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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-24683
PROSPECTUS SUPPLEMENT
(To Prospectus Dated June 6, 1997)
$500,000,000
WILLIAMS HOLDINGS OF DELAWARE, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Williams Holdings of Delaware, Inc. (the "Company") may from time to time offer
pursuant to this Prospectus Supplement its Medium-Term Notes, Series A (the
"Notes"), with an aggregate initial public offering price or purchase price of
up to $500,000,000, (or the equivalent thereof in one or more foreign or
composite currencies), subject to reduction as a result of the sale of other
securities under the Registration Statement of which this Prospectus Supplement
and the accompanying Prospectus form a part or under a Registration Statement to
which this Prospectus Supplement and the accompanying Prospectus relate. Unless
otherwise specified in the applicable Pricing Supplement, each Note will mature
on a Business Day nine months or more from its date of issue (the "Stated
Maturity"), which maturity date may be subject to extension at the option of the
Company. The Notes may bear interest at a fixed rate (a "Fixed Rate Note"),
which may be zero in the case of certain Discount Notes, or at a floating rate
(a "Floating Rate Note") determined by reference to LIBOR, the CD Rate, the
Commercial Paper Rate, the Federal Funds Rate, the Treasury Rate, the Prime
Rate, the CMT Rate, the Eleventh District Cost of Funds Rate or any other Base
Rate, as selected by the purchaser and agreed to by the Company, adjusted by the
Spread or Spread Multiplier, if any, applicable to such Note. Unless otherwise
indicated, interest on each Fixed Rate Note will be payable semiannually in
arrears on each March 1 and September 1 (each an "Interest Payment Date") and at
Stated Maturity. A Note may be issued as an amortizing note (an "Amortizing
Note") on which a portion or all the principal amount is payable prior to Stated
Maturity in accordance with a schedule, by application of a formula, or by
reference to an index. A Note may be issued as an indexed note (an "Indexed
Note") on which the amount of any interest payment, will be determined by
reference to the level of a specific index as defined on the applicable Pricing
Supplement. The Specified Currency, interest rate or interest rate formula,
reset provisions, Issue Price, Stated Maturity, Interest Payment Dates,
redemption, repayment and extension provisions and certain other terms with
respect to each Note will be established at the time of issuance and set forth
in a pricing supplement to this Prospectus Supplement (a "Pricing Supplement").
If the Notes are to be denominated in one or more foreign currencies or currency
units (each a "Specified Currency"), then the provisions with respect thereto
(including authorized denominations) and currency exchange rate information will
be set forth in the applicable Pricing Supplement. Each Note will be represented
by a Global Security registered in the name of a nominee of The Depository Trust
Company, as Depositary (a "Book-Entry Note"). Beneficial interests in Global
Securities representing 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 issuable as Certificated Notes except
under the circumstances described herein.
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 THE PROSPECTUS, THIS PROSPECTUS SUPPLEMENT OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO THE
PUBLIC(1) AND COMMISSION(2) COMPANY(2)(3)
<S> <C> <C> <C>
Per Note................................ 100.000% .125%-.750% 99.875%-99.250%
Total(4)................................ $500,000,000 $625,000-$3,750,000 $499,375,000-$496,250,000
</TABLE>
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(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to public will be 100% of the principal amount.
(2) The Company will pay to Salomon Brothers Inc, Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and Smith Barney Inc. (collectively, the
"Agents") a commission of from .125% to .750% of the principal amount of any
Note, depending upon its Stated Maturity through 30 years, sold through the
Agents. Commissions on Notes with a maturity of more than 30 years will be
negotiated at the time of sale.
(3) Before deduction of expenses payable by the Company estimated at $600,000,
including reimbursement of certain expenses of the Agents.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
The Notes are being offered on a continuous basis by the Company through the
Agents, which have agreed to use their best efforts to solicit orders to
purchase the Notes. The Company may also sell Notes at a discount to an Agent
for its own account or for resale to one or more purchasers at varying prices
related to prevailing market prices at the time of resale or, if set forth in
the applicable Pricing Supplement, at a fixed public offering price, as
determined by such Agent. In addition, such Agent may offer Notes purchased by
it as principal to other dealers. Unless otherwise specified in the applicable
Pricing Supplement, any Note purchased by an Agent as principal will be
purchased at 100% of the principal amount thereof less a percentage equal to the
commission applicable to an agency sale of a Note of identical maturity. The
Notes will not be listed on any securities exchange, and there can be no
assurance that the maximum amount of Notes offered by this Prospectus Supplement
will be sold or that there will be a secondary market for the Notes. The Company
reserves the right to withdraw, cancel or modify the offer made hereby without
notice. The Company or the Agents may reject any order to purchase Notes,
whether or not solicited, in whole or in part. See "Plan of Distribution".
SALOMON BROTHERS INC
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
SMITH BARNEY INC.
The date of this Prospectus Supplement is June 6, 1997
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY
BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
COMPANY DESCRIPTION
The Company was incorporated under the laws of the State of Delaware in
July, 1994. The principal executive offices of the Company are located at One
Williams Center, Tulsa, Oklahoma 74172 (telephone (918) 588-2000). Unless the
context otherwise requires, references to the Company herein include
subsidiaries of the Company. The Company is a wholly-owned subsidiary of The
Williams Companies, Inc. ("Williams").
The Company, through subsidiaries, engages in hydrocarbon exploration and
production activities; natural gas gathering, processing, and treating
activities; the transportation and terminaling of crude oil and petroleum
products; the production and marketing of ethanol; and energy commodity trading
and marketing and provides a variety of other products and services, including
price risk management services, to the energy industry. The Company's
communications subsidiaries offer data-, voice-, and video-related products and
services; advertising distribution services; video services and other multimedia
services for the broadcast industry; broadcast facsimile and audio- and
video-conferencing services for businesses; interactive, computer-based training
and services; and customer premise voice and data equipment, including
installation and maintenance; and network integration and management services
nationwide. The Company also has certain other equity investments.
The Company conducts substantially all of its operations through
subsidiaries. Williams performs management, legal, financial, tax, consultative,
administrative, and other services for the Company and its subsidiaries. The
Company's principal sources of cash are from external financings, dividends and
advances from its subsidiaries, advances from Williams, investments, and
interest payments from subsidiaries and Williams on cash advances. The amount of
dividends available to the Company from subsidiaries largely depends on each
subsidiary's earnings and capital requirements. Terms of one subsidiary's
borrowing arrangements limit the transfer of funds to the Company.
DESCRIPTION OF NOTES
The following description of the Notes will apply to each Note offered
hereby unless otherwise specified in the applicable Pricing Supplement.
GENERAL
The Notes are a series of Debt Securities that constitute senior debt of
the Company and are to be issued under a Senior Debt Indenture dated as of
February 1, 1996 (the "Indenture") with Citibank, N.A., as Trustee (the
"Trustee"). At the date of this Prospectus Supplement, the Notes offered
pursuant to this Prospectus Supplement are limited to an aggregate initial
public offering price or purchase price of up to $500,000,000 or the equivalent
thereof in one or more foreign or composite currencies, which amount is subject
to reduction as a result of the sale of other securities under the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
form a part or under a Registration Statement to which this Prospectus
Supplement and the accompanying Prospectus relate. The aggregate amount of Notes
may be increased from time to time to such larger amount as may be authorized by
the Company. The U.S. dollar equivalent of the public offering price or purchase
price of a Note having a Specified Currency other than U.S. dollars will be
determined on the basis of the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York (the "Market Exchange Rate") for such Specified
Currency on the applicable issue date. Such determination will be made by the
Company or its agent, as exchange
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rate agent for both series of Notes (the "Exchange Rate Agent"). The Notes will
constitute part of the Senior Indebtedness of the Company and will rank pari
passu with all other senior unsecured debt of the Company.
The Notes will consist of Registered Notes, and will be offered on a
continuous basis. Notes will be issued in fully registered form only, without
coupons. Each Note will be issued initially as either a Book-Entry Note or, if
specified in the applicable Pricing Supplement, a Certificated Note. Except as
set forth in the Prospectus under "Description of Debt Securities -- Registered
Global Securities", Book-Entry Notes will not be issuable as Certificated Notes.
See "Book-Entry System" below.
Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of Notes denominated in U.S. dollars will be $1,000 and
any larger amount that is an integral multiple of $1,000, and the authorized
denominations of Notes having a Specified Currency other than U.S. dollars will
be the approximate equivalents thereof in the Specified Currency.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will mature on a Business Day nine months or more from its date of issue, as
selected by the purchaser and agreed to by the Company (the "Stated Maturity"),
which maturity date may be subject to extension at the option of the Company.
Each Note may also be subject to redemption at the option of the Company, or
repayment at the option of the Holder, prior to its Stated Maturity. Each
Floating Rate Note will mature on an Interest Payment Date for such Note.
The Pricing Supplement relating to a Note will describe the following
terms: (i) the Specified Currency for such Note; (ii) whether such Note is a
Fixed Rate Note, a Floating Rate Note, an Amortizing Note and/or an Indexed
Note; (iii) the price (expressed as a percentage of the aggregate principal
amount or face amount thereof) 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 of the Stated Maturity; (vi) if such Note is a Fixed Rate
Note, the rate per annum at which such Note will bear interest, if any, and
whether and the manner in which such rate may be changed prior to its Stated
Maturity; (vii) if such Note is a Floating Rate Note, the Base Rate, the Initial
Interest Rate, the Interest Reset Period or the Interest Reset Dates, the
Interest Payment Dates, and, if applicable, the Index Maturity, the Maximum
Interest Rate, the Minimum Interest Rate, the Spread or Spread Multiplier (all
as defined below), and any other terms relating to the particular method of
calculating the interest rate for such Note and whether and the manner in which
such Spread or Spread Multiplier may be changed prior to Stated Maturity; (viii)
whether such Note is an Original Issue Discount Note (as defined below); (ix) if
such Note is an Amortizing Note, the terms for repayment prior to Stated
Maturity; (x) if such Note is an Indexed Note, in the case of an Indexed Rate
Note, the manner in which the amount of any interest payment will be determined
or, in the case of an Indexed Principal Note, its Face Amount and the manner in
which the principal amount payable at Stated Maturity will be determined; (xi)
whether such Note may be redeemed at the option of the Company, or repaid at the
option of the Holder, prior to Stated Maturity as described under "Optional
Redemption, Repayment and Repurchase" below and, if so, the provisions relating
to such redemption or repayment, including, in the case of an Original Issue
Discount Note or Indexed Note, the information necessary to determine the amount
due upon redemption or repayment; (xii) whether such Note is subject to an
optional extension beyond its Stated Maturity as described under "Extension of
Maturity" below; and (xiii) any other terms of such Note not inconsistent with
the provisions of the Indenture under which such Note will be issued.
"Business Day" with respect to any Note means any day, other than a
Saturday or Sunday, that is (i) not a legal holiday or a day on which banking
institutions are authorized or required by law, regulation or executive order to
be closed in (a) The City of New York or (b) if the Specified Currency for such
Note is other than U.S. dollars, the financial center of the country issuing
such Specified Currency (which, in the case of ECU, shall be Brussels, Belgium)
and (ii) if such Note is a LIBOR Note (as defined below), a London Banking Day.
"London Banking Day" with respect to any Note means any day on which dealings in
deposits in the Specified Currency of such Note are transacted in the London
interbank market.
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"Original Issue Discount Note" means (i) a Note, including any such Note
whose interest rate is zero, that has a stated redemption price at Stated
Maturity that exceeds its Issue Price by at least 0.25% of its stated redemption
price at Stated Maturity, multiplied by the number of full years from the
Original Issue Date to the Stated Maturity for such Note and (ii) any other Note
designated by the Company as issued with original issue discount for United
States Federal income tax purposes.
A "basis point" or "bp" equals one one-hundredth of a percentage point.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of and any premium and interest on each Note are payable by
the Company in the Specified Currency for such Note. If the Specified Currency
for a Note is other than U.S. dollars, the Company will (unless otherwise
specified in the applicable Pricing Supplement) arrange to convert all payments
in respect of such Note into U.S. dollars in the manner described in the
following paragraph. The Holder of a Note having a Specified Currency other than
U.S. dollars may (if the applicable Pricing Supplement and such Note so
indicate) elect to receive all payments in respect of such Note in the Specified
Currency by delivery of a written notice to the Trustee for such Note not later
than fifteen calendar days prior to the applicable payment date, except under
the circumstances described under "Currency Risks--Payment Currency" below. Such
election will remain in effect until revoked by written notice to such Trustee
received not later than fifteen calendar days prior to the applicable payment
date.
In the case of a Note having a Specified Currency other than U.S. dollars,
unless otherwise specified in the applicable Pricing Supplement, the amount of
any U.S. dollar payment in respect of such Note will be determined by the
Exchange Rate Agent based on the highest indicative bid quotation expressed in
U.S. dollars received by the Exchange Rate Agent at approximately 11:00 a.m.,
New York City time, on the second Business Day preceding the applicable payment
date (or, if no such rate is quoted on such date, the last date on which such
rate was quoted), from three (or, if three are not available, then two)
recognized foreign exchange dealers in The City of New York (one of which may be
an Agent and another of which may be the Exchange Rate Agent) selected by the
Exchange Rate Agent, for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Specified Currency payable on
such payment date in respect of all Notes denominated in such Specified
Currency. All currency exchange costs will be borne by the Holders of such Notes
by deductions from such payments. If no such bid quotations are available, such
payments will be made in such Specified Currency, unless such Specified Currency
is unavailable due to the imposition of exchange controls or to other
circumstances beyond the Company's control, in which case such payments will be
made as described under "Currency Risks--Payment Currency" below.
Unless otherwise specified in the applicable Pricing Supplement, U.S.
dollar payments of interest on Notes (other than interest payable at Stated
Maturity) will be made, except as provided below, by check mailed to the
Registered Holders of such Notes (which, in the case of Global Securities
representing Book-Entry Notes, will be a nominee of the Depositary); provided,
however, that, in the case of a Note issued between a Regular Record Date and
the related Interest Payment Date, unless otherwise specified in the related
Pricing Supplement, interest for the period beginning on the Original Issue Date
for such Note and ending on such Interest Payment Date shall be paid on the next
succeeding Interest Payment Date to the Registered Holder of such Note on the
related Regular Record Date. A Holder of $10,000,000 (or the equivalent thereof
in a Specified Currency other than U.S. dollars) or more in aggregate principal
amount of Notes of like tenor and term shall be entitled to receive such U.S.
dollar payments by wire transfer of immediately available funds, but only if
appropriate wire transfer instructions have been received in writing by the
Trustee for such Notes not later than fifteen calendar days prior to the
applicable Interest Payment Date. Simultaneously with the election by any Holder
to receive payments in a Specified Currency other than U.S. dollars (as provided
above), such Holder shall provide appropriate wire transfer instructions to the
Trustee for such Notes. Unless otherwise specified in the applicable Pricing
Supplement, principal and any premium and interest payable at the Stated
Maturity of a Note will be paid in immediately available funds upon surrender of
such Note at the corporate trust office or agency of the Trustee for such Note
in The City of New York.
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Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Discount Note is declared to be due and payable immediately as
described under "Description of Debt Securities-Events of Default" in the
Prospectus, the amount of principal due and payable with respect to such Note
shall be limited to the aggregate principal amount (or face amount, in the case
of an Indexed Principal Note) of such Note multiplied by the sum of its Issue
Price (expressed as a percentage of the aggregate principal amount) plus the
original issue discount amortized from the date of issue to the date of
declaration, which amortization shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles in effect
on the date of declaration).
The Regular Record Date with respect to any Interest Payment Date for a
Floating Rate Note or for an Indexed Rate Note shall be the date (whether or not
a Business Day) fifteen calendar days immediately preceding such Interest
Payment Date, and for a Fixed Rate Note (unless otherwise specified in the
applicable Pricing Supplement) shall be the February 15 or August 15 (whether or
not a Business Day) immediately preceding such Interest Payment Date.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date, or
from the last Interest Payment Date to which interest has been paid or duly
provided for, at the rate per annum stated in the applicable Pricing Supplement
until the principal amount thereof is paid or made available for payment, except
as described below under "Subsequent Interest Periods" and "Extension of
Maturity", and except that if so specified in the applicable Pricing Supplement,
the rate of interest payable on certain Fixed Rate Notes may be subject to
adjustment from time to time as described in such Pricing Supplement. Unless
otherwise set forth in the applicable Pricing Supplement, interest on each Fixed
Rate Note will be payable semiannually in arrears on each March 1 and September
1 (each such day being an "Interest Payment Date") and at Stated Maturity. If an
Interest Payment Date with respect to any Fixed Rate Note would otherwise be a
day that is not a Business Day, such Interest Payment Date shall not be
postponed; provided, however, that any payment required to be made in respect of
such Note on a date (including the day of Stated Maturity) that is not a
Business Day for such Note need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
date, and no additional interest shall accrue as a result of such delayed
payment. Each payment of interest in respect of an Interest Payment Date shall
include interest accrued through the day before such Interest Payment Date.
Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, each
Floating Rate Note will bear interest from its Original Issue Date to the first
Interest Reset Date (such period, the "Initial Interest Period") for such Note
at the Initial Interest Rate set forth on the face thereof and in the applicable
Pricing Supplement. The interest rate on such Note for each Interest Reset
Period (as defined below) (and for the Initial Interest Period if so specified
in the applicable Pricing Supplement) will be determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any. The "Spread" is the number of basis
points that may be specified in the applicable Pricing Supplement as being
applicable to such Note, and the "Spread Multiplier" is the percentage that may
be specified in the applicable Pricing Supplement as being applicable to such
Note, except in each case as described below under "Subsequent Interest Periods"
and "Extension of Maturity", and except that if so specified in the applicable
Pricing Supplement, the Spread or Spread Multiplier on certain Floating Rate
Notes may be subject to adjustment from time to time as described in such
Pricing Supplement. The applicable Pricing Supplement will designate one of the
following Base Rates as applicable to a Floating Rate Note: (i) LIBOR (a "LIBOR
Note"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (iii)
the Treasury Rate (a "Treasury Rate Note"), (iv) the Prime Rate (a "Prime Rate
Note"), (v) CMT Rate (a "CMT Note"), (vi) the Federal Funds Rate (a "Federal
Funds Rate Note"), (vii) the CD Rate (a "CD Rate Note"), (viii) the Eleventh
District Cost of
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Funds Rate (an "Eleventh District Cost of Funds Rate Note") or (ix) such other
Base Rate as is set forth in such Pricing Supplement and in such Note. The
"Index Maturity" for any Floating Rate Note is the period of maturity of the
instrument or obligation from which the Base Rate is calculated. "H.15(519)"
means the publication entitled "Statistical Release H.15(519), 'Selected
Interest Rates"', or any successor publication, published by the Board of
Governors of the Federal Reserve System. "Composite Quotations" means the daily
statistical release entitled "Composite 3:30 p.m. Quotations for U.S. Government
Securities" published by the Federal Reserve Bank of New York.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following (in each case expressed as a rate per
annum on a simple interest basis): (i) a maximum limitation, or ceiling, on the
rate at which interest may accrue during any interest period ("Maximum Interest
Rate") and (ii) a minimum limitation, or floor, on the rate at which interest
may accrue during any interest period ("Minimum Interest Rate"). In addition to
any Maximum Interest Rate that may be applicable to any Floating Rate Note, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by applicable law, as the same may be modified by United
States law of general application. The Notes will be governed by the law of the
State of New York and, under such law as of the date of this Prospectus
Supplement, the maximum rate of interest under provisions of the penal law, with
certain exceptions, is 25% per annum on a simple interest basis. Such maximum
rate of interest only applies to obligations that are less than $2,500,000.
Unless otherwise specified in the Pricing Supplement, the Trustee will be
the "Calculation Agent". Upon request of the holder of any Floating Rate Note,
the Calculation Agent will provide the interest rate then in effect and, if
determined, the interest rate will become effective as a result of a
determination for the next Interest Reset Date with respect to such Floating
Rate Note. Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date", if 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 Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or Stated Maturity, as the case may be.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Interest
Reset Period" for such Note, and the first day of each Interest Reset Period
being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, the
Interest Reset Dates will be, in the case of Floating Rate Notes that reset
daily, each Business Day; in the case of Floating Rate Notes (other than
Treasury Rate Notes) that reset weekly, Wednesday of each week; in the case of
Treasury Rate Notes that reset weekly, Tuesday of each week (except as provided
below under "Treasury Rate Notes"); in the case of Floating Rate Notes that
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes that reset quarterly, the third Wednesday of March, June, September and
December of each year; in the case of Floating Rate Notes that reset
semiannually, the third Wednesday of each of two months of each year specified
in the applicable Pricing Supplement; and, in the case of Floating Rate Notes
that reset annually, the third Wednesday of one month of each year specified in
the applicable Pricing Supplement. If an Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Reset Date shall be postponed to the next succeeding Business Day, except that,
in the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Reset Date shall be the immediately preceding
Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest that goes into effect on any Interest Reset Date shall be determined
on a date (the "Interest Determination Date") preceding such Interest Reset
Date, as further described below. Unless otherwise specified in the applicable
Pricing Supplement the Interest Determination Date pertaining to an Interest
Reset Date for a CD Rate Note or any Floating Rate Note for which the interest
rate is determined with reference to the CD Rate (the "CD Rate Interest
Determination Date"), for a Commercial Paper Rate Note or any Floating Rate Note
for which the interest rate is determined with reference to the Commercial Paper
Rate (the "Commercial Paper Rate Interest Determination Date"), for a Federal
Funds Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (the
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"Federal Funds Rate Interest Determination Date"), or for a Prime Rate Note or
any Floating Rate Note for which the interest rate is determined with reference
to the Prime Rate (the "Prime Rate Interest Determination Date"), or for a CMT
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the CMT Rate (the "CMT Rate Interest Determination Date"),
will be the second Business Day preceding the Interest Reset Date. The Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note or any
Floating Rate Note for which the interest rate is determined with reference to
LIBOR (the "LIBOR Rate Interest Determination Date") will be the second London
Business Day immediately preceding the Interest Reset Date with respect to such
Note. The Interest Determination Date pertaining to an Interest Reset Date for
an Eleventh District Cost of Funds Rate Note or any Floating Rate Note for which
the interest rate is determined with reference to the Eleventh District Cost of
Funds Rate (the "Eleventh District Cost of Funds Rate Interest Determination
Date") will be the last working day of the month immediately preceding the
applicable Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined below).
The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Treasury Rate (the "Treasury Rate Interest
Determination Date") will be the day of the week on which Treasury bills (as
defined below) would normally be auctioned in the week in which such Interest
Reset Date falls. Treasury bills are usually sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is usually
held on the following Tuesday, except that such auction may be held on the
preceding Friday. If, as the result of a legal holiday, an auction is so held on
the preceding Friday, such Friday will be the Treasury Rate Interest
Determination Date pertaining to an Interest Reset Date occurring in the next
succeeding week. If an auction date shall fall on a day which would otherwise be
an Interest Reset Date for a Treasury Rate Note, then such Interest Reset Date
shall instead be the first Business Day immediately following such auction date.
The Interest Determination Date pertaining to a Floating Rate Note the interest
rate of which is determined by reference to two or more Interest Rate Bases will
be the most recent Business Day which is at least two Business Days prior to the
applicable Interest Reset Date for such Floating Rate Note on which each
Interest Rate Basis is determinable. Each Interest Rate Basis will be determined
on such date, and the applicable interest rate will take effect on the
applicable Interest Reset Date.
Unless otherwise specified in the applicable Pricing Supplement, interest
payable in respect of Floating Rate Notes shall be the accrued interest from and
including the Original Issue Date or the last date to which interest has been
paid, as the case may be, to but excluding the applicable Interest Payment Date.
In the case of a Floating Rate Note that resets daily or weekly, interest
payable shall be the accrued interest from and including the Original Issue Date
or the last date to which interest has been accrued and paid, as the case may
be, to but excluding the Record Date immediately preceding the applicable
Interest Payment Date, except that, at Stated Maturity, interest payable will
include interest accrued to but excluding the date of Stated Maturity.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Note (or, in the case of a Floating
Rate Note that is an Indexed Principal Note, its Face Amount) by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which accrued
interest is being calculated. Unless otherwise specified in the applicable
Pricing Supplement the interest factor (expressed as a decimal calculated to
seven decimal places without rounding) for each such day is computed by dividing
the interest rate in effect on such day by 360, in the case of LIBOR Notes,
Prime Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes,
Eleventh District Cost of Funds Rate Notes, and CD Rate Notes or by the actual
number of days in the year, in the case of CMT Rate Notes or Treasury Rate
Notes. For purposes of making the foregoing calculation, the interest rate in
effect on any Interest Reset Date will be the applicable rate as reset on such
date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on a Floating
Rate Note will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward, and
all
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currency amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest one-hundredth of a unit (with .005 of a
unit being rounded upward).
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
that reset daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the applicable Pricing Supplement; in the case of Floating Rate
Notes that reset quarterly, on the third Wednesday of March, June, September,
and December of each year; in the case of Floating Rate Notes that reset
semiannually, on the third Wednesday of each of two months of each year
specified in the applicable Pricing Supplement; and, in the case of Floating
Rate Notes that reset annually, on the third Wednesday of one month of each year
specified in the applicable Pricing Supplement (each such day being an "Interest
Payment Date"). If an Interest Payment Date with respect to any Floating Rate
Note would otherwise be a day that is not a Business Day, such Interest Payment
Date shall be postponed to the next succeeding Business Day, except that, in the
case of a LIBOR Note, if such Business Day is in the next succeeding calendar
month, such Interest Payment Date shall be the immediately preceding Business
Day.
CD RATE NOTES
Each CD Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the CD Rate and the Spread or Spread
Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate on the CD Rate Interest
Determination Date for negotiable certificates of deposit having the Index
Maturity designated in the applicable Pricing Supplement as published in
H.15(519) under the heading "CDs (Secondary Market)". In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, then the "CD Rate" for such
Interest Reset Period will be the rate on such Interest Rate Determination Date
for negotiable certificates of deposit of the Index Maturity designated in the
applicable Pricing Supplement as published in Composite Quotations under the
heading "Certificates of Deposit". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or Composite
Quotations, then the "CD Rate" for such Interest Reset Period will be calculated
by the Calculation Agent for such CD Rate Note 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 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 such CD Rate Note for negotiable certificates of deposit
of major United States money center banks of the highest credit standing (in the
market for negotiable certificates of deposit) with a remaining maturity closest
to the Index Maturity designated in the Pricing Supplement in a denomination of
$5,000,000; provided, however, that if the dealers selected as aforesaid by such
Calculation Agent are not quoting offered rates as mentioned in this sentence,
the "CD Rate" for such Interest Reset 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 Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Each Commercial Paper Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Commercial Paper
Rate and the Spread or Spread Multiplier, if any, specified in such Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Note as of the Commercial Paper
Rate Interest Determination Date and shall be the Money Market Yield (as defined
below) on such Interest Determination Date of the rate for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement, as
such rate shall be published in
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H.15(519) under the heading "Commercial Paper". In the event that such rate is
not published prior to 3:00 p.m., New York City time, on the Calculation Date
(as defined below) pertaining to such Interest Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield on such Interest Determination Date of the rate 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 published in either H.15(519) or Composite
Quotations, then the "Commercial Paper Rate" for such Interest Reset Period
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 such Commercial Paper Rate Note for commercial paper of
the specified Index Maturity placed for an industrial issuer whose bonds are
rated "AA" or the equivalent by a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the "Commercial Paper
Rate" for such Interest Reset 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 Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<C> <C> <S>
D X 360
Money Market Yield = ----------------- X 100
360 - (D X M)
</TABLE>
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 interest period for which interest is being calculated.
FEDERAL FUNDS RATE NOTES
Each Federal Funds Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Federal Funds Rate
and the Spread or Spread Multiplier, if any, specified in such Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective rate
on the Federal Funds Rate Interest Determination Date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)". In the
event that such rate is not published prior to 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 Reset Period shall be the rate on such
Interest Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate". If by 3:00 p.m., New York City time, on
such Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Federal Funds Rate" for such Interest Reset
Period shall be the rate on such Interest Determination Date made publicly
available by the Federal Reserve Bank of New York which is equivalent to the
rate which appears in H.15(519) under the heading "Federal Funds (Effective)";
provided, however, that if such rate is not made publicly available by the
Federal Reserve Bank of New York by 3:00 p.m., New York City time, on such
Calculation Date, the "Federal Funds Rate" for such Interest Reset Period will
be the same as the Federal Funds Rate in effect for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Interest Rate). In the case of a Federal Funds Rate Note that resets
daily, the interest rate on such Note for the period from and including a Monday
to but excluding the succeeding Monday will be reset by the Calculation Agent
for such Note on such second Monday (or, if not a Business Day, on the next
succeeding Business Day) to a rate equal to the average of the Federal Funds
Rates in effect with respect to each such day in such week.
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LIBOR NOTES
Each LIBOR Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to LIBOR and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
will be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to any Interest Determination Date relating to a
LIBOR Note or any Floating Rate Note for which the interest is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be, as specified, in the applicable Pricing Supplement, either: (a) the
arithmetic mean of the offered rates for deposits in the Index Currency (as
defined below) having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Banking Day immediately
following that LIBOR Interest Determination Date, which appear on the
Reuters Screen LIBO Page as of 11:00 a.m., London time, on that LIBOR
Interest Determination Date, if at least two such offered rates appear on
the Reuters Screen LIBO Page, unless such Reuters Screen LIBO Page by its
terms provides only for a single rate, in which case such single rate shall
be used ("LIBOR Reuters"), or (b) the rate for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Business Day immediately
following that LIBOR Interest Determination Date, which appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on that LIBOR Interest
Determination Date ("LIBOR Telerate"). "Reuters Screen LIBO Page" means the
display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on that service
for the purpose of displaying London interbank offered rates of major banks
for the applicable Index Currency). "Telerate Page 3750" means the display
designated as page "3750" on the Dow Jones 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 of major banks for the
applicable Index Currency). If neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable Pricing Supplement, LIBOR for the applicable
Index Currency will be determined as if LIBOR Telerate (and, if the U.S.
dollar is the Index Currency, page 3750) had been specified. If fewer than
two offered rates appear on the Reuters Screen LIBO Page (unless, as
aforesaid, only a single rate is required), 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 (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates (unless, as aforesaid, only a single rate is
required) appear on the Reuters Screen LIBO Page, as specified in (i) (a)
above, or on which no rate appears on Telerate Page 3750, as specified in
(i) (b) above, as applicable, LIBOR will be determined on the basis of the
rates at which deposits in the Index Currency having the Index Maturity
designated in the applicable Pricing Supplement are offered at
approximately 11:00 a.m., London time, on that LIBOR Interest Determination
Date by four major banks in the London interbank market selected by the
Calculation Agent ("Reference Banks") to prime banks in the London
interbank market, commencing on the second London Banking Day immediately
following that LIBOR Interest Determination Date and in a principal amount
that is representative for a single transaction in such Index Currency in
such market at such time. The Calculation Agent will request the principal
London office of each of the Reference Banks to provide a quotation of its
rate. If at least two such quotations are provided, LIBOR in respect of
that LIBOR Interest Determination Date will be the arithmetic mean of such
quotations. 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 at approximately 11:00 a.m., in the Principal Financial Center
for the country of the Index Currency, on the LIBOR Interest Determination
Date by three major banks in such Principal Financial Center (which may
include affiliates of the Agents) selected by the
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<PAGE> 11
Calculation Agent for loans in the Index Currency to leading European
banks, having the Index Maturity designed in the applicable Pricing
Supplement commencing on the second London Banking Day following such LIBOR
Interest Determination Date and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such LIBOR Interest Determination Date will
be the rate of LIBOR in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency specified in the applicable Pricing
Supplement as the currency for which LIBOR shall be calculated. If no such
currency is specified in the applicable Pricing Supplement, the Index Currency
shall be U.S. dollars.
TREASURY RATE NOTES
Each Treasury Rate Note will bear interest for each Interest Reset Period
at the interest rate calculated with reference to the Treasury Rate and the
Spread or Spread Multiplier, if any, specified in such Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the auction
held on the Treasury Rate Interest Determination Date for such Interest Reset
Period of direct obligations of the United States ("Treasury securities") having
the Index Maturity specified in the applicable Pricing Supplement, as such rate
shall be published in H.15(519) under the heading "U.S. Government
Securities-Treasury bills-auction average (investment)" or, in the event that
such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the auction
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) on such Interest
Determination Date as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of Treasury securities
having the specified Index Maturity are not published or reported as provided
above by 3:00 p.m., New York City time, on such Calculation Date, or if no such
auction is held on such Interest Determination Date, then the "Treasury Rate"
for such Interest Reset Period shall be calculated by the Calculation Agent for
such Treasury Rate Note 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 United States government securities dealers
selected by such Calculation Agent for the issue of Treasury securities with a
remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period 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 Initial Interest Rate).
PRIME RATE NOTES
Each Prime Rate Note will bear interest at the interest rate calculated
with reference to the Prime Rate and the Spread or Spread multiplier, if any
specified in such Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
rate on such date as published in H.15(519) under the heading "Bank Prime Loan."
In the event that such rate is not published by 9:00 a.m., New York City time,
on the Calculation Date pertaining to such Interest Determination Date, then the
Prime Rate will be determined by the Calculation Agent and will be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME1 Page (as defined below) as such bank's
prime rate or base lending rate as in effect for that Interest Determination
Date. "Reuters Screen USPRIME1" means the display designated as page "USPRIME1"
on the Reuters
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<PAGE> 12
Monitor Money Rates Service (or such other page as may replace the USPRIME1 page
on that service for the purpose of displaying prime rates or base lending rates
of major United States banks). If fewer than four such rates but more than one
such rate appear on the Reuters Screen USPRIME1 Page for such Interest
Determination Date, the Prime Rate shall be determined by the Calculation Agent
and will be the arithmetic mean of the prime rates quoted on the basis of 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 major money center banks in New York
City selected by the Calculation Agent (after consulting with the Company). If
fewer than two such rates appear on the Reuters Screen USPRIME1 Page, the Prime
Rate will be determined by the Calculation Agent and will be the arithmetic mean
of the prime rates furnished in New York City by three substitute banks or trust
companies organized and doing business under the laws of the United States, or
any State thereof, in each case having total equity capital of at least U.S.
$500,000,000 and being subject to supervision or examination by Federal or State
authority, selected by the Calculation Agent (after consulting with the Company)
to provide such rate or rates; provided, however, that if the banks selected as
aforesaid are not quoting as mentioned in this sentence, the Prime Rate will
remain the Prime Rate in effect on such Interest Determination Date.
CMT RATE NOTES
Each CMT Rate Note will bear interest at the rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Note and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Rate Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption "...Treasury
Constant Maturities...Federal Reserve Board release H.15... Mondays
approximately 3:45 P.M.," under the column for the Designated CMT Maturity Index
(as defined below) for (i) if the Designated Telerate Page is 7055, the rate on
such Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the week, or the month, as applicable, ended immediately preceding the
week in which the related Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 P.M., New
York City time, on the related Calculation Date, then the CMT Rate for such
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in H15.(519). If such rate is no
longer published, or if not published by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate for such Interest Determination Date
will be such treasury constant maturity rate for the designated CMT Maturity
Index (or other United States Treasury rate for the Designated CMT Maturity
Index) for the Interest Determination Date with respect to such Interest Reset
Date as may then be published by either the Board of Governors of the Federal
Reserve System or the United States Department of the Treasury that the
Calculation Agent determines to be comparable to the rate formerly displayed on
the Designated CMT Telerate Page and published in the relevant H.15(519). If
such information is not provided by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate for such Interest Determination Date
will be calculated by the Calculation Agent and will be a yield to maturity,
based on the arithmetic mean of the secondary market closing side offer prices
as of approximately 3:30 P.M., New York City time, on the Interest Determination
Date reported, according to their written records, by three leading primary
United States government securities dealers (each, a "Reference Dealer") in the
City of New York selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States ("Treasury
Notes") with an original maturity of approximately the Designated CMT Maturity
Index and a remaining term to maturity of not less than such Designated CMT
Maturity Index minus one year. If the Calculation Agent cannot obtain three such
Treasury Note quotations, the CMT Rate for such Interest Determination Date will
be calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on the Interest Determination Date
of three Reference Dealers in the City of New York (from
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<PAGE> 13
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for such
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 in an amount of at least U.S. $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 are quoting as described herein, the CMT Rate
will be the CMT Rate in effect on such Interest Determination Date. If two
Treasury Notes with an original maturity as described in the third preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the quotes for the CMT Rate Note with the shorter remaining term
to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service designated in the applicable Pricing Supplement for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519) (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)). 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.
ELEVENTH DISTRICT COST OF FUNDS RATE NOTES
Each Eleventh District Cost of Funds Rate Note will bear interest at
interest rates calculated with reference to the Eleventh District Cost of Funds
Rate and the Spread or Spread Multiplier, if any, specified in such Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to an Eleventh District Cost of
Funds Interest Determination Date the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Interest Determination Date falls, as set forth under the caption "11th
district" on Telerate Page 7058 (as defined below) as of 11:00 A.M., San
Francisco time, on such Interest Determination Date. If such rate does not
appear on Telerate Page 7058 on such Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Interest Determination Date will be
the monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Index") by the FHLB of San Francisco as such cost of funds for the calendar
month immediately preceding the date of such announcement. If the FHLB of San
Francisco fails to announce such rate for the calendar month immediately
preceding such Interest Determination Date, then the Eleventh District Cost of
Funds Rate determined as of such Interest Determination Date will be the
Eleventh District Cost of Funds Rate in effect on such Interest Determination
Date.
"Telerate Page 7058" means the display designated as page "7058" on the Dow
Jones Telerate Service (or such other page as may replace the 7058 page on that
service for the purpose of displaying the monthly weighted average cost of funds
paid by member institutions of the Eleventh Federal Home Loan Bank District).
SUBSEQUENT INTEREST PERIODS
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to reset the interest rate (in the case of a Fixed Rate
Note) with respect to such Note or the Spread or Spread Multiplier (in the case
of a Floating Rate Note) with respect to such Note and, if so, the date or
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dates on which such interest rate or such Spread or Spread Multiplier, as the
case may be, may be reset (each an "Optional Reset Date").
The Company shall notify the Trustee for a Note whether or not it intends
to exercise such option with respect to such Note at least 45 but not more than
60 calendar days prior to an Optional Reset Date for such Note. Not later than
40 calendar days prior to such Optional Reset Date, the Trustee for such Note
will mail to the Holder of such Note a notice (the "Reset Notice"), first class,
postage prepaid, indicating whether the Company has elected to reset the
interest rate (in the case of a Fixed Rate Note) or the Spread or Spread
Multiplier (in the case of a Floating Rate Note) and if so, (i) such new
interest rate or such new Spread or Spread Multiplier, as the case may be; and
(ii) the provisions, if any, for redemption during the period from such Optional
Reset Date to the next Optional Reset Date or, if there is no such next Optional
Reset Date, to the Stated Maturity of such Note (each such period a "Subsequent
Interest Period"), including the date or dates on which or the period or periods
during which and the price or prices at which such redemption may occur during
such Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 calendar days prior to an
Optional Reset Date for a Note, the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the Spread or Spread
Multiplier (in the case of a Floating Rate Note) provided for in the Reset
Notice with respect to such Optional Reset Date and establish a higher interest
rate (in the case of a Fixed Rate Note) or a higher Spread or Spread Multiplier
(in the case of a Floating Rate Note) for the Subsequent Interest Period
commencing on such Optional Reset Date by causing the Trustee for such Note to
mail notice of such higher interest rate or higher Spread or Spread Multiplier,
as the case may be, first class, postage prepaid, to the Holder of such Note.
Such notice shall be irrevocable. All Notes with respect to which the interest
rate or Spread or Spread Multiplier is reset on an Optional Reset Date will bear
such higher interest rate (in the case of Fixed Rate Notes) or higher Spread or
Spread Multiplier (in the case of Floating Rate Notes), whether or not tendered
for repayment.
The Holder of a Note will have the option to elect repayment of such Note
by the Company on each Optional Reset Date at a price equal to the principal
amount thereof, plus interest accrued to such Optional Reset Date. In order for
a Note to be repaid on an Optional Reset Date, the Holder thereof must follow
the procedures set forth below under "Optional Redemption, Repayment and
Repurchase" for optional repayment, except that the period for delivery of such
Note or notification to the Trustee for such Note shall be at least 25 but not
more than 35 calendar days prior to such Optional Reset Date, and except that a
Holder who has tendered a Note for repayment pursuant to a Reset Notice may, by
written notice to the Trustee for such Note, revoke any such tender for
repayment until the close of business on the tenth day prior to such Optional
Reset Date.
AMORTIZING NOTES
The Company may from time to time offer Notes ("Amortizing Notes") on which
a portion or all the principal amount is payable prior to Stated Maturity in
accordance with a schedule, by application of a formula, or by reference to an
Index (as defined below). Further information concerning additional terms and
conditions of any Amortizing Notes, including terms for repayment thereof, will
be set forth in the applicable Pricing Supplement.
INDEXED NOTES
The Company may from time to time offer Notes ("Indexed Notes") on which
certain or all interest payments (in the case of an "Indexed Rate Note"), and/or
the principal amount payable at Stated Maturity or earlier redemption or
retirement (in the case of an "Indexed Principal Note"), is determined by
reference to the principal amount of such Notes (or, in the case of an Indexed
Principal Note, to the amount designated in the applicable Pricing Supplement as
the "Face Amount" of such Indexed Note) and by reference to prices, changes in
prices, or differences between prices, of securities, currencies, intangibles,
goods, articles or commodities or by such other objective price, economic or
other measures as are described in the applicable Pricing Supplement (the
"Index"). A description of the Index used in
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any determination of an interest or principal payment, and the method or formula
by which interest or principal payments will be determined by reference to such
Index, will be set forth in the applicable Pricing Supplement.
In the case of a Fixed Rate Note, Floating Rate Note or Indexed Rate Note
that is also an Indexed Principal Note, the amount of any interest payment will
be determined by reference to the Face Amount of such Indexed Note unless
specified otherwise in the applicable Pricing Supplement. In the case of an
Indexed Principal Note, the principal amount payable at Stated Maturity or any
earlier redemption or repayment of the Indexed Note may be different from the
Face Amount.
If the determination of the Index on which any interest payment or the
principal amount of an Indexed Note is calculated or announced by a third party,
which may be Salomon Brothers Inc or another affiliate of the Company, and such
third party either suspends the calculation or announcement of such Index or
changes the basis upon which such Index is calculated (other than changes
consistent with policies in effect at the time such Indexed Note was issued and
permitted changes described in the applicable Pricing Supplement), then such
Index shall be calculated for purposes of such Indexed Note by another third
party selected by the Company, which may be Salomon Brothers Inc or another
affiliate of the Company, subject to the same conditions and controls as applied
to the original third party. If for any reason such Index cannot be calculated
on the same basis and subject to the same conditions and controls as applied to
the original third party, then the indexed interest payments, if any, or any
indexed principal amount of such Indexed Note shall be calculated in the manner
set forth in the applicable Pricing Supplement. Any determination of such third
party shall in the absence of manifest error be binding on all parties.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to extend the Stated Maturity of such Note for one or
more periods of whole years from one to five (each an "Extension Period") up to
but not beyond the date (the "Final Maturity") set forth in such Pricing
Supplement.
The Company may exercise such option with respect to a Note by notifying
the Trustee for such Note at least 45 but not more than 60 calendar days prior
to the old Stated Maturity of such Note. Not later than 40 calendar days prior
to the old Stated Maturity of such Note, the Trustee for such Note will mail to
the Holder of such Note a notice (the "Extension Notice"), first class, postage
prepaid. The Extension Notice will set forth (i) the election of the Company to
extend the Stated Maturity of such Note; (ii) the new Stated Maturity; (iii) in
the case of a Fixed Rate Note, the interest rate applicable to the Extension
Period or, in the case of a Floating Rate Note, the Spread or Spread Multiplier
applicable to the Extension Period; and (iv) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which or
the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by such
Trustee of an Extension Notice to the Holder of a Note, the Stated Maturity of
such Note shall be extended automatically, and, except as modified by the
Extension Notice and as described in the next paragraph, such Note will have the
same terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior to the
old Stated Maturity of such Note, the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the Spread or Spread
Multiplier (in the case of a Floating Rate Note) provided for in the Extension
Notice for such Note and establish a higher interest rate (in the case of a
Fixed Rate Note) or a higher Spread or Spread Multiplier (in the case of a
Floating Rate Note) for the Extension Period, by causing the Trustee for such
Note to mail notice of such higher interest rate or higher Spread or Spread
Multiplier, as the case may be, first class, postage prepaid, to the Holder of
such Note. Such notice shall be irrevocable. All Notes with respect to which the
Stated Maturity is extended will bear such higher interest rate (in the case of
Fixed Rate Notes) or higher Spread or Spread Multiplier (in the case of Floating
Rate Notes) for the Extension Period, whether or not tendered for repayment.
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If the Company extends the Stated Maturity of a Note, the Holder of such
Note will have the option to elect repayment of such Note by the Company on the
old Stated Maturity at a price equal to the principal amount thereof, plus
interest accrued to such date. In order for a Note to be repaid on the old
Stated Maturity once the Company has extended the Stated Maturity thereof, the
Holder thereof must follow the procedures set forth below under "Optional
Redemption, Repayment and Repurchase" for optional repayment, except that the
period for delivery of such Note or notification to the Trustee for such Note
shall be at least 25 but not more than 35 days prior to the old Stated Maturity
and except that a Holder who has tendered a Note for repayment pursuant to an
Extension Notice may, by written notice to the Trustee for such Note, revoke any
such tender for repayment until the close of business on the tenth day before
the old Stated Maturity.
OPTIONAL REDEMPTION, REPAYMENT AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to its Stated Maturity or that such Note will be
redeemable at the option of the Company, in whole or in part, and the date or
dates (each an "Optional Redemption Date") on which such Note may be redeemed
and the price (the "Redemption Price") at which (together with accrued interest
to such Optional Redemption Date) such Note may be redeemed on each such
Optional Redemption Date. The Company may exercise such option with respect to a
Note by notifying the Trustee for such Note at least 45 days prior to any
Optional Redemption Date. Unless otherwise specified in the applicable Pricing
Supplement, at least 30 but not more than 60 days prior to the date of
redemption, such Trustee shall mail notice of such redemption, first class,
postage prepaid, to the Holder of such Note. In the event of redemption of a
Note in part only, a new Note or Notes for the unredeemed portion thereof shall
be issued to the Holder thereof upon the cancellation thereof. The Notes will
not be subject to any sinking fund.
The Pricing Supplement relating to each Note will also indicate whether the
Holder of such Note will have the option to elect repayment of such Note by the
Company prior to its Stated Maturity, and, if so, such Pricing Supplement will
specify the date or dates on which such Note may be repaid (each an "Optional
Repayment Date") and the price (the "Optional Repayment Price") at which,
together with accrued interest to such Optional Repayment Date, such Note may be
repaid on each such Optional Repayment Date.
In order for a Note to be repaid, the Trustee for such Note must receive,
at least 30 but not more than 45 days prior to an Optional Repayment Date (i)
such Note with the form entitled "Option to Elect Repayment" on the reverse
thereof duly completed, or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company in
the United States setting forth the name of the Holder of such Note, the
principal amount of such Note to be repaid, the certificate number or a
description of the tenor and terms of such Note, a statement that the option to
elect repayment is being exercised thereby and a guarantee that the Note to be
repaid with the form entitled "Option to Elect Repayment" on the reverse of the
Note duly completed will be received by such Trustee not later than five
Business Days after the date of such telegram, telex, facsimile transmission or
letter. If the procedure described in clause (ii) of the preceding sentence is
followed, then such Note and form duly completed must be received by such
Trustee by such fifth Business Day. Any tender of a Note by the Holder for
repayment (except pursuant to a Reset Notice or an Extension Notice) shall be
irrevocable. The repayment option may be exercised by the Holder of a Note for
less than the entire principal amount of such Note provided that the principal
amount of such Note remaining outstanding after repayment is an authorized
denomination. Upon such partial repayment, such Note shall be canceled and a new
Note or Notes for the remaining principal amount thereof shall be issued in the
name of the Holder of such repaid Note.
If a Note is represented by a Global Security, the Depositary's nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment.
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Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other direct or indirect participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary.
Notwithstanding anything in this Prospectus Supplement to the contrary, if
a Note is an Original Issue Discount Note (other than an Indexed Note), the
amount payable on such Note in the event of redemption or repayment prior to its
Stated Maturity shall be the Amortized Face Amount of such Note as of the date
of redemption or the date of repayment, as the case may be. The "Amortized Face
Amount" of a Discount Note shall be the amount equal to (i) the Issue Price set
forth in the applicable Pricing Supplement plus (ii) that portion of the
difference between the Issue Price and the principal amount of such Note that
has accrued at the Yield to Maturity set forth in the Pricing Supplement
(computed in accordance with generally accepted United States bond yield
computation principles) by such date of redemption or repayment, but in no event
shall the Amortized Face Amount of a Discount Note exceed its principal amount.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the Trustee for cancellation.
BOOK-ENTRY SYSTEM
Upon issuance, and subject to the rules of the Depositary, all Fixed Rate
Book-Entry Notes having the same Original Issue Date and otherwise identical
terms will be represented by a single Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York (the "Depositary"), and registered
in the name of a nominee or the Depositary. Book-Entry Notes will not be
exchangeable for Certificated Notes and, except under the circumstances
described in the Prospectus under "Description of Debt Securities--Registered
Global Securities", will not otherwise be issuable as Certificated Notes.
The Depositary has advised the Company and the Agents as follows: The
Depositary is a limited-purpose trust company organized under New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities--Registered Global Securities". The Depositary
has confirmed to the Company, the Agents and the Trustees that it intends to
follow such procedures.
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CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a Note having a Specified Currency other than U.S. dollars
entails significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and such Specified Currency and the possibility of the imposition or
modification of foreign exchange controls with respect to such Specified
Currency. Such risks generally depend on factors over which the Company has no
control and which cannot be readily foreseen, such as economic and political
events and the supply of and demand for the relevant currencies. In recent
years, rates of exchange between the U.S. dollar and certain 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 the Specified Currency for a Note
against the U.S. dollar would result in a decrease in the effective yield of
such Note below its coupon rate and, in certain circumstances, could result in a
substantial loss to the investor on a U.S. dollar basis.
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 Specified Currency for making payments in respect of Notes denominated in
such currency. At present, the Company has identified the following currencies
in which payments of principal, premium and interest on Notes may be made:
Australian dollars, Canadian dollars, Danish kroner, English pounds sterling,
French francs, German deutsche marks, Italian lire, Japanese yen, New Zealand
dollars, U.S. dollars and ECU. However, the Company may determine at any time to
issue Notes with Specified Currencies other than those listed. There can be no
assurances that exchange controls will not restrict or prohibit payments of
principal, premium or interest in any Specified Currency. Even if there are no
actual exchange controls, it is possible that, on a payment date with respect to
any particular Note, the currency in which amounts then due in respect of such
Note are payable would not be available to the Company. In that event, the
Company will make such payments in the manner set forth under "Description of
Notes--Payment of Principal and Interest" above.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT DESCRIBE
ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED IN A 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 AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN
INVESTMENT IN NOTES DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH
NOTES ARE 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 residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase or holding of, or receipt of payments of principal, premium
or interest in respect of, Notes. Such persons should consult their own advisors
with regard to such matters.
Any Pricing Supplement relating to Notes having a Specified Currency other
than U.S. dollars will contain a description of any material exchange controls
affecting such currency and any other required information concerning such
currency.
PAYMENT CURRENCY
Except as set forth below, if payment in respect of 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
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the country issuing such currency or for the settlement of transactions by
public institutions of or within the international banking community, then all
payments in respect of such Note shall be made in U.S. dollars until such
currency is again available or so used. The amounts so payable on any date in
such currency shall be converted into U.S. dollars on the basis of the most
recently available Market Exchange Rate for such currency or as otherwise
indicated in the applicable Pricing Supplement. Any payment in respect of such
Note made under such circumstances in U.S. dollars will not constitute an Event
of Default under the Indenture under which such Note shall have been issued.
If payment in respect of a Note is required to be made in ECU and ECU are
no longer used in the European Monetary System, then all payments in respect of
such Note shall be made in U.S. dollars until ECU are again so used. The amount
of each payment in U.S. dollars shall be computed on the basis of the equivalent
of ECU in U.S. dollars, determined as described below, as of the second Business
Day prior to the date on which such payment is due.
The equivalent of ECU in U.S. dollars as of any date (the "Day of
Valuation") shall be determined by the Trustee for such Note on the following
basis. The component currencies of ECU for this purpose (the "Components") shall
be the currency amounts that were components of ECU as of the last date on which
ECU were used in the European Monetary System. The equivalent of ECU in U.S.
dollars shall be calculated by aggregating the U.S. dollar equivalents of the
Components. The U.S. dollar equivalent of each of the Components shall be
determined by such Trustee or such Exchange Rate Agent, as the case may be, on
the basis of the most recently available Market Exchange Rates for such
Components or as otherwise indicated in the applicable Pricing Supplement.
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
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall be equal to the
amount of the former component currency divided by the number of currencies into
which that currency was divided.
All determinations referred to above made by the Trustee for the Notes or
the Exchange Rate Agent, as the case may be, 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.
FOREIGN CURRENCY JUDGMENTS
The Notes will be governed by and construed in accordance with the law of
the State of New York. Courts in the United States customarily have not rendered
judgments for money damages denominated in any currency other than the U.S.
dollar. A 1987 amendment to the Judiciary Law of the State of New York provides,
however, that an action based upon an obligation denominated in a currency other
than U.S. dollars will be rendered in the foreign currency of the underlying
obligation and converted into U.S. dollars at the rate of exchange prevailing on
the date of the entry of the judgment or decree.
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UNITED STATES FEDERAL TAXATION
In the opinion of Davis Polk & Wardwell, tax counsel to the Company, the
following summary accurately describes the principal United States federal
income tax consequences of ownership and disposition of the Notes to initial
holders purchasing Notes at the "issue price" (as defined below). This summary
is based on the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"), administrative pronouncements, judicial decisions and existing and
proposed Treasury Regulations, including regulations concerning the treatment of
debt instruments issued with original issue discount (the "OID Regulations"),
changes to any of which subsequent to the date of this Prospectus may affect the
tax consequences described herein. This summary discusses only Notes held as
capital assets within the meaning of Section 1221 of the Code. It does not
discuss all of the tax consequences that may be relevant to a holder in light of
his particular circumstances or to holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities.
Persons considering the purchase of Notes should consult their tax advisors with
regard to the application of the United States federal income tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of a Note
that is (i) for United States federal income tax purposes a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source. The term also
includes certain former citizens of the United States.
As used herein, the term "United States Alien Holder" means an owner of a
Note that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or more
of the members of which is, for United States federal income tax purposes, a
nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Payments of Interest
Interest paid on a Note will generally be taxable to a United States Holder
as ordinary interest income at the time it accrues or is received in accordance
with the United States Holder's method of accounting for federal income tax
purposes. Under the OID Regulations, all payments of interest on a Note that
matures one year or less from its date of issuance will be included in the
stated redemption price at maturity of the Notes and will be taxed in the manner
described below under "Original Issue Discount Notes." Special rules governing
the treatment of interest paid with respect to Original Issue Discount Notes,
including certain Floating Rate Notes and Indexed Notes, Foreign Currency Notes
and Currency Indexed Notes, are described under "Original Issue Discount Notes,"
"Foreign Currency Notes" and "Currency Indexed Notes" below.
Original Issue Discount Notes
A Note that is issued for an amount less than its stated redemption price
at maturity will generally be considered to have been issued at an original
issue discount for federal income tax purposes (an "Original Issue Discount
Note"). The "issue price" of a Note will equal the first price to the public
(not including bond houses, brokers or similar persons or organizations acting
in the capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of the Notes is sold for money. The stated redemption price
at maturity of a Note will equal the sum of all payments required under the Note
other than payments of "qualified stated interest". "Qualified stated interest"
is stated interest unconditionally payable as a series of payments in cash or
property (other than debt instruments of the issuer) at least annually during
the entire term of the Note and equal to the outstanding principal balance of
the Note multiplied by a single fixed rate of interest. In addition, interest
unconditionally payable at
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least annually with respect to Floating Rate Notes may in certain circumstances
be treated as qualified stated interest. Ordinarily, interest payable at least
annually at a single Base Rate that can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds, such as the CD
Rate, Commercial Paper Rate, Federal Funds Rate, LIBOR, Prime Rate, CMT Rate,
Eleventh District Cost of Funds Rate, and the Treasury Rate, plus or minus a
fixed spread (or a fixed rate minus one of the above Interest Rate Bases) will
generally be treated as qualified stated interest. However, special tax
considerations (including possible original issue discount and contingent debt
treatment (see below)), may arise with respect to Floating Rate Notes providing
for (i) interest not unconditionally payable at least annually, (ii) interest
payable at more than one Base Rate, (iii) interest payable at a fixed rate
followed or preceded by a Base Rate or Rates, (iv) a Spread Multiplier, (v) a
cap, floor, governor or similar restriction, or (vi) an interest rate, the
average value of which during the first half of the Note's term is reasonably
expected to be either significantly less than or significantly more than the
average value of the rate during the final half of the Note's term. Purchasers
of Floating Rate Notes should consult their tax advisors since the tax
consequences will depend, in part, on the particular terms of the purchased
Note.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the Note will not be considered to have original issue
discount. Holders of Notes with a de minimis amount of original issue discount
will generally include such original issue discount in income, as capital gain,
on a pro rata basis as principal payments are made on the Note.
A United States Holder of Original Issue Discount Notes will be required to
include any qualified stated interest payments in income in accordance with the
Holder's method of accounting for federal income tax purposes. United States
Holders of Original Issue Discount Notes that mature more than one year from
their date of issuance will be required to include original issue discount in
income for federal income tax purposes as it accrues, in accordance with a
constant yield method based on a compounding of interest, before the receipt of
cash payments attributable to such income. Under this method, United States
Holders of Original Issue Discount Notes generally will be required to include
in income increasingly greater amounts of original issue discount in successive
accrual periods.
Final Treasury Regulations published on June 14, 1996 (the "Contingent Debt
Regulations"), address, among other things, the accrual of original issue
discount on, and the character of gain realized on the sale, exchange or
retirement of, debt instruments providing for contingent payments. The
Contingent Debt Regulations will generally apply only to contingent payment debt
instruments issued on or after August 13, 1996. Prospective Holders of Floating
Rate Notes providing for contingent payments should refer to the discussion
regarding taxation in the applicable Pricing Supplement and should consult their
tax advisors regarding the federal income tax consequences of the ownership and
disposition of such Notes.
Under the OID Regulations, a Note that matures one year or less from its
date of issuance will be treated as a "short-term Original Issue Discount Note".
In general, a cash method United States Holder of a short-term Original Issue
Discount Note is not required to accrue original issue discount for United
States federal income tax purposes unless it elects to do so. Holders who make
such an election, Holders who report income for federal income tax purposes on
the accrual method and certain other Holders, including banks and dealers in
securities, are required to include original issue discount in income on such
short-term Original Issue Discount Notes as it accrues 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 Holder who is
not required and who does not elect to include original issue discount in income
currently, any gain realized on the sale, exchange or retirement of the
short-term Original Issue Discount Note will be ordinary income to the extent of
the original issue discount accrued on a straight-line basis (or, if elected,
according to a constant yield method based on daily compounding) through the
date of sale, exchange or retirement. In addition, such Holders will be required
to defer deductions for any interest paid on indebtedness incurred to purchase
or carry short-term Original
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Issue Discount Notes in an amount not exceeding the deferred interest income,
until such deferred interest income is recognized.
Under the OID Regulations, a Holder may make an election (the "Constant
Yield Election") to include in gross income all interest that accrues on a Note
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) in accordance with a constant yield method based on the
compounding of interest.
Certain of the Original Issue Discount Notes may be redeemed prior to
maturity. Original Issue Discount Notes containing such a feature may be subject
to rules that differ from the general rules discussed above. Purchasers of
Original Issue Discount Notes with such a feature should carefully examine the
applicable Pricing Supplement and should consult their 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.
The OID Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price, maturity
date, yield to maturity and stated redemption price at maturity for purposes of
calculating and accruing any original issue discount. Unless otherwise provided
in the related Pricing Supplement, the Company does not expect to treat any of
the Notes as being subject to the aggregation rules for purposes of computing
original issue discount.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and such Holder's adjusted tax
basis in the Note. For these purposes, the amount realized does not include any
amount attributable to accrued interest on the Note. Amounts attributable to
accrued interest are treated as interest as described under "Payments of
Interest" above. A United States Holder's adjusted tax basis in a Note will
equal the cost of the Note to such Holder, increased by the amounts of original
issue discount previously included in income by the Holder with respect to such
Note and reduced by any amortized premium and any principal payments received by
the Holder and, in the case of an Original Issue Discount Note, by the amounts
of any other payments that do not constitute qualified stated interest (as
defined above).
Subject to the discussion regarding "Foreign Currency Notes" below, gain or
loss realized on the sale, exchange or retirement of a Note will be capital gain
or loss (except in the case of a short-term Original Issue Discount Note, to the
extent of any original issue discount not previously included in the Holder's
taxable income), and will be long-term capital gain or loss if at the time of
sale, exchange or retirement the Note has been held for more than one year. See
"Original Issue Discount Notes" above. The excess of net long-term capital gains
over net short-term capital losses is taxed at a lower rate than ordinary income
for certain non-corporate taxpayers. The distinction between capital gain or
loss and ordinary income or loss is also relevant for purposes of, among other
things, limitations on the deductibility of capital losses.
If a United States Holder purchases a Note for an amount that is greater
than the amount payable at maturity, such Holder will be considered to have
purchased such Note with "amortizable bond premium" equal in amount to such
excess, and may elect (in accordance with applicable Code provisions) to
amortize such premium, using a constant yield method, over the remaining term of
the Note (where such Note is not optionally redeemable prior to its maturity
date). If such Note may be optionally redeemed prior to maturity after the
Holder has acquired it, the amount of amortizable bond premium is determined
with reference to the amount payable on maturity or, if it results in a smaller
premium attributable to the period of earlier redemption date, with reference to
the amount payable on the earlier redemption date. A Holder who elects to
amortize bond premium must reduce his tax basis in the Note by the amount of the
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<PAGE> 23
premium amortized in any year. An election to amortize bond premium applies to
all taxable debt obligations then owned and thereafter acquired by the taxpayer
and may be revoked only with the consent of the Internal Revenue Service.
If a Holder makes a Constant Yield Election for a Note with amortizable
bond premium, such election will result in a deemed election to amortize bond
premium for all of the Holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service with
respect to debt instruments acquired after revocation.
Foreign Currency Notes
The following summary relates to Notes that are denominated in a currency
or currency unit other than the U.S. dollar ("Foreign Currency Notes").
A United States Holder who uses the cash method of accounting and who
receives a payment of interest in a foreign currency with respect to a Foreign
Currency Note (other than an Original Issue Discount Note on which original
issue discount is accrued on a current basis except to the extent any qualified
stated interest is received) will be required to include in income the U.S.
dollar value of the foreign currency payment (determined on the date such
payment is received) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the United States
Holder's tax basis in the foreign currency.
To the extent the above paragraph is not applicable, a United States Holder
will be required to include in income the U.S. dollar value of the amount of
interest income (including original issue discount, but reduced by amortizable
bond premium to the extent applicable) that has accrued and is otherwise
required to be taken into account with respect to a Foreign Currency Note during
an accrual period. The U.S. dollar value of such accrued income will be
determined by translating such income at the average rate of exchange for the
accrual period or, with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable year. Such
United States Holder will recognize ordinary income or loss with respect to
accrued interest income on the date such income is actually received. The amount
of ordinary income or loss recognized will equal the difference between the U.S.
dollar value of the foreign currency payment received (determined on the date
such payment is received) in respect of such accrual period and the U.S. dollar
value of interest income that has accrued during such accrual period (as
determined above). A United States Holder may elect to translate interest income
(including original issue discount) into U.S. dollars at the spot rate on the
last day of the interest accrual period (or, in the case of a partial accrual
period, the spot rate on the last day of the taxable year) or, if the date of
receipt is within five business days of the last day of the interest accrual
period, the spot rate on the date of receipt. A United States Holder that makes
such an election must apply it consistently to all debt instruments from year to
year and cannot change the election without the consent of the Internal Revenue
Service.
Original issue discount and amortizable bond premium on a Foreign Currency
Note are to be determined in the relevant foreign currency.
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a United States Holder who has not elected
to amortize such premium under Section 171 of the Code will be a capital loss to
the extent of such bond premium. If such an election is made, amortizable bond
premium taken into account on a current basis shall reduce interest income in
units of the relevant foreign currency. Exchange gain or loss is realized on
such amortized bond premium with respect to any period by treating the bond
premium amortized in such period as a return of principal.
A United States Holder's tax basis in a Foreign Currency Note, and the
amount of any subsequent adjustment to such Holder's tax basis, will be the U.S.
dollar value of the foreign currency amount paid for such Foreign Currency Note,
or of the foreign currency amount of the adjustment, determined on the date of
such purchase or adjustment. A United States Holder who purchases a Foreign
Currency Note with previously owned foreign currency will recognize ordinary
income or loss in an amount equal to the
S-23
<PAGE> 24
difference, if any, between such United States Holder's tax basis in the foreign
currency and the U.S. dollar fair market value of the Foreign Currency Note on
the date of purchase.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between (i) the U.S. dollar value of the foreign currency
principal amount of such Note, and any payment with respect to accrued interest,
determined on the date such payment is received or such Note is disposed of, and
(ii) the U.S. dollar value of the foreign currency principal amount of such
Note, determined on the date such United States Holder acquired such Note, and
the U.S. dollar value of the accrued interest received, determined by
translating such interest at the average exchange rate for the accrual period.
Such foreign currency gain or loss will be recognized only to the extent of the
total gain or loss realized by a United States Holder on the sale, exchange or
retirement of the Foreign Currency Note. The source of such foreign currency
gain or loss will be determined by reference to the residence of the Holder or
the "qualified business unit" of the Holder on whose books the Note is properly
reflected. Any gain or loss realized by such a Holder in excess of such foreign
currency gain or loss will be capital gain or loss (except in the case of a
short-term Original Issue Discount Note, to the extent of any original issue
discount not previously included in the Holder's income).
A United States Holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign Currency Note equal to
the U.S. dollar value of such foreign currency, determined at the time of such
sale, exchange or retirement. Regulations issued under Section 988 of the Code
provide a special rule for purchases and sales of publicly traded Foreign
Currency Notes by a cash method taxpayer under which units of foreign currency
paid or received are translated into U.S. dollars at the spot rate on the
settlement date of the purchase or sale. Accordingly, no exchange gain or loss
will result from currency fluctuations between the trade date and the settlement
of such a purchase or sale. An accrual method taxpayer may elect the same
treatment required of cash-method taxpayers with respect to the purchase and
sale of publicly traded Foreign Currency Notes provided the election is applied
consistently. Such election cannot be changed without the consent of the
Internal Revenue Service. Any gain or loss realized by a United States Holder on
a sale or other disposition of foreign currency (including its exchange for U.S.
dollars or its use to purchase Foreign Currency Notes) will be ordinary income
or loss.
Currency Indexed Notes
The proper treatment of payments of principal of and interest on Currency
Indexed Notes is uncertain at this time. Holders of Currency Indexed Notes
should consult with their tax advisors as to the federal income tax consequences
of the ownership and disposition of such Notes.
Extension of Maturity and Reset of Interest Rate
Under regulations issued by the Internal Revenue Service the reset of the
interest rate on, or the extension of the maturity of, a Note pursuant to its
original terms generally will not be viewed as a taxable exchange.
Backup Withholding and Information Reporting
Certain noncorporate United States Holders may be subject to backup
withholding at a rate of 31% on payments of principal, premium and interest
(including original issue discount, if any) on, and the proceeds of disposition
of, a Note. Backup withholding will apply only if the Holder (i) fails to
furnish its Taxpayer Identification Number ("TIN") which, for an individual,
would be his Social Security number, (ii) furnishes an incorrect TIN, (iii) is
notified by the Internal Revenue Service that it has failed to properly report
payments of interest and dividends or (iv) under certain circumstances, fails to
certify, under penalty of perjury, that it has furnished a correct TIN and has
not been notified by the Internal Revenue
S-24
<PAGE> 25
Service that it is subject to backup withholding for failure to report interest
and dividend payments. United States Holders should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such Holder's United States federal
income tax liability and may entitle such Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal law, and subject to the discussion
below concerning backup withholding:
(a) payments of principal, interest (including original issue
discount, if any) and premium on the Notes by the Company or any paying
agent to any United States Alien Holder will not be subject to United
States federal withholding tax, provided that, in the case of interest, (i)
such Holder does not own, actually or constructively, 10 percent or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, is not a controlled foreign corporation related, directly
or indirectly, to the Company through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code and (ii)
if the Note is a Registered Note, the statement requirement set forth in
Section 871(h) or Section 881(c) of the Code has been fulfilled with
respect to the beneficial owner, as discussed below;
(b) a United States Alien Holder of a Note will not be subject to
United States federal income tax on gain realized on the sale, exchange or
other disposition of such Note, unless (i) such Holder is an individual who
is present in the United States for 183 days or more in the taxable year of
disposition, and either (a) such individual has a "tax home" (as defined in
Code Section 911(d)(3)) in the United States (unless such gain is
attributable to a fixed place of business in a foreign country maintained
by such individual and has been subject to foreign tax of at least 10%) or
(b) the gain is attributable to an office or other fixed place of business
maintained by such individual in the United States or (ii) such gain is
effectively connected with the conduct by such Holder of a trade or
business in the United States.
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
portfolio interest exemption from withholding tax described in paragraph (a)
above in the case of a Registered Note, either the beneficial owner of the Note,
or 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 that is holding the Note on behalf of such
beneficial owner, file a statement with the withholding agent to the effect that
the beneficial owner of the Note is not a United States Holder. Under temporary
United States Treasury Regulations, such requirement will be fulfilled if the
beneficial owner of a Note certifies on Internal Revenue Service Form W-8, under
penalties of perjury, that it is not a United States Holder and provides its
name and address, and any Financial Institution holding the Note on behalf of
the beneficial owner files a statement with the withholding agent to the effect
that it has received such a statement from the Holder (and furnishes the
withholding agent with a copy thereof). The portfolio interest exemption from
withholding tax described in paragraph (a) above will not apply to contingent
interest if the amount of such interest is determined with reference to the
profitability of the Company or a related person. Unless otherwise provided in
the applicable Pricing Supplement, the Company does not expect any interest on
the Notes to be subject to this provision.
If a United States Alien Holder of a Note is engaged in a trade or business
in the United States, and if interest (including original issue discount) on the
Note is effectively connected with the conduct of such trade or business, the
United States Alien Holder, although exempt from the withholding tax discussed
in the preceding paragraph, will generally be subject to regular United States
income tax on interest (including any original issue discount) and on any gain
realized on the sale, exchange or other disposition of a Note in the same manner
as if it were a United States Holder. See "Tax Consequences to United States
Holders" above. In lieu of the certificate described in the preceding paragraph,
such a
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<PAGE> 26
Holder will be required to provide to the Company a properly executed Internal
Revenue Service Form 4224 in order to claim an exemption from withholding tax.
In addition, if such United States Alien Holder is a foreign corporation, it may
be subject to a branch profits tax equal to 30% (or such lower rate provided by
an applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to certain adjustments. For purposes of the branch profits
tax, interest (including original issue discount) on and any gain recognized on
the sale, exchange or other disposition of a Note will be included in the
effectively connected earnings and profits of such United States Alien Holder if
such interest or gain, as the case may be, is effectively connected with the
conduct by the United States Alien Holder of a trade or business in the United
States.
Under Section 2105(b) of the United States federal estate tax law, a Note
or coupon held by an individual who is not a citizen or resident of the United
States at the time of his death will not be subject to United States federal
estate tax as a result of such individual's death, provided that the individual
does not own, actually or constructively, 10 percent or more of the total
combined voting power of all classes of stock of the Company entitled to vote
and, at the time of such individual's death, payments with respect to such Note
would not have been effectively connected to the conduct by such individual of a
trade or business in the United States.
Proposed Treasury Regulations issued in April of 1996 (the "Proposed
Regulations") would modify the current rules (including rules relating to
information reporting and backup withholding) in certain respects for payments
made after December 31, 1997. Prospective Holders should consult their tax
advisors regarding the federal income tax consequences of the Proposed
Regulations.
Backup Withholding and Information Reporting
Under current United States federal income tax law, a 31% backup
withholding tax and information reporting requirements apply to certain payments
of principal, premium and interest (including original issue discount) made to,
and to the proceeds of sale before maturity by, certain noncorporate United
States persons. Under current Treasury Regulations, backup withholding will not
apply to payments made on a Registered Note if the certifications required by
Sections 871(h) and 881(c) are received, provided in each case that the Company
or such paying agent, as the case may be, does not have actual knowledge that
the payee is a United States person.
Under current Treasury Regulations, if payments of principal, premium or
interest are made to or through the foreign office of a custodian, nominee or
other agent acting on behalf of a beneficial owner of a Note, such custodian,
nominee or other agent will not be required to apply backup withholding to such
payments made to such beneficial owner and generally will not be subject to
information reporting requirements. 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 percent or more of whose gross
income is effectively connected with a United States trade or business for a
specified three-year period, such custodian, nominee or other agent may be
subject to certain information reporting requirements with respect to such
payments unless it has in its records documentary evidence that the beneficial
owner is not a United States person and certain conditions are met or the
beneficial owner otherwise establishes an exemption. Under proposed Treasury
Regulations, backup withholding may apply to any payment which such custodian,
nominee or other agent is required to report if such custodian, nominee or other
agent has actual knowledge that the payee is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker generally
will not be subject to backup withholding. However, if such broker is a United
States person, a controlled foreign corporation for United States tax purposes
or a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting will be required unless the broker has in its
records documentary evidence that the beneficial owner is not a United States
person and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Under proposed Treasury Regulations, backup
withholding may apply to any payment which
S-26
<PAGE> 27
such broker is required to report if such broker has actual knowledge that the
payee is a United States person. Payments to or through the United States office
of a broker will be subject to backup withholding and information reporting
unless the Holder certifies, under penalties of perjury, that it is not a United
States person or otherwise establishes an exemption.
United States Alien Holders of Notes should consult their tax advisers
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Any amounts withheld
from a payment to a United States Alien Holder under the backup withholding
rules will be allowed as a credit against such Holder's United States federal
income tax liability and may entitle such Holder to a refund, provided that the
required information is furnished to the United States Internal Revenue Service.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company through
the Agents, which have agreed to use their reasonable efforts to solicit orders
to purchase Notes. The Company will have the sole right to accept orders to
purchase Notes and may reject proposed purchases in whole or in part. Each Agent
shall have the right, in its discretion reasonably exercised and without notice
to the Company, to reject any proposed purchase of Notes in whole or in part.
The Company will pay each Agent a commission of from .125% to .750% of the
principal amount of Notes sold through it, depending upon the Stated Maturity.
Commissions on Notes with a Stated Maturity of greater than 30 years will be
negotiated at the time of sale.
The Company may also sell Notes at a discount to an Agent for its own
account or for resale to one or more purchasers at varying prices related to
prevailing market prices at the time of resale or, if set forth in the
applicable Pricing Supplement, at a fixed public offering price, as determined
by such Agent. After any initial public offering of Notes to be resold to
purchasers at a fixed public offering price, the public offering price and any
concession or discount may be changed. In addition, an Agent may offer Notes
purchased by it as principal to other dealers. Notes sold by an Agent to a
dealer may be sold at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed will not be in excess of
the discount received by such Agent from the Company. Unless otherwise specified
in the applicable Pricing Supplement, any Note purchased by an Agent as
principal will be purchased at 100% of the principal amount or face amount
thereof less a percentage equal to the commission applicable to an agency sale
of a Note of identical maturity.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. An Agent may make a market in the
Notes, but such Agent is not obligated to do so and may discontinue any
market-making at any time without notice. There can be no assurance of a
secondary market for any Notes, or that the Notes will be sold.
An Agent, whether acting as agent or principal, may be deemed to be an
"underwriter" within the meaning of the Securities Act. The Company has agreed
to indemnify each Agent against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments that such Agent may be required
to make in respect thereof.
In order to facilitate the offering of the Notes, the Agents may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Notes may overallot in connection with the offering,
creating a short position in the Notes for their own account. In addition, to
cover overallotments or to stabilize the price of the Notes, the Agents may bid
for, and purchase, the Notes in the open market. Finally, the underwriting
syndicates may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the Notes in the offering, if the syndicate repurchases
previously distributed the Notes in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Notes above independent market
levels. The Agents are not required to engage in these activities, and may end
any of these activities at any time.
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<PAGE> 28
PROSPECTUS
WILLIAMS HOLDINGS OF DELAWARE, INC.
DEBT SECURITIES AND
PREFERRED STOCK
---------------------
Williams Holdings of Delaware, Inc. (the "Company") may offer and sell from
time to time (a) unsecured debentures, notes or other evidences of indebtedness
("Debt Securities"), and (b) shares of its Preferred Stock, $1.00 par value per
share ("Preferred Stock" and collectively with Debt Securities, the
"Securities") with an initial offering price not to exceed $500,000,000 in the
aggregate (or the equivalent in foreign denominated currency or units based on
or related to currencies, including European Currency Units). All specific terms
of the offering and sale of the Securities, including the specific (a)
designation, rights and restrictions and whether the Debt Securities are senior
or subordinated, the currencies or composite currencies in which the Debt
Securities are denominated, the aggregate principal amount, the maturity, rate
and time of payment of interest, and any conversion, exchange, redemption or
sinking fund provisions, (b) designation, rights, preferences, privileges and
restrictions of Preferred Stock, including dividend rate or rates/or methods of
ascertaining the same, dividend payment dates, voting rights, liquidation
preference, and any conversion, exchange or redemption or sinking fund
provisions, and (c) initial public offering price, listing on any securities
exchange, and the agents, dealers or underwriters, if any, to be utilized in
connection with the sale of the Securities, will be set forth in an accompanying
Prospectus Supplement (the "Prospectus Supplement"). The Securities may be sold
for U.S. dollars, foreign denominated currency or currency units; principal of
and any interest may likewise be payable in U.S. dollars, foreign denominated
currency or currency units -- in each case, as the Company specifically
designates. The managing underwriters with respect to each series sold to or
through underwriters will be named in the Prospectus Supplement.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The Securities may be offered through dealers, through underwriters or
through agents designated from time to time as set forth in the Prospectus
Supplement. Net proceeds to the Company will be the purchase price in the case
of a dealer, the public offering price less discount in the case of an
underwriter or the purchase price less commission in the case of an agent -- in
each case, less other expenses attributable to issuance and distribution. See
"Plan of Distribution" for possible indemnification arrangements for dealers,
underwriters and agents.
This Prospectus does not constitute an offer to sell or the solicitation of
an offer to buy any of the securities other than the Securities described in the
accompanying Prospectus Supplement.
June 6, 1997
<PAGE> 29
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a Registration Statement on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Securities offered hereby. Certain portions of the Registration Statement
have not been included in this Prospectus as permitted by the Commission's rules
and regulations. For further information, reference is made to the Registration
Statement and the exhibits thereto. 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
Commission. The Registration Statement (with exhibits), as well as such reports
and other information filed by the Company with the Commission, can be inspected
and copied at the public reference facilities maintained by the Commission at
its principal offices at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and its regional offices at Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048; or from the Commission's worldwide
web site at http://www.sec.gov. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549.
---------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
---------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, ("Form 10-K") and its Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997, filed by the Company with the Commission under the
Exchange Act, are incorporated by reference.
All documents filed by the Company pursuant to Section 13, 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of this offering shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the documents incorporated by reference
herein, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to:
Williams Holdings of Delaware, Inc., One Williams Center, Tulsa, Oklahoma 74172,
Attention: Corporate Secretary, (918) 588-2000.
REPORTS TO HOLDERS OF DEBT SECURITIES
The Company is not required to publish annual and quarterly reports to
holders of Debt Securities. The Company's annual report on Form 10-K containing
audited financial statements will be provided to holders of Debt Securities upon
request.
---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES.
SPECIFICALLY, THE UNDERWRITERS, IF ANY, MAY OVERALLOT IN CONNECTION WITH THE
OFFERING, AND MAY BID FOR, AND PURCHASE, THE SECURITIES IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
2
<PAGE> 30
THE COMPANY
The Company was incorporated under the laws of the State of Delaware in
July, 1994. The principal executive offices of the Company are located at One
Williams Center, Tulsa, Oklahoma 74172 (telephone (918) 588-2000). Unless the
context otherwise requires, references to the Company herein include
subsidiaries of the Company. The Company is a wholly-owned subsidiary of The
Williams Companies, Inc. ("Williams").
The Company, through subsidiaries, engages in hydrocarbon exploration and
production activities; natural gas gathering, processing, and treating
activities; the transportation and terminaling of crude oil and petroleum
products; the production and marketing of ethanol; and energy commodity trading
and marketing and provides a variety of other products and services, including
price risk management services, to the energy industry. The Company's
communications subsidiaries offer data-, voice-, and video-related products and
services; advertising distribution services; video services and other multimedia
services for the broadcast industry; broadcast facsimile and audio- and
video-conferencing services for businesses; interactive, computer-based training
and services; and customer premise voice and data equipment, including
installation and maintenance; and network integration and management services
nationwide. The Company also has certain other equity investments.
The Company conducts substantially all of its operations through
subsidiaries. Williams performs management, legal, financial, tax, consultative,
administrative, and other services for the Company and its subsidiaries. The
Company's principal sources of cash are from external financings, dividends and
advances from its subsidiaries, advances from Williams, investments, and
interest payments from subsidiaries and Williams on cash advances. The amount of
dividends available to the Company from subsidiaries largely depends on each
subsidiary's earnings and capital requirements. Terms of one subsidiary's
borrowing arrangements limit the transfer of funds to the Company.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds from the sale of the Securities will be used for general corporate
purposes, including funding of the Company's capital program. The Company
anticipates that it will raise additional funds from time to time through debt
financings, including borrowings under its bank Credit Agreement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table represents the Company's consolidated ratio of earnings
to fixed charges for the years shown.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- ---- ---- ---- ----- ----
<S> <C> <C> <C> <C>
8.47 5.17 6.71 14.10 2.86
</TABLE>
For the purpose of this ratio: (i) earnings consist of income from
continuing operations before fixed charges and income taxes for the Company, its
majority-owned subsidiaries and its proportionate share of 50 percent-owned
companies, less undistributed earnings of less than 50 percent-owned companies
and (ii) fixed charges consist of interest and debt expense on all indebtedness
(without reduction of interest capitalized) and that portion of rental payments
on operating leases estimated to represent an interest factor, plus the pretax
effect of preferred dividends of subsidiaries. The ratio of earnings to combined
fixed charges and preferred stock dividends is the same as the ratio of earnings
to fixed charges, as no preferred stock was outstanding during any of these
periods.
3
<PAGE> 31
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following selected income statement data for the years 1996, 1995, and
1994 and balance sheet data for 1996 and 1995 have been derived from the
Company's audited consolidated financial statements appearing in the Form 10-K
for the year ended December 31, 1996 and incorporated herein by reference. The
income statement data for the years 1993 and 1992 and balance sheet data for
1994, 1993 and 1992 have been derived from the Company's consolidated financial
statements not appearing elsewhere herein or in the Form 10-K. The selected
historical consolidated financial data shown below should be read in conjunction
with the consolidated financial statements of the Company and related notes and
the related audit report appearing in the Form 10-K and incorporated herein by
reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996(2) 1995(2) 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Total revenues.......................... $1,841.3 $1,354.0 $1,264.3 $1,221.0 $1,283.2
Income from continuing operations....... 228.7(3) 211.8(4) 125.5(5) 152.3(6) 46.9(7)
Income from discontinued operations..... -- 1,018.8 94.0 46.4 25.2
Net income.............................. 228.7 1,230.6 213.4 198.7 83.2
BALANCE SHEET DATA:(1)
Property, plant and equipment -- net.... 2,540.4 2,225.2 1,585.1 2,151.1 2,157.3
Total assets............................ 5,163.9 4,232.8 3,440.1 2,989.4 2,869.9
Long-term debt.......................... 860.4 273.9 507.0 229.4 337.1
Stockholder's equity.................... $2,482.8 $2,151.6 $1,739.9 $1,818.0 $1,614.6
RATIO OF EARNINGS TO FIXED CHARGES(8)... 8.47 5.17 6.71 14.10 2.86
</TABLE>
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(1) In the third quarter of 1994, the Company signed a definitive agreement to
enter into the sale of its network services operations (the "WNS Sale"). On
January 5, 1995, the Company consummated the transaction and the gain from
the sale was reported as discontinued operations in the 1995 first quarter
consolidated financial statements. The selected historical consolidated
financial data has been prepared to present operating results of the
operations sold in the WNS Sale as discontinued operations. Prior period
balance sheets have not been restated. For additional information see Note 3
of the Notes to Consolidated Financial Statements of the Company appearing
in the Form 10-K and incorporated herein by reference.
(2) On January 18, 1995, Williams acquired 60 percent of the outstanding common
stock of Transco Energy Company (Transco) in a cash tender offer. On May 1,
1995, the remaining 40 percent of Transco's outstanding common stock was
acquired through a merger, which involved the exchange of the remaining
Transco common stock for approximately 15.6 million shares of Williams
common stock. Williams then contributed the stock of Transco and Transco's
subsidiaries, except subsidiaries holding Transco's interstate natural gas
pipelines, to the Company. The consolidated financial statements as of and
for the years ended December 31, 1996 and 1995, reflect this contribution
from Williams effective January 18, 1995. For additional information see
Note 2 of the Notes to Consolidated Financial Statements of the Company
appearing in the Form 10-K, and incorporated herein by reference.
(3) Includes a pretax gain on sales of assets of $15.7 million. See Note 5 of
the Notes to Consolidated Financial Statements of the Company appearing in
the Form 10-K and incorporated herein by reference. Also includes a pretax
gain of $20 million from the property insurance coverage associated with
construction of replacement gathering facilities.
(4) Includes a pretax gain on exchange of investments of $25.4 million, a pretax
loss on sales of investments of $12.6 million, and a $41.4 million pretax
write-off of project costs. See Notes 4 and 5 of the Notes to Consolidated
Financial Statements of the Company appearing in the Form 10-K and
incorporated herein by reference.
(5) Includes a pretax gain on sales of assets of $22.7 million. See Note 5 of
the Notes to Consolidated Financial Statements of the Company appearing in
the Form 10-K and incorporated herein by reference.
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(6) Includes a pretax gain of $51.6 million from the sale of 6.1 million units
in the Williams Coal Seam Gas Royalty Trust and a pretax gain of $45.9
million from the sale of the intrastate natural gas pipeline system and
other related assets in Louisiana.
(7) Includes a pretax gain of $14.6 million from the sale of a tract of land in
Florida that had been retained from the previous sale of Agrico Chemical
Company.
(8) For the purpose of this ratio (i) earnings consist of income from continuing
operations before fixed charges and income taxes for the Company, its
majority owned subsidiaries and its proportionate share of 50 percent-owned
companies, less undistributed earnings of less than 50 percent-owned
companies; and (ii) fixed charges consist of interest and debt expense on
all indebtedness (without reduction of interest capitalized) and that
portion of rental payments on operating leases estimated to represent an
interest factor, plus the pretax effect of preferred dividends of
subsidiaries. The ratio of earnings to combined fixed charges and preferred
stock dividends is the same as the ratio of earnings to fixed charges, as no
preferred stock was outstanding during any of these periods.
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<PAGE> 33
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either senior or subordinated debt of
the Company and will be issued, in the case of Debt Securities that will be
senior debt, under an indenture dated as of February 1, 1996 (the "Senior Debt
Indenture"), between the Company and Citibank, N.A., as Trustee, and, in the
case of Debt Securities that will be subordinated debt, under an indenture (the
"Subordinated Debt Indenture"), between the Company and Citibank, N.A., as
Trustee. The Senior Debt Indenture and the Subordinated Debt Indenture are
sometimes hereinafter referred to individually as an "Indenture" and
collectively as the "Indentures." Citibank, N.A. is hereinafter referred to as
the "Trustee." The forms of the Indentures are filed as exhibits to the
Registration Statement. The following summaries of certain provisions of the
Indentures and the Debt Securities do not purport to be complete and such
summaries are subject to the detailed provisions of the applicable Indenture to
which reference is hereby made for a full description of such provisions,
including the definition of certain terms used herein, and for other information
regarding the Debt Securities. Numerical references in parentheses below are to
sections in the applicable Indenture. Wherever particular sections or defined
terms of the applicable Indenture are referred to, such sections or defined
terms are incorporated herein by reference as part of the statement made, and
the statement is qualified in its entirety by such reference. The Indentures are
substantially identical, except for the provisions relating to subordination and
the Company's limitation on liens. See "Subordinated Debt" and "Certain
Covenants of the Company." Neither Indenture contains any covenant or provision
which affords debt holders protection in the event of a highly leveraged
transaction.
CERTAIN DEFINITIONS
Certain terms defined in Article One of the Indentures are summarized as
follows:
"Consolidated Funded Indebtedness" means the aggregate of all
outstanding Funded Indebtedness of the Company and its consolidated
Subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Consolidated Net Tangible Assets" means the total assets appearing on
a consolidated balance sheet of the Company and its consolidated
Subsidiaries less, in general: (i) intangible assets; (ii) current and
accrued liabilities (other than Consolidated Funded Indebtedness and
capitalized rentals or leases), deferred credits, deferred gains and
deferred income; (iii) reserves; (iv) advances to finance oil or natural
gas exploration and development to the extent that the indebtedness related
thereto is excluded from Funded Indebtedness; (v) an amount equal to the
amount excluded from Funded Indebtedness representing "production payment"
financing of oil or natural gas exploration and development; and (vi)
minority stockholder interests.
"Funded Indebtedness" means any Indebtedness which matures more than
one year after the date as of which Funded Indebtedness is being determined
less any such Indebtedness as will be retired through or by means of any
deposit or payment required to be made within one year from such date under
any prepayment provision, sinking fund, purchase fund or otherwise;
provided, however, that such term shall not include Indebtedness of the
Company or any of its Subsidiaries incurred to finance outstanding advances
to others to finance oil or natural gas exploration and development to the
extent that the latter are not in default in their obligations to the
Company or such Subsidiary, nor shall such term include Indebtedness of the
Company or any of its Subsidiaries incurred to finance oil or natural gas
exploration and development by means commonly referred to as a "production
payment" to the extent that the Company or any of its Subsidiaries have not
guaranteed the repayment of the production payment.
"Holder" means, in general, a Person in whose name the Securities are
registered, or, if not registered, the bearer thereof.
"Indebtedness" means indebtedness which is for money borrowed from
others.
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<PAGE> 34
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Subsidiary" means any corporation at least a majority of the
outstanding securities of which having ordinary voting power shall be owned
by the Company and/or another Subsidiary or Subsidiaries.
GENERAL
Neither of the Indentures limits the amount of Debt Securities, debentures,
notes or other evidences of indebtedness that may be issued by the Company or
any of its Subsidiaries. The Debt Securities will be unsecured senior or
subordinated obligations of the Company. All of the operating assets of the
Company and its Subsidiaries are owned by its Subsidiaries. Therefore, the
Company's rights and the rights of its creditors, including Holders of Debt
Securities, to participate in the assets of any Subsidiary upon the latter's
liquidation or recapitalization will be subject to the prior claims of the
Subsidiary's creditors, except to the extent that the Company may itself be a
creditor with recognized claims against the Subsidiary. The ability of the
Company to pay principal of and interest on the Debt Securities is, to a large
extent, dependent upon the receipt by it of dividends or other payments from its
Subsidiaries. Dividends payable by Williams Pipe Line Company, one of the
principal subsidiaries of the Company, are restricted under that company's
current debt agreements.
The Indentures provide that Debt Securities may be issued from time to time
in one or more series and may be denominated and payable in foreign currencies
or units based on or relating to foreign currencies, including European Currency
Units. Special United States federal income tax considerations applicable to any
Debt Securities so denominated are described in the relevant Prospectus
Supplement.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Debt Securities (to the extent such terms are
applicable to such Debt Securities): (i) classification as senior or
subordinated Debt Securities, the specific designation, aggregate principal
amount, purchase price and denomination; (ii) currency or units based on or
relating to currencies in which such Debt Securities are denominated and/or in
which principal, premium, if any, and/or any interest will or may be payable;
(iii) any date of maturity; (iv) interest rate or rates (or method by which such
rate will be determined), if any; (v) the dates on which any such interest will
be payable; (vi) the place or places where the principal of and interest, if
any, on the Debt Securities will be payable; (vii) any redemption or sinking
fund provisions; (viii) whether the Debt Securities will be issuable in
registered or bearer form or both and, if Debt Securities in bearer form are
issuable, restrictions applicable to the exchange of one form for another and to
the offer, sale and delivery of Debt Securities in bearer form; (ix) any
applicable United States federal income tax consequences, including whether and
under what circumstances the Company will pay additional amounts on Debt
Securities held by a Person who is not a U.S. Person (as defined in the
Prospectus Supplement) in respect of any tax, assessment or governmental charge
withheld or deducted, and if so, whether the Company will have the option to
redeem such Debt Securities rather than pay such additional amounts; and (x) any
other specific terms of the Debt Securities, including any additional events of
default or covenants provided for with respect to such Debt Securities, and any
terms which may be required by or advisable under United States laws or
regulations.
Debt Securities may be presented for exchange, and registered Debt
Securities may be presented for transfer in the manner, at the places and
subject to the restrictions set forth in the Debt Securities and the Prospectus
Supplement. Such services will be provided without charge, other than any tax or
other governmental charge payable in connection therewith, but subject to the
limitations provided in the applicable Indenture. Debt Securities in bearer form
and the coupons, if any, appertaining thereto will be transferable by delivery.
Debt Securities that bear interest will do so at a fixed rate or a floating
rate. Debt Securities bearing no interest or interest at a rate that at the time
of issuance is below the prevailing market rate will be sold
7
<PAGE> 35
at a discount below their stated principal amount. Special United States federal
income tax considerations applicable to any such discounted Debt Securities or
to certain Debt Securities issued at par which are treated as having been issued
at a discount for United States federal income tax purposes will be described in
the relevant Prospectus Supplement.
REGISTERED GLOBAL SECURITIES
The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Securities (a "Registered Global Security") that
will be deposited with a depositary (the "Depositary"), or with a nominee for a
Depositary identified in the Prospectus Supplement relating to such series. In
such case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding registered Debt Securities of the series to be
represented by such Registered Global Security or Securities. Unless and until
it is exchanged in whole or in part for Debt Securities in definitive registered
form, a Registered Global Security may not be transferred except as a whole by
the Depositary for such Registered Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such series.
The Company anticipates that the following provisions will apply to all
depositary arrangements.
Upon the issuance of a Registered Global Security, the Depositary for such
Registered Global Security will credit, on its book-entry registration and
transfer system, the respective principal amounts of the Debt Securities
represented by such Registered Global Security to the accounts of Persons that
have accounts with such Depositary ("participants"). The accounts to be credited
shall be designated by any underwriters or agents participating in the
distribution of such Debt Securities. Ownership of beneficial interests in a
Registered Global Security will be limited to participants or Persons that may
hold interests through participants. Ownership of beneficial interests in such
Registered Global Security will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the Depositary for such
Registered Global Security (with respect to interests of participants) or by
participants or Persons that hold through participants (with respect to
interests of Persons other than participants). So long as the Depositary for a
Registered Global Security, or its nominee, is the registered owner of such
Registered Global Security, such Depositary or such nominee, as the case may be,
will be considered the sole owner or Holder of the Debt Securities represented
by such Registered Global Security for all purposes under the applicable
Indenture. Except as set forth below, owners of beneficial interests in a
Registered Global Security will not be entitled to have the Debt Securities
represented by such Registered Global Security registered in their names, will
not receive or be entitled to receive physical delivery of such Debt Securities
in definitive form and will not be considered the owners or Holders thereof
under the applicable Indenture.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Registered Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Registered Global Security. None of
the Company, the Trustee or any paying agent for such Debt Securities will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in such Registered
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Registered Global Security as shown on the records
of such Depositary. The
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<PAGE> 36
Company also expects that payments by participants to owners of beneficial
interests in such Registered Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with the securities held for the accounts of customers registered in "street
names" and will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered
Global Security is at any time unwilling or unable to continue as Depositary and
a successor Depositary is not appointed by the Company within ninety days, the
Company will issue such Debt Securities in definitive form in exchange for such
Registered Global Security. In addition, the Company may at any time and in its
sole discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event, will
issue Debt Securities of such series in definitive form in exchange for all of
the Registered Global Security or Securities representing such Debt Securities.
SENIOR DEBT
The Debt Securities and any coupons appertaining thereto (the "Coupons")
that will constitute part of the senior debt of the Company will be issued under
the Senior Debt Indenture and will rank equally and pari passu with all other
unsecured and unsubordinated debt of the Company.
SUBORDINATED DEBT
The Debt Securities and Coupons that will constitute part of the
subordinated debt of the Company will be issued under the Subordinated Debt
Indenture and will be subordinate and junior in right of payment, to the extent
and in the manner set forth in the Subordinated Debt Indenture, to all "Senior
Indebtedness" of the Company. The Subordinated Debt Indenture defines "Senior
Indebtedness" as obligations (other than nonrecourse obligations, the
subordinated Debt Securities or any other obligations specifically designated as
being subordinate in right of payment to Senior Indebtedness) of, or guaranteed
or assumed by, the Company for borrowed money or evidenced by bonds, debentures,
notes or other similar instruments, and amendments, renewals, extensions,
modifications and refundings of any such indebtedness or obligation.
(Subordinated Debt Indenture, Section 1.1)
In general, in the event (a) of any insolvency or bankruptcy proceedings,
or any receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or a substantial part of its property or (b) that (i) a
default shall have occurred with respect to the payment of principal, premium,
if any, or interest on or other monetary amounts due and payable on any Senior
Indebtedness or (ii) there shall have occurred an event of default (other than a
default in the payment of principal, premium, if any, or interest, or other
monetary amounts due and payable) with respect to any Senior Indebtedness, as
defined therein or in the instrument under which the same is outstanding,
permitting the holder or holders thereof to accelerate the maturity thereof
(with notice or lapse of time, or both), and such event of default shall have
continued beyond the period of grace, if any, in respect thereof, and such event
of default shall not have been cured or waived or shall not have ceased to
exist, or (c) that the principal of and accrued interest on any series of the
subordinated Debt Securities shall have been declared due and payable upon an
event of default pursuant to Section 5.1 of the Subordinated Debt Indenture and
such declaration shall not have been rescinded and annulled as provided therein,
then the holders of all Senior Indebtedness shall first be entitled to receive
payment of the full amount unpaid thereon, or provision shall be made for such
payment in money or money's worth, before the Holders of any of the subordinated
Debt Securities or Coupons are entitled to receive a payment on account of the
principal or interest on the indebtedness evidenced by such subordinated Debt
Securities. (Subordinated Debt Indenture, Section 13.1) If this Prospectus is
being delivered in connection with a series of subordinated Debt Securities, the
accompanying Prospectus Supplement or the information incorporated herein by
reference will set forth the approximate amount of Senior Indebtedness
outstanding as of the end of the most recent fiscal quarter.
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<PAGE> 37
CERTAIN COVENANTS OF THE COMPANY
Liens. The Senior Debt Indenture provides that, subject to certain
exceptions, the Company will not, nor will it permit any Subsidiary to, issue,
assume or guarantee any Indebtedness secured by a mortgage, pledge, lien,
security interest or encumbrance ("mortgage"), upon any of its properties
without effectively providing that the senior Debt Securities issued thereunder
shall be equally and ratably secured with such Indebtedness. Among the
exceptions are certain purchase money mortgages; certain preexisting mortgages
on any property acquired or constructed by the Company or a Subsidiary and
certain mortgages created within one year after completion of such acquisition
or construction; certain mortgages created on any contract for the sale of
products or services related to the operation or use of any property acquired or
constructed within one year after completion of such acquisition or
construction; mortgages on property of a Subsidiary existing at the time it
became a Subsidiary of the Company; and mortgages, other than as specifically
excepted, in an aggregate amount which, at the time of, and after giving effect
to, the incurrence does not exceed 5 percent of the Consolidated Net Tangible
Assets. (Senior Debt Indenture, Section 3.6)
Consolidation, Merger, Conveyance of Assets. Each Indenture provides, in
general, that the Company will not consolidate with or merge into any other
corporation or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, unless the corporation formed by such
consolidation or into which the Company is merged or the Person which acquires
such assets shall expressly assume the Company's obligations under such
Indenture and the Debt Securities issued thereunder and immediately after giving
effect to such 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
happened and be continuing. (Section 9.1)
EVENTS OF DEFAULT
In general, an Event of Default is defined under each Indenture with
respect to Debt Securities of any series issued under such Indenture as being:
(a) default in payment of any principal of the Debt Securities of such series,
either at maturity, upon any redemption, by declaration or otherwise; (b)
default for 30 days in payment of any interest on any Debt Securities of such
series unless otherwise provided; (c) default for 90 days after written notice
in the observance or performance of any covenant or warranty in the Debt
Securities of such series or such Indenture other than a covenant a default in
whose performance, or whose breach, is dealt with otherwise below or, if certain
conditions are met, the Events of Default described in this clause (c) are the
result of changes in generally accepted accounting principles; or (d) certain
events of bankruptcy, insolvency or reorganization of the Company. (Section 5.1)
In general, each Indenture provides that, (a) if an Event of Default
described in clauses (a), (b) or (c) above (if the Event of Default under clause
(c) is with respect to less than all series of Debt Securities then outstanding)
occurs, the Trustee or the Holders of not less than 25 percent in principal
amount of the Debt Securities of each affected series (treated as one class)
issued under such Indenture and then outstanding may then declare the entire
principal of all Debt Securities of each such affected series and interest
accrued thereon to be due and payable immediately and (b) if an Event of Default
due to a default described in clause (c) above which is applicable to all series
of Debt Securities then outstanding or due to certain events of bankruptcy,
insolvency and reorganization of the Company, shall have occurred and be
continuing, the Trustee or the Holders of not less than 25 percent in principal
amount of all Debt Securities issued under such Indenture and then outstanding
(treated as one class) may declare the entire principal amount of all such Debt
Securities and interest accrued thereon to be due and payable immediately, but
upon certain conditions such declarations may be annulled and past defaults may
be waived (except a continuing default in payment of principal of, premium, if
any, or interest on such Debt Securities) by the holders of a majority in
aggregate principal amount of the Debt Securities of all such affected series
then outstanding. (Sections 5.1 and 5.10)
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<PAGE> 38
Each Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of care,
to be indemnified by the Holders of Debt Securities (treated as one class)
issued under such Indenture before proceeding, at the request of such Holders,
to exercise any right or power under such Indenture. (Section 6.2) Subject to
such provisions in each Indenture for the indemnification of the Trustee and
certain other limitations, the Holders of a majority in aggregate principal
amount of the outstanding Debt Securities of each series affected (treated as
one class) issued under such Indenture may 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. (Section 5.9)
In general, each Indenture provides that no Holder of Debt Securities
issued under such Indenture may institute any action against the Company under
such Indenture (except actions for payment of principal or interest on or after
the due date provided) unless such Holder previously shall have given to the
Trustee written notice of default and continuance thereof and unless the Holders
of not less than 25 percent in principal amount of the Debt Securities of each
affected series (treated as one class) issued under such Indenture and then
outstanding shall have requested the Trustee to institute such action and shall
have offered the Trustee reasonable indemnity and the Trustee shall not have
instituted such action within 60 days of such request and the Trustee shall not
have received direction inconsistent with such written request by the Holders of
a majority in principal amount of the Debt Securities of each affected series
(treated as one class) issued under such Indenture and then outstanding.
(Sections 5.6, 5.7 and 5.9)
Each Indenture contains a covenant that the Company will file annually with
the Trustee a certificate of no default or a certificate specifying any default
that exists. (Section 3.5)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company can discharge or defease its obligations under each Indenture
as set forth below. (Section 10.1)
Under terms satisfactory to the Trustee, the Company may discharge certain
obligations to Holders of any series of Debt Securities issued under such
Indenture which have not already been delivered to the Trustee for cancellation
and which have either become due and payable or are by their terms due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee cash or, in the case of Debt Securities
payable only in U.S. dollars, U.S. Government Obligations (as defined in such
Indenture) as trust funds in an amount certified to be sufficient to pay at
maturity (or upon redemption) the principal of and interest on such Debt
Securities.
The Company may also, upon satisfaction of the conditions listed below,
discharge certain obligations to Holders of any series of Debt Securities issued
under such Indenture at any time ("defeasance"). Under terms satisfactory to the
Trustee, the Company may instead be released with respect to any outstanding
series of Debt Securities issued under the relevant Indenture from the
obligations imposed by Sections 3.6 and 9.1, in the case of the Senior Debt
Indenture, and Section 9.1, in the case of the Subordinated Debt Indenture
(which contain the covenants described above limiting liens and consolidations,
mergers and conveyances of assets), and omit to comply with such Sections
without creating an Event of Default ("covenant defeasance"). Defeasance or
covenant defeasance may be effected only if, among other things: (i) the Company
irrevocably deposits with the Trustee cash or, in the case of Debt Securities
payable only in U.S. dollars, U.S. Government Obligations, as trust funds in an
amount certified to be sufficient to pay at maturity (or upon redemption) the
principal of and interest on all outstanding Debt Securities of such series
issued under such Indenture; (ii) the Company delivers to the Trustee an opinion
of counsel to the effect that the Holders of such series of Debt Securities will
not recognize income, gain or loss for United States federal income tax purposes
as a result of such defeasance or covenant defeasance and will be subject to
United States federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if defeasance or covenant defeasance
had not occurred (in the case of a defeasance, such opinion must be based on a
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<PAGE> 39
ruling of the Internal Revenue Service or a change in United States federal
income tax law occurring after the date of such Indenture, since such a result
would not occur under current tax law); and (iii) in the case of the
Subordinated Debt Indenture (a) no event or condition shall exist that, pursuant
to certain provisions described under "Subordinated Debt" above, would prevent
the Company from making payments of principal of or interest on the subordinated
Debt Securities at the date of the irrevocable deposit referred to above or at
any time during the period ending on the 91st day after such deposit date and
(b) the Company delivers to the Trustee for the Subordinated Debt Indenture an
opinion of counsel to the effect that (1) the trust funds will not be subject to
any rights of holders of Senior Indebtedness and (2) after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, except that, if a court were to rule under any such
law in any case or proceeding that the trust funds remained property of the
Company, then no opinion is given as to the effect of such laws on the trust
funds except as set forth in the Subordinated Indenture relating to (i) the
Trustee's valid and perfected security interest in such trust funds; (ii)
adequate protection of holders of the Subordinated Debt Securities interests in
such trust funds; and (iii) no prior rights of holders of Senior Debt Securities
in property or interests granted to the Trustee or holders of the Subordinated
Debt Securities in exchange for or with respect to such trust funds.
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may enter into
supplemental indentures (which conform to the provisions of the Trust Indenture
Act of 1939) without the consent of the Holders to, in general: (a) secure any
Debt Securities; (b) evidence the assumption by a successor Person of the
obligations of the Company; (c) add further covenants for the protection of the
Holders; (d) cure any ambiguity or correct any inconsistency in such Indenture,
so long as such action will not adversely affect the interests of the Holders;
(e) establish the form or terms of Debt Securities of any series; and (f)
evidence the acceptance of appointment by a successor trustee. (Section 8.1)
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than the majority in
principal amount of Debt Securities of each series issued under such Indenture
then outstanding and affected (voting as one class) to, in general, add any
provisions to, or change in any manner or eliminate any of the provisions of,
such Indenture or modify in any manner the rights of the Holders of the Debt
Securities of each series so affected; provided that such changes conform to
provisions of the Trust Indenture Act of 1939 and provided that the Company and
the Trustee may not, without the consent of each Holder of outstanding Debt
Securities affected thereby, (a) extend the final maturity of the principal of
any Debt Securities, or reduce the principal amount thereof or reduce the rate
or extend the time of payment of interest thereon, or reduce any amount payable
on redemption thereof or change the currency in which the principal thereof
(including any amount in respect of original issue discount) or interest thereon
is payable, or reduce the amount of any original issue discount security payable
upon acceleration or provable in bankruptcy or alter certain provisions of such
Indenture relating to Debt Securities not denominated in U.S. dollars or for
which conversion to another currency is required to satisfy the judgment of any
court, or impair the right to institute suit for the enforcement of any payment
on any Debt Securities when due or (b) reduce the aforesaid percentage in
principal amount of Debt Securities of any series issued under such Indenture,
the consent of the Holders of which is required for any such modification.
(Section 8.2)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding subordinated Debt Securities without the
consent of each Holder of Senior Indebtedness then outstanding that would be
adversely affected thereby. (Subordinated Debt Indenture, Section 8.6)
CONCERNING THE TRUSTEE
The Trustee is one of a number of banks with which the Company, its parent
and its Subsidiaries maintain ordinary banking relationships and with which the
Company and its Subsidiaries and Affiliates maintain credit facilities.
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LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
Except as may otherwise be provided in the Prospectus Supplement applicable
thereto, in compliance with United States federal income tax laws and
regulations, Debt Securities that are Bearer Debt Securities (including Debt
Securities in global form) will not be offered, sold, resold or delivered,
directly or indirectly, in connection with their original issuance, at any time,
in the United States or to United States persons (as defined below) other than
to offices located outside the United States of United States financial
institutions (as defined in United States Treasury Regulations Section 1.165-
12(c)(1)(v)) that are purchasing for their own account or for the account of a
customer and that agree in writing to comply with the requirements of Sections
165(j)(3)(A), (B) or (C) of the Internal Revenue Code and the regulations
thereunder. Any underwriters, agents and dealers participating in the offerings
of Bearer Debt Securities, directly or indirectly, must agree that they will
not, in connection with the original issuance of any Bearer Debt Securities or
during the period set forth in the Prospectus Supplement following the original
issuance of such Bearer Debt Securities offer, sell, resell or deliver, directly
or indirectly, any Bearer Debt Securities in the United States or to United
States persons (other than the financial institutions described above). In
addition, any such underwriters, agents and dealers must agree to send a written
confirmation to each purchaser from or through it of Bearer Debt Securities in
connection with their original issuance or during the period set forth in the
Prospectus Supplement following the original issuance of such Bearer Debt
Securities in every case confirming that such purchaser represents that it is
not a United States person or, if it is a United States person, that it is a
financial institution described above purchasing for its own account or the
account of a customer and, if such person is a dealer, that it will send similar
confirmations to purchasers from it.
Bearer Debt Securities (other than temporary global Debt Securities) and
any Coupons appertaining thereto will bear a legend substantially to the
following effect: "Any United States person who holds this obligation will be
subject to limitations under the United States federal income tax laws,
including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code." The sections referred to in such legend provide that a
United States person (other than a United States financial institution described
above or United States person holding through such a financial institution) who
holds a Bearer Debt Security or Coupon will not be allowed to deduct any loss
realized on the sale, exchange or redemption of such Bearer Debt Security and
any gain (which might otherwise be characterized as capital gain) recognized on
such sale, exchange or redemption will be treated as ordinary income.
As used herein, "United States person" means a citizen, national or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is subject to
United States federal income taxation regardless of its source.
DESCRIPTION OF PREFERRED STOCK
Under the Company's Certificate of Incorporation, as amended, the Company
is authorized to issue up to 10,000,000 shares of Preferred Stock, par value
$1.00 per share, in one or more series. No Preferred Stock is currently
outstanding. The following description of Preferred Stock sets forth certain
general terms and provisions of the series of Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of a particular series of
Preferred Stock will be described in the Prospectus Supplement relating to such
series of Preferred Stock. If so indicated in the Prospectus Supplement relating
thereto, the terms of any such series of Preferred Stock may differ from the
terms set forth below. The description of Preferred Stock set forth below and
the description of the terms of a particular series of Preferred Stock set forth
in the Prospectus Supplement thereto do not purport to be complete and are
qualified in their entirety by reference to the Certificate of Incorporation and
to the certificate of designation relating to that series.
The rights of the holders of each series of Preferred Stock will be
subordinate to those of the Company's general creditors.
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GENERAL
The designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions
thereof, of the Preferred Stock of each series shall be such as are stated and
expressed in the Certificate of Incorporation and, to the extent not stated and
expressed therein, shall be such as may be fixed by the certificate of
designation relating to such series. A Prospectus Supplement, relating to each
series, shall specify the terms of the Preferred Stock as follows:
(a) the distinctive designation of such series and the number of
shares which shall constitute such series;
(b) the rate of dividends, if any, payable on shares of such series,
the dates, if any, from which such dividends shall accrue, the dates when
such dividends shall be payable, and whether such dividends shall be
cumulative or noncumulative;
(c) the amounts which the holders of the Preferred Stock of such
series shall be entitled to be paid in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Company;
(d) whether or not the Preferred Stock of such series shall be
redeemable and at what times and under what conditions and the amount or
amounts payable thereon in the event of redemption; and
(e) may, in a manner not inconsistent with the provisions of the
Certificate of Incorporation, (i) limit the number of shares of such series
which may be issued; (ii) provide for a sinking fund for the purchase or
redemption or a purchase fund for the purchase of shares of such series and
the terms and provisions governing the operation of any such fund and the
status as to reissue of shares of Preferred Stock purchased or otherwise
reacquired or redeemed or retired through the operation thereof; (iii)
grant voting rights to the holder of shares of such series, in addition to
and not inconsistent with those granted by the Certificate of Incorporation
to the holders of Preferred Stock; (iv) impose conditions or restrictions
upon the creation of indebtedness of the Company or upon the issue of
additional Preferred Stock or other capital stock ranking equally therewith
or prior thereto as to dividends or distribution of assets on liquidation;
(v) impose conditions or restrictions upon the payment of dividends upon,
or the making of other distributions to, or the acquisition of, junior
stock; (vi) grant to the holders of the Preferred Stock of such series the
right to convert such stock into shares of another series or class of
capital stock; and (vii) grant such other special rights to the holders of
shares of such series as the Board of Directors may determine and as shall
not be inconsistent with the provisions of the Certificate of
Incorporation.
DIVIDENDS
Subject to any limitations specified in the certificate of designation
providing for the issuance thereof, the holders of the Preferred Stock of any
series shall be entitled to receive, when and as declared by the Board of
Directors, preferential dividends in cash, at the rate per annum, if any, fixed
for such series, payable on such dates as may be specified in the certificate of
designation providing for the issuance of Preferred Stock of such series, to
stockholders of record on a date, preceding each such dividend payment date,
fixed for the purpose by the Board of Directors in advance of payment of each
particular dividend. Each share of Preferred Stock shall rank on a parity with
each other share of Preferred Stock, irrespective of series, with respect to
preferential dividends accrued on the shares of such series, and no dividend
shall be declared or paid or set apart for payment for the Preferred Stock of
any series unless at the same time a dividend in like proportion to the
dividends accrued upon the Preferred Stock of each other series shall be
declared or paid or set apart for payment, as the case may be, on Preferred
Stock of each other series then outstanding; but this does not prevent the
authorization or issuance of one or more series of Preferred Stock bearing
dividends subject to contingencies as to the existence or amount of earnings of
the Company during one or more fiscal periods, or as to other events, to which
dividends on other series of Preferred Stock are not subject.
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So long as any shares of Preferred Stock shall remain outstanding, in no
event shall any dividends whatsoever, whether in cash, stock or otherwise, be
paid or declared, or any distribution be made on any class of junior stock, nor
shall any shares of Preferred Stock (subject to certain limited exceptions) or
junior stock be purchased, retired or otherwise acquired for a valuable
consideration by the Company, unless all dividends accrued on outstanding shares
of Preferred Stock for all past dividend periods shall have been paid, or
declared and a sum sufficient for the payment thereof set apart.
The ability of the Company, as a holding company, to pay dividends on the
Preferred Stock will depend upon the payment of dividends, interest or other
charges by subsidiaries to it. Debt instruments of certain subsidiaries of the
Company limit the amount of payments to the Company which could affect the
amount of funds available to the Company to pay dividends on the Preferred
Stock.
First Chicago Trust Company of New York is the registrar, transfer agent
and dividend disbursing agent for the shares of the Preferred Stock.
REDEMPTION
The Company, at the option of the Board of Directors, may redeem all or any
part of the Preferred Stock of any series which by its terms is redeemable, at
the time or times and on the terms and conditions fixed for such series, upon
notice duly given in the manner provided in the certificate of designation
providing for such series, by paying therefor in cash the sum fixed for such
series, together, in each case, with an amount equal to accrued and unpaid
dividends thereon. The certificate of designation providing for a series subject
to redemption may provide that when notice of redemption of all or part of the
shares of such series shall have been given, and the redemption price of such
shares, together with accrued dividends to the date fixed as the redemption
date, has been set aside by the Company, or deposited with a suitable
depositary, for the pro rata benefit of the holders of the shares called for
redemption, then the shares so called shall no longer be deemed outstanding, and
all rights with respect to such shares, including the accrual of further
dividends, other than the right to receive the redemption price of such shares
without interest, shall cease.
VOTING RIGHTS
Except as stated herein or expressly provided by law or except as may be
provided for any series of Preferred Stock by the certificate of designation
relating thereto, the Preferred Stock shall have no right or power to vote on
any question or in any proceeding or to be represented at or to receive notice
of any meeting of stockholders. On any matters on which the holders of the
Preferred Stock or any series thereof shall be entitled to vote separately as a
class or series, they shall be entitled to one vote for each share held.
So long as any shares of Preferred Stock are outstanding, the Company shall
not, without the consent of the holders of at least a majority of the number of
shares of the Preferred Stock at the time outstanding, given in person or by
proxy, either in writing or by vote at any annual meeting, or any special
meeting called for the purpose, purchase, redeem or otherwise acquire for value
any shares of the Preferred Stock or of any other stock ranking on a parity with
the Preferred Stock in respect of dividends or distribution of assets on
liquidation during the continuance of any default in the payment of dividends on
the Preferred Stock.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the affairs
of the Company, voluntary or involuntary, then, before any distribution or
payment can be made to the holders of any class of stock of the Company ranking
junior to the Preferred Stock as to dividends or distribution of assets on
liquidation, the holders of the Preferred Stock of the respective series shall
be entitled to be paid in full the respective amount fixed, with respect to
liquidation, dissolution or winding up, voluntary or involuntary, as the case
may be, in the certificate of designation providing for the issue of shares of
such series, plus a sum equal to all accrued and unpaid dividends thereon to the
date of payment thereof. After such payment shall
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have been made in full to the holders of the Preferred Stock, the remaining
assets and funds of the Company shall be distributed among the holders of the
stocks of the Company ranking junior to the Preferred Stock according to their
respective rights. In the event that the assets of the Company available for
distribution to holders of Preferred Stock shall not be sufficient to make the
payment herein required to be made in full, such assets shall be distributed to
the holders of the respective shares of Preferred Stock pro rata in proportion
to the amounts payable upon each share thereof.
PLAN OF DISTRIBUTION
The Company may sell the Securities in the following ways: (i) through
agents; (ii) through underwriters; (iii) through dealers; and (iv) directly to
purchasers.
Offers to purchase the Securities may be solicited by agents designated by
the Company from time to time. Any such agent, who may be deemed to be an
underwriter as that term is defined in the Securities Act, involved in the offer
or sale of the Securities in respect of which this Prospectus is delivered will
be named, and any commissions payable by the Company to such agent set forth, in
the Prospectus Supplement. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
If any underwriters are utilized in the sale, the Company will enter into
an underwriting agreement with such underwriters at the time of sale to them and
the names of the underwriters and the terms of the transaction will be set forth
in the Prospectus Supplement, which will be used by the underwriters to make
resales to the public of the Securities in respect of which this Prospectus is
delivered.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
The Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms"), acting as principals for their own
accounts or as agents for the Company. Any remarketing firm will be identified
and the terms of its agreement, if any, with the Company and its compensation
will be described in the Prospectus Supplement. Remarketing firms may be deemed
to be underwriters in connection with the Securities remarketed thereby.
Remarketing firms may be entitled under agreements which may be entered into
with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company in
the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters or dealers to solicit offers by certain purchasers to
purchase the Securities from the Company at the public offering price set forth
in the Prospectus Supplement pursuant to delayed delivery contracts providing
for payment and delivery on a specified date in the future. Such contracts will
be subject to only those conditions set forth in the Prospectus Supplement, and
the Prospectus Supplement will set forth the commission payable for solicitation
of such offers.
EXPERTS
The audited consolidated financial statements and schedule of the Company
and its subsidiaries appearing in the Company's Form 10-K for the year ended
December 31, 1996 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and
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incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements and schedules of the Company included
in or incorporated by reference in any documents filed pursuant to Section 13,
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering will be so included or incorporated by reference
in reliance upon the reports of independent auditors pertaining to such
financial statements (to the extent covered by consents filed with the
Securities and Exchange Commission) given upon the authority of such independent
auditors as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Company by William G. von Glahn, Senior Vice President
and General Counsel of Williams, and for the Underwriters by Davis Polk &
Wardwell, New York, New York. Mr. von Glahn beneficially owns approximately
24,331 shares of Williams' Common Stock and also has exercisable options to
purchase an additional 34,182 shares of Williams' Common Stock. Pursuant to
their By-laws, the Company and Williams are required to indemnify Mr. von Glahn
to the fullest extent permitted by Delaware law against any expenses actually
and reasonably incurred by him in connection with any action, suit or proceeding
in which he is made party by reason of his being an officer of the Company. The
Company, through Williams, also maintains directors' and officers' liability
insurance under which Mr. von Glahn is insured against certain expenses and
liabilities.
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