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As filed Pursuant to Rule 424(b)(2)
Registration Nos. 333-82893 & 333-82893-01
[LOGO]
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 20, 1999)
U.S. $2,000,000,000
TEXACO CAPITAL INC.
SECOND SERIES 1999 MEDIUM-TERM NOTES
Due Nine Months Or More From Date Of Issue
Payment of Principal, any Premium and any Interest on the Medium Term Notes is
Guaranteed by
TEXACO INC.
TERMS: We plan to offer and sell the Notes with various terms, including the
following:
- Stated maturities of nine months or more from date of issue
- Repayment provisions
- Redemption provisions, which may be mandatory, at our option, at the
option of the holders or none at all
- Payments in U.S. dollars or one or more foreign currencies
- Minimum denominations of $1,000 or other specified denominations for
foreign currencies
- Book-entry (through The Depository Trust Company) or certificated form
- Interest payable on the dates stated in the applicable pricing supplement
- Interest at fixed or floating rates, or no interest at all. We may base
the floating interest rate on one or more of the following indices plus or
minus a spread and/or multiplied by a spread multiplier:
- CD rate
- CMT rate
- Commercial paper rate
- Eleventh district cost of funds rate
- Federal funds rate
- LIBOR
- Prime rate
- Treasury rate
- Any interest basis or interest rate formula as we may specify in the
applicable pricing supplement
The Notes will be issued by Texaco Capital Inc. and guaranteed by Texaco
Inc.
We will specify the final terms for each Note, which may be different from
the terms described in this prospectus supplement, in the applicable pricing
supplement.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON PAGE
S-3. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY PRICING SUPPLEMENT IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We may sell the Notes to the Agents listed below as principals for resale at
varying or fixed offering prices or through the Agents as agents using their
reasonable best efforts on our behalf. Unless otherwise specified in the
applicable pricing supplement, the price to the public for the Notes will be
100% of the principal amount. If we sell all of the Notes, we expect to receive
proceeds of between $1,997,500,000 and $1,977,500,000, after paying the Agents'
discounts and commissions of between $2,500,000 and $22,500,000, and before
deducting expenses payable by us. We may also sell the Notes ourselves without
the assistance of the Agents. We do not intend to list the Notes on any
securities exchange.
BLAYLOCK & PARTNERS, L.P.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
The date of this prospectus supplement is August 3, 1999.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
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Risk Factors......................................................................... S-3
About this Prospectus Supplement and the Pricing Supplements......................... S-4
Description of Notes................................................................. S-5
Special Provisions Relating to Foreign Currency Notes................................ S-19
United States Taxation............................................................... S-21
Plan of Distribution................................................................. S-30
PROSPECTUS
About This Prospectus................................................................ 2
Where You Can Find More Information.................................................. 2
Texaco Inc........................................................................... 3
Selected Financial Data of Texaco.................................................... 4
Ratios............................................................................... 5
Texaco Capital Inc................................................................... 5
Use of Proceeds...................................................................... 5
Plan of Distribution................................................................. 5
Description of Debt Securities....................................................... 6
Description of Texaco Common Stock................................................... 11
Description of Texaco Preferred Stock................................................ 12
Description of the Depositary Shares................................................. 14
Description of the Warrants.......................................................... 17
Experts.............................................................................. 18
Legal Opinions....................................................................... 18
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You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and any pricing supplement. We have not,
and the Agents have not, authorized any other person to provide you with
different or additional information. If anyone provides you with different or
additional information, you should not rely on it. We are not, and the Agents
are not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing
in or incorporated by reference in this prospectus supplement, the accompanying
prospectus and any pricing supplement is accurate as of its date only. Our
business, financial condition, results of operations and prospects may have
changed since such date.
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RISK FACTORS
Your investment in the Notes is subject to certain risks, especially if the
Notes involve in some way a foreign currency. This prospectus supplement does
not describe all of the risks of an investment in the Notes, whether arising
because the Notes are denominated in a foreign currency or because the return on
the Notes is linked to one or more interest rate or currency indices or
formulas. You should consult your own financial and legal advisors about the
risks entailed by an investment in the Notes and the suitability of your
investment in the Notes in light of your particular circumstances. The Notes are
not an appropriate investment for investors who are unsophisticated with respect
to foreign currency transactions or transactions involving the type of index or
formula used to determine amounts payable. If you are a non-U.S. resident, you
should consult your own legal and financial advisors with regard to these
matters. Before investing in the Notes, you should consider carefully, among
other factors, the matters described below.
FOREIGN CURRENCY NOTES AND CURRENCY INDEXED NOTES ARE SUBJECT TO RISKS RELATED
TO EXCHANGE RATES AND EXCHANGE CONTROLS
If you invest in foreign currency Notes and currency indexed Notes, your
investment will be subject to significant risks not associated with investments
in debt instruments denominated in U.S. dollars or U.S. dollar-based indexes.
Such risks include the possibility of significant changes in the rate of
exchange between the U.S. dollar and your payment currency and the imposition or
modification of foreign exchange controls by either the United States or the
applicable foreign governments. We have no control over the factors that
generally affect these risks, such as economic, financial and political events
and the supply and demand for the applicable currencies.
In recent years, rates of exchange between the U.S. dollar and certain
foreign currencies have been volatile and such volatility may continue in the
future. Past fluctuations in any particular exchange rate are not necessarily
indicative, however, of fluctuations that may occur in the future. Fluctuations
in exchange rates against the U.S. dollar could result in a decrease in the U.S.
dollar-equivalent yield of your foreign currency Notes or currency indexed
Notes, in the U.S. dollar-equivalent value of the principal or any premium
payable at maturity of your Notes and, generally, in the U.S. dollar-equivalent
market value of your Notes. We may further describe the currency risks with
respect to your foreign currency Notes or currency indexed Notes in the
applicable pricing supplement.
Foreign exchange rates can either float or be fixed by sovereign
governments. Governments, however, often do not voluntarily allow their
currencies to float freely in response to economic forces. Instead, governments
use a variety of techniques, such as intervention by that country's central
bank, or the imposition of regulatory controls or taxes, to affect the exchange
rate of their currencies. Governments may also issue a new currency to replace
an existing currency or alter the exchange rate or relative exchange
characteristics by the devaluation or revaluation of a currency. Thus, an
important risk in purchasing foreign currency Notes or currency indexed Notes
for U.S. dollar-based investors is that their U.S. dollar-equivalent yields
could be affected by governmental actions that could change or interfere with
currency valuation that was previously freely determined, fluctuations in
response to other market forces and the movement of currencies across borders.
We will not make any adjustment or change in the terms of the foreign currency
Notes or currency indexed Notes if exchange rates become fixed, or if any
devaluation or revaluation or imposition of exchange or other regulatory
controls or taxes occurs, or if there are other developments affecting the U.S.
dollar or any applicable currency occurs. The paying agent will make all
calculations relating to your foreign currency Notes or currency indexed Notes.
All such determinations will, in the absence of clear error, be binding on you.
On January 1, 1999, Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, The Netherlands, Portugal and Spain (the "Participating
States") commenced a new stage of economic and monetary union and introduced a
single currency (the "euro"), which is legal tender in the Participating
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States in substitution for the national currencies of those countries. Bills and
coins denominated in euro will be circulated for the first time on January 1,
2002. For a three-year transitional period until December 31, 2001, the current
currencies of the Participating States remain legal tender in those countries as
a subdivision of the euro. The conversion rate between the current currencies of
each Participating State and the euro have been fixed irrevocably by the Council
of the European Union effective on January 1, 1999. The Council of the European
Union has adopted regulations providing specific rules for the introduction of
the euro.
For Notes with a specified currency other than U.S. dollars we will include
in the applicable pricing supplement information concerning historical exchange
rates for that currency against the U.S. dollar and a brief description of any
relevant exchange controls.
RISKS ASSOCIATED WITH INDEXED NOTES
If you invest in indexed Notes, your investment will be subject to
significant risks that are not associated with an investment in a conventional
fixed rate debt security. The interest rate of a Note which is indexed may
result in lower, or no, interest compared to a conventional fixed rate debt
security issued at the same time. The principal of and/or premium on a Note
which is indexed may result in the payment of a lower amount of principal and/or
premium, or no principal and/or premium, compared to the original purchase price
of the Note. The value of an index can fluctuate based on a number of
interrelated factors, including economic, financial and political events over
which we do not have any control. Additionally, if the formula that we specify
to determine the amount of principal, premium and/or interest payable with
respect to indexed Notes contains a multiple or leverage factor, that feature
will magnify the effect of any change in the index. You should not view the
historical experience of an index as an indication of its future performance.
YOU CANNOT RELY ON THE CREDIT RATINGS OF THE NOTES
The credit ratings on the Notes may not reflect the potential impact of all
risks related to structure and other factors on the value of the Notes. In
addition, real or anticipated changes in our credit ratings generally will
affect the market value of the Notes.
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS
We intend to use this prospectus supplement, the attached prospectus and a
related pricing supplement to offer our Notes from time to time. This prospectus
supplement provides you with certain terms of the Notes and supplements the
description of the debt securities contained in the attached prospectus. If any
information in this prospectus supplement is inconsistent with the prospectus,
this prospectus supplement replaces the inconsistent information. Each time we
issue Notes, we will prepare a pricing supplement that will contain additional
terms of the offering and the description of the specific Notes offered. The
pricing supplement also may add, update or change information in this prospectus
supplement or the attached prospectus, including provisions describing the
calculation of interest and the method of making payments under the terms of a
Note. The flexibility available to us to set or negotiate individualized terms
for Notes means that there will be transactions, particularly with Indexed
Notes, that are quite complex. Frequently, the terms of the Notes differ from
the terms that we describe in this prospectus supplement. Any information in the
pricing supplement that is inconsistent with this prospectus supplement will
replace the inconsistent information in this prospectus supplement.
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DESCRIPTION OF NOTES
The following summary of certain terms of the Notes is not complete. For
additional terms of the Notes, and of the guaranties of the Notes issued by
Texaco Inc., you should also read the indenture under which the Notes and
Guaranties will be issued. The following description of the Notes supplements
and, to the extent the descriptions are inconsistent, replaces the description
of the general terms and provisions of the debt securities that is found under
the heading "Description of Debt Securities" in the attached prospectus. The
following descriptions will apply to each Note unless otherwise specified in the
pricing supplement.
GENERAL
We will offer the Notes on a continuous basis.
The Notes are unsecured and will rank equally with all unsecured
indebtedness of Texaco Capital. The guaranties will rank equally with all other
unsecured indebtedness of, and other guarantees issued by, Texaco Inc.
The total initial public offering price of the Notes that we may offer using
this prospectus supplement, together with any debt warrants, is $2,000,000,000
or its equivalent in one or more foreign currencies or composite currencies.
The indenture does not limit the amount of our Notes or other debt
obligations that may be issued thereunder.
The Notes are not subject to any sinking fund.
The defeasance and covenant defeasance provisions of the indenture described
under "Description of Debt Securities" in the attached prospectus will apply to
the Notes.
Unless we specify otherwise in the applicable pricing supplement, we will
denominate the Notes in U.S. dollars and we will make all payments on the Notes
in U.S. dollars. For further information regarding foreign currency Notes, see
"Risk Factors" and "Special Provisions Relating To Foreign Currency Notes".
As used in this prospectus supplement, "Business Day" means any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by law, regulation or executive
order to close in The City of New York; provided, however, that, with respect to
foreign currency Notes, such day is also not a day on which commercial banks are
authorized or required by law, regulation or executive order to close in the
Principal Financial Center (as defined below) of the country issuing the
specified currency (or, if the specified currency is the euro, such day is also
a day on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer (TARGET) System is open); provided, further, that, with respect to
Notes for which interest is based on the LIBOR index, such day is also a London
Business Day (as defined below).
"London Business Day" means a day on which commercial banks are open for
business (including dealings in the designated LIBOR currency) in London.
"Principal Financial Center" means (1) the capital city of the country
issuing the specified currency or (2) the capital city of the country to which
the designated LIBOR currency relates, as applicable, except, in the case of (1)
or (2) above, that with respect to United States dollars, Australian dollars,
Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos, South
African rand and Swiss francs, the "Principal Financial Center" shall be The
City of New York, Sydney and (solely in the case of the specified currency)
Melbourne, Toronto, Frankfurt, Amsterdam, London (solely in the case of the
designated LIBOR currency), Johannesburg and Zurich, respectively.
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The authorized denominations of Notes denominated in U.S. dollars will be
integral multiples of $1,000. We will designate the authorized denominations of
foreign currency Notes in the applicable pricing supplement.
BOOK-ENTRY DEBT SECURITIES
Except under certain circumstances, we will issue the Notes in book-entry
form only. This means that we will not issue actual Notes or certificates to
you. Instead, we will issue a global security representing Notes with similar
terms and such Global Security will be held by The Depository Trust Company
("DTC") or its nominee. In order to own a beneficial interest in a Note, you
must be an institution that has an account with DTC as a participant or have an
account with an institution, such as a brokerage firm, that has an account with
DTC. For a more complete description of book-entry debt securities, see
"Description of Debt Securities--Book-Entry Debt Securities" in the attached
prospectus.
Payments of principal, any premium, and any interest on the Notes
represented by a global security will be made in same-day funds to DTC in
accordance with arrangements then in effect between the applicable trustee and
DTC.
INTEREST AND INTEREST RATES
GENERAL
Each Note will begin to accrue interest from the date it is originally
issued. In the related pricing supplement, we will designate each Note as a
Fixed Rate Note, a Floating Rate Note, an Amortizing Note or an Indexed Note and
describe the method of determining the interest rate, including any Spread
and/or Spread Multiplier. For an Indexed Note, we will also describe in the
related pricing supplement the method for calculating and paying principal and
interest. For a Floating Rate Note or Indexed Note we may also specify a maximum
and a minimum interest rate in the related pricing supplement.
Instead of issuing a Note as a Fixed Rate Note or a Floating Rate Note, we
may also issue a Note that combines fixed and floating rate terms.
Interest rates on the Notes that we offer may differ depending upon, among
other things, the aggregate principal amount of Notes purchased in any single
transaction. We may offer Notes with similar variable terms but different
interest rates, as well as Notes with different variable terms, concurrently to
different investors. We may, from time to time, change the interest rates or
formulas and other terms of Notes, but no such change will affect any Note
already issued or as to which an offer to purchase has been accepted.
FIXED RATE NOTES
In the pricing supplement for Fixed Rate Notes we will specify a fixed
interest rate payable semi-annually in arrears on the dates specified in the
applicable pricing supplement (each an "Interest Payment Date") and the regular
record date for Fixed Rate Notes will also be specified in the applicable
pricing supplement. Interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months. If the maturity date or an Interest
Payment Date for any Fixed Rate Note is not a Business Day, we will pay
principal, any premium, and any interest for that Note on the next Business Day,
and no interest will accrue from and after the maturity date or Interest Payment
Date.
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ORIGINAL ISSUE DISCOUNT NOTES
We may issue original issue discount Notes (including zero coupon
Notes)("OID Notes"), which are Notes issued at a discount from the principal
amount payable at the maturity date. An OID Note may not have any periodic
interest payments. For OID Notes, interest normally accrues during the life of
the Note and is paid at the maturity date or upon earlier redemption. Upon a
redemption, repayment or acceleration of the maturity of an OID Note, the amount
payable will be determined as set forth under "Description of Notes--Optional
Redemption, Repayment and Repurchase" in the related prospectus. Normally this
amount is less than the amount payable at the maturity date.
AMORTIZING NOTES
We may issue amortizing Notes, which are Fixed Rate Notes for which combined
principal and interest payments are made in installments over the life of each
Note ("Amortizing Notes"). We apply payments on Amortizing Notes first to
interest due and then to reduce the unpaid principal amount. We will include a
table setting forth repayment information in the related pricing supplement for
an Amortizing Note.
FLOATING RATE NOTES
Each Floating Rate Note will have an interest rate basis or formula. We may
base that formula on:
- the CD Rate;
- the CMT Rate;
- the Commercial Paper Rate;
- the Eleventh District Cost of Funds Rate;
- the Federal Funds Rate;
- LIBOR;
- the Prime Rate;
- the Treasury Rate; or
- another negotiated interest rate basis or formula.
In the pricing supplement we also will indicate any spread and/or spread
multiplier, which would be applied to the interest rate formula to determine the
interest rate. Any Floating Rate Note may have a maximum or minimum interest
rate limitation. In addition to any maximum interest rate limitation, the
interest rate on the Floating Rate Notes will in no event be higher than the
maximum rate permitted by New York law, as the same may be modified by United
States law for general application.
We will appoint a calculation agent to calculate interest rates on the
Floating Rate Notes. Unless we identify a different party in the pricing
supplement, the paying agent will be the calculation agent for each Note. In
most cases, a Floating Rate Note will have a specified "Interest Reset Date",
"Interest Determination Date" and "Calculation Date" associated with it. An
Interest Reset Date is the date on which the interest rate on the Note is
subject to change. An Interest Determination Date is the date as of which the
new interest rate is determined for a particular Interest Reset Date, based on
the applicable interest rate basis or formula as of that Interest Determination
Date. The Calculation Date is the date by which the calculation agent will
determine the new interest rate that became effective on a particular Interest
Reset Date based on the applicable interest rate basis or formula on the
Interest Determination Date.
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CHANGE OF INTEREST RATE. We may reset the interest rate on each Floating
Rate Note daily, weekly, monthly, quarterly, semi-annually, annually or on some
other basis that we specify. Unless otherwise specified in the pricing
supplement, the Interest Reset Date will be:
- for Notes with interest that resets daily, each Business Day;
- for Notes (other than Treasury Rate Notes) with interest that resets
weekly, Wednesday of each week;
- for Treasury Rate Notes with interest that resets weekly, Tuesday of each
week;
- for Notes with interest that resets monthly, the third Wednesday of each
month;
- for Notes with interest that resets quarterly, the third Wednesday of
March, June, September and December of each year;
- for Notes with interest that resets semi-annually, the third Wednesday of
each of the two months of each year indicated in the applicable pricing
supplement; and
- for Notes with interest that resets annually, the third Wednesday of the
month of each year indicated in the applicable pricing supplement.
The related pricing supplement will describe the initial interest rate or
interest rate formula on each Note. That rate is effective until the following
Interest Reset Date. Thereafter, the interest rate will be the rate determined
on each Interest Determination Date. Each time a new interest rate is
determined, it becomes effective on the subsequent Interest Reset Date. If any
Interest Reset Date is not a Business Day, then the Interest Reset Date is
postponed to the next Business Day, except, in the case of a LIBOR Note, in
which case, if the next Business Day is in the next calendar month, the Interest
Reset Date is the immediately preceding Business Day.
DATE INTEREST RATE IS DETERMINED. The Interest Determination Date for all
Floating Rate Notes (except LIBOR Notes, Treasury Rate Notes and Eleventh
District Cost of Funds Rate Notes) will be the second Business Day before the
Interest Reset Date. The Interest Determination Date in the case of LIBOR Notes
will be the second London Business Day immediately preceding the applicable
Interest Reset Date, unless the Designated LIBOR currency is British pounds
sterling, in which case the "Interest Determination Date" will be the applicable
Interest Reset Date.
The Interest Determination Date for Treasury Rate Notes will be the day of
the week in which the Interest Reset Date falls on which Treasury bills of the
same index maturity are normally auctioned. Treasury bills are usually sold at
auction on Monday of each week, unless that day is a legal holiday, in which
case the auction is usually held on Tuesday. Sometimes, the auction is held on
the preceding Friday. If an auction is held on the preceding Friday, that day
will be the Interest Determination Date relating to the Interest Reset Date
occurring in the next week. If an auction date falls on any Interest Reset Date
then the Interest Reset Date will instead be the first Business Day immediately
following the auction date.
The Interest Determination Date for an Eleventh District Cost of Funds Rate
Note is the last Business Day of the month immediately preceding the applicable
Interest Reset Date in which the Federal Home Loan Bank of San Francisco
published the index.
CALCULATION DATE. Unless we specify a different date in a pricing
supplement, the "Calculation Date," relating to an Interest Determination Date
will be the earlier of
(1) the tenth calendar day after such Interest Determination Date or, if such
day is not a Business Day, the next succeeding Business Day, or
(2) the Business Day immediately preceding the relevant Interest Payment Date or
the maturity date, as the case may be.
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Upon the request of the beneficial holder of any Floating Rate Note, the
calculation agent will provide the interest rate then in effect and, if
different, the interest rate that will become effective on the next Interest
Reset Date for the Floating Rate Note.
PAYMENT OF INTEREST. Unless otherwise specified in the pricing supplement,
we will pay installments of interest on Floating Rate Notes as follows (each, an
"Interest Payment Date"):
- for Notes with interest payable monthly, on the third Wednesday of each
month;
- for Notes with interest payable quarterly, on the third Wednesday of
March, June, September, and December of each year;
- for Notes with interest payable semi-annually, on the third Wednesday of
each of the two months specified in the applicable pricing supplement; and
- for Notes with interest payable annually, on the third Wednesday of the
month specified in the applicable pricing supplement.
We will also pay interest at maturity, redemption or repurchase.
Each interest payment on a Floating Rate Note will include interest accrued
from, and including, the issue date or the last Interest Payment Date, as the
case may be, to, but excluding, the following Interest Payment Date or the
maturity date, date of redemption or repurchase as the case may be. We will pay
installments of interest on Floating Rate Notes beginning on the first Interest
Payment Date after its issue date to holders of record on the corresponding
Regular Record Date. Unless we otherwise specify in the applicable pricing
supplement, the Regular Record Date for a Floating Rate Note will be on the
15(th) day (whether or not a Business Day) next preceding the Interest Payment
Date. If an Interest Payment Date is not a Business Day, we will postpone
payment until the next Business Day. In the case of LIBOR Notes, such Interest
Payment Date will be the preceding Business Day if the next Business Day is in
the next calendar month. If the maturity date, date of redemption or repurchase
of any Floating Rate Note is not a Business Day, principal, if applicable,
premium, if any, and interest for that Note will be paid on the next Business
Day, and no interest will accrue from and after the maturity date, date of
redemption or repurchase.
We will calculate accrued interest on a Floating Rate Note by multiplying
the principal amount of a Note by an accrued interest factor. The accrued
interest factor is the sum of the interest factors calculated for each day in
the period for which accrued interest is being calculated. The interest factor
for each day is computed by dividing the interest rate in effect on that day by
(1) the actual number of days in the year, in the case of Treasury Rate Notes or
CMT Rate Notes, or (2) 360, in the case of other Floating Rate Notes. All
percentages resulting from any calculation are rounded to the nearest one
hundredth of a percentage point, with five one-thousanths of a percentage point
rounded upward. For example, 9.875% (or .09875) will be rounded to 9.88% (or
.0988). Dollar amounts used in the calculation are rounded to the nearest cent
(with one-half cent being rounded upward).
CALCULATION OF INTEREST. In this section, we explain how we will calculate
the interest rate basis on different types of Floating Rate Notes.
CD RATE NOTES
The "CD Rate" for any Interest Determination Date is the rate on that date
for negotiable certificates of deposit having the Index Maturity described in
the related pricing supplement, as published in H.15(519) prior to 3:00 P.M.,
New York City time, on the Calculation Date for that Interest Determination Date
under the heading "CDs (secondary market)". The "Index Maturity" is the period
to maturity of the instrument or obligation with respect to which the related
interest rate basis or formulae will be calculated.
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The calculation agent will observe the following procedures if the CD Rate
cannot be determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the CD Rate will be the rate on that
Interest Determination Date for negotiable certificates of deposit of the
Index Maturity described in the pricing supplement as published in H.15
Daily Update, or such other recognized electronic source used for the
purpose of displaying such rate, under the caption "CDs (secondary
market)".
- If that rate is not published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the
Calculation Date, then the calculation agent will determine the CD Rate to
be the average of the secondary market offered rates as of 10:00 A.M., New
York City time, on that Interest Determination Date, quoted by three
leading non-bank dealers of negotiable U.S. dollar certificates of deposit
in New York City for negotiable certificates of deposit in a denomination
of $5,000,000 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 described in the
pricing supplement. The calculation agent will select the three dealers
referred to above.
- If fewer than three dealers are quoting as mentioned above, the CD Rate
will remain the CD Rate then in effect on that Interest Determination
Date.
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site 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.
COMMERCIAL PAPER RATE NOTES
The "Commercial Paper Rate" for any Interest Determination Date is the Money
Market Yield of the rate on that date for commercial paper having the Index
Maturity described in the related pricing supplement, as published in H.15(519)
prior to 3:00 P.M., New York City time, on the Calculation Date for that
Interest Determination Date under the heading "Commercial Paper--Nonfinancial".
The calculation agent will observe the following procedures if the
Commercial Paper Rate cannot be determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the Commercial Paper Rate will be the
Money Market Yield of the rate on that Interest Determination Date for
commercial paper having the Index Maturity described in the pricing
supplement, as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "Commercial Paper-- Nonfinancial".
- If that rate is not published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the
Calculation Date, then the calculation agent will determine the Commercial
Paper Rate to be the Money Market Yield of the average of the offered
rates of three leading dealers of U.S. dollar commercial paper in New York
City as of 11:00 A.M., New York City time, on that Interest Determination
Date for commercial paper having the Index Maturity described in the
pricing supplement placed for an industrial issuer whose bond rating is
"Aa", or the equivalent, from a nationally recognized securities rating
organization. The calculation agent will select the three dealers referred
to above.
- If fewer than three dealers are quoting as mentioned above, the Commercial
Paper Rate will remain the Commercial Paper Rate then in effect on that
Interest Determination Date.
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"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
<TABLE>
<S> <C> <C>
Money Market Yield = D X 360 X 100
--------------
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the reset period for which interest is being calculated.
LIBOR NOTES
On each Interest Determination Date, the calculation agent will determine
LIBOR as follows:
- If the pricing supplement specifies "LIBOR Telerate", LIBOR on any
Interest Determination Date will be the rate for deposits in the LIBOR
Currency having the Index Maturity described in the related pricing
supplement on the applicable Interest Reset Date, as such rate appears on
the Designated LIBOR Page as of 11:00 A.M., London time, on that Interest
Determination Date.
- If the pricing supplement specifies "LIBOR Reuters", LIBOR on any Interest
Determination Date will be the average of the offered rates for deposits
in the LIBOR Currency having the Index Maturity described in the related
pricing supplement on the applicable Interest Reset Date, as such rates
appear on the Designated LIBOR Page as of 11:00 A.M., London time, on that
Interest Determination Date, if at least two such offered rates appear on
the Designated LIBOR Page.
- If the pricing supplement does not specify "LIBOR Telerate" or "LIBOR
Reuters," the LIBOR Rate will be LIBOR Telerate. In addition, if the
Designated LIBOR Page by its terms provides only for a single rate, that
single rate will be used regardless of the foregoing provisions requiring
more than one rate.
On any Interest Determination Date on which fewer than the required number
of applicable rates appear or no rate appears on the applicable Designated LIBOR
Page, the calculation agent will determine LIBOR as follows:
- LIBOR will be determined on the basis of the offered rates at which
deposits in the LIBOR Currency having the Index Maturity described in the
related pricing supplement on the Interest Determination Date and in a
principal amount that is representative of a single transaction in that
market at that time are offered by four major banks in the London
interbank market at approximately 11:00 A.M., London time, on the Interest
Determination Date to prime banks in the London interbank market. The
calculation agent will select the four banks and request the principal
London office of each of those banks to provide a quotation of its rate
for deposits in the LIBOR Currency. If at least two quotations are
provided, LIBOR for that Interest Determination Date will be the average
of those quotations.
- If fewer than two quotations are provided as mentioned above, LIBOR will
be the average of the rates quoted by three major banks in the Principal
Financial Center selected by the calculation agent at approximately 11:00
A.M. in the Principal Financial Center, on the Interest Determination Date
for loans to leading Europeans banks in the LIBOR Currency having the
Index Maturity designated in the pricing supplement and in a principal
amount that is representative for a single transaction in the LIBOR
Currency in that market at that time. The calculation agent will select
the three banks referred to above.
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- If fewer than three banks selected by the calculation agent are quoting as
mentioned above, LIBOR will remain LIBOR then in effect on that Interest
Determination Date.
"LIBOR Currency" means the currency specified in the applicable pricing
supplement as to which LIBOR shall be calculated or, if no such currency is
specified in the applicable pricing supplement, United States dollars.
"Designated LIBOR Page" means:
- if the pricing supplement specifies "LIBOR Reuters", the display on the
Reuters Monitor Money Rates Service (or any successor service) on the page
specified in such pricing supplement (or any other page as may replace
such page on such service) for the purpose of displaying the London
interbank rates of major banks for the LIBOR Currency; or
- if the pricing supplement specifies "LIBOR Telerate" or neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified in the applicable pricing
supplement as the method of calculating LIBOR, the display on Bridge
Telerate, Inc. (or any successor service, "Telerate") on the page
specified in such pricing supplement (or any other page as may replace
such page on such service) for the purpose of displaying the London
interbank rates of major banks for the LIBOR Currency.
FEDERAL FUNDS RATE NOTES
The "Federal Funds Rate" for any Interest Determination Date is the rate on
that date for Federal Funds, as published in H.15(519) prior to 3:00 P.M., New
York City time, on the Calculation Date for that Interest Determination Date
under the heading "Federal Funds (Effective)", as such rate is displayed on
Telerate on page 120 (or any other page as may replace such page on such
service) ("Telerate Page 120").
The calculation agent will follow the following procedures if the Federal
Funds Rate cannot be determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the Federal Funds Rate will be the
rate on that Interest Determination Date, as published in H.15 Daily
Update, or such other recognized electronic source used for the purpose of
displaying such rate, under the caption "Federal Funds (Effective)".
- If that rate does not appear on Telerate Page 120 or is not published in
H.15(519), H.15 Daily Update or another recognized electronic source by
3:00 P.M., New York City time, on the Calculation Date, then the
calculation agent will determine the Funds Rate to be the average of the
rates for the last transaction in overnight Federal Funds quoted by three
leading brokers of Federal Funds transactions in New York City as of 9:00
A.M., New York City time, on that Interest Determination Date. The
calculation agent will select the three brokers referred to above.
- If fewer than three brokers are quoting as mentioned above, the Federal
Funds Rate will be the Federal Funds Rate then in effect on that Interest
Determination Date.
PRIME RATE NOTES
The "Prime Rate" for any Interest Determination Date is the prime rate or
base lending rate on that date, as published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date for that Interest Determination Date under
the heading "Bank Prime Loan" or, if not published by 3:00 P.M., New York City
time, on the related Calculation Date, the rate on such Interest Determination
Date as published in H.15 Daily Update, or such other recognized electronic
source used for the purpose of displaying such rate, under the caption "Bank
Prime Loan."
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The calculation agent will follow the following procedures if the Prime Rate
cannot be determined as described above:
- If the rate is not published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the
Calculation Date, then the calculation agent will determine the Prime Rate
to be the average of the rates of interest publicly announced by each bank
that appears on the Reuters screen designated as "US Prime 1" as that
bank's prime rate or base lending rate as in effect for that Interest
Determination Date.
- If at least one rate but fewer than four rates appear on "US Prime 1" on
the Interest Determination Date, then the Prime Rate will be the average
of the prime rates or base lending rates quoted (on the basis of the
actual number of days in the year divided by a 360-day year) as of the
close of business on the Interest Determination Date by three major money
center banks in the City of New York selected by the calculation agent.
- If fewer than three banks are quoting as mentioned above, the Prime Rate
will remain the Prime Rate then in effect on the Interest Determination
Date.
TREASURY RATE NOTES
The "Treasury Rate" for any Interest Determination Date is the rate set at
the auction of direct obligations of the United States ("Treasury bills") having
the Index Maturity described in the related pricing supplement under the caption
"INVESTMENT RATE" on the display on Telerate on page 56 (or any other page as
may replace such page on such service) ("Telerate Page 56") or page 57 (or any
other page as may replace such page on such service) ("Telerate Page 57") by
3:00 P.M., New York City time, on the Calculation Date for that Interest
Determination Date.
The calculation agent will follow the following procedures if the Treasury
Rate cannot be determined as described above:
- If the rate is not so published by 3:00 P.M., New York City time, on the
Calculation Date, the Treasury Rate will be the Bond Equivalent Yield of
the auction rate of such Treasury bills as published in H.15 Daily Update,
or such recognized electronic source used for the purpose of displaying
such rate, under the caption "U.S. Government Securities Treasury
Bills/Auction High."
- If the rate is not so published by 3:00 P.M., New York City time, on the
Calculation Date, the Treasury Rate will be the Bond Equivalent Yield of
the auction rate of such Treasury bills as otherwise announced by the
United States Department of Treasury.
- If the results of the most recent auction of Treasury bills having the
Index Maturity described in the pricing supplement are not published or
announced as described above by 3:00 P.M., New York City time, on the
Calculation Date, or if no auction is held on the Interest Determination
Date, then the Treasury Rate will be the Bond Equivalent Yield on such
Interest Determination Date of Treasury bills having the Index Maturity
specified in the applicable pricing supplement as published in H.15(519)
under the caption "U.S. Government securities/Treasury bills/ Secondary
market" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Interest Determination Date of
such Treasury Bills as published in H.15 Daily Update, or such other
recognized electronic source used for the purpose of displaying such rate,
under the caption "U.S. Government securities/Treasury bills/Secondary
market."
- If such rate is not published in H.15(519) H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the
related Calculation Date, then the calculation agent will determine the
Treasury Rate to be the Bond Equivalent Yield of the average of the
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secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on the Interest Determination Date of three leading primary U.S.
government securities dealers (which may include the Agents or their
affiliates) for the issue of Treasury bills with a remaining maturity
closest to the Index Maturity described in the related pricing supplement.
The calculation agent will select the three dealers referred to above.
- If fewer than three dealers are quoting as mentioned above, the Treasury
Rate will remain the Treasury Rate then in effect on that Interest
Determination Date.
"Bond Equivalent Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
<TABLE>
<S> <C> <C>
Bond Equivalent Yield = D X N X 100
--------------
360 - (D X M)
</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 applicable Interest Reset Period.
CMT RATE NOTES
The "CMT Rate" for any Interest Determination Date is the rate displayed on
the Designated CMT Telerate Page by 3:00 P.M., New York City time, on the
Calculation Date for that Interest Determination Date under the caption "...
Treasury Constant Maturities... Federal Reserve Board Release H.15... Mondays
Approximately 3:45 P.M.," under the column for the Index Maturity described in
the related pricing supplement for:
(1) if the Designated CMT Telerate Page is 7051, the rate on such Interest
Determination Date; or
(2) if the Designated CMT Telerate Page is 7052, the weekly or monthly
average for the week, or the month, specified in the related pricing
supplement, ended immediately preceding the week or month in which the
related Interest Determination Date occurs.
The calculation agent will follow the following procedures if the CMT Rate
cannot be determined as described above:
- If the rate is not displayed on the relevant page by 3:00 P.M., New York
City time, on the Calculation Date, then the CMT Rate will be the Treasury
constant maturity rate for the Designated CMT Maturity Index, as published
in H.15(519).
- If that rate is not published in H.15(519) by 3:00 P.M., New York City
time, on the Calculation Date, then the CMT Rate will be the Treasury
constant maturity rate (or other United States Treasury rate) for the
Designated CMT Maturity Index for the Interest Determination 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 that information is not provided by 3:00 P.M., New York City time, on
the Calculation Date, then the calculation agent will determine the CMT
Rate to be a yield to maturity based on the average of the secondary
market closing offered rates, as of approximately 3:30 P.M., New York City
time, on the Interest Determination Date reported, according to their
written records, by three leading primary United States government
securities dealers (each, a "Reference Dealer") in New York City. The
calculation agent will select five Reference Dealers and will eliminate
the highest quotation (or, in the event of overlap, one of the highest
quotations) and the lowest
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quotation (or, in the event of overlap, one of the lowest quotations), 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 the Designated CMT Maturity Index minus one
year.
- If the calculation agent cannot obtain three Treasury Note quotations, the
calculation agent will determine the CMT Rate to be a yield to maturity
based on the average of the secondary market offered rates as of
approximately 3:30 P.M., New York City time, on the Interest Determination
Date of three Reference Dealers in New York City (selected using the same
method described above) for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated
CMT Maturity Index and in an amount of at least $100,000,000. If two
Treasury Notes with an original maturity have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the calculation agent
will obtain quotations for the Treasury Note with the shorter remaining
term to maturity.
- If three or four (but not five) Reference Dealers are quoting as described
above, then the CMT Rate will be based on the average of the offered rates
obtained and neither the highest nor the lowest of those quotations will
be eliminated.
- If fewer than three Reference Dealers selected by the calculation agent
are quoting as described above, the CMT Rate will remain the CMT Rate then
in effect on the Interest Determination Date.
"Designated CMT Telerate Page" means the display on Telerate, on the page
specified in the applicable pricing supplement (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) or, if no such page is specified in the
applicable pricing supplement, page 7052.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
the applicable pricing supplement with respect to which the CMT Rate will be
calculated or, if no such maturity is specified in the applicable pricing
supplement, 2 years.
ELEVENTH DISTRICT COST OF FUNDS RATE NOTES
The "Eleventh District Cost of Funds Rate" for any Interest Determination
Date is the rate equal to the monthly weighted average cost of funds for the
month preceding the Interest Determination Date as displayed on the Telerate
Page 7058 by 11:00 A.M., San Francisco time, on the Calculation Date for that
Interest Determination Date under the caption "11(th) District."
The calculation agent will use the following procedures if the Eleventh
District Cost of Funds Rate cannot be determined as described above:
- If the rate is not displayed on the relevant page by 11:00 A.M., San
Francisco time, on the Calculation Date, then the Eleventh District Cost
of Funds Rate will be the monthly weighted average cost of funds paid by
member institutions of the Eleventh Federal Home Loan Bank District, as
announced by the Federal Home Loan Bank of San Francisco, for the month
immediately preceding the Interest Determination Date.
- If no announcement was made relating to the month preceding the Interest
Determination Date, the Eleventh District Cost of Funds Rate will remain
the Eleventh District Cost of Funds Rate then in effect on the Interest
Determination Date.
S-15
<PAGE>
INDEXED NOTES
We may issue Notes for which the amount of interest or principal that you
will receive will not be known on your date of purchase. We will specify the
formulae for computing interest or principal payments for these types of Notes,
which we call "Indexed Notes", by reference to securities, financial or
non-financial indices, currencies, commodities, interest rates, or composites or
baskets of any or all of the above. Examples of indexed items that we may use
include a published stock index, the common stock price of a publicly traded
company, the value of the U.S. dollar versus another currency such as the
Japanese Yen, or the price in a particular market of a barrel of West Texas
intermediate crude oil.
If you purchase an Indexed Note, you may receive a principal amount at
maturity that is greater than or less than the Note's face amount, and an
interest rate that is greater than or less than the interest rate that you would
have earned if you had instead purchased a conventional debt security issued by
us at the same time with the same maturity. The amount of interest and principal
that you will receive will depend on the structure of the Indexed Note and the
level of the specified indexed item throughout the term of the Indexed Note and
at maturity. Specific information pertaining to the method of determining the
interest payments and the principal amount will be described in the applicable
pricing supplement, which may include additional risk factors unique to the
Indexed Note, certain historical information for the specified indexed item and
certain additional United States federal tax considerations.
RENEWABLE NOTES
We may issue renewable notes ("Renewable Notes") which are Notes that will
automatically renew at their maturity date unless the holder of the Renewable
Note elects to terminate the automatic extension feature by giving notice in the
manner described in the related pricing supplement.
If you purchase Renewable Notes, you must give notice of termination at
least 15 but not more than 30 days prior to the Renewal Date. You may terminate
the automatic extension for less than all of your Renewable Notes only if the
terms of the Note specifically permit partial termination. An election to
terminate the automatic extension of any portion of the Renewable Note is not
revocable and will be binding on you. If you elect to terminate the automatic
extension of the maturity of the Note, you will become entitled to the principal
and interest accrued up to the Renewal Date. The related pricing supplement will
identify a final maturity date beyond which you cannot renew the maturity date.
If a Renewable Note is represented by a Global Security, DTC or its nominee
will be the holder of the Renewable Note and therefore will be the only entity
that can exercise a right to terminate the automatic extension of a Renewable
Note. In order to ensure that DTC or its nominee will exercise a right to
terminate the automatic extension provisions of a particular Renwable Note, the
beneficial owner of the Renewable Note must instruct the broker or other DTC
participant through which it holds an interest in the Renewable Note to notify
DTC of its desire to terminate the automatic extension of the Renewable Note.
Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other participant through which it holds an interest in a Renewable
Note to ascertain the cut-off time by which an instruction must be given for
delivery of timely notice to DTC or its nominee.
EXTENDIBLE NOTES
We may issue Notes whose stated maturity date may be extended at our option
(an "Extendible Note") for one or more whole year periods (each an "Extension
Period"), up to but not beyond a final maturity date described in the related
pricing supplement (not to exceed 30 years from the date of issue).
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We may exercise our option to extend the Extendible Note by notifying the
trustee (or any duly appointed paying agent) at least 45 but not more than 60
days prior to the then effective maturity date. If we elect to extend the
Extendible Note, the Trustee (or paying agent) will mail (at least 40 days prior
to the initial maturity date) to the registered holder of the Extendible Note a
notice ("Extension Notice") informing the holder of our election, the new
maturity date and any updated terms. Upon the mailing of the Extension Notice,
the maturity of such Note will be extended automatically as set forth in the
Extension Notice.
However, we may, not later than 20 days prior to the maturity date of an
Extendible Note (or, if such date is not a Business Day, on the immediately
succeeding Business Day), at our option, establish a higher interest rate, in
the case of a Fixed Rate Note, or a higher Spread and/or Spread Multiplier, in
the case of a Floating Rate Note, for the Extension Period by mailing or causing
the trustee (or paying agent) to mail notice of such higher interest rate or
higher Spread and/or Spread Multiplier to the holder of the Extendible Note. The
notice will be irrevocable.
If we elect to extend the maturity of an Extendible Note, the holder of the
Note will have the option to instead elect repayment of the Note by us on the
then effective maturity date. In order for an Extendible Note to be so repaid on
such maturity date, we must receive, at least 15 days but not more than 30 days
prior to the maturity date:
1) the Extendible Note with the form "Option to Elect Repayment" on the reverse
of the Extendible Note duly completed; or
2) a facsimile transmission, telex or a letter from a member of a national
securities exchange or the National Association of Securities Dealers, Inc.
(the "NASD") or a commercial bank or trust company in the United States
setting forth the name of the holder of the Extendible Note, the principal
amount of the Extendible Note, the principal amount of the Extendible Note
to be repaid, the certificate number or a description of the tenor and terms
of the Extendible Note, a statement that the option to elect repayment is
being exercised thereby and a guarantee that the Extendible Note to be
repaid, together with the duly completed form entitled "Option to Elect
Repayment" on the reverse of the Extendible Note, will be received by the
trustee (or paying agent) not later than the fifth Business Day after the
date of the facsimile transmission, telex or letter; PROVIDED, HOWEVER, that
the facsimile transmission, telex or letter will only be effective if the
trustee or paying agent receives the Extendible Note and form duly completed
by that fifth Business Day. A holder of an Extendible Note may exercise this
option for less than the aggregate principal amount of the Extendible Note
then outstanding if the principal amount of the Extendible Note remaining
outstanding after repayment is an authorized denomination.
If an Extendible Note is represented by a global security, DTC or its
nominee will be the holder of that Extendible Note and therefore will be the
only entity that can exercise a right to repayment. In order to ensure that DTC
or its nominee will timely exercise a right to repayment with respect to a
particular Extendible Note, the beneficial owner of that Extendible Note must
instruct the broker or other participant through which it holds an interest in
the Extendible Note to notify DTC of its desire to exercise a right of
repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other participant through which it holds an interest in an
Extendible Note to determine the cut-off time by which an instruction must be
given for timely notice to be delivered to DTC or its nominee.
WARRANTS
We may issue Notes paired with warrants. In that case, the related
prospectus supplement will include a description of those warrants.
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OPTIONAL REDEMPTION, REPAYMENT AND REPURCHASE
We will indicate in the pricing supplement for a Note whether we will have
the option to redeem the Note before the stated maturity and the price or prices
at which, and date or dates on which we may redeem the Note. If we are allowed
to redeem a Note, we may exercise the option by notifying the trustee at least
45 days prior to the redemption date. At least 30 but not more than 60 days
before the redemption date, the trustee will mail notice or cause the paying
agent to mail notice of redemption to the holders. If we partially redeem a
Note, we will issue a new Note or Notes for the unredeemed portion.
The pricing supplement relating to a Note will also indicate whether you
will have the option to elect repayment by us prior to the stated maturity, and
the price and the date or dates on which repayment may occur.
For a Note to be repaid at your option, the paying agent must receive, at
least 30 but not more than 60 days prior to an optional repayment date, such
Note with the form entitled "Option to Elect Repayment" on the reverse of the
Note duly completed. You may also send the paying agent a facsimile or letter
from a member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States describing the particulars of the payment, including a guarantee that the
Note and the form entitled "Option to Elect Repayment" will be received by the
paying agent no later than five Business Days after such facsimile or letter. If
you present a Note for repayment, such act will be irrevocable. You may exercise
the repayment option for less than the entire principal of the Note, provided
the remaining principal outstanding is an authorized denomination. If you elect
partial repayment, your Note will be cancelled, and we will issue a new Note or
Notes for the remaining amount.
If a Note is represented by a global security, DTC or its nominee will be
the holder of that global security and therefore will be the only entity that
can exercise a right of repayment. If you are a beneficial owner of a global
security and you want to exercise your right of repayment, you must instruct
your broker or other participant through which you hold an interest in a Note to
notify DTC. You should consult your broker or such participant to discuss the
appropriate cut-off times and any other requirements for giving this
instruction. The giving of any such instruction will be irrevocable.
If a Note is an Original Issue Discount Note (other than an Indexed Note),
the amount payable in the event of redemption or repayment prior to its stated
maturity will be the amortized face amount on the redemption or repayment date,
as the case may be. The amortized face amount of an Original Issue Discount Note
will be equal to (a) the issue price plus (b) that portion of the difference
between the issue price and the principal amount of the Note that has accrued at
the yield to maturity described in the applicable pricing supplement (computed
in accordance with generally accepted U.S. bond yield computation principles) by
the redemption or repayment date. However, in no case will the amortized face
amount of an Original Issue Discount Note exceed its principal amount.
We may at any time purchase Notes at any price in the open market or
otherwise. We may hold, resell or surrender for cancellation any Notes that we
purchase.
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SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless we indicate otherwise in the applicable pricing supplement, we will
denominate the Notes in U.S. dollars. We will make principal and interest
payments on the Notes in U.S. dollars and you must pay the purchase price of the
Notes in immediately available funds. If any of the Notes ("Foreign Currency
Notes") are to be denominated or payable in a currency or basket of currencies
other than U.S. dollars (a "specified currency"), the following provisions will
apply in addition to, and to the extent inconsistent therewith will replace, the
description of general terms and provisions of Notes set forth in the
accompanying prospectus and elsewhere in this prospectus supplement.
A pricing supplement with respect to any Foreign Currency Note (which may
include information with respect to applicable current foreign exchange
controls) is a part of this prospectus and prospectus supplement. Any
information we furnish you concerning exchange rates is furnished as a matter of
information only and you should not regard it as indicative of the range of, or
trends in fluctuations in, currency exchange rates that may occur in the future.
We may offer Foreign Currency Notes denominated and/or payable in a
specified currency or specified currencies. Unless we indicate otherwise in the
applicable pricing supplement, you are required to pay for Foreign Currency
Notes in the specified currency. At the present time, there are limited
facilities in the United States for conversion of U.S. dollars into specified
currencies and vice versa, and banks may elect not to offer non-U.S. dollar
checking or savings account facilities in the United States. However, at your
request on or prior to the third Business Day preceding the date of delivery of
the Foreign Currency Notes, or by such other day as determined by the Agent who
presents such offer to purchase Foreign Currency Notes to us, such Agent may be
prepared to arrange for the conversion of U.S. dollars into the applicable
specified currency set forth in the applicable pricing supplement to enable you
to pay for the Foreign Currency Notes. Each such conversion will be made by the
Agent or Agents on such terms and subject to such conditions, limitations and
charges as the Agent may from time to time establish in accordance with their
regular foreign exchange practices. If you purchase Foreign Currency Notes, you
will pay all costs of exchange.
The applicable pricing supplement will set forth information about the
specified currency in which a particular Foreign Currency Note is denominated
and/or payable, including historical exchange rates and a description of the
currency and any exchange controls, and, in the case of a basket of currencies,
will include a description of such basket and a description of provisions for
payment in the event such currency basket is no longer used for the purposes for
which it was established.
PAYMENT OF PRINCIPAL AND INTEREST
We will pay the principal and any interest on Foreign Currency Notes as
specified below.
Currently, banks do not generally offer non-U.S. dollar denominated account
facilities in their offices in the United States, although they are permitted to
do so. Accordingly, if you are a holder of Foreign Currency Notes you will be
paid in U.S. dollars converted from the specified currency unless you elect to
be paid in the specified currency or unless the applicable pricing supplement
provides otherwise.
If you hold a Foreign Currency Note we will base any U.S. dollar amount that
you are owed on the highest bid quotation in The City of New York received by
our agent specified in the applicable pricing supplement (the "Exchange Rate
Agent") at approximately 11:00 A.M., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign exchange
dealers (one of whom may be the Exchange Rate Agent) selected by the Exchange
Rate Agent and approved by us for the purchase by the quoting dealer of the
specified currency for U.S. dollars for settlement on such payment date in the
aggregate amount of the specified currency payable
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to all holders of Foreign Currency Notes scheduled to receive U.S. dollar
payments and at which the applicable dealer commits to execute a contract. If
three such bid quotations are not available, we will make payments in the
specified currency. All currency exchange costs will be borne by the holders of
the Foreign Currency Note by deductions from such payments.
Unless we indicate otherwise in the applicable pricing supplement, as a
holder of Foreign Currency Notes you may elect to receive payment of the
principal of and interest on the Foreign Currency Notes in the specified
currency by transmitting a written request for such payment to the corporate
trust office of the trustee in The City of New York on or prior to the Regular
Record Date or at least fifteen calendar days prior to Maturity, as the case
maybe. You may make this request in writing (mailed or hand delivered) or sent
by facsimile transmission. As a holder of a Foreign Currency Note you may elect
to receive payment in the specified currency for all principal and interest
payments and need not file a separate election for each payment. Your election
will remain in effect until revoked by written notice to the trustee, but
written notice of any such revocation must be received by the trustee on or
prior to the Regular Record Date or at least fifteen calendar days prior to the
maturity date, as the case may be. If your Foreign Currency Notes are held in
the name of a broker or nominee, you should contact your broker or nominee to
determine whether and how you may elect to receive payments in the specified
currency.
If a Foreign Currency Note is represented by a global security, DTC or its
nominee will be the holder of the Foreign Currency Note and will be entitled to
all payments on the Foreign Currency Note. Although DTC can hold Foreign
Currency Notes denominated in foreign currencies, all payments to DTC will be
made in U.S. dollars. Accordingly, a beneficial owner of the related global
security who elects to receive payments of principal, premium, if any, and/or
interest, if any, in the specified currency must notify the participant through
which it owns its interest on or prior to the applicable Record Date or at least
fifteen calendar days prior to the maturity, as the case may be, of such
beneficial owner's election. The participant must notify DTC of such election on
or prior to the third Business Day after such Record Date or at least twelve
calendar days prior to the maturity, as the case may be, and DTC will notify the
trustee of such election on or prior to the fifth Business Day after such Record
Date or at least ten calendar days prior to the maturity, as the case may be. If
the participant receives complete instructions from the beneficial owner and
such instructions are timely forwarded by the participant to DTC, and by DTC to
the trustee, on or prior to such dates, then the beneficial owner should receive
payments in the specified currency. See "Description of Debt
Securities--Book-Entry Debt Securities."
We will pay principal and interest on Foreign Currency Notes to be paid in
U.S. dollars in the manner specified in the accompanying prospectus and this
prospectus supplement with respect to Notes denominated in U.S. dollars. See
"Description of the Notes--General". We will pay interest on Foreign Currency
Notes in the specified currency by check mailed on the relevant Interest Payment
Date to the persons entitled thereto to the address of such holders as they
appear in the security register or, at our option by wire transfer to a bank
account maintained by the holder in the country of the specified currency. The
principal of Foreign Currency Notes, together with interest accrued and unpaid
thereon, due at maturity will be paid in immediately available funds upon
surrender of such Foreign Currency Notes at the corporate trust office of the
Trustee in The City of New York, or, at our option, by wire transfer to such
bank account.
PAYMENT CURRENCY
If a specified currency is not available for the payment of principal, any
premium or any interest with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances beyond our control, we
will be entitled to satisfy our obligations to holders of Foreign Currency Notes
by making such payment in U.S. dollars on the basis of the noon buying rate in
The City of New York for cable transfers of the specified currency as certified
for customs purposes (or, if not so certified as otherwise determined) by the
Federal Reserve Bank of New York (the "Market
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Exchange Rate") as computed by the Exchange Rate Agent on the second Business
Day prior to such payment or, if not then available, on the basis of the most
recently available Market Exchange Rate or as otherwise indicated in the
applicable pricing supplement. Any payment made under such circumstances in U.S.
dollars where the required payment is in a specified currency will not
constitute a default under the indenture with respect to the Notes. All
determinations referred to above made by the Exchange Rate Agent will be at its
sole discretion and will, in the absence of clear error, be conclusive for all
purposes and binding on the holders of the Foreign Currency Notes.
AS INDICATED ABOVE, IF YOU INVEST IN FOREIGN CURRENCY NOTES OR CURRENCY
INDEXED NOTES YOUR INVESTMENT WILL BE SUBJECT TO SUBSTANTIAL RISKS, THE EXTENT
AND NATURE OF WHICH CHANGE CONTINUOUSLY. AS WITH ANY INVESTMENT THAT YOU MAKE IN
A SECURITY, YOU SHOULD CONSULT YOUR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE
RISKS ENTAILED IN AN INVESTMENT IN FOREIGN CURRENCY NOTES OR CURRENCY INDEXED
NOTES. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR YOU IF YOU ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY MATTERS.
UNITED STATES TAXATION
In the opinion of Ivins, Phillips & Barker, Chartered, our special tax
counsel, the following summary accurately describes the material United States
federal income tax consequences of the purchase, ownership, and disposition of a
Note, subject to the limitations stated below. Such opinion is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
(including proposed Regulations and temporary Regulations) promulgated
thereunder, rulings, official pronouncements and judicial decisions, all as in
effect on the date of this prospectus supplement and all of which are subject to
change, possibly with retroactive effect, or to different interpretations. This
summary provides general information only and does not address all of the
federal income tax consequences that may be applicable to a holder of a Note. It
does not address all of the tax consequences that may be relevant to certain
types of holders subject to special treatment under the federal income tax law,
such as individual retirement and other tax-deferred accounts, dealers in
securities or currencies, life insurance companies, tax-exempt organizations,
persons holding Notes as a hedge or hedged against currency risk, as a position
in a straddle for tax purposes, as part of a "synthetic security" or other
integrated investment comprised of a Note and one or more other investments or
United States persons (as defined below) whose functional currency is other than
the U.S. dollar. It also does not discuss the tax consequences to subsequent
purchasers of Notes and is limited to investors who hold Notes as a capital
asset. The federal income tax consequences of purchasing, holding or disposing
of a particular Note will depend, in part, on the particular terms of such Note
as set forth in the applicable pricing supplement. The federal income tax
consequences of purchasing, holding or disposing of certain Floating Rate Notes,
Foreign Currency Notes (other than Single Foreign Currency Notes, as defined
below), Amortizing Notes, Floating Rate/Fixed Rate Notes, Indexed Notes,
Renewable Notes and exchangeable or convertible Debt Securities will be set out
in the applicable pricing supplement. In a recent announcement, the Treasury
Department and the Internal Revenue Service stated that the current proposed
regulations concerning multiple-currency debt instruments and contingent payment
debt instruments denominated in foreign currencies may be replaced with new
proposed regulations. No such regulations have yet been issued. Persons
considering the purchase of Notes and making any election under the Code or the
Treasury Regulations with respect to such Notes should consult their own tax
advisors concerning the application of the United States federal income tax law
to their particular situations as well as any tax consequences arising under the
law of any state, local or foreign tax jurisdiction, subject to the limitations
stated below.
"Single Foreign Currency Note" shall mean a Note on which all payments a
holder is entitled to receive are denominated in or determined by reference to
the value of a single Foreign Currency. "Foreign Currency" shall mean a currency
or currency unit, other than a hyperinflationary currency or the U.S. dollar.
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UNITED STATES PERSONS
For purposes of the following discussion, "United States person" means (1)
an individual who is a citizen or resident of the United States, (2) an estate
subject to United States federal income taxation without regard to the source of
its income, (3) a corporation, partnership or other business entity created or
organized in or under the laws of the United States or any state or the District
of Columbia, unless, in the case of a partnership, the Internal Revenue Service
(the "Service") provides otherwise by regulations, or (4) a trust if both (A) a
court within the United States is able to exercise primary supervision over the
administration of the trust, and (B) one or more United States persons have the
authority to control all substantial decisions of the trust. The following
discussion pertains only to a holder of a Note who is a beneficial owner of such
Note and who is a United States person.
PAYMENTS OF INTEREST ON NOTES THAT ARE NOT DISCOUNT NOTES
Except as discussed below under "Discount Notes" and "Short-Term Notes",
payments of interest on a Note will be taxable to a holder as ordinary interest
income at the time it is accrued or received in accordance with the holder's
method of tax accounting. If the payment is denominated in or determined with
reference to a single Foreign Currency, the amount required to be included in
income by a cash basis holder will be the U.S. dollar value of the amount paid
(determined on the basis of the "spot rate" on the date such payment is
received) regardless of whether the payment is in fact converted into U.S.
dollars. No exchange gain or loss will be recognized with respect to the receipt
of such payment.
Except in the case of a Spot Rate Convention Election (as defined below), a
holder of a Single Foreign Currency Note who uses the accrual method of
accounting or is otherwise required to accrue interest income prior to receipt
will be required to include in income for each taxable year the U.S. dollar
value of the interest that has accrued during such year, determined by
translating such interest at the average rate of exchange for the period or
periods during which such interest has accrued. The average rate of exchange for
an interest accrual period (or partial period) is the simple average of the spot
exchange rates for each business day of such period (or such other average that
is reasonably derived and consistently applied by the holder). Upon receipt of
an interest payment, such holder will recognize ordinary gain or loss in an
amount equal to the difference between the U.S. dollar value of the Foreign
Currency received (determined on the basis of the "spot rate" on the date such
payment is received) or, in the case of interest received in U.S. dollars rather
than in Foreign Currency, the amount so received and the U.S. dollar value of
the interest income that such holder has previously included in income with
respect to such payment. Any such gain or loss generally will not be treated as
interest income or expense, except to the extent provided by administrative
pronouncements of the Service.
A holder may elect (a "Spot Rate Convention Election") to translate accrued
interest into U.S. dollars at the "spot rate" on the last day of an accrual
period for the interest, or, in the case of an accrual period that spans two
taxable years, at the "spot rate" on the last day of the taxable year.
Additionally, if a payment of interest is received within five business days of
the last day of the accrual period, an electing holder may instead translate
such accrued interest into U.S. dollars at the "spot rate" on the day of
receipt. Any such election will apply to all debt instruments held by the United
States person at the beginning of the first taxable year to which the election
applies or thereafter acquired by the United States person and cannot be revoked
without the consent of the Service.
For purposes of this discussion, the "spot rate" generally means a rate that
reflects a fair market rate of exchange available to the public for currency
under a "spot contract" in a free market and involving representative amounts. A
"spot contract" is a contract to buy or sell a currency on or before two
business days following the date of the execution of the contract. If such a
spot rate cannot be
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demonstrated, the Service has the authority to determine the spot rate from a
source of exchange rate information reflecting actual transactions conducted in
a free market.
PURCHASE, SALE, EXCHANGE OR RETIREMENT OF NOTES
A holder's tax basis in a Note generally will be the U.S. dollar cost of the
Note to such holder (which in the case of a Note purchased with Foreign Currency
will be determined by translating the purchase price at the spot rate on the
date of purchase), increased by any original issue discount, market discount or
acquisition discount (all as defined below) previously included in the holder's
gross income (as described below), and reduced by any amortized premium (as
described below) and any principal payments and payments of stated interest that
are not payments of qualified stated interest (as defined below).
Upon the sale, exchange or retirement of a Note, a holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale, exchange or retirement (or the U.S. dollar value at the spot rate on
the date of the sale, exchange or retirement of the amount realized in Foreign
Currency), except to the extent such amount is attributable to accrued interest,
and the holder's tax basis in the Note. Except with respect to (1) gains or
losses attributable to changes in exchange rates (as described in the next
paragraph), (2) gain attributable to market discount (as described below) and
(3) gain on the disposition of a Short-Term Note (as described below), gain or
loss so recognized will be capital gain or loss and will be long-term capital
gain or loss, if, at the time of the sale, exchange or retirement, the Note was
held for more than one year. Under current law, long-term capital gains of
individuals are, under certain circumstances, taxed at lower rates than items of
ordinary income.
Gain or loss recognized by a holder on the sale, exchange or retirement of a
Single Foreign Currency Note that is attributable to changes in exchange rates
will be treated as ordinary income or loss and generally will not be treated as
interest income or expense except to the extent provided by administrative
pronouncements of the Service. Gain or loss attributable to changes in exchange
rates is recognized on the sale, exchange or retirement of a Single Foreign
Currency Note only to the extent of the total gain or loss recognized on such
sale, exchange or retirement.
EXCHANGE OF FOREIGN CURRENCY
A holder's tax basis in Foreign Currency purchased by the holder generally
will be the U.S. dollar value thereof at the spot rate on the date such Foreign
Currency is purchased. A holder's tax basis in Foreign Currency received as
interest on, or on the sale, exchange or retirement of, a Single Foreign
Currency Note will be the U.S. dollar value thereof at the spot rate at the time
such Foreign Currency is received. The amount of gain or loss recognized by a
holder on a sale, exchange or other disposition of Foreign Currency will be
equal to the difference between (1) the amount of U.S. dollars, the U.S. dollar
value at the spot rate of the Foreign Currency, or the fair market value in U.S.
dollars of the property received by the holder in the sale, exchange or other
disposition, and (2) the holder's tax basis in the Foreign Currency.
Accordingly, a holder that purchases a Note with Foreign Currency will
recognize gain or loss in an amount equal to the difference, if any, between
such holder's tax basis in the Foreign Currency and the U.S. dollar value at the
spot rate of the Foreign Currency on the date of purchase. Generally, any such
gain or loss will be ordinary income or loss and will not be treated as interest
income or expense, except to the extent provided by administrative
pronouncements of the Service.
SUBSEQUENT INTEREST PERIODS AND EXTENSION OF MATURITY
If so specified in the pricing supplement relating to a Note, we may have
the option (1) to reset the interest rate, in the case of a Fixed Rate Note, or
to reset the Spread, the Spread Multiplier or
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other formula by which the interest rate basis is adjusted, in the case of a
Floating Rate Note, and/or (2) to extend the Maturity of such Note. See
"Description of Notes--Interest and Interest Rates" and "Description of
Notes--Extendible Notes". The treatment of a holder of Notes with respect to
which such an option has been exercised who does not elect to have us repay such
Notes will depend on the terms established for such Notes by us pursuant to the
exercise of such option (the "revised terms"). Depending on the particular
circumstances, such holder may be treated as having surrendered such Notes for
new Notes with the revised terms in either a taxable exchange or a
recapitalization qualifying for non-recognition of gain or loss.
DISCOUNT NOTES
The following summary is a general description of U.S. federal income tax
consequences to holders of Notes issued with original issue discount ("Discount
Notes") and is based on the provisions of the Code as in effect on the date
hereof and on certain Treasury Regulations promulgated thereunder relating to
original issue discount (the "OID Regulations").
For U.S. federal income tax purposes, original issue discount is the excess
of the stated redemption price at maturity of each Discount Note over its issue
price, if such excess is greater than or equal to a DE MINIMIS amount (generally
1/4 of 1% of the Discount Note's stated redemption price at maturity multiplied
by the number of complete years to maturity from the issue date). The issue
price of an issue of Discount Notes that are issued for cash will be equal to
the first price at which a substantial amount of such Notes are sold for money.
For this purpose, sales to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers are ignored. The stated redemption price at maturity of a Discount
Note is the sum of all payments provided by the Discount Note other than
payments of "qualified stated interest". Under the OID Regulations, "qualified
stated interest" includes stated interest that is unconditionally payable in
cash or property (other than debt instruments of the issuer) at least annually
at a single fixed rate (with certain exceptions for lower rates paid during some
periods) or certain variable rates as described below. Interest is payable at a
single fixed rate only if the rate appropriately takes into account the length
of the interval between payments. Except as described below with respect to
Short-Term Notes, a holder of a Discount Note will be required to include
original issue discount in taxable income as it accrues before the receipt of
cash attributable to such income, regardless of such holder's method of
accounting for tax purposes. Special rules for Variable Rate Notes (as defined
below under "Variable Rate Notes") are described below under "Variable Rate
Notes".
The amount of original issue discount includible in taxable income by the
initial holder of a Discount Note is the sum of the daily portions of original
issue discount with respect to such Note for each day during the taxable year on
which such holder held such Note ("accrued original issue discount"). Generally,
the daily portion of the original issue discount is determined by allocating to
each day in any "accrual period" a ratable portion of the original issue
discount allocable to such accrual period. Under the OID Regulations, the
"accrual periods" for a Discount Note may be selected by each holder, may be of
any length, and may vary in length over the term of a Discount Note, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs either on the first day or final day of an
accrual period. The amount of original issue discount allocable to each accrual
period is equal to the excess (if any) of (a) the product of a Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and adjusted for the length of such accrual period) over (b) the amount
of qualified stated interest, if any, payable on such Discount Note and
allocable to such accrual period. The "adjusted issue price" of a Discount Note
at the beginning of any accrual period generally is the sum of the issue price
of a Discount Note plus the accrued original issue discount allocable for all
prior accrual periods reduced by any prior payment on the Discount Note other
than a payment of qualified stated interest. Under these rules, a holder of a
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Discount Note generally will have to include in taxable income increasingly
greater amounts of original issue discount in successive accrual periods.
Original issue discount on a Discount Note that is also a Single Foreign
Currency Note will be determined for any accrual period in the applicable
Foreign Currency and then translated into U.S. dollars in the same manner as
interest income accrued by a holder on the accrual basis, including the
application of a Spot Rate Convention Election. See "Payments of Interest on
Notes that are not Discount Notes". Likewise, upon receipt of payment
attributable to original issue discount (whether in connection with a payment of
interest or the sale, exchange or retirement of a Discount Note), a holder will
recognize exchange gain or loss to the extent of the difference between such
holder's basis in the accrued original issue discount (determined in the same
manner as for accrued interest) and the U.S. dollar value of such payment
(determined by translating any Foreign Currency received at the spot rate on the
date of payment). Generally, any such exchange gain or loss will be ordinary
income or loss and will not be treated as interest income or expense, except to
the extent provided in administrative pronouncements of the Service. For this
purpose, all payments on a Note will be viewed first as the payment of qualified
stated interest (determined under the original issue discount rules), second as
payments of previously accrued original issue discount (to the extent thereof),
with payments considered made for the earliest accrual periods first, and
thereafter as the payment of principal.
If a holder's tax basis in a Discount Note immediately after purchase
exceeds the adjusted issue price of the Discount Note (the amount of such excess
is considered "acquisition premium") but is not greater than the stated
redemption price at maturity of such Discount Note, the amount includible in
income in each taxable year as original issue discount is reduced (but not below
zero) by that portion of the excess properly allocable to such year.
If a holder purchases a Discount Note for an amount in excess of the stated
redemption price at maturity, the holder does not include any original issue
discount in income and generally may be subject to the "bond premium" rules
discussed below. See "Amortizable Bond Premium". If a holder has a tax basis in
a Discount Note that is less than the adjusted issue price of such Discount
Note, the difference may be subject to the market discount provisions discussed
below. See "Market Discount".
Under the OID Regulations, a holder of a Note may elect to include in gross
income all interest that accrues on such Note using the constant yield method.
For this purpose, interest includes stated interest, acquisition discount,
original issue discount, DE MINIMIS original issue discount, market discount, DE
MINIMIS market discount, and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium. Special rules apply to elections made with
respect to Notes issued with amortizable bond premium or market discount. Once
made with respect to a Note, the election cannot be revoked without the consent
of the Service. A holder considering an election under these rules should
consult a tax advisor.
MARKET DISCOUNT
If a holder purchases a Note (other than a Discount Note) for an amount that
is less than its stated redemption price at maturity, or purchases a Discount
Note for less than its "revised issue price" (as defined under the Code) as of
the purchase date, the amount of the difference will be treated as "market
discount" unless such difference is less than a specified DE MINIMIS amount.
Under the market discount rules of the Code, a holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange or retirement of, a Note as ordinary income to the extent of
the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. Further, a disposition of a Note by gift (and in certain other
circumstances) could result in the recognition of market discount income,
computed as if such Note had been sold at its then fair market value. In
addition, a holder who purchases a Note with
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market discount may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry such Note until the maturity of the Note or its earlier
disposition in a taxable transaction.
Market discount is considered to accrue ratably during the period from the
date of acquisition to the maturity date of a Note, unless the holder elects to
accrue market discount under the rules applicable to original issue discount. A
holder may elect to include market discount in income currently as it accrues,
in which case the rules described above regarding the deferral of interest
deductions will not apply.
With respect to a Single Foreign Currency Note, market discount is
determined in the applicable Foreign Currency. In the case of a holder who does
not elect current inclusion, accrued market discount is translated into U.S.
dollars at the spot rate on the date of disposition. No part of such accrued
market discount is treated as exchange gain or loss. In the case of a holder who
elects current inclusion, the amount currently includible in income for a
taxable year is the U.S. dollar value of the market discount that has accrued
during such year, determined by translating such market discount at the average
rate of exchange for the period or periods during which it accrued. Such an
electing holder will recognize exchange gain or loss with respect to accrued
market discount under the same rules as apply to accrued interest on a Single
Foreign Currency Note received by a holder on the accrual basis. See "Payments
of Interest on Notes that are not Discount Notes".
AMORTIZABLE BOND PREMIUM
Generally, if a holder's tax basis in a Note held as a capital asset exceeds
the stated redemption price at maturity of such Note, such excess may constitute
amortizable bond premium that the holder may elect to amortize under the
constant interest rate method over the period from his acquisition date to the
Note's maturity date. Under certain circumstances, amortizable bond premium may
be determined by reference to an early call date. Special rules apply with
respect to Single Foreign Currency Notes.
VARIABLE RATE NOTES
A "Variable Rate Note" is a Note that: (A) has an issue price that does not
exceed the total non-contingent principal payments by more than the lesser of
(1) the product of (x) the total non contingent principal payments, (y) the
number of complete years to maturity from the issue date and (z) .015, or (2) 15
percent of the total non contingent principal payments, and (B) does not provide
for stated interest other than stated interest compounded or paid at least
annually at (1) one or more "qualified floating rates," (2) a single fixed rate
and one or more qualified floating rates, (3) a single "objective rate" or (4) a
single fixed rate and a single objective rate that is a "qualified inverse
floating rate."
A qualified floating rate or objective rate in effect at any time during the
term of the instrument must be set at a "current value" of that rate. A "current
value" of a rate is the value of the rate on any day that is no earlier than 3
months prior to the first day on which that value is in effect and no later than
1 year following that first day.
A variable rate is a "qualified floating rate" if (1) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the Note
is denominated or (2) it is equal to the product of such a rate and either (a) a
fixed multiple that is greater than .65 but not more than 1.35, or (b) a fixed
multiple greater than .65 but not more than 1.35, increased or decreased by a
fixed rate. If a Note provides for two or more qualified floating rates that (1)
are within 0.25 percent of each other on the issue date or (2) can reasonably be
expected to have approximately the same values throughout the term of the Note,
the qualified floating rates together constitute a single qualified floating
rate. A rate is not a qualified
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floating rate, however, if the rate is subject to certain restrictions
(including caps, floors, governors, or other similar restrictions) unless such
restrictions are fixed throughout the term of the Note or are not reasonably
expected to significantly affect the yield on the Note.
An "objective rate" is a rate, other than a qualified floating rate, that is
determined using a single, fixed formula and that is based on objective
financial or economic information. A rate will not qualify as an objective rate
if it is based on information that is within the control of the issuer (or a
related party) or that is unique to the circumstances of the issuer (or a
related party), such as dividends, profits, or the value of the issuer's stock
(although a rate does not fail to be an objective rate merely because it is
based on the credit quality of the issuer). A variable rate is not an objective
rate, however, if it is reasonably expected that the average value of the rate
during the first half of the Note's term will be either significantly less than
or significantly greater than the average value of the rate during the final
half of the Note's term. An objective rate is a "qualified inverse floating
rate" if (1) the rate is equal to a fixed rate minus a qualified floating rate,
and (2) the variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the qualified floating rate.
If interest on a Note is stated at a fixed rate for an initial period of one
year or less followed by either a qualified floating rate or an objective rate
for a subsequent period and (1) the fixed rate and the qualified floating rate
or objective rate have values on the issue date of the Note that do not differ
by more than 0.25 percent or (2) the value of the qualified floating rate or
objective rate is intended to approximate the fixed rate, the fixed rate and the
qualified floating rate or the objective rate constitute a single qualified
floating rate or objective rate. Under these rules, Commercial Paper Rate Notes,
LIBOR Notes, Treasury Rate Notes, CD Rate Notes, Federal Funds Rate Notes, Prime
Rate Notes, and CMT Rate Notes generally will be treated as Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a single
qualified floating rate or objective rate and the interest is unconditionally
payable in cash at least annually, all stated interest on the Note is qualified
stated interest and the amount of OID, if any, is determined by using, in the
case of a qualified floating rate or qualified inverse floating rate, the value
as of the issue date of the qualified floating rate or qualified inverse
floating rate, or, in the case of any other objective rate, a fixed rate that
reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or a single objective rate, or at a single fixed rate
(other than at a single fixed rate for an initial period), the amount of
interest and OID accruals on the Note are generally determined by (1)
determining a fixed rate substitute for each variable rate provided under the
Variable Rate Note (generally, the value of each variable rate as of the issue
date or, in the case of an objective rate that is not a qualified inverse
floating rate, a rate that reflects the reasonably expected yield on the Note),
(2) constructing the equivalent fixed rate debt instrument (using the fixed rate
substitute described above), (3) determining the amount of qualified stated
interest and OID with respect to the equivalent fixed rate debt instrument, and
(4) making the appropriate adjustments for actual variable rates during the
applicable accrual period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the Variable
Rate Note as of the issue date would be approximately the same as the fair
market value of an otherwise identical debt instrument that provides for the
qualified floating rate (or qualified inverse floating rate) rather than the
fixed rate.
S-27
<PAGE>
SHORT-TERM NOTES
In general, an individual or other cash method holder of a Note that matures
one year or less from the date of its issuance (a "Short-Term Note") is not
required to accrue original issue discount on such Note unless it has elected to
do so. Holders who report income for federal income tax purposes under the
accrual method, however, and certain other holders, including banks, dealers
insecurities and electing holders, are required to accrue original issue
discount (unless the holder elects to accrue "acquisition discount" in lieu of
original issue discount) on such Note. "Acquisition discount" is the excess of
the remaining stated redemption price at maturity of the Short-Term Note over
the holder's tax basis in the Short-Term Note at the time of the acquisition. In
the case of a holder who is not required and does not elect to accrue original
issue discount on a Short-Term Note, any gain realized on the sale, exchange or
retirement of such Short-Term Note will be ordinary income to the extent of the
original issue discount accrued through the date of sale, exchange or
retirement. Such a holder will be required to defer, until such Short-Term Note
is sold or otherwise disposed of, the deduction of a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
Short-Term Note. Original issue discount or acquisition discount on a Short-Term
Note accrues on a straight-line basis unless an election is made to use the
constant yield method (based on daily compounding).
In the case of a Short-Term Note that is also a Single Foreign Currency
Note, the amount of original issue discount or acquisition discount subject to
current accrual and the amount of any exchange gain or loss on a sale, exchange
or retirement are determined under the same rules that apply to accrued interest
on a Single Foreign Currency Note held by a holder on the accrual basis. See
"Payments of Interest on Notes that are not Discount Notes".
The market discount rules will not apply to a Short-Term Note having market
discount.
NON-UNITED STATES PERSONS
Subject to the discussion of backup withholding below, payments of
principal, premium, if any, and interest (including original issue discount) by
us or our agent (in its capacity as such) to any holder who is a beneficial
owner of a Note but is not a United States person will not be subject to United
States federal withholding tax provided, in the case of premium, if any, and
interest (including original issue discount) that (1) such holder does not
actually or constructively own 10% of more of the total combined voting power of
all classes of our stock entitled to vote, (2) such holder is not a controlled
foreign corporation for United States tax purposes that is related to us through
stock ownership, (3) such holder is not a bank ineligible for the exemption from
withholding by reason of the application of Section 881(c)(3)(A) of the Code,
(4) such holder is not a foreign private foundation, and (5) either (A) the
beneficial owner of the Note certifies to us or our agent, under penalties of
perjury, that such owner is not a United States person and provides its name and
address (which certification can be made on IRS Form W-8 or Form W-8BEN) or (B)
a securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"financial institution") certifies to us or our agent, under penalties of
perjury, that the certification described in clause (A) hereof has been received
from the beneficial owner by it or by another financial institution acting for
the beneficial owner. Recently finalized Treasury Regulations provide
alternative methods for satisfying the certification requirement described in
clause (5)(A) and (B) above. These Regulations generally will be effective for
payments made after December 31, 2000, subject to certain transition rules.
These Regulations also would require, in the case of Notes held by a foreign
partnership, that (x) the certification described in clause (5)(A) above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships.
S-28
<PAGE>
If a holder of a Note who is not a United States person cannot satisfy the
requirements of the "portfolio interest" exception described above, payments of
interest (including original issue discount) made to such holder generally will
be subject to a 30% withholding tax (or such lower rate as may be provided by an
applicable income tax treaty between the United States and a foreign country)
unless the beneficial owner of the Note provides us or our paying agent, as the
case may be, with a properly executed (1) IRS Form 1001 or Form W-8BEN claiming
an exemption from withholding under the benefit of a tax treaty or (2) IRS Form
4224 or Form W-8ECI stating that interest paid on the Note is not subject to
withholding tax because it is effectively connected with the beneficial owner's
conduct of a trade or business in the United States. Under the recently
finalized Treasury regulations, Holders who are not United States persons will
generally be required to provide the appropriate IRS Form W-8 in lieu of the IRS
Form 1001 and IRS Form 4224, although alternative documentation may be
applicable in certain situations.
If a holder of a Note who is not a United States person is engaged in a
trade or business in the United States and premium, if any, or interest
(including original issue discount) on the Note is effectively connected with
the conduct of such trade or business, such holder, although exempt from United
States withholding tax as discussed in the preceding paragraph (by reason of the
delivery of a properly completed IRS Form 4224 or Form W-8ECI), will be subject
to United States federal income tax on such premium, if any, and interest
(including original issue discount) in the same manner as if it were a United
States person, provided a true and accurate U.S. Federal income tax return is
timely filed. In addition, if such holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to adjustments. In addition,
branch interest taxes may apply.
Subject to the discussion of "backup" withholding below, any capital gain
realized upon the sale, exchange or retirement of a Note by a holder who is not
a United States person will not be subject to United States federal income or
withholding taxes if (1) such gain is not effectively connected with a United
States trade or business of the holder, or (2) in the case of an individual,
either (A) such holder is either not present in the United States for 183 days
or more in the taxable year of the retirement or disposition or (B) if such
holder has a "tax home" (as determined in the Code) in the United States, the
gain is not attributable to an office or other fixed place of business
maintained by such holder in the United States.
Notes held by an individual who at the time of death is neither a citizen
nor a resident of the United States for United States tax purposes will not be
subject to United States federal estate tax, provided (1) that the income from
the Notes was not or would not have been effectively connected with a United
States trade or business of such individual, (2) that such individual qualified
for the exemption from United States federal withholding tax (without regard to
the certification requirements) that is described above, and (3) that such
individual did not, within the 10-year period ending with the date of death,
lose United States citizenship or cease to be a long-term resident of the United
States with a principal purpose of avoiding United States federal estate tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The "backup" withholding and information reporting requirements may apply to
certain payments of principal, any premium, and any interest (including original
issue discount) on a Note and to certain payments of proceeds of the sale or
retirement of a Note. We, our agent, a broker, the Trustee or any paying agent,
as the case may be, will be required to withhold tax from any payment that is
subject to backup withholding at a rate of 31% of such payment if the holder
fails to furnish his taxpayer identification number (social security number or
employer identification number), to certify that such holder is not subject to
backup withholding, or to otherwise comply with the applicable requirements of
the backup withholding rules. Certain holders (including, among others,
corporations) are not subject to the backup withholding and reporting
requirements.
S-29
<PAGE>
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by us or our agent (in its capacity as
such) to a holder of a Note who has provided the required certification under
penalties of perjury that it is not a United States person as set forth in
clause (5) in the first paragraph under "Non-United States Persons" or has
otherwise established an exemption (provided that neither we nor our agent has
actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not in fact satisfied). Recently finalized
Treasury Regulations would modify the application of the information reporting
requirements and backup withholding tax to holders who are not United States
persons for payments made after December 31, 2000. Among other things, these
regulations may require such holders to furnish new certifications of their
non-U.S. status.
Any amounts withheld under the backup withholding rules from a payment to a
holder may be claimed as a credit against such holder's United States federal
income tax liability provided required information is furnished to the Service.
WE HAVE INCLUDED THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE FOR YOUR
GENERAL INFORMATION ONLY AND IT MAY NOT BE APPLICABLE DEPENDING UPON YOUR
PARTICULAR SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
We are offering the Notes on a continuous basis through Blaylock & Partners,
L.P., Credit Suisse First Boston Corporation, Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated and Salomon Smith Barney Inc. (the "Agents"). The
Agents have agreed to use their best efforts to solicit orders. We have the
right to accept orders or reject proposed purchases in whole or in part. The
Agents also have the right, using their reasonable discretion, to reject any
proposed purchase of the Notes in whole or in part. We might pay an Agent a
commission ranging from .125% to 1.125% of the principal amount of Notes with a
stated maturity of nine months or more. The exact commission paid will be
determined by the stated maturity of the Notes sold. The following table
describes the potential proceeds we will receive but does not include expenses
payable by us in connection with the offering and sale of the Notes which we
currently estimate to be $200,000.
<TABLE>
<CAPTION>
AGENTS' COMMISSIONS PROCEEDS
PRICE TO PUBLIC AND DISCOUNTS TO TEXACO
------------------ ---------------------------- ------------------------------------
<S> <C> <C> <C>
Per Note................. 100% .125% to 1.125% 99.875% to 98.875%
Total.................... $ 2,000,000,000 $ 2,500,000 to $22,500,000 $ 1,997,500,000 to $1,977,500,000
</TABLE>
We may arrange for Notes to be sold through any Agent or may sell Notes
directly to investors. If we sell Notes directly to investors, we will not pay
any commissions or discounts. We also may sell Notes to any Agent as principal
for the Agent's account at a price agreed upon at the time of sale. Such Notes
may be resold by the Agent to investors at a fixed public offering price or at
prevailing market prices, or at a related price, that the Agent may determine.
Unless we specify otherwise in the applicable pricing supplement, if we sell a
Note to an Agent as principal, the Agent will purchase such Note at a price
equal to 100% of the principal amount minus a discount equal to the commission
that we would pay on an agency sale of a Note of identical maturity.
Agents may sell Notes purchased from us as principal to other dealers for
resale, to investors and other purchasers and may provide any portion of the
discount received in connection with their purchase from us to such dealers.
After the initial public offering of the Notes, the public offering price, the
concession and the discount may be changed.
S-30
<PAGE>
The Notes will not have an established trading market when issued. Also, we
do not intend to list the Notes on any securities exchange. The Agents may make
a market in the Notes, but are not obligated to do so and may discontinue any
market-making at any time without notice. There can be no assurance that a
secondary market for any Notes will develop or be maintained.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act. We have agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that they may be required to make in connection with such
indemnification.
Unless we specify otherwise in the applicable pricing supplement, you will
be required to pay the purchase price of the Notes in immediately available
funds in the specified currency in The City of New York on the date of
settlement. See "Description of the Notes--General".
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed-price basis, such Agent(s) will be permitted to engage in
certain transactions that stabilize the price of such Notes. Such transactions
may consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of such Notes. If the Agent or Agents creates or create,
as the case may be, a short position in such Notes (i.e., if it sells or they
sell Notes in an aggregate principal amount exceeding that set forth in the
applicable pricing supplement), such Agent(s) may reduce that short position by
purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
Notes to be higher than it might be in the absence of such purchases.
Neither we nor any of the Agents make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the Notes. In addition, neither we nor any of the
Agents make any representation that the Agents will engage in any such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
Debt securities having terms substantially similar to the terms of the Notes
(but constituting a separate series of debt securities for purposes of the
applicable indenture) may be offered outside the United States by us on a
continuing basis, concurrently with offerings of the Notes. We may also sell
Notes, other debt securities or warrants to purchase debt securities pursuant to
another prospectus supplement to the accompanying prospectus. The aggregate
initial offering price of Notes that may be offered by this prospectus
supplement and the accompanying prospectus will be reduced by any such sales.
In the ordinary course of its business, the Agents and their affiliates have
engaged and may in the future engage in investment and commercial banking
transactions with us and certain of our subsidiaries.
S-31
<PAGE>
PROSPECTUS
TEXACO INC.
AND
TEXACO CAPITAL INC.
$2,000,000,000
GUARANTEED DEBT SECURITIES
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
Texaco Inc. or Texaco Capital Inc. may offer any of the following securities
from time to time:
- debt securities issued by Texaco Capital Inc. and guaranteed by Texaco
Inc.
- debt securities issued by Texaco Inc.
- common stock issued by Texaco Inc.
- preferred stock issued by Texaco Inc.
- warrants to purchase debt securities, common stock or preferred stock
- depositary shares relating to preferred stock
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
July 20, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
About This Prospectus...................................................................................... 2
Where You Can Find More Information........................................................................ 2
Texaco Inc. ............................................................................................... 3
Selected Financial Data of Texaco.......................................................................... 4
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends... 5
Texaco Capital Inc. ....................................................................................... 5
Use of Proceeds............................................................................................ 5
Plan of Distribution....................................................................................... 5
Description of Debt Securities............................................................................. 6
Description of Texaco Common Stock......................................................................... 11
Description of Texaco Preferred Stock...................................................................... 12
Description of the Depositary Shares....................................................................... 14
Description of the Warrants................................................................................ 17
Experts.................................................................................................... 18
Legal Opinions............................................................................................. 18
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
sell any combination of the securities described in this prospectus in one or
more offerings up to a total dollar amount of $2,000,000,000. This prospectus
provides you with a general description of the securities we may offer. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with additional information described under the heading Where You Can
Find More Information.
WHERE YOU CAN FIND MORE INFORMATION
Texaco Inc. files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any document we file
at the SEC's public reference rooms in Washington, D.C., Chicago, Illinois, and
New York, New York. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from the SEC's Web site at "http://www.sec.gov".
2
<PAGE>
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to these documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below, which we have already filed with the SEC,
and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until we sell all of the
securities.
<TABLE>
<CAPTION>
TEXACO SEC FILINGS (FILE NO. 1-27) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K.............................. Year ended December 31, 1998.
Quarterly Report on Form 10-Q........................... Quarter ended March 31, 1999.
Current Reports on Form 8-K............................. Filed January 8, 1999, January 26, 1999, April 27, 1999
and April 28, 1999.
</TABLE>
You may request a copy of these filings (other than any exhibits, unless we
have specifically incorporated by reference an exhibit in this Prospectus) at no
cost, by writing or telephoning us at the following address:
Texaco Inc.
2000 Westchester Avenue
White Plains, New York 10650
Tel: (914) 253-4000
Attention: Secretary
This prospectus is part of a registration statement we filed with the SEC.
We have incorporated into this registration statement exhibits that include a
form of proposed underwriting agreement and indenture. You should read the
exhibits carefully for provisions that may be important to you.
You should rely on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. 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 in this prospectus or the documents incorporated by
reference is accurate as of any date other than the date on the front of this
prospectus or those documents.
We are not including any separate financial information for Texaco Capital.
Texaco Capital is wholly owned by Texaco Inc. It essentially has no independent
operations, and any debt securities it issues will be fully and unconditionally
guaranteed by Texaco Inc.
TEXACO INC.
Texaco Inc. was incorporated in Delaware on August 26, 1926 as The Texas
Corporation. Our name was changed in 1941 to The Texas Company and in 1959 to
Texaco Inc. We are the successor of a corporation incorporated in Texas in 1902.
Our principal executive offices are located at 2000 Westchester Avenue, White
Plains, New York 10650; telephone: (914) 253-4000.
We are a vertically integrated enterprise principally engaged in the
worldwide exploration for and production, transportation, refining and marketing
of crude oil, natural gas and petroleum products.
3
<PAGE>
SELECTED FINANCIAL DATA OF TEXACO
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------------------------------
(MILLIONS OF DOLLARS, EXCEPT WHERE NOTED) 1999 1998 1997 1996 1995 1994
- --------------------------------------------------- --------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues from continuing operations................ $ 7,190 $ 31,707 $ 46,667 $ 45,500 $ 36,787 $ 33,353
Income (loss) before cumulative effect of
accounting change
Continuing operations............................ $ 199 $ 603 $ 2,664 $ 2,018 $ 728 $ 979
Discontinued operations.......................... -- -- -- -- -- (69)
Cumulative effect of accounting change........... -- (25) -- -- (121) --
------- --------- --------- --------- --------- ---------
Net income....................................... $ 199 $ 578 $ 2,664 $ 2,018 $ 607 $ 910
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
Net income per common share (dollars)
Basic
Income (loss) before cumulative effect of
accounting change
Continuing operations............................ $ .35 $ 1.04 $ 4.99 $ 3.77 $ 1.29 $ 1.72
Discontinued operations.......................... -- -- -- -- -- (.14)
Cumulative effect of accounting change........... -- (.05) -- -- (.24) --
------- --------- --------- --------- --------- ---------
Net income....................................... $ .35 $ .99 $ 4.99 $ 3.77 $ 1.05 $ 1.58
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
Diluted
Income from continuing operations................ $ .35 $ 1.04 $ 4.87 $ 3.68 $ 1.28 $ 1.72
Net income....................................... $ .35 $ .99 $ 4.87 $ 3.68 $ 1.05 $ 1.58
Nonowner changes in equity......................... $ 179 $ 572 $ 2,601 $ 1,863 $ 592 $ 972
Cash dividends per common share (dollars).......... $ .45 $ 1.80 $ 1.75 $ 1.65 $ 1.60 $ 1.60
Total cash dividends paid on common stock.......... $ 237 $ 952 $ 918 $ 859 $ 832 $ 830
At end of period:
Total assets....................................... $ 28,079 $ 28,570 $ 29,600 $ 26,963 $ 24,937 $ 25,505
Debt and capital lease obligations
Short-term....................................... $ 700 $ 939 $ 885 $ 465 $ 737 $ 917
Long-term........................................ 6,784 6,352 5,507 5,125 5,503 5,564
------- --------- --------- --------- --------- ---------
Total debt and capital lease obligations......... $ 7,484 $ 7,291 $ 6,392 $ 5,590 $ 6,240 $ 6,481
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
</TABLE>
4
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Our ratios of earnings to fixed charges and earnings to combined fixed
charges and preferred stock dividends for each of the periods indicated are set
forth in the table below. The information in the table for 1994 excludes
discontinued operations. The information for 1995 and 1998 excludes the
cumulative effect of accounting changes. Preferred stock dividend requirements
have been adjusted (1) to reflect the pre-tax earnings that would be required to
cover:
- dividends on the Series C Variable Rate Cumulative Preferred Stock, which
was redeemed on September 30, 1994
- dividends on the Series E Variable Rate Cumulative Preferred Stock, which
was exchanged for common stock on November 8, 1994
- dividends on the Market Auction Preferred Shares
and (2) to exclude the interest portion of the Series B and Series F ESOP
Convertible Preferred Stock dividends. On February 16, 1999, each share of
Series F was converted into 20 shares of common stock, after we called the
Series F for redemption. On June 30, 1999, each share of Series B was converted
into 25.736 shares of common stock, after we called the Series B for redemption.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------------------
1999 1998 1997 1996
----------------- ----- ----- -----
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges of Texaco on a total
enterprise basis (unaudited).................................. 2.43 2.11 6.04 5.75
Ratio of earnings to combined fixed charges and preferred stock
dividends of Texaco on a total enterprise basis (unaudited)... 2.26 1.99 5.60 5.36
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Ratio of earnings to fixed charges of Texaco on a total
enterprise basis (unaudited).................................. 2.55 2.86
Ratio of earnings to combined fixed charges and preferred stock
dividends of Texaco on a total enterprise basis (unaudited)... 2.40 2.58
</TABLE>
TEXACO CAPITAL INC.
Texaco Capital, a wholly owned subsidiary of Texaco Inc., is a Delaware
corporation which was incorporated on June 24, 1983. Its principal executive
offices are located at 1013 Centre Road, Wilmington, Delaware 19801; telephone:
(800) 927-9800. Texaco Capital is engaged principally in the business of lending
funds borrowed from unrelated persons to Texaco Inc. and its subsidiaries for
general corporate purposes.
USE OF PROCEEDS
We will use the net proceeds from the sale of the securities offered by
Texaco Inc. for working capital, retirement of debt and other general corporate
purposes. Texaco Capital will lend the net proceeds from the sale of any debt
securities offered by it to Texaco Inc. or its subsidiaries to be used for
similar purposes.
PLAN OF DISTRIBUTION
We may sell the securities in any one or more of the following ways:
- directly to investors
- to investors through agents or dealers
- through underwriting syndicates led by one or more managing underwriters
- through one or more underwriters acting alone
5
<PAGE>
If we use underwriters in the sale, the obligations of the underwriters to
purchase the securities will be subject to certain conditions. The underwriters
will be obligated to purchase all the securities offered, if any are purchased.
The underwriters will acquire the securities for their own account. The
underwriters may resell the securities in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The underwriters may change from time to time
any initial public offering price and any discounts or concessions allowed or
re-allowed or paid to dealers.
We may use agents in the sale of securities. Unless indicated in the
prospectus supplement, the agents will be acting on a best efforts basis for the
period of their appointment.
If we use a dealer in the sale of the securities, we will sell the
securities to the dealer as principal. The dealer may then resell the securities
to the public at varying prices it determines at the time of resale.
We may also sell the securities in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by a remarketing firm acting as principals for their own accounts
or as our agents. Remarketing firms may be deemed to be underwriters in
connection with the securities they remarket.
We may authorize underwriters, dealers or agents to solicit offers to
purchase the securities under a delayed delivery contract providing for payment
and delivery at a future date.
We will identify any underwriters or agents and describe their compensation,
including any discounts or commissions, in a prospectus supplement.
Underwriters, dealers and agents that participate in the distribution of the
offered securities may be underwriters as defined in the Securities Act of 1933,
and any discounts or commissions received by them from us and any profit on the
resale of the securities by them may be treated as underwriting discounts and
commissions.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute to payments which the underwriters,
dealers or agents may be required to make. Underwriters, dealers or agents may
engage in transactions with, or perform services for, us in the ordinary course
of their business.
DESCRIPTION OF DEBT SECURITIES
This prospectus describes the terms and provisions of the debt securities.
When Texaco Capital offers to sell a particular series of debt securities, it
will describe the specific terms of the securities in a supplement to this
prospectus. The prospectus supplement will also indicate whether the general
terms and provisions described in this prospectus apply to the particular series
of debt securities.
The debt securities will be offered by Texaco Capital and will be fully and
unconditionally guaranteed by Texaco Inc. The debt securities will be issued
under an indenture, among Texaco Inc., Texaco Capital, and The Chase Manhattan
Bank, as Trustee dated as of August 24, 1984, as supplemented and restated by
- the First Supplemental Indenture dated as of January 31, 1990. We filed a
copy of this supplemental indenture as Exhibit 4.1 to Registration
Statement No. 33-33303, filed on February 1, 1990
- the First Supplement to the First Supplemental Indenture dated as of
October 11, 1990. We filed a copy of this supplemental indenture as
Exhibit 4.1(a) to our Current Report on Form 8-K, dated October 12, 1990
and filed on October 15, 1990
- the Second Supplement to the First Supplemental Indenture, dated as of
August 5, 1997. We filed a copy of this supplemental indenture as Exhibit
4.1(b) to our Form 10-Q for the quarterly period ended June 30, 1997, on
August 13, 1997
6
<PAGE>
We have summarized the material terms of the indenture below. The indenture
has been incorporated by reference as an exhibit to the registration statement
for these securities that we have filed with the SEC. You should read the
indenture for the provisions that are important to you.
Capitalized terms used in the following summary have the meanings specified
in the indenture.
PRINCIPAL TERMS OF THE DEBT SECURITIES
The debt securities will rank equally and ratably with all other unsecured
and unsubordinated indebtedness of Texaco Capital. The guaranties will rank
equally with all other unsecured and unsubordinated indebtedness of Texaco.
A prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to that series of debt securities.
These terms will include some or all of the following:
- their type and title
- their total principal amount and currency or currency unit
- the denominations in which they are authorized to be issued
- the percentage of their principal amount at which they will be issued
- the date on which they will mature
- if they bear interest, the interest rate or the method by which the
interest rate will be determined
- the times at which any interest will be payable or the manner of
determining the interest payment dates
- any optional or mandatory redemption periods and the redemption or
purchase price
- any sinking fund requirements
- any special United States federal income tax considerations
- whether they are to be issued in the form of one or more temporary or
permanent global securities and, if so, the identity of the depositary for
the global securities
- any information with respect to book-entry procedures
- the manner in which the amount of any payments of principal and interest
determined by reference to an index are determined
- any other specific terms not inconsistent with the indenture
Under the current terms of the indenture, holders of the debt securities are
not protected from Texaco Inc. or Texaco Capital incurring additional
indebtedness.
DENOMINATIONS, REGISTRATION, TRANSFER AND PAYMENT
Texaco Capital will issue the debt securities in registered form without
coupons or in the form of one or more global securities, as described below
under "Global Securities". We will issue registered securities denominated in
U.S. dollars only in denominations of $1,000 or any integral multiple of $1,000.
We will issue global securities in a denomination equal to the total principal
amount of outstanding debt securities of the series represented by the global
security. We will describe the denomination of debt securities denominated in a
foreign or composite currency in a prospectus supplement.
You may present registered securities for registration of transfer at the
office of the registrar or at the office of any transfer agent designated by
Texaco Capital. Texaco Capital has initially appointed the trustee as registrar.
Texaco Capital will pay principal and any premium and interest on registered
securities at the office of the paying agent designated by Texaco Capital.
Texaco Capital may choose to make any interest payment (1) by check mailed to
the address of the holder as such address shall appear in the
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register or (2) by wire transfer to an account maintained by the holder as
specified in the register. Texaco Capital will make interest payments to the
person in whose name the debt security is registered at the close of business on
the day or days specified by Texaco Capital.
The trustee's principal office in the City of New York will be designated as
Texaco Capital's sole paying agent for payments on registered securities.
GUARANTIES
Texaco Inc. will unconditionally guarantee the payment of the principal, any
premium, and any interest on the Texaco Capital debt securities as they become
due, whether at maturity or upon redemption, declaration or otherwise.
GLOBAL SECURITIES
We will deposit global securities with the depositary identified in the
prospectus supplement. A global security is a security, typically held by a
depositary, that represents the beneficial interests of a number of purchasers
of the security.
After we issue a global security, the depositary will credit on its
book-entry registration and transfer system the respective principal amounts of
the debt securities represented by the global security to the accounts of
persons that have accounts with the depositary ("participants"). The
underwriters or agents participating in the distribution of the debt securities
will designate the accounts to be credited. Only a participant or a person that
may hold an interest through a participant may be the beneficial owner of a
global security. Ownership of beneficial interests in the global security will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by the depositary and its participants.
We and the trustee will treat the depositary or its nominee as the sole
owner or holder of the debt securities represented by a global security. Except
as set forth below, owners of beneficial interests in a global security will not
be entitled to have the debt securities represented by the global security
registered in their names. They also will not receive or be entitled to receive
physical delivery of the debt securities in definitive form and will not be
considered the owners or holders of the debt securities.
Principal, any premium and any interest payments on debt securities
represented by a global security registered in the name of a depositary or its
nominee will be made to the depositary or its nominee as the registered owner of
the global security. None of Texaco Capital, Texaco Inc., the trustee or any
Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the global security or for maintaining, supervising or reviewing
any records relating to the beneficial ownership interests.
We expect that the depositary, upon receipt of any payments, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of the global
security as shown on the depositary's records. We also expect that payments by
participants to owners of beneficial interest in the global security will be
governed by standing instructions and customary practices, as is the case with
the securities held for the accounts of customers registered in "street names"
and will be the responsibility of the participants.
If the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by Texaco Capital within
ninety days, Texaco Capital will issue registered securities in exchange for the
global security. In addition, Texaco Capital may at any time in its sole
discretion determine not to have any of the debt securities of a series
represented by global securities. In that event, Texaco Capital will issue debt
securities of that series in definitive form in exchange for the global
securities.
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LIMITATIONS ON LIENS
We have agreed not to, and not to permit any Principal Subsidiary (as
defined below), to incur a lien to secure a Long-Term Debt on a Principal
Property, any Capital Stock or a Long-Term Debt of a Principal Subsidiary
unless:
(1) the Lien equally and ratably secures the debt securities and the secured
Debt
(2) the Lien is in existence at the time a corporation merges into or
consolidates with Texaco Inc. or a Principal Subsidiary or becomes a
Principal Subsidiary
(3) the Lien is on a Principal Property at the time Texaco Inc. or a
Principal Subsidiary acquires the Principal Property
(4) the Lien secures Debt incurred to finance all or some of the purchase
price of a Principal Property or a Principal Subsidiary
(5) the Lien secures Debt incurred to finance all or some of the costs of
Improvements on a Principal Property
(6) the Lien secures Debt of a Principal Subsidiary owing to Texaco Inc. or
another Principal Subsidiary
(7) the Lien extends, renews or replaces in whole or in part a permitted
Lien
(8) the secured Debt plus all other Debt secured by Liens on Principal
Properties, Capital Stock or Debt of a Principal Subsidiary at the time
does not exceed 10% of Texaco Inc.'s Consolidated Net Tangible Assets.
However, Debt secured by a permitted Lien is excluded from all other Debt
in the determination
A Principal Subsidiary is a subsidiary:
(1) substantially all of the assets of which are located, and substantially
all of the operations of which are conducted, in the United States
(2) which owns a Principal Property, defined as an important oil and gas
producing property in or outside of the United States or any important
refinery or manufacturing plant located in the United States
(3) in which Texaco Inc.'s direct or indirect net investment exceeds $100
million
LIMITATIONS ON SALE AND LEASEBACK
We have agreed not to, and not to permit any Principal Subsidiary to, enter
into a Sale-Leaseback Transaction unless:
(1) the lease has a term of three years or less
(2) the lease is between Texaco Inc. and a Principal Subsidiary or between
Principal Subsidiaries
(3) Texaco Inc. or a Principal Subsidiary could create a Lien on the
Principal Property to secure a Debt at least equal in amount to the
Attributable Debt for the lease
(4) Texaco Inc. or a Principal Subsidiary within 120 days of the effective
date of the Sale-Leaseback Transaction:
(a) retires Debt of Texaco Inc. or of a Principal Subsidiary at least
equal in amount to the fair value of the Principal Property at the
time the Principal Property is leased
(b) if the net proceeds of the Sale-Leaseback Transaction equal or exceed
the fair value of the Principal Property, applies the net proceeds to
fund investment in other Principal Properties, which investments were
made within twelve months before or after the transaction
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CONSOLIDATION, MERGER OR SALE
We may merge into another corporation, or transfer substantially all of our
properties and assets to another person without the consent of the holders of
any of the debt securities outstanding, if the person assumes by supplemental
indenture all of our obligations under the debt securities and the indenture and
immediately after the transaction no default exists. If a merger or sale takes
place, our obligations would end.
EVENTS OF DEFAULT
When we use the term "Event of Default" in the indenture, here are examples
of what we mean:
- we fail to pay the principal or any premium on any debt security when due
- we fail to deposit any sinking fund payment when due
- we fail to pay interest when due on any security for 30 days
- we fail to comply with any other covenant in the debt securities and this
failure continues for 90 days after we receive written notice of it
- we take certain actions relating to our bankruptcy, insolvency or
reorganization
The supplemental indenture or the form of security for a particular series
of debt securities may include additional Events of Default or changes to the
Events of Default described above. You should refer to the prospectus supplement
for the Events of Default relating to a particular series of debt securities. A
default under our other indebtedness will not be a default under the indenture.
A default under one series of debt securities will not necessarily be a default
under another series.
If an Event of Default for debt securities of any series occurs and is
continuing, the trustee or the holders of at least 25% in principal amount of
all of the debt securities of that series outstanding may require us to
immediately repay all of the principal and interest due on the debt securities
of that series. The holders of a majority in principal amount of all of the debt
securities of that series may rescind this accelerated payment requirement, if
the rescission would not conflict with any judgment or decree by a court and if
all existing Events of Default have been cured or waived.
If an Event of Default occurs and is continuing, the trustee may pursue any
remedy available to it to collect payment or to enforce the performance of any
provision of the debt securities or the indenture.
The holders of a majority in principal amount of the debt securities may
generally waive an existing default and its consequences.
MODIFICATION OF THE INDENTURE
The indenture may be amended without the consent of any holder of debt
securities:
- to cure any ambiguity, defect or inconsistency
- to comply with Article 5 of the indenture to permit a successor to assume
our obligations under the indenture
- to make any change that does not adversely affect the rights of any holder
- to provide for debt securities of any series to be issued and establish
the terms and conditions of those debt securities
The indenture may be amended with the written consent of the holders of at
least 50.1% in principal amount of the debt securities of the series affected by
such amendment. Holders of at least 50.1% in principal amount of the debt
securities may waive our compliance with any provision of the indenture or the
debt securities by giving notice to the trustee.
However, no amendment or waiver which
- reduces the amount of debt securities whose holders must consent to an
amendment or waiver
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- reduces the rate of or extends the time for payment of interest on any
debt security
- reduces the principal of or extends the fixed maturity of any debt
security
- waives a default in the payment of the principal or any premium or
interest on any debt security
- makes any debt security payable in currency other than that stated in the
debt security
will be effective against any holder without the holder's consent.
DEFEASANCE AND DISCHARGE
When we use the term "defeasance," we mean discharge from some or all of
Texaco Capital's obligations under the indenture. We may deposit with the
trustee sufficient money or government securities to pay principal and any
premium and interest on the debt securities to redemption or maturity. If our
obligations on all the debt securities of a series are defeased, the trustee, at
our request, will release its rights and interests in any security we have
issued. We are required to furnish an opinion of recognized independent tax
counsel to the effect that the proposed deposit and termination will not have
any effect on the holders for Federal income tax purposes. The opinion must be
based upon a ruling of the Internal Revenue Service or a change in United States
federal income tax law occurring after the date of this prospectus, since that
result would not occur under current tax law.
OTHER DEBT SECURITIES
In addition to the debt securities described above, Texaco Capital may issue
subordinated debt securities that rank junior to Texaco Capital's senior debt
securities. These securities will be guaranteed on a subordinated basis by
Texaco Inc. Texaco Inc. may also issue either senior debt securities or debt
securities which rank junior to its senior debt securities. These debt
securities will be described in a prospectus supplement and will be issued
pursuant to an indenture entered into among Texaco Inc., a trustee and, if
applicable, Texaco Capital. The indenture will be filed with the SEC and
qualified under the Trust Indenture Act.
DESCRIPTION OF TEXACO COMMON STOCK
Our Certificate of Incorporation authorizes us to issue 850,000,000 shares
of common stock, $3.125 par value per share. As of July 2, 1999, there were
outstanding 552,725,897 shares of common stock.
Our common stockholders may receive dividends of cash, securities or
properties if our Board of Directors declares these dividends. Dividends on our
common stock are also subject to the preferred stockholders' rights to receive
dividends. In general, our common stockholders are entitled to one vote per
share on all matters which require a vote of the common stockholders. If Texaco
Inc. voluntarily or involuntarily liquidates, dissolves or winds up its
business, the preferred stockholders are paid first, then the common
stockholders share equally, depending on the number of shares of common stock
they hold, in our remaining assets available for distribution. We cannot redeem
our common stock, and our common stock does not contain subscription, conversion
or preemptive rights. If an acquiror accumulates or begins a tender offer for
20% or more of our common stock that does not meet the conditions of our
Stockholder Rights Plan, each share of common stock has a right to purchase
additional shares of common stock or other securities at a significant discount.
We are the transfer agent and registrar for our common stock.
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DESCRIPTION OF TEXACO PREFERRED STOCK
This prospectus describes the terms and provisions of our preferred stock.
When we offer to sell a particular series of preferred stock, we will describe
the specific terms of the securities in a supplement to this prospectus. The
prospectus supplement will also indicate whether the terms and provisions
described in this prospectus apply to the particular series of preferred stock.
The preferred stock will be issued under a certificate of designations relating
to each series of preferred stock, and is also subject to our Certificate of
Incorporation.
We have summarized the material portions of the certificate of designations
below. The certificate of designations will be filed with the SEC in connection
with an offering of preferred stock.
Our Certificate of Incorporation authorizes us to issue 30,000,000 shares of
preferred stock, par value $1.00 per share. Our Board is authorized to designate
any series of preferred stock and the powers, preferences and rights of the
preferred stock without further shareholder action. As of July 2, 1999, there
were outstanding 1,200 shares of Market Auction Preferred Stock. There are
3,000,000 shares designated as Series D Junior Participating Preferred Stock,
none of which are currently outstanding.
Our Board is authorized to determine or fix the following terms for each
series of preferred stock, which will be described in a prospectus supplement:
- the number of shares and their designation or title
- dividend rights
- the rights of the holders upon our liquidation, or upon any distribution
of our assets
- whether the shares will be convertible and the terms of the conversion
- whether the shares will be redeemable and the terms of the redemption
- whether and upon what terms the shares will have a purchase, retirement or
sinking fund
- the holders' voting rights, if any
- other preferences, rights, qualifications, limitations, or restrictions
If we purchase, redeem or convert shares of preferred stock, we will retire
and cancel them and restore them to the status of authorized but unissued shares
of preferred stock. These shares will not be part of any particular series of
preferred stock and we may reissue them.
When we issue preferred stock, they will be fully paid and nonassessable.
Unless the prospectus supplement specifies otherwise:
- each series of preferred stock will rank equally in all respects with the
outstanding shares of each other series of preferred stock
- the preferred stock will have no preemptive rights to subscribe for any
additional securities which we may issue in the future
- even if there are any sinking fund installments due on a particular series
of preferred stock, we will not be restricted from purchasing, redeeming
or converting shares of preferred stock
DIVIDENDS
The holders of preferred stock will be entitled to receive cash dividends if
declared by our Board of Directors out of funds we can legally use for payment.
The prospectus supplement will set forth the dividend rates and the dates on
which we will pay dividends. The rates may be fixed or variable or both. If the
dividend rate is variable, the formula used to determine the dividend rate will
be described
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in the prospectus supplement. We will pay dividends to the holders of record as
they appear on our registrar on the record dates fixed by our Board.
Our Board will not declare and pay a dividend on any series of preferred
stock unless full dividends for all series of preferred stock ranking equal as
to dividends have been declared or paid and sufficient funds are set aside for
payment. If dividends are not paid in full, we will declare any dividends pro
rata among the preferred stock of each series and any series of preferred stock
ranking equal to any other series as to dividends. A "pro rata" declaration
means that the dividends we declare per share on each series of preferred stock
will bear the same relationship to each other that the full accrued dividends
per share on each series of the preferred stock bear to each other.
Unless all dividends on the preferred stock have been paid in full, we will
not declare or pay any dividends or set aside sums for payment of dividends or
distributions on any common stock or on any class of security ranking junior to
the series of preferred stock, except for dividends or distributions paid for
with securities ranking junior to the preferred stock. We will also not redeem,
purchase, or otherwise acquire any securities ranking junior to the series of
preferred stock as to dividends or liquidation preferences, except by conversion
into or exchange for stock junior to the series of preferred stock.
We will not convert or exchange any series of preferred stock for other
securities or property.
REDEMPTION AND SINKING FUND
We will not redeem or pay into a sinking fund any series of preferred stock.
LIQUIDATION
If we voluntarily or involuntarily liquidate, dissolve or wind up our
business, holders of any series of preferred stock will be entitled to receive
the liquidation preference per share specified in the prospectus supplement and
all accrued and unpaid dividends. We will pay these amounts to the holders of
each series of the preferred stock, and all amounts owing on any preferred stock
ranking equally with that series of preferred stock as to distributions upon
liquidation. These payments will be made out of our assets available for
distribution to shareholders before any distribution is made to holders of
common stock or any class of stock ranking junior to the series of preferred
stock as to dividends and liquidation preferences.
In the event there are insufficient assets to pay the liquidation
preferences for all equally-ranked classes of preferred stock in full, we will
allocate the remaining assets equally among all series of equally-ranked
preferred stock based upon the aggregate liquidation preference for all
outstanding shares for each series. This distribution means that the
distribution we pay to the holders of all shares ranking equal as to
distributions if we dissolve, liquidate or wind up our business will bear the
same relationship to each other that the full distributable amounts for which
the holders are respectively entitled if we dissolve, liquidate or wind up our
business bear to each other. After we pay the full amount of the liquidation
preference to which they are entitled, the holders of shares of a series of
preferred stock will not be entitled to participate in any further distribution
of our assets.
VOTING
No series of preferred stock will be entitled to vote except as provided
below or in the related prospectus supplement. If we fail at any time to declare
and pay in full dividends for six quarterly periods, whether consecutive or not,
on any series of preferred stock and all these dividends remain unpaid, the
number of our Board of Directors will be increased by two. Holders of that
series of preferred stock, voting together as a class with all other series of
preferred stock also entitled to vote, will be entitled to elect the two
additional directors until the full accumulated dividends have been
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declared and paid in full. If and when all accumulated dividends have been paid
in full, the holders will no longer have these voting rights as a result of that
default. Once the special voting rights terminate, the term of office of each
director elected by the preferred stockholders will terminate. Any director
elected in this manner may only be removed by a majority of the holders of
shares that elected that director, voting as a separate class. As long as the
default continues, holders of the preferred stock will not be entitled to vote
on the election or removal of directors generally, but may have other voting
rights provided to the holders of preferred stock by law.
A majority of the outstanding shares of each series of preferred stock
voting together as a class is required to authorize any amendment, alteration or
repeal of our Certificate of Incorporation or any certificate of designations
which would adversely affect the powers, preferences, or special rights of the
preferred stock, including authorizing any class of stock with superior dividend
and liquidation preferences.
TRANSFER AGENT AND REGISTRAR
The prospectus supplement for each series of preferred stock will name the
transfer agent and registrar.
DESCRIPTION OF THE DEPOSITARY SHARES
This prospectus describes the terms and provisions of our depositary shares.
When we offer to sell depositary shares, we will describe the specific terms for
the securities in a supplement to this prospectus. The prospectus supplement
will also indicate whether the terms and provisions described in this prospectus
apply to the depositary shares being offered.
We have summarized the material portions of the deposit agreement below. The
deposit agreement will be filed with the SEC in connection with an offering of
depositary shares.
We may offer fractional interests in preferred stock, rather than full
shares of preferred stock. If we do, we will provide for a depositary to issue
to the public receipts for depositary shares, each of which will represent
ownership of and entitlement to all rights and preferences of a fractional
interest in a share of preferred stock of a specified series. These rights
include dividend, voting, redemption and liquidation rights. The applicable
fraction will be specified in a prospectus supplement. The shares of preferred
stock represented by the depositary shares will be deposited with a depositary
named in a prospectus supplement, under a deposit agreement among us and the
depositary and the holders of the depositary receipts.
The depositary shares will be evidenced by depositary receipts issued under
the deposit agreement. The depositary will be the transfer agent, registrar and
dividend disbursing agent for the depositary shares. Holders of depositary
receipts agree to be bound by the deposit agreement, which requires holders to
file proof of residence and pay charges.
DIVIDENDS
The depositary will distribute all cash dividends or other cash
distributions received to the record holders of depositary receipts in
proportion to the number of depositary shares owned by them on the relevant
record date. The record date will be the same date as the record date we fix for
the applicable series of preferred stock.
If we make a non-cash distribution, the depositary will distribute property
to the holders of depositary receipts, unless the depositary determines, after
consultation with us, that it is not feasible to make this distribution. If this
occurs, the depositary may, with our approval, adopt any other method for the
distribution as it deems appropriate, including the sale of the property and
distribution of the net proceeds from the sale.
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LIQUIDATION PREFERENCE
If we voluntarily or involuntarily liquidate, dissolve or wind up our
business, the holders of each depositary share will receive the fraction of the
liquidation preference accorded each share of the applicable series of preferred
stock.
REDEMPTION
If the series of preferred stock underlying the depositary shares is
redeemed, the depositary shares will be redeemed from the redemption proceeds of
the preferred stock held by the depositary. Whenever we redeem any preferred
stock held by the depositary, the depositary will redeem on the same redemption
date the number of depositary shares representing the preferred stock being
redeemed. The depositary will mail the notice of redemption between 30 to 60
days prior to the date fixed for redemption to the record holders of the
depositary receipts.
VOTING
The depositary will promptly mail information contained in any notice of
meeting it receives from us to the record holders of the depositary receipts.
Each record holder of depositary receipts will be entitled to instruct the
depositary as to its exercise of its voting rights pertaining to the number of
shares of preferred stock represented by its depositary shares. The depositary
will try, if practical, to vote the preferred stock underlying the depositary
shares according to the instructions received. We will agree to take all action
which the depositary may find necessary in order to enable the depositary to
vote the preferred stock in that manner. The depositary will not vote any of the
preferred stock for which it does not receive specific instructions from the
holders of depositary receipts.
WITHDRAWAL OF PREFERRED STOCK
If holders surrender depositary receipts at the principal office of the
depositary and pay any unpaid amount due to the depositary, the owner of the
depositary shares is entitled to receive the number of whole shares of preferred
stock and all money and other property represented by the depositary shares.
Partial shares of preferred stock will not be issued. If the holder delivers
depositary receipts evidencing a number of depositary shares that represent more
than a whole number of shares of preferred stock, the depositary will issue a
new depositary receipt evidencing the excess number of depositary shares to that
holder. Holders of preferred stock received in exchange for depositary shares
will no longer be entitled to deposit these shares under the deposit agreement
or to receive depositary receipts.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time and from time to time be
amended by agreement between us and the depositary. However, any amendment which
materially and adversely alters the rights of the holders, other than any change
in fees, of depositary shares will not be effective unless approved by at least
a majority of the depositary shares then outstanding. An amendment may not
impair the right of any owner of any depositary shares to surrender its
depositary receipt with instructions to the depositary in exchange for preferred
stock, money and property, except in order to comply with mandatory provisions
of applicable law. The deposit agreement may be terminated by us or the
depositary only if:
- all outstanding depositary shares have been redeemed
- there has been a final distribution to the preferred stock in connection
with the liquidation, dissolution or winding up of our business, and the
distribution has been made to all the holders of depositary shares
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CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges
attributable solely to the depositary arrangements. We will pay the depositary's
charges for the initial deposit of the preferred stock and the initial issuance
of the depositary shares, any redemption of the preferred stock and all
exchanges for preferred stock. Holders of depositary receipts will pay transfer,
income and other taxes and governmental charges and other charges stated in the
deposit agreement to be for their accounts. In some circumstances, the
depositary may refuse to transfer depositary shares, may withhold dividends and
distributions and sell the depositary shares if those charges are not paid.
OBLIGATIONS OF DEPOSITARY
The depositary will forward to the holders of depositary receipts all
reports and communications from us which are delivered to it and which we are
required to furnish to the holders of the preferred stock. In addition, the
depositary will make available for inspection by holders of depositary receipts
at its principal office, and at such other places as it may from time to time
deem advisable, any reports and communications received from us.
We will not assume, and the depositary will not assume, any obligation or
any liability under the deposit agreement to holders of depositary receipts
other than for gross negligence or willful misconduct. We will not be liable,
and the depositary will not be liable, if we are prevented or delayed by law or
any circumstance beyond our control in performing our obligations under the
deposit agreement. Our obligations and the depositary's obligations under the
deposit agreement will be limited to performance in good faith of our and their
duties. We and the depositary will not be obligated to prosecute or defend any
legal proceeding in respect of any depositary shares or preferred stock unless
we and/or the depositary receives satisfactory indemnity. We and the depositary
may rely on written advice of our counsel or accountants, on information
provided by holders of depositary receipts or other persons believed in good
faith to be competent to give this information and on documents believed to be
genuine and to have been signed or presented by the proper party or parties.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to us notice of its
election to do so. We may also at any time remove the depositary. The
resignation or removal will take effect after a successor depositary is
appointed and has accepted the appointment. We must appoint a successor within
60 days after delivery of the notice for resignation or removal and the
successor depositary must be a bank or trust company having its principal office
in the United States of America and having a combined capital and surplus of at
least $150,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the depositary shares will be treated for federal income tax
purposes as if they were owners of the preferred stock underlying the depositary
shares. Accordingly, the owners will be entitled to take into account for
federal income tax purposes income and deductions to which they would be
entitled if they were holders of the preferred stock. In addition:
- no gain or loss will be recognized for federal income tax purposes upon
the receipt of preferred stock in exchange for depositary shares
- the tax basis of each share of preferred stock to an exchanging owner of
depositary shares will, when exchanged, be the same as the aggregate tax
basis of the depositary shares being exchanged
- the holding period for preferred stock in the hands of an exchanging owner
of depositary shares will include the period during which that person
owned such depositary shares
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DESCRIPTION OF THE WARRANTS
This prospectus describes the terms and provisions of the warrants. When we
offer to sell warrants, we will describe the specific terms of the warrants and
warrant agreement in a supplement to this prospectus. The prospectus supplement
will also indicate whether the terms and provisions described in this prospectus
apply to the warrants being offered.
We have summarized the material portions of the warrant agreement below.
Forms of warrant agreements have been incorporated by reference as exhibits to
the registration statement for these securities that we have filed with the SEC.
You should read the warrant agreements for the provisions that are important to
you.
We may issue warrants for the purchase of our debt securities, preferred
stock or common stock. Warrants may be issued alone or together with debt
securities, preferred stock or common stock offered by any prospectus supplement
and may be attached to or separate from those securities. Each series of
warrants will be issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent. The warrant agent will
act solely as our agent in connection with the warrants and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of warrants.
DEBT WARRANTS
The prospectus supplement relating to a particular issue of warrants to
issue debt securities will describe the terms of the debt warrants, including
the following:
- their title
- their offering price
- their aggregate number
- the designation and terms of the debt securities that can be purchased
when they are exercised
- the designation and terms of the debt securities that are issued with the
warrants and the number of warrants issued with each debt security
- the date when they and any debt securities issued will be separately
transferable
- the principal amount of debt securities that can be purchased when they
are exercised and the purchase price
- the date on which the right to exercise warrants begins and the date on
which the right expires
- the minimum or maximum amount of warrants that may be exercised at any one
time
- whether they and the debt securities that may be issued when they are
exercised will be issued in registered or bearer form
- information about book-entry procedures
- the currency or currency units in which the offering price and the
exercise price are payable
- a discussion of material United States federal income tax considerations
- the antidilution provisions
- the redemption or call provisions
STOCK WARRANTS
The prospectus supplement relating to any particular issue of warrants to
issue common stock or preferred stock will describe the terms of such stock
warrants, including the following:
- their title
- their offering price
17
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- their aggregate number
- the designation and terms of the common stock or preferred stock that can
be purchased when they are exercised
- the designation and terms of the common stock or preferred stock that are
issued with the warrants and the number of warrants issued with shares of
each common stock or preferred stock
- the date when they and any common stock or preferred stock issued will be
separately transferable
- the number of shares of common stock or preferred stock that can be
purchased when they are exercised and the purchase price
- the date on which the right to exercise the warrants begins and the date
on which the right expires
- the minimum or maximum amount of warrants that may be exercised at any one
time
- the currency or currency units in which the offering price and the
exercise price are payable
- a discussion of material United States federal income tax considerations
- the antidilution provisions
- the redemption or call provisions
EXPERTS
The audited consolidated financial statements and schedule included or
incorporated by reference in the Annual Report of Texaco Inc. for the fiscal
year ended December 31, 1998 filed on Form 10-K, incorporated herein by
reference, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
The combined financial statements of the Caltex Group of Companies as of
December 31, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1998, have been incorporated by reference herein in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements of Equilon Enterprises LLC as of
January 1, 1998 and December 31, 1998 and for the year ended December 31, 1998,
incorporated in this Prospectus by reference to the Annual Report of Texaco Inc.
on Form 10-K for the year ended December 31, 1998, incorporated herein by
reference, have been audited by Arthur Andersen LLP and PricewaterhouseCoopers
LLP, independent accountants, as indicated in their report with respect thereto,
and have been so incorporated in reliance upon the report of such firms given
upon their authority as experts in accounting and auditing.
The financial statements of Motiva Enterprises LLC as of July 1, 1998 and
December 31, 1998 and for the period from inception (July 1, 1998) to December
31, 1998, incorporated in this Prospectus by reference to the Annual Report of
Texaco Inc. on Form 10-K for the year ended December 31, 1998, incorporated
herein by reference, have been audited by Arthur Andersen LLP, Deloitte & Touche
LLP and PricewaterhouseCoopers LLP, independent accountants, as indicated in
their report with respect thereto, and have been so incorporated in reliance
upon the report of such firms given upon their authority as experts in
accounting and auditing.
LEGAL OPINIONS
The validity of the securities we are offering will be passed upon for us by
Paul R. Lovejoy, Esq., our Assistant General Counsel or another of our attorneys
as we may designate, and for the purchasers by Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York 10017.
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[LOGO]
U.S. $2,000,000,000
TEXACO CAPITAL INC.
SECOND SERIES 1999 MEDIUM-TERM NOTES
Guaranteed by
TEXACO INC.
-----------------------------
PROSPECTUS SUPPLEMENT
-----------------------------
BLAYLOCK & PARTNERS, L.P.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
August 3, 1999
