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As filed with the Securities and Exchange Commission on May 17, 1996.
REGISTRATION NO. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STANDARD FEDERAL BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2899274
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2600 WEST BIG BEAVER ROAD
TROY, MICHIGAN 48084
(810) 643-9600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
____________________
JOSEPH KRUL
SENIOR VICE PRESIDENT
STANDARD FEDERAL BANCORPORATION, INC.
2600 WEST BIG BEAVER ROAD
TROY, MICHIGAN 48084
(810) 637-2530
(Name, address, including zip code, and telephone number, including
area code, agent for service of process)
COPIES TO:
PAUL R. RENTENBACH, ESQ. DANIEL M. ROSSNER, ESQ.
DYKEMA GOSSETT P.L.L.C. BROWN & WOOD
400 RENAISSANCE CENTER ONE WORLD TRADE CENTER
DETROIT, MICHIGAN 48243 NEW YORK, NEW YORK 10048
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined
by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED MAXIMUM AMOUNT OF
PROPOSED MAXIMUM AGGREGATE REGISTRATION
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING FEE
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT(2) PRICE(2)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Senior/Subordinated
Debt Securities . . . . . . . . . . $200,000,000 100% $200,000,000 $68,965.52
====================================================================================================================================
(1) Or, if Debt Securities are to be issued with a principal amount
denominated in a foreign currency, such greater principal amount as
shall result in an aggregate initial offering price equivalent to
$200,000,000 at the time of initial offering, or if at an original
issue discount, such greater principal amount as shall result in
proceeds to the registrant of $200,000,000.
(2) Estimated solely for purpose of calculating the registration fee.
(3) Exclusive of accrued interest, if any.
____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 17, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated June __, 1996)
$_00,000,000
STANDARD FEDERAL BANCORPORATION, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Standard Federal Bancorporation, Inc. (the "Company") may offer from time to
time up to $_00,000,000 aggregate initial offering price, or the equivalent
thereof in one or more foreign or composite currencies, of its Senior
Medium-Term Notes (the "Senior Notes") and Subordinated Medium-Term Notes (the
"Subordinated Notes") Due Nine Months or More From Date of Issue (collectively,
the "Notes"). Such aggregate initial offering price is subject to reduction as
a result of the sale by the Company of other Debt Securities described in the
accompanying Prospectus. Each Note will mature on any day nine months or more
from the date of issue, as specified in the applicable pricing supplement
hereto (each, a "Pricing Supplement"), and may be subject to redemption at the
option of the Company or repayment at the option of the Holder thereof, in each
case, in whole or in part, prior to its Stated Maturity Date, as specified in
the applicable Pricing Supplement. In addition, each Note may be denominated
and/or payable in United States dollars or a foreign or composite currency, as
specified in the applicable Pricing Supplement. The Notes, other than Foreign
Currency Notes, will be issued in minimum denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable Pricing
Supplement, while Foreign Currency Notes will be issued in the minimum
denominations specified in the applicable Pricing Supplement. The Subordinated
Notes will be subordinated to all existing and future Senior Indebtedness (as
defined in the accompanying Prospectus) of the Company. See "Description of
Debt Securities-Subordination" in the accompanying Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
bear interest at fixed rates ("Fixed Rate Notes") or at floating rates
("Floating Rate Notes"). The applicable Pricing Supplement will specify
whether a Floating Rate Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note and whether the rate of
interest thereon is determined by reference to one or more of the CD Rate, the
CMT Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an
"Interest Rate Basis"), or any other interest rate basis or formula, as
adjusted by any Spread and/or Spread Multiplier. Interest on each Floating
Rate Note will accrue from its date of issue and, unless otherwise specified in
the applicable Pricing Supplement, will be payable monthly, quarterly,
semiannually or annually in arrears, as specified in the applicable Pricing
Supplement, and on the Maturity Date. Unless otherwise specified in the
applicable Pricing Supplement, the rate of interest on each Floating Rate Note
will be reset daily, weekly, monthly, quarterly, semiannually or annually, as
specified in the applicable Pricing Supplement. Interest on each Fixed Rate
Note will accrue from its date of issue and, unless otherwise specified in the
applicable Pricing Supplement, will be payable semiannually in arrears on
_______ and ________ of each year and on the Maturity Date. Notes may also be
issued that do not bear any interest currently or that bear interest at a below
market rate. See "Description of Notes."
The interest rate, or formula for the determination of the interest rate, if
any, applicable to each Note and the other variable terms thereof will be
established by the Company on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formula and
other terms of Notes are subject to change by the Company, but no change will
affect any Note already issued or as to which an offer to purchase has been
accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee.
Interests in the Global Securities will be shown on, and transfers thereof will
be effected only through, records maintained by the Depositary (with respect to
its participants) and the Depositary's participants (with respect to beneficial
owners).
THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY
SAVINGS BANK OR NON-BANK SUBSIDIARY OF THE COMPANY AND ARE NOT INSURED BY THE
SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
____________________________________________
SEE "RISK FACTORS" ON PAGE S-2 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED
HEREBY.
____________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, THE PROSPECTUS
OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
==================================================================================================================
Price to Agent's Discounts Proceeds to
Public(1) and Commissions(1)(2) Company (1)(3)
- ------------------------------------------------------------------------------------------------------------------
Per Note . . . . . . 100% .125% - .750% %- %
- ------------------------------------------------------------------------------------------------------------------
Total(4) . . . . . . $_00,000,000 $ -$ $ -$
==================================================================================================================
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and [ ] (the "Agents"), may purchase Notes, as principal, from the
Company, for resale to investors and other purchasers at varying prices
relating to prevailing market prices at the time of resale as determined
by the applicable Agent, or, if so specified in the applicable Pricing
Supplement, for resale at a fixed offering price. Unless otherwise
specified in the applicable Pricing Supplement, any Note sold to an
Agent as principal will be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale (as
described below) of a Note of identical maturity. If agreed to by the
Company and an Agent, such Agent may utilize its reasonable efforts on
an agency basis to solicit offers to purchase the Notes at 100% of the
principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Company will pay a commission to the Agent,
ranging from .125% to .75% of the principal amount of a Note, depending
upon its stated maturity, sold through such Agent. Commissions with
respect to Notes with stated maturities in excess of 30 years that are
sold through an Agent will be negotiated between the Company and such
Agent at the time of such sale. See "Plan of Distribution."
(2) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of
Distribution."
(3) Before deducting expenses payable by the Company estimated at
$610,000.
(4) Or the equivalent thereof in one or more foreign or composite
currencies.
The Notes are being offered on a continuous basis by the Company to or
through the Agents. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be listed on any securities exchange and there
can be no assurance that the Notes offered hereby will be sold or that there
will be a secondary market for the Notes or that there will be liquidity in such
market if one develops. The Company reserves the right to cancel or modify the
offer made hereby without notice. The Company or an Agent, if it solicits the
offer on an agency basis, may reject any offer to purchase Notes in whole or in
part. See "Plan of Distribution."
___________________
MERRILL LYNCH & CO.
___________________
The date of this Prospectus Supplement is June __, 1996.
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IN CONNECTION WITH AN OFFERING OF NOTES PURCHASED BY AN AGENT AS
PRINCIPAL ON A FIXED OFFERING PRICE BASIS, SUCH AGENT MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF NOTES AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
____________________
RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in Notes that result from such Notes being denominated or payable in
or determined by reference to a currency or composite currency other than
United States dollars or to one or more interest rate, currency or other
indices or formulas. The Company and the Agents disclaim any responsibility to
advise prospective investors of such risks as they exist at the date of this
Prospectus Supplement or as they change from time to time. Prospective
investors should consult their own financial and legal advisors as to the risks
entailed by an investment in such Notes. Such Notes are not an appropriate
investment for investors who are unsophisticated with respect to foreign
currency transactions or transactions involving the applicable interest rate
index or currency index or other indices or formulas.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, if any, to one or more currencies or composite currencies (including
exchange rates and swap indices between currencies or composite currencies),
commodities, interest rates or other indices or formulas, either directly or
inversely, entails significant risks that are not associated with similar
investments in a conventional fixed rate or floating rate debt security. Such
risks include, without limitation, the possibility that such indices or
formulas may be subject to significant changes, that the resulting interest
rate will be less than that payable on a conventional fixed rate or floating
rate debt security issued by the Company at the same time, that the repayment
of principal and/or premium, if any, can occur at times other than that
expected by the investor, and that the investor could lose all or a substantial
portion of principal and/or premium, if any, payable on the Maturity Date (as
defined under "Description of Notes--General"). Such risks depend on a number
of interrelated factors, including economic, financial and political events,
over which the Company has no control. Additionally, if the formula used to
determine the amount of principal, premium, if any, and/or interest, if any,
payable with respect to such Notes contains a multiplier or leverage factor,
the effect of any change in the applicable index or indices or formula or
formulas will be magnified. In recent years, values of certain indices and
formulas have been highly volatile and such volatility may be expected to
continue in the future. Fluctuations in the value of any particular index or
formula that have occurred in the past are not necessarily indicative, however,
of fluctuations that may occur in the future.
Any optional redemption feature of Notes might affect the market value
of such Notes. Since the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
The Notes will not have an established trading market when issued, and
there can be no assurance of a secondary market for the Notes or the liquidity
of such market if one develops. See "Plan of Distribution."
The secondary market for Notes will be affected by a number of factors
independent of the creditworthiness of the Company and the value of the
applicable index or indices or formula or formulas, including the complexity
and volatility of each such index or formula, the method of calculating the
principal, premium, if any, and/or interest, if any, in respect of such Notes,
the time remaining to the maturity of such Notes, the outstanding amount of
such Notes, any redemption features of such Notes, the amount of other debt
securities linked to such index or formula and the level, direction and
volatility of market interest rates generally. Such factors also will affect
the market value of such Notes. In addition, certain Notes may be designed for
specific investment objectives or strategies and, therefore, may have a more
limited secondary market and experience more price volatility than conventional
debt securities. Investors may not be able to sell such Notes readily or at
prices that will enable
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investors to realize their anticipated yield. No investor should purchase
Notes unless such investor understands and is able to bear the risk that such
Notes may not be readily saleable, that the value of such Notes will fluctuate
over time and that such fluctuations may be significant.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as defined under "Description
of Notes--General") entails significant risks that are not associated with a
similar investment in a debt security denominated and payable in United States
dollars. Such risks include, without limitation, the possibility of
significant changes in the rate of exchange between the United States dollar
and the Specified Currency (as defined below under "Description of Notes --
General") and the possibility of the imposition or modification of exchange
controls by the applicable governments or monetary authorities. Such risks
generally depend on factors over which the Company has no control, such as
economic, financial and political events and the supply and demand for the
applicable currencies or composite currencies. In addition, if the formula
used to determine the amount of principal, premium, if any, and/or interest, if
any, payable with respect to Foreign Currency Notes contains a multiplier or
leverage factor, the effect of any change in the applicable currencies or
composite currencies will be magnified. In recent years, rates of exchange
between the United States dollar and foreign currencies or composite currencies
have been highly volatile and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations that may occur in the
future. Depreciation of the Specified Currency applicable to a Foreign
Currency Note against the United States dollar would result in a decrease in
the United States dollar-equivalent yield of such Foreign Currency Note, in the
United States dollar-equivalent value of the principal and premium, if any,
payable on the Maturity Date of such Foreign Currency Note, and, generally, in
the United States dollar-equivalent market value of such Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and
may in the future impose or revise, exchange controls at or prior to the date
on which any payment of principal of, or premium, if any, or interest, if any,
on, a Foreign Currency Note is due, which could affect exchange rates as well
as the availability of the Specified Currency on such date. Even if there are
no exchange controls, it is possible that the Specified Currency would not be
available on the applicable payment date due to other circumstances beyond the
control of the Company. In such cases, the Company will be entitled to satisfy
its obligations in respect of such Foreign Currency Note in United States
dollars. See "Special Provisions Relating to Foreign Currency
Notes--Availability of Specified Currency."
CREDIT RATINGS
Any credit ratings assigned to the Company's medium-term note program
may not reflect the potential impact of all risks related to structure and
other factors on the market value of the Notes. Accordingly, prospective
investors should consult their own financial and legal advisors as to the risks
entailed by an investment in the Notes and the suitability of such Notes in
light of their particular circumstances.
DESCRIPTION OF NOTES
The Senior Notes will be issued as a series of Debt Securities under an
Indenture, dated as of June __, 1996, as amended or supplemented from time to
time (the "Senior Indenture"), and the Subordinated Notes will be issued as a
series of Debt Securities under an Indenture dated as of June __, 1996, as
amended or supplemented from time to time (the "Subordinated Indenture" and
collectively with the Senior Indenture, the "Indenture") between the Company
and The Chase Manhattan Bank, N.A., as trustee (the "Trustee"). The Indenture
is subject to, and governed by, the Trust Indenture Act of 1939, as amended.
The following summary of certain provisions of the Notes and the Indenture does
not purport to be complete and is qualified in its entirety by reference to the
actual provisions of the Notes and the Indenture. Capitalized terms used but
not defined herein shall have the meanings given to them in the accompanying
Prospectus, the Notes or the Indenture, as the case may be. The term "Debt
Securities," as used in this Prospectus Supplement, refers to all debt
securities, including the Notes, issued and
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issuable from time to time under the Indenture. The following description of
Notes will apply to each Note offered hereby unless otherwise specified in the
applicable Pricing Supplement.
GENERAL
The Notes will be unsecured obligations of the Company. The Senior
Notes will rank on a parity with other unsecured and unsubordinated
indebtedness of the Company. The Subordinated Notes will be subordinate in
right of payment to all existing and future Senior Indebtedness of the Company
as described under "Description of Debt Securities - Subordination" in the
accompanying Prospectus. The Indenture does not limit the aggregate initial
offering price of Debt Securities that may be issued thereunder and Debt
Securities may be issued thereunder from time to time in one or more series up
to the aggregate initial offering price from time to time authorized by the
Company for each series. The Company may, from time to time, without the
consent of the Holders of the Notes, provide for the issuance of Notes or other
Debt Securities under the Indenture in addition to the $_00,000,000 aggregate
initial offering price of Notes offered hereby.
The Notes are currently limited to up to $_00,000,000 aggregate initial
offering price, or the equivalent thereof in one or more foreign or composite
currencies. The Notes will be offered on a continuous basis and will mature on
any day nine months or more from their dates of issue (each, a "Stated Maturity
Date"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, interest-bearing Notes will
either be Fixed Rate Notes or Floating Rate Notes, as specified in the
applicable Pricing Supplement. Notes may also be issued that do not bear any
interest currently or that bear interest at a below market rate.
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will be denominated in, and payments of principal, premium, if any,
and/or interest, if any, will be made in, United States dollars. The Notes
also may be denominated in, and payments of principal, premium, if any, and/or
interest, if any, may be made in, one or more foreign currencies or composite
currencies ("Foreign Currency Notes"). See "Special Provisions Relating to
Foreign Currency Notes--Payment of Principal, Premium, if any, and Interest, if
any." The currency or composite currency in which a Note is denominated,
whether United States dollars or otherwise, is herein referred to as the
"Specified Currency." References herein to "United States dollars", "U.S.
dollars" or "$" are to the lawful currency of the United States of America (the
"United States").
Unless otherwise specified in the applicable Pricing Supplement,
purchasers are required to pay for the Notes in the applicable Specified
Currencies. At the present time, there are limited facilities in the United
States for the conversion of United States dollars into foreign currencies or
composite currencies and vice versa, and commercial banks do not generally
offer non-United States dollar checking or savings account facilities in the
United States. Each applicable Agent is prepared to arrange for the conversion
of United States dollars into the Specified Currency in which the related
Foreign Currency Note is denominated in order to enable the purchaser to pay
for such Foreign Currency Note, provided that a request is made to such Agent
on or prior to the fifth Business Day (as hereinafter defined) preceding the
date of delivery of such Foreign Currency Note, or by such other day as
determined by such Agent. Each such conversion will be made by an Agent on
such terms and subject to such conditions, limitations and charges as such
Agent may from time to time establish in accordance with its regular foreign
exchange practices. All costs of exchange will be borne by the purchaser of
each such Foreign Currency Note. See "Special Provisions Relating to Foreign
Currency Notes."
Interest rates offered by the Company with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of
Notes purchased in any single transaction. Interest rates or formula and other
terms of Notes are subject to change by the Company from time to time, but no
such change will affect any Note already issued or as to which an offer to
purchase has been accepted by the Company.
Each Note will be issued in fully registered form as a Book-Entry Note
or a Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the applicable
Pricing Supplement.
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Payments of principal of, and premium, if any, and interest, if any, on,
Book-Entry Notes will be made by the Company through the Trustee to the
Depositary. See "--Book-Entry Notes." In the case of Certificated Notes,
payment of principal and premium, if any, due on the Stated Maturity Date or
any prior date on which the principal, or an installment of principal, of each
Certificated Note becomes due and payable, whether by the declaration of
acceleration, notice of redemption at the option of the Company, notice of the
Holder's option to elect repayment or otherwise (the Stated Maturity Date or
such prior date, as the case may be, is herein referred to as the "Maturity
Date" with respect to the principal of the applicable Note repayable on such
date) will be made in immediately available funds upon presentation and
surrender thereof (or, in the case of any repayment on an Optional Repayment
Date, upon presentation and surrender thereof and a duly completed election
form in accordance with the provisions described below) at the office or agency
maintained by the Company for such purpose in the Borough of Manhattan, The
City of New York, currently the corporate trust office of the Trustee located
at _________. Payment of interest, if any, due on the Maturity Date of each
Certificated Note will be made to the person to whom payment of the principal
and premium, if any, shall be made. Payment of interest, if any, due on each
Certificated Note on any Interest Payment Date (as hereinafter defined) other
than the Maturity Date will be made by check mailed to the address of the
Holder entitled thereto as such address shall appear in the Security Register
of the Company. Notwithstanding the foregoing, a Holder of $10,000,000 (or, if
the applicable Specified Currency is other than United States dollars, the
equivalent thereof in such Specified Currency) or more in aggregate principal
amount of Notes (whether having identical or different terms and provisions)
will be entitled to receive interest payments, if any, on any Interest Payment
Date other than the Maturity Date by wire transfer of immediately available
funds if appropriate wire transfer instructions have been received in writing
by the Trustee not less than 15 days prior to such Interest Payment Date. Any
such wire transfer instructions received by the Trustee shall remain in effect
until revoked by such Holder. For special payment terms applicable to Foreign
Currency Notes, see "Special Provisions Relating to Foreign Currency
Notes--Payment of Principal, Premium, if any, and Interest, if any."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in
The City of New York; provided, however, that, with respect to Foreign Currency
Notes, such day is also not a day on which banking institutions are authorized
or required by law, regulation or executive order to close in the Principal
Financial Center (as hereinafter defined) of the country issuing the Specified
Currency (or, in the case of European Currency Units ("ECU"), is not a day that
appears as an ECU non-settlement day on the display designated as "ISDE" on the
Reuter Monitor Money Rates Service (or a day so designated by the ECU Banking
Association) or, if ECU non-settlement days do not appear on that page (and are
not so designated), is not a day on which payments in ECU cannot be settled in
the international interbank market); provided, further, that, with respect to
Notes as to which LIBOR is an applicable Interest Rate Basis, such day is also
a London Business Day (as hereinafter defined). "London Business Day" means (i)
if the Index Currency (as hereinafter defined) is other than ECU, any day on
which dealings in such Index Currency are transacted in the London interbank
market or (ii) if the Index Currency is ECU, any day that does not appear as an
ECU non-settlement day on the display designated as "ISDE" on the Reuter
Monitor Money Rates Service (or a day so designated by the ECU Banking
Association) or, if ECU non-settlement days do not appear on that page (and are
not so designated), is not a day on which payments in ECU cannot be settled in
the international interbank market.
"Principal Financial Center" means the capital city of the country
issuing the Specified Currency or, solely with respect to the calculation of
LIBOR, the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECUs, the Principal Financial Center shall be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "--Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by the
Company for such purpose in the Borough of Manhattan, The City of New York. No
service charge will be made by the Company or the Trustee for any such
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith (other than exchanges pursuant to the
Indenture not involving any transfer).
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REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be subject to any sinking fund. The Notes will be redeemable at
the option of the Company prior to the Stated Maturity Date only if an Initial
Redemption Date is specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to redemption at the option of the Company
on any date on and after the applicable Initial Redemption Date in whole or
from time to time in part in increments of $1,000 or such other minimum
denomination specified in such Pricing Supplement (provided that any remaining
principal amount thereof shall be at least $1,000 or such minimum
denomination), at the applicable Redemption Price (as hereinafter defined),
together with unpaid interest accrued to the date of redemption, on notice
given not more than 60 nor less than 30 calendar days prior to the date of
redemption and in accordance with the provisions of the Indenture. "Redemption
Price", with respect to a Note, means an amount equal to the Initial Redemption
Percentage specified in the applicable Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial
Redemption Date by an amount equal to the applicable Annual Redemption
Percentage Reduction, if any, until the Redemption Price is equal to 100% of
the unpaid principal amount to be redeemed. See also "--Original Issue
Discount Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Company at the option of the Holders
thereof prior to the Stated Maturity Date only if one or more Optional
Repayment Dates are specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to repayment at the option of the Holders
thereof on any Optional Repayment Date in whole or from time to time in part in
increments of $1,000 or such other minimum denomination specified in the
applicable Pricing Supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or such other minimum denomination), at a
repayment price equal to 100% of the unpaid principal amount to be repaid,
together with unpaid interest accrued to the date of repayment. For any Note
to be repaid, such Note must be received, together with the form thereon
entitled "Option to Elect Repayment" duly completed, by the Trustee at its
Corporate Trust Office (or such other address of which the Company shall from
time to time notify the Holders) not more than 60 nor less than 30 calendar
days prior to the date of repayment. Exercise of such repayment option by the
Holder will be irrevocable. See also "--Original Issue Discount Notes."
Only the Depositary may exercise the repayment option in respect of
Global Securities representing Book-Entry Notes. Accordingly, Beneficial
Owners (as hereinafter defined) of Global Securities that desire to have all or
any portion of the Book-Entry Notes represented by such Global Securities
repaid must instruct the Participant (as hereinafter defined) through which
they own their interest to direct the Depositary to exercise the repayment
option on their behalf by delivering the related Global Security and duly
completed election form to the Trustee as aforesaid. In order to ensure that
such Global Security and election form are received by the Trustee on a
particular day, the applicable Beneficial Owner must so instruct the
Participant through which it owns its interest before such Participant's
deadline for accepting instructions for that day. Different firms may have
different deadlines for accepting instructions from their customers.
Accordingly, Beneficial Owners should consult the Participants through which
they own their interest for the respective deadlines for such Participants.
All instructions given to Participants from Beneficial Owners of Global
Securities relating to the option to elect repayment shall be irrevocable. In
addition, at the time such instructions are given, each such Beneficial Owner
shall cause the Participant through which it owns its interest to transfer such
Beneficial Owner's interest in the Global Security or Securities representing
the related Book-Entry Notes, on the Depositary's records, to the Trustee. See
"--Book-Entry Notes."
If applicable, the Company will comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any other securities laws or regulations in connection with any such
repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
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INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
Notes will equal the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date of
issue, if no interest has been paid or duly made available for payment) to but
excluding the applicable Interest Payment Date or the Maturity Date, as the
case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless
otherwise specified in the applicable Pricing Supplement, the first payment of
interest on any such Note originally issued between a Record Date (as
hereinafter defined) and the related Interest Payment Date will be made on the
Interest Payment Date immediately following the next succeeding Record Date to
the Holder on such next succeeding Record Date. Unless otherwise specified in
the applicable Pricing Supplement, a "Record Date" shall be the fifteenth
calendar day (whether or not a Business Day) immediately preceding the related
Interest Payment Date.
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes will be payable on _____________ and ___________
of each year (each, an "Interest Payment Date") and on the Maturity Date.
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be computed on the basis of a 360-day year of twelve
30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after such Interest Payment Date or the
Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement,
Floating Rate Notes will be issued as described below. The applicable Pricing
Supplement will specify certain terms with respect to which each Floating Rate
Note is being delivered, including: whether such Floating Rate Note is a
"Regular Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse
Floating Rate Note," the Fixed Rate Commencement Date, if applicable, Fixed
Interest Rate, if applicable, Interest Rate Basis or Bases, Initial Interest
Rate, if any, Initial Interest Reset Date, Interest Reset Period and Dates,
Interest Payment Period and Dates, Index Maturity, Maximum Interest Rate and/or
Minimum Interest Rate, if any, and Spread and/or Spread Multiplier, if any, as
such terms are defined below. If one or more of the applicable Interest Rate
Bases is LIBOR or the CMT Rate, the applicable Pricing Supplement will also
specify the Index Currency, if any, and Designated LIBOR Page or the Designated
CMT Maturity Index and Designated CMT Telerate Page, respectively, as such
terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a
"Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate Note" or as
having an Addendum attached or having "Other/Additional Provisions"
apply relating to a different interest rate formula, such Floating Rate
Note will be designated as a "Regular Floating Rate Note" and, except as
described below or in the applicable Pricing Supplement,
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will bear interest at the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if
any, and/or (b) multiplied by the applicable Spread Multiplier, if any.
Commencing on the Initial Interest Reset Date, the rate at which
interest on such Regular Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period, if any, from the date of issue
to the Initial Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the
applicable Pricing Supplement, such Floating Rate Note will bear
interest at the rate determined by reference to the applicable Interest
Rate Basis or Bases (a) plus or minus the applicable Spread, if any,
and/or (b) multiplied by the applicable Spread Multiplier, if any.
Commencing on the Initial Interest Reset Date, the rate at which
interest on such Floating Rate/Fixed Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that (y) the
interest rate in effect for the period, if any, from the date of issue
to the Initial Interest Reset Date will be the Initial Interest Rate and
(z) the interest rate in effect for the period commencing on the Fixed
Rate Commencement Date to the Maturity Date shall be the Fixed Interest
Rate, if such rate is specified in the applicable Pricing Supplement or,
if no such Fixed Interest Rate is specified, the interest rate in effect
thereon on the day immediately preceding the Fixed Rate Commencement
Date.
(iii) If such Floating Rate Note is designated as an "Inverse
Floating Rate Note," then, except as described below or in the
applicable Pricing Supplement, such Floating Rate Note will bear
interest at the Fixed Interest Rate minus the rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or
minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Pricing Supplement, the interest
rate thereon will not be less than zero. Commencing on the Initial
Interest Reset Date, the rate at which interest on such Inverse Floating
Rate Note shall be payable shall be reset as of each Interest Reset
Date; provided, however, that the interest rate in effect for the
period, if any, from the date of issue to the Initial Interest Reset
Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to
maturity of the instrument or obligation with respect to which the related
Interest Rate Basis or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or
in the applicable Pricing Supplement, the interest rate in effect on each day
shall be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date (as hereinafter defined)
immediately preceding such Interest Reset Date or (ii) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds
Rate, (vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such
other Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement; provided, however, that the interest rate in
effect on a Floating Rate Note for the period, if any, from the date of issue
to the Initial Interest Reset Date will be the Initial Interest Rate; provided,
further, that with respect to a Floating Rate/Fixed Rate Note the interest rate
in effect for the period commencing on the Fixed Rate Commencement Date to the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in
the applicable Pricing Supplement or, if no such Fixed Interest Rate is
specified, the interest rate in effect thereon on the day immediately preceding
the Fixed Rate Commencement Date.
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The applicable Pricing Supplement will specify whether the rate of
interest on the related Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually or on such other specified basis
(each, an "Interest Reset Period") and the dates on which such rate of interest
will be reset (each, an "Interest Reset Date"). Unless otherwise specified in
the applicable Pricing Supplement, the Interest Reset Dates will be, in the
case of Floating Rate Notes which reset: (i) daily, each Business Day; (ii)
weekly, the Wednesday of each week (with the exception of weekly reset Floating
Rate Notes as to which the Treasury Rate is an applicable Interest Rate Basis,
which will reset the Tuesday of each week, except as described below); (iii)
monthly, the third Wednesday of each month (with the exception of monthly reset
Floating Rate Notes as to which the Eleventh District Cost of Funds Rate is an
applicable Interest Rate Basis, which will reset on the first calendar day of
the month); (iv) quarterly, the third Wednesday of March, June, September and
December of each year; (v) semiannually, the third Wednesday of the two months
specified in the applicable Pricing Supplement; and (vi) annually, the third
Wednesday of the month specified in the applicable Pricing Supplement; provided
however, that, with respect to Floating Rate/Fixed Rate Notes, the rate of
interest thereon will not reset after the applicable Fixed Rate Commencement
Date. If any Interest Reset Date for any Floating Rate Note would otherwise be
a day that is not a Business Day, such Interest Reset Date will be postponed to
the next succeeding Business Day, except that in the case of a Floating Rate
Note as to which LIBOR is an applicable Interest Rate Basis and such Business
Day falls in the next succeeding calendar month, such Interest Reset Date will
be the immediately preceding Business Day. In addition, in the case of a
Floating Rate Note as to which the Treasury Rate is an applicable Interest Rate
Basis and the Interest Determination Date would otherwise fall on an Interest
Reset Date, then such Interest Reset Date will be postponed to the next
succeeding Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the related Interest Reset Date will be the rate determined as of the
applicable Interest Determination Date and calculated on or prior to the
Calculation Date (as hereinafter defined), except with respect to LIBOR and the
Eleventh District Cost of Funds Rate, which will be calculated as of such
Interest Determination Date. The "Interest Determination Date" with respect to
the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal Funds Rate
and the Prime Rate will be the second Business Day immediately preceding the
applicable Interest Reset Date; the "Interest Determination Date" with respect
to the Eleventh District Cost of Funds Rate will be the last working day of the
month immediately preceding the applicable Interest Reset Date on which the
Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco") publishes
the Index (as hereinafter defined); and the "Interest Determination Date" with
respect to LIBOR will be the second London Business Day immediately preceding
the applicable Interest Reset Date, unless the Index Currency is British pounds
sterling, in which case the "Interest Determination Date" will be the
applicable Interest Reset Date. With respect to the Treasury Rate, the
"Interest Determination Date" will be the day in the week in which the
applicable Interest Reset Date falls on which day Treasury Bills (as
hereinafter defined) are normally auctioned (Treasury Bills are normally sold
at an auction held on Monday of each week, unless that day is a legal holiday,
in which case the auction is normally held on the following Tuesday, except
that such auction may be held on the preceding Friday); provided, however, that
if an auction is held on the Friday of the week preceding the applicable
Interest Reset Date, the Interest Determination Date will be such preceding
Friday. The "Interest Determination Date" pertaining to a Floating Rate Note
the interest rate of which is determined by reference to two or more Interest
Rate Bases will be the most recent Business Day which is at least two Business
Days prior to the applicable Interest Reset Date for such Floating Rate Note on
which each Interest Rate Basis is determinable. Each Interest Rate Basis will
be determined as of such date, and the applicable interest rate will take
effect on the applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i)
a Maximum Interest Rate, or ceiling, that may accrue during any Interest Period
and (ii) a Minimum Interest Rate, or floor, that may accrue during any Interest
Period. In addition to any Maximum Interest Rate that may apply to any
Floating Rate Note, the interest rate on 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.
Except as provided below or in the applicable Pricing Supplement,
interest will be payable, in the case of Floating Rate Notes which reset: (i)
daily, weekly or monthly, 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; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii)
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semiannually, on the third Wednesday of the two months of each year specified
in the applicable Pricing Supplement; and (iv) annually, on the third Wednesday
of the month of each year specified in the applicable Pricing Supplement (each,
an "Interest Payment Date") and, in each case, on the Maturity Date. If any
Interest Payment Date other than the Maturity Date for any Floating Rate Note
would otherwise be a day that is not a Business Day, such Interest Payment Date
will be postponed to the next succeeding Business Day, except that in the case
of a Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis
and such Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business Day. If the
Maturity Date of a Floating Rate Note falls on a day that is not a Business
Day, the required payment of principal, premium, if any, and interest will be
made on the next succeeding Business Day as if made on the date such payment
was due, and no interest will accrue on such payment for the period from and
after the Maturity Date to the date of such payment on the next succeeding
Business Day.
All percentages resulting from any calculation on Floating Rate Notes
will be rounded to the nearest one hundred-thousandth of a percentage point,
with five-one millionths of a percentage point rounded upwards (e.g., 9.876545%
(or .09876545) would be rounded to 9.87655% (or .0987655)), and all amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded, in the case of United States dollars, to the nearest cent or, in the
case of a foreign currency or composite currency, to the nearest unit (with
one-half cent or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated
by multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Floating Rate Notes for which an applicable
Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise
specified in the applicable Pricing Supplement, the interest factor for
Floating Rate Notes for which the interest rate is calculated with reference to
two or more Interest Rate Bases will be calculated in each period in the same
manner as if only one of the applicable Interest Rate Bases applied as
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
Trustee will be the "Calculation Agent." Upon request of the Holder of any
Floating Rate Note, the Calculation Agent will disclose the interest rate then
in effect and, if determined, the interest rate that will become effective as a
result of a determination made for the next succeeding Interest Reset Date with
respect to such Floating Rate Note. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date," if applicable,
pertaining to any Interest Determination Date will be the earlier of (i) the
tenth calendar day after such Interest Determination Date, or, if such day is
not a Business Day, the next succeeding Business Day or (ii) the Business Day
immediately preceding the applicable Interest Payment Date or the Maturity
Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing
Supplement, "CD Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable United States dollar certificates of deposit having
the Index Maturity specified in the applicable Pricing Supplement as published
by the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or
any successor publication ("Composite Quotations") under the heading
"Certificates of Deposit." If such rate is not yet published in either
H.15(519) or
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Composite Quotations by 3:00 P.M., New York City time, on the related
Calculation Date, then the CD Rate on such CD Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the secondary market offered rates as of 10:00 A.M., New York City time, on
such CD Rate Interest Determination Date, of three leading nonbank dealers in
negotiable United States dollar certificates of deposit in The City of New York
(which may include the Agent or its affiliates) selected by the Calculation
Agent for negotiable United States dollar certificates of deposit of major
United States money center banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement in an amount that is representative for a single transaction
in that market at that time; provided, however, that if the dealers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate determined as of such CD Rate Interest Determination Date will be the CD
Rate in effect on such CD Rate Interest Determination Date.
CMT RATE. Unless otherwise specified in the applicable Pricing
Supplement, "CMT Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page under the caption "...Treasury
Constant Maturities...Federal Reserve Board Release H.15...Mondays
Approximately 3:45 P.M.," under the column for the Designated CMT Maturity
Index for (i) if the Designated CMT Telerate Page is 7055, the rate on such CMT
Rate Interest Determination Date and (ii) if the Designated CMT Telerate Page
is 7052, the weekly or monthly average, as specified in the applicable Pricing
Supplement, for the week or the month, as applicable, ended immediately
preceding the week or the month, as applicable, in which the related CMT Rate
Interest Determination Date occurs. If such rate is no longer displayed on the
relevant page or is not displayed by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in H.15(519). If such rate is no
longer published or is not published by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate on such CMT Rate Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date
with respect to such Interest Reset Date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in H.15(519). If such information is not provided by 3:00 P.M.,
New York City time, on the related Calculation Date, then the CMT Rate on the
CMT Rate Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity, based on the arithmetic mean of the
secondary market closing offer side prices as of approximately 3:30 P.M., New
York City time, on such CMT Rate Interest Determination Date reported,
according to their written records, by three leading primary United States
government securities dealers (each, a "Reference Dealer") in The City of New
York (which may include the Agent or its affiliates) selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity
of approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent is unable to obtain three such Treasury Note
quotations, the CMT Rate on such CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date of three Reference Dealers in The City of New York (from
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the
next highest to the Designated CMT Maturity Index and a remaining term to
maturity closest to the Designated CMT Maturity Index and in an amount of at
least $100 million. If three or four (and not five) of such Reference Dealers
are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers so selected by the Calculation Agent are quoting as
mentioned herein, the CMT Rate determined as of such CMT Rate Interest
Determination Date will be the CMT Rate in effect on such CMT Rate Interest
Determination Date. If two Treasury Notes with an original maturity as
described in the second
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preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the Calculation Agent will obtain quotations for
the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service (or any successor service) on the page specified in the
applicable Pricing Supplement (or any other page as may replace such page on
such service (or any successor service)) for the purpose of displaying Treasury
Constant Maturities as reported in H.15(519). If no such page is specified in
the applicable Pricing Supplement, the Designated CMT Telerate Page shall be
7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable
Pricing Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as hereinafter
defined) on such date of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper." In the event that such rate is
not published by 3:00 P.M., New York City time, on the related Calculation
Date, then the Commercial Paper Rate on such Commercial Paper Rate Interest
Determination Date will be the Money Market Yield of the rate for commercial
paper having the Index Maturity specified in the applicable Pricing Supplement
as published in Composite Quotations under the heading "Commercial Paper" (with
an Index Maturity of one month or three months being deemed to be equivalent to
an Index Maturity of 30 days or 90 days, respectively). If such rate is not
yet published in either H.15(519) or Composite Quotations by 3:00 P.M., New
York City time, on the related Calculation Date, then the Commercial Paper Rate
on such Commercial Paper Rate Interest Determination Date will be calculated by
the Calculation Agent and will be the Money Market Yield of the arithmetic mean
of the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include the Agent or its
affiliates) selected by the Calculation Agent for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA", or the equivalent, from a
nationally recognized statistical rating organization; provided, however, that
if the dealers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate determined as of such
Commercial Paper Rate Interest Determination Date will be the Commercial Paper
Rate in effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
D x 360 X 100
Money Market Yield = ------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the Interest Period for which interest is being
calculated.
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate
Note for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate
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Interest Determination Date shall be the monthly weighted average cost of funds
paid by member institutions of the Eleventh Federal Home Loan Bank District
that was most recently announced (the "Index") by the FHLB of San Francisco as
such cost of funds for the calendar month immediately preceding such Eleventh
District Cost of Funds Rate Interest Determination Date. If the FHLB of San
Francisco fails to announce the Index on or prior to such Eleventh District
Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable
Pricing Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds
Rate Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates for the last transaction in
overnight United States dollar federal funds arranged by three leading brokers
of federal funds transactions in The City of New York (which may include the
Agent or its affiliates) selected by the Calculation Agent prior to 9:00 A.M.,
New York City time, on such Federal Funds Rate Interest Determination Date;
provided, however, that if the brokers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Federal Funds Rate determined as
of such Federal Funds Rate Interest Determination Date will be the Federal
Funds Rate in effect on such Federal Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is
determined with reference to LIBOR (a "LIBOR Interest Determination
Date"), LIBOR will be either: (a) if "LIBOR Reuters" is specified in
the applicable Pricing Supplement, the arithmetic mean of the offered
rates (unless the Designated LIBOR Page by its terms provides only for
a single rate, in which case such single rate shall be used) for
deposits in the Index Currency having the Index Maturity specified in
such Pricing Supplement, commencing on the applicable Interest Reset
Date, that appear (or, if only a single rate is required as aforesaid,
appears) on the Designated LIBOR Page as of 11:00 A.M., London time,
on such LIBOR Interest Determination Date, or (b) if "LIBOR Telerate"
is specified in the applicable Pricing Supplement or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified in the applicable Pricing
Supplement as the method for calculating LIBOR, the rate for deposits
in the Index Currency having the Index Maturity specified in such
Pricing Supplement, commencing on such Interest Reset Date, that
appears on the Designated LIBOR Page as of 11:00 A.M., London time, on
such LIBOR Interest Determination Date. If fewer than two such
offered rates so appear, or if no such rate so appears, as applicable,
LIBOR on such LIBOR Interest Determination Date will be determined in
accordance with the provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date
on which fewer than two offered rates appear, or no rate appears, as
the case may be, on the Designated LIBOR Page as specified in clause
(i) above, the Calculation Agent will request the principal London
offices of each of four major reference banks in the London interbank
market, as selected by the Calculation Agent, to provide the
Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity specified in the
applicable Pricing Supplement, commencing on the applicable Interest
Reset Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative
for a single transaction in such Index Currency in such market at such
time. If at least two such quotations are so provided, then LIBOR on
such LIBOR Interest Determination Date will be the arithmetic mean of
such quotations. If fewer than two such
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quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable Principal Financial
Center, on such LIBOR Interest Determination Date by three major banks
in such Principal Financial Center selected by the Calculation Agent
for loans in the Index Currency to leading European banks, having the
Index Maturity specified in the applicable Pricing Supplement and in a
principal amount that is representative for a single transaction in
such Index Currency in such market at such time; provided, however,
that if the banks so selected by the Calculation Agent are not quoting
as mentioned in this sentence, LIBOR determined as of such LIBOR
Interest Determination Date will be LIBOR in effect on such LIBOR
Interest Determination Date.
"Index Currency" means the currency or composite currency specified in
the applicable Pricing Supplement as to which LIBOR shall be calculated. If no
such currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in
the applicable Pricing Supplement, the display on the Reuter Monitor Money
Rates Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service (or any
successor service)) for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
specified in the applicable Pricing Supplement or neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified in the applicable Pricing Supplement as the
method for calculating LIBOR, the display on the Dow Jones Telerate Service (or
any successor service) on the page specified in such Pricing Supplement (or any
other page as may replace such page on such service (or any successor service))
for the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency.
PRIME RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen US PRIME 1 Page (as hereinafter defined) as such
bank's prime rate or base lending rate as in effect for such Prime Rate
Interest Determination Date. If fewer than four such rates appear on the
Reuters Screen US PRIME 1 Page for such Prime Rate Interest Determination Date,
then the Prime Rate shall be the arithmetic mean of the prime rates quoted on
the basis of the actual number of days in the year divided by a 360-day year as
of the close of business on such Prime Rate Interest Determination Date by four
major money center banks in The City of New York selected by the Calculation
Agent. If fewer than four such quotations are so provided, then the Prime Rate
shall be the arithmetic mean of four prime rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Interest Determination Date as furnished in The
City of New York by the major money center banks, if any, that have provided
such quotations and by a reasonable number of substitute banks or trust
companies to obtain four such prime rate quotations, provided such substitute
banks or trust companies are organized and doing business under the laws of the
United States, or any State thereof, each having total equity capital of at
least $500 million and being subject to supervision or examination by Federal
or State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks or trust companies so selected by
the Calculation Agent are not quoting as mentioned in this sentence, the Prime
Rate determined as of such Prime Rate Interest Determination Date will be the
Prime Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen US PRIME 1 Page" means the display designated as page
"US PRIME 1" on the Reuter Monitor Money Rates Service (or any successor
service) (or such other page as may replace the US PRIME 1 page on such service
(or any successor service) for the purpose of displaying prime rates or base
lending rates of major United States banks).
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the
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auction held on such Treasury Rate Interest Determination Date (the "Auction")
of direct obligations of the United States ("Treasury Bills") having the Index
Maturity specified in the applicable Pricing Supplement, as such rate is
published in H.15(519) under the heading "Treasury Bills-auction average
(investment)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the auction average rate of such Treasury Bills
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the
Auction of Treasury Bills having the Index Maturity specified in the applicable
Pricing Supplement are not reported as provided by 3:00 P.M., New York City
time, on the related Calculation Date, or if no such Auction is held, then the
Treasury Rate will be calculated by the Calculation Agent and 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 Treasury Rate Interest Determination Date, of three leading
primary United States government securities dealers (which may include the
Agent or its affiliates) selected by the Calculation Agent, for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity
specified in the applicable Pricing Supplement; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such Treasury Rate
Interest Determination Date.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification
and determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Maturity Date or any other term relating thereto, may be modified and/or
supplemented as specified under "Other/Additional Provisions" on the face
thereof or in an Addendum relating thereto, if so specified on the face
thereof. Such provisions will be described in the applicable Pricing
Supplement.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless
otherwise specified in the applicable Pricing Supplement, interest on each
Amortizing Note will be computed on the basis of a 360-day year of twelve
30-day months. Payments with respect to Amortizing Notes will be applied first
to interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
provisions of Amortizing Notes will be specified in the applicable Pricing
Supplement, including a table setting forth repayment information for such
Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Notes ("Original Issue Discount Notes") from
time to time that have an Issue Price (as specified in the applicable Pricing
Supplement) that is less than 100% of the principal amount thereof (i.e. par).
Original Issue Discount Notes may not bear any interest currently or may bear
interest at a rate that is below market rates at the time of issuance. The
difference between the Issue Price of an Original Issue Discount Note and par
is referred to herein as the "Discount." In the event of redemption, repayment
or acceleration of maturity of an Original Issue Discount Note, the amount
payable to the Holder of such Original Issue Discount Note, unless otherwise
specified in the applicable Pricing Supplement, will be equal to the sum of (i)
the Issue Price (increased by any accruals of Discount) and, in the event of
any redemption of such Original Issue Discount Note (if applicable), multiplied
by the Initial Redemption Percentage specified in the applicable Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) and (ii) any unpaid interest on such Original Issue Discount Note
accrued from the date of issue to the date of such redemption, repayment or
acceleration of maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for an
Original Issue Discount Note, such Discount will be accrued using a constant
yield method. The constant yield will be calculated using a 30-day month,
360-day year convention, a compounding period that, except for the
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Initial Period (as hereinafter defined), corresponds to the shortest period
between Interest Payment Dates for the applicable Original Issue Discount Note
(with ratable accruals within a compounding period), a coupon rate equal to the
initial coupon rate applicable to such Original Issue Discount Note and an
assumption that the maturity of such Original Issue Discount Note will not be
accelerated. If the period from the date of issue to the initial Interest
Payment Date for an Original Issue Discount Note (the "Initial Period") is
shorter than the compounding period for such Original Issue Discount Note, a
proportionate amount of the yield for an entire compounding period will be
accrued. If the Initial Period is longer than the compounding period, then
such period will be divided into a regular compounding period and a short
period with the short period being treated as provided in the preceding
sentence. The accrual of the applicable Discount may differ from the accrual
of original issue discount for purposes of the Internal Revenue Code of 1986,
as amended (the "Code"), certain Original Issue Discount Notes may not be
treated as having original issue discount within the meaning of the Code, and
Notes other than Original Issue Discount Notes may be treated as issued with
original issue discount for federal income tax purposes. See "Certain United
States Federal Income Tax Considerations" herein.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or
interest payable in respect thereof to be determined with reference to the
price or prices of specified commodities or stocks, to the exchange rate of one
or more designated currencies (including a composite currency such as the ECU)
relative to an indexed currency or to other price(s) or exchange rate(s)
("Indexed Notes"), in each case as specified in the applicable Pricing
Supplement. In certain cases, Holders of Indexed Notes may receive a principal
payment on the Maturity Date that is greater than or less than the principal
amount of such Indexed Notes depending upon the relative value on the Maturity
Date of the specified indexed item. Information as to the method for
determining the amount of principal, premium, if any, and/or interest, if any,
payable in respect of Indexed Notes, certain historical information with
respect to the specified indexed item and any material tax considerations
associated with an investment in Indexed Notes will be specified in the
applicable Pricing Supplement. See also "Risk Factors."
BOOK-ENTRY NOTES
The Company has established a depositary arrangement with The
Depository Trust Company with respect to the Book-Entry Notes, the terms of
which are summarized below. Any additional or differing terms of the
depositary arrangement with respect to the Book-Entry Notes will be described
in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate
principal amount bearing interest (if any) at the same rate or pursuant to the
same formula and having the same date of issue, Specified Currency, Interest
Payment Dates (if any), Stated Maturity Date, redemption provisions (if any),
repayment provisions (if any) and other terms will be represented by a single
Global Security. Each Global Security representing Book-Entry Notes will be
deposited with, or on behalf of, the Depositary and will be registered in the
name of the Depositary or a nominee of the Depositary. No Global Security may
be transferred except as a whole by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or
such nominee to a successor of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole Holder of the Book-Entry Notes represented thereby for all purposes under
the Indenture. Except as otherwise provided in this section, the Beneficial
Owners of the Global Security or Securities representing Book-Entry Notes will
not be entitled to receive physical delivery of Certificated Notes and will not
be considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferable. Accordingly, each Beneficial Owner must rely on the procedures
of the Depositary and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such Global Security
or the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to
transfer beneficial interests in a Global Security representing Book-Entry
Notes.
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Unless otherwise specified in the applicable Pricing Supplement, each
Global Security representing Book-Entry Notes will be exchangeable for
Certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Securities, (ii) the Depositary ceases to be a clearing agency
registered under the Exchange Act, (iii) the Company in its sole discretion
determines that the Global Securities shall be exchangeable for Certificated
Notes or (iv) there shall have occurred and be continuing an Event of Default
under the Indenture with respect to the Notes. Upon any such exchange, the
Certificated Notes shall be registered in the names of the Beneficial Owners of
the Global Security or Securities representing Book-Entry Notes, which names
shall be provided by the Depositary's relevant Participants (as identified by
the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the
Book-Entry Notes. The Book-Entry Notes will be issued as fully
registered securities registered in the name of Cede & Co. (the
Depositary's partnership nominee). One fully registered Global
Security will be issued for each issue of Book-Entry Notes, each in
the aggregate principal amount of such issue, and will be deposited
with the Depositary. If, however, the aggregate principal amount of
any issue exceeds $200,000,000, one Global Security will be issued
with respect to each $200,000,000 of principal amount and an
additional Global Security will be issued with respect to any
remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. The Depositary
holds securities that its participants ("Participants") deposit with
the Depositary. The Depositary also facilitates the settlement among
Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the
need for physical movement of securities certificates. Direct
Participants of the Depositary ("Direct Participants") include
securities brokers and dealers (including the Agent), banks, trust
companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the
Depositary's system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable
to the Depositary and its Participants are on file with the Securities
and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system
must be made by or through Direct Participants, which will receive a
credit for such Book-Entry Notes on the Depositary's records. The
ownership interest of each actual purchaser of each Book-Entry Note
represented by a Global Security ("Beneficial Owner") is in turn to be
recorded on the records of Direct Participants and Indirect
Participants. Beneficial Owners will not receive written confirmation
from the Depositary of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from
the Direct Participants or Indirect Participants through which such
Beneficial Owner entered into the transaction. Transfers of ownership
interests in a Global Security representing Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated Notes
representing their ownership interests therein, except in the event
that use of the book-entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities
representing Book-Entry Notes which are deposited with, or on behalf
of, the Depositary are registered in the name of the Depositary's
nominee, Cede & Co. The deposit of Global Securities with, or on
behalf of, the Depositary and their registration
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in the name of Cede & Co. effect no change in beneficial ownership.
The Depositary has no knowledge of the actual Beneficial Owners of the
Global Securities representing the Book-Entry Notes; the Depositary's
records reflect only the identity of the Direct Participants to whose
accounts such Book-Entry Notes are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the
Depositary to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from
time to time.
Neither the Depositary nor Cede & Co. will consent or vote
with respect to the Global Securities representing the Book-Entry
Notes. Under its usual procedures, the Depositary mails an Omnibus
Proxy to the Company as soon as possible after the applicable record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the Book-Entry
Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments
on the Global Securities representing the Book-Entry Notes will be
made in immediately available funds to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on
the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has
reason to believe that it will not receive payment on such date.
Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
Participant and not of the Depositary, the Trustee or the Company,
subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any,
and/or interest, if any, to the Depositary is the responsibility of
the Company or the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co.
If less than all of the Book-Entry Notes within an issue are being
redeemed, the Depositary's practice is to determine by lot the amount
of the interest of each Direct Participant in such issue to be
redeemed.
A Beneficial Owner shall give notice of any option to elect to
have its Book-Entry Notes repaid by the Company, through its
Participant, to the Trustee, and shall effect delivery of such
Book-Entry Notes by causing the Direct Participant to transfer the
Participant's interest in the Global Security or Securities
representing such Book-Entry Notes, on the Depositary's records, to
the Trustee. The requirement for physical delivery of Book-Entry Notes
in connection with a demand for repayment will be deemed satisfied
when the ownership rights in the Global Security or Securities
representing such Book-Entry Notes are transferred by Direct
Participants on the Depositary's records.
The Depositary may discontinue providing its services as
securities depository with respect to the Book-Entry Notes at any time
by giving reasonable notice to the Company or the Trustee. Under such
circumstances, in the event that a successor securities depository is
not obtained, Certificated Notes are required to be printed and
delivered.
The Company may decide to discontinue use of the system of
book-entry transfers through the Depositary (or a successor securities
depository). In that event, Certificated Notes will be printed and
delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
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SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement,
Foreign Currency Notes will not be sold in, or to residents of, the country
issuing the applicable currency. The information set forth in this Prospectus
Supplement is directed to prospective purchasers who are United States
residents and, with respect to Foreign Currency Notes, is by necessity
incomplete. The Company disclaims any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal of, and premium, if any, and interest, if any, on, the
Foreign Currency Notes. Such persons should consult their own financial and
legal advisors with regard to such matters. See "Risk Factors--Exchange Rates
and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, IF ANY
Unless otherwise specified in the applicable Pricing Supplement, the
Company is obligated to make payments of principal of, and premium, if any, and
interest, if any, on, Foreign Currency Notes in the applicable Specified
Currency (or, if such Specified Currency is not at the time of such payment
legal tender for the payment of public and private debts, in such other coin or
currency of the country which issued such Specified Currency as at the time of
such payment is legal tender for the payment of such debts). Any such amounts
payable by the Company in the Specified Currency will, unless otherwise
specified in the applicable Pricing Supplement, be converted by the exchange
rate agent named in the applicable Pricing Supplement (the "Exchange Rate
Agent") into United States dollars for payment to Holders. However, the Holder
of a Foreign Currency Note may elect to receive such amounts payable in the
Specified Currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a
Foreign Currency Note will be based on the highest bid quotation in The City of
New York received by the Exchange Rate Agent at approximately 11:00 A.M., New
York City time, on the second Business Day preceding the applicable payment
date from three recognized foreign exchange dealers (one of whom may be the
Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the
Company for the purchase by the quoting dealer of the Specified Currency for
United States dollars for settlement on such payment date in the aggregate
amount of such Specified Currency payable to all Holders of Foreign Currency
Notes scheduled to receive United States dollar payments and at which the
applicable dealer commits to execute a contract. All currency exchange costs
will be borne by the Holders of such Foreign Currency Notes by deductions from
such payments. If three such bid quotations are not available, payments will
be made in the Specified Currency.
Holders of Foreign Currency Notes may elect to receive all or a
specified portion of any payments of principal, premium, if any, and/or
interest, if any, in the Specified Currency by submitting a written request for
such payment to the Trustee at its corporate trust office in The City of New
York on or prior to the applicable Record Date or at least fifteen calendar
days prior to the Maturity Date, as the case may be. Such written request may
be mailed or hand delivered or sent by cable, telex or other form of facsimile
transmission. Holders of Foreign Currency Notes may elect to receive all or a
specified portion of all future payments in the Specified Currency and need not
file a separate election for each payment. Such election will remain in effect
until revoked by written notice to the Trustee, but written notice of any such
revocation must be received by the Trustee on or prior to the applicable Record
Date or at least fifteen calendar days prior to the Maturity Date, as the case
may be. Holders of Foreign Currency Notes to be held in the name of a broker
or nominee should contact such broker or nominee to determine whether and how
an election to receive payments in the Specified Currency may be made.
Payments of the principal of, and premium, if any, and/or interest, if
any, on, Foreign Currency Notes which are to be made in United States dollars
will be made in the manner specified herein with respect to Notes denominated
in United States dollars. See "Description of Notes--General." Payments of
interest, if any, on Foreign Currency Notes which are to be made in the
Specified Currency on an Interest Payment Date other than the Maturity Date
will be made by check mailed to the address of the Holders of such Foreign
Currency Notes as
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they appear in the Security Register, subject to the right to receive such
interest payments by wire transfer of immediately available funds under the
circumstances described under "Description of Notes--General." Payments of
principal of, and premium, if any, and/or interest, if any, on, Foreign
Currency Notes which are to be made in the Specified Currency on the Maturity
Date will be made by wire transfer of immediately available funds to an account
with a bank designated at least fifteen calendar days prior to the Maturity
Date by each Holder thereof, provided that such bank has appropriate facilities
therefor and that the applicable Foreign Currency Note is presented and
surrendered at the principal corporate trust office of the Trustee in time for
the Trustee to make such payments in such funds in accordance with its normal
procedures.
Unless otherwise specified in the applicable Pricing Supplement, if
the Specified Currency is other than United States dollars, a Beneficial Owner
of the related Global Security or Securities which elects to receive payments
of principal, premium, if any, and/or interest, if any, in the Specified
Currency must notify the Participant through which it owns its interest on or
prior to the applicable Record Date or at least fifteen calendar days prior to
the Maturity Date, as the case may be, of such Beneficial Owner's election.
Such Participant must notify the Depositary of such election on or prior to the
third Business Day after such Record Date or at least twelve calendar days
prior to the Maturity Date, as the case may be, and the Depositary will notify
the Trustee of such election on or prior to the fifth Business Day after such
Record Date or at least ten calendar days prior to the Maturity Date, as the
case may be. If complete instructions are received by the Participant from the
Beneficial Owner and forwarded by the Participant to the Depositary, and by the
Depositary to the Trustee, on or prior to such dates, then such Beneficial
Owner will receive payments in the applicable foreign currency or composite
currency.
AVAILABILITY OF SPECIFIED CURRENCY
If the Specified Currency for a Foreign Currency Note is not available
for the required payment of principal, premium, if any, and/or interest, if
any, due to the imposition of exchange controls or other circumstances beyond
the control of the Company, the Company will be entitled to satisfy its
obligations to the Holder of such Foreign Currency Note by making such payment
in United States dollars on the basis of the Market Exchange Rate on the second
Business Day prior to such payment or, if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate or
as otherwise specified in the applicable Pricing Supplement.
If payment in respect of a Foreign Currency Note is required to be
made in any composite currency, and such composite currency is unavailable due
to the imposition of exchange controls or other circumstances beyond the
control of the Company, the Company will be entitled to satisfy its obligations
to the Holder of such Foreign Currency Note by making such payment in United
States dollars. The amount of each payment in United States dollars shall be
computed by the Exchange Rate Agent on the basis of the equivalent of the
composite currency in United States dollars. The component currencies of the
composite currency for this purpose (collectively, the "Component Currencies"
and each, a "Component Currency") shall be the currency amounts that were
components of the composite currency as of the last day on which the composite
currency was used. The equivalent of the composite currency in United States
dollars shall be calculated by aggregating the United States dollar equivalents
of the Component Currencies. The United States dollar equivalent of each of
the Component Currencies shall be determined by the Exchange Rate Agent on the
basis of the most recently available Market Exchange Rate for each such
Component Currency, or as otherwise specified in the applicable Pricing
Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency 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 Component Currencies 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 the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
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The "Market Exchange Rate" for a currency or composite currency other
than United States dollars means the noon dollar buying rate in The City of New
York for cable transfers for such currency or composite currency as certified
for customs purposes by (or if not so certified, as otherwise determined by)
the Federal Reserve Bank of New York. Any payment made in United States
dollars under such circumstances where the required payment is in a currency or
composite currency other than United States dollars will not constitute an
Event of Default under the Indenture with respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the
laws of the State of New York. Under current New York law, a state court in
the State of New York rendering a judgment on a Foreign Currency Note would be
required to render such judgment in the Specified Currency, and such judgment
would be converted into United States dollars at the exchange rate prevailing
on the date of entry of the judgment. Accordingly, Holders of Foreign Currency
Notes would be subject to of exchange rate fluctuations after such date. It is
not certain, however that a non-New York court would follow the same rules and
procedures with respect to such conversions of the Specified Currency.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal
with holders other than original purchasers (except where otherwise
specifically noted). Persons considering the purchase of the Notes should
consult their own tax advisors concerning the application of United States
Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) any other person whose income or gain in respect of a Note is effectively
connected with the conduct of a United States trade or business. As used
herein, the term "non-U.S. Holder" means a beneficial owner of a Note that is
not a U.S. Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting).
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Original Issue Discount
The following summary is a general discussion of the United States
Federal income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("Discount Notes").
The following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") on January 27,
1994 under the original issue discount provisions of the Code.
For United States Federal income tax purposes, original issue discount
is the excess of the stated redemption price at maturity of a Note over its
issue price, if such excess equals or exceeds a de minimis amount (generally
1/4 of 1% of the Note's stated redemption price at maturity multiplied by the
number of complete years to its maturity from its issue date or, in the case of
a Note providing for the payment of any amount other than qualified stated
interest (as hereinafter defined) prior to maturity, multiplied by the weighted
average maturity of such Note). The issue price of each Note in an issue of
Notes equals the first price at which a substantial amount of such Notes has
been sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is
the sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion"
of original issue discount on any Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is
greater than its adjusted issue price as of the purchase date and less than or
equal to the sum of all amounts payable on the Discount Note after the purchase
date other than payments of qualified stated interest, will be considered to
have purchased the Discount Note at an "acquisition premium." Under the
acquisition premium rules, the amount of original issue discount which such
U.S. Holder must include in its gross income with respect to such Discount Note
for any taxable year (or portion thereof in which the U.S. Holder holds the
Discount Note) will be reduced (but not below zero) by the portion of the
acquisition premium properly allocable to the period.
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Under the OID Regulations, Floating Rate Notes and Indexed Notes
("Variable Notes") are subject to special rules whereby a Variable Note will
qualify as a "variable rate debt instrument" if (a) its issue price does not
exceed the total noncontingent principal payments due under the Variable Note
by more than a specified de minimis amount and (b) it provides for stated
interest, paid or compounded at least annually, at current values of (i) one or
more qualified floating rates, (ii) a single fixed rate and one or more
qualified floating rates, (iii) a single objective rate, or (iv) a single fixed
rate and a single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in
the value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the Note. An "objective rate" is a rate that
is not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon (i) one or more qualified floating rates,
(ii) one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
Variable Note is denominated, (iii) either the yield or changes in the price of
one or more items of actively traded personal property (other than stock or
debt of the issuer or a related party) or (iv) a combination of objective
rates. The OID Regulations also provide that other variable interest rates may
be treated as objective rates if so designated by the IRS in the future.
Despite the foregoing, a variable rate of interest on a Variable Note will not
constitute an objective rate if it is reasonably expected that the average
value of such rate during the first half of the Variable Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Variable Note's term. A "qualified
inverse floating rate" is any objective rate where such rate is equal to a
fixed rate minus a qualified floating rate, as long as variations in the rate
can reasonably be expected to inversely reflect contemporaneous variations in
the cost of newly borrowed funds. The OID Regulations also provide that if a
Variable Note provides for stated interest at a fixed rate for an initial
period of less than one year followed by a variable rate that is either a
qualified floating rate or an objective rate and if the variable rate on the
Variable Note's issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof qualifies as a "variable rate debt instrument" under the OID
Regulations, then any stated interest on such Note which is unconditionally
payable in cash or property (other than debt instruments of the issuer) at
least annually will constitute qualified stated interest and will be taxed
accordingly. Thus, a Variable Note that provides for stated interest at either
a single qualified floating rate or a single objective rate throughout the term
thereof and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the Variable Note is issued at a "true" discount (i.e.,
at a price below the Note's stated principal amount) in excess of a specified
de minimis amount. Original issue discount on such a Variable Note arising
from "true" discount is allocated to an accrual period using the constant yield
method described above by assuming that the variable rate is a fixed rate equal
to (i) in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or (ii) in the case of an objective rate
(other than a qualified inverse floating rate), a fixed rate that reflects the
yield that is reasonably expected for the Variable Note.
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In general, any other Variable Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the Variable Note. The OID
Regulations generally require that such a Variable Note be converted into an
"equivalent" fixed rate debt instrument by substituting any qualified floating
rate or qualified inverse floating rate provided for under the terms of the
Variable Note with a fixed rate equal to the value of the qualified floating
rate or qualified inverse floating rate, as the case may be, as of the Variable
Note's issue date. Any objective rate (other than a qualified inverse floating
rate) provided for under the terms of the Variable Note is converted into a
fixed rate that reflects the yield that is reasonably expected for the Variable
Note. In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate
or a qualified inverse floating rate, the Variable Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS
released proposed amendments to the OID Regulations which would broaden the
definition of an objective rate and would further clarify certain other
provisions contained in the OID Regulations. If ultimately adopted, these
amendments to the OID Regulations would be effective for debt instruments
issued 60 days or more after the date on which such proposed amendments are
finalized.
If a Variable Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Variable Note would be treated
as a contingent payment debt obligation. It is not entirely clear under
current law how a Variable Note would be taxed if such Note were treated as a
contingent payment debt obligation. The proper United States Federal income
tax treatment of Variable Notes that are treated as contingent payment debt
obligations will be more fully described in the applicable Pricing Supplement.
Furthermore, any other special United States Federal income tax considerations,
not otherwise discussed herein, which are applicable to any particular issue of
Notes will be discussed in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the
Company prior to their stated maturity (a "call option") and/or (ii) may be
repayable at the option of the holder prior to their stated maturity (a "put
option"). Notes containing such features may be subject to rules that differ
from the general rules discussed above. Investors intending to purchase Notes
with such features should consult their own tax advisors, since the original
issue discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all
interest (including stated interest, acquisition discount, original issue
discount, de minimis original issue discount, market discount, de minimis
market discount, and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium) that accrues on a debt instrument by using the
constant yield method applicable to original issue discount, subject to certain
limitations and exceptions.
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Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term
Notes") will be treated as having been issued with original issue discount. In
general, an individual or other cash method U.S. Holder is not required to
accrue such original issue discount unless the U.S. Holder elects to do so.
If such an election is not made, any gain recognized by the U.S. Holder on the
sale, exchange or maturity of the Short-Term Note will be ordinary income to
the extent of the original issue discount accrued on a straight-line basis, or
upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks
and dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
Market Discount
If a U.S. Holder purchases a Note, other than a Discount Note, for an
amount that is less than its issue price (or, in the case of a subsequent
purchaser, its stated redemption price at maturity) or, in the case of a
Discount Note, for an amount that is less than its adjusted issue price as of
the purchase date, such U.S. Holder will be treated as having purchased such
Note at a "market discount," unless such market discount is less than a
specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to
treat any partial principal payment (or, in the case of a Discount Note, any
payment that does not constitute qualified stated interest) on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the lesser of (i) the amount of such payment
or realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time of
such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on the basis
of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a
portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry a Note with market discount until the maturity
of the Note or certain earlier dispositions, because a current deduction is
only allowed to the extent the interest expense exceeds an allocable portion of
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the
first day of the first taxable year to which such election applies and may be
revoked only with the consent of the IRS.
Premium
If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable
year by the amortized amount of such excess for the taxable year. However, if
the Note may be optionally redeemed after the U.S. Holder acquires it at a
price in excess of its stated redemption price at maturity, special rules would
apply which could result in a deferral of the amortization of some bond premium
until later in the term of the Note. Any election to amortize bond premium
applies to all taxable debt instruments acquired by the U.S. Holder on or after
the first day of the first taxable year to which such election applies and may
be revoked only with the consent of the IRS.
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Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a
Note, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit
other than U.S. dollars.
Payments of Interest in a Foreign Currency
Cash Method. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of
interest on a Note (other than original issue discount or market discount) will
be required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of
accounting for United States Federal income tax purposes, or who otherwise is
required to accrue interest prior to receipt, will be required to include in
income the U.S. dollar value of the amount of interest income (including
original issue discount or market discount and reduced by amortizable bond
premium to the extent applicable) that has accrued and is otherwise required to
be taken into account with respect to a Note during an accrual period. The U.S.
dollar value of such accrued income will be determined by translating such
income at the average rate of exchange for the accrual period or, with respect
to an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. A U.S. Holder may elect, however, to
translate such accrued interest income using the rate of exchange on the last
day of the accrual period or, with respect to an accrual period that spans two
taxable years, using the rate of exchange on the last day of the taxable year.
If the last day of an accrual period is within five business days of the date
of receipt of the accrued interest, a U.S. Holder may translate such interest
using the rate of exchange on the date of receipt. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above election. A U.S. Holder will recognize exchange gain
or loss (which will be treated as ordinary income or loss) with respect to
accrued interest income on the date such income is received. The amount of
ordinary income or loss recognized will equal the difference, if any, between
the U.S. dollar value of the Foreign Currency payment received (determined on
the date such payment is received) in respect of such accrual period and the
U.S. dollar value of interest income that has accrued during such accrual
period (as determined above).
Purchase, Sale and Retirement of Notes
A U.S. Holder who purchases a Note with previously owned Foreign
Currency will recognize ordinary income or loss in an amount equal to the
difference, if any, between such U.S. Holder's tax basis in the Foreign
Currency and the U.S. dollar fair market value of the Foreign Currency used to
purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the
sale, exchange or retirement of a Note, a U.S. Holder will recognize taxable
gain or loss equal to the difference between the amount realized on the sale,
exchange or retirement and such U.S. Holder's adjusted tax basis in the Note.
Such gain or loss generally will be capital gain or loss (except to the extent
of any accrued market discount not previously included in the U.S.
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Holder's income) and will be long-term capital gain or loss if at the time of
sale, exchange or retirement the Note has been held by such U.S. Holder for
more than one year. To the extent the amount realized represents accrued but
unpaid interest, however, such amounts must be taken into account as interest
income, with exchange gain or loss computed as described in "Payments of
Interest in a Foreign Currency" above. If a U.S. Holder receives Foreign
Currency on such a sale, exchange or retirement the amount realized will be
based on the U.S. dollar value of the Foreign Currency on the date the payment
is received or the Note is disposed of (or deemed disposed of as a result of a
material change in the terms of such Note). In the case of a Note that is
denominated in Foreign Currency and is traded on an established securities
market, a cash basis U.S. Holder (or, upon election, an accrual basis U.S.
Holder) will determine the U.S. dollar value of the amount realized by
translating the Foreign Currency payment at the spot rate of exchange on the
settlement date of the sale. A U.S. Holder's adjusted tax basis in a Note will
equal the cost of the Note to such holder, increased by the amounts of any
market discount or original issue discount previously included in income by the
holder with respect to such Note and reduced by any amortized acquisition or
other premium and any principal payments received by the holder. A U.S.
Holder's tax basis in a Note, and the amount of any subsequent adjustments to
such holder's tax basis, will be the U.S. dollar value of the Foreign Currency
amount paid for such Note, or of the Foreign Currency amount of the adjustment,
determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note
that is attributable to fluctuations in currency exchange rates will be
ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will
equal the difference between the U.S. dollar value of the Foreign Currency
principal amount of the Note, determined on the date such payment is received
or the Note is disposed of, and the U.S. dollar value of the Foreign Currency
principal amount of the Note, determined on the date the U.S. Holder acquired
the Note. Such Foreign Currency gain or loss will be recognized only to the
extent of the total gain or loss realized by the U.S. Holder on the sale,
exchange or retirement of the Note.
Original Issue Discount
In the case of a Discount Note or Short-Term Note, (i) original issue
discount is determined in units of the Foreign Currency, (ii) accrued original
issue discount is translated into U.S. dollars as described in "Payments of
Interest in a Foreign Currency--Accrual Method" above and (iii) the amount of
Foreign Currency gain or loss on the accrued original issue discount is
determined by comparing the amount of income received attributable to the
discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
Premium and Market Discount
In the case of a Note with market discount, (i) market discount is
determined in units of the Foreign Currency, (ii) accrued market discount taken
into account upon the receipt of any partial principal payment or upon the
sale, exchange, retirement or other disposition of the Note (other than accrued
market discount required to be taken into account currently) is translated into
U.S. dollars at the exchange rate on such disposition date (and no part of such
accrued market discount is treated as exchange gain or loss) and (iii) accrued
market discount currently includible in income by a U.S. Holder for any accrual
period is translated into U.S. dollars on the basis of the average exchange
rate in effect during such accrual period, and the exchange gain or loss is
determined upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note in the manner described
in "Payments of Interest in a Foreign Currency--Accrual Method" above with
respect to computation of exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such
premium is determined in the relevant Foreign Currency and reduces interest
income in units of the Foreign Currency. Although not entirely clear, a U.S.
Holder should recognize exchange gain or loss equal to the difference between
the U.S. dollar value of the bond premium amortized with respect to a period,
determined on the date the interest attributable to such period is received,
and the U.S. dollar value of the bond premium determined on the date of the
acquisition of the Note.
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Exchange of Foreign Currencies
A U.S. Holder will have a tax basis in any Foreign Currency received
as interest or on the sale, exchange or retirement of a Note equal to the U.S.
dollar value of such Foreign Currency, determined at the time the interest is
received or at the time of the sale, exchange or retirement. Any gain or loss
realized by a U.S. Holder on a sale or other disposition of Foreign Currency
(including its exchange for U.S. dollars or its use to purchase Notes) will be
ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income
taxes on payments of principal, premium (if any) or interest (including
original issue discount, if any) on a Note, unless such non-U.S. Holder is a
direct or indirect 10% or greater shareholder of the Company, a controlled
foreign corporation related to the Company or a bank receiving interest
described in section 881(c)(3)(A) of the Code. To qualify for the exemption
from taxation, the last United States payor in the chain of payment prior to
payment to a non-U.S. Holder (the "Withholding Agent") must have received in
the year in which a payment of interest or principal occurs, or in either of
the two preceding calendar years, a statement that (i) is signed by the
beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income
taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should
consult its tax advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of
31% may apply to payments made in respect of the Notes to registered owners who
are not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Notes to a U.S. Holder must be reported to the
IRS, unless the U.S. Holder is an exempt recipient or establishes an exemption.
Compliance with the identification procedures described in the preceding
section would establish an exemption from backup withholding for those non-U.S.
Holders who are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient or
(ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller
is a non-U.S. Holder (and certain other conditions are met). Such a sale must
also
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be reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or (ii) the seller certifies its
non-U.S. status (and certain other conditions are met). Certification of the
registered owner's non-U.S. status would be made normally on an IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the
Company to or through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and [ ] (the "Agents"). The Agents may purchase Notes, as
principal, from the Company from time to time for resale to investors and other
purchasers at varying prices relating to prevailing market prices at the time
of resale as determined by the applicable Agent, or, if so specified in the
applicable Pricing Supplement, for resale at a fixed offering price. If agreed
to by the Company and an Agent, such Agent may also utilize its reasonable
efforts on an agency basis to solicit offers to purchase the Notes at 100% of
the principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Company will pay a commission to the applicable Agent,
ranging from .125% to .75% of the principal amount of each Note, depending upon
its stated maturity, sold through such Agent. Commissions with respect to
Notes with stated maturities in excess of 30 years that are sold through an
Agent will be negotiated between the Company and such Agent at the time of such
sale.
Unless otherwise specified in the applicable Pricing Supplement, any
Note sold to an Agent as principal will be purchased by such Agent at a price
equal to 100% of the principal amount thereof less a percentage of the
principal amount equal to the commission applicable to an agency sale of a Note
of identical maturity. The Agents may sell Notes which they purchase from the
Company as principal to other dealers for resale to investors and other
purchasers, and may reallow all or any portion of the discount received in
connection with such purchase from the Company to such dealers. After the
initial offering of Notes, the offering price (in the case of Notes to be
resold on a fixed offering price basis), the concession and the discount may be
changed.
The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice and may reject offers in whole or in part (whether
placed directly with the Company or through an Agent). Each Agent will have
the right, in its discretion reasonably exercised, to reject in whole or in
part any offer to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement,
payment of the purchase price of the Notes will be required to be made in
immediately available funds in the Specified Currency in The City of New York
on the date of settlement. See "Description of Notes-- General."
Upon issuance, the Notes will not have an established trading market.
The Notes will not be listed on any securities exchange. The Agents may from
time to time purchase and sell Notes in the secondary market, but the Agents
are not obligated to do so, and there can be no assurance that there will be a
secondary market for the Notes or that there will be liquidity in the secondary
market if one develops. From time to time, the Agents may make a market in the
Notes, but the Agents are not obligated to do so and may discontinue any
market-making activity at any time.
Each of the Agents may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"). The
Company has agreed to indemnify the Agents against certain liabilities
(including liabilities under the Securities Act), or to contribute to payments
the Agents may be required to make in respect thereof. The Company has agreed
to reimburse the Agents for certain other expenses.
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In the ordinary course of its business, the Agents and their
affiliates have engaged and may in the future engage in investment and
commercial banking transactions with the Company and certain of its affiliates.
Concurrently with the offering of Notes described herein, the Company
may issue and sell other Debt Securities described in the accompanying
Prospectus.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 17, 1996
PROSPECTUS
STANDARD FEDERAL BANCORPORATION, INC.
DEBT SECURITIES
Standard Federal Bancorporation, Inc., a Michigan corporation (the
"Company"), may offer, from time to time, in one or more series, its unsecured
debt securities (the "Debt Securities"), having such prices and terms as are
determined in light of market conditions at the time of sale. The Prospectus
Supplement accompanying this Prospectus sets forth, with respect to the
particular series of Debt Securities for which this Prospectus and the
Prospectus Supplement are being delivered, the specific aggregate principal
amount, denominations (which may be in United States dollars, in any other
currency or in composite currencies), maturity, rate (which may be fixed or
variable) and time of payment of any interest, purchase price, any terms for
redemption or other special terms and the names of the underwriters, if any.
The Debt Securities may be unsecured Debt Securities (the "Senior Debt
Securities") or unsecured and subordinated Debt Securities (the "Subordinated
Debt Securities"). The Senior Debt Securities, when issued, will rank on a
parity with all other unsecured Senior Indebtedness (as defined herein) of the
Company, and the Subordinated Debt Securities, when issued, will be subordinate
in right of payment to all Senior Indebtedness. See "Description of Debt
Securities - Subordination."
Each issue of Debt Securities may vary, where applicable, as to aggregate
principal amount, maturity date, public offering or purchase price, interest
rate or rates and timing of payments thereof, provision for redemption, sinking
fund requirements, if any, currencies of denomination or currencies otherwise
applicable thereto and any other variable terms and method of distribution. No
Debt Securities may be sold without delivery of a Prospectus Supplement
describing such issue of Debt Securities and the method and terms of offering
thereof.
THE DEBT SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY SAVINGS BANK OR NON-BANK SUBSIDIARY OF THE COMPANY AND ARE
NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE
FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRO-
SPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________________
The Company may sell the Debt Securities to or through one or more agents,
dealers or underwriters, and may also sell Debt Securities directly to other
purchasers. Such dealers may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933, as amended. If any agents, dealers or
underwriters are involved in the sale of any Debt Securities in respect of
which this Prospectus is being delivered, the names of such agents, dealers or
underwriters and any applicable commissions or discounts will be set forth in a
Prospectus Supplement. The net proceeds to the Company from such sale will
also be set forth in a Prospectus Supplement. See "Plan of Distribution".
________________
The date of this Prospectus is June __, 1996.
33
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information concerning the Company may be
inspected and copies may be made at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the Commission's Regional Offices in New York
(Seven World Trade Center, 13th Floor, New York, New York 10048), and Chicago
(500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511). Copies of
these materials may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, reports, proxy statements and other information concerning
the Company may be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is
hereby made to the Registration Statement and related exhibits for further
information with respect to the Company and the Debt Securities. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
and are incorporated herein by reference: (i) the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995; (ii) the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; and (iii)
the Company's Current Report on Form 8-K, dated May 14, 1996.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering of the Debt Securities, shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is
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deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement or document so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON REQUEST, A COPY OF ANY AND ALL OF THE DOCUMENTS
DESCRIBED ABOVE OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS. WRITTEN REQUESTS
SHOULD BE MAILED TO STANDARD FEDERAL BANCORPORATION, INC., 2600 WEST BIG BEAVER
ROAD, TROY, MICHIGAN 48084, ATTENTION: INVESTOR RELATIONS. TELEPHONE REQUESTS
SHOULD BE DIRECTED TO (810) 643-9600.
THE COMPANY
The Company is the holding company for Standard Federal Bank (the "Bank"),
a federally chartered savings bank. With deposits of $9.4 billion at March 31,
1996, the Company has the largest deposit base of all thrift institutions
headquartered in the Midwest. Based on total assets at March 31, 1996, the
Company is the seventh largest publicly traded thrift institution in the United
States and the largest thrift institution headquartered in Michigan. The Bank
was founded in 1893, converted to a publicly-owned stock chartered thrift
institution in 1987, and reorganized to become a subsidiary of the Company in
May 1995. The Bank currently conducts its retail banking business from 166
full-service Banking Centers and 11 retail Home Lending Centers located in
Michigan, Indiana and Ohio. The Bank has four offices in the City of Detroit
and 105 offices in the suburban Detroit area, 10 offices in north-central
Michigan, five offices in northern Michigan, 32 offices in the southwest
Michigan/northwest Indiana region, 11 offices in northeast Indiana and 11
offices in northwest Ohio. The Bank also has 24 wholesale Loan Production
Offices that conduct business with correspondents nationwide, and also owns and
operates 347 automated teller machines located throughout its retail market
area. According to recognized industry sources, the Bank was the tenth largest
mortgage originator in the United States in 1995, based on the dollar volume of
loans originated. The Company's executive offices are located at 2600 West Big
Beaver Road, Troy, Michigan 48084, and its telephone number is (810) 643-9600.
On December 14, 1995, the Company and Bell Bancorp, Inc. ("Bell") executed
a definitive merger agreement pursuant to which the Company will acquire all of
the outstanding shares of Bell for a purchase price (including payments made
with respect to outstanding stock options) of approximately $354.5 million (the
"Bell Merger"). Bell, through its principal subsidiary, Bell Federal Savings
and Loan Association ("Bell Federal Savings"), operates 14 full-service branch
offices in the Chicago, Illinois market. Bell had total assets of $1.9
billion, total deposits of $1.6 billion and stockholders' equity of $307.4
million at March 31, 1996. The stockholders of Bell approved the transaction
on May 16, 1996, and all regulatory approvals for the Bell Merger have also
been received. The acquisition is scheduled to be completed on June 7, 1996.
Upon completion of the Bell Merger, Bell Federal Savings will be merged into
the Bank and will be operated as a division of the Bank. The Company will
account for the Bell Merger as a purchase and such merger is anticipated to
result in goodwill of approximately $57.0
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35
million to $62.0 million. The addition of Bell's assets along with the related
intangibles will reduce the Bank's various capital ratios. On a pro forma
basis, and without giving effect to any additional capital which may be
contributed by the Company to the Bank with proceeds from the sale of Debt
Securities or other borrowings by the Company, the Company's management believes
the Bank will continue to meet all regulatory requirements, except that the
Bank's capital could fall slightly below the minimum level of capital required
for the Bank to be categorized as "well-capitalized" for purposes of the Prompt
Corrective Action ("PCA") regulations of the Office of Thrift Supervision
("OTS"). Shortly following the Bell Merger, the Company anticipates issuing
Debt Securities, the proceeds of which would be contributed to the capital of
the Bank and that the amount of such capital contribution will be sufficient to
restore the Bank's capital to that of a "well-capitalized" thrift institution.
For additional information regarding the Bell Merger, see the Company's Current
Report on Form 8-K dated May 14, 1996, which is incorporated herein by
reference.
The Bank's primary business consists of attracting deposits from the
general public and originating single-family home mortgage loans. The Bank
also acquires funds on a wholesale basis from a variety of sources, manages a
high-quality securities portfolio, services a significant volume of loans for
others and makes consumer loans and commercial real estate and non-real estate
loans. The Bank also operates a nationwide wholesale mortgage banking
correspondent network.
The Bank's primary sources of revenue are interest earned on mortgage
loans and investment securities (including mortgage-backed securities, or
"MBSs"), gains on sales of loans and MBSs, fees earned in connection with loans
and deposits, and income earned on the portfolio of loans and MBSs which the
Bank services for others. Its principal expense is interest incurred on
interest-bearing liabilities, including deposits and borrowings.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
The Bank is regulated by the Director (the "OTS Director") of the OTS and
the Federal Deposit Insurance Corporation (the "FDIC") which, through the
Savings Association Insurance Fund (the "SAIF"), insures the deposit accounts
of thrift institutions such as the Bank. The Bank is a member of the Federal
Home Loan Bank (the "FHLB") of Indianapolis, which is one of the twelve
regional banks for federally insured depository institutions comprising the
Federal Home Loan Bank System. The Bank is further subject to certain
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") governing reserves required to be maintained against
certain deposits and other matters.
The Company is a legal entity separate and distinct from the Bank and its
other subsidiaries. The ability of holders of securities of the Company,
including the holders of the Debt Securities offered hereby, to benefit from
the distribution of assets of any subsidiary of the Company (including the
Bank) upon the liquidation or reorganization of such subsidiary is
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36
subordinate to prior claims of creditors of such subsidiary (including
depositors in the case of the Bank) except to the extent that a claim of the
Company as a creditor of the subsidiary may be recognized.
RESTRICTIONS ON CAPITAL DISTRIBUTIONS AND TRANSACTIONS BY THE BANK WITH
AFFILIATES
The Company's principal sources of funds are cash dividends paid to it by
the Bank and its other subsidiaries, investment income and borrowings. OTS
regulations impose limitations upon certain "capital distributions" by thrift
institutions, including dividends. The OTS Director has the authority to
preclude those institutions from declaring a dividend. Generally, the OTS
regulations permit specified amounts of capital distributions by a thrift
institution that meets or exceeds its' minimum capital requirements, so long as
the institution notifies the OTS and receives no objection to the distribution
from the OTS. The Bank may currently make capital distributions during any
calendar year equal to the greater of 100% of its year to date income plus 50%
of its "surplus capital ratio" at the beginning of the calendar year, or 75% of
its net income over the most recent four quarter period. The "surplus capital
ratio" is the lowest percentage by which the institution's three ratios of
fully phased-in capital to assets exceed the ratios of its fully phased-in
capital requirements to assets.
The OTS has proposed to amend its regulation on capital distributions such
that the Bank would no longer have to obtain approval from the OTS in order to
make a distribution in excess of the safe harbor amount, unless such
distribution would cause the Bank to fail to meet the OTS's PCA capital
standards. The OTS would, however, continue to receive prior notice of a
distribution and would retain the authority to prohibit any capital
distribution upon a determination that the making of such distribution would
constitute an unsafe or unsound practice. The Company does not anticipate that
adoption of the proposed regulation would have a material impact on the Bank's
ability to make distributions of capital.
In addition to regulation of capital distributions, there are various
statutory and regulatory limitations on the extent to which thrift institution
subsidiaries of the Company, such as the Bank, can finance or otherwise
transfer funds to the Company or its non-banking subsidiaries, whether in the
form of loans, extensions of credit, investments or asset purchases. Such
transfers by any subsidiary thrift institution to the Company or any
non-banking subsidiary are generally limited to 10% of the thrift institution's
capital and surplus and, with respect to the Company and all such non-banking
subsidiaries, to an aggregate of 20% of such thrift institution's capital and
surplus. Furthermore, loans and extensions of credit are required to be
secured in specified amounts and are required to be on terms and conditions
consistent with safe and sound banking practices. The OTS Director may further
restrict these transactions in the interest of safety and soundness.
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37
CAPITAL REGULATIONS
The OTS has prescribed capital regulations (the "Capital Regulations")
that establish three capital requirements which must be met by the Bank - a
"core capital requirement," a "tangible capital requirement" and a "risk-based
capital requirement". The Capital Regulations require thrift institutions to
maintain "core" capital of at least 3% of adjusted total assets, "tangible"
capital of at least 1.5% of adjusted total assets, and "risk-based" capital of
at least 8% of risk-weighted assets. Capital standards for thrifts must be no
less stringent than the capital standards applicable to national banks (a
leverage ratio of 4% of adjusted assets). Therefore, the Bank believes that it
is required to maintain core capital of at least 4% of adjusted total assets.
The Bank meets all of the current capital requirements at March 31, 1996.
The OTS has also adopted separate PCA regulations that call for the OTS to
enforce certain restrictions on savings institutions that are classified as
undercapitalized. The Bank was categorized for PCA purposes as a
"well-capitalized institution" by the OTS as of the completion of the Bank's
1995 Safety and Soundness Examination, and the Company's management believes
the Bank remains so categorized at March 31, 1996. An institution's capital
category, however is determined solely for regulatory purposes and may not
constitute an accurate representation of the institution's financial condition
or prospects. As discussed above, as a result of the Bell Merger, it is
possible that the Bank's capital level could fall slightly below the minimum
capital required for the Bank to be categorized as "well-capitalized". In that
event, it is anticipated that the Bank would be categorized as "adequately
capitalized" for PCA purposes. Under applicable regulations, "adequately
capitalized" thrifts are subject to certain restrictions on their ability to
accept brokered deposits. However, the Bank does not currently accept brokered
deposits. In addition, the rate paid in the future for deposit insurance to the
FDIC could be increased by 3 cents per $100 dollars of insured deposits until
the Bank regains its well-capitalized status.
The OTS has also defined an interest rate risk ("IRR") component which,
although initially proposed as an additional component of risk-based capital
requirements, is now likely to be used by the OTS only as a supervisory tool.
The results derived from the OTS' IRR model indicate that at March 31, 1996,
the Bank was exposed to IRR at a level higher than the regulatory benchmark.
The Bank's March 31, 1996, IRR component was $32.9 million; such amount
equalling the Bank's IRR component as of September 30, 1995. Because the Bank
had $291.8 million of excess risk-based capital as of March 31, 1996, this IRR
component will neither affect the Bank's continued compliance with applicable
regulatory capital requirements, nor will it likely result in any increased
regulatory oversight.
DEPOSIT INSURANCE
The Bank's deposits are insured by the FDIC through the SAIF to the extent
permitted by law. The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") directed the FDIC to establish by January 1, 1994, a risk-based
system for setting deposit insurance assessments for FDIC insured institutions
such as the Bank under which an institution's insurance assessments vary
depending on the level of capital the institution holds and the degree to which
it is the subject of supervisory concern to the FDIC from 0.23% to 0.31%. The
FDIC has reduced the assessment rate charged by the Bank Insurance Fund ("BIF")
by a substantial
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amount, but has not reduced the SAIF assessment rates at all. Various
committees of Congress and various federal regulatory banking agencies,
including the FDIC, are currently discussing changes to the federal deposit
insurance system to narrow or eliminate the difference in financial
characteristics between the BIF and the SAIF. One of the proposals would,
among other things, assess thrifts such as the Bank, a one-time fee to
recapitalize the SAIF. In the event that such a proposal were to become law on
the terms currently discussed, management of the Company estimates that the Bank
would be required to record a one-time charge to earnings of approximately
$48.2 million, or $1.50 per share, after-tax, based on March 31, 1996, deposit
balances and an assessment fee of 85 cents per $100 dollars of insured
deposits. Under this proposal, thereafter, the Bank's annual insurance expense
would be reduced for the foreseeable future by approximately 80% to 100% of
current premiums. Management estimates that a premium reduction of this
magnitude would represent annual after-tax cost savings to the Bank of
approximately $10.1 million to $12.6 million, based upon the actual 1995
deposit insurance premiums incurred by the Bank. The currently proposed
legislation has evolved significantly over recent months and may continue to
change until finally enacted, if ever. There can be no assurance that a
premium reduction will occur.
INTERSTATE BANKING
Under legislation effective June 1, 1997, commercial banks will be able to
operate branch offices outside of their home state, although the extent of
their ability to branch into a new state will depend on the law of that state.
Federal thrift associations such as the Bank are already able to branch
nationwide, and the Bank currently operates branch offices in three states
(Michigan, Ohio and Indiana), and following the Bell Merger will operate branch
offices in Illinois. The effectiveness of the recent legislation will reduce
the Bank's competitive advantage over commercial banks in this regard, and
could increase competition in the markets in which the Bank operates.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
net proceeds from the sale of the Debt Securities will be used to make a
capital contribution to the Bank, to finance future acquisitions and for other
general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Company is computed by dividing
earnings by fixed charges. Earnings consist primarily of income before income
taxes and fixed charges. Fixed charges represent interest expense and the
proportion of rental expense deemed representative of the interest factor.
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THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31
----------------------- --------------
1995 1994 1993 1992 1991 1996 1995
---- ---- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges:
Including interest on deposits . . . . . . . 1.31x 1.42x 1.42x 1.30x 1.17x 1.33x 1.33x
Excluding interest on deposits . . . . . . . 2.01 2.48 2.31 1.85 1.46 2.21 2.02
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities will be issued under an Indenture (the "Senior
Indenture"), between the Company and a trustee, that will be filed as an
exhibit to or incorporated by reference in the Registration Statement of which
this Prospectus is a part. The Subordinated Debt Securities will be issued
under an Indenture (the "Subordinated Indenture" and collectively with the
Senior Indenture, the "Indenture"), between the Company and a trustee
(collectively with the trustee under the Senior Indenture, the "Trustee"), that
will be filed as an exhibit to or incorporated by reference in the Registration
Statement of which this Prospectus is a part. The following summary of certain
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all provisions of the Indenture,
including the definitions therein of certain terms. Wherever particular
Sections or defined terms of the Indenture are referred to, it is intended that
such Sections or defined terms (including, unless otherwise indicated herein,
definitions of terms capitalized in this summary) shall be incorporated herein
by reference. The following sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may apply to the Debt
Securities so offered, will be described in the Prospectus Supplement relating
to such Debt Securities. There is no requirement that future issues of debt
securities of the Company be issued under the Indenture, and the Company is
free to employ other indentures or documentation containing provisions
different from those included in the Indenture or applicable to one or more
issues of Debt Securities, in connection with future issues of such other debt
securities.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that Debt Securities may
be issued from time to time in one or more series up to the aggregate principal
amount which may be authorized from time to time by the Company. The Senior
Debt Securities will be direct, unsecured obligations of the Company and will
rank on a parity with other unsecured Senior Indebtedness of the Company. The
Subordinated Debt Securities will be unsecured and will rank on a parity with
other subordinated debt of the Company and, together with such other
subordinated debt, will be subordinate and junior in right of payment to the
prior payment in full of the Senior Indebtedness of the Company, as described
below under "Subordination."
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Because the Company is a holding company, rights to participate in any
distribution of assets of any subsidiary, including the Bank, upon its
bankruptcy, liquidation or other reorganization are subject to the prior claims
of the subsidiary's creditors, except to the extent that the Company is itself
a creditor with recognized claims against the subsidiary.
The Indenture provides that there may be more than one Trustee under the
Indenture with respect to one or more series of Debt Securities. Any Trustee
under the Indenture may resign or be removed with respect to one or more series
of Debt Securities issued under the Indenture, and a successor Trustee may be
appointed to act with respect to such series. Reference is made to the
Prospectus Supplement relating to the particular series of Debt Securities
offered thereby for the following terms: (1) the title of such Debt Securities
and series in which such Debt Securities will be included; (2) any limit on the
aggregate principal amount of such Debt Securities; (3) the price or prices
(expressed as a percentage of the aggregate principal amount thereof) at which
such Debt Securities will be issued; (4) the date or dates, or the method or
methods, if any, by which such date or dates shall be determined, on which such
Debt Securities will mature and, if other than the principal amount thereof,
the portion of the principal amount of such Debt Securities payable at
maturity; (5) the rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, or the method or methods, if any,
by which such rate or rates are to be determined and the manner upon which
interest will be calculated if other than that of a 360-day year of twelve
30-day months; (6) the date or dates from which such interest, if any, on such
Debt Securities will accrue or the method or methods, if any, by which such
date or dates are to be determined, the date or dates on which such interest,
if any, will be payable, the date on which payment of such interest, if any,
will commence and the Regular Record Dates for such Interest Payment Dates, if
any; (7) the date or dates, if any, on or after which, or the period or
periods, if any, within which, and the price or prices at which the Debt
Securities will, pursuant to any mandatory sinking fund provisions, or may,
pursuant to any optional sinking fund or to any purchase fund provisions, be
redeemed by the Company, and the other terms and provisions of such sinking
and/or purchase funds; (8) the date or dates, if any, on or after which, or the
period or periods, if any, within which, and the price or prices at which the
Debt Securities may, pursuant to any optional redemption provisions, be
redeemed at the option of the Company or of the holder thereof and the other
terms and provisions of such optional redemption; (9) the extent to which any
of the Debt Securities will be issuable in temporary or permanent global form
and, if so, the identity of the depositary for such global Debt Security, or
the manner in which any interest payable on a temporary or permanent global
Debt Security will be paid; (10) the denomination or denominations in which
such Debt Securities are authorized to be issued if other than $1,000 (in the
case of Debt Securities issued in registered form) or $5,000 (in the case of
Debt Securities issued in bearer form) and integral multiples thereof; (11)
whether such Debt Securities will be issued in registered or bearer form or
both and, if in bearer form, the terms and conditions relating thereto and any
limitations on issuance of such bearer Debt Securities (including exchange for
registered Debt Securities of the same series); (12) information with respect
to book-entry procedures relating to global Debt Securities; (13) the terms, if
any, upon which such Debt Securities may be convertible into other securities
of the Company and the terms and conditions upon which such conversion may be
effected, including the initial conversion price
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or rate and any other provision in addition to or in lieu of those described
herein; (14) whether any of the Debt Securities will be issued as Original
Issue Discount Securities; (15) each office or agency where, subject to the
terms of the Indenture, the principal of, and premium and interest, if any, on,
the Debt Securities will be payable and where such Debt Securities may be
presented for registration of transfer or exchange; (16) the currencies or
currency units in which such Debt Securities are issued and in which the
principal of, and premium and interest, if any, on, and additional amounts, if
any, in respect of such Debt Securities will be payable; (17) whether the
amount of payments of principal of, and interest on, and additional amounts, if
any, in respect of such Debt Securities may be determined with reference to an
index, formula or other method or methods (which index, formula or method or
methods may, but need not be, based on one or more currencies, currency units
or composite currencies, commodities, equity indices or other indices) and the
manner in which such amounts shall be determined; (18) whether the Company or a
holder may elect payment of the principal of, or premium or interest, if any,
on, or additional amounts in respect of, such Debt Securities in a currency,
currencies, currency unit or units or composite currency or currencies other
than that in which such Debt Securities are denominated or stated to be
payable, the period or periods within which, and the terms and conditions upon
which, such election may be made, and the time and manner of determining the
exchange rate between the currency, currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are denominated
or stated to be payable and the currency, currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are to be paid;
(19) if other than the Trustee, the identity of each Security Registrar, Paying
Agent and Authenticating Agent; (20) the applicability of the defeasance
provisions to such Debt Securities; (21) the person to whom any interest on any
registered Debt Securities of the series shall be payable, if other than the
person in whose name that Debt Security (or one or more predecessor Debt
Securities) is registered at the close of business on the applicable Regular
Record Date for such payment of interest, the manner in which, or the person to
whom, any interest on any bearer Debt Security of the series shall be payable,
if otherwise than upon presentation and surrender of the coupons appertaining
thereto as they severally mature, and the extent to which, or the manner in
which, any interest payable on a temporary global Debt Security on an Interest
Payment Date will be paid if other than in the manner provided in the
Indenture; (22) whether and under what circumstances the Company will pay
additional amounts as contemplated by Section 1004 of the Indenture (the term
"interest," as used in this Prospectus, shall include such additional amounts)
on such Debt Securities to any holder who is a United States Alien (as defined
in the Indenture) (including any modification to the definition of such term as
contained in the Indenture as originally executed) in respect of any tax,
assessment or governmental charge and, if so, whether the Company will have the
option to redeem such Debt Securities rather than pay such additional amounts
(and the terms of any such option); (23) any deletions from, modifications of
or additions to the Events of Default or covenants of the Company with respect
to any of such Debt Securities; (24) any special federal income tax
considerations applicable to such Debt Securities; and (25) any other terms of
such Debt Securities (which will not be inconsistent with the provisions of the
Indenture).
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Debt Securities may be issued as Original Issue Discount Securities to be
sold at a substantial discount below their principal amount. In the event of
an acceleration of the maturity of any Original Issue Discount Security, the
amount payable to the holder of such Original Issue Discount Security upon such
acceleration will be determined in accordance with the applicable Prospectus
Supplement, the terms of such Debt Security and the Indenture, but will be an
amount less than the amount payable at the maturity of the principal of such
Original Issue Discount Security. Special federal income tax and other
considerations applicable thereto will be described in the Prospectus
Supplement relating thereto.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for information with respect to any
deletions from, modifications of or additions to the Events of Default
described below or covenants of the Company contained in the Indenture,
including any addition of a covenant or other provision providing event risk or
similar protection.
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Debt Securities will be issued in registered form only, without
coupons. The Indenture, however, provides that the Company may also issue Debt
Securities in bearer form only, or in both registered and bearer form. Debt
Securities in bearer form shall not be offered, sold, resold or delivered in
connection with their original issuance in the United States or to any United
States person (as defined below) other than offices located outside the United
States of certain United States financial institutions. As used herein,
"United States person" means any citizen or resident of the United States, any
corporation, partnership or other entity created or organized in or under the
laws of the United States, or any estate or trust, the income of which is
subject to United States federal income taxation regardless of its source, and
"United States" means the United States of America (including the States and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction. Purchasers of Debt Securities in bearer form will
be subject to certification procedures and may be affected by certain
limitations under United States tax laws. Such procedures and limitations will
be described in the Prospectus Supplement relating to the offering of the Debt
Securities in bearer form.
Unless otherwise indicated in the applicable Prospectus Supplement,
registered Debt Securities will be issued in denominations of $1,000 or any
integral multiple thereof and bearer Debt Securities will be issued in
denominations of $5,000. No service charge will be made for any transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Unless otherwise described in the Prospectus Supplement relating thereto,
the principal, premium, if any, and interest, if any, of or on the Debt
Securities will be payable, and transfer of the Debt Securities will be
registrable, at the corporate trust office of The Chase Manhattan Bank, N.A.,
as Paying Agent and Security Registrar under the Indenture, in the Borough of
Manhattan, The City of New York, provided that payments of interest with
respect to any Debt
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Security in registered form may be made at the option of the Company by check
mailed to the address appearing in the applicable Security Register of the
person in whose name such Debt Security is registered at the close of business
on the Regular Record Date or by transfer to an account maintained with a bank
located in the United States (Sections 305, 307, and 1002).
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal of, premium, if any, and interest, if any, on Debt
Securities in bearer form will be made payable, subject to any applicable laws
and regulations, at such office outside the United States as specified in the
Prospectus Supplement and as the Company may designate from time to time, at
the option of the holder, by check or by transfer to an account maintained by
the payee with a bank located outside the United States. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of interest and
certain additional amounts on Debt Securities in bearer form will be made only
against surrender of the coupon relating to such Interest Payment Date. No
payment with respect to any Debt Security in bearer form will be made at any
office or agency of the Company in the United States or by check mailed to any
address in the United States or by transfer to an account maintained with a
bank located in the United States.
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 ("Global Debt Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such series. Global Debt Securities may
be issued in either registered or bearer form and in either temporary or
permanent form. Unless and until it is exchanged in whole or in part for
individual certificates evidencing Debt Securities in definitive form
represented thereby, a Global Debt Security may not be transferred except as a
whole by the Depositary for such Global Debt Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Global Debt Securities and certain limitations and restrictions relating to
a series of bearer Global Debt Securities, will be described in the Prospectus
Supplement relating to such series.
OUTSTANDING DEBT SECURITIES
In determining whether the holders of the requisite principal amount of
Outstanding Debt Securities have given any request, demand, authorization,
direction, notice, consent or waiver under the Indenture, (i) the portion of
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding for such purposes shall be that portion of the
principal amount thereof that could be declared to be due and payable pursuant
to the terms of such Original Issue Discount Security as of the date of such
determination, (ii) the principal amount of any Indexed Security shall be the
principal face amount of such Indexed Security determined on the date of its
original issuance, (iii) the principal amount of a Debt Security
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denominated in a Foreign Currency (as defined below) shall be the U.S. dollar
equivalent, determined on the date of original issue of such Debt Security, of
the principal amount of such Debt Security and (iv) any Debt Security owned by
the Company or any obligor on such Debt Security or any Affiliate of the
Company or such other obligor, shall be deemed not to be Outstanding (Section
101).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of 66-2/3% in aggregate
principal amount of the Outstanding Debt Securities of each series affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the holder of each Outstanding Debt
Security affected thereby: (a) change the stated maturity date of the principal
of, or any installment of principal or interest on, any Debt Security; (b)
reduce the principal amount of, or any premium or interest on, any Debt
Security; (c) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the maturity thereof or the amount
thereof provable in bankruptcy; (d) change the redemption provisions or
adversely affect the right of repayment at the option of any holder; (e) change
the place of payment of, currency of payment of principal of, or any premium or
interest on, any Debt Security; (f) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security; (g) reduce
the percentage in principal amount of Outstanding Debt Securities of any series
the consent of whose holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults; (h) modify the provisions of the Indenture
described in this paragraph or those regarding waiver of compliance with
certain provisions of, or certain defaults and their consequences under, the
Indenture, except to increase the percentage of Outstanding Debt Securities
necessary to modify and amend the Indenture or to give any such waiver, and
except to provide that certain other provisions of the Indenture cannot be
modified or waived without the consent of the holder of each Outstanding Debt
Security affected thereby; (i) make any change that adversely affects the right
to convert any Debt Security; or (j) in the case of Subordinated Debt
Securities, modify the provisions of the Indenture with respect to
subordination of such Subordinated Debt Securities in a manner adverse to the
holders (Section 902).
The holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture (Section 1007).
The holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of each series may, on behalf of all holders of Debt Securities of
that series, waive any past default under the Indenture with respect to Debt
Securities of that series, except a default in the payment of principal or any
premium or interest on a Debt Security of such series, or a default in respect
of a provision which under the Indenture cannot be modified or amended without
the consent of the holder of each affected Outstanding Debt Security of that
series (Section 513).
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Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any holder for any of the following
purposes: (i) to evidence the succession of another corporation to the Company;
(ii) to add to the covenants of the Company for the benefit of the holders of
all or any series of Debt Securities or to surrender any right or power therein
conferred upon the Company; (iii) to add or change any provisions of the
Indenture to facilitate the issuance of bearer Debt Securities; (iv) to
establish the form or terms of Debt Securities of any series and any related
coupons; (v) to provide for the acceptance of appointment by a successor
Trustee; (vi) to cure any ambiguity, defect or inconsistency in the Indenture,
provided such action does not adversely affect the interests of holders of Debt
Securities of any series or any related coupons in any material respect; (vii)
to add to, delete from or revise the conditions, limitations and restrictions
on the authorized amount, terms or purposes of issue, authentication and
delivery of Debt Securities; (viii) to add any additional Events of Default;
(ix) to supplement any of the provisions of the Indenture to such extent as
shall be necessary to permit or facilitate the defeasance and discharge of any
series of Debt Securities, provided such action does not adversely affect the
interests of holders of Debt Securities of such series or any related coupons
in any material respect; (x) to secure the Debt Securities; (xi) to make
provisions with respect to conversion rights of holders of Debt Securities of
any series; and (xii) to amend or supplement any provision contained in the
Indenture or in any supplemental indenture, provided that such amendment or
supplement does not materially adversely affect the interests of the holders of
any Debt Securities then Outstanding (Section 901).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may consolidate or merge with or into, or transfer its assets
substantially as an entirety to, any corporation organized under the laws of
any domestic jurisdiction, provided that the successor corporation assumes the
Company's obligations on the Debt Securities and under the Indenture, that
after giving effect to the transaction no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have occurred and be continuing, and that certain other conditions are met
(Section 801).
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal of, or any premium
on, any Debt Security of that series when due; (b) failure to pay any interest
on any Debt Security of that series when due, continued for 30 days; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) breach of any other covenant or warranty of the
Company in the Indenture (other than a covenant or warranty included in the
Indenture solely for the benefit of a series of Debt Securities other than that
series), continued for 60 days after written notice as provided in the
Indenture; (e) certain events in bankruptcy, insolvency or reorganization
involving the Company or any Restricted Subsidiary (as hereinafter defined);
(f) acceleration of Indebtedness in a principal amount in excess of $10,000,000
of the Company or any Restricted Subsidiary under the terms of the instrument
under which such Indebtedness was issued or
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secured, if such acceleration is not annulled within 30 days after written
notice as provided in the Indenture; and (g) any other Event of Default
provided with respect to Debt Securities of that series (Section 501). If an
Event of Default with respect to Debt Securities of any series at the time
Outstanding (other than an Event of Default described in clause (e) above)
occurs and is continuing, either the Trustee or the holders of at least 25% in
aggregate principal amount of the Outstanding Debt Securities of that series
may declare the principal amount of all the Debt Securities of that series or
such lesser amount as may be provided for in the Debt Securities of such series
to be due and payable immediately. If an Event of Default specified in clause
(e) above with respect to Debt Securities of any series at the time Outstanding
occurs, the principal amount of all the Debt Securities of that series or such
lesser amount as may be provided for in the Debt Securities of such series will
ipso facto become immediately due and payable without any declaration on the
part of the Trustee or any holder. At any time after Debt Securities of any
series have been accelerated, but before a judgment or decree based on
acceleration has been obtained, the holders of a majority in aggregate
principal amount of Outstanding Debt Securities of that series may rescind and
annul such acceleration, provided that, among other things, all Events of
Default with respect to such series, other than payment defaults caused by such
acceleration, have been cured or waived as provided in the Indenture (Section
502).
"Restricted Subsidiary" means Standard Federal Bank so long as it remains
a Subsidiary, and any other successor to all or a principal part of the
business or properties thereof, and any other Subsidiary which the Board of
Directors designates as a Restricted Subsidiary (Section 101).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company may discharge certain obligations to holders of any series of
Debt Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
depositing with the Trustee, in trust, funds in U.S. dollars or in such Foreign
Currency in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal
(and premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the Maturity thereof, as the case
may be (Section 401).
The Indenture provides that, if the provisions of Section 402 thereof are
made applicable to the Debt Securities of or within any series pursuant to
Section 301 thereof, the Company may elect either (a) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for, among other things, the obligation to pay Additional Amounts, if
any, upon the occurrence of certain events of taxation, assessment or
governmental charge with respect to payments on such Debt Securities and the
obligations to register the transfer or exchange of such Debt Securities, to
replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to
maintain an office or agency in respect of such Debt Securities and to hold
moneys for payment in trust) ("defeasance") (Section 402(2)) or (b) to be
released from its obligations with respect to such Debt Securities under the
covenants described in "Limitation on
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Sale or Pledge of Stock of the Bank" below or, if provided pursuant to Section
301 of the Indenture, its obligations with respect to any other covenant, and
any omission to comply with such obligations shall not constitute a default or
an Event of Default with respect to such Debt Securities ("covenant
defeasance") (Section 402(3)), in either case upon the irrevocable deposit by
the Company with the Trustee, in trust, of an amount, in U.S. dollars or in
such Foreign Currency in which such Debt Securities are payable at Stated
Maturity, or Government Obligations (as defined below), or both, applicable to
such Debt Securities which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor (Section 402(4)).
Such a trust may only be established if, among other things, (i) the
applicable defeasance or covenant defeasance does not result in a breach or
violation of, or constitute a default under, the Indenture or any other
material agreement or instrument to which the Company is a party or by which it
is bound, (ii) no default or Event of Default with respect to the Debt
Securities to be defeased shall have occurred and be continuing on the date of
the establishment of such a trust and (iii) the Company has delivered to the
Trustee an Opinion of Counsel (as specified in the Indenture) to the effect
that the holders of such Debt Securities will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred, and such Opinion of
Counsel, in the case of defeasance, must refer to and be based upon a letter
ruling of the Internal Revenue Service received by the Company, a Revenue
Ruling published by the Internal Revenue Service or a change in applicable U.S.
federal income tax law occurring after the date of the Indenture (Section
402(4)(d) and (e)).
"Foreign Currency" means any currency, currency unit or composite
currency, including, without limitation, the ECU, issued by the government of
one or more countries other than the United States of America or by any
recognized confederation or association of such governments (Section 101).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government or the governments in the
confederation which issued the Foreign Currency in which the Debt Securities of
a particular series are payable, for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America or
such government or governments which issued the Foreign Currency in which the
Debt Securities of such series are payable, the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government or governments, which, in the case
of clauses (i) and (ii), are not callable or redeemable at the option of the
issuer or issuers thereof, and shall also include a depository receipt issued
by a bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of or any other
amount with respect to any such Government Obligation
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held by such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of or any other
amount with respect to the Government Obligation evidenced by such depository
receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if
after the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the holder of a Debt Security of such series is entitled to, and
does, elect pursuant to Section 301 of the Indenture or the terms of such Debt
Security to receive payment in a currency other than that in which such deposit
has been made in respect of such Debt Security, or (b) a Conversion Event (as
defined below) occurs in respect of the Foreign Currency in which such deposit
has been made, the indebtedness represented by such Debt Security shall be
deemed to have been, and will be, fully discharged and satisfied through the
payment of the principal of (and premium, if any) and interest, if any, on such
Debt Security as such Debt Security becomes due out of the proceeds yielded by
converting the amount so deposited in respect of such Debt Security into the
currency in which such Debt Security becomes payable as a result of such
election or such Conversion Event based on (x) in the case of payments made
pursuant to clause (a) above, the applicable market exchange rate for such
currency in effect on the second business day prior to such payment date, or
(y) with respect to a Conversion Event, the applicable market exchange rate for
such Foreign Currency in effect (as nearly as feasible) at the time of the
Conversion Event (Section 402(5)).
"Conversion Event" means the cessation of use of (i) a Foreign Currency
both by the government of the country or the confederation which issued such
Foreign Currency and for the settlement of transactions by a central bank or
other public institutions of or within the international banking community,
(ii) the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Community or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that is payable in a Foreign Currency
that ceases to be used by its government or confederation of issuance shall be
made in U.S. dollars (Section 101).
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default other than an Event of Default with
respect to Section 1005 of the Indenture (which Section would no longer be
applicable to such Debt Securities after such covenant defeasance) or with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such Foreign Currency in which such Debt Securities are payable,
and Government Obligations on deposit with the Trustee, will be sufficient to
pay amounts due on such Debt Securities at the time of their Stated Maturity
but may not be sufficient to pay amounts due on such Debt Securities at the
time of the acceleration resulting from such Event of Default.
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49
However, the Company would remain liable to make payment of such amounts due at
the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
Under each Indenture, the Company is required to furnish to the Trustee
annually a statement as to performance by the Company of certain of its
obligations under the Indenture and as to any default in such performance. The
Company is also required to deliver to the Trustee, within five days after the
occurrence thereof, written notice of any event which after notice or lapse of
time or both would constitute an Event of Default (Section 1008).
LIMITATION ON SALE OR PLEDGE OF STOCK OF THE BANK
The Indenture provides that, unless otherwise specified therein with
respect to a series of Debt Securities, the Company (a) will not (i) sell,
transfer or otherwise dispose of any shares of the Voting Stock of the Bank or
(ii) permit the Bank to issue, sell or otherwise dispose of shares of its
Voting Stock unless in either case the Bank remains a Controlled Subsidiary and
(b) will not permit the Bank to (i) merge or consolidate unless the surviving
entity is the Bank or a Controlled Subsidiary or (ii) convey or transfer its
properties and assets substantially as an entirety to any person, except to the
Company or a Controlled Subsidiary (Section 1005). However, the Company may
avoid this restriction if prior to any such transaction the Bank
unconditionally guarantees payment when due of the principal of, premium, if
any, and interest on the Debt Securities, the Bank obtains all regulatory
approvals, if any, required to permit such guarantee, and the Company obtains
an Opinion of Counsel to such guarantee. For purposes of these covenants, the
Bank includes any successor but not a Subsidiary of the Bank, "Controlled
Subsidiary" means any Person at least 80% of the outstanding shares of Voting
Stock (except for directors' qualifying shares, if any) of which is at the time
owned directly or indirectly by the Company and "Voting Stock" of any Person
means stock of any class or classes, however designated, having ordinary voting
power for the election of a majority of the board of directors of such Person,
other than stock having such power only by reason of the occurrence of a
contingency (Sections 101 and 1005).
The Indenture also provides that, unless otherwise specified with respect
to a series of Debt Securities, the Company will not create, assume, incur or
suffer to exist, as security for indebtedness for borrowed money any mortgage,
pledge, encumbrance, lien or charge of any kind upon the Voting Stock of the
Bank (other than directors' qualifying shares) without effectively providing
that such series of Debt Securities is secured equally and ratably with (or
prior to) such indebtedness; provided, however, that the Company may create,
assume, incur or suffer to exist any such mortgage, pledge, encumbrance, lien
or charge without regard to the foregoing provisions so long as after giving
effect thereto the Company will own directly or indirectly at least 80% of the
Voting Stock of the Bank then issued and outstanding, free and clear of any
such mortgage, pledge, encumbrance, lien or charge. The Company may also avoid
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50
this restriction if prior to creating, assuming, incurring or suffering to
exist any such mortgage, pledge, encumbrance, lien or charge, the Bank
unconditionally guarantees payment when due of the principal of, premium, if
any, and interest on the Debt Securities, the Bank obtains all regulatory
approvals, if any, required to permit such guarantee, and the Company obtains
an Opinion of Counsel pertaining to such guarantee.
The Indenture does not restrict the Company from incurring, assuming or
becoming liable for any type of debt or from creating, assuming, incurring or
permitting to exist any mortgage, pledge, encumbrance, lien or charge on its
property (except the Voting Stock of the Bank). The Indenture does not require
the Company to maintain any financial ratios or specified levels of net worth
or liquidity.
Unless otherwise indicated in the applicable Prospectus Supplement with
respect to a series of Debt Securities, the covenants contained in the
Indenture would not necessarily provide holders of Debt Securities any
protection in the event of a highly leveraged or other transaction involving
the Company that may adversely affect holders.
Any additional restrictive covenants with respect to any series of Debt
Securities, and any variations from the foregoing restrictive covenants
applicable to any series of Debt Securities, will be described in the
applicable Prospectus Supplement.
SUBORDINATION
The payment of the principal of and interest on the Subordinated Debt
Securities will, to the extent set forth in the Indenture relating thereto, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below). Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshalling of assets or any
bankruptcy, insolvency, receivership or similar proceedings of the Company, the
holders of all Senior Indebtedness will first be entitled to receive payment in
full of all amounts due or to become due thereon before the holders of the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of or interest thereto. In the event of the acceleration of
the maturity of any Subordinated Debt Securities, the holders of all Senior
Indebtedness will first be entitled to receive payment in full of all amounts
due thereon before the holders of the Subordinated Debt Securities will be
entitled to receive any payment upon the principal of or interest thereon. No
payment on account of principal or interest in respect of the Subordinated Debt
Securities may be made if there shall have occurred and be continuing beyond
any applicable grace period a default in any payment with respect to Senior
Indebtedness, or if there shall have occurred an event of default with respect
to any Senior Indebtedness permitting the holders thereof to accelerate the
maturity thereof, or if any judicial proceeding shall be pending with respect
to any such default (Article 16 of the Subordinated Indenture).
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By reason of such subordination, in the event of insolvency, holders of
the Subordinated Debt Securities may recover less, ratably, than other
creditors of the Company, including holders of Senior Indebtedness.
"Senior Indebtedness" is defined in the Indenture to mean the principal of
(and premium, if any) and interest on (a) all indebtedness of the Company
(including indebtedness of others guaranteed by the Company) other than the
Subordinated Debt Securities, which is (i) for money borrowed or (ii) evidenced
by a note or similar instrument given in connection with the acquisition of any
businesses, properties or assets of any kind, (b) obligations of the Company as
lessee under leases required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles and leases of property or
assets made as part of any sale and lease-back transaction to which the Company
is a party, and (c) amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligation, unless in any case in the
instrument creating or evidencing any such indebtedness or obligation or
pursuant to which the same is outstanding it is provided that such indebtedness
or obligation is not superior in right of payment to the Subordinated Debt
Securities or such indebtedness or obligation is subordinated to senior
indebtedness of the Company to substantially the same extent as the
Subordinated Debt Securities are subordinated to the Senior Indebtedness, in
each case whether such indebtedness or obligation is outstanding on the date of
the Indenture or thereafter created, incurred or assumed (Section 101 of the
Subordinated Indenture). The Indenture relating to the Subordinated Debt
Securities does not prohibit or limit the incurrence of additional Senior
Indebtedness.
ADDITIONAL PROVISIONS
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnity (Section 601). Subject to such
provisions for the indemnification of the Trustee and certain other conditions,
the holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Debt Securities of that series (Section 512).
No holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless: (i) such holder shall have previously given to the Trustee
written notice of a continuing Event of Default with respect to Debt Securities
of that series; (ii) the holders of not less than 25% in aggregate principal
amount of the Outstanding Debt Securities of that series shall have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as trustee; (iii) the Trustee shall have failed to institute
such proceeding within 60 days after receipt of such written request; and (iv)
the Trustee shall not have received from the holders of a majority in principal
amount of the Outstanding Debt Securities of that series a direction
inconsistent with
20
52
such request (Section 507). However, the holder of any Debt Security will have
an absolute right to receive payment of the principal of (and premium, if any)
and interest on such Debt Security on the due dates expressed in such Debt
Security and to institute suit for the enforcement of any such payment (Section
508).
CONCERNING THE TRUSTEE
The Company has, from time to time, engaged in transactions with the
Trustee in the ordinary course of its business.
PLAN OF DISTRIBUTION
The Company may sell all or part of the Debt Securities from time to time
on terms determined at the time such Debt Securities are offered for sale. The
Debt Securities may be sold (i) through underwriters or dealers; (ii) through
agents; (iii) directly to one or more purchasers; or (iv) through a combination
of any such methods of sale. The Prospectus Supplement with respect to the
Debt Securities of a particular series describes the terms of the offering of
such Debt Securities, including the name of the agent or the name or names of
any underwriters, the public offering or purchase price, any discounts and
commissions to be allowed or paid to the agent or underwriters, all other items
constituting underwriting compensation, the discounts and commissions to be
allowed or paid to dealers, if any, and the exchanges, if any, on which the
Debt Securities will be listed. Only the agents or underwriters so named in
the Prospectus Supplement are agents or underwriters in connection with the
Debt Securities offered thereby. Under certain circumstances, the Company may
repurchase Debt Securities and reoffer them to the public as set forth above.
The Company may also arrange for repurchases and resales of such Debt
Securities by dealers.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters to solicit offers by certain institutions to purchase Debt
Securities from the Company pursuant to Delayed Delivery Contracts providing
for payment and delivery on the date stated in the Prospectus Supplement. Each
such contract will be for an amount not less than, and, unless the Company
otherwise agrees, the aggregate principal amount of Debt Securities sold
pursuant to such contracts shall not be more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but shall in all cases be subject to the
approval of the Company. Delayed Delivery Contracts will not be subject to any
conditions except that the purchase by an institution of Debt Securities
covered thereby shall not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which such institution is subject.
The Company will agree to indemnify any agents or underwriters through
which Debt Securities are sold against certain civil liabilities, including
liabilities under the Securities Act,
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53
or to contribute to payments the agents or the underwriters may be required to
make in respect thereof.
Certain of the underwriters and their associates and affiliates may be
customers of, have borrowing relationships with, engage in other transactions
with, and/or perform services, including investment banking services for, the
Company or its affiliates in the ordinary course of business.
LEGAL OPINIONS
The validity of the Debt Securities offered hereby and other legal matters
will be passed upon for the Company by Dykema Gossett P.L.L.C., Detroit,
Michigan. Certain legal matters will be passed upon for the underwriters or
agents by Brown & Wood, New York, New York. Members of the firm of Dykema
Gossett P.L.L.C. own in the aggregate a total of _____ shares of the Company's
common stock (less than 0.1% of the total outstanding shares).
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended March 31, 1996 and 1995 which is incorporated herein by reference,
Deloitte & Touche LLP have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated in
their reports included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of Bell Bancorp, Inc. incorporated
by reference into the Company's Current Report on Form 8-K dated May 14, 1996,
which are incorporated by reference herein, have been incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
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54
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations other than contained or
incorporated by reference in this Prospectus Supplement, the applicable Pricing
Supplement or the Prospectus in connection with the offer made by this
Prospectus Supplement, the applicable Pricing Supplement and the Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Agents. Neither the delivery of
this Prospectus Supplement, the applicable Pricing Supplement or the Prospectus
nor any sale made hereunder and thereunder shall under any circumstance create
an implication that there has not been any change in the affairs of the Company
since the date hereof. This Prospectus Supplement, the applicable Pricing
Supplement and the Prospectus do not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or in
which the person making such offer is not qualified to do so or to anyone to
whom it is unlawful to make such offer or solicitation.
-----------------
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT
Risk Factors . . . . . . . . . . . . . . S-2
Description of Notes . . . . . . . . . . S-3
Special Provisions Relating to Foreign
Currency Notes . . . . . . . . . . . . S-19
Certain United States Federal Income Tax
Considerations . . . . . . . . . . . . S-21
Plan of Distribution . . . . . . . . . . S-29
PROSPECTUS
Available Information . . . . . . . . . . 2
Incorporation of Certain Documents
By Reference . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . 3
Certain Regulatory Considerations . . . . 4
Use of Proceeds . . . . . . . . . . . . . 7
Ratio of Earnings to Fixed Charges . . . 7
Description of Debt Securities . . . . . 8
Plan of Distribution . . . . . . . . . . 21
Legal Opinions . . . . . . . . . . . . . 22
Experts . . . . . . . . . . . . . . . . . 22
$_00,000,000
LOGO
STANDARD FEDERAL BANCORPORATION, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
-----------------
PROSPECTUS SUPPLEMENT
-----------------
MERRILL LYNCH & CO.
[ ]
June __, 1996
55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the estimated amounts of expenses to be
borne by the Company in connection with the distribution of the securities
offered hereby:
Securities and Exchange Commission
registration fee $ 68,966
Blue Sky fees and expenses 15,000
Accounting fees and expenses 25,000
Legal fees and expenses 150,000
Trustee's fees and expenses 15,000
Printing and engraving expenses 120,000
Rating Agency fees 200,000
Miscellaneous expenses 16,034
--------
Total $610,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 561 through 571 of the Michigan Business Corporation Act (the "MBCA")
govern the indemnification of officers, directors and other persons. In this
regard, the MBCA provides for indemnification of directors and officers acting
in good faith and in a manner they reasonably believe to be in, or not opposed
to, the best interest of the Company or its shareholders (and, with respect to
a criminal proceeding, if they have no reasonable cause to believe their
conduct to be unlawful). Such indemnification may be made against (a) expenses
(including attorney's fees), judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred in connection with any threatened,
pending or completed action, suit or proceeding (other than an action by, or in
the right of, the Company) arising out of a position with the Company (or with
some other entity at the Company's request), and (b) expenses (including
attorney's fees) and amounts paid in settlement actually and reasonably
incurred in connection with a threatened, pending or completed action or suit
by, or in the right of, the Company, unless the director or officer is found
liable to the Company and an appropriate court does not determine that he or
she is nevertheless fairly and reasonably entitled to indemnification. The
MBCA requires indemnification for expenses to the extent that a director or
officer is successful in defending against any such action, suit or proceeding,
and otherwise requires, in general, that the indemnification provided for in
(a) and (b) above be made only on a determination by a majority vote of a
quorum of the Board of Directors comprised of members who were not parties to
or threatened to be made parties to such action. In certain circumstances, the
MBCA further permits advances to cover such expenses before a final
determination that indemnification is permissible, upon receipt of (i) a
written affirmation by the director or officer of his good faith belief that he
has met the applicable standard of conduct set forth in the MBCA, and (ii) a
written undertaking by or on behalf of the director or officer to repay such
amounts unless it shall ultimately be determined that he is entitled to
indemnification and a determination that the facts then known to those making
the advance would not preclude indemnification.
The MBCA permits the Company to purchase insurance on behalf of its directors
and officers against liabilities arising out of their positions with the
Company, whether or not such liabilities would be within the indemnification
provisions of the MBCA.
Indemnification under the MBCA is not exclusive of other rights to
indemnification to which a person may be entitled under a Company's articles of
incorporation or bylaws, or under contract executed by such corporation.
Subject to the exceptions recited in the following sentence, the Company's
Articles of Incorporation provide that no director shall be personally liable
to the Company or its shareholders for damages for breach of his or her duty as
a director. Such exculpatory language does not, however, eliminate or limit
the liability of a director for (a) breach of the duty of loyalty, (b) acts or
omissions that are not in good faith or involve intentional misconduct or
knowing violation of law, (c) certain other violations of the Michigan Business
Corporation Act, or (d) responsibility in respect of any transaction from which
the director has derived an improper personal benefit.
The bylaws of the Company provide that the Company shall indemnify its
directors, officers, employees and other agents ("indemnitees") in respect of
expenses, judgments, penalties, fines, and settlement of claims paid or
incurred, if the
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56
indemnitee acted in good faith and in what he or she reasonably believed to be
in, or not opposed to, the best interest of the corporation, and, in the case
of criminal action, if the indemnitee had no reasonable cause to believe his or
her conduct was unlawful. In respect of actions brought by or on behalf of the
Company in which the indemnitee is found liable, indemnification shall not be
made without a judicial determination by the court in which the matter was
heard that the indemnitee is, in all of the circumstances, fairly and
reasonably entitled to indemnification for reasonable expenses incurred. To
the extent that an indemnitee is successful in the defense of any proceeding,
he or she is entitled to be indemnified against actual and reasonable expenses
incurred in connection with such defense. Unless a court orders
indemnification, it shall not be made unless the directors of the Company
determine that indemnification is proper. The bylaws establish procedures
pursuant to which such a determination may be made. The bylaws authorize the
Company to purchase and maintain directors' and officers' liability insurance.
ITEM 16. EXHIBITS
1. Form of Distribution Agreement
4.1 Form of Senior Indenture
4.2 Form of Fixed Rate Senior Note
4.3 Form of Floating Rate Senior Note
4.4 Form of Subordinated Indenture
4.5 Form of Fixed Rate Subordinated Note
4.6 Form of Floating Rate Subordinated Note
5. Opinion of Dykema Gossett P.L.L.C.
12. Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Dykema Gossett P.L.L.C. (contained in Exhibit 5)
24. Power of Attorney (contained on signature page)
25. Form T-1 Statement of Eligibility of Trustee
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. That for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
2. (a) To file, during any period in which offers or sales are being
made, a post effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement, (b) that, for the purpose of
determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof, and (c) to remove
from registration by means of a post-effective amendment any of the securities
which remain unsold at the termination of the offering.
3. That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Troy, State of Michigan on the 16th day of May,
1996.
STANDARD FEDERAL BANCORPORATION, INC.
By:/s/ Thomas R. Ricketts
------------------------------------------
Thomas R. Ricketts, Chairman and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas R. Ricketts and Ronald J. Palmer,
jointly and severally, his or her attorneys-in-fact, each with the power of
substitution, for such person in any and all capacities, to sign any amendments
to this Registration Statement and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 16th day of May, 1996.
NAME AND SIGNATURE CAPACITY
/s/ Thomas R. Ricketts Chairman, President and Director
- ------------------------- (Principal Executive Officer)
Thomas R. Ricketts
/s/ Garry G. Carley Executive Vice President,
- ------------------------- Secretary and Director
Garry G. Carley
/s/ Joseph Krul Senior Vice President and Chief Financial
- ------------------------- Officer (Principal Financial and Accounting
Joseph Krul Officer)
/s/ Beverly Beltaire Director
- -------------------------
Beverly Beltaire
/s/ Ernest L. Grove, Jr. Director
- -------------------------
Ernest L. Grove, Jr.
/s/ Norman P. Hahn Director
- -------------------------
Norman P. Hahn
/s/ William E. Hoglund Director
- -------------------------
William E. Hoglund
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/s/ John M. O'Hara Director
- -----------------------
John M. O'Hara
Director
- -----------------------
Jack L. Otto
/s/ E.G. Wilkinson, Jr. Director
- -----------------------
E.G. Wilkinson, Jr.
/s/ David P. Williams Director
- -----------------------
David P. Williams
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59
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
1. Form of Distribution Agreement
4.1 Form of Senior Indenture
4.2 Form of Fixed Rate Senior Note
4.3 Form of Floating Rate Senior Note
4.4 Form of Subordinated Indenture
4.5 Form of Fixed Rate Subordinated Note
4.6 Form of Floating Rate Subordinated Note
5. Opinion of Dykema Gossett P.L.L.C.
12. Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Dykema Gossett P.L.L.C. (contained in Exhibit 5)
24. Power of Attorney (contained on signature page)
25. Form T-1 Statement of Eligibility of Trustee
II-5