cash and the fair market value of other property received in exchange therefor
(other than amounts attributable to accrued but unpaid interest on the 8.250%
Senior Notes due 2007 and the 8.625% Senior Notes due 2011) and (2) the holder's
adjusted tax basis in such note. A holder's adjusted tax basis in a note will
equal the purchase price paid by such holder for the note increased in the case
of a 9.920% Senior Discount Note due 2011 by any OID previously included in
income by such holder with respect to such note and decreased in the case of a
9.920% Senior Discount Note due 2011 by any payments received thereon.
Gain or loss realized on the sale, exchange, retirement or other taxable
disposition of a note will be capital gain or loss and will be long-term capital
gain or loss if at the time of sale, exchange, retirement, or other taxable
disposition, the note has been held for more than 12 months. The maximum rate of
tax on long-term capital gains with respect to notes held by an individual is
20%. The deductibility of capital losses is subject to certain limitations.
A holder receives a "market discount" when it (1) purchases an 8.250%
Senior Note due 2007 or an 8.625% Senior Note due 2009 for an amount below the
issue price, or (2) purchases a 9.920% Senior Discount Note due 2011 for an
amount below the adjusted issue price on the date of purchase (as determined in
accordance with the OID rules above.) Under the market discount rules, a U.S.
Holder will be required to treat any partial principal payment on, or any gain
on the sale, exchange, retirement or other disposition of, a note as ordinary
income to the extent of the market discount which has not previously been
included in income and is treated as having accrued on such note at the time of
such payment or disposition. In addition, the U.S. Holder may be required to
defer, until the maturity of the note or its earlier disposition in a taxable
transaction, the deduction of a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such notes.
Any 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 such discount on a constant interest rate method. A U.S.
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or constant interest rate method), in which case the
holder's basis in the note will be increased to reflect the amount of income
recognized and the rules described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service (the "IRS").
AMORTIZABLE BOND PREMIUM; ACQUISITION PREMIUM
A U.S. Holder that (1) purchases an 8.250% Senior Note due 2007 or an
8.625% Senior Note due 2009 for an amount in excess of the principal amount, or
(2) purchases a 9.920% Senior Discount Note due 2011 for an amount in excess of
the stated redemption price will be considered to have purchased such note with
"amortizable bond premium." A U.S. Holder generally may elect to amortize the
premium over the remaining term of the note on a constant yield method as
applied with respect to each accrual period of the note, and allocated ratably
to each day within an accrual period in a manner substantially similar to the
method of calculating daily portions of OID, as described above. However,