospectus Supplement, principal and
interest, if any, will be payable at the office of one or more paying agents
as specified in the Prospectus Supplement; provided that payment of interest
may be made at the option of the Company by check mailed to the address of the
person entitled thereto as it appears in the register of the Debt Securities.
To the extent set forth in the Prospectus Supplement, except in special
circumstances set forth in the Indenture, interest, if any, on bearer Debt
Securities will be payable only against presentation and surrender of the
coupons for the interest installments evidenced thereby as they mature at the
office of a paying agent of the Company located outside of the United States
and its possessions. The Company will maintain one or more such agents for a
period of two years after the principal of such bearer Debt Securities has
become due and payable. During any period thereafter for which it is necessary
in order to conform to United States tax laws or regulations, the Company will
maintain a paying agent outside of the United States and its possessions to
which the bearer Debt Securities and coupons related thereto may be presented
for payment and will provide the necessary funds therefor to such paying agent
7
<PAGE>
<PAGE> 44
upon reasonable notice. No payment with respect to any bearer Debt Security
will be made at any office or agency of the Company in the United States or by
check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payment of principal of (and premium, if any) and interest on
bearer Debt Securities denominated and payable in U.S. dollars will be made at
the office of the Company's Paying Agent in the Borough of Manhattan, The City
of New York if, and only if, payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
In connection with any sale during the "restricted period" as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations
(generally, the first 40 days after the closing date and, with respect to
unsold allotments, until sold), no bearer Debt Security shall be mailed or
otherwise delivered to any location in the United States (as defined under
"Limitations on Issuance of Bearer Debt Securities" below). A bearer Debt
Security in definitive form (including interests in a permanent global
Security) may be delivered only if the Person entitled to receive such bearer
Debt Security furnishes written certification, in the form required by the
applicable Indenture, to the effect that such Bearer Debt Security is not
owned by or on behalf of a United States person (as defined under "Limitations
on Issuance of Bearer Debt Securities" below), or, if a beneficial interest in
such Bearer Debt Security is owned by or on behalf of a United States person,
that such United States person (i) acquired and holds the bearer Debt Security
through a foreign branch of a United States financial institution, (ii) is a
foreign branch of a United States financial institution purchasing for its own
account or resale (and in either case, (i) or (ii), such financial institution
agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder) or (iii) is a financial institution purchasing for
resale during the restricted period only to non-United States persons outside
the United States. See "Limitations on Issuance of Bearer Securities" below
and "Global Securities--Bearer Debt Securities".
Bearer Debt Securities and the coupons related thereto will be
transferable by delivery. Unless otherwise indicated in the Prospectus
Supplement, registered Debt Securities will be transferable at the office of
one or more transfer or paying agents as specified in the Prospectus
Supplement.
The Debt Securities will be unsecured obligations of the Company and
will rank pari passu (equal in right of payment) with all other unsecured and
unsubordinated indebtedness of the Company. At June 30, 1995, the Company's
consolidated indebtedness (all of which is unsecured and unsubordinated) was
approximately $7.7 billion. The Debt Securities will, however, be effectively
subordinate (with respect to the assets of the Company's subsidiaries) to the
indebtedness and other liabilities of such subsidiaries. At June 30, 1995,
such indebtedness and other liabilities aggregated approximately $2.0 billion.
The Company has no current intention or plan to increase the amount of such
indebtedness in the future, other than in connection with the growth of the
Company's business.
Unless otherwise indicated in the Prospectus Supplement, the Debt
Securities will be issued only in denominations that are integral multiples of
$1,000, or in the case of Debt Securities denominated in a foreign currency or
currency unit, 1,000 units of such currency or currency unit. No service
charge will be made for any transfer or exchange of such Debt Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Debt Securities may be issued as original issue discount Debt Securities
(bearing no interest or interest at a rate which at the time of issuance is
below market rates) to be sold at a substantial discount below their stated
principal amount. United States federal income tax consequences and other
special considerations applicable to any such original issue discount Debt
Securities will be described in the Prospectus Supplement relating thereto.
Registered Debt Securities may be exchanged for an equal aggregate
principal amount of registered Debt Securities of the same series, date of
8
<PAGE>
<PAGE> 45
maturity, interest rate and original issue date in such authorized
denominations as may be requested upon surrender of the registered Debt
Securities to a transfer agent of the Company as specified in the Prospectus
Supplement and upon fulfillment of all other requirements of such agent.
To the extent permitted by the terms of a series of Debt Securities
authorized to be issued in registered form and bearer form, bearer Debt
Securities may be exchanged for an equal aggregate principal amount of
registered or bearer Debt Securities of the same series, date of maturity,
interest rate and original issue date in such authorized denominations as may
be requested upon delivery of the bearer Debt Securities with all unpaid
coupons relating thereto to a transfer or paying agent of the Company as
specified in the Prospectus Supplement and upon fulfillment of all other
requirements of such agent. Registered Debt Securities will not be
exchangeable for bearer Debt Securities.
COVENANTS
Set forth below is a description of the principal covenants of the
Company contained in the Indenture. The Indenture does not restrict the
Company, other than as set forth below, from engaging in any highly leveraged
transaction, reorganization, restructuring, merger or similar transaction, or
from incurring additional indebtedness or causing its subsidiaries to incur
additional indebtedness, any of which transactions could have a material
adverse effect on the holders of the Debt Securities.
Consolidation, Merger, Sale or Conveyance of Assets of the
Company. Pursuant to the Indenture, the Company covenants that it will not
merge or consolidate with any other corporation or sell or convey all or
substantially all its assets to any person (other than such a sale or
conveyance to a Subsidiary (as defined below) of the Company or any successor
thereto (such a sale or conveyance being called an "Asset Drop-Down")), unless
(1) either the Company is the continuing corporation or the successor
corporation or the person which acquires by sale or conveyance substantially
all the assets of the Company (if other than the Company) is a corporation
organized under the laws of the United States of America or any state thereof
and expressly assumes the due and punctual payment of the principal of,
premium, if any, and interest, if any, on all the Debt Securities and the due
and punctual performance and observance of all the covenants and conditions of
the Indenture to be performed or observed by the Company, by supplemental
indenture in form satisfactory to the Trustee, executed and delivered to the
Trustee by such corporation, and (2) the Company or such successor
corporation, as the case may be, is not, immediately after such merger or
consolidation, or such sale or conveyance, in default in the performance of
any such covenant or condition. In the case of any such consolidation, merger,
sale or conveyance, and following such an assumption by the successor
corporation, such successor corporation will succeed to and be substituted for
the Company, with the same effect as if it had been named in the Indenture,
and, in the case of any such sale or conveyance (other than a conveyance by
way of lease), the Company will be released and discharged from all
obligations and covenants under the Indenture and the Securities. In the event
of any Asset Drop-Down after the date of the Indenture, any subsequent sale or
conveyance of assets by the Subsidiary of the Company to which assets were
transferred in such Asset Drop-Down (the "Drop-Down Subsidiary") will be
deemed to be a sale or conveyance of assets by the Company for purposes of the
covenant described in this paragraph. (Sections 5.01 and 5.02)
The term "all or substantially all", which appears in the foregoing
covenant, is not defined in the Indenture, and it does not have a precise
established definition under applicable law. The application of the covenant
may depend on the facts and circumstances of a particular transaction,
including the qualitative as well as the quantitative aspects of such
transaction. Accordingly, there may be uncertainty in connection with any
particular transaction as to whether a sale or conveyance of all or
substantially all of the assets of the Company has occurred and thus as to
whether this covenant has been complied with. Because New York law governs
the Indenture, New York law will govern the interpretation of such term.
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Limitations on Incurrence of Secured Debt. The Company will not, nor
will it permit any Restricted Subsidiary (as defined below) to, incur, issue,
assume or guarantee any indebtedness for money borrowed ("debt") secured by
any pledge, mortgage, security interest or lien ("lien") on any property or
assets of the Company or any Restricted Subsidiary, or on any shares of stock
or debt of any Restricted Subsidiary, without effectively providing that the
principal of, premium, if any, and interest on the Debt Securities of each
series (together with, if the Company so determines, any other debt of the
Company or such Restricted Subsidiary, which is not subordinated to the Debt
Securities of each series) shall be secured equally and ratably with (or prior
to) such debt, so long as any such debt shall be so secured, unless, after
giving effect thereto, the aggregate amount of all such secured debt of the
Company and its Restricted Subsidiaries would not exceed 10% of the
Consolidated Net Tangible Assets (as defined below) of the Company and its
Restricted Subsidiaries; provided, however, that (i) any recourse provided by
the Company or any Restricted Subsidiary in connection with any sale, transfer
or other disposition by the Company or any Restricted Subsidiary of Accounts
Receivable (as defined below) or of any Restricted Subsidiary substantially
all the assets of which are Accounts Receivable which constitutes a "sale"
under generally accepted accounting principles (as in effect at the time of
such sale, transfer or other disposition) shall not, in any event, constitute
debt and (ii) no Asset Drop-Down shall, in any event, constitute a lien; and
provided further that neither the satisfaction and discharge of any debt
pursuant to the Indenture or pursuant to any similar provision in any other
indenture or instrument governing any debt, nor the defeasance of any debt
pursuant to the Indenture or pursuant to any similar provision in any other
indenture or instrument governing any debt, shall be deemed the incurrence,
issue, assumption or guarantee of debt secured by a lien for purposes of this
provision. Notwithstanding the foregoing, this restriction does not apply to:
(1) liens on property of, or on any shares of stock or debt of, any
corporation existing at the time such corporation becomes a Restricted
Subsidiary; (2) liens on property, shares of stock, other equity interests, or
debt existing at the time of acquisition or repossession thereof by the
Company or any Restricted Subsidiary; (3) liens on physical property (or any
Accounts Receivable arising in connection with the lease thereof), shares of
stock, other equity interests, or debt acquired (or, in the case of physical
property, constructed) after the date of the Indenture by the Company or any
Restricted Subsidiary, which liens are created prior to, at the time of, or
within one year after such acquisition (or, in the case of physical property,
the completion of such construction or commencement of commercial operation of
such property, whichever is later) to secure any debt issued, incurred,
assumed or guaranteed prior to, at the time of, or within one year after such
acquisition (or such completion or commencement, whichever is later) or to
secure any other debt issued, incurred, assumed or guaranteed at any time
thereafter for the purpose of refinancing all or any part of such debt;
(4) liens on Accounts Receivable of the Company or any Restricted Subsidiary
arising from or in connection with transactions entered into by the Company or
such Restricted Subsidiary after the date of the Indenture or on Accounts
Receivable acquired by the Company or such Restricted Subsidiary after such
date from others, which liens are created prior to, at the time of, or within
one year after such Accounts Receivable arise or are acquired or, if later,
the completion of the delivery or installation of the equipment or goods or
the rendering of the services or the advancement or loaning of funds relating
thereto (i) as a result of any guarantee, repurchase or other contingent
(direct or indirect) or recourse obligation of the Company or such Restricted
Subsidiary in connection with the discounting, sale, assignment, transfer or
other disposition of such Accounts Receivable or any interest therein, or
(ii) to secure or provide for the payment of all or any part of the investment
of the Company or such Restricted Subsidiary in any such Accounts Receivable
(whether or not such Accounts Receivable are the Accounts Receivable on which
such liens are created) or the purchase price thereof or to secure any debt
(including without limitation Non-Recourse Debt (as defined below)) issued,
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incurred, assumed or guaranteed for the purpose of financing or refinancing
all or any part of such investment or purchase price; (5) liens in favor of
the Company or any Restricted Subsidiary; (6) liens in favor of the United
States of America or any State thereof or the District of Columbia, or any
agency, department or other instrumentality thereof, to secure progress,
advance or other payments pursuant to any contract or provision of any
statute; (7) liens securing the performance of letters of credit, bids,
tenders, sales contracts, purchase agreements, leases, surety and performance
bonds, and other similar obligations not incurred in connection with the
borrowing of money; (8) liens to secure Non-Recourse Debt in connection with
the Company or any Restricted Subsidiary engaging in any leveraged or
single-investor or other lease transactions, whether (in the case of liens on
or relating to leases or groups of leases or the particular properties subject
thereto) such liens be on the particular properties subject to any leases
involved in any of such transactions and/or the rental or other payments or
rights under such leases or, in the case of any group of related or unrelated
leases, on the properties subject to the leases comprising such group and/or
on the rental or other payments or rights under such leases, or on any direct
or indirect interest therein, and whether (in any case) (i) such liens be
created prior to, at the time of, or at any time after the entering into of
such lease transactions and/or (ii) such leases be in existence prior to, or
be entered into by the Company or such Restricted Subsidiary at the time of or
at any time after, the purchase or other acquisition by the Company or such
Restricted Subsidiary of the properties subject to such leases; and (9) any
extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any of the foregoing; provided,
however, that any such extension, renewal or replacement shall be limited to
all or a part of the property or assets which secured the lien so extended,
renewed or replaced (plus any improvements on such property). (Section 4.03)
"Accounts Receivable" means (i) any accounts receivable (whether or not
earned by performance), chattel paper, instruments, documents, general
intangibles, trade acceptances, any other rights to receive installment,
rental or other payments for, or relating to amounts due or to become due on
account of equipment or goods sold or leased or to be sold or leased or
services rendered or to be rendered or funds advanced or loaned or to be
advanced or loaned and other rights to payment of any kind, (ii) any proceeds
of any of the foregoing and (iii) any interest in any property or asset of any
kind (whether of the obligor under such Accounts Receivable or any other
person) securing the payment of any item listed in clause (i) hereof. (Section
1.01)
"Consolidated Net Tangible Assets" means, at the date of any
determination, the total assets appearing on the consolidated balance sheet of
the Company and its Restricted Subsidiaries as at the end of the most recent
fiscal quarter of the Company for which such balance sheet is available,
prepared in accordance with generally accepted accounting principles, less (a)
all current liabilities (obligations whose liquidation is reasonably expected
to occur within twelve months), (b) investments in and advances to
Subsidiaries other than Restricted Subsidiaries or other entities accounted
for on the equity method of accounting and (c) Intangible Assets.
(Section 1.01)
"Intangible Assets" means the value (net of any applicable reserves), as
shown on or reflected in the Company's balance sheet, of: (i) all trade names,
trademarks, licenses, patents, copyrights and goodwill; (ii) organization and
development costs; (iii) deferred charges (other than prepaid items such as
insurance, taxes, interest, commissions, rents and similar items and tangible
assets being amortized); and (iv) unamortized debt discount and expense, less
unamortized premium. (Section 1.01)
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"Non-Recourse Debt" of the Company or any Restricted Subsidiary means
any indebtedness for borrowed money of the Company or such Restricted
Subsidiary, as the case may be, which is secured by any lien on, or payable
solely from the income and proceeds of, any property (including, without
limiting the generality of such term, any intangible assets), shares of stock,
other equity interests or debt of the Company or such Restricted Subsidiary,
as the case may be, and which is not a general obligation of the Company or
such Restricted Subsidiary, as the case may be. (Section 1.01)
"Restricted Subsidiary" means each Subsidiary of the Company organized
under the laws of any State of the United States or the District of Columbia,
no substantial portion of the business of which is carried on outside the
United States; provided that each Drop-Down Subsidiary will be a Restricted
Subsidiary. (Section 1.01)
"Subsidiary" means any corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company and/or
by one or more other Subsidiaries. For purposes of such definition, "voting
stock" means stock ordinarily having voting power for the election of
directors, whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency. (Section 1.01)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein in
respect of any series of Debt Securities shall have occurred and be
continuing, either the Trustee or the holders of not less than 25% in
aggregate principal amount of the outstanding Debt Securities of such series
may declare the principal of all the securities of such series to be due and
payable. (Section 6.01)
Events of Default in respect of the Debt Securities of any series are
defined in the Indenture as being: default for 90 days in payment of any
interest installment when due; unless otherwise specified in the Prospectus
Supplement with respect to the Debt Securities of any series, default in
payment of principal of or premium, if any, on Debt Securities of such series
when due; default for 90 days after written notice to the Company by the
Trustee or by the holders of not less than 25% in aggregate principal amount
of the outstanding Debt Securities of such series in the performance of any
agreement in the Debt Securities or Indenture in respect of such series; and
certain events of bankruptcy, insolvency and reorganization. (Section 6.01)
The Indenture provides that the Company will, within 120 days after the
close of each fiscal year, commencing with the first fiscal year following the
issuance of any series of Debt Securities, file with the Trustee a certificate
stating whether or not the Company has complied with all conditions and
covenants on its part contained in the Indenture and, if not, specifying each
default (without regard to any grace period or requirement of notice under the
Indenture) and the nature thereof. (Section 4.04)
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Debt Securities, give to
the holders of such series notice of all defaults known to it; provided that,
except in the case of default in payment on any of the Debt Securities of such
series, the Trustee will be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of the
holders of such series. The term "default" for the purpose of this provision
means any event which is, or after notice or passage of time or both would be,
an Event of Default. (Section 7.05)
The Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default in respect of any series of
Debt Securities to act with the required standard of care, to refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it. (Section 7.01)
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The Indenture provides that the holders of a majority in aggregate
principal amount of the outstanding securities of any series affected (with
each series voting as a separate class) may direct the time, method and place
of conducting proceedings for remedies available to the Trustee, or
exercising any trust or power conferred on the Trustee, in respect of such
series. (Section 6.06)
In certain cases, the holders of a majority in principal amount of the
outstanding Debt Securities of a series may on behalf of the holders of all
Debt Securities of such series waive any past default or Event of Default, or
compliance with certain provisions of the Indenture, except among other things
a default in payment of the principal of, premium, if any, or interest on, any
of the Debt Securities of such series. (Sections 6.01 and 6.06)
DISCHARGE AND DEFEASANCE
Under terms satisfactory to the Trustee, the Company may discharge
certain obligations to holders of any series of Debt Securities issued under
the Indenture which have not already been delivered to the Trustee for
cancellation and which have either become due and payable or are by their
terms due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee as trust funds an amount in
cash sufficient to pay at maturity (or upon redemption) the principal of,
premium, if any, and interest on such Debt Securities. (Section 8.01)
In the case of any series of Debt Securities with respect to which the
exact amounts (including the currency of payment) of principal of and interest
due on such series can be determined at the time of making the deposit
referred to below (which include Debt Securities with a floating or variable
rate of interest that cannot exceed a specified or determinable maximum rate),
the Company at its option may also (i) discharge any and all of its
obligations to holders of such series of Debt Securities ("defeasance") on the
91st day after the conditions set forth below have been satisfied, but may not
thereby avoid its duty to register the transfer or exchange of such series of
Debt Securities, to replace any temporary, mutilated, destroyed, lost or
stolen Debt Securities of such series or to maintain an office or agency in
respect of such series of Debt Securities, or (ii) be released with respect to
such series of Debt Securities from the obligations imposed by the covenants
described under "Covenants" above ("covenant defeasance"). Defeasance and
covenant defeasance may be effected only if, among other things, (i) the
Company irrevocably deposits with the Trustee as trust funds (a) money in an
amount, (b) in the case of Debt Securities payable only in U.S. Dollars, U.S.
Governmental Obligations (as defined in the Indenture) which through the
payment of interest and principal in respect thereof will provide money in an
amount, or (c) a combination of (a) and (b), certified by a nationally
recognized firm of independent public accountants to be sufficient to pay each
installment of principal of and interest on all outstanding Debt Securities of
such series on the dates such installments of principal and interest are due;
and (ii) the Company delivers to the Trustee an opinion of independent counsel
to the effect that the holders of such series of Debt Securities will not
recognize income, gain or loss for United States Federal income tax purposes
as a result of such defeasance or covenant defeasance and will be subject to
United States Federal income tax on the same amount and in the same manner and
at the same time as would have been the case if such defeasance or covenant
defeasance had not occurred (which opinion may include or be based on a ruling
to that effect received from or published by the Internal Revenue Service).
(Section 8.02(a))
In addition, in the event (i) AT&T or any successor thereto shall
directly and unconditionally guarantee the payment in full, as and when the
same shall become due and payable, of the principal of, premium (if any) and
interest on the Debt Securities of any series and (ii) at least two nationally
recognized statistical rating agencies that have rated the Debt Securities of
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such series prior to such guarantee (or, if such series has not been so rated,
the Debt Securities of another series that has been so rated which is so
guaranteed substantially simultaneously with and on substantially identical
terms as such series) confirm in writing that their ratings for such Debt
Securities of such series (or for such Debt Securities of such other series,
as the case may be) in effect immediately prior to such guarantee or such
simultaneous guarantee, as the case may be, will not be downgraded as a result
of such guarantee or such simultaneous guarantee, as the case may be (and the
non-compliance by the Company with the covenants described under "Covenants"
above), then the Company shall cease to be under any obligation to comply with
any term, provision or condition of the covenants described under "Covenants"
above. (Section 8.02(b))
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in principal amount of
the outstanding Debt Securities of each series affected thereby (with such
series voting as a separate class), to execute supplemental indentures adding
any provisions to or changing or eliminating any of the provisions of the
Indenture or modifying the rights of the holders of Debt Securities of each
such series, except that no such supplemental indenture may, without the
consent of each holder affected, among other things, change the maturity of
any Debt Securities, or change the principal amount thereof, or any premium
thereon, or change the rate or change the time of payment of interest thereon,
make any Debt Security payable in money other than that stated in the Debt
Security, or reduce the aforesaid percentage of outstanding Debt Securities
required to approve any such supplemental indenture. (Section 9.02)
CONCERNING THE TRUSTEE
The Company may from time to time maintain lines of credit, and have
other customary banking relationships, with Chemical Bank, the Trustee under
the Indenture. In addition, Chemical Bank is the trustee under the Indentures
dated as of April 9, 1990, and as of June 1, 1992, each as amended, among the
Company, AT&T, AT&T Capital Holdings, Inc., a wholly-owned subsidiary of AT&T
and Chemical Bank, pursuant to which, the Company assumed and AT&T guaranteed
certain medium-term notes issued by AT&T Capital Holdings, Inc. At the date
of this Prospectus the aggregate outstanding principal amount of such
medium-term notes was approximately $.5 billion.
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
In compliance with United States federal tax laws and regulations,
bearer Debt Securities may not be offered or sold during the restricted period
(as defined under "General" above), or delivered in definitive form in
connection with a sale during the restricted period, in the United States or
to United States persons other than to (a) the United States office of (i) an
international organization (as defined in Section 7701 (a)(18) of the Code),
(ii) a foreign central bank (as defined in Section 895 of the Code), or (iii)
any underwriter, agent, or dealer offering or selling bearer Debt Securities
during the restricted period (a "Distributor") pursuant to a written contract
with the issuer or with another Distributor, that purchases bearer Debt
Securities for resale or for its own account and agrees to comply with the
requirements of Section 165 (j)(3)(A), (B), or (C) of the Code, or (b) the
foreign branch of a United States financial institution purchasing for its own
account or for resale, which institution agrees to comply with the
requirements of Section 165 (j)(3)(A), (B), or (C) of the Code. In addition,
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a sale of a bearer Debt Security may be made during the restricted period to a
United States person who acquired and holds the bearer Debt Security on the
Certification Date through a foreign branch of a United States financial
institution that agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Code. Any Distributor (including an affiliate
of a Distributor) offering or selling bearer Debt Securities during the
restricted period must agree not to offer or sell bearer Debt Securities in
the United States or to United States persons (except as discussed above) and
must employ procedures reasonably designed to ensure that its employees or
agents directly engaged in selling bearer Debt Securities are aware of these
restrictions.
Bearer Debt Securities and their interest coupons will bear the following
legend: "Any United States person who holds this obligation will be subject
to limitations under the United States income tax laws, including the
limitations provided in Section 165(j) and 1287(a) of the Internal Revenue
Code."
Purchasers of bearer Debt Securities may be affected by certain
limitations under United States tax laws. See the applicable Prospectus
Supplement for a summary of material U.S. federal income tax consequences to
United States persons investing in bearer Debt Securities.
As used herein, "United States person" means a citizen or resident of
the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States and an estate or trust the
income of which is subject to United States federal income taxation regardless
of its source, and "United States" means the United States of America
(including the States and the District of Columbia) and its possessions
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
DESCRIPTION OF THE WARRANTS
The Debt Warrants, Currency Warrants, Index Warrants and Interest Rate
Warrants are to be issued under separate warrant agreements (each a "Warrant
Agreement" and respectively a "Debt Warrant Agreement", a "Currency Warrant
Agreement", an Index Warrant Agreement" and an "Interest Rate Warrant
Agreement") to be entered into between the Company and one or more banks or
trust companies, as warrant agent (each a "Warrant Agent" and respectively a
"Debt Warrant Agent", a "Currency Warrant Agent", an "Index Warrant Agent" and
an "Interest Rate Warrant Agent"), all as shall be set forth in the Prospectus
Supplement relating to the Warrants being offered thereby. A form of each
type of Warrant Agreement, including a form of warrant certificate
representing each type of Warrant (each a "Warrant Certificate" and
respectively a "Debt Warrant Certificate", a "Currency Warrant Certificate",
an "Index Warrant Certificate" and an "Interest Rate Warrant Certificate"),
reflecting the alternative provisions that may be included in the Warrant
Agreements to be entered into with respect to particular offerings of
Warrants, are herein incorporated by reference to exhibits to the Registration
Statement of which this Prospectus is a part. The descriptions contained
herein of the Warrant Agreements and the Warrant Certificates and summaries of
certain provisions of the Warrant Agreements and the Warrant Certificates do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the applicable Warrant
Agreements and the Warrant Certificates, including the definitions therein of
certain terms not otherwise defined in this Prospectus. Wherever particular
sections of, or terms defined in, the Warrant Agreements are referred to, such
sections or defined terms are incorporated herein by reference.
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The particular terms of each issue of Warrants, as well as any
modifications or additions to the general terms of the applicable Warrant
Agreement or Warrant Certificate, will be described in the Prospectus
Supplement relating to such Warrants. Accordingly, for a description of the
terms of a particular issue of Warrants, reference must be made to the
Prospectus Supplement relating thereto and to the descriptions set forth
below.
DEBT WARRANTS
The Company may issue, together with Debt Securities, Currency Warrants,
Index Warrants or Interest Rate Warrants, or separately, Debt Warrants for the
purchase of Debt Securities. If any of the Debt Warrants are sold for foreign
currencies or foreign currency units or if any series of Debt Warrants is
exercisable in foreign currencies or foreign currency units, the restrictions,
elections, tax consequences, specific terms and other information with respect
to such issue of Debt Warrants and such currencies or currency units will be
set forth in the Prospectus Supplement relating thereto.
If so specified in the Prospectus Supplement, the Debt Warrants may, in
certain circumstances, be cancelled by the Company prior to their expiration
date and the holders thereof will be entitled to receive only the applicable
Cancellation Amount. The Cancellation Amount may be either a fixed amount or
an amount that varies during the term of the Debt Warrants in accordance with
a schedule or formula.
General
The Prospectus Supplement will describe the terms of any Debt Warrants
offered thereby, the Debt Warrant Agreement relating to such Debt Warrants and
the Debt Warrant Certificates representing such Debt Warrants, including the
following: (1) the title of such Debt Warrants; (2) the aggregate amount of
such Debt Warrants; (3) the initial offering price of such Debt Warrants; (4)
the exercise price; (5) the currency or currency unit in which the initial
offering price and/or the exercise price of such Debt Warrants is payable; (6)
whether the Debt Warrants are to be issuable in registered or bearer form or
both, and if in bearer form whether such Debt Warrants may be exchanged for
Debt Warrants in registered form and the circumstances and places for such
exchange, if permitted; (7) if applicable, the title and terms of related Debt
Securities with which such Debt Warrants are issued, the number of such Debt
Warrants issued with each such Debt Security and the date, if any, on and
after which such Debt Warrants and such Debt Securities will be separately
transferable; (8) the title, aggregate principal amount and terms of the Debt
Securities purchasable upon exercise of all such Debt Warrants; (9) the
principal amount of Debt Securities purchasable upon exercise of each Debt
Warrant and the price at which such principal amount of Debt Securities may be
purchased upon such exercise; (10) the date on which the right to exercise
such Debt Warrants shall commence and the date (the "Debt Warrant Expiration
Date") on which such right shall expire; (11) any minimum number of Debt
Warrants which must be exercised at any one time, other than upon automatic
exercise; (12) the maximum number, if any, of such Debt Warrants that may,
subject to election by the Company, be exercised by all owners (or by any
person or entity) on any day; (13) any provisions for the automatic exercise
of such Debt Warrants; (14) whether and under which circumstances such Debt
Warrants may be cancelled by the Company prior to expiration; (15) any other
procedures and conditions relating to the exercise of such Debt Warrants; (16)
the identity of the Debt Warrant Agent; (17) any national securities exchange
on which such Debt Warrants will be listed; (18) provisions, if any, for
issuing such Debt Warrants in certificated form; (19) if applicable, a
discussion of certain United States federal income tax, accounting or other
special considerations applicable thereto; and (20) any other terms of the
Debt Warrants.
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Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and, if in registered form, may be
presented for registration of transfer and Debt Warrants may be exercised at
the corporate trust office of the Debt Warrant Agent or any other office
indicated in the Prospectus Supplement relating thereto (Section 3.1). Prior
to the exercise of Debt Warrants, holders of Debt Warrants will not be
entitled to payments of principal of (or premium, if any) or interest, if any,
on the Debt Securities purchasable upon such exercise, or to enforce any of
the covenants in the Indenture (Section 4.1).
Exercise Of Debt Warrants
Unless otherwise provided in the Prospectus Supplement, each Debt
Warrant will entitle the holder thereof to purchase for cash such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the Prospectus Supplement
relating to the Debt Warrants offered thereby (Sections 2.1). Debt Warrants
may be exercised at any time up to the close of business on the Debt Warrant
Expiration Date specified in the Prospectus Supplement relating to the Debt
Warrants offered thereby. After the close of business on the Debt Warrant
Expiration Date (or such later date to which such Debt Warrant Expiration Date
may be extended by the Company), unexercised Debt Warrants will become void
(Section 2.2).
Debt Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Debt Warrants offered thereby. Upon receipt of payment and
the Debt Warrant Certificate properly completed and duly executed at the
corporate trust office of the Debt Warrant Agent or any other office indicated
in the Prospectus Supplement the Company will, as soon as practicable, forward
to the person entitled thereto the Debt Securities purchasable upon such
exercise. If fewer than all the Debt Warrants represented by such Debt
Warrant Certificate are exercised, a new Debt Warrant Certificate will be
issued for the remaining amount of Debt Warrants (Section 2.3).
Other Information
Other important information concerning Debt Warrants is set forth below
under "Certain Items Applicable to All Warrants--Modifications", "--Merger,
Consolidation, Sale or Other Dispositions" and "--Enforceability of Rights by
Beneficial Owner; Governing Law".
CURRENCY WARRANTS
The Company may issue, together with Debt Securities, Debt Warrants,
Index Warrants or Interest Rate Warrants, or separately, Currency Warrants (a)
in the form of Currency Put Warrants, entitling the owners thereof to receive
from the Company the Currency Warrant Cash Settlement Value (as shall be
defined in the Prospectus Supplement) of the right to sell a specified amount
of one currency (whether U.S. dollars or a foreign currency or foreign
currency unit)(a "Base Currency") for a specified amount of a different
currency (whether U.S. dollars or a foreign currency or foreign currency unit)
(a "Reference Currency"), (b) in the form of Currency Call Warrants, entitling
the owners thereof to receive from the Company the Currency Warrant Cash
Settlement Value of the right to purchase a specified amount of a Base
Currency for a specified amount of a Reference Currency, or (c) in such other
form as shall be specified in the related Prospectus Supplement. The
Prospectus Supplement for an issue of Currency Warrants will set forth the
formula pursuant to which the Currency Warrant Cash Settlement Value will be
determined, including any multipliers, if applicable.
The Prospectus Supplement will describe the terms of any Currency
Warrants offered thereby, the Currency Warrant Agreement relating to such
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Currency Warrants and the Currency Warrant Certificates representing such
Currency Warrants, including the following: (1) the title of such Currency
Warrants; (2) the aggregate amount of such Currency Warrants; (3) the initial
offering price of such Currency Warrants; (4) the exercise price, if any; (5)
the currency or currency unit in which the initial offering price, the
exercise price, if any, and the Currency Warrant Cash Settlement Value of such
Currency Warrants is payable; (6) the Base Currency and the Reference Currency
for such Currency Warrants; (7) whether such Currency Warrants shall be
Currency Put Warrants, Currency Call Warrants or otherwise; (8) the formula
for determining the Currency Warrant Cash Settlement Value, if applicable, of
each Currency Warrant; (9) whether and under what circumstances a minimum
and/or maximum expiration value is applicable upon the expiration or exercise
of such Currency Warrants; (10) the effect or effects, if any, of the
occurrence of a Market Disruption Event or Force Majeure Event (each as
defined in the Currency Warrant Agreement); (11) the date on which the right
to exercise such Currency Warrants shall commence and the date (the "Currency
Warrant Expiration Date") on which such right shall expire; (12) any minimum
number (or maximum number) of Currency Warrants which must be exercised at any
one time, other than upon automatic exercise; (13) the maximum number, if any,
of such Currency Warrants that may, subject to election by the Company, be
exercised by all owners (or by any person or entity) on any day; (14) any
provisions for the automatic exercise of such Currency Warrants other than at
expiration; (15) whether and under what circumstances such Currency Warrants
may be cancelled by the Company prior to their expiration date; (16) any
provisions permitting a Holder to condition any notice of exercise on the
absence of certain specified changes in the Spot Rate (as defined in the
Currency Warrant Agreement); (17) any other procedures and conditions relating
to the exercise of such Currency Warrants; (18) the identity of the Currency
Warrant Agent; (19) any national securities exchange on which such Currency
Warrants will be listed; (20) provisions, if any, for issuing such Currency
Warrants in certificated form; (21) if such Currency Warrants are not issued
in book-entry form, the place or places at which payments in respect of such
Currency Warrants are to be made by the Company; (22) if applicable, a
discussion of certain United States federal income tax, accounting or other
special considerations applicable thereto; and (23) any other terms of such
Currency Warrants.
Other important information concerning Currency Warrants is set forth
below under "Certain Items Applicable to All Warrants--Modifications",
"--Merger, Consolidation, Sale or Other Dispositions" and "--Enforceability of
Rights by Beneficial Owner; Governing Law" and "Certain Items Applicable to
Currency Warrants, Index Warrants and Interest Rate Warrants--Exercise of
Warrants",--Market Disruption and Force Majeure Events", "--Settlement
Currency" and "--Listing".
INDEX WARRANTS
The Company may issue, together with Debt Securities, Debt Warrants,
Currency Warrants or Interest Rate Warrants, or separately, Index Warrants (a)
in the form of Index Put Warrants, entitling the owners thereof to receive
from the Company the Index Cash Settlement Value (as shall be defined in the
Prospectus Supplement) in cash, which amount will be determined by reference
to the amount, if any, by which the Fixed Amount (as shall be defined in the
Prospectus Supplement) at the time of exercise exceeds the Index Value (as
shall be defined in the Prospectus Supplement), (b) in the form of Index Call
Warrants, entitling the owners thereof to receive from the Company the Index
Cash Settlement Value in cash, which amount will be determined by reference to
the amount, if any, by which the Index Value at the time of exercise exceeds
the Fixed Amount, (c) in the form of Index Spread Warrants, entitling the
owners thereof to receive from the Company the Index Cash Settlement Value in
cash, which amount will be determined by reference to the amount, if any, by
which the Reference Index Value (as shall be defined in the Prospectus
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Supplement) at the time of exercise exceeds the Base Index Value (as shall be
defined in the Prospectus Supplement) or (d) in such other form as shall be
specified in the related Prospectus Supplement. The Prospectus Supplement for
an issue of Index Warrants will set forth the formula pursuant to which the .
Index Cash Settlement Value will be determined, including any multipliers, if
applicable
The Prospectus Supplement will describe the terms of Index Warrants
offered thereby, the Index Warrant Agreement relating to such Index Warrants
and the Index Warrant Certificate representing such Index Warrants, including
the following (1) the title of such Index Warrants; (2) the aggregate amount
of such Index Warrants; (3) the initial offering price of such Index Warrants;
(4) the exercise price, if any; (5) the currency or currency unit in which the
initial offering price, the exercise price, if any, and the Index Cash
Settlement Value of the Index Warrants is payable; (6) the Index or Indices
for such Index Warrants, which may be based on one or more U.S. or foreign
stocks, bonds, or other securities, one or more U.S. or foreign interest
rates, one or more currencies or currency units, or any combination of the
foregoing, and may be a preexisting U.S. or foreign index compiled and
published by a third party or an index based on one or more securities,
interest rates or currencies selected by the Company solely in connection with
the issuance of such Index Warrants, and certain information regarding such
Index or Indices and the underlying securities, interest rates or currencies
or currency units (including, to the extent possible, the policies of the
publisher of the Index with respect to additions, deletions and substitutions
of such securities, interests rates or currencies or currency units); (7)
whether such Index Warrants shall be Index Put Warrants, Index Call Warrants,
Index Spread Warrants or otherwise; (8) the method of providing for a
substitute Index or Indices or otherwise determining the amount payable in
connection with the exercise of such Index Warrants if any Index changes or
ceases to be made available by its publisher, which determination will be made
by an independent expert; (9) the formula for determining the Index Cash
Settlement Value, if applicable, of each Index Warrant; (10) whether and under
what circumstances a minimum and/or maximum expiration value is applicable
upon the expiration or exercise of such Index Warrants; (11) the effect or
effects, if any, of the occurrence of a Market Disruption Event or Force
Majeure event (each as defined in the Index Warrant Agreement); (12) the date
on which the right to exercise such Index Warrants shall commence and the date
(the "Index Warrant Expiration Date") on which such right shall expire; (13)
any minimum number of Index Warrants which must be exercised at any one time,
other than upon automatic exercise; (14) the maximum number if any, of such
Index Warrants that may, subject to election by the Company, be exercised by
all owners (or by any person or entity) on any day; (15) any provisions for
the automatic exercise of such Index Warrants other than at expiration; (16)
whether and under what circumstances such Index Warrants may be cancelled by
the Company prior to their expiration date; (17) any provisions permitting a
Holder to condition any notice of exercise on the absence of certain specified
changes in the Index Value, the Base Index Value or the Referenced Index Value
after the date of exercise; (18) any other procedures and conditions relating
to the exercise of such Index Warrants; (19) the identity of the Index Warrant
Agent; (20) any national securities exchange on which such Index Warrants will
be listed; (21) provisions, if any, for issuing such Index Warrants in
certificated form; (22) if such Index Warrants are not issued in book-entry
form, the place or places at which payments in respect of such Index Warrants
are to be made by the Company; (23) if applicable, a discussion of certain
United States federal income tax, accounting or other special considerations
applicable thereto; and (24) any other terms of such Index Warrants.
Other important information concerning Index Warrants is set forth below
under "Certain Items Applicable to All Warrants--Modifications", "--Merger,
Consolidation, Sale or Other Disposition" and "--Enforceability of Rights by
Beneficial Owner; Governing Law" and "Certain Items Applicable to Currency
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Warrants, Index Warrants and Interest Rate Warrants--Exercise of Warrants",
"--Market Disruption and Force Majeure Events", "--Settlement Currency" and
"--Listing".
INTEREST RATE WARRANTS
The Company may issue, together with Debt Securities, Debt Warrants,
Currency Warrants or Index Warrants or, separately, Interest Rate Warrants (a)
in the form of Interest Rate Put Warrants, entitling the owners thereof to
receive from the Company the Interest Rate Cash Settlement Value (as shall be
defined in the Prospectus Supplement) in cash, which amount will be determined
by reference to the amount, if any, by which the Spot Amount (as shall be
defined in the Prospectus Supplement) is less than the Strike Amount (as shall
be defined in the Prospectus Supplement) on the applicable valuation date
following exercise, (b) in the form of Interest Rate Call Warrants, entitling
the owners thereof to receive from the Company the Interest Rate Cash
Settlement Value in cash, which amount will be determined by reference to the
amount, if any, by which the Spot Amount on the applicable valuation date
following exercise exceeds the Strike Amount or (c) in such other form as
shall be specified in the related Prospectus Supplement. The Prospectus
Supplement for an issue of Interest Rate Warrants will set forth the formula
pursuant to which the Interest Rate Cash Settlement Value will be determined,
including any multipliers, if applicable. The Strike Amount may either be a
fixed yield, price or rate of a Sovereign Debt Instrument, a Rate or any
combination of Sovereign Debt Instruments and/or Rates or a yield, price or
rate that varies during the term of the Interest Rate Warrants in accordance
with a schedule or formula. The Sovereign Debt Instrument will be one or more
instruments specified in the applicable Prospectus Supplement issued either by
the United States government or by a foreign government. The Rate will be one
or more interest rates or interest rate swap rates established from time to
time by one or more financial institutions specified in the applicable
Prospectus Supplement.
The Prospectus Supplement will describe the terms of Interest Rate
Warrants offered thereby, the Interest Rate Warrant Agreement relating to such
Interest Rate Warrants and the Interest Rate Warrant Certificate representing
such Interest Rate Warrants, including the following: (1) the title of such
Interest Rate Warrants; (2) the aggregate amount of such Interest Rate
Warrants; (3) the initial offering price of such Interest Rate Warrants; (4)
the exercise price, if any; (5) the currency or currency unit in which the
initial offering price, the exercise price, if any, and the Interest Rate Cash
Settlement Value of such Interest Rate Warrants is payable; (6) the Sovereign
Debt Instrument (which may be one or more debt instruments issued either by
the United States government or by a foreign government), the Rate (which may
be one or more interest rates or interest rate swap rates established from
time to time by one or more specified financial institutions) or the other
yield, price or rate utilized for such Interest Rate Warrants, and certain
information regarding such Sovereign Debt Instrument, Rate or such other
yield, price or rate; (7) whether such Interest Rate Warrants shall be
Interest Rate Put Warrants, Interest Rate Call Warrants or otherwise; (8) the
Strike Amount, the method of determining the Spot Amount and the method of
expressing movements in the yield or closing price of the Sovereign Debt
Instrument or in the level of the Rate or such other yield, price or rate as a
cash amount in the currency in which the Interest Rate Cash Settlement Value
of such Warrants is payable; (9) the formula for determining the Interest Rate
Cash Settlement Value, if applicable, of each Interest Rate Warrant; (10)
whether and under what circumstances a minimum and/or maximum expiration value
is applicable upon the expiration or exercise of such Interest Rate Warrants;
(11) the effect or effects, if any, of the occurrence of a Market Disruption
Event or Force Majeure Event (each as defined in the Interest Rate Warrant
Agreement); (12) the date on which the right to exercise such Interest Rate
Warrants shall commence and the date (the "Interest Rate Warrant Expiration
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Date") on which such right shall expire; (13) any minimum number of Interest
Rate Warrants which must be exercised at any one time, other than upon
automatic exercise; (14) the maximum number, if any, of such Interest Rate
Warrants that may, subject to elections by the Company, be exercised by all
owners (or by any person or entity) on any day; (15) any
provisions for the automatic exercise of such Interest Rate Warrants other
than at expiration; (16) whether and under what circumstances such Interest
Rate Warrants may be cancelled by the Company prior to their expiration date;
(17) any provisions permitting a Holder to condition any notice of exercise on
the absence of certain specified changes in the Spot Amount after the date of
exercise; (18) any other procedures and conditions relating to the exercise of
such Interest Rate Warrants; (19) the identity of the Interest Rate Warrant
Agent; (20) any national securities exchange on which such Interest Rate
Warrants will be listed; (21) provisions, if any, for issuing such Interest
Rate Warrants in certificated form; (22) if such Interest Rate Warrants are
not issued in book-entry form, the place or places at which payments in
respect of such Interest Rate Warrants are to be made by the Company; (23) if
applicable, a discussion of certain United States federal income tax,
accounting or other special considerations applicable thereto; and; (24) any
other terms of such Interest Rate Warrants.
Other important information concerning Interest Rate Warrants is set
forth below under "Certain Items Applicable to All Warrants--Modifications",
"--Merger, Consolidation, Sale or Other Disposition" and "--Enforceability of
Rights by Beneficial Owner; Governing Law" and "Certain Items Applicable to
Currency Warrants, Index Warrants and Interest Rate Warrants--Exercise of
Warrants", "--Market Disruption and Force Majeure Events", "--Settlement
Currency" and "--Listing".
CERTAIN ITEMS APPLICABLE TO ALL WARRANTS
Modifications.
Each Warrant Agreement and the terms of each issue of Warrants may be
amended by the Company and the applicable Warrant Agent, without the consent
of the beneficial owners or the registered holders, for the purpose of curing
any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained therein, or in any other manner which the
Company may deem necessary or desirable and which will not materially
adversely affect the interests of the beneficial owners of the then
outstanding unexercised Warrants (Section 6.1).
The Company and the applicable Warrant Agent may also modify or amend
the applicable Warrant Agreement and the terms of the related Warrants, with
the consent of the beneficial owners of not less than a majority in number of
the then outstanding unexercised Warrants affected, provided that no such
modification or amendment that reduces the amount receivable upon exercise,
shortens the period of time during which the Warrants may be exercised,
increases the minimum or decreases the maximum number of Warrants that may be
exercised by or on behalf of any one beneficial owner at any one time, changes
the formula for determining the Cash Settlement Value or otherwise materially
and adversely affects the exercise rights of the owners or reduces the number
of outstanding Warrants the consent of whose beneficial owners is required for
modification or amendment of the applicable Warrant Agreement or the terms of
the Warrants may be made without the consent of each beneficial owner affected
thereby (Section 6.1).
Merger, Consolidation, Sale or Other Disposition.
The Company will covenant in the Warrant Agreements that it will
not merge or consolidate with any other corporation or sell or convey all or
substantially all its assets to any person (other than an Asset Drop-Down (as
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defined under "Description of the Debt Securities--Covenants--Consolidation,
Merger, Sale or Conveyance of Assets of the Company")), unless (i) either the
Company is the continuing corporation or the successor corporation or the
person which acquires by sale or conveyance substantially all the assets of
the Company (if other than the Company) is a corporation organized under the
laws of the United States of America or any state thereof and expressly
assumes the due and punctual performance and observance of all the covenants
and conditions of each Warrant Agreement to be performed or observed by the
Company, by amendment to the Warrant Agreements satisfactory to the respective
Warrant Agents, executed and delivered to the Warrant Agents by such
corporation, and (ii) the Company or such successor corporation, as the case
may be, is not, immediately after such merger or consolidation, or such sale
or conveyance, in default in the performance of any such covenant or
condition. In the case of any such consolidation, merger, sale or conveyance,
and following such an assumption by the successor corporation, such successor
corporation will succeed to and be substituted for the Company, with the same
effect as if it had been named in the Warrant Agreements, and, in the case of
any such sale or conveyance, the Company will be released and discharged from
all obligations and covenants under the Warrant Agreements and the Warrants.
In the event of any Asset Drop-Down after the date of any Warrant Agreement,
any subsequent sale or conveyance of assets by the Drop-Down Subsidiary will
be deemed to be a sale or conveyance of assets by the Company for purposes of
the covenant described in this paragraph. The term "substantially all", which
appears in the foregoing covenant, is not defined in the Warrant Agreements
and a precise explanation of such term is not feasible. The Company will
interpret such term in any particular situation in light of all then existing
facts and circumstances.
Enforceability of Rights by Beneficial Owner; Governing Law.
Each Warrant Agent will act solely as an agent of the Company in
connection with the issuance and exercise of the applicable Warrants and will
not assume any obligation or relationship of agency or trust for or with any
owner of a beneficial interest in any Warrant or with the registered holder
thereof (Sections 5.2). A Warrant Agent shall have no duty or responsibility
in case of any default by the Company in the performance of its covenants or
agreements under the applicable Warrant Agreement or Warrant Certificate
including, without limitation, any duty or responsibility to initiate any
proceedings at law or otherwise or except as provided in the applicable Debt
Warrant Agreement, to make any demand upon the Company (Section 5.2).
Beneficial owners may, without the consent of the applicable Warrant Agent,
enforce by appropriate legal action, on their own behalf, their right to
exercise their Warrants, to receive Debt Securities, in the case of Debt
Warrants, and to receive payment, if any, for their Warrants, in the case of
Currency Warrants, Index Warrants or Interest Rate Warrants (Section 3.3 of
the Debt Warrant Agreement and Section 3.1 of each other Warrant Agreement).
Except as may otherwise be provided in the Prospectus Supplement
relating thereto, each issue of Warrants and the applicable Warrant Agreement
will be governed by and construed in accordance with the law of the State of
New York (Section 6.7 of the Debt Warrant Agreement and Section 6.5 of each
other Warrant Agreement).
CERTAIN ITEMS APPLICABLE TO CURRENCY WARRANTS, INDEX WARRANTS AND INTEREST
RATE WARRANTS
Exercise of Warrants.
Except as may otherwise be provided in the applicable Prospectus
Supplement relating thereto, (a) each Currency Warrant, Index Warrant and
Interest Rate Warrant will entitle the owner, upon payment of the exercise
price, if any, to the applicable Cash Settlement Value of such Warrant, on the
applicable Exercise Date, in each case as such terms will further be defined
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in the applicable Prospectus Supplement relating thereto (Sections 1.1 and
2.2) and (b) if not exercised prior to 1:30 p.m., New York City time, on the
Business Day preceding the applicable Warrant Expiration Date, the Warrants
will be deemed automatically exercised on such Warrant Expiration Date
(Section 2.3). As described below, Currency Warrants, Index Warrants and
Interest Rate Warrants may also be deemed to be automatically exercised if
they are delisted. Procedures for exercise of the Currency Warrants, Index
Warrants and Interest Rate Warrants will be set forth in the applicable
Prospectus Supplement.
Market Disruption and Force Majeure Events.
If so specified in the applicable Prospectus Supplement, following the
occurrence of a Market Disruption Event or Force Majeure Event (as each term
shall be defined therein), the Cash Settlement Value of a Currency Warrant, an
Index Warrant or an Interest Rate Warrant may be determined on a different
basis than under normal exercise of a Warrant or the determination of the
applicable Cash Settlement Value. In addition, if so specified in the
applicable Prospectus Supplement, Currency Warrants, Index Warrants and
Interest Rate Warrants may, in certain circumstances, be cancelled by the
Company prior to the expiration date and the holders thereof will be entitled
to receive only the applicable Cancellation Amount. The Cancellation Amount
may be either a fixed amount or an amount that varies during the term of the
Warrants in accordance with a schedule or formula.
Settlement Currency.
Currency Warrants, Index Warrants and Interest Rate Warrants will be
settled only in U.S. dollars (unless settlement in a foreign currency is
specified in the applicable Prospectus Supplement and is permissible under
securities exchange rules approved by the Commission) and accordingly will not
require or entitle an owner to sell, deliver, purchase, or take delivery of
the currency, security or other instrument underlying such Warrants. If any of
the Currency Warrants, Index Warrants or Interest Rate Warrants are sold for,
or if the exercise price, if any, is payable in, foreign currencies or foreign
currency units or if the amount payable by the Company in respect of any
series of Currency Warrants, Index Warrants or Interest Rate Warrants is
payable in foreign currencies or foreign currency units, the restrictions,
elections, tax consequences, specific terms and other information with respect
to such issue of Warrants and such currencies or currency units will be set
forth in the Prospectus Supplement relating thereto.
Listing.
Unless otherwise provided in the Prospectus Supplement, each issue of
Currency Warrants, Index Warrants and Interest Warrants will be listed on a
national securities exchange, as specified in the applicable Prospectus
Supplement, subject only to official notice of issuance, as a pre-condition to
the sale of any such Warrants. It may be necessary in certain circumstances
for such national securities exchange to obtain the approval of the Commission
in connection with any such listing. In the event that such Warrants are
delisted from, or permanently suspended from trading on, such exchange, and at
or prior to such delisting or suspension, such Warrants shall not have been
listed on another national securities exchange, any such Warrants not
previously exercised will be deemed automatically exercised on the date such
delisting or permanent trading suspension becomes effective (Sections 2.3).
The applicable Cash Settlement Value to be paid in such event will be as set
forth in the applicable Prospectus Supplement. The Company will notify
holders of such Warrants as soon as practicable of such delisting or permanent
trading suspension. The applicable Warrant Agreement will contain a covenant
of the Company not to seek delisting of such Warrants from or permanent
suspension of their trading on, such exchange (Section 2.4 of the Currency
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Warrant Agreement and the Interest Rate Warrant Agreement and Section 2.5 of
the Index Warrant Agreement).
GLOBAL SECURITIES
The Securities of a series may be issued in whole or in part in the form
of one or more global Securities that will be deposited with or on behalf of a
depository (a "Depository") identified in the Prospectus Supplement relating
to such series. Global Securities representing Debt Securities or Debt
Warrants may be issued in either registered or bearer form. Global Securities
representing Currency Warrants, Index Warrants or Interest Rate Warrants will
be issued in registered form only. Global Securities may be issued in either
temporary or permanent form.
The specific terms of the depository arrangement with respect to any
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
apply to all depository arrangements.
Unless otherwise specified in the Prospectus Supplement, Securities
which are to be represented by a global Security in registered form to be
deposited with or on behalf of a Depository will be registered in the name of
such Depository or its nominee. Upon the issuance of a global Security in
registered form, the Depository for such global Security will credit the
respective principal amounts, in the case of Debt Securities, and
the respective number of warrants, in the case of Warrants represented by such
global Security to the accounts of institutions that have accounts with such
Depository or its nominee ("participants"). The accounts to be credited shall
be designated by the underwriters or agents of such Securities or by the
Company, if such Securities are offered and sold directly by the Company.
Ownership of beneficial interests in such global Securities will be limited to
participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in such global Securities
will be shown on, and the transfer of that ownership interest will be effected
only through, records maintained by the Depository or its nominee for such
global Security. Ownership of beneficial interests in global Securities by
persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a global Security.
So long as the Depository for a global Security in registered form, or
its nominee, is the registered owner of such global Security, such Depository
or such nominee, as the case may be, will be considered the sole owner or
holder of the Securities represented by such global Security for all purposes
under the Indenture, in the case of Debt Securities, or under the applicable
Warrant Agreement, in the case of Warrants, governing such Securities. Except
as set forth below or as the Company may otherwise agree in its sole
discretion, owners of beneficial interests in such global Security will not be
entitled to have Securities of the series represented by such global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Securities of such series in definitive form and will not be
considered the owners or holders thereof under the Indenture, in the case of
Debt Securities, or under the applicable Warrant Agreement, in the case of
Warrants.
Payments in respect of Securities registered in the name of or held by a
Depository or its nominee will be made to the Depository or its nominee, as
the case may be, as the registered owner or the holder of the global Security.
None of the Company, the Trustee or applicable Warrant Agent, any Paying Agent
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or any Security Registrar (the "Security Registrar") for such Securities will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in a global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interest.
The Company expects that the Depository for a permanent global Security
in registered form, upon receipt of any payment in respect of a permanent
global Security, will credit immediately participants' accounts with payments
in amounts proportionate to their respective beneficial interests in such
global Security as shown on the records of such Depository. The Company also
expects that payments by participants to owners of beneficial interests in
such global Security held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such participants.
A global Security in registered form may not be transferred except as a
whole by the Depository for such global Security to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any such nominee to a
successor of such Depository or nominee or a nominee of such successor. If a
Depository for a permanent global Security in registered form is at any time
unwilling or unable to continue as Depository and a successor Depository is
not appointed by the Company within 90 days, the Company will issue Securities
in definitive registered form in exchange for the global Security representing
such Securities. In addition, the Company may at any time and in its sole
discretion determine not to have any Securities of a series in registered form
represented by one or more global Securities and, in such event, will issue
Securities of such series in definitive form in exchange for all the global
Securities representing such Series. Further, if the Company so specifies
with respect to the Securities of a series or otherwise consents in its sole
discretion, an owner of a beneficial interest in a global Security
representing Securities of such series may, on terms acceptable to the Company
and the Depository for such global Security, receive Securities of such series
in definitive form. In any such instance, an owner of a beneficial interest
in a global Security will be entitled to physical delivery in definitive form
of Securities of the series represented by such global Security equal in
principal amount, in the case of Debt Securities, or number, in the case of
Warrants, to such beneficial interest and to have such Securities registered
in its name (if the Securities of such series are issuable as registered
securities). Unless otherwise specified by the Company, Securities of such
series so issued in definitive form will be issued either as registered or
bearer securities (if the Securities of such series are issuable in such form)
and in authorized denominations, in the case of Debt Securities, or in
authorized numbers, in the case of Warrants, as specified in the applicable
Prospectus Supplement. See, however, "Description of the Debt Securities--
Limitations on Issuance of Bearer Debt Securities" for a description of
certain restrictions on the issuance of a bearer Debt Security in definitive
form in exchange for an interest in a global Security.
BEARER DEBT SECURITIES
If so specified in the Prospectus Supplement, pending the availability
of a permanent global Security, all or any portion of the Debt Securities of a
series which may be issuable as bearer Debt Securities will initially be
represented by one or more temporary global Securities, without interest
coupons, to be deposited with a common depository in London for Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euro-clear System ("Euro-clear") and Cedel Bank, societe anonyme ("Cedel") for
credit to the designated accounts. The interests of the beneficial owner or
owners in such a temporary global Security in bearer form will be exchangeable
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for definitive bearer Debt Securities (including
interests in a permanent global Security in bearer form), representing Debt
Securities having the same interest rate and stated maturity, but only upon
written certification in the form and to the effect described under
"Description of Debt Securities-General" unless such certification has been
provided on an earlier interest payment date. The beneficial owner of a Debt
Security represented by a temporary global Security in bearer form or a
permanent global Security in bearer form may, on or after the applicable
exchange date and upon 30 days' notice to the Trustee given through Euro-clear
or Cedel, exchange its interest for definitive bearer Debt Securities or, if
specified in the Prospectus Supplement, definitive registered Debt Securities
of any authorized denomination. No bearer Debt Security delivered in exchange
for a temporary global Security or a permanent global Security shall be mailed
or otherwise delivered to any location in the United States in connection with
such exchange.
Unless otherwise specified in the Prospectus Supplement, interest in
respect of any portion of such a temporary global Security in bearer form
payable in respect of an Interest Payment Date occurring prior to the issuance
of a permanent global Security in bearer form will be paid to each of
Euro-clear and Cedel with respect to the portion of the temporary global
Security in bearer form held for its account. Each of Euro-clear and Cedel
will undertake in such circumstances to credit such interest received by it in
respect of a temporary global Security in bearer form to the respective
accounts for which it holds such temporary global Security in bearer form as
of the relevant Interest Payment Date, but only upon receipt in each case of
written certification, in the form and to the effect described under
"Description of Debt Securities--General".
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
A summary of the material United States federal income tax consequences
to persons investing in Securities will be set forth in the Prospectus
Supplement. This summary in the Prospectus Supplement will be presented for
information purposes only, however, and will not be intended as legal or tax
advice to prospective purchasers. Prospective purchasers of Securities are
urged to consult their own tax advisors prior to any acquisition of
Securities.
PLAN OF DISTRIBUTION
The Company may sell any of the Securities in four ways: (i) directly to
purchasers, (ii) through agents, (iii) through dealers or (iv) through
underwriters. Any or all of the foregoing may be customers of, engage in other
transactions with or perform other services for the Company in the ordinary
course of business.
Offers to purchase the Securities may be solicited directly by the
Company or by agents designated by the Company from time to time. Any such
agent, who may be deemed to be an underwriter as that term is defined in the
Securities Act, involved in the offer or sale of the Securities in respect of
which this Prospectus is delivered will be named, and any commissions payable
by the Company to such agent set forth, in the Prospectus Supplement. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment. Agents may
be entitled under agreements, which may be entered into with the Company, to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act.
If a dealer is utilized in the sale of the Securities in respect of
which this Prospectus is delivered, the Company will sell such Securities to
the dealer, as principal. The dealer may then resell such Securities to the
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public at varying prices to be determined by such dealer at the time of
resale. Dealers may be entitled to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act.
If the sale is accomplished through an underwriter or underwriters, the
Company will enter into an underwriting agreement with such underwriters at
the time of sale to them, and the names of the underwriters and the terms of
the transaction will be set forth in the Prospectus Supplement, which,
together with this Prospectus, will be used by the underwriters to make
resales of the Securities in respect of which the Prospectus Supplement and
this Prospectus is delivered to the public. The underwriters may be entitled,
under the relevant underwriting agreement, to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on a specified future date. Institutions
with which Contracts, when authorized, may be made include commercial and
savings banks, insurance companies, pension funds, educational and charitable
institutions, and other institutions, but shall in all cases be subject to the
approval of the Company. Except as otherwise provided in the Prospectus
Supplement, Contracts will not be subject to any conditions except that the
purchase by an institution of the Securities covered by its Contract shall not
at the time of delivery be prohibited under the laws of any jurisdiction in
the United States to which such institution is subject. A commission indicated
in the Prospectus Supplement will be paid to agents and underwriters
soliciting purchases of the Securities pursuant to Contracts accepted by the
Company.
The place and time of delivery for the Securities in respect of which
this Prospectus is delivered are set forth in the Prospectus Supplement.
FOR FLORIDA RESIDENTS
AT&T, the parent of the Company, provides telecommunications services
between the United States and Cuba jointly with Empresa de Telecomunicaciones
Internacionales de Cuba ("EMTELCUBA"), the Cuban telephone company, pursuant
to all applicable U.S. laws and regulations. All payments due EMTELCUBA are
handled in accordance with the provisions of the Cuban Assets Control
Regulations and the Cuban Democracy Act of 1992 and specific licenses issued
thereunder. AT&T is the sole owner of the Cuban American Telephone and
Telegraph Company ("CATT"), a Cuban corporation. CATT owns cable facilities
between the United States and Cuba that were activated on November 25, 1994.
This information is accurate as of the date hereof. Current information
concerning AT&T's business dealings with the government of Cuba or with any
person or affiliate located in Cuba may be obtained from the Division of
Securities and Investor Protection of the Florida Department of Banking and
Finance, the Capitol, Tallahassee, Florida 32399-0350, telephone number (904)
488-9805.
LEGAL MATTERS
G. Daniel McCarthy, Senior Vice President, General Counsel, Secretary
and Chief Risk Management Officer of the Company, is passing upon the legality
of the Securities for the Company. Sidley & Austin, New York, New York, is
also passing upon certain legal matters for the Company. Sidley & Austin also
provides various legal services to the Company and AT&T on an ongoing basis.
Davis Polk & Wardwell, New York, New York, is passing upon certain legal
matters, including the legality of the Securities, for any agent, dealer or
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underwriter that may be involved in any sale thereof. Davis Polk & Wardwell is
also representing the agent for certain banks party to the Company's revolving
credit agreements.
EXPERTS
The consolidated balance sheets of the Company, as of December 31, 1994
and 1993 and the related consolidated statements of income, changes in
shareowners' equity and cash flows for each of the three years in the period
ended December 31, 1994, incorporated by reference in this Prospectus and
Registration Statement, have been incorporated herein in reliance on the
reports of Coopers & Lybrand L.L.P., independent auditors, which reports
include explanatory paragraphs regarding the Company's change in its method of
accounting for income taxes in 1993 as discussed in Note 10 to the
consolidated financial statements of the Company, given on the authority of
that firm as experts in accounting and auditing.
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