<PAGE>
FileD Pursuant to Rule 424(b)(5)
Registration No. 333-32879
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 12, 1997
$550,000,000
BURLINGTON NORTHERN SANTA FE CORPORATION
MEDIUM-TERM NOTES, SERIES B
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 B in an aggregate principal amount of up to
$550,000,000 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 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 February 15 and August 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) ........... $550,000,000 $687,500-$4,125,000 $545,875,000-$549,312,500
</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 DEAN WITTER
SALOMON BROTHERS INC
---------------
The date of this Prospectus Supplement is August 20, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE
OFFERING.
----------------
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:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
(c) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997;
(d) Current Report on Form 8-K (Date of earliest event reported: January
21, 1997); and
(e) Current Report on Form 8-K (Date of earliest event reported: July 22,
1997).
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering shall be deemed to be incorporated herein by reference and shall be
deemed 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 will 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 any such statement.
Any such statement so modified or superseded will 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, including any
beneficial owner, to whom this Prospectus Supplement is delivered, on the
request of such person, a copy of any of the foregoing documents incorporated
herein by reference (other than the exhibits to such documents unless such
exhibits are specifically incorporated by reference into such documents).
Written or telephone requests should be directed to Burlington Northern Santa
Fe Corporation, 2650 Lou Menk Drive, Fort Worth, Texas 76131-2830, Attention:
Corporate Secretary (telephone (817) 333-2000).
Unless otherwise indicated, currency amounts in the Prospectus and this
Prospectus Supplement are stated in United States dollars ("$" or "dollars").
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, 1996 and for the six
month periods ended June 30, 1997 and 1996. The ratios reflect the historical
results only for BNI in all periods reported prior to 1996, except for the
year ended December 31, 1995, which period includes SFP results from September
22, 1995.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
30 YEAR ENDED DECEMBER 31,
----------- -------------------------------
1997 1996 1996 1995(2) 1994 1993 1992
----- ----- ----- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges(1)........ 3.21x 3.63x 3.89x 1.85x 3.70x 3.19x 2.58x
</TABLE>
- - --------
(1) For purposes of this ratio, earnings are calculated by adding fixed
charges (excluding capitalized interest) to income (loss) from continuing
operations and deducting the undistributed equity in earnings of
investments accounted for under the equity method. Fixed charges consist
of interest
S-2
<PAGE>
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) 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.
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 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.$550,000,000 (or the equivalent
thereof in foreign currencies or currency units). In this Prospectus
Supplement, the accompanying Prospectus and any Pricing Supplement, reference
to "U.S. dollars", "U.S.$", "$", "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.
S-3
<PAGE>
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 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
S-4
<PAGE>
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 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
S-5
<PAGE>
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
of 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 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
S-6
<PAGE>
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 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-
hundredths 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).
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<PAGE>
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 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 February 15 and August 15 of each
year and the Regular Record Dates will be on the last day of January and July
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
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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 next 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;
(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
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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
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
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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.
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
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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"
or, if unavailable, such other headings representing commercial paper issued by
non-financial entities whose bond rating is "AA" or the equivalent from a
nationally recognized statistical rating agency. 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).
"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
D X 360
MONEY MARKET YIELD = ------------ X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the 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
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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 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
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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
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".
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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
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
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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 References 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, 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
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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 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
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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
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,
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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 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.
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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 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
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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 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.
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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
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).
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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 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
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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.
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
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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 (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, under current law, 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. The Taxpayer Relief Act of 1997 lowers the maximum rate of tax
imposed on gain realized from the sale, exchange or retirement of Notes held by
certain U.S. Holders, provided the Notes have been held by such holder for more
than eighteen months. In general, the maximum tax rate on net long-term capital
gains (i.e., the excess of net long-term capital gains over net short-term
capital loss) is lowered to 20% from the present 28% for most capital assets
held for
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more than 18 months. Capital gain on assets held for more than one year and not
more than 18 months will be taxed as "mid term gain" at a maximum rate of 28%.
A lower rate of 18% will apply after December 31, 2000 for assets held for more
than five years. However, the 18% rate only applies to assets acquired after
December 31, 2000 unless the taxpayers elects to treat an asset held prior to
such date as sold for fair market value on January 1, 2001. The maximum rates
are lower and other rules apply to taxpayers whose ordinary income is subject
to tax at a maximum rate of 15%.
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) 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.
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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.
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
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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
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.
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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.
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, not a United States
holder of a Note.
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.
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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
condition are met.
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
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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 (v) 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 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.
S-31
<PAGE>
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.
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 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.
S-32
<PAGE>
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms of the Distribution Agreement dated as of August 20,
1997 (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 connection with the offering, the Agents may purchase and sell the Notes
in the open market. These transactions may include over-allotment and
stabilizing transactions, and purchases to cover short positions created by the
Agents in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Notes; and short positions created by the Agents
involve the sale by the Agents of a greater number of Notes than they are
required to purchase from the Company in the offering. The Agents may impose a
penalty bid, whereby selling concessions allowed to broker-dealers in respect
of the Notes sold in the offering may be reclaimed by the Agents if such Notes
are repurchased by the Agents in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Notes, which may be higher than the price that might otherwise prevail in the
open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
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.
S-33
<PAGE>
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.
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 directors of the Company hold positions with or serve in an
advisory capacity to 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 and the financial statement schedule
as of December 31, 1996 and for the year ended December 31, 1996 incorporated
in this Prospectus Supplement by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, have been so incorporated in
reliance on the reports of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements and the financial statement schedule
as of December 31, 1995 and for each of the two years in the period ended
December 31, 1995 incorporated in this Prospectus Supplement by reference to
the Company's Annual Report on Form 10-K for the year ended December 31, 1996
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.
S-34
<PAGE>
PROSPECTUS
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
(including notes commonly known as medium-term notes), or other evidences of
indebtedness in one or more series at an aggregate initial offering price not to
exceed $550,000,000 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 August 12, 1997
<PAGE>
No person is authorized in connection with any offering made hereby to give
any information or to make any representations not contained in or incorporated
by reference in this Prospectus, and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the Debt Securities offered hereby, nor
does it constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby to any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation to such person. Neither the
delivery of this Prospectus or any Prospectus Supplement nor any sale made
hereunder shall under any circumstance create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
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 and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy material and other information
filed with the Commission can be inspected and copied at the offices of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
should be available at its regional offices, 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, Thirteenth Floor, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates and from the Commission's worldwide web site at
http://www.sec.gov. Such reports, proxy material and other information
concerning the Company also may be inspected at the offices of the New York
Stock Exchange, Inc. (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.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"). This
prospectus ("Prospectus"), which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the content of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
2
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company under the Exchange
Act with the Commission are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
(c) Current Report on Form 8-K (Date of earliest event reported: January
21, 1997); and
(d) Current Report on Form 8-K (Date of earliest event reported: July 22,
1997).
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act prior to the termination of the offering
shall be deemed to be incorporated herein by reference and shall be deemed 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 will
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 any such statement. Any such statement so modified or
superseded will 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, including any
beneficial owner, to whom this Prospectus is delivered, on the request of such
person, a copy of any of the foregoing documents incorporated herein by
reference (other than the exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Written or
telephone requests should be directed to Burlington Northern Santa Fe
Corporation, 2650 Lou Menk Drive, Fort Worth, Texas 76131-2830, Attention:
Corporate Secretary (telephone (817) 333-2000).
Unless otherwise indicated, currency amounts in the Prospectus and any
Prospectus Supplement are stated in United States dollars ("$" or "dollars").
3
<PAGE>
THE COMPANY
On September 22, 1995, Burlington Northern Inc. (BNI) and Santa Fe
Pacific Corporation ("SFP") effected a business combination (the "Merger")
pursuant to which each became a direct or indirect wholly owned subsidiary of
the Company. As a result of the Merger, Burlington Northern Railroad Company
("BN") and The Atchison, Topeka and Santa Fe Railway Company ("ATSF") also
became indirect wholly owned subsidiaries of the Company.
On December 30, 1996, BNI merged with and into SFP. On December 31,
1996, ATSF merged with and into BN and BN changed its name to The Burlington
Northern and Santa Fe Railway Company ("BNSF Railway").
Through its principal operating subsidiary, BNSF Railway, the company
is engaged primarily in railroad transportation. BNSF Railway operates one of
the largest railroad networks in the United States, with approximately 35,000
route miles reaching across 29 states and two Canadian provinces as of December
31, 1996. Approximately 7,900 route miles of BNSF Railway's system consist of
trackage rights which permit BNSF Railway to operate its trains with its crews
over another railroad's tracks.
BNSF Railway 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 West
and in the midwestern and southwestern United States. The principal cities
served by BNSF Railway include Albuquerque, Billings, Birmingham, Cheyenne,
Chicago, Corpus Christi, Dallas, Denver, Des Moines, Duluth/Superior,
Fargo/Moorhead, Fort Worth, Galveston, Houston, Kansas City, Little Rock,
Lincoln, Los Angeles, Memphis, Mobile, Oklahoma City, Omaha, Pensacola, Phoenix,
Portland, Reno, Salt Lake City, San Antonio, 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 Brownsville, El Paso and Eagle Pass, Texas and San
Diego.
BNSF Railway derives a substantial portion of its revenues from
intermodal transportation and the transportation of coal and agricultural
commodities. Other significant aspects of BNSF Railway's business include the
transportation of commodities in the following areas: chemicals, forest
products, consumer goods, automotive, metals, and minerals.
The Company's principal executive offices are located at 2650 Lou Menk
Drive, Fort Worth, Texas 76131-2830, 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, 1996, and for the
three month periods ended March 31, 1997 and 1996. The ratios reflect the
historical results for BNI only in all periods reported prior to 1996, except
for the year ended December 31, 1995, which period includes SFP results from
September 22, 1995.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------ -----------------------------------------------
1997 1996 1996 1995(2) 1994 1993 1992
---- ---- ---- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges(1) 2.75x 3.45x 3.89x 1.85x 3.70x 3.19x 2.58x
</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) 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.
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, and for the repurchase of the Company's common stock from time to
time.
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, 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.
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.
5
<PAGE>
General
The Indenture provides that separate series of Debt Securities may be
issued under the Indenture 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 on 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 on 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 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 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
6
<PAGE>
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 Securities 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 Securities may be
exchanged in whole or in part for Debt Securities registered, and any transfer
of such Global Securities in whole or in part may be registered, in the names of
Persons other than the Depositary for such Global Securities 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 extensions 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 Holders of any of such Debt
Securities to declare the principal amount of any of such Debt Securities and
any change in the right of the Trustee or the 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 federal 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 endorsed thereon duly executed) at the office of the Security Registrar
or at the 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 a transfer agent 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)
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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 Debt
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 exchange 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 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 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 laws may impair the ability to transfer beneficial
interests in a 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
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Securities represented by such Global Security for all purposes under the
Indenture. Except as described above, Beneficial Owners 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 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).
Payments of principal of and interest, if any, on the Debt Securities
represented by the Global Security registered in the name of the Depositary or
its nominee will be made by the Company through the Trustee under the Indenture
or a paying agent (the "Paying Agent"), which may also be the Trustee under the
Indenture, to the Depositary 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
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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 Debt 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 SFP or BNSF Railway (each, a "Restricted Subsidiary") to secure any
obligation (other than the Debt Securities) of the Company, any Subsidiary or
other Person, unless all of the Outstanding Debt 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 Debt 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 to the Company 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 involving
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 Debt Securities) with respect to
the Debt Securities of any series at the time Outstanding Debt shall occur and
be continuing, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the Outstanding Debt 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
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Security) to be due and payable immediately. If an Event of Default described in
clause (d) above that is applicable to all Outstanding Debt 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 such 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 Debt 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 amount of the Outstanding Debt 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 Debt Securities
of that series have made written request, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding 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
Debt 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 Debt 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 Debt
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 Debt 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 Debt
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
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modification and waiver. (Section 902)
The Holders of a majority in aggregate principal amount of the Outstanding
Debt 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 Debt 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 Debt 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 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 Debt 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 Debt 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) 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
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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, in certain circumstances, 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, and that in
those circumstances 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, 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 laws 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
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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 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.
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EXPERTS
The consolidated financial statements and the financial statement
schedule as of December 31, 1996 and for the year ended December 31, 1996
incorporated in this Prospectus by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 have been so incorporated in
reliance on the reports of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements and the financial statement schedule
as of December 31, 1995 and for each of the two years in the period ended
December 31, 1995 incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 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.
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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........................................ 2
Ratio of Earnings to Fixed Charges......................................... 2
Description of Notes....................................................... 3
Important Currency Information............................................. 22
Currency Risks............................................................. 22
United States Tax Considerations........................................... 24
ERISA Considerations....................................................... 32
Supplemental Plan of Distribution.......................................... 33
Validity of the Notes...................................................... 34
Experts.................................................................... 34
PROSPECTUS
Available Information...................................................... 2
Documents Incorporated By Reference........................................ 3
The Company................................................................ 4
Ratio of Earnings to Fixed Charges......................................... 5
Use of Proceeds............................................................ 5
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 13
Validity of Securities..................................................... 14
Experts.................................................................... 15
</TABLE>
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$550,000,000
BURLINGTON NORTHERN
SANTA FE CORPORATION
MEDIUM-TERM NOTES, SERIES B
DUE 9 MONTHS OR MORE
FROM DATE OF ISSUE
-----------
BNSF
-----------
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
CHASE SECURITIES INC.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
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