1
Filed Pursuant to Rule 424(b)(2)
File No. 333-38135
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 21, 1997)
$1,000,000,000
BankBoston LOGO
BANKBOSTON CORPORATION
MEDIUM-TERM NOTES
------------------------
Due Nine Months or More from Date of Issue
------------------------
BankBoston Corporation (the "Corporation") may offer from time to time up to
$1,000,000,000 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 Corporation of other 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
Corporation or repayment at the option of the Holder thereof, in each case, in
whole or in part, prior to its Stated Maturity Date, as set forth therein and
specified in the applicable Pricing Supplement. Each Note may be denominated in
U.S. dollars or in a currency or composite currency other than U.S. dollars, as
specified in the applicable Pricing Supplement. See "Risk Factors" and "Special
Provisions Relating to Foreign Currency Notes." The Notes will be issued in
denominations of $1,000 and integral multiples thereof, unless otherwise
specified in the applicable Pricing Supplement, and in such amounts in
currencies or composite currencies as 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
Corporation. At September 30, 1997, the outstanding Senior Indebtedness of the
Corporation, exclusive of guarantees and other contingent obligations, was
approximately $614 million. Payment of principal of Subordinated Notes may be
accelerated only in the case of bankruptcy, insolvency or reorganization of the
Corporation or receivership of BankBoston, N.A. (the "Bank"). See "DESCRIPTION
OF DEBT SECURITIES--SUBORDINATED SECURITIES" in the accompanying Prospectus.
continued on following page
------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE S-4, FOR A DISCUSSION OF CERTAIN
RISKS THAT SHOULD BE CONSIDERED PRIOR TO MAKING AN INVESTMENT IN THE NOTES.
------------------------
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.
The Notes are unsecured obligations of the Corporation and are not savings
accounts, deposits or other obligations of any bank or nonbank subsidiary of the
Corporation and are not insured by the Federal Deposit Insurance Corporation
(the "FDIC"), the Bank Insurance Fund or any other government agency.
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(1)(2) CORPORATION(1)(3)
---------------- ----------------------- ---------------------------
Per Note............................... 100% .125%-.750% 99.875%-99.250%
Total(4)............................... $1,000,000,000 $1,250,000-$7,500,000 $998,750,000-$992,500,000
- ---------------
(1) Morgan Stanley & Co. Incorporated, BancBoston Securities Inc., Bear, Stearns
& Co. Inc., Chase Securities Inc., Credit Suisse First Boston Corporation,
Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Brothers Inc (each, an "Agent" and,
collectively, the "Agents"), may purchase Notes, as principal, from the
Corporation, 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 public 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 Corporation and an Agent, such
Agent may utilize its reasonable efforts on an agency basis to solicit
offers to purchase Notes at 100% of the principal amount thereof, unless
otherwise specified in the applicable Pricing Supplement. The Corporation
will pay a commission to each Agent ranging from .125% to .750% 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 Corporation and such Agent at the time of such sale. See "Plan of
Distribution."
(2) The Corporation 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 Corporation estimated at $640,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
------------------------
The Notes are being offered on a continuous basis by the Corporation to or
through the Agents. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be listed on any securities exchange. There is no
assurance that the Notes offered hereby will be sold or, if sold, that there
will be a secondary market for the Notes or liquidity in the secondary market if
one develops. The Corporation reserves the right to cancel or modify the offer
made hereby without notice. The Corporation or an Agent, if such Agent solicits
the offer on an agency basis, may reject any offer to purchase Notes in whole or
in part. See "Plan of Distribution."
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MORGAN STANLEY DEAN WITTER BANCBOSTON SECURITIES INC.
BEAR, STEARNS & CO. INC. CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS
MERRILL LYNCH & CO. SALOMON BROTHERS INC
November 25, 1997
2
Continued from prior page
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating rates
(the "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 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 will be payable in arrears monthly, quarterly,
semiannually or annually, 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 set forth therein.
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 June 15 and December 15 of each year and on the
Maturity Date. The Notes may also be issued with original issue discount, and
such Notes may or may not pay any interest. See "Description of Notes."
The interest rate, or the formula for the determination of any such
interest rate, applicable to each Note and the other variable terms thereof as
described herein will be established by the Corporation on the date of issue of
such Note and will be set forth therein and specified in the applicable Pricing
Supplement. Interest rates, interest rate formulas and such other variable terms
are subject to change by the Corporation, but no change will affect any Note
already issued or as to which an offer to purchase has been accepted by the
Corporation.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note"). 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 (or such other depository identified in the applicable
Pricing Supplement) (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). See "Description
of Notes--Book-Entry System."
This Prospectus Supplement and the accompanying Prospectus may be used by
BancBoston Securities Inc. ("BSI"), a wholly-owned subsidiary of the
Corporation, in connection with offers and sales related to market-making
transactions in the Notes. BSI may act as principal or agent in such
transactions.
3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY
BID FOR, AND PURCHASE THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Risk Factors......................................................................... S-4
Consolidated Ratios of Earnings to Fixed Charges..................................... S-5
Description of Notes................................................................. S-6
Special Provisions Relating to Foreign Currency Notes................................ S-22
Certain United States Federal Income Tax Considerations.............................. S-24
Plan of Distribution................................................................. S-33
Legal Opinions....................................................................... S-34
PROSPECTUS
Available Information................................................................ 2
Incorporation of Certain Documents by Reference...................................... 2
The Corporation...................................................................... 3
Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed Charges
and Preferred Stock Dividend Requirements.......................................... 3
Supervision and Regulation........................................................... 4
Use of Proceeds...................................................................... 4
Description of Debt Securities....................................................... 4
Description of Preferred Stock....................................................... 15
Description of Common Stock.......................................................... 21
Description of Capital Securities.................................................... 23
Description of Securities Warrants................................................... 23
Plan of Distribution................................................................. 25
Legal Opinions....................................................................... 25
Experts.............................................................................. 26
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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 CORPORATION 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 CORPORATION SINCE THE
DATE HEREOF OR THEREOF. 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.
S-3
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RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in Notes, whether resulting 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, or otherwise. The Corporation 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 and the suitability of
investing in such Notes in light of their particular circumstances. 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 or currency index or other indices or formulas.
Prospective investors should carefully consider, among other factors, the
matters described below.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, if any, to one or more interest rate, currency (including exchange
rates and swap indices between currencies or composite currencies) 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 no interest will be payable in respect of such Notes or will be payable at
a rate lower than one applicable to a conventional fixed rate or floating rate
debt security issued by the Corporation at the same time, that repayment of the
principal and/or premium, if any, in respect of such Notes may occur at times
other than that expected by the Holders (as defined in the accompanying
Prospectus), and that the Holders could lose all or a substantial portion of
principal and/or premium, if any, payable with respect to such Notes on the
Maturity Date (as defined under "Description of Notes--Interest"). Such risks
depend on a number of interrelated factors, including economic, financial and
political events, over which the Corporation 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 Corporation may be expected to redeem such Notes when
prevailing interest rates are relatively low, Holders generally will not be able
to reinvest the redemption proceeds in a comparable security at an effective
interest rate as high as the current 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 liquidity in
the secondary market if one develops. See "Plan of Distribution."
The secondary market, if any, for Notes will be affected by a number of
factors independent of the creditworthiness of the Corporation 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. Holders may not be able to sell such Notes readily or at prices
that will enable them 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.
S-4
5
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 U.S. dollars.
Such risks include, without limitation, the possibility of significant changes
in the rate of exchange between the U.S. dollar and the Specified Currency (as
defined 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
Corporation 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 U.S. dollar and foreign or composite
currencies have been highly volatile and such volatility may be expected to
continue 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 U.S. dollar would result in a decrease in
the U.S. dollar-equivalent yield of such Foreign Currency Note, in the U.S.
dollar-equivalent value of the principal and premium, if any, payable on the
Maturity Date of such Foreign Currency Note, and, generally, in the U.S.
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 Corporation. In such cases, the Corporation will be entitled to
satisfy its obligations in respect of such Foreign Currency Note in U.S.
dollars. See "Special Provisions Relating to Foreign Currency Notes--Payment."
CREDIT RATINGS
The credit ratings assigned to the Corporation's medium-term note program
may not reflect the potential impact of all risks related to structure and other
factors on the 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 investing in such Notes in light
of their particular circumstances.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The Corporation's ratios of earnings to fixed charges are set forth below
for the periods indicated:
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1996
---- ----
Earnings to Fixed Charges:
Excluding Interest on Deposits.......................................... 2.33x 2.16x
Including Interest on Deposits.......................................... 1.53 1.41
For purposes of computing the ratio of earnings to fixed charges, earnings
represent net income plus applicable income taxes and fixed charges. Fixed
charges, excluding interest on deposits, include interest expense (other than on
deposits) and the proportion deemed representative of the interest factor of
rent expense, net of income from subleases. Fixed charges, including interest on
deposits, include all interest expense and the proportion deemed representative
of the interest factor of rent expense, net of income from subleases.
S-5
6
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities (as defined in the
accompanying Prospectus) set forth under the heading "DESCRIPTION OF DEBT
SECURITIES" in the accompanying Prospectus, to which description reference is
hereby made. The following description will apply to each Note unless otherwise
specified in the applicable Pricing Supplement. Certain terms not defined in
this Prospectus Supplement are defined in the accompanying Prospectus.
GENERAL
The Notes will be either Senior Notes or Subordinated Notes (referred to in
the accompanying Prospectus as "Senior Securities" and "Subordinated
Securities," respectively). The Senior Notes will be issued as a single series
under an indenture dated as of June 15, 1992 (the "Senior Indenture"), between
the Corporation and Norwest Bank Minnesota, National Association ("Norwest" or
the "Trustee"), as trustee. The Subordinated Notes will be issued as a single
series under an indenture dated as of June 15, 1992, as amended by the First
Supplemental Indenture dated as of June 24, 1993 (the "Subordinated Indenture"),
between the Corporation and Norwest, as trustee. The Senior Indenture and the
Subordinated Indenture are collectively referred to herein as the "Indentures."
This Prospectus Supplement, together with the accompanying Prospectus and any
Pricing Supplement, may be used in connection with the offer and sale of the
Notes in an aggregate initial offering price of up to $1,000,000,000 (or its
equivalent in foreign currencies or composite currencies), subject to reduction
as a result of future sales of the Corporation's Securities described in the
accompanying Prospectus.
The Indentures do not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provide that Debt Securities may be
issued thereunder from time to time in one or more series up to the aggregate
principal amount from time to time authorized by the Corporation for each
series. As of the date of this Prospectus Supplement, the Corporation had issued
$1,600,000,000 aggregate principal amount of Debt Securities under the
Indentures, $1,323,174,441 of which was then outstanding. As of such date,
$850,000,000 aggregate initial offering price of Senior Notes had been issued,
$575,000,000 of which were then outstanding, and $750,000,000 aggregate initial
offering price of Subordinated Notes had been issued, $748,174,441 of which were
then outstanding. As of the date hereof, the Corporation has authorized the
issuance and sale of up to an additional $1,500,000,000 aggregate initial
offering price, or the equivalent thereof in one or more foreign or composite
currencies, of Notes. The Corporation 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 Indentures in addition to the $1,000,000,000 aggregate
initial offering price of Notes offered hereby and the other Debt Securities
previously issued.
The Notes will not be entitled to the benefit of a sinking fund or to the
defeasance and covenant defeasance provisions contained in the Indentures.
THE NOTES ARE UNSECURED OBLIGATIONS OF THE CORPORATION AND ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF THE
CORPORATION AND ARE NOT INSURED BY THE FDIC, THE BANK INSURANCE FUND OR ANY
OTHER GOVERNMENT AGENCY.
The Notes will be offered on a continuous basis and will mature on any day
nine months or more from their dates of issue (the "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. The Notes may also be issued with original issue discount ("Discount
Notes") and such Notes may or may not bear any interest.
The Notes will be unsecured obligations of the Corporation. The Senior
Notes will rank on a parity with other unsecured and unsubordinated indebtedness
of the Corporation. The Subordinated Notes will be subordinate in right of
payment to all existing and future Senior Indebtedness of the Corporation as
described under "DESCRIPTION OF DEBT SECURITIES--SUBORDINATED
SECURITIES--Subordination" in the accompanying Prospectus. At September 30,
1997, the outstanding Senior Indebtedness of the
S-6
7
Corporation, exclusive of guarantees and other contingent obligations of the
Corporation, was approximately $614 million.
Payment of principal of the Subordinated Notes may be accelerated only in
the case of bankruptcy, insolvency or reorganization of the Corporation or the
receivership of the Bank. There is no right of acceleration of the payment of
principal of the Subordinated Notes upon a default in the payment of principal
or interest on the Subordinated Notes or in the performance of any covenant of
the Corporation contained in the Subordinated Indenture. See "DESCRIPTION OF
DEBT SECURITIES--SUBORDINATED SECURITIES--Events of Default; Defaults" in the
accompanying Prospectus. Except as may be set forth in a supplement to this
Prospectus Supplement, the Subordinated Notes are not convertible into any other
securities and are not Securities for which Capital Securities are exchangeable.
See "DESCRIPTION OF DEBT SECURITIES--SUBORDINATED SECURITIES--Exchangeability"
in the accompanying Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, and premium,
if any, and interest on, the Notes will be made in U.S. dollars. The Notes may
also be denominated in, and payments of principal of, and premium, if any, and
interest in respect thereof may be made in, currencies or composite currencies
other than U.S. dollars ("Foreign Currency Notes") (the currency or composite
currency in which a Note is denominated (or, if such currency or composite
currency is no longer legal tender for the payment of public and private debts
in the relevant country, such other currency or composite currency which is then
legal tender in such country for the payment of such debts), whether U.S.
dollars or otherwise, is herein referred to as the "Specified Currency" with
respect to such Note). See "Special Provisions Relating to Foreign Currency
Notes--Payments of Principal and Premium, if any, and Interest."
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency in
which such Notes are denominated. At the present time, there are limited
facilities in the United States for the conversion of U.S. dollars into foreign
currencies or composite currencies and vice versa, and commercial banks do not
generally offer non-U.S. dollar checking or savings account facilities in the
United States. If requested on or prior to the third Business Day (as defined
below) preceding the date of delivery of the Foreign Currency Notes, or by such
other day as determined by the applicable Agent, the Agents may be prepared to
arrange for the conversion of U.S. dollars into the Specified Currency to enable
the purchasers to pay for such Notes. Each such conversion will be made by the
applicable 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
purchasers of the Foreign Currency Notes. See "Special Provisions Relating to
Foreign Currency Notes."
Interest rates offered by the Corporation 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, interest rate
formulas and other variable terms of the Notes are subject to change by the
Corporation 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 Corporation.
Each Note will be issued in fully registered form as a Book-Entry 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.
Book-Entry Notes may be transferred or exchanged only through the Depositary.
See "Book-Entry System."
The Bank through its head office in Boston, Massachusetts and through its
fifty percent owned joint venture Boston EquiServe LP at the office of
Securities Transfer & Reporting Services, Inc. in the Borough of Manhattan in
The City of New York (collectively, the "Paying Agents") will act as the
Corporation's paying agents with respect to the Notes. Payments of principal of,
and premium, if any, and interest on, Book-Entry Notes will be made by the
Corporation through the Paying Agents to the Depositary. For special payment
S-7
8
terms applicable to Foreign Currency Notes, see "Special Provisions Relating to
Foreign Currency Notes--Payments of Principal and Premium, if any, and
Interest."
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 or Boston, Massachusetts; provided, however, that, with respect
to Foreign Currency Notes the payment of which is to be made in a Specified
Currency other than U.S. dollars, 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 defined below) of the country
issuing such Specified Currency unless the Specified Currency is European
Currency Units ("ECU"), in which case such day is also 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 is not a day designated as an ECU non-settlement
day by the ECU Banking Association) or, if ECU non-settlement days do not appear
on that page (and are not so designated), a day that 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. "London
Business Day" means any day on which dealings in the Designated LIBOR Currency
(as hereinafter defined) are transacted in the London interbank market.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency (except as described in the immediately preceding
paragraph with respect to ECU) or (ii) the capital city of the country to which
the Designated LIBOR Currency relates (or, in the case of ECU, Luxembourg), as
applicable, except, in the case of (i) or (ii) above, that with respect to U.S.
dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders,
Italian lire and Swiss francs, the "Principal Financial Center" shall be The
City of New York, Sydney, Toronto, Frankfurt, Amsterdam, Milan (solely in the
case of the Specified Currency) and Zurich, respectively.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each 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, specified in the applicable Pricing Supplement, until the
principal thereof is paid or duly made available for payment. Interest will be
payable in arrears on each Interest Payment Date specified in the applicable
Pricing Supplement on which an installment of interest is due and payable and on
the Stated Maturity Date or any prior date on which the principal, or an
installment of principal, of a Note becomes due and payable, whether by the
declaration of acceleration, call for redemption at the option of the
Corporation, repayment at the option of the Holder or otherwise (the Stated
Maturity Date or such prior date, as the case may be, is herein referred to as
the "Maturity Date"). Unless otherwise specified in the applicable Pricing
Supplement, the first payment of interest on any Note originally issued between
a Record Date (as defined below) and the related Interest Payment Date or on an
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.
Interest payments on the 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 from and including the date of issue, if no
interest has been paid with respect to the applicable Note) to but excluding the
related Interest Payment Date or the Maturity Date, as the case may be.
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Payment Dates" for the Fixed Rate Notes will be June 15 and December
15 of each year and the Maturity Date. Unless otherwise
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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 the "Interest Rate Basis" or "Interest Rate Bases" by reference to
which interest will be determined, which may be one or more of (i) the "CMT
Rate," in which case such Note will be a "CMT Rate Note," (ii) the "Commercial
Paper Rate," in which case such Note will be a "Commercial Paper Rate Note,"
(iii) the "Eleventh District Cost of Funds Rate," in which case such Note will
be an "Eleventh District Cost of Funds Rate Note," (iv) the "Federal Funds
Rate," in which case such Note will be a "Federal Funds Rate Note," (v) "LIBOR,"
in which case such Note will be a "LIBOR Note," (vi) the "Prime Rate," in which
case such Note will be a "Prime Rate Note," (vii) the "Treasury Rate," in which
case such Note will be a "Treasury Rate Note," or (viii) such other Interest
Rate Basis or interest rate formula as may be set forth in the applicable
Pricing Supplement. The applicable Pricing Supplement will also specify certain
additional 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 and Fixed Interest Rate, as applicable,
the Initial Interest Rate, Interest Reset Period and Dates, Record Dates,
Interest Payment Period and Dates, Index Maturity, Maximum Interest Rate and
Minimum Interest Rate, if any, and the Spread and/or Spread Multiplier, if any,
and if one or more of the applicable Interest Rate Bases is LIBOR, the
Designated LIBOR Currency and the Designated LIBOR Page, as described 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," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, 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 first 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 from the date of issue to the first
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 first 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 from
the date of issue to the first Interest Reset Date will be the Initial
Interest Rate and (z) the interest rate in effect for the period commencing
on, and including, the Fixed Rate Commencement Date to, but excluding, 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
so specified, the interest rate in effect thereon on the Business 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 equal
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to the Fixed Interest Rate specified in the applicable Pricing Supplement
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 percent. Commencing on the
first Interest Reset Date, the rate at which interest on such Inverse
Floating Rate Note is payable shall be reset as of each Interest Reset
Date; provided, however, that the interest rate in effect for the period
from the date of issue to the first Interest Reset Date will be the Initial
Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
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.
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, annually or such other specified period (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 Date 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 in effect
for the period from the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate or, if no such Fixed Interest Rate is specified, the
interest rate in effect on the day immediately preceding the Fixed Rate
Commencement Date, as specified in the applicable Pricing Supplement. 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 day that is a Business Day, except that in the case of a Floating
Rate Note as to which LIBOR is an applicable Interest Rate Basis, if such
Business Day falls in the next succeeding calendar month, such Interest Reset
Date will be the immediately preceding Business Day.
The interest rate applicable to each day in an Interest Reset Period will
be the rate determined by the Calculation Agent as of the Interest Determination
Date immediately preceding the Interest Reset Date on which such Interest Reset
Period commenced and calculated on or prior to the Calculation Date (as defined
herein), except with respect to LIBOR and the Eleventh District Cost of Funds
Rate, which will be calculated on such Interest Determination Date. The
"Interest Determination Date" with respect to 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 defined below); 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 Designated
LIBOR 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
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Determination Date" will be the day in the week in which the applicable Interest
Reset Date falls on which day Treasury Bills (as defined below) 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; and provided, further, that if
an auction falls on the applicable Interest Reset Date, then the Interest Reset
Date will instead be the first Business Day following such auction. 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
on such date, and the applicable interest rate will take effect on the
applicable Interest Reset Date.
Each Floating Rate Note will bear interest from the date of issue at the
rates specified in the applicable Pricing Supplement until the principal thereof
is paid or otherwise made available for payment. Except as provided below or in
the applicable Pricing Supplement, the "Interest Payment Dates" for the Floating
Rate Notes will be, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, the third Wednesday of each month or the third Wednesday of
March, June, September and December of each year, as specified in the applicable
Pricing Supplement; (ii) quarterly, the third Wednesday of March, June,
September and December of each year, (iii) semiannually, the third Wednesday of
the two months of each year specified in the applicable Pricing Supplement; and
(iv) annually, the third Wednesday of the month of each year specified in the
applicable Pricing Supplement and, in each case, interest will be payable on the
Maturity Date. If any Interest Payment Date for any Floating Rate Note (other
than the Maturity Date) would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the next succeeding day that is
a Business Day, except that in the case of a Floating Rate Note as to which
LIBOR is an applicable Interest Rate Basis, if 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/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest shall 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.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period (a "Maximum Interest Rate") and (ii) a minimum
numerical limitation, or floor, on the rate at which interest may accrue during
any interest period (a "Minimum Interest Rate"). In addition to any Maximum
Interest Rate that may be applicable to any Floating Rate Note pursuant to the
above provisions, the interest rate on Floating Rate Notes will in no event be
higher than the maximum rate permitted by Massachusetts law, as the same may be
modified by United States law of general application.
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 period for which accrued interest is being calculated. 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 the Interest Rate
Basis is 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 the 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.
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 upward
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(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 U.S. dollars, to the nearest cent or, in the
case of a Specified Currency other than U.S. dollars, to the nearest unit (with
one-half cent or unit being rounded upward).
Unless otherwise specified in the applicable Pricing Supplement, the Bank
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. The
determination of any interest rate by the Calculation Agent will be final and
binding absent manifest error.
CMT Rate. CMT Rate Notes will bear interest at the rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note or any 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 (as defined below) 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 (as defined below) 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 in which the
related CMT Rate Interest Determination Date falls. If such rate is no longer
displayed on the relevant page, or if 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 by the Board of Governors of the
Federal Reserve System in the relevant weekly statistical release entitled
"Statistical Release H.15(519), Selected Interest Rates," or any successor
publication ("H.15(519)"). If such rate is no longer published, or if not
published 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 (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 for 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 offered rates as of approximately 3:30 P.M., New York
City time, on the 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 Agents or their respective 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 cannot obtain three such Treasury Note quotations, the CMT
Rate for such CMT Rate Interest Determination Date will be
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calculated by the Calculation Agent and will be a yield to maturity based on the
arithmetic mean of the secondary market offered rates as of approximately 3:30
P.M., New York City time, on the 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 rates obtained and
neither the highest nor the lowest of such quotes will be eliminated; provided
however, that if fewer than three Reference Dealers selected by the Calculation
Agent are quoting as described herein, the CMT Rate will be the CMT Rate in
effect on such CMT Rate Interest Determination Date. If two Treasury Notes with
an original maturity of approximately the Designated CMT Maturity Index have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the Treasury Note with the shorter remaining term to maturity
will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Markets
Limited (or any successor service) on the page designated in the applicable
Pricing Supplement (or any other page as may replace such page on that 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.
"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. Commercial Paper Rate Notes will bear interest at
the rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any 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
defined below) 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 caption "Commercial Paper -- Nonfinancial." 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 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 Agents or their respective affiliates)
selected by the Calculation Agent for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement placed for a non-financial
entity whose bond rating is "Aa", or the equivalent, from a nationally
recognized statistical rating organization; provided, however, that if any of
the dealers selected as aforesaid 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
Money Market Yield = 360 - (D X M) X 100
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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. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the Eleventh
District Cost of Funds Rate and the Spread and/or Spread Multiplier, if any)
specified in such Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any 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 "Eleventh District" on Telerate Page 7058 (as
defined below) 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 any related Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate for such Eleventh
District Cost of Funds Rate 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 the date of such announcement. If the FHLB of San
Francisco fails to announce the Index for the calendar month immediately
preceding such Eleventh District Cost of Funds Rate Interest Determination Date,
then 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.
"Telerate Page 7058" means the display designated as page "7058" on the Dow
Jones Telerate Service (or such other page as may replace the 7058 page on that
service for the purpose of displaying the monthly weighted average cost of funds
paid by member institutions of the Eleventh Federal Home Loan Bank District).
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the
rates (calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any 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 by 3:00 P.M., New York City time, on the
related Calculation Date such rate is not published in either H.15(519) or
Composite Quotations, 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 U.S.
dollar federal funds arranged prior to 9:00 A.M., New York City time, on such
Federal Funds Rate Interest Determination Date by three leading brokers of
federal funds transactions in The City of New York (which may include the Agents
or their respective affiliates) selected by the Calculation Agent; 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.
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LIBOR. LIBOR Notes will bear interest at the rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
such LIBOR Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent 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 Designated LIBOR 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 Designated LIBOR 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 (which may include affiliates of the Agents) in the
London interbank market, as selected by the Calculation Agent, to provide
the Calculation Agent with its offered quotation for deposits in the
Designated LIBOR 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 the
Designated LIBOR 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
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 (which may include affiliates of
the Agents) in such Principal Financial Center selected by the Calculation
Agent for loans in the Designated LIBOR 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 the Designated LIBOR 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.
"Designated LIBOR Currency" means the currency or composite currency
specified in the applicable Pricing Supplement as to which LIBOR shall be
calculated or, if no such currency or composite currency is specified in
the applicable Pricing Supplement, 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) for the purpose of displaying the London interbank rates of major
banks for the Designated LIBOR 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
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method for calculating LIBOR, the display on the Dow Jones Markets Limited
(or any successor service) on the page specified in such Pricing Supplement
(or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
Designated LIBOR Currency, unless the Designated LIBOR Currency specified
in the applicable Pricing Supplement is U.S. dollars, in which case the
display designated as page "3750" on the Dow Jones Telerate Service (or
such other page as may replace such page on such service).
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any 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 USPRIME1 Page (as defined below) 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
USPRIME1 Page for such Prime Rate Interest Determination Date, the Prime Rate
shall be the arithmetic mean of the prime rates or base lending rates quoted on
the basis of the actual number of days in the year divided by a 360-day year as
of the close of business on such Prime Rate Interest Determination Date by four
major money center banks (which may include affiliates of the Agents) in The
City of New York selected by the Calculation Agent. If fewer than four such
rates appear on the Reuters Screen USPRIME1 Page, the Prime Rate will be the
arithmetic mean of the prime rates or base lending rates quoted on the basis of
the actual number of days in the year divided by a 360-day year as of the close
of business on such Prime Rate Interest Determination Date by four major money
center banks (which may include affiliates of the Agents) 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 (which may include affiliates of
the Agents) 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 selected as
aforesaid 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 USPRIME1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent 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 (expressed as a
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bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury Bills
having the Index Maturity designated in the applicable Pricing Supplement are
not reported as provided by 3:00 P.M., New York City time, on such Calculation
Date, or if no such auction is held in a particular week, then the Treasury Rate
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 Agents or
their respective affiliates) selected by the Calculation Agent, for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate determined as of such Treasury
Rate Interest Determination Date will be the Treasury Rate in effect on such
Treasury Rate Interest Determination Date.
DISCOUNT NOTES
The Corporation may from time to time offer Discount Notes that have an
original issue price (the "Issue Price") (as specified in the applicable Pricing
Supplement) that is less than 100% of the principal amount thereof (i.e., par)
by more than a percentage equal to the product of 0.25% and the number of full
years to the Stated Maturity Date. 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 a Discount Note and par
is referred to herein as the "Discount." In the event of redemption, repayment
or acceleration of maturity of a Discount Note, the amount payable to the Holder
of such Discount Note 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
Discount Note (if applicable), multiplied by the Initial Redemption Percentage
(as adjusted by the Annual Redemption Percentage Reduction, if applicable) and
(ii) any unpaid interest accrued thereon 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 a
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 Initial Period (as hereinafter
defined), corresponds to the shortest period between Interest Payment Dates for
the applicable Discount Note (with ratable accruals within a compounding
period), a coupon rate equal to the initial coupon rate applicable to such
Discount Note and an assumption that the maturity of such Discount Note will not
be accelerated. If the period from the date of issue to the initial Interest
Payment Date for a Discount Note (the "Initial Period") is shorter than the
compounding period for such 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 United States Internal Revenue Code of 1986, as amended (the "Code"),
certain Discount Notes may not be treated as having original issue discount
within the meaning of the Code, and Notes other than Discount Notes may be
treated as issued with original issue discount for United States Federal income
tax purposes. See "Certain United States Federal Income Tax Considerations."
FOREIGN-CURRENCY NOTES
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, and premium,
if any, and interest on, the Notes will be made in U.S. dollars. Foreign
Currency Notes will be denominated in a currency, including a composite
currency, other than U.S. dollars. Special provisions relating to Foreign
Currency Notes will be described in the applicable Note and the Pricing
Supplement relating thereto.
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An investment in Foreign Currency Notes entails significant risks that are
not associated with similar investments in debt securities that are denominated
in U.S. dollars and the payments with respect to which are made in U.S. dollars.
See "Risk Factors" and "Special Provisions Relating to Foreign Currency Notes."
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, the exchange rate of one or more
specified currencies (including a composite currency such as the ECU) relative
to an indexed currency or such other price or exchange rate ("Indexed Notes"),
as set forth in the applicable Pricing Supplement. In certain cases, Holders of
Indexed Notes may receive a principal amount on the Maturity Date that is
greater than or less than the face amount of the 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
and/or interest payable in respect of Indexed Notes, certain historical
information with respect to the specified indexed item and tax considerations
associated with an investment in such Indexed Notes will be set forth in the
applicable Pricing Supplement. See "Risk Factors."
REDEMPTION AT THE OPTION OF THE CORPORATION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. If so agreed upon by the Corporation
and the purchaser thereof, a Note will be redeemable on and after a date fixed
at the time of sale and specified in the applicable Pricing Supplement (the
"Initial Redemption Date") either in whole or in part, at the option of the
Corporation, on written notice given not more than 60 nor less than 30 calendar
days prior to the date of redemption by the Corporation to the Holder thereof in
accordance with the provisions of the applicable Indenture. On and after the
Initial Redemption Date, if any, such Note will be redeemable in increments of
$1,000 or any other integral multiple of an authorized denomination specified in
the applicable Pricing Supplement (provided that any remaining principal amount
of such Note shall be at least $1,000 or the authorized minimum denomination of
such Note) at the option of the Corporation at the applicable Redemption Price,
together with unpaid interest accrued thereon at the applicable rate borne by
such Note to the date of redemption. The "Redemption Price," with respect to a
Note, will initially be the Initial Redemption Percentage (as specified in the
applicable Pricing Supplement) of the principal amount of such Note to be
redeemed and will decline at each anniversary of the Initial Redemption Date by
the Annual Redemption Percentage Reduction (as specified in the applicable
Pricing Supplement), if any, of the principal amount to be redeemed until the
Redemption Price is 100% of such principal amount. Whenever less than all the
Notes at any time outstanding are to be redeemed, the terms of the Notes to be
so redeemed shall be selected by the Corporation. If the Corporation elects to
redeem any Note in part only, the remaining principal amount of such Note will
be an authorized denomination of such Note. If no Initial Redemption Date is
specified in the applicable Pricing Supplement, such Note will not be redeemable
prior to its Stated Maturity Date.
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be subject to repayment at the option of the Holders thereof
in accordance with the terms of the Notes on their respective Optional Repayment
Dates, if any, as agreed upon by the Corporation and the purchasers at the time
of sale and specified in the applicable Pricing Supplement. If no Optional
Repayment Date is specified with respect to a Note, such Note will not be
repayable at the option of the Holder thereof prior to the Stated Maturity Date.
On any Optional Repayment Date with respect to a Note, such Note will be
repayable in whole or in part in increments of $1,000 or any other integral
multiple of an authorized denomination specified in the applicable Pricing
Supplement (provided that any remaining principal amount of such Note shall be
at least $1,000 or the authorized minimum denomination of such Note). Unless
otherwise specified in the applicable Pricing Supplement, the repayment price
for any Note to be repaid means an amount equal to the sum of (i) 100% of the
unpaid principal amount thereof or the portion thereof plus (ii) accrued
interest to the date of repayment. Information with respect to the repayment
price for Indexed Notes shall be set forth in the applicable Pricing Supplement.
For any Note to be repaid, such Note
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must be received, together with the form thereon entitled "Option to Elect
Repayment" duly completed, by one of the Paying Agents at its office (or such
other address of which the Corporation shall from time to time notify the
Holders) not more than 60 nor less than 30 days prior to the date of repayment.
Exercise of such repayment option by the Holder will be irrevocable.
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment may be exercised by the
applicable participant (as defined below) that has an account with the
Depositary, on behalf of the beneficial owners of the Global Security or
Securities representing such Book-Entry Notes, by delivering a written notice
substantially similar to the above mentioned form to one of the Paying Agents at
its office (or such other address of which the Corporation shall from time to
time notify the Holders), not more than 60 nor less than 30 days prior to the
date of repayment. Notices of elections from participants on behalf of
beneficial owners of the Global Security or Securities representing such
Book-Entry Notes to exercise their option to have such Book-Entry Notes repaid
must be received by one of the Paying Agents, not later than 5:00 P.M., New York
City time, on the last day for giving such notice. In order to ensure that a
notice is received by one of the Paying Agents on a particular day, the
beneficial owner of the Global Security or Securities representing such
Book-Entry Notes must so direct the applicable participant 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 of the Global Security or Securities representing
Book-Entry Notes should consult the participants through which they own their
interest therein for the respective deadlines for such participants. All notices
shall be executed by a duly authorized officer of such participant (with
signature guaranteed) and shall be irrevocable. In addition, beneficial owners
of the Global Security or Securities representing Book-Entry Notes shall effect
delivery at the time such notices of election are given to the Depositary by
causing the applicable participant to transfer such beneficial owner's interest
in the Global Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Trustee. See "Book-Entry Notes."
If applicable, the Corporation will comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, as amended, and any other
securities laws or regulations in connection with any such repayment.
The Corporation may at any time purchase Notes at any price or prices in
the open market or otherwise. Notes so purchased by the Corporation may be held
or resold or, at the discretion of the Corporation, may be surrendered to the
Trustee for cancellation.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the Maturity Date or any other variable term
relating thereto, may be modified as specified under "Other Provisions" on the
face thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
The Corporation has established a depository arrangement with The
Depository Trust Company (the "Depositary") with respect to the Book-Entry
Notes, the terms of which are summarized below. Any additional or differing
terms of the depository arrangement with respect to the Book-Entry Notes will be
described in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes of like tenor and terms up to
$200,000,000 aggregate principal amount and having the same original issue date
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, located in the Borough of Manhattan, The City of New York, and will
be registered in the name of the Depositary or its nominee. No Global Security
described above may be transferred except as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the
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Depositary or by the Depositary or any such nominee to a successor depositary or
a nominee of such successor depository.
Book-Entry Notes represented by a Global Security are exchangeable for
definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, only if (x) the Depositary notifies the Corporation in writing
that it is unwilling or unable to continue as Depositary for such Global
Security or if at any time the Depositary ceases to be a clearing agency
registered under the Exchange Act, and a successor depositary is not appointed
by the Corporation within 60 days (y) the Corporation in its sole discretion
determines not to have such Book-Entry Notes represented by one or more Global
Securities or (z) an event shall have happened and be continuing which, after
notice or lapse of time, or both, would constitute an Event of Default with
respect to such Book-Entry Notes. Any Global Security representing Book-Entry
Notes that is exchangeable pursuant to the preceding sentence shall be
exchangeable in whole for definitive Notes in registered form, of like tenor and
of an equal aggregate principal amount, in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof (or in such amounts in other
currencies or composite currencies as specified in the applicable Pricing
Supplement). Such definitive Notes shall be registered in the name or names of
such person or persons as the Depositary shall instruct the Security Registrar.
It is expected that such instructions may be based upon directions received by
the Depositary from its participants with respect to ownership of Book-Entry
Notes.
Except as provided above, owners of Book-Entry Notes will not be entitled
to receive physical delivery of Notes in definitive form and no Global Security
representing Book-Entry Notes shall be exchangeable, except for another Global
Security of like denomination and tenor to be registered in the name of the
Depositary or its nominee. Accordingly, each Beneficial Owner owning a
Book-Entry Note 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 beneficial interest, to exercise
any rights of a Holder under the Notes. The Corporation understands that, under
existing industry practices, in the event that (i) the Corporation requests any
action of Holders or (ii) an owner of a Book-Entry Note desires to give or take
any action which a Holder is entitled to give or take under the Notes in
accordance with the terms of the Notes, the Depositary would authorize the
participants owning the relevant Book-Entry Notes to give or take such action,
and such participants would authorize beneficial owners owning through such
participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
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 Securities
Exchange Act of 1934. 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
Agents), 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
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relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depositary and its Participants are
on file with the Securities and Exchange Commission.
Purchase of 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 interest 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
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 Depository'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
Corporation, 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 Corporation and
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 of like tenor and terms 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 Corporation, 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
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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 Corporation 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 herein concerning the Depositary and the Depositary's
system has been obtained from sources that the Corporation believes to be
reliable, but neither the Corporation nor any Agent takes any responsibility for
the accuracy thereof.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than U.S. dollars or ECUs will not be sold in, or to
residents of, the country issuing the Specified Currency in which the particular
Notes are denominated. 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 Corporation
and the Agents disclaim 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 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."
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts. If an action based on Foreign Currency Notes
were commenced in a court of the United States, it is likely that such court
would grant judgment relating to such Notes only in U.S. dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion into
U.S. dollars would be determined with reference to the date of default, the date
judgment is rendered or some other date. Under current Massachusetts law, a
state court in The Commonwealth of Massachusetts rendering a judgment on a
Foreign Currency Note would be required to render such judgment in the Specified
Currency in which such Foreign Currency Note is denominated, and such judgment
would be converted into U.S. dollars at the exchange rate prevailing on the date
of entry of the judgment. Accordingly, Holders of Foreign Currency Notes would
bear the risk of exchange rate fluctuations between the time the amount of the
judgment is calculated and the time such amount is converted from U.S. dollars
into the applicable Specified Currency.
PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, the
Corporation is obligated to make payments of principal of and premium, if any,
and interest 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 paid by the
Corporation 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
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"Exchange Rate Agent") into U.S. dollars for payment to Holders. However, unless
otherwise specified in the applicable Pricing Supplement, the Holder of a
Foreign Currency Note may elect to receive such payments in the applicable
Specified Currency as hereinafter described.
Any U.S. 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 Corporation for the
purchase by the quoting dealer of the Specified Currency for U.S. dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency payable to all Holders of Foreign Currency Notes scheduled to receive
U.S. dollar payments and at which the applicable dealer commits to execute a
contract. All currency exchange costs will be borne by the Holder of such
Foreign Currency Note by deductions from such payments. If three such bid
quotations are not available, payments will be made in the Specified Currency.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payment of the principal of and
premium, if any, and/or interest on such Note in the Specified Currency by
submitting a written request for such payment to the Trustee at its principal
corporate trust office in Minneapolis, Minnesota 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. A Holder of a Foreign
Currency Note may elect to receive payment in the applicable Specified Currency
for all such principal, premium, if any, and interest payments 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 whose Notes are 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 applicable Specified
Currency may be made.
Payments of the principal of and premium, if any, and interest on Foreign
Currency Notes which are to be made in U.S. dollars will be made in the manner
specified herein with respect to Notes denominated in U.S. dollars. See
"Description of Notes--General." Payments of interest on Foreign Currency Notes
which are to be made in the applicable Specified Currency on an Interest Payment
Date (other than the Maturity Date) will be made by check mailed to the address
of the Persons entitled thereto as they appear in the Security Register.
Payments of principal of and premium, if any, and interest on Foreign Currency
Notes which are to be made in the applicable 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 the applicable Holder, provided that such bank has appropriate
facilities therefor and that the applicable Note is presented 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, a
beneficial owner of a Global Security or Securities representing Book-Entry
Notes denominated in a Specified Currency other than U.S. dollars which elects
to receive payments of principal, premium, if any, and interest in such
Specified Currency must notify the participant through which its interest is
held 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 to receive all or a portion of such payment in such Specified Currency.
Such participant must notify the Depositary of such election on or prior to the
third Business Day after such Record Date or at least ten 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 and forwarded by
the participant to the Depositary, and by the Depositary to the Trustee, on or
prior to such dates, then the beneficial owner will receive payments in such
Specified Currency.
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PAYMENT CURRENCY
Except as set forth below, if the applicable Specified Currency is not
available for the payment of principal, premium, if any, or interest with
respect to a Foreign Currency Note due to the imposition of exchange controls or
other circumstances beyond the control of the Corporation, the Corporation will
be entitled to satisfy its obligations to the Holder of such Foreign Currency
Note by making such payment in U.S. dollars on the basis of the Market Exchange
Rate, as defined herein, 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. The "Market Exchange Rate" for a Specified
Currency other than U.S. dollars means the noon dollar buying rate in The City
of New York for cable transfer for such Specified Currency as certified for
customs purposes (or if not so certified, as otherwise determined) by the
Federal Reserve Bank of New York. Any payment made under such circumstances in
U.S. dollars where the required payment is in a Specified Currency other than
U.S. dollars will not constitute an Event of Default under the applicable
Indenture with respect to the Notes.
If payment in respect of a Foreign Currency Note is required to be made in
any currency unit (e.g., ECU), and such currency unit is unavailable due to the
imposition of exchange controls or other circumstances beyond the Corporation's
control, then the Corporation will be entitled, but not required, to make any
payments in respect of such Foreign Currency Note in U.S. dollars until such
currency unit is again available. The amount of each payment in U.S. dollars
shall be computed on the basis of the equivalent of the currency unit in U.S.
dollars, which shall be determined by the Exchange Rate Agent on the following
basis. The component currencies of the currency unit for this purpose
(collectively, the "Component Currencies" and each, a "Component Currency")
shall be the currency amounts that were components of the currency unit as of
the last day on which the currency unit was available. The equivalent of the
currency unit in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Component Currencies. The U.S. dollar equivalent of each of
the Component Currencies shall be determined by the Exchange Rate Agent on the
second Business Day prior to the required payment or, if such Market Exchange
Rate is not then available, 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.
All determinations referred to above that are made by the Corporation or
its agent (including 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.
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 U.S. 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
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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 treated as
a corporation or a partnership for United States Federal income tax purposes
created or organized in or under the laws of the United States or of any state
or the District of Columbia (other than a partnership that is not treated as a
United States person under any applicable Treasury regulations), (iii) an estate
whose income is subject to U.S. federal income tax regardless of its source of
income, (iv) a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust, or (v) 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.
Notwithstanding the preceding sentence, to the extent provided in regulations,
certain trusts in existence on August 20, 1996 and treated as United States
persons prior to such date that elect to continue to be treated as United States
persons shall be considered U.S. Holders as well. 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).
DISCOUNT NOTES. 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. The
following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") on January 27,
1994, as amended on June 11, 1996, 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
defined below) 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
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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.
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 0.65 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 0.65 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 that is based on objective financial or economic information. A rate
will not qualify as an objective rate if it is based on information that is
within the control of the issuer (or a related party) or that is unique to the
circumstances of the issuer (or a related party), such as dividends, profits, or
the value of the issuer's stock (although a rate does not fail to be an
objective rate merely because it is based on the credit quality of the issuer).
A "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 qualified floating rate. 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
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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, and if
the interest on such Note which is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually then all stated
interest on the Note 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. The amount of qualified stated interest and the amount of
original issue discount, if any, that accrues during an accrual period on such a
Variable Note is determined under the rules applicable to fixed rate debt
instruments. 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. The qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid during
an accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period pursuant to the foregoing rules.
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.
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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. U.S. Holders should be aware that on June
11, 1996, the Treasury Department issued final regulations (the "CPDI
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In general, the CPDI Regulations would
cause the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States Federal income tax law.
Specifically, the CPDI Regulations generally require a U.S. Holder of such an
instrument to include future contingent and noncontingent interest payments in
income as such interest accrues based upon a projected payment schedule.
Moreover, in general, under the CPDI Regulations, any gain recognized by a U.S.
Holder on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any loss
realized could be treated as ordinary loss as opposed to capital loss (depending
upon the circumstances). The CPDI Regulations apply to debt instruments issued
on or after August 13, 1996. 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.
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 difference 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
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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 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 redeemed at the option of the Corporation 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 such bond premium until later in the term of the Note. Any election to
amortize bond premium applies to all taxable debt obligations then owned and
thereafter acquired by the U.S. Holder and may be revoked only with the consent
of the IRS.
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 the applicable holding period.
The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individual taxpayers for more
than eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specific conditions). Prospective investors should
consult their own tax advisors concerning these tax law changes.
NOTES DENOMINATED OR ON 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
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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 convert 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. 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 the
applicable holding period. 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 (i) the date of
receipt of such Foreign Currency in the case of a cash basis U.S. Holder and
(ii) the date of disposition in the case of an accrual basis U.S. Holder. 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 converting 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
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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
converted 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.
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.
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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 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.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the
Corporation to or through Morgan Stanley & Co. Incorporated, BancBoston
Securities Inc., Bear, Stearns & Co. Inc., Chase Securities Inc., Credit Suisse
First Boston Corporation, Lehman Brothers Inc., Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc. The Agents
may purchase Notes, as principal, from the Corporation 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 public 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 Corporation and the applicable Agent, such Agent may utilize its
reasonable efforts on an agency basis to solicit offers to purchase Notes at
100% of the principal amount thereof, unless otherwise specified in the
applicable Pricing Supplement. The Corporation will pay a commission to each
Agent ranging from .125% to .750% 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 Corporation and such Agent at
the time of such sale.
An Agent may sell Notes it has purchased from the Corporation as principal
to other dealers for resale to investors and other purchasers, and may allow any
portion of the discount received in connection with such purchase from the
Corporation to such dealers. After the initial public offering of Notes, the
public offering price (in the case of Notes to be resold at a fixed public
offering price), the concession and the discount may be changed.
The Corporation has reserved the right to sell Notes to investors directly
on its own behalf only in those jurisdictions where it is authorized to do so.
No commission will be payable nor will a discount be allowed on any sales made
directly by the Corporation.
The Corporation reserves the right to withdraw, cancel or modify the offer
made hereby without notice and may reject orders in whole or in part (whether
placed directly by the Corporation or through one of the Agents). The Agents
will have the right, in their discretion reasonably exercised, to reject in
whole or in part any offer to purchase Notes received by them 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 applicable 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. Each of the Agents may from
time to time purchase and sell Notes in the secondary market, but no Agent is
obligated to do so, and there can be no assurance that there will be a secondary
market for the Notes or liquidity in the secondary market if one develops. From
time to time, each of the Agents may make a market in the Notes, but no Agent is
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
Corporation 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 Corporation has
agreed to reimburse each of the Agents for certain other expenses.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of Notes. If the Agent creates or the Agents create, as
the case may be, a short position in Notes, i.e., if it sells or they sell Notes
in an aggregate principal amount exceeding that set forth in the applicable
Pricing Supplement, such Agent(s) may reduce that short position by purchasing
Notes in the open market. In
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general, purchases of Notes for the purpose of stabilization or to reduce a
short position could cause the price of Notes to be higher than it might be in
the absence of such purchases.
Neither the Corporation nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described in the immediately preceding paragraph may have on the price of Notes.
In addition, neither the Corporation nor any of the Agents makes any
representation that the Agents will engage in any such transactions or that such
transactions, once commenced, will not be discontinued without notice.
Certain of the Agents and their affiliates may be customers of, including
borrowers from, engage in transactions with, and perform services for, the
Corporation and the Bank in the ordinary course of business. In connection with
any particular issue of Notes, the Corporation may enter into swaps or other
hedging transactions with, or arranged by, the applicable Agent or an affiliate
thereof. Such Agent or such affiliate thereof may receive compensation, trading
gain or other benefits from such transaction.
BancBoston Securities Inc. ("BSI") is a wholly-owned subsidiary of the
Corporation. Accordingly, the Notes will be offered in compliance with Rule 2720
of the Conduct Rules of the National Association of Securities Dealers, Inc.
("NASD"). No NASD member participating in the offering of the Notes will execute
a transaction in the Notes in a discretionary account without the prior written
specific approval of the member's customer. This Prospectus Supplement and the
accompanying Prospectus may be used by BSI in connection with offers and sales
related to secondary market transactions in the Notes. BSI may act as principal
or agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale.
Concurrently with the offering of Notes described herein, the Corporation
may issue other Debt Securities described in the accompanying Prospectus
pursuant to the Indentures.
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the
Corporation by Gary A. Spiess, General Counsel of the Corporation, and for the
Agents by Brown & Wood LLP, New York, New York. Brown & Wood LLP will rely as to
all matters of Massachusetts law on the opinion of Mr. Spiess. As of November
14, 1997, Mr. Spiess had a direct or indirect interest in 28,177 shares of the
Corporation's Common Stock and had options to purchase an additional 61,723
shares, of which options to purchase 47,348 shares will be exercisable within 60
days after November 14, 1997.
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