Registration Statement for Securities Offered Pursuant to a Transaction — Form S-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-3 Form S-3 for Nru/Cfc 26 172K
2: EX-4.2 First Supp. Indenture Between Co. & Chemical Bank 11 39K
3: EX-4.4 Form of Fixed Rate Mtn 14 54K
4: EX-4.5 Form of Floating Rate, Mtn 21 83K
5: EX-5 Opinion & Consent of Milbank, Tweed 2 10K
6: EX-12 Schedule of Computation of Ratio of Margins 1 8K
7: EX-23.1 Consent of Arthur Andersen LLP 1 6K
8: EX-25 Form T-1 5 22K
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 5, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
(Exact name of registrant as specified in charter)
[Download Table]
DISTRICT OF COLUMBIA 52-089-1669
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2201 COOPERATIVE WAY
HERNDON, VIRGINIA 22071
(703) 709-6700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JOHN JAY LIST, GENERAL COUNSEL
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
2201 COOPERATIVE WAY
HERNDON, VIRGINIA 22071
(703) 709-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
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MARK L. WEISSLER THOMAS R. BROME
MILBANK, TWEED, HADLEY & MCCLOY CRAVATH, SWAINE & MOORE
1 CHASE MANHATTAN PLAZA 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10019
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of this registration statement as determined by
market conditions.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED PURSUANT
TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. / /
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. /X/
CALCULATION OF REGISTRATION FEE
[Enlarge/Download Table]
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PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
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Debt Securities and/or Warrants to
Purchase Debt Securities............ $400,000,000 100% $400,000,000 $137,932
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(1) Expressed as the principal amount of Debt Securities, or in the case of
Original Issue Discount Securities, the offering price thereof.
(2) Estimated solely for purposes of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
PURSUANT TO RULE 429 OF THE COMMISSION UNDER THE SECURITIES ACT OF 1933,
THE WITHIN PROSPECTUS RELATES TO DEBT SECURITIES REGISTERED HEREBY AND TO DEBT
SECURITIES PREVIOUSLY REGISTERED BY REGISTRATION STATEMENT NO. 33-50463.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
APRIL 5, 1995
SUBJECT TO COMPLETION
PROSPECTUS
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
DEBT SECURITIES AND/OR WARRANTS
TO PURCHASE DEBT SECURITIES
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National Rural Utilities Cooperative Finance Corporation ("CFC" or the
"Company") intends to issue from time to time debt securities (the "Securities")
each of which will be a direct, unsecured obligation of the Company and which
will be offered to the public on terms determined by market conditions at the
time of sale, and/or Warrants to purchase Securities (the "Warrants"). The
Company may sell Securities and Warrants for proceeds up to $453,040,000, or the
equivalent thereof if any of the Securities or Warrants are denominated in a
foreign currency or a currency unit, (i) directly to purchasers, (ii) through
agents designated from time to time or (iii) through underwriters or a group of
underwriters which may include Lehman Brothers Inc. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Securities may be issued in registered form without coupons, in a form
registered as to principal only with or without coupons, in bearer form with or
without coupons or any combination thereof. In addition, all or a portion of the
Securities may be issued in temporary or definitive global form. Securities in
bearer form are offered only to non-United States persons and to offices located
outside the United States of certain United States financial institutions. See
"Limitations on Issuance of Bearer Securities".
The Securities and Warrants may be sold for U.S. dollars, foreign
currencies or foreign currency units, and the principal (including any premium)
and any interest on the Securities may be payable in U.S. dollars, foreign
currencies or foreign currency units. The Securities may be issued in one or
more series with the same or various maturities at or above par or with an
original issue discount. The specific designation, aggregate principal amount,
currency, currencies or currency unit or units in which the principal, premium,
if any, or interest, if any, is payable, authorized denominations, purchase
price, maturity, rate (or method of calculation) and time of payment of any
interest, any redemption terms, any listing on a securities exchange, or other
specific terms of the Securities in respect of which this Prospectus is being
delivered ("Offered Securities") are set forth in the accompanying Prospectus
Supplement and in a supplement thereto relating to the specific Offered
Securities (together, the "Prospectus Supplement"), together with the terms of
offering of the Offered Securities. With regard to the Warrants, if any, in
respect of which this Prospectus is being delivered, the Prospectus Supplement
sets forth a description of the Offered Securities for which each Warrant is
exercisable and the offering price, if any, exercise price, duration and other
terms of such Warrant. Warrants may be sold in units with Securities or in
separate offerings, as specified in a Prospectus Supplement.
For a discussion of certain United States Federal income tax consequences,
see "United States Taxation".
A discussion of certain other United States Federal tax matters applicable
to the Offered Securities may be set forth in the Prospectus Supplement relating
to the Offered Securities.
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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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES OR
WARRANTS UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
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THE DATE OF THIS PROSPECTUS IS APRIL , 1995
IN CONNECTION WITH AN OFFERING, THE UNDERWRITERS FOR SUCH OFFERING, IF ANY,
MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE OFFERED SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected at the office of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, as well as at the Regional Offices of the Commission
at 7 World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies can also be
obtained by mail from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 at the prescribed
rates. In addition, certain of the Company's securities are listed on, and
reports and other information concerning the Company can also be inspected at,
the New York Stock Exchange, 20 Broad Street, New York, NY 10005.
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus.
1. The Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1994.
2. The Company's Quarterly Reports on Form 10-Q for the quarters
ended August 31, 1994, November 30, 1994 and February 28, 1995.
3. The Company's Current Reports on Form 8-K dated June 14, 1994,
September 9, 1994, September 16, 1994 and February 28, 1995.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
of the Securities, shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the respective date of filing of each
such document. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will furnish without charge upon written or oral request by any
person, including any beneficial owner, to whom this Prospectus is delivered a
copy of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the information that this Prospectus incorporates. Requests for such copies
should be directed to Steven L. Lilly, Senior Vice President and Chief Financial
Officer, National Rural Utilities Cooperative Finance Corporation, Woodland
Park, 2201 Cooperative Way, Herndon, VA 22071. Telephone requests may be
directed to (703) 709-6700.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR THE PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF, OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SINCE ITS DATE.
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THE COMPANY
National Rural Utilities Cooperative Finance Corporation ("CFC" or the
"Company") was incorporated as a private, not-for-profit cooperative association
under the laws of the District of Columbia in 1969. The principal purpose of CFC
is to provide its members with a source of financing to supplement the loan
program of the Rural Utilities Service ("RUS") (formerly the Rural
Electrification Administration) of the United States Department of Agriculture.
CFC makes loans primarily to its rural utility system members ("Utility
Members") to enable them to acquire, construct and operate electric
distribution, generation, transmission and related facilities. CFC also makes
loans to service organization members ("Service Members") to finance office
buildings, equipment, related facilities and services provided by them to the
rural utility systems. CFC has also provided guarantees for tax-exempt financing
of pollution control facilities and other properties constructed or acquired by
its members, and in addition has provided loans or guarantees through National
Cooperative Services Corporation ("NCSC") in connection with certain lease
transactions of its members. Also, through Rural Telephone Finance Cooperative
("RTFC"), a controlled affiliate of CFC established in 1987, CFC provides
financing to rural telephone and telecommunications companies and their
affiliates. In addition, through Guaranty Funding Cooperative, ("GFC"), a
controlled affiliate of CFC established in 1991, CFC provides financing for
members to refinance their debt to the Federal Financing Bank of the United
States Treasury ("FFB"). CFC's offices are located at Woodland Park, 2201
Cooperative Way, Herndon, VA 22071 and its telephone number is (703) 709-6700.
CFC's 1,039 members as of May 31, 1994, included 899 Utility Members,
virtually all of which are consumer-owned cooperatives, 71 Service Members and
69 associate members. The Utility Members included 833 distribution systems and
66 generation and transmission ("Power Supply") systems operating in 46 states
and U.S. territories. At December 31, 1993, CFC's member systems served
approximately 12.4 million consumers, representing service to an estimated 32.5
million ultimate users of electricity, and owned approximately $62.6 billion
(before depreciation of $17.9 billion) in total utility plant.
CFC's long-term loans to Utility Members generally have 35-year maturities.
They are made primarily in conjunction with concurrent RUS loans and are
generally secured ratably with RUS's loans by a common mortgage on substantially
all the Utility Member's property (including revenues). Interest rates on these
loans are either fixed or variable. Fixed rates are offered weekly based on
CFC's overall cost of long-term capital and may be obtained for any period from
one to 30 years. Variable rates are adjusted monthly in line with changes in
CFC's cost of short-term funds.
CFC makes short-term unsecured line-of-credit loans and secured
intermediate-term loans with up to five-year maturities. Rates on these loans
may be adjusted semi-monthly in line with changes in CFC's short-term cost of
funds. The intermediate-term loans are generally made to Power Supply systems in
connection with the planning and construction of new generating plants and
transmission facilities.
CFC also makes loans to telecommunication systems through RTFC. Such loans
are long-term fixed or variable rate loans with maturities not exceeding 15
years and short-term loans.
CFC's guarantees are senior obligations ranking on a par with its other
senior debt. Even if the system defaults in payment of the guaranteed
obligations, the debt cannot be accelerated as long as CFC pays the debt service
under its guarantee as due. The system is generally obligated to reimburse CFC
on demand for amounts paid on the guarantee, and this obligation is usually
secured by a mortgage (often joint with RUS) on the system's property or, in the
case of a lease transaction, on the leased property. Holders of $1,214.6 million
of the guaranteed pollution control debt (at May 31, 1994) have the right at
certain times to tender their bonds for remarketing, and, if they cannot
otherwise be remarketed, CFC has committed to purchase bonds so tendered.
By policy, CFC maintains an allowance for loan and guarantee losses at a
level believed to be adequate in relation to the quality and size of its loans
and guarantees outstanding. At May 31, 1994, the allowance was $188.2 million.
At May 31, 1994, CFC's ten largest borrowers, which were all Power Supply
members, had outstanding loans totaling $461.6 million (excluding $394.1 million
of loans guaranteed by RUS), which represented approximately 7.5% of CFC's total
loans outstanding. As of May 31, 1994, outstanding guarantees for these same ten
largest borrowers totaled $2,117.7 million, which represented 79.2% of CFC's
total guarantees outstanding, including guarantees of the maximum amounts of
lease obligations at such date. On that date, no
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member had loans and guarantees outstanding in excess of 10% of the aggregate
amount of CFC's outstanding loans and guarantees; however, one of the ten
largest borrowers, Deseret Generation & Transmission Co-operative ("Deseret"),
was in financial difficulty. At May 31, 1994, Deseret accounted for 1.8% of
loans outstanding (excluding loans guaranteed by RUS) and 12.6% of guarantees
outstanding and represented 26.8% of total Members' Equity, Members'
Subordinated Certificates and the allowance for loan and guarantee losses.
Fixed charge coverage ratio (unaudited):
[Download Table]
NINE
MONTHS
ENDED
FEBRUARY YEAR ENDED MAY 31,
28, ----------------------------------------
1995 1994 1993 1992 1991 1990
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1.17.. 1.13 1.16 1.14 1.14 1.11
Margins used to compute the fixed charge coverage ratio represent net
margins before extraordinary loss resulting from redemption premiums on bonds
plus fixed charges. The fixed charges used in the computation of the fixed
charge coverage ratio consist of interest and amortization of bond discount and
bond issuance expenses. The ratio for the nine months ended February 28, 1995
may not be representative of the ratio for the full fiscal year ending May 31,
1995.
USE OF PROCEEDS
Except as may be otherwise provided in a Prospectus Supplement, the net
proceeds from the sale of the Securities will be added to the general funds of
the Company and will be available for making loans to members, the repayment of
short-term borrowings, the refinancing of existing long-term debt and for other
corporate purposes. The Company expects to incur additional indebtedness from
time to time, the amount and terms of which will depend upon the volume of its
business, general market conditions and other factors.
DESCRIPTION OF SECURITIES
The following description of the Securities summarizes certain general
terms and provisions of the Securities to which any Prospectus Supplement may
relate. The particular terms of the Securities and the extent, if any, to which
such general provisions may apply to any series of Securities will be described
in the Prospectus Supplement relating to such series.
The Securities are to be issued under an Indenture dated as of December 15,
1987, as supplemented by a First Supplemental Indenture dated as of October 1,
1990 between the Company and Harris Trust and Savings Bank, as successor Trustee
(as so supplemented, the "Indenture"). The Indenture does not limit the
aggregate principal amount of Securities which may be issued thereunder.
The statements under this heading are subject to the detailed provisions of
the Indenture and the Securities. Whenever particular provisions of the
Indenture and the Securities or terms defined therein are referred to, such
provisions or definitions are incorporated by reference herein as a part of the
statements made and the statements are qualified in their entirety by such
reference.
GENERAL
The Securities may be issued in fully registered form without coupons
("Registered Securities"), or in a form registered as to principal only with or
without coupons or in bearer form with or without coupons ("Bearer Securities")
or any combination thereof. Securities may also be issued in temporary or
definitive global bearer form. Unless otherwise specified in the Prospectus
Supplement accompanying the Offered Securities, the Securities will be only
Registered Securities. The Securities denominated in U.S. dollars will be
issued, unless otherwise set forth in the Prospectus Supplement accompanying the
Offered Securities, in denominations of $1,000 or an integral multiple thereof
for Registered Securities, and in denominations of $5,000 or an integral
multiple thereof for Bearer Securities.
The Securities will be direct, unsecured obligations of the Company.
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If any of the Securities are sold for any foreign currency or currency unit
or if principal of (or premium, if any) or any interest on any of the Securities
is payable in any foreign currency or currency unit, the restrictions,
elections, tax consequences, specific terms and other information with respect
to such issue of Securities and such foreign currency or currency unit will be
set forth in the Prospectus Supplement relating thereto.
The Securities may be issued in one or more series with the same or various
maturities at or above par or with an original issue discount. Offered
Securities bearing no interest or interest at a rate which at the time of
issuance is below market rates ("Original Issue Discount Securities") will be
sold at a discount (which may be substantial) below their stated principal
amount. See "United States Taxation--U.S. Holders--Original Issue Discount" for
a discussion of certain Federal income tax considerations with respect to any
such Original Issue Discount Securities.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Securities: (i) the title and the limit, if any, on the aggregate
principal amount of Offered Securities; (ii) the percentage of their principal
amount at which the Offered Securities will be sold; (iii) the date or dates on
which the Offered Securities will mature; (iv) the rate or rates (which may be
fixed or variable) per annum, if any, at which the Offered Securities will bear
interest or the method of determining such rate or rates; (v) the date or dates
from which such interest, if any, shall accrue and the date or dates at which
such interest, if any, will be payable; (vi) the place where the principal of
(and premium, if any) and the interest, if any, on the Offered Securities will
be payable; (vii) the terms for redemption for early payment, if any, including
any mandatory or optional sinking fund or analogous provision; (viii) the
principal amount of the Offered Securities which are Original Issue Discount
Securities payable upon declaration of acceleration of the maturity of the
Offered Securities; (ix) the means of satisfaction and discharge of the
Indenture with respect to the Offered Securities; (x) any deletions or
modifications of or additions to the Events of Default or covenants of the
Company; (xi) the currency, currencies or currency unit or units for which the
Offered Securities may be purchased and the currency, currencies or currency
unit or units in which the payment of principal of (and premium, if any) and
interest, if any, on such Offered Securities will be made and, if the Company or
the Holders of Offered Securities may elect for such payment in a currency,
currencies or currency unit or units other than that in which the Offered
Securities are stated to be payable, then the period or periods within which,
and the terms and conditions upon which, such election may be made and, if the
amount of such payments may be determined with reference to an index based on a
currency, currencies or currency unit or units, other than that in which the
Offered Securities are stated to be payable, then the manner in which such
amounts shall be determined; (xii) whether the Offered Securities will be issued
in registered form without coupons, in a form registered as to principal only
with or without coupons, in bearer form with or without coupons, including
temporary and definitive global form, or any combination thereof and the
circumstances, if any, upon which such Offered Securities may be exchanged for
Offered Securities issued in a different form; (xiii) whether and under what
circumstances the Company will pay additional amounts to any Holder of Offered
Securities who is not a United States person (as defined under "United States
Taxation") in respect of any tax, assessment or governmental charge required to
be withheld or deducted and, if so, whether the Company will have the option to
redeem rather than pay additional amounts; (xiv) whether the covenants described
below under "Restriction on Indebtedness" will not apply to the Offered
Securities; and (xv) any other terms of the Offered Securities not inconsistent
with the Indenture. (Section 301)
EXCHANGE, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement,
Registered Securities of any series will be exchangeable for other Registered
Securities of the same series and of a like aggregate principal amount and tenor
of different authorized denominations. In addition, if 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 with
coupons appertaining thereto surrendered in exchange for Registered Securities
between a Regular Record Date or a Special Record Date and the relevant date for
payment of interest must 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
5
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. No service
charge will be made for any registration of transfer or exchange of the
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge in connection therewith. (Section 305)
Unless otherwise specified in the applicable Prospectus Supplement,
Securities may be presented for exchange as provided above, and Registered
Securities 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 Securities and referred to in an
applicable Prospectus Supplement. 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. The Company has appointed Bank of Montreal Trust Company as Security
Registrar. (Section 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 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 acts, except that, if 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 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. The Company may at any time
designate additional transfer agents with respect to any series of Securities.
(Section 1002)
In the event of any redemption in part, the Company will not be required
to: (i) issue, register the transfer of or exchange Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Securities of that series to be redeemed and ending at the close of
business on (a) if Securities of the series are issuable only as Registered
Securities, the day of mailing of the relevant notice of redemption and (b) if
Securities of the series are issuable only as Bearer Securities, the day of the
first publication of the relevant notice of redemption or, if Securities of the
series are also issuable as Registered Securities and there is no publication,
the day of mailing of the relevant notice of redemption; (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 simultaneously surrendered for redemption. (Section 305)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any 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. (Section
301) 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. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
office of Bank of Montreal Trust Company in the Borough of Manhattan, The City
of New York will be designated as the Company's sole Paying Agent for payments
with respect to Offered Securities that are issuable solely as Registered
Securities and as the Company's Paying Agent in the Borough of Manhattan, The
City of New York, for payments with respect to Offered Securities. Any Paying
Agents outside the United States and any other Paying Agents in the United
States initially designated by the Company for the Offered 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, unless otherwise indicated in an applicable Prospectus Supplement,
if 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
6
such series and, if 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 certain circumstances) and (ii) a Paying Agent in a Place of
Payment located outside the United States where Bearer Securities of such series
and any coupons appertaining thereto may be presented and surrendered for
payment. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of
principal of (and premium, if any) or any interest on any Security or coupon
that remains unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and the
Holder of such Security or coupon will thereafter, as an unsecured general
creditor, look only to the Company for payment thereof. (Section 1003)
RESTRICTION ON INDEBTEDNESS
The Company may not incur any Superior Indebtedness or make any optional
prepayment on any Capital Term Certificate if, as a result, the principal amount
of Superior Indebtedness outstanding, less a principal amount thereof equal to
the principal amount of Government or Government Insured Obligations (as defined
in the Indenture) held by the Company, thereafter or on any future date would
exceed 20 times the sum of the Members' equity in the Company at the time of
determination plus the principal amount of Capital Term Certificates outstanding
at the time of determination or at such given future date, as the case may be.
The principal amounts of Superior Indebtedness and Capital Term Certificates to
be outstanding on any future given date will be computed after giving effect to
maturities and sinking fund requirements. (Section 1007) "Superior Indebtedness"
means all indebtedness of the Company (including all guarantees by the Company
of indebtedness of others) except Capital Term Certificates. A "Capital Term
Certificate" is defined for the purposes of the Indenture as a note of the
Company substantially in the form of the capital term certificates of the
Company outstanding on the date of the Indenture and any other indebtedness
having substantially similar provisions as to subordination. As of May 31, 1994,
the Company had $6,772,325,000 outstanding of Superior Indebtedness and within
the restrictions of the Indenture was permitted to have outstanding an
additional $22,904,195,000 of Superior Indebtedness.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company, without the consent of the Holders
of any of the Outstanding Securities, may consolidate with or merge into any
other corporation or transfer its assets substantially as an entirety to any
Person provided that: (i) the successor is a corporation organized under the
laws of any domestic jurisdiction; (ii) the successor corporation assumes the
Company's obligations under the Indenture and the Securities issued thereunder;
(iii) immediately after giving effect to the transaction, no Event of Default
(as defined below under "Events of Default, Notice and Waiver") and no event
that, after notice or lapse of time, or both, would become an Event of Default,
shall have occurred and be continuing; and (iv) certain other conditions are
met. (Section 801)
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may, without the
consent of any Holders of Securities, enter into supplemental indentures for the
purposes, among other things, of adding to the Company's covenants, adding
additional Events of Default, establishing the form or terms of Securities of
any series, changing or eliminating any restriction on the manner or place of
payment of principal of or interest on Bearer Securities or, provided such
action shall not adversely affect the interests of the Holders of any series of
Securities in any material respect, curing ambiguities or inconsistencies in the
Indenture or making other provisions with respect to matters arising under the
Indenture. (Section 901)
The Indenture contains provisions permitting the Company, with the consent
of the Holders of not less than a majority in principal amount of the
Outstanding Securities of all affected series (acting as one class), to execute
supplemental indentures adding any provisions to or changing or eliminating any
of the provisions of the
7
Indenture or modifying the rights of the Holders of the Securities of such
series, except that no such supplemental indenture may, without the consent of
the Holders of all the Outstanding Securities affected thereby, among other
things: (i) change the maturity of the principal of, or any installment of
principal of or interest on, any of the Securities; (ii) reduce the principal
amount thereof (or any premium thereon) or the rate of interest, if any,
thereon; (iii) reduce the amount of the principal of Original Issue Discount
Securities payable on any acceleration of maturity; (iv) change the currency,
currencies or currency unit or units in which any of the Securities or any
premium or interest thereon is payable; (v) change any obligation of the Company
to maintain an office or agency in the places and for the purposes required by
the Indenture; (vi) impair the right to institute suit for the enforcement of
any payment on or after the applicable maturity date; (vii) reduce the
percentage in principal amount of the Outstanding Securities of any series, the
consent of the Holders of which is required for any such supplemental indenture
or for any waiver of compliance with certain provisions of, or of certain
defaults under, the Indenture; or (viii) with certain exceptions, to modify the
provisions for the waivers of certain covenants and defaults and any of the
foregoing provisions. (Section 902)
WAIVER OF CERTAIN COVENANTS
The Indenture provides that the Company may omit to comply with certain
restrictive covenants (including that described above under "Restriction on
Indebtedness") if the Holders of not less than a majority in principal amount of
all series of Outstanding Securities affected thereby (acting as one class)
waive compliance with such restrictive covenants. (Section 1009)
EVENTS OF DEFAULT, NOTICE AND WAIVER
An Event of Default in respect of any series of Securities (unless it is
either inapplicable to a particular series or has been modified or deleted with
respect to any particular series) is defined in the Indenture to be: (i) a
default for 30 days in the payment of any installment of interest upon any of
the Securities of such series when due; (ii) a default in the payment of
principal of (or premium, if any, on) any of the Securities of such series when
due; (iii) a default in the deposit of any sinking fund payment when the same
becomes due by the terms of the Securities of such series; (iv) a default in the
performance, or breach, of the covenant of the Company described above under
"Restrictions on Indebtedness" which shall not have been remedied for a period
of 60 days after such default has become known to an officer of the Company; (v)
a default by the Company in the performance, or breach, of any of its other
covenants or warranties in the Indenture which shall not have been remedied for
a period of 60 days after notice from the Trustee thereunder or the Holder of
not less than 25% in principal amount of the Outstanding Securities of such
series; (vi) certain events of bankruptcy, insolvency or reorganization of the
Company; and (vii) such other events as may be specified for each series.
(Section 501)
The Indenture provides that if an Event of Default specified therein in
respect of any series of Outstanding Securities shall have happened and be
continuing, either the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities of such series may declare the principal
(or, if such Securities are Original Issue Discount Securities, such portion of
the principal amount as may be specified by the terms of such Securities) of all
of the Outstanding Securities of such series to be immediately due and payable.
(Section 502)
The Indenture provides that the Holders of not less than a majority in
principal amount of the Outstanding Securities of any series may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Securities of such series, provided that such Trustee may act in
any way that is not inconsistent with such directions and may decline to act if
any such direction is contrary to law or to the Indenture or would involve such
Trustee in personal liability. (Section 507)
The Indenture provides that the Holders of not less than a majority in
principal amount of the Outstanding Securities of any series may on behalf of
the Holders of all of the Outstanding Securities of such series waive any past
default with respect to such series and its consequences, except a default (i)
in the payment of the principal of (or premium, if any) or any interest on any
of the Securities of such series or (ii) in respect of a covenant or provision
which, under the terms of the Indenture, cannot be modified or amended without
the consent of the Holders of all of the Outstanding Securities of such series
affected thereby. (Section 508)
8
The Indenture contains provisions entitling the Trustee, subject to the
duty during an Event of Default in respect of any series of Securities to act
with the required standard of care, to be indemnified by the Holders of the
Securities of such series before proceeding to exercise any right or power at
the request of the Holders of the Securities of such series. (Sections 601 and
603)
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Securities, give to the
Holders of the Securities of such series notice of all uncured and unwaived
defaults known to it; provided, however, that, except in the case of a default
in the payment of the principal of (or premium, if any) or any interest on, or
any sinking fund or purchase fund installment with respect to, any of the
Securities of such series, the Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interest of the Holders of the Securities of such series; and provided,
further, that such notice shall not be given until at least 60 days after the
occurrence of an Event of Default regarding the performance, or breach, of any
covenant or warranty of the Company other than for the payment of the principal
of (or premium, if any) or any interest on, or any sinking fund installment with
respect to, any of the Securities of such series. The term default for the
purpose of this provision only means any event that is, or after notice or lapse
of time, or both, would become, an Event of Default with respect to the
Securities of such series. (Section 602)
The Indenture requires the Company to file annually with the Trustee a
certificate, executed by two officers of the Company, indicating whether the
Company is in default under the Indenture. (Section 1008)
MEETINGS
The Indenture contains provisions for convening meetings of the Holders of
Securities of a series if Securities of that series are issuable as Bearer
Securities. (Section 1201) 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 1202) Persons
entitled to vote a majority in principal amount of the Outstanding Securities of
a series shall constitute a quorum at a meeting of Holders of Securities of such
series, except that in the absence of a quorum, a meeting, called by the Company
or the Trustee shall be adjourned for a period of not less than 10 days, and in
the absence of a quorum at any such adjourned meeting, the meeting shall be
further adjourned for a period of not less than 10 days, at which further
adjourned meeting persons entitled to vote 25% in aggregate principal amount of
the Outstanding Securities of such series shall constitute a quorum. Except for
any consent which must be given by the Holder of each Outstanding Security
affected thereby, as described above under "Modification of the Indenture", and
subject to the provisions described in the last sentence under this subheading,
any resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the lesser
of (i) the Holders of a majority in principal amount of the Outstanding
Securities of that series and (ii) 66 2/3% in aggregate principal amount of
Outstanding Securities of such series represented and voting at the meeting;
provided, however, 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 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 lesser of (i) the Holders of such
specified percentage in principal amount of the Outstanding Securities of that
series and (ii) a majority in principal amount of Outstanding Securities of such
series represented and voting at the meeting. 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. With respect to any consent, waiver or
other action which the Indenture expressly provides may be given by the Holders
of a specified percentage of Outstanding Securities of all series affected
thereby (acting as one class), only the principal amount of Outstanding
Securities of any series represented at a meeting or adjourned meeting duly
reconvened at which a quorum is present as aforesaid and voting in favor of such
action shall be counted for purposes of calculating the aggregate principal
amount of Outstanding Securities of all series affected thereby favoring such
action. (Section 1204)
9
NOTICES
Except as otherwise provided in the Indenture, notices to Holders of Bearer
Securities will be given by publication at least once in a daily newspaper in
The City of New York and London and in such other city or cities as may be
specified in such Bearer Securities and will be mailed to such Persons whose
names and addresses were previously filed with the Trustee, within the time
prescribed for the giving of such notice. Notices to Holders of Registered
Securities will be given by mail to the address of such Holders as they appear
in the Security Register. (Section 106)
TITLE
Title to any Bearer Security (including any Bearer Security in temporary or
definitive global bearer form) 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 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 SECURITIES AND COUPONS
Any mutilated Security and any Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
Holder upon surrender of such mutilated Security or Security with a mutilated
coupon to the Trustee. 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 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 (upon surrender
to the Trustee of the Security with all appurtenant coupons not destroyed,
stolen or lost) by issuance of a new Security in exchange for the Security to
which such coupon appertains. In the case of a destroyed, lost or stolen
Security or coupon an indemnity satisfactory to the Trustee and the Company may
be required at the expense of the Holder of such Security or coupon before a
replacement Security will be issued. (Section 306)
SATISFACTION AND DISCHARGE; DEFEASANCE
At the request of the Company, the Indenture will cease to be in effect as
to the Company (except for certain obligations to register the transfer or
exchange of Securities and hold moneys for payment in trust) with respect to the
Securities when all such Securities have been cancelled by the Trustee, or, in
the case of Securities and coupons not delivered to the Trustee for
cancellation, (i) such Securities or coupons have become due and payable, will
become due and payable at their stated maturity within one year, or are to be
called for redemption within one year, and, in each case, the Company has
deposited with the Trustee, in trust, money, and, in the case of Securities and
coupons denominated in U.S. dollars, U.S. Government Obligations (as defined in
the Indenture) or, in the case of Securities and coupons denominated in a
foreign currency, Foreign Government Securities (as defined in the Indenture),
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay in
the currency, currencies or currency units or units in which the Offered
Securities are payable all the principal of, and interest on, the Offered
Securities on the dates such payments are due in accordance with the terms of
the Offered Securities, or (ii) such Securities or coupons are deemed paid and
discharged in the manner described in the next paragraph. (Section 401)
Unless the Prospectus Supplement relating to the Offered Securities
provides otherwise, the Company at its option (a) will be Discharged (as such
term is defined in the Indenture) from any and all obligations in respect of the
Offered Securities (except for certain obligations to register the transfer or
exchange of Securities, replace stolen, lost or mutilated Securities and
coupons, maintain paying agencies and hold moneys for payment in trust) or (b)
need not comply with certain restrictive covenants of the Indenture (including
those described above under "Restriction on Indebtedness"), in each case after
the Company deposits with the Trustee, in trust, money, and, in the case of
Securities and coupons denominated in U.S. dollars, U.S. Government Obligations
or,
10
in the case of Securities and coupons denominated in a foreign currency, Foreign
Government Securities, which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money in an amount
sufficient to pay in the currency, currencies or currency unit or units in which
the Offered Securities are payable all the principal of, and interest on, the
Offered Securities on the dates such payments are due in accordance with the
terms of the Offered Securities. Among the conditions to the Company's
exercising any such option, the Company is required to deliver to the Trustee an
opinion of counsel to the effect that the deposit and related defeasance would
not cause the Holders of the Offered Securities to recognize income, gain or
loss for United States federal income tax purposes and that the Holders will be
subject to United States federal income tax in the same amounts, in the same
manner and at the same times as would have been the case if such deposit and
related defeasance has not occurred. (Section 403)
At the request of the Company, the Trustee will deliver or pay to the
Company any U.S. Government Obligations, Foreign Government Securities or money
deposited, for the purposes described in the preceding two paragraphs, with the
Trustee by the Company and which, in the opinion of a nationally-recognized firm
of independent public accountants, are in excess of the amount thereof which
would then have been required to be deposited for such purposes. In addition,
the Trustee, in exchange for, simultaneously, other U.S. Government Obligations,
Foreign Government Securities or money, will deliver or pay to the Company, at
the Company's request, U.S. Government Obligations, Foreign Government
Securities or money deposited with the Trustee for the purposes described in the
preceding two paragraphs, provided that, in the opinion of a
nationally-recognized firm of independent public accountants, immediately after
such exchange the obligations, securities or money then held by the Trustee will
be in such amount as would then have been required to be deposited with the
Trustee for such purposes. (Section 403)
GOVERNING LAW
The Indenture, the Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York. (Section 113)
THE TRUSTEE
Harris Trust and Savings Bank, Chicago, Illinois is the Trustee under the
Indenture.
DESCRIPTION OF WARRANTS
The following statements with respect to the Warrants are summaries of, and
subject to, the detailed provisions of one or more separate Warrant Agreements
(each a "Warrant Agreement") between the Company and one or more banking
institutions or trust companies as Warrant Agents (each a "Warrant Agent"). A
form of Warrant Agreement will be filed as an exhibit to the Registration
Statement prior to the issuance of any Warrant.
GENERAL
Warrants, evidenced by Warrant Certificates (the "Warrant Certificates"),
may be issued under a Warrant Agreement independently or together with any
Offered Securities and may be attached to or separate from such Offered
Securities. If Warrants are offered, the Prospectus Supplement will describe the
terms of the Warrants, including the following: (i) the offering price, if any,
including the currency, currencies or currency unit or units in which such price
will be payable; (ii) the designation, aggregate principal amount and terms of
the Offered Securities purchasable upon exercise of the Warrants; (iii) if
applicable, the designation and terms of the Offered Securities with which the
Warrants are issued and the number of Warrants issued with each such Offered
Security; (iv) if applicable, the date on and after which the Warrants and the
related Offered Securities will be separately transferable; (v) the principal
amount of Offered Securities purchasable upon exercise of one Warrant and the
price or prices at which, and the currency, currencies or currency unit or units
in which such principal amount of Offered Securities may be purchased upon
exercise; (vi) the date on which the right to exercise the Warrants shall
commence and the date on which such right shall expire; (vii) United States
Federal income tax
11
consequences; (viii) whether the Warrants represented by the Warrant
Certificates will be issued in registered or unregistered form or both; and (ix)
any other terms of the Warrants.
Warrant Certificates, if any, may be exchanged for new Warrant Certificates
of different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Warrant Agent,
which will be listed in the Prospectus Supplement, or at such other office as
may be set forth therein. Warrantholders do not have any of the rights of
Holders of Offered Securities (except to the extent that the consent of
Warrantholders may be required for certain modifications of the terms of the
Indenture) and are not entitled to payments of principal (or premium, if any),
or interest, if any, on such Offered Securities.
EXERCISE OF WARRANTS
Warrants may be exercised by surrendering the Warrant Certificate, if any,
at the corporate trust office or other designated office of the Warrant Agent,
with the form of election to purchase on the reverse side of the Warrant
Certificate, if any, properly completed and executed, and by payment in full of
the exercise price, as set forth in the Prospectus Supplement. Upon exercise of
Warrants, the Warrant Agent will, as soon as practicable, deliver the Offered
Securities issuable upon the exercise of the Warrants in authorized
denominations in accordance with the instructions of the exercising
Warrantholder and at the sole cost and risk of such holder. If less than all of
the Warrants evidenced by the Warrant Certificate, if any, are exercised, a new
Warrant Certificate will be issued for the remaining amount of unexercised
Warrants, if sufficient time exists prior to the expiration date.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
Under U.S. federal tax laws, certain limitations on offers, sales and
delivery apply to Bearer Securities. These limitations, as well as additional
information regarding the U.S. federal income tax consequences in respect of a
Bearer Security, will be set forth in any Prospectus Supplement providing for
the issuance of Bearer Securities.
UNITED STATES TAXATION
The following is a summary of the principal U.S. federal income tax
consequences of the acquisition, ownership and disposition of Registered
Securities. The summary reflects present law, which is subject to prospective
and retroactive changes. It is not intended as tax advice, and it does not
describe all of the tax considerations that may be relevant to a prospective
purchaser. The summary addresses only original purchasers of the Securities that
hold the Securities as capital assets. It does not address U.S. federal income
tax issues relevant to purchasers subject to special rules, such as banks,
securities dealers, life insurance companies, controlled foreign corporations,
persons holding Securities in connection with a hedge or persons having a
functional currency other than the U.S. dollar. The summary does not consider
the tax consequences of Securities with terms other than those described in this
Prospectus. PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISERS ABOUT
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE SECURITIES UNDER THE LAWS OF THE
UNITED STATES AND OTHER JURISDICTIONS WHERE PURCHASERS ARE SUBJECT TO TAXATION.
For the purposes of this discussion, "U.S. Holder" means (i) a beneficial
owner of the Securities that is a citizen or resident of the United States, a
corporation or partnership organized in or under the laws of the United States,
or an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source or (ii) any other beneficial owner as to which
income from the Securities is effectively connected with the conduct of a trade
or business within the United States. The term "Non-U.S. Holder" refers to any
beneficial owner of the Securities other than a U.S. Holder.
12
U.S. HOLDERS
PAYMENTS OF INTEREST
Interest on a Security generally will be taxable to a U.S. Holder as
ordinary interest income at the time of receipt or accrual in accordance with
the U.S. Holder's method of accounting for U.S. federal income tax purposes.
Special rules for the interest on Securities with original issue discount are
described below.
ORIGINAL ISSUE DISCOUNT
The following is a summary of the U.S. federal income tax consequences to
U.S. Holders of the purchase, ownership and disposition of Securities issued
with original issue discount ("OID"). The following summary is based on sections
1271 through 1273 and section 1275 of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), and on certain final regulations of the U.S. Department of
Treasury issued in 1994 (the "Final OID Regulations") interpreting these
provisions. Additionally, the summary includes a discussion of proposed
regulations issued in December 1994 relating principally to contingent payment
debt instruments issued with OID (the "Proposed OID Regulations").
General. A U.S. Holder of a Security issued at a discount with a maturity
of more than one year after the date of issue must include original issue
discount in income over the term of the Security. The U.S. Holder generally must
include in gross income for the taxable year the sum of the daily portions of
original issue discount that accrue on the Security for each day during the year
on which such holder held the Security. Accordingly, a U.S. Holder will be
required to include amounts attributable to original issue discount in income
before receiving cash attributable to that income.
A Security has original issue discount for U.S. federal income tax purposes
to the extent that the Security's stated redemption price at maturity exceeds
its issue price. The issue price of a Security is the initial offering price at
which a substantial amount of the Securities is sold to the public (excluding
bond houses, brokers or similar persons). The stated redemption price of a
Security is the total of all payments due on the Security other than payments of
"qualified stated interest." A Security is not treated as issued at a discount,
however, if the discount is less than 1/4 of 1 percent of the Security's stated
redemption price at maturity multiplied by the number of complete years to
maturity ("de minimis original issue discount"). A Security that bears interest
for any accrual period at a rate below the rate for the remaining term of the
Security (e.g., a Security with a "teaser rate") also will not be treated as
issued at a discount solely on account of that feature if the foregone interest
is less than 1/4 of 1 percent of the Security's adjusted stated redemption price
multiplied by the number of complete years to maturity.
Qualified stated interest is interest that is payable unconditionally in
cash or in property (other than debt of the issuer) at least annually at either
(a) a single fixed rate that appropriately takes into account the length of the
interval between payments or (b) the current values of (i) a single "qualified
floating rate," (ii) a single qualified floating rate followed by a second
qualified floating rate, (iii) a single fixed rate followed by a single
qualified floating rate or (iv) a single "objective rate" (each a "Variable
Rate"). A qualified floating rate is any floating rate the variations in which
reasonably can be expected to measure contemporaneous variations in the cost of
newly-borrowed funds (e.g., LIBOR). An objective rate is a rate, other than a
qualified floating rate, determined by a single formula that is fixed throughout
the term of the Security and is based on (i) one or more qualified floating
rates (e.g., a multiple of a qualified floating rate or the inverse of a
qualified floating rate), (ii) one or more rates each of which would be a
qualified floating rate for a Security denominated in a currency other than the
currency in which the Security is denominated, (iii) the yield or the changes in
the price of one or more items of actively traded personal property (other than
stock or debt of the Company or a related party), (iv) a combination of rates
described above in (i), (ii), or (iii), or (v) other rates designated from time
to time by the Internal Revenue Service. The Proposed OID Regulations provide
that an objective rate is any rate, other than a qualified floating rate, that
is determined using a single fixed formula and that is based on objective
financial or economic information. A rate will not be considered an objective
rate, however, if it is reasonably expected that the average value of the rate
during the first half of the Security's term will be either significantly less
than or significantly greater than the average value of the rate during the
final half of the Security's term. A fixed rate for an initial period of less
than one year followed by a qualified floating rate or an objective rate
together constitute a
13
single qualified floating objective rate if the value of the qualified floating
rate or objective rate on the issue date is intended to approximate the fixed
rate.
To determine the daily portions of original issue discount, original issue
discount accruing during an accrual period is divided by the number of days in
the period. The amount of original discount accruing during an accrual period is
determined by using a constant yield to maturity method. The accrued amount for
any period is the excess of (i) the product of the Security's adjusted issue
price at the beginning of the accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
appropriately adjusted for the length of the accrual period) over (ii) the
amount of any qualified stated interest payments allocable to the accrual
period. The adjusted issue price of a Security at the beginning of any accrual
period generally equals the issue price of the Security increased by the
aggregate amount of original issue discount that accrued on that Security in all
prior accrual periods and reduced by the amount of payments in prior accrual
periods other than payments of qualified stated interest.
A U.S. Holder of a Security issued at a discount that purchases the
Security for more than the Security's adjusted issue price but less than the
Security's stated redemption price at maturity may reduce the daily portions of
original issue discount includible in gross income by daily portions of the
acquisition premium paid for the Security.
Variable Rate Securities. Special rules apply to the U.S. Holder of a
Security that bears interest at a Variable Rate (a "Variable Rate Security"). In
general, to compute the accrual of OID on a Variable Rate Security, the Final
OID Regulations convert the Variable Rate Security into a fixed rate debt
instrument and then apply the general rules discussed above to the deemed fixed
rate debt instrument. If a Variable Rate Security provides for stated interest
at either a single qualified floating rate or objective rate that is
unconditionally payable at least annually, (a) all stated interest with respect
to the Variable Rate Security is treated as qualified stated interest and (b)
the amount of OID, if any, is determined under the rules applicable to fixed
rate debt instruments discussed above by assuming that the Variable Rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value, as of the issue date of the Variable Rate
Security, of the qualified floating rate or the qualified inverse floating rate,
or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably expected
for the Variable Rate Security.
If the Variable Rate Security does not provide for stated interest as
described in the preceding paragraph, to determine the amounts of interest and
OID accruals an "equivalent fixed rate debt instrument" must be constructed. The
equivalent fixed rate debt instrument has terms that are identical to those
provided under the Variable Rate Security, except that the equivalent fixed rate
debt instrument provides for fixed rate substitutes in lieu of the qualified
floating rates or objective rate provided under the Variable Rate Security. The
fixed rate substitute (a) for each qualified floating rate is the value of each
such rate as of the issue date of the Variable Rate Security (with appropriate
adjustment for any differences in intervals between interest adjustment dates),
(b) for a qualified inverse floating rate is the value of the qualified inverse
floating rate as of the issue date of the Variable Rate Security and (c) for an
objective rate (other than a qualified inverse floating rate) is a fixed rate
that reflects the yield that is reasonably expected for the Variable Rate
Security. The amounts of qualified stated interest and OID, if any, are
determined for the equivalent fixed rate debt instrument under the rules
applicable to fixed rate debt instruments as described above and are taken into
account as if the holder of the Security held the equivalent fixed rate debt
instrument. Qualified stated interest or OID allocable to an accrual period is
increased (or decreased) if the interest actually accrued or paid during an
accrual period exceeds (or is less than) the interest assumed to be accrued or
paid during the accrual period under the equivalent fixed rate debt instrument.
This increase or decrease is an adjustment to qualified stated interest of the
accrual period if the equivalent fixed rate debt instrument provides for
qualified stated interest and the increase or decrease is reflected in the
amount actually paid during the accrual period. Otherwise, this increase or
decrease is an adjustment to OID for the accrual period. If the Variable Rate
Security provides for interest at a qualified floating rate or qualified inverse
floating rate and also provides for stated interest at a single fixed rate
(other than a single fixed rate for an initial period of less than one year that
is intended to approximate the value of the qualified floating or objective
rate), in constructing the equivalent fixed rate debt instrument, such a
Variable Rate Security is treated as if it provided for a qualified floating
rate (or qualified inverse floating rate, as the case may be) instead of the
fixed rate, which qualified floating (or inverse floating) rate is such that the
Variable Rate Security would have the same fair market
14
value as of its issue date. The foregoing rules do not apply, and a Security is
treated as a Contingent Payment Security (defined below), if its issue price
exceeds the total of noncontingent principal payments by more than the lesser of
(i) the product of .015, the total noncontingent principal payments and the
number of complete years to maturity (or a lesser amount if principal is payable
in installments) and (ii) 15 percent of the total noncontingent principal
payments.
Optional Redemption. For purposes of determining the yield of a Security,
the Company will be presumed to exercise any right to redeem a Security before
its stated maturity or to extend the maturity of a Security if exercise would
reduce the yield on the Security. Likewise, the holder will be presumed to
exercise any right to require the redemption of a Security or to extend the
maturity of the Security if exercise would increase the yield on the Security.
If the Security is not actually redeemed on the date when the option was
presumed to have been exercised, the Security will be treated only for purposes
of determining yield as having been reissued at a price equal to that Security's
adjusted issue price on that date with a term based on the original final
maturity of the Security.
Short-Term Securities. U.S. Holders that do not use the accrual method of
accounting for tax purposes generally will not be required to recognize original
issue discount on Securities maturing within one year of original issuance until
they receive payments on the Securities. Taxpayers on the accrual method,
regulated investment companies, common trust funds, and certain others, however,
must accrue original issue discount on such short-term Securities on a
straight-line basis unless they elect to accrue the discount on a constant yield
basis with daily compounding. The original issue discount on a short-term
Security is the amount by which the total principal and interest payments on the
Security exceed its issue price. U.S. Holders may elect to include discount on
such short-term Securities into income based on acquisition discount rather than
original issue discount. Acquisition discount is the excess of a Security's
stated redemption price at maturity over the U.S. Holder's basis in the
Security.
Gain recognized on the sale or exchange of a short-term Security by a U.S.
Holder that has not accrued discount on the Security will be ordinary income to
the extent attributable to accrued interest and original issue discount. Such a
holder also must defer deductions for net interest expense on any borrowing
attributable to the short-term Security to the extent that the expense does not
exceed accrued but unrecognized interest and original issue discount (or
acquisition discount) on the Security.
ANTI-ABUSE RULE
The Internal Revenue Service can apply or depart from the rules contained
in the Final OID Regulations as necessary or appropriate to achieve a reasonable
result where a principal purpose in structuring a Security or applying the
otherwise applicable rules is to achieve a result that is unreasonable in light
of the purposes of the applicable statutes (which generally are intended to
achieve the clear reflection of income for both sellers and purchasers of the
Securities).
MARKET DISCOUNT
A U.S. Holder that purchases a Security at a market discount generally will
be required to treat payments other than qualified stated interest payments as
ordinary income to the extent of the accrued market discount and to treat gain
on the sale of the Security as ordinary income to the extent of the accrued
market discount not previously included in income. See "Sale or Exchange of
Securities" below. Market discount is the amount by which the stated redemption
price at maturity (or, in the case of a Security with original issue discount,
the revised issue price) exceeds the purchaser's basis in the Security
immediately after acquisition. A Security is not treated as purchased at a
market discount, however, if the discount is less than 1/4 of 1 percent of the
stated redemption price at maturity (or the revised issue price) multiplied by
the number of complete years remaining to maturity ("de minimis market
discount"). (The revised issue price of a Security is its initial issue price
increased by the amount of original issue discount includible in the gross
income of previous holders.) Market discount on a Security will accrue, at the
election of the holder, either ratably or at a constant yield to maturity. The
U.S. Holder may elect to take market discount into income as it accrues. Under
certain circumstances, the
15
U.S. Holder may be required to defer deductions for interest expense
attributable to debt incurred or continued to purchase a Security with market
discount.
PREMIUM
A U.S. Holder that purchases a Security for more than its stated redemption
price at maturity may elect to amortize the bond premium. If a U.S. Holder makes
such an election, the amount of interest on the Security otherwise to be
included in the U.S. Holder's income will be reduced each year by the amount of
amortizable bond premium allocable to such year on a constant yield to maturity
basis (except to the extent regulations may provide otherwise). Amortized bond
premium will reduce the U.S. Holder's basis in the Security. An election to
amortize bond premium will apply to certain other debt instruments that the U.S.
Holder acquired at a premium, and the election may have different tax
consequences depending on when the debt instruments were issued or acquired. It
also is not entirely clear how amortizable bond premium would be computed for
obligations with contingent interest payments. A U.S. Holder should consult its
tax adviser before making an election to amortize bond premium.
INTEREST ELECTION
A U.S. Holder may elect, in the taxable year in which the U.S. Holder
acquires a Security, to treat all interest on any Security as OID and calculate
the amount includible in gross income under the constant yield method described
above. For purposes of this election, interest includes stated interest,
acquisition discount, OID, de minimis OID, market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. If a U.S. Holder makes this election for a Security with
market discount or amortizable bond premium, the election is treated as an
election under the market discount or amortizable bond premium provisions,
described above, and the electing U.S. Holder will be required to amortize bond
premium or include market discount in income currently for all of its other debt
instruments with market discount or amortizable bond premium acquired during
such tax year and in any subsequent tax year. The election, once made, may not
be revoked without the consent of the Internal Revenue Service. U.S. Holders
should consult with their own tax advisers before making this election.
SALE OR EXCHANGE OF SECURITIES
Except to the extent that gain or loss is attributable to accrued but
unpaid interest or accrued market discount, a U.S. Holder generally will
recognize capital gain or loss upon a sale, exchange or complete retirement of a
Security equal to the difference between the amount realized and the U.S.
Holder's adjusted basis in the Security. The gain or loss will be long-term if
the Security has been held for more than one year. The adjusted basis of a
Security generally will equal its initial cost increased by any original issue
discount, market discount or acquisition discount with respect to the Security
previously included in the U.S. Holder's gross income and reduced by the
payments previously received on the Security, other than payments of qualified
stated interest, and by any amortized premium.
The tax consequences of the partial redemption of a Security will depend
upon the price at which the U.S. Holder purchased the Security. A U.S. Holder
that purchased a Security at a de minimis market discount or purchased a
Security for more than its revised issue price, but less than its principal
amount, will recognize capital gain equal to the difference between the
principal prepayment and the U.S. Holder's adjusted basis in the prepaid portion
of the Security. If a U.S. Holder purchased a Security at a market discount, (i)
the principal prepayment will be included in ordinary income to the extent of
the accrued market discount (and it is possible that amounts allocable to
unaccrued market discount will be recognized as capital gain) and (ii) any
principal prepayment exceeding the revised issue price allocable to the prepaid
portion of the Security will be capital gain. If a U.S. Holder purchased a
Security for more than its stated principal amount and has not elected to
amortize bond premium, the U.S. Holder will recognize a capital loss equal to
any amount by which the U.S. Holder's adjusted basis in the prepaid portion of
the Security exceeds the amount of the principal prepayment. If the U.S. Holder
has elected to amortize bond premium, all or part of such excess might be
deductible as amortizable bond premium rather than as capital loss. Any capital
gain or loss will be long-term if the Security has been held for more than one
year. It is possible that capital gain realized by holders of one or more
classes of Securities could be considered
16
gain realized upon the disposition of property that was part of a "conversion
transaction." A "conversion transaction" is any transaction in which
substantially all of the expected return is attributable to the time value of
the U.S. Holder's net investment, if (i) the U.S. Holder entered the contract to
sell the Security substantially contemporaneously with acquiring the Security,
(ii) the Security is part of a straddle, (iii) the Security is marketed or sold
as producing capital gains, or (iv) the transaction is specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of
the Security is part of a conversion transaction, all or any portion of the gain
realized upon the sale or other disposition of the Securities would be treated
as ordinary income instead of capital gain.
FOREIGN CURRENCY SECURITIES
The tax treatment of Securities the interest or principal on which may be
determined by reference to one or more foreign currencies will depend on the
application of special rules to the particular terms of the Securities. The tax
considerations relevant to such Securities will be described in an applicable
Prospectus Supplement, and each prospective purchaser should consult its tax
adviser about such matters.
CONTINGENT PAYMENT SECURITIES
The Proposed OID Regulations contain special rules for determining the
timing and amount of OID to be accrued in respect of Securities providing for
one or more contingent payments ("Contingent Payment Securities"). For this
purpose, a Security is not a Contingent Payment Security if it (i) is a Variable
Rate Security, (ii) provides for alternate payment schedules upon the occurrence
of contingencies or (iii) is a foreign currency debt instrument. Under the
Proposed OID Regulations, U.S. Holders generally would be required to take
contingent interest payments on Contingent Payment Securities into income on a
yield to maturity basis in accordance with a schedule of projected payments
provided by the Company to U.S. Holders and would make annual adjustments to
income to account for the difference between actual payments received and
projected payment amounts accrued. The Proposed OID Regulations have a
prospective effective date and would not apply to a Security issued at any time
prior to sixty days after the regulations are published in final form.
Additional disclosure will be provided for in a Prospectus Supplement in
connection with any offering of Contingent Payment Securities. Prospective
purchasers should consult their own tax advisers regarding the Proposed OID
Regulations in connection with ownership of a Security that provides for
contingent payments.
NON-U.S. HOLDERS
Interest received by a Non-U.S. Holder is exempt from U.S. federal income
tax unless the holder actually or constructively owns at least 10% of the total
combined voting power of the Company's stock or the holder is for U.S. income
tax purposes a controlled foreign corporation related to the Company through
stock ownership. However, "contingent interest" paid to a Non-U.S. Holder will
be subject to a 30% tax (unless an applicable tax treaty eliminates or reduces
the rate of the tax and the Non-U.S. Holder complies with the requirements for
obtaining that reduction or elimination of the tax). For this purpose,
contingent interest is an amount of interest determined by reference to (i)
receipts, sales, or other cash flows of the Company or a related person, (ii)
income or profits of the Company or a related person, (iii) any change in the
value of any property of the Company or a related person, or (iv) any dividend,
partnership distribution, or similar payment made by the Company or a related
person. To qualify for that exemption, a Non-U.S. Holder must provide a
statement signed under penalties of perjury certifying that the holder is not a
U.S. person for U.S. tax purposes and providing the holder's name and address.
The Internal Revenue Service currently is considering modifications to the
certification procedures required to qualify for the exemption. Gain from the
sale or other disposition of a Security by a Non-U.S. Holder is not subject to
U.S. federal income tax unless the Non-U.S. Holder is an individual who is
present in the United States for at least 183 days during the taxable year of
the disposition and certain other conditions are met.
Securities held by a Non-U.S. Holder will not be subject to the U.S.
federal estate tax unless the holder actually or constructively owns at least
10% of the total combined voting power of the Company's stock.
17
INFORMATION REPORTING AND BACKUP WITHHOLDING
A 31% backup withholding of federal income tax and certain information
reporting requirements may apply to certain payments made on the Securities and
to the proceeds from the disposition of a Security if the holder is not a
corporation, a financial institution or otherwise entitled to an exemption. U.S.
Holders that provide a correct taxpayer identification number and Non-U.S.
Holders that provide the statement described above to establish an exemption
from withholding tax generally are exempt from backup withholding. Amounts
withheld under the backup withholding rules can be claimed as a refund or taken
as a credit against the holder's U.S. federal income tax liability on a properly
filed annual income tax return.
PLAN OF DISTRIBUTION
The Company may sell the Securities and/or Warrants being offered hereby
(i) directly to purchasers, (ii) through agents or (iii) through underwriters or
a group of underwriters which may include Lehman Brothers Inc. and/or Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Offers to purchase Offered Securities and/or Warrants may be solicited
directly by the Company or by agents designated by the Company from time to
time. Unless otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a best-efforts basis for the period of its appointment. Agents
may be entitled under agreements which may be entered into with the Company to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Act").
If an underwriter or underwriters are utilized in the sale, the Company
will enter into an underwriting agreement with such underwriters at the time of
sale to them and the names of the underwriters and the terms of the transaction
will be set forth in the Supplement, which will be used by the underwriters to
make resales of the Offered Securities and/or Warrants in respect of which this
Prospectus is delivered to the public. The underwriters may be entitled, under
the underwriting agreement, to indemnification by the Company against certain
liabilities, including liabilities under the Act.
The agents and underwriters may be deemed to be underwriters and any
discounts, commissions or concessions received by them from the Company or any
profit on the resale of Offered Securities and/or Warrants by them may be deemed
to be underwriting discounts and commissions under the Act. Any such person who
may be deemed to be an underwriter and any such compensation received from the
Company will be described in the Prospectus Supplement.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Offered Securities and/or Warrants from the Company at the public offering price
set forth in the Prospectus Supplement pursuant to delayed delivery contracts
("Contracts") providing for payment and delivery on the date stated in the
Prospectus Supplement. Each Contract will be for an amount not less than, and
unless the Company otherwise agrees the aggregate principal amount of Offered
Securities and/or Warrants sold pursuant to Contracts will be not less nor more
than, the respective amounts stated in the Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions, but will in all cases be
subject to the approval of the Company. Contracts will not be subject to any
conditions except that the purchase by an institution of the Offered Securities
and/or Warrants covered by its Contract shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject. A commission indicated in the Prospectus Supplement will
be granted to agents and underwriters soliciting purchases of Offered Securities
pursuant to Contract accepted by the Company. Agents and underwriters will have
no responsibility in respect of the delivery or performance of Contracts.
The place and time of delivery for the Offered Securities and Warrants in
respect of which this Prospectus is delivered are set forth in the Supplement.
Each underwriter, dealer and agent participating in the distribution of any
Offered Securities which are issuable in bearer form will agree that it will not
offer, sell or deliver, directly or indirectly, Offered Securities in
18
bearer form in the United States or its possessions or to United States persons
(other than qualifying financial institutions) in connection with the original
issuance of the Offered Securities. See "Limitations on Issuance of Bearer
Securities".
The Offered Securities may not be offered or sold directly or indirectly in
Great Britain other than to persons whose ordinary business it is to buy or sell
shares or debentures (except in circumstances which do not constitute an offer
to the public within the meaning of the Companies Act of 1985), and this
Prospectus and any Prospectus Supplement or any other offering material relating
to the Offered Securities may not be distributed in or from Great Britain other
than to persons whose business involves the acquisition and disposal, or the
holding, of securities whether as principal or as agent.
All Offered Securities will be a new issue of securities with no
established trading market. Any underwriters to whom Offered Securities are sold
by the Company for public offering and sale may make a market in such Offered
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 Offered Securities.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for the Company in the ordinary course of
business.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon for the
Company by Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York,
New York, and for the agents or underwriters, if any, by Cravath, Swaine &
Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York.
EXPERTS
The audited financial statements included in the Company's Annual Report on
Form 10-K for the year ended May 31, 1994 incorporated by reference in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities covered hereby, other than underwriting commissions, are, subject to
further contingencies, estimated to be as follows:
[Download Table]
Registration Statement Filing Fee................................. $137,932
Printing.......................................................... 100,000
Legal Fees and Expenses........................................... 100,000
Blue Sky Fees and Expenses........................................ 15,000
Accounting Fees................................................... 15,000
Fees of Trustee................................................... 15,000
Miscellaneous..................................................... 7,068
--------
Total................................................... $390,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 29-1104(9) of the District of Columbia Cooperative Association Act
provides that an association such as the Registrant shall have the capacity "to
exercise . . . any power granted to ordinary business corporations, save those
powers inconsistent with this chapter." Section 29-304(16) of the District of
Columbia Business Corporation Act permits any corporation:
"To indemnify any and all of its directors or officers or former
directors or officers or any person who may have served at its request as a
director or officer of another corporation in which it owns shares of
capital stock or of which it is a creditor against expenses actually and
necessarily incurred by them in connection with the defense of any action,
suit, or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been directors or officers or a
director or officer of the corporation, or of such other corporation,
except in relation to matters as to which any such director or officer or
former director or officer or person shall be adjudged in such action,
suit, or proceeding to be liable for negligence or misconduct in the
performance of duty. Such indemnification shall not be deemed exclusive of
any other rights to which those indemnified may be entitled, under any
bylaw, agreement, vote of stockholders, or otherwise."
The Board of Directors of CFC has resolved to indemnify all CFC directors,
officers and employees in accordance with the terms of the first sentence of the
above Section. The Bylaws of CFC also provide for indemnification of all CFC
directors, officers and employees as set forth above.
II-1
ITEM 16. LIST OF EXHIBITS
[Enlarge/Download Table]
1.1 -- Debt Securities and/or Warrants to Purchase Debt Securities Underwriting
Agreement Basic Provisions has been filed as exhibit 1.1 to Post-Effective
Amendment No. 1 to Registration No. 33-2194 filed December 18, 1987 and is
incorporated herein by reference. An Underwriting Agreement with respect to
each particular offering of Securities registered hereunder will be filed as
an exhibit to a current report on Form 8-K and incorporated herein by
reference.
1.2 -- An Agency Agreement between the Company and the agents named therein,
relating to distribution of the Company's Medium-Term Notes, Series C, within
the United States will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference.
1.3 -- A form of Placement Agency Agreement between the Company and the agents named
therein relating to the distribution, if any, of the Company's Medium-Term
Notes outside the United States will be filed as an exhibit to a current
report on Form 8-K and incorporated herein by reference prior to the use of
such agreement.
4.1 -- Indenture between the Company and Chemical Bank, as Trustee. Incorporated by
reference to Exhibit 4.1 to Amendment No. 1 to Registration Statement on Form
S-3 filed on October 12, 1990 (Registration No. 33-34927).
4.2 -- First Supplemental Indenture between the Company and Chemical Bank, as
Trustee.
4.3 -- Instrument of Resignation, Appointment and Acceptance among the Company,
Chemical Bank, Harris Trust and Savings Bank and Harris Trust Company of New
York dated as of October 1, 1993. Incorporated by reference to Exhibit 4.3 to
Registration Statement on Form S-3 filed on October 1, 1993 (Registration No.
33-50463).
4.4 -- Form of Fixed Rate Medium-Term Note (for offerings within the United States).
4.5 -- Form of Floating Rate Medium-Term Note (for offerings within the United
States).
4.6 -- A form of Fixed or Floating Rate Registered Medium-Term Note (for offerings
outside the United States) will be filed as an exhibit to a current report on
Form 8-K and incorporated herein by reference prior to the issuance of any
such Note.
4.7 -- A form of Fixed or Floating Rate Bearer Medium-Term Note (for offerings
outside the United States) will be filed as an exhibit to a current report on
Form 8-K and incorporated herein by reference prior to the issuance of any
such Note.
4.8 -- A form of Temporary Global Bearer Fixed or Floating Rate Medium-Term Note
(for offerings outside the United States) will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by reference prior to the
issuance of any such Note.
4.9 -- A form of Definitive Global Bearer Fixed or Floating Rate Medium-Term Note
(for offerings outside the United States) will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by reference prior to the
issuance of any such Note.
4.10 -- A form of Warrant Agreement between the Company and one or more banking
institutions or trust companies as Warrant Agents will be filed as an exhibit
to a current report on Form 8-K and incorporated herein by reference prior to
the issuance of any Warrants.
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy. An opinion and
consent of Milbank, Tweed, Hadley & McCloy respecting Warrants will be filed
as an exhibit to a current report on Form 8-K and incorporated herein by
reference prior to the issuance of any Warrants.
8 -- Opinion of Milbank, Tweed, Hadley & McCloy. Included as part of Exhibit 5.
12 -- Schedule of computation of ratio of margins to fixed charges.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy. Included as part of Exhibit 5.
24 -- Power of Attorney (included on signature pages).
25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
Harris Trust and Savings Bank, as Trustee.
II-2
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement (other than
as provided in the proviso and instructions to Item 512(a) of Regulation
S-K):
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
THE REGISTRANT AND EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY
AUTHORIZES EACH OF SHELDON C. PETERSEN, STEVEN L. LILLY AND JOHN JAY LIST (THE
"AGENTS") TO FILE ONE OR MORE AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS)
TO THE REGISTRATION STATEMENT WHICH AMENDMENTS MAY MAKE SUCH CHANGES IN THE
REGISTRATION STATEMENT AS SUCH AGENT DEEMS APPROPRIATE AND THE REGISTRANT AND
EACH SUCH PERSON HEREBY APPOINTS EACH SUCH AGENT AS ATTORNEY-IN-FACT TO EXECUTE
IN THE NAME AND ON BEHALF OF THE REGISTRANT AND EACH SUCH PERSON, INDIVIDUALLY
AND IN EACH CAPACITY STATED BELOW, ANY SUCH AMENDMENTS TO THE REGISTRATION
STATEMENT.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE COUNTY OF FAIRFAX, COMMONWEALTH OF VIRGINIA, ON THE 5TH
DAY OF APRIL, 1995.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By: /s/ SHELDON C. PETERSEN
------------------------------------
SHELDON C. PETERSEN
Governor and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REPORT HAS
BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
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SIGNATURE TITLE DATE
---------------------------------------- ---------------------------- ----------------------
/s/ SHELDON C. PETERSEN Governor and Chief
---------------------------------------- Executive Officer
SHELDON C. PETERSEN
/s/ STEVEN L. LILLY Senior Vice President and
---------------------------------------- Chief Financial Officer
STEVEN L. LILLY
/s/ ANGELO M. SALERA Controller (Principal
---------------------------------------- Accounting Officer)
ANGELO M. SALERA
/s/ J. CHRIS CARIKER President and Director April 5, 1995
----------------------------------------
J. CHRIS CARIKER
/s/ GARRY BYE Vice President and
---------------------------------------- Director
GARRY BYE
/s/ RALPH L. LOVELESS Secretary-Treasurer and
---------------------------------------- Director
RALPH L. LOVELESS
II-4
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SIGNATURE TITLE DATE
---------------------------------------- ---------------------------- ----------------------
/s/ JOHN C. ANDERSON Director
----------------------------------------
JOHN C. ANDERSON
/s/ ROBERT J. BAUMAN Director
----------------------------------------
ROBERT J. BAUMAN
/s/ BILL BERTRAM Director
----------------------------------------
BILL BERTRAM
/s/ HAROLD I. DYCUS Director
----------------------------------------
HAROLD I. DYCUS
Director
----------------------------------------
GLENN ENGLISH
/s/ NADINE GRIFFIN Director
----------------------------------------
NADINE GRIFFIN
/s/ BENSON HAM Director
----------------------------------------
BENSON HAM
/s/ RALPH HARMEYER Director
----------------------------------------
RALPH HARMEYER
/s/ GORDON J. HUDSON Director
----------------------------------------
GORDON J. HUDSON
/s/ DAVID HUTCHENS Director April 5, 1995
----------------------------------------
DAVID HUTCHENS
/s/ GEORGE W. KLINE Director
----------------------------------------
GEORGE W. KLINE
/s/ PAUL J. LIESS Director
----------------------------------------
PAUL J. LIESS
Director
----------------------------------------
ROBERT MCCLURG
/s/ R. LAYNE MORRILL Director
----------------------------------------
R. LAYNE MORRILL
/s/ GERARD P. PAOLUCCI Director
----------------------------------------
GERARD P. PAOLUCCI
/s/ TERRY PITCHFORD Director
----------------------------------------
TERRY PITCHFORD
/s/ HENRY UMSCHEID Director
----------------------------------------
HENRY UMSCHEID
/s/ ROBERT O. WILLIAMS Director
----------------------------------------
ROBERT O. WILLIAMS
/s/ ELDWIN WIXSON Director
----------------------------------------
ELDWIN WIXSON
II-5
EXHIBIT INDEX
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SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ------------------------------------------------------------------------- -------------
1.1 -- Debt Securities and/or Warrants to Purchase Debt Securities
Underwriting Agreement Basic Provisions has been filed as exhibit 1.1
to Post-Effective Amendment No. 1 to Registration No. 33-2194 filed
December 18, 1987 and is incorporated herein by reference. An
Underwriting Agreement with respect to each particular offering of
Securities registered hereunder will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by reference.
1.2 -- An Agency Agreement between the Company and the agents named therein,
relating to distribution of the Company's Medium-Term Notes, Series C,
within the United States will be filed as an exhibit to a current
report on Form 8-K and incorporated herein by reference.
1.3 -- A form of Placement Agency Agreement between the Company and the
agents named therein relating to the distribution, if any, of the
Company's Medium-Term Notes outside the United States will be filed as
an exhibit to a current report on Form 8-K and incorporated herein by
reference prior to the use of such agreement.
4.1 -- Indenture between the Company and Chemical Bank, as Trustee.
Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to
Registration Statement on Form S-3 filed on October 12, 1990
(Registration No. 33-34927).
4.2 -- First Supplemental Indenture between the Company and Chemical Bank, as
Trustee.
4.3 -- Instrument of Resignation, Appointment and Acceptance among the
Company, Chemical Bank, Harris Trust and Savings Bank and Harris Trust
Company of New York dated as of October 1, 1993. Incorporated by
reference to Exhibit 4.3 to Registration Statement on Form S-3 filed
on October 1, 1993 (Registration No. 33-50463).
4.4 -- Form of Fixed Rate Medium-Term Note (for offerings within the United
States).
4.5 -- Form of Floating Rate Medium-Term Note (for offerings within the
United States).
4.6 -- A form of Fixed or Floating Rate Registered Medium-Term Note (for
offerings outside the United States) will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by reference prior
to the issuance of any such Note.
4.7 -- A form of Fixed or Floating Rate Bearer Medium-Term Note (for
offerings outside the United States) will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by reference prior
to the issuance of any such Note.
4.8 -- A form of Temporary Global Bearer Fixed or Floating Rate Medium-Term
Note (for offerings outside the United States) will be filed as an
exhibit to a current report on Form 8-K and incorporated herein by
reference prior to the issuance of any such Note.
4.9 -- A form of Definitive Global Bearer Fixed or Floating Rate Medium-Term
Note (for offerings outside the United States) will be filed as an
exhibit to a current report on Form 8-K and incorporated herein by
reference prior to the issuance of any such Note.
4.10 -- A form of Warrant Agreement between the Company and one or more
banking institutions or trust companies as Warrant Agents will be
filed as an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any Warrants.
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy. An opinion and
consent of Milbank, Tweed, Hadley & McCloy respecting Warrants will be
filed as an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any Warrants.
8 -- Opinion of Milbank, Tweed, Hadley & McCloy. Included as part of
Exhibit 5.
12 -- Schedule of computation of ratio of margins to fixed charges.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy. Included as part of
Exhibit 5.
24 -- Power of Attorney (included on signature pages).
25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of Harris Trust and Savings Bank, as Trustee.
Dates Referenced Herein and Documents Incorporated by Reference
6 Subsequent Filings that Reference this Filing
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