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Filed Pursuant to Rule 424(b)(5)
Reg. No. 333-55873
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 17, 1998)
$150,000,000
TAMPA ELECTRIC COMPANY
7 3/8% RESET PUT SECURITIES ("REPS (SM)") DUE 2015 *
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INTEREST PAYABLE MARCH 1 AND SEPTEMBER 1
------------------------
WE ARE ISSUING 7 3/8% RESET PUT SECURITIES (REPS) DUE SEPTEMBER 1, 2015. THESE
NOTES WILL BEAR INTEREST AT RATES ESTABLISHED PERIODICALLY IN A REPS MODE, A
LONG TERM MODE OR A COMMERCIAL PAPER TERM MODE, AS DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT.
THE NOTES WILL INITIALLY BE IN A REPS MODE. FROM THE DATE OF THEIR INITIAL
ISSUANCE UP TO, BUT EXCLUDING, SEPTEMBER 1, 2002, THE REPS WILL BEAR INTEREST AT
AN ANNUAL RATE OF 7 3/8%. THE NOTES ARE REQUIRED TO BE TENDERED FOR REMARKETING
OR REPURCHASE ON SEPTEMBER 1, 2002. IF MORGAN STANLEY & CO. INCORPORATED, ACTING
AS THE INITIAL CALLHOLDER, ELECTS TO PURCHASE THE NOTES, THE NOTES MUST BE
TENDERED TO MORGAN STANLEY & CO. INCORPORATED ON SEPTEMBER 1, 2002, EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT. IN THAT
EVENT, THE NOTES WILL, FROM SEPTEMBER 1, 2002 UP TO, BUT EXCLUDING, SEPTEMBER 1,
2012, BEAR INTEREST AT THE REPS COUPON RESET RATE DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT. IF MORGAN STANLEY & CO. INCORPORATED DOES NOT PURCHASE THE NOTES,
THE NOTES WILL CEASE TO BE IN THE INITIAL REPS MODE, AND SEPTEMBER 1, 2002 WILL,
INSTEAD, CONSTITUTE AN INTEREST RATE ADJUSTMENT DATE. FOLLOWING REMARKETING ON
THAT DATE, EACH NOTE WILL BEAR INTEREST AT A RATE OR RATES IN A NEW REPS MODE,
THE LONG TERM RATE MODE OR A COMMERCIAL PAPER TERM MODE. WE MUST REPURCHASE ANY
NOTES NOT REMARKETED IN A NEW INTEREST RATE MODE.
WE MAY NOT REDEEM THE NOTES PRIOR TO SEPTEMBER 1, 2002. ON SEPTEMBER 1, 2002 AND
ON EACH INTEREST RATE ADJUSTMENT DATE, HOWEVER, WE CAN REDEEM THE NOTES.
------------------------
PRICE 99.991% AND ACCRUED INTEREST, IF ANY
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS COMPANY(1)(2)
--------- ----------- -------------
<S> <C> <C> <C>
PER NOTE............................... 99.991% .250% 102.771%
TOTAL.................................. $149,986,500 $375,000 $154,156,500
</TABLE>
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(1) PLUS ACCRUED INTEREST, IF ANY, FROM AUGUST 21, 2000.
(2) INCLUDES CONSIDERATION PAYABLE BY MORGAN STANLEY & CO. INCORPORATED FOR THE
RIGHT TO SERVE AS INITIAL CALLHOLDER.
------------------------
*REPS IS A SERVICE MARK OF MORGAN STANLEY DEAN WITTER & CO.
------------------------
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
WE EXPECT TO DELIVER THE NOTES TO PURCHASERS ON AUGUST 21, 2000.
------------------------
MORGAN STANLEY DEAN WITTER CHASE SECURITIES INC.
AUGUST 16, 2000
<PAGE>
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF
ANY DATE OTHER THAN THE DATE OF THIS PROSPECTUS SUPPLEMENT.
------------------------
TABLE OF CONTENTS
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PROSPECTUS SUPPLEMENT
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Offering Summary...................... S-3
Use of Proceeds....................... S-4
Description of the Notes.............. S-4
Material United States Federal Income
Tax Considerations.................. S-30
Certain ERISA Considerations.......... S-34
Underwriting.......................... S-36
Legal Matters......................... S-37
Experts............................... S-37
<CAPTION>
PROSPECTUS
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<S> <C>
Available Information................. 2
Documents Incorporated by Reference... 2
The Company........................... 3
Ratios of Earnings to Fixed Changes... 3
Use of Proceeds....................... 3
Description of Debt Securities........ 4
Plan of Distribution.................. 12
Legal Matters......................... 13
Experts............................... 13
</TABLE>
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OFFERING SUMMARY
<TABLE>
<S> <C>
Notes Offered.................. $150 million principal amount of 7 3/8% REset Put Securities
(REPS) due 2015.
Stated Maturity................ September 1, 2015, subject to mandatory tender on
September 1, 2002.
Available Modes................ The notes will bear interest at rates determined
periodically as described in this prospectus supplement, in
the REPS mode, the long term rate mode or a commercial paper
term mode.
REPS Mode.................... The REPS mode is the interest rate mode in which notes bear
interest and are subject to remarketing as REset Put
Securities.
Long Term Rate Mode.......... The long term rate mode is the interest rate mode in which
notes bear interest during a period of more than 364 days.
Commercial Paper Term The commercial paper term rate mode is the interest rate
Rate Mode.................... mode in which the interest rate on the applicable notes is
reset on a periodic basis not less than each calendar day
nor more than 364 consecutive calendar days.
Initial Mode................... The notes initially will be in a REPS mode. In this initial
REPS mode, notes will bear interest from the date of initial
issuance to, but excluding, September 1, 2002, at the
initial interest rate. If the initial callholder exercises
its right to purchase the notes on September 1, 2002, the
notes will bear interest at the REPS coupon reset rate from
September 1, 2002 to, but excluding, September 1, 2012.
Initial Interest Rate.......... The notes will bear interest at the rate of 7 3/8% per annum
from the issuance date to, but excluding, September 1, 2002.
Interest Payment Dates......... March 1 and September 1, during the initial REPS mode,
commencing on September 1, 2000. Interest payments will be
made to the persons in whose names the notes are registered
on the 15th calendar day immediately preceding the
applicable interest payment date, except that the
September 1, 2000 interest payment will be made to the
persons in whose names the notes are registered on the date
we deliver the notes.
Mandatory Tender to the Initial The initial callholder has the right to purchase all of the
Callholder..................... notes, on September 1, 2002, at a price equal to 100% of
the principal amount.
Mandatory Tender............... If the initial callholder does not purchase the notes on
September 1, 2002, the notes will be subject to mandatory
tender for redemption or for remarketing in a new interest
rate mode at a price equal to 100% of the principal amount
thereof.
Redemption or Conversion....... If the initial callholder elects to purchase the notes on
September 1, 2002, we will have the right either (i) to
redeem the notes from the initial callholder at a premium to
par or (ii) to convert the notes to a new interest rate mode
and pay the initial callholder a fee.
Special Mandatory Purchase..... We will be obligated to purchase, on each interest rate
adjustment date, any notes which have not been successfully
remarketed by a remarketing agent appointed by us at an
aggregate purchase price equal to 100% of the principal
amount.
Ranking........................ The notes will be unsecured debt and rank on a parity with
our other unsecured and unsubordinated indebtedness.
Use of Proceeds................ We will use the net proceeds from the sale of the notes to
repay short-term indebtedness and for general corporate
purposes. Pending such uses, we will invest the net proceeds
in short-term money market instruments.
Form and Denomination.......... We will issue the notes in denominations of $100,000 and, in
excess of $100,000, in integral multiples of $1,000. The
notes will be represented by registered global securities
registered in the name of Cede & Co., the partnership
nominee of the depositary, The Depository Trust Company.
Beneficial interests in the notes will be shown on, and
transfers will be effected through, records maintained by
the depositary and its participants.
</TABLE>
S-3
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USE OF PROCEEDS
The net proceeds from the offering of the 7 3/8% REset Put Securities Due
2015 (the "Notes") are estimated to be approximately $153.9 million. The company
expects to use the net proceeds from the offering of the Notes to repay
short-term indebtedness, and for general corporate purposes. Pending such uses,
the net proceeds will be invested by the company in short-term money market
instruments. At June 30, 2000, the company had $276.9 million in short-term debt
outstanding.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements the description of the general terms of the Debt Securities
(as defined in the accompanying Prospectus) set forth under the caption
"Description of Debt Securities" in the accompanying Prospectus, to which
description reference is hereby made. Capitalized terms not defined herein have
the meanings set forth in the Indenture, dated as of July 1, 1998 (as amended
and supplemented by the Second Supplemental Indenture thereto, the "Indenture"),
between the company and The Bank of New York as trustee.
The following summaries of certain provisions of the Indenture do not
purport to be complete, and are subject to, and are qualified in their entirety
by reference to, the provisions of the Indenture, the form of which has been
filed with the SEC as an exhibit to the Registration Statement of which the
Prospectus forms a part. The Indenture provides for the issuance from time to
time of various series of Debt Securities, including the Notes offered hereby.
Each series may differ as to terms, including maturity, interest rate,
redemption and sinking fund provisions, covenants, and events of default. As of
the date of this Prospectus Supplement, August 16, 2000, the company has an
aggregate principal amount of $50,000,000 in Debt Securities outstanding under
the Indenture. For purposes of the following description, unless otherwise
indicated, a Business Day shall be any day that is not a day on which banking
institutions in New York, New York are authorized or obligated by law or
executive order to close.
GENERAL
The Notes offered hereby will be unsubordinated and unsecured obligations of
the company and will rank PARI PASSU in right of payment with all other
unsubordinated and unsecured indebtedness of the company. The Notes will not
limit other indebtedness or securities that may be incurred or issued by the
company or any of its subsidiaries or contain financial or similar restrictions
of the company or any of its subsidiaries. The Notes do not have a sinking fund.
The Notes will be issued in fully registered form, without coupons, in
minimum denominations of $100,000 or integral multiples of $1,000 in excess
thereof. The Notes initially will be issued as Global Securities. See
"Description of Debt Securities--Global Securities" and "--Book-Entry System" in
the accompanying Prospectus for additional information concerning the Notes, the
Indenture and the book-entry system. The Depository Trust Company (the
"Depositary") will be the depositary with respect to the Notes. Settlement of
the sale of the Notes to the Underwriters will be in immediately available
funds. The Notes will trade in the Depositary's Same-Day Funds Settlement System
until maturity or earlier redemption, as the case may be, and secondary market
trading activity in the Notes will therefore settle in immediately available
funds. All payments of principal and interest will be made by the company in
immediately available funds to the Depositary in the City of New York.
PRINCIPAL AND MATURITY
The Notes will be limited to $150,000,000 in aggregate principal amount and
will mature on September 1, 2015 (the "Stated Maturity").
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INTEREST
The Notes will bear interest at 7 3/8% per annum (the "Initial Interest
Rate") (assuming a 360-day year consisting of twelve 30-day months) for the
period from August 21, 2000 to, but excluding, September 1, 2002 (the "Initial
REPS Remarketing Date"). If Morgan Stanley & Co. Incorporated, as the Initial
Callholder, elects to remarket the Notes (except in the limited circumstances
described in this prospectus supplement): (a) the Notes will be subject to
mandatory tender to the Initial Callholder at 100% of the aggregate principal
amount thereof for remarketing on the Initial REPS Remarketing Date, on the
terms and subject to the conditions described herein, and (b) during the period
(the "REPS Period") from the Initial REPS Remarketing Date to, but excluding,
September 1, 2012, the Notes will bear interest at the rate determined by the
Initial Callholder in accordance with the procedures set forth below (the "REPS
Coupon Reset Rate"). If the Initial Callholder does not purchase the Notes on
the Initial REPS Remarketing Date, the Notes will cease to be in the initial
REPS Mode, the Initial REPS Remarketing Date will constitute an Interest Rate
Adjustment Date and the Notes automatically will be subject to mandatory tender
at 100% of the principal amount of the tendered Notes for redemption on such
date by the company or for remarketing on such date by a Remarketing Agent in a
new REPS Mode, a Long Term Rate Mode or a Commercial Paper Term Mode.
During the initial REPS Mode, interest on the Notes will be payable
semi-annually on March 1 and September 1 of each year (each, an "Interest
Payment Date"), commencing September 1, 2000. Interest payments will be made to
the persons in whose names the Notes are registered on the 15th calendar day
(whether or not a Business Day) immediately preceding the related Interest
Payment Date (each a "Regular Record Date"), except that the September 1, 2000
interest payment will be made to the persons in whose names the Notes are
registered on the date the company delivers the Notes.
MANDATORY TENDER TO THE INITIAL CALLHOLDER
ELECTION TO REMARKET. Provided that the Initial Callholder gives notice to
the company and the trustee on a Business Day not later than five Business Days
prior to the Initial REPS Remarketing Date of its intention to purchase the
Notes for remarketing (the "Initial Notification Date"), each of the Notes will
be automatically tendered to the Initial Callholder for purchase on the Initial
REPS Remarketing Date, except in the circumstances described under "--Conversion
or Redemption Following Election by Initial Callholder to Remarket" and "--
Failure of Initial Callholder to Remarket." The purchase price for the tendered
Notes to be paid by the Initial Callholder will be equal to 100% of the
aggregate principal amount of the tendered Notes. See "--Notification of
Results; Settlement." When the Notes are tendered to the Initial Callholder for
remarketing, the Initial Callholder may remarket the Notes for its own account
at varying prices to be determined by the Initial Callholder at the time of each
sale. If the Initial Callholder elects to remarket the Notes, the obligation of
the Initial Callholder to purchase the Notes on the Initial REPS Remarketing
Date is subject to certain conditions. See "--Initial Callholder." If the
Initial Callholder purchases the Notes, during the REPS Period, the Notes will
bear interest at the REPS Coupon Reset Rate.
REPS COUPON RESET RATE. The REPS Coupon Reset Rate will be determined by
the Initial Callholder by 3:30 p.m., New York City time, on the third Business
Day immediately preceding the Initial REPS Remarketing Date (the "Initial
Determination Date"), to the nearest one hundred-thousandth (0.00001) of
one percent per annum, and will be equal to the sum of 5.75% (the "Base Rate")
and the Applicable Spread (as defined below), which will be based on the Dollar
Price (as defined below) of the Notes.
For the purpose of determining the REPS Coupon Reset Rate, the following
terms have the following meanings:
"Applicable Spread" means the lowest bid indication, expressed as a spread
(in the form of a percentage or in basis points) above the Base Rate, obtained
by the Initial Callholder on the Initial
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Determination Date from the bids quoted by five Reference Corporate Dealers (as
defined below) for the full aggregate outstanding principal amount of the Notes
at the Dollar Price, but assuming
(a) an issue date that is the Initial REPS Remarketing Date, with settlement
on such date without accrued interest,
(b) a maturity date of September 1, 2012,
(c) a stated annual interest rate equal to the Base Rate plus the spread bid
by the applicable Reference Corporate Dealer, and
(d) the benefit of any credit support provided by the company, if the
company elects to provide credit support.
If fewer than five Reference Corporate Dealers bid as described above, then
the Applicable Spread shall be the lowest of such bid indications obtained as
described above. The REPS Coupon Reset Rate announced by the Initial Callholder,
absent manifest error, shall be binding and conclusive upon the Beneficial
Owners, the Holders (as defined in the Indenture) of the Notes, the company and
the trustee.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Callholder as being the current on-the-run ten year
United States Treasury security.
"Comparable Treasury Price" means, with respect to the Initial REPS
Remarketing Date, (a) the offer prices for the Comparable Treasury Issues
(expressed in each case as a percentage of its principal amount) at 11:00 a.m.
on the Initial Determination Date, as set forth on Telerate Page 500 (or such
other page as may replace Telerate Page 500) or (b) if such page (or any
successor page) is not displayed or does not contain such offer prices on such
date, (i) the average of the Reference Treasury Dealer Quotations (as defined
below) on the Initial Determination Date, after excluding the highest and lowest
of such Reference Treasury Dealer Quotations, or (ii), if the Callholder obtains
fewer than four such Reference Treasury Dealer Quotations, the average of all
such Reference Treasury Dealer Quotations. "Telerate Page 500" means the display
designated as "Telerate Page 500" on Dow Jones Markets (or such other page as
may replace Telerate Page 500 on such service) or such other service displaying
the offer prices specified in (a) above as may replace Dow Jones Markets.
"Dollar Price" means, with respect to the Notes, the present value, as of
the Initial REPS Remarketing Date, of the Remaining Scheduled Payments (as
defined below) discounted to the Initial REPS Remarketing Date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate (as defined below).
"Reference Corporate Dealers" means such Reference Corporate Dealers as
shall be appointed by the Initial Callholder after consultation with the
company.
"Reference Treasury Dealer" means such Reference Treasury Dealers as shall
be appointed by the Initial Callholder after consultation with the company.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and the Initial REPS Remarketing Date, the offer prices for the
Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted in writing to the Initial Callholder by such Reference
Treasury Dealer by 3:30 p.m., New York City time on the Initial Determination
Date.
"Remaining Scheduled Payments" means, with respect to the Notes, the
remaining scheduled payments of the principal and interest, calculated at the
Base Rate only, that would be due after the Initial REPS Remarketing Date to and
including September 1, 2012.
"Treasury Rate" means, with respect to the Initial REPS Remarketing Date,
the rate per annum equal to the semi-annual equivalent yield to maturity or
interpolated (on a day count basis) yield to maturity of the Comparable Treasury
Issues (as defined above), assuming a price for the Comparable Treasury Issues
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<PAGE>
(expressed as a percentage of its principal amount), equal to the Comparable
Treasury Price (as defined above) for such Initial REPS Remarketing Date.
NOTIFICATION OF RESULTS; SETTLEMENT. Provided the Initial Callholder has
previously notified the company and the trustee on the Initial Notification Date
of its intention to purchase all tendered Notes on the Initial REPS Remarketing
Date, the Initial Callholder will notify the company, the trustee and the
Depositary by telephone, confirmed in writing, by 4:00 p.m., New York City time,
on the Initial Determination Date, of the REPS Coupon Reset Rate.
All the tendered Notes will be automatically delivered to the account of the
trustee, by book-entry through the Depositary pending payment of the purchase
price, on the Initial REPS Remarketing Date.
The Initial Callholder will make or cause the trustee to make payment to the
Participant of each tendering Beneficial Owner of Notes, by book-entry through
the Depositary by the close of business on the Initial REPS Remarketing Date
against delivery through the Depositary by the close of business on the Initial
REPS Remarketing Date of such Beneficial Owner's tendered Notes.
The transactions described above will be executed on the Initial REPS
Remarketing Date through the Depositary in accordance with the procedures of the
Depositary, and the accounts of the respective Participants will be debited and
credited and the Notes delivered by book-entry as necessary to effect the
purchases and sales thereof.
Transactions involving the sale and purchase of Notes remarketed by the
Initial Callholder during the REPS Period will settle in immediately available
funds through the Depositary's Same-Day Funds Settlement System.
The tender and settlement procedures described above, including provisions
for payment by purchasers of Notes in the remarketing or for payment to selling
Beneficial Owners of tendered Notes, may be modified, notwithstanding any
contrary terms of the Indenture, to the extent required by the Depositary or, if
the book-entry system is no longer available for the Notes at the time of the
remarketing, to the extent required to facilitate the tendering and remarketing
of Notes in certificated form. In addition, the Initial Callholder may,
notwithstanding any contrary terms of the Indenture, modify the settlement
procedures set forth above in order to facilitate the settlement process.
As long as the Depositary's nominee holds the certificates representing any
Notes in the book-entry system of the Depositary, no certificates for such Notes
will be delivered by any selling Beneficial Owner to reflect any transfer of
such Notes effected in the remarketing. In addition, under the terms of the
Notes and the Initial REPS Remarketing Agreement (as defined below), the company
has agreed that, notwithstanding any provision to the contrary set forth in the
Indenture, (a) it will use reasonable commercial efforts to maintain the Notes
in book-entry form with the Depositary or any successor thereto and to appoint a
successor depositary to the extent necessary to maintain the Notes in book-entry
form and (b) it will waive any discretionary right it otherwise has under the
Indenture to cause the Notes to be issued in certificated form.
For further information with respect to transfers and settlement through the
Depositary, see "Description of Debt Securities--Book-Entry Issuance" in the
accompanying Prospectus.
INITIAL CALLHOLDER. On or prior to the date of original issuance of the
Notes, the company and the Initial Callholder will enter into a REPS Remarketing
Agreement (the "Initial REPS Remarketing Agreement").
The Initial Callholder will not receive any fees or reimbursement of
expenses from the company in connection with the remarketing. If the Initial
REPS Remarketing Agreement is terminated at the option of the Initial Callholder
based upon the occurrence of any of certain specified termination events, the
company may be obligated thereunder to reimburse the Initial Callholder for all
of its reasonable out-of-pocket expenses. In addition, in the event of certain
specified termination events, the company will be
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obligated to pay to the Initial Callholder the fair market value, calculated as
set forth in the Initial REPS Remarketing Agreement, of the Initial Callholder's
right to purchase and remarket the Notes pursuant to the Initial REPS
Remarketing Agreement.
The company will agree to indemnify the Initial Callholder against certain
liabilities, including liabilities under the Securities Act, arising out of or
in connection with its duties under the Initial REPS Remarketing Agreement.
In the event that the Initial Callholder elects to remarket the Notes as
described herein, the obligation of the Initial Callholder to purchase Notes
from tendering Beneficial Owners of Notes will be subject to several conditions
precedent set forth in the Initial REPS Remarketing Agreement, including the
conditions that, since the Initial Notification Date, no material adverse change
in the consolidated financial condition, stockholders' equity, results of
operations, business or prospects of the company and its subsidiaries considered
as one enterprise has occurred, and that no Event of Default (as defined in the
Indenture), or any event which, with the giving of notice or passage of time, or
both, would constitute an Event of Default, has occurred and is continuing with
respect to the Notes. In addition, the Initial REPS Remarketing Agreement will
provide for the termination thereof, or redetermination of the REPS Coupon Reset
Rate, by the Initial Callholder on or before the Initial REPS Remarketing Date,
upon the occurrence of certain events.
No Beneficial Owner of any Notes shall have any rights or claims under the
Initial REPS Remarketing Agreement or against the company or the Initial
Callholder as a result of the Initial Callholder not purchasing the Notes.
The Initial REPS Remarketing Agreement will also provide that the Initial
Callholder may submit its resignation at any time as the Initial Callholder,
such resignation to be effective 10 business days after the delivery to the
company and the trustee of notice of such resignation. In such case, it shall be
the sole obligation of the company to appoint a successor Callholder.
The Initial Callholder, in its individual or any other capacity, may buy,
sell, hold and deal in any of the Notes. The Initial Callholder may exercise any
vote to join in any action that any Beneficial Owner of Notes may be entitled to
exercise or take with like effect as if it did not act in any capacity under the
Initial REPS Remarketing Agreement. The Initial Callholder, in its individual
capacity, either as principal or agent, may also engage in or have an interest
in any financial or other transaction with the company as freely as if it did
not act in any capacity under the Initial REPS Remarketing Agreement.
The summaries in this prospectus supplement of certain provisions of the
Initial REPS Remarketing Agreement do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the provisions of the
Initial REPS Remarketing Agreement.
CONVERSION OR REDEMPTION FOLLOWING ELECTION BY THE INITIAL CALLHOLDER TO
REMARKET. If the Initial Callholder elects to remarket the Notes on the Initial
REPS Remarketing Date, the Notes will be subject to mandatory tender to the
Initial Callholder for remarketing on such date, subject to the company's right
to convert the Notes to a new Interest Rate Mode or to redeem the Notes from the
Initial Callholder, in each case as described in the next sentence. The company
will notify the Initial Callholder and the trustee not later than the Business
Day immediately preceding the Initial Determination Date if the company
irrevocably elects to exercise its right to either convert the Notes to a new
Interest Rate Mode or to redeem the Notes from the Initial Callholder at the
Optional Redemption Price (as defined below), in each case, on September 1,
2002.
In the event that the company irrevocably elects to convert the Notes to a
new Interest Rate Mode, then as of September 1, 2002 the Notes will be subject
to remarketing on such date by a Remarketing Agent appointed by the company in a
new REPS Mode, a Long Term Rate Mode or a Commercial Paper Term Mode established
by the company in accordance with the procedures described below under
"--Conversion to New Interest Rate Mode," provided that, in such case, the
notice required for
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conversion shall be given no later than the Initial Determination Date. In such
case, the company shall pay to the Initial Callholder the excess of the Dollar
Price of the Notes over 100% of the principal amount of the Notes in same-day
funds by wire transfer to an account designated by the Initial Callholder.
In the event that the company irrevocably elects to redeem the Notes from
the Initial Callholder, the "Optional Redemption Price" shall be the greater of
(i) 100% of the principal amount of the Notes plus accrued and unpaid interest
and (ii) the Dollar Price. If the company elects to redeem the Notes, it shall
pay the Optional Redemption Price in same-day funds by wire transfer to an
account designated by the Initial Callholder on September 1, 2002.
FAILURE OF INITIAL CALLHOLDER TO REMARKET. In the event that the Initial
Callholder for any other reason does not purchase the Notes on September 1,
2002, the Notes automatically will be subject to mandatory tender at 100% of the
principal amount thereof for redemption on such date by the company or, if the
company at its option elects, for remarketing on such date by a Remarketing
Agent appointed by the company in a new REPS Mode, a Long Term Rate Mode or a
Commercial Paper Term Mode established by the company in accordance with the
procedures described in "--Conversion to New Interest Rate Mode"; provided that
the notice period required for conversion shall be the lesser of ten (10) days
and the period commencing the date that the Initial Callholder notifies the
company that it will not purchase the Notes for remarketing on September 1, 2002
or fails to so purchase, as the case may be.
CONVERSION TO NEW INTEREST RATE MODE
GENERAL. If the company elects to convert the Notes to a new Interest Rate
Mode, on and after September 1, 2002, or, if the Initial Callholder remarkets
the Notes as described above, on and after September 1, 2012, each Note at the
option of the company will bear interest for designated Interest Rate Periods in
the Commercial Paper Term Mode, the REPS Mode or the Long Term Rate Mode
(together the "Interest Rate Modes"). Each Note may bear interest in the same or
a different Interest Rate Mode from other Notes. The interest rate for the Notes
will be established periodically as described herein by a Remarketing Agent
selected by the company. The company also may appoint one or more standby
remarketing agents for any Remarketing Agent (each, a "Standby Remarketing
Agent") on the terms described herein.
Interest will be payable on any such Note at maturity and (i) for any
Interest Rate Period in the Commercial Paper Term Mode, on the interest rate
adjustment date (each an "Interest Rate Adjustment Date") commencing the next
succeeding Interest Rate Period for such Note and on such other dates (if any)
as will be established upon conversion of such Note to the Commercial Paper Term
Mode or upon remarketing of the Note in a new Interest Rate Period in the
Commercial Paper Term Mode; and (ii) in the Long Term Rate Mode or the REPS
Mode, no less frequently than semi-annually on such dates as will be established
upon conversion of such Note to the Long Term Rate Mode or the REPS Mode (or
upon remarketing of the Note to a new Interest Rate Period in the Long Term Rate
Mode or the REPS Mode, as the case may be) and set forth in the applicable
prospectus supplement, other remarketing document or the confirmation, in the
case of a fixed interest rate, or as described below under "--Floating Interest
Rates" in the case of a floating interest rate, and on the Interest Rate
Adjustment Date commencing the next succeeding Interest Rate Period (each such
date, an "Interest Payment Date"). Such interest will be payable to the holder
thereof as of the related record date (a "Record Date"), which, for any Note
(x) in the Commercial Paper Term Mode, is the Business Day prior to the related
Interest Payment Date; and (y) bearing interest in the Long Term Rate Mode or
the REPS Mode, is 15 days prior to the related Interest Payment Date whether or
not a Business Day. If any Interest Payment Date would otherwise be a day that
is not a Business Day, such Interest Payment Date will be postponed to the next
succeeding Business Day, and no interest will accrue on such payment for the
period from and after such Interest Payment Date to the date of such payment on
the next succeeding Business Day.
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Interest on Notes bearing interest in the Commercial Paper Term Mode or at a
floating interest rate during any Interest Rate Period in the Long Term Mode or
the REPS Mode will be computed on the basis of actual days elapsed divided by
360; provided that, if an applicable Interest Rate Basis (as defined below) is
the CMT Rate or the Treasury Rate (each as defined below), interest will be
computed on the basis of actual days elapsed divided by the actual number of
days in the year. Interest on Notes bearing interest at a fixed rate in the Long
Term Rate Mode or the REPS Mode will be computed on the basis of a year of 360
days consisting of twelve 30-day months.
As used in this section, a Business Day shall be any day other than a
Saturday or Sunday that is (a) neither a legal holiday nor a day on which
banking institutions are authorized or required by law or regulations to close
(x) in The City of New York or (y) for Notes denominated in a specified currency
other than U.S. dollars, Australian dollars or Euro, in the principal financial
center of the country of the specified currency or (z) for Notes denominated in
Australian dollars, in Sydney and (b) for Notes denominated in Euro, that is
also a day on which the Trans-European Automated Real-time Gross Settlement
Express Transfer System, which is commonly referred to as "TARGET", is
operating. A London Business Day shall mean any day on which deposits in the
relevant index currency are transacted in the London interbank market.
DETERMINATION OF INTEREST RATES. The interest rate and, in the case of a
floating interest rate, the Spread (as defined below), if any, and the Spread
Multiplier (as defined below), if any, for any Note will be established by the
applicable Remarketing Agent in a remarketing (as described below) or otherwise
not later than the first day of each succeeding Interest Rate Period for such
Note, which must be a Business Day (each, an "Interest Rate Adjustment Date"),
and will be the minimum rate of interest and, in the case of a floating interest
rate, Spread (if any) and Spread Multiplier (if any) necessary in the judgment
of such Remarketing Agent to produce a par bid in the secondary market for such
Note on the date the interest rate is established. Such rate will be effective
for the next succeeding Interest Rate Period for such Note commencing on such
Interest Rate Adjustment Date.
In the event that (i) the applicable Remarketing Agent has been removed or
has resigned and no successor has been appointed, or (ii) such Remarketing Agent
has failed to announce the appropriate interest rate, Spread (if any) or Spread
Multiplier (if any), as the case may be, on the Interest Rate Adjustment Date
for any Note for whatever reason, or (iii) the appropriate interest rate, Spread
(if any), or Spread Multiplier (if any), as the case may be, or Interest Rate
Period cannot be determined for any Note for whatever reason, then the next
succeeding Interest Rate Period for such Note will be automatically converted to
a Weekly Rate Period (a Commercial Paper Term Period described below), and the
rate of interest thereon will be equal to the Federal Funds Rate (as defined
below; such rate of interest being referred to in this prospectus supplement as
the "Special Interest Rate").
After any Interest Rate Adjustment Date, any Beneficial Owner may contact
the Trustee or the Remarketing Agent in order to be advised of the interest rate
applicable to such Beneficial Owner's remarketed Notes. No notice of the
applicable interest rate will be sent to Beneficial Owners.
The interest rate and other terms announced by the Remarketing Agent, absent
manifest error, will be binding and conclusive upon the Beneficial Owners, the
company and the trustee.
INTEREST RATE MODES
The times specified below are subject to extension under standby remarketing
arrangements, if any, as provided herein. See "--Remarketing--Interest Rate
Adjustment Date; Determination of Interest Rate" below.
COMMERCIAL PAPER TERM MODE. As used in this prospectus supplement,
"Commercial Paper Term Mode" means, with respect to any Note, the Interest Rate
Mode in which the interest rate on such Note is reset on a periodic basis, which
shall not be less than one calendar day nor more than 364 consecutive
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calendar days and interest is paid as provided for such Interest Rate Mode above
under "--Conversion to New Interest Rate Mode--General." The Interest Rate
Period for any Note in the Commercial Paper Term Mode will be a period of not
less than one nor more than 364 consecutive calendar days (a "Commercial Paper
Term Period"), as determined by the company (as described below under "--
Conversion Between Interest Rate Modes") or, if not so determined, by the
Remarketing Agent for such Note (in its best judgment in order to obtain the
lowest interest cost for such Note). Each Commercial Paper Term Period will
commence on the Interest Rate Adjustment Date therefor and end on the day
preceding the date specified by such Remarketing Agent as the first day of the
next Interest Rate Period for such Note. A "Weekly Rate Period" is a Commercial
Paper Term Period and will be a period of seven days commencing on any Interest
Rate Adjustment Date and ending on the day preceding the first day of the next
Interest Rate Period for such Note. The interest rate for any Commercial Paper
Term Period relating to a Note will be determined not later than 11:50 a.m., New
York City time, on the Interest Rate Adjustment Date for such Note, which is the
first day of each Interest Period for such Note.
LONG TERM RATE MODE. As used herein, "Long Term Rate Mode" means, with
respect to any Note, the Interest Rate Mode in which the interest rate on such
Note is reset in a Long Term Rate Period and interest is paid as provided for
such Interest Rate Mode above under "--Conversion to New Interest Rate
Mode--General" or below under "--Floating Interest Rates." The Interest Rate
Period for any Note in the Long Term Rate Mode will be established by the
company (as described below under "--Conversion Between Interest Rate Modes") as
a period of more than 364 days and not exceeding the remaining term to the
Stated Maturity (a "Long Term Rate Period"). The interest rate, or Spread (if
any) and Spread Multiplier (if any) for any Note in the Long Term Rate Mode will
be determined not later than 11:50 a.m., New York City time, on the Interest
Rate Adjustment Date for such Note, which is the first day of each Interest Rate
Period for such Note.
REPS MODE. As used herein, "REPS Mode" means, with respect to any Note, the
Interest Rate Mode in which the Notes shall bear interest and be subject to
remarketing as REset Put Securities, or REPS, by a remarketing agent selected by
the company (a "Callholder") as described under "REPS Mode" below. The Notes
will initially be in a REPS Mode, and the provisions applicable while the Notes
are in this initial REPS Mode are found above under "--Interest" and
"--Mandatory Tender to the Initial Callholder." If any Notes are converted to a
new REPS Mode after the Initial REPS Mode, the provisions below "--REPS Mode"
will apply. So long as any Notes are in a new REPS Mode, the provisions set
forth herein applicable to the remarketing of Notes generally shall apply to
such Notes only to the extent expressly provided under "--REPS Mode" below.
The Interest Rate Period for any Note in the REPS Mode will be established
by the company (as described below under "--Conversion Between Interest Rate
Modes") as a period of more than 364 days and not exceeding the remaining term
to the Stated Maturity (a "REPS Rate Period"). A REPS Rate Period shall consist
of the period to and excluding the REPS Remarketing Date (as defined below) and
the period from and including the REPS Remarketing Date to but excluding the
next succeeding Interest Rate Adjustment Date, as described below under "--REPS
Mode" and subject to the conditions therein and otherwise herein described. The
interest rate and, in the case of a floating interest rate, the Spread (if any),
and the Spread Multiplier (if any), to the REPS Remarketing Date for any Note in
the REPS Mode will be determined not later than 11:50 a.m., New York City time,
on the Interest Rate Adjustment Date for such Note, which for the REPS Mode is
the first day of each Interest Rate Period for such Note.
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CONVERSION BETWEEN INTEREST RATE MODES
The company may change the Interest Rate Mode at its option in the manner
described below.
CONVERSION BETWEEN COMMERCIAL PAPER TERM PERIODS. Each Note in a Commercial
Paper Term Period may be remarketed into the same Interest Rate Period or
converted at the option of the company to a different Commercial Paper Term
Period on any Interest Rate Adjustment Date upon either receipt by the
Remarketing Agent and the trustee of a notice, which will be submitted or
promptly confirmed in writing (which includes facsimile or appropriate
electronic media), from the company (a "Conversion Notice") prior to 9:30 a.m.,
New York City time, or the remarketing of such Note, whichever occurs later, on
such Interest Rate Adjustment Date.
CONVERSION FROM THE COMMERCIAL PAPER TERM MODE TO THE LONG TERM RATE MODE OR
THE REPS MODE. Each Note in the Commercial Paper Term Mode may be converted at
the option of the company to the Long Term Rate Mode or the REPS Mode on any
Interest Rate Adjustment Date upon receipt not less than ten days prior to such
Interest Rate Adjustment Date by the Remarketing Agent and the trustee of a
Conversion Notice from the company.
CONVERSION BETWEEN LONG TERM RATE PERIODS OR FROM THE LONG TERM RATE MODE OR
THE REPS MODE TO THE COMMERCIAL PAPER TERM MODE, THE LONG TERM RATE MODE OR THE
REPS MODE. Each Note in a Long Term Rate Period may be remarketed in the same
Interest Rate Period or converted at the option of the company to a different
Long Term Rate Period or from the Long Term Rate Mode to the Commercial Paper
Term Mode or the REPS Mode, or from the REPS Mode to a different REPS Mode or to
the Long Term Rate Mode or the Commercial Paper Term Mode, on any Interest Rate
Adjustment Date for such Note upon receipt by the trustee and the Remarketing
Agent for such Note of a Conversion Notice from the company not less than ten
days prior to such Interest Rate Adjustment Date; provided that the notice
required for conversion from the initial REPS Mode shall not be required until
the latest of the day after the Initial Callholder notifies the company that it
will not purchase the Notes for remarketing, the day the Initial Callholder
fails to so purchase the Notes or the day the company elects to convert the
Notes to a new Interest Rate Mode after the Initial Callholder has elected to
remarket the Notes.
CONVERSION NOTICE. Each Conversion Notice must state each Note to which it
relates and the new Interest Rate Mode (if applicable), the new Interest Rate
Period, the date of the applicable conversion (the "Conversion Date") and, with
respect to any Long Term Rate Period, any optional redemption or repayment terms
for each such Note. If the company revokes a Conversion Notice or the trustee
and the Remarketing Agent fail to receive a Conversion Notice from the company
by the specified date in advance of the Interest Rate Adjustment Date for a
Note, the Note shall be converted automatically to the Weekly Rate Period.
REVOCATION OR CHANGE OF CONVERSION NOTICE OR FLOATING INTEREST RATE
NOTICE. The company may, upon written notice received by the rustee and the
applicable Remarketing Agent, revoke any Conversion Notice or Floating Interest
Rate Notice (as defined herein) or change the Interest Rate Mode to which such
Conversion Notice relates or change any Floating Interest Rate Notice up to
9:30 a.m., New York City time, on the Conversion Date, subject to the limitation
set forth in the next paragraph.
LIMITATION ON CONVERSION, CHANGE OF CONVERSION NOTICE OR FLOATING INTEREST
RATE NOTICE AND REVOCATION. Notwithstanding the foregoing, the company may not,
without the consent of the applicable Remarketing Agent, convert any Note or
revoke or change any Conversion Notice or Floating Interest Rate Notice at or
after the time at which such Remarketing Agent has determined the interest rate,
or Spread (if any) and Spread Multiplier (if any), for any Note being remarketed
(i.e., the time at which such Note has been successfully remarketed, subject to
settlement on the related Interest Rate Adjustment Date). The Remarketing Agent
may advise the company of indicative rates from time to time, or at any time
upon the request of the company, prior to making such determination of the
interest rate, Spread or Spread Multiplier, as the case may be.
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TENDER OF NOTES
Each Note will be automatically tendered for purchase, or deemed tendered
for purchase, on each Interest Rate Adjustment Date relating thereto. Notes will
be purchased on the Interest Rate Adjustment Date relating thereto as described
below.
REMARKETING
When any Note is tendered for remarketing, the Remarketing Agent therefor
will use its reasonable efforts to remarket such Note on behalf of the
Beneficial Owner thereof at a price equal to 100% of the principal amount
thereof. The Remarketing Agent may purchase tendered Notes for its own account
in a remarketing, but will not be obligated to do so. The company may offer to
purchase Notes in a remarketing, provided that the interest rate established
with respect to Notes in such remarketing is not different from the interest
rate that would have been established if the company had not purchased such
Notes. Any Notes for which the company shall have given a notice of redemption
to the trustee and the Remarketing Agent will not be considered in a
remarketing.
INTEREST RATE ADJUSTMENT DATE; DETERMINATION OF INTEREST RATE. By 11:00
a.m., New York City time, on the Interest Rate Adjustment Date for any Note, the
applicable Remarketing Agent will determine the interest rate for such Note
being remarketed to the nearest one hundred thousandth (0.00001) of one percent
per annum for the next Interest Rate Period in the case of a fixed interest
rate, and the Spread (if any) and Spread Multiplier (if any) in the case of a
floating interest rate; provided, that between 11:00 a.m., New York City time,
and 11:50 a.m., New York City time, the Remarketing Agent and the Standby
Remarketing Agent, if any, will use their reasonable efforts to determine the
interest rate for any Notes not successfully remarketed as of the applicable
deadline specified in this paragraph. In determining the applicable interest
rate for such Note and other terms, such Remarketing Agent will, after taking
into account market conditions as reflected in the prevailing yields on fixed
and variable rate taxable debt securities, (i) consider the principal amount of
all Notes tendered or to be tendered on such date and the principal amount of
such Notes prospective purchasers are or may be willing to purchase and (ii)
contact, by telephone or otherwise, prospective purchasers and ascertain the
interest rates therefor at which they would be willing to hold or purchase such
Notes.
NOTIFICATION OF RESULTS; SETTLEMENT. By 12:30 p.m., New York City time, on
the Interest Rate Adjustment Date of any Notes, the applicable Remarketing Agent
will notify the company and the trustee in writing (which may include facsimile
or other electronic transmission), of (i) the interest rate or, in the case of a
floating interest rate, the initial interest rate, the Spread and Spread
Multiplier and the initial Interest Reset Date (as defined below), applicable to
such Notes for the next Interest Rate Period, (ii) the Interest Rate Adjustment
Date, (iii) the Interest Payment Dates for any Notes in the Commercial Paper
Term Mode (if other than the Interest Rate Adjustment Date), the Long Term Rate
Mode or the REPS Mode, (iv) the optional redemption terms, if any, and early
remarketing terms, if any, in the case of a remarketing into a Long Term Rate
Period, (v) the aggregate principal amount of tendered Notes and (vi) the
aggregate principal amount of such tendered Notes that such Remarketing Agent
was able to remarket, at a price equal to 100% of the principal amount plus
accrued interest, if any. Immediately after receiving such notice and, in any
case, not later than 1:30 p.m., New York City time, the trustee will transmit
such information and any other settlement information required by DTC to DTC in
accordance with DTC's procedures as in effect from time to time.
By telephone at approximately 1:00 p.m., New York City time, on such
Interest Rate Adjustment Date, the applicable Remarketing Agent will advise each
purchaser of Notes (or the DTC Participant of each such purchaser who it is
expected in turn will advise such purchaser) of the principal amount of such
Notes that such purchaser is to purchase.
Each purchaser of Notes in a remarketing will be required to give
instructions to its DTC Participant to pay the purchase price therefor in same
day funds to the applicable Remarketing Agent against delivery
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of the principal amount of such Notes by book-entry through DTC by 3:00 p.m.,
New York City time, on the Interest Rate Adjustment Date.
All tendered Notes will be automatically delivered to the account of the
trustee (or such other account meeting the requirements of DTC's procedures as
in effect from time to time), by book-entry through DTC against payment of the
purchase price or redemption price therefor, on the Interest Rate Adjustment
Date relating thereto.
The applicable Remarketing Agent will make, or cause the trustee to make,
payment to the DTC participant of each tendering Beneficial Owner of Notes
subject to a remarketing, by book-entry through DTC by the close of business on
the Interest Rate Adjustment Date against delivery through DTC of such
Beneficial Owner's tendered Notes, of the purchase price for tendered Notes that
have been sold in the remarketing. If any such Notes were purchased under a
Special Mandatory Purchase (as defined below), subject to receipt of funds from
the company or, if applicable, an institution providing credit support, as the
case may be, the trustee will make such payment of the purchase price of such
Notes plus accrued interest, if any, to such date.
The transactions described above for a remarketing of any Notes will be
executed on the Interest Rate Adjustment Date for such Notes through DTC in
accordance with the procedures of DTC, and the accounts of the respective DTC
Participants will be debited and credited and such Notes delivered by book-entry
as necessary to effect the purchases and sales thereof, in each case as
determined in the related remarketing.
Except as otherwise set forth below under "--Purchase and Redemption of
Notes," any Notes tendered in a remarketing will be purchased solely out of the
proceeds received from purchasers of such Notes in such remarketing, and none of
the trustee, the applicable Remarketing Agent, any Standby Remarketing Agent or
the company will be obligated to provide funds to make payment upon any
Beneficial Owner's tender in a remarketing.
Although tendered Notes will be subject to purchase by a Remarketing Agent
in a remarketing, such Remarketing Agent and any Standby Remarketing Agent will
not be obligated to purchase any such Notes.
The settlement and remarketing procedures described above, including
provisions for payment by purchasers of tendered Notes or for payment to selling
Beneficial Owners of tendered Notes, may be modified to the extent required by
DTC. In addition, each Remarketing Agent may, in accordance with the terms of
the Indenture, modify the settlement and remarketing procedures set forth above
in order to facilitate the settlement and remarketing process.
As long as DTC's nominee holds the certificates representing the Notes in
the book-entry system of DTC, no certificates for such Notes will be delivered
by any selling Beneficial Owner to reflect any transfer of Notes effected in any
remarketing.
FAILED REMARKETING. Notes not successfully remarketed will be subject to
Special Mandatory Purchase by the company (a "Special Mandatory Purchase"). The
procedures for a Special Mandatory Purchase are described below under
"--Purchase and Redemption of Notes--Special Mandatory Purchase."
PURCHASE AND REDEMPTION OF NOTES
SPECIAL MANDATORY PURCHASE. Subject to certain exceptions, if on any
Interest Rate Adjustment Date for any Notes, the applicable Remarketing Agent
and the applicable Standby Remarketing Agent(s) have not remarketed all such
Notes, the Notes that have not been remarketed are subject to Special Mandatory
Purchase by the company. The company is obligated to pay all accrued and unpaid
interest, if any, on unremarketed Notes to such Interest Rate Adjustment Date.
Payment of the principal amount of unremarketed Notes by the company, and
payment of accrued and unpaid interest, if any, by the company, will be made by
deposit of same-day funds with the trustee (or such other account meeting the
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requirements of DTC's procedures as in effect from time to time) irrevocably in
trust for the benefit of the Beneficial Owners of Notes subject to Special
Mandatory Purchase by 3:00 p.m., New York City time, on such Interest Rate
Adjustment Date.
Failure by the company to purchase Notes pursuant to a Special Mandatory
Purchase will constitute an Event of Default under the Indenture in which event
the date of such failure shall constitute a date of Maturity for such Notes and
the principal thereof may be declared due and payable in the manner and with the
effect provided in the Indenture. Following such failure to pay under a Special
Mandatory Purchase, such Notes will bear interest at the Special Interest Rate
as provided above under "--Conversion to New Interest Rate Mode--Determination
of Interest Rates."
OPTIONAL REDEMPTION ON ANY INTEREST RATE ADJUSTMENT DATE. Each Note will be
subject to redemption at the option of the company in whole or in part on any
Interest Rate Adjustment Date relating thereto without notice to the holders
thereof at a redemption price equal to 100% of the principal amount thereof.
REDEMPTION WHILE NOTES ARE IN THE LONG TERM RATE MODE. Any Notes in the
Long Term Rate Mode are subject to redemption at the option of the company at
the times and upon the terms specified at the time of conversion to or within
such Long Term Rate Mode.
ALLOCATION. Except in the case of a Special Mandatory Purchase, if the
Notes are to be redeemed in part, DTC, after receiving notice of redemption
specifying the aggregate principal amount of Notes to be so redeemed, will
determine by lot (or otherwise in accordance with the procedures of DTC) the
principal amount of such Notes to be redeemed from the account of each DTC
Participant. After making its determination as described above, DTC will give
notice of such determination to each DTC Participant from whose account such
Notes are to be redeemed. Each such DTC Participant, upon receipt of such notice
will in turn determine the principal amount of Notes to be redeemed from the
accounts of the Beneficial Owners of such Notes for which it serves as DTC
Participant, and give notice of such determination to the Remarketing Agent.
REPS MODE
Except as otherwise specified in an applicable prospectus supplement or
other offering memorandum, if so designated by the company prior to commencement
of an Interest Rate Period in accordance with the procedures described above
under "--Conversion to New Interest Rate Mode," during a period in which Notes
are in the REPS Mode the Notes shall bear interest and be subject to remarketing
by a Callholder designated by the company as described below.
GENERAL. Each Note in the REPS Mode will bear interest at the annual
interest rate established by the Callholder from, and including, the Interest
Rate Adjustment Date commencing the Interest Rate Period for the REPS Mode to,
but excluding, the date (the "REPS Remarketing Date") designated at such time by
the Callholder after consultation with the company. Such interest rate will be
the minimum rate of interest and, in the case of a floating interest rate,
Spread (if any) and Spread Multiplier (if any) necessary in the judgment of such
Callholder to produce a par bid in the secondary market for such Note on the
date the interest rate is established. The designated REPS Remarketing Date
shall be an Interest Payment Date within such Interest Rate Period. If the
Callholder elects to remarket the Notes (except in the limited circumstances
described in this prospectus supplement) (i) the Notes will be subject to
mandatory tender to the Callholder at 100% of the principal amount thereof for
remarketing on the REPS Remarketing Date, on the terms and subject to the
conditions described herein, and (ii) from, and including, the REPS Remarketing
Date to, but excluding, the next succeeding Interest Rate Adjustment Date, the
Notes will bear interest at the rate determined by the Callholder in accordance
with the procedures set forth below (the "REPS Coupon Reset Rate"). See
"--Tender; Remarketing" below.
Under the circumstances described below, the Notes are subject to
remarketing in a new Interest Rate Mode or repurchase by the company on the REPS
Remarketing Date. See "--Conversion or Redemption
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Following Election by the Callholder to Remarket" below. If the Callholder does
not elect to purchase the Notes for remarketing on the REPS Remarketing Date or
if the Callholder gives notice of its election to remarket the Notes but for any
reason does not purchase all tendered Notes on the REPS Remarketing Date, then
as of such date the Notes will cease to be in the REPS Mode, the REPS
Remarketing Date will constitute an Interest Rate Adjustment Date, and the Notes
will be subject to remarketing on such date by a Remarketing Agent appointed by
the company in the Commercial Paper Term Mode or the Long Term Rate Mode or a
new REPS Mode established by the company in accordance with the procedures
described above under "--Conversion to New Interest Rate Mode;" provided that,
in such case, the notice period required for conversion shall be the lesser of
ten (10) days and the period commencing the date that the Callholder notifies
the company that it will not purchase the Notes for remarketing on the REPS
Remarketing Date or fails to so purchase, as the case may be.
TENDER; REMARKETING. The following description sets forth the terms and
conditions of the remarketing of the Notes, in the event that the Callholder
elects to purchase the Notes and remarkets the Notes on the REPS Remarketing
Date.
Provided that the Callholder gives notice to the company and the trustee on
a Business Day not later than five (5) days prior to the REPS Remarketing Date
of its intention to purchase the Notes for remarketing (the "Notification
Date"), each Note will be automatically tendered, or deemed tendered, to the
Callholder for remarketing at the REPS Coupon Reset Rate on the REPS Remarketing
Date, except in the circumstances described above. The purchase price for the
tendered Notes to be paid by the Callholder will equal 100% of the principal
amount thereof. See "--Notification of Results; Settlement" below. When the
Notes are tendered for remarketing, the Callholder may remarket the Notes for
its own account at varying prices to be determined by the Callholder at the time
of each sale. From, and including, the REPS Remarketing Date to, but excluding,
the next succeeding Interest Rate Adjustment Date, the Notes will bear interest
at the REPS Coupon Reset Rate. If the Callholder elects to remarket the Notes,
the obligation of the Callholder to purchase the Notes on the REPS Remarketing
Date is subject to certain conditions. See "--The Callholder."
The REPS Coupon Reset Rate shall be determined by the Callholder by 3:30
p.m., New York City time, on the third Business Day immediately preceding the
REPS Remarketing Date (the "Determination Date") to the nearest one
hundred-thousandth (0.00001) of one percent per annum and will be equal to the
Base Rate established by the Callholder, after consultation with the company, at
or prior to the commencement of the REPS Mode (the "Base Rate"), plus the
Applicable Spread (as defined below), which will be based on the Dollar Price
(as defined below) of the Notes.
For the purposes of such calculations, the following terms have the
following meanings:
"Applicable Spread" means the lowest bid indication, expressed as a spread
(in the form of a percentage or in basis points) above the Base Rate, obtained
by the Callholder on the Determination Date from the bids quoted by up to five
Reference Corporate Dealers (as defined below) for the full aggregate
outstanding principal amount of the Notes at the Dollar Price, but assuming
(a) an issue date equal to the REPS Remarketing Date, with settlement on
such date without accrued interest,
(b) a maturity date equal to the next succeeding Interest Rate Adjustment
Date of the Notes, and
(c) a stated annual interest rate, payable semiannually on each Interest
Payment Date, equal to the Base Rate plus the spread bid by the
applicable Reference Corporate Dealer.
If fewer than five Reference Corporate Dealers bid as described above, then the
Applicable Spread shall be the lowest of such bid indications obtained as
described above. The REPS Coupon Reset Rate announced by the Callholder, absent
manifest error, shall be binding and conclusive upon the Beneficial Owners and
holders of the Notes, the company and the trustee.
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"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Callholder as having an actual or interpolated
maturity or maturities comparable or applicable to the remaining term to the
next succeeding Interest Rate Adjustment Date of the Notes being purchased.
"Comparable Treasury Price" means, with respect to the REPS Remarketing
Date, (a) the offer prices for the Comparable Treasury Issues (expressed in each
case as a percentage of its principal amount) at 11:00 a.m. on the Determination
Date, as set forth on Telerate Page 500 (or such other page as may replace
Telerate Page 500) or (b) if such page (or any successor page) is not displayed
or does not contain such offer prices on such Determination Date, (i) the
average of the Reference Treasury Dealer Quotations (as defined below) for such
REPS Remarketing Date, after excluding the highest and lowest of such Reference
Treasury Dealer Quotations, or (ii) if the Callholder obtains fewer than four
such Reference Treasury Dealer Quotations, the average of all such Reference
Treasury Dealer Quotations. "Telerate Page 500" means the display designated as
"Telerate Page 500" on Dow Jones Markets (or such other page as may replace
Telerate Page 500 on such service) or such other service displaying the offer
prices specified in (a) above as may replace Dow Jones Markets.
"Dollar Price" means, with respect to the Notes, the present value
determined by the Callholder, as of the REPS Remarketing Date, of the Remaining
Scheduled Payments (as defined below) discounted to the REPS Remarketing Date,
on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months), at the Treasury Rate (as defined below).
"Reference Corporate Dealers" means such Reference Corporate Dealers as
shall be appointed by the Callholder after consultation with the company.
"Reference Treasury Dealer" means such Reference Treasury Dealer as shall be
appointed by the Callholder after consultation with the company.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and the REPS Remarketing Date, the offer prices for the
Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted in writing to the Callholder by such Reference Treasury
Dealer by 3:30 p.m., New York City time, on the Determination Date.
"Remaining Scheduled Payments" means, with respect to the Notes, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the REPS Remarketing
Date to and including the next succeeding Interest Rate Adjustment Date.
"Treasury Rate" means, with respect to the REPS Remarketing Date, the rate
per annum equal to the semiannual equivalent yield to maturity or interpolated
(on a day count basis) yield to maturity of the Comparable Treasury Issues (as
defined above), assuming a price for the Comparable Treasury Issues (expressed
as a percentage of its principal amount), equal to the Comparable Treasury Price
(as defined above) for such REPS Remarketing Date.
NOTIFICATION OF RESULTS; SETTLEMENT. Provided the Callholder has previously
notified the company and the trustee on the Notification Date of its intention
to purchase all tendered Notes on the REPS Remarketing Date, the Callholder will
notify the company, the trustee and DTC by telephone, confirmed in writing, by
4:00 p.m., New York City time, on the Determination Date, of the REPS Coupon
Reset Rate.
All of the tendered Notes will be automatically delivered to the account of
the trustee, by book-entry through DTC pending payment of the purchase price
therefor, on the REPS Remarketing Date.
In the event that the Callholder purchases the tendered Notes on the REPS
Remarketing Date, the Callholder will make or cause the trustee to make payment
to the DTC Participant of each tendering Beneficial Owner of Notes, by
book-entry through DTC by the close of business on the REPS Remarketing Date
against delivery through DTC of such Beneficial Owner's tendered Notes. If the
Callholder does not purchase all of the Notes on the REPS Remarketing Date, the
company may attempt to convert the Notes to a new Interest Rate Mode; the
interest rate will be determined as provided above in "--Conversion to
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New Interest Rate Mode--Determination of Interest Rates;" and settlement will be
effected as described above under "--Remarketing--Notification of Results;
Settlement" or "--Failed Remarketing," as the case may be. In any case, the
company will make or cause the trustee to make payment of interest to each
Beneficial Owner of Notes due on the REPS Remarketing Date by book-entry through
DTC by the close of business on the REPS Remarketing Date.
The transactions described above will be executed on the REPS Remarketing
Date through DTC in accordance with the procedures of DTC, and the accounts of
the respective DTC participants will be debited and credited and the Notes
delivered by book-entry as necessary to effect the purchases and sales thereof.
Transactions involving the sale and purchase of Notes remarketed by the
Callholder on and after the REPS Remarketing Date will settle in immediately
available funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures described above, including provisions
for payment by purchasers of Notes in the remarketing or for payment to selling
Beneficial Owners of tendered Notes, may be modified to the extent required by
DTC or to the extent required to facilitate the tender and remarketing of Notes
in certificated form, if the book-entry system is no longer available for the
Notes at the time of the remarketing. In addition, the Callholder may, in
accordance with the terms of the Indenture, modify the tender and settlement
procedures set forth above in order to facilitate the tender and settlement
process.
As long as DTC's nominee holds the certificates representing any Notes in
the book-entry system of DTC, no certificates for such Notes will be delivered
by any selling Beneficial Owner to reflect any transfer of such Notes effected
in the remarketing. In addition, under the terms of the Notes and the REPS
Remarketing Agreement (described below), the company will agree that,
notwithstanding any provision to the contrary set forth in the Indenture,
(a) it will use reasonable commercial efforts to maintain the Notes in
book-entry form with DTC or any successor thereto and to appoint a
successor depositary to the extent necessary to maintain the Notes in
book-entry form, and
(b) it will waive any discretionary right it otherwise has under the
Indenture to cause the Notes to be issued in certificated form.
THE CALLHOLDER. If the Notes are to be remarketed in the REPS Mode, the
company and the Callholder will enter into a REPS Remarketing Agreement (a "REPS
Remarketing Agreement"), the general terms and provisions of which are
summarized below.
The Callholder will not receive any fees or reimbursement of expenses from
the company in connection with the remarketing in the REPS Mode.
The company will agree to indemnify the Callholder against certain
liabilities, including liabilities under the Securities Act, arising out of or
in connection with its duties under the REPS Remarketing Agreement.
In the event that the Callholder elects to remarket the Notes as described
herein, the obligation of the Callholder to purchase Notes from tendering
Beneficial Owners of Notes will be subject to several conditions precedent set
forth in the REPS Remarketing Agreement, including the conditions that, since
the Notification Date, no material adverse change in the consolidated financial
condition, stockholders' equity, results of operations, business or prospects of
the company and its subsidiaries, considered as one enterprise, shall have
occurred and that no Event of Default (as defined in the Indenture), or any
event which, with the giving of notice or passage of time, or both, would
constitute an Event of Default, with respect to the Notes shall have occurred
and be continuing. In addition, the REPS Remarketing Agreement will provide for
the termination thereof, or redetermination of the REPS Coupon Reset Rate,
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by the Callholder on or before the REPS Remarketing Date, upon the occurrence of
certain events as set forth in the REPS Remarketing Agreement.
No holder or Beneficial Owner of any Notes will have any rights or claims
under the REPS Remarketing Agreement or against the Callholder as a result of
the Callholder not purchasing such Notes.
A REPS Remarketing Agreement will also provide that the Callholder may
resign at any time as Callholder, such resignation to be effective 10 days after
the delivery to the company and the trustee of notice of such resignation. In
such case, it shall be the sole obligation of the company to appoint a successor
Callholder.
The Callholder, in its individual or any other capacity, may buy, sell, hold
and deal in any of the Notes. The Callholder may exercise any vote or join in
any action that any Beneficial Owner of Notes may be entitled to exercise or
take with like effect as if it did not act in any capacity under the applicable
REPS Remarketing Agreement. The Callholder, in its individual capacity, either
as principal or agent, may also engage in or have an interest in any financial
or other transaction with the company as freely as if did not act in any
capacity under the REPS Remarketing Agreement.
The summaries in this prospectus supplement of certain provisions of a REPS
Remarketing Agreement do not purport to be complete, and are subject to, and are
qualified in their entirety by reference to, the provisions of any REPS
Remarketing Agreement.
CONVERSION OR REDEMPTION FOLLOWING ELECTION BY THE CALLHOLDER TO
REMARKET. If the Callholder elects to remarket the Notes on the REPS
Remarketing Date, the Notes will be subject to mandatory tender to the
Callholder for remarketing on such date, in each case subject to the conditions
described above under "--Tender; Remarketing" and to the company's right to
either convert the Notes to a new Interest Rate Mode on the REPS Remarketing
Date or to redeem the Notes from the Callholder, in each case as described in
the next sentence. The company will notify the Callholder and the trustee, not
later than the Business Day immediately preceding the Determination Date, if the
company irrevocably elects to exercise its right to either convert the Notes to
a new Interest Rate Mode, or to redeem the Notes, in whole but not in part, from
the Callholder at the Optional Redemption Price, in each case on the REPS
Remarketing Date.
In the event that the company irrevocably elects to convert the Notes to a
new Interest Rate Mode, then as of the REPS Remarketing Date the Notes will
cease to be in the REPS Mode, the REPS Remarketing Date will constitute an
Interest Rate Adjustment Date, and the Notes will be subject to remarketing on
such date by a Remarketing Agent appointed by the company in the Commercial
Paper Term Mode or the Long Term Rate Mode or a new REPS Mode established by the
company in accordance with the procedures described above under "--Conversion
Between Interest Rate Modes," provided that, in such case, the notice period
required for conversion shall be the period commencing on the Determination
Date. In such case, the company shall pay to the Callholder the excess of the
Dollar Price of the Notes over 100% of the principal amount of the Notes in
same-day funds by wire transfer to an account designated by the Callholder on
the REPS Remarketing Date.
In the event that the company irrevocably elects to redeem the Notes, the
"Optional Redemption Price" shall be the greater of either (i) 100% of the
principal amount of the Notes or (ii) the Dollar Price, plus in either case
accrued and unpaid interest from the REPS Remarketing Date on the principal
amount being redeemed to the date of redemption. If the company elects to redeem
the Notes, it shall pay the redemption price in same-day funds by wire transfer
to an account designated by the Callholder on the REPS Remarketing Date.
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FLOATING INTEREST RATES
While any Note bears interest in the Long Term Rate Mode or the REPS Mode
(with respect to the period from, and including, the Interest Rate Adjustment
Date commencing such period to, but excluding, the REPS Remarketing Date), the
company may elect a floating interest rate by providing notice, which will be
submitted or promptly confirmed in writing (which includes facsimile or
appropriate electronic media), received by the trustee and the Remarketing Agent
for such Note (the "Floating Interest Rate Notice") not less than ten (10) days
prior to the Interest Rate Adjustment Date for such Long Term Rate or REPS Rate
Period. The Floating Interest Rate Notice must identify by CUSIP number or
otherwise the portion of the Note to which it relates and state the Interest
Rate Period (or portion thereof, in the case of the REPS Mode) to which it
relates. Each Floating Interest Rate Notice must also state the Interest Rate
Basis or Bases, the initial Interest Reset Date, the Interest Reset Period and
Dates, the Interest Rate Period and Dates, the Index Maturity (as defined below)
and the Floating Rate Maximum Interest Rate (as defined below) and/or Floating
Rate Minimum Interest Rate (as defined below), if any. If one or more of the
applicable Interest Rate Bases is LIBOR or the CMT Rate, the Floating Interest
Rate Notice will also specify the Index Currency and Designated LIBOR Page or
the Designated CMT Maturity Index and Designated CMT Telerate Page, as such
terms are defined below.
If any Note bears interest at a floating rate in a Long Term Rate Period or
REPS Rate Period, such Note will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or minus the
Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any,
specified by the Remarketing Agent, in the case of a Long Term Rate Period, or
the Callholder, in the case of a REPS Rate Period. Commencing on the Interest
Rate Adjustment Date for such Interest Rate Period, the rate at which interest
on such Note will be payable will be reset as of each Interest Reset Date during
such Interest Rate Period specified in the applicable Floating Interest Rate
Notice.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to an Interest Rate Period
for such Note. The "Spread Multiplier" is the percentage of the related Interest
Rate Basis or Bases applicable to such Interest Rate Period by which such
Interest Rate Basis or Bases will be multiplied to determine the applicable
interest rate from time to time for such Long Term Rate Period or REPS Rate
Period, as the case may be. The "Index Maturity" is the period to maturity of
the instrument or obligation with respect to which the related Interest Rate
Basis or Bases will be calculated.
The applicable floating interest rate on any Note during any Interest Rate
Period will be determined by reference to the applicable Interest Rate Basis or
Interest Rate Bases, which may include
- the CD Rate,
- the CMT Rate,
- the Federal Funds Rate,
- LIBOR,
- the Prime Rate,
- the Treasury Rate or
- such other Interest Rate Basis or interest rate formula as may be
specified in the applicable Floating Interest Rate Notice (each, an
"Interest Rate Basis").
Unless otherwise specified in the applicable Floating Interest Rate Notice,
the interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Floating Interest Rate Notice, the interest rate in effect on
each day will be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date (as defined below) immediately
preceding such Interest Reset Date or (ii), if such day
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is not an Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the most recent Interest Reset Date. If
any Interest Reset Date would otherwise be a day that is not a Business Day,
such Interest Reset Date will be postponed to the next succeeding Business Day,
unless LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, in which case such Interest Reset Date will
be the immediately preceding Business Day. In addition, if the Treasury Rate is
an applicable Interest Rate Basis and the Interest Determination Date would
otherwise fall on an Interest Reset Date, then such Interest Reset Date will be
postponed to the next succeeding Business Day.
The applicable Floating Interest Rate Notice will specify whether the rate
of interest will be reset daily, weekly, monthly, quarterly, semiannually or
annually or on such other specified basis (each, an "Interest Reset Period") and
the dates on which such rate of interest will be reset (each, an "Interest Reset
Date"). Unless otherwise specified in the applicable Floating Interest Rate
Notice, the Interest Reset Dates will be, in the case of a floating interest
rate which resets:
- daily, each Business Day;
- weekly, the Wednesday of each week (unless the Treasury Rate is an
applicable Interest Rate Basis, in which case the Tuesday of each week
except as described below);
- monthly, the third Wednesday of each month;
- quarterly, the third Wednesday of March, June, September and December of
each year;
- semiannually, the third Wednesday of the two months specified in the
applicable Floating Interest Rate Notice; and
- annually, the third Wednesday of the month specified in the applicable
Floating Interest Rate Notice.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date. The "Interest Determination Date" with respect to
the CD Rate, the CMT Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day immediately preceding the applicable Interest Reset Date;
and the "Interest Determination Date" with respect to LIBOR will be the second
London Business Day immediately preceding the applicable Interest Reset Date,
unless the Index Currency is British pounds sterling, in which case the
"Interest Determination Date" will be the applicable Interest Reset Date. The
"Interest Determination Date" with respect to the Treasury Rate will be the day
in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at an auction held on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the "Interest Determination Date"
will be such preceding Friday. If the interest rate of any Note is a floating
interest rate determined with reference to two or more Interest Rate Bases
specified in the applicable Floating Interest Rate Notice, the "Interest
Determination Date" pertaining to the Note will be the most recent Business Day
which is at least two Business Days prior to the applicable Interest Reset Date
on which each Interest Rate Basis is determinable. Each Interest Rate Basis will
be determined as of such date, and the applicable interest rate will take effect
on the related Interest Reset Date.
Either or both of the following may also apply to the floating interest rate
on any Note for an Interest Rate Period: (i) a floating rate maximum interest
rate, or ceiling, that may accrue during any Interest Reset Period (the
"Floating Rate Maximum Interest Rate") and (ii) a floating rate minimum interest
rate, or floor, that may accrue during any Interest Reset Period (the "Floating
Rate Minimum Interest Rate"). In addition to any Floating Rate Maximum Interest
Rate that may apply, the interest rate on any Note will in
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no event be higher than the maximum rate permitted by New York law, as the same
may be modified by United States laws of general application.
Except as provided below or in the applicable Floating Interest Rate Notice,
interest will be payable, in the case of floating interest rates which reset:
- daily, weekly or monthly, on the third Wednesday of each month;
- quarterly, on the third Wednesday of March, June, September and December
of each year;
- semiannually, on the third Wednesday of the two months of each year
specified in the applicable Floating Interest Rate Notice; and
- annually, on the third Wednesday of the month of each year specified in
the applicable Floating Interest Rate Notice and, in each case, on the
Business Day immediately following the applicable Long Term Rate Period or
REPS Rate Period, as the case may be.
If any Interest Payment Date for the payment of interest at a floating rate
(other than following the end of the applicable Long Term Rate Period or REPS
Rate Period, as the case may be) would otherwise be a day that is not a Business
Day, such Interest Payment Date will be postponed to the next succeeding
Business Day, except that if LIBOR is an applicable Interest Rate Basis and such
Business Day falls in the next succeeding calendar month, such Interest Payment
Date will be the immediately preceding Business Day.
All percentages resulting from any calculation of floating interest rates
will be rounded to the nearest one hundred thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards (e.g., 9.876545%
(or .09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation will be rounded, in the case of United
States dollars, to the nearest cent or, in the case of a foreign currency or
composite currency, to the nearest unit (with one-half cent or unit being
rounded upwards).
Accrued floating rate interest will be calculated by multiplying the
principal amount of the applicable Note by an accrued interest factor. Such
accrued interest factor will be computed by adding the interest factor
calculated for each day in the applicable Interest Reset Period. Unless
otherwise specified in the applicable Floating Interest Rate Notice, the
interest factor for each such day will be computed by dividing the interest rate
applicable to such day by 360, if an applicable Interest Rate Basis is the CD
Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number
of days in the year if an applicable Interest Rate Basis is the CMT Rate or the
Treasury Rate. Unless otherwise specified in the applicable Floating Interest
Rate Notice, if the floating interest rate is calculated with reference to two
or more Interest Rate Bases, the interest factor will be calculated in each
period in the same manner as if only one of the applicable Interest Rate Bases
applied as specified in the applicable Floating Interest Rate Notice.
Prior to having Notes remarketed with a floating interest rate, the company
will select a calculation agent (the "Calculation Agent"). For any Note bearing
interest at a floating rate, the applicable Remarketing Dealer will determine
the interest rate in effect from the Interest Rate Adjustment Date for such Note
to the initial Interest Reset Date. The Calculation Agent will determine the
interest rate in effect for each Interest Reset Period thereafter. Upon request
of the Beneficial Owner of a Note, after any Interest Rate Adjustment Date, the
Calculation Agent or the Remarketing Dealer will disclose the interest rate and,
in the case of a floating interest rate, Interest Rate Basis or Bases, Spread
(if any) and Spread Multiplier (if any), and in each case the other terms
applicable to such Note then in effect and, if determined, the interest rate
that will become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to such Note. Except as described
herein with respect to a Note earning interest at floating rates, no notice of
the applicable interest rate, Spread (if any) or Spread Multiplier (if any) will
be sent to the Beneficial Owner of any Note.
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Unless otherwise specified in the applicable Floating Interest Rate Notice,
the "Calculation Date," if applicable, pertaining to any Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or Maturity, as the case may be.
CD RATE. If an Interest Rate Basis for any Note is specified in the
applicable Floating Interest Rate Notice as the "CD Rate," the CD Rate means,
with respect to any Interest Determination Date relating to a Note (a "CD Rate
Interest Determination Date"), the rate on such date for negotiable certificates
of deposit having the Index Maturity specified in the applicable Floating
Interest Rate Notice as published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15(519), Selected Interest Rates" or
any successor publication of the Board of Governors of the Federal Reserve
System ("H.15(519)") under the heading "CDs (Secondary Market)," or, if not
published in H.15(519) by 9:00 a.m., New York City time, on the related
Calculation Date, the CD Rate will be the rate on such CD Rate Interest
Determination Date set forth in the daily update of H.15(519), available through
the world wide website of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/ releases/h15/update, or any successor site or
publication ("H.15 Daily Update"), for the day in respect of certificates of
deposit having the Index Maturity specified in the applicable Floating Interest
Rate Notice under the caption "CDs (Secondary Market)." If such rate is not yet
published in either H.15(519) or the H.15 Daily Update by 3:00 p.m., New York
City time, on the related Calculation Date, the Calculation Agent will determine
the CD Rate to 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 New York City selected by the Calculation Agent (after consultation
with the company) for negotiable certificates of deposit of major United States
money center banks of the highest credit standing in the market for negotiable
certificates of deposit with a remaining maturity closest to the Index Maturity
specified in the applicable Floating Interest Rate Notice in an amount that is
representative for a single transaction in that market at that time; provided,
however, that if the dealers selected by the Calculation Agent are not quoting
as mentioned in this sentence, the CD Rate will remain the CD Rate then in
effect on such CD Rate Interest Determination Date.
CMT RATE. If an Interest Rate Basis for any Note is specified in the
applicable Floating Interest Rate Notice as the "CMT Rate," the CMT Rate means,
with respect to any Interest Determination Date relating to a Note for which the
interest rate is determined with reference to the CMT Rate (a "CMT Rate Interest
Determination Date"), the rate displayed on the Designated CMT Telerate Page (as
defined below) under the caption ". . . Treasury Constant Maturities . . .
Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 P.M.," under
the column for the Designated CMT Maturity Index (as defined below) for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or monthly average, as specified in the Floating Interest Rate Notice,
for the week or the month, as applicable, ended immediately preceding the week
or the month, as applicable, in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page or is not displayed by 3:00 p.m., New York City time, on the related
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 as published in H.15(519). If such rate is no longer published or
is not published by 3:00 p.m., New York City time, on the related Calculation
Date, then the CMT Rate on 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 Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that the Calculation
Agent determines to be comparable to the rate formerly displayed on the
Designated CMT Telerate Page and published in H.15(519). If such information is
not provided by 3:00 p.m., New York City time, on the related Calculation Date,
then the CMT Rate on the CMT Rate Interest
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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 such CMT
Rate Interest Determination Date reported, according to their written records,
by three leading primary United States government securities dealers (each, a
"Reference Dealer") in the City of New York (which may include the Remarketing
Agent or its affiliates) selected by the Calculation Agent after consultation
with the company (from five such Reference Dealers selected by the Calculation
Agent, after consultation with the company, and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for the most
recently issued direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the Designated CMT
Maturity Index and a remaining term to maturity of not less than such Designated
CMT Maturity Index minus one year. If the Calculation Agent is unable to obtain
three such Treasury Note quotations, the CMT Rate on 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 such CMT Rate
Interest Determination Date of three Reference Dealers in the City of New York
(from five such Reference Dealers selected by the Calculation Agent, after
consultation with the company, and eliminating the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least U.S. $100 million. If three or four
(and not five) of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer prices obtained
and neither the highest nor the lowest of such quotes will be eliminated;
PROVIDED, HOWEVER, that if fewer than three Reference Dealers so selected by the
Calculation Agent, after consultation with the company, are quoting as mentioned
in this prospectus supplement, the CMT Rate determined as of such CMT Rate
Interest Determination Date will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Calculation Agent, after
consultation with the company, will obtain from five Reference Dealers
quotations for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Markets
(or any successor service) on the page specified in the applicable Floating
Interest Rate Notice (or any other page as may replace such page on such service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)) for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified in the applicable Floating
Interest Rate Notice, the page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
United States Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Floating Interest Rate Notice with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Floating Interest Rate Notice, the Designated CMT Maturity Index
shall be 2 years.
FEDERAL FUNDS RATE. If an Interest Rate Basis for any Note is specified in
the applicable Floating Interest Rate Notice as the "Federal Funds Rate," the
Federal Funds Rate means, with respect to any Interest Determination Date
relating to a Note (a "Federal Funds Rate Interest Determination Date"), the
rate on that day for Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)" as displayed on Bridge Telerate, Inc. (or any
successor service) on page 120 or any other page as may replace the applicable
page on that service ("Telerate Page 120"). If such rate is not displayed on
Telerate Page 120 or is not published by 9:00 a.m., New York City time, on the
related Calculation Date, the Federal Funds Rate will be the rate on such
Federal Funds Rate Interest Determination Date as published in H.15 Daily Update
under the heading "Federal Funds/(Effective)." If such rate is not yet
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published in either H.15(519) or H.15 Daily Update by 3:00 p.m., New York City
time, on the related Calculation Date, the Calculation Agent will determine the
Federal Funds Rate to be the arithmetic mean of the rates for the last
transaction in overnight Federal Funds arranged by each of three leading brokers
of Federal Funds transactions in New York City selected by the Calculation Agent
(after consultation with the company) prior to 9:00 a.m., New York City time, on
such Federal Funds Rate Interest Determination Date. If the brokers selected by
the Calculation Agent are not quoting as mentioned above, the Federal Funds Rate
with respect to such Federal Funds Rate Interest Determination Date will remain
the Federal Funds Rate then in effect on such Federal Funds Rate Interest
Determination Date.
LIBOR. If an Interest Rate Basis for any Note is specified in the
applicable Floating Interest Rate Notice as "LIBOR," LIBOR means, the rate
determined by the Calculation Agent as of the applicable Interest Determination
Date (a "LIBOR Interest Determination Date") in accordance with the following
provisions:
(i) if (a) "LIBOR Reuters" is specified in the applicable Floating
Interest Rate Notice, the arithmetic mean of the offered rates (unless the
specified LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the Index Currency (as defined below) having the Index Maturity designated
in the applicable Floating Interest Rate Notice, commencing on the second
London Business Day immediately following such LIBOR Interest Determination
Date, that appear on the Designated LIBOR Page 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, or (b) "LIBOR Telerate" is specified in the
applicable Floating Interest Rate Notice, the rate for deposits in the Index
Currency (as defined below) having the Index Maturity designated in the
applicable Floating Interest Rate Notice, commencing on the second London
Business Day immediately following such LIBOR Interest Determination Date,
that appears on such Designated LIBOR Page as of 11:00 a.m., London time, on
that LIBOR Interest Determination Date. If fewer than two offered rates
appear (if "LIBOR Reuters" is specified in the applicable Floating Interest
Rate Notice) or no rate appears (if "LIBOR Telerate" is specified in the
applicable Floating Interest Rate Notice), LIBOR in respect of the related
LIBOR Interest Determination Date will be determined as if the parties had
specified the rate described below.
(ii) With respect to an LIBOR Interest Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Floating Interest Rate Notice) or no rate appears (if "LIBOR
Telerate" is specified in the applicable Floating Interest Rate Notice), 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 Index Currency for the period of the Index
Maturity designated in the applicable Floating Interest Rate Notice,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, to prime banks in the London interbank
market at approximately 11:00 a.m., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative of a
single transaction in such Index Currency in such market at such time.
(iii) 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 quotations are provided, LIBOR determined on
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 Floating Interest Rate Notice), in the applicable principal
financial center for the country of the Index Currency on such LIBOR
Interest Determination Date, by three major banks in such principal
financial center selected by the Calculation Agent for loans in the Index
Currency to leading European banks, having the Index Maturity designated in
the applicable Floating Interest Rate Notice and in a principal amount that
is representative for a single transaction in such Index Currency in such
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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 in
effect for the applicable period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the Notes for which
such LIBOR is being determined shall be the Initial Interest Rate).
"Index Currency" means the currency or composite currency specified in the
applicable Floating Interest Rate Notice as to which LIBOR will be calculated.
If no such currency or composite currency is specified in the applicable
Floating Interest Rate Notice, the Index Currency will be United States dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Floating Interest Rate Notice, the display on the Reuters Monitor
Money Rates Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Floating Interest Rate Notice, the display on
Bridge Telerate, Inc. (or any successor service) on the page specified in the
applicable Floating Interest Rate Notice (or any other page as may replace that
page on that service) for the purpose of displaying the London interbank rates
of major banks for the applicable Index Currency.
PRIME RATE If an Interest Rate Basis for any Note is specified in the
applicable Floating Interest Rate Notice as the "Prime Rate," the Prime Rate
means, with respect to any Interest Determination Date relating to a Note for
which the interest rate is determined with reference to the Prime Rate (a "Prime
Rate Interest Determination Date"), the rate on such date as published in
H.15(519) under the heading "Bank Prime Loan." If such rate if not published
prior to 9:00 a.m., New York City time, on the Calculation Date, then the Prime
Rate will be the rate on such Prime Rate Interest Determination Date as
published in H.15 Daily Update opposite the caption "Bank Prime Loan." If such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date, in either H.15(519) or H.15 Daily Update then the Calculation Agent will
determine the Prime Rate to be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen US PRIME 1
Page (as defined below) as such bank's prime rate or base lending rate as in
effect for that Prime Rate Interest Determination Date. If fewer than four such
rates appear on the Reuters Screen US PRIME 1 Page for the Prime Rate Interest
Determination Date, the Calculation Agent will determine the Prime Rate to be
the arithmetic mean of the prime rates quoted on the basis of the actual number
of days in the year divided by 360 as of the close of business on such Prime
Rate Interest Determination Date by at least three major banks in New York City
selected by the Calculation Agent (after consultation with the company);
PROVIDED, HOWEVER, that if the banks selected are not quoting as mentioned in
this sentence, the Prime Rate will remain the Prime Rate in effect on such Prime
Rate Interest Determination Date.
"Reuters Screen US PRIME 1 Page" means the display designated as page "US
PRIME 1" on the Reuters Monitor Money Rates Service (or any successor 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.
TREASURY RATE. If an Interest Rate Basis for any Note is specified in the
applicable Floating Interest Rate Notice as the "Treasury Rate," the Treasury
Rate means, with respect to any Interest Determination Date relating to a Note
for which the interest rate is determined with reference to the Treasury Rate (a
"Treasury Rate Interest Determination Date"), the following:
(i) the rate from the auction held on the applicable Interest Determination
Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable
Floating Interest Rate Notice as that rate appears under the caption
"INVESTMENT RATE" on the display on Bridge Telerate, Inc., or any
successor service, on page 56 or any other page as may replace page 56
on that service ("Telerate Page 56") or page 57 or any other page as may
replace page 57 on that service ("Telerate Page 57"); or
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(ii) if the rate described above is not published by 3:00 p.m., New York
City time, on the Calculation Date, the Bond Equivalent Yield of the
rate for the applicable Treasury Bills as published in the H.15 Daily
Update, or other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High;" or
(iii) if the rate described above is not published by 3:00 p.m., New York
City time, on the related Calculation Date, the Bond Equivalent Yield
of the Auction rate of the applicable Treasury Bills, announced by the
United States Department of the Treasury; or
(iv) in the event that the rate described above is not announced by the
United States Department of the Treasury, or if the Auction is not
held, the Bond Equivalent Yield of the rate on the applicable Interest
Determination Date of Treasury Bills having the Index Maturity
specified in the applicable Floating Interest Rate Notice published in
H.15(519) under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market;" or
(v) if the rate described above is not so published by 3:00 p.m., New York
City time, on the related Calculation Date, the rate on the applicable
Interest Determination Date of the applicable Treasury Bills as
published in H.15 Daily Update, or other recognized electronic source
used for the purpose of displaying the applicable rate, under the
caption "U.S. Government Securities/ Treasury Bills/Secondary Market;"
or
(vi) if the rate described above is not so published by 3:00 p.m., New York
City time, on the related Calculation Date, the rate on the applicable
Interest Determination Date calculated by the Calculation Agent as the
Bond Equivalent Yield of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 p.m., New York City time, on the
applicable Interest Determination Date, of three primary United States
government securities dealers, which may include the Calculation Agent
or its affiliates, selected by the Calculation Agent, for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity
specified in the applicable Floating Interest Rate Notice; or
(vii) if the dealers selected by the Calculation Agent are not quoting as
described above, the Treasury Rate for the immediately preceding
Interest Reset Period, or, if there was no Interest Reset Period, the
rate of interest payable shall be the Initial Interest Rate.
The "Bond Equivalent Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
<TABLE>
<C> <C> <S>
D X N
Bond Equivalent Yield = -----------
360-(DXM)
</TABLE>
where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.
REMARKETING AGENTS
THE REMARKETING AGREEMENT. The company and each Remarketing Agent for the
Notes will enter into a Remarketing Agreement. The summaries below are summaries
of certain expected provisions in such Remarketing Agreements and do not purport
to be complete and are subject to, and qualified in their entirety by, the
provisions of any Remarketing Agreement. The terms of the Initial REPS
Remarketing Agreement are described under "--Mandatory Tender to Initial
Callholder--Initial Callholder." The general provisions of any other REPS
Remarketing Agreement are described above under "--REPS Mode--The Callholder."
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FEES AND EXPENSES. For its services in determining the interest rate and
remarketing Notes, each Remarketing Agreement is expected to provide that, the
Remarketing Agent will receive from the company a fee to be determined in
accordance with the Remarketing Agreement. The Remarketing Agent may pay to
selected broker-dealers a portion of any fees it receives from the company for
its services as Remarketing Agent reflecting Notes sold through such
broker-dealers to purchasers in remarketings.
INDEMNIFICATION OF REMARKETING AGENT. The company, if applicable, will
agree to indemnify the Remarketing Agent against certain liabilities, including
liabilities under the Securities Act arising out of or in connection with its
duties under the Remarketing Agreement.
CONDITIONS TO THE REMARKETING AGENT'S OBLIGATIONS. The obligation of the
Remarketing Agent to remarket Notes and perform its other obligations under a
Remarketing Agreement are expected to be subjected to certain conditions,
including
- the accuracy of certain representations and warranties by the company and
the performance by the company of its obligations and agreements set forth
in the Remarketing Agreement;
- the absence of certain adverse events; and
- between the time at which the interest rate on any Note is established and
the time at which payment therefor is to be made, the rating of the Notes
not having been downgraded or put on Credit Watch or Watch List with
negative implications or withdrawn by a national rating service, the
effect of which, in the opinion of the Remarketing Agent, is to affect
materially and adversely the market price of the Notes or the Remarketing
Agent's ability to remarket the Notes.
REMOVAL OF THE REMARKETING AGENT. Each Remarketing Agreement is expected to
provide that the company may in its absolute discretion remove any Remarketing
Agent by giving prior notice to such Remarketing Agent, the trustee and the
other Remarketing Agents; PROVIDED, HOWEVER, that if (i) such removed
Remarketing Agent shall then be the sole Remarketing Agent or (ii) all of the
remaining Remarketing Agents elect to resign or are removed within one week of
delivery of such notice, then, except as provided in the following sentence, no
such removal shall become effective until the company shall have appointed a
successor to perform the services of the Remarketing Agent under the Remarketing
Agreement. In such case, the company will use reasonable commercial efforts to
appoint a successor Remarketing Agent as soon as reasonably practicable;
PROVIDED, HOWEVER, that, if the company has not so appointed a successor
Remarketing Agent within 90 days of delivery of such notice, the Remarketing
Agreement shall automatically terminate on such 90th day.
RESIGNATION OF THE REMARKETING AGENT. The Remarketing Agreement is also
expected to provide that a Remarketing Agent may resign at any time as
Remarketing Agent, such resignation to be effective 30 days after the delivery
to the company, the trustee and the other Remarketing Agents of notice of such
resignation; PROVIDED, HOWEVER, that if (i) such resigning Remarketing Agent
shall then be the sole Remarketing Agent or (ii) all of the remaining
Remarketing Agents elect to resign or are removed within one week of delivery of
such notice, then, except as provided in the following sentence, no such
resignation shall become effective until the company shall have appointed at
least one successor to perform the services of the Remarketing Agent under the
Remarketing Agreement. In such case, the company will use reasonable commercial
efforts to appoint a successor Remarketing Agent as soon as reasonably
practicable; PROVIDED, HOWEVER, that, if the company has not so appointed a
successor Remarketing Agent within 90 days of delivery of such notice, the
Remarketing Agreement shall automatically terminate on such 90th day. In such
case, it shall be the sole obligation of the company to appoint a successor
Remarketing Agent. In certain circumstances, including upon the occurrence of
certain events, a Remarketing Agent may resign effective immediately upon giving
notice to the company and the trustee.
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CREDIT SUPPORT
GENERAL. Credit support may be provided with respect to Notes in a
particular Interest Rate Mode during all or any portion of an Interest Rate
Period. Such credit support may be in the form of a Standby Note Purchase
Agreement (a "Standby Note Purchase Agreement"), a letter of credit, a financial
guaranty insurance policy, a limited guaranty issued by a guarantor, the
establishment of one or more reserve funds, any other form of credit support or
any combination of the foregoing. Unless otherwise specified in an applicable
prospectus supplement or other Remarketing documents, no form of credit support
will provide protection against all risks of loss or guarantee repayment of the
entire principal of and interest on the Notes. The following summaries of terms
of potential credit support arrangements are qualified in their entirety by
reference to the provisions of any agreements governing such arrangements.
STANDBY NOTE PURCHASE AGREEMENT. In order to support its obligation to
purchase Notes pursuant to any Special Mandatory Purchase obligation, the
company may from time to time, at its option, enter into a Standby Note Purchase
Agreement with one or more banks or other credit providers. Any such Standby
Note Purchase Agreement would provide that, subject to certain conditions
specified therein, the credit provider would advance funds for payment of the
purchase price for Notes subject to a Special Mandatory Purchase.
LETTER OF CREDIT. The company may from time to time, at its option, provide
credit support for Notes in the form of a letter of credit from a bank or other
financial institution. The coverage, amount and other terms of any such letter
of credit would be specified in an applicable prospectus supplement or other
offering document.
FINANCIAL GUARANTY INSURANCE. The company may from time to time, at its
option, provide credit support for Notes in the form of a financial guaranty
insurance policy which would guaranty payment of interest on and principal of
the Notes. The coverage, amount and other terms of any such financial guaranty
insurance policy would be specified in an applicable prospectus supplement or
other offering document.
LIMITED GUARANTY. The company may from time to time, at its option, provide
credit support for Notes in the form of a guaranty pursuant to which a guarantor
agrees to provide the company with sufficient funds to make timely interest and
principal payments in the event the company lacks sufficient resources to do so.
The coverage, amount and other terms of any such guaranty would be specified in
an applicable prospectus supplement or other offering document.
RESERVE FUNDS. The company may from time to time, at its option, provide
credit support for Notes in a reserve fund established with the trustee. The
manner of funding any such reserve fund and the amounts required from time to
time to be on deposit therein would be specified in an applicable prospectus
supplement or other offering document.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material anticipated United States federal
income tax consequences of the purchase, ownership and disposition of the Notes.
The statements of U.S. federal income and estate tax law or legal conclusion set
forth in this summary, subject to the limitations set forth herein, constitute
the opinion of Palmer & Dodge LLP, counsel to the company. This summary is based
upon laws, regulations, rulings and decisions now in effect (or, in the case of
certain regulations, in proposed form), all of which are subject to change,
possibly with retroactive effect, or possible differing interpretations. This
discussion only addresses the United States federal income tax considerations of
the Notes until the Initial REPS Remarketing Date and does not deal with holders
other than original purchasers. It deals only with purchasers who hold Notes as
capital assets, and does not purport to deal with persons in special tax
situations, such as banks, thrifts, and other financial institutions, insurance
companies, tax-exempt organizations, partnerships, S corporations, regulated
investment companies, real estate investment trusts or real estate mortgage
investment conduits, financial asset securitization investment trusts, dealers
in securities or currencies, persons subject to alternative minimum tax, persons
holding Notes as a part of a hedging conversion, short sale or integrated
transaction or as a position in a "straddle" for tax purposes, persons whose
functional currency is not the U.S. dollar, holders of 10% or more, by voting
power or value, of the stock of the company, persons who have ceased to be U.S.
citizens, or to be taxed as resident aliens, or foreign persons whose income or
gain from the Notes is effectively connected with the conduct of a United States
trade or business.
PERSONS CONSIDERING THE PURCHASE OF 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.
Prospective investors should note that no rulings have been or are expected
to be sought from the IRS with respect to any of the tax considerations
discussed below, and no assurance can be given that the IRS will not take
contrary positions.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable regulations of the U.S. Department of the
Treasury ("Treasury" or "Treasury Department")), (iii) an estate whose income is
subject to United States federal income tax regardless of its source, or (iv) a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
regulations and guidance, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to such date, that elect to continue to
be treated as United States persons also will be U.S. Holders. 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
CHARACTERIZATION OF THE NOTES. The United States federal income tax
treatment of debt obligations such as the Notes is not certain. The proper
treatment of the Notes will depend, in part, upon whether the Notes are treated
as maturing on (i) the Stated Maturity or (ii) the Initial REPS Remarketing
Date. Because the Notes are subject to mandatory tender at par on the Initial
REPS Remarketing Date, the company intends, for United States federal income tax
purposes, to treat the Notes as maturing and (in the case of Notes that are
remarketed) as reissued on the Initial REPS Remarketing Date. By purchasing the
Notes, a U.S. Holder agrees to follow such treatment for United States federal
income tax purposes.
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Except where indicated to the contrary, the following discussion assumes such
treatment of the Notes for United States federal income tax purposes.
PAYMENTS OF INTEREST. Interest on the Notes during the period commencing on
the date of initial issuance to, but excluding the Initial REPS Remarketing Date
will constitute "qualified stated interest" and generally will be taxable to a
U.S. Holder as ordinary interest income at the time it is accrued or received,
in accordance with the U.S. Holder's regular method of tax accounting.
ORIGINAL ISSUE DISCOUNT. The company does not expect that the Notes will be
issued with original issue discount. The Notes will not be treated as issued
with original issue discount if (i) their issue price (generally, 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)) is equal to their
par value or (ii) the excess (if any) of their par value over their issue price
is less than a statutory DE MINIMIS amount (generally 1/4 of 1% of the Notes'
par value multiplied by the number of complete years from the date the Notes are
issued to the date the Notes are treated as maturing). If the Notes are issued
at a discount equal to or greater than the statutory DE MINIMIS amount, however,
the Notes will have original issue discount equal to the excess of their par
value over their issue price. For United States federal income tax purposes, a
U.S. Holder will be required to include this original issue discount in income
as ordinary interest as it accrues under a constant yield method in advance of
receipt of the cash payments attributable to such income, regardless of the U.S.
Holder's regular method of accounting. In general, the amount of original issue
discount included in income by an initial U.S. Holder of Notes issued with
original issue discount will be the sum of the daily portions of original issue
discount with respect to such Notes for each day during the taxable year (or
portion of the taxable year) on which such U.S. Holder held such Notes. The
"daily portion" of original issue discount on any Notes 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
Notes, 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
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 (x) the Notes' adjusted issue price at the
beginning of such accrual period and (y) the yield of the Notes (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 the Notes at the beginning of any
accrual period is the sum of the issue price of the Notes plus the amount of
original issue discount allocable to all prior accrual periods minus the amount
of any prior payments on the Notes that were not 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 a Note with original issue discount for an
amount that is greater than the Note's adjusted issue price as of the purchase
date and less than or equal to the sum of all amounts payable on the Note after
the purchase date, other than payments of qualified stated interest, will be
considered to have purchased the 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 Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
PREMIUM. If a U.S. Holder purchases a Note for an amount that is greater
than its par value, 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.
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DISPOSITION OF THE NOTES. Upon the sale, exchange or retirement of a Note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
the Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included 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
will generally be capital gain or loss and will be long-term gain or loss if the
Notes are held by the United States Holder for more than one year. The net
long-term capital gain of individuals are generally taxed at lower rates than
ordinary income. Capital losses realized on such a disposition may be subject to
certain limitiations on deductibility.
ALTERNATIVE TREATMENT OF THE NOTES. There can be no assurance that the IRS
will agree with, or that a court will uphold, the company's treatment of the
Notes as maturing on the Initial REPS Remarketing Date. In particular, the IRS
could seek to treat the Notes as maturing on the Stated Maturity. In the event
the Notes are treated, for United States federal income tax purposes, as
maturing on the Stated Maturity, the IRS could seek to treat the Notes as
"contingent payment debt instruments."
In such event, under Treasury regulations governing contingent payment debt
instruments (the "Contingent Payment Regulations"), the company would be
required to construct a projected payment schedule for the Notes based upon the
company's current borrowing costs for comparable debt instruments of the
company, from which an estimated yield on the Notes would be calculated. A U.S.
Holder would be required (regardless of the holder's usual method of accounting)
to include in income as ordinary interest an amount equal to the sum of the
daily portions of interest on the Notes that would be deemed to accrue at this
estimated yield under this projected payment schedule for each day during the
U.S. Holder's taxable year on which the U.S. Holder holds the Notes. The amount
of interest that would be deemed to accrue in any accrual period would equal the
product of this estimated yield (properly adjusted for the length of the accrual
period) and the Notes' adjusted issue price (as defined below) at the beginning
of the accrual period. The daily portions of interest would be determined by
allocating to each day in the accrual period the ratable portion of the interest
that would be deemed to accrue during the accrual period. In general, for these
purposes, the Notes' adjusted issue price would equal the Notes' issue price
increased by the interest previously accrued on the Notes, and reduced by the
amount of any noncontingent payment and the projected amount of any contingent
payment previously made on the Notes. To the extent that contingent payments
actually made during a year differ from the projected amounts of those
contingent payments, adjustments would be made on the Notes which would
generally increase or decrease the amount includible in income as interest on
the Notes. Nevertheless, as a result of the application of the Contingent
Payment Regulations, it is possible that a U.S. Holder would be required to
include interest in income in excess of actual cash payments received for
certain taxable years.
Under the Contingent Payment Regulations, upon the sale or exchange of a
Note (including a sale pursuant to a mandatory tender on the Initial REPS
Remarketing Date), a U.S. Holder would be required to recognize taxable income
or loss in an amount equal to the difference, if any, between the amount
realized by the U.S. Holder upon such sale or exchange and the U.S. Holder's
adjusted tax basis in the Note as of the date of disposition. A U.S. Holder's
adjusted tax basis in the Note generally would equal such U.S. Holder's initial
investment in the Note increased by any interest previously accrued on the Note,
and decreased by the amount of any noncontingent payment and the projected
amount of any contingent payment previously made on the Note. Any such taxable
income generally would be treated as ordinary income. Any such taxable loss
generally would be treated as ordinary loss to the extent that the U.S. Holder's
total interest inclusions on the Note exceeded the total net negative
adjustments on the Note. Any remaining loss generally would be treated as
short-term or long-term capital loss (depending upon the U.S. Holder's holding
period for the Notes). All amounts includable in income by a U.S. Holder as
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ordinary income pursuant to the Contingent Payment Treasury Regulations would be
treated as original issue discount.
In addition, the IRS could seek to treat the Notes as "variable rate debt
instruments" ("VRDIs"). It is not clear that the Notes would meet the
requirements for qualifying as VRDIs even if they were treated as maturing on
the Stated Maturity. If the IRS were successful in treating the Notes as VRDIs,
the treatment of the Notes could differ from that set forth above in this
summary.
NON-U.S. HOLDERS
PAYMENTS OF INTEREST. A non-U.S. Holder will not be subject to United
States Federal income taxes on payments of principal or interest (including
original issue discount and accruals under the Treasury regulations applicable
to contingent payment debt obligations, if any) on a Note, provided that such
payment is not effectively connected with the conduct of a U.S. trade or
business of the holder, and that such non-U.S. Holder does not own actually or
constructively 10% or more of the total combined voting power of the company, is
not a controlled foreign corporation related to the company through actual or
constructive stock ownership and is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code. In addition, to qualify for this exemption
from taxation, the non-U.S. Holder, or a securities clearing organization, bank,
or other financial institution that holds customer securities in the ordinary
course of its trade or business and that holds the Notes for the account of such
holder, must provide to the last United States payor in the chain of payment
prior to payment to the non-U.S. Holder (the "Withholding Agent") required
certification of the non-U.S. status of the holder (generally made on an IRS
Form W-8 or W-8BEN). New Treasury Regulations have modified the required methods
of certification for this exemption effective for payments made on or after
January 1, 2001. Accordingly, non-U.S. Holders seeking this exemption may be
required to re-certify as to their exempt status at such time.
DISPOSITION OF THE NOTES. Generally, a non-U.S. Holder will not be subject
to United States Federal income taxes on any amount which constitutes 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 to this rule for nontaxability (for
example, applicable to certain individuals present in the U.S. for 183 or more
days in the year of retirement or disposition, or to U.S. expatriates) may be
applicable, and a non-U.S. Holder should consult its tax advisor in this regard.
ESTATE TAX. The Notes will not be includable in the estate of an individual
who at the time of death is not a citizen or resident of the United States (or
former citizen or former long-term lawful permanent resident subject to taxation
under Code Section 2107) unless the individual owns, actually or constructively,
10% or more of the total combined voting power of the company or, at the time of
such individual's death, 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.
Special rules may be applicable to a non-U.S. Holder if its holding of the
Notes is effectively connected with the conduct of a U.S. trade or business of
such holder. Non-U.S. Holders who hold the Notes in connection with the conduct
of a U.S. trade or business should consult their own tax advisors regarding the
U.S. federal income tax consequences to them of the purchase, ownership, or
disposition of the Notes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. HOLDERS. U.S. information reporting requirements may apply to certain
payments of principal and interest on the Notes and to the proceeds from the
sale, exchange or retirement of the Notes paid to U.S. Holders other than
certain exempt recipients (such as corporations). In addition, a 31% backup
withholding tax may apply to those amounts if the U.S. Holder fails to furnish
the payor with a correct taxpayer identification number, certificate of foreign
status, or other required certification or fails to report interest or dividends
required to be shown on the holder's federal income tax returns. Backup
withholding
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is not an additional tax, and amounts withheld as backup withholding will be
creditable against the U.S. Holder's federal income tax liability, provided that
the required information is furnished to the IRS. As a result of certain
newly-issued federal Treasury Regulations which apply for payments made on or
after January 1, 2001, it is possible that U.S. Holders of Notes may be required
to supply a new withholding certificate in order to qualify for continued
exemption from actual withholding under these regulations when they become
effective.
Non-U.S. Holders of the Notes should consult their tax advisors regarding
the application of information reporting and backup withholding in their
particular situations, the availability of exemptions and the procedure for
obtaining such exemptions, if available. Any amount withheld from a payment to a
Non-U.S. Holder under the backup withholding rules is allowable as a credit
against the holder's federal income tax, provided that the required information
is furnished to the IRS.
CERTAIN ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in section 4975(e)(1) of
the Code, including individual retirement accounts, qualified plans, and Keogh
plans, (c) any entities whose underlying assets include plan assets by reason of
a plan's investment in such entities (each a "Plan") and (d) persons who have
certain specified relationships to such Plans ("Parties-in-Interest" under ERISA
and "Disqualified Persons" under the Code). ERISA also imposes certain duties on
persons who are fiduciaries of Plans subject to ERISA and prohibits certain
transactions between a Plan and Parties-in-Interest or Disqualified Persons with
respect to such Plans.
The company, the Callholder and any Remarketing Agent, because of their
activities or the activities of their respective affiliates, may be considered
to be Parties-in-Interest or Disqualified Persons with respect to certain Plans.
If the Notes are acquired by a Plan with respect to which the company, the
Callholder or any Remarketing Agent is, or subsequently becomes, a
Party-in-Interest or Disqualified Person, the purchase, holding or sale of Notes
to the Callholder could be deemed to be a direct or indirect violation of the
Prohibited Transaction rules of ERISA and the Code unless such transaction were
subject to one or more statutory or administrative exemptions such as:
- Prohibited Transaction Class Exemption ("PTCE") 75-1, which exempts
certain transactions involving employee benefit plans and certain
broker-dealers, reporting dealers and banks;
- PTCE 90-1, which exempts certain transactions between insurance company
pooled separate accounts and Parties-in-Interest or Disqualified Persons;
- PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties-in-Interest or Disqualified Persons;
- PTCE 84-14, which exempts certain transactions effected on behalf of a
Plan by a "qualified professional asset manager";
- PTCE 95-60, which exempts certain transactions between insurance company
general accounts and Parties-in-Interest or Disqualified Persons; or
- PTCE 96-23, which exempts certain transactions effected on behalf of a
Plan by an "in-house assets manager."
Even if the conditions specified in one or more of these exemptions are met,
the scope of relief provided by these exemptions will not necessarily cover all
acts that might be construed as prohibited transactions. Each Purchaser of the
Notes will be deemed to have represented that it is not acquiring the Notes for
or on behalf, or with the assets, of, and will not sell or otherwise transfer
the Notes to, any such Plan, except to the extent such purchase, sale or
transfer satisfies the conditions for exemptive relief under one or more PTCE
described in the prior paragraph or is to a governmental plan (as defined in
Section 3
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of ERISA) that is not subject to Title I of ERISA or Section 4975 of the Code or
to any similar law, rule or regulation.
Accordingly, prior to making an investment in the Notes, a Plan should
determine whether the company, the Callholder or any Remarketing Agent is a
Party-in-Interest or Disqualified Person with respect to such Plan and, if so,
whether such transaction is subject to one or more statutory or administrative
exemptions, including those described above.
Prior to making an investment in the Notes, Plans should consult with their
legal advisors concerning the impact of ERISA and the Code and the potential
consequences of such investment with respect to their specific circumstances.
Moreover, each Plan fiduciary who has the authority to make the investment on
behalf of the Plan must determine whether the investment constitutes a direct or
indirect transaction with a Party-in-Interest or a Disqualified Person; and
whether under the general fiduciary standards of investment prudence and
diversification an investment in the Notes is appropriate for the Plan, taking
into account the overall investment policy of the Plan and the composition of
the Plan's investment portfolio.
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UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among the company and the Underwriters named below, the
company has agreed to sell to each of the Underwriters, and each of the
Underwriters has severally agreed to purchase, the principal amounts of the
Notes set forth opposite its name below.
<TABLE>
<CAPTION>
NAME PRINCIPAL AMOUNT OF NOTES
---- -------------------------
<S> <C>
Morgan Stanley & Co. Incorporated..................... $ 100,000,000
Chase Securities Inc.................................. 50,000,000
-------------
Total........................................... $ 150,000,000
=============
</TABLE>
The Purchase Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent. The nature of the underwriting
commitment is such that the Underwriters purchasing the Notes will be obligated
to purchase all of the Notes if any of the Notes are purchased.
The company has been advised by the Underwriters that the Underwriters
propose to offer the Notes to the public initially at the public offering price
set forth on the cover page of this prospectus supplement and to certain dealers
at such price less a concession of .150% of the principal amount of the Notes.
The Underwriters and such dealers may reallow a discount of .125% of such
principal amount on sales to certain other dealers. After the initial offering
of the Notes, the public offering price and concessions and discounts to dealers
may be changed by the Underwriters.
The company does not intend to apply for listing of any of the Notes on a
national securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market-making may be discontinued at any time at the
sole discretion of the Underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Notes.
In order to facilitate the offering of the Notes, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Underwriters may overallot in connection with the
offering, creating a short position in the Notes for their own account. In
addition, to cover overallotments or to stabilize the price of the Notes, the
Underwriters may bid to stabilize the price of the Notes in the open market.
Finally, the underwriting syndicate may reclaim selling concessions allowed to
an underwriter or a dealer for distributing the Notes in the offering, if the
syndicate repurchases previously distributed Notes in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Notes above
independent market levels. The Underwriters are not required to engage in these
activities, and may end any of these activities at any time.
In the ordinary course of their businesses, Morgan Stanley & Co.
Incorporated and Chase Securities Inc. and their affiliates have engaged and may
in the future engage in investment and commercial banking transactions with the
company and certain of its affiliates. Morgan Stanley & Co. Incorporated is the
Initial Callholder.
The company has agreed to indemnify the several Underwriters against certain
civil liabilities, including liabilities under the Securities Act of 1933.
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LEGAL MATTERS
The validity of the Notes to which this prospectus supplement relates will
be passed upon for the company by Palmer & Dodge LLP, Boston, Massachusetts and
for the Underwriters by Ropes & Gray, Boston, Massachusetts. Palmer & Dodge LLP,
Boston, Massachusetts is also advising the company on certain federal income tax
matters.
EXPERTS
The financial statements incorporated in this prospectus supplement and
prospectus by reference to the company's annual report on Form 10-K for the year
ended December 31, 1999, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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