<PAGE>
RULE NO.424(b)(5)
REGISTRATION NO. 33-58365
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 5, 1995
$3,000,000,000
TRANSAMERICA FINANCE CORPORATION
MEDIUM-TERM NOTES, SERIES E
[LOGO OF TRANSAMERICA FINANCE CORPORATION]
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
--------------
Transamerica Finance Corporation (the "Company") may offer from time to time
its Medium-Term Notes, Series E (the "Notes") in an aggregate principal amount
of up to $3,000,000,000 (or the equivalent thereof if any of the Notes are
denominated in one or more foreign currencies or foreign composite currency
units such as the European Currency Unit (the "ECU")), subject to reduction as
a result of the sale of other Debt Securities covered by the accompanying
Prospectus. The Notes will be due from 9 months to 30 years from the date of
issue, as selected by the initial purchaser and agreed to by the Company.
Unless otherwise set forth in an accompanying supplement to this Prospectus
Supplement (a "Pricing Supplement"), the Notes will not be redeemable or
repayable prior to their Maturity Date (as defined below). Each Note will be
denominated in U.S. dollars, a foreign currency or units of a foreign
composite currency (the "Specified Currency") as specified in the applicable
Pricing Supplement. See "Important Currency Information" and "Currency Risks."
Unless otherwise indicated in the applicable Pricing Supplement, Notes
denominated in U.S. dollars will be issued in denominations of $100,000 and
integral multiples of $1,000 in excess thereof. If the Notes are to be
denominated in a foreign currency or units of a foreign composite currency,
the authorized denominations and currency exchange rate information will be
set forth in the applicable Pricing Supplement. The Notes may be issued as
Senior Indebtedness (as defined below) or Subordinated Indebtedness (as defined
below). At March 31, 1995, Senior Indebtedness aggregated approximately $8.68
billion. Subordinated Indebtedness will be subordinate to all Senior
Indebtedness. See "Description of Notes."
The interest rate or interest rate formula with respect to each Note will be
established by the Company on the date of issue of such Note and will be
indicated in the applicable Pricing Supplement. Interest rates and interest
rate formulas are subject to change by the Company, but no such change will
affect the interest rate or interest rate formula on any Note previously
issued or which the Company has agreed to sell. Unless otherwise indicated in
the applicable Pricing Supplement, the Notes will bear interest at a fixed
rate (which may be zero in the case of certain Notes issued at a discount from
the principal amount payable at the Maturity Date) or at rates determined by
reference to the CD Rate, the Commercial Paper Rate, the Federal Funds Rate,
LIBOR, the Prime Rate, the Treasury Rate, the Kenny Rate or such other
interest rate formula as may be designated in an applicable Pricing
Supplement, as adjusted by the Spread and/or Spread Multiplier, if any,
applicable to such Notes. See "Description of Notes." Interest on Fixed Rate
Notes will be payable each March 1 and September 1 and at the Maturity Date or
upon redemption or repayment unless otherwise indicated in the applicable
Pricing Supplement. Interest on Floating Rate Notes will be payable on the
dates indicated therein and in the applicable Pricing Supplement.
Each Note will be issued only in fully registered form and will be
represented by either a global security (a "Global Note") registered in the
name of a nominee of The Depository Trust Company, as Depositary or other
depositary, if so specified in the applicable Pricing Supplement (each such
Note represented by a Global Note being referred to herein as a "Book-Entry
Note"), or a certificate issued in definitive form (a "Certificated Note"), as
set forth in the applicable Pricing Supplement. Beneficial interests in Book-
Entry Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to participants'
interests) and its participants (with respect to beneficial owners'
interests). Except as described in "Description of Notes--Book-Entry System,"
Book-Entry Notes will not be issuable in definitive form.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' COMMISSIONS(2)
PUBLIC(1) OR DISCOUNT PROCEEDS TO COMPANY(2)(3)
--------- ---------------------- -------------------------
<S> <C> <C> <C>
Per Note... 100.00% .125%-.750% 99.875%-99.250%
Total(4)... $3,000,000,000 $3,750,000-$22,500,000 $2,996,250,000-$2,977,500,000
</TABLE>
- -------
(1) Unless otherwise specified in a Pricing Supplement, the Price to Public of
each Note will be 100% of its principal amount. The total Price to Public
of all Notes sold, however, will not exceed $3,000,000,000 or the
equivalent thereof in foreign currencies or currency units.
(2) The Company will pay to Morgan Stanley & Co. Incorporated, CS First Boston
Corporation, Salomon Brothers Inc, J.P. Morgan Securities Inc., Goldman,
Sachs & Co., BA Securities, Inc., Chase Securities, Inc., Chemical
Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Lehman Brothers, Lehman Brothers Inc. (including its affiliate Lehman
Government Securities Inc.) and UBS Securities Inc. (each an "Agent",
collectively the "Agents"), a commission, which may be in the form of a
discount, ranging from .125% to .750% of the principal amount of any Note,
depending upon the Maturity Date, sold through any such Agent. The Company
may also sell Notes to any Agent at a discount for resale to investors or
other purchasers. The Company has agreed to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company estimated at $2,625,000.
(4) Or the equivalent thereof in foreign currencies or currency units.
--------------
The Notes are being offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its best reasonable efforts to solicit
offers to purchase the Notes. The Company may also sell the Notes to any Agent
acting as principal at a discount for its own account or for resale to one or
more investors at varying prices relating to prevailing market prices at the
time of resale, as determined by such Agent or, if so agreed, at a fixed
public offering price. The Company has reserved the right to sell the Notes by
other means. The Notes will not be listed on any securities exchange, and
there can be no assurance that the Notes offered by this Prospectus Supplement
will be sold or that there will be a secondary market for the Notes. The
Company reserves the right to withdraw, cancel or modify the offer or
solicitations of offers made hereby without notice. The Company or the Agents
may reject any offer to purchase Notes, whether or not solicited, in whole or
in part. See "Plan of Distribution."
MORGAN STANLEY & CO.
INCORPORATED
CS FIRST BOSTON
SALOMON BROTHERS INC
J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.
BA SECURITIES, INC.
CHASE SECURITIES, INC.
CHEMICAL SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
UBS SECURITIES INC.
--------------
The date of this Prospectus Supplement is May 15, 1995
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
The following summary of consolidated financial information of Transamerica
Finance Corporation and its subsidiaries should be read in conjunction with the
detailed information and consolidated financial statements and notes thereto
included in the documents described under "Information Incorporated by
Reference" in the Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total revenues.......... $1,557,344 $1,402,417 $1,430,883 $1,392,126 $1,677,827
Interest and debt ex-
pense.................. 620,626 514,230 459,518 414,556 485,643
Depreciation on equip-
ment held for lease.... 87,111 91,138 98,789 102,538 197,295
Salaries and other oper-
ating expenses......... 501,642 492,019 504,037 512,652 582,025
Provision for losses on
receivables............ 166,861 287,404 84,815 94,142 99,071
Provision for losses on
assets held for sale... -- 141,225 -- 50,000 --
---------- ---------- ---------- ---------- ----------
Income (loss) before in-
come taxes, extraordi-
nary item and cumula-
tive effect of account-
ing change............. 181,104 (123,599) 283,724 218,238 313,793
Income taxes (benefit).. 62,420 (30,088) 121,052 95,357 125,551
---------- ---------- ---------- ---------- ----------
Income (loss) before ex-
traordinary item and
cumulative effect of
accounting change ..... 118,684 (93,511) 162,672 122,881 188,242
Extraordinary loss on
early extinguishment of
debt, net of applicable
income tax benefit of
$11,447................ -- -- -- (23,084) --
Cumulative effect of
change in accounting
for post employment
benefits other than
pensions, net of appli-
cable income tax bene-
fit of $5,602 ......... -- (10,875) -- -- --
---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 118,684 $ (104,386) $ 162,672 $ 99,797 $ 188,242
========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges--Note A.. 1.28 0.77 1.59 1.50 1.62
</TABLE>
NOTE A. The ratios of earnings to fixed charges are computed by dividing
earnings from continuing operations before fixed charges and income taxes by
the fixed charges. For purposes of computation of the ratios, earnings and
fixed charges include those of the Company and all subsidiaries, and fixed
charges consist of interest and debt expense and one-third of rent expense
(which approximates the interest factor) of such companies.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Note in the Specified Currency for
such Note. Currently, there are limited facilities in the United States for
conversion of U.S. dollars into foreign currencies and vice versa, and banks
currently do not offer non-U.S. dollar checking or savings account facilities
in the United States. However, if requested by a prospective purchaser of Notes
denominated in a Specified Currency other than U.S. dollars, the Agent
soliciting the offer to purchase will arrange for the conversion of U.S.
dollars into such Specified Currency to enable the purchaser to pay for such
Notes. Such requests must be made on or before the fifth Business Day (as
defined below) preceding the date of delivery of the Notes, or by such other
date as determined by such Agent. Each such conversion will be made by the
relevant Agent on such terms and subject to such conditions, limitations and
charges as such Agent may from time to time establish in accordance with its
regular foreign exchange practice. All costs of exchange will be borne by
purchasers of the Notes.
S-2
<PAGE>
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements
and, to the extent inconsistent therewith, replaces the description of the
general terms and provisions of the Debt Securities set forth under the heading
"Description of Debt Securities" in the accompanying Prospectus, to which
description reference is hereby made. The provisions of the Notes summarized
herein will apply to such Notes unless otherwise specified in the applicable
Pricing Supplement and the applicable Note.
Capitalized terms not defined in this Prospectus Supplement have the meanings
assigned to such terms in the accompanying Prospectus. Unless otherwise
indicated in the applicable Pricing Supplement, currency amounts in this
Prospectus Supplement, the accompanying Prospectus and any Pricing Supplement
are stated in United States dollars ("$", "dollars", "U.S. dollars" or
"U.S.$").
GENERAL
The Notes may be issued under the Senior Indenture or the Subordinated
Indenture. The Notes issued under each Indenture will constitute a single
series for purposes of such Indenture. Notes issued under the Senior Indenture
will rank pari passu with all other Senior Indebtedness of the Company. Notes
issued under the Subordinated Indenture will rank pari passu with all other
Subordinated Indebtedness of the Company and, together with such other
Subordinated Indebtedness, will be subordinated in right of payment to the
prior payment in full of the Senior Indebtedness of the Company. See
"Description of Debt Securities--Subordination" in the Prospectus. The Notes
are currently limited to U.S. $3,000,000,000 in aggregate principal amount (or
the equivalent thereof if any of the Notes are denominated other than in U.S.
dollars). The foregoing limit, however, may be increased by the Company if in
the future it determines that it may wish to sell additional Notes. The Company
may from time to time sell additional series of Debt Securities, including
additional series of medium-term notes. The U.S. dollar equivalent of the
public offering price of Notes denominated in currencies other than U.S.
dollars will be determined by the Exchange Rate Agent (as defined below) on the
basis of the noon buying rate in The City of New York for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York (the "Market Exchange Rate") for such currencies on the
applicable issue dates.
The Notes will be offered on a continuing basis and will mature on any
Business Day (as defined below) from 9 months to 30 years from the date of
issue, as selected by the purchaser and agreed to by the Company, and may be
subject to redemption or repayment or renewal prior to the Maturity Date at the
price or prices specified in the applicable Pricing Supplement. Each Note will
bear interest at either (i) a fixed rate (a "Fixed Rate Note"), which may be
zero in the case of certain Notes issued at an Issue Price (as defined below)
representing a discount from the principal amount payable at maturity or (ii) a
floating rate determined by reference to the interest rate basis or combination
of interest rate bases (the "Base Rate") specified in the applicable Pricing
Supplement (a "Floating Rate Note") that may be adjusted by a Spread and/or
Spread Multiplier (each as defined below).
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth below under "Book-Entry System," Book-
Entry Notes will not be issuable in definitive form.
The Notes will be issuable only in fully registered form. Unless otherwise
specified in the applicable pricing supplement, the authorized denominations of
the Notes denominated in U.S. dollars will be $100,000 or any larger amount
that is an integral multiple of $1,000. The authorized denominations of Notes
denominated in a Specified Currency other than U.S. dollars will be set forth
in the applicable Pricing Supplement.
"Business Day" means any day, other than a Saturday or Sunday, that meets
each of the following applicable requirements: the day is (a) not a day on
which banking institutions are authorized or required by law or regulation to
be closed in The City of New York, (b) if the Note is denominated in a
Specified Currency
S-3
<PAGE>
other than U.S. dollars, (i) not a day on which banking institutions are
authorized or required by law or regulation to close in the financial center of
the country issuing the Specified Currency (which in the case of ECU shall be
London and Luxembourg) and (ii) a day on which banking institutions in such
financial center are carrying out transactions in such Specified Currency, and
(c) with respect to LIBOR Notes, a London Banking Day. Unless otherwise
specified in the applicable Pricing Supplement, "London Banking Day" means any
day (a) if the Index Currency (as defined below) is other than ECU, on which
dealings in deposits in such Index Currency are transacted in the London
interbank market or (b) if the Index Currency is the ECU, that is not
designated as an ECU Non-Settlement Day by the ECU Banking Association in Paris
or otherwise generally regarded in the ECU interbank market as a day on which
payments on ECUs shall not be made.
"Original Issue Discount Note" means a Note which has a stated redemption
price at the Maturity Date that exceeds its Issue Price (as defined below) by
more than a specified de minimis amount and which the applicable Pricing
Supplement indicates will be an "Original Issue Discount Note."
The Pricing Supplement relating to each Note will describe the following
terms: (1) the Specified Currency with respect to such Note (and, if such
Specified Currency is other than U.S. dollars, certain other terms relating to
such Note, including the authorized denominations); (2) whether such Note is a
Fixed Rate Note or a Floating Rate Note and whether such Note is an Original
Issue Discount Note; (3) the price (expressed either as a dollar amount or as a
percentage of the aggregate principal amount thereof) at which such Note will
be issued (the "Issue Price"); (4) the date on which such Note will be issued
(the "Original Issue Date"); (5) the date on which such Note will mature (the
"Maturity Date"); (6) if such Note is a Fixed Rate Note, the rate per annum at
which such Note will bear interest, if any; (7) if such Note is a Floating Rate
Note, the Base Rate(s), the Initial Interest Rate, the Interest Reset Period,
the Interest Reset Dates, the Interest Payment Period, the Interest Payment
Dates, the Index Maturity, the Maximum Interest Rate and the Minimum Interest
Rate, if any, and the Spread and/or Spread Multiplier, if any, (all as defined
below) and any other terms relating to the particular method of calculating the
interest rate for such Note; (8) whether such Note may be redeemed, repaid or
renewed prior to the Maturity Date and, if so, the provisions relating to such
redemption or repayment; (9) whether such Note is represented by one or more
Global Notes, and, if so, any special provisions with respect to such Global
Note or Notes; and (10) any other terms of such Note not inconsistent with the
provisions of the related Indenture.
Certificated Notes may be presented for registration of transfer or exchange
at the office of the applicable Trustee. The transfer or exchange of Book-Entry
Notes will be effected as specified in "Book-Entry System" below.
The Notes are referred to in the accompanying Prospectus as the "Debt
Securities." For a description of the rights attaching to different series of
Debt Securities under each Indenture, see "Description of Debt Securities" in
the Prospectus. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will have the terms described below.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of and any premium and interest on each Note is payable by the
Company in the Specified Currency for such Note. If the Specified Currency for
a Note is other than U.S. dollars, the Company will (unless otherwise specified
in the applicable Pricing Supplement) appoint an agent (the "Exchange Rate
Agent") to determine the exchange rate for converting all payments in respect
of such Note into U.S. dollars in the manner described in the following
paragraph. Unless otherwise specified in the applicable Pricing Supplement, The
Bank of New York will act as the Exchange Rate Agent. Notwithstanding the
foregoing, the Holder of a Note denominated in a Specified Currency other than
U.S. dollars may (if the applicable Pricing Supplement and the Note so
indicate) elect to receive all such payments in the Specified Currency by
delivery of a written request to the applicable Trustee not later than fifteen
calendar days prior to the applicable payment date. Such election will remain
in effect until revoked by written notice to the applicable Trustee received
not later than fifteen calendar days prior to the applicable payment date.
S-4
<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, in the case
of a Note denominated in a Specified Currency other than U.S. dollars, unless
the Holder has elected otherwise, payment in respect of such Note shall be made
in U.S. dollars based upon the exchange rate as determined by the Exchange Rate
Agent based on the highest firm bid quotation for U.S. dollars received by such
Exchange Rate Agent at approximately 11:00 a.m. (or, in the case of a payment
of principal, prior to the close of business), New York time, on the second
Business Day preceding the applicable payment date (or, if no such rate is
quoted on such date, the last date on which such rate was quoted), from three
recognized foreign exchange dealers in The City of New York selected by the
Exchange Rate Agent and approved by the Company (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of the Specified Currency payable on
such payment date in respect of all Notes denominated in such Specified
Currency. All currency exchange costs will be borne by the Holders of such
Notes by deductions from such payments. If no such bid quotations are
available, payments will be made in the Specified Currency, unless such
Specified Currency is unavailable due to the imposition of exchange controls or
other circumstances beyond the Company's control, in which case payment will be
made as described below under "Currency Risks--Payment Currency."
Unless otherwise specified in the applicable Pricing Supplement, payments in
U.S. dollars of interest on Certificated Notes (other than interest payable at
Maturity) will be made by mailing a check to the Holders at the addresses of
such Holders appearing on the Security Register on the applicable Regular
Record Date. Notwithstanding the foregoing, the Company may at its option elect
to make such payments in U.S. dollars by wire transfer of immediately available
funds, but only if appropriate payment instructions have been received in
writing by the applicable Trustee not less than fifteen calendar days prior to
the applicable Interest Payment Date. Simultaneously with the election by any
Holder to receive payments in a Specified Currency other than U.S. dollars (as
provided above), such Holder shall provide appropriate payment instructions to
such Trustee, and all such payments will be made in immediately available funds
to an account maintained by the payee with a bank located outside the United
States. Unless otherwise specified in the applicable Pricing Supplement,
principal and any premium and interest payable at Maturity in respect of a
Certificated Note will be paid in immediately available funds upon surrender of
such Certificated Note at the office of the applicable Trustee.
The total amount of any principal, premium, if any, or interest due on any
Global Note representing one or more Book-Entry Notes on any Interest Payment
Date or at Maturity will be made available to the applicable Trustees on such
date. As soon as possible thereafter, the Trustees will make such payments to
the Depositary in accordance with existing arrangements between the Trustees
and the Depositary. The Depositary will allocate such payments to each Book-
Entry Note represented by such Global Note and make payments to the owners or
holders thereof in accordance with its existing operating procedures. Neither
the Company nor the Trustees shall have any responsibility or liability for
such payments by the Depositary. So long as the Depositary or its nominee is
the registered owner of any Global Note, the Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Book-Entry Note
or Notes represented by such Global Note for all purposes under the Indentures.
If any Interest Payment Date on a Fixed Rate Note or the date of Maturity of
any Note falls on a day that is not a Business Day, the related payment of
principal, premium, if any, or interest will be made on the next succeeding
Business Day with the same force and effect as if made on the date such payment
was due, and no additional interest shall accrue as a result of such delayed
payment.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described in the accompanying Prospectus under "Description of
Debt Securities--Defaults and Certain Rights on Default," the amount of
principal due and payable with respect to such Note shall be limited to the sum
of the aggregate principal amount of such Note multiplied by the Issue Price
(expressed as a percentage of the aggregate principal amount), plus the
original issue discount accrued from the date of issue to the date of
declaration, which accrual shall be
S-5
<PAGE>
calculated using the "interest method" (computed in accordance with generally
accepted accounting principles in effect on the date of declaration).
Unless otherwise specified in the applicable Pricing Supplement, the "Regular
Record Date" with respect to any Interest Payment Date (as defined below) shall
be the date fifteen calendar days immediately preceding such Interest Payment
Date whether or not such date shall be a Business Day. Interest payable and
punctually paid or duly provided for on any Interest Payment Date will be paid
to the person in whose name a Note is registered at the close of business on
the Regular Record Date next preceding such Interest Payment Date; provided,
however, that the first payment of interest on any Note with an Original Issue
Date between a Regular Record Date and an Interest Payment Date or on an
Interest Payment Date will be made on the Interest Payment Date following the
next succeeding Regular Record Date to the registered owner on such next
succeeding Regular Record Date; provided, further, that interest payable at
Maturity will be payable to the person to whom principal shall be payable.
All percentages resulting from any calculations will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point being rounded upwards, and all
currency or currency unit amounts used and resulting from such calculations on
the Notes will be rounded to the nearest one-hundredth of a unit (with .005 of
a unit being rounded upwards).
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Unless otherwise set forth in the
applicable Pricing Supplement, interest on each Fixed Rate Note will be payable
semi-annually each March 1 and September 1 (each an "Interest Payment Date")
and at Maturity. Each payment of interest in respect of an Interest Payment
Date shall include interest accrued to but excluding such Interest Payment
Date. Interest on Fixed Rate Notes will be computed on the basis of a 360-day
year of twelve 30-day months.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the Original Issue Date for
such Note at the Initial Interest Rate set forth on the face thereof and in the
applicable Pricing Supplement. Thereafter, the interest rate on such Note for
each Interest Reset Period (as defined below) will be determined by reference
to an interest rate basis or combination of interest rate bases (each a "Base
Rate") plus or minus the Spread, if any, and/or multiplied by the Spread
Multiplier, if any (each as specified in the applicable Pricing Supplement), in
each case applicable to such Interest Reset Period until the principal thereof
is paid or made available for payment. The "Spread" is the number of basis
points (one basis point equals one-hundredth of a percentage point) that may be
specified in the applicable Pricing Supplement as being applicable to such
Floating Rate Note, and the "Spread Multiplier" is the percentage that may be
specified in the applicable Pricing Supplement as being applicable to such
Note. Any Floating Rate Note may also have either or both of the following: (i)
a maximum numerical interest rate limitation, or ceiling, on the rate of
interest which may accrue during any interest period (the "Maximum Interest
Rate") or (ii) a minimum numerical interest rate limitation, or floor, on the
rate of interest which may accrue during any interest period (the "Minimum
Interest Rate"). In addition, a Floating Rate Note may have an interest rate
calculated by adding or subtracting two or more Base Rates as adjusted. The
applicable Pricing Supplement will designate one or more of the following Base
Rates as applicable to the related Floating Rate Note: (a) the CD Rate (a "CD
Rate Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate Note"),
(c) the Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR
Note"), (e) the Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a
"Treasury Rate Note"), (g) the Kenny Rate (a "Kenny Rate Note"), (h) one or
more fixed rates or (i) such other Base Rate as may be set forth in such
Pricing Supplement and in such Note.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (the "Interest Reset Period"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the date or dates on which interest will be
reset
S-6
<PAGE>
(each an "Interest Reset Date") will be, in the case of Floating Rate Notes
which reset daily, each Business Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) that reset weekly, Wednesday of each week; in the
case of Treasury Rate Notes that reset weekly, Tuesday of each week; in the
case of Floating Rate Notes that reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes that reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes that reset semi-annually, the third Wednesday of the two months specified
in the applicable Pricing Supplement; and in the case of Floating Rate Notes
that reset annually, the third Wednesday of the month specified in the
applicable Pricing Supplement. If any Interest Reset Date for any Floating Rate
Note is not a Business Day, such Interest Reset Date shall be postponed to the
next day that is a Business Day, except that in the case of a LIBOR Note, if
such Business Day is in the next succeeding calendar month, such Interest Reset
Date shall be the immediately preceding Business Day, and in the case of a
Kenny Rate Note, such Interest Reset Date shall not be postponed but shall
remain the date specified in the applicable Pricing Supplement. If an auction
falls on a day that is an Interest Reset Date for Treasury Rate Notes, the
Interest Reset Date shall be the following day that is a Business Day.
Interest on each Floating Rate Note will be payable monthly, quarterly, semi-
annually or annually (the "Interest Payment Period") and at Maturity. Except as
provided below or in the applicable Pricing Supplement, the date or dates on
which interest will be payable (each an "Interest Payment Date") will be, in
the case of Floating Rate Notes with a monthly Interest Payment Period, on the
third Wednesday of each month; in the case of Floating Rate Notes with a
quarterly Interest Payment Period, on the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes with a semi-annual
Interest Payment Period, on the third Wednesday of the two months specified in
the applicable Pricing Supplement; and in the case of Floating Rate Notes with
an annual Interest Payment Period, on the third Wednesday of the month
specified in the applicable Pricing Supplement.
If any Interest Payment Date for any Floating Rate Note would otherwise be a
day that is not a Business Day, such Interest Payment Date shall be postponed
to the next day that is a Business Day, except that in the case of a LIBOR
Note, if such Business Day is in the next succeeding calendar month, such
Interest Payment Date shall be the immediately preceding Business Day.
Interest payments on each Interest Payment Date for Floating Rate Notes
(except in the case of Floating Rate Notes which reset daily or weekly) will
include accrued interest from and including the Original Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, such Interest Payment Date. In the case of Floating
Rate Notes that reset daily or weekly, interest payments will include accrued
interest from and including the Original Issue Date or from, but excluding the
last date in respect of which interest has been paid, as the case may be, to,
and including, the Regular Record Date immediately preceding the applicable
Interest Payment Date. At Maturity the interest payable on all Floating Rate
Notes will include interest accrued to, but excluding, the date of Maturity.
Accrued interest will be calculated by multiplying the principal amount of a
Floating Rate Note by an accrued interest factor. This accrued interest factor
will be computed by adding the interest factors calculated for each day in the
period for which accrued interest is being calculated. Unless otherwise
specified in the applicable Pricing Supplement, the interest factor (expressed
as a decimal) for each such day will be computed by dividing the interest rate
applicable to such day by 360, in the cases where the Base Rate is CD Rate,
Commercial Paper Rate, Federal Funds Rate, LIBOR or Prime Rate, by the actual
number of days in the year, in the case where the Base Rate is Treasury Rate,
or by 365, in the case where the Base Rate is Kenny Rate. Unless otherwise
specified in the applicable Pricing Supplement, if the Base Rate for an
applicable Interest Reset Period is a fixed rate, interest will be calculated
on the basis of a 360-day year of twelve 30-day months. The interest factor for
Notes for which the interest rate is calculated with reference to two or more
Base Rates will be calculated in each period in the manner specified in the
applicable Pricing Supplement. The interest rate in effect on each day will be
(a) if such day is an Interest Reset Date, the interest rate with respect to
the Interest Determination Date (as defined below) pertaining to such Interest
Reset Date, or (b) if such day is not an Interest Reset Date, the interest rate
with respect to the Interest Determination Date pertaining to the next
preceding Interest Reset Date, subject in either case to any Maximum or Minimum
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Interest Rate limitation referred to above and to any adjustment by a Spread
and/or a Spread Multiplier referred to above; provided, however, that the
interest rate in effect for the period from the Original Issue Date to the
first Interest Reset Date set forth in the Pricing Supplement with respect to a
Floating Rate Note will be the "Initial Interest Rate" specified in the
applicable Pricing Supplement. The interest rate on the Floating Rate Notes
will in no event be higher than the maximum rate permitted by California law.
Under present California law, there is no maximum rate applicable to the Notes.
Unless otherwise specified the applicable Pricing Supplement, the "Interest
Determination Date" pertaining to an Interest Reset Date where the Base Rate is
other than LIBOR, Treasury Rate or Kenny Rate, will be the second Business Day
next preceding such Interest Reset Date. Unless otherwise specified in the
applicable Pricing Supplement, the Interest Determination Date pertaining to an
Interest Reset Date where the Base Rate is LIBOR will be the second London
Banking Day next preceding such Interest Reset Date. Unless otherwise specified
in the applicable Pricing Supplement, the Interest Determination Date
pertaining to an Interest Reset Date where the Base Rate is Treasury Rate will
be the day of the week in which such Interest Reset Date falls on which
Treasury bills of the Index Maturity specified on the face of the Treasury Rate
Note are auctioned. Treasury bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that such auction may be held on
the preceding Friday. If, as a result of a legal holiday, an auction is so held
on the preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week.
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date where the Base Rate is
Kenny Rate will be the day of the calendar week in which such Interest Reset
Date falls, on which Kenny Information Systems or Lehman Brothers Special
Financing Inc., announces the applicable index or rate, as the case may be.
Kenny Information Systems normally publishes its index on Tuesday of each week,
unless that day is a legal holiday, in which case it is published on Wednesday.
Unless otherwise specified the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date shall be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if any such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day preceding the applicable
Interest Payment Date or date of Maturity.
Unless otherwise specified in the applicable Pricing Supplement, The Bank of
New York will be the calculation agent (the "Calculation Agent") with respect
to the Floating Rate Notes. Upon request of the Holder of any Floating Rate
Note, the Calculation Agent will provide the interest rate then in effect and,
if determined, the interest rate which will become effective on the next
Interest Reset Date with respect to such Floating Rate Note. The Calculation
Agent will also provide such information to the applicable Trustee and Paying
Agent as soon as the interest rate with respect to the Floating Rate Notes has
been determined and as soon as practicable after any change in such interest
rate.
Except as otherwise specified in the applicable Pricing Supplement, on each
Interest Reset Date the rate of interest on a Floating Rate Note shall be the
rate determined in accordance with the provisions of the applicable heading
below.
CD Rate Notes
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, which
is applicable to the Interest Reset Period) specified in the CD Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
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Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)" or, if
not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 p.m. Quotations for U.S. Government Securities" ("Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in Composite Quotations by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, then the CD
Rate on such Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 a.m., New York City time, on such Interest Determination Date, of
three leading nonbank dealers in negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent (after consultation
with the Company) for negotiable certificates of deposit of major United States
money center banks of the highest credit standing (in the market for negotiable
certificates of deposit) with a remaining Maturity Date closest to the Index
Maturity designated in the applicable Pricing Supplement in a denomination of
$5,000,000; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
for the applicable period will be the same as the CD Rate for the immediately
preceding Interest Reset Period (or, if there was no Interest Reset Period, the
Initial Interest Rate).
CD RATE NOTES, LIKE OTHER NOTES, ARE NOT DEPOSIT OBLIGATIONS OF A BANK AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, which is applicable to the Interest Reset Period)
specified in the Commercial Paper Rate Notes and the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on that date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement as
published in H.15(519), under the heading "Commercial Paper." In the event that
such rate is not published by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, then the Commercial Paper
Rate shall be the Money Market Yield of the rate on that Interest Determination
Date for commercial paper having the Index Maturity designated in the
applicable Pricing Supplement as published in Composite Quotations under the
heading "Commercial Paper." If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in Composite Quotations, the
Commercial Paper Rate for that Interest Determination Date shall be calculated
by the Calculation Agent and shall be the Money Market Yield of the arithmetic
mean of the offered rates of three leading dealers of commercial paper in The
City of New York selected by the Calculation Agent (after consultation with the
Company) as of 11:00 a.m., New York City time, on that Interest Determination
Date, for commercial paper having the Index Maturity designated in the
applicable Pricing Supplement placed for an industrial issuer whose bond rating
is "AA," or the equivalent, from a nationally recognized rating agency;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Commercial Paper Rate
for the applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no Interest Reset
Period, the Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360
-------------------
360 - (D X M) X 100
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
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Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rates (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, which is applicable to the Interest Reset Period) specified
in the Federal Funds Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
that day for Federal Funds as published in H.15(519) under the heading "Federal
Funds (Effective)" or, if not so published by 3:00 p.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the
Federal Funds Rate will be the rate on such Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds (Effective
Rate)." If such rate is not yet published in either H.15 (519) or the Composite
Quotations by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal
Funds arranged by three leading brokers of Federal Funds transactions in The
City of New York selected by the Calculation Agent (after consultation with the
Company) as of 9:00 a.m., New York City time, on such Interest Determination
Date; provided, however, that if the brokers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate for the applicable period will be the same as the Federal Funds Rate
for the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Interest Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, which is
applicable to the Interest Reset Period) specified in the LIBOR Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, with respect
to a LIBOR Note indexed to the offered rates for U.S. dollar deposits, "LIBOR"
will be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to an Interest Determination Date, LIBOR will be either
(a) if "LIBOR Reuters" is specified in the applicable Pricing Supplement,
the arithmetic mean of the offered rates (unless the specified Designated
LIBOR Page (as defined below) by its terms provides only for a single rate,
in which case such single rate shall be used) for deposits in the Index
Currency having the Index Maturity, each as designated in the applicable
Pricing Supplement, commencing on the second London Banking day immediately
following such Interest Determination Date, which appear on the Designated
LIBOR Page specified in the applicable Pricing Supplement as of 11:00 a.m.,
London time, on the Interest Determination Date, if at least two such
offered rates appear (unless, as aforesaid only a single rate is required)
on such Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in
the applicable Pricing Supplement, the rate for deposits in the Index
Currency having the Index Maturity, each as designated in the applicable
Pricing Supplement, commencing on the second London Banking Day immediately
following that Interest Determination Date, that appears on the Designated
LIBOR Page specified in the applicable Pricing Supplement as of 11:00 a.m.,
London time, on the Interest Determination Date. In the case where (a)
above applies, if fewer than two offered rates appear on the Designated
LIBOR Page specified in the applicable Pricing Supplement (unless, as
aforesaid, only a single rate is required), or, in the case where (b) above
applies if no rate appears on the Designated LIBOR Page specified in the
applicable Pricing Supplement, as applicable, LIBOR in respect of that
Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to an Interest Determination Date on which this
provision applies, LIBOR will be determined on the basis of the rates at
which deposits in the Index Currency having the Index Maturity, each as
designated in the applicable Pricing Supplement, are offered at
approximately 11:00 a.m., London
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time, on such Interest Determination Date by four major banks ("Reference
Banks") in the London interbank market, selected by the Calculation Agent
(after consultation with the Company) to prime banks in the London
interbank market commencing on the second London Banking Day immediately
following such Interest Determination Date and in a principal amount of not
less than the equivalent of U.S. $1,000,000 that is representative for a
single transaction in such market and in the specified Index Currency at
such time. The Calculation Agent will request the principal London office
of the Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, LIBOR for such Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR for such Interest Determination Date will be
the arithmetic mean of the rates quoted at approximately 11:00 A.M., in the
applicable Principal Financial Center (as defined below), on such Interest
Determination Date by three major money center banks (which may include the
Agents) in such Principal Financial Center selected by the Calculation
Agent (after consultation with the Company) for loans in the Index Currency
designated in the applicable Pricing Supplement to leading European banks
having the Index Maturity designated in the applicable Pricing Supplement
commencing on the second London Banking Day immediately following such
Interest Determination Date and in a principal amount of not less than the
equivalent of U.S. $1,000,000 that is representative for a single
transaction in such market and in the specified Index Currency at such
time; provided, however, that if the banks in such Principal Financial
Center selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR for the applicable period will be the
same as LIBOR for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, LIBO Page) had been specified.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to U.S.
dollars, Deutsche marks, and ECUs, the Principal Financial Center shall be The
City of New York, Frankfurt, and Luxembourg, respectively.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
which is applicable to the Interest Reset Period) specified in the Prime Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date, the rate set forth on
such date in H.15(519) under the heading "Bank prime loan." In the event that
such rate is not published prior to 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, then the Prime
Rate will be determined by the Calculation Agent and will be the arithmetic
mean of the rates of interest publicly announced by each bank that appears on
the Reuters Screen NYMF Page (as defined herein) as such bank's prime rate or
base lending rate as in effect for that Interest Determination Date. If fewer
than four such rates appear on the Reuters Screen NYMF Page for the Interest
Determination Date, the Prime Rate will be determined by the
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Calculation Agent and will be the arithmetic mean of the prime rates quoted on
the basis of the actual number of days in the year divided by a 360-day year as
of the close of business on such Interest Determination Date by at least two
major money center banks in The City of New York selected by the Calculation
Agent. If fewer than two such rates are quoted as aforesaid, the Prime Rate
will be determined by the Calculation Agent on the basis of the rates furnished
in The City of New York by one or two, as the case may be, substitute banks or
trust companies organized and doing business under the laws of the United
States, or any State thereof, having total equity capital of at least U.S.
$500,000,000 and being subject to supervision or examination by federal or
state authority, selected by the Calculation Agent (after consultation with the
Company) to provide such rate or rates; provided, however, that if the banks or
trust companies selected as aforesaid are not quoting as mentioned in this
sentence, the Prime Rate for the applicable period will be the same as the
Prime Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the Initial Interest Rate). "Reuters Screen
NYMF Page" means the display designated as page "NYMF" on the Reuters Monitor
Money Rates Service (or such other page as may replace the NYMF page on that
service for that purpose of displaying the prime rate or base lending rate of
major United States banks).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rates (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
which is applicable to the Interest Reset Period) specified in the Treasury
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date, the rate for the
auction held on such Interest Determination Date of direct obligations of the
United States ("Treasury bills") having the Index Maturity specified in the
applicable Pricing Supplement, as such rate shall be published in H.15(519)
under the heading "U.S. Government Securities--Treasury bills--Auction average
(investment)" or, if not so published by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the auction
average rate (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced
by the United States Department of the Treasury. In the event that the results
of the auction of Treasury bills having the Index Maturity designated in the
applicable Pricing Supplement are not published or reported as provided above
by 3:00 p.m., New York City time, on such Calculation Date or if no such
auction is held in a particular week, then the Treasury Rate shall be
calculated by the Calculation Agent and shall be a yield to maturity (expressed
as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 p.m., New York City time, on such Interest
Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent (after consultation with
the Company) for the issue of Treasury bills with a remaining Maturity Date
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Treasury Rate for the
applicable period will be the same as the Treasury Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the Initial Interest Rate).
Kenny Rate Notes
Kenny Rate Notes will bear interest at the interest rates (calculated with
reference to the Kenny Rate and the Spread and/or Spread Multiplier, if any,
which is applicable to the Interest Reset Period) specified in the Kenny Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Kenny Rate"
means, with respect to any Interest Determination Date, the per annum rate on
such date equal to the index published by the Kenny Information Systems or its
successor, based upon 30-day yield evaluations at par of bonds, the interest on
which is excludable from gross income for federal income tax purposes under the
Code, of not less than five
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"high grade" component issuers selected from time to time by the Kenny
Information Systems, including without limitation, issuers of general
obligation bonds, provided however that the bonds on which the Index is based
shall not include any bonds the interest on which is subject to an "alternate
minimum tax" or similar tax under the Code, unless all tax exempt bonds are
subject to such tax. If such rate is not published by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Kenny Rate shall be the rate quoted by Lehman Brothers Special Financing
Inc. or its successor equalling the prevailing rate for bonds rated in the
highest short-term rating category by Moody's Investors Service and Standard &
Poor's Corporation in respect to issuers selected by Lehman Brothers Special
Financing Inc. most closely resembling the "high grade" component issuers
selected by Kenny Information System that are subject to tender by the holders
thereof for purchase on not more than seven (7) days notice and the interest on
which is (i) variable on a weekly basis, (ii) excludable from gross income for
Federal income tax purposes under the Code, and (iii) not subject to an
"alternate minimum tax" or similar tax under the Code, unless all tax-exempt
bonds are subject to such tax; provided, however, that if Lehman Brothers
Special Financing Inc. is not quoting as mentioned in this sentence, the Kenny
Rate for the applicable period shall be the same as the Kenny Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Interest Rate).
Indexed Notes
Amounts due on a Note in respect of principal, interest and premium, if any,
may be determined by reference to (a) a currency exchange rate or rates, (b) a
securities or commodities exchange index, (c) the value of a particular
security or commodity or (d) any other index or indices (any such Note being
herein referred to as an "Indexed Note") and such terms will be set forth on
such Note. The Pricing Supplement relating to an Indexed Note will set forth
the method by which and the terms on which the amount of principal (whether at
or prior to the Maturity Date thereof), interest and premium, if any, are
determined, the tax consequences to holders of Indexed Notes, a description of
certain risks associated with investments in Indexed Notes and other
information relating to such Indexed Notes.
Renewable Notes
The Pricing Supplement relating to each Note will indicate whether the Holder
of such Note has the option to renew the Maturity Date of such Note to one or
more dates (each a "New Maturity Date") indicated in the applicable Pricing
Supplement. If the Holder has such option with respect to any such renewable
Note (a "Renewable Note"), the following procedures will apply, unless
otherwise specified in the applicable Pricing Supplement.
Each Renewable Note will mature on the Maturity Date as indicated in the
applicable Pricing Supplement; provided, that the Maturity Date may be renewed,
at the option of the Holder, to the New Maturity Date or Dates, if any,
specified in the applicable Pricing Supplement if the Holder of such Note so
elects, in the manner specified below, prior to the applicable Notice of
Renewal Date shown in the applicable Pricing Supplement. Such election will be
irrevocable and will be binding upon each Holder of such Note.
Any such election to renew the Maturity Date of a Renewable Note will be
effective only if notice thereof is provided to the Company in the manner
described below. The Maturity Date of such Note may be renewed, in whole or
part, at the option of the Holder thereof, to each successive New Maturity Date
indicated in the applicable Pricing Supplement if the Holder of such Note
presents a duly completed and executed notice, in the applicable form attached
to such Note, together with such Note, to the applicable Trustee in its
respective Corporate Trust Office or such other address as the Company shall
from time to time notify the Holders of the Notes not less than ten nor more
than 30 days prior to the applicable Notice of Renewal Date shown in the
applicable Pricing Supplement, provided, however, that if a Holder of such Note
does not make an election with respect to all or a portion of the Note with
respect to a specified New Maturity Date, such Note or such portion may not be
renewed to a subsequent New Maturity Date. The Trustee will provide the Holder
with a new Note with respect to that portion which is being renewed indicating
the New Maturity Date, and
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a new Note with respect to that portion, if any, which is not being renewed
indicating the original Maturity Date. All questions as to the validity,
eligibility (including time of receipt) and acceptance of any option to renew
the Maturity Date of such Note will be determined by the Company, whose
determination will be final and binding. If no New Maturity Date or Dates are
indicated with respect to a Note, the Maturity Date of such Note will not be
renewable.
BOOK-ENTRY SYSTEM
Upon issuance, if indicated in the applicable Pricing Supplement, all Fixed
Rate Book-Entry Notes having the same original issuance date, interest rate,
Maturity Date, Specified Currency and other terms, if any, will be represented
by a single Global Note. In addition, if indicated in the applicable Pricing
Supplement, all Floating Rate Book-Entry Notes having the same Base Rate(s),
Original Issue Date, Initial Interest Rate, Interest Payment Dates, Index
Maturity, Index Currency, Interest Reset Dates, Interest Determination Dates,
Spread (if any), Spread Multiplier (if any), Minimum Rate (if any), Maximum
Rate (if any), Maturity Date, Specified Currency and other terms, if any, will
be represented by a single Global Note. Each Global Note representing Book-
Entry Notes will be deposited with, or on behalf of, the Depositary, and
registered in the name of a nominee of the Depositary. Book-Entry Notes will
not be exchangeable for Certificated Notes in definitive form except under the
circumstances described below.
The Depositary has advised the Company and the Agents as follows: the
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
facilitates the settlement among Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. "Direct
Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the Depositary's system is also available to
others such as banks, securities brokers and dealers and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The Rules applicable
to the Depositary and its participants are on file with the Securities and
Exchange Commission.
Purchase of interests in the Global Notes under the Depositary's system must
be made by or through Direct Participants, which will receive a credit for such
interests on the Depositary's records. The ownership interest of each actual
purchaser of interests in the Global Notes ("Beneficial Owner") is in turn to
be recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from the Depositary of their purchase,
but Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Global
Notes are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Global Notes, except
as described below.
To facilitate subsequent transfers, all Global Notes deposited by
Participants with the Depositary are registered in the name of the Depositary's
partnership nominee, Cede & Co. The deposit of Global Notes with the Depositary
and their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners of
the interests in the Global Notes; the Depositary's records reflect only the
identity of the Direct Participants to whose accounts interests in the Global
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
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Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangement among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all the interests
in the Global Notes are being redeemed, the Depositary's practice is to
determine by lot the amount of the interest of each Direct Participant in such
Global Note to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Notes. Under its usual procedures, the Depositary mails an Omnibus
Proxy to the issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts interests in the Global Notes are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Global Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on the payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of the Depositary, the Trustee, the Company, its
paying agent or the Securities Registrant, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to the Depositary is the responsibility of the Company
or its paying agent, disbursement of such payments to Direct and Indirect
Participants shall be the responsibility of the Depositary, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of Direct
and Indirect Participants.
Unless otherwise specified in the applicable Pricing Supplement, a beneficial
owner of Book-Entry Notes denominated in a Specified Currency electing to
receive payments of principal or any premium or interest in a currency other
than U.S. dollars must notify the participant through which its interest is
held on or prior to the applicable Regular Record Date, in the case of a
payment of interest, and on or prior to the sixteenth day prior to Maturity, in
the case of principal or premium, of such beneficial owner's election to
receive all or a portion of such payment in a Specified Currency. Such
participant must notify the Depositary of such election on or prior to the
third Business Day after such Regular Record Date. The Depositary will notify
the Paying Agent of such election on or prior to the fifth Business Day after
such Regular Record Date. If complete instructions are received by the
participant and forwarded by the participant to the Depositary, and by the
Depositary to the Paying Agent, on or prior to such dates, the beneficial owner
will receive payments in the Specified Currency.
The Depositary may discontinue providing its services as depositary with
respect to the Notes at any time by giving reasonable notice to the Company or
its paying agent. Under such circumstances, in the event that a successor
depositary is not obtained, Certificated Notes are required to be printed and
delivered. The Company may decide to discontinue use of the system of book-
entry transfers through the Depositary (or a successor depositary). In that
event, Certificated Notes will be printed and delivered.
Unless and until it is exchanged in whole or in part for Certificated Notes
of such series in definitive form, a Global Note may not be transferred except
as a whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor of such Depositary or
nominee of such successor.
The Book-Entry Notes of a series of Notes represented by one or more Global
Notes are exchangeable for Certificated Notes in definitive form of like tenor
as such Book-Entry Notes if (i) the Depositary for such Global Notes notifies
the Company that it is unwilling or unable to continue as Depositary for such
Global Notes or if at any time such Depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, and, in
either case, a successor depositary is not appointed by the
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Company within 90 days of the receipt by the Company of such notice or of the
Company becoming aware of such ineligibility, (ii) the Company in its
discretion at any time determines not to have all of the Book-Entry Notes of
such series represented by one or more Global Note or Notes and notifies the
Trustee thereof, or (iii) an Event of Default has occurred and is continuing
with respect to the Notes of such series. Any Book-Entry Note that is
exchangeable pursuant to the preceding sentence is exchangeable for
Certificated Notes issuable in authorized denominations and registered in such
names as the Depositary holding such Global Note shall direct. Subject to the
foregoing, a Global Note is not exchangeable, except for a Global Note or
Global Notes of the same aggregate denominations to be registered in the name
of such Depositary or its nominee or in the name of a successor of such
Depositary or a nominee of such successor.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
REDEMPTION
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to the Maturity Date, or that such Note will be
redeemable at the option of the Company on a date or dates specified prior to
the Maturity Date at a price or prices, set forth in the applicable Pricing
Supplement, together with accrued interest to the date of redemption. The Notes
will not be subject to any sinking fund. The Company may redeem any of the
Notes which are redeemable and remain outstanding either in whole or from time
to time in part, upon not less than 30 nor more than 60 days' prior notice
given as provided in the Indenture. If less than all of the Notes with like
tenor and terms are to be redeemed, the Notes to be redeemed shall be selected
by the Trustee not more than 60 days prior to the Redemption Date from the
Notes of like tenor and terms not previously called for redemption. Such
selection shall be of principal amounts equal to the minimum authorized
denomination for such Notes or any integral multiple thereof. Subject to the
immediately preceding sentence, such selection shall be made by any method as
the Trustee shall deem fair and appropriate. The notice of such redemption
shall specify which Notes are to be redeemed. In the event of redemption of
such Notes in part only, a new Note or Notes of this series of like tenor and
terms for the unredeemed portion thereof will be issued in the name of the
Holder thereof upon the cancellation thereof.
REPAYMENT AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to the Maturity Date, or that the Note will be
repayable at the option of the Holder on a date or dates specified prior to the
Maturity Date, at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
In order for a Note to be repaid, the Company must receive at the specified
location of the applicable Trustee, or if so designated, the agency of the
Company maintained for such purposes in the Borough of Manhattan, the City of
New York, unless otherwise specified in the applicable Pricing Supplement, at
least 15 days, but not more than 30 days, prior to the specified repayment date
(i) the Note with the form entitled "Option to Elect Repayment" on the Note
duly completed or (ii) a telegram, telex, facsimile transmission or letter from
a member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States of America setting forth the name of the Holder of the Note, the
principal amount of the Note, the amount of the Note to be repaid (which shall
not be less than the minimum authorized denomination of such Note), the
certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid with the form entitled "Option to Elect
Repayment" on the Note duly completed will be received by the Company at such
location not later than five Business Days after the date of such telegram,
telex, facsimile transmission or letter and such Note and form duly completed
are received by the Company at such location by such fifth Business Day.
Exercise of the repayment option by the Holder
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of a Note shall be irrevocable. The repayment option may be exercised by the
Holder of a Note for less than the entire principal amount of the Note provided
that the principal amount of the Note remaining outstanding after repayment, if
any, is an authorized denomination. All questions as to the validity,
eligibility (including time of receipt) and acceptance of any Note for
repayment will be determined by the Company whose determination will be final
and binding.
If a Note is represented by a Global Security, the Depositary or its nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary or its
nominee will timely exercise a right to repayment with respect to a particular
Note, the beneficial owner of such Note must instruct the broker or other
direct or indirect participant through which it holds an interest in such Note
to notify the Depositary of its desire to exercise a right to repayment.
Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other direct or indirect participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary.
Unless otherwise specified in the applicable Pricing Supplement, if an
Original Issue Discount Note is to be repaid prior to its Maturity Date, the
amount of principal due and payable with respect to such Note shall be limited
to the sum of the principal amount of such Note multiplied by the Issue Price
(expressed as a percentage of the aggregate principal amount), plus the
original issue discount accrued from the date of issue to the date of
declaration, which accrual shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles in effect
on the date of declaration).
The Company may at any time purchase Notes at any price in the open market or
otherwise. Notes so purchased by the Company may be held or resold or, at the
discretion of the Company, may be surrendered to the applicable Trustee for
cancellation.
DEFEASANCE AND COVENANT DEFEASANCE
The defeasance and covenant defeasance provisions described in the Prospectus
will not be applicable to the Notes.
CERTAIN INVESTMENT CONSIDERATIONS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, to one or more currencies or composite currencies (including exchange
rates and swap indices between currencies or composite currencies),
commodities, interest rates or other indices, either directly or inversely,
entails significant risks that are not associated with similar investments in a
conventional fixed rate or floating rate debt security. Such risks include,
without limitation, the possibility that such index or indices may be subject
to significant changes, that the resulting interest rate will be less than that
payable on a conventional fixed rate or floating rate debt security issued by
the Company at the same time, that the repayment of principal and/or premium,
if any, can occur at times other than that expected by the investor, and that
the investor could lose all or a substantial portion of principal and/or
premium, if any, payable at Maturity. Such risks depend on a number of
interrelated factors, including economic, financial and political events, over
which the Company has no control. Additionally, if the formula used to
determine the amount of principal, premium, if any, and/or interest payable
with respect to such Notes contains a multiple or leverage factor, the effect
of any change in the applicable index or indices will be magnified. In recent
years, values of certain indices have been highly volatile and such volatility
may be expected to continue in the future. Fluctuations in the value of any
particular index that have occurred in the past are not necessarily indicative,
however, of fluctuations that may occur in the future.
Any optional redemption feature of the Notes might affect the market value of
such Notes. Since the Company may be expected to redeem the Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
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The secondary market for such Notes will be affected by a number of factors
independent of the creditworthiness of the Company and the value of the
applicable index or indices, including the complexity and volatility of such
index or indices, the method of calculating the principal, premium, if any,
and/or interest in respect of such Notes, the time remaining to the Maturity of
such Notes, the outstanding amount of such Notes, any redemption features of
such Notes, the amount of other debt securities linked to such index or indices
and the level, direction and volatility of market interest rates generally.
Such factors also will affect the market value of the Notes. In addition,
certain Notes may be designed for specific investment objectives or strategies
and, therefore, may have a more limited secondary market and experience more
price volatility than conventional debt securities. Investors may not be able
to sell Notes readily or at prices that will enable investors to realize their
anticipated yield. No investor should purchase Notes unless such investor
understands and is able to bear the risk that certain Notes may not be readily
saleable, that the value of Notes will fluctuate over time and that such
fluctuations may be significant.
The credit ratings assigned to the Company's Notes are a reflection of the
Company's credit status, but in no way are a reflection of the potential impact
of the factors discussed above, or other factors, on the market value of the
Notes. Accordingly, prospective investors should consult their own financial
and legal advisors as to the risks entailed by an investment in the Notes and
the suitability of such Notes in light of their particular circumstances.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in a Specified Currency other
than the currency of the country in which the purchaser is a resident or the
currency (including any composite currency) in which the purchaser conducts its
business (the "Home Currency") entails significant risks that are not
associated with a similar investment in a security denominated in the Home
Currency. Such risks include, without limitation, the possibility of
significant changes in rates of exchange between the Home Currency and the
Specified Currency and the possibility of the imposition or modification of
foreign exchange controls with respect to the Specified Currency. Such risks
generally depend on factors over which the Company has no control, such as
economic and political events and the supply of and demand for the relevant
currencies. In recent years, rates of exchange for certain currencies have been
highly volatile, and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Note. Depreciation of the Specified Currency in which a
Note is denominated against the relevant Home Currency would result in a
decrease in the effective yield of such Note below its coupon rate, and in
certain circumstances could result in a loss to the investor on a Home Currency
basis.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency on an Interest Payment Date or at Maturity with respect
to a Note. At present, the Company has identified the following currencies and
currency units in which payments of principal and interest on Notes may be
made: Australian Dollars, Canadian Dollars, Danish Kroner, German Marks, Hong
Kong Dollars, Japanese Yen, Italian Lire, New Zealand Dollars, Spanish Pesetas,
United States Dollars and European Currency Units. There can be no assurances
that exchange controls will not restrict or prohibit payments of principal or
interest in any currency or currency unit. Even if there are no actual exchange
controls, it is possible that on an Interest Payment Date or at Maturity with
respect to any particular Note, a Specified Currency for such Note would not be
available to the Company to make payments of interest and principal then due.
In that event, the Company will make such payments in the manner set forth
below under "Payment Currency."
Pricing Supplements relating to Notes denominated in a Specified Currency
other than U.S. dollars may contain information concerning historical exchange
rates for such Specified Currency against the U.S. dollar, a description of the
currency and any exchange controls affecting such currency.
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THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT AND, ALONG
WITH THE APPLICABLE PRICING SUPPLEMENT, WILL NOT DESCRIBE ALL THE RISKS OF AN
INVESTMENT IN NOTES DENOMINATED IN A CURRENCY (INCLUDING ANY COMPOSITE
CURRENCY) OTHER THAN A PROSPECTIVE PURCHASER'S HOME CURRENCY, AND THE COMPANY
DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS
THEY EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE DATE OF ANY PRICING
SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE
RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN CURRENCIES (INCLUDING
COMPOSITE CURRENCIES) OTHER THAN THE PARTICULAR HOME CURRENCY. SUCH NOTES ARE
NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT
TO FOREIGN CURRENCY TRANSACTIONS.
PAYMENT CURRENCY
Except as set forth below or in the applicable pricing supplement, if payment
on a Note is required to be made in a foreign currency and such currency is
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control, or is no longer used by the government of the
country issuing such currency or for the settlement of transactions by public
institutions of or within the international banking community, then all
payments due on that date with respect to such Note shall be made in U.S.
dollars. The amount so payable on any date in such foreign currency shall be
converted into U.S. dollars at a rate determined by the Exchange Rate Agent on
the basis of the most recently available Market Exchange Rate or as otherwise
determined in good faith by the Company if the foregoing is impracticable.
If payment on a Note is required to be made in ECU and ECU is unavailable due
to the imposition of exchange controls or other circumstances beyond the
Company's control, or is no longer used in the European Monetary System, all
payments due on that due date with respect to the Notes shall be made in U.S.
dollars. The amount so payable on any date in ECU shall be converted into U.S.
dollars, at a rate determined by the Exchange Rate Agent as of the second
Business Day prior to the date on which such payment is due on the following
basis. The component currencies of the ECU for this purpose (the "Components")
shall be the currency amounts which were components of the ECU as of the last
date on which the ECU was used in the European Monetary System. The equivalent
of the ECU in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Components. The U.S. dollar equivalent of each of the
Components shall be determined by the Exchange Rate Agent on the basis of the
most recently available Market Exchange Rate, or as otherwise indicated in the
applicable Pricing Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into
two or more currencies, the amount of that currency as a Component shall be
replaced by amounts of such two or more currencies, each of which shall have a
value on the date of division equal to that amount of the former component
currency divided by the number of currencies into which that currency was
divided.
All determinations referred to above made by the Exchange Rate Agent shall be
at its sole discretion (except to the extent expressly provided herein that any
determination is subject to the approval of the Company). In the absence of
manifest error, such determinations shall be conclusive for all purposes and
binding on Holders of the Notes.
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FOREIGN CURRENCY JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of California. Although courts in the United States have not
customarily rendered judgments for money damages denominated in any currency
other than U.S. dollars, California statutory law provides that in a California
court a judgment on a claim expressed in a currency other than U.S. dollars
shall be stated in the amount of the currency in which the parties have agreed
that payment is to be made, and a foreign currency judgment is payable in that
foreign currency or, at the option of the debtor, in the amount of the U.S.
dollars which will purchase that amount of foreign currency at the rate of
exchange in effect on the banking day next preceding the date of payment.
Nevertheless, if for purposes of obtaining a judgment against the Company in
any court it becomes necessary to convert the sum due into U.S. dollars, the
Indentures provide that the rate of exchange into U.S. dollars in respect of
any such judgment will be determined on the Business Day preceding the day the
judgment is rendered. If the rate of exchange were ultimately determined by
reference to the date of the judgment, Holders of the Notes would bear the risk
of exchange rate fluctuations between the time the amount of the judgment is
calculated and the time the Trustee converts U.S. dollars to the specified
currency or composite currency for payment of the judgment.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the ownership of Notes as of the date hereof. This summary is
based on the Internal Revenue Code of 1986 (the "Code") as well as final,
temporary and proposed Treasury regulations and administrative and judicial
decisions. Legislative, judicial and administrative changes may occur, possibly
with retroactive effect, that could affect the accuracy of the statements set
forth herein. This summary does not purport to address all federal income tax
matters that may be relevant to particular purchasers of Notes. For example, it
generally is addressed only to original purchasers of the Notes, deals only
with Notes held as capital assets within the meaning of Section 1221 of the
Code, and does not address tax consequences of holding Notes that may be
relevant to investors in special tax situations, such as banks, insurance
companies, tax-exempt organizations, dealers in securities or currencies, Notes
held as a hedge or as part of a hedging, straddle or conversion transaction, or
Holders whose "functional currency" (as defined in Code section 985) is not the
United States dollar. Persons considering the purchase of Notes should consult
their own tax advisors concerning the application of United States federal
income tax laws, as well as any state, local, foreign, or other tax laws, to
their particular situations. Additional United States federal income tax
consequences applicable to particular Notes may be set forth in the applicable
Pricing Supplement.
PAYMENT OF INTEREST
Except as set forth below, interest on a Note will be taxable to a Holder as
ordinary interest income at the time it accrues or is received, in accordance
with the Holder's method of accounting for tax purposes. Special rules
governing the treatment of Notes issued at an original issue discount are
described under "Original Issue Discount" below.
ORIGINAL ISSUE DISCOUNT
The following is a summary of the principal federal income tax consequences
of the ownership of Notes issued at an original issue discount. It is based in
part upon the rules governing original issue discount that are set forth in
Code sections 1271 through 1275 and in Treasury regulations thereunder (the
"OID Regulations"). On December 15, 1994, the Internal Revenue Service ("IRS")
issued proposed Treasury regulations relating to contingent payment debt
instruments, which also contained proposed amendments to the OID Regulations
with regard to variable rate debt instruments (the "Proposed Regulations"). In
general, the Proposed Regulations are proposed to be effective for debt
instruments issued on or after the date that is 60 days after final regulations
are published. The following summary does not discuss the application of the
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Proposed Regulations to, or address the federal income tax consequences of, an
investment in contingent payment debt instruments. In the event the Company
issues contingent payment debt instruments, such as Indexed Notes, the
applicable Pricing Supplement will describe the material federal income tax
consequences thereof.
A Note which has an "issue price" of less than its "stated redemption price
at maturity" generally will be issued at an original issue discount for federal
income tax purposes. The issue price of a Note generally is the first price at
which a substantial amount of the issue of Notes is sold to the public
(excluding bond houses, brokers, or similar persons acting in the capacity of
underwriters or wholesalers). The "stated redemption price at maturity" is the
total amount of all payments provided by the Note other than "qualified stated
interest" payments; qualified stated interest generally is stated interest that
is unconditionally payable at least annually either at a single fixed rate, or,
to the extent described below, at a "qualifying variable rate." Qualified
stated interest will be taxable to a Holder when accrued or received in
accordance with such Holder's method of tax accounting. A Note generally will
be considered to have de minimis original issue discount if the excess of its
stated redemption price at maturity over its issue price is less than the
product of 0.25 percent of the stated redemption price at maturity and the
number of complete years to maturity (or the "weighted average maturity" in the
case of a Note that provides for payment of an amount other than qualified
stated interest before maturity). Holders of Notes having de minimis original
issue discount generally must include a proportionate amount of the de minimis
original issue discount in income as each payment of stated principal is made
as a payment received in retirement of the Note.
Holders of Notes issued at an original issue discount that is not de minimis
original issue discount and that mature more than one year from the date of
issuance will be required to include such original issue discount in gross
income for federal income tax purposes as it accrues, in advance of receipt of
the cash attributable to such income. Original issue discount accrues based on
a compounded, constant yield to maturity; accordingly, Holders of Notes issued
at an original issue discount generally will be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods. The annual amount of original issue discount includable in income by
the initial Holder of a Note issued at an original issue discount will equal
the sum of the daily portions of the original issue discount with respect to
the Note for each day on which such Holder held the Note during the taxable
year. Generally, the daily portions of the original issue discount are
determined by allocating to each day in an accrual period the ratable portion
of the original issue discount allocable to such accrual period. The term
"accrual period" means any interval of time with respect to which the accrual
of original issue discount is measured, and which may vary in length over the
term of the Note provided that each scheduled payment of principal or interest
occurs at the beginning or end of an accrual period. The amount of original
issue discount allocable to an accrual period will be the excess of (a) the
product of the "adjusted issue price" of the Note at the commencement of such
accrual period and its "yield to maturity" over (b) the amount of any qualified
stated interest payments allocable to the accrual period. The "adjusted issue
price" of the Note at the beginning of the first accrual period is its issue
price, and, on any day thereafter, it is the sum of the issue price and the
amount of the original issue discount previously includable in the gross income
of any Holder (without regard to any acquisition premium), reduced by the
amount of any payment other than a payment of qualified stated interest
previously made with respect to the Note. The OID Regulations provide a special
rule for determining the original issue discount allocable to an accrual period
if an interval between payments of qualified stated interest contains more than
one accrual period. The "yield to maturity" of the Note is computed on the
basis of a constant interest rate, compounding at the end of each accrual
period, taking into account the length of the particular accrual period. If all
accrual periods are of equal length except for an initial or an initial and
final shorter accrual period(s), the amount of original issue discount
allocable to the initial period may be computed using any reasonable method;
the original issue discount allocable to the final accrual period is in any
event the difference between the amount payable at maturity (other than a
payment of qualified stated interest) and the adjusted issue price at the
beginning of the final accrual period.
For purposes of calculating the yield and maturity of a Note subject to an
issuer or holder right to accelerate principal repayment (respectively, a "call
option" or "put option"), such call option or put option
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is presumed exercised if the yield on the Note would be less or more,
respectively, than it would be if the option were not exercised. The effect of
this rule generally may be to accelerate or defer the inclusion of original
issue discount in the income of a Holder whose Note is subject to a put option
or a call option, as compared to a Note that does not have such an option. If
any such option presumed to be exercised is not in fact exercised, the Note is
treated as reissued on the date of presumed exercise for an amount equal to its
adjusted issue price on that date for purposes of redetermining such Note's
yield and maturity and any related subsequent accruals of original issue
discount. Purchasers of Notes with such features should carefully review the
applicable Pricing Supplement and should consult their own tax advisors with
respect to the consequences of a Note having such an option.
Special considerations relate to the calculation of interest income and
original issue discount with respect to Floating Rate Notes. Such notes
generally will bear interest at a "qualified floating rate" and thus will be
treated as "variable rate debt instruments" under the OID Regulations. Such
Notes will be treated as described in the following paragraph. Floating Rate
Notes that do not bear interest at a "qualifying variable rate" or that have an
issue price that exceeds the total noncontingent principal payments by more
than a specified minimum amount will be treated as contingent debt instruments.
The Pricing Supplement applicable to any such debt instrument will describe the
material federal income tax consequences of the ownership of such instrument.
If a Note qualifies as a variable rate debt instrument, the OID Regulations
specify rules for determining the amount of qualified stated interest and the
amount and accrual of any original issue discount. If the Note bears interest
that is unconditionally payable at least annually at a single qualified
floating rate or objective rate, all stated interest is treated as qualified
stated interest. The accrual of any original issue discount is determined by
assuming the Note bears interest at a fixed interest rate equal to the issue
date value of the qualified floating rate or qualified inverse floating rate,
or equal to the reasonably expected yield for the Note in the case of any other
objective rate. The Proposed Regulations clarify that the qualified stated
interest allocable to an accrual period is increased (or decreased) if the
interest actually paid during an accrual period exceeds (or is less than) the
interest assumed to be paid during the accrual period; such clarification is
proposed to be effective for debt instruments issued on or after April 4, 1994.
If the Note bears interest at a rate that is not a single qualified floating
rate or objective rate, the amount of interest and accruals of original issue
discount generally are determined by (i) determining a fixed rate substitute
for each variable rate as described in the preceding sentence, (ii) determining
the amount of qualified stated interest and original issue discount by assuming
the Note bears interest at such substitute fixed rates, and (iii) making
appropriate adjustments to the qualified stated interest and original issue
discount so determined for actual interest paid under the Note. However, if
such qualifying variable rate includes a fixed rate, the Note first is treated
for purposes of applying clause (i) of the preceding sentence as if it provided
for an assumed qualified floating rate (or qualified inverse floating rate if
the actual variable rate is such) in lieu of the fixed rate; the assumed
variable rate would be a rate that would cause the Note to have approximately
the same fair market value.
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 for federal income tax purposes
unless it elects to do so. Holders who report income for federal income tax
purposes on the accrual method and certain other Holders, including banks,
regulated investment companies and dealers in securities, are required to
include original issue discount on such Notes on a straight-line basis, unless
an election is made to accrue the original issue discount according to a
constant interest method based on daily compounding. In the case of a Holder
who is not required and does not elect to include original issue discount in
income currently, any gain realized on the sale, exchange or retirement of such
Note will be ordinary income to the extent of the original issue discount
accrued on a straight-line basis (or, if elected, according to a constant
interest method based on daily compounding) through the date of sale, exchange
or retirement. In addition, such non-electing Holders who are not subject to
the current inclusion requirement described in this paragraph will be required
to defer deductions for any interest paid on indebtedness incurred or continued
to purchase or carry such Notes in an amount not exceeding the deferred
interest income, until such deferred
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interest income is realized. As described elsewhere herein, certain of the
Notes may be subject to special put, call, and renewal options. These options
may affect the determination of whether a Note has a maturity of not more than
one year and thus is a Short-term Note. Purchasers of Notes with such options
should carefully review the applicable Pricing Supplement and should consult
their own tax advisors with respect to such features.
RENEWABLE NOTES
A Holder of a Note with a Maturity Date that may be extended at the option of
the Holder (a "Renewable Note") will determine yield and maturity of the Note
depending upon whether the option to extend is treated as exercised. The option
to extend shall be treated as exercised if the resulting yield on the Renewable
Note would be greater than it would be if the option to extend were not
exercised. Correspondingly, the option to extend shall be treated as not
exercised if the resulting yield on the Renewable Note would be equal to or
greater than it would be if the option to extend were exercised. A Renewable
Note will not be considered to have original issue discount if the difference
between the Note's stated redemption price at maturity determined under the
foregoing rules and its issue price is less than 0.25% of the stated redemption
price at maturity as so determined multiplied by the number of complete years
to the Note's Maturity Date (or, the weighted average maturity, if applicable),
as so determined.
In addition, there is a possibility that a Holder of a Renewable Note that
elects to extend the Maturity Date may be treated for federal income tax
purposes as having exchanged such Note (the "Old Note") for a new Note with
revised terms (the "New Note"). If the Holder is treated as having exchanged
the Old Note for the New Note, such exchange may be treated as either a taxable
exchange or a tax-free recapitalization, possibly on the day of the agreement
to exercise the option even though the extension may not be immediately
effective, with differing consequences under the original issue discount rules.
On the other hand, if the Holder is not treated as exchanging the Old Note for
the New Note, no gain or loss will be recognized as a result thereof. Holders
of Notes should consult their own tax advisors regarding the tax consequences
of holding and disposing of the Renewable Notes, including the decision whether
to elect to extend the Maturity Dates.
PREMIUM AND MARKET DISCOUNT
If a Holder purchases a Note (other than a Short-term Note) for an amount
that is less than the Note's stated redemption price at maturity, or, in the
case of a Note issued at an original issue discount, less than its adjusted
issue price (as defined above) as of the date of purchase, the amount of the
difference generally will be treated as "market discount" for federal income
tax purposes. A Note acquired at its original issue will not have market
discount unless the Note is purchased at less than its issue price. Market
discount generally will be de minimis and hence disregarded, however, if it is
less than the product of 0.25 percent of the stated redemption price at
maturity of the Note and the number of remaining complete years to maturity (or
weighted average maturity in the case of Notes paying any amount other than
qualified stated interest prior to maturity). Under the market discount rules,
a Holder is required to treat any principal payment on, or any gain on the
sale, exchange, retirement or other disposition of, a Note as ordinary income
to the extent of any accrued market discount which has not previously been
included in income. If such Note is disposed of in a nontaxable transaction
(other than certain specified nonrecognition transactions), accrued market
discount will be includable as ordinary income to the Holder as if such Holder
had sold the Note at its then fair market value. In addition, the Holder may be
required to defer, until the maturity of the Note or its earlier disposition in
a taxable transaction, the deduction of all or a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
Note.
Market discount is considered to accrue ratably during the period from the
date of acquisition to the maturity of a Note, unless the Holder elects to
accrue on a constant interest basis. A Holder of a Note may elect to include
market discount in income currently as it accrues (on either a ratable or
constant interest basis), in which case the rule described above regarding
deferral of interest deductions will not apply. This
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election to include market discount currently applies to all market discount
obligations acquired during or after the first taxable year to which the
election applies, and may not be revoked without the consent of the IRS.
A Holder who purchases a Note issued at an original issue discount for an
amount exceeding its adjusted issue price (as defined above) and less than or
equal to the sum of all amounts payable on the Note after the purchase date
other than payments of qualified stated interest will be considered to have
purchased such Note with "acquisition premium." The amount of original issue
discount which such Holder must include in gross income with respect to such
Note will be reduced in the proportion that such excess bears to the original
issue discount remaining to be accrued as of the Note's acquisition.
A Holder who acquires a Note for an amount that is greater than the sum of
all amounts payable on the Note after the purchase date other than payments of
qualified stated interest will be considered to have purchased such Note at a
premium, and will not be required to include any original issue discount in
income. A Holder generally may elect to amortize such premium using a constant
interest method over the remaining term of the Note. Any such election shall
apply to all debt instruments (other than debt instruments the interest on
which is excludable from gross income) held at the beginning of the first
taxable year to which the election applies or thereafter acquired, and is
irrevocable without consent of the IRS. Special rules may apply if a Note is
subject to call prior to maturity at a price in excess of its stated redemption
price at maturity.
CONSTANT YIELD ELECTION
A Holder of a Note may elect to include in income all interest, discount and
premium with respect to such Note based on a constant interest method, as
described above. The election is made for the taxable year in which the Holder
acquires the Note, and it may not be revoked without the consent of the IRS. If
such election is made with respect to a Note having market discount, such
Holder will be deemed to have elected to include market discount currently on a
constant interest basis with respect to all debt instruments having market
discount acquired during the year of election or thereafter. If made with
respect to a Note having amortizable bond premium, such Holder will be deemed
to have made an election to amortize premium generally with respect to all debt
instruments having amortizable bond premium held by the taxpayer during the
year of election or thereafter.
SALE AND RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized from
the sale, exchange or retirement (less any accrued qualified stated interest
which will be taxable as such) and the Holder's adjusted tax basis in the Note.
Such gain or loss generally will be capital gain or loss, except as discussed
below with respect to foreign currency gain or loss (see "Foreign Currency
Notes") and except to the extent of any accrued market discount (see "Premium
and Market Discount" above), such capital gain or loss will generally be long
term capital gain or loss if the Note has been held for more than one year. A
Holder's adjusted tax basis in a Note will equal the cost of the Note,
increased by any original issue discount or market discount previously
includible in taxable income by the Holder with respect to such Note, and
reduced by any amortizable bond premium applied to reduce interest on a Note,
any principal payments received by the Holder, and in the case of Notes issued
at an original issue discount, any other payments not constituting qualified
stated interest (as defined above).
The Code provides preferential treatment under certain circumstances for net
long-term capital gains realized by individual investors. The ability of United
States Holders to offset capital losses against ordinary income is limited.
Special rules regarding the treatment of gain realized with respect to Short-
term Notes issued at an original issue discount are described under "Original
Issue Discount" above.
FOREIGN CURRENCY NOTES
The following is a summary of the principal federal income tax consequences
to a Holder of the ownership of a Note denominated in a Specified Currency
other than the United States dollar (such currency being herein referred to as
a "nonfunctional currency" and such Notes being referred to as "Foreign
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Currency Notes"). Persons considering the purchase of Foreign Currency Notes
should consult their own tax advisors with regard to the application of the
United States federal income tax laws to their particular situations, as well
as any consequences arising under the laws of any other taxing jurisdictions.
In general, if a payment of interest with respect to a Note is made in (or
determined by reference to the value of) nonfunctional currency, the amount
includable in the income of the Holder will be, in the case of a cash basis
Holder, the United States dollar value of the nonfunctional currency payment
based on the exchange rate in effect on the date of receipt or, in the case of
an accrual basis Holder, based on the average exchange rate in effect during
the interest accrual period (or, with respect to an accrual period that spans
two taxable years, the partial period within the taxable year), in either case
regardless of whether the payment is in fact converted into United States
dollars. Upon receipt of an interest payment (including a payment attributable
to accrued but unpaid interest upon the sale or retirement of the Foreign
Currency Note) in (or determined by reference to the value of) nonfunctional
currency, an accrual basis Holder will recognize ordinary income or loss
measured by the difference between such average exchange rate and the exchange
rate in effect on the date of receipt. Accrual basis Holders may determine the
United States dollar value of any interest income accrued in a nonfunctional
currency under an alternative method, as described below as the "spot accrual
convention."
A Holder will have a tax basis in any nonfunctional currency received as
payment of interest on, or on the sale, exchange or retirement of, the Foreign
Currency Note equal to the United States dollar value of such nonfunctional
currency, determined at the time of payment, or the disposition of the Foreign
Currency Note. Any gain or loss realized by a Holder on a sale or other
disposition of nonfunctional currency (including its exchange for United States
dollars or its use to purchase Foreign Currency Notes) will be ordinary income
or loss.
A Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustments to such Holder's tax basis, will be the United States
dollar value of the nonfunctional currency amount paid for such Foreign
Currency Note, or the nonfunctional currency amount of the adjustment,
determined using the spot rate on the date of such purchase or adjustment and
increased by the amount of any original issue discount included in the Holder's
income (and accrued market discount, in the case of a Holder who has elected to
currently include market discount, as described above) with respect to the
Foreign Currency Note and reduced by the amount of any payments on the Foreign
Currency Note that are not qualified stated interest payments and by the amount
of any amortizable bond premium applied to reduce interest on the Foreign
Currency Note. A Holder who converts United States dollars to a nonfunctional
currency and immediately uses that currency to purchase a Foreign Currency Note
denominated in the same currency normally will not recognize gain or loss in
connection with such conversion and purchase. However, a Holder who purchases a
Foreign Currency Note with previously owned nonfunctional currency will
recognize gain or loss in an amount equal to the difference, if any, between
such Holder's tax basis in the nonfunctional currency and the United States
dollar value of the nonfunctional currency on the date of purchase.
For purposes of determining the amount of any gain or loss recognized by a
Holder on the sale, exchange or retirement of a Foreign Currency Note (as
described above in the section "Sale and Retirement of the Notes"), the amount
realized upon such sale, exchange or retirement will be the United States
dollar value of the nonfunctional currency received (or that was payable, in
the case the payment was made in United States dollars), determined using the
spot rate on the date of the sale, exchange or retirement.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note which is attributable to fluctuations in currency exchange rates
will be treated as ordinary income or loss. Gain or loss attributable to
fluctuations in exchange rates will be calculated by multiplying the original
purchase price paid by the Holder (expressed in the relevant nonfunctional
currency) by the change in the relevant exchange rare (expressed in dollars per
unit or relevant nonfunctional currency) between the date on which the Holder
acquired the Foreign Currency Note and the date on which the Holder received
payment in respect of the
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sale, exchange or retirement of the Foreign Currency Note. Such nonfunctional
currency gain or loss will be recognized only to the extent of the total gain
or loss realized by a Holder on the sale, exchange or retirement of the Foreign
Currency Note.
Original issue discount on a Note which is also a Foreign Currency Note is to
be determined for any accrual period in the relevant nonfunctional currency by
using the constant interest method described above and then translating the
nonfunctional currency amount so determined into United States dollars on the
basis of the average exchange rate in effect during such accrual period. If the
interest accrual period spans two taxable years, the original issue discount
accruing within each year's portion of the accrual period is to be translated
into United States dollars on the basis of the average exchange rate for the
partial period within the taxable year. A Holder may elect to translate
original issue discount (and, in the case of an accrual basis Holder, accrued
interest) into United States dollars at the exchange rate in effect on the last
day of an accrual period for the original issue discount or interest, or in the
case of an accrual period that spans two taxable years, at the exchange rate in
effect on the last day of the partial period within the taxable year (the "spot
accrual convention"). Additionally if a payment of original issue discount or
interest is actually received within five business days of the last day of the
accrual period or taxable year, an electing Holder may instead translate such
original issue discount or accrued interest into United States dollars at the
exchange rate in effect on the day of actual receipt. Any such election will
apply to all debt instruments held by the Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the
Holder, and will be irrevocable without the consent of the IRS. Because
exchange rates may fluctuate, a United States Holder of a Note with original
issue discount denominated in a foreign currency may recognize a different
amount of original issue discount income in each accrual period than would the
Holder of a similar Note with original issue discount denominated in United
States dollars. Also, as described above, exchange gain or loss will be
recognized when the original issue discount is paid or the Holder disposes of
the Note.
If the Holder of a Foreign Currency Note has not elected to include market
discount in income currently as it accrues, the amount of accrued market
discount must be determined in the nonfunctional currency and translated into
United States dollars using the spot exchange rate in effect on the date
principal is paid or the Foreign Currency Note is sold, exchanged, retired or
otherwise disposed of. No part of such accrued market discount is treated as
exchange gain or loss. If the Holder has elected to include market discount in
income currently as it accrues, the amount of market discount which accrues
during any accrual period will be required to be determined in units of
nonfunctional currency and translated into United States dollars on the basis
of the average exchange rate in effect during such accrual period. Such an
electing Holder will recognize exchange gain or loss with respect to accrued
market discount under the same rules that apply to the accrual of interest
payments on a Foreign Currency Note by a Holder on the accrual basis.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A 31 percent "backup" withholding tax and certain information reporting
requirements may apply to payments of principal, premium and interest
(including any original issue discount) made to, and the proceeds of
disposition of a Note by, certain Holders. Backup withholding will apply only
if (i) the Holder fails to furnish its Taxpayer Identification Number ("TIN")
to the payor, (ii) the IRS notifies the payor that the Holder has furnished an
incorrect TIN, (iii) the IRS notifies the payor that the Holder has failed to
report properly payments of interest and dividends or (iv) under certain
circumstances, the Holder fails to certify, under penalty of perjury, that it
has both furnished a correct TIN and not been notified by the IRS that it is
subject to backup withholding for failure to report interest and dividend
payments. Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations and financial institutions.
Holders should consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.
The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's federal income tax liability and may
entitle such Holder to a refund, provided that the required information is
furnished to the IRS.
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NON-UNITED STATES HOLDERS
A "non-United States Holder" is any person other than (i) a citizen or
resident of the United States, (ii) a corporation or partnership organized in
or under the laws of the United States, any state thereof or the District of
Columbia, or (iii) an estate or trust the income of which is includible in
gross income for United States federal income tax purposes regardless of its
source. A non-United States Holder generally will not be subject to United
States federal withholding tax with respect to payments of interest on Notes,
provided that (1) such Holder does not actually or constructively own 10
percent or more of the total combined voting power of all classes of stock of
the Company entitled to vote, (2) such Holder is not for United States federal
income tax purposes a controlled foreign corporation related to the Company
through stock ownership, (3) the beneficial owner of the Note certifies under
penalties of perjury as to its status as a non-United States Holder and
complies with applicable identification procedures, and (4) such payment is not
a payment of "contingent interest" described in Code section 871(h)(4). The
applicable Pricing Supplement will indicate if a Note is described in section
871(h)(4). In certain circumstances, the above-described certification can be
provided by a bank or other financial institution.
In addition a non-United States Holder of a Note generally will not be
subject to United States federal income tax on any gain realized upon the sale,
retirement or other disposition of a Note, unless such Holder is an individual
who is present in the United States for 183 days or more during the taxable
year of such sale, retirement or other disposition and certain other conditions
are met. If a non-United States Holder of a Note is engaged in a trade or
business in the United States and income or gain from the Note is effectively
connected with the conduct of such trade or business, the non-United States
Holder will be exempt from withholding tax if appropriate certification has
been provided, but will generally be subject to regular United States income
tax on such income and gain in the same manner as if it were a United States
Holder. In addition, if such non-United States Holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30 percent of its
effectively connected earnings and profits for the taxable year, subject to
adjustments.
Backup withholding will not apply to payments of principal, premium, if any,
and interest made to a non-United States Holder by the Company on a Note with
respect to which the Holder has provided the required certification under
penalties of perjury of its non-United States Holder status or has otherwise
established an exemption, provided in each case that the Company or its paying
agent, as the case may be, does not have actual knowledge that the payee is a
United States person. Payments on the sale, exchange or other disposition of a
Note by a non-United States Holder to or through a foreign office of a broker
will not be subject to backup withholding. However, if such broker is a United
States person, a controlled foreign corporation for United States tax purposes
or a foreign person 50 percent or more of whose gross income is derived from
its conduct of a United States trade or business for a specified three-year
period, information reporting will be required unless the broker has in its
records documentary evidence that the beneficial owner is not a United States
person and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the Holder certifies under penalties of perjury to its non-United States Holder
status or otherwise establishes an exemption.
Non-United States Holders should consult their tax advisors regarding the
application of United States federal income tax laws, including information
reporting and backup withholding, to their particular situations.
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<PAGE>
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
Morgan Stanley & Co. Incorporated, CS First Boston Corporation, Salomon
Brothers Inc, J.P. Morgan Securities Inc., Goldman, Sachs & Co., BA Securities,
Inc., Chase Securities, Inc., Chemical Securities Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, Lehman Brothers, Lehman Brothers Inc.
(including its affiliate Lehman Government Securities Inc.) and UBS Securities
Inc., each of whom has agreed to use its best reasonable efforts to solicit
purchases of the Notes. The Company will pay each Agent a commission, which may
be in the form of a discount, ranging from .125% to .750% of the principal
amount of any Note, depending upon the Maturity Date, sold through any such
Agent. The Company may sell the Notes to any of the Agents, as principal, at a
discount for their own account or for resale to investors at varying prices
related to prevailing market prices at the time of resale, to be determined by
such Agent or, if so agreed, at a fixed public offering price. The Company may
also appoint additional agents and has reserved the right to sell the Notes by
other means. In the case of sales made directly by the Company, no commission
will be payable. The Company has agreed to reimburse the Agents for certain
expenses.
The Company will have the sole right to accept offers to purchase the Notes
and may reject any proposed purchase of Notes in whole or in part. Each Agent
will have the right, in its discretion reasonably exercised and without notice
to the Company, to reject any offer to purchase Notes received by it in whole
or in part.
In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
such Agent from the Company. Unless otherwise specified in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note with
an identical Maturity Date, and may be resold by the Agent to investors and
other purchasers from time to time as described above. After the initial public
offering of Notes to be resold to investors and other purchasers, the public
offering price (in the case of a fixed price public offering), concession and
discount may be changed by the Agent selling the Note.
The Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the "Act"),
or to contribute to payments such Agent may be required to make in respect
thereof. Each Agent may be deemed to be an "Underwriter" within the meaning of
the Act.
No Note will have an established trading market when issued. The Company does
not intend to list the Notes on a national securities exchange. The Company has
been advised by the Agents that each of them currently intends to make a market
in the Notes but they are not obligated to do so and may discontinue such
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
From time to time, the Agents and certain of their affiliates perform
investment banking, commercial banking and other financial services for the
Company and its affiliates.
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the Company
by Orrick, Herrington & Sutcliffe, San Francisco, California and for the Agents
by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Cleary, Gottlieb,
Steen & Hamilton will rely on the opinion of Orrick, Herrington & Sutcliffe as
to matters of California law.
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<PAGE>
PROSPECTUS
$3,000,000,000
TRANSAMERICA FINANCE CORPORATION
DEBT SECURITIES AND WARRANTS
Transamerica Finance Corporation (the "Company") from time to time may offer
its debt securities consisting of senior debentures, notes, bonds and/or other
evidences of indebtedness ("Senior Securities") and/or subordinated debentures,
notes, bonds and/or other evidences of indebtedness ("Subordinated Securities";
the Senior Securities and the Subordinated Securities being herein collectively
referred to as "Debt Securities") and warrants to purchase Debt Securities
("Warrants") with an aggregate initial public offering price of up to
$3,000,000,000 or the equivalent thereof in one or more foreign currencies or
composite currencies, including European Currency Units ("ECU"). The Debt
Securities and Warrants may be offered in separate series in amounts, at prices
and on terms to be set forth in supplements to this Prospectus. The Debt
Securities and Warrants may be sold for U.S. Dollars, one or more foreign
currencies or amounts determined by reference to an index and the principal of
and any interest on the Debt Securities may likewise be payable in U.S.
Dollars, one or more foreign currencies or amounts determined by reference to
an index.
The Senior Securities will rank equally with all other unsubordinated
indebtedness of the Company. The Subordinated Securities will be subordinated
to all existing and future Senior Indebtedness (as defined) of the Company. See
"Description of Debt Securities."
The terms of the Debt Securities and any Warrants, including, where
applicable, the specific designation, aggregate principal amount, currency,
denomination, maturity, premium, rate (which may be fixed or variable) and time
of payment of interest, terms for redemption at the option of the Company or
the holder, for sinking fund payments, for payments of additional amounts or
for exercising the Warrants, and the initial public offering price, will be set
forth in the accompanying Prospectus Supplement (the "Prospectus Supplement").
The Debt Securities and Warrants may be sold through underwriting syndicates
led by one or more managing underwriters or through one or more underwriters
acting alone. The Debt Securities and Warrants may also be sold directly by the
Company or through agents designated from time to time. If any underwriters or
agents are involved in the sale of the Debt Securities or Warrants, their
names, the principal amount of Debt Securities or Warrants to be purchased by
them and any applicable fee, commission or discount arrangements with them will
be set forth in the Prospectus Supplement. See "Plan of Distribution." With
regard to the Warrants, if any, in respect of which this Prospectus is being
delivered, the applicable Prospectus Supplement will set forth a description of
the Debt Securities for which the Warrants are exercisable and the offering
price, if any, exercise price, duration, detachability and any other specific
terms of the Warrants.
The Debt Securities may be issued in registered form or bearer form with
coupons attached or both. In addition, all or a portion of the Debt Securities
of a series may be issuable in temporary or permanent global form. Debt
Securities in bearer form will be offered only (1) to persons located outside
the United States and (2) to non-United States persons and to offices located
outside the United States of certain United States financial institutions.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is April 5, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information can be inspected and copied at Regional
Offices of the Commission located at 500 West Madison Street, Suite 1400,
Chicago, Illinois and 7 World Trade Center, Suite 1300, New York, New York; and
at the Public Reference Office of the Commission at 450 Fifth Street, N.W.,
Washington D.C. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington D.C.
20549 at prescribed rates. In addition, certain securities of the Company are
listed on the New York Stock Exchange, and such reports and other information
concerning the Company can also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York.
INFORMATION INCORPORATED BY REFERENCE
The Company's annual report on Form 10-K for the year ended December 31, 1994
filed by the Company with the Commission is incorporated by reference in this
Prospectus.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this Prospectus
and prior to the termination of the offering of the Debt Securities and the
Warrants offered hereby shall be deemed to be incorporated by reference in this
Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference, other than exhibits to such documents. Requests should be directed
to Edwin C. Summers, Senior Vice President, Secretary and General Counsel,
Transamerica Finance Corporation, 1150 South Olive Street, Los Angeles,
California 90015 (telephone: 213-742-4757).
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$", "dollars",
"U.S. dollars" or "U.S. $").
This Prospectus may not be used to consummate sales of Debt Securities or
Warrants unless accompanied by a Prospectus Supplement.
TRANSAMERICA FINANCE CORPORATION
Transamerica Finance Corporation (formerly Transamerica Finance Group, Inc.)
is principally engaged in consumer lending, commercial lending and leasing
operations. Unless the context indicates otherwise, the term "Company" as used
herein refers to Transamerica Finance Corporation and its subsidiaries.
The Company is a wholly owned subsidiary of Transamerica Corporation
("Transamerica"). Transamerica is a financial services organization which
engages through its subsidiaries in consumer lending, commercial lending,
leasing, life insurance, real estate services and asset management. In addition
to activities conducted through the Company, Transamerica conducts, through
other subsidiaries, certain of Transamerica's commercial lending (insurance
finance) operations.
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The executive offices of the Company are located at Transamerica Center, 1150
South Olive Street, Los Angeles, California 90015 (telephone: 213-742-4321).
Because Transamerica Finance Corporation is a holding company, the rights of
its creditors, including the holders of the Debt Securities, to participate in
the assets of any subsidiary upon the latter's liquidation or reorganization
will be subject to the claims of the subsidiary's creditors, which will take
priority except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary.
APPLICATION OF PROCEEDS
Except as otherwise described in the Prospectus Supplement, the net proceeds
from the sale of the Debt Securities and Warrants offered hereby and the
exercise of Warrants will be applied to the reduction of short-term debt
incurred to provide funds for use in the ordinary course of the Company's
financing business. The Company anticipates that such proceeds will also be
used from time to time (1) to provide funds needed in the ordinary course of
its financing business, the amount and nature of which are dependent on several
factors, including the volume of the Company's business, and (2) to pay
maturing long-term debt.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges are computed by dividing earnings
from continuing operations before fixed charges and income taxes by the fixed
charges. For purposes of computation of the ratios, earnings and fixed charges
include those of the Company and all subsidiaries, and fixed charges consist of
interest and debt expense, and one-third of rent expense (which approximates
the interest factor) of such companies.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges..................... 1.28 0.77 1.59 1.50 1.62
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered will be
described in the Prospectus Supplement relating to such Debt Securities.
The Senior Securities are to be issued under an Indenture dated as of April
1, 1991 (the "Senior Indenture") between the Company and Harris Trust and
Savings Bank, as Trustee (the "Senior Trustee"). The Subordinated Securities
are to be issued under an Indenture dated as of April 1, 1991 (the
"Subordinated Indenture") between the Company and First Interstate Bank of
California, formerly First Interstate Bank, Ltd., as Trustee (the "Subordinated
Trustee"; together with the Senior Trustee, the "Trustees"). The Senior
Indenture and the Subordinated Indenture (collectively, the "Indentures") are
exhibits to the Registration Statement. The following summaries of certain
provisions of the Indentures do not purport to be complete and are qualified in
their entirety by reference to the provisions of the Indentures. Numerical
references in parentheses below are to sections of the Indentures and, unless
otherwise indicated, capitalized terms shall have the meanings ascribed to them
in the Indentures.
GENERAL
Debt Securities and Warrants offered by this Prospectus will be limited to an
aggregate initial public offering price of $3,000,000,000 or the equivalent
thereof in one or more foreign currencies or composite
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currencies (including ECU). The Indentures provide that Debt Securities in an
unlimited amount may be issued thereunder from time to time in one or more
series. The Senior Securities will rank pari passu with other Senior
Indebtedness of the Company. The Subordinated Securities will rank pari passu
with other Subordinated Indebtedness of the Company and, together with such
Subordinated Indebtedness, will be subordinated in right of payment to the
prior payment in full of the Senior Indebtedness of the Company as described
under "Subordination--Subordinated Securities."
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the series of Debt Securities offered thereby: (1) the
title of the Debt Securities; (2) any limit on the aggregate principal amount
of the Debt Securities; (3) whether the Debt Securities are to be issuable as
Registered Securities or Bearer Securities or both, whether any Bearer
Securities will be subject to any limitations on offering, sale and
distribution, whether any of the Debt Securities are to be issuable initially
in temporary global form and whether any of the Debt Securities are to be
issuable in permanent global form; (4) the price or prices (expressed as a
percentage of the aggregate principal amount thereof) at which the Debt
Securities will be issued; (5) the date or dates on which the Debt Securities
will mature; (6) the rate or rates at which the Debt Securities will bear
interest, if any, or the formula pursuant to which such rate or rates shall be
determined, and the date or dates from which any such interest will accrue; (7)
the Interest Payment Dates on which any such interest on the Debt Securities
will be payable, the Regular Record Date for any interest payable on any Debt
Securities which are Registered Securities on any Interest Payment Date, and
the extent to which, or the manner in which, any interest payable on a
temporary global Security on an Interest Payment Date will be paid if other
than in the manner described under "Temporary Global Securities" below; (8) the
person to whom any interest on any Registered Security will be payable if other
than the person in whose name such Registered Security is registered at the
close of business on the Regular Record Date for such interest as described
under "Payment and Paying Agents" below, and the manner in which any interest
on any Bearer Security will be paid if other than in the manner described under
"Payment and Paying Agents" below; (9) any mandatory or optional sinking fund
or analogous provisions; (10) each office or agency where, subject to the terms
of the Indenture as described below under "Payment and Paying Agents," the
principal of and any premium and interest on the Debt Securities will be
payable and each office or agency where, subject to the terms of the Indenture
as described under "Form, Exchange, Registration and Transfer" below, the Debt
Securities may be presented for registration of transfer or exchange; (11) the
date, if any, after which and the price or prices at which the Debt Securities
may be redeemed, in whole or in part at the option of the Company or the
Holder, or pursuant to mandatory redemption provisions, and the other detailed
terms and provisions of any such optional or mandatory redemption provisions;
(12) the denominations in which any Debt Securities which are Registered
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof, and the denomination or denominations in which any
Debt Securities which are Bearer Securities will be issuable, if other than the
denomination of $5,000; (13) the currency or currencies of payment of principal
of and any premium and interest on the Debt Securities; (14) any index used to
determine the amount of payments of principal of and any premium and interest
on the Debt Securities; (15) the portion of the principal amount of the Debt
Securities, if other than the principal amount thereof, payable upon
acceleration of maturity thereof; (16) the application, if any, of either or
both of the defeasance or covenant defeasance sections of the Indenture as
described below under "Defeasance and Covenant Defeasance" to the Debt
Securities; (17) the Person who shall be the Security Registrar for Debt
Securities issuable as Registered Securities, if other than the Trustee, the
Person who shall be the initial Paying Agent and the Person who shall be the
initial Common Depositary or the depositary, as the case may be; (18) any other
terms of the Debt Securities not inconsistent with the provisions of the
Indenture; and (19) the terms of any Warrants offered together with such Debt
Securities. Any such Prospectus Supplement will also describe any special
provisions for the payment of additional amounts with respect to the Debt
Securities of such series.
Debt Securities may be issued as Original Issue Discount Securities to be
sold at a substantial discount below their stated principal amounts. Special
United States federal income tax considerations applicable to Debt Securities
issued at an original issue discount will be set forth in a Prospectus
Supplement relating
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thereto. Special United States tax considerations applicable to any Debt
Securities that are denominated in a currency other than United States dollars
or that use an index to determine the amount of payments of principal of and
any premium and interest on the Debt Securities will be set forth in a
Prospectus Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Unless otherwise indicated in an applicable
Prospectus Supplement, definitive Bearer Securities (other than Bearer
Securities in global form) will have interest coupons attached. (Section 201)
The Indenture also will provide that Bearer Securities of a series may be
issuable in permanent global form. (Section 201) See "Permanent Global
Securities." If Bearer Securities are being offered, the applicable Prospectus
Supplement will set forth various limitations on their offering, sale and
distribution.
Registered Securities of any series will be exchangeable for other Registered
Securities of the same series of authorized denominations and of a like
aggregate principal amount and tenor. In addition, if Debt Securities of any
series are issuable as both Registered Securities and Bearer Securities, at the
option of the Holder upon request confirmed in writing, and subject to the
terms of the Indenture, Bearer Securities (with all unmatured coupons, except
as provided below, and all matured coupons in default) of such series will be
exchangeable into Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. Bearer
Securities surrendered in exchange for Registered Securities between the close
of business on a Regular Record Date or a Special Record Date and the relevant
date for payment of interest shall be surrendered without the coupon relating
to such date for payment of interest and interest will not be payable in
respect of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon when due in accordance
with the terms of the Indenture. Bearer Securities will not be issued in
exchange for Registered Securities. (Section 305) Each Bearer Security other
than a temporary global Bearer Security will bear a legend substantially to the
following effect: "Any United States Person who holds this obligation will be
subject to limitations under the United States income tax laws including the
limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue
Code."
Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than a Debt Security issued in global form) may be
presented for registration of transfer (with the form of transfer endorsed
thereon duly executed), at the office of the Security Registrar or at the
office of any transfer agent designated by the Company for such purpose with
respect to any series of Debt Securities and referred to in an applicable
Prospectus Supplement, without service charge and upon payment of any taxes and
other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Security Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity of
the person making the request. Unless the Prospectus Supplement provides
otherwise, the applicable Trustee will be the initial Security Registrar for
the Debt Securities. (Sections 101 and 305) If a Prospectus Supplement refers
to any transfer agents (in addition to the Security Registrar) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent (or
Security Registrar) acts, except that, if Debt Securities of a series are
issuable solely as Registered Securities, the Company will be required to
maintain a transfer agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as Bearer Securities, the Company will be
required to maintain (in addition to the Security Registrar) a transfer agent
in a Place of Payment for such series located in Europe. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities. (Section 1002)
The Company shall not be required to (i) issue, register the transfer of or
exchange Debt Securities of any series during a period beginning at the opening
of business 15 days before (A) if Debt Securities of the
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series are issuable only as Registered Securities, the day of mailing of the
relevant notice of redemption and ending at the close of business on the day
for such mailing and (B) if Debt Securities of the series are issuable as
either Bearer Securities or Registered Securities, the earlier of the day of
the first publication of the relevant notice of redemption or the mailing of
the relevant notice of redemption and ending on the close of business on such
earlier day; (ii) register the transfer of or exchange any Registered Security,
or portion thereof, called for redemption, except the unredeemed portion of any
Registered Security being redeemed in part; or (iii) exchange any Bearer
Security called for redemption, except to exchange such Bearer Security for a
Registered Security of that series and like tenor which is immediately
surrendered for redemption. (Section 305)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of and any premium and interest on Bearer Securities will be payable,
subject to any applicable laws and regulations, at the offices of such Paying
Agents outside the United States as the Company may designate from time to time
or, at the option of the Holder, by a check or by transfer to an account
maintained by the payee with a bank located outside the United States. (Section
1002) Unless otherwise indicated in an applicable Prospectus Supplement,
payment of interest on Bearer Securities on any Interest Payment Date will be
made only against surrender outside the United States, to a Paying Agent, of
the coupon relating to such Interest Payment Date. (Section 1001) No payment
with respect to any Bearer Security will be made at any office or agency of the
Company in the United States or by check mailed to any address in the United
States or by transfer to an account maintained with a bank located in the
United States. Notwithstanding the foregoing, payments of principal of and any
premium and interest on Bearer Securities denominated and payable in U.S.
dollars will be made at the office of the Company's Paying Agent in the Borough
of Manhattan, The City of New York, if (but only if) payment of the full amount
thereof in U.S. dollars at all offices or agencies outside the United States is
illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of and any premium and interest on Registered Securities will be made
at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that at the option of the Company payment
of any interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register. Unless
otherwise indicated in an applicable Prospectus Supplement, payment of any
installment of interest on Registered Securities will be made to the Person in
whose name such Registered Security is registered at the close of business on
the Regular Record Date for such interest. (Sections 307 and 1002)
Any Paying Agents outside the United States and any other Paying Agents in
the United States initially designated by the Company for the Debt Securities
will be named in an applicable Prospectus Supplement. The Company may at any
time designate additional Paying Agents or rescind the designation of any
Paying Agent or approve a change in the office through which any Paying Agent
acts, except that, if Debt Securities of a series are issuable solely as
Registered Securities, the Company will be required to maintain a Paying Agent
in each Place of Payment for such series and, if Debt Securities of a series
are issuable as Bearer Securities, the Company will be required to maintain (i)
a Paying Agent in the Borough of Manhattan, The City of New York for payments
with respect to any Registered Securities of the series (and for payments with
respect to Bearer Securities of the series in the limited circumstances
described above, but not otherwise), and (ii) a Paying Agent in a Place of
Payment located outside the United States where Debt Securities of such series
and any coupons appertaining thereto may be presented and surrendered for
payment; provided that if the Debt Securities of such series are listed on The
International Stock Exchange of the United Kingdom and the Republic of Ireland
or the Luxembourg Stock Exchange or any other stock exchange located outside
the United States and such stock exchange shall so require, the Company will
maintain a Paying Agent in London or Luxembourg or any other required city
located outside the United States, as the case may be, for the Debt Securities
of such series. (Section 1002)
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All moneys paid by the Company to a Paying Agent or held by the Company in
trust for the payment of principal of and any premium or interest on any Debt
Security, which remain unclaimed at the end of two years after such principal,
premium or interest shall have become due and payable, will be discharged from
trust and repaid to the Company and the Holder of such Debt Security or any
coupon will thereafter, as an unsecured general creditor, look only to the
Company for payment thereof. (Section 1003)
TEMPORARY GLOBAL SECURITIES
If so specified in an applicable Prospectus Supplement, all or any portion of
the Debt Securities of a series which are issuable as Bearer Securities will
initially be represented by one or more temporary global Securities, without
interest coupons, to be deposited with a common depositary for Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear System
("Euroclear") and CEDEL S.A. ("CEDEL") for credit to the designated accounts.
On and after the date determined as provided in any such temporary global
Security and described in an applicable Prospectus Supplement, but within a
reasonable period of time, each such temporary global Security will be
exchangeable for definitive Bearer Securities, definitive Registered Securities
or all or a portion of a permanent global Bearer Security, or any combination
thereof, as specified in an applicable Prospectus Supplement, only under the
circumstances set forth in the accompanying pricing supplement to such
Prospectus Supplement. No definitive Bearer Security delivered in exchange for
a portion of a temporary global Security shall be mailed or otherwise delivered
to any location in the United States or its possessions in connection with such
exchange. (Section 304) Any special restrictions on delivery of a Debt Security
issued in permanent global form will be set forth in a Prospectus Supplement
relating thereto.
PERMANENT GLOBAL SECURITIES
If any Debt Securities of a series are issuable in permanent global form, the
applicable Prospectus Supplement will describe the distribution procedures
applicable to such securities in permanent global form (including any
applicable certification requirements) and the circumstances, if any, under
which beneficial owners of interests in any such permanent global Security may
exchange such interests for Debt Securities of such series and of like tenor
and principal amount of any authorized form and denomination. (Section 305) A
Person will, except with respect to payment of principal of and any premium and
interest on such permanent global Security, be treated as a Holder of such
principal amount of Outstanding Securities represented by such permanent global
Security as shall be specified in a written statement of the Holder of such
permanent global Security. (Section 203) Principal of and any premium and
interest on a permanent global Security will be payable in the manner described
in the applicable Prospectus Supplement.
SUBORDINATION
General
As used herein "Senior Indebtedness" means all Debt of the Company, except
Subordinated Indebtedness and Junior Subordinated Indebtedness; "Debt" of the
Company means all indebtedness representing money borrowed, which indebtedness
is incurred or guaranteed by the Company; "Subordinated Indebtedness" means all
Debt of the Company, other than Junior Subordinated Indebtedness, which is
subordinate and junior in right with respect to the general assets of the
Company to Senior Indebtedness; "Junior Subordinated Indebtedness" means all
Debt of the Company which is subordinate and junior in right with respect to
the general assets of the Company to all other Debt of the Company (including
without limitation Senior Indebtedness and Subordinated Indebtedness).
Subordinated Securities
The payment of principal, premium, if any, and interest in respect of the
Subordinated Securities is expressly subordinated in right of payment, to the
extent set forth in the Subordinated Indenture, to all Senior
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Indebtedness which may at any time and from time to time be outstanding. In the
event of any receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, whether or not pursuant to bankruptcy laws, sale
of all or substantially all of the assets, dissolution, liquidation or any
other marshaling of the assets and liabilities of the Company, no amount shall
be paid by the Company in respect of the principal, premium, if any, or
interest on the Subordinated Securities or any related coupon unless and until
all Senior Indebtedness shall have been paid in full together with all interest
thereon and all other amounts payable in respect thereof. (Subordinated
Indenture Section 1501)
The Subordinated Indenture also states that if an Event of Default with
respect to the Subordinated Securities, other than those specified in the
preceding paragraph, shall happen and be continuing, no amount shall be paid by
the Company in respect of the principal, premium, if any, or interest on the
Subordinated Securities or any related coupon, except at Stated Maturity
(subject to the preceding paragraph) and except for current interest payments
as provided in the Subordinated Securities or any related coupon, unless and
until all Senior Indebtedness shall have been paid in full together with all
interest thereon and all other amounts payable in respect thereof. Further, in
the event of any default in the payment of any Senior Indebtedness and during
the continuance of any such default, the Subordinated Indenture states that no
amount shall be paid by the Company in respect of the principal, premium, if
any, or interest on the Subordinated Securities or any related coupon, except
at Stated Maturity (subject to the preceding paragraph), and except for current
interest payments as provided in the Subordinated Securities or any related
coupon. (Subordinated Indenture Section 1501)
There are no restrictions in the Subordinated Indenture with respect to the
creation of Senior Indebtedness. At December 31, 1994, Senior Indebtedness
aggregated approximately $7.73 billion. The Company expects to make additional
borrowings constituting Senior Indebtedness from time to time.
CERTAIN COVENANTS OF THE COMPANY WITH RESPECT TO SENIOR SECURITIES
Limitations on Liens
The Senior Indenture provides that neither the Company nor any Subsidiary
will create, incur or assume any mortgage, pledge, lien, charge or other
security interest on any of the assets of the Company or of any Subsidiary
(except to secure Debt to the Company or a Subsidiary) without making effective
provision whereby the Senior Securities shall be equally and ratably secured
except: (i) such security interests on assets of the Company or any Subsidiary
existing at the date of the Senior Indenture and renewals thereof; (ii) certain
purchase money liens, liens on real property and any improvements thereon
constructed in whole or in part by or for the Company or any Subsidiary to
secure the cost of such construction improvements made after the date of the
Senior Indenture, existing security interests on after-acquired assets, and
renewals thereof; (iii) certain security interests affecting property of a
corporation existing at the time it first becomes a Subsidiary, and renewals
thereof; (iv) certain security interests in connection with taxes or legal
proceedings or created in the ordinary course of business and not in connection
with the borrowing of money; (v) certain security interests in connection with
government and certain other contracts; and (vi) certain security interests on
property and assets in connection with any arrangement involving the transfer
of such property or assets where the transfer is accounted for as a sale under
generally accepted accounting principles. In the case of clause (ii) above, the
principal amount secured by any of such security interests may not exceed the
lesser of the cost or fair value (as determined by the Board of Directors) of
the property subject to such security interests and, in the case of clause
(iii) above, the principal amount secured by any of such security interests may
not exceed the lesser of the book value or fair value (as determined by the
Board of Directors) of the property subject to such security interest. (Senior
Indenture Section 1007)
Limitations on Mergers
The Senior Indenture provides that if any merger or consolidation of the
Company with or into any other corporation or any conveyance or transfer to any
person of all or substantially all of the property or
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assets of the Company would subject any of the property or assets of the
Company owned immediately prior to such consolidation, merger, conveyance or
transfer to any mortgage, pledge, lien, charge or other security interest, the
Company will, prior to such consolidation, merger, conveyance or transfer,
secure the Senior Securities, equally and ratably with any other Debt of the
Company then entitled to be so secured, by a direct lien on all such property
or assets equal to and ratable with all liens other than any theretofore
existing thereon. (Senior Indenture Section 803)
ABSENCE OF OTHER RESTRICTIVE COVENANTS AND EVENT RISK PROVISIONS
The Indentures do not contain any provision which will restrict the Company
in any way from paying dividends or making other distribution on its capital
stock or purchasing or redeeming any of its capital stock, or from incurring,
assuming or becoming liable upon Senior Indebtedness or Subordinated
Indebtedness or any other type of debt or other obligations. The Indentures do
not contain any financial ratios or specified levels of net worth or liquidity
to which the Company must adhere. In addition, the Subordinated Indenture does
not restrict the Company from creating liens on its property for any purpose.
In addition, the Indentures do not contain any provisions which would require
the Company to repurchase or redeem or otherwise modify the terms of any of its
Debt Securities upon a change in control or other events involving the Company
which may adversely affect the creditworthiness of the Debt Securities.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Securities under the Indentures, may consolidate with or merge into, or convey
or transfer its assets substantially as an entirety to, any Person that is a
corporation, partnership or trust organized and existing under the laws of any
domestic jurisdiction, provided that any successor Person assumes the Company's
obligations on the Debt Securities and under the Indentures, that after giving
effect to the transaction no Event of Default and no event which, after notice
or lapse of time, would become an Event of Default shall have occurred and be
continuing, and that certain other conditions are met. (Section 801)
DEFAULTS AND CERTAIN RIGHTS ON DEFAULT
Each Indenture defines an Event of Default with respect to any series of Debt
Securities thereunder as being any of the following events and such other
events as may be established for the Debt Securities of such series: (i)
default for 30 days in any payment of interest on the Debt Securities of such
series; (ii) default with respect to Debt Securities of such series in any
payment of principal or premium, if any, when due; (iii) default in the payment
of any sinking fund installment with respect to the Debt Securities of such
series when due; (iv) default in performance of any other covenant in the
Indenture for 60 days after written notice to the Company by the Trustee or the
Holders of at least 15% in principal amount of the Debt Securities of such
series then Outstanding; (v) failure by the Company or any Subsidiary to pay
any Debt in an amount exceeding $10,000,000 at maturity; (vi) acceleration of
any Debt of the Company or any Subsidiary in an amount exceeding $10,000,000
under the terms of the instrument under which such Debt is or may be
outstanding, if such acceleration is not annulled within 30 days after notice
to the Company by the Trustee or the Holders of at least 15% in principal
amount of the Debt Securities of such series then Outstanding; or (vii) certain
events of bankruptcy, insolvency, receivership or reorganization. (Section 501)
The Company will be required to file with the Trustee annually a written
statement as to the fulfillment of its obligations under the Indenture.
(Section 704)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Securities of
that series by notice as provided in the Indenture may declare the principal
amount (or, if the Outstanding Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of that series) of all the Outstanding Securities of that series
to be due and payable immediately. At any time after a declaration of
acceleration with respect to Debt
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Securities of any series has been made, but before a judgment or decree for
payment of money has been obtained by the Trustee, and subject to applicable
law and certain other provisions of the applicable Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of that
series may, under certain circumstances, rescind and annul such acceleration.
(Section 502)
Each Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holder shall have
offered to the Trustee reasonable indemnity. (Sections 601 and 603) Subject to
such provisions for the indemnification of the Trustee, and subject to
applicable law and certain other provisions of the Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Debt Securities of that
series. (Section 512)
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of each Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Security affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any Debt
Security or related coupon, (b) reduce the principal amount of, or premium or
interest on, any Debt Security or related coupon or any premium payable upon
the redemption thereof, (c) change any obligation of the Company to pay
additional amounts, (d) reduce the amount of principal of an Original Issue
Discount Security payable upon acceleration of the Maturity thereof, (e) change
the coin or currency in which any Debt Security or any premium or interest
thereon is payable, (f) impair the right to institute suit for the enforcement
of any payment on or with respect to any Debt Security, (g) reduce the
percentage in principal amount of Outstanding Securities of any series, the
consent of whose Holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults, (h) reduce the requirements contained in the
Indenture for quorum or voting, (i) change any obligation of the Company to
maintain an office or agency in the places and for the purposes required by the
Indenture, (j) with respect to each of the Subordinated and Junior Subordinated
Indentures, modify the terms relating to subordination in a manner adverse to
the Holders of Debt Securities issued under that Indenture, (k) adversely
affect the right of repayment, if any, of the Debt Securities at the option of
the Holders thereof, or (l) modify any of the above provisions. (Section 902)
The Holders of at least a majority in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of all Holders of Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
(Senior Indenture Section 1009 and Subordinated Indenture Section 1008) The
Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of all Holders of Debt
Securities of that series and any coupons appertaining thereto, waive any past
default and its consequences under the Indenture with respect to Debt
Securities of that series, except a default (a) in the payment of principal of
(or premium, if any) or any interest on any Debt Security or coupon of such
series, and (b) in respect of a covenant or provision of the Indenture which
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series or coupon affected. (Section 513)
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of Holders of Debt Securities or
the number of votes entitled to be cast by the Holder of any Debt Security (i)
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof that
would be
10
<PAGE>
due and payable as of the date of such determination upon acceleration of the
Maturity thereof, and (ii) the principal amount of a Debt Security denominated
in a foreign currency or a composite currency shall be the U.S. dollar
equivalent, determined as of the date of original issuance of such Debt
Security by the Company in good faith, of the principal amount of such Debt
Security (or, in the case of an Original Issue Discount Security, the U.S.
dollar equivalent, determined as of the date of original issuance of such Debt
Security, of the amount determined as provided in (i) above). (Section 101)
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series. (Section 1301) A meeting may be called at any time
by the Trustee, and also, upon request, by the Company or the Holders of at
least 10% in principal amount of the Outstanding Securities of such series, in
any such case upon notice given in accordance with "Notices" below. (Section
1302) Except for any consent which must be given by the Holder of each
Outstanding Security affected thereby, as described above, any resolution
presented at a meeting or adjourned meeting at which a quorum (as described
below) is present may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Securities of that series;
provided, however, that, any resolution with respect to any consent or waiver
which must be given by the Holders of not less than 66 2/3% in principal amount
of the Outstanding Securities of a series may be adopted at a meeting or an
adjourned meeting duly convened at which a quorum is present only by the
affirmative vote of the Holders of 66 2/3% in principal amount of the
Outstanding Securities of that series; and provided, further, that, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which may be made, given or taken by
the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by
the affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Securities of that series. Any resolution passed or
decision taken at any meeting of Holders of Securities of any series duly held
in accordance with the Indenture will be binding on all Holders of Securities
of that series and the related coupons. The quorum at any meeting called to
adopt a resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the Outstanding Securities of a
series; provided, however, that if any action is to be taken at such meeting
with respect to a consent or waiver which must be given by the Holders of not
less than 66 2/3% in principal amount of the Outstanding Securities of a
series, the persons holding or representing 66 2/3% in principal amount of the
Outstanding Securities of such series will constitute a quorum. (Section 1304)
DEFEASANCE AND COVENANT DEFEASANCE
Each Indenture provides, unless the Company elects otherwise pursuant to
Section 301 of the Indenture with respect to the Debt Securities of any series,
that the Company may elect either (A) to defease and be discharged from any and
all obligations with respect to such Debt Securities (except for the
obligations to register the transfer or exchange of such Debt Securities, to
replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to
maintain an office or agency in respect of the Debt Securities and to hold
moneys for payment in trust) ("defeasance") or (B) to be released from its
obligations with respect to such Debt Securities under Sections 1006, 1007 and
1008 of the Senior Indenture and Sections 1006 and 1007 of the Subordinated
Indenture ("covenant defeasance"), upon the deposit with the Trustee (or other
qualifying trustee), in trust for such purpose, of money, and/or U.S.
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide money, in an amount sufficient to pay
the principal of and any premium and interest on such Debt Securities, and any
mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor. Such a trust may only be established if, among other things,
the Company has delivered to the trustee an opinion of counsel (as specified in
the Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance or covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not occurred and,
in the case of Bearer Securities, there will be no adverse federal tax
consequences to the Holders of such Bearer Securities as a result of such
11
<PAGE>
defeasance or covenant defeasance. Such opinion, in the case of defeasance
under clause (A) above, must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax law
occurring after the date of the Indenture. In the case of covenant defeasance,
such termination will not relieve the Company of its obligation to pay when due
the principal of or interest on the Debt Securities of such series if the Debt
Securities of such series are not paid from the money or Government Obligations
held by the Trustee for the payment thereof. The Prospectus Supplement may
further describe the provisions, if any, permitting such defeasance or covenant
defeasance with respect to the Debt Securities of a particular series. (Article
Fourteen)
NOTICES
Except as otherwise provided in the applicable Indenture, notices to Holders
of Bearer Securities will be given by publication at least twice in a daily
newspaper in The City of New York and in such other city or cities as may be
specified in such Securities. Notices to Holders of Registered Securities will
be given by mail to the addresses of such Holders as they appear in the
Security Register. (Sections 101 and 106)
TITLE
Title to any Bearer Securities and any coupons appertaining thereto will pass
by delivery. The Company, the Trustee and any agent of the Company or the
Trustee may treat the bearer of any Bearer Security and the bearer of any
coupon and the registered owner of any Registered Security as the absolute
owner thereof (whether or not such Debt Security or coupon shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308)
REPLACEMENT OF DEBT SECURITIES AND COUPONS
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
Holder upon surrender of such Debt Security to the Trustee. Debt Securities or
coupons that become destroyed, stolen or lost will be replaced by the Company
at the expense of the Holder upon delivery to the Trustee of the Debt Security,
coupon or coupons or evidence of the destruction, loss or theft thereof
satisfactory to the Company and the Trustee; in the case of any coupon which
becomes destroyed, stolen or lost, such coupon will be replaced by issuance of
a new Debt Security in exchange for the Debt Security to which such coupon
appertains. In the case of a destroyed, lost or stolen Debt Security or coupon
an indemnity satisfactory to the Trustee and the Company may be required at the
expense of the Holder of such Debt Security or coupon before a replacement Debt
Security will be issued. (Section 306)
CONCERNING THE TRUSTEES
Harris Trust and Savings Bank, the Senior Trustee under the Senior Indenture,
has stand-by credit facilities with the Company in the amount of $80,000,000,
the borrowings under which would rank on a parity with the Senior Securities.
The Company also maintains a deposit account and conducts other transactions
with the Senior Trustee. The Senior Trustee is also the trustee under the
Company's Indenture dated as of July 1, 1982 and the Company's Indenture dated
as of November 1, 1987 pursuant to each of which the Company has outstanding
Senior Indebtedness.
First Interstate Bank of California, formerly First Interstate Bank, Ltd.,
the Subordinated Trustee under the Subordinated Indenture, has stand-by credit
facilities with the Company in the amount of $95,000,000, the borrowings under
which would be senior to the Subordinated Securities. The Company also
maintains a deposit account and conducts other transactions with the
Subordinated Trustee. The Subordinated Trustee is also the successor trustee
under the Company's Indenture dated as of September 1, 1984 pursuant to which
the Company has outstanding Subordinated Indebtedness.
12
<PAGE>
The Senior Trustee or the Subordinated Trustee may from time to time make
loans to the Company and perform other services for the Company in the normal
course of business. Under the provisions of the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), upon the occurrence of a default under an
indenture, if a trustee has a conflicting interest (as defined in the Trust
Indenture Act) the trustee must, within 90 days, either eliminate such
conflicting interest or resign. Under the provisions of the Trust Indenture
Act, an indenture trustee shall be deemed to have a conflicting interest if the
trustee is a creditor of the obligor. If the trustee fails either to eliminate
the conflicting interest or to resign within 10 days after the expiration of
such 90-day period, the trustee is required to notify security holders to this
effect and any security holder who has been a bona fide holder for at least six
months may petition a court to remove the trustee and to appoint a successor
trustee.
DESCRIPTION OF WARRANTS
The following description of the terms of the Warrants sets forth certain
general terms and provisions of the Warrants to which any Prospectus Supplement
may relate. The particular terms of the Warrants offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply
to the Warrants so offered will be described in the Prospectus Supplement
relating to such Warrants.
Warrants may be offered independently or together with any series of Debt
Securities offered by a Prospectus Supplement and may be attached to or
separate from such Debt Securities. Each series of Warrants will be issued
under a separate warrant agreement (a "Warrant Agreement") to be entered into
between the Company and a bank or trust company, as Warrant Agent (the "Warrant
Agent"), all as set forth in the Prospectus Supplement relating to such series
of Warrants. The Warrant Agent will act solely as the agent of the Company in
connection with the certificates for the Warrants (the "Warrant Certificates")
of such series and will not assume any obligation or relationship of agency or
trust for or with any holders of Warrant Certificates or beneficial owners of
Warrants. Copies of the forms of Warrant Agreements, including the forms of
Warrant Certificates, are filed as an exhibit to the Registration Statement to
which this Prospectus pertains. The following summaries of certain provisions
of the forms of Warrant Agreements and Warrant Certificates do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Warrant Agreements and the Warrant
Certificates.
GENERAL
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of such
Warrants including, where applicable: (i) the offering price; (ii) the
currencies in which such Warrants are being offered; (iii) the designation,
aggregate principal amount, currencies, denominations and terms of the series
of Debt Securities purchasable upon exercise of such Warrants; (iv) the
designation and terms of the series of Debt Securities with which such Warrants
are being offered and the number of such Warrants being offered with each such
Debt Security; (v) the date on and after which such Warrants and the related
series of Debt Securities will be transferable separately; (vi) the principal
amount of the series of Debt Securities purchasable upon exercise of each such
Warrant and the price at which and currencies in which such principal amount of
Debt Securities of such series may be purchased upon such exercise; (vii) the
date on which the right to exercise such Warrants shall commence and the date
(the "Expiration Date") on which such right shall expire; (viii) federal income
tax consequences; and (ix) any other terms of such Warrants.
Warrant Certificates of each series will be in registered form and will be
exchangeable at the option of the holder thereof for Warrant Certificates of
such series of like tenor representing in the aggregate the number of Warrants
surrendered for exchange. Warrant Certificates of each series will be
transferable upon surrender without service charge, subject to the payment of
any taxes or other governmental charges due in respect of a transfer, and will
be exchangeable and transferable at the corporate trust office of the Warrant
Agent or any other office indicated in the Prospectus Supplement relating to
such series of Warrants. Prior
13
<PAGE>
to the exercise of their Warrants, holders of Warrants will not have any of the
rights of holders of the series of Debt Securities purchasable upon such
exercise, including the right to receive payments of principal of, premium, if
any, or interest on the series of Debt Securities purchasable upon such
exercise, or to enforce any of the covenants in the applicable Indenture.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder thereof to purchase such principal
amount of the related series of Debt Securities at such exercise price as shall
in each case be set forth in, or calculable as set forth in, the Prospectus
Supplement relating to such Warrant. Warrants of a series may be exercised at
the corporate trust office of the Warrant Agent for such series of Warrants (or
any other office indicated in the Prospectus Supplement relating to such series
of Warrants) at any time prior to 5:00 P.M., New York City time, on the
Expiration Date set forth in the Prospectus Supplement relating to such series
of Warrants. After the close of business on the Expiration Date relating to
such series of Warrants (or such later date to which such Expiration Date may
be extended by the Company), unexercised Warrants of such series will become
void.
Warrants of a series may be exercised by delivery to the appropriate Warrant
Agent of payment, as provided in the Prospectus Supplement relating to such
series of Warrants, of the amount required to purchase the principal amount of
the series of Debt Securities purchasable upon such exercise, together with
certain information as set forth on the reverse side of the Warrant Certificate
evidencing such Warrants. Such Warrants will be deemed to have been exercised
upon receipt of the exercise price, subject to the receipt within five business
days of such Warrant Certificate. Upon receipt of such payment and such Warrant
Certificate, properly completed and duly executed, at the corporate trust
office of the appropriate Warrant Agent (or any other office indicated in the
Prospectus Supplement relating to such series of Warrants), the Company will,
as soon as practicable, issue and deliver the principal amount of the series of
Debt Securities purchasable upon such exercise. If fewer than all of the
Warrants represented by such Warrant Certificate are exercised, a new Warrant
Certificate will be issued for the remaining amount of Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities and the Warrants separately or
together, (i) to one or more underwriters or dealers for public offering and
sale by them and (ii) to investors directly or through agents. The distribution
of the Debt Securities and the Warrants may be effected from time to time in
one or more transactions at a fixed price or prices (which may be changed from
time to time), at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Each
Prospectus Supplement will describe the method of distribution of the Debt
Securities and the Warrants offered thereby.
In connection with the sale of the Debt Securities and the Warrants,
underwriters, dealers or agents may receive compensation from the Company or
from purchasers of the Debt Securities and the Warrants for whom they may act
as agents, in the form of discounts, concessions or commissions. The
underwriters, dealers or agents that participate in the distribution of the
Debt Securities and the Warrants may be deemed to be underwriters under the
Securities Act of 1933 and any discounts or commissions received by them and
any profit on the resale of the Debt Securities and the Warrants received by
them may be deemed to be underwriting discounts and commissions thereunder. Any
such underwriter, dealer or agent will be identified and any such compensation
received from the Company will be described in the Prospectus Supplement. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Under agreements that may be entered into with the Company, underwriters,
dealers and agents may be entitled to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act of
1933, or to contribution with respect to payments which the underwriters,
dealers or agents may be required to make in respect thereof.
14
<PAGE>
Each underwriter, dealer and agent participating in the distribution of any
Debt Securities that are issuable in bearer form will agree that it will not
offer, sell, resell or deliver, directly or indirectly, Debt Securities in
bearer form to persons located in the United States or to United States persons
(other than qualifying financial institutions), in connection with the original
issuance of the Debt Securities.
All Debt Securities and Warrants will be new issues of securities with no
established trading market. Any underwriters to whom Debt Securities or
Warrants are sold by the Company for public offering and sale may make a market
in such securities, but such underwriters will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for any such securities.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for the Company in the
ordinary course of business.
LEGAL OPINIONS
The validity of the Debt Securities and Warrants is being passed upon for the
Company by Orrick, Herrington & Sutcliffe, San Francisco.
EXPERTS
The consolidated financial statements of Transamerica Finance Corporation and
subsidiaries appearing in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994,have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
15
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY PRIC-
ING SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PRO-
SPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTI-
TUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUM-
STANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE PROSPECTUS NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Transamerica Finance Corporation and Subsidiaries Summary of Consolidated
Financial Information.................................................... S-2
Important Currency Information............................................ S-2
Description of Notes...................................................... S-3
Certain Investment Considerations......................................... S-17
Currency Risks............................................................ S-18
Certain United States Federal Income Tax Consequences..................... S-20
Plan of Distribution...................................................... S-28
Legal Opinions............................................................ S-28
PROSPECTUS
Available Information..................................................... 2
Information Incorporated by Reference..................................... 2
Transamerica Finance Corporation.......................................... 2
Application of Proceeds................................................... 3
Ratio of Earnings to Fixed Charges........................................ 3
Description of Debt Securities............................................ 3
Description of Warrants................................................... 13
Plan of Distribution...................................................... 14
Legal Opinions............................................................ 15
Experts................................................................... 15
</TABLE>
===============================================================================
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$3,000,000,000
TRANSAMERICA FINANCE CORPORATION
MEDIUM TERM-NOTES, SERIES E
DUE FROM 9 MONTHS TO 30 YEARS
FROM DATE OF ISSUE
TRANSAMERICA LOGO
---------------
PROSPECTUS SUPPLEMENT
---------------
MORGAN STANLEY & CO.
INCORPORATED
CS FIRST BOSTON
SALOMON BROTHERS INC
J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.
BA SECURITIES, INC.
CHASE SECURITIES, INC.
CHEMICAL SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
UBS SECURITIES INC.
===============================================================================
