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RULE NO. 424(b)(3)
REGISTRATION NO. 33-61957
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 19, 1995)
$600,000,000
THE BANK OF NEW YORK COMPANY, INC.
SENIOR MEDIUM-TERM NOTES SERIES B
SUBORDINATED MEDIUM-TERM NOTES SERIES C
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
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The Bank of New York Company, Inc. (the "Company") may offer from time to
time up to an aggregate initial public offering price of $600,000,000 (or the
equivalent thereof in foreign currencies or composite currencies including
European Currency Units) of its Medium Term Note securities as a class of its
debt securities entitled the Senior Medium-Term Notes Series B (the "Senior
Notes") or the Subordinated Medium-Term Notes Series C (the "Subordinated
Notes", and together with the Senior Notes, the "Notes"). Each Note will
mature nine months or longer from its date of issue, as agreed to by the
purchaser and the Company. The payment of principal and interest on the Senior
Notes will be senior to the Subordinated Notes. The Senior Notes will be
unsecured and will rank pari passu with other unsubordinated indebtedness of
the Company. The payment of principal of and interest on the Subordinated
Notes will be subordinated in right of payment to all Senior Indebtedness (as
defined in the accompanying Prospectus) of the Company (see "Description of
Debt Securities--Subordination of Subordinated Debt Securities" in the
Prospectus). Indebtedness of the Company senior to the Subordinated Notes, at
December 31, 1997, totaled approximately $2.1 billion. The Notes may be
subject to optional redemption, or obligate the Company to redeem or
repurchase the Notes or to repay the Notes at the option of the Holder thereof
prior to its stated maturity, in each case as indicated in the applicable
Pricing Supplement to this Prospectus Supplement (a "Pricing Supplement").
Unless otherwise specified in the applicable Pricing Supplement, the Notes
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THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY
BANK OR NON-BANK SUBSIDIARY OF THE COMPANY AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND
OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE
PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENT'S DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
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<S> <C> <C> <C>
Per Note.......... 100% .125%-3.00% 99.875%-97%
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Total............. $600,000,000 $750,000-$18,000,000 $599,250,000-$582,000,000
</TABLE>
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(1) Unless otherwise specified in the applicable Pricing Supplement, each Note
will be issued at 100% of its principal amount.
(2) The Company will pay Goldman, Sachs & Co., Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated and Salomon Brothers Inc as agents
(the "Agents"), a commission (or grant a discount) ranging from .125% to
3.00% of principal amount of any Note, depending on its maturity, sold
through one or more of the Agents (or sold to an Agent as principal in
circumstances in which no other discount is agreed). The Company also may
sell Notes to an Agent, as principal, for resale to one or more investors
and other purchasers at varying prices relating to prevailing market prices
at the time of resale, as determined by the Agent, or if so agreed, at a
fixed public offering price. The Company has agreed to indemnify the Agents
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Plan of Distribution of Medium-Term Notes".
(3) Before deducting expenses payable by the Company estimated at $100,000.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
The date of this Prospectus Supplement is April 2, 1998
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denominated in U.S. dollars will be issued in denominations of $1,000 or
integral multiples thereof (see "Description of Medium-Term Notes--General" in
this Prospectus Supplement). If the Notes are to be denominated in a foreign
currency or composite currency, then certain provisions with respect thereto
will be set forth in a foreign currency supplement hereto ("Multi-Currency
Prospectus Supplement") and the applicable Pricing Supplement.
The series designation of the Notes, interest rate or interest rate formula,
if any, the Specified Currency, issue price, Stated Maturity, Interest Payment
Dates and redemption, repayment or sinking fund provisions, if any, for each
Note will be established by the Company at the time of issuance of such Note
(the "Original Issue Date") and will be set forth therein and specified in a
Pricing Supplement. Unless otherwise indicated in the applicable Pricing
Supplement, the Notes, except Zero-Coupon Notes, will bear interest at a fixed
rate ("Fixed Rate Notes") or at a floating rate or rates ("Floating Rate
Notes"). The applicable Pricing Supplement will specify whether a Floating
Rate Note is a Regular Floating Rate Note, a Floating Rate/Fixed Rate Note or
an Inverse Floating Rate Note and whether the interest rate thereon is
determined by reference to the Commercial Paper Rate, LIBOR, the Treasury
Rate, the CD Rate, the Federal Funds Rate, the Prime Rate, the CMT Rate, the
Eleventh District Cost of Funds Rate or other rate formula, as adjusted by a
spread or spread multiplier. Zero-Coupon Notes will be issued at a discount
from the principal amount payable at Maturity thereof and holders of such
Notes will not receive periodic payments of interest. Interest rates or
interest rate indices are subject to change by the Company from time to time,
but no such change will affect any Note already issued or as to which an offer
to purchase has been accepted by the Company. See "Description of Medium-Term
Notes" in this Prospectus Supplement and "Description of Debt Securities" in
the Prospectus.
Payment of principal of the Subordinated Notes may be accelerated only in
case of the bankruptcy, insolvency or reorganization of the Company. There is
no right of acceleration of the payment of principal of the Subordinated Notes
upon a default in the payment of principal of or interest on such Notes or in
the performance of any covenant of the Company contained in the Indenture (as
hereinafer defined). See "Description of Debt Securities--Subordination of
Subordinated Debt Securities" in the Prospectus.
The Notes will be issued in fully registered form and will be represented by
a global security registered in the name of a nominee of The Depository Trust
Company ("DTC"). Beneficial interests in Notes in book-entry form will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC. Except as described in "Description of Medium-Term Notes--
Book-Entry Notes" in this Prospectus Supplement, owners of beneficial
interests in Notes issued in book-entry form will not be entitled to physical
delivery of Notes in certificated form and will not be considered the holders
thereof.
In addition to the offering of the Notes made hereby, the Company may offer
other series of its Medium-Term Notes or other Debt Securities, and the sale
of such Medium-Term Notes or other Debt Securities may reduce the amount of
Notes that may be sold hereunder.
The Notes are being offered on a continuous basis by the Company through one
or more Agents. The Company may also sell Notes directly to investors and
other purchasers on its own behalf in those jurisdictions where it is
authorized to do so. The Notes will not be listed on any securities exchange,
and there can be no assurance that the Notes 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 any offer
to sell Notes without notice and may reject orders in whole or in part whether
placed directly with the Company or through an Agent. An Agent will have the
right, in its discretion reasonable exercised, to reject, in whole or in part,
any offer to purchase Notes received by it on an agency basis. See "Plan of
Distribution of Medium Term Notes" in this Prospectus Supplement.
IN CONNECTION WITH AN OFFERING OF THE NOTES OF THE COMPANY PURCHASED BY ONE
OR MORE AGENTS, AS PRINCIPAL, ON A FIXED OFFERING PRICE BASIS, EACH SUCH AGENT
MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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THE COMPANY
The Bank of New York Company, Inc., a New York corporation, is a bank
holding company subject to the Bank Holding Company Act of 1956, as amended.
Its principal wholly-owned banking subsidiaries are The Bank of New York (the
"Bank") and The Bank of New York (Delaware). The Company provides a complete
range of banking and other financial services to corporations and individuals
worldwide through its core businesses: Corporate Banking, Retail Banking,
Securities and other Processing, Trust, Investment Management and Private
Banking and Financial Market Services.
The Bank, which was founded in 1784, was New York's first bank and is the
oldest bank in the country still operating under its original name. The Bank
is a state-chartered New York banking corporation and a member of the Federal
Reserve System. The Bank conducts a national and international wholesale
banking business and a retail banking business in the New York City, New
Jersey and Connecticut areas, and provides a comprehensive range of corporate
and personal trust, securities processing and investment services.
The Bank of New York (Delaware) is a Delaware chartered, FDIC insured bank
which is not a member of the Federal Reserve System. It provides selected
banking services to corporations, primarily in the mid-Atlantic states.
The Company has its principal offices at 48 Wall Street, New York, New York
10286 (telephone: 212-495-1784).
The Company's principal assets and sources of income are its investments in
its bank subsidiaries, and it is a legal entity separate and distinct from its
banks and other subsidiaries. There are various legal limitations on the
extent to which these banks and other subsidiaries can finance or otherwise
supply funds to the Company and certain of its affiliates. See "Certain
Regulatory Considerations."
RECENT DEVELOPMENTS
In the fourth quarter of 1997, the Company adopted a new accounting
principle, relating to the calculation of earnings per share ("EPS"), as set
forth in a statement (SFAS No. 128) issued by the Financial Accounting
Standards Board. Accordingly, the presentation of "primary" and "fully
diluted" EPS in the Company's earnings statements is replaced with "basic" and
"diluted" EPS. The effect of the new accounting pronouncement on the
calculation of EPS is not material. On February 27, 1998, the Company filed a
Current Report on Form 8-K restating certain data appearing in the Company's
Annual Report of Form 10-K for the year ended December 31, 1996 to reflect the
change in accounting principle.
In addition to the sources listed under "Available Information" in the
Prospectus, information with respect to the proxy statements, annual,
quarterly and special reports, and other information which the Company files
with the Securities and Exchange Commission ("SEC") is also available at the
SEC's website at "http://www.sec.gov".
CERTAIN REGULATORY CONSIDERATIONS
DIVIDENDS
The Bank is subject to dividend limitations under the Federal Reserve Act
and the New York Banking Law. Under these statutes, prior regulatory approval
is required for dividends in any year that would exceed the net profits of the
bank declaring the dividend for such year combined with retained net profits
for the prior two years. Also, the Bank is prohibited from paying a dividend
in an amount greater than "undivided profits then on hand" less "bad debts"
(generally loans six months or more past due).
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Under the first of these two standards, in 1998 the Bank could declare
dividends of approximately $839 million plus net profits earned in 1998. As of
December 31, 1997 the second standard was less restrictive than the first.
In addition to these statutory tests, the Bank's primary federal regulator
(the Federal Reserve Board), could prohibit a dividend if it determined that
the payment would constitute an unsafe or unsound banking practice. The
Federal Reserve Board has indicated that, generally, dividends should be paid
by banks only to the extent of earnings from continuing operations.
Consistent with its policy regarding bank holding companies serving as a
source of financial strength for their subsidiary banks, the Federal Reserve
Board has indicated that, as a matter of prudent banking, a bank holding
company generally should not maintain a rate of cash dividends unless its net
income available to common stockholders has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears consistent
with the bank holding company's capital needs, asset quality and overall
financial condition. In the year ended December 31, 1997, the Company's net
income available to common stockholders was $1,095 million and it paid common
stock dividends totaling $373 million.
CAPITAL ADEQUACY
The Federal bank regulators have adopted risk-based capital guidelines for
bank holding companies and banks. The minimum ratio of qualifying total
capital ("Total Capital") to risk-weighted assets (including certain off-
balance sheet items) is 8%. At least half of the Total Capital is to be
comprised of common stock, retained earnings, noncumulative perpetual
preferred stock, minority interests, and, for bank holding companies, a
limited amount of qualifying cumulative perpetual preferred stock, less most
intangibles including goodwill ("Tier 1 Capital"). The remainder ("Tier 2
Capital") may consist of other preferred stock, certain other instruments, and
limited amounts of subordinated debt and the loan and lease loss allowance.
In addition, the Federal Reserve Board has established minimum Leverage
Ratio (Tier 1 capital to average total assets) guidelines for bank holding
companies and banks. The Federal Reserve Board's guidelines provide for a
minimum Leverage Ratio of 3% for bank holding companies and banks that meet
certain specified criteria, including those having the highest regulatory
rating. All other banking organizations will be required to maintain a
Leverage Ratio of at least 3% plus an additional cushion of 100 to 200 basis
points. The guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. As of December 31, 1997 the Federal
Reserve Board has not advised the Company of any specific minimum Leverage
Ratio applicable to it.
Federal banking agencies recently have issued regulations that modify
existing rules related to capital ratios with respect to various areas of risk
including interest rate exposure and other market risk. The Company does not
believe that the aggregate impact of these modifications will have a
significant impact on its capital position.
Most banks and bank holding companies operate with capital ratios
substantially above the regulatory minimums.
Certain consolidated ratios of the Company are included in the Company's
Current Report on Form 8-K dated January 20, 1998.
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FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
among other things, requires the federal banking regulators to take prompt
corrective action in respect of FDIC-insured depository institutions (such as
the Bank) that do not meet minimum capital requirements. FDICIA establishes
five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." A depository institution's capital tier will depend upon
how its capital levels compare to various relevant capital measures and
certain other factors, as established by regulation. Under applicable
regulations, an FDIC-insured bank is defined to be well capitalized if it
maintains a Leverage Ratio of at least 5%, a Tier 1 Capital Ratio (Tier 1
Capital to risk-weighted assets and certain off-balance sheet items) of at
least 6% and a Total Capital Ratio of at least 10% and is not otherwise in a
"troubled condition" as specified by its appropriate federal regulatory
agency. A bank is generally considered to be adequately capitalized if it is
not defined to be well capitalized but meets all of its minimum capital
requirements, i.e., if it has a Total Capital Ratio of 8% or greater, a Tier 1
Capital Ratio of 4% or greater and a Leverage Ratio of 4% or greater. A bank
will be considered undercapitalized if it fails to meet any minimum required
measure, significantly undercapitalized if it is significantly below such
measure and critically undercapitalized if it maintains a level of tangible
equity capital equal to or less than 2% of total assets. A bank may be deemed
to be in a capitalization category that is lower than is indicated by its
actual capital position if it receives an unsatisfactory examination rating.
FDICIA generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to restrictions on borrowing from the Federal Reserve. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit a capital restoration plan. The federal banking
agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to
succeed in restoring the depository institution's capital. In addition, for an
undercapitalized depository institution's capital restoration plan to be
acceptable, its holding company must guarantee the capital plan up to an
amount equal to the lesser of 5% of the depository institution's assets at the
time it became undercapitalized or the amount of the capital deficiency when
the institution fails to comply with the plan. In the event of the parent
holding company's bankruptcy, such guarantee would take priority over the
parent's general unsecured creditors. If a depository institution fails to
submit an acceptable plan, it is treated as if it is significantly
undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator. A depositary institution that is not well
capitalized is subject to certain limitations on brokered deposits.
At December 31, 1997, the Bank was well capitalized. At December 31, 1997,
the Bank had a Leverage Ratio of 7.42%, a risk-based Total Capital Ratio of
10.38% and a risk-based Tier 1 Capital Ratio of 7.70%.
INTERSTATE BANKING
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("IBBEA") permits bank holding companies, with Federal Reserve Board approval,
to acquire banks located in states other than the bank holding company's home
state without regard to whether the transaction is permitted under state law.
In addition, IBBEA provides that national banks and state banks with different
home states will be permitted to merge across state lines, with the approval
of the appropriate federal banking
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agency, unless the home state of a participating bank passed legislation
between the date of enactment of IBBEA and May 31, 1997 expressly prohibiting
interstate mergers. Most states, including New York, New Jersey and
Connecticut have not passed legislation prohibiting interstate mergers. A bank
may also establish and operate a de novo branch in a state in which the bank
does not maintain a branch if that state expressly permits de novo branching.
Once a bank has established branches in a state through an interstate merger
transaction, the bank may establish and acquire additional branches at any
location in the state where any bank involved in the interstate merger
transaction could have established or acquired branches under applicable
federal or state law. A bank that has established a branch in a state through
de novo branching may establish and acquire additional branches in such state
in the same manner and to the same extent as a bank having a branch in such
state as a result of an interstate merger.
TRANSACTIONS WITH AFFILIATES
The Federal Reserve Act limits amounts of, and requires collateral on,
extensions of credit by the Company's insured bank subsidiaries to the Company
and, with certain exceptions, its nonbank affiliates; also, there are
restrictions on the amounts of investment by such banks in stock and other
securities of the Company and such affiliates, and restrictions on the
acceptance of their securities as collateral for loans by such banks.
Extensions of credit by insured bank subsidiaries to each of the Company and
such affiliates are limited to 10% of such bank subsidiary's capital and
surplus, and in the aggregate for the Company and all such affiliates to 20%.
PROPOSED LEGISLATION
Various bills have been introduced into the United States Congress that
would revise the current limitations on affiliations between banks and
securities companies, insurance companies and (generally to a limited extent)
other companies. Other proposals to change the laws and regulations governing
the banking industry are frequently introduced in Congress, in the state
legislatures and before the various bank regulatory agencies. The Company
cannot determine the ultimate effect that potential legislation, if enacted,
or implementing regulations, would have upon its financial condition or
results of operations.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges for the years ended
December 31, 1997 and December 31, 1996 were 5.12 and 4.30, respectively,
excluding interest on deposits and 2.06 and 2.00 respectively, including
interest on deposits.
DESCRIPTION OF MEDIUM-TERM NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities (as defined in the
Prospectus) set forth under the heading "Description of Debt Securities" in
the Prospectus, to which description reference is hereby made. The following
description will apply to each Note unless otherwise specified in the
applicable Pricing Supplement. Certain terms not defined in this Prospectus
Supplement are defined in the Prospectus.
GENERAL
The Notes will be either Senior Notes or Subordinated Notes (referred to in
the accompanying Prospectus as the "Senior Debt Securities" and the
"Subordinated Debt Securities," respectively). The Senior Notes and the
Subordinated Notes will each constitute a single series to be issued under an
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Indenture dated as of October 1, 1993 (the "Indenture"), between the Company
and Chase Manhattan Trust Company, as Successor Trustee (the "Trustee"). At
the date hereof, the maximum aggregate amount of Notes authorized for issuance
is $600,000,000. This Prospectus Supplement, together with the Prospectus and
any Pricing Supplement, may be used in connection with the offer and sale of
Notes in an aggregate initial public offering price of up to $600,000,000,
subject to reduction as a result of future sales of the Company's other
securities. The foregoing limit may be increased by the Company if in the
future it determines it may wish to sell additional Notes.
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provides that Debt Securities may
be issued in one or more series up to the aggregate principal amount that may
be authorized from time to time by the Company. Debt Securities of any series
need not all be issued at the same time, and a series may be reopened either
for issuances of additional Debt Securities of such series or to establish
additional terms of such series. The Company may concurrently offer other
series of its Senior or Subordinated Medium-Term Notes having different
interest rates and variable terms and such offers may depend upon the
aggregate principal amount subject to purchase in any single transaction.
The Senior Notes will be unsecured and will rank pari passu with other
unsubordinated indebtedness of the Company. The Subordinated Notes will be
unsecured and subordinated to Senior Indebtedness of the Company as described
in the accompanying Prospectus under the heading "Description of Debt
Securities--Subordination of Subordinated Debt Securities."
Indebtedness of the Company senior to the Subordinated Notes, at December
31, 1997, totalled approximately $2.1 billion. The Indenture does not limit or
prohibit the incurrence of additional Senior Indebtedness. See "Description of
Debt Securities--Subordination of Subordinated Debt Securities" in the
Prospectus.
Payment of principal of the Subordinated Notes may be accelerated only in
case of the bankruptcy, insolvency or reorganization of the Company. There is
no right of acceleration of the payment of principal of the Subordinated Notes
upon a default in the payment of principal of or interest on such Notes or in
the performance of any covenant of the Company contained in the Indenture. See
"Description of Debt Securities--Defaults--The Subordinated Indenture" in the
Prospectus.
The Notes will be offered on a continuous basis and will mature on any day
nine months or longer from the date of issue, as agreed to by the purchaser
and the Company.
Unless otherwise indicated in the Pricing Supplement, the Notes will bear
interest at a fixed rate, or at floating rates determined by reference to an
interest rate index or formula which will be set forth in the applicable
Pricing Supplement, or any combination of fixed and floating rates until the
principal thereof is paid or made available for payment. See "Fixed Rates
Notes" and "Floating Rate Notes" below. Notes may be issued as discounted
securities (bearing no interest ("Zero-Coupon Notes") or interest at rates
which at the time of issuance are below market rates), at prices below their
stated principal amounts, which securities will provide that upon redemption
or acceleration of the maturity thereof amounts less than the principal
amounts thereof shall become due and payable, or as other Notes which for
United States Federal income tax purposes would be considered to have original
issue discount ("Original Issue Discount Notes"). See "United States Taxation"
in this Prospectus Supplement.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and
payable immediately as described in the accompanying Prospectus under
"Description of Debt Securities--Subordination of Subordinated Debt
Securities", the amount of principal due and payable with respect to such Note
shall be its Amortized Face Amount (as hereinafter defined). See "Optional
Redemption and Optional Repayment" below.
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Interest, if any, will be payable as specified under "Fixed Rate Notes" and
"Floating Rate Notes" below. Interest payable and punctually paid or duly
provided for on any date on which interest is payable (an "Interest Payment
Date") and on the stated maturity date (or New Maturity Date or Extended
Maturity Date, each as hereafter defined) or upon earlier redemption or
repayment (such stated maturity date, New Maturity Date, Extended Maturity
Date or date of redemption or repayment, as the case may be, being
collectively hereinafter referred to as the "Maturity Date"), or on a later
date on which payment may be made hereunder in respect of such Interest
Payment Date, will be paid to the person in whose name a Note is registered at
the close of business on the Regular Record Date (as hereinafter defined) next
preceding such Interest Payment Date; provided, however, that the first
payment of interest on any Note with an Original Issue Date (as set forth in
the Pricing Supplement) between a Regular Record Date and an Interest Payment
Date or on an Interest Payment Date will be made on an Interest Payment Date
following the next succeeding Regular Record Date to the registered holder on
such next succeeding Regular Record Date; provided, further, that interest
payable at maturity or upon earlier redemption or repayment will be payable to
the person to whom principal shall be payable.
The Notes will be denominated in U.S. dollars and payments of principal of
and interest on the Notes will be made in U.S. dollars, except as may
otherwise be provided in an applicable Pricing Supplement and Multi-Currency
Prospectus Supplement. Except as provided in the applicable Pricing
Supplement, the authorized denominations of the Notes denominated in U.S.
dollars will be U.S. $1,000 and integral multiples of U.S. $1,000 in excess
thereof.
The Company will pay any administrative costs imposed by banks in connection
with transmitting payments of principal, interest or premium, by wire
transfer, but any tax, assessment or governmental charge imposed upon payments
will be borne by owners of beneficial interests in Notes issued in book-entry
form in respect of which payments are made.
All references herein to "registered holders" or "holders" will be to DTC or
its nominee and not to owners of beneficial interests in such Notes, except as
otherwise provided. See "Book-Entry Notes" below.
BOOK-ENTRY NOTES
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be represented by one or more permanent global Notes (collectively, the
"Global Note") registered in the name of a nominee of The Depository Trust
Company, as Depositary under the Indenture ("DTC"). The provisions set forth
under "Description of Securities--Permanent Global Debt Securities" in the
Prospectus will be applicable to the Notes. Accordingly, beneficial interests
in the Notes will be shown on, and transfers thereof will be effected only
through, records maintained by DTC and its participants. Owners of beneficial
interests in the Global Note will not be entitled to receive Notes in
definitive form and will not be considered Holders of Notes unless (i) DTC
notifies the Company in writing that it is no longer willing or able to act as
a depositary or if DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934 (the "Exchange Act"), (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of Notes in definitive form or (iii) any event shall have happened and be
continuing which, after notice or lapse of time, or both, would constitute an
Event of Default with respect to the Notes. In such circumstances, upon
surrender by DTC or a successor depositary of the Global Note, Notes in
definitive form will be issued to each person that DTC or a successor
depositary identifies as the beneficial owner of the related Notes. Upon such
issuance, the Trustee is required to register such Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee
thereof). Such Notes would be issued in fully registered form without coupons,
in denominations of $1,000 and integral multiples thereof.
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DTC has advised the Company and the Agent as follows: DTC is a limited-
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
under the Exchange Act. DTC 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. DTC's participants include
securities brokers and dealers (including the Agent), banks, trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representatives) own DTC. Access to DTC'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. DTC agrees with and represents to its participants
that it will administer its book-entry system in accordance with its rules and
by-laws and requirements of law.
Principal and interest payments on the Notes registered in the name of DTC's
nominee will be made to DTC's nominee as the registered owner of the Global
Note. Under the terms of the Indenture, the Company and the Trustee will treat
the persons in whose names the Notes are registered as the owners of such
Notes for the purpose of receiving payment of principal and interest on such
Notes and for all other purposes whatsoever. Therefore, neither the Company,
the Trustee nor any paying agent has any direct responsibility or liability
for the payment of principal or interest on the Notes to owners of beneficial
interests in the Global Note. DTC has advised the Company and the Trustee that
its current practice is to credit the accounts of the participants with
payments of principal and interest on the date payable in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the Global Note as shown in the records of DTC, unless DTC has
reason to believe that it will not receive payment on such date. DTC's current
practice is to credit such accounts, as to interest, in next-day funds and, as
to principal, in same-day funds. Payments by participants and indirect
participants to owners of beneficial interests in the Global Note will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or
registered in "street name" and will be the responsibility of the participants
or indirect participants.
PAYING AGENT, REGISTRAR AND TRANSFER AGENT
The initial Paying Agent, Registrar and Transfer Agent is the Bank, acting
through its principal corporate trust offices in The City of New York. The
Company reserves the right at any time to vary or terminate the appointment of
the Paying Agent, Registrar and the Transfer Agent and to appoint additional
Paying Agents, Registrars and Transfer Agents and to approve any change in the
office through which the Paying Agent, Registrar or Transfer Agent acts,
provided that, so long as any Notes remain outstanding, there will at all
times be a Paying Agent in The City of New York and the Company will maintain
in The City of New York one or more offices or agencies where Notes may be
presented for registration of transfer and exchange.
OPTIONAL REDEMPTION AND OPTIONAL REPAYMENT
If set forth in the applicable Pricing Supplement, the Notes will be subject
to redemption by the Company on and after the initial redemption date fixed at
the time of sale (the "Initial Redemption Date"). If no Initial Redemption
Date is indicated with respect to a Note, such Note will not be redeemable
prior to the stated maturity date. On and after the Initial Redemption Date
with respect to any Note, such Note will be redeemable in whole or in part in
increments of $1,000 (provided that any remaining principal amount of such
Note shall be at least $1,000) at the option of the Company at a redemption
price (the "Redemption Price") determined in accordance with the following
paragraph, together with interest thereon payable to the date of redemption,
on notice given to a holder of a Note not less than 30 nor more than 60 days
prior to the date of redemption.
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The Redemption Price for each Note subject to redemption may initially be
equal to a certain premium (the "Initial Redemption Percentage") in excess of
100% of the principal amount of such Note to be redeemed, which may decline at
each anniversary of the Initial Redemption Date with respect to such Note by a
percentage (the "Annual Redemption Percentage Reduction") of the principal
amount to be redeemed until the Redemption Price equals 100% of such principal
amount to be redeemed until the Redemption Price equals 100% of such principal
amount. Any Initial Redemption Percentage and any Annual Redemption Percentage
Reduction with respect to each Note subject to redemption prior to the stated
maturity date will be fixed at the time of sale and set forth in the
applicable Pricing Supplement and in the applicable Note.
If set forth in the applicable Pricing Supplement, the Notes will be subject
to repayment at the option of the holders thereof in accordance with the terms
of the Notes on their respective optional repayment dates fixed at the time of
sale (each, an "Optional Repayment Date"). If no Optional Repayment Date is
indicated with respect to a Note, such Note will not be repayable at the
option of the holder thereof prior to the stated maturity date. On any
Optional Repayment Date with respect to any Note, such Note will be repayable
in whole or in part in increments of $1,000 (provided that any remaining
principal amount of such Note shall be at least $1,000) at the option of such
holder at a price equal to 100% of the principal amount to be repaid, together
with interest thereon accrued to the date of repayment, on notice of the
Paying Agent, given not less than 30 nor more than 60 days prior to the
Optional Repayment Date.
While the Notes are represented by the Global Note and registered in the
name of DTC or its nominee, the option for repayment may be exercised by a DTC
Participant, on behalf of the beneficial owners of the Global Note, by
delivering a written notice to the Paying Agent at its corporate trust office
(or such other address of which the Company shall from time to time notify the
Holders), not less than 30 nor more than 60 days prior to the date of
repayment. Notices of elections from DTC Participants on behalf of beneficial
owners of the Global Note to exercise their option to have such Book-Entry
Notes repaid must be received by the Paying Agent by 5:00 P.M., New York City
time, on the last day for giving such notice. In order to ensure that a notice
is received by the Paying Agent on a particular day, the beneficial owner of
the Global Note must direct its DTC Participant before such DTC Participant's
deadline for accepting instructions for that day. Different DTC Participants
may have different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the Global Note should consult the DTC
Participant through which they own their interest therein for the respective
deadlines for such DTC Participant. All notices shall be executed by a duly
authorized officer of such DTC Participant (with signature guaranteed) and
shall be irrevocable. In addition, beneficial owners of the Global Note shall
effect delivery by causing the applicable DTC Participant to transfer such
beneficial owner's interest in the Global Note, on DTC's records, to the
Paying Agent. See "Book-Entry Notes" in this Prospectus Supplement.
If applicable, the Company will comply with the requirements of Rule 14a-1
under the Securities Exchange Act of 1934, as amended, and any other
securities laws or regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation.
Notwithstanding anything in this Prospectus Supplement to the contrary, if a
Note is an Original Issue Discount Note, the amount payable on such Note in
the event of redemption or repayment prior to the stated maturity date 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 an
Original Issue Discount Note shall be the amount equal to (i) the issue price
set forth in the applicable
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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 (computed in accordance with generally accepted United States bond
yield computation principles) by such date of redemption or repayment, as
calculated by the Calculation Agent (as hereinafter defined), but in no event
shall the Amortized Face Amount of an Original Issue Discount Note exceed its
principal amount.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the Original Issue Date at the
rate per annum stated on the face thereof (which may be zero), except as
described below under "--Extendible Notes", until the principal amount thereof
is paid or duly made available for payment. Unless otherwise provided in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
on the basis of a 360-day year consisting of twelve 30-day months. Unless
otherwise specified in the applicable Pricing Supplement, interest on Fixed
Rate Notes will be payable on the 15th day of each month during the term of
the Notes (each an "Interest Payment Date") and on the Maturity Date. Unless
otherwise provided in the applicable Pricing Supplement, the "Regular Record
Date" for Fixed Rate Notes will be the first day of each month or if the
Interest Payment Dates are other than the 15th day of the month, the calendar
day fifteen days preceding each Interest Payment Date whether or not such day
is a Business Day (as hereinafter defined). If any Interest Payment Date or
the Maturity Date on a Fixed Rate Note falls on a day that is not a Business
Day, the payment shall be made on the next succeeding day that is a Business
Day as if it were made on the date such payment was due and no additional
interest will accrue on the amount so payable for the period from and after
such Interest Payment Date or the Maturity Date, as the case may be. Interest
payments will be in the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including the Original Issue Date if no
interest has been paid or duly provided for with respect to such Note) to but
excluding the Interest Payment Date or the Maturity Date, as the case may be.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its Original Issue Date at
the rates determined as described below, except as described below under "--
Extendible Notes," until the principal amount thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest on each Floating Rate Note will be determined by
reference to an interest rate basis or bases (the "Base Rate"), which may be
(i) the CD Rate (a "CD Rate Note"), (ii) the Commercial Paper Rate (a
"Commercial Paper Rate Note"), (iii) LIBOR (a "LIBOR Note"), (iv) the Federal
Funds Rate (a "Federal Funds Rate Note"), (v) the Prime Rate (a "Prime Rate
Note"), (vi) the Treasury Rate (a "Treasury Rate Note"), (vii) the CMT Rate (a
"CMT Rate Note"), (viii) the Eleventh District Cost of Funds Rate (an
"Eleventh District Cost of Funds Rate Note"), or (ix) such other Base Rate or
Rates as may be set forth in the applicable Pricing Supplement and in such
Note.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note" or an "Inverse Floating Rate Note," or as having an
Addendum attached or having "Other Provisions" apply, in each case relating
to a different interest rate formula, such Floating Rate Note will be
designated as a "Regular Floating Rate Note" and, except as described below
or in the applicable Pricing Supplement, will bear interest at the rate
determined by reference to the applicable Base Rate or Rates (a) plus or
minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the initial Interest
Reset Date, the rate at which interest on such Regular Floating Rate Note
shall be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period, if any, from the
date of issue to the initial Interest Reset Date will be the Initial
Interest Rate.
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(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Base Rate or Rates (a) plus or
minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the initial Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (x) the interest rate in effect for the period, if
any, from the date of issue to the Initial Interest Reset Date will be the
initial Interest Rate and (y) the interest rate in effect for the period
commencing on the Fixed Rate Commencement Date to the Stated Maturity shall
be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement or, if no such Fixed Interest Rate is specified, the
interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed
Interest Rate minus the rate determined by reference to the applicable Base
Rate or Rates (a) plus or minus the applicable Spread, if any, and/or (b)
multiplied by the applicable Spread Multiplier, if any; provided, however,
that, unless otherwise specified in the applicable Pricing Supplement, the
interest rate thereon will not be less than zero. Commencing on the initial
Interest Reset Date, the rate at which interest on such Inverse Floating
Rate Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period, if any,
from the date of issue to the initial Interest Reset Date will be the
Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Base Rate or Rates applicable to such Floating Rate Note. The
"Spread Multiplier" is the percentage of the related Base Rate or Rates
applicable to such Floating Rate Note by which such Base Rate or Rates will be
multiplied to determine the applicable interest rate on such Floating Rate
Note. The "Index Maturity" is the period to maturity of the instrument or
obligation with respect to which the related Base Rate or Rates will be
calculated. The Spread, Spread Multiplier, Index Maturity and other variable
terms of the Floating Rate Notes are subject to change by the Company from
time to time, but, except as described below under "Description of Notes--
Extendible Notes," no such change will affect any Floating Rate Note
previously issued or as to which an offer to purchase has been accepted by the
Company.
The applicable Pricing Supplement will specify for each Floating Rate Note
the following terms: whether such Floating Rate Note is a "Regular Floating
Rate Note," a "Floating Rate /Fixed Rate Note," or an "Inverse Floating Rate
Note," the Fixed Rate Commencement Date, if any, Fixed Interest Rate, if any,
Original Issue Date, Base Rate or Rates, Initial Interest Rate (as hereinafter
defined), Interest Payment Period (as hereinafter defined), Interest Reset
Date (as hereinafter defined), Interest Reset Period (as hereinafter defined),
Interest Payment Dates, Index Maturity, Maturity Date, Maximum Interest Rate
(as hereinafter defined) and /or Minimum Interest Rate (as hereinafter
defined), if any, Spread and/or Spread Multiplier, if any, Renewal Date (as
hereinafter defined), if any, if an Extendible Note, the Initial Maturity Date
and Final Maturity Date (as such terms are hereinafter defined), Initial
Redemption Date, if any, Initial Redemption Percentage, if any, Annual
Redemption Percentage Reduction, if any, defeasance provisions, if any, and
Optional Repayment Dates, if any. If one or more of the applicable Base Rates
is LIBOR or the CMT Rate, the applicable Pricing Supplement will also specify
the Designated LIBOR Page or the Designated CMT Maturity Index and the
Designated CMT Telerate Page, respectively, as such terms are defined below.
Unless otherwise specified in the applicable Pricing Supplement, the "Regular
Record Date" for Floating Rate Notes with respect to any Interest Payment Date
will be the fifteenth calendar day, whether or not a Business Day, prior to
such Interest Payment Date.
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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 rate at which interest
may accrue during any interest period ("Maximum Interest Rate") and (ii) a
minimum rate at which interest may accrue during any interest period ("Minimum
Interest Rate"). In addition to any such Maximum Interest Rate, 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. Under current New York law, the maximum rate of
interest (for any loan in the amount of $250,000 or more) is 25% per annum on
a simple interest basis. This limit may not apply to Notes in which $2,500,000
or more has been invested.
The Company will appoint an agent (a "Calculation Agent") to calculate
interest rates on Floating Rate Notes. The Bank will serve as Calculation
Agent unless otherwise specified in the applicable Pricing Supplement.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (such period being the "Interest
Reset Period" for such Note and the first 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
and except as provided below, the Interest Reset Dates will be (i) in the case
of Floating Rate Notes that reset daily, each Business Day; (ii) in the case
of Floating Rate Notes (other than Treasury Rate Notes) that reset weekly,
Wednesday of each week; (iii) in the case of Treasury Rate Notes that reset
weekly, Tuesday of each week; (iv) in the case of Floating Rate Notes that
reset monthly, the third Wednesday of each month; (v) in the case of Floating
Rate Notes that reset quarterly, the third Wednesday of March, June, September
and December of each year; (vi) in the case of Floating Rate Notes that reset
semi-annually, the third Wednesday of each of two months of each year
specified in the applicable Pricing Supplement; and (vii) 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; provided, however,
that with respect to Floating Rate/Fixed Rate Notes, the rate of interest
thereon will not reset after the applicable Fixed Rate Commencement Date. 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 will be postponed to the
next succeeding Business Day, except that in the case of a LIBOR Note, if the
next succeeding Business Day is in the next succeeding calendar month, such
Interest Reset Date will be the next preceding Business Day. If a Treasury
bill auction (as described below) will be held on any day that would otherwise
be an Interest Reset Date for a Treasury Rate Note, then such Interest Reset
Date will instead be the Business Day following such auction date. Unless
otherwise specified in the applicable Pricing Supplement, "Business Day" means
any day other than a Saturday, Sunday, legal holiday or other day on which
banking institutions in The City of New York are authorized or required by
law, regulation or executive order to close; provided, that, with respect to
Notes as to which LIBOR is an applicable Interest Rate Basis, such day is also
a London Banking Day. "London Banking Day" means a day on which dealings in
the applicable LIBOR Currency are transacted in the London interbank market.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate in effect with respect to a Floating Rate Note during an
Interest Reset Period will be the rate determined on the "Calculation Date" by
reference to the "Interest Determination Date." Unless otherwise provided in
the applicable Pricing Supplement, the Interest Determination Date for a CD
Rate Note, Commercial Paper Rate Note, Federal Funds Rate Note, Prime Rate
Note or CMT Rate Note will be the second Business Day preceding the applicable
Interest Reset Date; the Interest Determination Date for a LIBOR Note will be
the second London Banking Day preceding the applicable Interest Reset Date;
the Interest Determination Date for an Eleventh District Cost of Funds Rate
Note will be the last Business Day of the month immediately preceding the
applicable Interest Reset Date in which the Federal Home Loan Bank (the
"FHLB") of San Francisco publishes the Index (as hereinafter defined); and the
Interest
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Determination Date for a Treasury Rate Note will be the day of the week in
which the applicable Interest Reset Date falls on which Treasury bills of the
Index Maturity specified on the face of such Treasury Rate Note are auctioned.
Treasury bills are normally sold at auction on Monday of each week. If such
day is a legal holiday, the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the
result of a legal holiday, an auction is so held on the preceding Friday, such
Friday will be the Interest Determination Date with respect to the Interest
Reset Date for a Treasury Note occurring in the succeeding week. The "Interest
Determination Date" pertaining to a Floating Rate Note the interest rate of
which is determined by reference to two or more Base Rates will be the second
Business Day next preceding the applicable Interest Reset Date for such
Floating Rate Note on which each Base Rate is determinable. Each Base Rate
will be determined as of such date, and the applicable interest rate will take
effect on the applicable Interest Reset Date. Unless otherwise specified in
the applicable Pricing Supplement, the "Calculation Date" pertaining to any
Interest Determination Date shall 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 next preceding the
applicable Interest Payment Date or Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate in effect with respect to a Floating Rate Note on each day that
is not an Interest Reset Date will be the interest rate determined as of the
Interest Determination Date pertaining to the immediately preceding Interest
Reset Date, and the interest rate in effect on any day that is an Interest
Reset Date will be the interest rate determined as of the Interest
Determination Date pertaining to such Interest Reset Date, subject in either
case to any Maximum or Minimum Interest Rate limitation referred to above;
provided, however, that the interest rate in effect with respect to a Floating
Rate Note for the period from the Original Issue Date to the initial Interest
Reset Date (the "Initial Interest Rate") will be specified in the applicable
Pricing Supplement, if available, and, unless otherwise specified in the
applicable Pricing Supplement, the interest rate in effect for the ten
calendar days immediately prior to the Maturity Date (with respect to any
amount to be redeemed or repaid) will be the interest rate in effect on the
tenth calendar day preceding such Maturity Date. The interest rate on a
Floating Rate Note for the initial Interest Reset Period (as hereinafter
defined) and for the final Interest Reset Period may be based upon a different
Index Maturity and therefore may result in a different interest rate for
either or both of such Interest Reset Periods, as set forth in the applicable
Pricing Supplement.
Interest on each Floating Rate Note will be payable monthly, quarterly,
semi-annually or annually (the "Interest Payment Period"), as specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement and except as provided below, the date or dates on which
interest will be payable (each an "Interest Payment Date") will be (i) in the
case of Floating Rate Notes with a monthly Interest Payment Period, the third
Wednesday of each month; (ii) in the case of Floating Rate Notes with a
quarterly Interest Payment Period, the third Wednesday of March, June,
September and December of each year; (iii) in the case of Floating Rate Notes
with a semi-annual Interest Payment Period, the third Wednesday of each of two
months of each year specified in the applicable Pricing Supplement; (iv) in
the case of Floating Rate Notes with an annual Interest Payment Period, the
third Wednesday of one month of each year specified in the applicable Pricing
Supplement; and (v) in each case, on the Maturity Date.
Interest payments will be in the amount of interest accrued from and
including the next preceding Interest Payment Date in respect of which
interest has been paid or duly provided for (or from and including the
Original Issue Date if no interest has been paid or duly provided for with
respect to such Note) to but excluding the Interest Payment Date or the
Maturity Date, as the case may be. However, in the case of Floating Rate Notes
on which the interest rate is reset daily or weekly, unless otherwise
specified in the applicable Pricing Supplement, interest payments on each
Interest Payment Date will be in the amount of interest accrued from but
excluding the Regular Record Date through which
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interest has been paid or duly provided for (or from and including the
Original Issue Date if no interest has been paid or duly provided for with
respect to such Note) to and including the Regular Record Date next preceding
the applicable Interest Payment Date, except that the interest payment due on
the Maturity Date will include interest accrued to but excluding such date.
If any Interest Payment Date (other than the Maturity Date) for any Floating
Rate Note would fall on a day that is not a Business Day with respect to such
Note, such Interest Payment Date will be the following day that is a Business
Day with respect to such Note, except that, in the case of a LIBOR Note, if
such Business Day is in the next succeeding calendar month, such Interest
Payment Date will be the immediately preceding day that is a Business Day with
respect to such LIBOR Note. If the Maturity Date of any Floating Rate Note
falls on a day that is not a Business Day, the payment of principal (and
premium, if any) or interest may be made on the next succeeding Business Day
as if it were made on the date such payment was due, and no additional
interest will accrue on the amount so payable for the period from and after
the Maturity Date.
Unless otherwise specified in the applicable Pricing Supplement, accrued
interest on any Floating Rate Note will be calculated by multiplying the
principal amount of such Note by an accrued interest factor. Such accrued
interest factor will be computed by adding the interest factor calculated for
each day from and including the Original Issue Date, or from but excluding the
last date to which interest has been paid, as the case may be, to and
including the date for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
(expressed as a decimal) for each such day shall be computed by dividing the
interest rate in effect on such day by (i) the actual number of days in the
year, in the case of Treasury Rate Notes or CMT Rate Notes, and (ii) 360, in
the case of other Floating Rate Notes. Unless otherwise specified in the
applicable Pricing Supplement, all percentages resulting from any calculation
on Floating Rate Notes will be rounded to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation
on Floating Rate Notes will be rounded to the nearest cent (with one-half cent
being rounded upward).
Upon the request of the beneficial holder of any Floating Rate Note, the
Calculation Agent will provide the interest rate then in effect and, if
determined, the interest rate that will become effective as a result of a
determination made for the next Interest Reset Date with respect to such
Floating Rate Note. The Calculation Agent will also make certain calculations,
specified below, on or prior to the Calculation Date.
The interest rate that will become effective on each subsequent Interest
Reset Date will be determined by the Calculation Agent (calculated with
reference to the Base Rate or Rates and the Spread and/or Spread Multiplier,
if any, specified in the applicable Pricing Supplement) as follows (such
determination, in the absence of manifest error, to be binding upon all
parties).
CD RATE
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to an Interest Determination Date relating to a CD Rate
Note (the "CD Rate Interest Determination Date"), the rate on such CD Rate
Interest Determination Date for negotiable certificates of deposit having the
Index Maturity specified in the applicable Pricing Supplement, as such rate is
published by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Federal Reserve Board
("H.15(519)"), under the heading "CDs (Secondary Market)." If H.15(519) is not
so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such CD Rate Interest Determination Date, the CD Rate will be
the rate on such CD Rate Interest Determination Date for
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negotiable certificates of deposit of the Index Maturity specified in the
applicable Pricing Supplement, as published by the Federal Reserve Bank of New
York in its daily statistical release "Composite 3:30 P.M. Quotations for U.S.
Government Securities" ("Composite Quotations") under the heading
"Certificates of Deposit." If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in Composite Quotations, the
CD Rate for such CD Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 a.m., New York City time, on such CD Rate Interest
Determination Date, of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit in denominations of $5,000,000 of
major United States money center banks with a remaining maturity closest to
the Index Maturity specified in the applicable Pricing Supplement. However, if
such dealers are not so quoting such rates, the CD Rate for such CD Rate
Interest Determination Date will be the CD Rate then in effect on such CD Rate
Interest Determination Date.
COMMERCIAL PAPER RATE
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to an Interest Determination Date relating to
a Commercial Paper Note (a "Commercial Paper Rate Interest Determination
Date"), the Money Market Yield (as hereinafter defined) of the rate on such
Commercial Paper Rate Interest Determination Date for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement as published
in H.15(519) under the caption "Commercial Paper--Non Financial." If such rate
is not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Commercial Paper Rate Interest Determination Date, the
Commercial Paper Rate will be the Money Market Yield on such Commercial Paper
Rate Interest Determination Date of the rate for commercial paper of the Index
Maturity specified in the applicable Pricing Supplement 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
Composite Quotations, the Commercial Paper Rate for such Commercial Paper Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be the Money Market Yield of the arithmetic mean of the offered rates, as
of 11:00 a.m., New York City time, on such Commercial Paper Rate Interest
Determination Date of three leading dealers of commercial paper in The City of
New York (which may include the Calculation Agent or its affiliates) selected
by the Calculation Agent for commercial paper of the Index Maturity specified
in the applicable Pricing Supplement placed for an industrial issuer whose
bond rating is "AA" or the equivalent by a nationally recognized securities
rating agency. However, if such dealers are not so quoting such rates, the
Commercial Paper Rate for such Commercial Paper Rate Interest Determination
Date will be the Commercial Paper Rate then in effect on such Commercial Paper
Rate Interest Determination Date.
"Money Market Yield" will be a yield calculated in accordance with the
following formula:
Money Market Yield = D x 360 x 100
-----------
360-(D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
LIBOR
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
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(i) With respect to an Interest Determination Date relating to a LIBOR
Note (a "LIBOR Interest Determination Date"), LIBOR will be "LIBOR
Telerate" unless "LIBOR Reuters" is specified in the applicable Pricing
Supplement. "LIBOR Telerate" is the rate for deposits in the LIBOR Currency
(as defined below) having the Index Maturity designated in the applicable
Pricing Supplement that appears on the Designated LIBOR Page (as defined
below) specified in the applicable Pricing Supplement as of 11:00 a.m.
London time, on that LIBOR Interest Determination Date. "LIBOR Reuters" is
that rate which is the arithmetic mean of the offered rates (unless the
specified Designated LIBOR Page by its terms provides only for a single
rate, in which case such single rate shall be used) for deposits in the
LIBOR Currency having the Index Maturity designated in the applicable
Pricing Supplement that appear on the Designated LIBOR Page specified in
the applicable Pricing Supplement as of 11:00 a.m. London time, on that
LIBOR Interest Determination Date, if at least two such offered rates
appear (unless, as aforesaid, only a single rate is required) on such
Designated LIBOR Page. If LIBOR cannot be determined under this clause (i),
LIBOR in respect of the related LIBOR Interest Determination Date will be
determined as if the parties had specified the rate described in clause
(ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which the
applicable LIBOR rate cannot be determined under clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the LIBOR Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement to prime banks in
the London interbank market commencing on the applicable Interest Reset
Date at approximately 11:00 a.m., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such LIBOR Currency in such market at such time. If
at least two such quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two such quotations are provided, LIBOR for such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 a.m. (or such other time specified in the applicable
Pricing Supplement), in the applicable Principal Financial Center (as
defined below), on such LIBOR Interest Determination Date by three major
banks in such Principal Financial Center selected by the Calculation Agent
for loans in the LIBOR Currency to leading European banks, having the Index
Maturity designated in the applicable Pricing Supplement commencing on the
applicable Interest Reset Date and in a principal amount that is
representative for a single transaction in such LIBOR Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined on such LIBOR Interest Determination Date will be LIBOR then in
effect on such LIBOR Interest Determination Date.
"LIBOR Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable
Pricing Supplement, the LIBOR Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Telerate" is designated
in the applicable Pricing Supplement, the display on the Dow Jones Telerate
Service for the purpose of displaying the London interbank offered rates of
major banks for the applicable LIBOR Currency, or (b) if "LIBOR Reuters" is
designated in the applicable Pricing Supplement, the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
offered rates of major banks for the applicable LIBOR Currency. If neither
LIBOR Telerate nor LIBOR Reuters is specified in the applicable Pricing
Supplement, LIBOR for the applicable LIBOR Currency will be determined as if
LIBOR Telerate (and, if the U.S. dollar is the LIBOR Currency, Page 3750) had
been specified.
"Principal Financial Center" will generally be the capital city of the
country of the specified LIBOR Currency, except that with respect to U.S.
dollars, Australian dollars, Canadian dollars, Deutsche
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marks, Italian lire, Swiss francs and ECUs, the Principal Financial Center
shall be The City of New York, Sydney, Toronto, Frankfurt, Milan, Zurich and
Luxembourg, respectively.
FEDERAL FUNDS RATE
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to an Interest Determination Date relating to
a Federal Funds Rate Note (a "Federal Funds Rate Interest Determination
Date"), the rate on such Federal Funds Rate Interest Determination Date for
Federal Funds as published in H.15(519) under the heading "Federal Funds
(Effective)." If H.15(519) is not so published by 3:00 p.m., New York City
time, on the Calculation Date pertaining to such Federal Funds Rate Interest
Determination Date, the Federal Funds Rate will be the rate on such Federal
Funds Rate Interest Determination Date for Federal Funds 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 Composite Quotations, the Federal Funds Rate for such Federal
Funds Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the rates for the last transaction in
overnight Federal Funds as of 9:00 a.m., New York City time, on such Federal
Funds Rate Interest Determination Date quoted by each of three leading brokers
of Federal Funds transactions in The City of New York selected by the
Calculation Agent. However, if fewer than three such brokers are so quoting
such rates, the Federal Funds Rate for such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate then in effect on such
Federal Funds Rate Interest Determination Date.
PRIME RATE
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to an Interest Determination Date relating to a
Prime Rate Note (a "Prime Rate Interest Determination Date"), the rate set
forth on such date in H.15(519) under the heading "Bank Prime Loan," or if not
so published prior to 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Prime Rate 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 US PRIME 1 (as defined below) as such bank's prime rate or base
lending rates as in effect for that Prime Rate Interest Determination Date. If
fewer than four such rates but more than one such rate appear on the Reuters
Screen US PRIME 1 for the Prime Rate Interest Determination Date, the Prime
Rate will be determined by the Calculation Agent and will be the arithmetic
mean of the prime rates, quoted on the basis of the actual number of days in
the year divided by a 360-day year, as of the close of business on such Prime
Rate Interest Determination Date by four major money center banks in The City
of New York as selected by the Calculation Agent. If fewer than two such rates
appear on the Reuters Screen US PRIME l, the Prime Rate will be determined by
the Calculation Agent as of the close of business on the Prime Rate Interest
Determination Date, on the basis of the prime rates, as of the close of
business on the Prime Rate Interest Determination Date, furnished in The City
of New York by the appropriate number of substitute banks or trust companies
organized and doing business under the laws of the United States, or any state
thereof, having total equity capital of at least $500,000,000 and being
subject to supervision or examination by federal or state authority, selected
by the Calculation Agent. However, if the banks so selected are not quoting
prime rates, the Prime Rate for such Prime Rate Interest Determination Date
will be the Prime Rate then in effect on such Prime Rate Interest
Determination Date.
"Reuters Screen US PRIME 1" means the display designated as page "US PRIME
1" on the Reuters Monitor Money Rates Service (or such other page as may
replace the US PRIME 1 page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).
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TREASURY RATE
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to an Interest Determination Date relating to a
Treasury Rate Note (a "Treasury Rate Interest Determination Date"), the rate
for the auction held on such Treasury Rate Interest Determination Date of
direct obligations of the United States ("Treasury bills") having the Index
Maturity specified in the applicable Pricing Supplement, as published in
H.15(519) under the heading "U.S. Government Securities--Treasury bills-
auction average (investment)." If such rate is not published by 3:00 p.m., New
York City time, on the Calculation Date pertaining to such Treasury Rate
Interest Determination Date, the Treasury Rate will be 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 Treasury Rate
Interest Determination Date as otherwise announced by the United States
Department of the Treasury. If such rate is not published or reported by 3:00
p.m., New York City time, on such Calculation Date, or if no such auction is
held on such Treasury Rate Interest Determination Date, then the Treasury Rate
for such Treasury Rate Interest Determination Date will be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Treasury Rate Interest Determination Date, of three leading primary
United States government securities dealers, selected by the Calculation
Agent, for the issue of Treasury bills with a remaining maturity closest to
the Index Maturity specified in the applicable Pricing Supplement. However, if
such dealers are not so quoting such rates, the Treasury Rate for such
Treasury Rate Interest Determination Date will be the Treasury Rate then in
effect on such Treasury Date Interest Determination Date.
CMT RATE
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to an Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined by
reference to the CMT Rate (a "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 for (i) if the Designated CMT Telerate Page is 7055, the rate on such
CMT Rate Interest Determination Date and (ii) if the Designated CMT Telerate
Page is 7052, the week or the month, as applicable, as specified in the
applicable Pricing Supplement, ended immediately preceding the week in which
the related CMT Rate Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 p.m., New
York City time, on the Calculation Date pertaining to such CMT Rate Interest
Determination Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such Treasury Constant Maturity Rate for the Designated CMT
Maturity Index as published in the relevant H.15(519). If such rate is no
longer published, or if not published by 3:00 p.m., New York City time, on
such Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such Treasury Constant Maturity Rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date
with respect to such Interest Reset Date as may then be published by either
the Federal Reserve Board 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 such Calculation Date, then the CMT Rate for the CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 p.m., New York City time,
on the CMT Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Referenced Dealer") in The City of New York selected by the
Calculation Agent (from five such Referenced Dealers selected by the
Calculation Agent and eliminating the highest quotation
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(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, non-callable fixed rate obligations of the United States
("Treasury Note") with an original maturity of approximately the Designated
CMT Maturity Index and a remaining term to maturity of not less than such
Designated CMT Maturity Index minus one year. If the Calculation Agent cannot
obtain three such Treasury Note quotations, the CMT Rate for such CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 p.m., New York City time, on
the CMT Rate Interest Determination Date of three Referenced Dealers in The
City of New York (from five such Referenced Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100,000,000. If three or four (and not
five) of such Referenced Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor lowest of such quotes will be eliminated; provided,
however, that if fewer than three Referenced Dealers selected by the
Calculation Agent are quoting as described herein, the CMT Rate will be the
CMT Rate then in effect on such CMT Rate 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 Treasury Rate Note with the shorter
remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturity 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 two years.
ELEVENTH DISTRICT COST OF FUNDS RATE
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to an Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any Floating
Rate Note for which the interest rate is determined by reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month preceding such Eleventh District Cost of
Funds Rate Interest Determination Date as set forth under the caption
"Eleventh District" on Telerate page 7058 as of 11:00 a.m., San Francisco
time, on such Eleventh District Cost of Funds Rate Interest Determination
Date. If such rate does not appear on Telerate page 7058 on any related
Eleventh District Cost of Funds Rate Interest Determination Date, the Eleventh
District Cost of Funds Rate for such Eleventh District Cost of Funds Rate
Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month preceding the date of
such announcement. If the FHLB of San Francisco fails to announce such rate
for the calendar month next preceding such Eleventh District Cost of Funds
Rate Interest Determination Date, then the Eleventh District Cost of Funds
Rate for such Eleventh District Cost of Funds Rate Interest Determination Date
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will be the Eleventh District Cost of Funds Rate then in effect on such
Eleventh District Cost of Funds Rate Interest Determination Date. "Telerate
Page 7058" means the display on the Dow Jones Telerate Service on such page
(or such other page as may replace such page on that service for the purpose
of displaying the Eleventh District Cost of Funds Rate) for the purpose of
displaying the monthly average cost of funds paid by member institutions of
the Eleventh Federal Home Loan Bank District.
RENEWABLE NOTES
The Company may from time to time offer renewable Notes ("Renewable Notes")
that will mature on an Interest Payment Date as specified in an applicable
Pricing Supplement unless the maturity of all (or if so indicated in such
Pricing Supplement, a portion of) the principal amount of such Note is renewed
in accordance with the procedures described below. Renewable Notes will be
issued in book-entry form only. If the Company issues any such Renewable
Notes, the following procedures will apply, unless otherwise specified in the
applicable Pricing Supplement.
On the dates in each year specified in the applicable Pricing Supplement
(each such date, a "Renewal Date"), the maturity of such Renewable Note will
be automatically extended to the next maturity date (each, a "New Maturity
Date") specified in such Pricing Supplement, unless the holder of such
Renewable Note elects to terminate the automatic extension of the maturity of
such Renewable Note (or, if specified in the applicable Pricing Supplement,
any portion thereof) by delivering a notice to such effect to the Trustee (or
any duly appointed Paying Agent) not less than 15 nor more than 30 days prior
to the Renewal Date. An election to terminate the automatic extension of the
maturity of a Renewable Note may be exercised with respect to less than the
entire principal amount of such Renewable Note only if so specified in the
applicable Pricing Supplement and only in such a principal amount, or integral
multiple in excess thereof, as is specified in the applicable Pricing
Supplement. Notwithstanding the foregoing, the maturity of any Renewable Note
may not be extended beyond the final maturity date (the "Final Maturity Date")
specified for such Renewable Notes in the applicable Pricing Supplement. If a
holder elects to terminate the automatic extension of the maturity of any
portion of the principal amount of a Renewable Note on any Renewal Date, such
portion will become due and payable on the stated maturity date or New
Maturity Date then in effect with respect to such Note, as the case may be. An
election to terminate the automatic extension of the maturity of a Renewable
Note shall be irrevocable and shall be binding on each holder of the Note. The
renewal of the maturity of a Renewable Note will not affect the interest rate
applicable to such Renewable Note.
If a Note is represented by a Global Note, DTC or its nominee will be the
holder of such Note and therefore will be the only entity that can exercise a
right to terminate the automatic extension of a Note. In order to ensure that
DTC or its nominee will timely exercise a right to terminate the automatic
extension with respect to a particular Note, the beneficial owner of such Note
must instruct the broker or other DTC participant or indirect participant
through which it holds an interest in such Note to notify DTC of its desire to
terminate the automatic extension of such Note. Different firms have different
cut-off times for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other DTC
participant 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 DTC or its nominee.
EXTENDIBLE NOTES
The Company may from time to time offer Notes whose stated maturity date may
be extended at the option of the Company (an "Extendible Note") for one or
more whole year periods (each an "Extension Period"), up to but not beyond the
final maturity date (the "Final Maturity Date") specified for such Extendible
Note in the applicable Pricing Supplement. If the Company issues any such
Extendible Notes, the following procedures will apply, unless otherwise
specified in the applicable Pricing Supplement.
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The Company may exercise such option with respect to an Extendible Note by
notifying the Trustee (or any duly appointed Paying Agent) of such exercise at
least 45 but not more than 60 days prior to the stated maturity date
originally in effect with respect to such Note (the "Initial Maturity Date")
or, if the stated maturity date of such Note has already been extended, prior
to the stated maturity date then in effect (an "Extended Maturity Date"). No
later than 40 days prior to the Initial Maturity Date or an Extended Maturity
Date, as the case may be (each, a "Maturity Date"), the Trustee (or any duly
appointed Paying Agent) will mail to the registered holder of such Extendible
Note a notice (the "Extension Notice") relating to such Extension Period,
first class mail, postage prepaid, setting forth (i) the election of the
Company to extend the maturity of such Extendible Note, (ii) the new Extended
Maturity Date, (iii) in the case of a Fixed Rate Note, the interest rate
applicable to the Extension Period or, in the case of a Floating Rate Note,
the Spread and/or Spread Multiplier applicable to the Extension Period, and
(iv) the provisions, if any, for redemption during the Extension Period,
including the date or dates on which, 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 the Trustee (or any duly appointed Paying Agent)
of an Extension Notice to the holder of an Extendible Note, the maturity of
such Note shall be extended automatically as set forth in the Extension
Notice, and, except as modified by the Extension Notice and as described in
the next paragraph, such Extendible Note will have the same terms as prior to
the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Maturity
Date for an Extendible Note (or, if such date is not a Business Day, on the
immediately succeeding Business Day), the Company may, at its option, revoke
the interest rate, in the case of a Fixed Rate Note, or the Spread and/or
Spread Multiplier, in the case of a Floating Rate Note, provided for in the
Extension Notice and establish a higher interest rate, in the case of a Fixed
Rate Note, or a higher Spread and/or Spread Multiplier, in the case of a
Floating Rate Note, for the Extension Period by mailing or causing the Trustee
(or any duly appointed Paying Agent) to mail notice of such higher interest
rate or higher Spread and/or Spread Multiplier, as the case may be, first
class mail, postage prepaid, to the holder of such Note. Such notice shall be
irrevocable. All Extendible Notes with respect to which the Maturity Date is
extended will bear such higher interest rate, in the case of a Fixed Rate
Note, or higher Spread and/or Spread Multiplier, in the case of a Floating
Rate Note, for the Extension Period.
If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to elect repayment of such Note by
the Company on the Maturity Date then in effect at a price equal to the
principal amount thereof plus any accrued and unpaid interest to such date. In
order for an Extendible Note to be so repaid on the Maturity Date, the Company
must receive, at least 15 days but not more than 30 days prior to the Maturity
Date then in effect with respect to the Note (i) the Note with the form
"Option to Elect Repayment" on the reverse of the Note duly completed or (ii)
a telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange or the National Association of Securities
Dealers, Inc. (the "NASD") or a commercial bank or trust company in the United
States setting forth the name of the holder of the Note, the principal amount
of the Note, the principal amount of the Note to be repaid, the certificate
number or a description of the tenor and terms of the Note, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
the Note to be repaid, together with the duly completed form entitled "Option
to Elect Repayment" on the reverse of the Note, will be received by the
Trustee (or any duly appointed Paying Agent) not later than the fifth Business
Day after the date of such telegram, telex, facsimile transmission or letter,
provided, however, that such telegram, telex, facsimile transmission or letter
shall only be effective if such Note and form duly completed are received by
the Trustee (or any duly appointed Paying Agent) by such fifth Business Day.
Such option may be exercised by the holder of an Extendible Note for less than
the aggregate principal amount of the Note then outstanding, provided that the
principal amount of the Note remaining outstanding after repayment is an
authorized denomination.
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If a Note is represented by a Global Note, DTC or its 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 DTC or its 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 DTC
participant or indirect participant through which it holds an interest in such
Note to notify DTC of its desire to exercise a right to repayment. Different
firms have different cut-off times for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other DTC participant 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 DTC or
its nominee.
AMORTIZING NOTES
The Company may from time to time offer Notes ("Amortizing Notes") with the
amount of principal thereof and interest thereon payable in installments over
the term of such Notes. Unless otherwise specified in the applicable Pricing
Supplement, interest on each Amortizing Note will be computed on the basis of
a 360-day year of twelve 30-day months. Payments with respect to Amortizing
Notes will be applied first to interest due and payable thereon and then to
the reduction of the unpaid principal amount thereof. Further information
concerning additional terms and provisions of Amortizing Notes will be
specified in the applicable Pricing Supplement, including a table setting
forth repayment information for such Amortizing Notes.
OTHER PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification and
determination of the Base Rate or Rates, the calculation of the interest rate
applicable to a Floating Rate Note, the Interest Payment Dates or any other
matter relating to the Notes, may be modified and/or supplemented as specified
under "Other Provisions" on the face thereof or in an Addendum relating
thereto, if so specified on the face of such Note and described in the
applicable Pricing Supplement.
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York.
UNITED STATES TAXATION
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purpose to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal
with holders other than original purchasers (except where otherwise
specifically noted). Persons considering the purchase of the Notes should
consult their own tax advisors concerning the application of United States
Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
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political subdivision thereof, (iii) a trust subject to the control of a
United States person and the primary supervision of a United States court,
(iv) an estate the income of which is subject to United States Federal income
taxation regardless of its source, or (v) any other person whose income or
gain in respect of a Note is effectively connected with the conduct of a
United States trade or business. The term also includes certain former
citizens of the United States. As used herein, the term "non-U.S. Holder"
means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
Original Issue Discount. The following summary is a generally discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes with original issue discount
("Original Issue Discount Notes").
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a
Note providing for the payment of any amount other than qualified stated
interest (as hereinafter defined) prior to maturity, multiplied by the
weighted average maturity of such Note). The issue price of each Note in an
issue of Notes equals the first price at which a substantial amount of such
Notes has been sold (ignoring sales to bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers). The stated redemption price at maturity of a Note is
the sum of all payments provided by the Note other than "qualified stated
interest" payments. The term "qualified stated interest" generally means
stated interest that is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually at a single fixed rate.
In addition, under final Treasury Regulations (the "OID Regulations")
promulgated by the Internal Revenue Service (the "IRS") under the original
issue discount provisions of the Code, if a Note bears interest for one or
more accrual periods at a rate below the rate applicable for the remaining
term of such Note (e.g., Notes with teaser rates or interest holidays), and if
the greater of either the resulting foregone interest on such Note or any
"true" discount on such Note (i.e., the excess of the Note's stated principal
amount over its issue price) equals or exceeds a specified de minimis amount,
then the stated interest on the Note would be treated as original issue
discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note that matures
more than one year from the date of issuance must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S.
Holder's regular method of tax accounting. In general, the amount of original
issue discount included in income by the initial U.S. Holder of an Original
Issue Discount Note is the sum of the daily portions of original issue
discount with respect to such Original Issue Discount Note for each day during
the taxable year (or portion of the taxable year) on which such U.S. Holder
held such Original Issue Discount Note. The "daily portion" of original issue
discount on any Original Issue Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue
discount allocable to that accrual period. An "accrual period" may be of any
length and the accrual periods may vary in length over the term of the
Original Issue Discount Note, provided that each accrual period is no longer
than one year and each scheduled payment of principal or interest occurs
either on the final day of an
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accrual period or on the first day of an accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Original Issue Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and (ii) the amount of any qualified stated
interest payments allocable to such accrual period. The "adjusted issue price"
of an Original Issue Discount Note at the beginning of any accrual period is
the sum of the issue price of the Original Issue Discount Note plus the amount
of original issue discount allocable to all prior accrual periods minus the
amount of any prior payments on the Original Issue Discount Note that were no
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
Note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount Note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross
income with respect to such Original Issue Discount Note for any taxable year
(or portion thereof in which the U.S. Holder holds the Original Issue Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes are subject to special rules
whereby a Floating Rate Note will qualify as a "variable rate debt instrument"
if (a) its issue price does not exceed the total noncontingent principal
payments due under the Floating Rate Note by more than a specified de minimis
amount and (b) it provides for stated interest, paid or compounded at least
annually, at current values of (i) one or more qualified floating rates, (ii)
a single fixed rate and one or more qualified floating rates, (iii) a single
objective rate, or (iv) a single fixed rate and a single objective rate that
is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Note is denominated. Although a multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate, a
variable rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than 0.65 but not more than 1.35 will constitute a
qualified floating rate. A variable rate equal to the product of a qualified
floating rate and a fixed multiple that is greater than 0.65 but not more than
1.35, increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the OID Regulations, two or more qualified
floating rates that can reasonably be expected to have approximately the same
values throughout the term of the Floating Rate Note (e.g., two or more
qualified floating rates with values within 25 basis points of each other as
determined on the Floating Rate Note's issue date) will be treated as a single
qualified floating rate. Notwithstanding the foregoing, a variable rate that
would otherwise constitute a qualified floating rate but which is subject to
one ore more restrictions such as a maximum numerical limitation (i.e., a cap)
or a minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating rate under the OID
Regulations unless such cap or floor is fixed throughout the term of the Note.
An "objective rate" is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and which is based upon
objective financial or economic information outside of the issuer's control,
such as: (i) one or more qualified floating rates, (ii) one or more rates
where each rate would be a qualified floating rate for a debt instrument
denominated in a currency other than the
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currency in which the Floating Rate Note is denominated, (iii) either the
yield or changes in the price or one or more items of actively traded personal
property (other than stock or debt of the issuer or a related party) or (iv) a
combination of objective rates. The OID Regulations also provide that other
variable interest rates may be treated as objective rates if so designated by
the IRS in the future. Despite the foregoing, a variable rate of interest on a
Floating Rate Note will not constitute an objective rate if it is reasonably
expected that the average value of such rate during the first half of the
Floating Rate Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Floating Rate Note's term. A "qualified inverse floating rate" is any
objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds. The OID Regulations also provide than if a Floating Rate Note provides
for stated interest at a fixed rate for an initial period of less than one
year followed by a variable rate that is either a qualified floating rate or
an objective rate and if the variable rate on the Floating Rate Note's issue
date is intended to approximate the fixed rate (e.g., the value of the
variable rate on the issue date does not differ from the value of the fixed
rate by more than 25 basis points), then the fixed rate and the variable rate
together will constitute either a single qualified floating rate or objective
rate, as the case may be.
If a Floating Rate Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually during
the term of the Note will constitute qualified stated interest and will be
taxed accordingly. Thus, a Floating Rate Note that provides for stated
interest at either a single qualified floating rate or a single objective rate
throughout the term thereof and that qualifies as a "variable rate debt
instrument" under the OID Regulations will generally not be treated as having
been issued with original issue discount unless the Floating Rate Note is
issued at a "true" discount (i.e., at a price below the Note's stated
principal amount) in excess of a specified de minimis amount. Original issue
discount on such a Floating Rate Note arising from "true" discount is
allocated to an accrual period using the constant yield method described above
by assuming that the variable rate is a fixed rate equal to (i) in the case of
a qualified floating rate or qualified inverse floating rate, the value as of
the issue date, of the qualified floating rate or qualified inverse floating
rate, or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Floating Rate Note.
In general, any other Floating Rate Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original
issue discount and qualified stated interest on the Floating Rate Note. The
OID Regulations generally require that such a Floating Rate Note be converted
into an "equivalent" fixed rate debt instrument by substituting any qualified
floating rate or qualified inverse floating rate provided for under the terms
of the Floating Rate Note with a fixed rate equal to the value of the
qualified floating rate or qualified inverse floating rate, as the case may
be, as of the Floating Rate Note's issue date. Any objective rate (other than
a qualified inverse floating rate) provided for under the terms of the
Floating Rate Note is converted into a fixed rate that reflects the yield that
is reasonably expected for the Floating Rate Note. In the case of a Floating
Rate Note that qualifies as a "variable rate debt instrument" and provides for
stated interest at a fixed rate in addition to either one or more qualified
floating rates or a qualified inverse floating rate, the fixed rate is
initially converted into a qualified floating rate (or a qualified inverse
floating rate, if the Floating Rate Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Floating Rate Note as of the Floating Rate Note's
issue date is approximately the same as the fair market value of an otherwise
identical debt instrument that provides for either the qualified floating rate
or qualified inverse
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floating rate rather than the fixed rate. Subsequent to converting the fixed
rate into either a qualified floating rate or a qualified inverse floating
rate, the Floating Rate Note is then converted into an "equivalent" fixed rate
debt instrument in the manner described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S.
Holder of the Floating Rate Note will account for tax purposes for such
original issue discount and qualified stated interest as if the U.S. Holder
held the "equivalent" fixed rate debt instrument. In each accrual period,
appropriate adjustments will be made to the amount of qualified stated
interest or original issue discount assumed to have been accrued or paid with
respect to the "equivalent" fixed rate debt instrument in the event that such
amounts differ from the actual amount of interest accrued or paid on the
Floating Rate Note during the accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Floating Rate Note would be
treated as a contingent payment debt obligation. The OID Regulations contain
special rules for determining the timing and amount of OID to be accrued in
respect of Notes providing for one or more contingent payments ("Contingent
Payment Notes"). For this purpose, a Note is not a Contingent Payment Note if
it (i) is a variable rate Note, (ii) provides for alternate payment schedules
upon the occurrence of contingencies if certain other requirements are met or
(iii) is a foreign currency debt instrument. Under the OID Regulations, a U.S.
Holder generally would be required to take contingent interest payments on
Contingent Payment Notes into income on a yield to maturity basis in
accordance with a schedule of projected payments provided by the Company to
U.S. Holders and would make annual adjustments to income to account for the
difference between actual payments received and projected payment amounts
accrued. Additional disclosure will be provided for in a Pricing Supplement in
connection with any offering of Contingent Payment Notes. Prospective
purchasers should consult their own tax advisors regarding the OID Regulations
in connection with ownership of a Note that provides for contingent payments.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable
at the option of the holder prior to their stated maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase Notes with such
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(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) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based
on daily compounding), through the date of sale, exchange or maturity, and a
portion of the deductions otherwise allowable to the U.S. Holder for interest
on borrowings allocable to the Short-Term Note will be deferred until a
corresponding amount of income is realized. U.S. Holders who report income for
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United States Federal income tax purposes under the accrual method, and
certain other holders including banks and dealers in securities, are required
to accrue original issue discount on a Short-Term Note on a straight-line
basis unless an election is made to accrue the original issue discount under a
constant yield method (based on daily compounding).
Market Discount. In the case of a Note other than a Short-Term Note, if a
U.S. Holder purchases a Note, other than an Original Issue Discount Note, for
an amount that is less than its stated redemption price at maturity or, in the
case of an Original Issue Discount Note, for an amount that is less than its
adjusted issue price as of the purchase date, such U.S. Holder will be treated
as having purchased such Note at a "market discount," unless such market
discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of an Original Issue Discount Note,
any payment that does not constitute qualified stated interest) on, or any
gain realized on the sale, exchange, retirement or other disposition of, a
Note as ordinary income to the extent of the lesser of (i) the amount of such
payment or realized gain or (ii) the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the Maturity
Date of the Note, unless the U.S. Holder elects to accrue market discount on
the basis of semiannual compounding.
A U.S. Holder may be required to defer the education of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note
or certain earlier dispositions, because a current deduction is only allowed
to the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of
certain cash payments and regarding the deferral of interest deductions will
not apply. Generally, such currently included market discount is treated as
ordinary interest for United States Federal income tax purposes. Such an
election will apply to all debt instruments acquired by the U.S. Holder on or
after the first day of the taxable year to which such election applies and may
be revoked only with the consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to such excess. A U.S. Holder may elect to amortize such premium using
a constant yield method over the remaining term of the Note and may offset
interest otherwise required to be included in respect of the Note during any
taxable year by the amortized amount of such excess for the taxable year.
However, if the Note may be optionally redeemed after the U.S. Holder acquires
it at a price in excess of its stated redemption price at maturity, special
rules would apply which could result in a deferral of the amortization of some
bond premium until later in the term of the Note. Any election to amortize
bond premium applies to all taxable debt obligations then owned and thereafter
acquired by the U.S. Holder and may be revoked only with the consent of the
IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest
which are treated as ordinary income) and such U.S. Holder's adjusted tax
basis in the Note. A U.S. Holder's adjusted tax basis in a Note generally will
equal such U.S. Holder's initial investment in the Note increased by any
original issue discount included in income (and accrued
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market discount, if any, if the U.S. Holder has included such market discount
in income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year, although the
preferential 20% rate applicable to individuals applies only in the case of a
Note held for more than 18 months.
Foreign Currency Denominated Notes. The tax treatment of Notes the interest
or principal on which may be determined by reference to one or more foreign
currencies will depend on the application of special rules to the particular
terms of the Notes. The tax considerations relevant to such Notes will be
described in an applicable Pricing Supplement, and each prospective purchaser
should consult its tax advisor about such matters.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater stockholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
Section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial
owner of the Note under penalties of perjury, (ii) certifies that such owner
is not a U.S. Holder and (iii) provides the name and address of the beneficial
owner. The statement may be made on an IRS Form W-8 or a substantially similar
form, and the beneficial owner must inform the Withholding Agent of any change
in the information on the statement within 30 days of such change. If a Note
is held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. In addition, the
Treasury Department recently issued regulations regarding the withholding
rules discussed above. In general, the new regulations do not alter the
substantive withholding and information reporting requirements but unify
current certification procedures and forms and clarify reliance standards.
However, the regulations would require in the case of Notes held by a foreign
partnership that the certification requirement described above be provided by
the partners rather than by the foreign partnership unless the partnership
meets certain requirements and is authorized as a "withholding foreign
partnership" by the IRS. A look-through rule would apply in the case of tiered
partnerships. The regulations also generally require a non-U.S. Holder to
provide a taxpayer identification number in order to claim a reduced rate of
withholding pursuant to a treaty. The regulations are generally effective for
payments made after December 31, 1998, subject to certain transition rules. In
particular, valid withholding certificates that are held on December 31, 1998,
generally remain valid until the earlier of December 31, 1999, or the due date
of the expiration of the certificate under rules currently in effect. Further,
certificates dated prior to January 1, 1998, that were valid as of January 1,
1998, remain valid until the end of 1988.
Generally, a non-U.S. Holder will not be subject to Federal income or
withholding taxes on any amount which constitutes capital gain upon retirement
or disposition of a Note, provided the gain is not effectively connected with
the conduct of a trade or business in the United States by the non-U.S.
Holder. Certain other exceptions may be applicable, and a non-U.S. Holder
should consult its tax advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater stockholder of the
Company or, at the time of such individual's death,
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<PAGE>
payments in respect of the Notes would have been effectively connected with
the conduct by such individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to beneficial owners who are
not "exempt recipients" and who fail to provide certain identifying
information (such as the beneficial owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Notes to a U.S. Holder must be reported to the
IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding for
those non-U.S. Holders who are not exempt recipients.
Under current Treasury Regulations, payment 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% 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 recently issued Treasury
regulations, backup withholding may apply to any payment which such broker is
required to report if such broker has actual knowledge that the payee is a
United States person. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the Holder certifies, under penalties of perjury, that it is not a United
States person or otherwise establishes an exemption.
Holders should consult their tax advisors regarding the qualification for an
exemption from backup withholding and information reporting and the procedures
for obtaining such an exemption, if applicable. Any amounts withheld under the
backup withholding rules from a payment to a beneficial owner would be allowed
as a refund or a credit against such beneficial owner's United States Federal
income tax provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION OF MEDIUM-TERM NOTES
The Notes are being offered on a continuous basis for sale by the Company
through Goldman, Sachs & Co., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, PaineWebber
Incorporated and Salomon Brothers Inc (the "Agents"). If agreed to by the
Company and an Agent, such Agent may utilize its best efforts on an agency
basis to solicit offers to purchase the Notes at 100% of the principal amount
thereof, unless otherwise specified in an applicable Pricing Supplement. The
Company will pay the Agents a commission which, depending on the maturity of
the Notes, will range from .125% to 3.00% of the principal amount of any Note
sold through the Agents. Commissions and discounts with respect to Notes with
maturities in excess of 30 years will be negotiated between the Company and
the applicable Agent at the time of such sale. The Company may also sell Notes
directly to investors and other purchasers on its own behalf in those
jurisdictions where it is authorized to do so.
In addition, any Agent may offer the Notes it has purchased as principal to
other dealers for resale to investors, and may allow any portion of the
discount received in connection with such purchases from the Company to such
dealers. After the initial public offering of Notes to be resold to investors
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<PAGE>
and other purchasers, the public offering price (in the case of Notes to be
resold on a fixed public offering price basis), concession and discount may be
changed.
The Company reserves the right to withdraw, cancel or modify any offer to
sell Notes without notice and may reject orders in whole or in part whether
placed directly with the Company or through the Agents. Each Agent will have
the right, in its discretion reasonably exercised, to reject, in whole or in
part, any offer to purchase Notes received by it on an agency basis.
Unless otherwise provided in a Pricing Supplement, payment of the purchase
price of the Notes will be required to be made in immediately available funds
in The City of New York on the date of settlement.
The Agents, whether acting as agent or principal, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"). The Company has agreed to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments that the Agents may be required to make in respect
thereof. The Agents may engage in transactions with, or perform services for,
the Company in the ordinary course of business.
The Agents may from time to time purchase and sell Notes in the secondary
market, but they are not obligated to do so, and there can be no assurance
that there will be a secondary market for the Notes or liquidity in the
secondary market if one develops. From time to time, the Agents may make a
market in the Notes, but the Agents are not obligated to do so and may
discontinue any market-making at any time.
In addition to Notes being offered through the Agents as described herein,
other series of notes (including other series of Medium-Term Notes) that may
have terms identical or similar to the terms of the Notes may be concurrently
offered by the Company on a continuous basis both inside and outside the
United States pursuant to one or more separate distribution agreements with
the Agents or other agents. Pursuant to such agreements, such agents may also
purchase notes as principal for their own account or for resale, and the
Company may make direct sales of notes on its own behalf. Any notes so offered
and sold in excess of certain amounts will reduce correspondingly the maximum
aggregate principal amount of Notes that may be offered by this Prospectus
Supplement and the accompanying Prospectus.
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EXPERTS
The consolidated financial statements of the Company appearing in its Annual
Reports on Form 10-K, at December 31, 1997 and 1996, and for the two years in
the period then ended, have been audited by Ernst & Young LLP, independent
auditors, and at December 31, 1995, and for the year then ended, by Deloitte &
Touche LLP, independent auditors, as set forth in their respective reports
thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such reports given upon the authority of such firms as experts
in accounting and auditing.
LEGAL OPINIONS
The validity of the Notes is being passed upon the Company by Paul A.
Immerman, Esq., Senior Counsel to the Company, and on behalf of the Agent by
Milbank, Tweed, Hadley & McCloy, New York, New York. Mr. Immerman owns shares
of the Company's Common Stock (par value $7.50 per share).
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NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING
SUPPLEMENT) AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE AGENT. THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING
SUPPLEMENT) AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
(INCLUDING ANY PRICING SUPPLEMENT) AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS NOT BEEN ANY CHANGE IN THE FACTS CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) OR THE
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
-----------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................................................... S-3
Recent Developments....................................................... S-3
Certain Regulatory Considerations......................................... S-3
Consolidated Ratios of Earnings to Fixed Charges.......................... S-6
Description of Medium-Term Notes.......................................... S-6
Governing Law............................................................. S-23
United States Taxation.................................................... S-23
Plan of Distribution of Medium-Term Notes................................. S-30
Experts................................................................... S-32
Legal Opinions............................................................ S-32
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 3
Recent Developments....................................................... 3
Certain Regulatory Considerations......................................... 3
Use of Proceeds........................................................... 7
Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividend Requirements........................ 7
Description of Debt Securities............................................ 8
Description of Preferred Stock............................................ 17
Description of Depository Shares.......................................... 21
Description of Common Stock............................................... 23
Description of Preferred Stock Purchase Rights............................ 24
Validity of Securities.................................................... 26
Experts................................................................... 26
Plan of Distribution...................................................... 26
</TABLE>
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$600,000,000
THE BANK OF NEW YORK
COMPANY, INC.
SENIOR MEDIUM-TERM NOTES SERIES B
SUBORDINATED
MEDIUM-TERM NOTES
SERIES C
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PROSPECTUS SUPPLEMENT
APRIL 2, 1998
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
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