<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration Nos. 333-17831 and
333-30175
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 17, 1997)
$500,000,000
SMITH BARNEY HOLDINGS INC.
MEDIUM-TERM NOTES, THIRD SERIES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------
Smith Barney Holdings Inc. (the "Company") may offer from time to time its
Medium-Term Notes, Third Series (the "Notes"), in an aggregate principal face
amount of up to $500,000,000 (or (i) the equivalent thereof in other currencies
or currency units or (ii) such greater amount if Notes are issued at an original
issue discount, as shall result in aggregate proceeds of $500,000,000), subject
to reduction under certain circumstances as a result of the sale of other
Securities (as defined in the accompanying Prospectus). The Notes will be
offered at varying maturities of nine months or more from the date of issue as
selected by the purchaser and agreed to by the Company, and may be subject to
redemption at the option of the Company or repayment at the option of the holder
thereof prior to the Stated Maturity thereof (as defined below). The Notes
offered by this Prospectus Supplement will constitute unsecured unsubordinated
indebtedness of the Company and will rank pari passu with all other unsecured
indebtedness of the Company. Each Note will be denominated in U.S. dollars or in
other currencies or currency units (the "Specified Currency"), including
European Currency Units ("ECU"), as set forth in a pricing supplement (the
"Pricing Supplement") to this Prospectus Supplement. See "Important Currency
Exchange Information" and "Foreign Currency Risks."
(Continued on following page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=========================================================================================================
PRICE TO AGENT'S COMMISSION PROCEEDS TO
PUBLIC(1)(2) OR DISCOUNT(2)(3) COMPANY(1)(4)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............................ 100% .125% - .750% 99.875% - 99.250%
- ---------------------------------------------------------------------------------------------------------
Total............................... $500,000,000 $625,000 - $3,750,000 $499,375,000 - $496,250,000
=========================================================================================================
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes will
be issued at 100% of the principal amount thereof.
(2) Or the equivalent thereof in the Specified Currency.
(3) The Company will pay a commission to Smith Barney Inc. (the "Agent"), in the
form of a discount, ranging from 0.125% to 0.750% of the principal amount of
a Note, depending on its Stated Maturity, sold through the Agent. The
Company may also sell Notes to the Agent for resale to investors or other
purchasers at varying prices related to prevailing market prices at the time
of resale to be determined by the Agent or, if so agreed, at a fixed public
offering price. Unless otherwise specified in the applicable Pricing
Supplement, any Note sold to the Agent as principal will be purchased by the
Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note of
identical maturity, and may be resold by the Agent. The Company may also
sell Notes directly to investors on its own behalf, in which case no
commission will be payable. The Company has agreed to indemnify the Agent
against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended.
(4) Before deducting expenses payable by the Company estimated at $175,000,
including fees and disbursements of counsel for the Agent.
------------------
SMITH BARNEY INC.
The date of this Prospectus Supplement is July 24, 1997.
<PAGE> 2
(Continued from previous page)
Each Note will bear interest (i) at 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 at Stated Maturity, (ii)
at a floating rate (a "Floating Rate Note") or (iii) at a combination of fixed
and floating rates. A Fixed Rate Note may pay both interest and principal
amortized over the life of the Note (an "Amortizing Note"). See "Description of
Notes -- Fixed Rate Notes," "Description of Notes -- Floating Rate Notes" and
"Description of Notes -- Floating/Fixed Rate Notes." The principal amount
payable at Maturity (as defined below) and/or the interest (or premium, if any)
on each Note may be determined by reference to the relationship between two or
more currencies, to the price of one or more specified securities or commodities
or to one or more securities or commodities exchange indices or other indices or
by other similar methods (an "Indexed Note"), as described in the applicable
Pricing Supplement. An Indexed Note whose principal amount payable at Maturity
and/or the interest rate of which is determined by reference to the relationship
between two currencies, two composite currencies or a currency and a composite
currency is referred to herein as a "Currency Indexed Note." See "Description of
Notes -- Currency Indexed Notes" and "Description of Notes -- Other Indexed
Notes and Certain Terms Applicable to All Indexed Notes."
Unless otherwise specified in the applicable Pricing Supplement, the dates,
if any, on which interest will be payable for each Fixed Rate Note (other than
an Amortizing Note) will be February 15 and August 15 of each year and at
Maturity. The dates on which interest will be payable for each Floating Rate
Note will be established on the date of issue of such Note and will be set forth
in the applicable Pricing Supplement. Amortizing Notes will pay principal and
interest semi-annually each February 15 and August 15, or quarterly each
February 15, May 15, August 15 and November 15, and at Maturity, or otherwise,
as specified in the applicable Pricing Supplement. See "Description of
Notes -- Payment of Principal and Interest." Interest rates and interest rate
formulae are subject to change by the Company, but no change will affect any
Note already issued or as to which an offer to purchase has been accepted by the
Company.
Each Note will be issued in fully registered form and will be represented
by either a global security (a "Global Security") registered in the name of a
nominee of The Depository Trust Company ("DTC") or other depositary (DTC or such
other depositary as is specified in the applicable Pricing Supplement is herein
referred to as the "Depositary"), or a certificate issued in definitive form, as
specified in the applicable Pricing Supplement. An interest in a Global Security
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary or its participants. A beneficial interest in a
Global Security will be exchanged for Notes in definitive form only under the
limited circumstances described herein. See "Description of Notes -- Book-Entry
Notes." Unless otherwise specified in the applicable Pricing Supplement, Notes
will be issued only in registered form in minimum denominations of $1,000 and
any amount in excess thereof that is an integral multiple of $1,000 or, in the
case of Notes denominated in a Specified Currency other than U.S. dollars, the
authorized denominations set forth in the applicable Pricing Supplement. See
"Description of Notes -- General."
The Specified Currency, any applicable interest rate or formula, the Issue
Price (as defined below), the Stated Maturity, any Interest Payment Dates (as
defined below), any principal payment dates, any redemption or repayment
provisions, the extent to which such Note is a Fixed Rate Note, a Floating Rate
Note, an Amortizing Note or an Indexed Note, whether such Note will be
represented by a Global Security and any other terms applicable to each Note and
established at the time of offering will be set forth in the applicable Pricing
Supplement.
The Notes are being offered on a continuing basis by the Company through
the Agent, which has agreed to use its reasonable best efforts to solicit offers
to purchase the Notes. The Company has reserved the right to sell Notes directly
on its own behalf or to the Agent acting as principal for resale to investors
and other purchasers or through other agents (provided that any other agent will
execute an agreement with the Company which contains substantially the same
terms and conditions as its agreement with the Agent). Unless otherwise
specified in an applicable Pricing Supplement, the Notes will not be listed on
any securities exchange, and there can be no assurance that the Notes offered by
this Prospectus Supplement will be sold or that there will be a secondary market
for the Notes. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or the Agent may reject any offer
in whole or in part. See "Plan of Distribution."
This Prospectus Supplement and the accompanying Prospectus, together with
an appropriate Pricing Supplement, may be used by the Agent, a subsidiary of the
Company, in connection with offers and sales of the Notes in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale. The Agent may act as principal or agent in such transactions.
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RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 31, ----------------------------------------
1997 1996 1995 1994 1993 1992
--------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...... 1.87 1.93 1.71 1.81 2.68 2.06
</TABLE>
The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes and fixed charges by the fixed charges. For
purposes of this ratio, fixed charges consist of interest expense and that
portion of rentals deemed representative of the appropriate interest factor.
DESCRIPTION OF NOTES
The following description of the terms of the Notes offered hereby
(referred to in the accompanying Prospectus as the "Offered Securities")
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of Securities set forth under the heading
"Description of Securities" in the accompanying Prospectus, to which description
reference is hereby made. The following summary of the Notes is qualified in its
entirety by reference thereto and to the Indenture referred to therein.
Capitalized terms not otherwise defined in this Prospectus Supplement or the
accompanying Prospectus shall have the meanings given to them in the Indenture.
The provisions of the Notes summarized herein apply to the Notes unless
otherwise specified in the applicable Pricing Supplement and the applicable
Note.
GENERAL
The Notes offered by this Prospectus Supplement are limited to $500,000,000
aggregate principal face amount (or (i) the equivalent thereof in one or more
currencies or (ii) such greater amount if Notes are issued at an original issue
discount, as shall result in aggregate proceeds of $500,000,000), subject to
reduction under certain circumstances as a result of the sale of other
Securities covered by the Registration Statement of which the Prospectus
accompanying this Prospectus Supplement is a part. The Notes will be issued
under an Indenture, dated as of May 15, 1993, between the Company and Citibank,
N.A.("Citibank"), as Trustee (the "Trustee"), as supplemented by the First
Supplemental Indenture, dated as of September 1, 1993, between the Company and
the Trustee and the Second Supplemental Indenture dated as of December 12, 1996,
between the Company and the Trustee (the indenture as so supplemented is
hereinafter referred to as the "Indenture"). The Indenture is further described
under the heading "Description of Securities" in the accompanying Prospectus.
The provisions of the Indenture and the designation of the Notes provide the
Company with the ability to "reopen" the series that is the Notes and to issue
additional securities of that series. The U.S. dollar equivalent of Notes
denominated in a currency or currency unit other than U.S. dollars will be
determined upon issuance by the Exchange Rate Agent (as defined below), on the
basis of the Market Exchange Rate (as defined below) for such other currency on
the applicable trade dates. The Notes will be subject to defeasance and covenant
defeasance as described in the accompanying Prospectus under the heading
"Description of Securities -- Defeasance." The statements herein concerning the
Notes and the Indenture do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, the Indenture, including the
definitions therein of certain terms. Whenever particular defined terms not
otherwise defined herein are referred to, such defined terms are incorporated
herein by reference.
The Notes constitute one series of Securities (as defined in the
Indenture), unlimited as to principal amount, established by the Company
pursuant to the Indenture.
Notes will be offered on a continuing basis and will mature from nine
months or more from the date of issue, as selected by the purchaser and agreed
to by the Company, and may be subject to redemption at the option of the Company
or repayment at the option of the holder prior to Stated Maturity as set forth
below under "Redemption and Repayment." Each Note will bear interest from the
Issue Date (as defined below) or from such other date as may be specified in the
applicable Pricing Supplement at (i) a fixed rate, which may be zero in the case
of a Note issued at an Issue Price representing a substantial discount from the
principal amount payable at Stated Maturity (a "Zero-Coupon Note"), (ii) a
floating rate or rates determined by
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reference to a Base Rate, which may be adjusted by a Spread and/or a Spread
Multiplier (each as defined below), or (iii) a combination of fixed and floating
rates.
Each Note will be issued in fully registered form without coupons and will
be represented by either a Global Security registered in the name of a nominee
of the Depositary or a certificate issued in definitive form, in each case as
specified in the applicable Pricing Supplement. All Notes issued on the same day
and having the same terms, including, but not limited to, the same designation,
Specified Currency, Interest Payment Dates, rate of interest, Stated Maturity
and redemption or repayment provisions may be represented by a single Global
Security. An interest in a Global Security will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary or
its participants. Payments of principal and interest on Notes represented by a
Global Security will be made by the Company or its paying agent to the
Depositary or its nominee. See "Description of Notes -- Book-Entry Notes."
Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of Notes (other than Global Securities) denominated in
U.S. dollars will be $1,000 and any amount in excess thereof that is an integral
multiple of $1,000. The authorized denominations of Notes denominated in a
Specified Currency other than U.S. dollars will be as set forth in the
applicable Pricing Supplement.
The Notes will constitute unsecured indebtedness of the Company and will
rank pari passu with all other unsecured unsubordinated indebtedness of the
Company. The Pricing Supplement will indicate whether the Notes will be
redeemable at the option of the Company, or repayable at the option of the
holder, or both, on or after a specified date prior to their Stated Maturity.
Unless otherwise specified in the applicable Pricing Supplement, the Notes,
other than Amortizing Notes, will not be subject to any sinking fund. See
"Description of Notes -- Redemption and Repayment."
The amount of any Discount Note (as defined below) payable in the event of
redemption by the Company, repayment at the option of the holder or acceleration
of its Stated Maturity, in lieu of the stated principal amount due at the Stated
Maturity, shall be the Amortized Face Amount (as defined below) of such Discount
Note as of the date of such redemption, repayment or acceleration. For the
purpose of determining whether holders of the requisite amount of Securities
outstanding under the Indenture have made a demand or given a notice or waiver
or taken any other action, the outstanding principal amount will be deemed to be
the Amortized Face Amount. A "Discount Note" means a Note, including any
Zero-Coupon Note, issued with more than a de minimis amount of original issue
discount (as determined under United States federal income tax rules applicable
to original issue discount instruments). The "Amortized Face Amount" of a
Discount Note shall be the amount equal to (i) the Issue Price of such Discount
Note set forth in the applicable Pricing Supplement plus (ii) the portion of the
difference between the Issue Price and the principal amount of such Discount
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) at the date as of which the Amortized Face Amount
is calculated, but in no event shall the Amortized Face Amount of such Discount
Note exceed its stated principal amount. See "Certain Federal Income Tax
Considerations -- U.S. Holders -- Discount Notes."
The Pricing Supplement relating to each Note will describe the following
terms, as applicable: (1) the Specified Currency with respect to such Note (and,
if such Specified Currency is other than U.S. dollars, certain other terms
relating to such Note); (2) the extent to which such Note is a Fixed Rate Note,
an Amortizing Note, a Floating Rate Note, a Discount Note or a Zero-Coupon Note;
(3) whether such Note is a Currency Indexed Note or other Indexed Note, and if
so, the specific terms thereof; (4) the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Note will be issued (the
"Issue Price"); (5) the date on which such Note will be issued (the "Issue
Date") and the date from which interest shall accrue (if different from the
Issue Date); (6) the date on which such Note will mature (the "Stated Maturity")
and whether the Stated Maturity may be extended by the Company and if so, the
Extension Periods and the Final Maturity Date (each as defined below); (7) if
such Note is a Fixed Rate Note, the rate per annum at which such Note will bear
interest, if any (the "Interest Rate"), the Interest Payment Date or Dates and,
if so specified in the applicable Pricing Supplement, that such rate may be
changed by the Company prior to the Stated Maturity and, if so, the basis or
formula for such change, if any; (8) if such Note
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is a Floating Rate Note, the Base Rate, the Initial Interest Rate or formula for
determining such, the Interest Reset Period, the Interest Reset Date or Dates,
the Interest Payment Date or Dates, the Index Maturity, the Maximum Interest
Rate and/or the Minimum Interest Rate, if any, and the Spread and/or Spread
Multiplier, if any (all as defined below), and any other terms relating to the
particular method of calculating the Interest Rate for such Note and, if so
specified in the applicable Pricing Supplement, that any such Spread and/or
Spread Multiplier may be changed by the Company prior to the Stated Maturity
and, if so, the basis or formula for such change, if any; (9) if such Note is an
Amortizing Note, whether payments of principal thereof and interest thereon will
be made quarterly or semi-annually, and the repayment information in respect
thereof; (10) whether the interest rate on such Note may be reset upon the
occurrence of certain events or at the option of the Company; (11) whether such
Note may be redeemed at the option of the Company, or repaid at the option of
the holder, prior to the Stated Maturity, and if so, the provisions relating to
such redemption or repayment; (12) whether such Note will be represented by a
Global Security or a certificate issued in definitive form; (13) certain special
federal income tax consequences of the purchase, ownership and disposition of
certain Notes, if any; (14) whether such Note is a Renewable Note (as defined
below), and, if so, the specific terms thereof; (15) the use of proceeds, if
such use materially differs from that disclosed in the accompanying Prospectus;
and (16) any other terms of such Note not inconsistent with the provisions of
the Indenture.
PAYMENT CURRENCY
Unless otherwise specified in the applicable Pricing Supplement, and except
as otherwise described herein with respect to Currency Indexed Notes, principal
(and premium, if any) and interest, if any, on each Note will be paid by the
Company in U.S. dollars in the manner described in the following paragraphs,
even if such Note is denominated in a Specified Currency other than U.S.
dollars; provided that, if the applicable Pricing Supplement and the Note so
indicate, the holder of a Note denominated in a Specified Currency other than
U.S. dollars may elect to receive all such payments in respect of such Note in
such Specified Currency, subject to certain conditions described in the
following paragraphs, by delivery of a written election to the Company's paying
agent (the "Paying Agent") in The City of New York. Except as otherwise provided
herein with respect to Global Securities, any such election must be received by
the Paying Agent on or prior to the applicable Regular Record Date (as defined
below) or at least 15 calendar days prior to Maturity, as the case may be, and
no such change of election may be made with respect to payments on any Note with
respect to which (i) an Event of Default has occurred, (ii) the Company has
exercised any of its defeasance or covenant defeasance options, or (iii) the
Company has given notice of redemption. Such election shall remain in effect
unless and until changed by written notice to the Paying Agent, received on or
prior to the applicable Regular Record Date or at least 15 calendar days prior
to Maturity, as the case may be. Until the Notes are paid or payment thereof is
provided for, the Company will, at all times, maintain a Paying Agent in The
City of New York capable of performing the duties described herein to be
performed by the Paying Agent and, to the extent permitted by the Indenture, the
Company may be the Paying Agent. The Company has initially appointed Citibank,
N.A., New York, New York as Paying Agent under the Indenture. The Company will
notify the holders of the Notes in accordance with the Indenture of any change
in the Paying Agent or its address. Except as may otherwise be provided in a
Pricing Supplement with respect to Currency Indexed Notes, all currency exchange
costs related to a Note, if any, will be borne by the holder of such Note by
deductions from payments otherwise due such holder.
Unless otherwise specified in the applicable Pricing Supplement, in the
case of a Note denominated in a Specified Currency other than U.S. dollars, the
amount of U.S. dollar payments in respect of such Note will be determined by an
agent for the Company specified in the applicable Pricing Supplement (the
"Exchange Rate Agent"), based on the indicative quotation in The City of New
York selected by such Exchange Rate Agent at approximately 11:00 a.m., New York
City time, on the second Business Day preceding the applicable payment date,
that yields the largest number of U.S. dollars upon conversion of the Specified
Currency. Except with respect to LIBOR Notes and LIBID Notes (each as defined
below), "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York City are
authorized or obligated by law or executive order to close and, with respect to
Notes denominated in or indexed to a Specified Currency other than U.S. dollars
or ECU, each Monday, Tuesday,
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Wednesday, Thursday or Friday which is not a day on which banking institutions
in the principal financial center of the country issuing the Specified Currency
are authorized or required by law or regulation to close and a day on which
banking institutions in such principal financial center are carrying out
transactions in such Specified Currency and, with respect to Notes denominated
in or indexed to ECU, each day which is not a day that banking institutions in
Luxembourg are authorized or required by law or regulation to close and which is
an ECU clearing day, as determined by the ECU Banking Association in Paris. If
the Notes are LIBOR Notes or LIBID Notes, "Business Day" shall mean each day as
determined pursuant to the preceding sentence which is also a London business
day (as defined below). Unless otherwise specified in the applicable Pricing
Supplement, such selection shall be made from among the quotations of at least
three banks agreed to by the Company and the Exchange Rate Agent appearing on
the bank composite or multi-contributor pages of the Reuters Monitor Foreign
Exchange Service, or if not available, the Telerate Monitor Foreign Exchange
Service (the "Exchange Rate"). If such quotations are unavailable from either
such foreign exchange service, such selection shall be made as specified in the
applicable Pricing Supplement. If a payment is to be made in a Specified
Currency and such Specified Currency is unavailable due to the imposition of
exchange controls or to other circumstances beyond the Company's control, or is
no longer used by the government of the country issuing such Specified Currency
or for the settlement of transactions by public institutions of or within the
international banking community, the Company will be entitled to make payments
in U.S. dollars on the basis of the noon buying rate in The City of New York for
cable transfers in the Specified Currency as certified for customs purposes by
the Federal Reserve Bank of New York (the "Market Exchange Rate") for such
Specified Currency on the second Business Day prior to such payment date, or on
such other basis as shall be specified in the applicable Pricing Supplement. In
the event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Specified Currency is not
a composite currency, on the basis of the most recently available Market
Exchange Rate for such Specified Currency or (ii) if such Specified Currency is
a composite currency, including, without limitation, ECU, in an amount
determined by the Exchange Rate Agent to be the sum of the results obtained by
multiplying the number of units of each component currency of such composite
currency, as of the most recent date on which such composite currency was used,
by the Market Exchange Rate for such component currency on the second Business
Day prior to such payment date (or if such Market Exchange Rate is not then
available, by the most recently available Market Exchange Rate for such
component currency, or as otherwise specified in the applicable Pricing
Supplement). Unless otherwise provided in the applicable Pricing Supplement,
Citibank, N.A. will be the Exchange Rate Agent with respect to the Notes.
Unless otherwise specified in the applicable Pricing Supplement, if a
holder of a Note denominated in a Specified Currency other than U.S. dollars or
ECU shall have elected to receive payments of principal (and premium, if any)
and interest, if any, on such Note in such Specified Currency as described
above, or if the Denominated Currency (as defined herein) of a Currency Indexed
Note is a foreign currency (other than ECU), and such Specified Currency or
Denominated Currency is unavailable as of the due date for any payment thereon
because of the imposition of exchange controls or other circumstances beyond the
Company's control, or is no longer used by the government of the country issuing
such Specified Currency or Denominated Currency or for the settlement of
transactions by public institutions of or within the international banking
community, then all payments due on such due date with respect to such Note
shall be made in U.S. dollars. The amount so payable on any date in such
Specified Currency or Denominated Currency shall be converted into U.S. dollars
at a rate determined by the Exchange Rate Agent on the basis of the most
recently available Market Exchange Rate, or as otherwise specified in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, if a
holder of a Note denominated in ECU shall have elected to receive payments of
principal (and premium, if any) and interest, if any, on such Note in ECU as
described above, or if the Denominated Currency of a Currency Indexed Note is
ECU, and ECU are unavailable as of the due date for any payment thereon because
of the imposition of exchange controls or other circumstances beyond the
Company's control, or are no longer used in the European Monetary System, all
payments due on that due date with respect to such Note shall be made in U.S.
dollars. The amount so payable on any date in ECU shall be converted into U.S.
dollars at a rate determined by the Exchange Rate Agent as of the second
Business Day prior to the date on which such payment is due on the
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following basis: The component currencies of ECU for this purpose shall be the
currency amounts that were components of the ECU as of the last date on which
ECU were used in the European Monetary System. The equivalent of ECU in U.S.
dollars shall be calculated by aggregating the U.S. dollar equivalents of such
component currencies. The U.S. dollar equivalent of each of such component
currencies shall be determined by the Exchange Rate Agent on the basis of the
most recently available Market Exchange Rate, or as otherwise specified in the
applicable Pricing Supplement.
If the official unit of any component currency of a composite currency is
altered by way of combination or subdivision, the number of units of that
currency as a component shall be divided or multiplied in the same proportion.
If two or more component currencies are consolidated into a single currency, the
amounts of those currencies as components shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that currency as a component
shall be replaced by amounts of such two or more currencies having an aggregate
value on the date of division equal to the amount of the former component
currency immediately before such division.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and, in the absence of manifest error, shall be
conclusive for all purposes and binding on holders of the Notes, and the
Exchange Rate Agent shall have no liability therefor.
Each Note will provide that, in the event of an official redenomination of
the Specified Currency thereof (including, without limitation, an official
redenomination of any such Specified Currency that is a composite currency), the
obligations of the Company with respect to payments on Notes denominated in such
Specified Currency shall, in all cases, be deemed immediately following such
redenomination to provide for the payment of that amount of redenominated
currency representing the amount of such obligations immediately before such
redenomination. Except to the extent Currency Indexed Notes provide for the
adjustment of the principal amount payable at Maturity thereof pursuant to
application of the formulae described under "Description of Notes -- Currency
Indexed Notes -- Payments of Principal and Interest," or any other formulae
provided for in the applicable Pricing Supplement, Notes will not provide for
any adjustment to any amount payable under such Notes as a result of (i) any
change in the value of the Specified Currency thereof relative to any other
currency due solely to fluctuations in exchange rates or (ii) any redenomination
of any component currency of any composite currency (unless such composite
currency is itself officially redenominated).
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks do
not generally offer non-U.S. dollar-denominated checking or savings account
facilities in the United States. Accordingly, payments on Notes made in a
currency other than U.S. dollars will be made from an account at a bank located
outside the United States unless otherwise specified in the applicable Pricing
Supplement.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, interest
on certificated Notes, and principal of Amortizing Notes (in each case other
than interest or, in the case of Amortizing Notes, principal, payable at
Maturity), will be paid by mailing a check (unless otherwise specified in the
applicable Pricing Supplement, from an account at a bank located outside the
United States if such check is payable in a currency other than U.S. dollars) to
the holder at the address of such holder appearing on the security register of
the Company on the applicable Regular Record Date (which in the case of a Global
Security, will be the Depositary or its nominee); provided that in the case of a
Note issued between a Regular Record Date and the Interest Payment Date relating
to such Regular Record Date, interest for the period beginning on the Issue Date
or the date on which such Note otherwise begins to accrue interest (if different
from the Issue Date) and ending on such Interest Payment Date shall be paid on
the Interest Payment Date following the succeeding Regular Record Date to the
registered holder on such succeeding Regular Record Date. Notwithstanding the
foregoing, a holder of U.S. $10,000,000 or more in aggregate principal amount of
certificated Notes of like tenor and term (or a holder of the equivalent thereof
in a Specified Currency other than U.S. dollars) shall be
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entitled to receive such interest and, in the case of Amortizing Notes,
principal payments in immediately available funds, but only if complete and
appropriate instructions have been received in writing by the Paying Agent on or
prior to the applicable Regular Record Date. Owners of beneficial interests in a
Global Security will be paid in accordance with the Depositary's and the
participant's procedures in effect from time to time as described under
"Description of Notes -- Book-Entry Notes." Simultaneously with the election by
any holder of a Note to receive payments in a Specified Currency other than U.S.
dollars (as provided above), such holder may, if so entitled as described above,
elect to receive such payments in immediately available funds by providing
complete and appropriate instructions to the Paying Agent, and all payments in
respect of principal or premium, if any, of, or interest, if any, on, such Note
will be made in immediately available funds to an account maintained by the
payee with a bank located outside the United States or as otherwise provided in
the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, payments of principal (and premium, if any) and interest at
Maturity will be made in immediately available funds (unless otherwise specified
in the applicable Pricing Supplement, payable to an account maintained by the
payee with a bank located outside the United States if payable in a Specified
Currency other than U.S. dollars) upon surrender of the Note at the office of
the Paying Agent, provided that the Note is presented to the Paying Agent in
time for the Paying Agent to make such payments in such funds in accordance with
its normal procedures. See "Important Currency Exchange Information." Unless
otherwise specified in the applicable Pricing Supplement, principal, premium, if
any, and interest, if any, payable at Maturity of a Global Security will be paid
by the Paying Agent by wire transfer in immediately available funds to an
account specified by the Depositary. Unless otherwise specified in the
applicable Pricing Supplement, payments of interest on a Global Security, and
principal of Amortizing Notes in global form (in each case, other than at
Maturity), will be made in same-day funds in accordance with existing
arrangements between the Paying Agent and the Depositary. The Company will pay
any administrative costs imposed by banks in connection with making payments in
immediately available funds, but any tax, assessment or governmental charge
imposed upon payments, including, without limitation, any withholding tax, will
be borne by the holders of the Notes in respect of which such payments are made.
INTEREST AND INTEREST RATES
Each Note other than a Zero-Coupon Note will bear interest from its Issue
Date (or such other date on which such Note otherwise begins to accrue interest
if different from the Issue Date) or from the most recent Interest Payment Date
to which interest on such Note has been paid or duly provided for at a fixed
rate or rates per annum, or at a rate or rates per annum determined pursuant to
a Base Rate stated therein and in the applicable Pricing Supplement that may be
adjusted by a Spread and/or Spread Multiplier, until the principal thereof is
paid or made available for payment. Interest will be payable on each Interest
Payment Date and at Maturity. "Maturity" means the date on which the principal
of a Note or an installment of principal becomes due and payable in full in
accordance with its terms and the terms of the Indenture, whether at Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
Interest will be payable to the holder at the close of business on the Regular
Record Date next preceding such Interest Payment Date; provided, however, that
interest payable at Maturity will be payable to the person to whom principal
shall be payable. The first payment of interest on any Note originally issued
between a Regular Record Date for such Note and the succeeding Interest Payment
Date will be made on the Interest Payment Date following the next succeeding
Regular Record Date for such Note to the Holder on such next Regular Record
Date.
Interest rates and interest rate formulae are subject to change by the
Company, but no such change will affect any Note already issued or as to which
an offer to purchase has been accepted by the Company. The Interest Payment
Dates and the Regular Record Dates for each Fixed Rate Note shall be as
described below under "Fixed Rate Notes." The Interest Payment Dates for each
Floating Rate Note shall be as described below under "Floating Rate Notes" and
in the applicable Pricing Supplement, and the Regular Record Dates for a
Floating Rate Note will be the fifteenth day (whether or not a Business Day)
next preceding each Interest Payment Date.
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FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Issue Date or such other
date on which such Note otherwise begins to accrue interest (if different from
the Issue Date) at the rate per annum set forth thereon and in the applicable
Pricing Supplement until the principal amount thereof is paid, or made available
for payment, in full, except as described below under "Description of
Notes -- Subsequent Interest Periods" and "Description of Notes -- Extension of
Maturity." Unless otherwise specified in the applicable Pricing Supplement,
interest on each Fixed Rate Note (other than a Zero-Coupon Note or an Amortizing
Note) will be payable semi-annually each February 15 and August 15 and the
Regular Record Dates will be each January 31 and July 31. Unless otherwise
specified in the applicable Pricing Supplement, principal of and interest on
each Amortizing Note will be payable either quarterly on each February 15, May
15, August 15 and November 15, or semi-annually on each February 15 and August
15 as set forth in the applicable Pricing Supplement, and at Maturity. Unless
otherwise specified in the applicable Pricing Supplement, the Regular Record
Dates will be each January 31, April 30, July 31 and October 31 for each
Amortizing Note that is payable quarterly and each January 31 and July 31 for
each Amortizing Note that is payable semi-annually. 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 included
in the applicable Pricing Supplement and set forth on such Notes. Each payment
of interest on a Fixed Rate Note shall include interest accrued through the day
before the Interest Payment Date or date of Maturity, as the case may be. Any
payment of principal (and premium, if any) or interest required to be made on a
Fixed Rate Note on a day that is not a Business Day need not be made on such
day, but may be made on the next succeeding Business Day with the same force and
effect as if made on such day, and no additional interest shall accrue as a
result of such delayed payment. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes, if any, will be computed on
the basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Except for the period from the Issue Date (or the date on which such Note
otherwise begins to accrue interest (if different from the Issue Date)) to the
first Interest Reset Date set forth in the applicable Pricing Supplement, each
Floating Rate Note will bear interest at a rate determined by reference to an
interest rate base (the "Base Rate"), which may be adjusted by a Spread and/or a
Spread Multiplier. The applicable Pricing Supplement will designate one or more
of the following Base Rates as applicable to a Floating Rate Note: (a) the CD
Rate (a "CD Rate Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate
Note"), (c) LIBID (a "LIBID Note"), (d) LIBOR (a "LIBOR Note"), (e) the Treasury
Rate (a "Treasury Rate Note"), (f) the Federal Funds Rate (a "Federal Funds Rate
Note"), (g) the Prime Rate (a "Prime Rate Note"), (h) the J.J. Kenny Rate (a
"J.J. Kenny Rate Note"), (i) the Eleventh District Cost of Funds Rate (an
"Eleventh District Cost of Funds Rate Note"), (j) the CMT Rate (a "CMT Rate
Note") or (k) such other Base Rate or 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 to maturity (as specified in the applicable Pricing
Supplement) of the instrument or obligation from which the Base Rate is
calculated.
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 at which interest may accrue during any interest period ("Maximum
Interest Rate"); and/or (ii) a minimum limitation, or floor, on the rate at
which interest may accrue during any interest period ("Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by applicable
law (including, without limitation, New York law, which is stated to govern the
Notes and the Indenture), as the same may be modified by United States law of
general application. Under present New York law, the maximum rate of interest,
with certain exceptions, is 25% per annum on a simple interest basis. This limit
may not apply to Notes in which $2,500,000 or more has been invested, including
Notes purchased by the Agent in such aggregate principal amount or more for
resale to investors.
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Unless otherwise specified herein or in the applicable Pricing Supplement,
all percentages resulting from any calculation of the rate of interest on a
Floating Rate Note will be rounded upward, if necessary, to the nearest one
hundred-thousandth of a percent (.0000001), with five one-millionths of a
percentage point being rounded upward, and all currency amounts used in or
resulting from such calculation on Floating Rate Notes will be rounded to the
nearest one-hundredth of a unit (with five one-thousandths of a unit being
rounded upwards).
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (the "Interest Reset
Period"), as or unless otherwise specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the date or
dates on which interest will be reset (each an "Interest Reset Date") will be,
in the case of Floating Rate Notes that reset daily, each Business Day; in the
case of Floating Rate Notes (other than Treasury Rate Notes) that reset weekly,
the Wednesday of each week; in the case of Treasury Rate Notes that reset
weekly, the Tuesday of each week (except as provided below); in the case of
Floating Rate Notes that reset monthly, the third Wednesday of each month (with
the exception of monthly reset Eleventh District Cost of Funds Rate Notes, which
reset on the first calendar day of each month); in the case of Floating Rate
Notes that reset quarterly, the third Wednesday of each March, June, September
and December; in the case of Floating Rate Notes that reset semi-annually, the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes that reset annually,
the third Wednesday of the month of each year specified in the applicable
Pricing Supplement; provided that (i) the interest rate in effect from the Issue
Date (or the date on which such Notes otherwise begin to accrue interest (if
different from the Issue Date)) to the first Interest Reset Date will be the
Initial Interest Rate (as defined below) and (ii) the interest rate in effect
for the 10 days immediately prior to Maturity will be that in effect on the
tenth day preceding such Maturity. If any Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Reset Date shall be the succeeding Business Day, except that, in the case of a
LIBID Note or a LIBOR Note, if such Business Day is in the succeeding calendar
month, such Interest Reset Date shall be the next preceding Business Day. If an
auction of direct obligations of the United States Treasury Bills ("Treasury
bills") falls on a day that is an Interest Reset Date for Treasury Rate Notes,
the Interest Reset Date shall be the succeeding Business Day. The interest rate
or the formula for establishing the interest rate in effect with respect to a
Floating Rate Note from the Issue Date (or the date on which such Note otherwise
begins to accrue interest (if different from the Issue Date)) to the first
Interest Reset Date (the "Initial Interest Rate") will be specified in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one basis point equals one-hundredth of a percentage point) to be added to or
subtracted from the related Base Rate applicable to such Floating Rate Note, and
the "Spread Multiplier" is the percentage of the related Base Rate applicable to
such Floating Rate Note by which said Base Rate is to be multiplied to determine
the applicable interest rate on such Floating Rate Note. Each Floating Rate Note
and the applicable Pricing Supplement will specify the Spread and/or Spread
Multiplier, if any, applicable to each such Floating Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, the
interest payable on each Interest Payment Date or at Maturity for Floating Rate
Notes will be the amount of interest accrued from and including the Issue Date
(or the date on which such Notes otherwise begin to accrue interest (if
different from the Issue Date)) or from and including the last Interest Payment
Date to which interest has been paid to, but excluding, such Interest Payment
Date or date of Maturity, as the case may be (an "Interest Period"); provided
that in the case of a Floating Rate Note on which interest is reset daily or
weekly, interest payable on each Interest Payment Date will be the amount of
interest accrued from and including the Issue Date (or the date on which such
Notes otherwise begin to accrue interest (if different from the Issue Date)) or
from and excluding the last date to which interest has been paid, as the case
may be, to, and including, the Regular Record Date immediately preceding such
Interest Payment Date, except that at Maturity the interest payable will include
interest accrued to, but excluding, the date of Maturity.
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With respect to a Floating Rate Note, unless otherwise specified in the
applicable Pricing Supplement, accrued interest will be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Unless otherwise specified in the applicable Pricing
Supplement, such accrued interest factor will be computed by adding the interest
factors calculated for each day in the Interest Period for 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 on such day by 360, in the cases of CD
Rate Notes, Commercial Paper Rate Notes, LIBID Notes, LIBOR Notes, Federal Funds
Rate Notes, Prime Rate Notes, J.J. Kenny Rate Notes or Eleventh District Cost of
Funds 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 interest rate as determined, in accordance
with the procedures hereinafter set forth, with respect to the Interest
Determination Date (as defined below) pertaining to such Interest Reset 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).
Unless otherwise specified in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes that reset daily or weekly
or monthly (other than Eleventh District Cost of Funds Rate Notes), on the third
Wednesday of each month or on the third Wednesday of March, June, September and
December of each year, as specified in the applicable Pricing Supplement, or, in
the case of Eleventh District Cost of Funds Rate Notes, on the first calendar
day of each month or the first calendar day of each March, June, September and
December, as specified in the applicable Pricing Supplement; in the case of
Floating Rate Notes that reset quarterly, on the third Wednesday of March, June,
September and December of each year; in the case of Floating Rate Notes that
reset semi-annually, on the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and in the case of Floating Rate
Notes that reset annually, on the third Wednesday of the month of each year
specified in the applicable Pricing Supplement, and in each case at Maturity
(each such day being an "Interest Payment Date"). Unless otherwise specified in
the applicable Pricing Supplement, if an Interest Payment Date (other than at
Maturity) with respect to any Floating Rate Note would otherwise be a day that
is not a Business Day, such Interest Payment Date shall be the succeeding
Business Day, except, in the case of a LIBID Note or a LIBOR Note, if such day
would fall in the succeeding calendar month, such Interest Payment Date will be
the preceding Business Day. Any payment of principal (and premium, if any) and
interest required to be made on a Floating Rate Note on a date of Maturity that
is not a Business Day will be made on the succeeding Business Day, except, in
the case of a LIBID Note or a LIBOR Note, if such Business Day would fall in the
succeeding calendar month, such payment will be made on the preceding Business
Day (in each case with the same force and effect as if made on such date of
Maturity and no additional interest shall accrue as a result of any such delayed
payment).
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for CD Rate
Notes (the "CD Interest Determination Date"), Commercial Paper Rate Notes (the
"Commercial Paper Interest Determination Date"), Federal Funds Rate Notes (the
"Federal Funds Interest Determination Date"), Prime Rate Notes (the "Prime Rate
Interest Determination Date"), J.J. Kenny Rate Notes (the "J.J. Kenny Interest
Determination Date") and CMT Rate Notes (the "CMT Interest Determination Date")
will be the second Business Day preceding such Interest Reset Date. Unless
otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for LIBID Notes (the
"LIBID Interest Determination Date") and LIBOR Notes (the "LIBOR Interest
Determination Date") will be the second London Business Day (as defined below)
preceding such Interest Reset Date. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note (the "Treasury Interest Determination Date")
will be the day of the week in which such Interest Reset Date falls on which
Treasury bills of the applicable Index Maturity are 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 such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Interest Determination Date pertaining to the Interest
Reset Date occurring in the succeeding week. Unless otherwise specified in the
applicable Pricing Supplement, the Interest Determination Date pertaining to an
Interest Reset Date for an Eleventh District Cost of Funds Rate Note (the
"Eleventh District Cost of Funds Interest
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<PAGE> 12
Determination Date") will be the last working day of the month immediately
preceding such Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the monthly Eleventh District
Cost of Funds Index (as defined below).
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if any such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day preceding the applicable
Interest Payment Date or date of Maturity, as the case may be.
The Company will appoint, and enter into an agreement with, an agent (the
"Calculation Agent") to calculate interest on the Floating Rate Notes. Unless
otherwise specified in the applicable Pricing Supplement, Citibank will be the
calculation agent with respect to Floating Rate Notes. Upon the request of the
holder of any Floating Rate Note, the Calculation Agent will advise such holder
of the interest rate then in effect and, if determined, the interest rate that
will become effective on the next Interest Reset Date with respect to such
Floating Rate Note. All determinations to be made by the Calculation Agent shall
be at its sole discretion and, in the absence of manifest error, shall be
conclusive for all purposes and binding on holders of the Notes, and the
Calculation Agent shall have no liability therefor.
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 indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as made available and subsequently published
by the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication of the Board of
Governors of the Federal Reserve System ("H.15(519)") under the heading "CDs
(Secondary Market)." In the event that such rate is not made available prior to
3:00 P.M., New York City time, on the Calculation Date pertaining to such CD
Interest Determination Date, then the CD Rate will be the rate on such CD
Interest Determination Date for negotiable certificates of deposit having the
specified Index Maturity as made available and subsequently published by the
Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" or any successor
publication ("Composite Quotations") under the heading "Certificates of
Deposit." If by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such CD Interest Determination Date the rate for such CD Interest
Determination Date has not yet been made available in either H.15(519) or
Composite Quotations, then 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 of the highest credit standing (in the market for negotiable
certificates of deposit) having a remaining maturity closest to the specified
Index Maturity in a denomination of $5,000,000; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the CD Rate with respect to such CD Interest
Determination Date will be the CD Rate in effect on such CD Interest
Determination Date.
CD Rate Notes, like other Notes, are not deposit obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation.
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COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) on
such date of the rate for commercial paper having the Index Maturity designated
in the applicable Pricing Supplement as made available and subsequently
published in H.15(519) under the heading "Commercial Paper." In the event that
such rate is not made available by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Commercial Paper Interest Determination
Date, then the Commercial Paper Rate shall be the Money Market Yield of the rate
on that Commercial Paper Interest Determination Date for commercial paper having
the Index Maturity designated in the applicable Pricing Supplement as made
available and subsequently published in Composite Quotations under the heading
"Commercial Paper." If by 3:00 P.M., New York City time, on such Calculation
Date such rate has not yet been made available in either H.15(519) or Composite
Quotations, the Commercial Paper Rate for such Commercial Paper Interest
Determination Date shall be calculated by the Calculation Agent and shall be the
Money Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M.,
New York City time, on such Commercial Paper Interest Determination Date of
three leading dealers of commercial paper in The City of New York selected by
the Calculation Agent for commercial paper having the Index Maturity designated
in the applicable Pricing Supplement placed for an industrial issuer whose
senior unsecured bond rating is "AA," or the equivalent, from a nationally
recognized securities rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Commercial Paper Rate with respect to such Commercial Paper
Interest Determination Date will be the Commercial Paper Rate in effect on such
Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
LIBID NOTES
LIBID Notes will bear interest at the interest rates (calculated by
reference to LIBID and the Spread and/or Spread Multiplier, if any) specified in
the LIBID Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBID will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBID Interest Determination Date, LIBID will be
as specified in the applicable Pricing Supplement, either LIBID Reuters (as
defined below) or LIBID Telerate (as defined below), subject to the last
sentence of this paragraph. "LIBID Reuters" means the arithmetic mean of
the bid rates for deposits in the Designated Deposit Currency (as defined
below) having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second day on which dealings in deposits in
the Designated Deposit Currency are transacted in the London interbank
market ("London Business Day") immediately following such LIBID Interest
Determination Date, that appear on the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London
interbank bid and offered rates of major banks) (the "Reuters Screen LIBO
Page") as of 11:00 A.M., London time, on such LIBID Interest Determination
Date, if at least two such bid rates appear on the Reuters Screen LIBO
Page. "LIBID Telerate" means the rate for deposits in the Designated
Deposit Currency having
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the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following that
LIBID Interest Determination Date, that appears on the display designated
as page "3750" on the Telerate Service (or such other page as may replace
the 3750 page on that service or such other service or services as may be
nominated by the British Bankers' Association for the purpose of displaying
London interbank bid and offered rates for deposits in the Designated
Deposit Currency) (the "Telerate Page 3750") as of 11:00 A.M., London time,
on such LIBID Interest Determination Date. If neither LIBID Reuters nor
LIBID Telerate is specified in the applicable Pricing Supplement, LIBID
will be determined as if LIBID Telerate had been specified. If fewer than
two bid rates appear on the Reuters Screen LIBO Page, or if no rate appears
on the Telerate Page 3750, as applicable, LIBID in respect of such LIBID
Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to a LIBID Interest Determination Date on which
fewer than two bid rates appear on the Reuters Screen LIBO Page, or on
which no rate appears on Telerate Page 3750, as applicable, LIBID will be
determined on the basis of the bid rates at which deposits in the
Designated Deposit Currency, having the Index Maturity designated in the
applicable Pricing Supplement, are quoted at approximately 11:00 A.M.,
London time, on such LIBID Interest Determination Date to prime banks in
the London interbank market by four major banks in the London interbank
market selected by the Calculation Agent (the "LIBID Reference Banks")
commencing on the second London Business Day immediately following such
LIBID Interest Determination Date and in a principal amount equal to an
amount of not less than U.S. $1,000,000 (or the equivalent in the
Designated Deposit Currency) that is representative for a single
transaction in such market at such time. The Calculation Agent will request
the principal London office of each of such LIBID Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBID in respect of such LIBID Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBID in respect of such LIBID Interest Determination Date will
be the arithmetic mean of the rates quoted in the applicable Principal
Financial Center (as defined below), on such LIBID Interest Determination
Date by three major banks in such Principal Financial Center selected by
the Calculation Agent for loans in the Designated Deposit Currency to
leading banks, having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Business Day
immediately following the LIBID Interest Determination Date and in a
principal amount equal to an amount of not less than U.S. $1,000,000 (or
the equivalent in the Designated Deposit Currency) that is representative
for a single transaction in such market at such time; provided, however,
that if the banks selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, LIBID with respect to such LIBID
Interest Determination Date will be LIBID in effect on such LIBID Interest
Determination Date.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be
as specified in the applicable Pricing Supplement, either LIBOR Reuters (as
defined below) or LIBOR Telerate (as defined below), subject to the last
sentence of this paragraph. "LIBOR Reuters" means the arithmetic mean of
the offered rates for deposits in the Designated Deposit Currency having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO
Page as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page. "LIBOR Telerate" means the rate for deposits in the Designated
Deposit Currency having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date, that appears
on Telerate Page 3750 as of 11:00 A.M., London time,
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on such LIBOR Interest Determination Date. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR
will be determined as if LIBOR Telerate had been specified. If fewer than
two offered rates appear on the Reuters Screen LIBO Page, or if no rate
appears on the Telerate Page 3750, as applicable, LIBOR in respect of such
LIBOR Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page, or on
which no rate appears on Telerate Page 3750, as applicable, LIBOR will be
determined on the basis of the rates at which deposits in the Designated
Deposit Currency, having the Index Maturity designated in the applicable
Pricing Supplement, are offered at approximately 11:00 A.M., London time,
on such LIBOR Interest Determination Date by four major banks in the London
interbank market selected by the Calculation Agent (the "LIBOR Reference
Banks") to prime banks in the London interbank market commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date and in a principal amount equal to an amount of not less
than U.S. $1,000,000 (or the equivalent in the Designated Deposit Currency)
that is representative for a single transaction in such market at such
time. The Calculation Agent will request the principal London office of
each of such LIBOR Reference Banks to provide a quotation of its rate. If
at least two such quotations are provided, LIBOR in respect of such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two quotations are provided, LIBOR in respect of such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
in the applicable Principal Financial Center, on such LIBOR Interest
Determination Date by three major banks in such Principal Financial Center
selected by the Calculation Agent for loans in the Designated Deposit
Currency to leading banks, having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following the LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than U.S. $1,000,000 (or
the equivalent in the Designated Deposit Currency) that is representative
for a single transaction in such market at such time; provided, however,
that if the banks selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, LIBOR with respect to such LIBOR
Interest Determination Date will be LIBOR in effect on such LIBOR Interest
Determination Date.
"Designated Deposit Currency" means, with respect to any LIBID Note or
LIBOR Note, the currency (including a composite currency), if any, designated in
the applicable LIBID Note or LIBOR Note as the Designated Deposit Currency. If
no such currency is designated in the applicable LIBID Note or LIBOR Note, the
Designated Deposit Currency shall be U.S. dollars. "Principal Financial Center"
means, with respect to any LIBID Note or LIBOR Note, unless otherwise specified
in the applicable Pricing Supplement, the capital city of the country that
issues as its legal tender the Designated Deposit Currency of such LIBID Note or
LIBOR Note, except that with respect to U.S. dollars, Deutsche marks and ECUs,
the Principal Financial Center shall be the City of New York, Frankfurt and
Luxembourg, respectively.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of Treasury bills having the Index Maturity
designated in the applicable Pricing Supplement as made available and
subsequently published in H.15(519) under the heading "U.S. Government
Securities -- Treasury bills-auction average (investment)" or, if not so made
available by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Treasury Interest Determination Date, the auction average rate
(expressed as a bond equivalent, rounded to the nearest one hundredth of a
percent, with five one thousandths of a percent rounded upward, on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) for such
auction or 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
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not otherwise made available or 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 in a particular week, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, rounded to the nearest one-hundredth of a percent, with five
one-thousandths of a percent rounded upward, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) of the arithmetic mean of
the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Treasury Interest Determination Date of three 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 with respect
to such Treasury Interest Determination Date will be the Treasury Rate in effect
on such Treasury Interest Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds as made available and subsequently
published in H.15(519) under the heading "Federal Funds (Effective)." In the
event that such rate has not been made available 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 will be the rate on such Federal
Funds Interest Determination Date as made available and subsequently published
in Composite Quotations under the heading "Federal Funds/Effective Rate." If
such rate is not made available in H.15(519) or in Composite Quotations by 3:00
P.M., New York City time, on such Calculation Date, then 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 as of 9:00 A.M.,
New York City time, on such Federal Funds Interest Determination Date for the
last transaction in overnight Federal Funds arranged by three leading brokers of
Federal Funds transactions in The City of New York selected by the Calculation
Agent; provided, however, that if the brokers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate with respect to such Federal Funds Interest Determination Date will
be the Federal Funds Rate in effect on such Federal Funds Interest Determination
Date.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (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 indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Interest Determination Date, the rate
made available and subsequently published on such date in H.15(519) under the
heading "Bank Prime Loan." In the event that such rate has not been made
available prior to 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Prime Interest Determination Date, the Prime Rate will be
calculated by the Calculation Agent and will be the arithmetic mean of the rates
of interest publicly announced by each bank that appears on the Reuters Screen
NYMF Page (as defined below) as such bank's prime rate or base lending rate as
in effect for such Prime Interest Determination Date. If fewer than four such
rates but more than one such rate appear on the Reuters Screen NYMF Page for the
Prime Interest Determination Date, the rate shall be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year divided
by 360 as of the close of business on such Prime Interest Determination Date by
four major money center banks in The City of New York selected by the
Calculation Agent. If fewer than two such rates appear on the Reuters Screen
NYMF Page, the Prime Rate will be calculated by the Calculation Agent and will
be the arithmetic mean of the prime rates quoted in The City of New York on such
Prime Interest Determination Date by at least three substitute banks or trust
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companies organized and doing business under the laws of the United States, or
any State thereof, having total equity capital of at least U.S. $500,000,000 and
being subject to supervision or examination by Federal or State authority,
selected by the Calculation Agent to provide such rate or rates; provided,
however, that if the banks or trust companies selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Prime Rate
with respect to such Prime Interest Determination Date will be the Prime Rate in
effect on such Prime Interest Determination Date. "Reuters Screen NYMF Page"
means the display designated as page "NYMF" on the Reuters Monitor Money Rates
Service (or such other page as may replace the NYMF page on that service for the
purpose of displaying prime rates or base lending rates of major United States
banks).
J.J. KENNY RATE NOTES
J.J. Kenny Rate Notes will bear interest at the interest rates (calculated
by reference to the J.J. Kenny Rate and the Spread and/or Spread Multiplier, if
any) specified in the J.J. Kenny Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "J.J. Kenny
Rate" means, with respect to any J.J. Kenny Interest Determination Date, the per
annum rate on such date equal to the index made available and subsequently
published by Kenny Information Systems or its successor, based upon 30-day yield
evaluations at par of bonds, the interest on which is excludable from gross
income for federal income tax purposes under the Internal Revenue Code of 1986,
as amended (the "Code"), of not less than five "high grade" component issuers
selected from time to time by Kenny Information Systems, including without
limitation, issuers of general obligation bonds; provided, however, that the
bonds on which the index is based shall not include any bonds the interest on
which is subject to an "alternate minimum tax" or similar tax under the Code,
unless all tax-exempt bonds are subject to such tax. If such rate is not made
available by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such J.J. Kenny Interest Determination Date, the J.J. Kenny Rate shall be the
rate quoted by a successor indexing agent selected by the Company equalling the
prevailing rate for bonds rated in the highest short-term rating category by
Moody's Investors Service, Inc. and Standard & Poor's Corporation in respect of
issuers selected by such successor indexing agent most closely resembling the
"high grade" component issuers selected by Kenny Information Systems that are
subject to tender by the holders thereof for purchase on not more than seven
days notice and the interest on which is (A) variable on a weekly basis, (B)
excludable from gross income for federal income tax purposes under the Code, and
(C) not subject to an "alternate minimum tax" or similar tax under the Code,
unless all tax-exempt bonds are subject to such tax; provided, however, that if
a successor indexing agent is not available, the J.J. Kenny Rate with respect to
such J.J. Kenny Interest Determination Date will be the J.J. Kenny Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Interest Rate).
ELEVENTH DISTRICT COST OF FUNDS RATE NOTES
Eleventh District Cost of Funds Rate Notes will bear interest at the
interest rates (calculated by reference to the Eleventh District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any) specified in the Eleventh
District Cost of Funds Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Eleventh District Cost
of Funds Interest Determination Date, the rate equal to the monthly weighted
average cost of funds for the calendar month preceding such Eleventh District
Cost of Funds Interest Determination Date as set forth under the caption
"Eleventh District" on Telerate Page 7058 as of 11:00 A.M., San Francisco time,
on such Eleventh District Cost of Funds Interest Determination Date. If such
rate does not appear on Telerate Page 7058 on any related Eleventh District Cost
of Funds Interest Determination Date, the Eleventh District Cost of Funds Rate
for such Eleventh District Cost of Funds Interest Determination Date shall be
the monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Eleventh District Cost of Funds Rate Index") by the FHLB of San Francisco as
such cost of funds for the calendar month preceding the date of such
announcement. If the FHLB of San Francisco fails to announce such rate for the
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calendar month next preceding such Eleventh District Cost of Funds Interest
Determination Date, then the Eleventh District Cost of Funds Rate for such
Eleventh District Cost of Funds Interest Determination Date will be the Eleventh
District Cost of Funds Rate in effect on such Eleventh District Cost of Funds
Interest Determination Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated by
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the CMT Rate for
Treasury bills on such date having the Index Maturity designated in the
applicable Pricing Supplement as made available and subsequently published in
H.15(519) under the heading "Treasury constant maturities" or, if not so made
available by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such CMT Interest Determination Date, as displayed on Telerate Screen Page
7052 under the heading "Treasury Constant Maturities." If by 3:00 P.M., New York
City time, on the Calculation Date pertaining to such CMT Interest Determination
Date the rate has not yet been made available in H.15(519) or displayed on
Telerate Screen Page 7052, then the CMT Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, rounded to the nearest one-hundredth of a percent, with five one
thousandths of a percent rounded upward, 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 CMT Interest Determination Date of three leading primary United States
government securities dealers selected by the Calculation Agent for the issue of
Treasury bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting bid rates
as mentioned in this sentence, the CMT Rate with respect to such CMT Interest
Determination Date will be the CMT Rate in effect immediately prior to such CMT
Interest Determination Date.
INVERSE FLOATING RATE NOTES
Any Floating Rate Note may be designated in the applicable Pricing
Supplement as an "Inverse Floating Rate Note," in which event, unless otherwise
specified in the applicable Pricing Supplement, the interest rate on such
Floating Rate Note will be equal to (i) in the case of the period, if any,
commencing on the Issue Date (or the date on which such Note otherwise begins to
accrue interest (if different from the Issue Date)) up to the first Interest
Reset Date, a fixed rate of interest established by the Company as described in
the applicable Pricing Supplement and (ii) in the case of each period commencing
on an Interest Reset Date, a fixed rate of interest specified in the Pricing
Supplement minus the interest rate determined by reference to the Base Rate as
adjusted by the Spread and/or Spread Multiplier, if any; provided, however, that
(x) the interest rate thereon will not be less than zero and (y) the interest
rate in effect for the ten days immediately prior to the date of Maturity of
such Inverse Floating Rate Note will be that in effect on the tenth day
preceding such date.
FLOATING RATE/FIXED RATE NOTES
The applicable Pricing Supplement may provide that a Note will be a
Floating Rate Note for a specified portion of its term and a Fixed Rate Note for
the remainder of its term, in which event the interest rate on such Note will be
determined as herein provided as if it were a Floating Rate Note and a Fixed
Rate Note hereunder for each such respective period, all as specified in such
applicable Pricing Supplement.
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CURRENCY INDEXED NOTES
General
The Company may from time to time offer Notes, the principal amount payable
at Maturity and/or the interest rate of which is determined by reference to the
rate of exchange between the currency or composite currency in which such Notes
are denominated (the "Denominated Currency") and the other currency or composite
currency specified as the Indexed Currency (the "Indexed Currency") in the
applicable Pricing Supplement, or as determined in such other manner as may be
specified in the applicable Pricing Supplement ("Currency Indexed Notes").
Unless otherwise specified in the applicable Pricing Supplement, holders of
Currency Indexed Notes will be entitled to receive (i) an amount in respect of
such Currency Indexed Notes exceeding the amount designated as the face amount
of the principal (the "Face Amount") of, and/or interest calculated at the
designated rate of interest on, such Currency Indexed Notes in the applicable
Pricing Supplement if, on the date of Maturity or upon the relevant Interest
Payment Date, as the case may be, the rate at which the Denominated Currency can
be exchanged for the Indexed Currency is greater than the rate of such exchange
designated as the Base Exchange Rate, expressed in units of the Indexed Currency
per one unit of the Denominated Currency, in the applicable Pricing Supplement
(the "Base Exchange Rate"), or (ii) an amount in respect of such Currency
Indexed Notes less than the Face Amount and/or interest calculated at such
designated interest rate of such Currency Indexed Notes if, at Maturity or upon
the relevant Interest Payment Date, as the case may be, the rate at which the
Denominated Currency can be exchanged for the Indexed Currency is less than such
Base Exchange Rate, in each case determined as described below under "Payment of
Principal and Interest." Information as to the relative historical value (which
information is not necessarily indicative of relative future value) of the
applicable Denominated Currency against the applicable Indexed Currency, any
exchange controls applicable to such Denominated Currency or Indexed Currency
and the U.S. federal income tax consequences of the purchase, ownership and
disposition of Currency Indexed Notes will be set forth in the applicable
Pricing Supplement. See "Foreign Currency Risks."
Unless otherwise specified in the applicable Pricing Supplement, the term
"Exchange Rate Day" shall mean any day which is a Business Day in The City of
New York, and if the Denominated Currency or Indexed Currency is any currency or
composite currency other than the U.S. dollar, in the principal financial center
of the country of such Denominated Currency or Indexed Currency.
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, the
payment of principal at Maturity and interest on Currency Indexed Notes on each
Interest Payment Date (until principal thereof is paid or made available for
payment) will be payable in the Denominated Currency (except in the
circumstances of the unavailability of such currency, as otherwise described
under "Payment Currency" above) in amounts calculated in the manner described
below.
Unless otherwise specified in the applicable Pricing Supplement, principal
at Maturity, if indexed, will be payable in an amount equal to the Face Amount
of the Currency Indexed Note, plus or minus an amount of the Denominated
Currency determined by the determination agent specified in the applicable
Pricing Supplement (the "Determination Agent") by reference to the difference
between the Base Exchange Rate and the rate at which the Denominated Currency
can be exchanged for the Indexed Currency on the second Exchange Rate Day (the
"Determination Date") prior to the date of Maturity of such Currency Indexed
Note. Such rate of exchange shall be the highest bid of the open market spot
offer quotations for the Indexed Currency (spot bid quotations for the
Denominated Currency) obtained by the Determination Agent from the Reference
Dealers (as defined below) in The City of New York at 11:00 A.M., New York City
time, on the Determination Date, for an amount of Indexed Currency equal to the
Face Amount of such Currency Indexed Note multiplied by the Base Exchange Rate,
with settlement on the date of Maturity to be in the Denominated Currency (such
rate of exchange, as so determined and expressed in units of the Indexed
Currency per one unit of the Denominated Currency, is hereafter referred to as
the "Spot Rate"). If such quotations from the Reference Dealers are not
available on the Determination Date due to circumstances
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beyond the control of the Company or the Determination Agent, the Spot Rate will
be determined on the basis of the most recently available quotations from the
Reference Dealers. As used herein, the term "Reference Dealers" shall mean the
three banks or firms specified as such in the applicable Pricing Supplement, or
if any of them shall be unwilling or unable to provide the requested quotations,
such other major money center bank or banks in The City of New York selected by
the Determination Agent to act as Reference Dealer or Dealers in replacement
therefor. In the absence of manifest error, the determination by the
Determination Agent of the Spot Rate and the principal amount of and interest on
the Currency Indexed Notes payable at Maturity thereof shall be final and
binding on the Company and the holders of such Currency Indexed Notes.
Unless otherwise specified in the applicable Pricing Supplement, on the
basis of the aforesaid determination by the Determination Agent and the formulae
and limitations set forth below, (i) if the Base Exchange Rate equals the Spot
Rate for any Currency Indexed Note, then the principal amount of such Currency
Indexed Note payable at Maturity would be equal to the Face Amount of such
Currency Indexed Note; (ii) if the Spot Rate exceeds the Base Exchange Rate
(i.e., the Denominated Currency has appreciated against the Indexed Currency
during the term of the Currency Indexed Note), then the principal amount so
payable would be greater than the Face Amount of such Currency Indexed Note up
to an amount equal to twice the Face Amount of such Currency Indexed Note; (iii)
if the Spot Rate is less than the Base Exchange Rate (i.e., the Denominated
Currency has depreciated against the Indexed Currency during the term of the
Currency Indexed Note) but is greater than one-half of the Base Exchange Rate,
then the principal amount so payable would be less than the Face Amount of such
Currency Indexed Note; and (iv) if the Spot Rate is less than or equal to
one-half of the Base Exchange Rate, then the Spot Rate will be deemed to be
one-half of the Base Exchange Rate and no principal amount of the Currency
Indexed Note would be payable at Maturity.
With respect to the payment of interest on each Interest Payment Date, if
indexed, the amount will be the Face Amount multiplied by the relevant interest
rate, indexed as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
formulae to be used by the Determination Agent to determine the principal amount
of a Currency Indexed Note payable at Maturity will be as follows:
As to principal, if the Spot Rate exceeds or equals the Base Exchange Rate,
the principal amount of a Currency Indexed Note payable at Maturity shall equal:
Face Amount + (Face Amount X Spot Rate - Base Exchange Rate)
----------------------
Spot Rate
and if the Base Exchange Rate exceeds the Spot Rate, the principal amount of a
Currency Indexed Note payable at Maturity (which shall, in no event, be less
than zero) shall equal:
Face Amount - (Face Amount X Base Exchange Rate - Spot Rate)
----------------------
Spot Rate
Unless otherwise specified in the applicable Pricing Supplement, if the
formulae set forth above are applicable to a Currency Indexed Note, the maximum
principal amount payable at Maturity in respect of such a Currency Indexed Note
would be an amount equal to twice the Face Amount and the minimum principal
amount payable would be zero.
OTHER INDEXED NOTES AND CERTAIN TERMS APPLICABLE TO ALL INDEXED NOTES
The Notes may be issued as Indexed Notes, other than Currency Indexed
Notes, the principal amount of which payable at Maturity or the interest (or
premium, if any) thereon, or both, may be determined by reference to the
relationship between two or more currencies, to the price of one or more
specified securities or commodities, to one or more securities or commodities
exchange indices or other indices or by other similar methods or formulae. The
Pricing Supplement relating to such an Indexed Note will describe, as
applicable, the method by which the amount of interest payable on any Interest
Payment Date and the amount of
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principal payable at Maturity in respect of such Indexed Note will be
determined, the U.S. federal income tax consequences of the purchase, ownership
and disposition of such Notes, certain risks associated with an investment in
such Notes and other information relating to such Notes. See "Foreign Currency
Risks."
Unless otherwise specified in the applicable Pricing Supplement, the
maximum principal amount payable at Maturity in respect of any Indexed Note will
be an amount equal to twice the Face Amount of such Note and the minimum
principal amount so payable will be zero.
Unless otherwise specified in the applicable Pricing Supplement, (i) for
the purpose of determining whether holders of the requisite principal amount of
Securities outstanding under the Indenture have made a demand or given a notice
or waiver or taken any other action, the outstanding principal amount of Indexed
Notes will be deemed to be the Face Amount thereof, and (ii) in the event of an
acceleration of the Stated Maturity of an Indexed Note, the principal amount
payable to the holder of such Note upon acceleration will be the principal
amount determined by reference to the formula by which the principal amount of
such Note would be determined on the Stated Maturity thereof, as if the date of
acceleration were the Stated Maturity.
An investment in Indexed Notes entails significant risks, including wide
fluctuations in market value as well as in the amounts of payments due
thereunder, that are not associated with a similar investment in a conventional
debt security. Such risks depend on a number of factors including supply and
demand for the particular commodity and economic and political events over which
the Company has no control. Fluctuations in the price of any particular security
or commodity, in the rates of exchange between particular currencies or in
particular indices that have occurred in the past are not necessarily
indicative, however, of fluctuations in the price or rates of exchange that may
occur during the term of any Indexed Notes. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by an investment in Indexed Notes. Indexed Notes are not an appropriate
investment for investors who are unsophisticated with respect to securities,
commodities and/or foreign currency transactions.
DUAL CURRENCY NOTES
The Company may from time to time offer Notes (the "Dual Currency Notes")
as to which the Company has a one time option, exercisable on any one of the
dates specified in the applicable Pricing Supplement (each an "Option Election
Date") in whole, but not in part, with respect to all Dual Currency Notes issued
on the same day and having the same terms (a "Tranche"), of thereafter making
all payments of principal, premium, if any, and interest (which payments would
otherwise be made in the Specified Currency of such Notes) in the optional
currency specified in the applicable Pricing Supplement (the "Optional Payment
Currency"). Information as to the relative value of the Specified Currency
compared to the Optional Payment Currency will be set forth in the applicable
Pricing Supplement.
The Pricing Supplement for each issuance of Dual Currency Notes will
specify, among other things, the
Specified Currency and Optional Payment Currency of such issuance and the
Designated Exchange Rate for such issuance, which will be a fixed exchange rate
used for converting amounts denominated in the Specified Currency into amounts
denominated in the Optional Payment Currency (the "Designated Exchange Rate").
The Pricing Supplement will also specify the Option Election Dates and Interest
Payment Dates for the related issuance of Dual Currency Notes. Each Option
Election Date will be a certain number of days before an Interest Payment Date
or the Maturity Date, as set forth in the applicable Pricing Supplement, and
will be the date on which the Company may select whether to make all scheduled
payments due thereafter in the Optional Payment Currency rather than in the
Specified Currency.
If the Company makes such an election, the amount payable in the Optional
Payment Currency shall be determined using the Designated Exchange Rate
specified in the applicable Pricing Supplement. If such election is made, notice
of such election shall be mailed in accordance with the terms of the applicable
Tranche of Dual Currency Notes within two Business Days of the Option Election
Date and shall state (i) the first date, whether an Interest Payment Date and/or
the Maturity Date, on which scheduled payments in the Optional Payment Currency
will be made and (ii) the Designated Exchange Rate. Any such notice by the
Company, once given, may not be withdrawn. The equivalent value in the Specified
Currency of payments
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made after such an election may be less, at the then current exchange rate, than
if the Company had made such payment in the Specified Currency.
For federal income tax purposes, holders of Dual Currency Notes may be
subject to rules which differ from the general rules applicable to holders of
other types of Notes offered hereby. The U.S. federal income tax consequences of
the purchase, ownership and disposition of Dual Currency Notes will be set forth
in the applicable Pricing Supplement.
SUBSEQUENT INTEREST PERIODS
The Pricing Supplement relating to each Note will indicate whether the
Company has the option with respect to such Note to reset the interest rate, in
the case of a Fixed Rate Note, or to reset the Spread and/or Spread Multiplier,
in the case of a Floating Rate Note, and, if so, the date or dates on which such
interest rate or such Spread and/or Spread Multiplier, as the case may be, may
be reset (each an "Optional Reset Date"). If the Company has such option with
respect to any Note, the following procedures shall apply, unless modified as
set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 days prior to an
Optional Reset Date for such Note. Not later than 40 days prior to such Optional
Reset Date, the Trustee will mail to the holder of such Note a notice (the
"Reset Notice") setting forth (i) the election of the Company to reset the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, (ii) such new interest rate or
such new Spread and/or Spread Multiplier, as the case may be, and (iii) the
provisions, if any, for redemption during the period from such Optional Reset
Date to the next Optional Reset Date or, if there is no such next Optional Reset
Date, to the Stated Maturity of such Note (each such period a "Subsequent
Interest Period"), including the date or dates on which or the period or periods
during which and the price or prices at which such redemption may occur during
such Subsequent Interest Period. Upon the transmittal by the Trustee of a Reset
Notice to the holder of a Note, such new interest rate or such new Spread and/or
Spread Multiplier, as the case may be, shall take effect automatically, and,
except as modified by the Reset Notice and as described in the next paragraph,
such Note will have the same terms as prior to the transmittal of such Reset
Notice.
Notwithstanding the foregoing, not later than 20 days prior to an Optional
Reset Date for a Note, the Company may, at its option, revoke the interest rate,
in the case of a Fixed Rate Note, or the Spread and/or Spread Multiplier, in the
case of a Floating Rate Note, provided for in the Reset Notice and establish an
interest rate, in the case of a Fixed Rate Note, or a Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, that is higher than the
interest rate or Spread and/or Spread Multiplier, as the case may be, provided
for in the Reset Notice, for the Subsequent Interest Period commencing on such
Optional Reset Date by causing the Trustee to transmit notice of such higher
interest rate or higher Spread and/or Spread Multiplier, as the case may be, to
the holder of such Note. Such notice shall be irrevocable. All Notes with
respect to which the interest rate or Spread and/or Spread Multiplier is reset
on an Optional Reset Date and with respect to which the holders of such Notes
have not tendered such Notes for repayment (or have validly revoked any such
tender) pursuant to the next succeeding paragraph will bear such higher interest
rate, in the case of a Fixed Rate Note, or higher Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, for the Subsequent Interest
Period.
If the Company elects to reset the interest rate or the Spread and/or
Spread Multiplier of a Note as described above, the holder of such Note will
have the option to elect repayment of such Note by the Company on any Optional
Reset Date at a price equal to the aggregate principal amount thereof
outstanding on, plus any interest accrued to, such Optional Reset Date. In order
for a Note to be so repaid on an Optional Reset Date, the holder thereof must
follow the procedures set forth below under "Redemption and Repayment" for
optional repayment, except that the period for delivery of such Note or
notification to the Trustee shall be at least 25 but not more than 35 days prior
to such Optional Reset Date and except that a holder who has tendered a Note for
repayment pursuant to a Reset Notice may, by written notice to the
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Trustee, revoke any such tender for repayment until the close of business on the
tenth day prior to such Optional Reset Date.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing
Note) will indicate whether the Company has the option to extend the Stated
Maturity of such Note for one or more periods (each an "Extension Period") up to
but not beyond the date (the "Final Maturity Date") set forth in such Pricing
Supplement. If the Company has such option with respect to any Note (other than
an Amortizing Note), the following procedures shall apply, unless modified as
set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to a Note (other than an
Amortizing Note) by notifying the Trustee of such exercise at least 50 but not
more than 60 days prior to the Stated Maturity of such Note in effect prior to
the exercise of such option (the "Original Stated Maturity"). No later than 40
days prior to the Original Stated Maturity, the Trustee will mail to the holder
of such Note a notice (the "Extension Notice") relating to such Extension
Period, setting forth (i) the election of the Company to extend the Original
Stated Maturity, (ii) the new Stated Maturity, (iii) in the case of a Fixed Rate
Note, the interest rate applicable to the Extension Period or, in the case of a
Floating Rate Note, the Spread and/or Spread Multiplier applicable to the
Extension Period and (iv) the provisions, if any, for redemption during the
Extension Period, including the date or dates on which or the period or periods
during which and the price or prices at which such redemption may occur during
the Extension Period. Upon the transmittal by the Trustee of an Extension Notice
to the holder of a Note, the Original Stated Maturity shall be extended
automatically, and, except as modified by the Extension Notice and as described
in the next paragraph, such Note will have the same terms as prior to the
transmittal of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Original
Stated Maturity for a Note, the Company may, at its option, revoke the interest
rate, in the case of a Fixed Rate Note, or the Spread and/or Spread Multiplier,
in the case of a Floating Rate Note, provided for in the Extension Notice and
establish an interest rate, in the case of a Fixed Rate Note, or a Spread and/or
Spread Multiplier, in the case of a Floating Rate Note, that is higher than the
interest rate or Spread and/or Spread Multiplier, as the case may be, provided
for in the Extension Notice, for the Extension Period by causing the Trustee to
transmit notice of such higher interest rate or higher Spread and/or Spread
Multiplier, as the case may be, to the holder of such Note. Such notice shall be
irrevocable. All Notes with respect to which the Stated Maturity is extended and
with respect to which the holders of such Notes have not tendered such Notes for
repayment (or have validly revoked any such tender) pursuant to the next
succeeding paragraph will bear such higher interest rate, in the case of a Fixed
Rate Note, or higher Spread and/or Spread Multiplier, in the case of a Floating
Rate Note, for the Extension Period.
If the Company elects to extend the Stated Maturity of a Note, the holder
of such Note will have the option to elect repayment of such Note by the Company
on the Original Stated Maturity at a price equal to the aggregate principal
amount thereof outstanding plus any accrued interest to such date. In order for
a Note to be so repaid on the Original Stated Maturity, the holder thereof must
follow the procedures set forth below under "Redemption and Repayment" for
optional repayment, except that the period for delivery of such Note or
notification to the Trustee shall be at least 25 but not more than 35 days prior
to the Original Stated Maturity and except that a holder who has tendered a Note
for repayment pursuant to an Extension Notice may, by written notice to the
Trustee, revoke any such tender for repayment until the close of business on the
tenth day prior to the Original Stated Maturity.
RENEWABLE NOTES
The Company may from time to time offer Notes which will mature on an
Interest Payment Date specified in the applicable Pricing Supplement occurring
in or prior to the twelfth month following the original Issue Date of such Notes
(the "Initial Maturity Date") unless the term of all or any portion of any such
Note (a "Renewable Note") is renewed in accordance with the procedures described
below.
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On the Interest Payment Date occurring in the sixth month (unless a
different interval (the "Special Election Interval") is specified in the
applicable Pricing Supplement) prior to the Initial Maturity Date of a Renewable
Note (the "Initial Renewal Date") and on the Interest Payment Date occurring in
each sixth month (or in the last month of each Special Election Interval) after
such Initial Renewal Date (each, together with the Initial Renewal Date, a
"Renewal Date"), the term of such Renewable Note may be extended to the Interest
Payment Date occurring in the twelfth month (or, if a Special Election Interval
is specified in the applicable Pricing Supplement, the last month in a period
equal to twice the Special Election Interval) after such Renewal Date, if the
holder of such Renewable Note elects to extend the term of such Renewable Note
or any portion thereof as described below. If a holder does not elect to extend
the term of any portion of the principal amount of a Renewable Note during the
specified period prior to any Renewal Date, such portion will become due and
payable on the Interest Payment Date occurring in the sixth month (or the last
month in the Special Election Interval) after such Renewal Date (the "New
Maturity Date").
A holder of a Renewable Note may elect to renew the term of such Renewable
Note, or if so specified in the applicable Pricing Supplement, any portion
thereof, by delivering a notice to such effect to the Trustee (or any duly
appointed paying agent) at the Corporate Trust Office not less than 15 nor more
than 30 days prior to such Renewal Date (unless another period is specified in
the applicable Pricing Supplement as the "Special Election Period"). Such
election will be irrevocable and will be binding upon each subsequent holder of
such Renewable Note. An election to renew the term of a Renewable Note may be
exercised with respect to less than the entire principal amount of such
Renewable Note only if so specified in the applicable Pricing Supplement and
only in such principal amount, or any integral multiple in excess thereof, as is
specified in the applicable Pricing Supplement. Notwithstanding the foregoing,
the term of the Renewable Notes may not be extended beyond the Stated Maturity
specified for such Renewable Notes in the applicable Pricing Supplement.
If the holder does not elect to renew the term, such Renewable Note must be
presented to the Trustee (or any duly appointed paying agent) and, with respect
to a Renewable Note that is a certificate issued in definitive form, as soon as
practicable following receipt of such Renewable Note the Trustee (or any duly
appointed paying agent) shall issue in exchange therefor in the name of such
holder (i) a Note, in a principal amount equal to the principal amount of such
exchanged Renewable Note for which no election to renew the term thereof was
exercised, with terms identical to those specified on such Renewable Note
(except that such Note shall have a fixed, nonrenewable Stated Maturity on the
New Maturity Date) and (ii) if an election to renew is made with respect to less
than the full principal amount of such holder's Renewable Note, a replacement
Renewable Note, in a principal amount equal to the principal amount of such
exchanged Renewable Note for which the election to renew was made, with terms
identical to such exchanged Renewable Notes.
COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "Subsequent Interest Periods," "Extension of Maturity" and
"Renewable Notes."
REDEMPTION AND REPAYMENT
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to its Stated Maturity or that such Note will be
redeemable, in whole or in part, at the option of the Company on a date or dates
specified prior to such Stated Maturity at a price or prices, set forth in the
applicable Pricing Supplement, together with accrued interest to the date of
redemption. Unless otherwise specified in the applicable Pricing Supplement, the
Notes, other than Amortizing Notes, will not be subject to any sinking fund. 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. Unless otherwise specified in the applicable Pricing
Supplement, if less than all of the 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.
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The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid at the option of the holder prior to its Stated Maturity
or that such Note will be repayable at the option of the holder thereof on a
date or dates specified prior to its Stated Maturity at a price or prices set
forth in the applicable Pricing Supplement, together with accrued interest to
the date of repayment.
Unless otherwise specified in the applicable Pricing Supplement, in order
for a Note to be repaid at the option of the holder thereof, the Company must
receive at least 30 days but not more than 45 days prior to the repayment date
the Note with the form entitled "Option to Elect Repayment" on the reverse of or
otherwise accompanying the Note duly completed. Exercise of the repayment option
by the holder of a Note shall be irrevocable, except as otherwise described
above under "Description of Notes -- Subsequent Interest Periods" and
"Description of Notes -- Extension of Maturity." The repayment option may be
exercised by the holder of a Note for less than the aggregate principal amount
of the Note then outstanding provided that the principal amount of the Note
remaining outstanding after repayment is an authorized denomination.
With respect to a Global Security, the Depositary's nominee will be the
holder of such Global Security and therefore will be the only entity that can
exercise a right to repayment. See "Description of Notes -- Book-Entry Notes"
below. In order to ensure that the Depositary's nominee will timely exercise a
right to repayment with respect to a particular beneficial interest in a Global
Security, the beneficial owner of such interest must instruct the broker or
other direct or indirect participant through which it holds a beneficial
interest in such Global Security to notify the Depositary of its desire to
exercise a right to repayment. Different firms have different cut-off times for
accepting instructions from their customers and, accordingly, each beneficial
owner should consult the broker or other direct or indirect participant through
which it holds an interest in a Global Security in order to ascertain the
cut-off time by which such an instruction must be given in order for timely
notice to be delivered to the Depositary.
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 Stated Maturity will be the Amortized Face Amount of such
Note, as specified in the applicable Pricing Supplement, as of the date of
redemption or repayment, as the case may be.
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held or resold or may be surrendered to the
Trustee for cancellation.
OTHER PROVISIONS
Any provisions with respect to the determination of an interest rate basis,
the specification of an interest rate basis, calculation of the interest rate
applicable to, or the principal payable at Maturity on, any Note, its Interest
Payment Dates or any other matter relating thereto may be modified by the terms
as specified under "Other Provisions" on the face of such Note, or in an
addendum relating thereto if so specified on the face thereof, and in the
applicable Pricing Supplement.
BOOK-ENTRY NOTES
Global Securities will be deposited with, or on behalf of, the Depositary
and registered in the name of the Depositary's nominee. Except as set forth
below, a Global Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor of the Depositary or a nominee of such successor.
Unless otherwise specified in the applicable Pricing Supplement, DTC will be the
Depositary.
Principal and interest payments on the Notes represented by one or more
Global Securities will be made by the Company to the Depositary or its nominee,
as the case may be, as the registered owner of the related Global Security or
Securities. The Company expects that the Depositary or its nominee, upon receipt
of any
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payment of principal or interest in respect of Global Securities, will credit
immediately the accounts of the related participants with payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in such Global Securities as shown on the records of the Depositary.
Neither the Company nor the Trustee or any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of Global Securities,
or for maintaining, supervising or reviewing any records relating to such
beneficial interests. The Company also expects that payments by participants to
owners of beneficial interests in Global Securities held through such
participants will be governed by standing customer instructions and customary
practices, as is the case with securities registered in "street name." Such
instructions will be the responsibility of such participants.
If an issue of Notes is denominated in a currency other than the U.S.
dollar, the Company will make payments of principal and any interest in the
currency in which the Notes are denominated (the "foreign currency") or in U.S.
dollars. DTC has elected to have all such payments of principal and interest in
U.S. dollars unless notified by any of its participants through which an
interest in the Notes is held that it elects, in accordance with and to the
extent permitted by the applicable Pricing Supplement and the Note, to receive
such payment of principal or interest in the foreign currency. On or prior to
the third Business Day after the record date for payment of interest and twelve
days prior to the date for payment of principal, such participant shall notify
DTC of (i) its election to receive all, or the specified portion, of such
payment in the foreign currency and (ii) its instructions for wire transfer of
such payment to a foreign currency account.
DTC will notify the Paying Agent on or prior to the fifth Business Day
after the record date for payment of interest and ten days prior to the date for
payment of principal of the portion of such payment to be received in the
foreign currency and the applicable wire transfer instructions, and the Paying
Agent shall use such instructions to pay the participants directly. If DTC does
not so notify the Paying Agent, it is understood that only U.S. dollar payments
are to be made. The Paying Agent shall notify DTC on or prior to the second
Business Day prior to the payment date of the conversion rate to be used and the
resulting U.S. dollar amount to be paid per $1,000 face amount. In the event
that the Paying Agent's quotation to convert the foreign currency into U.S.
dollars is not available, the Paying Agent shall notify DTC's Dividend
Department that the entire payment is to be made in the foreign currency. In
such event, DTC will ask its participants for payment instructions and forward
such instructions to the Paying Agent and the Paying Agent shall use such
instructions to pay the participants directly.
If the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days, the Company will issue Notes in certificated form in
exchange for beneficial interests in the Global Securities. In addition, the
Company may at any time determine not to have its Notes represented by one or
more Global Securities, and, in such event, will issue Notes in certificated
form in exchange for beneficial interests in Global Securities. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in certificated form of Notes equal in principal
amount to such beneficial interest and to have such Notes registered in its
name. Notes so issued in certificated form will be issued in denominations of
$1,000 or any amount in excess thereof that is an integral multiple of $1,000
and will be issued in registered form only, without coupons.
A further description of the Depositary's procedures with respect to Global
Securities is set forth in the accompanying Prospectus under "Description of
Securities -- Global Securities."
IMPORTANT CURRENCY EXCHANGE INFORMATION
Each purchaser of a Note is required to pay for such Note in the Specified
Currency thereof. Currently, there are limited facilities in the United States
for conversion of U.S. dollars into foreign currencies and vice versa, and banks
do not generally offer non-U.S. dollar checking or savings account facilities in
the United States. However, if requested by a prospective purchaser of Notes
denominated in a Specified Currency other than U.S. dollars, the Agent will
arrange for the conversion of U.S. dollars into such Specified Currency to
enable the purchaser to pay for such Notes. Such request must be made on or
before the fifth Business Day preceding the date of delivery of the Notes, or by
such other date as is determined by the Agent. Each such conversion will be made
by the Agent on such terms and subject to such conditions, limitations and
charges as
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the Agent may from time to time establish in accordance with its regular foreign
exchange practice. All costs of any such exchange will be borne by the
purchasers of the Notes requesting such conversion.
FOREIGN CURRENCY RISKS
GOVERNING LAW AND JUDGMENTS
The Notes will state that they will be governed by and construed in
accordance with the laws of the State of New York. Courts in the United States
have not customarily rendered judgments for money damages denominated in any
currency other than the U.S. dollar. The Judiciary Law of the State of New York
provides, however, that judgment rendered in an action based upon an obligation
denominated in a currency other than U.S. dollars will be rendered in the
foreign currency of the underlying obligation and converted into U.S. dollars at
a rate of exchange prevailing on the date of the entry of the judgment or
decree.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in a Specified Currency other
than U.S. dollars ("Foreign Currency Notes") entails significant risks that are
not associated with a similar investment in a security denominated in U.S.
dollars. Similarly, an investment in a Currency Indexed Note entails significant
risks that are not associated with a similar investment in non-Indexed Notes.
Such risks include, without limitation, the possibility of significant market
changes in rates of exchange between U.S. dollars and such Specified Currency
(or, in the case of each Currency Indexed Note, the rate of exchange between the
Denominated Currency and the Indexed Currency for such Currency Indexed Note),
the possibility of significant changes in rates of exchange between U.S. dollars
and such Specified Currency (or, in the case of each Currency Indexed Note,
changes in rates of exchange between the Denominated Currency and the Indexed
Currency for such Currency Indexed Note) resulting from official redenomination
with respect to such Specified Currency (or, in the case of each Currency
Indexed Note, with respect to the Denominated Currency or the Indexed Currency
therefor) 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 factors over which the Company has no control, such as
economic and political events, and on the supply of and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies, and between certain foreign currencies and other
foreign currencies, have been volatile, and such volatility may be expected in
the future. Fluctuations that have occurred in any particular exchange rate in
the past are not necessarily indicative, however, of fluctuations that may occur
in the rate during the term of any Foreign Currency Note or any Currency Indexed
Note. Depreciation of the Specified Currency of a Foreign Currency Note against
U.S. dollars would result in a decrease in the effective yield of such Foreign
Currency Note below its coupon rate and, in certain circumstances, could result
in a loss to the investor on a U.S. dollar basis. Similarly, depreciation of the
Denominated Currency with respect to a Currency Indexed Note against the
applicable Indexed Currency would result in the principal amount payable with
respect to such Currency Indexed Note at the date of Maturity being less than
the Face Amount of such Currency Indexed Note which, in turn, would decrease the
effective yield of such Currency Indexed Note below its stated interest rate and
could also result in a loss to the investor. See "Description of
Notes -- Currency Indexed Notes."
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency (other than U.S. dollars) at the time of payment of
principal of, or premium, if any, or interest on, a Foreign Currency Note. There
can be no assurance that exchange controls will not restrict or prohibit
payments of principal (and premium, if any) or interest in any such Specified
Currency. Even if there are no actual exchange controls, it is possible that
such Specified Currency would not be available to the Company when payments on
such Note are due because of circumstances beyond the control of the Company. In
any such event, the Company will make required payments in U.S. dollars on the
basis described herein. See "Description of Notes -- Payment Currency" and
"Description of Notes -- Currency Indexed Notes -- Payment of Principal and
Interest."
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THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT, AND ANY
PRICING SUPPLEMENT WILL NOT, DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES
DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A CURRENCY
OR COMPOSITE CURRENCY OTHER THAN U.S. DOLLARS, AND THE COMPANY DISCLAIMS ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE INVESTORS 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 SUCH NOTES. SUCH NOTES ARE
NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT
TO FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise specified in the applicable Pricing Supplement, no Foreign
Currency Note will be sold in or to residents of the country issuing the
Specified Currency of such Foreign Currency Note. 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 (and premium, if any) or interest on such
Foreign Currency Notes. Such persons should consult their own counsel with
regard to such matters.
Pricing Supplements relating to Foreign Currency Notes or Currency Indexed
Notes will contain information concerning historical exchange rates for the
applicable Specified Currency or Denominated Currency against the U.S. dollar or
other relevant currency (including, in the case of Currency Indexed Notes, the
applicable Indexed Currency), a description of such currency or currencies and
any exchange controls affecting such currency or currencies. The information
therein concerning exchange rates is furnished as a matter of information only
and should not be regarded as indicative of the range of or trends in
fluctuations in currency exchange rates that may occur in the future.
CERTAIN FEDERAL TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Notes as of the
date hereof. It deals only with Notes held as capital assets and does not deal
with persons in special tax situations, such as financial institutions,
insurance companies, tax-exempt organizations, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes, or persons whose functional currency
is not the U.S. dollar. It also does not deal with state, local or foreign tax
consequences or with holders other than original purchasers. This summary is
based upon the provisions of the Code and regulations, rulings and judicial
decisions thereunder as of the date hereof, which authorities may be repealed,
revoked or modified, possibly with retroactive effect, so as to result in
federal income tax consequences different from those discussed below.
Persons considering the purchase of the Notes should consult their tax
advisors concerning the application of United States federal income tax laws to
their particular situations as well as any consequences arising under the laws
of any state, local or foreign taxing jurisdiction. The material federal income
tax consequences of Indexed Notes, Currency Indexed Notes, Dual Currency Notes,
or Notes containing terms that result in consequences other than those described
below will be addressed in the applicable pricing supplement.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is included in gross
income for U.S. federal income tax purposes regardless of source, or (iv) a
trust, if a U.S. court is able to exercise primary supervision over its
administration and one or more U.S. fiduciaries have the authority to control
all of its substantial decisions. The term "Non-U.S. Holder" means a holder of a
Note that is not a U.S. Holder.
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U.S. HOLDERS
PAYMENTS OF INTEREST ON THE NOTES
Interest paid on a Note (whether in U.S. dollars or in other than U.S.
dollars) that is not a Discount Note (as defined below) will generally be
taxable to a U.S. Holder as ordinary interest income at the time it accrues or
is received, in accordance with the U.S. Holder's method of accounting for
federal income tax purposes.
DISCOUNT NOTES
The following discussion is a summary of the principal United States
federal income tax consequences of the ownership and disposition of Discount
Notes (as defined below) by U.S. Holders. Additional rules applicable to
Discount Notes that are denominated in a Specified Currency (as defined below)
other than the U.S. dollar, or have payments of interest or principal determined
by reference to the value of one or more currencies or currency units other than
the U.S. dollar, are described under "Foreign Currency Notes" below.
A Note with an "issue price" that is less than its "stated redemption price
at maturity" generally will carry original issue discount ("OID") for United
States federal income tax purposes (a "Discount Note"), unless such difference
is less than a specified de minimis amount. In general, the stated redemption
price at maturity of a Discount Note is the total of all payments required to be
made under the Discount Note other than "qualified stated interest" payments.
"Qualified stated interest" is stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate of interest. In addition, qualified stated
interest includes stated interest with respect to a variable rate debt
instrument that is unconditionally payable at least annually at a single
qualified floating rate or a rate that is determined using a single fixed
formula based on one or more qualified floating rates, or a single fixed rate
and one or more qualified floating rates.
A U.S. Holder of Discount Notes is required to include qualified stated
interest in income at the time it is received or accrued, in accordance with
such holder's method of accounting. In addition, U.S. Holders of Discount Notes
that mature more than one year from the date of issuance will be required to
include OID in income for United States federal income tax purposes as it
accrues, in accordance with a constant yield method, before the receipt of cash
payments attributable to such income, but such holders will not be required to
include separately in income cash payments received on such Notes, even if
denominated as interest, to the extent they do not constitute qualified stated
interest.
All stated interest on a Note that matures one year or less from its date
of issuance (a "short-term Discount Note") is included in its stated redemption
price at maturity. In general, a U.S. Holder who uses the cash method of tax
accounting is not required to accrue OID on a short-term Discount Note unless
such holder elects to do so. U.S. Holders who report income on the accrual
method, cash method U.S. Holders who elect to include OID on short-term Discount
Notes in income, and certain other holders, including banks and dealers in
securities, are required to include OID (or, alternatively, acquisition
discount) on such short-term Discount Notes on a straight-line basis, unless an
election is made to accrue the OID according to a constant yield method. In the
case of a U.S. Holder who is not required, and does not elect, to include OID in
income currently, (i) any gain realized on the sale, exchange or retirement of a
short-term Discount Note will be ordinary interest income to the extent of the
OID accrued on a straight-line basis (or, alternatively, upon election, under
the constant yield method) through the date of sale, exchange or retirement and
(ii) such U.S. Holder will be required to defer the deduction of all or a
portion of any interest paid on indebtedness incurred to purchase short-term
Discount Notes until a corresponding amount of OID is included in such holder's
income.
U.S. Holders are permitted to elect to include all interest on a Note,
including stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium, under a constant yield method.
U.S. Holders considering such an election should consult their tax advisor.
S-29
<PAGE> 30
MARKET DISCOUNT AND ACQUISITION PREMIUM
A Note (other than a Discount Note) purchased for an amount that is less
than its stated redemption price at maturity or, in the case of a Discount Note,
its adjusted issue price, will have "market discount" equal to such difference,
which generally will be taxable as ordinary income upon disposition of such Note
(unless such difference is less than a specified de minimis amount). A Discount
Note purchased for an amount that is greater than its adjusted issue price, but
less than or equal to the sum of all amounts payable on the Note after the
purchase date (other than qualified stated interest), will have "acquisition
premium" equal to such excess, which reduces the OID with respect to such Note
for any taxable year by a certain fraction.
AMORTIZABLE BOND PREMIUM
A Note purchased for an amount greater than its stated redemption price at
maturity will have "amortizable bond premium" equal to such excess, which a U.S.
Holder may elect to amortize, using a constant yield method. However, if the
Note may be optionally redeemed at a price in excess of its stated redemption
price at maturity, special rules would apply which could result in a deferral of
the amortization of some bond premium until later in the term of the Note.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a U.S. Holder generally
will recognize taxable gain or loss equal to the difference between the amount
realized and such holder's adjusted tax basis in the Note, except to the extent
attributable to accrued interest or market discount. A U.S. Holder's adjusted
tax basis in a Note generally will equal the cost of the Note to such holder,
increased by the amounts of any market discount, OID and de minimis OID
previously included in income by the holder with respect to such Note and
reduced by any amortized bond premium and any principal payments received by the
U.S. Holder and, in the case of a Discount Note, by the amounts of any other
payments that do not constitute qualified stated interest.
FOREIGN CURRENCY NOTES
The following discussion summarizes the principal United States federal
income tax consequences to a U.S. Holder of the ownership and disposition of
certain Notes (other than Indexed Notes, Currency Indexed Notes and Dual
Currency Notes) that are denominated in a Specified Currency other than the U.S.
dollar or the payments of interest or principal on which are payable in one or
more currencies or currency units other than the U.S. dollar (a "Foreign
Currency Note"). Such Foreign Currency Notes also may be subject to the rules
discussed above regarding original issue discount, market discount, acquisition
premium, etc.
PAYMENTS OF INTEREST ON FOREIGN CURRENCY NOTES
Cash Method. A U.S. Holder who uses the cash method of accounting for
federal income tax purposes and who receives a payment of qualified stated
interest on a Foreign Currency Note will be required to include in income the
U.S. dollar value of the foreign currency payment (determined at the spot rate
on the date such payment is received or paid) regardless of whether the payment
is in fact converted to U.S. dollars at that time, and such U.S. dollar value
will be the U.S. Holder's tax basis in such foreign currency. No exchange gain
or loss will be recognized with respect to the receipt of such payment.
Accrual Method. A U.S. Holder who uses the accrual method of accounting
for federal income tax purposes, or who otherwise is required to accrue interest
prior to receipt (e.g., under the OID rules), will be required to include in
income the U.S. dollar value of the amount of interest income (including OID (as
adjusted for acquisition premium, if any) or market discount and reduced by
amortizable bond premium to the extent applicable) that has accrued and is
otherwise required to be taken into account with respect to a Foreign Currency
Note during an accrual period. The U.S. dollar value of such accrued income will
be determined by translating such income at the average rate of exchange for the
accrual period or, with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable
S-30
<PAGE> 31
year. A U.S. Holder may elect, however, to translate such accrued interest
income using the rate of exchange on the last day of the accrual period or, with
respect to an accrual period that spans two taxable years, using the rate of
exchange on the last day of the taxable year. A U.S. Holder will recognize
exchange gain or loss (which will be treated as ordinary income or loss) with
respect to accrued interest income on the date such income is received equal to
the difference, if any, between the U.S. dollar value of the foreign currency
received (determined on the date payment is received) in respect of such accrual
period and the U.S. dollar value of interest income that has accrued during such
accrual period (as determined above).
Rules similar to those described above apply in the case of OID, market
discount and amortizable bond premium.
SALE, EXCHANGE OR RETIREMENT OF FOREIGN CURRENCY NOTES
A U.S. Holder will have a tax basis in any foreign currency received on the
sale, exchange or retirement of a Foreign Currency Note equal to the U.S. dollar
value of such foreign currency, determined at the time of such sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of foreign currency (including its exchange for U.S. dollars or its
use to purchase Foreign Currency Notes) will be ordinary income or loss.
A U.S. Holder's tax basis in, and amount realized on the sale of, a Foreign
Currency Note, and the amount of any subsequent adjustment to the 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.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note will be ordinary income or loss to the extent it is attributable
to fluctuations in currency exchange rates.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current federal income tax law, information reporting and a 31%
backup withholding tax are required with respect to certain interest and
principal payments made to, and the proceeds of sales before maturity by,
certain holders (other than corporations) if such persons fail to supply
taxpayer identification numbers and other information. Amounts withheld under
the backup withholding rules would be allowed as a refund or a credit against
the U.S. Holder's federal income tax provided that the required information is
furnished to the Internal Revenue Service (the "Service").
NON-U.S. HOLDERS
A non-U.S. Holder will generally not be subject to U.S. federal income
taxes, including withholding taxes, on payments of principal, premium, if any,
or interest (including OID, if any) on a Note or coupon, or any gain arising
from the sale or disposition of a Note or coupon, provided that (i) any such
income is not effectively connected with the conduct of a trade or business
within the U.S., (ii) such non-U.S. Holder is not a person who owns (directly or
by attribution) ten percent or more of the total combined voting power of all
classes of stock of the Company, (iii) with respect to any gain, such non-U.S.
Holder (if an individual) is not present in the U.S. 183 days or more during the
taxable year of the disposition and does not have a "tax home" (as defined in
section 911(d)(3) of the Code) in the U.S. and (iv) required certification of
the non-U.S. status of the beneficial owner is provided to the Company or its
agents.
The 31% "backup" withholding and information reporting requirements will
generally not apply to payments by the Company or its agents of principal,
premium, if any, and interest on a Note, and to proceeds of the sale or
redemption of a Note before maturity, with respect to a non-U.S. Holder that
provides the Company or its agent with the certification of non-U.S. status.
Non-U.S. Holders of Notes should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available. Any amounts withheld from a payment
to a non-U.S. Holder under the backup withholding rules will be allowed as a
credit against such holder's U.S. federal
S-31
<PAGE> 32
income tax liability and may entitle such holder to a refund, provided that the
required information is furnished to the Service.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
Smith Barney Inc., as agent (the "Agent"), which has agreed to use its
reasonable best efforts to solicit purchases of the Notes. The Company also may
sell Notes to the Agent, as principal. Unless otherwise indicated in the
applicable Pricing Supplement, a Note sold to the Agent as principal will be
purchased by the Agent at a price equal to 100% of the principal amount thereof
less a percentage equal to the commission applicable to an agency sale of a note
of identical maturity. Such Notes may be resold to investors and other
purchasers from time to time at market prices prevailing at the time of sale, at
prices related to such prevailing prices, at a fixed price or prices, which may
be changed, or at negotiated prices. The Agent may sell Notes that it has
purchased as principal to other dealers and such Notes may be sold at a discount
which, unless otherwise specified in the applicable Pricing Supplement, will not
exceed the discount to be received by the Agent from the Company. The Company
reserves the right to sell Notes directly on its own behalf, by itself or
through an affiliate, in those jurisdictions where authorized to do so. Notes
also may be offered through other agents, which offerings will be on
substantially the same terms and conditions as those described above for
offerings through the Agent. In such case, the names of the other agents and any
terms of such agency which differ from those described herein will be set forth
in a Pricing Supplement. 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 Agent will have the right, in its discretion reasonably exercised, to
reject any proposed purchase of Notes through it in whole or in part. The
Company will pay the Agent a commission in the form of a discount ranging from
0.125% to 0.750% of the principal amount of Notes sold through the Agent
depending upon Note maturity. No commission will be payable on any sales made
directly by the Company.
Payment of the purchase price of the Notes will be required to be made in
immediately available funds in New York City on the date of settlement.
The Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agent against certain liabilities, including liabilities
under the Securities Act, or to contribute to the payments the Agent may be
required to make in respect thereof, and will reimburse the Agent for certain
legal and other expenses incurred by it in connection with the offer and sale of
the Notes.
The Agent has advised the Company that it may make a market in the Notes as
permitted by applicable laws and regulations; however, the Agent is not
obligated to do so. There can be no assurance that there will be a secondary
market for the Notes.
Concurrently with the offering of Notes through the Agent as described
herein, the Company may issue other Securities pursuant to the Indenture
referred to in the Prospectus.
The Agent is an affiliate of the Company. The offering of the Notes will
comply with the requirements of Rule 2720 of the Conduct Rules of the NASD
regarding a NASD member firm's underwriting securities of an affiliate.
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the
Company by A. George Saks, as counsel for the Company, 388 Greenwich Street, New
York, NY 10013 and for the Agent by Skadden, Arps, Slate, Meagher & Flom LLP,
919 Third Avenue, New York, NY 10022. Mr. Saks, Executive Vice President and
General Counsel of the Company, beneficially owns, or has rights to acquire
under Travelers Group Inc. employee benefit plans, an aggregate of less than 1%
of the common stock of Travelers Group Inc. Skadden, Arps, Slate, Meagher & Flom
LLP has from time to time acted as counsel for Travelers Group Inc. and certain
of its subsidiaries and may do so in the future. Mr. Kenneth J. Bialkin, a
partner in that firm, is a
S-32
<PAGE> 33
director of Travelers Group Inc., and he and other attorneys in such firm
beneficially own an aggregate of less than 1% of the common stock of Travelers
Group Inc.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, have been incorporated by reference
herein, in reliance upon the report (also incorporated by reference herein) of
Coopers & Lybrand L.L.P., independent auditors, and upon the authority of said
firm as experts in accounting and auditing.
S-33
<PAGE> 34
PROSPECTUS
SMITH BARNEY HOLDINGS INC.
DEBT SECURITIES
------------------
Smith Barney Holdings Inc. (the "Company") may offer from time to time its
debt securities (the "Securities") at an aggregate initial offering price not
expected to exceed $750,000,000 (or the equivalent in foreign denominated
currencies or composite currencies, based on the applicable exchange rate at the
time of offering), on terms to be determined by the Company at the time of sale.
When a particular series of Securities is offered (the "Offered Securities"), a
supplement to this Prospectus (the "Prospectus Supplement") will be delivered
with this Prospectus setting forth with respect to such series: the specific
designation, aggregate principal amount, maturity, purchase price,
denominations, currency, rate (which may be fixed or variable) and time of
payment of any interest, any sinking fund, any terms of redemption at the option
of the Company or the holder, any listing on a securities exchange and any other
variable terms.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
The Offered Securities sold by the Company will be sold directly, or
through agents designated from time to time, or through underwriters or dealers,
which may be a group of underwriters represented by one or more firms. If any
agents of the Company or any underwriters are involved in the sale by the
Company of Offered Securities, the names of such agents or underwriters and any
applicable fee, commission, purchase price or discount arrangements with them
will be set forth, or will be calculable from the information set forth, in the
Prospectus Supplement. The net proceeds to the Company from such sale will be
set forth in the Prospectus Supplement. The Company may also sell Offered
Securities directly to investors on its own behalf. This Prospectus, together
with an appropriate Prospectus Supplement, may also be used by Smith Barney Inc.
("Smith Barney"), a subsidiary of the Company, in connection with offers and
sales of the Offered Securities in market-making transactions at negotiated
prices related to prevailing market prices at the time of sale. Smith Barney may
act as principal or agent in such transactions.
July 17, 1997
<PAGE> 35
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR SMITH BARNEY. THIS
PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THE PROSPECTUS SUPPLEMENT
RELATES, OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
OR ITS SUBSIDIARIES SINCE THE DATE HEREOF.
------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission at: Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and Seven World Trade Center,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web, the address of which is http://www.sec.gov, that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission. Certain of the Company's debt securities are listed on the New York
Stock Exchange, Inc. (the "NYSE") and such reports and other information can
also be inspected at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
------------------
The Company has filed with the Commission Registration Statements on Form
S-3 under the Securities Act of 1933, as amended (the "Act"), with respect to
the Securities. For further information with respect to the Company and the
Securities, reference is made to the Registration Statements and exhibits
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Company's Registration Statements, each such statement being qualified in
all respects by such reference.
------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference the following documents heretofore
filed with the Commission pursuant to the Exchange Act:
1. Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1996.
2. Quarterly Report of the Company on Form 10-Q for the fiscal quarter
ended March 31, 1997.
3. Current Reports of the Company on Form 8-K dated January 21, 1997,
March 6, 1997, March 6, 1997, March 10, 1997, May 14, 1997, July 9,
1997 and July 15, 1997.
2
<PAGE> 36
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the later of (i) the termination of the offering of Offered Securities hereby
and (ii) the date on which Smith Barney ceases offering and selling Offered
Securities pursuant to this Prospectus shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
Any statement contained herein or in 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,
in an accompanying Prospectus Supplement or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus except as
so modified or superseded.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference in the Registration Statements of which this Prospectus forms a
part other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into such documents. Requests should be directed to
Smith Barney Holdings Inc., 388 Greenwich Street, New York, New York 10013;
Attention: Treasurer; telephone (212) 816-6000.
THE COMPANY
The Company provides investment banking, asset management, brokerage and
other financial services through its wholly owned subsidiaries. Its principal
operating subsidiary is Smith Barney, an investment banking, securities trading
and brokerage firm that traces its origins back to 1873. As of March 31, 1997,
the Company employs approximately 10,500 financial consultants operating out of
approximately 443 branch offices.
The Company is an investment banking and securities trading and brokerage
firm serving United States and foreign corporations, governments and
institutional and individual investors. Its business includes securities,
options and commodities brokerage for domestic and international institutional
and individual clients; underwriting and distribution of securities; arranging
for the private placement of securities; assisting in mergers and acquisitions
and providing financial advisory services; market making and trading in
corporate debt and equity, United States government and agency, mortgage-related
and municipal securities and foreign exchange, futures and forward contracts;
consumer financing activities; securities lending activities; investment
management and advisory services; securities research, and other related
activities.
The Company's investment banking services include the underwriting of debt
and equity issues for United States and foreign corporations and for state,
local and other governmental and government sponsored authorities. Frequently,
the Company acts as managing underwriter in corporate and public securities
offerings. The Company also acts as a private placement agent for various
clients and as such helps to place securities for clients with large
institutions and other qualified investors. The Company also provides financial
advice to investment banking clients on a wide variety of transactions including
mergers and acquisitions, exchanges of securities and corporate restructurings.
The Company provides discretionary and non-discretionary asset management
and consulting services to a wide array of mutual funds and institutional and
individual investors, with respect to domestic and foreign equity and debt
securities, municipal bonds, money market instruments, and related options and
futures contracts. The Company typically receives ongoing fees from its asset
management and consulting clients, generally stated as a percentage of the
client's assets with respect to which the Company's services are rendered. At
March 31, 1997, such client assets in the aggregate exceeded $115 billion.
3
<PAGE> 37
The Company is a wholly owned subsidiary of Travelers Group Inc.
("Travelers Group"), a financial services holding company engaged, through its
subsidiaries, principally in four business segments: (i) Investment Services
(through the Company); (ii) Consumer Finance Services; (iii) Property & Casualty
Insurance Services; and (iv) Life Insurance Services. The periodic reports of
Travelers Group provide additional business and financial information concerning
that company and its consolidated subsidiaries.
The principal offices of the Company are located at 388 Greenwich Street,
New York, New York 10013, telephone (212) 816-6000. The Company was incorporated
in Delaware in 1989.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------------
1997 1996 1995 1994 1993 1992
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges... 1.87 1.93 1.71 1.81 2.68 2.06
</TABLE>
- ---------------
The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes and fixed charges by the fixed charges. For the
purpose of this ratio, fixed charges consist of interest expense and that
portion of rentals deemed representative of the appropriate interest factor.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying Prospectus Supplement with
respect to the proceeds from the sale of any particular Offered Securities, the
Company intends to apply the net proceeds from the sale of Offered Securities
for general corporate purposes, which may include capital contributions to
subsidiaries of the Company and/or the reduction or refinancing of borrowings of
the Company or its subsidiaries. In order to fund its investment brokerage
business, the Company expects to incur additional indebtedness in the future.
DESCRIPTION OF SECURITIES
The following description of the terms of the Securities sets forth certain
general terms and provisions of the Securities to which any Prospectus
Supplement may relate. The particular terms of the Securities offered by any
Prospectus Supplement (the "Offered Securities") and the extent, if any, to
which such general provisions may apply to the Securities so offered will be
described in the Prospectus Supplement relating to such Securities.
The Securities will be issued under an indenture, between the Company and a
trustee, that has been or will be filed as an exhibit to or incorporated by
reference in the Registration Statements of which this Prospectus forms a part.
Unless otherwise indicated in an accompanying Prospectus Supplement, the
Securities will be issued under an Indenture dated as of May 15, 1993, between
the Company and Citibank, N.A., as Trustee (the "Trustee"), as supplemented by
the First Supplemental Indenture dated as of September 1, 1993, between the
Company and the Trustee and the Second Supplemental Indenture dated as of
December 12, 1996, between the Company and the Trustee (the indenture as so
supplemented is hereinafter referred to as the "Indenture"). The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the Indenture,
a copy of which has been incorporated by reference or filed as an exhibit to the
Registration Statements of which this Prospectus forms a part. Capitalized terms
used and not otherwise defined in this section shall have the meanings assigned
to them in the Indenture. Parenthetical section references refer to sections of
the Indenture.
GENERAL
The Securities will be unsecured general obligations of the Company. As a
holding company, the Company's sources of funds are derived principally from
advances and dividends from subsidiaries, certain of
4
<PAGE> 38
which are subject to regulatory considerations, and from sales of assets and
investments. The Indenture provides that the Securities and other unsecured debt
securities of the Company, without limitation as to aggregate principal amount,
may be issued in one or more series, and a single series may be issued at
various times, with different maturity dates and different interest rates, in
each case as authorized from time to time by the Company. One or more series of
the Securities may be issued with the same or various maturities at par or at a
discount.
Reference is made to the Prospectus Supplement relating to a particular
series of Securities for the following terms, where applicable, of the Offered
Securities:
(1) the designation of the Offered Securities;
(2) any limit on the aggregate principal amount of the Offered
Securities and, if applicable, the method for determining the amount of
principal payable at maturity;
(3) the date or dates on which the principal of, and premium, if any,
on the Offered Securities shall be payable, or the method by which such
date or dates shall be determined;
(4) the rate or rates (which may be fixed or variable) at which the
Offered Securities shall bear interest, if any, the date or dates from
which any such interest shall accrue, or the method by which such rate or
rates shall be determined, the Interest Payment Dates on which such
interest shall be payable and the Regular Record Date for the interest
payable on any Interest Payment Date;
(5) the place or places where the principal of, premium, if any, and
interest on the Offered Securities shall be payable;
(6) if applicable, the period or periods within which or the date or
dates on which, the price or prices at which and the terms and conditions
upon which the Offered Securities may be redeemed, in whole or in part, at
the option of the Company;
(7) the obligation, if any, of the Company to redeem or purchase the
Offered Securities pursuant to any sinking fund or analogous provisions or
at the option of a Holder thereof and the period or periods within which,
the price or prices at which and the terms and conditions upon which the
Offered Securities shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(8) any special provisions relating to the issuance of any Bearer
Securities of any series;
(9) if other than Dollars, the currency of denomination of the Offered
Securities, and the currency or currencies in which payment of the
principal of, premium, if any, and interest on the Offered Securities will
be made;
(10) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company set forth in the Indenture
pertaining to the Offered Securities;
(11) the form of the Offered Securities and Coupons, if any, and if
the Offered Securities are to be issuable in definitive form (whether upon
original issue or upon exchange of a temporary Security of such series)
only upon receipt of certain certificates or other documents or
satisfaction of other conditions, the form and/or terms of such
certificates, documents or conditions;
(12) whether the Offered Securities shall be issued in whole or in
part in global form, including Book-Entry Securities, and the Depositary
for such Global Securities; and
(13) any other terms of the Offered Securities not inconsistent with
the provisions of the Indenture (SECTION 301).
Under the Indenture, the Company may authorize the issuance and provide the
terms of a series of Securities pursuant to a supplemental indenture or pursuant
to a resolution of its Board of Directors, any duly authorized committee of the
Board or any committee of officers or other representatives of the Company duly
authorized by the Board of Directors for such purpose. The provisions of the
Indenture provide the Company with the ability, in addition to the ability to
issue Securities with terms different from those of Securities
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previously issued, to "reopen" a previous issue of a series of Securities and to
issue additional Securities of such series.
The Securities will be issuable as Registered Securities, as Bearer
Securities or both. Securities of a series may be issuable in the form of one or
more Global Securities, as described below under "Global Securities." Unless
otherwise provided in the Prospectus Supplement accompanying this Prospectus,
Registered Securities denominated in United States dollars will be issued only
in denominations of $1,000 or any integral multiple thereof, and Bearer
Securities denominated in United States dollars will be issued only in
denominations of $5,000 or any integral multiple thereof (SECTION 302). The
Prospectus Supplement relating to Offered Securities denominated in a foreign or
composite currency will specify the denomination thereof (SECTION 302).
DENOMINATIONS, REGISTRATION AND TRANSFER
At the option of the Holder upon request confirmed in writing, and subject
to the terms of the Indenture, Bearer Securities (with all unmatured Coupons,
except as provided below) of any series will be exchangeable into an equal
aggregate principal amount of Registered Securities or Bearer Securities of the
same series (with the same interest rate and maturity date), and Registered
Securities of any series will be exchangeable into an equal aggregate principal
amount of Registered Securities of the same series (with the same interest rate
and maturity date), of different authorized denominations. If a Holder
surrenders Bearer Securities in exchange for Registered Securities between a
Regular Record Date or, in certain circumstances, a Special Record Date, and the
relevant Interest Payment Date, such Holder will not be required to surrender
the Coupon relating to such interest payment date. Registered Securities may not
be exchanged for Bearer Securities (SECTION 305).
Securities may be presented for exchange, and Registered Securities (other
than a Global Security) may be presented for registration of transfer, at the
office of any transfer agent or at the office of the Security Registrar. No
service charge will be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. All Registered
Securities presented or surrendered for registration of transfer or for exchange
shall (if so required by the Company or the Trustee) be duly endorsed by, or
accompanied by a written instrument of transfer in a form satisfactory to the
Company and the Security Registrar duly executed by, the Holder or his attorney
duly authorized in writing (SECTION 305). Bearer Securities will be transferable
by delivery.
Securities may be issued under the Indenture as Original Issue Discount
Securities to be offered and sold at a substantial discount from the principal
amount thereof. If the Offered Securities are Original Issue Discount
Securities, the special Federal income tax, accounting and other considerations
applicable thereto will be described in the Prospectus Supplement relating
thereto. As defined in the Indenture, "Original Issue Discount Security" means
any security which provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the Maturity thereof
upon the occurrence of an Event of Default and the continuation thereof
(SECTIONS 101 AND 502).
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, on Registered Securities
(other than a Global Security) will be made in the designated currency against
surrender of such Securities at the principal corporate trust office of the
Trustee in The City of New York. Unless otherwise indicated in the Prospectus
Supplement, payment of any installment of interest on Registered Securities will
be made to the person in whose name such Security is registered at the close of
business on the Regular Record Date for such interest. Unless otherwise
indicated in the Prospectus Supplement, payments of such interest will be made
at the principal corporate trust office of the Trustee in The City of New York,
or by a check mailed to the Holder at such Holder's registered address (SECTIONS
307 AND 901).
Payment of principal of and premium, if any, and interest on Bearer
Securities will be payable in the currency and in the manner designated in the
Prospectus Supplement, subject to any applicable laws and regulations, at such
paying agencies outside the United States as the Company may appoint from time
to time.
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The paying agents outside the United States initially appointed by the Company
for a series of Securities will be named in the Prospectus Supplement. The
Company may terminate the appointment of any of the paying agents from time to
time, except that the Company will maintain at least one paying agent in The
City of New York for payments with respect to Registered Securities and such
other paying agents as shall be required (SECTION 902).
All moneys paid by the Company to a paying agent for the payment of
principal of or premium, if any, or interest on any Security that remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will be repaid to the Company together with
interest accrued thereon, if any, and the Holder of such Security or any Coupon
appertaining thereto will thereafter look only to the Company for payment
thereof (SECTION 903).
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 identified in the Prospectus Supplement relating to such series
(SECTION 301 AND 303).
The specific terms of the depository arrangement with respect to a series
of Offered Securities will be described in the Prospectus Supplement relating to
such series. Unless otherwise indicated in any accompanying Prospectus
Supplement, the following provisions will apply to any depository arrangements.
Global Securities will be deposited with, or on behalf of, The Depository
Trust Company ("DTC") and registered in the name of DTC or its nominee. Except
as set forth below or in an accompanying Prospectus Supplement, Global
Securities may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee
to a successor of DTC or a nominee of such successor.
DTC 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 Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the NYSE, the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. (the "NASD"). Access to the DTC system
is also available to others, such as securities brokers and dealers, banks and
trust companies that clear transactions through or maintain a direct or indirect
custodial relationship with a Direct Participant, either directly or indirectly.
The rules applicable to DTC and its Participants are on file with the
Commission.
Upon the issuance by the Company of a Global Security, DTC will credit, on
its book-entry registration and transfer system, the respective principal
amounts of the Securities represented by such Global Security to the accounts of
participants. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in Global Securities will be shown on, and the
transfer of such interests will be effected only through, records maintained by
DTC or its nominee (with respect to beneficial interests of participants) or by
participants or persons that may hold interests through participants (with
respect to beneficial interests of beneficial ownership). The laws of some
states may require that certain purchasers of securities take physical delivery
of such securities in certificated form. Such limits and such laws may impair
the ability to transfer beneficial interests in Global Securities.
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So long as DTC or its nominee is the registered owner of the Global
Securities, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Securities represented by such Global Securities for all
purposes under the Indenture. Except as provided in an accompanying Prospectus
Supplement, owners of beneficial interests in Global Securities will not be
entitled to have Securities represented by such Global Securities registered in
their names, will not receive or be entitled to receive physical delivery of
such Securities in certificated form and will not be considered the owners or
holders thereof under the Indenture.
COVENANTS
Limitations on Liens. The Company has agreed that it will not, and will
not permit any Subsidiary to, incur, issue, assume or guarantee any Indebtedness
if such Indebtedness is secured by a pledge of, lien on, or security interest in
any shares of Voting Stock of any Significant Subsidiary, whether such Voting
Stock is now owned or is hereafter acquired, without providing that each series
of Securities issued under the Indenture (together with, if the Company shall so
determine, any other indebtedness or obligations of the Company or any
Subsidiary ranking equally with such Securities and then existing or thereafter
created) shall be secured equally and ratably with such Indebtedness. The
foregoing limitation shall not apply to indebtedness secured by a pledge of,
lien on or security interest in any shares of Voting Stock of any corporation at
the time it becomes a Significant Subsidiary (SECTION 905).
Limitations on Mergers and Sales of Assets. The Company may not
consolidate or merge with or into any other corporation or sell, lease, transfer
or otherwise dispose of all or substantially all its assets to another Person
unless (a) the successor Person (if other than the Company) is organized and
existing under the laws of the United States of America or a State thereof or
the District of Columbia and assumes payment of the principal of and interest on
the Securities and the performance and the observance of the Indenture and (b)
such successor Person (or the Company) shall not, immediately after such merger
or consolidation, be in default in the performance of any covenant or condition
of the Indenture (SECTION 701).
Limitation on Indebtedness of a Subsidiary. As of September 1, 1993, the
First Supplemental Indenture, among other things, added a covenant of the
Company to the effect that for so long as any Securities are Outstanding, the
Company will not permit Smith Barney (Delaware) Inc. (formerly Smith Barney
Inc.), one of its Subsidiaries, to incur or suffer to exist any Indebtedness
(SECTION 908).
Certain Definitions. The term "Indebtedness" means any and all obligations
of a corporation for money borrowed which in accordance with generally accepted
accounting principles would be reflected on the balance sheet of such
corporation as a liability on the date as of which Indebtedness is to be
determined. The term "Significant Subsidiary" means a Subsidiary, including its
Subsidiaries, which meets any of the following conditions: (a) the Company's and
its other Subsidiaries' investments in and advances to the Subsidiary exceed 10
percent of the total assets of the Company and its Subsidiaries consolidated as
of the end of the most recently completed fiscal year; (b) the Company's and its
other Subsidiaries' proportionate share of the total assets (after intercompany
eliminations) of the Subsidiary exceeds 10 percent of the total assets of the
Company and its Subsidiaries consolidated as of the end of the most recently
completed fiscal year; or (c) the Company's and its other Subsidiaries' equity
in the income from continuing operations before income taxes, extraordinary
items and cumulative effect of a change in accounting principles of the
Subsidiary exceeds 10 percent of such income of the Company and its Subsidiaries
consolidated for the most recently completed fiscal year. The term "Subsidiary"
means a corporation more than 50% of the outstanding Voting Stock of which is
owned, directly or indirectly, by the Company or by one or more other
Subsidiaries, or by the Company and one or more other Subsidiaries. The term
"Voting Stock" means capital stock the holders of which have general voting
power under ordinary circumstances to elect at least a majority of the board of
directors of a corporation, provided that, for the purposes of such definition,
capital stock which carries only the right to vote conditioned on the happening
of an event shall not be considered voting stock whether or not such event shall
have happened (SECTIONS 101 AND 905).
The use of the term "all or substantially all" in Indenture provisions such
as the covenant regarding the limitations on mergers and sales of assets has not
been interpreted under New York law (which is the
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governing law of the Indenture) to represent a specific quantitative test.
Accordingly, there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or substantially all"
of the assets of a person, which uncertainty should be considered by prospective
purchasers of Offered Securities.
MODIFICATION AND WAIVER OF THE INDENTURE
Modifications and amendments to the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the Outstanding Securities of each series affected thereby; provided,
however, that no such modification or amendment may, without the consent of the
Holder of each Outstanding Security affected thereby, (a) change the stated
maturity date of the principal of, or any installment of principal of or
interest on, any Security issued under the Indenture, (b) reduce the principal
amount of, or the premium, if any, or interest, if any, on, any Security, (c)
reduce the amount of principal of any Original Issue Discount Security payable
upon acceleration of the Maturity thereof, (d) change the coin or currency in
which any Securities or premium, if any, or interest, if any, thereon is
payable, or (e) reduce the percentage in principal amount of Outstanding
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults (SECTION
802).
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any Holder to evidence a successor to the
Company, to add to the Company's covenants or Events of Default, to permit or
facilitate Securities to be issued by book-entry or in bearer form or relating
to the place of payment thereof, to provide for a successor trustee, to
establish forms or terms of Securities, to change or eliminate any provision not
adversely affecting any interests of Holders of Outstanding Securities in any
material respect or to cure any ambiguity or inconsistency (SECTION 801).
The Holders of a majority in principal amount of the Outstanding Securities
of any series may on behalf of the Holders of all Securities of that series
waive, insofar as that series is concerned, compliance by the Company with
certain restrictive provisions of the Indenture (SECTION 906). The Holders of a
majority in principal amount of the Outstanding Securities of any series may on
behalf of the Holders of all Securities of that series waive any past default
under the Indenture with respect to Securities of that series, except a default
in the payment of the principal of, or premium, if any, or interest, if any, on,
any Security of that series or in respect of any provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Security of that series affected (SECTION 511).
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to
Securities of any series: (a) failure to pay principal of or premium, if any, on
any Security of that series at its Maturity; (b) failure to pay any interest on
any Security of that series when due, continued for 30 days; (c) failure to
deposit any sinking fund payment, when due, in respect of any Security of that
series; (d) any other defaults in the performance, or breach, of any covenant of
the Company in the Indenture, continued for 60 days after written notice of such
default or breach from the Trustee or the Holders of at least 25% in principal
amount of the Outstanding Securities of that series; (e) the occurrence of a
default in payment of any debt that results from borrowings in excess of
$50,000,000 or any interest thereon, for a period longer than the specified
period of grace, which default shall have resulted in acceleration of the
maturity of such debt without such acceleration having been rescinded after due
notice in writing to the Company of such default by the Trustee or by such
notice to the Company and the Trustee by Holders of at least 10% of the
principal amount of the Outstanding Securities of that series; (f) certain
events of bankruptcy, insolvency or reorganization; and (g) any other Event of
Default provided with respect to Securities of that series (SECTION 501).
In accordance with applicable provisions of the Trust Indenture Act of
1939, as amended (the "TIA"), the Trustee is required to give the Holders notice
of all defaults known to the Trustee within 90 days after the occurrence
thereof, in the manner and to the extent provided by the TIA. The TIA further
provides that except in the case of default in the payment of the principal of
or interest on any indenture security, or in the
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payment of any sinking fund or purchase fund installment, the Trustee shall not
be required to give such notice if it determines that withholding the notice is
in the interests of the indenture security holders.
If an Event of Default with respect to Outstanding Securities of any series
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in principal amount of the Outstanding Securities of that series may declare the
principal amount (or, if the Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all Securities of that series to be due and payable
immediately. However, at any time after a declaration of acceleration with
respect to Securities of any series has been made, but before a judgment or
decree based on such acceleration has been obtained, the Holders of a majority
in principal amount of Outstanding Securities of that series may, under certain
circumstances, rescind and annul such acceleration (SECTION 502). For
information as to waiver of defaults, see "Modification of the Indenture,"
above. Reference is made to the Prospectus Supplement relating to each series of
Offered Securities that are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Indenture provides that, subject to the provisions of the TIA, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity (Section
601). Subject to such provisions for indemnification of the Trustee, the Holders
of a majority in principal amount of the Outstanding Securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, with respect to the Securities of that series
(SECTION 510).
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance (SECTION 907).
DEFEASANCE
The Indenture provides that, if specified with respect to the Securities of
a particular series, the Company (a) shall be discharged from its obligations in
respect of the Securities of such series ("defeasance and discharge"), or (b)
may cease to comply with the restrictive covenants ("covenant defeasance") in
Article Seven (Consolidation, Merger or Sale), Section 905 (Limitations on
Liens) and Section 908 (Limitation on Indebtedness of Smith Barney (Delaware)
Inc. (formerly Smith Barney Inc.)), and any such omission shall not be an Event
of Default with respect to the Securities of such series, in each case at any
time prior to the Stated Maturity or redemption thereof, when the Company has
irrevocably deposited with the Trustee, in trust, (i) sufficient funds in the
currency or currency unit in which the Securities are denominated to pay the
principal of (and premium, if any), and interest to Stated Maturity (or
redemption) on, the Securities of such series, or (ii) such amount of direct
obligations of, or obligations the principal of and interest on which are fully
guaranteed by, the government which issued the currency in which the Securities
are denominated, and which are not subject to prepayment, redemption or call, as
will, together with the predetermined and certain income to accrue thereon
without consideration of any reinvestment thereof, be sufficient to pay when due
the principal of (and premium, if any), and interest to Stated Maturity (or
redemption) on, the Securities of such series. Such defeasance and discharge and
covenant defeasance are conditioned upon the Company's delivery of an opinion of
counsel that the Holders of the Securities of such series will have no federal
income tax consequences as a result of such deposit, and will be taxed in the
same manner as if no defeasance and discharge or covenant defeasance, as the
case may be, had occurred. Upon such defeasance and discharge, the Holders of
the Securities of such series shall no longer be entitled to the benefits of the
Indenture, except for the purposes of registration of transfer and exchange of
the Securities of such series and replacement of lost, stolen or mutilated
Securities and shall look only to such deposited funds or obligations for
payment (SECTION 403).
CONCERNING THE TRUSTEE
Citibank, N.A. is the Trustee under the Indenture. The Company and its
affiliates have and may from time to time in the future have banking
relationships with the Trustee in the ordinary course of business.
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PLAN OF DISTRIBUTION
The Company may offer the Securities in any of the following ways: (i)
through underwriters or dealers; (ii) directly; (iii) through agents; or (iv)
through a combination of any such methods of sale. The Prospectus Supplement
with respect to an offering of Offered Securities will set forth the terms of
such offering, including the name or names of any underwriters, the purchase
price of the Offered Securities and the proceeds to the Company from such sale,
any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
such Offered Securities may be listed.
If underwriters are used in an offering of Securities, such Securities will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. The Securities may be either offered to the public through underwriting
syndicates represented by one or more managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the Prospectus Supplement,
the obligations of the underwriters to purchase Offered Securities will be
subject to certain conditions precedent and the underwriters will be obligated
to purchase all such Offered Securities if any are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
In connection with underwritten offerings of the Securities and in
accordance with applicable law and industry practice, underwriters may
over-allot or effect transactions which stabilize, maintain or otherwise affect
the market price of the Securities at levels above those which might otherwise
prevail in the open market, including by entering stabilizing bids, effecting
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid, or the effecting of any purchase, for the purpose
of pegging, fixing or maintaining the price of a security. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting syndicate
or the effecting of any purchase to reduce a short position created in
connection with the offering. A penalty bid means an arrangement that permits
the managing underwriter to reclaim a selling concession from a syndicate member
in connection with the offering when Securities originally sold by the syndicate
member are purchased in syndicate covering transactions. Such transactions may
be effected in the over-the-counter market or otherwise. Underwriters are not
required to engage in any of these activities. Any such activities, if
commenced, may be discontinued at any time.
Offered Securities also may be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Offered Securities in respect of which this Prospectus is
delivered will be named, and the terms of any such agency (including any
commissions payable by the Company to such agent) will be set forth, in the
applicable Prospectus Supplement. Unless otherwise indicated in such Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
As one of the means of direct issuance of Offered Securities, the Company
may utilize the services of an entity through which it may conduct an electronic
"dutch auction" or similar offering of the Offered Securities among potential
purchasers who are eligible to participate in the auction or offering of such
Offered Securities, if so described in the applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
The anticipated date of delivery of Offered Securities will be as set forth
in the Prospectus Supplement relating to the offering of such Securities.
This Prospectus together with an applicable Prospectus Supplement may also
be used by Smith Barney, a subsidiary of the Company, in connection with offers
and sales of the Securities in market-making transactions
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at negotiated prices related to prevailing market prices at the time of sale.
Smith Barney may act as principal or agent in such transactions. Smith Barney
has no obligation to make a market in any of the Securities and may discontinue
any market-making activities at any time without notice, at its sole discretion.
The Securities issued hereunder will be new issues of securities with no
established trading market, and no assurance can be made as to the existence or
liquidity of a trading market for such Securities.
Smith Barney, a member of the NASD and an affiliate of the Company, may
participate in distributions of the Offered Securities. Accordingly, the
offerings of Offered Securities will conform with the requirements of Rule 2720
of the Conduct Rules of the NASD regarding a NASD member firm's underwriting of
securities of an affiliate.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Act. Underwriters, dealers and
agents may engage in transactions with, or perform services for, the Company and
affiliates of the Company.
ERISA MATTERS
By virtue of the Company's affiliation with certain of its subsidiaries and
certain subsidiaries of Travelers Group, including insurance company
subsidiaries and Smith Barney, that provide services to many employee benefit
plans, including investment advisory and asset management activities, the
Company, Travelers Group and any direct or indirect subsidiary of either of them
may each be considered a "party in interest" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and a
"disqualified person" under corresponding provisions of the Internal Revenue
Code of 1986 (the "Code"), with respect to many employee benefit plans.
"Prohibited transactions" within the meaning of ERISA and the Code may result if
the Securities are acquired by an employee benefit plan with respect to which
the Company, Travelers Group or any direct or indirect subsidiary of either is a
party in interest, unless such Securities are acquired pursuant to an applicable
exemption. Any employee benefit plan or other entity subject to such provisions
of ERISA or the Code proposing to acquire the Securities should consult with its
legal counsel.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for the Company
by A. George Saks, Esq., General Counsel of the Company, Smith Barney Holdings
Inc., 388 Greenwich Street, New York, New York 10013, or by counsel to be
identified in the Prospectus Supplement. Mr. Saks, Executive Vice President,
General Counsel and Secretary of Smith Barney, beneficially owns, or has rights
to acquire under Travelers Group's employee benefit plans, an aggregate of less
than 1% of Travelers Group Common Stock.
The validity of the Offered Securities will be passed upon for the
underwriters or agents by counsel to be identified in the Prospectus Supplement.
EXPERTS
The consolidated financial statements and financial statement schedules of
the Company as of December 31, 1996 and 1995, and for each of the years in the
three-year period ended December 31, 1996, included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, have been incorporated
by reference herein, in reliance upon the report (also incorporated by reference
herein) of Coopers & Lybrand L.L.P., independent auditors, and upon the
authority of said firm as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN OR THEREIN, IN CONNECTION WITH THE OFFERING
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE AGENT. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO
WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION CONTAINED IN EITHER IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Ratio of Earnings to Fixed Charges.... S-3
Description of Notes.................. S-3
Important Currency Exchange
Information......................... S-26
Foreign Currency Risks................ S-27
Certain Federal Tax Consequences...... S-28
Plan of Distribution.................. S-32
Legal Opinions........................ S-32
Experts............................... S-33
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Ratio of Earnings to Fixed Charges.... 4
Use of Proceeds....................... 4
Description of Securities............. 4
Plan of Distribution.................. 11
ERISA Matters......................... 12
Legal Matters......................... 12
Experts............................... 12
</TABLE>
======================================================
======================================================
$500,000,000
SMITH BARNEY HOLDINGS INC.
MEDIUM-TERM NOTES, THIRD SERIES
------------------------
PROSPECTUS SUPPLEMENT
JULY 24, 1997
(INCLUDING PROSPECTUS
DATED JULY 17, 1997)
------------------------
SMITH BARNEY INC.
======================================================
