PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 25, 2002)
$6,000,000,000
[LOGO] AMERICAN EXPRESS CREDIT CORPORATION
MEDIUM-TERM SENIOR NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
-------------------
American Express Credit Corporation may offer from time to time its
medium-term senior notes, Series B. At the conclusion of this offering,
including all notes we have previously issued, we will have issued
$7,970,000,000 of the notes. The final terms of each note offered will be
included in a pricing supplement. Unless a pricing supplement states otherwise,
the notes offered will have the following general terms:
The notes will mature in nine months or more from the date of issue.
The notes will bear interest at either a fixed or a floating rate. Floating rate
interest will be based on:
Commercial Paper Rate
Federal Funds Rate
CD Rate
LIBOR
EURIBOR
Prime Rate
Treasury Rate
Any other rate specified in the applicable pricing supplement.
The Notes may be indexed in which payments of interest or principal may be
linked to the price of one or more securities, currencies, commodities or other
goods.
Fixed rate interest will be paid on February 1 and August 1, accruing from the
date of issue.
Floating rate interest will be paid on the dates stated in the applicable
pricing supplement.
The notes will be held in global form through The Depository Trust Company,
unless otherwise specified.
The notes may be either redeemed by us or repaid at your option if specified in
the applicable pricing supplement.
The notes will be denominated in U.S. dollars unless another currency is
specified in the applicable pricing supplement and will have minimum
denominations of $100,000 unless otherwise specified.
<Table>
<Caption>
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS US
Per Note................... 100% 0.010% - .750% 99.250% - 99.990%
Total...................... $6,000,000,000 $600,000 - $45,000,000 $5,955,000,000 - $5,999,400,000
</Table>
YOU SHOULD CONSIDER CAREFULLY THE INFORMATION UNDER 'RISK FACTORS' BEGINNING
ON PAGE S-5 OF THIS PROSPECTUS SUPPLEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Offers to purchase the notes are being solicited from time to time by the
agents listed below. The agents have agreed to use their reasonable efforts to
sell the notes. There is no established trading market for the notes and there
can be no assurance that a secondary market for the notes will develop.
-------------------
ABN AMRO INCORPORATED BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC. BARCLAYS CAPITAL
BNP PARIBAS CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANK SECURITIES JPMORGAN
LEHMAN BROTHERS SALOMON SMITH BARNEY
UTENDAHL CAPITAL PARTNERS, L.P. WACHOVIA SECURITIES
September 5, 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
Where You Can Find More Information......................... S-3
Documents Incorporated by Reference......................... S-3
Summary of the Offering..................................... S-4
Risk Factors................................................ S-5
Important Currency Information.............................. S-7
Ratio of Earnings to Fixed Charges.......................... S-7
Use of Proceeds of the Notes................................ S-8
Description of Notes........................................ S-8
Certain United States Federal Income Tax Consequences....... S-20
Plan of Distribution........................................ S-27
Legal Matters............................................... S-28
Experts..................................................... S-28
PROSPECTUS
About this Prospectus....................................... 2
Where You Can Find More Information......................... 2
American Express Credit Corporation......................... 3
Use of Proceeds............................................. 4
Description of Debt Securities.............................. 4
Description of Warrants..................................... 11
Plan of Distribution........................................ 11
Legal Matters............................................... 13
Experts..................................................... 13
</Table>
You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and the pricing supplement as well as
the information incorporated by reference. We have not authorized anyone to
provide you with information that is different. This document may only be used
where it is legal to sell these notes. The information incorporated by reference
or contained in this prospectus supplement or the accompanying prospectus may
only be accurate on the date of this prospectus supplement.
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WHERE YOU CAN FIND MORE INFORMATION
As required by the Securities Act of 1933, as amended, or the Securities
Act, we filed a registration statement (No. 333-84320) relating to the notes we
are offering by this prospectus supplement and the accompanying prospectus.
Those registration statements include additional information.
We file annual, quarterly and current reports and other information with the
Securities and Exchange Commission, or the SEC. You may read and copy any
document we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. You can also request copies of the
documents, upon payment of a duplication fee, by writing the Public Reference
Section of the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from the SEC's web site at http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to 'incorporate by reference' the information we file with
the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus supplement. Information that we file
later with the SEC will automatically update and supersede this information. In
all cases, you should rely on the later information over different information
included in this prospectus supplement, the accompanying prospectus or in
previously incorporated documents. We incorporate by reference the documents
listed below and any future filings made with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, or the Securities
Exchange Act, including annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K until the offering of these notes has
been completed:
Annual Report on Form 10-K for the year ended December 31, 2001.
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002 and
June 30, 2002.
Current Reports on Form 8-K dated January 11, 2002, March 19, 2002 and
April 23, 2002.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address or number:
American Express Credit Corporation
301 North Walnut Street
Wilmington, Delaware 19801
Attention: President
(302) 594-3350
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SUMMARY OF THE OFFERING
This summary provides a brief overview of the terms of the offered notes.
For a more complete understanding of the terms of the offered notes, before
making your investment decision, you should carefully read:
This prospectus supplement, which (1) explains certain terms of the notes
that may be offered and (2) updates and changes information in the
accompanying prospectus;
The accompanying prospectus, which (1) provides an overview of us and
certain aspects of our business and (2) explains the general terms of debt
securities that we may offer;
The pricing supplement, which (1) contains the specific terms of the notes
being offered and (2) updates and changes information in the prospectus
and/or the prospectus supplement; and
The documents referred to in 'Where You Can Find More Information' and
'Documents Incorporated by Reference' above for information on us and for
our financial statements.
GENERAL TERMS OF THE NOTES
We may offer from time to time up to U.S. $6,000,000,000, or the equivalent
of that amount in other currencies or currency units, of the notes described in
this prospectus supplement. We refer to the offering of the notes as our
medium-term note program. At the conclusion of this offering, including all
notes we have previously issued, we will have issued $7,970,000,000 of the
notes. The following summary describes the notes we are offering under this
program in general terms only.
The notes will mature nine months or more from the date of issuance and
will pay interest, if any, on the dates specified in the applicable pricing
supplement.
The notes will bear interest at either a fixed rate, which may be zero in
the case of notes issued at an original issue discount, or a floating rate.
The notes will be issued in U.S. dollars, unless we specify otherwise in
the applicable pricing supplement.
The notes may be either redeemed by us or repaid at your option, if
specified in the applicable pricing supplement.
Payments of principal and/or interest on the notes may be linked to prices,
changes in prices, or differences between prices, of currencies,
commodities, securities, baskets of securities, or indices based on other
price, economic or other measures as are described in the applicable
pricing supplement.
We may issue amortizing notes that pay both interest and principal prior to
the maturity of the notes.
The notes will not be listed on any securities exchange, unless we specify
otherwise in the applicable pricing supplement.
FORMS OF THE NOTES
Unless otherwise specified in the applicable pricing supplement, the notes
that we offer under our medium-term note program will only be issued in fully
registered form and will be represented by global securities registered in the
name of a nominee of The Depository Trust Company, or the DTC, as depositary
under the indenture governing the notes except under certain circumstances set
forth in the indenture in which the global notes may be exchanged for
certificates issued in definitive form. We refer you to 'Description of the
Notes -- Book-Entry Notes' below for information on DTC's book-entry system.
S-4
RISK FACTORS
CHANGES IN EXCHANGE RATES AND EXCHANGE CONTROLS COULD RESULT IN A SUBSTANTIAL
LOSS TO YOU
An investment in notes that are denominated in, or the payment of which is
determined with reference to, a specified currency other than U.S. dollars
entails significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Similarly, an investment in an indexed
note, on which all or part of any payment due is based on a currency other than
U.S. dollars, has significant risks that are not associated with a similar
investment in non-indexed notes. Such risks include, without limitation:
the possibility of significant changes in rates of exchange between U.S.
dollars and the specified currency, and
the possibility of the imposition or modification of foreign exchange
controls with respect to the specified currency.
Such risks generally depend on factors over which we have no control, such as:
economic events,
political events, and
the supply of and demand for the relevant currencies.
In recent years, rates of exchange between U.S. dollars and certain currencies
have been highly volatile, and this volatility may continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any note. Depreciation against the U.S. dollar of a foreign
currency or foreign currency units in which a note is denominated would result
in a decrease in the effective yield of such note below its coupon rate, and in
certain circumstances could result in a loss to the investor on a U.S. dollar
basis.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a foreign currency for making payments on a note denominated in such
currency. We can give no assurances that exchange controls will not restrict or
prohibit payments of principal, premium or interest in any currency or currency
unit.
Even if there are no actual exchange controls, it is possible that on an
interest payment date or at maturity for any particular note, the foreign
currency for such note would not be available to us to make payments of interest
and principal then due. In that event, we will make such payments in U.S.
dollars. See ' -- The Unavailability of Currencies Could Result in a Substantial
Loss to You' below.
The information set forth in this prospectus supplement is directed to
prospective purchasers of notes who are United States residents. We disclaim any
responsibility to advise prospective purchasers who are residents of countries
other than the United States regarding any matters that may affect the purchase
or holding of, or receipt of payments of principal, premium or interest on,
notes. Such persons should consult their own counsel and advisors with regard to
such matters. Pricing supplements relating to notes having a specified currency
other than U.S. dollars will contain information concerning historical exchange
rates for such specified currency, a description of the currency and any
exchange controls as of the date of the applicable pricing supplement affecting
such currency.
THE UNAVAILABILITY OF CURRENCIES COULD RESULT IN A SUBSTANTIAL LOSS TO YOU
Except as we specify in the applicable pricing supplement, if payment on a
note is required to be made in a specified currency other than U.S. dollars and
such currency is:
unavailable due to the imposition of exchange controls or other
circumstances beyond our control,
no longer used by the government of the country issuing such currency, or
no longer used for the settlement of transactions by public institutions of
or within the international banking community,
then all payments with respect to the note shall be made in U.S. dollars until
such currency is again available or so used. The amount so payable on any date
in such foreign currency shall be converted into U.S. dollars at a rate
determined on the basis of the most recently available market exchange rate or
as otherwise determined in good faith by us if the foregoing is impracticable.
Any payment in respect of
S-5
such note made under such circumstances in U.S. dollars will not constitute an
event of default under the indenture under which such note will have been
issued.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that original component currency as a
component shall be replaced by the amounts of such two or more currencies having
an aggregate value on the date of division equal to the amount of the former
component currency immediately before such division.
The notes will not provide for any adjustment to any amount payable as a
result of:
any change in the value of the specified currency of those notes relative
to any other currency due solely to fluctuations in exchange rates, or
any redenomination of any component currency of any composite currency,
unless that composite currency is itself officially redenominated.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks do
not generally offer non-U.S. dollar-denominated checking or savings account
facilities in the United States. Accordingly, payments on notes made in a
currency other than U.S. dollars will be made from an account at a bank located
outside the United States, unless otherwise specified in the applicable pricing
supplement.
JUDGMENTS IN A FOREIGN CURRENCY COULD RESULT IN A SUBSTANTIAL LOSS TO YOU
The notes will be governed by and construed in accordance with the laws of
the State of New York. Courts in the United States customarily have not rendered
judgments for money damages denominated in any currency other than U.S. dollars.
A 1987 amendment to the Judiciary Law of New York State provides, however, that
an action based on an obligation denominated in a currency other than U.S.
dollars will be rendered in the foreign currency of the underlying obligation.
If a note is denominated in a specified currency other than U.S. dollars, any
judgment under New York law will be rendered in the foreign currency of the
underlying obligation and converted into U.S. dollars at a rate of exchange
prevailing on the date of entry of the judgment or decree.
CHANGES IN THE VALUE OF UNDERLYING ASSETS OF INDEXED NOTES COULD RESULT IN A
SUBSTANTIAL LOSS TO YOU
An investment in indexed notes may have significant risks that are not
associated with a similar investment in a debt instrument that:
has a fixed principal amount,
is denominated in U.S. dollars, and
bears interest at either a fixed rate or a floating rate based on
nationally published interest rate references.
The risks of a particular indexed note will depend on the terms of that
indexed note. Such risks may include, but are not limited to, the possibility of
significant changes in the prices of:
the underlying assets,
another objective price, and
economic or other measures making up the relevant index.
Underlying assets could include:
currencies,
commodities,
securities (individual or baskets), and
indices.
The risks associated with a particular indexed note generally depend on
factors over which we have no control and which cannot readily be foreseen.
These risks include:
economic events,
S-6
political events, and
the supply of, and demand for, the underlying assets.
In recent years, currency exchange rates and prices for various underlying
assets have been highly volatile. Such volatility may continue in the future.
Fluctuations in rates or prices that have occurred in the past are not
necessarily indicative, however, of fluctuations that may occur during the term
of any indexed note.
In considering whether to purchase indexed notes, you should be aware that
the calculation of amounts payable on indexed notes may involve reference to
prices that are published solely by third parties or entities which are not
regulated by the laws of the United States.
The risk of loss as a result of linking of principal or interest payments on
indexed notes to an index and to the underlying assets can be substantial. You
should consult your own financial and legal advisors as to the risks of an
investment in indexed notes.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each note in the specified currency
specified by us for that note. If requested by a prospective purchaser of notes
having a specified currency other than U.S. dollars, the agent soliciting the
offer to purchase may at its discretion arrange for the conversion of U.S.
dollars into such specified currency to enable the purchaser to pay for such
notes. Each such conversion will be made by the relevant agent on such terms and
subject to such conditions, limitations and charges that the agent may from time
to time establish in accordance with its regular foreign exchange practice. The
purchaser must pay all costs of exchange.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our historical ratios of earnings to fixed charges
and those of American Express Company for the periods indicated:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED --------------------------------
JUNE 30, 2002 2001 2000 1999 1998 1997
------------- ---- ---- ---- ---- ----
American Express Credit Corporation............ 1.35 1.29 1.30 1.30 1.31 1.29
American Express Company(1).................... 2.41 1.52 2.25 2.48 2.24 2.22
</Table>
- ---------
(1) The securities described in this prospectus supplement are not obligations
of American Express Company or the Card Issuers (as defined in the
accompanying prospectus).
Under our receivables agreements, the discount rate for new non-interest
bearing receivables that we acquire must be sufficient to yield us earnings of
not less than 1.25 times our fixed charges on an annual basis.
In computing our ratio of earnings to fixed charges, 'earnings' consist of
net income plus income taxes and interest expense, amortization of debt
discount, premium and related expenses. 'Fixed charges' consist of interest
expense, amortization of debt discount, premium and related expenses. Gross
rentals on long-term leases were minimal in amount in each of the periods shown.
Since the rate of discount on non-interest bearing receivables that we purchased
is established by the receivables agreements to enable us to achieve at least a
predetermined ratio of earnings to fixed charges, a pro forma ratio of earnings
to fixed charges would not be meaningful.
In computing American Express Company's ratio of earnings to fixed charges,
'earnings' consist of pretax income from continuing operations plus interest
expense, amortization of capitalized interest, the net loss of affiliates
accounted for at equity whose debt is not guaranteed by American Express
Company, the minority interest in the earnings of majority-owned subsidiaries
with fixed charges, and the interest component of rental expense less
undistributed net income of affiliates accounted for at equity. 'Fixed Charges'
consist of interest expense, capitalized interest costs and the interest
component of rental expense. Interest expense in the above computation includes
interest expense related to the international banking operations of American
Express Company and Cardmember (as defined in the accompanying prospectus)
lending activities of American Express Travel Related Services Company, Inc.
which is netted against interest and dividends and Cardmember lending net
finance charge revenue, respectively, in the Consolidated Statement of Income of
American Express Company.
S-7
USE OF PROCEEDS OF THE NOTES
We will add the net proceeds from the sale of the notes to our general funds
which we will use for financing our operations, including the purchase of
receivables, the repayment of short-term senior debt previously incurred
primarily to finance the purchase of receivables and for investment in
short-term and medium-term financial assets.
We expect to incur additional debt in the future to carry on our business.
The nature and amount of our short-term, medium-term and long-term debt and the
proportionate amount of each can be expected to fluctuate as a result of market
conditions and other factors
DESCRIPTION OF NOTES
The following description of the particular notes supplements the
description of the general terms and provisions of the debt securities set forth
in the accompanying prospectus. If any specific information regarding the notes
in this prospectus supplement is inconsistent with the more general terms of the
debt securities described in the accompanying prospectus, you should rely on the
information in this prospectus supplement.
The pricing supplement for each offering of notes will contain the specific
information and terms for that offering. If any information in the pricing
supplement, including any changes in the method of calculating interest on any
note, is inconsistent with this prospectus supplement, you should rely on the
information in the pricing supplement. The pricing supplement may also add,
update or change information contained in the accompanying prospectus and this
prospectus supplement. It is important for you to consider the information
contained in the accompanying prospectus, this prospectus supplement and the
pricing supplement in making your investment decision.
GENERAL
We will issue the notes under the indenture described in the accompanying
prospectus, as supplemented by the eighth supplemental indenture, dated December
21, 2001, between us and Bank One Trust Company, N.A., as trustee. The notes are
limited to an aggregate principal amount of $6,000,000,000 (or the equivalent in
other currencies or currency units), in addition to the $1,970,000,000 we
previously issued. We may increase this limit if in the future we determine that
we may wish to sell additional notes or decrease this limit if in the future we
determine to sell debt securities under other programs or in specific issuances.
We may from time to time sell additional series of debt securities (as defined
in the accompanying prospectus), including additional series of medium-term
senior notes. See 'Plan of Distribution'.
In this prospectus supplement, the accompanying prospectus and in any
pricing supplement, unless otherwise specified or the context otherwise
requires, references to 'dollars', '$' and 'U.S.$' are to United States dollars.
We will offer the notes on a continuous basis and the notes will mature nine
months or later from their date of issue, as specified in an applicable pricing
supplement. Floating rate notes will mature on an interest payment date.
Unless otherwise specified for notes denominated in a currency other than
U.S. dollars or as otherwise specified in an applicable pricing supplement, we
will issue notes only in fully registered form in denominations of $100,000 and
integral multiples of $1,000 in excess of that amount. The notes will be
denominated in U.S. dollars and payments of principal of and premium, if any,
and interest on the notes will be made in U.S. dollars unless we provide
otherwise in a pricing supplement. If any of the notes are to be denominated in
a foreign currency or currency unit, or if the principal of and premium, if any,
and any interest on any of the notes is to be payable at your option or at our
option in a currency, including a currency unit, other than that in which such
notes are denominated, we will provide additional information pertaining to such
notes in the pricing supplement.
Unless we specify otherwise in an applicable pricing supplement, the notes
will be issued in book-entry form only through the facilities of DTC and will be
registered in the name of the nominee of DTC. Transfers or exchanges of the
notes may only be effected through a participating member of DTC. So long as DTC
or its nominee is the registered owner of a note, DTC or its nominee, as the
case may be, will be considered the sole owner or holder of the note for all
purposes under the indenture. Except as
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set forth under ' -- Book-Entry Notes' below, no note issued in book-entry form
will be issuable in certificated form.
In the pricing supplement relating to each note we will describe the
following terms:
the currency in which such note will be denominated (and, if such currency
is other than U.S. dollars, certain other terms relating to such note,
including the authorized denominations),
whether such note is a fixed rate note or a floating rate note,
the issue price (expressed as a percentage of the aggregate principal
amount thereof), which is the price of the note at issuance,
the date on which such note will be issued,
the date on which such note will mature,
if such note is a fixed rate note, the annual rate at which the note will
bear interest, if any,
if such note is a floating rate note, the interest rate basis, the initial
interest rate, the interest reset dates, the interest payment dates, the
index maturity, the maximum interest rate and the minimum interest rate, if
any, and the spread and/or spread multiplier, if any (all of these terms
are described below), and any other terms relating to the particular method
of calculating the interest rate for such note,
whether such note may be redeemed at our option or repaid at your option
prior to the maturity date, and, if so, the provisions relating to such
redemption or repayment, and
any other terms of such notes not inconsistent with the provisions of the
indenture.
REDEMPTION AND REPAYMENT
Unless we specify otherwise in a pricing supplement, the notes will not be
redeemable prior to their stated maturity. If we so specify in an applicable
pricing supplement, the note will be redeemable on or after the date or dates
set forth in such supplement, either in whole or from time to time in part, at
our option, at a redemption price equal to 100% of the principal amount to be
redeemed or at such other price or prices set forth in such pricing supplement.
We will pay interest accrued on a redeemed note to the date of redemption, and
will give notice of redemption no more than 60 and not less than 30 days prior
to the date of redemption. The notes will not be subject to any sinking fund or
to any provisions for repayment at your option unless we specify otherwise in
the applicable pricing supplement.
INTEREST AND INTEREST RATES
Each note will bear interest from its date of issue at the annual rate, or
at a rate determined according to an interest rate formula, stated in the note
and in the applicable pricing supplement, until the principal of the note is
paid or made available for payment. We will pay interest, if any, on each
interest payment date and at maturity or upon redemption. Interest payment date
means the date on which payments of interest on a note (other than payments on
maturity) are to be made. Maturity means the date on which the principal of a
note becomes due and payable, whether at the stated maturity or by declaration
of acceleration or otherwise. Stated maturity means the date specified in a note
as the date on which principal of the note is due and payable. Any note that has
a specified currency of pounds sterling will mature in compliance with the
regulations the Bank of England may promulgate from time to time.
We will pay interest to the person in whose name a note is registered at the
close of business on the regular record date next preceding the applicable
interest payment date. Regular record date means the date on which a note must
be held in order for the holder to receive an interest payment on the next
interest payment date. However, we will pay interest at maturity or upon
redemption to the person to whom we pay the principal. The first payment of
interest on any note originally issued between a regular record date and an
interest payment date will be made on the interest payment date following the
next succeeding regular record date to the registered owner on such next regular
record date.
Unless we specify otherwise in the applicable pricing supplement, the
interest payment dates and the regular record dates for fixed rate notes shall
be described below under 'Fixed Rate Notes'. The interest payment dates for
floating rate notes shall be as indicated in the applicable pricing supplement,
and unless
S-9
we specify otherwise in the applicable pricing supplement, each regular record
date for a floating rate note will be the fifteenth day (whether or not a
business day) next preceding each interest payment date.
Each note will bear interest either at a fixed rate or a floating rate
determined by reference to an interest rate formula which may be adjusted by a
spread or spread multiplier, if any. Spread means the constant amount, if any,
to be added to the Commercial Paper Rate, the Federal Funds Rate, the CD Rate,
LIBOR, EURIBOR, the Prime Rate, the Treasury Rate or any other interest rate
index in effect from time to time with respect to a note, which amount will be
set forth in such note and the related pricing supplement. Spread multiplier
means the constant amount by which the Commercial Paper Rate, the Federal Funds
Rate, the CD Rate, LIBOR, EURIBOR, the Prime Rate, the Treasury Rate or any
other interest rate index in effect from time to time with respect to a note is
to be multiplied, which amount will be set forth in such note and the related
pricing supplement. Any floating rate note may also have either or both of the
following: (1) a maximum numerical interest rate limitation, or ceiling, on the
rate of interest which may accrue during any interest period; and (2) a minimum
numerical interest rate limitation, or floor, on the rate of interest which may
accrue during any interest period.
The applicable pricing supplement will designate one of the following
interest rate bases as applicable to each note:
a fixed rate per year in which case the note will be a fixed rate note,
the Commercial Paper Rate in which case the note will be a Commercial Paper
Rate note,
the Federal Funds Rate in which case the note will be a Federal Funds Rate
note,
the CD Rate in which case the note will be a CD Rate note,
LIBOR in which case the note will be a LIBOR note,
EURIBOR in which case the note will be a EURIBOR note,
the Prime Rate in which case the note will be a Prime Rate note,
the Treasury Rate in which case the note will be a Treasury Rate note, or
such other interest rate formula as is set forth in the pricing supplement.
We will specify in the applicable pricing supplement for each floating rate
note the applicable index maturity for the note. Index maturity means the period
of time designated by us as the representative maturity of the commercial paper,
the certificates of deposit, the U.S. dollar deposits or the Treasury bills,
respectively, by references to transactions in which the Commercial Paper Rate,
the CD Rate, LIBOR, EURIBOR and the Treasury Rate, respectively, or any other
interest rate index in effect from time to time with respect to a note will be
calculated as set forth in a floating rate note bearing interest at one of those
rates and in the applicable pricing supplement.
FIXED RATE NOTES
Each fixed rate note will bear interest from its date of issue at the annual
rate stated on the note. Unless we indicate otherwise in the applicable pricing
supplement, the interest payment dates for the fixed rate notes will be on
February 1 and August 1 of each year and the regular record dates will be on
January 15 and July 15 of each year. Unless we specify otherwise in an
applicable pricing supplement, interest on fixed rate notes will be computed and
paid on the basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
The interest rate on each floating rate note will be equal to either
(1) the interest rate calculated by reference to the specified interest rate
formula (as specified in the applicable pricing supplement) plus or minus the
spread, if any, or (2) the interest rate calculated by reference to the
specified interest rate formula multiplied by the spread multiplier, if any. We
will specify in the applicable pricing supplement the interest rate basis and
the spread or spread multiplier, if any, and the maximum or minimum interest
rate limitation, if any, applicable to each floating rate note. In addition,
such pricing supplement may contain particulars as to the calculation agent,
calculation dates, index maturity, initial interest rate, interest
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determination dates, interest payment dates, regular record dates and interest
reset dates with respect to such note.
Except as provided below, interest on floating rate notes will be payable:
in the case of floating rate notes with a weekly interest reset date (as
defined below) on the third Wednesday of each month or on the third
Wednesday of March, June, September and December,
in the case of floating rate notes with a monthly interest reset date, on
the third Wednesday of each month or on the third Wednesday of March, June,
September and December of each year, as specified in the applicable pricing
supplement,
in the case of floating rate notes with a quarterly interest reset date, on
the third Wednesday of March, June, September and December of each year,
in the case of floating rate notes with a semi-annual interest reset date,
on the third Wednesday of two months of each year, as specified in the
applicable pricing supplement, and
in the case of floating rate notes with an annual interest reset date, on
the third Wednesday of one month of each year, as specified in the
applicable pricing supplement.
If any interest payment date for any floating rate note would otherwise be a
day that is not a business day for that floating rate note, the interest payment
date for that floating rate note shall be postponed to the next day that is a
business day for that floating rate note, except that in the case of a LIBOR
note or a EURIBOR note, if such day falls in the next calendar month, the
interest payment date shall be the preceding day that is a business day.
As used in this prospectus supplement, business day means:
with respect to any payment, each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, New York City are authorized or required by law or executive
order to close,
when used for any other purpose, each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the Borough
of Manhattan, New York City, or in the city in which the Corporate Trust
Office of the trustee is located, are authorized or required by law or
executive order to close,
for notes based on LIBOR only, such day shall also be a day on which
dealings in deposits in U.S. dollars are transacted in the London interbank
market,
for notes based on EURIBOR only, such day shall be any day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer system
is open, and
for notes having a specified currency other than U.S. dollars only, any day
that, in the capital city of the country issuing the specified currency,
except for Australian dollars, Canadian dollars, Deutsche marks, Dutch
guilders, Italian lire and Swiss francs, which will be based on the cities
of Sydney, Toronto, Frankfurt, Amsterdam, Milan and Zurich, respectively,
is not a day on which banking institutions are authorized or obligated to
close.
The rate of interest on each floating rate note will be reset on the
interest reset date that will be weekly, monthly, quarterly, semi-annually or
annually, as we specify in the applicable pricing supplement. The interest reset
date will be:
in the case of floating rate notes (other than Treasury Rate notes) that
reset weekly, the Wednesday of each week,
in the case of Treasury Rate notes that reset weekly, the Tuesday of each
week,
in the case of floating rate notes that reset monthly, the third Wednesday
of each month,
in the case of floating rate notes that reset quarterly, the third
Wednesday of March, June, September and December,
in the case of floating rate notes that reset semi-annually, the third
Wednesday of two months of each year, as specified in the applicable
pricing supplement, and
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in the case of floating rate notes that reset annually, the third Wednesday
of one month of each year, as specified in the applicable pricing
supplement.
However, in each case, (1) the interest rate in effect from the date of
issue to the first interest reset date with respect to a floating rate note will
be the initial interest rate set forth in the applicable pricing supplement and
(2) the interest rate in effect for the ten days immediately prior to maturity
or redemption, if applicable, will be the rate in effect on the tenth day
preceding such maturity or redemption. If any interest reset date for any
floating rate note would otherwise be a day that is not a business day for that
floating rate note, the interest reset date for that floating rate note shall be
postponed to the next day that is a business day for that floating rate note,
except that in the case of a LIBOR note or a EURIBOR note, if such business day
is in the next succeeding calendar month, the interest reset date shall be the
immediately preceding business day.
The interest rate applicable to each interest accrual period beginning on an
interest reset date will be the rate determined on the calculation date, if any,
by reference to the interest determination date. Calculation date means the
date, if any, on which the calculation agent (as defined below) is to calculate
an interest rate for a floating rate note. The calculation date shall be the
tenth calendar day after the related interest determination date for a note or
if such day is not a business day, the next succeeding business day, unless we
specify otherwise in the note and the related pricing supplement. Calculation
agent means the agent we appoint to calculate interest rates on floating rate
notes. The calculation agent will be Bank One Trust Company, N.A. unless we
specify otherwise in the applicable pricing supplement.
The interest determination date pertaining to an interest reset date will
be:
the second business day preceding such interest reset date for (1) a
Commercial Paper Rate note, (2) a Federal Funds Rate note, (3) a CD Rate
note or (4) a Prime Rate note,
the second business day preceding such interest reset date for a LIBOR note
or a EURIBOR
note, or
the day of the week in which such interest reset date falls on which
Treasury bills would normally be auctioned for a Treasury Rate note.
Treasury bills are usually sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is usually held on the
following Tuesday, except that such auction may be held on the preceding Friday.
If, as the result of a legal holiday, an auction is held on the preceding
Friday, such Friday will be the treasury interest determination date pertaining
to the interest reset date occurring in the next succeeding week. If an auction
date shall fall on any interest reset date for a Treasury Rate note, then such
interest reset date shall instead be the first business day immediately
following such auction date.
Unless we specify otherwise in the applicable pricing supplement, the
interest payable on each interest payment date or at maturity for floating rate
notes will be the amount of interest accrued from and including the issue date
or from and including the last interest payment date to which interest has been
paid, as the case may be, to, but excluding, such interest payment date or the
date of maturity, as the case may be. However, in the case of a floating rate
note on which interest is reset weekly, interest payable on each interest
payment date will be the amount of interest accrued from and including the issue
date or from and excluding the last date to which interest has been paid, as the
case may be, to, and including, the regular record date immediately preceding
such interest payment date, except that at maturity the interest payable will
include interest accrued to, but excluding, the date of maturity.
Accrued interest from the date of issue or from the last date to which
interest has been paid is calculated by multiplying the face amount of a note by
an accrued interest factor. This accrued interest factor is computed by adding
the interest factors calculated for each day from the date of issue or from the
last date to which interest has been paid, to the date for which accrued
interest is being calculated. The interest factor (expressed as a decimal
rounded to the nearest one hundred-thousandth of a percentage point (e.g.,
9.876544% and 9.876545% being rounded to 9.87654% and 9.87655%, respectively))
for each such day is computed by dividing the interest rate (expressed as a
decimal rounded to the nearest one hundred-thousandth of a percentage point)
applicable to such date by 360, in the case of Commercial Paper Rate notes,
Federal Funds Rate notes, CD Rate notes, LIBOR notes, EURIBOR notes and Prime
Rate notes, or by the actual number of days in the year, in the case of Treasury
Rate notes. All dollar
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amounts used in or resulting from calculations on floating rate notes will be
rounded to the nearest cent with one half cent being rounded upward.
The calculation agent will, upon the request of the holder of any floating
rate note, provide the interest rate then in effect and, if determined, the
interest rate which will become effective as a result of a determination made on
the most recent interest determination date with respect to such note. For
purposes of calculating the rate of interest payable on floating rate notes, we
will enter into an agreement with the calculation agent.
In addition to any maximum interest rate that may be applicable to any
floating rate note, the interest rate on the floating rate notes will in no
event be higher than the maximum rate permitted by New York law as the same may
be modified by United States law of general application. Under present New York
law, the maximum rate of interest, with few exceptions, is 25% per year
(calculated on a simple interest basis). This limit only applies to obligations
that are less than $2,500,000.
Commercial Paper Rate Notes
A Commercial Paper Rate note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the spread or spread
multiplier, if any) we specify in the Commercial Paper Rate note and in the
applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement,
Commercial Paper Rate for any interest determination date will be the money
market yield (calculated as described below) of the rate on that date for
commercial paper having the index maturity designated in the applicable pricing
supplement as such rate is published by the Board of Governors of the Federal
Reserve System in 'Statistical Release H.15(519), Selected Interest Rates' or
any successor publication of the Board of Governors of the Federal Reserve
System ('H.15(519)') under the heading 'Commercial Paper -- Nonfinancial'.
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
In the event that such rate is not published by 9:00 A.M., New York City
time, on the applicable calculation date, then the Commercial Paper Rate
shall be the money market yield of the rate on such date for commercial
paper having the index maturity designated in the applicable pricing
supplement as published in the daily update of H.15(519), available through
the worldwide website of the Board of Governors of the Federal Reserve
System at http://www.bog.frb.fed.us/releases/ h15/update, or any successor
site or publication ('H.15 Daily Update') under the heading 'Commercial
Paper -- Nonfinancial'.
If by 3:00 P.M., New York City time, on such calculation date such rate is
not yet published in H.15 Daily Update, then the Commercial Paper Rate for
such interest determination date shall be calculated by the calculation
agent and shall be the money market yield of the arithmetic mean (each as
rounded to the nearest one hundred-thousandth of a percentage point) of the
offered rates of three leading dealers of commercial paper in New York City
selected by the calculation agent as of 11:00 A.M., New York City time, on
such date, for commercial paper having the index maturity designated in the
applicable pricing supplement placed for an industrial issuer whose bond
rating is 'AA', or the equivalent, from a nationally recognized securities
rating agency.
If the dealers selected by the calculation agent are not quoting as
mentioned in the previous sentence, the Commercial Paper Rate with respect
to such interest determination date will be the Commercial Paper Rate in
effect on such date.
Money market yield will be a yield (expressed as a percentage rounded to the
nearest one hundred-thousandth of a percentage point) calculated in accordance
with the following formula:
<Table>
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
</Table>
where 'D' refers to the annual rate for the commercial paper quoted on a bank
discount basis and expressed as a decimal, and 'M' refers to the actual number
of days in the interest period for which interest is being calculated.
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Federal Funds Rate Notes
A Federal Funds Rate note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the spread or spread
multiplier, if any) we specify in the Federal Funds Rate note and in the
applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement, Federal
Funds Rate for any interest determination date will be the rate on that date for
federal funds as published in H.15(519) under the heading 'Federal Funds
(Effective)'.
The following procedures will be followed if the Federal Funds Rate cannot
be determined as described above:
If that rate is not published by 9:00 A.M., New York City time, on the
applicable calculation date, the Federal Funds Rate will be the rate on
such interest determination date as published in H.15 Daily Update under
the heading 'Federal Funds/Effective'.
If such rate is not yet published by 3:00 P.M., New York City time, on the
applicable calculation date, then the Federal Funds Rate for such interest
determination date will be calculated by the calculation agent and will be
the arithmetic mean (rounded to the nearest one hundred-thousandth of a
percentage point) of the rates as of 11:00 A.M., New York City time, on
such date for the last transaction in overnight federal funds arranged by
three leading brokers of federal funds transactions in New York City
selected by the calculation agent.
If the brokers selected by the calculation agent are not quoting as
mentioned in the previous sentence, the Federal Funds Rate with respect to
such interest determination date will be the Federal Funds Rate in effect
on such date.
CD Rate Notes
A CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the spread or spread multiplier, if any) we specify
in the CD Rate note and in the applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement, the CD
Rate for any interest determination date will be the rate on that date for
negotiable certificates of deposit having the index maturity designated in the
applicable pricing supplement as published in H.15(519) under the heading 'CDs
(Secondary Market)'.
The following procedures will be followed if the CD Rate cannot be
determined as described above:
If that rate is not published by 9:00 A.M., New York City time, on the
applicable calculation date, the CD Rate will be the rate on such interest
determination date for negotiable certificates of deposit of the index
maturity designated in the applicable pricing supplement as published in
H.15 Daily Update under the caption 'CDs (secondary market)'.
If such rate is not published by 3:00 P.M., New York City time, on such
calculation date, then the CD Rate on such interest determination date will
be calculated by the calculation agent and will be the arithmetic mean
(each as rounded to the nearest one hundred-thousandth of a percentage
point) of the secondary market offered rates as of the opening of business,
New York City time, on such date, of three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in New York City selected by
the calculation agent for negotiable certificates of deposit of major
United States money market banks of the highest credit standing (in the
market for negotiable certificates of deposit) with a remaining maturity
closest to the index maturity designated in the applicable pricing
supplement in a denomination of $5,000,000.
If the dealers selected by the calculation agent are not quoting as
mentioned in the previous sentence, the CD Rate with respect to such
interest determination date will be the CD Rate in effect on such date.
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LIBOR Notes
A LIBOR note will bear interest at the interest rate (calculated with
reference to LIBOR and the spread or spread multiplier, if any) we specify in
the LIBOR note and in the applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement, LIBOR
will be determined by the calculation agent in accordance with the following
provisions in the order set forth below:
On each interest determination date, LIBOR will be determined on the basis
of the offered rates for deposits in U.S. dollars having the index maturity
designated in the applicable pricing supplement, commencing on the second
business day immediately following such interest determination date, which
appear on the Reuters Screen LIBOR Page as of 11:00 A.M., London time, on
such interest determination date. If at least two such offered rates appear
on the Reuters Screen LIBOR Page, the rate will be the arithmetic mean
(rounded to the nearest one hundred-thousandth of a percentage point) of
those offered rates as determined by the calculation agent. If fewer than
two offered rates appear, LIBOR for such interest determination date will
be determined as if the parties had specified the rate described in the
following bullet points.
On any interest determination date on which fewer than two offered rates
appear on the Reuters Screen LIBOR Page as specified above, LIBOR will be
determined on the basis of the rates at which deposits in U.S. dollars are
offered by four major banks in the London interbank market selected by the
calculation agent at approximately 11:00 A.M., London time, on such
interest determination date to prime banks in the London interbank market,
having the index maturity designated in the applicable pricing supplement,
commencing on the second business day immediately following such interest
determination date and in a principal amount equal to an amount of not less
than U.S. $1,000,000 that is representative for a single transaction in
such market at such time. The calculation agent will request the principal
London office of each of those four major banks to provide a quotation of
its rate. If at least two such quotations are provided, LIBOR in respect of
such interest determination date will be the arithmetic mean (rounded to
the nearest one hundred-thousandth of a percentage point) of such
quotations.
If fewer than two quotations are provided, LIBOR in respect of such
interest determination date will be the arithmetic mean (rounded to the
nearest one hundred-thousandth of a percentage point) of the rates quoted
by three major banks in New York City selected by the calculation agent at
approximately 11:00 A.M., New York City time, on such interest
determination date for loans in U.S. dollars to leading European banks,
having the index maturity designated in the applicable pricing supplement,
such loans commencing on the second business day immediately following such
interest determination date and in a principal amount equal to an amount of
not less than U.S. $1,000,000 that is representative for a single
transaction in such market at such time.
If the banks in New York City selected by the calculation agent are not
quoting as mentioned in the previous bullet point, LIBOR with respect to
such interest determination date will be LIBOR in effect on such interest
determination date.
Reuters Screen LIBOR Page means the display on the Reuters Monitor Money
Rates Service, or any successor service, for the purpose of displaying the
London interbank rates of major banks for U.S. dollar deposits.
EURIBOR Notes
Each EURIBOR note will bear interest for each interest reset period at an
interest rate equal to EURIBOR and any spread or spread multiplier as specified
in the note and the applicable pricing supplement.
The calculation agent will determine EURIBOR on each EURIBOR determination
date. The EURIBOR determination date is the second business day prior to the
interest reset date for each interest reset period.
On a EURIBOR determination date, the calculation agent will determine
EURIBOR for each interest reset period as follows.
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The calculation agent will determine the offered rates for deposits in euros
for the period of the index maturity specified in the applicable pricing
supplement, commencing on the interest reset date, which appears on page 248 on
the Bridge Telerate Service or any successor service or any page that may
replace page 248 on that service which is commonly referred to as 'Telerate
Page 248' as of 11:00 a.m., Brussels time, on that date.
If EURIBOR cannot be determined on a EURIBOR determination date as described
above, then the calculation agent will determine EURIBOR as follows:
The calculation agent for the EURIBOR note will select four major banks in
the euro-zone interbank market.
The calculation agent will request that the principal euro-zone offices of
those four selected banks provide their offered quotations to prime banks
in the euro-zone interbank market at approximately 11:00 a.m., Brussels
time, on the EURIBOR determination date. These quotations shall be for
deposits in euros for the period of the specified index maturity,
commencing on the interest reset date. Offered quotations must be based on
a principal amount equal to at least $1,000,000 or the approximate
equivalent in euros that is representative of a single transaction in such
market at that time.
(1) If two or more quotations are provided, EURIBOR for the interest reset
period will be the arithmetic mean of those quotations.
(2) If less than two quotations are provided, the calculation agent will
select four major banks in the euro-zone and follow the steps in the two
bullet points below:
The calculation agent will then determine EURIBOR for the interest
reset period as the arithmetic mean of rates quoted by those four major
banks in the euro-zone to leading European banks at approximately 11:00
a.m., Brussels time, on the EURIBOR determination date. The rates
quoted will be for loans in euros, for the period of the specified
index maturity, commencing on the interest reset date. Rates quoted
must be based on a principal amount of at least $1,000,000 or the
approximate equivalent in euros that is representative of a single
transaction in such market at that time.
If the banks so selected by the calculation agent are not quoting rates
as described above, EURIBOR for the interest reset period will be the
same as for the immediately preceding interest reset period. If there
was no preceding interest reset period, EURIBOR will be the initial
interest rate.
'Euro-zone' means the region comprised of member states of the European
Union that adopt the single currency in accordance with the Treaty establishing
the European Community, as amended by the Treaty on European Union.
Prime Rate Notes
A Prime Rate note will bear interest at the interest rate (calculated with
reference to the Prime Rate and the spread or spread multiplier, if any) we
specify in the Prime Rate note and in the applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement, Prime
Rate for any interest determination date will be the rate on that date as
published in H.15(519) under the heading 'Bank Prime Loan'.
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
If the rate is not published prior to 9:00 a.m., New York City time, on the
calculation date, then the Prime Rate will be the rate on that interest
determination date as published in H.15 Daily Update under the heading
'Bank Prime Loan'.
If the rate is not published prior to 3:00 p.m., New York City time, on the
calculation date in either H.15(519) or the H.15 Daily Update, then the
calculation agent will determine the Prime Rate to be the arithmetic mean
of the rates of interest publicly announced by each bank that
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appears on the Reuters Screen USPRIME 1 Page (as defined below) as that
bank's prime rate or base lending rate as in effect for that interest
determination date.
If fewer than four rates appear on the Reuters Screen USPRIME 1 Page for
that interest determination date, the calculation agent will determine the
Prime Rate to be the arithmetic mean of the prime rates quoted on the basis
of the actual number of days in the year divided by 360 as of the close of
business on that interest determination date by at least three major banks
in New York City selected by the calculation agent, after consultation with
us.
If the banks selected are not quoting as mentioned above, the Prime Rate
with respect to such interest determination date will be the Prime Rate in
effect on such interest determination date.
Reuters Screen USPRIME 1 Page means the display designated as page 'USPRIME
1' of the Reuters Monitor Money Rates Service, or any successor service, or any
other page that may replace the USPRIME 1 Page on that service for the purpose
of displaying prime rates or base lending rates of major United States banks.
Treasury Rate Notes
A Treasury Rate note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the spread or spread multiplier, if any)
we specify in the Treasury Rate note and in the applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement, the
Treasury Rate for any interest determination date will be the rate applicable to
the auction held on such date of direct obligations of the United States
('Treasury bills') having the index maturity specified in the applicable pricing
supplement as such rate appears on either the display designated as Page 56 or
the display designated as Page 57 on Telerate under the heading 'AVGE INVEST
YIELD'.
The following procedures will be followed if the Treasury Rate cannot be
determined as above:
If the above rate is not published by 9:00 a.m., New York City time, on the
calculation date, the Treasury Rate will be the auction average rate on
such interest determination date (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) as otherwise announced by the United States Department of the
Treasury. Treasury bills are usually sold at auction on Monday of each week
unless that day is a legal holiday, in which case the auction is usually
held on the following Tuesday, except that such auction may be held on the
preceding Friday.
In the event that the results of the auction of Treasury bills having the
index maturity specified in the applicable pricing supplement are not
published or reported as provided above by 3:00 p.m., New York City time,
on such calculation date, or if no such auction is held on such interest
determination date, then the calculation agent will determine the Treasury
Rate to be the bond equivalent yield of the rate set forth in H.15(519) for
that day opposite the index maturity under the caption 'U.S. Government
Securities/Treasury Bills/Secondary Market'.
If the above rate is not published in H.15(519) on the calculation date,
the rate for that day will be the rate set forth in H.15 Daily Update, or
another recognized electronic source used for the purpose of displaying
such rate, for that day in respect of the index maturity under the caption
'U.S. Government Securities/Treasury Bills/Secondary Market'.
If the above rate is not published in H.15(519), H.15 Daily Update or
another recognized source, the Treasury Rate will be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days,
as applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City
time, on such interest determination date, of three leading primary United
States government securities dealers selected by the calculation agent
(after consultation with us), for the issue of Treasury bills with a
remaining maturity closest to the index maturity specified in the
applicable pricing supplement.
If the dealers selected by the calculation agent are not quoting as
mentioned above, the Treasury Rate with respect to such interest
determination date will remain the Treasury Rate then in effect on such
interest determination date.
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Bond Equivalent Yield means a yield (expressed as a percentage) calculated
as follows:
<Table>
D x N
Bond Equivalent Yield = ------------- x 100
360 - (D x M)
</Table>
where 'D' refers to the applicable annual rate for the Treasury bills quoted on
a bank discount basis and expressed as a decimal, 'N' refers to 365 or 366, as
the case may be, and 'M' refers to the actual number of days in the interest
period for which interest is being calculated.
AMORTIZING NOTES
We may from time to time offer amortizing notes on which a portion or all
the principal amount is payable prior to stated maturity:
in accordance with a schedule,
by application of a formula, or
based on an index.
Further information concerning additional terms and conditions of any amortizing
notes, including terms of repayment of such notes, will be set forth in the
applicable pricing supplement.
INDEXED NOTES
We may also issue indexed notes on which the principal amount payable at
maturity, premium, if any, and/or interest payments are determined with
reference to the price or prices of specified commodities (including baskets of
commodities), securities (including baskets of securities), interest rate
indices, interest rate or exchange rate swap indices, the exchange rate of one
or more specified currencies (including baskets of currencies or a composite
currency) relative to an indexed currency, or such other price or exchange rate
or other financial or non-financial index or indices as we may specify in such
indexed note and in the applicable pricing supplement for the indexed note.
Holders of indexed notes may receive a principal amount at maturity that is
greater than or less than the face amount of the indexed notes depending upon
the relative value at maturity of the specified index. We will provide
information on the method for determining the principal payable at maturity,
premium, if any and/or interest payments in the applicable pricing supplement
for the indexed notes. Certain historical information, where applicable, with
respect to the specified indexed item or items and tax considerations associated
with an investment in indexed notes will also be provided in the pricing
supplement.
Notwithstanding anything to the contrary contained herein or in the
accompanying prospectus, for purposes of determining the rights of a holder of
an indexed note in respect of voting for or against amendments to the indenture
and modifications and the waiver of rights thereunder, the principal amount of
such indexed note shall be deemed to be equal to the face amount thereof upon
issuance. The amount of principal payable at maturity will be specified in the
applicable pricing supplement.
BOOK-ENTRY NOTES
For notes in book-entry form, we will issue one or more global certificates
representing the entire issue of notes. Each global certificate will be
deposited with, or on behalf of, DTC, as depositary, and will be registered in
the name of DTC or a nominee of DTC. DTC will thus be the only registered holder
of these global notes and will be considered the sole owner of the global notes
for purposes of the indenture.
Purchasers may only hold interests in the global notes through DTC if they
are participants in the DTC system. Purchasers may also hold interests through a
securities intermediary -- banks, brokerage houses and other institutions that
maintain a securities accounts for customers -- that has an account with DTC or
its nominee. DTC will maintain accounts showing the securities holdings of its
participants, and these participants will in turn maintain accounts showing the
securities holdings of their customers. Some of these customers may themselves
be securities intermediaries holding notes for their customers. Thus, each
beneficial owner of a note in book-entry form will hold that note indirectly
through a hierarchy of
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intermediaries, with DTC at the 'top' and the beneficial owner's own securities
intermediary at the 'bottom'.
The notes of each beneficial owner in book-entry form will be evidenced
solely by entries on the books of the beneficial owner's securities
intermediary. The actual purchaser of the notes will generally not be entitled
to have the notes represented by the global certificates registered in its name
and will not be considered the owner under the indenture. In most cases, a
beneficial owner will also not be able to obtain a paper certificate evidencing
the holder's ownership. The book-entry system for holding securities eliminates
the need for physical movement of certificates. However, the laws of some
jurisdictions require some purchasers of securities to take physical delivery of
their securities in definitive form. These laws may impair the ability to
transfer book-entry securities.
The indenture provides that if:
DTC notifies us that it is unwilling or unable to continue as depository
for the notes, or if DTC is no longer legally qualified to serve in that
capacity, and a successor depository is not appointed by us within 90 days
of written notice,
we decided to discontinue use of the system of book-entry transfers through
the DTC or its successor, or
an event of default with respect to the notes shall have occurred and be
continuing,
then the global notes will be exchanged for notes in definitive form of like
tenor and of an equal aggregate principal amount, in authorized denominations.
Such definitive notes shall be registered in such name or names as DTC shall
instruct the trustee. It is expected that such instructions may be based upon
directions received by DTC from direct participants with respect to ownership of
beneficial interests in global notes.
In this prospectus supplement, references to actions taken by note holders
will mean actions taken by DTC upon instructions from its participants, and
references to payments and notices of redemption to note holders will mean
payments and notices of redemption to DTC as the registered holder of the notes
for distribution to participants in accordance with DTC's procedures.
DTC is a limited-purpose trust company organized under the State of New
York, a 'banking organization' within the meaning of the New York banking law, a
member of the Federal Reserve System, a 'clearing corporation' within the
meaning of the New York Uniform Commercial Code and a 'clearing agency'
registered under Section 17A of the Securities Exchange Act. The rules
applicable to DTC and its direct and indirect participants are on file with the
SEC.
We will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the notes in book-entry form or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
The information in this section about DTC has been provided by DTC for
informational purposes only. We take no responsibility for the accuracy of this
information, and this information is not intended to serve as a representation,
warranty or contract modification of any kind.
CONCERNING THE TRUSTEE
Bank One Trust Company, N.A., the trustee under the indenture of the notes,
provides corporate trust services to us. In addition, affiliates of the trustee
provide substantial investment banking, bank and corporate trust services and
extend credit to our affiliate, the American Express Company and many of its
subsidiaries. One of the agents for the notes, Banc One Capital Markets, Inc.,
is an affiliate of the trustee. We and our affiliates may have other customary
banking relationships (including other trusteeships) with the trustee.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summarizes certain United States federal income tax
consequences of the ownership of medium-term senior notes as of the date of this
prospectus supplement. Except where noted, this summary deals only with notes
held as capital assets and does not deal with special situations. For example,
this summary does not address:
tax consequences to holders who may be subject to special tax treatment,
such as dealers in securities or currencies, traders in securities electing
mark to market, financial institutions, tax-exempt entities or life
insurance companies,
tax consequences to persons holding notes as part of a hedging, integrated,
constructive sale or conversion transaction or a straddle,
tax consequences to holders of notes whose functional currency is not the
U.S. dollar,
alternative minimum tax consequences, if any, or
any state, local or foreign tax consequences.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended, or the Code, and regulations, rulings and judicial
decisions as of the date of this prospectus supplement. Those authorities may be
changed, perhaps retroactively, so as to result in United States federal income
tax consequences different from those discussed below, and may be adverse to
holders of notes.
The discussion below is for general information only and is not intended to
be tax advice. Holders who are considering the purchase of notes should consult
their own tax advisors concerning the U.S. federal, state and local as well as
the foreign tax consequences to them of ownership of the notes in light of their
particular situations.
UNITED STATES HOLDERS
The following is a summary of certain United States federal income tax
consequences that will apply to holders that are United States Holders, as we
describe below, of notes.
Certain consequences to holders of notes that are not United States Holders
are described under ' -- Non-United States Holders' below.
A 'United States Holder' of a note means a beneficial owner of a note that
is:
a citizen or resident of the United States,
a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision of the United States,
an estate the income of which is subject to United States federal income
taxation regardless of its source, or
a trust that is (a) subject to the supervision of a court within the United
States and the control of one or more United States persons or (b) that has
a valid election in effect under applicable U.S. Treasury regulations to be
treated as a United States person.
Payments of Interest
Except as set forth below, interest on a note will generally be taxable to a
holder as ordinary income from domestic sources at the time it is paid or
accrued in accordance with the holder's method of accounting for tax purposes.
Original Issue Discount
If holders own notes issued with original issue discount ('OID') they will
be subject to special tax accounting rules, as described in greater detail
below. In that case, they should be aware that they generally must include OID
in gross income in advance of the receipt of cash attributable to that income.
However, they generally will not be required to include separately in income
cash payments received on
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the notes, even if denominated as interest, to the extent those payments do not
constitute qualified stated interest (as defined below). Notes issued with OID
will be referred to as 'Original Issue Discount Notes'.
A note with an issue price that is less than its 'stated redemption price at
maturity' generally will be issued with OID if that difference is at least 0.25%
of the stated redemption price at maturity multiplied by the number of complete
years to maturity or, in the case of an amortizing note, the weighted average
maturity. The term 'stated redemption price at maturity' of a note means the sum
of all payments to be made on the note other than 'qualified stated interest.'
The 'issue price' of each note in a particular offering will be the first price
at which a substantial amount of that particular offering is sold to the public.
The term 'qualified stated interest' means stated interest that is
unconditionally payable in cash or in property, other than debt instruments of
the issuer, and the interest to be paid meets all of the following conditions:
it is payable at least once per year,
it is payable over the entire term of the note, and
it is payable at a single fixed rate or, subject to certain conditions,
based on one or more interest indices.
Holders that own notes issued with 'de minimis OID,' generally must include
the de minimis OID in income at the time payments (other than qualified stated
interest) on the notes are made in proportion to the amount paid. 'De minimis
OID' means discount that is not OID because it is less than 0.25% of the stated
redemption price at maturity multiplied by the number of complete years to
maturity or, in the case of an amortizing note, the weighted average maturity.
Any amount of de minimis OID that holders have included in income will be
treated as capital gain.
Certain of the notes may contain provisions permitting them to be redeemed
prior to their stated maturity at our option and/or at the option of the holder.
Original Issue Discount Notes containing those features may be subject to rules
that differ from the general rules discussed in this prospectus supplement.
Holders who are considering the purchase of Original Issue Discount Notes with
those features should carefully examine the applicable pricing supplement and
should consult their own tax advisors with respect to those features since the
tax consequences to them with respect to OID will depend, in part, on the
particular terms and features of the notes.
Holders of Original Issue Discount Notes with a maturity upon issuance of
more than one year generally must include OID in income in advance of the
receipt of some or all of the related cash payments using the 'constant yield
method' described in the following paragraph. This method takes into account the
compounding of interest. The accruals of OID on an Original Issue Discount Note
will generally be less in the early years and more in the later years.
The amount of OID that holders must include in income if they are the
initial United States Holders of an Original Issue Discount Note is the sum of
the 'daily portions' of OID with respect to the note for each day during the
taxable year or portion of the taxable year in which they held that note
('accrued OID'). The daily portion is determined by allocating to each day in
any 'accrual period' a pro rata portion of the OID allocable to that accrual
period. The 'accrual period' for an Original Issue Discount Note may be of any
length and may vary in length over the term of the note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs on the first day or the final day of an accrual
period. The amount of OID allocable to any accrual period is an amount equal to
the excess, if any, of (a) the note's adjusted issue price at the beginning of
the accrual period times its yield to maturity, determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period, over (b) the aggregate of all qualified stated
interest allocable to the accrual period. OID allocable to a final accrual
period is the difference between the amount payable at maturity, other than a
payment of qualified stated interest, and the adjusted issue price at the
beginning of the final accrual period. The 'adjusted issue price' of a note at
the beginning of any accrual period is equal to its issue price increased by the
accrued OID for each prior accrual period (determined without regard to the
amortization of any acquisition or bond premium, as described below) and reduced
by any payments made on the note (other than qualified stated interest) on or
before the first day of the accrual period. Under these rules, holders will have
to include in income
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increasingly greater amounts of OID in successive accrual periods. We are
generally required to provide information returns stating the amount of OID
accrued on notes held of record by persons other than corporations and other
exempt holders.
Floating Rate Notes are generally subject to special OID rules. In the case
of an Original Issue Discount Note that is a Floating Rate Note, both the 'yield
to maturity' and 'qualified stated interest' will generally be determined solely
for purposes of calculating the accrual of OID as though the note will bear
interest in all periods at a fixed rate generally equal to the rate that would
be applicable to interest payments on the note on its date of issue or, in the
case of certain Floating Rate Notes, the rate that reflects the yield to
maturity that is reasonably expected for the note. Additional rules may apply if
the interest on a Floating Rate Note is based on more than one interest index or
the principal amount of the note is indexed in any manner. Holders who are
considering the purchase of floating rate Original Issue Discount Notes should
carefully examine the applicable pricing supplement and should consult their own
tax advisors regarding the United States federal income tax consequences to them
of holding and disposing of those Notes.
Holders may elect to treat all interest on any note 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. Holders must make this election for the taxable year in
which they acquired the note, and they may not revoke the election without the
consent of the Internal Revenue Service, or the IRS. Holders should consult with
their own tax advisors about this election.
Short-Term Notes
In the case of notes having a term of one year or less, or Short-Term Notes,
all payments, including all stated interest, will be included in the stated
redemption price at maturity and will not be qualified stated interest. As a
result, holders will generally be taxed on the discount in lieu of stated
interest. The discount will be equal to the excess of the stated redemption
price at maturity over the issue price of a Short-Term Note, unless a holder has
elected to compute this discount using tax basis instead of issue price. In
general, individual and certain other cash method United States Holders of
Short-Term Notes are not required to include accrued discount in their income
currently unless they elect to do so. However, these holders may be required to
include stated interest in income as the income is received. United States
Holders that report income for United States federal income tax purposes on the
accrual method and certain other United States Holders are required to accrue
discount on Short-Term Notes as ordinary income on a straight-line basis, unless
an election is made to accrue the discount according to a constant yield method
based on daily compounding. If holders are not required, and do not elect, to
include discount in income currently, any gain they realize on the sale,
exchange or retirement of a Short-Term Note will generally be ordinary income to
the holders to the extent of the discount accrued by them through the date of
sale, exchange or retirement. In addition, if they do not elect to currently
include accrued discount in income, they may be required to defer deductions for
a portion of their interest expense with respect to any indebtedness
attributable to the Short-Term Notes until maturity or other disposition in a
taxable transaction.
Market Discount
If holders purchase a note, other than an Original Issue Discount Note, for
an amount that is less than its stated redemption price at maturity, or, in the
case of an Original Issue Discount Note, its adjusted issue price, the amount of
the difference will be treated as 'market discount' for United States federal
income tax purposes, unless that difference is less than .25% of the remaining
amount multiplied by the number of remaining whole years to maturity or in the
case of an amortizing note, the weighted average maturity. Under the market
discount rules, holders will be required to treat any payment, other than
qualified stated interest, on, or any gain on the sale, exchange, retirement or
other disposition of, a note as ordinary income to the extent of the market
discount that they have not previously included in income and are treated as
having accrued on the note at the time of its payment or disposition. In
addition, holders may be required to defer, until the maturity of the note or
its earlier disposition in a
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taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness attributable to the note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity of the Note, unless holders elect
to accrue it on a constant interest method. Holders may elect to include market
discount in income currently as it accrues, on either a ratable or constant
interest method, in which case the rule described above regarding deferral of
interest deductions will not apply. Holders' elections to include market
discount in income currently, once made, applies to all market discount
obligations acquired by them on or after the first taxable year to which their
election applies and may not be revoked without the consent of the IRS.
Acquisition Premium & Amortizable Bond Premium
Holders who purchase an Original Issue Discount Note for an amount that is
greater than its adjusted issue price but equal to or less than the sum of all
amounts payable on the note after the purchase date other than payments of
qualified stated interest will be considered to have purchased that note at an
'acquisition premium.' Under the acquisition premium rules, the amount of OID
that a holder must include in gross income with respect to the note for any
taxable year will be reduced by the portion of the acquisition premium properly
allocable to that year.
Holders who purchase a note, including an Original Issue Discount Note, for
an amount in excess of the sum of all amounts payable on the note after the
purchase date other than qualified stated interest will be considered to have
purchased the note at a 'premium' and, if it is an Original Issue Discount Note,
will not be required to include any OID in income. Holders generally may elect
to amortize the premium over the remaining term of the Note on a constant yield
method as an offset to interest when includible in income under their regular
accounting method. In the case of instruments that provide for alternative
payment schedules, bond premium is calculated by assuming that (a) holders will
exercise or not exercise options in a manner that maximizes their yield, and (b)
we will exercise or not exercise options in a manner that minimizes holders'
yield, except that we will be assumed to exercise call options in a manner that
maximizes holders' yield. If holders do not elect to amortize bond premium, that
premium will decrease the gain or increase the loss they would otherwise
recognize on disposition of the note. Holders' election to amortize premium on a
constant yield method will also apply to all debt obligations held or
subsequently acquired by them on or after the first day of the first taxable
year to which the elections apply. Holders may not revoke their election without
the consent of the IRS.
Sale, Exchange and Retirement of Notes
Holders' tax basis in a note will, in general, be their cost for that note,
increased by OID, market discount or any discount with respect to a Short-Term
Note that they previously included in income, and reduced by any amortized
premium and any cash payments on the note other than qualified stated interest.
Upon the sale, exchange, retirement or other disposition of a note, they will
recognize gain or loss equal to the difference between the amount they realize
upon the sale, exchange, retirement or other disposition (less an amount equal
to any accrued qualified stated interest that they did not previously include in
income, which will be taxable as such) and the adjusted tax basis of the note.
Except as described above with respect to certain Short-Term Notes or with
respect to gain or loss attributable to changes in exchange rates as described
below with respect to certain Foreign Currency Notes (as defined below), with
respect to market discount, that gain or loss will be capital gain or loss.
Capital gains of individuals derived from capital assets held for more than one
year are eligible for reduced rates of taxation. The deductibility of capital
losses is subject to limitations.
Foreign Currency Notes
The following is a summary of certain United States federal income tax
consequences to holders who own a note denominated in a specified currency other
than the U.S. dollar, or a Foreign Currency Note.
Interest Payments. Holders who are cash basis taxpayers are required to
include in income the U.S. dollar value of interest payments they receive, based
on the exchange rate in effect on the date of receipt,
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regardless of whether they convert the interest payments into U.S. dollars. They
will not recognize exchange gain or loss upon the receipt of this payment.
If the holders are accrual basis taxpayers, they may determine the amount of
income they recognize with respect to the interest payment in accordance with
either of two methods. Under the first method, they will be required to include
in income for each taxable year the U.S. dollar value of the interest that has
accrued during the year, determined by translating the interest at the average
rate of exchange for the period or periods during which the interest accrued.
Under the second method, they may elect to translate interest income at the spot
rate on the last day of the accrual period, or last day of the taxable year in
the case of an accrual period that straddles their taxable year, or on the date
they receive the interest payment if the date is within five days of the end of
the accrual period. When they receive an interest payment on a note, they will
recognize ordinary income or loss in an amount equal to the difference between
the U.S. dollar value of the payment, determined by translating any foreign
currency received at the spot rate for the foreign currency on the date
received, and the U.S. dollar value of the interest income that they have
previously included in income with respect to the payment.
Foreign Currency Original Issue Discount Notes. OID on a note that is also a
Foreign Currency Note will be determined for any accrual period in the
applicable foreign currency and then translated into U.S. dollars in the same
manner as interest income accrued by a holder on the accrual basis, as described
above. Additionally, holders will recognize exchange gain or loss when the OID
is paid to the extent of the difference between the U.S. dollar value of the
accrued OID, determined in the same manner as for accrued interest, and the U.S.
dollar value of the payment, determined by translating any foreign currency
received at the spot rate for the foreign currency on the date of payment.
Because exchange rates may fluctuate, a United States holder of an Original
Issue Discount Note that is also a Foreign Currency Note may recognize a
different amount of OID income in each accrual period than would the holder of
an otherwise similar Original Issue Discount Note denominated in U.S. dollars.
All payments on an Original Issue Discount Note (other than payments of
qualified stated interest) will generally be viewed first as payments of
previously-accrued OID, and then as payments of principal.
Market Discount. Holders will determine market discount on Foreign Currency
Notes includible in income by translating the market discount determined in the
foreign currency into U.S. dollars at the spot rate on the date the Foreign
Currency Note is retired or the holders otherwise dispose of the note. If they
have elected to accrue market discount currently, then the amount they accrue is
determined in the foreign currency and then translated into U.S. dollars on the
basis of the average exchange rate in effect during the accrual period. They
will recognize exchange gain or loss with respect to market discount they accrue
currently using the approach applicable to the accrual of interest income as
described above.
Amortizable Bond Premium. Holders will compute bond premium on a Foreign
Currency Note in the applicable foreign currency. If they elect to amortize the
premium, the amortizable bond premium will reduce interest income in the
applicable foreign currency. At the time bond premium is amortized, they will
realize exchange gain or loss, which is generally ordinary income or loss, based
on the difference between spot rates at this time and at the time of acquisition
of the Foreign Currency Note. If they do not elect to amortize bond premium,
they will translate the bond premium, computed in the applicable foreign
currency, into U.S. dollars at the spot rate on the maturity date and the bond
premium will constitute a capital loss which may be offset or eliminated by
exchange gain.
Sale or Other Disposition of Foreign Currency Note. Holders' tax basis in a
Foreign Currency Note will be the U.S. dollar value of the foreign currency
amount they paid for the Foreign Currency Note determined at the time of their
purchase. If they purchase a note with previously owned foreign currency, they
will recognize exchange gain or loss at the time of purchase attributable to the
difference at the time of purchase, if any, between their tax basis in the
foreign currency and the fair market value of the note in U.S. dollars on the
date of purchase. This gain or loss will be ordinary income or loss. The
conversion of U.S. dollars to a foreign currency and the immediate use of that
foreign currency to purchase a Foreign Currency Note will not result in a
taxable gain or loss for a U.S. holder.
For purposes of determining the amount of any gain or loss they will
recognize on the sale, exchange, retirement or other disposition of a Foreign
Currency Note, the amount realized upon the sale, exchange, retirement or other
disposition will be the U.S. dollar value of the amount realized in foreign
currency, other than amounts attributable to accrued but unpaid interest not
previously included in the
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holder's income, determined at the time of the sale, exchange, retirement or
other disposition. In the case of a Foreign Currency Note that is traded on an
established securities market, a cash basis United States Holder, and if it so
elects, an accrual basis United States Holder will determine the U.S. dollar
value of the amount realized by translating such amount at the spot rate on the
settlement date of the sale. The election available to the accrual basis United
States Holders in respect of the purchase and sale of Foreign Currency Notes
traded on an established securities market must be applied consistently to all
debt instruments from year to year and cannot be changed without the consent of
the IRS.
Holders will recognize exchange gain or loss attributable to the movement in
exchange rates between the time of purchase and the time of sale, exchange,
retirement or other disposition of a Foreign Currency Note. This gain or loss
will be treated as ordinary income or loss. Holders' realization of this gain or
loss will be limited to the amount of overall gain or loss realized on their
sale of a Foreign Currency Note. Under proposed U.S. Treasury Regulations, if a
Foreign Currency Note is denominated in one of certain hyperinflationary
currencies, generally (i) holders would realize exchange gain or loss with
respect to movements in the exchange rate between the beginning and end of each
taxable year, or the shorter period, that they held the note and (ii) holders
would treat the exchange gain or loss as an addition or offset, respectively, to
the accrued interest income on, and an adjustment to the holder's tax basis in,
the Foreign Currency Note.
Exchange Gain or Loss With Respect to Foreign Currency. Holders' tax basis
in foreign currency received as interest on, or OID with respect to, or received
on the sale, exchange, retirement or other disposition of, a Foreign Currency
Note will be the U.S. dollar value thereof at the spot rate at the time they
receive the foreign currency. Gain or loss holders recognize on a sale,
exchange, retirement or other disposition of foreign currency will be ordinary
income or loss and will not be treated as interest income or expense, except to
the extent provided in U.S. Treasury Regulations or administrative
pronouncements of the IRS.
Indexed Notes
Holders who purchase an indexed note will depend on factors including the
specific index or indices used to determine indexed payments on the note and the
amount and timing of any contingent payments of principal and interest. Holders
who are considering purchasing indexed notes should carefully examine the
applicable pricing supplement and should consult their own tax advisor regarding
the United States federal income tax consequences of holding and disposing of
the notes.
NON-UNITED STATES HOLDERS
The following is a summary of certain United States federal income and
estate tax consequences that will apply to Non-United States Holders of notes.
It assumes that the notes are not subject to the rules of section 871(h)(4)(A)
of the Code, relating to interest payments that are determined by reference to
the income, profits, changes in the value of property or other attributes of the
debtor or a related party.
A 'Non-United States Holder' means a beneficial owner of a note that is:
a nonresident alien individual,
a foreign corporation,
a foreign partnership, or
an estate or trust that is not subject to United States federal income tax
on a net income basis on income or gain from the note.
U.S. Federal Withholding Tax
The current 30% U.S. federal withholding tax will generally not apply to any
payment of principal or interest, including OID, on notes, provided that:
the holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of our voting stock within the meaning
of the Code and U.S. Treasury Regulations,
the holder is not a controlled foreign corporation that is related to us
through stock ownership,
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the holder is not a bank whose receipt of interest on the notes is
described in the Code, and
either (a) the holder provides its name and address on an IRS Form W-8BEN
(or successor form), and certifies, under penalty of perjury, that it is
not a U.S. person or (b) a qualifying financial institution holding the
notes on the owner's behalf certifies, under penalty of perjury, that it
has received an IRS Form W-8BEN (or successor form) from the owner as the
beneficial owner and provides us with a copy.
In the case of Non-United States Holders who cannot satisfy the requirements
described above, payments of premium, if any, and interest including OID, made
to them will be subject to the 30% U.S. federal withholding tax, unless they
provide us with a properly executed (1) Form W-8BEN (or successor form) claiming
an exemption from, or reduction in, withholding under the benefit of a tax
treaty or (2) Form W-8ECI (or successor form) stating that interest paid on the
notes is not subject to withholding tax because it is effectively connected with
their conduct of a trade or business in the United States.
Except as discussed below, the current 30% U.S. federal withholding tax will
generally not apply to any gain or income that holders realize on the sale,
exchange, retirement or other disposition of notes.
U.S. Federal Estate Tax
Non-United States Holders' estates will generally not be subject to U.S.
federal estate tax on notes beneficially owned by them at the time of their
death, provided that (1) they do not own 10% or more of the total combined
voting power of all classes of our voting stock, within the meaning of the Code
and U.S. Treasury Regulations, and (2) interest on those notes would not have
been, if received at the time of their death, effectively connected with the
conduct by them of a trade or business in the United States.
U.S. Federal Income Tax
If holders are engaged in a trade or business in the United States and
premium, if any, or interest, including OID, on the notes is effectively
connected with the conduct of that trade or business, they will be subject to
U.S. federal income tax on that interest and OID on a net income basis, although
exempt from the 30% withholding tax, in the same manner as if they were a U.S.
person as defined under the Code. In addition, any holder that is a foreign
corporation, may be subject to a branch profits tax equal to 30% or lower
applicable treaty rate of its earnings and profits for the taxable year, subject
to adjustments that are effectively connected with its conduct of a trade or
business in the United States. For this purpose, the premium, if any, and
interest, including OID, on notes will be included in earnings and profits.
Any gain or income realized by holders on the disposition of a note will
generally not be subject to U.S. federal income or withholding tax unless:
that gain or income is effectively connected with the conduct of a trade or
business in the United States,
the holder is an individual who is present in the United States for 183
days or more in the taxable year of that disposition, and certain other
conditions are met, or
to the extent the gain is considered accrued but unpaid interest on the
note, the requirements described above are not satisfied.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information reporting requirements will apply to certain payments of
principal, interest, OID and premium paid on notes and to the proceeds of sale
of a note if a holder is a United States Holder and is not an exempt recipient,
such as a corporation. A backup withholding tax will apply to payments made to
holders who are United States Holders if they fail to provide their taxpayer
identification number or a certificate demonstrating their foreign or exempt
status or they fail to report in full dividend and interest income.
If holders are Non-United States Holders, no information reporting and
backup withholding will generally be required regarding payments that we make to
them, provided that we do not have actual
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knowledge that they are United States persons and we have received from them the
statement described above under 'U.S. Federal Withholding Tax.' In addition,
backup withholding and information reporting may apply to the proceeds of the
sale of a note made within the United States or conducted through certain U.S.
related financial intermediaries, unless the payor receives the statement
described above and does not have actual knowledge that the holder is a United
States person, as defined under the Code, or the holder otherwise establishes an
exemption. Any amounts withheld under the backup withholding rules may be
allowed as a refund or a credit against your U.S. federal income tax liability
provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
Under the terms of an agency agreement, dated as of December 21, 2001, as
amended and restated on April 1, 2002, we will offer the notes on a continuous
basis through ABN AMRO Incorporated, Banc of America Securities LLC, Banc One
Capital Markets, Inc., Barclays Capital Inc., BNP Paribas Securities Corp.,
Credit Suisse First Boston Corporation, Deutsche Bank Securities Inc., First
Union Securities, Inc., J.P. Morgan Securities Inc., Lehman Brothers Inc.,
Salomon Smith Barney Inc. and Utendahl Capital Partners, L.P., as agents. Each
of the agents has agreed to use its reasonable efforts to solicit offers to
purchase the notes. We will pay each agent a commission of from 0.010% to 0.750%
of the principal amount of each note sold through the agent. We will have the
sole right to accept offers to purchase notes and we may reject any such offer,
in whole or in part. Each agent shall have the right, in its discretion
reasonably exercised, without notice to us, to reject any offer to purchase
notes received by it, in whole or in part. We reserve the right to sell notes
directly on our own behalf, in which case no commission will be payable to an
agent.
We may also sell the notes to an agent as principal for its own account at
discounts to be agreed upon at the time of sale. That agent may resell these
notes to investors and other purchasers at a fixed offering price or at
prevailing market prices, or prices related thereto at the time of resale or
otherwise, as that agent determines and as we will specify in the applicable
pricing supplement. An agent may offer the notes it has purchased as principal
to other dealers. That agent may sell the notes to any dealer at a discount and,
unless otherwise specified in the applicable pricing supplement, the discount
allowed to any dealer will not be in excess of the discount that agent will
receive from us. After the initial public offering of notes that an agent is to
resell (in the case of notes to be resold at a fixed public offering price), the
agent may change the public offering price, the concession and the discount.
Unless otherwise provided in the applicable pricing supplement, we do not
intend to apply for the listing of the notes on a national securities exchange,
but have been advised by the agents that they intend to make a market in these
securities, as applicable laws and regulations permit. The agents are not
obligated to do so, however, and the agents may discontinue making a market at
any time without notice. No assurance can be given as to the liquidity of any
trading market for these securities.
We estimate that our total expenses for the offering, excluding underwriting
commissions or discounts, will be approximately $1,350,000.
Some of the agents or their affiliates have from time to time provided, and
may in the future provide, investment banking and general financing and banking
services to us and our affiliates. To the extent that the proceeds of any
offering of the notes are used to repay indebtedness owed to affiliates of the
agents, such offerings will be made pursuant to Rule 2710(c)(8) of the Conduct
Rules of the National Association of Securities Dealers, Inc. One of the agents
for the notes, Banc One Capital Markets, Inc., is an affiliate of the trustee.
First Union Securities, Inc. ('FUSI'), a subsidiary of Wachovia Corporation,
conducts its investment banking, institutional and capital markets businesses
under the trade name of Wachovia Securities. Any references to 'Wachovia
Securities' in this prospectus supplement, however, do not include Wachovia
Securities, Inc., a separate broker-dealer subsidiary of Wachovia Corporation
and sister affiliate of FUSI which may or may not be participating as a separate
selling dealer in the distribution of the notes.
S-27
In connection with an offering of the notes, the agents may purchase and
sell notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales.
Short sales involve the sale by the agents of a greater number of notes
than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the
notes while the offering is in progress.
The agents also may impose a penalty bid. This occurs when a particular
agent repays to the agents a portion of the underwriting discount received by it
because the agents have repurchased notes sold by or for the account of such
agent in stabilizing or short covering transactions.
These activities by the agents may stabilize, maintain or otherwise affect
the market price of the notes. As a result, the price of the notes may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the agents at any time.
These transactions may be effected in the over-the-counter market or otherwise.
Each agent may be deemed to be an 'underwriter' within the meaning of the
Securities Act. We have agreed to indemnify each agent against liabilities under
the Securities Act, or contribute to payments which the agents may be requested
to make in that respect. We will reimburse the agents for customary legal and
other expenses incurred by them in connection with the offer and sale of the
notes.
Unless otherwise indicated in the applicable pricing supplement, the
purchase price of the notes will be required to be paid in immediately available
funds in New York, New York.
LEGAL MATTERS
David S. Carroll, Group Counsel of American Express Company, World Financial
Center, New York, New York, will act as legal counsel to American Express Credit
Corporation. Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York,
New York, will act as legal counsel to the agents. Cleary, Gottlieb, Steen &
Hamilton has from time to time acted as counsel for American Express Company,
American Express Credit Corporation and their respective subsidiaries and
affiliates and may do so in the future.
EXPERTS
The financial statements which we have incorporated in this prospectus
supplement by reference to our Annual Report on Form 10-K for the year ended
December 31, 2001 have been audited by Ernst & Young LLP, 787 Seventh Avenue,
New York, New York 10019, independent certified public accountants, to the
extent indicated in their report included in the Annual Report. We have
incorporated by reference the financial statements in this prospectus supplement
in reliance upon the report of that firm, given on their authority as experts in
accounting and auditing.
Ernst & Young has given and not withdrawn their written consent to the
incorporation by reference of their report dated January 28, 2002 from the
Annual Report on our audited financial statements for the financial year ended
December 31, 2001.
S-28
PROSPECTUS
$8,000,000,000
AMERICAN EXPRESS CREDIT CORPORATION
DEBT SECURITIES
WARRANTS TO PURCHASE DEBT SECURITIES
-------------------
American Express Credit Corporation may offer from time to time in one or
more series:
unsecured debt securities; and
warrants to purchase unsecured debt securities.
We may offer any combination of these securities at prices and on terms to
be determined at or prior to the time of sale.
All of these securities will have an initial offering price no greater than
$8,000,000,000 in the aggregate, although we may increase this amount in the
future.
We may offer and sell securities to or through underwriters, dealers and
agents or directly to purchasers. The names of any underwriters or agents
involved in the sale of securities and their compensation will be described in
an accompanying prospectus supplement.
This prospectus may not be used to consummate a sale of these securities
unless accompanied by a supplement to this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------
The date of this prospectus is March 25, 2002.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission, which we refer to as the SEC, using a shelf
registration process. Under this process, we may sell from time to time any
combination of the securities described in this prospectus for an initial
purchase price of up to $8,000,000,000.
This prospectus describes the general terms of these securities and the
general manner in which we will offer the securities. Each time these securities
are sold, this prospectus will be accompanied by a prospectus supplement that
describes the specific terms of these securities and the specific manner in
which they may be offered. You should read the prospectus supplement and this
prospectus, along with the documents incorporated by reference and described
under the heading 'WHERE YOU CAN FIND MORE INFORMATION', before making your
investment decision.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, current reports, and other information with the
SEC. You may read and copy any document we file at the SEC's public reference
room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our SEC filings are also available to
the public from the SEC's web site at http://www.sec.gov.
The SEC allows us to incorporate by reference the information we file with
the SEC, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this prospectus.
Information that we file later with the SEC will automatically update and
supersede this information. This means that you must look at all of the SEC
filings that we incorporate by reference to determine if any of the statements
in this prospectus or in any documents previously incorporated by reference have
been modified or superseded. We incorporate by reference into this prospectus
the following documents:
Annual Report on Form 10-K for the year ended December 31, 2000.
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001.
Current Reports on Form 8-K dated December 21, 2001, January 11, 2002 and
March 19, 2002.
All documents filed by us under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 before the termination of this offering.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address or number:
American Express Credit Corporation
One Christina Centre
301 North Walnut Street
Wilmington, Delaware 19801
Attention: President
(302) 594-3350
The financial statements which we have incorporated into this prospectus by
reference to the annual report on Form 10-K for the year ended December 31, 2000
have been audited by Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, independent certified public accountants, to the extent indicated in
their report included in the annual report. We have incorporated by reference
the financial statements in this prospectus in reliance upon the report of that
firm, given on their authority as experts in accounting and auditing.
2
AMERICAN EXPRESS CREDIT CORPORATION
We are a wholly-owned subsidiary of American Express Travel Related Services
Company, Inc., or TRS, which is a wholly-owned subsidiary of American Express
Company.
We are primarily engaged in the business of financing most non-interest
bearing charge card receivables arising from the use of the American Express'r'
Card, including the American Express'r' Gold Card, Platinum Card'r' and
Corporate Card issued in the United States, and in designated currencies outside
the United States. We also finance certain interest-bearing revolving credit
receivables arising from the use of the Optima'r' Card and other revolving
credit cards issued by TRS. In this prospectus we refer to the American Express
Card and the Optima Card as the Card. TRS provides a variety of products and
services, including among others, a global card network, issuing and processing
services, the Card, consumer and corporate lending and banking products, the
American Express'r' Travelers Cheque and other stored value products, business
expense management products and services, corporate and consumer travel products
and services, magazine publishing and merchant transaction processing,
point-of-sale and back office products and services. The Card is issued by TRS
and certain of its subsidiaries (which we refer to as the Card issuers).
We finance Card receivables by purchasing them from the Card issuers,
without recourse, pursuant to receivables agreements, which provide that amounts
resulting from unauthorized charges (for example, those made with a lost or
stolen Card) are not eligible for purchase by us. If the unauthorized nature of
the charge is discovered after purchase by us, the Card issuer repurchases the
charge from us at its face amount.
We generally purchase non-interest-bearing charge Card receivables at face
amount less a specified discount agreed upon from time to time and
interest-bearing revolving credit receivables at face amount. The receivables
agreements generally require that non-interest-bearing receivables be purchased
at discount rates which yield to us earnings of not less than 1.25 times our
fixed charges on an annual basis, which we sometimes refer to in this prospectus
as the fixed charge coverage ratio. The receivables agreements also provide that
consideration will be given from time to time to revising the discount rate
applied to purchases of new non-interest bearing receivables to reflect changes
in money market interest rates or significant changes in the collectibility of
receivables. We generally purchase new groups of Card receivables net of reserve
balances applicable to them.
The Card issuers, at their expense and as our agents, perform accounting,
clerical and other services necessary to bill and collect all Card receivables
that we own. The receivables agreements provide that the credit standards used
to determine whether a Card is to be issued to an applicant may not be
materially reduced and that the policy as to the cancellation of Cards for
credit reasons may not be materially liberalized without our prior written
consent.
The indenture under which the securities described in this prospectus are to
be issued states that we will not engage in any transaction with American
Express Company or its affiliates unless on a basis not materially less
favorable to us than would be the case if we had effected such transaction with
a non-related party.
American Express Company, as the parent company of TRS, has agreed with us
that it will take all necessary steps to assure performance of certain of TRS'
obligations under the receivables agreement between TRS and us. The securities
are solely our obligations and are not guaranteed under the receivables
agreements or otherwise by American Express Company or the Card issuers. The
receivables agreements may be terminated at any time by either the Card issuer
or us, generally with little or no notice. Additionally, the Card issuers and we
may agree to reduce the discount rate in the receivables agreements to result in
less than the 1.25 fixed charge coverage ratio, which would result in lower
discount rates, and, consequently, lower revenues and net income for us.
Our executive offices are located at One Christina Centre, 301 North Walnut
Street, Wilmington, Delaware 19801-2919 (telephone number: 302-594-3350).
3
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our historical ratios of earnings to fixed charges
and those of American Express Company for the periods indicated:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
NINE MONTHS ENDED -----------------------------------
SEPTEMBER 30, 2001 2000 1999 1998 1997 1996
------------------ ---- ---- ---- ---- ----
American Express Credit
Corporation....................... 1.31 1.30 1.30 1.31 1.29 1.30
American Express Company(1)......... 1.51 2.25 2.48 2.24 2.22 2.17
</Table>
- ---------
(1) The securities described in this prospectus are not obligations of American
Express Company or the Card issuers.
Under our receivables agreements, the discount rate for new non-interest
bearing receivables that we acquire must be sufficient to yield us earnings of
not less than 1.25 times our fixed charges on an annual basis.
In computing our ratio of earnings to fixed charges, 'earnings' consist of
net income plus income taxes and interest expense, amortization of debt
discount, premium and related expenses. 'Fixed charges' consist of interest
expense, amortization of debt discount, premium and related expenses. Gross
rentals on long-term leases were minimal in amount in each of the periods shown.
Since the rate of discount on non-interest bearing receivables that we purchased
is established by the receivables agreements to enable us to achieve at least a
predetermined ratio of earnings to fixed charges, a pro forma ratio of earnings
to fixed charges would not be meaningful.
In computing American Express Company's ratio of earnings to fixed charges,
'earnings' consist of pretax income from continuing operations plus interest
expense, amortization of capitalized interest, the net loss of affiliates
accounted for at equity whose debt is not guaranteed by American Express
Company, the minority interest in the earnings of majority-owned subsidiaries
with fixed charges, and the interest component of rental expense less
undistributed net income of affiliates accounted for at equity. 'Fixed Charges'
consist of interest expense, capitalized interest costs and the interest
component of rental expense. Interest expense in the above computation includes
interest expense related to the international banking operations of American
Express Company and Cardmember lending activities of TRS, which is netted
against interest and dividends and Cardmember lending net finance charge
revenue, respectively, in the Consolidated Statement of Income of American
Express Company.
USE OF PROCEEDS
Unless otherwise indicated in the prospectus supplement accompanying this
prospectus, we will use the net proceeds from the sale of the securities to
reduce short-term senior debt incurred primarily to finance the purchase of
receivables, and, pending such use, we may invest a portion of the proceeds in
short-term investments.
We expect to incur additional debt in the future to carry on our business.
The nature and amount of our short-term, medium-term and long-term debt and the
proportionate amount of each can be expected to fluctuate as a result of market
conditions and other factors.
DESCRIPTION OF DEBT SECURITIES
The debt securities covered by this prospectus will be our direct unsecured
obligations. The debt securities will be senior debt securities, that rank on an
equal basis with all our other senior unsecured and unsubordinated debt.
The following description briefly sets forth certain general terms and
provisions of the debt securities. The prospectus supplement for a particular
series of debt securities will describe the particular terms of the debt
securities we offer and the extent to which such general terms and provisions
may apply to that particular series of debt securities.
4
GENERAL
The debt securities will be issued under an indenture, dated as of
September 1, 1987, between us and U.S. Bank Trust National Association (as
successor to Security Pacific National Trust Company (New York)), as trustee.
The indenture has been supplemented and amended by the following supplemental
indentures:
a first supplemental indenture, dated as of November 1, 1987, between us
and Bank of Montreal Trust Company, as trustee;
a second supplemental indenture, dated as of January 15, 1988, between us
and The First National Bank of Boston, as trustee;
a third supplemental indenture, dated as of April 1, 1988, between us and
The Chase Manhattan Bank (as successor to Manufacturers Hanover Trust
Company), as trustee;
a fourth supplemental indenture, dated as of May 1, 1988, between us and
Trust Company Bank, as trustee;
a fifth supplemental indenture, dated as of March 28, 1989, between us and
The Bank of New York, as trustee;
a sixth supplemental indenture, dated as of May 1, 1989, between us and
Bank of Montreal Trust Company, as trustee;
a seventh supplemental indenture, dated as of July 28, 1995, between the
Company and The Chase Manhattan Bank; and
an eighth supplemental indenture dated as of December 21, 2001 between us
and Bank One Trust Company, N.A., as trustee.
When we refer to the indenture in this prospectus, we mean the indenture as
it has been supplemented.
A form of the indenture has been filed with the SEC and is incorporated by
reference as an exhibit to the registration statement on Form S-3
(No. 333-84320) under the Securities Act of 1933 of which this prospectus forms
a part.
The following summaries of certain provisions of the indenture are not
complete and are qualified in their entirety by reference to the indenture. You
should read the indenture for further information. Where appropriate, we use
parentheses to refer you to the particular sections of the indenture. Any
reference to particular sections or defined terms of the indenture in any
statement under this heading qualifies the entire statement and incorporates by
reference the applicable definition into that statement.
The debt securities will be unsecured and will rank on an equal basis with
all our other unsecured and unsubordinated indebtedness. (Section 12.09) The
indenture does not limit the amount of debt securities which we may issue.
(Section 3.01) This prospectus relates to debt securities and warrants, the
initial offering price of which aggregate up to $8,000,000,000 or the equivalent
amount in foreign denominated currencies. We will offer them to the public on
terms determined by market conditions at the time of sale. We may issue the debt
securities and warrants from time to time in one or more series with the same or
different terms. We may not issue all debt securities of the same series at the
same time. All debt securities of the same series need not bear interest at the
same rate or mature on the same date. The indenture permits us to appoint a
different trustee for each series of debt securities. (Section 8.09) If there is
at any time more than one trustee under the indenture, the term trustee means
each trustee and will apply to each trustee only with respect to those series of
debt securities for which it is serving as trustee.
We may sell the debt securities at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. The applicable prospectus supplement will
describe the Federal income tax consequences and special considerations
applicable to any such series of debt securities.
Terms Specified in the Prospectus Supplement
You should read the prospectus supplement that accompanies this prospectus
for information with respect to the debt securities being offered, including:
the designation, aggregate principal amount and authorized denominations of
the debt securities;
5
the percentage of the principal amount at which we will sell the debt
securities;
the maturity date or the method for determining the maturity date;
the terms for exchange, if any, of the debt securities;
the interest rate or rates, if any, or the method for computing such rate
or rates;
the interest payment dates or the method for determining such dates;
whether the debt securities will be issued in fully registered form or in
bearer form or any combination thereof;
whether the debt securities will be issued in the form of one or more
global securities and whether such global securities are to be issuable in
a temporary global form or permanent global form;
if other than U.S. dollars, the currency or currencies in which debt
securities may be denominated and purchased and the currency or currencies
in which principal, premium, if any, and any interest may be payable;
if the currency for which debt securities may be purchased or in which
principal, premium, if any, and any interest may be payable is at the
election of us or the purchaser, the manner in which such an election may
be made and the terms of such election;
any mandatory or optional sinking fund, redemption or other similar terms;
any index or other method used to determine the amount of principal,
premium, if any, and interest, if any, on the debt securities;
if a trustee other than U.S. Bank Trust National Association is named for
the debt securities, the name of such trustee;
any material tax consequences;
any material provisions of the indenture that do not apply to the debt
securities; and
any other specific terms of the debt securities.
Payment
Unless otherwise specified in the applicable prospectus supplement,
principal and premium and interest, if any, on the debt securities will be
payable initially at the principal corporate trust office of the trustee. At our
option, payment of interest may be made, subject to collection, by check mailed
to the holders of record at the address registered with the trustee.
(Section 12.02)
If the principal of or premium, if any, and interest, if any, on any series
of debt securities is payable in foreign currencies or if debt securities are
sold for foreign currencies the restrictions, elections, tax consequences,
specific terms and other information with respect to such debt securities will
be described in the applicable prospectus supplement.
Global Securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with or on behalf
of a depositary identified in the applicable prospectus supplement. Global
securities will be issued in registered form and may be in either temporary or
permanent form.
The related prospectus supplement will describe the specific terms of the
depositary arrangement with respect to that series of debt securities. We
anticipate that the following provisions will apply to all depositary
arrangements.
Unless otherwise specified in an applicable prospectus supplement, global
securities to be deposited with or on behalf of a depositary will be registered
in the name of such depositary or its nominee. Upon the issuance of a global
security, the depositary for such global security will credit the respective
principal amounts of the debt securities represented by such global security to
the participants that have accounts with such depositary or its nominee.
Ownership of beneficial interests in such global securities will be limited to
participants in the depositary or persons that may hold interests through these
participants.
6
A participant's ownership of beneficial interests in these global securities
will be shown on the records maintained by the depositary or its nominee. The
transfer of a participant's beneficial interest will only be effected through
these records. A person whose ownership of beneficial interests in these global
securities is held through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a global security.
So long as the depositary for a global security, or its nominee, is the
registered owner of such global security, we will consider such depositary or
such nominee, to be the sole owner or holder of the debt securities represented
by such global security. Except as described below, owners of beneficial
interests in global securities will not be entitled to have debt securities of
the series represented by such global security registered in their names and
will not receive or be entitled to receive physical delivery of debt securities
of such series in definitive form. We will not consider owners of beneficial
interests in global securities to be the owners or holders of those debt
securities under the indenture.
We will make payment of principal of, premium, if any, and any interest on
global securities to the depositary or its nominee, as the case may be, as the
registered owner or the holder of the global security. Neither we, the trustee,
any paying agent nor the securities registrar for such debt securities will have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in a global security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. (Section 3.09)
We expect that the depositary for a permanent global security, upon receipt
of any payment in respect of a permanent global security, will immediately
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global security
as shown on the records of such depositary. We also expect that payments by
participants to owners of beneficial interests in such global security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in 'street name', and will be the
responsibility of such participants.
We may at any time and in our sole discretion determine not to have any debt
securities represented by one or more global securities. In such event, we will
issue debt securities in definitive form in exchange for all of the global
securities representing such debt securities. (Section 3.05)
If set forth in the applicable prospectus supplement, an owner of a
beneficial interest in a global security may, on terms acceptable to us and the
depositary, receive debt securities of such series in definitive form. In any
such instance, an owner of a beneficial interest in a global security will be
entitled to physical delivery in definitive form of debt securities of the
series represented by such global security equal in principal amount to such
beneficial interest and to have such debt securities registered in its name.
Registered securities may be exchangeable for other debt securities of the
same series, registered in the same name, for the same aggregate principal
amount in authorized denominations and will be transferable at any time or from
time to time at the office of the trustee. The holder will not pay a service
charge for any such exchange or transfer except for any tax or governmental
charge incidental thereto. (Section 3.05)
COVENANTS RELATING TO US
The covenants in the indenture include the following:
Transactions With Affiliates. Neither we nor any of our subsidiaries will
engage in any transaction with any of our affiliates unless such transaction is
on a basis not materially less favorable to us or our subsidiary than would be
the case if we had effected such transaction with a non-related third party.
(Section 12.08) Our affiliates are defined as any corporation controlling,
controlled by or under common control with us. (Section 1.01) Our subsidiaries
means any corporation of which we own or control, directly or indirectly, more
than 50% of each class of its voting stock. (Section 1.01)
Maintenance Of Net Worth. The indenture requires that we shall at all times
maintain a net worth of at least $50,000,000. (Section 12.10) Net worth is
defined in the indenture to include, at any date, the aggregate stated
7
value of all classes of our capital stock plus the aggregate amount of the
consolidated surplus (whether capital, earned or other) of us and our
consolidated subsidiaries. (Section 1.01)
Restrictions As To Liens. Neither we nor any of our subsidiaries will
create, assume or allow to exist any mortgage, pledge, encumbrance, lien or
charge of any kind upon our or their properties or assets (whether now owned or
hereafter acquired), or acquire or agree to acquire property or assets under any
conditional sale agreement or other title retention agreement. However, we may
incur or allow to exist on our and our subsidiaries' property the following
types of liens:
liens for taxes and governmental charges not yet due or being contested in
good faith;
liens incidental to the conduct of our business not incurred in connection
with the issuance or assumption of debt;
liens on our deposits or on a subsidiary's deposits with banks, in
accordance with customary and established banking practice, in connection
with our providing financial accommodations to any person in the ordinary
course of business;
liens securing obligations of a subsidiary to us or to another subsidiary;
certain liens on after acquired tangible property and purchase money liens;
and
extensions, renewals or replacements of any of such liens.
(Section 12.11)
However, we and any subsidiary may create, assume or suffer to exist a lien
or charge upon any of our assets in connection with the issuance or assumption
of secured debt which would otherwise be subject to the foregoing restrictions,
provided that the aggregate amount of all such secured debt does not exceed 10%
of our borrowing base. (Section 12.11) Borrowing base means the sum of (i) the
outstanding debt owed by us to American Express Company or a subsidiary of
American Express Company which has been subordinated to the debt securities plus
(ii) net worth as defined above. (Section 1.01) Debt is defined as all
obligations which in accordance with generally accepted accounting principles
would be included in determining total liabilities on the liabilities side of
our balance sheet and all obligations guaranteeing debt of any third person.
(Section 1.01)
Ownership Of Our Capital Stock. American Express Company will at all times
own, directly or indirectly, 100% of our common stock and shares representing
not less than 80% of the total combined voting power of all shares issued by us
having ordinary voting rights. (Section 12.12)
Release From Covenants. Except as otherwise set forth in the prospectus
supplement relating to any series of the debt securities, the covenants
described above shall cease to be binding on us from and after the ninety-first
day following our deposit with the trustee, in trust, of sufficient cash and/or
government securities to pay and discharge the principal and premium, if any,
and interest, if any, to the date of maturity of such debt securities.
(Section 12.16)
MODIFICATION OF THE INDENTURE
We may make modifications and amendments of the indenture with respect to
one or more series of debt securities by supplemental indenture without the
consent of the holders of such debt securities in the following instances:
to evidence the succession of another corporation to us and the assumption
by such successor of our obligations under the indenture;
to add to or modify our covenants or events of default for the benefit of
the holders of the debt securities;
to establish the form or terms of the debt securities of any series;
to cure any ambiguity or make any other provisions with respect to matters
or questions arising under the indenture which will not adversely affect
the interests of the holders in any material respect;
to modify, eliminate or add to the provisions of the indenture as necessary
to qualify it under any applicable federal law;
to name, by supplemental indenture, a trustee other than U.S. Bank Trust
National Association for a series of debt securities;
8
to provide for the acceptance of appointment by a successor trustee;
to add to or modify the provisions of the indenture to provide for the
denomination of debt securities in foreign currencies; or
to supplement any provisions of the indenture as is necessary to permit or
facilitate the defeasance and discharge of any debt securities as described
in this prospectus.
Any other modifications or amendments of the indenture by way of
supplemental indenture require the consent of the holders of 66 2/3% in
principal amount of the debt securities at the time outstanding of each series
affected. However, no such modification or amendment may, without the consent of
the holder of each debt security affected thereby:
modify the terms of payment of principal or interest;
reduce the percentage of holders of debt securities necessary to modify or
amend the indenture or waive our compliance with any restrictive covenant;
or
subordinate the indebtedness evidenced by the debt securities to any of our
indebtedness.
(Sections 11.01 and 11.02)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The indenture provides holders of debt securities with remedies if we fail
to perform specific obligations, such as making payments on the debt securities.
You should review these provisions carefully in order to understand what
constitutes an event of default under the indenture.
Unless otherwise stated in the prospectus supplement, an event of default
with respect to any series of debt securities will be:
default in the payment of the principal of, or premium, if any, on any debt
security of such series when it is due and payable;
default in making a sinking fund payment, if any, when due and payable;
default for 30 days in the payment of an installment of interest, if any,
on any debt security of such series;
failure of American Express Company, directly or indirectly, to own 100% of
our common stock and to own shares representing at least 80% of the total
combined voting power of all of our issued shares having ordinary voting
rights;
default for 60 days after written notice to us in the performance of any
other covenant in respect of the debt securities of such series;
certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of us or our property;
an event of default with respect to any other series of debt securities
outstanding under the indenture or as defined in any other indenture or
instrument under which we have outstanding any indebtedness for borrowed
money, as a result of which indebtedness of us of at least $10,000,000
principal amount shall have been accelerated and such acceleration shall
not have been annulled within 15 days after written notice thereof; and
and any other event of default provided in or pursuant to the applicable
resolution of our Board of Directors or to the supplemental indenture under
which such series of debt securities is issued.
(Section 7.01)
An event of default with respect to a particular series of debt securities
issued under the indenture does not necessarily constitute an event of default
with respect to any other series of debt securities. The trustee may withhold
notice to the holders of any series of debt securities of any default with
respect to such series (except in the payment of principal, premium or interest)
if it considers such withholding to be in the interests of such holders.
(Section 8.02)
If an event of default with respect to any series of debt securities has
occurred and is continuing, the trustee or the holders of 25% in aggregate
principal amount of the debt securities of such series may declare the
9
principal (or in the case of discounted debt securities, such portion thereof as
may be described in the prospectus supplement) of all the debt securities of
such series to be due and payable immediately. (Section 7.02)
The indenture contains a provision entitling the trustee to be indemnified
by the holders before exercising any right or power under the indenture at the
request of any of the holders. (Section 8.03) The indenture provides that the
holders of a majority in principal amount of the outstanding debt 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 upon the trustee with respect to the debt securities of such series.
(Section 7.12) The right of a holder to institute a proceeding with respect to
the indenture is subject to certain conditions precedent including notice and
indemnity to the trustee. However, the holder has an absolute right to receipt
of principal and premium, if any, at stated maturity and interest on any overdue
principal or to institute suit for the enforcement thereof. (Sections 7.07 and
7.08)
The holders of not less than a majority in principal amount of the
outstanding debt securities of any series under the indenture may on behalf of
the holders of all the debt securities of such series waive any past defaults
except (a default in payment of the principal of or premium, if any, or
interest, if any, on any debt security of such series and a default in respect
of a covenant or provision of the indenture which cannot be amended or modified
without the consent of the holder of each debt security affected.
(Section 7.13)
We are required by the indenture to furnish to the trustee annual statements
as to the fulfillment of our obligations under the indenture. (Sections 9.04
and 12.06)
CONCERNING THE TRUSTEE
U.S. Bank National Association is an affiliate of the trustee and has
extended lines of credit to us, and, as either principal or fiduciary, also owns
or may own debt we have issued. We have other customary banking relationships
with U.S. Bank National Association in the ordinary course of business, and
American Express Company has or may have similar customary banking
relationships. If a bank or trust company other than U.S. Bank Trust National
Association is to act as trustee for a series of debt securities, the applicable
prospectus supplement will provide information concerning such other trustee.
DEFEASANCE OF THE INDENTURE AND DEBT SECURITIES
The indenture permits us to be discharged from our obligations under the
indenture and the debt securities if we comply with the following procedures.
This discharge from our obligations is referred to in this prospectus as
defeasance. (Section 6.02)
Unless the applicable prospectus supplement states otherwise, if we deposit
with the trustee sufficient cash and/or government securities to pay and
discharge the principal and premium, if any, and interest, if any, to the date
of maturity of such series of debt securities, then from and after the
ninety-first day following such deposit:
we will be deemed to have paid and discharged the entire indebtedness on
the debt securities of any series; and
our obligations under each indenture with respect to the debt securities of
such series will cease to be in effect (except for certain obligations to
register the transfer or exchange of the debt securities of such series,
replace stolen, lost or mutilated debt securities of such series, maintain
paying agencies and hold moneys for payment in trust).
The indenture also provides that the defeasance will not be effective unless
we deliver to the trustee a written opinion of our counsel to the effect that
holders of the debt securities subject to defeasance will not recognize gain or
loss on such debt securities for federal income tax purposes solely as a result
of such defeasance and that such holders will be subject to federal income tax
in the same amounts and at the same times as would be the case if the defeasance
had not occurred. (Section 6.02)
Following such defeasance, holders of the applicable debt securities would
be able to look only to the trust fund for payment of principal and premium, if
any, and interest, if any, on their debt securities.
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DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of debt securities. We may issue
warrants independently or together with any debt securities offered by any
prospectus supplement. The warrants may be attached to or separate from such
debt securities. Warrants will be issued under warrant agreements to be entered
into between us and a bank or trust company, as warrant agent. The warrant agent
will act solely as our agent in connection with the warrants and will not assume
any obligation or relationship of agency or trust for or with any holders of or
beneficial owners of warrants. A copy of the form of warrant agreement,
including the form of warrant certificate representing the warrants, is filed as
an exhibit to the registration statement of which this prospectus is a part. The
following summary of certain provisions of the form of warrant agreement and the
warrants does not purport to be complete and further terms will be described in
the applicable prospectus supplement.
The applicable prospectus supplement that accompanies this prospectus will
describe the following terms and other information with respect to the warrants
that may be offered:
the offering price;
the currency or currencies for which warrants may be purchased;
the designation, aggregate principal amount, currency or currencies and
terms of the debt securities purchasable upon exercise of the warrants;
if applicable, the designation and terms of the debt securities with which
the warrants are issued and the number of warrants issued with each such
debt security;
if applicable, the date on and after which the warrants and the related
debt securities will be separately transferable;
the principal amount of debt securities purchasable upon exercise of one
warrant and the price and currency or currencies at which such principal
amount of debt securities may be purchased upon such exercise;
the date on which the right to exercise the warrants shall commence and the
date on which such right shall expire;
a discussion of certain federal income tax considerations; and
any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
Prior to the exercise of their warrants, holders of warrants will not have
any of the rights of holders of the debt securities purchasable upon such
exercise, including the right to receive payments of principal of, premium, if
any, or interest, if any, on the debt securities purchasable upon such exercise
or to enforce covenants in the indenture.
PLAN OF DISTRIBUTION
We may sell the debt securities from time to time in one or more of the
following ways:
through underwriters or dealers;
directly to one or more purchasers;
through agents; or
through a combination of any such methods of sale.
The prospectus supplement with respect to the offered securities will set
forth the terms of the offering, including:
the name or names of any underwriters or agents;
the purchase price of such securities and the proceeds to us from such
sale;
any underwriting discounts or sales agents' commissions and other items
constituting underwriters' or agents' compensation;
any initial public offering price;
any discounts or concessions allowed or reallowed or paid to dealers; and
11
any securities exchanges on which such securities may be listed.
Only underwriters or agents named in the prospectus supplement are deemed to
be underwriters or agents in connection with the securities offered thereby.
If underwriters are used in the sale, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The obligations of
the underwriters to purchase such securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
securities of the series offered by the prospectus supplement relating to such
series if any of such securities are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
We may also sell securities directly or through agents we designate from
time to time. Any agent involved in the offering and sale of the offered
securities will be named in the applicable prospectus supplement, and any
commissions payable by us to such agent will be set forth in the applicable
prospectus supplement. Unless otherwise indicated in such prospectus supplement,
any such agent will be acting on a best efforts basis for the period of its
appointment.
If so indicated in a prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers by certain institutional investors to
purchase such securities which offers provide for payment and delivery on a
future date specified in such prospectus supplement. There may be limitations on
the minimum amount which may be purchased by any such institutional investor or
on the portion of the aggregate principal amount of the particular securities
which may be sold pursuant to such arrangements.
Institutional investors to which such offers may be made, when authorized,
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and such other
institutions as may be approved by us. The obligations of any such purchasers
pursuant to such delayed delivery and payment arrangements will only be subject
to the following two conditions:
the purchase by an institution of the particular securities will not at the
time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject, and
if the particular securities are being sold to underwriters, we shall have
sold to such underwriters the total principal amount of such securities
less the principal amount thereof covered by such arrangements.
Underwriters will not have any responsibility in respect of the validity of
such arrangements or the performance of us or such institutional investors
thereunder.
We estimate that the total expenses for the offering, excluding underwriting
or agency commissions or discounts, will be approximately $1,800,000.
In connection with an offering, the underwriters may purchase and sell
securities in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by underwriters of a greater number of
securities than they are required to purchase in an offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the securities while an
offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased securities
sold by or for the account of the underwriter in stabilizing or short-covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the securities. As a result, the price of the
securities may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be offered on an exchange or
automated quotation system, if the securities are listed on that exchange or
admitted for trading on that automated quotation system, or in the
over-the-counter market or otherwise.
Underwriters and agents may be entitled under agreements entered into with
us to indemnification by us against civil liabilities, including liabilities
under the Securities Act of 1933, or to contribution with respect to payments
which the underwriters or agents may be required to make in that respect.
Underwriters and agents or
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their affiliates may engage in transactions with, or perform services for, us
and our affiliates in the ordinary course of business.
LEGAL MATTERS
The validity of the securities will be passed upon for us by
David S. Carroll, Counsel of American Express Credit Corporation,
200 Vesey Street, World Financial Center, New York, New York. Unless otherwise
stated in the applicable prospectus supplement, certain legal matters will be
passed upon for any underwriters or agents by Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York. Cleary, Gottlieb, Steen &
Hamilton has from time to time acted as counsel for American Express Company,
American Express Credit Corporation and their respective subsidiaries and
affiliates and may do so in the future.
EXPERTS
Our consolidated financial statements and schedule included in our Annual
Report on Form 10-K for the year ended December 31, 2000 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report included
in the Annual Report on Form 10-K and incorporated in this prospectus by
reference. We have incorporated by reference into our prospectus our
consolidated financial statements and schedule in reliance upon such report
given upon the authority of Ernst & Young as experts in accounting and auditing.
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$6,000,000,000
AMERICAN EXPRESS CREDIT CORPORATION
MEDIUM-TERM SENIOR NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
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PROSPECTUS SUPPLEMENT
SEPTEMBER 5, 2002
(INCLUDING PROSPECTUS DATED MARCH 25, 2002)
-------------------
ABN AMRO INCORPORATED BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC. BARCLAYS CAPITAL
BNP PARIBAS CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANK SECURITIES JPMORGAN
LEHMAN BROTHERS SALOMON SMITH BARNEY
UTENDAHL CAPITAL PARTNERS, L.P. WACHOVIA SECURITIES
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STATEMENT OF DIFFERENCES
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The registered trademark symbol shall be expressed as...................... 'r'