<PAGE>
Filed Pursuant to Rule 424(b)5
Under the Securities Act of 1933 in
connection with Registration No: 333-2501
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 15, 1996
$475,000,000
BURLINGTON NORTHERN SANTA FE CORPORATION
MEDIUM-TERM NOTES, SERIES A
DUE 9 MONTHS OR MORE FROM DATE OF ISSUE
---------------
Burlington Northern Santa Fe Corporation may offer from time to time its
Medium-Term Notes, Series A in an aggregate principal amount of up to
$475,000,000 or its equivalent in one or more currencies or composite
currencies. Such aggregate offering price is subject to reduction as a result
of the sale by the Company of certain other Debt Securities (as defined below).
See "Supplemental Plan of Distribution". Each Note will mature on a day nine
months or more from its date of issue, as selected by the purchaser and agreed
to by the Company. Unless otherwise specified in the applicable Pricing
Supplement to this Prospectus Supplement related to any Notes, the Notes will
not be redeemable prior to maturity by the Company and will not be subject to
repayment prior to maturity at the option of the holders thereof.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be issued in registered form in denominations of $1,000 and any integral
multiple thereof, or the approximate equivalent thereof in the Specified
Currency, as specified in the applicable Pricing Supplement. Each Note will be
represented either by a global note registered in the name of The Depository
Trust Company, as depositary, or a nominee thereof, or by a certificate issued
in definitive form, as set forth in the applicable Pricing Supplement.
Beneficial interests in Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Book-Entry Notes will not be exchangeable for Certificated
Notes except under the circumstances described under "Description of Notes--
Book-Entry System" herein.
The Notes may be denominated in either U.S. dollars or in such foreign
currencies or composite currencies as set forth in the applicable Pricing
Supplement. The specific currency or composite currency, interest rate or rates
(if any), issue price and maturity date of any Note will be set forth in the
related Pricing Supplement to this Prospectus Supplement. Unless otherwise
specified in the applicable Pricing Supplement, Notes denominated in other than
U.S. dollars or ECUs will not be sold in, or to residents of, the country
issuing the Specified Currency. See "Description of Notes".
Interest rates and interest rate formulae are subject to change by the
Company but no such change will affect any Note already issued or which the
Company has agreed to issue. Unless otherwise indicated in the applicable
Pricing Supplement, each Note will bear interest at a fixed rate or at a
floating rate which may be determined by reference to the CD Rate, the
Commercial Paper Rate, the Federal Funds Rate, LIBOR, the Prime Rate, the
Treasury Rate or the CMT Rate, as adjusted by the Spread and/or Spread
Multiplier, if any, applicable to such Note. Certain Notes issued at a discount
from the principal amount payable at maturity thereof may provide that holders
of such Notes will not receive periodic payments of interest. See "Description
of Notes--Original Issue Discount Notes".
Unless otherwise indicated in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable on April 15 and October 15 of each year and at
maturity or upon any earlier redemption or repayment, and interest on Floating
Rate Notes will be payable on the dates indicated herein and in the applicable
Pricing Supplement. See "Description of Notes--Interest and Interest Rates".
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
--------- ------------- -------------
<S> <C> <C> <C>
Per Note ........... 100% .125-.750% 99.250-99.875%
Total(4) ........... $475,000,000 $593,750-$3,562,500 $471,437,500-$474,406,250
</TABLE>
- -------
(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes will
be issued at 100% of their principal amount.
(2) The Company will pay a commission to the Agents generally ranging from
.125% to .750% of the principal amount of any Note, depending upon its
maturity, sold through such Agents (or sold to such Agents as principal in
circumstances in which no other discount is agreed upon). The Company may
also sell Notes to any Agent at a discount for resale to one or more
investors or other purchasers at varying prices related to prevailing
market prices at the time of resale or otherwise, as determined by such
Agent. Unless otherwise indicated in an applicable Pricing Supplement, any
Note sold to an Agent as principal shall be purchased by such Agent at a
price equal to 100% of the principal amount thereof less a percentage equal
to the commission applicable to any agency sale of a Note of identical
maturity. The Company has agreed to indemnify each Agent against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Supplemental Plan of Distribution".
(3) Before deducting estimated expenses of $250,000 payable by the Company,
including reimbursement of certain of the Agents' expenses.
(4) Or the approximate equivalent thereof in another Specified Currency.
---------------
The Notes are being offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. The Company also may sell Notes to any Agent
acting as principal for resale to investors or other purchasers and may sell
Notes, through other agents, dealers or underwriters, or directly to investors
on its own behalf in jurisdictions where it is authorized to do so. Unless
otherwise specified in the applicable Pricing Supplement, the Notes will not be
listed on any securities exchange. The Company reserves the right to withdraw,
cancel or modify the offer made hereby without notice. The Company, or any
Agent who solicits any such offer, may reject such offer, in whole or in part.
See "Supplemental Plan of Distribution".
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
CHASE SECURITIES INC.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
---------------
The date of this Prospectus Supplement is October 24, 1996.
<PAGE>
IN CONNECTION WITH THE DISTRIBUTION OF THE NOTES, THE AGENTS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THE DISTRIBUTION OF THE NOTES NOR HAS THE COMMISSIONER PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
----------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by Burlington Northern Santa Fe
Corporation ("BNSF" or the "Company") under the Securities Exchange Act of 1934
(the "Exchange Act") with the Securities and Exchange Commission (the
"Commission") are incorporated herein by reference: (1) Annual Report on Form
10-K for the year ended December 31, 1995 (and Form 10-K/A with respect
thereto); (2) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996 and June 30, 1996; and (3) Current Reports on Form 8-K dated February 13,
1996, April 12, 1996, June 4, 1996, June 19, 1996 and October 22, 1996.
The following documents previously filed by Santa Fe Pacific Corporation
("SFP") under the Exchange Act with the Commission are incorporated herein by
reference: (1) Annual Report on Form 10-K for the year ended December 31, 1994
(and Form 10-K/A with respect thereto); and (2) Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1995 and June 30, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus Supplement
and prior to the termination of the distribution of the Notes shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus Supplement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus Supplement has been delivered a copy of any or all of the documents
referred to above which have been or may be incorporated by reference herein
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference therein). Requests for such copies should be directed
to Burlington Northern Santa Fe Corporation, 2650 Lou Menk Drive, Fort Worth,
Texas 76131, Attention: Marsha K. Morgan, Vice President--Investor Relations
and Corporate Secretary, telephone number (817) 352-6454.
S-2
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of the
Company for each of the five years ended December 31, 1995, for the six months
ended June 30, 1996, and for the year ended December 31, 1995 on a pro forma
basis. The ratios reflect the historical results only for Burlington Northern
Inc. ("BNI") in all periods reported, except for the year ended December 31,
1995, which period includes Santa Fe Pacific Corporation ("SFP") results from
September 22, 1995, and for the six months ended June 30, 1996, and except for
the pro forma year ended December 31, 1995 as described in note (2) below.
<TABLE>
<CAPTION>
SIX
MONTHS PRO FORMA
ENDED YEAR ENDED YEAR ENDED DECEMBER 31,
JUNE 30, DECEMBER 31, -------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- ------------ ------- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed
Charges(1).............. 3.62x 2.87x(2) 1.85x(3) 3.70x 3.19x 2.58x (4)
</TABLE>
- --------
(1) For purposes of this ratio, earnings are calculated by adding fixed
charges (excluding capitalized interest) to income (loss) from continuing
operations. Fixed charges consist of interest on indebtedness (including
amortization of debt discount and premium) and the portion of rental
expense under long term operating leases representative of an interest
factor.
(2) The pro forma computation of ratio of earnings to fixed charges displays
the effect of the consummation on September 22, 1995 of the business
combination (the "Merger") pursuant to which each of BNI and SFP became a
direct or indirect wholly owned subsidiary of the Company, including the
effects of purchase accounting and debt issued by BNI and SFP to
repurchase, pursuant to the Merger agreement, 25 million and 38 million
shares of SFP common stock, respectively, as if the Merger had occurred on
January 1, 1995, and includes $230 million of the $735 million of Merger,
Severance and Asset charges which are not directly attributable to the
Merger. Excluding the $230 million of such charges, the pro forma ratio
would have been 3.33x. The pro forma information should be considered in
conjunction with the Company's Current Reports on Form 8-K (Dates of
earliest event reported: February 13, 1996 and April 12, 1996).
(3) Earnings for the year ended December 31, 1995, include Merger, Severance
and Asset charges of $735 million. Excluding these costs, the ratio would
have been 3.91x.
(4) The ratio of earnings to fixed charges, before the 1991 special charge of
$708 million, was 1.65x. Additional earnings of $490 million for the year
ended December 31, 1991 would have been necessary to cover fixed charges.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which reference is hereby made. Unless otherwise
specified in the applicable Pricing Supplement (as defined below), the Notes
will have the terms described below, except that references to interest
payments and interest-related information do not apply to certain Original
Issue Discount Notes (as defined below).
GENERAL
The Pricing Supplement relating to a Note will describe the following terms:
(i) the currency (or composite currency) with respect to such Note (the
"Specified Currency"), and, if such Specified Currency is other than U.S.
dollars, certain other terms relating to such Note, including the authorized
denominations; (ii) whether such Note is a Fixed Rate Note or a Floating Rate
Note (each as defined
S-3
<PAGE>
below); (iii) the price at which such Note will be issued (the "Issue Price");
(iv) the date on which such Note will be issued (the "Original Issue Date");
(v) the date on which such Note will mature (the "Maturity Date"); (vi) if
such Note is a Fixed Rate Note, the rate per annum at which such Note will
bear interest, if any; (vii) if such Note is a Floating Rate Note, the Base
Rate, the Initial Interest Rate, the Interest Payment Date, the Index
Maturity, the Spread and/or Spread Multiplier, if any (each as defined below)
and any other terms relating to the particular method of calculating the
interest rate for such Note; (viii) whether such Note is an Original Issue
Discount Note (as defined below) and whether it has been issued with original
issue discount for United States Federal income tax purposes; (ix) whether
such Note may be redeemed at the option of the Company, or repaid at the
option of the holder, prior to maturity as described under "Optional
Redemption" and "Repayment at the Noteholders' Option; Repurchase" below and,
if so, the provisions relating to such redemption or repayment, including, in
the case of any Original Issue Discount Notes, the information necessary to
determine the amount due upon redemption or repayment; (x) any relevant
material tax consequences associated with the terms of such Note which have
not been described in "United States Tax Considerations" below; and (xi) any
other terms of such Note not inconsistent with the provisions of the
Indenture.
The Notes will be issued under an Indenture, dated as of December 1, 1995,
between Burlington Northern Santa Fe Corporation (the "Company") and The First
National Bank of Chicago (the "Trustee"), as the same may be amended or
supplemented from time to time (said Indenture, as so supplemented, referred
to herein as the "Indenture"). The following summaries of certain provisions
of the Indenture do not purport to be complete, and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions therein of certain terms. The Notes are
limited to an aggregate principal amount of U.S.$475,000,000 (or the
equivalent thereof in foreign currencies or currency units). In this
Prospectus Supplement, the accompanying Prospectus and any Pricing Supplement,
reference to "U.S. dollars", "U.S.$", "$", "dollars" or "cents" are to United
States currency, unless otherwise indicated in the applicable Pricing
Supplement. Each Note will be denominated in U.S. dollars or in such other
currency (or composite currency) as is specified in the applicable Pricing
Supplement.
Each Fixed Rate Note will mature on a day nine months or more from the date
of issue, as specified in the applicable Pricing Supplement, as selected by
the initial purchaser and agreed to by the Company. In the event that such
Maturity Date of any Fixed Rate Note or any date fixed for redemption or
repayment of any Fixed Rate Note is not a Market Day (as defined below),
principal and interest payable at maturity or upon such redemption or
repayment will be paid on the next succeeding Market Day with the same effect
as if such Market Day were the Maturity Date or the date fixed for redemption
or repayment, and no interest shall accrue for the period from and after the
Maturity Date or date fixed for redemption or repayment to such next
succeeding Market Day.
Each Floating Rate Note will mature on an Interest Payment Date (as defined
below) nine months or more from the date of issue as specified in the
applicable Pricing Supplement, as selected by the initial purchaser and agreed
to by the Company. In the event that the Maturity Date of any Floating Rate
Note or any date fixed for redemption or repayment of any Floating Rate Note
is not a Market Day, the required payment of principal, premium, if any, or
interest otherwise payable on such date need not be made on such date, but may
be made on the next succeeding Market Day with the same force and effect as if
made on the date such payment was due, and no interest shall accrue for the
period from and after the Maturity Date (or any date fixed for redemption or
repayment) to such next succeeding Market Day.
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in U.S. dollars will be issuable in denominations of $1,000 and
integral multiples thereof. The authorized denominations of any Note
denominated in other than U.S. dollars will be the amount of the Specified
Currency for such Note approximately equivalent, at the noon buying rate in
The City of New York for
S-4
<PAGE>
cable transfers for such Specified Currency as certified for customs purposes
by the Federal Reserve Bank of New York (the "Market Exchange Rate") on the
first Business Day in The City of New York and the country issuing such
currency (or, in the case of European Currency Units ("ECUs"), Brussels) prior
to the date on which the Company accepts the offer to purchase such Note, to
U.S. $1,000, or such other minimum denomination as may be allowed or required
from time to time by any relevant central bank or equivalent governmental
body, however designated, or by any laws or regulations applicable to the
Notes or to such Specified Currency. The Notes will be issued in integral
multiples of 1,000 units of any such Specified Currency in excess of their
minimum denominations. If any of the Notes are to be denominated in a
Specified Currency other than U.S. dollars, or if the principal of, premium,
if any, and any interest on any of the Notes not denominated in U.S. dollars
are to be payable at the option of the holder or the Company in U.S. dollars,
the applicable Pricing Supplement will provide additional information,
including applicable exchange rate information, pertaining to the terms of
such Notes and other matters of interest to the holders thereof.
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a global note (a "Book-Entry Note") registered in
the name of The Depository Trust Company, as depositary (the "Depositary"), or
a nominee thereof, or a certificate in definitive form (a "Certificated
Note").
Principal of, premium, if any, and interest on the Notes will be payable
(with respect to any Certificated Note for which payment is to be made in U.S.
dollars), the transfer of the Notes will be registrable and Notes will be
exchangeable for Notes bearing identical terms and provisions at the principal
offices of the Trustee in New York, New York, currently located at 14 Wall
Street, Eighth Floor, Window Two, New York, New York 10005, Attention:
Corporate Trust Administration. Notwithstanding the foregoing, payment of
interest, other than interest at the Maturity Date (or any date fixed for
repayment or redemption), may, at the option of the Company, (i) be made by
check mailed to the address of the person entitled thereto as it appears on
the security register at the close of business on the Regular Record Date (as
defined below) corresponding to the relevant Interest Payment Date or (ii) be
made to a holder of U.S. $10,000,000 or more in aggregate principal amount of
Notes by wire transfer of immediately available funds if appropriate wire
transfer instructions have been received in writing by the Trustee not less
than 15 calendar days prior to such Interest Payment Date. Any such wire
transfer instructions received by the Trustee shall remain in effect until
revoked by such holder. The principal and interest payable on each Note at the
Maturity Date (or any date fixed for repayment or redemption) will be made in
immediately available funds upon surrender of the Note at the office of the
Trustee, unless otherwise provided in the applicable Pricing Supplement.
Notwithstanding the foregoing, the Depositary, as holder of Book-Entry Notes,
shall be entitled to receive payments of interest by wire transfer of
immediately available funds. Book-Entry Notes will be exchangeable only in the
manner and to the extent set forth under "Description of Notes--Book-Entry
System" below.
Unless otherwise specified in the applicable Pricing Supplement, payments of
interest, principal and premium, if any, with respect to any Note to be made
in a Specified Currency other than U.S. dollars will be made by wire transfer
to such account with a bank located in the country issuing the Specified
Currency (or, with respect to Notes denominated in ECUs, Brussels) or other
jurisdiction acceptable to the Company and the Trustee as shall have been
designated at least 15 days prior to the Interest Payment Date or the Maturity
Date (or any date fixed for repayment or redemption), as the case may be, by
the holder of such Note on the relevant Regular Record Date or at the Maturity
Date (or any date fixed for repayment or redemption), provided that, in the
case of payment of principal of, premium, if any, and interest due at the
Maturity Date (or any date fixed for repayment or redemption), the Note is
presented to the Trustee at its principal office in New York, New York,
currently located at 14 Wall Street, Eighth Floor, Window Two, New York, New
York 10005, Attention: Corporate Trust Administration, in time for the Trustee
to make such payments in such funds in
S-5
<PAGE>
accordance with its normal procedures. Such designation shall be made by
filing the appropriate information with the Trustee at its Corporate Trust
Office, and, unless revoked, any such designation made with respect to any
Note by a holder will remain in effect with respect to any further payments
with respect to such Note payable to such holder. If a payment with respect to
any such Note cannot be made by wire transfer because the required designation
has not been received by the Trustee on or before the requisite date or for
any other reason, a notice will be mailed to the holder at its registered
address requesting a designation pursuant to which such wire transfer can be
made and, upon the Trustee's receipt of such a designation, such payment will
be made within 15 days of such receipt.
The Company will pay any administrative costs imposed by banks in connection
with making payments by wire transfer, but any tax, assessment or governmental
charge imposed upon payments will be borne by the holders of the Notes, in
respect of which such payments are made.
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal of, premium, if any, and interest on all Notes will be made in the
applicable Specified Currency, provided, however, that payments of principal
of, premium, if any, and interest on Notes denominated in other than U.S.
dollars will nevertheless be made in U.S. dollars (i) at the option of the
holders thereof under the procedures described below and (ii) at the option of
the Company on the basis of the Market Exchange Rate on the last date such
Specified Currency was available (the "Conversion Date"), if such Specified
Currency is unavailable, in the good faith judgment of the Company, due to the
imposition of exchange controls or other circumstances beyond the control of
the Company (any such payment made by the Company will not constitute an Event
of Default under the Indenture).
If so specified in the applicable Pricing Supplement, except as provided
below, payments of interest, principal and premium, if any, with respect to
any Note denominated in other than U.S. dollars will be made in U.S. dollars
if the holder of such Note on the relevant Regular Record Date or at the
Maturity Date (or any date fixed for repayment or redemption), as the case may
be, has transmitted a written request for such payment in U.S. dollars to the
Trustee at its principal office in New York, New York, on or prior to such
Regular Record Date or the date 15 days prior to the Maturity Date (or any
date fixed for repayment or redemption), as the case may be. Such request may
be delivered by mail, by hand or by cable, telex or any other form of
facsimile transmission. Any such request made with respect to any Note by a
holder will remain in effect with respect to any further payments of interest,
principal and premium, if any, with respect to such Note payable to such
holder, unless such request is revoked by written notice received by the
Trustee on or prior to the relevant Regular Record Date or the date 15 days
prior to the Maturity Date (or any date fixed for repayment or redemption), as
the case may be (but no such revocation may be made with respect to payments
made on any such Note if an Event of Default has occurred with respect thereto
or upon the giving of a notice of redemption). Holders of Notes denominated in
other than U.S. dollars whose Notes are registered in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in U.S. dollars may be made.
The U.S. dollar amount to be received by a holder of a Note denominated in
other than U.S. dollars who elects to receive payments in U.S. dollars will be
based on the highest indicated bid quotation for the purchase of U.S. dollars
with the Specified Currency obtained by the Currency Determination Agent (as
defined below) at approximately 11:00 a.m., New York City time, on the second
Market Day prior to the applicable payment date from the bank composite or
multi-contributor pages of the Quoting Source (as defined below) for three (or
two if three are not available) major banks in The City of New York. The first
three (or two) such banks selected by the Currency Determination Agent which
are offering quotes on the Quoting Source will be used. If fewer than two such
bid quotations are available at 11:00 a.m., New York City time, on the second
Market Day prior to the applicable payment date, such payment will be based on
the Market Exchange Rate as of the second Market Day prior to the applicable
payment date. If the Market Exchange Rate for such date is not then
S-6
<PAGE>
available, such payment will be made in the Specified Currency. As used
herein, the "Quoting Source" means Reuters Monitor Foreign Exchange Service
or, if the Currency Determination Agent determines that such service is not
available, Telerate Monitor Foreign Exchange Service or, if the Currency
Determination Agent determines that neither service is available, such
comparable display or other comparable manner of obtaining quotations as shall
be agreed between the Company and the Currency Determination Agent. All
currency exchange costs associated with any payment in U.S. dollars on any
such Note will be borne by the holder thereof by deductions from such payment.
Unless otherwise provided in the applicable Pricing Supplement, The First
National Bank of Chicago will be the Currency Determination Agent (the
"Currency Determination Agent") with respect to the Notes.
If payment in respect of a Note is required to be made in any currency unit
(e.g., ECUs) and such currency unit is unavailable, in the good faith judgment
of the Company, due to the imposition of exchange controls or other
circumstances beyond the Company's control, then all payments in respect of
such Note shall be made in U.S. dollars until such currency unit is again
available. The amount of each payment of U.S. dollars shall be computed on the
basis of the equivalent of the currency unit in U.S. dollars, which shall be
determined by the Currency Determination Agent on the following basis. The
component currencies of the currency unit for this purpose (the "Component
Currencies") shall be the currency amounts that were components of the
currency unit as of the Conversion Date. The equivalent of the currency unit
in U.S. dollars shall be calculated by aggregating the U.S. dollar equivalents
of the Component Currencies. The U.S. dollar equivalent of each of the
Component Currencies shall be determined by the Currency Determination Agent
on the basis of the Market Exchange Rate for each such Component Currency that
is available as of the third Market Day prior to the date on which the
relevant payment is due and for each such Component Currency that is
unavailable, if any, as of the Conversion Date for such Component Currency.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of that currency as a
Component Currency 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 Component Currencies 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 the
original Component Currency shall be replaced by the amounts of such two or
more currencies, the sum of which shall be equal to the amount of the original
Component Currency.
All determinations referred to above made by the Currency Determination
Agent shall be at its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and binding on holders of Notes.
INTEREST AND INTEREST RATES
Each Note, except any Zero Coupon Note (as defined below), will bear
interest at either (a) a fixed rate (such Note a "Fixed Rate Note") or (b) a
floating rate determined by reference to an interest rate formula (such Note a
"Floating Rate Note"), which may be adjusted by adding or subtracting the
Spread and/or multiplying by the Spread Multiplier (each as defined below).
Notes also may be issued as zero coupon notes ("Zero Coupon Notes"), which
will be issued at a discount from the principal amount at maturity thereof,
but holders of which will not receive interest thereon. Any Floating Rate Note
may also have either or both of the following: (i) a maximum interest rate
limitation, or ceiling, on the rate at which interest may accrue during any
interest period, and (ii) a minimum interest rate limitation, or floor, on the
rate at which interest may accrue during any interest period. The applicable
Pricing Supplement with respect to Fixed Rate Notes will designate a fixed
rate per annum for each Fixed Rate Note. The applicable Pricing Supplement
with respect to Floating Rate Notes will designate one of the following
interest rate bases as applicable to each Floating Rate Note: (a) the CD Rate
(as
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<PAGE>
defined below), in which case such Note will be a "CD Rate Note"; (b) the
Commercial Paper Rate (as defined below), in which case such Note will be a
"Commercial Paper Rate Note"; (c) the Federal Funds Rate (as defined below),
in which case such Note will be a "Federal Funds Rate Note"; (d) LIBOR (as
defined below), in which case such Note will be a "LIBOR Note"; (e) the Prime
Rate (as defined below), in which case such Note will be a "Prime Rate Note";
(f) the Treasury Rate (as defined below), in which case such Note will be a
"Treasury Rate Note"; (g) the CMT Rate (as defined below), in which case such
Note will be a "CMT Rate Note"; or (h) such other interest rate formula as is
set forth in such Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Note will be equal to (a) in the case of a Fixed Rate
Note, a fixed rate, or (b) in the case of a Floating Rate Note, either (i) the
interest rate determined by reference to the specified interest rate formula
(as specified in the applicable Pricing Supplement), plus or minus the Spread,
if any, and/or (ii) the interest rate determined by reference to the specified
interest rate formula, multiplied by the Spread Multiplier, if any, plus or
minus the Spread, if any. The "Spread" is the number of basis points (one-
hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate of such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note. The "Base Rate" is the rate specified, or determined according to a
formula specified, in the applicable Pricing Supplement.
Each Note will bear interest from its Original Issue Date or, except as
otherwise specified herein with respect to certain Floating Rate Notes, from
the most recent date to which interest on such Note has been paid or duly
provided for, at the annual rate, or at a rate determined pursuant to an
interest rate formula, stated therein, until the principal thereof is paid or
made available for payment. Interest will be payable on each Interest Payment
Date (except for certain Original Issue Discount Notes and except for Notes
originally issued between a Regular Record Date and an Interest Payment Date)
and at the Maturity Date (or any date fixed for redemption or repayment).
Interest will be payable to the person in whose name a Note is registered at
the close of business on the Regular Record Date next preceding the Interest
Payment Date; provided, however, that (i) if the Company fails to pay such
interest on such Interest Payment Date, such defaulted interest will be paid
to the person in whose name such Note is registered at the close of business
on the record date to be established for the payment of defaulted interest and
(ii) interest payable at the Maturity Date (or any date fixed for redemption
or repayment) 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 and an Interest Payment Date will be made on the Interest
Payment Date following the next succeeding Regular Record Date to the
registered owner on such next Regular Record Date. Interest rates and interest
rate formulae are subject to change by the Company from time to time but no
such change will affect any Note theretofore issued or which the Company has
agreed to issue. Unless otherwise indicated in the applicable Pricing
Supplement, the Interest Payment Dates and the Regular Record Dates for Fixed
Rate Notes shall be as described below under "Fixed Rate Notes". The Interest
Payment Dates for Floating Rate Notes shall be as indicated in the applicable
Pricing Supplement and in such Note, and, unless otherwise specified in the
applicable Pricing Supplement, each Regular Record Date for a Floating Rate
Note will be the fifteenth day (whether or not a Business Day) prior to each
Interest Payment Date.
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or
.09876544) being rounded to 9.87654% (or .0987654)), and all U.S. dollar
amounts used in or resulting from such calculation on
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Floating Rate Notes will be rounded to the nearest cent (with one-half cent
being rounded upward) and, in the case of Notes denominated in a Specified
Currency other than U.S. dollars, such Specified Currency amounts will be
rounded to the smallest unit of such Specified Currency (with one-half being
rounded upward).
The interest rate on the Notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States
Federal law of general application.
FIXED RATE NOTES
Each Fixed Rate Note, except any Zero Coupon Note, will bear interest at the
annual rate specified therein and in the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, the Interest Payment
Dates for the Fixed Rate Notes will be on April 15 and October 15 of each year
and the Regular Record Dates will be on the last day of March and September of
each year. Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes will be computed and paid on the basis of a 360-
day year of twelve 30-day months. In the event that any Interest Payment Date,
the Maturity Date or any date fixed for redemption or repayment is not a
Market Day, payment of interest, premium, if any, or principal payable on
Fixed Rate Notes will be made on the next succeeding Market Day and no
interest shall accrue for the period from and after such Interest Payment Date
or the Maturity Date or any date fixed for redemption or repayment to such
next succeeding Market Day.
FLOATING RATE NOTES
Except as provided below and unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable (i) in the
case of Floating Rate Notes with a daily, weekly, or monthly Interest Reset
Date (as defined below) on (a) the third Wednesday of each month or (b) on the
third Wednesday of June and December of each year or (c) on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) in the case of Floating Rate Notes
with a quarterly Interest Reset Date, on the third Wednesday of March, June,
September and December of each year; (iii) in the case of Floating Rate Notes
with a semi-annual Interest Reset Date, on the third Wednesday of two months
of each year, as specified in the applicable Pricing Supplement; and (iv) in
the case of Floating Rate Notes with an annual Interest Reset Date, on the
third Wednesday of one month of each year, as specified in the applicable
Pricing Supplement. If any Interest Payment Date (other than the Maturity Date
or any date fixed for redemption or repayment) for any Floating Rate Note
would otherwise be a day that is not a Market Day, the Interest Payment Date
for such Floating Rate Notes shall be postponed to the next day that is a
Market Day and interest shall accrue to but exclude such next succeeding
Market Day, except that in the case of a LIBOR Note, if such Market Day is in
the next succeeding calendar month, such Interest Payment Date shall be the
immediately preceding Market Day (with interest accruing to but excluding such
immediately preceding Market Day). If the Maturity Date or any earlier
redemption or repayment date of a Floating Rate Note falls on a day that is
not a Market Day, the required payment of principal, premium, if any, or
interest otherwise payable on such date need not be made on such date, but may
be made on the next succeeding Market Day with the same force and effect as if
made on the date such payment was due, and no interest shall accrue for the
period from and after the Maturity Date (or any date fixed for redemption or
repayment) to such next succeeding Market Day.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
"Market Day" means:
(a) with respect to any Note not otherwise provided for in (b), (c) or
(d) below, any Business Day in The City of New York;
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(b) with respect to any LIBOR Note, any Business Day in The City of New
York which is also a day on which dealings in deposits in the Index
Currency (as defined below) are transacted in the London interbank market
(a "London Banking Day");
(c) with respect to Notes denominated in a Specified Currency other than
U.S. dollars or ECUs, any Business Day in The City of New York which is
also a day in the Principal Financial Center (as defined below) of the
country of the Specified Currency on which banking institutions generally
are not authorized or obligated by law to close; and
(d) with respect to Notes denominated in ECUs only, any Business Day in
The City of New York which is also a day that is designated as an ECU
settlement day by the ECU Banking Association in Paris or otherwise
generally regarded in the ECU interbank market as a day on which payments
in ECUs may be made.
"Business Day," as used herein for any particular location, means each
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in such location are authorized or obligated by law or
executive order to close.
The applicable Pricing Supplement will specify the issue price, the interest
rate basis, the interest payment period, the Spread or Spread Multiplier, if
any, and the maximum or minimum interest rate limitation, if any, applicable
to each Floating Rate Note. In addition, such Pricing Supplement will define
or particularize for each Floating Rate Note the following terms, if
applicable: the period to maturity of the instrument or obligation on which
the interest rate formula is based (the "Index Maturity"), Initial Interest
Rate (as defined below), Interest Payment Dates, Regular Record Dates and
Interest Reset Dates with respect to such Note.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually, annually or otherwise (each an "Interest
Reset Date"; the period between consecutive Interest Reset Dates being the
"Interest Reset Period"), as specified in the applicable Pricing Supplement.
The Interest Reset Date will be, in the case of Floating Rate Notes which are
reset daily, each Market Day; in the case of Floating Rate Notes (other than
Treasury Rate Notes) which are reset weekly, the Wednesday of each week; in
the case of Treasury Rate Notes which are reset weekly, the Tuesday of each
week, except as provided below; in the case of Floating Rate Notes which are
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes which are reset quarterly, the third Wednesday of March, June, September
and December; in the case of Floating Rate Notes which are reset semi-
annually, the third Wednesday of two months of each year, as specified in the
applicable Pricing Supplement; in the case of Floating Rate Notes which are
reset annually, the third Wednesday of one month of each year, as specified in
the applicable Pricing Supplement; and in the case of Floating Rate Notes
which are reset at intervals other than those described above, the days
specified in the applicable Pricing Supplement; provided, however, that the
interest rate in effect from the Original Issue Date to the first Interest
Reset Date with respect to a Floating Rate Note (the "Initial Interest Rate")
will be as set forth in the applicable Pricing Supplement. If the Interest
Reset Date for any Floating Rate Note would otherwise be a day that is not a
Market Day, the Interest Reset Date for such Floating Rate Note shall be
postponed to the next day that is a Market Day, except that in the case of a
LIBOR Note, if such Market Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Market Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for a CD
Rate Note (the "CD Interest Determination Date"), a Commercial Paper Rate Note
(the "Commercial Paper Interest Determination Date"), a Federal Funds Rate
Note (the "Federal Funds Interest Determination Date"), a Prime Rate Note (the
"Prime Interest Determination Date") or a CMT Rate Note (the "CMT Interest
Determination Date") will be the second Market Day prior to the Interest Reset
Date. Unless otherwise specified in the applicable Pricing Supplement, the
Interest Determination Date pertaining to an Interest Reset Date for a LIBOR
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Note (the "LIBOR Interest Determination Date") will be the second London
Banking Day prior to such Interest Reset Date. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note will be the day of the week
in which such Interest Reset Date falls on which Treasury bills would normally
be auctioned. Treasury bills are normally sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, but such auction may be held on the
preceding Friday. If, as the result of a legal holiday, an auction is so held
on the preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week.
If an auction falls on a day that is an Interest Reset Date, such Interest
Reset Date will be the next following Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, interest
payments on an Interest Payment Date for a Floating Rate Note will include
interest accrued from, and including, the next preceding Interest Payment Date
in respect of which interest has been paid (or from, and including, the
Original Issue Date if no interest has been paid with respect to such Floating
Rate Note) to, but excluding, such Interest Payment Date. However, if the
Interest Reset Dates with respect to such Note are daily or weekly, interest
payable on any Interest Payment Date, other than interest payable on any date
on which the principal of such Note is payable, will include interest accrued
only from, and excluding, the next preceding Regular Record Date to which
interest has been paid (or from, and including, the Original Issue Date if no
interest has been paid with respect to such Floating Rate Note) to, and
including, the Regular Record Date preceding the next applicable Interest
Payment Date, except that the interest payment at the Maturity Date or any
date fixed for redemption or repayment will include interest accrued to, but
excluding, such Maturity Date or date fixed for redemption or repayment, as
the case may be. Accrued interest from the Original Issue Date or from the
last date to which interest has been paid is calculated by multiplying the
face amount of a Note by an accrued interest factor. The accrued interest
factor is computed by adding together the interest factors calculated for each
day from the Original Issue Date, or from the last date to which interest has
been paid, to the date 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 to such
day by 360, in the cases of CD Rate Notes, Commercial Paper Rate Notes,
Federal Funds Rate Notes and Prime Rate Notes, or by the actual number of days
in the year, in the case of CMT Rate Notes or Treasury Rate Notes. The
interest rate in effect on each day will be (a) if such day is an Interest
Reset Date, the interest rate with respect to the Interest Determination Date
pertaining to such Interest Reset Date or (b) if such day is not an Interest
Reset Date, the interest rate with respect to the Interest Determination Date
pertaining to the immediately preceding Interest Reset Date, subject in either
case to any maximum or minimum interest rate limitation referred to above and
to any adjustment by a Spread or a Spread Multiplier referred to above.
Unless otherwise provided for in the applicable Pricing Supplement, The
First National Bank of Chicago will be the Calculation Agent (the "Calculation
Agent", which term includes any successor calculation agent appointed by the
Company), and for each Interest Reset Date will determine the interest rate as
described below. The Calculation Agent will notify the Trustee of each
determination of the interest rate applicable to any such Floating Rate Note
promptly after such determination is made. The Trustee will, upon the request
of the holder of any Floating Rate Note, provide the interest rate then in
effect and, if applicable, the interest rate which will become effective as a
result of a determination made with respect to the most recent Interest
Determination Date relative to such Note. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date", where applicable,
pertaining to any Interest Determination Date will be the earlier of (i) the
tenth calendar day after such Interest Determination Date (or, if such day is
not a Market Day, the next succeeding Market Day) or (ii) the Market Day
immediately preceding the applicable Interest Payment Date or the Maturity
Date, as the case may be. The Calculation Agent's determination of any
interest rate will be final and binding in the absence of manifest error.
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Interest rates will be determined by the Calculation Agent as follows:
CD RATE NOTES. CD Rate Notes will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified in the CD Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519) Selected Interest
Rates", or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)", or,
if not so published by 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate
on such Interest Determination Date for negotiable certificates of deposit of
the Index Maturity designated in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 p.m. Quotations for U.S. Government Securities" (the
"Composite Quotations") under the heading "Certificates of Deposit". If such
rate is not yet published in either H.15(519) or the Composite Quotations by
3:00 p.m., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the CD Rate on such Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the secondary market offered rates as of 10:00 a.m., New York City time, on
such Interest Determination Date, for certificates of deposit in the
denomination of $5,000,000 with a remaining maturity closest to the Index
Maturity designated in the Pricing Supplement of three leading nonbank dealers
in negotiable U.S. dollar certificates of deposit in The City of New York
selected by the Calculation Agent for negotiable certificates of deposit of
major U.S. money center banks of the highest credit standing in the market for
negotiable certificates of deposit; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as set forth
above, the rate of interest in effect for the applicable period will be the
same as the CD Rate for the immediately preceding Interest Reset Period (or,
if there was no such Interest Reset Period, the rate of interest payable on
the CD Rate Notes for which such CD Rate is being determined shall be the
Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES. Commercial Paper Rate Notes will bear interest
at the interest rate (calculated with reference to the Commercial Paper Rate
and the Spread and/or Spread Multiplier, if any) specified in the Commercial
Paper Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on that date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial
Paper". In the event that such rate is not published prior to 9:00 a.m., New
York City time, on the Calculation Date, then the Commercial Paper Rate shall
be the Money Market Yield of the rate on such Interest Determination Date for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper". If by 3:00 p.m., New York
City time, on such Calculation Date such rate is not yet available in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate shall be the
Money Market Yield of the arithmetic mean of the offered rates as of 11:00
a.m., New York City time, on such Interest Determination Date of three leading
dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper of the specified Index Maturity, placed
for an industrial issue, whose bond rating is "AA", or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting offered rates
as mentioned in the preceding sentence, the rate of interest in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).
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"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
MONEY MARKET YIELD =
D x 360
-----------
360 - (D x M)
x 100
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the period from the Interest Reset Date to but
excluding the day that numerically corresponds to such Interest Reset Date
(or, if there is not any such numerically corresponding day, the last day) in
the calendar month that is the number of months corresponding to the specified
Index Maturity after the month in which such Interest Reset Date falls.
FEDERAL FUNDS RATE NOTES. Federal Funds Rate Notes will bear interest at the
interest rate (calculated with reference to the Federal Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the Federal Funds Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date,
the rate on such date for Federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)" or, if not so published by 9:00 a.m., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If such rate is not yet published in either
H.15(519) or the Composite Quotations by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate for such Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight Federal funds as of 11:00 a.m., New York City time,
on such Interest Determination Date arranged by three leading brokers of
Federal Funds transactions in The City of New York selected by the Calculation
Agent; provided, however, that if the brokers selected as aforesaid by the
Calculation Agent are not quoting as set forth above, the rate of interest in
effect for the applicable period will be the same as the Federal Funds Rate
for the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the Federal Funds Rate
Notes for which such Federal Funds Rate is being determined shall be the
Initial Interest Rate).
LIBOR NOTES. LIBOR Notes will bear interest at the interest rate (calculated
with reference to LIBOR and the Spread and/or Spread Multiplier, if any)
specified in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Reset Date will be determined by the Calculation Agent as
follows:
(a) either (i) the arithmetic mean of the offered rates for deposits in
the Index Currency for the period of the applicable Index Maturity which
appear on the Reuters Screen LIBO Page at approximately 11:00 a.m., London
time, on such LIBOR Interest Determination Date if at least two such
offered rates appear on the Reuters Screen LIBO Page ("LIBOR Reuters"), or
(ii) the rate for deposits in the Index Currency for the period of the
applicable Index Maturity that appears on the Telerate Page 3750 as of
11:00 a.m., London time, on such LIBOR Interest Determination Date ("LIBOR
Telerate"). "Reuters Screen LIBO Page" means the display designated as Page
"LIBO" on the Reuters Monitor Money Rate Service (or such other page as may
replace the LIBO page on the service for the purpose of displaying London
interbank offered rates of major banks). "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or
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such other page as may replace the 3750 page on that service or such other
service or services as may be nominated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for U.S.
dollar deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified
in the applicable Pricing Supplement, LIBOR will be determined as if LIBOR
Telerate has 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 that LIBOR Interest Determination Date
will be determined as if the parties had specified the rate described in
(b) below.
(b) If fewer than two offered rates appear on the Reuters Screen LIBO
Page or no rate appears on Telerate Page 3750, as applicable, the
Calculation Agent will request the principal London offices of four major
banks in the London interbank market, as selected by the Calculation Agent,
to provide the Calculation Agent with its offered quotations for deposits
in the Index Currency for the period of the applicable Index Maturity to
prime banks in the London interbank market at approximately 11:00 a.m.,
London time, commencing on the second London Banking Day immediately
following such LIBOR Interest Determination Date and in a principal amount
equal to an amount of not less than U.S. $1 million or the approximate
equivalent thereof in the applicable Index Currency that is representative
of a single transaction in such market at such time. If at least two
quotations are provided, LIBOR in respect of that LIBOR Interest
Determination Date will be the arithmetic mean of such rates. If fewer than
two quotations are provided, LIBOR in respect of that LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted by three
major banks in the applicable Principal Financial Center (as defined below)
selected by the Calculation Agent at approximately 11:00 a.m. in such
Principal Financial Center, commencing on the second London Banking Day
immediately following such LIBOR Interest Determination Date for loans in
the Index Currency to leading European banks, for the period of the
applicable Index Maturity and in a principal amount equal to an amount of
not less than U.S. $1 million or the approximate equivalent thereof in the
applicable Index Currency that is representative of a single transaction in
such market at such time; provided, however, that if fewer than three banks
selected as aforesaid by the Calculation Agent are quoting rates as
mentioned in this sentence, the rate of interest in effect for the
applicable period will be the LIBOR in effect on such LIBOR Interest
Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable
Pricing Supplement, the Index Currency shall be United States dollars.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to United
States dollars, Deutsche marks, Italian lira, Swiss francs, Dutch Gilders and
ECUs, the Principal Financial Center shall be The City of New York, Frankfurt,
Milan, Zurich, Amsterdam and Luxembourg, respectively.
PRIME RATE NOTES. Prime Rate Notes will bear interest at the interest rate
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified in the Prime Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set
forth in H.15(519) for such date opposite the caption "Bank Prime Loan". If
such rate is not yet published by 9:00 a.m., New York City time, on the
Calculation Date, the Prime Rate for such Interest Determination Date will be
the arithmetic mean of the rates of interest publicly announced by each bank
named on the display designated as page "USPRIME1" on the Reuters Monitor
Money Rate Service (or such other page as may replace the USPRIME1 page on
such service for the purpose of displaying prime rates of major New York City
banks (the "Reuters Screen USPRIME1 Page")) as such bank's prime rate or base
lending rate as in
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effect for such Interest Determination Date as quoted on the Reuters Screen
USPRIME1 Page on such Interest Determination Date, or, if fewer than four such
rates appear on the Reuters Screen USPRIME1 Page for such Interest
Determination Date, the rate shall be the arithmetic mean of the prime rates
quoted on the basis of the actual number of days in the year divided by 360 as
of the close of business on such Interest Determination Date by at least two
of the three major money center banks in The City of New York selected by the
Calculation Agent from which quotations are requested. If fewer than two
quotations are provided, the Prime Rate shall be calculated by the Calculation
Agent and shall be determined as the arithmetic mean on the basis of the prime
rates in The City of New York by the appropriate number of substitute banks or
trust companies organized and doing business under the laws of the United
States, or any State thereof, in each case having total equity capital of at
least $500 million and being subject to supervision or examination by Federal
or State authority, selected by the Calculation Agent to quote such rate or
rates.
If in any month or two consecutive months the Prime Rate is not published in
H.15(519) and the banks or trust companies selected as aforesaid are not
quoting as mentioned in the preceding paragraph, the "Prime Rate" for such
Interest Reset Period will be the same as the Prime Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Prime Rate Notes for which the
Prime Rate is being determined shall be the Initial Interest Rate). If this
failure continues over three or more consecutive months, the Prime Rate for
each succeeding Interest Determination Date until the Maturity Date or the
date fixed for repayment or redemption of such Prime Rate Notes or, if
earlier, until this failure ceases, shall be LIBOR determined as if such Prime
Rate Notes were LIBOR Notes, and the Spread, if any, shall be the number of
basis points specified in the applicable Pricing Supplement as the "Alternate
Rate Event Spread".
TREASURY RATE NOTES. Treasury Rate Notes will bear interest at the interest
rate (calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any) specified in the Treasury Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such date of direct obligations of the United
States ("Treasury Bills") having the Index Maturity designated in the
applicable Pricing Supplement, as published in H.15(519) under the heading
"U.S. Government Securities/Treasury Bills/Auction Average (Investment)", or,
if not so published by 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the auction average rate on
such Interest Determination Date (expressed as a bond equivalent, on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the Index
Maturity designated in the applicable Pricing Supplement are not published or
reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date or if no such auction is held during such week, then the
Treasury Rate shall be the rate set forth in H.15(519) for the relevant
Interest Determination Date for the specified Index Maturity under the heading
"U.S. Government Securities/Treasury Bills/Secondary Market." If such rate is
not so published by 3:00 p.m. New York City time, on the relevant Calculation
Date, then the Treasury Rate shall be calculated by the Calculation Agent and
shall be a yield to maturity (expressed as a bond equivalent, on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Interest Determination Date, of three
leading primary U.S. government securities dealers selected by the Calculation
Agent for the issue of Treasury Bills with a remaining maturity closest to the
Index Maturity designated in the applicable Pricing Supplement; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent
are not quoting bid rates as mentioned in this sentence, the Treasury Rate for
such Interest Reset Date will be the same as the Treasury Rate for the
immediately
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preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Treasury Rate Notes for which the
Treasury Rate is being determined shall be the Initial Interest Rate).
CMT RATE NOTES. CMT Rate Notes will bear interest at the interest rate
(calculated with reference to the CMT Rate and the Spread or Spread
Multiplier, if any) specified in the CMT Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date relating to a CMT
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the CMT Rate, the rate displayed on the Designated CMT
Telerate Page (as defined below) under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays
Approximately 3:45 p.m.", under the column for the Designated CMT Maturity
Index (as defined below) for (i) if the Designated CMT Telerate Page is 7055,
the rate on such CMT Interest Determination Date and (ii) if the Designated
CMT Telerate Page is 7052, the week, or the month, as specified in the
applicable Pricing Supplement, ended immediately preceding the week, or the
month, as applicable, in which the related CMT Interest Determination Date
occurs. If such rate is no longer displayed on the relevant page, or if not
displayed by 3:00 p.m., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519), if such rate is no longer published, or
if not published by 3:00 p.m., New York City time, on the related Calculation
Date, then the CMT Rate for such CMT Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index (or
other United States Treasury rate for the Designated CMT Maturity Index) for
the CMT Interest Determination Date with respect to such Interest Reset Date
as may then be published by either the Board of Governors of the Federal
Reserve System or the United States Department of Treasury that the
Calculation Agent determines to be comparable to the rate formerly displayed
on the Designated CMT Telerate Page and published in the relevant H.15(519).
If such information is not provided by 3:00 p.m., New York City time, on the
related Calculation Date, then the CMT Rate for the CMT Interest Determination
date will be calculated by the Calculation Agent and will be a yield to
maturity, based on the arithmetic mean of the secondary market closing offer
side prices as of approximately 3:30 p.m., New York City time, on the CMT
Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include any Agent or
its affiliates) selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent (after consultation with the
Company) and eliminating the highest quotation (or, in the event of equality,
one of the highest) and the lowest quotation (or, in the event of equality,
one of the lowest)), for the most recently issued direct noncallable fixed
rate obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index and a remaining
term to maturity of not less than such Designated CMT Maturity Index minus one
year. If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for such CMT Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 p.m., New York City time, on the CMT Interest Determination
Date of three Reference Dealers in The City of New York (from five such
Reference Dealers selected by the Calculation Agent (after consultation with
the Company) and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not
five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated;
provided, however,
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that if fewer than three Reference Dealers selected by the Calculation Agent
(after consultation with the Company) are quoting as described herein, the CMT
Rate will be the CMT Rate in effect on such CMT Interest Determination Date.
If two Treasury Notes with an original maturity as described in the second
preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the quotes for the Treasury Note with the
shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Services on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will
be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
ORIGINAL ISSUE DISCOUNT NOTES
"Original Issue Discount Notes" are Notes issued at a discount from the
principal amount payable at maturity and which may be considered to be issued
with original issue discount which must be included in income for United
States Federal income tax purposes at a constant rate. Unless otherwise
specified in the applicable Pricing Supplement, if the principal of any
Original Issue Discount Note is declared to be due and payable immediately
either (a) as described under "Description of the Securities--Events of
Default, Waiver and Notice" in the accompanying Prospectus or (b) pursuant to
any redemption or repayment, in either such case the amount of principal due
and payable with respect to such Note shall be limited to the Issue Price of
such Note (plus, in the case of a redemption, the premium to par, if any,
specified in the applicable Pricing Supplement), plus the original issue
discount amortized with respect to such Note from the Original Issue Date to
the date of acceleration or redemption, which amortization shall be calculated
using the "constant yield method" (computed in accordance with the rules under
the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, in effect on the date of acceleration or redemption).
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate
(calculated with reference to a Base Rate and the Spread or Spread Multiplier,
if any) specified in the Renewable Notes and in the applicable Pricing
Supplement.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates
specified in the applicable Pricing Supplement (each such Interest Payment
Date, an "Election Date"), the maturity of the Renewable Notes will be
extended to the Interest Payment Date occurring twelve months after such
Election Date, unless the holder thereof elects to terminate the automatic
extension of the maturity of the Renewable Notes or of any portion thereof
having a principal amount of $1,000 or any integral multiple thereof, or the
approximate equivalent thereof in the Specified Currency indicated in the
applicable Pricing Supplement, by delivering a notice of such effect to the
Trustee not less than nor more than a number of days to be specified in the
applicable Pricing Supplement prior to such Election Date. If no such notice
period is specified in the applicable Pricing Supplement, such notice shall be
given no less than 30 days nor more than 60 days prior to such
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Election Date. Such option may be exercised with respect to less than the
entire principal amount of the Renewable Notes; provided, that the principal
amount for which such option is not exercised is at least $1,000 or any larger
amount that is an integral multiple thereof, or the approximate equivalent
thereof in the Specified Currency indicated in the applicable Pricing
Supplement. Notwithstanding the foregoing, the maturity of the Renewable Notes
may not be extended beyond the Final Maturity Date, as specified in the
applicable Pricing Supplement (the "Final Maturity Date"). If the holder
elects to terminate the automatic extension of the maturity of any portion of
the principal amount of the Renewable Notes and such election is not revoked
as described below, such portion will become due and payable on the Interest
Payment Date falling six months (unless another period is specified in the
applicable Pricing Supplement) after the Election Date prior to which the
holder made such election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000
or any integral multiple thereof, or the approximate equivalent thereof in the
Specified Currency indicated in the applicable Pricing Supplement, by
delivering a notice to such effect to the Trustee on any day following the
effective date of the election to terminate the automatic extension of
maturity and prior to the date 15 days before the date on which such portion
would otherwise mature. Such a revocation may be made for less than the entire
principal amount of the Renewable Notes for which the automatic extension of
maturity has been terminated; provided that the principal amount of the
Renewable Notes for which the automatic extension of maturity has been
terminated and for which such a revocation has not been made is at least
$1,000 or any larger amount that is an integral multiple thereof, or the
approximate equivalent thereof in the Specified Currency indicated in the
applicable Pricing Supplement. Notwithstanding the foregoing, a revocation may
not be made during the period from and including a Regular Record Date to but
excluding the immediately succeeding Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent
holder.
The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Dates in each year specified in the applicable
Pricing Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement at a redemption price as stated in the
applicable Pricing Supplement, together with accrued and unpaid interest to
the date of redemption. Notwithstanding anything to the contrary in this
Prospectus Supplement, notice of redemption will be provided by mailing a
notice of such redemption to each holder by first class mail, postage paid, at
least 180 days (unless otherwise specified in the applicable Pricing
Supplement) prior to the date fixed for redemption.
OPTIONAL REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement related to
any Notes, the Notes will not be redeemable prior to maturity by the Company.
The applicable Pricing Supplement relating to each Note will indicate whether
such Note can be redeemed prior to maturity and, if applicable, the terms on
which such Note will be redeemable at the option of the Company. Except as
provided above for Renewable Notes, Notice of redemption shall be provided by
mailing a notice of such redemption to each holder by first class mail,
postage paid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to the respective address of each holder as that address
appears upon the books of the Company.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
Unless otherwise specified in the applicable Pricing Supplement relating to
any Notes, the Notes will not be subject to repayment prior to maturity at the
option of the holders thereof. If applicable, the Pricing Supplement relating
to each Note will indicate that the Note will be repayable at the option of
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the holder on a date or dates specified prior to its Maturity Date. If so
indicated, the Notes will be subject to repayment at the option of the holders
thereof in whole or from time to time in part in increments of $1,000, or the
approximate equivalent thereof in the Specified Currency indicated in the
applicable Pricing Supplement, or such other minimum denomination specified in
the applicable Pricing Supplement (provided that any remaining principal
amount thereof shall be at least $1,000, or the approximate equivalent thereof
in the Specified Currency indicated in the applicable Pricing Supplement, or
such other authorized denomination), and unless specified in such Pricing
Supplement, at a repayment price equal to 100% of the unpaid principal amount
to be repaid, together with unpaid interest accrued to the date of repayment.
In order for such a Note to be repaid, the Trustee must receive at least 30
days but not more than 60 days prior to the repayment, (i) the Note with the
form entitled "Option to Elect Repayment" on the reverse of the Note duly
completed or (ii) a telegram, facsimile transmission or a letter from a member
of a national securities exchange or a member of the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States which must set forth the name of the holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid,
the certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Note, will be
received by the Trustee not later than the fifth Market Day after the date of
such telegram, facsimile transmission or letter; provided, however, that such
telegram, facsimile transmission or letter from a member of a national
securities exchange or a member of the NASD, or a commercial bank or trust
company in the United States shall only be effective in such case, if such
Note and form duly completed are received by the Trustee by such fifth Market
Day. Exercise of the repayment option by the holder of a Note will be
irrevocable. In the event that the option of the holder to elect repayment as
described above is deemed to be a "tender offer" within the meaning of Rule
14e-1 under the Exchange Act, the Company will comply with Rule 14e-1 as then
in effect to the extent applicable.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes purchased by the Company, at its discretion, may be held,
resold or surrendered to the registrar for cancellation.
BOOK-ENTRY SYSTEM
The Company has established a depositary arrangement with The Depository
Trust Company (the "Depositary") with respect to the Book-Entry Notes, the
terms of which are summarized below. Any additional or differing terms of the
depositary arrangement with respect to the Book-Entry Notes will be described
in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, currency of denomination and
payment, Interest Payment Dates (if any), the Maturity Date, redemption
provisions (if any), repayment provisions (if any) and other terms will be
represented by a single global security (a "Global Security"). Each Global
Security representing Book-Entry Notes will be deposited with, or on behalf
of, the Depositary and will be registered in the name of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or
such nominee to a successor of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided in this section, the Beneficial Owners
(as defined below) of the Global Security or Securities representing Book-
Entry Notes will not be entitled to receive physical delivery of certificated
Notes and will not be considered
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the holders thereof for any purpose under the Indenture, and no Global
Security representing Book-Entry Notes shall be exchangeable or transferable.
Accordingly, each Beneficial Owner must rely on the procedures of the
Depositary and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a holder under such Global
Security or the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to
transfer beneficial interests in a Global Security representing Book-Entry
Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the
Global Securities, (ii) the Depositary ceases to be a clearing agency
registered under the Exchange Act, (iii) the Company in its sole discretion
determines that the Global Securities shall be exchangeable for certificated
Notes or (iv) there shall have occurred and be continuing an Event of Default
under the Indenture with respect to the Notes. Upon any such exchange, the
certificated Notes shall be registered in the names of the Beneficial Owners
of the Global Security or Securities representing Book-Entry Notes, which
names shall be provided by the Depositary's relevant Participants (as
identified by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership
nominee). One fully registered Global Security will be issued for each
issue of Book-Entry Notes, each in the aggregate principal amount of such
issue, and will be deposited with the Depositary. If, however, the
aggregate principal amount of any issue exceeds $200,000,000, one Global
Security will be issued with respect to each $200,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
The Depositary 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. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants of the Depositary ("Direct Participants")
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for such
Book-Entry Notes on the Depositary's records. The ownership interest of
each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect
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Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Security representing Book-Entry Notes will not receive
certificated Notes representing their ownership interests therein, except
in the event that use of the book-entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary
are registered in the name of the Depositary's nominee, Cede & Co. The
deposit of Global Securities with, or on behalf of, the Depositary and
their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners
of the Global Securities representing the Book-Entry Notes; the
Depositary's records reflect only the identity of the Direct Participants
to whose accounts such Book-Entry Notes are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Securities representing the Book-Entry Notes. Under its usual
procedure, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Payment of principal, premium, if any, and/or interest, if any, on the
Global Securities representing the Book-Entry Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason
to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of the Depositary,
the Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and/or interest, if any, to the Depositary is the
responsibility of the Company or the Trustee, disbursement of such payments
to Direct Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes within an issue are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Company, through its Participant, to the
Trustee, and shall effect delivery of such Book-Entry Notes by causing the
Direct Participant to transfer the Participant's interest in the Global
Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Trustee. The requirement for physical delivery
of Book-Entry Notes in connection with a demand
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for repayment will be deemed satisfied when the ownership rights in the
Global Security or Securities representing such Book-Entry Notes are
transferred by Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes
to be reliable, but the Company takes no responsibility for the accuracy
thereof.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the accompanying
Prospectus under "Description of Securities--Global Securities." The
Depositary has confirmed to the Company that it intends to follow such
procedures.
GOVERNING LAW AND JUDGMENTS
The Indenture and Notes will be governed by and construed in accordance with
the laws of the State of New York.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Note in the Specified Currency for
such Note. Currently, there are limited facilities in the United States for
conversion of U.S. dollars into foreign currencies and vice versa, and banks
generally do not offer non-U.S. dollar checking or savings account facilities
in the United States. However, if requested by a prospective purchaser of
Notes denominated in a Specified Currency other than U.S. dollars, the Agent
soliciting the offer to purchase will arrange for the conversion of U.S.
dollars into such Specified Currency to enable the purchaser to pay for such
Notes. Such requests must be made on or before the fifth Market Day preceding
the date of delivery of the Notes, or by such other date as determined by the
Agent which presents the offer to the Company. Each such conversion will be
made by the relevant Agent on such terms and subject to such conditions,
limitations and charges as such Agent may from time to time establish in
accordance with its regular foreign exchange practice. All costs of exchange
will be borne by the relevant purchaser of the Notes.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which is
determined with reference to, a Specified Currency other than the currency of
the country in which a purchaser is resident or the currency (including any
composite currency) in which a purchaser conducts its primary business (the
"home currency") entails significant risks that are not associated with a
similar investment in a security denominated in the home currency. Such risks
include, without limitation, the possibility of significant changes in rates
of exchange between the home currency and the Specified Currency, including
changes resulting from official redenomination with respect to such Specified
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Currency and the possibility of the imposition or modification of foreign
exchange controls with respect to the Specified Currency. Such risks generally
depend on factors over which the Company has no control, such as economic and
political events and the supply of and demand for the relevant currencies. In
recent years, rates of exchange for Specified Currencies have been highly
volatile, and such volatility may be expected in the future. Fluctuations in
any particular exchange rate that have occurred in the past are not
necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Note. Depreciation of a foreign currency or units of a
foreign composite currency in which a Note is denominated against the home
currency would result in a decrease in the effective yield of such Note below
its coupon rate, and in certain circumstances could result in a loss to the
investor on a home currency basis.
The Notes will provide that, in the event of an official redenomination of a
foreign currency (including, without limitation, an official redenomination of
a foreign currency that is a composite currency), the obligations of the
Company with respect to payments on Notes denominated in such currency shall,
in all cases, be deemed immediately following such redenomination to provide
for the payment of that amount of redenominated currency representing the
amount of such obligations immediately before such redenomination. The Notes
do not provide for any adjustment to any amount payable under the Note as a
result of (a) any change in the value of a foreign currency relative to any
other currency due solely to fluctuations in exchange rates or (b) any
redenomination of any component currency of any composite currency (unless
such composite currency is itself officially redenominated).
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a foreign currency for making payments with respect to a Note denominated
in such currency. There can be no assurances that exchange controls will not
restrict or prohibit payments of principal or interest in any currency or
currency unit. Even if there are not actual exchange controls, it is possible
that, with respect to any particular Note, the foreign currency for such Note
will not be available to the Company to make payments of interest and
principal then due because of circumstances beyond the control of the Company.
In that event, the Company will make such payment in the manner set forth
below under "Payment Currency".
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT, AND THE
APPLICABLE PRICING SUPPLEMENT WILL NOT, DESCRIBE ALL THE RISKS OF AN
INVESTMENT IN NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE
VALUE OF, A CURRENCY (INCLUDING ANY COMPOSITE CURRENCY) OTHER THAN U.S.
DOLLARS, AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE
PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS PROSPECTUS
SUPPLEMENT OR THE DATE OF THE APPLICABLE PRICING SUPPLEMENT OR AS SUCH RISKS
MAY CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED IN AN INVESTMENT IN SUCH
NOTES. SUCH AN INVESTMENT IS NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers of Notes who are United States Holders (defined below)
and the Company disclaims any responsibility to advise prospective purchasers
who are residents of countries other than the United States with respect to
any matters that may affect the purchase or holding of, or receipt of payments
of principal, premium or interest in respect of, Notes. Such persons should
consult their own advisors and legal counsel with regard to such matters.
The Pricing Supplement relating to Notes denominated in a Specified Currency
other than U.S. dollars will contain information concerning historical
exchange rates for such Specified Currency or
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Denominated Currency against the U.S. dollar or other relevant currency, a
description of such currency or currencies and any exchange controls affecting
such currency or currencies. Information concerning exchange rates is
furnished as a matter of information only and should not be regarded as
indicative of the range of or trend in fluctuations in currency exchange rates
that may occur in the future.
PAYMENT CURRENCY
Except as set forth in the applicable Pricing Supplement, if payment on a
Note is required to be made in a Specified Currency other than U.S. dollars
and such currency is unavailable due to the imposition of exchange controls or
other circumstances beyond the Company's control or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by the international banking community, then any payments with
respect to such Note shall be made in U. S. dollars until such currency is
again available or so used. The amount so payable on any date in such foreign
currency shall be converted into U.S. dollars on the basis of the Market
Exchange Rate on the last date such Specified Currency was available. See
"Description of Notes--General."
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 of a composite currency are consolidated
into a single currency, the amounts of those currencies as components shall be
replaced by an amount in such single currency. If any component currency of a
composite currency is divided into two or more currencies, the amount of that
original component currency as a component shall be replaced by the amounts of
such two or more currencies having an aggregate value on the date of division
equal to the amount of the former component currency immediately before such
division.
FOREIGN CURRENCY JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York applicable to instruments made and to be performed
wholly within such jurisdiction. Courts in the United States customarily have
not rendered judgments for money damages denominated in any currency other
than U.S. dollars. If a Note is denominated in a Specified Currency other than
U.S dollars, any judgment under New York law will be rendered in the foreign
currency of the underlying obligation and converted into U.S. dollars at a
rate of exchange prevailing on the date of entry of the judgment or decree.
UNITED STATES TAX CONSIDERATIONS
The following summary describes certain United States Federal income tax
consequences relevant to a holder of a Note. This summary is based on laws,
regulations, rulings and decisions now in effect (or, in the case of certain
Treasury Regulations, now in proposed form), all of which are subject to
change, possibly with retroactive effect. This summary deals only with holders
that will hold Notes as capital assets, and does not address tax
considerations applicable to investors that may be subject to special tax
rules, such as banks, insurance companies, tax-exempt organizations, dealers
in securities or currencies, persons that will hold Notes as a position in a
"straddle" or as part of a "hedging" or "conversion" transaction for United
States Federal income tax purposes, and persons that have a "functional
currency" other than the U.S. dollar. Moreover, this summary does not address
tax considerations applicable to Notes due more than 30 years from the
Original Issue Date, the tax consequences of which will be addressed in the
applicable Pricing Supplement.
Investors should consult their own tax advisors in determining the tax
consequences to them of the acquisition, holding and sale of Notes, including
the application to their particular situation of the tax considerations
discussed below, as well as the application of state, local, foreign or other
tax laws.
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UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Payments of "qualified stated interest" (as defined under "Notes with
Original Issue Discount") on a Note generally will be taxable to a United
States holder as ordinary interest income at the time that such payments are
accrued or are received (in accordance with the United States holder's method
of tax accounting). A United States holder is a beneficial owner who is a
citizen or resident of the United States, a corporation, partnership or other
entity created in or organized under the laws of the United States or any
political subdivision thereof, a trust if a U.S. court is able to exercise
primary supervision over the administration of the trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of the
trust, an estate the income of which is subject to United States Federal
income taxation regardless of its source or a holder that otherwise is subject
to United States Federal income taxation on a net income basis in respect of a
Note. A United States holder who uses the cash method of accounting and who
holds a Note denominated in a currency other than U.S. dollars (a "foreign
currency"), will be required to include in income the U.S. dollar value of the
amount of interest income received (determined as of the time that such
payment is received), regardless of whether such payment in fact is received
in U.S. dollars or converted into U.S. dollars. A United States holder that
uses the accrual method of accounting will be required to include in income
the U.S. dollar value of the amount of interest income that has accrued 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, at the United States holder's election, at the spot rate of
exchange on the last day of the accrual period. Additionally, if a payment of
interest is actually received within five business days of the last day of the
accrual period or taxable year, an electing accrual basis United States holder
may instead translate such accrued interest into U.S. dollars at the exchange
rate in effect on the day of actual receipt. The average rate of exchange for
an accrual period shall be a simple average of the spot exchange rates for
each business day of such period (or other average exchange rate for the
period reasonably derived and consistently applied by the holder). Such United
States holder will recognize foreign currency gain or loss, as the case may
be, on the receipt of an interest payment if the exchange rate in effect on
the date the payment is received differs from the rate applicable to a
previous accrual of that interest income. This foreign currency gain or loss
will be treated as ordinary income or loss.
PURCHASE, SALE AND RETIREMENT OF NOTES
A United States holder's tax basis in a Note generally will equal the cost
of such Note to such holder, increased by any amounts includible in income by
the holder as original issue discount or market discount (if the United States
holder elects to include such market discount in income on a current basis)
and amounts, if any, attributable to de minimis original issue discount and de
minimis market discount includible in income by the holder and reduced by any
amortized premium (each as described below) and any payments other than
qualified stated interest (as defined below) made on such Note. In the case of
a Note denominated in a foreign currency, the cost of such Note to a United
States holder will be the U.S. dollar value of the foreign currency purchase
price determined on the date of purchase. In the case of a Note which is
denominated in a foreign currency and is traded on an established securities
market, a cash basis taxpayer (or, if it elects, an accrual basis taxpayer)
will determine the U.S. dollar value of the cost of such Note by translating
the amount paid at the spot rate of the exchange on the settlement date of the
purchase. The amount of any subsequent adjustments to a United States holder's
tax basis in a Note in respect of foreign currency-denominated original issue
discount, market discount and premium will be determined in the manner
described below for such adjustments.
Upon the sale, exchange or retirement of a Note, a United States holder
generally will recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement
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(less any accrued interest, which will be taxable as such) and the United
States holder's tax basis in the Note. With respect to the sale, exchange or
retirement of a Note denominated in a foreign currency, the amount realized
generally will be the U.S. dollar value of the payment received determined on
(i) the date of receipt of payment in the case of a cash basis taxpayer and
(ii) the date of disposition in the case of an accrual basis taxpayer. In the
case of a Note which is denominated in a foreign currency and is traded on an
established securities market, a cash basis taxpayer (or, if it elects, an
accrual basis taxpayer) will determine the U.S. dollar value of the amount
realized by translating such amount at the spot rate of exchange on the
settlement date of the sale.
Except as discussed below with respect to market discount, short-term OID
Notes, certain Notes with contingent payments and foreign currency gain or
loss, or to the extent attributable to accrued but unpaid interest, gain or
loss recognized by a United States holder on the sale, exchange or retirement
of a Note generally will be long-term capital gain or loss if the United
States holder has held the Note for more than one year at the time of
disposition and will be short-term capital gain or loss if held for one year
or less.
Notwithstanding the foregoing, gain or loss recognized by a United States
holder on the sale, exchange or retirement of a Note denominated in a foreign
currency generally will be treated as ordinary income or loss to the extent
that the gain or loss is attributable to changes in exchange rates during the
period in which the holder held such Note.
NOTES WITH ORIGINAL ISSUE DISCOUNT
Certain Notes, including Original Issue Discount Notes (collectively, "OID
Notes"), may be considered to be issued with original issue discount, as such
term is defined under the Code, and certain Treasury Regulations issued
thereunder. A Note will be considered to be issued with original issue
discount if such Note has a stated redemption price at maturity (as defined
below) that exceeds its issue price (as defined below) by at least 0.25% of
its stated redemption price at maturity multiplied by the number of complete
years to the maturity for such Note. If the stated redemption price at
maturity of a Note exceeds its issue price, but by less than this amount, such
Note will be considered to have de minimis original issue discount and will
not be an OID Note. United States holders of OID Notes generally will be
subject to the special tax accounting rules for original issue discount
obligations provided by the Code and the Treasury Regulations issued
thereunder. United States holders of such Notes should be aware that, as
described in greater detail below, they generally must include original issue
discount in income for United States Federal income tax purposes as it
accrues, in advance of the receipt of cash attributable to that income.
In general, each United States holder of an OID Note which matures more than
one year from the issue date, whether such holder uses the cash or the accrual
method of tax accounting, will be required to include in ordinary gross income
the sum of the "daily portions" of original issue discount on that Note
calculated under a constant yield method for all days during the taxable year
that the United States holder owns the Note. In addition, a United States
holder will be required to include any "qualified stated interest" (as defined
below) on such a Note in gross income (as interest) under the holder's regular
method of tax accounting. The daily portions of original issue discount on an
OID Note are determined by allocating to each day in any accrual period
(generally any period that is elected by a holder, provided that each accrual
period is no longer than one year and that each Interest Payment Date is the
first or last day of the accrual period) a ratable portion of the original
issue discount allocable to that accrual period. In the case of an initial
holder, the amount of original issue discount of an OID Note allocable to each
accruable period is generally determined by (i) multiplying the "adjusted
issue price" (as defined below) of the Note at the beginning of the accrual
period by the yield to maturity of the Note (adjusting the yield to take into
account the length of the particular accrual period)
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and (ii) subtracting from that product the amount (if any) payable as
"qualified stated interest" during that accrual period. The "adjusted issue
price" of an OID Note at the beginning of any accrual period will be the sum
of its issue price and the amount of original issue discount allocable to all
prior accrual periods, reduced by the amount of all payments other than
"qualified stated interest" payments (if any) made with respect to such Note
in all prior accrual periods. The "issue price" of a Note for this purpose is
generally the first price at which a substantial amount of the Notes included
in the particular issuance is sold to the public (excluding bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). "Qualified stated interest"
generally is stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the issuer) at least annually at a
single fixed rate. The "stated redemption price at maturity" of a Note is the
sum of all payments provided by the Note other than qualified stated interest
payments.
Under Treasury Regulations, interest payments on a "variable rate debt
instrument" will be considered qualified stated interest. For this purpose, a
Note is a "variable rate debt instrument" if it (x) has an issue price that
does not exceed the total noncontingent principal payments by more than an
amount equal to the lesser of (i) 0.015 multiplied by the product of such
total noncontingent principal payments and the number of complete years to
maturity of the Note and (ii) 15% of the total noncontingent principal
payments and (y) provides for stated interest (compounded or paid at least
annually) at the current value of (A) one or more qualified floating rates (as
defined below); (B) a single fixed rate followed by one or more qualified
floating rates; (C) a single objective rate (as defined below); or (D) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate (as defined below). Moreover, to qualify as a variable rate debt
instrument, a Note must not provide for any principal payments that are
contingent. If a Note that provides for a variable rate of interest does not
qualify as a variable rate debt instrument, such Note will be considered a
"contingent payment debt instrument" subject to a special set of rules. A
"qualified floating rate" is a floating rate under which variations in the
rate can reasonably be expected to measure contemporaneous variations in the
cost of newly borrowed funds in the currency in which the Note is denominated.
A multiple of a qualified floating rate is not a qualified floating rate
unless the relevant multiplier is (x) fixed at a number that is greater than
.65 but not more than 1.35 or (y) fixed at a number that is greater than .65
but not more than 1.35, increased or decreased by a fixed rate. An "objective
rate" is a rate (other than a qualified floating rate) that is determined
using a single fixed formula and that is based on objective financial or
economic information, provided, however, that an objective rate would not
include a rate based on information that is within the control of, or unique
to the circumstances of, the issuer (or a related party within the meaning of
the applicable statutory provisions), such as dividends, profits or the value
of the issuer's stock. A variable rate is not an objective rate, however, if
it is reasonably expected that the average value of the rate during the first
half of the Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Note's term. A "qualified inverse floating rate" is an objective rate
(1) that is equal to a fixed rate minus a qualified floating rate and (2) the
variations in which can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds.
Stated interest on a Note that is subject to a maximum or minimum interest
rate limitation (i.e., a cap or floor), a restriction on the amount of
increase or decrease in such rate (i.e., a governor) or other similar
restrictions generally will not be treated as a qualified floating rate.
However, a restriction will not cause a variable rate to fail to be a
qualified floating rate if it is a cap, floor or governor that is fixed
throughout the term of the Note or is a cap, floor, governor or similar
restriction that is not reasonably expected on the issue date to cause the
yield on the Note to be significantly less than (in the case of a cap), more
than (in the case of a floor), or different from (in the case of a governor),
the expected yield determined without such cap, floor or governor, as the case
may be. A Note under which interest is payable pursuant to a variable rate
that fails to qualify as a qualified floating rate or an objective rate will
be considered under the OID Regulations to have been issued with original
issue discount and will be subject to the rules governing contingent debt
instruments.
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Generally, the rules for determining the amount and accrual of original
issue discount and qualified stated interest on a variable rate debt
instrument provide for the conversion of such debt instrument into a fixed
rate debt instrument and the application of the general rules regarding
original issue discount to such debt instrument. Certain variable rate debt
instruments, though, are subject to special rules. If such special rules apply
to Notes, any material United States Federal income tax consequences to a
United States holder of such Notes resulting therefrom will be discussed in
the applicable Pricing Supplement.
While each United States holder of an OID Note which matures more than one
year from the issue date will be required to accrue original issue discount
income under a constant yield method, as described above, a taxpayer may also
elect to include in gross income all interest that accrues on a debt
instrument (including stated interest, acquisition discount, original issue
discount, de minimis original issue discount, market discount (as defined
below), de minimis market discount, unstated interest, as adjusted by any
amortizable bond premium or acquisition premium (as discussed below)) under a
constant yield method.
As a result of this "constant yield" method of including original issue
discount income, the amounts so includible in income by a United States holder
in respect of an OID Note denominated in U.S. dollars are lesser in the early
years and greater in the later years than the amounts that would be includible
on a straight-line basis.
OID Notes which are subject to redemption prior to maturity or Notes which
provide for an alternative payment schedule or schedules applicable upon the
occurrence of a contingency or contingencies (including upon the option of the
Company or the holder) may be subject to rules that differ from the general
rules discussed above. Holders who intend to purchase OID Notes with any such
feature should carefully examine the applicable Pricing Supplement and should
consult with their own tax advisors with respect to such a feature since the
tax consequences with respect to original issue discount will depend, in part,
on the particular terms and the particular features of the purchased Note.
Under Treasury Regulations, no payment of interest on a Note that matures
one year or less from the date of its issuance would be considered to be
qualified stated interest. Therefore, any such Note would be considered to be
issued with original issue discount. In general, a United States holder who
uses the cash method of tax accounting and who holds an OID Note that matures
one year or less from the date of its issuance (a "short-term OID Note") is
not required to accrue original issue discount for United States Federal
income tax purposes unless such holder elects to do so. United States holders
who utilize the accrual method of accounting and certain other holders,
including banks and dealers in securities, are required to include original
issue discount (or alternatively, acquisition discount) on such short-term OID
Notes on a straight-line basis, unless an election is made to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of a United States holder who is not required, and
does not elect, to include original issue discount in income currently, any
gain recognized on the sale, exchange or retirement of a short-term OID Note
will be ordinary income to the extent of the original issue discount accrued
on a straight-line basis (or alternatively under the constant yield method)
through the date of sale, exchange or retirement. In addition, such non-
electing United States holders who are not subject to the current inclusion
requirement described in the fourth sentence of this paragraph will be
required to defer the deduction of all or a portion of any interest paid on
indebtedness incurred to purchase short-term OID Notes until such original
issue discount is included in such holder's income.
In the case of an OID Note denominated in a foreign currency, a United
States holder should determine the U.S. dollar amount includible in income as
original issue discount for each accrual period by (i) calculating the amount
of original issue discount allocable to each accrual period in the foreign
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currency using the constant yield method described above, and (ii) translating
the foreign currency amount so derived at the average exchange rate in effect
during that accrual period or, at the United States holder's election, at the
spot rate of exchange on the last day of the accrual period. Because exchange
rates may fluctuate, a United States holder of an OID Note denominated in a
foreign currency may recognize a different amount of original issue discount
income in each accrual period than would the holder of a similar OID Note
denominated in U.S. dollars.
A subsequent United States holder of an OID Note that purchases the Note at a
cost less than its remaining redemption amount also generally will be required
to include in gross income the daily portions of original issue discount,
calculated as described above. The remaining redemption amount is the total
amount of all future payments due under such Note other than qualified stated
interest. However, if the subsequent United States holder acquires the OID Note
at a lower yield to maturity than the yield of the Note for original issue
discount purposes with respect to the initial holder of the Note, the
subsequent United States holder may reduce its periodic inclusions of original
issue discount income to reflect the lower yield to maturity of the Note or
elect to compute original issue discount accruals by treating the purchase as a
purchase at original issue and applying the mechanics of the constant yield
method.
PREMIUM AND MARKET DISCOUNT
A United States holder of a Note that purchases the Note at a cost greater
than its principal amount will be considered to have purchased the Note at a
premium, and may make an election, applicable to all notes purchased at a
premium and held by such holder, to amortize such premium, using a constant
yield method, over the remaining term of such notes. In the case of a Note
denominated in a foreign currency purchased at a premium, a United States
holder should calculate the amortization of the premium in the relevant foreign
currency and should reduce interest income by the amortizable bond premium in
units of such foreign currency. Exchange gain or loss is realized with respect
to such amortizable premium by treating such premium as a return of principal.
If a United States holder of a Note purchases the Note at a price that
produces a yield to maturity higher than the yield to maturity at which such
Note first was issued, the Note generally will be considered to bear "market
discount" in the hands of such United States holder. In such case, gain
realized by the United States holder on the sale, exchange or retirement of the
Note generally will be treated as ordinary income to the extent of the market
discount that accrued on the Note while held by such holder and such holder
could be required to defer the deduction of a portion of the interest paid on
any indebtedness incurred or continued to purchase or carry the Note (unless
the holder elects to include such market discount in income as it accrues). In
general terms, market discount on a Note will be treated as accruing ratably
over the term of such Note, or, at the election of the holder, under a constant
yield method. With respect to Notes which are denominated in a foreign
currency, the amount of market discount which accrues during any accrual period
will be determined in the foreign currency and translated into U.S. dollars (i)
at the spot rate of exchange on the date the Note is disposed of, or (ii), if
the holder elects to include such market discount in income as it accrues, at
the average exchange rate for the accrual period. A United States holder will
recognize foreign currency gain or loss, as the case may be, to the extent that
the spot rate on the date the Note is disposed of differs from the rate used to
accrue such market discount.
NOTES WITH CONTINGENT PAYMENT
The tax consequences to United States holders of Notes with contingent
payments will depend on factors including the specific index or indices used to
determine payments on such Notes and the amount and timing of any noncontingent
payments on such Notes. A description of any material United States Federal
income tax considerations relevant to United States holders of such Notes will
be set forth in the applicable Pricing Supplement.
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FOREIGN HOLDERS
As used herein, the term "non-United States holder" means a holder of a Note
that is, for United States Federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or
more of the members of which is, for United States Federal income tax
purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of non-United States Holders. The 1996 Proposed
Regulations are generally proposed to be effective for payments after December
31, 1997, regardless of the issue date of the Note with respect to which such
payments are made, subject to certain transition rules. It cannot be predicted
at this time whether the 1996 Proposed Regulations will become effective as
proposed or what, if any, modifications may be made to them. The discussion
under this heading and under "Backup Withholding and Information Reporting,"
below, is not intended to be a complete discussion of the provisions of the
1996 Proposed Regulations, and prospective investors are urged to consult
their tax advisors with respect to the effect the 1996 Proposed Regulations
may have if adopted.
Under current United States Federal income tax law now in effect, and
subject to the discussion of backup withholding in the following section,
payments of principal and interest (including original issue discount and
premium, if any) with respect to a Note by the Company or by any paying agent
to any non-United States holder are not subject to United States Federal
withholding tax, provided, in the case of interest or original issue discount,
that (i) such holder does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, (ii) such holder is not for Federal income tax purposes a
controlled foreign corporation related, directly or indirectly, to the Company
through stock ownership, (iii) such holder is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code and (iv) either (A) the
beneficial owner of the Note certifies, under penalties of perjury, to the
Company or paying agent, as the case may be, that such owner is a non-United
States holder and provides such owner's name and address, or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note, certifies, under penalties of
perjury, to the Company or paying agent, as the case may be, that such
certificate has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof. A certificate described in this paragraph is
effective only with respect to payments of interest (including original issue
discount) made to the certifying non-United States holder after the issuance
of the certificate in the calendar year of its issuance and the two
immediately succeeding calendar years. Under temporary Treasury Regulations,
the foregoing certification may be provided by the beneficial owner of a Note
on IRS Form W-8.
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations generally would not affect the documentation rules described in
the preceding paragraph, but would require, in the case of Notes held by a
foreign partnership, that (x) the certification described in clause (iv) above
be provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The 1996 Proposed Regulations would also add "intermediary
certification" options for certain qualifying withholding agents. Under one
such option, a withholding agent would be allowed to rely on IRS Form W-8
furnished by a financial institution or other intermediary on behalf of one or
more beneficial owners (or other intermediaries) without having to obtain the
beneficial owner certificate described in the preceding paragraph, provided
that the financial institution or intermediary has entered into a withholding
agreement with the IRS and thus is a "qualified intermediary." Under another
option, an authorized foreign agent of a U.S. withholding agent would be
permitted to act on behalf of the U.S. withholding agent, provided certain
conditions are met.
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The 1996 Proposed Regulations, if adopted, would also provide certain
presumptions with respect to withholding for holders not providing the
required certifications to qualify for the withholding exemption described
above. In addition, the 1996 Proposed Regulations would replace a number of
current tax certification forms (including IRS Form W-8 and IRS Form 4224,
discussed below) with a single, restated form and standardize the period of
time for which withholding agents could rely on such certifications.
Notwithstanding the foregoing, interest described in Section 871(h)(4) of
the Code is subject to United States withholding tax at a 30% rate (or such
lower rate as may be provided by an applicable treaty). In general, interest
described in Section 871(h)(4) of the Code includes (subject to certain
exceptions) any interest the amount of which is determined by reference to
receipts, sales or other cash flow of the issuer or a related person, any
income or profits of the issuer or a related person, any change in the value
of any property of the issuer or a related person or any dividends,
partnership distribution or similar payments made by the issuer or a related
person. Interest described in Section 871(h)(4) of the Code may include other
types of contingent interest identified by the IRS in future Treasury
Regulations.
If a non-United States holder is engaged in a trade or business in the
United States and interest (including original issue discount) on the Note is
effectively connected with the conduct of such trade or business, the non-
United States holder, although exempt from the withholding tax discussed in
the preceding paragraphs, is subject to United States Federal income tax on
such interest (including original issue discount) in the same manner as if it
were a United States holder. In lieu of the certificate described above, such
holder must provide a properly executed IRS Form 4224 annually in order to
claim an exemption from withholding tax. In addition, if such holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30%
(or such lower rate as may be specified by an applicable treaty) of its
effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, interest (including original issue discount) on
a Note is included in the earnings and profits of such holder if such interest
(including original issue discount) is effectively connected with the conduct
by such holder of a trade or business in the United States.
Generally, any gain or income (other than that attributable to accrued
interest or original issue discount) realized upon the sale, exchange,
retirement or other disposition of a Note is not subject to Federal income tax
unless (i) such gain or income is effectively connected with a trade or
business in the United States of the non-United States holder or (ii) in the
case of a non-United States holder who is an individual, the non-United States
holder is present in the United States for 183 days or more in the taxable
year of such sale, exchange, retirement or other disposition and either (a)
such individual has a "tax home" (as defined in Section 911(d)(3) of the Code)
in the United States or (b) the gain is attributable to an office or other
fixed place of business maintained by such individual in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
Under current United States Federal income tax law, information reporting
requirements apply to interest (including original issue discount) and
principal payments made to, and to the proceeds of sales before maturity by,
certain non-corporate United States holders. In addition, a 31% backup
withholding tax applies if the non-corporate United States holder (i) fails to
furnish such holder's Taxpayer Identification Number ("TIN") (which, for an
individual, would be his or her Social Security Number) to the payor in the
manner required, (ii) furnishes an incorrect TIN and the payor is so notified
by the IRS, (iii) is notified by the IRS that such holder has failed properly
to report payments of interest and dividends or (iv) in certain circumstances,
fails to certify, under penalties of perjury, that such holder has not been
notified by the IRS that it is subject to backup withholding for failure
properly to
S-31
<PAGE>
report interest and dividend payments. Backup withholding does not apply with
respect to payments made to certain exempt recipients, such as corporations
(within the meaning of Section 7701(a) of the Code) and tax-exempt
organizations.
FOREIGN HOLDERS
In the case of a non-United States holder, under Treasury Regulations,
backup withholding and information reporting do not apply to payments of
principal and interest made by the Company or any paying agent thereof on a
Note with respect to which such holder has provided the required certification
under penalties of perjury that such holder is a non-United States holder or
has otherwise established an exemption, provided that (i) the Company or
paying agent, as the case may be, does not have actual knowledge that the
payee is a United States person and (ii) certain other conditions are
satisfied.
Subject to the discussion below, payments to or through the United States
office of a broker are subject to backup withholding and information reporting
unless the holder (i) certifies under penalties of perjury as to such holders'
status as a non-United States holder, establishes certain other qualifications
and provides such holder's name and address (and no agent of the broker who is
responsible for receiving or reviewing such certification has actual knowledge
that it is incorrect) or (ii) otherwise establishes an exemption.
In general, if principal or interest payments on a Note are collected
outside the United States by a foreign office of a custodian, nominee or other
agent acting on behalf of a beneficial owner of a Note, such custodian,
nominee or other agent is not required to apply backup withholding to such
payments made to such beneficial owner and is not subject to information
reporting. However, if such custodian, nominee or other agent is a United
States person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income is effectively
connected with its conduct of a United States trade or business for a
specified three-year period, such custodian, nominee or other agent may be
subject to certain information reporting (but not backup withholding)
requirements with respect to such payment unless such custodian, nominee or
other agent has in its records documentary evidence that the beneficial owner
is not a United States person and certain conditions are met or the beneficial
owner otherwise establishes an exemption.
Under Treasury Regulations, payments on the sale, exchange or retirement of
a Note to or through a foreign office of a broker are not subject to backup
withholding. However, if such broker is a United States person, a controlled
foreign corporation for United States tax purposes, or a foreign person 50% or
more of whose gross income is effectively connected with its conduct of a
United States trade or business for a specified three-year period, information
reporting (but not backup withholding) is required unless such broker has in
its records documentary evidence that the beneficial owner is not a United
States person and certain other conditions are met or the beneficial owner
otherwise establishes an exemption.
The 1996 Proposed Regulations would, if adopted, alter the foregoing rules
in certain respects. In particular, the 1996 Proposed Regulations would
provide certain presumptions under which non-United States Holders may be
subject to backup withholding in the absence of required certifications.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a Holder under the backup withholding rules are
allowed as a refund or a credit against such Holder's United States Federal
income tax, provided that the required information is furnished to the IRS.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding to their particular situations,
the availability of an exemption therefrom, and the procedure for obtaining
such an exemption, if available.
S-32
<PAGE>
ERISA CONSIDERATIONS
No purchaser should purchase a Note with plan assets of any plan subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code"), if the purchase or holding of the Note will result in a
nonexempt prohibited transaction under Section 406(a) of ERISA or Section 4975
of the Code.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms of the Distribution Agreement dated as of October 24,
1996 (the "Distribution Agreement"), the Notes are being offered on a
continuing basis by the Company through Goldman, Sachs & Co., J.P. Morgan
Securities Inc., Chase Securities Inc., Morgan Stanley & Co. Incorporated and
Salomon Brothers Inc (the "Agents"), who have agreed to use reasonable best
efforts to solicit purchases of the Notes. 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. Each Agent shall have the right, in its
discretion reasonably exercised, to reject any offer it receives to purchase
Notes, in whole or in part. The Company will pay the Agents a commission of
(except as otherwise provided in a Pricing Supplement with respect to certain
Original Issue Discount Notes) from .125% to .750% of the principal amount of
the Notes, depending upon maturity, for sales made through them as Agents. The
commission with respect to Notes having maturities in excess of 30 years will
be negotiated by the Company and the Agents at the time of sale.
The Company may also sell Notes to the Agents as principals for their own
accounts at a discount to be agreed upon at the time of sale, or the Agents
purchasing as principals may receive from the Company a commission or discount
equivalent to that set forth on the cover page hereof in the case of any such
principal transaction in which no other discount is agreed. Such Notes may be
resold at prevailing market prices, or at prices related thereto, at the time
of such resale, as determined by the Agent selling such Notes.
Each Agent may offer any Notes it has purchased as principal to other
dealers. Each Agent may sell any Notes it has purchased to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer may include all or part of the discount to
be received from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased
by such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
In those jurisdictions in which the Company is permitted to do so, the
Company reserves the right to sell, and may solicit and accept offers to
purchase, Notes directly on its own behalf or through other agents, dealers or
underwriters on terms substantially identical to the terms contained in the
Distribution Agreement, and, in the case of any such sale not resulting from a
solicitation made by any Agent, no commission will be payable to any Agent
with respect to such sale.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Act"). The
Company has agreed to indemnify the Agents against certain liabilities,
including liabilities under the Act and to contribute to payments which the
Agents may be required to make in respect thereof. The Company has agreed to
reimburse the Agents for certain expenses.
The Agents may sell to or through dealers who may resell to investors, and
the Agents may pay all or part of their discount or commission to such
dealers. Such dealers may be deemed to be "underwriters" within the meaning of
the Act.
S-33
<PAGE>
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in The City of New York.
In the ordinary course of their respective businesses, certain of the Agents
and their affiliates engage and may in the future engage in investment banking
and commercial banking transactions with the Company and its subsidiaries. In
addition, certain members of the board of directors of the Company hold
positions with certain affiliates of Chase Securities Inc., and Denis E.
Springer, Senior Vice President and Chief Financial Officer of the Company, is
a member of the National Advisory Board of The Chase Manhattan Corporation, an
affiliate of Chase Securities Inc.
Concurrently with the offering of the Notes through the Agents as described
herein, the Company may issue Debt Securities as described under "Description
of Debt Securities" in the accompanying Prospectus.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given
as to the existence or liquidity of a secondary market for the Notes.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for the Company by Mayer,
Brown & Platt, Chicago, Illinois, and for the Agents by Sullivan & Cromwell,
New York, New York. The opinions of Mayer, Brown & Platt and Sullivan &
Cromwell will be conditioned upon, and subject to certain assumptions
regarding, future action required to be taken by the Company and the Trustee
in connection with the issuance and sale of a particular Note, the specific
terms of Notes and other matters which may affect the validity of Notes but
which cannot be ascertained on the dates of such opinions.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus Supplement by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, have been so incorporated in reliance on
the report of Coopers & Lybrand, L.L.P., independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of SFP incorporated in this Prospectus
Supplement by reference to SFP's Annual Report on Form 10-K for the year ended
December 31, 1994, have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
S-34
<PAGE>
PROSPECTUS
LOGO
$675,000,000
BURLINGTON NORTHERN SANTA FE CORPORATION
DEBT SECURITIES
----------------
Burlington Northern Santa Fe Corporation ("BNSF" or the "Company") may from
time to time offer debt securities consisting of bonds, debentures, notes, or
other evidences of indebtedness in one or more series at an aggregate initial
offering price not to exceed $675,000,000 or its equivalent in any other
currency or composite currency ("Debt Securities"). The Debt Securities may be
offered as separate series in amounts, at prices, and on terms to be
determined at the time of sale. The accompanying Prospectus Supplement sets
forth with regard to the series of Debt Securities in respect of which this
Prospectus is being delivered the title, aggregate principal amount,
denominations (which may be in United States dollars, in any other currency or
in a composite currency), maturity, rate, if any (which may be fixed or
variable), and time of payment of any interest, any terms for redemption at
the option of the Company or the holder, any terms for sinking fund payments,
any listing on a securities exchange, and the initial public offering price
and any other terms in connection with the offering and sale of such Debt
Securities.
The Company may sell Debt Securities to or through one or more underwriters
or dealers, and also may sell Debt Securities directly to other purchasers or
through agents. The accompanying Prospectus Supplement sets forth the names of
any underwriters or agents involved in the sale of the Debt Securities in
respect of which this Prospectus is being delivered, the principal amounts, if
any, to be purchased by underwriters and the compensation, if any, of such
underwriters or agents. See "Plan of Distribution" for possible
indemnification arrangements for underwriters, agents, and their controlling
persons.
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is May 15, 1996.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES TO ANY PERSON IN ANY JURISDICTION TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. 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
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF
OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"); Santa Fe Pacific
Corporation ("SFP") was subject to the informational requirements of the
Exchange Act prior to November 13, 1995. Reports, proxy and information
statements and other information filed with the Commission can be inspected
and copied during normal business hours at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available at its regional offices at 7 World Trade
Center, Thirteenth Floor, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports,
proxy and information statements, and other information concerning the Company
can also be inspected at the offices of the New York Stock Exchange (the
"NYSE"), 20 Broad Street, New York, New York 10005, the Chicago Stock Exchange
Incorporated, One Financial Place, 440 South LaSalle Street, Chicago, Illinois
60605, and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement")
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to the Company and the Debt Securities
offered hereby. Any statements contained herein concerning the provisions of
any document are not necessarily complete, and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company under the Exchange
Act with the Commission are incorporated herein by reference: (1) Annual
Report on Form 10-K for the year ended December 31, 1995; (2) Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996; and (3) Current Reports on
Form 8-K dated February 13, 1996 and April 12, 1996.
2
<PAGE>
The following documents previously filed by SFP under the Exchange Act with
the Commission are incorporated herein by reference: (1) Annual Report on Form
10-K for the year ended December 31, 1994 (and Form 10-K/A with respect
thereto); and (2) Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995 and June 30, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus has been delivered a copy of any or all of the documents referred
to above which have been or may be incorporated by reference herein other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference therein). Requests for such copies should be directed to
Burlington Northern Santa Fe Corporation, 1700 East Golf Road, Schaumburg,
Illinois 60173-5860, Attention: Corporate Secretary, telephone number (847)
995-6000.
Unless otherwise indicated, currency amounts in the Prospectus and any
Prospectus Supplement are stated in United States dollars ("$" or "dollars").
3
<PAGE>
THE COMPANY
The Company is engaged primarily in railroad transportation through its two
principal indirect subsidiaries, Burlington Northern Railroad Company ("BNRR")
and The Atchison, Topeka and Santa Fe Railway Company ("ATSF"). Both railroads
are major Class I carriers. Through those subsidiaries, the Company operates
the largest railroad network in the United States, with approximately 31,000
route miles reaching across 27 states and two Canadian provinces as of
December 31, 1995.
The Company serves all major ports in the western United States, certain
Mexican and Canadian gateways and Gulf ports, important gateways to the
eastern United States and most major cities in the Pacific Northwest and in
the midwestern and southwestern United States. The principal cities served by
the Company's rail subsidiaries include Albuquerque, Billings, Birmingham,
Cheyenne, Chicago, Denver, Des Moines, Duluth/Superior, Fargo/Moorhead, Fort
Worth/Dallas, Galveston, Houston, Kansas City, Los Angeles, Lincoln, Memphis,
Mobile, Omaha, Pensacola, Phoenix, Portland, St. Louis, St. Paul/Minneapolis,
the San Francisco Bay area, Seattle, Spokane, Springfield (Missouri), Tacoma,
Tulsa, Wichita, Vancouver (British Columbia), Winnipeg (Manitoba) and the
United States/Mexico crossings of El Paso and San Diego.
The Company derives a substantial portion of its revenues from intermodal
transportation and the transportation of coal and agricultural commodities.
Other significant aspects of the Company's rail business include the
transportation of chemicals and plastics, forest products, consumer and food
products, metals, minerals and ores and automotive products.
On September 22, 1995, Burlington Northern Inc. ("BNI") and SFP consummated
a business combination (the "Merger") pursuant to which each became a direct
or indirect wholly owned subsidiary of the Company. The Company was
incorporated in the State of Delaware on December 16, 1994 for the purpose of
effecting the Merger. The Current Report on Form 8-K (Date of earliest event
reported: April 12, 1996) incorporated herein by reference, contains pro forma
financial information about the Company.
The Company's principal executive offices are located at 3800 Continental
Plaza, 777 Main Street, Fort Worth, Texas 76102, telephone number (817) 333-
2000.
4
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of the
Company for each of the five years ended December 31, 1995, for the quarter
ended March 31, 1996, and for the year ended December 31, 1995 on a pro forma
basis. The ratios reflect the historical results only for BNI in all periods
reported, except for the year ended December 31, 1995, which period includes
SFP results from September 22, 1995, and for the quarter ended March 31, 1996,
and except for the pro forma year ended December 31, 1995 as described in note
(2) below.
<TABLE>
<CAPTION>
PRO FORMA YEAR ENDED DECEMBER 31,
QUARTER ENDED YEAR ENDED -------------------------------
MARCH 31, 1996 DECEMBER 31, 1995 1995 1994 1993 1992 1991
-------------- ----------------- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed
Charges(1)............. 3.45x 2.87x(2) 1.85x(3) 3.70x 3.19x 2.58x (4)
</TABLE>
- --------
(1) For purposes of this ratio, earnings are calculated by adding fixed
charges (excluding capitalized interest) to income (loss) from continuing
operations. Fixed charges consist of interest on indebtedness (including
amortization of debt discount and premium) and the portion of rental
expense under long term operating leases representative of an interest
factor.
(2) The pro forma computation of ratio of earnings to fixed charges displays
the effect of the Merger, including the effects of purchase accounting and
debt issued by BNI and SFP to repurchase, pursuant to the Merger
agreement, 25 million and 38 million shares of SFP common stock,
respectively, as if the Merger had occurred on January 1, 1995, and
includes $230 million of the $735 million of Merger, Severance and Asset
charges which are not directly attributable to the Merger. Excluding the
$230 million of such charges, the pro forma ratio would have been 3.33x.
The pro forma information should be considered in conjunction with the
Company's Current Reports on Form 8-K (Dates of earliest event reported:
February 13, 1996 and April 12, 1996).
(3) Earnings for the year ended December 31, 1995, include Merger, Severance
and Asset charges of $735 million. Excluding these costs, the ratio would
have been 3.91x.
(4) The ratio of earnings to fixed charges, before the 1991 special charge of
$708 million, was 1.65x. Additional earnings of $490 million for the year
ended December 31, 1991 would have been necessary to cover fixed charges.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, net
proceeds from the sale of the Debt Securities will be used for general
corporate purposes, including working capital, capital expenditures and debt
repayment.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (the "Indenture"),
between the Company and The First National Bank of Chicago, as Trustee (the
"Trustee"), a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Debt Securities may be
issued from time to time in one or more series. The particular terms of each
series, or of Debt Securities forming a part of a series, which are offered by
a Prospectus Supplement will be described in such Prospectus Supplement.
The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Indenture, including the
definitions therein of certain terms, and, with respect to any particular Debt
Securities, to the description of the terms thereof included in the Prospectus
Supplement relating thereto. Wherever particular Sections or defined terms of
the Indenture are referred to herein or in a Prospectus Supplement, such
Sections or defined terms are incorporated by reference herein or therein, as
the case may be.
5
<PAGE>
The Company is a holding company, conducting its operations through its
operating subsidiaries. Accordingly, the Company's ability to service the Debt
Securities is dependent, in part, on its ability to obtain dividends or loans
from such operating subsidiaries which may be subject to contractual
restrictions. In addition, the rights of the Company and the rights of its
creditors, including holders of the Debt Securities, to participate in any
distribution of the assets of a subsidiary upon the liquidation or
recapitalization of such subsidiary will be subject to the prior claims of the
subsidiary's creditors except to the extent the Company itself may be a
creditor with recognized claims against the subsidiary.
The covenants in the Indenture would not necessarily afford the holders of
the Debt Securities protection in the event of a decline in the Company's
credit quality resulting from highly leveraged or other transactions involving
the Company.
GENERAL
The Indenture provides that Debt Securities in separate series may be issued
thereunder from time to time without limitation as to aggregate principal
amount. The Company may specify a maximum aggregate principal amount for the
Debt Securities of any series. (Section 301) The Debt Securities are to have
such terms and provisions which are not inconsistent with the Indenture,
including as to maturity, principal and interest, as the Company may
determine. Except as provided in Section 1008, the Debt Securities will be
unsecured obligations of the Company and will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Company.
The applicable Prospectus Supplement will set forth the price or prices at
which the Debt Securities to be offered will be issued and will describe the
following terms of such Debt Securities: (1) the title of such Debt
Securities; (2) any limit upon the aggregate principal amount of the
particular series of Debt Securities; (3) the date or dates on which the
principal of any of such Debt Securities will be payable or the method by
which such date or dates will be determined or extended; (4) the rate or rates
at which any of such Debt Securities will bear interest, if any, or the method
by which such rate or rates shall be determined, the date or dates from which
any such interest will accrue, the Interest Payment Dates on which any such
interest will be payable and the Regular Record Date for any such interest
payable on any Interest Payment Date, or the method by which such date or
dates shall be determined, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months; (5)
the place or places where the principal of and any premium and interest on any
of such Debt Securities will be payable; (6) the period or periods within
which, the price or prices at which and the terms and conditions upon which
any of such Debt Securities may be redeemed, in whole or in part, at the
option of the Company and the manner in which any election by the Company to
redeem such Debt Securities shall be evidenced (if other than by a Board
Resolution); (7) the obligation, if any, of the Company to redeem or purchase
any of such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of the Holder thereof, and the period or periods
within which, the price or prices at which and the terms and conditions upon
which any of such Debt Securities will be redeemed or purchased, in whole or
in part, pursuant to any such obligation; (8) the denominations in which any
of such Debt Securities will be issuable, if other than denominations of
$1,000 and any integral multiple thereof; (9) if the amount of principal of or
any premium or interest on any of such Debt Securities may be determined with
reference to an index or pursuant to a formula, the manner in which such
amounts will be determined; (10) if other than the currency of the United
States of America, the currency, currencies or currency units in which the
principal of or any premium or interest on any of such Debt Securities will be
payable (and the manner in which the equivalent of the principal amount
thereof in the currency of the United States of America is to be determined
for any purpose, including for the purpose of determining the principal amount
deemed to be Outstanding at any time); (11) if the principal of or any premium
or interest on any of such Debt Securities is to be payable, at the election
of the Company or the Holder thereof, in one or more currencies or currency
units other than those in which such Debt Securities are stated to be
6
<PAGE>
payable, the currency, currencies or currency units in which payment of any
such amount as to which such election is made will be payable, the periods
within which and the terms and conditions upon which such election is to be
made and the amount so payable (or the manner in which such amount is to be
determined); (12) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the entire principal amount
thereof, the portion of the principal amount of any of such Debt Securities
which will be payable upon declaration of acceleration of the Maturity thereof
or the method by which such portion shall be determined; (13) if the principal
amount payable at the Stated Maturity of any of such Debt Securities will not
be determinable as of any one or more dates prior to the Stated Maturity, the
amount which will be deemed to be such principal amount as of any such date
for any purpose, including the principal amount thereof which will be due and
payable upon any Maturity other than the Stated Maturity or which will be
deemed to be Outstanding as of any such date (or, in any such case, the manner
in which such deemed principal amount is to be determined); (14) any variation
from the application of the provisions of the Indenture described under
"Defeasance and Covenant Defeasance--Defeasance and Discharge" or "Defeasance
and Covenant Defeasance--Defeasance of Certain Covenants," or under both such
captions and the manner in which any election of the Company to defease such
Debt Securities shall be evidenced (if other than by a Board Resolution); (15)
whether any of such Debt Securities will be issuable in whole or in part in
the form of one or more Global Securities and, if so, the respective
Depositaries for such Global Securities, the form of any legend or legends to
be borne by any such Global Security in addition to or in lieu of the legend
referred to under "Form, Exchange and Transfer--Global Securities" and, if
different from those described under such caption, any circumstances under
which any such Global Security may be exchanged in whole or in part for Debt
Securities registered, and any transfer of such Global Security in whole or in
part may be registered, in the names of Persons other than the Depositary for
such Global Security or its nominee; (16) whether any of such Debt Securities
will be subject to certain optional interest rate reset provisions; (17)
whether any of such Debt Securities will be subject to certain optional
extension of maturity provisions; (18) any addition to or change in the Events
of Default applicable to any of such Debt Securities and any change in the
right of the Trustee or the requisite Holders of any of such Debt Securities
to declare the principal amount thereof due and payable; (19) any addition to
or change in the covenants in the Indenture applicable to any of such Debt
Securities; and (20) any other terms of such Debt Securities not inconsistent
with the provisions of the Indenture. (Section 301)
Debt Securities, including Original Issue Discount Securities, may be sold
at a substantial discount below their principal amount. Certain special United
States income tax considerations (if any) applicable to Debt Securities sold
at an original issue discount may be described in the applicable Prospectus
Supplement. In addition, certain special United States income tax or other
considerations (if any) applicable to any Debt Securities which are
denominated in a currency or currency unit other than United States dollars
may be described in the applicable Prospectus Supplement.
FORM, EXCHANGE AND TRANSFER
The Debt Securities of each series will be issuable only in fully registered
form, without coupons, and, unless otherwise specified in the applicable
Prospectus Supplement, only in denominations of $1,000 and integral multiples
thereof. (Section 302)
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Debt Securities of each series
will be exchangeable for other Debt Securities of the same series of any
authorized denomination and of a like tenor and aggregate principal amount.
(Section 305)
Subject to the terms of the Indenture and the limitations applicable to
Global Securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or with the form of
transfer duly executed) at the office of the Security Registrar or at the
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office of any transfer agent designated by the Company for such purpose. No
service charge will be made for any registration of transfer or exchange of
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Such transfer or exchange will be effected upon the Security Registrar or such
transfer agent, as the case may be, being satisfied with the documents of
title and identity of the person making the request. The Company has appointed
the Trustee as Security Registrar. Any transfer agent (in addition to the
Security Registrar) initially designated by the Company for any Debt
Securities will be named in the applicable Prospectus Supplement. (Section
305) The Company may at any time designate additional transfer agents or
rescind the designation of any transfer agent or approve a change in the
office through which any transfer agent acts, except that the Company will be
required to maintain an office or agency in each Place of Payment for the Debt
Securities of each series. (Section 1002)
If the Debt Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company will not be required to (i) issue,
register the transfer of or exchange any Debt Security of that series (or of
that series and specified tenor, as the case may be) during a period beginning
at the opening of business 15 days before the day of mailing of a notice of
redemption of any such Debt Security that may be selected for redemption and
ending at the close of business on the day of such mailing or (ii) register
the transfer of or exchange any Debt Security so selected for redemption, in
whole or in part, except the unredeemed portion of any such Debt Security
being redeemed in part. (Section 305)
GLOBAL SECURITIES
Unless otherwise provided in the Prospectus Supplement, some or all of the
Debt Securities of any series may be represented, in whole or in part, by one
or more Global Securities which will have an aggregate principal amount equal
to that of the Debt Securities represented thereby. Unless otherwise provided
in the Prospectus Supplement, the Global Security representing Securities will
be deposited with, or on behalf of, The Depository Trust Company ("DTC"), or
other successor depository appointed by the Company (DTC or such other
depository is herein referred to as the "Depositary") and registered in the
name of the Depositary or its nominee and such Global Security will bear a
legend regarding the restrictions on exchanges and registration of transfer
thereof referred to below and any such other matters as may be provided for
pursuant to the Indenture. Unless otherwise provided in the Prospectus
Supplement, Debt Securities will not be issued in definitive form.
Notwithstanding any provision of the Indenture or any Debt Security
described herein, no Global Security may be exchanged in whole or in part for
Debt Securities registered, and no transfer of a Global Security in whole or
in part may be registered in the name of any Person other than the Depositary
for such Global Security or any nominee of such Depositary unless (i) the
Depositary has notified the Company that it is unwilling or unable to continue
as Depositary for such Global Security or has ceased to be qualified to act as
such as required by the Indenture, (ii) there shall have occurred and be
continuing an Event of Default with respect to the Debt Securities represented
by such Global Security or (iii) there shall exist such circumstances, if any,
in addition to or in lieu of those described above as may be described in the
applicable Prospectus Supplement. All Debt Securities issued in exchange for a
Global Security or any portion thereof will be registered in such names as the
Depositary may direct. (Sections 204 and 305)
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited
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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.
DTC is owned by a number of Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to DTC's book-entry system is
also available to others, such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The Rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
Upon the issuance by the Company of Debt Securities represented by a Global
Security, purchases of Debt Securities under the DTC System must be made by or
through Direct Participants, which will receive a credit for the Debt
Securities on DTC's records. The ownership interest of each actual purchaser
of each Debt Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Debt Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Debt Securities, except in the event
that use of the book-entry system for the Debt Securities is discontinued. The
laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in the Global
Security.
So long as the Depositary for the Global Security, or its nominee, is the
registered owner of the Global Security, the Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described above, owners of beneficial
interests in Debt Securities represented by the Global Security will not be
entitled to have Debt Securities represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities in definitive form and will not be considered the
owners or holders thereof under the applicable Indenture.
To facilitate subsequent transfers, all Debt Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Debt Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Debt Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Debt Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers. Conveyance of notices and other
communications by DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to Debt
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Debt Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
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Payments of principal of and interest, if any, on the Debt Securities
represented by the Global Security registered in the name of DTC or its
nominee will be made by the Company through the Trustee under the applicable
Indenture or a paying agent (the "Paying Agent"), which may also be the
Trustee under the applicable Indenture to DTC or its nominee, as the case may
be, as the registered owner of the Global Security. Neither the Company, the
Trustee, nor the 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 the Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company has been advised that DTC will credit Direct Participants'
accounts on the payable date in accordance with their respective holdings
shown on DTC's records unless DTC has reason to believe that it will not
receive payment on the payable date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as
in the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
Participant and not of DTC, the Paying Agent, or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the Company
or the Paying Agent, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to
the Person in whose name such Debt Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a
particular series will be payable at the office of such Paying Agent or Paying
Agents as the Company may designate for such purpose from time to time, except
that, at the option of the Company, payment of any interest may be made by
check mailed to the address of the Person entitled thereto as such address
appears in the Security Register. Unless otherwise indicated in the applicable
Prospectus Supplement, the corporate trust office of the Trustee in Chicago,
Illinois will be designated as the Company's sole Paying Agent for payments
with respect to Debt Securities of each series. Any other Paying Agents
initially designated by the Company for the Debt Securities of a particular
series will be named in the applicable Prospectus Supplement. The Company may
at any time designate additional Paying Agents or rescind the designation of
any Paying Agent or approve a change in the office through which any Paying
Agent acts, except that the Company will be required to maintain a Paying
Agent in each Place of Payment for the Debt Securities of a particular series.
(Section 1002)
Any money paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Security which remains
unclaimed at the end of two years after such principal, premium or interest
has become due and payable may be repaid to the Company at the Company's
request. (Section 1003)
NEGATIVE PLEDGE
In the Indenture, the Company covenants that it will not, and it will not
permit any subsidiary to, create, assume, incur or suffer to exist any Lien
upon any stock of BNI, SFP, BNRR and ATSF (each a "Restricted Subsidiary") to
secure any obligation (other than the Debt Securities) of the Company,
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any Subsidiary or other Person, unless all of the Outstanding Securities are
directly secured equally and ratably with such obligation. (Section 1008) The
Indenture defines the term Restricted Subsidiary to include any successor or
assign thereof, whether by merger or otherwise.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into, or convey, transfer or
lease its properties and assets substantially as an entirety to, any Person (a
"successor Person"), and may not permit any Person to merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to,
the Company, unless (i) the successor Person (if any) is a corporation,
partnership, trust or other entity organized and validly existing under the
laws of any domestic jurisdiction and assumes the Company's obligations on the
Debt Securities and under the Indenture and (ii) immediately after giving
effect to the transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing. (Section 801)
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to Debt Securities of any series: (a) failure to pay
principal of or any premium on any Debt Security of that series when due; (b)
failure to pay any interest on any Debt Securities 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) failure to perform or
breach of any other covenant or warranty of the Company in the Indenture with
respect to Debt Securities of that series (other than a covenant included in
the Indenture solely for the benefit of a series other than that series),
continued for 90 days after written notice has been given by the Trustee or
the Holders of at least 25% in principal amount of the Outstanding Securities
of that series, as provided in the Indenture; and (e) certain events in
bankruptcy, insolvency or reorganization. (Section 501)
If an Event of Default (other than an Event of Default described in clause
(d) above that is applicable to all Outstanding Securities) with respect to
the Debt Securities of any series at the time Outstanding shall occur and be
continuing, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities of that series by notice as
provided in the Indenture may declare the principal amount of the Debt
Securities of that series (or, in the case of any Debt Security that is an
Original Issue Discount Security or the principal amount of which is not then
determinable, such portion of the principal amount of such Debt Security, or
such other amount in lieu of such principal amount, as may be specified in the
terms of such Debt Security) to be due and payable immediately. If an Event of
Default described in clause (d) above that is applicable to all Outstanding
Securities shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of all the Debt Securities then
Outstanding (treated as one class) by notice as provided in the Indenture may
declare the principal amount (or, if any Debt Securities are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms thereof) of all the Debt Securities then Outstanding to be due
and payable immediately. After any acceleration of a series, but before a
judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of the Outstanding Securities of that series may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indenture.
(Section 502) For information as to waiver of defaults, see "Modification and
Waiver".
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, 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
603) Subject to such provisions for the indemnification of the Trustee, the
Holders of a majority in aggregate principal
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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 Debt Securities of that series. (Section 512)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing
Event of Default with respect to the Debt Securities of that series, (ii) the
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities of that series have made written request, and such Holder or
Holders have offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee and (iii) the Trustee has failed to institute such
proceeding, and has not received from the Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series a direction
inconsistent with such request, within 60 days after such notice, request and
offer. (Section 507) However, such limitations do not apply to a suit
instituted by a Holder of a Debt Security for the enforcement of payment of
the principal of or any premium or interest on such Debt Security on or after
the applicable due date specified in such Debt Security. (Section 508)
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the performance or observance of any of the terms,
provisions and conditions of the Indenture and, if so, specifying all such
known defaults. (Section 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
modification or amendment; 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 of the principal of, or any
installment of principal of or interest on, any Debt Security, (b) reduce the
principal amount of, or any premium or interest on, any Debt Security, (c)
reduce the amount of principal of an Original Issue Discount Security or any
other Debt Security payable upon acceleration of the Maturity thereof, (d)
change the place or currency of payment of principal of, or any premium or
interest on, any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f) reduce
the percentage in principal amount of Outstanding Securities of any series,
the consent of whose Holders is required for modification or amendment of the
Indenture, (g) reduce the percentage in principal amount of Outstanding
Securities of any series necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, or (h) make
certain modifications to such provisions with respect to modification and
waiver. (Section 902)
The Holders of a majority in principal amount of the Outstanding Securities
of any series may waive any past default or compliance with certain
restrictive provisions under the Indenture, except a default in the payment of
principal, premium or interest and certain covenants and provisions of the
Indenture, which cannot be amended without the consent of the Holder of each
Outstanding Security of such series affected. (Sections 513 and 1009)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given or taken
any direction, notice, consent, waiver or other action under the Indenture as
of any date, (i) the principal amount of an Original Issue Discount Security
that will be deemed to be Outstanding will be the amount of the principal
thereof that would be due and payable as of such date upon acceleration of the
Maturity thereof to such date, (ii) if, as of such date, the principal amount
payable at the Stated Maturity of a Debt Security is not determinable (for
example, because it is based on an index), the principal amount of such Debt
Security deemed to be
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Outstanding as of such date will be an amount determined in the manner
prescribed for such Debt Security and (iii) the principal amount of a Debt
Security denominated in one or more foreign currencies or currency units that
will be deemed to be Outstanding will be the U.S. dollar equivalent,
determined as of such date in the manner prescribed for such Debt Security, of
the principal amount of such Debt Security (or, in the case of a Debt Security
described in clause (i) or (ii) above, of the amount described in such
clause). Certain Debt Securities, including those for whose payment or
redemption money has been deposited or set aside in trust for the Holders and
those that have been fully defeased pursuant to Section 1402, will not be
deemed to be Outstanding. (Section 101)
Except in certain limited circumstances, the Company will be entitled to set
any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give or take any direction,
notice, consent, waiver or other action under the Indenture, in the manner and
subject to the limitations provided in the Indenture. In certain limited
circumstances, the Trustee will be entitled to set a record date for action by
Holders. If a record date is set for any action to be taken by Holders of a
particular series, such action may be taken only by persons who are Holders of
Outstanding Securities of that series on the record date. To be effective,
such action must be taken by Holders of the requisite principal amount of such
Debt Securities within a specified period following the record date. For any
particular record date, this period will be 180 days or such shorter period as
may be specified by the Company (or the Trustee, if it set the record date)
and may be shortened or lengthened (but not beyond 180 days) from time to
time. (Section 104)
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided in the applicable Prospectus Supplement, the
provisions of Section 1402, relating to defeasance and discharge of
indebtedness, or Section 1403, relating to defeasance of certain restrictive
covenants in the Indenture, shall apply to the Debt Securities of any series
or to any specified part of a series. (Section 1401)
Defeasance and Discharge. Section 1402 of the Indenture provides that the
Company will be discharged from all its obligations with respect to such Debt
Securities (except for certain obligations to exchange or register the
transfer of Debt Securities, to replace stolen, lost or mutilated Debt
Securities, to maintain paying agencies and to hold moneys for payment in
trust and in respect of the Trustee) upon the deposit in trust for the benefit
of the Holders of such Debt Securities of money or U.S. Government
Obligations, or both, which, through the payment of principal and interest in
respect thereof in accordance with their terms, will provide money in an
amount sufficient to pay the principal of and any premium and interest on such
Debt Securities on the respective Stated Maturities in accordance with the
terms of the Indenture and such Debt Securities. Such defeasance or discharge
may occur only if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel to the effect that the Company has received
from, or there has been published by, the United States Internal Revenue
Service a ruling, or there has been a change in tax law, in either case to the
effect that Holders of such Debt Securities will not recognize gain or loss
for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge were not to occur. (Sections 1402 and 1404)
Defeasance of Certain Covenants. Section 1403 of the Indenture provides that
the Company may omit to comply with certain restrictive covenants, including
those described under "Certain Covenants" and any that may be described in the
applicable Prospectus Supplement, the occurrence of certain Events of Default,
which are described above in clause (d) (with respect to such restrictive
covenants) under "Events of Default" and any that may be described in the
applicable Prospectus Supplement, will be deemed not to be or result in an
Event of Default, in each case with respect to such Debt Securities. The
Company, in order to exercise such option, will be required to deposit, in
trust for the benefit of the Holders of such Debt Securities, money or U.S.
Government Obligations, or both, which,
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through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such Debt Securities on the
respective Stated Maturities in accordance with the terms of the Indenture and
such Debt Securities. The Company will also be required, among other things,
to deliver to the Trustee an Opinion of Counsel to the effect that Holders of
such Debt Securities will not recognize gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and
defeasance were not to occur. In the event the Company exercised this option
with respect to any Debt Securities and such Debt Securities were declared due
and payable because of the occurrence of any Event of Default, the amount of
money and U.S. Government Obligations so deposited in trust would be
sufficient to pay amounts due on such Debt Securities at the time of their
respective Stated Maturities but might not be sufficient to pay amounts due on
such Debt Securities upon any acceleration resulting from such Event of
Default. In such case, the Company would remain liable for such payments.
(Sections 1403 and 1404)
NOTICES
Notices to Holders of Debt Securities will be given by mail to the addresses
of such Holders as they may appear in the Security Register. (Sections 101 and
106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the
purpose of making payment and for all other purposes. (Section 309)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the law of the State of New York. (Section 112)
REGARDING THE TRUSTEE
The First National Bank of Chicago has lending and other customary banking
relationships with the Company.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (i) through an underwriter or
underwriters, (ii) through dealers, (iii) through agents, (iv) directly to
purchasers, including affiliates of the Company, or (v) through a combination
of any such methods of sale. The applicable Prospectus Supplement will set
forth the terms of the offerings of any Debt Securities, including the method
of distribution, the name or names of any underwriters, dealers or agents, any
managing underwriter or underwriters, the purchase price of the Debt
Securities and the proceeds to the Company from the sale, any underwriting
discounts, agency fees and other items constituting underwriters' compensation
and any discounts and concessions allowed, reallowed or paid to dealers or
agents. Any initial public offering price and any discount or concessions
allowed or reallowed to dealers may be changed from time to time. The expected
time of delivery of the Debt Securities in respect of which this Prospectus is
delivered will be set forth in the applicable Prospectus Supplement.
If underwriters are used in the sale of the Debt Securities, the
underwriting agreement will provide that the obligations of the underwriters
are subject to certain conditions precedent and that the underwriters with
respect to a sale of Debt Securities will be obligated to purchase all such
Debt Securities if any are purchased. In connection with the sale of Debt
Securities underwriters may receive compensation from the Company or from
purchasers of Debt Securities for whom they may
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act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent.
Underwriters, agents or dealers participating in the distribution of Debt
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Debt
Securities may be deemed to be underwriting discounts and commissions under
the Securities Act.
The Debt Securities may be sold in one or more transactions either at a
fixed price or prices which may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company may also offer and sell the Debt Securities in
exchange for one or more of its outstanding issues of debt or convertible debt
securities or in the satisfaction of indebtedness.
Underwriters, agents or dealers who participate in the distribution of Debt
Securities may be entitled, under agreements which may be entered into with
the Company, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments that such underwriters, dealers or agents or any of their
controlling persons may be required to make in respect thereof. Underwriters,
agents or dealers may be customers of, engage in transactions with or perform
services for the Company or subsidiaries of the Company in the ordinary course
of business.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers and agents to solicit offers by certain institutions to
purchase Debt Securities from the Company pursuant to delayed delivery
contracts providing for payment and delivery on the date stated in the
Prospectus Supplement. Such contracts will be subject only to those conditions
set forth in the Prospectus Supplement. The Prospectus Supplement will also
set forth the commission payable for solicitation of such contracts.
Offers to purchase Debt Securities may be solicited directly by the Company
and sales thereof may be made by the Company directly to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto. Except
as set forth in the applicable Prospectus Supplement, no director, officer or
employee of the Company will solicit or receive a commission in connection
with direct sales by the Company of the Debt Securities, although such persons
may respond to inquiries by potential purchasers and perform ministerial and
clerical work in connection with any such direct sales.
VALIDITY OF SECURITIES
The validity of the Debt Securities being offered hereby will be passed upon
for the Company by Mayer, Brown & Platt, Chicago, Illinois, and for the
underwriters, dealers, or agents, if any, by Sullivan & Cromwell, New York,
New York.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, have been so incorporated in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of SFP incorporated in this Prospectus
by reference to SFP's Annual Report on Form 10-K for the year ended December
31, 1994, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
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15
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT, THE PRO-
SPECTUS OR ANY PRICING SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PRO-
SPECTUS SUPPLEMENT, THE PROSPECTUS AND ANY PRICING SUPPLEMENT DO NOT CONSTI-
TUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUM-
STANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY PRICING SUPPLEMENT NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Documents Incorporated by Reference........................................ S-2
Ratio of Earnings to Fixed Charges......................................... S-3
Description of Notes....................................................... S-3
Important Currency Information............................................. S-22
Currency Risks............................................................. S-22
United States Tax Considerations........................................... S-24
ERISA Considerations....................................................... S-33
Supplemental Plan of Distribution.......................................... S-33
Validity of the Notes...................................................... S-34
Experts.................................................................... S-34
PROSPECTUS
Available Information...................................................... 2
Documents Incorporated By Reference........................................ 2
The Company................................................................ 4
Ratio of Earnings to Fixed Charges......................................... 5
Use of Proceeds............................................................ 5
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 14
Validity of Securities..................................................... 15
Experts.................................................................... 15
</TABLE>
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$475,000,000
BURLINGTON NORTHERN
SANTA FE CORPORATION
MEDIUM-TERM NOTES, SERIES A
DUE 9 MONTHS OR MORE
FROM DATE OF ISSUE
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LOGO
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GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
CHASE SECURITIES INC.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
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