<PAGE>
FILED PURSUANT TO RULE 424(B)(2)
REGISTRATION NO. 333-26211
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 27, 1997
$3,788,900,000
IBM Credit Corporation
Medium-Term Notes
Due from 9 Months to 30 Years from Date of Issue
-------------
IBM Credit Corporation (the "Company") may from time to time offer up to
$3,788,900,000 aggregate principal amount of Medium-Term Notes (the "Notes"),
or the equivalent thereof if any Notes are denominated in currencies or
currency units other than U.S. dollars, subject to reduction as a result
of the sale of other Securities (as defined in the Prospectus). Each
Note will bear interest at a fixed or floating rate as indicated in the
applicable Pricing Supplement (the "Pricing Supplement") to be
delivered with this Prospectus Supplement to the purchaser of such
Note. Each Note will mature from 9 months to 30 years from its
date of issue and may be subject to redemption prior to
maturity, as set forth in the applicable Pricing Supplement.
Each Fixed Rate Note will pay interest on March 1 and
September 1 of each year, unless otherwise specified in the
applicable Pricing Supplement, and each Floating Rate
Note will pay interest on the dates specified in the
applicable Pricing Supplement.
The Notes will be issued in fully registered form, without coupons, and will be
represented by either a Global Security registered in the name of The
Depository Trust Company, as Depositary (a "Book-Entry Note"), or a
certificate issued in definitive form, as set forth in the applicable Pricing
Supplement. Beneficial interests in Book-Entry Notes will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by the Depositary (with respect to its participants' interests)
and its participants. Except as described in "Description of the
Notes -- Book-Entry Notes", owners of beneficial interests in Global
Securities will not be entitled to receive Notes in definitive form
and will not be considered to be the holders thereof.
Each Note may be denominated or payable in U.S. dollars, a foreign currency,
foreign currencies, European Currency Units or another currency unit or
currency units, as specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
Notes denominated in U.S. dollars will be issued in minimum
denominations of $1,000 and integral multiples thereof. The
authorized denominations of Notes not denominated in U.S.
dollars will be set forth in the applicable Pricing
Supplement. See "Description of the Notes" in this
Prospectus Supplement and "Description of the
Securities" in the Prospectus.
----------------
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, ANY PRICING SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Agents' Proceeds to
Public(1) Commissions(2) Company(2)(3)
------------------------ --------------------------- ------------------------------------
<S> <C> <C> <C>
Per Note........................ 100% .125%-.600% 99.400%-99.875%
Total(4)........................ $3,788,900,000 $4,736,125-$22,733,400 $3,766,166,600-$3,784,163,875
</TABLE>
(1) Unless otherwise specified in a Pricing Supplement, the price to the public
of each Note will be 100% of its principal amount.
(2) The Company will pay to Credit Suisse First Boston Corporation, Goldman,
Sachs & Co., Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc and Smith Barney Inc. (each an "Agent") a
commission ranging from .125% to .600% of the principal amount of any Note,
depending upon maturity, sold through such Agent. The Company may also sell
Notes to any Agent, as principal, at a discount. The Company will agree to
indemnify the Agents against certain liabilities, including liabilities
under the Securities Act of 1933. The Company may replace the Agents or
appoint additional agents from time to time.
(3) Assuming Notes are issued at 100% of principal amount and before deducting
expenses payable by the Company estimated at $1,000,000.
(4) In U.S. dollars or, for Notes denominated in foreign currencies or currency
units, the equivalent thereof based on the prevailing exchange rates at the
respective times such Notes are first offered.
----------------
The Notes are being offered on a continuing basis by the Company through the
Agents, who will agree to use their reasonable efforts to solicit purchases of
the Notes. The initial purchaser may propose certain terms of the Notes,
including the maturity, interest rate or interest rate formula and principal
amount and terms, if any, of redemption, but the Company will have the sole
right to accept any offers to purchase Notes. Payment of the purchase price of
Notes will be required to be made in funds immediately available in The City of
New York. The Notes may be sold at a discount to any Agent, as principal, for
resale to one or more investors at varying prices related to prevailing market
prices at the time of resale, or, if set forth in the applicable Pricing
Supplement, at a fixed public offering price, as determined by such Agent, or
sold directly to purchasers by the Company on its own behalf in those
jurisdictions where it is authorized to do so. Unless otherwise indicated in the
applicable Pricing Supplement, the Notes will not be listed on any securities
exchange, and there can be no assurance that there will be a secondary market
for the Notes. The Company reserves the right to withdraw, cancel or modify the
offer or solicitation of offers made hereby without notice. The Company or any
Agent, if it solicits such offer, may reject any offer to purchase Notes in
whole or in part. See "Plan of Distribution".
Credit Suisse First Boston
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
Morgan Stanley Dean Witter
Salomon Brothers Inc
Smith Barney Inc.
The date of this Prospectus Supplement is June 27, 1997.
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
in the Prospectus, to which description reference is hereby made. Capitalized
terms not defined herein have the meanings assigned to such terms in the
Prospectus. The following description of Notes will apply to each Note offered
hereby unless otherwise specified in the applicable Pricing Supplement.
GENERAL
Each issue of the Notes will constitute a separate series of Securities
described in the accompanying Prospectus. The Chase Manhattan Bank will act as
Trustee under the Indenture, as successor to The Chase Manhattan Bank (National
Association). Each Fixed Rate Note will mature on a Business Day, and each
Floating Rate Note will mature on a Business Day that is also an Interest
Payment Date, that is 9 months to 30 years from its date of issue. The initial
purchaser may propose certain terms of the Notes, including the maturity,
interest rate or interest rate formula and principal amount and terms, if any,
of redemption, but the Company will have the sole right to accept any offers to
purchase Notes and may reject any proposed purchase of Notes in whole or in
part. The Notes will be issued as Registered Securities, without coupons.
Each Note may be denominated or payable in U.S. dollars or in a foreign
currency, foreign currencies, a currency unit or currency units, as specified in
the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, Notes denominated in U.S. dollars will be issued in minimum
denominations of $1,000 and integral multiples thereof. If specified in the
applicable Pricing Supplement, the amount of payments of principal or interest
on a series of Notes may be determined by reference to an index based on one or
more currencies or currency units or to other indices. Unless otherwise
indicated in the applicable Pricing Supplement, currency amounts in this
Prospectus Supplement, the accompanying Prospectus and any Pricing Supplement
are stated in United States dollars ("$", "U.S. $", "dollars" or "U.S.
dollars").
Each Note will be issued initially as either a Book-Entry Note or as Notes
issued in definitive form. See "Book-Entry Notes".
Unless otherwise specified in the applicable Pricing Supplement, "Business
Day" as used in this Prospectus Supplement and the Prospectus means each day on
which commercial banks and foreign exchange markets settle payments in the Place
of Payment referred to below and also, with respect to any LIBOR Note (as
defined below), is a day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market (a "London Banking Day").
Except as set forth in the Prospectus under "The Company" with respect to
the Support Agreement between IBM and the Company, pursuant to which, subject to
certain exceptions, IBM agrees to maintain ownership of 100% of the voting
capital stock of the Company and to cause the Company to have a tangible net
worth of $1.00 as long as the Securities are outstanding, and under "Description
of the Securities--Covenants--Limitations on Liens", the Indenture and
Securities do not contain any covenants or other provisions designed to afford
holders of the Securities protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company.
PAYMENTS AT MATURITY
Payments of principal and interest at maturity and upon redemption will be
made in immediately available funds at the office of the Company's paying agent
at the Special Issues Processing Department of The Chase Manhattan Bank, One
Chase Manhattan Plaza, Level 1B, Institutional Trust Window, New York, New York
10081 or such other office as shall be specified in the applicable Pricing
Supplement (the
S-2
<PAGE>
"Place of Payment"), provided that the Note is presented at the Place of Payment
in sufficient time for it to make such payment in accordance with its usual
procedures. The Notes may also be presented at such office for registration of
transfer and exchange.
INTEREST RATES AND PAYMENTS
Each Note will bear interest from the later of (i) the original issue date
specified on the face of such Note and (ii) the most recent Interest Payment
Date to which interest has been paid occurring on or before the date of
authentication of such Note. Notes will bear interest at either (a) a fixed rate
indicated in the Pricing Supplement, in the case of a Fixed Rate Note, or (b) a
rate calculated pursuant to an interest rate formula set forth in the Pricing
Supplement, in the case of a Floating Rate Note.
Interest rates offered with respect to the Notes may differ depending on,
among other things, the aggregate principal amount of Notes purchased in a
single transaction.
FIXED RATE NOTES
Unless otherwise indicated in the applicable Pricing Supplement, the
Interest Payment Dates for Fixed Rate Notes will be March 1 and September 1 of
each year and upon maturity or, if applicable, upon redemption, and the Regular
Record Dates for payments of interest on Fixed Rate Notes will be February 15
and August 15 of each year. Interest payable on any Interest Payment Date for a
Fixed Rate Note will be payable by check mailed to the person in whose name such
Note is registered at the close of business on the Regular Record Date next
preceding such Interest Payment Date, except that (a) on any Note originally
issued after a Regular Record Date and prior to the next succeeding Interest
Payment Date, the first payment of interest on such Note will be made on the
Interest Payment Date following the next succeeding Regular Record Date to the
registered owner on such next Regular Record Date and (b) interest payable at
maturity (or upon redemption) will be payable to the person to whom the
principal of such Note is payable. Interest on Fixed Rate Notes will be computed
on the basis of a 360-day year of twelve 30-day months. Unless otherwise
specified in the applicable Pricing Supplement, in any case where any payment of
principal, premium or interest on a Fixed Rate Note is due on a day that is not
a Business Day, that payment may be made on the next succeeding Business Day. No
additional interest will accrue as a result of the delay in payment.
FLOATING RATE NOTES
The applicable Pricing Supplement will designate one of the following
interest rate bases as applicable to each Floating Rate Note: (a) LIBOR, in the
case of a LIBOR Note, (b) Treasury Rate, in the case of a Treasury Rate Note,
(c) Prime Rate, in the case of a Prime Rate Note, (d) Commercial Paper Rate, in
the case of a Commercial Paper Rate Note, (e) Federal Funds Rate, in the case of
a Federal Funds Rate Note, (f) CD Rate, in the case of a CD Rate Note, (g) CMT
Rate, in the case of a CMT Rate Note or (h) such other interest rate basis as is
set forth in such Pricing Supplement. Each Floating Rate Note will bear interest
at a rate determined by reference to the interest rate basis specified in the
Pricing Supplement (i) plus or minus (as specified in the Pricing Supplement)
the Spread, if any, or (ii) multiplied by the Spread Multiplier, if any. The
"Spread" is the number of basis points specified in the Pricing Supplement as
being applicable to such Floating Rate Note, and the "Spread Multiplier" is the
percentage specified in the Pricing Supplement as being applicable to such
Floating Rate Note. Any Floating Rate Note may also have either or both of the
following, as specified in the applicable Pricing Supplement: (i) a maximum
interest rate limitation, or ceiling, on the rate of interest which may apply
during any interest period; and (ii) a minimum interest rate limitation, or
floor, on the rate of interest which may apply during any interest period. In
addition, the applicable Pricing Supplement will define or particularize for
each Floating Rate Note the following terms, if applicable: Index Maturity,
Initial Interest Rate, Interest Payment Dates and Interest Reset Dates.
S-3
<PAGE>
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually on the Interest Reset Date or
Dates specified in the applicable Pricing Supplement. Unless otherwise specified
in the applicable Pricing Supplement, the Interest Reset Date will be, in the
case of Floating Rate Notes which reset daily, each Business Day; in the case of
Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Tuesday of each week (except as provided below); in the case of Floating
Rate Notes which reset monthly, the third Wednesday of each month; in the case
of Floating Rate Notes which reset quarterly, the third Wednesday of March,
June, September and December; in the case of Floating Rate Notes which reset
semi-annually, the third Wednesday of two months of each year specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, the third Wednesday of the month of each year 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 shall be postponed to the next day that is a Business Day, except, in the
case of a LIBOR Note, if such Business Day is in the next succeeding calendar
month, such Interest Reset Date shall be the next preceding Business Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
LIBOR Note will be the second London Banking Day preceding such Interest Reset
Date. The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note will be the day of the week in which such Interest Reset Date
falls on which Treasury bills would normally be auctioned. Treasury bills are
normally sold at auction 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. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Interest Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week. The Interest Determination Date
pertaining to an Interest Reset Date for a Commercial Paper Rate Note, for a
Federal Funds Rate Note, for a Prime Rate Note, for a CD Rate Note or for a CMT
Rate Note will be the second Business Day next preceding such Interest Reset
Date.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, the Interest Payment Dates in the case of Floating Rate Notes
which reset daily, weekly or monthly will be the third Wednesday of each month
or the third Wednesday of March, June, September and December of each year (as
indicated in the applicable Pricing Supplement); in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December of each year; in the case of Floating Rate Notes which reset
semi-annually, the third Wednesday of the two months of each year specified in
the applicable Pricing Supplement; in the case of Floating Rate Notes which
reset annually, the third Wednesday of the month specified in the applicable
Pricing Supplement; and, in each case, at maturity. If an Interest Payment Date
other than at maturity with respect to any Floating Rate Note would otherwise
fall on a day that is not a Business Day, such Interest Payment Date will be the
following day that is a Business Day, except that in the case of a LIBOR Note,
if such day falls in the next calendar month, such Interest Payment Date will be
the next preceding day that is a Business Day. If the Maturity Date of a
Floating Rate Note falls on a day that is not a Business Day, the required
payment of principal, premium, if any, and interest will be made on the next
succeeding Business Day as if made on the date such payment was due, and no
interest will accrue on such payment for the period from and after the Maturity
Date to the date of such payment on the next succeeding Business Day.
Unless specified in the applicable Pricing Supplement, the Regular Record
Date for each payment of interest on a Floating Rate Note will be the 15th
calendar day prior to the applicable Interest Payment Date. Interest payable on
any Interest Payment Date for a Floating Rate Note will be payable by check
mailed to the person in whose name such Floating Rate Note is registered at the
close of business on the Regular Record Date for such Interest Payment Date,
except that (a) on any Floating Rate Note originally issued between a Regular
Record Date and an Interest Payment Date, the first payment of interest on such
Note will be made on the Interest Payment Date following the next succeeding
Regular Record Date to the
S-4
<PAGE>
registered owner on such next Regular Record Date and (b) interest payable at
maturity (or upon redemption or repayment) will be payable to the person to whom
the principal of the Floating Rate Note is payable.
Interest payments for Floating Rate Notes will include accrued interest from
the original issue date or from the last date in respect of which interest has
been paid, as the case may be, to, but excluding, the applicable Interest
Payment Date. Accrued interest will be calculated by multiplying the principal
amount of a Note by an accrued interest factor. This accrued interest factor
will be computed by adding the interest factors calculated for each day in the
period for which accrued interest is being calculated. The interest factor
(rounded to the nearest one-hundred thousandth of a percent) for each such day
will be computed by dividing the interest rate applicable to such day by 360, in
the case of LIBOR Notes, Prime Rate Notes, Commercial Paper Rate Notes, CD Rate
Notes and Federal Funds Rate Notes, or by the actual number of days in the year,
in the case of CMT Rate Notes or Treasury Rate Notes. The interest rate in
effect on each day will be (a) if such day is an Interest Reset Date, the
interest rate with respect to the Interest Determination Date pertaining to such
Interest Reset Date, or (b) if such day is not an Interest Reset Date, the
interest rate with respect to the Interest Determination Date pertaining to the
next preceding Interest Reset Date, subject in either case to any maximum or
minimum interest rate limitation referred to above and to any adjustment by a
Spread or a Spread Multiplier referred to above; PROVIDED, HOWEVER, that (i) the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date with respect to a Floating Rate Note will be the Initial
Interest Rate specified in the Pricing Supplement, (ii) except in the case of
Floating Rate Notes which reset daily or weekly, the interest rate in effect for
the ten calendar days immediately prior to maturity will be that in effect on
the tenth calendar day preceding such maturity and (iii) in the case of Floating
Rate Notes which reset daily or weekly, the interest rate in effect from the two
Business Days immediately prior to maturity will be that in effect on the second
Business Day preceding such maturity.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date", where applicable, pertaining to an Interest Determination
Date is the earlier of (i) the tenth calendar day after such Interest
Determination Date or if any 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 maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded, if necessary, to the nearest one-hundred thousandth of a percent, with
five one-millionths of a percent rounded upwards (e.g., 9.876545% (or .09876545)
being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544) being
rounded to 9.87654% (or .0987654)), and all dollar amounts used in or resulting
from such calculation on Floating Rate Notes will be rounded to the nearest cent
(with one-half cent being rounded upwards).
Unless otherwise indicated in the applicable Pricing Supplement, The Chase
Manhattan Bank will be the initial Calculation Agent with respect to each series
of Notes. The Calculation Agent will, upon the request of the holder of any
Floating Rate Note, provide the interest rate then in effect and, if determined,
the interest rate which will become effective as a result of a determination
made with respect to the most recent Interest Determination Date with respect to
such Note.
The interest rate on the Notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States law
of general application. Under present applicable New York law, the maximum rate
of interest is 25% per annum on a simple interest basis. This limit may not
apply to Notes in which $2,500,000 or more has been invested.
S-5
<PAGE>
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in the
LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, with
respect to a LIBOR Note indexed to the offered rates for U.S. dollar deposits,
"LIBOR" will be determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date, LIBOR will be: (a)
If the Designated LIBOR Page specified on the applicable Pricing Supplement
is Telerate Page 3750 (as defined below), the rate for deposits in U.S.
dollars having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following that Interest Determination Date, that appears on the Telerate
Page 3750 as of 11:00 a.m., London time, on that Interest Determination Date
or (b) if the Designated LIBOR Page specified on the applicable Pricing
Supplement is Reuters Screen LIBO Page (as defined below), the arithmetic
mean of the offered rates for deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Banking Day immediately following such Interest Determination
Date, which appear on the Reuters Screen LIBO Page as of 11:00 a.m., London
time, on the Interest Determination Date. In the case where (a) above
applies, if no rate appears, or in the case where (b) above applies, if
fewer than two offered rates appear, LIBOR in respect of the Interest
Determination Date will be determined as if the parties had specified the
rate described in (ii) below.
(ii) With respect to an Interest Determination Date on which this
provision applies, LIBOR will be determined on the basis of the rates at
which deposits in U.S. dollars are offered by four major banks in the London
interbank market selected by the Calculation Agent (after consultation with
the Company) at approximately 11:00 a.m., London time, on that Interest
Determination Date to prime banks in the London interbank market having the
Index Maturity designated in the Pricing Supplement commencing on the second
London Banking Day immediately following that Interest Determination Date
and in a principal amount equal to an amount of not less than U.S. $1
million that is representative for a single transaction in such market at
such time. The Calculation Agent will request the principal London office of
each of such banks to provide a quotation of its rate. If at least two such
quotations are provided, LIBOR in respect of that Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR in respect of that Interest Determination
Date will be the arithmetic mean of the rates quoted by three major money
center banks in The City of New York selected by the Calculation Agent
(after consultation with the Company) at approximately 11:00 a.m., New York
City time, on that Interest Determination Date for loans in U.S. dollars to
leading European banks, having the Index Maturity designated in the
applicable Pricing Supplement commencing on the second London Banking Day
immediately following that Interest Determination Date and in a principal
amount equal to an amount of not less than U.S. $1 million that is
representative for a single transaction in such market at such time;
PROVIDED, HOWEVER, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR for
the applicable period will be the same as LIBOR for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the Initial Interest Rate).
"Telerate Page 3750" means the display designated on page "3750" on the
Telerate Service (or such other page as may replace the 3750 page on that
service or such service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates for
U.S. dollar deposits). "Reuters Screen LIBO Page" means the display designated
as Page "LIBO" on the Reuters Monitor Money Rate Service (or such other page as
may replace the LIBO page on that service for the purpose of displaying London
Interbank offered rates of major banks). The selection of the
S-6
<PAGE>
Designated LIBOR Page as the basis for determining LIBOR will be specified in
the applicable Pricing Supplement. If no Designated LIBOR Page is specified in
such Pricing Supplement, LIBOR will be determined as if the Telerate Page 3750
had been specified as the Designated LIBOR Page.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity designated in the applicable
Pricing Supplement as published by the Board of Governors of the Federal Reserve
System in "Statistical Release H.15(519), Selected Interest Rates"
("H.15(519)"), or any successor publication of the Board of Governors of the
Federal Reserve System, under the heading "Treasury bills-- auction average
(investment)" or, if not so published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the auction
average rate, expressed as a Bond Equivalent Yield (as defined below), 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 published or
reported as provided above by 3:00 p.m., New York City time, on such Calculation
Date or if no such auction is held in a particular week, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity,
expressed as a Bond Equivalent Yield, of the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 p.m., New York City time, on such
Interest Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent (after consultation with
the Company) 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 will be the
Treasury Rate in effect on such Interest Determination Date.
"Bond Equivalent Yield" means a yield (expressed as a percentage rounded to
the nearest one-hundred thousandth of a percent) calculated in accordance with
the following formula:
<TABLE>
<C> <C> <S>
Bond Equivalent Yield = D X N X 100
360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for Treasury bills, quoted on a bank
discount basis and expressed as a decimal; "N" refers to the actual number of
days in the year for which interest is being calculated; and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement,
except that the initial interest rate for each Prime Rate Note will be the rate
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Prime
Rate" means, with respect to any Interest Determination Date, the rate on such
date as published by the Board of Governors of the Federal Reserve System in
H.15(519) under the heading "Bank Prime Loan". If such rate is not published by
9:00 a.m., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean of the rates of interest
publicly announced by each bank named on the "Reuters Screen USPRIME1 Page" (as
defined below) as such bank's prime rate or base lending rate as in effect for
such
S-7
<PAGE>
Interest Determination Date. "Reuters Screen USPRIME1 Page" means the display
designated as page "USPRIME1" on the Reuters Monitor Money Rates Service (such
term to include such other page as may replace the USPRIME1 page on that Service
for the purpose of displaying prime rates or base lending rates of major United
States banks). If fewer than four such rates but more than one such rate appear
on the Reuters Screen USPRIME1 Page for such Interest Determination Date, the
Prime Rate will be determined by the Calculation Agent and will be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent from a list approved by the Company. If fewer
than two such rates appear on the Reuters Screen USPRIME1 Page, the Prime Rate
will be calculated by the Calculation Agent and will be determined as the
arithmetic mean of the prime rates furnished in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, in each case
having total equity capital of at least U.S.$500,000,000 and being subject to
supervision or examination by federal or state authority, selected by the
Calculation Agent from a list approved by the Company to provide such rate or
rates; PROVIDED, HOWEVER, that if the banks or trust companies selected as
aforesaid by the Calculation Agent from a list approved by the Company are not
quoting as mentioned in this sentence, the rate of interest in effect for the
applicable period will be the rate of interest in effect on such Interest
Determination Date.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in the applicable Pricing Supplement.
"Commercial Paper Rate" means, with respect to any Interest Determination
Date, the Money Market Yield (as defined below) of the rate on that date for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement as published in H.15(519), under the heading "Commercial Paper". In
the event that such rate is not published by 9:00 a.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield of the rate on that
Interest Determination Date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release, "Composite 3:30 p.m.
Quotations for U.S. Government Securities" ("Composite Quotations") under the
heading "Commercial Paper". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in Composite Quotations, the
Commercial Paper Rate for that Interest Determination Date shall be calculated
by the Calculation Agent and shall be the Money Market Yield of the arithmetic
mean (rounded to the nearest one-hundred thousandth of a percent) of the offered
rates of three leading dealers of commercial paper in The City of New York
selected by the Calculation Agent (after consultation with the Company) as of
11:00 a.m., New York City time, on that Interest Determination Date, for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency; PROVIDED, HOWEVER, that
if the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate will be the Commercial
Paper Rate in effect on such Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded to the
nearest one-hundred thousandth of a percent) calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C>
Money Market Yield = D X 360 X 100
360 - (D X M)
</TABLE>
S-8
<PAGE>
where "D" refers to the 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.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates calculated
with reference to the Federal Funds Rate and the Spread or Spread Multiplier, if
any, specified in the Federal Funds Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date, the
rate on such date for 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 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 Interest Determination Date will
be calculated by the Calculation Agent and will be the arithmetic mean of the
rates for the last transaction in overnight United States dollar federal funds
arranged by three leading brokers of federal funds transactions in overnight
transactions in The City of New York (which may include the Agents or their
affiliates) selected by the Calculation Agent (after consultation with the
Company) prior to 9:00 a.m., New York City time, on such Interest Determination
Date; PROVIDED, HOWEVER, that if the brokers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Federal Funds Rate
determined as of such Interest Determination Date will be the Federal Funds Rate
then in effect on such Interest Determination Date.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any, specified
in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in H.15(519) under the heading
"CDs (Secondary Market)," or, if not published by 3:00 P.M., New York City time,
on the related Calculation Date, the rate on such Interest Determination Date
for negotiable United States dollar certificates of deposit of the Index
Maturity specified in the applicable Pricing Supplement as published by the
Federal Reserve Bank of New York in Composite Quotations under the heading
"Certificates of Deposit." If such rate is not yet published in either H.15(519)
or Composite Quotations by 3:00 P.M., New York City time, on the related
Calculation Date, then the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date, of three leading nonbank dealers in negotiable
United States dollar certificates of deposit in The City of New York (which may
include the Agent or its affiliates) selected by the Calculation Agent for
negotiable United States dollar certificates of deposit of major United States
money market banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity specified in the applicable Pricing
Supplement in an amount that is representative for a single transaction in that
market at that time; PROVIDED, HOWEVER, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
determined as of such Interest Determination Date will be the CD Rate in effect
on such Interest Determination Date.
S-9
<PAGE>
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates calculated with
reference to the CMT Rate and the Spread or Spread Multiplier, if any, specified
in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed on
the Designated CMT Telerate Page under the caption "...Treasury Constant
Maturities...Federal Reserve Board Release H.15...Mondays Approximately 3:45
P.M.," under the column for the Designated CMT Maturity Index for (i) if the
Designated CMT Telerate Page is 7055, the rate on such Interest Determination
Date and (ii) if the Designated CMT Telerate Page is 7052, the week, or the
month, as applicable, ended immediately preceding the week in which the related
Interest Determination Date occurs. If such rate is no longer displayed on the
relevant page or is not displayed by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate for such Interest Determination Date
will be such treasury constant maturity rate for the Designated CMT Maturity
Index as published in the relevant H.15(519). If such rate is no longer
published or is not published by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate on such 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
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 the relevant H.15(519). If such information is
not provided by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate on the Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30 P.M.,
New York City time, on such Interest Determination Date reported, according to
their written records, by three leading primary United States government
securities dealers (each, a "Reference Dealer") in The City of New York (which
may include the Agent or its affiliates) selected by the Calculation Agent (from
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less than
such Designated CMT Maturity Index minus one year. If the Calculation Agent is
unable to obtain three such Treasury Note quotations, the CMT Rate on such
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity based on the arithmetic mean of the secondary market
offer side prices as of approximately 3:30 P.M., New York City time, on such
Interest Determination Date of three Reference Dealers in The City of New York
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; PROVIDED HOWEVER, that if fewer than
three Reference Dealers so selected by the Calculation Agent are quoting as
mentioned herein, the CMT Rate determined as of such Interest Determination Date
will be the CMT Rate in effect on such Interest Determination Date. If two
Treasury Notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the Calculation Agent will obtain from five Reference Dealers
quotations for the Treasury Note with the shorter remaining term to maturity.
S-10
<PAGE>
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified 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)) for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing Note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement. A table
setting forth repayment information in respect of each Amortizing Note will be
included in the applicable Pricing Supplement and set forth in each such Note.
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 securities, 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 maturity that is greater than or
less than the face amount of the Notes depending upon the relative value on
maturity of the specified indexed item. Information as to the method for
determining the amount of principal, premium, if any, and/or interest payable in
respect of Indexed Notes, certain historical information with respect to the
specified indexed items and tax considerations associated with an investment in
such Indexed Notes will be set forth in the applicable Pricing Supplement.
An investment in Notes indexed, as to principal or interest or both, to one
or more values of currencies (including exchange rates between currencies),
commodities or interest rate indices entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate on such a Note is so indexed, it may result in an interest
rate that is less than that payable on a conventional fixed-rate debt security
issued at the same time, including the possibility that no interest will be paid
or that negative interest will accrue, and, if the principal amount of such a
Note is so indexed, the principal amount payable at maturity may be less than
the original purchase price of such Note if allowed pursuant to the terms of
such Note, including the possibility that no principal will be paid, or if such
principal amount is utilized to net against accrued negative interest, the
principal amount payable at maturity may be less than the original purchase
price of such Note if allowed pursuant to the terms of such Note, including the
possibility that no principal will be paid. The secondary market for such Notes
will be affected by a number of factors, independent of the creditworthiness of
the issuer and the value of the applicable currency, commodity or interest rate
index, the time remaining to the maturity of such Notes, the amount outstanding
of such Notes and market interest rates. The value of the applicable currency,
commodity or interest rate index depends on a number of interrelated factors,
including economic, financial and political events, over which the Company has
no control. Additionally, if the formula used to determine the principal amount
or interest payable with respect to such Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index will be increased. The historical experience of the relevant
currencies, commodities or interest rate
S-11
<PAGE>
indices should not be taken as an indication of future performance of such
currencies, commodities or interest rate indices during the term of any Note.
The credit ratings assigned to the Company's medium-term note program are a
reflection of the Company's credit status and, in no way, are a reflection of
the potential impact of the factors discussed above, or any other factors, on
the market value of the Notes. Accordingly, prospective investors should consult
their own financial and legal advisors as to the risk entailed by an investment
in such Notes and the suitability of such Notes in light of their particular
circumstances.
BOOK-ENTRY NOTES
Unless otherwise specified in the applicable Pricing Supplement, the
following provisions will apply to all Book-Entry Notes.
Book-Entry Notes of any series will be issued in the form of one or more
registered Global Notes (collectively, the "Global Note") that will be deposited
with, or on behalf of, The Depository Trust Company, New York, New York, as
Depositary (the "Depositary"), and registered in the name of the Depositary's
nominee. Unless and until it is exchanged in whole or in part for Notes in
definitive registered form, the Global Note may not be transferred except as a
whole by the Depositary to another nominee of the Depositary or to a successor
depositary or a nominee of such successor.
Upon the issuance of the Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by the Global Note to accounts of institutions that have accounts
with the Depositary ("participants"). The accounts to be credited will be
designated by the Agents, or the Company in the event of a direct sale of Notes.
Owners of beneficial interests in the Global Note that are not participants or
persons that may hold through participants but desire to purchase, sell or
otherwise transfer ownership of the Notes by book-entry on the records of the
Depositary may do so only through participants and persons that may hold through
participants. Because the Depositary can only act on behalf of participants and
persons that may hold through participants, the ability of an owner of a
beneficial interest in the Global Note to pledge Notes to persons or entities
that do not participate in the book-entry and transfer system of the Depositary,
or otherwise take actions in respect of such Notes, may be limited. In addition,
the laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair a purchaser's ability to transfer beneficial interests in the
Global Note.
So long as the Depositary, or its nominee, is the registered owner of the
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by the Global Note
for all purposes under the Indenture. Except as set forth below, owners of
beneficial interests in the Global Note will not be entitled to have Notes
represented by the Global Note registered in their names, will not receive or be
entitled to receive physical delivery of Notes in definitive form and will not
be considered the owners or holders thereof under the Indenture.
Principal and interest payments on Notes registered in the name of the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the Global Note. None of the Company,
the Trustee, any paying agent or the Note registrar will have any responsibility
or liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the Global Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the Depositary, upon receipt of any payment of
principal or interest, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the Global Note as shown on the records of the
Depositary. The Company also expects that payments by participants to owners of
beneficial interests in the Global Note held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers and registered in "street
name", and will
S-12
<PAGE>
be the responsibility of such participants. Owners of beneficial interests in
the Global Note that hold through the Depositary under a book-entry format (as
opposed to holding certificates directly) may experience some delay in the
receipt of interest payments since the Depositary will forward payments to its
participants, which in turn will forward them to persons that hold through
participants or such owners.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company or the
Depositary within ninety days, the Company will issue Notes in definitive
registered form in exchange for all of the Global Note. In addition, the Company
or the Depositary may at any time and in its sole discretion determine not to
have the Notes represented by the Global Note and, in such event, the Company
will issue Notes in definitive registered form in exchange for all of the Global
Note. In either instance, an owner of a beneficial interest in the Global Note
will be entitled to have Notes equal in principal amount to such beneficial
interest registered in its name and will be entitled to physical delivery of
such Notes in definitive form.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
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 was created to hold securities of its participants
and to facilitate the clearance and settlement of securities transactions among
its participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depositary's participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations, some of whom (and/or their representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies, that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
REDEMPTION AND REPURCHASE BY COMPANY
The Pricing Supplement relating to each Note may indicate that such Note
will be redeemable at the option of the Company on a date or dates or under
circumstances specified prior to its maturity at a price or prices set forth in
the applicable Pricing Supplement, together with accrued interest to the date of
redemption. Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be subject to redemption prior to maturity. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will not be subject to
any sinking fund. The Company may redeem any of the Notes that are redeemable
and remain outstanding either in whole or from time to time in part, upon not
less than 30 nor more than 60 days' notice. If less than all of the Notes having
the same terms (except as to principal amount and date of issuance) are to be
redeemed, the Notes to be redeemed shall be selected by the Trustee by such
method as the Trustee shall deem fair and appropriate.
The Company may at any time repurchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the Trustee for cancellation.
REPAYMENT AT OPTION OF HOLDER
If (but only if) the Pricing Supplement relating to any Note indicates that
such Note will be repayable at the option of the holder on a date or dates prior
to maturity, and at a price or prices, set forth in such Pricing Supplement,
together with accrued interest to the date of repayment, then such Note will be
subject to such repayment option.
In order for a Note to be repaid, the Trustee must receive at least 30 days
but not more than 45 days prior to the repayment date (a) appropriate wire
instructions and (b) either (i) the Note with the form entitled "Option to Elect
Repayment" on the reverse of the Note duly completed or (ii) a telegram, telex,
S-13
<PAGE>
facsimile transmission or letter from a member of a national securities exchange
or the National Association of Securities Dealers, Inc., or a commercial bank or
trust company in the United States or any other "eligible guarantor institution"
(as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934) setting forth the name of the holder of the Note, the principal amount of
the Note, the portion of the principal amount of the Note to be repaid, the
certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid with the form entitled "Option to Elect
Repayment" on the reverse of the Note duly completed will be received by the
Trustee not later than five Business Days after the date of such telegram,
telex, facsimile transmission or letter and such Note and form duly completed
must be received by the Trustee by such fifth Business Day. Exercise of the
repayment option by the holder of a Note shall be irrevocable. The repayment
option may be exercised by the holder of a Note for less than the entire
principal amount of the Note provided that the principal amount of the Note
remaining outstanding after repayment is an authorized denomination. No transfer
or exchange of any Note (or, in the event that any Note is to be repaid in part,
the portion of the Note to be repaid) will be permitted after exercise of a
repayment option. All questions as to the validity, eligibility (including time
of receipt) and acceptance of any Note for repayment will be determined by the
Company, whose determination will be final, binding and non-appealable.
If a Note is represented by a Global Note, the Depositary's nominee will be
the holder of such Note and therefore will be the only entity that can exercise
a right to repayment. In order to ensure that the Depositary's nominee will
timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different cutoff times for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other direct or
indirect participant through which it holds an interest in a Note in order to
ascertain the cutoff time by which such an instruction must be given in order
for timely notice to be delivered to the Depositary.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. Federal income tax
consequences resulting from the beneficial ownership of Notes by certain
persons. This summary does not purport to consider all the possible U.S. Federal
tax consequences of the purchase, ownership or disposition of the Notes and is
not intended to reflect the individual tax position of any beneficial owner. It
deals only with Notes and currencies or composite currencies other than U.S.
dollars ("Foreign Currency") held as capital assets. Moreover, except as
expressly indicated, it addresses initial purchasers and does not address
beneficial owners that may be subject to special tax rules, such as banks,
insurance companies, dealers in securities or currencies, Notes (or Foreign
Currency) held as a hedge against currency risks or as part of a straddle with
other investments or as part of a "synthetic security" or other integrated
investment (including a "conversion transaction") comprised of a Note and one or
more other investments, or situations in which the "functional currency" of the
beneficial owner is not the U.S. dollar. Except to the extent discussed below
under "Non-U.S. Holders", this summary is not applicable to non-United States
persons not subject to U.S. Federal income tax on their worldwide income. This
summary is based upon the U.S. Federal tax laws and regulations as now in effect
and as currently interpreted and does not take into account possible changes in
such tax laws or such interpretations, any of which may be applied
retroactively. It does not include any description of the tax laws of any state,
local or foreign governments that may be applicable to the Notes or holders
thereof. Persons considering the purchase of Notes should consult their own tax
advisors concerning the application of the U.S. Federal tax laws to their
particular situations as well as any consequences to them under the laws of any
other taxing jurisdiction.
S-14
<PAGE>
U.S. HOLDERS
PAYMENTS OF INTEREST
In general, interest on a Note, whether payable in U.S. dollars or a Foreign
Currency (other than certain payments on a Discount Note, as defined and
described below under "Original Issue Discount"), will be taxable to a
beneficial owner who or which is (i) a citizen or resident of the United States,
(ii) a corporation created or organized under the laws of the United States or
any State thereof (including the District of Columbia) or (iii) a person
otherwise subject to United States Federal income taxation on its worldwide
income (a "U.S. Holder") as ordinary income at the time it is received or
accrued, depending on the holder's method of accounting for tax purposes. If an
interest payment is denominated in or determined by reference to a Foreign
Currency, then special rules, described below under "Foreign Currency Notes",
apply.
ORIGINAL ISSUE DISCOUNT
The following discussion summarizes the United States Federal income tax
consequences to U.S. Holders of Notes issued with original issue discount for
Federal income tax purposes ("OID"). The basic rules for reporting OID are
contained in the Internal Revenue Code of 1986, as amended (the "Code") and the
Treasury regulations thereunder (the "OID Regulations").
Special rules apply to OID on a Discount Note that is denominated in Foreign
Currency. See "Foreign Currency Notes--Foreign Currency Discount Notes".
GENERAL. A Note will be treated as issued with OID (a "Discount Note") if
the excess of the Note's "stated redemption price at maturity" over its issue
price is greater than a DE MINIMIS amount (set forth in the Code and the OID
Regulations). Generally, the issue price of a Note (or any Note that is part of
an issue of Notes) will be the first price at which a substantial amount of
Notes that are part of such issue of Notes is sold (other than to underwriters,
placement agents or wholesalers). Under the OID Regulations, the "stated
redemption price at maturity" of a Note is the sum of all payments provided by
the Note that are not payments of "qualified stated interest". A "qualified
stated interest" payment includes any stated interest payment on a Note that is
unconditionally payable in cash or property (other than debt instruments of the
Company) at least annually at a single fixed rate (or at certain floating rates)
that appropriately takes into account the length of the interval between stated
interest payments. The applicable Pricing Supplement will state whether a
particular issue of Notes will constitute an issue of Discount Notes.
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is de minimis, then such excess constitutes "DE MINIMIS
OID". Under the OID Regulations, unless the election described below under
"Election to Treat All Interest as Original Issue Discount" is made, such a Note
will not be treated as issued with OID (in which case the following paragraphs
under "Original Issue Discount" will not apply) and a U.S. Holder of such a Note
will recognize capital gain with respect to such DE MINIMIS OID as stated
principal payments on the Note are made. The amount of such gain with respect to
each such payment will equal the product of the total amount of the Note's DE
MINIMIS OID and a fraction, the numerator of which is the amount of the
principal payment made and the denominator of which is the stated principal
amount of the Note.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to bear OID for Federal income tax purposes, with the result that the
inclusion of interest in income for Federal income tax purposes may vary from
the actual cash payments of interest made on such Notes, generally accelerating
income for cash method taxpayers. Under the OID Regulations, a Note may be a
Discount Note where, among other things, (i) a Note bearing interest at a
floating rate (a "Floating Rate Note") provides for a maximum interest rate or a
minimum interest rate that is reasonably expected as of the issue date to cause
the yield on the debt instrument to be significantly less, in the case of a
maximum rate, or more, in the case
S-15
<PAGE>
of a minimum rate, than the expected yield determined without the maximum or
minimum rate, as the case may be; (ii) a Floating Rate Note provides for
significant front-loading or back-loading of interest; or (iii) a Note bears
interest at a floating rate in combination with one or more other floating or
fixed rates. Notice will be given in the applicable Pricing Supplement when the
Company determines that a particular Note will be a Discount Note. Unless
specified in the applicable Pricing Supplement, Floating Rate Notes will not be
Discount Notes.
The Code and the OID Regulations provide rules that require a U.S. Holder of
a Discount Note having a maturity of more than one year from its date of issue
to include OID in gross income before the receipt of cash attributable to such
income, without regard to the holder's method of accounting for tax purposes.
The amount of OID includible in gross income by a U.S. Holder of a Discount Note
is the sum of the "daily portions" of OID with respect to the Discount Note for
each day during the taxable year or portion of the taxable year in which the
U.S. Holder holds such Discount Note ("accrued OID"). The daily portion is
determined by allocating to each day in any "accrual period" a PRO RATA portion
of the OID allocable to that accrual period. Under the OID Regulations, accrual
periods with respect to a Note may be any set of periods (which may be of
varying lengths) selected by the U.S. Holder as long as (i) no accrual period is
longer than one year and (ii) each scheduled payment of interest or principal on
the Note occurs on the first day or final day of an accrual period.
The amount of OID allocable to an accrual period equals the excess of (a)
the product of the Discount Note's adjusted issue price at the beginning of the
accrual period and the Discount Note's yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (b) the sum of any payments of
qualified stated interest on the Discount Note allocable to the accrual period.
The "adjusted issue price" of a Discount Note at the beginning of the first
accrual period is the issue price and at the beginning of any accrual period
thereafter is (x) the sum of the issue price of such Discount Note, the accrued
OID for each prior accrual period (determined without regard to the amortization
of any acquisition premium or bond premium, which are discussed below), and the
amount of any qualified stated interest on the Note that has accrued prior to
the beginning of the accrual period but is not payable until a later date, less
(y) any prior payments on the Discount Note that were not qualified stated
interest payments. If a payment (other than a payment of qualified stated
interest) is made on the first day of an accrual period, then the adjusted issue
price at the beginning of such accrual period is reduced by the amount of the
payment. If a portion of the initial purchase price of a Note is attributable to
interest that accrued prior to the Note's issue date, the first stated interest
payment on the Note is to be made within one year of the Note's issue date and
such payment will equal or exceed the amount of pre-issuance accrued interest,
then the issue price will be decreased by the amount of pre-issuance accrued
interest, in which case a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as an
amount payable on the Note.
The OID Regulations contain certain special rules that generally allow any
reasonable method to be used in determining the amount of OID allocable to a
short initial accrual period (if all other accrual periods are of equal length)
and require that the amount of OID allocable to the final accrual period equal
the excess of the amount payable at the maturity of the Discount Note (other
than any payment of qualified stated interest) over the Discount Note's adjusted
issue price as of the beginning of such final accrual period. In addition, if an
interval between payments of qualified stated interest on a Discount Note
contains more than one accrual period, then the amount of qualified stated
interest payable at the end of such interval is allocated PRO RATA (on the basis
of their relative lengths) between the accrual periods contained in the
interval.
U.S. Holders of Discount Notes generally will have to include in income
increasingly greater amounts of OID over the life of the Notes.
S-16
<PAGE>
ACQUISITION PREMIUM. A U.S. Holder that purchases a Discount Note at its
original issuance for an amount in excess of its issue price but less than its
stated redemption price at maturity (any such excess being "acquisition
premium"), and that does not make the election described below under "Original
Issue Discount--Election To Treat All Interest as Original Issue Discount", is
permitted to reduce the daily portions of OID by a fraction, the numerator of
which is the excess of the U.S. Holder's purchase price for the Note over the
issue price, and the denominator of which is the excess of the sum of all
amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, over the Note's issue price. Alternatively, a U.S.
Holder may elect to compute OID accruals as described under "Original Issue
Discount--General" above, treating the U.S. Holder's purchase price as the issue
price.
OPTIONAL REDEMPTION. If the Company has an option to redeem a Discount
Note, or the holder has an option to cause a Discount Note to be repurchased,
prior to the Discount Note's stated maturity, such option will be presumed to be
exercised if, by utilizing any date on which such Discount Note may be redeemed
or repurchased as the maturity date and the amount payable on such date in
accordance with the terms of such Discount Note (the "redemption price") as the
stated redemption price at maturity, the yield on the Discount Note would be (i)
in the case of an option of the Company, lower than its yield to stated
maturity, or (ii) in the case of an option of the holder, higher than its yield
to stated maturity. If such option is not in fact exercised when presumed to be
exercised, the Note would be treated solely for OID purposes as if it were
redeemed or repurchased, and a new Note were issued, on the presumed exercise
date for an amount equal to the Discount Note's adjusted issue price on that
date.
SHORT-TERM NOTES. Under the Code, special rules apply with respect to OID
on Notes that mature one year or less from the date of issuance ("Short-Term
Notes"). In general, a cash basis U.S. Holder of a Short-Term Note is not
required to include OID in income as it accrues for United States Federal income
tax purposes unless it elects to do so. Accrual basis U.S. Holders and certain
other U.S. Holders, including banks, regulated investment companies, dealers in
securities and cash basis U.S. Holders who so elect, are required to include OID
in income as it accrues on Short-Term Notes on a straight-line basis or, at the
election of the U.S. Holder, under the constant yield method (based on daily
compounding). In the case of U.S. Holders not required and not electing to
include OID in income currently, any gain realized on the sale or retirement of
Short-Term Notes will be ordinary income to the extent of the OID accrued on a
straight-line basis (unless an election is made to accrue the original issue
discount under the constant yield method) through the date of sale or
retirement. U.S. Holders who are not required and do not elect to include OID on
Short-Term Notes in income as it accrues will be required to defer deductions
for interest on borrowings allocable to Short-Term Notes in an amount not
exceeding the deferred income until the deferred income is realized.
Any U.S. Holder of a Short-Term Note can elect to apply the rules in the
preceding paragraph taking into account the amount of "acquisition discount", if
any, with respect to the Note (rather than the OID with respect to such Note).
Acquisition discount is the excess of the stated redemption price at maturity of
the Short-Term Note over the U.S. Holder's purchase price therefor. Acquisition
discount will be treated as accruing on a ratable basis or, at the election of
the U.S. Holder, on a constant-yield basis.
For purposes of determining the amount of OID subject to these rules, the
OID Regulations provide that no interest payments on a Short-Term Note are
qualified stated interest, but instead such interest payments are included in
the Short-Term Note's stated redemption price at maturity. Actual receipt of
stated interest will be taxable to the extent of accrued OID at the time of
receipt.
S-17
<PAGE>
NOTES PURCHASED AT A PREMIUM
Under the Code, a U.S. Holder that purchases a Note for an amount in excess
of its principal amount will not be subject to the OID rules and may elect to
treat such excess as "amortizable bond premium", in which case the amount of
qualified stated interest required to be included in the U.S. Holder's income
each year with respect to interest on the Note will be reduced by the amount of
amortizable bond premium allocable (based on the Note's yield to maturity) to
such year. Any election to amortize bond premium is applicable to all bonds
(other than bonds the interest on which is excludible from gross income) held by
the U.S. Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the U.S. Holder, and may not be revoked
without the consent of the Internal Revenue Service ("IRS"). A U.S. Holder that
does not elect to amortize bond premium will generally be entitled to treat the
premium as capital loss when the Note matures. See also "Original Issue
Discount--Election to Treat All Interest as Original Issue Discount".
NOTES PURCHASED AT A MARKET DISCOUNT
A Note, other than a Short-Term Note, will be treated as issued at a market
discount (a "Market Discount Note") if the amount for which a U.S. Holder
purchased the Note is less than the Note's issue price, subject to a DE MINIMIS
rule similar to the rule relating to DE MINIMIS OID described under "Original
Issue Discount--General".
In general, any partial payment of principal on, or gain recognized on the
maturity or disposition of a Market Discount Note will be treated as ordinary
income to the extent that such gain does not exceed the accrued market discount
on such Note. Alternatively, a U.S. Holder of a Market Discount Note may elect
to include market discount in income currently over the life of the Market
Discount Note. Such an election applies to all debt instruments with market
discount acquired by the electing U.S. Holder on or after the first day of the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS.
Market discount accrues on a straight-line basis unless the U.S. Holder
elects to accrue such discount on a constant yield to maturity basis. Such an
election is applicable only to the Market Discount Note with respect to which it
is made and is irrevocable. A U.S. Holder of a Market Discount Note that does
not elect to include market discount in income currently generally will be
required to defer deductions for interest on borrowings allocable to such Note
in an amount not exceeding the accrued market discount on such Note until the
maturity or disposition of such Note.
The market discount rules do not apply to a Short-Term Note.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
Any U.S. Holder may elect to include in gross income all interest that
accrues on a Note using the constant yield method described above under the
heading "Original Issue Discount--General," with the modifications described
below. For purposes of this election, interest includes stated interest, OID, DE
MINIMIS OID, market discount, acquisition discount, DE MINIMIS market discount
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing U.S.
Holder's adjusted basis in the Note immediately after its acquisition, the issue
date of the Note will be the date of its acquisition by the electing U.S.
Holder, and no payments on the Note will be treated as payments of qualified
stated interest. This election is generally applicable only to the Note with
respect to which it is made and may not be revoked without the consent of the
IRS. If this election is made with respect to a Note with amortizable bond
premium, the electing U.S. Holder will be deemed to have elected to apply
amortizable bond premium against interest with respect to all debt instruments
with amortizable bond premium (other than debt instruments the interest on which
is
S-18
<PAGE>
excludible from gross income) held by such electing U.S. Holder as of the
beginning of the taxable year in which the Note with respect to which the
election is made is acquired or thereafter acquired. The deemed election with
respect to amortizable bond premium may not be revoked without the consent of
the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Market Discount Note, as defined
above, then the electing U.S. Holder will be treated as having made the election
discussed above under "Notes Purchased at a Market Discount" to include market
discount in income currently over the life of all debt instruments held or
thereafter acquired by such U.S. Holder.
PURCHASE, SALE AND RETIREMENT OF THE NOTES
GENERAL. A U.S. Holder's tax basis in a Note generally will equal its U.S.
dollar cost (which, in the case of a Note purchased with a Foreign Currency,
will be the U.S. dollar value of the purchase price on the date of purchase),
increased by the amount of any OID or market discount (or acquisition discount,
in the case of a Short-Term Note) included in the U.S. Holder's income with
respect to the Note and the amount, if any, of income attributable to DE MINIMIS
OID included in the U.S. Holder's income with respect to the Note, and reduced
by the sum of (i) the amount of any payments that are not qualified stated
interest payments, and (ii) the amount of any amortizable bond premium applied
to reduce interest on the Note. A U.S. Holder generally will recognize gain or
loss on the sale or retirement of a Note equal to the difference between the
amount realized on the sale or retirement and the U.S. Holder's tax basis in the
Note. The amount realized on a sale or retirement for an amount in Foreign
Currency will be the U.S. dollar value of such amount on the date of sale or
retirement. Except to the extent described above under "Original Issue
Discount--Short Term Notes" or "Market Discount" or below under "Foreign
Currency Notes--Exchange Gain or Loss", and except to the extent attributable to
accrued but unpaid interest, gain or loss recognized on the sale or retirement
of a Note will be capital gain or loss and will be long-term capital gain or
loss if the Note was held for more than one year.
FOREIGN CURRENCY NOTES
INTEREST PAYMENTS. If an interest payment is denominated in or determined
by reference to a Foreign Currency, the amount of income recognized by a cash
basis U.S. Holder will be the U.S. dollar value of the interest payment, based
on the exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars. Accrual basis U.S. Holders may
determine the amount of income recognized with respect to such interest payment
in accordance with either of two methods. Under the first method, the amount of
income recognized will be based on the average exchange rate in effect during
the interest accrual period (or, with respect to an accrual period that spans
two taxable years, the partial period within the taxable year). Upon receipt of
an interest payment (including a payment attributable to accrued but unpaid
interest upon the sale or retirement of a Note) determined by reference to a
Foreign Currency, an accrual basis U.S. Holder will recognize ordinary income or
loss measured by the difference between such average exchange rate and the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars. Under the second method, an
accrual basis U.S. Holder may elect to translate interest income into U.S.
dollars at the spot exchange rate in effect on the last day of the accrual
period or, in the case of an accrual period that spans two taxable years, at the
exchange rate in effect on the last day of the partial period within the taxable
year. Additionally, if a payment of interest is actually received within 5
business days of the last day of the accrual period or taxable year, an accrual
basis U.S. Holder applying the second method may instead translate such accrued
interest into U.S. dollars at the spot exchange rate in effect on the day of
actual receipt (in which case no exchange gain or loss will result). Any
election to apply the second method will apply to all debt instruments held by
the U.S. Holder at the beginning of the first taxable year to which the
S-19
<PAGE>
election applies or thereafter acquired by the U.S. Holder and may not be
revoked without the consent of the IRS.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS. Foreign Currency received
as interest on a Note or on the sale or retirement of a Note will have a tax
basis equal to its U.S. dollar value at the time such interest is received or at
the time of such sale or retirement, as the case may be. Foreign Currency that
is purchased will generally have a tax basis equal to the U.S. dollar value of
the Foreign Currency on the date of purchase. Any gain or loss recognized on a
sale or other disposition of a Foreign Currency (including its use to purchase
Notes or upon exchange for U.S. dollars) will be ordinary income or loss.
FOREIGN CURRENCY DISCOUNT NOTES. OID for any accrual period on a Discount
Note that is denominated in a Foreign Currency will be determined in the Foreign
Currency and then translated into U.S. dollars in the same manner as stated
interest accrued by an accrual basis U.S. Holder. Upon receipt of an amount
attributable to original issue discount (whether in connection with a payment of
interest or the sale or retirement of a Note), a U.S. Holder may recognize
ordinary income or loss.
AMORTIZABLE BOND PREMIUM. In the case of a Note that is denominated in a
Foreign Currency, bond premium will be computed in units of Foreign Currency,
and amortizable bond premium will reduce interest income in units of the Foreign
Currency. At the time amortized bond premium offsets interest income, a U.S.
Holder may realize ordinary income or loss, measured by the difference between
exchange rates at that time and at the time of the acquisition of the Notes.
MARKET DISCOUNT. Market discount is determined in units of the Foreign
Currency. Accrued market discount that is required to be taken into account on
the maturity or upon disposition of a Note is translated into U.S. dollars at
the exchange rate on the maturity or the disposition date, as the case may be
(and no part is treated as exchange gain or loss). Accrued market discount
currently includible in income by an electing U.S. Holder is translated into
U.S. dollars at the average exchange rate for the accrual period (or the partial
accrual period during which the U.S. Holder held the Note), and exchange gain or
loss is determined on maturity or disposition of the Note (as the case may be)
in the manner described above under "Foreign Currency Notes--Interest Payments"
with respect to the computation of exchange gain or loss on the receipt of
accrued interest by an accrual method holder.
EXCHANGE GAIN OR LOSS. Gain or loss recognized by a U.S. Holder on the sale
or retirement of a Note that is attributable to changes in exchange rates will
be treated as ordinary income or loss. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
INDEXED NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States Federal income tax rules with respect to currency indexed notes or
other indexed Notes.
NON-U.S. HOLDERS
Subject to the discussion of backup withholding below, payments of principal
(and premium, if any) and interest (including OID) by the Company or any agent
of the Company (acting in its capacity as such) to any holder of a Note that is
not a U.S. Holder (a "Non-U.S. Holder") will not be subject to U.S. Federal
withholding tax, PROVIDED, in the case of interest (including OID), that (i) the
Non-U.S. Holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote,
(ii) the Non-U.S. Holder is not a controlled foreign corporation for U.S. tax
purposes that is related to the Company (directly or indirectly) through stock
ownership, and (iii) either (A) the Non-U.S. Holder certifies to the Company or
its agent under penalties of perjury that it is not a United States person and
provides its name and address or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a
S-20
<PAGE>
"financial institution") and holds the Note certifies to the Company or its
agent under penalties of perjury that such statement has been received from the
Non-U.S. Holder by it or by another financial institution and furnishes the
payor with a copy thereof. A Non-U.S. Holder of a Note providing for payments of
contingent interest within the meaning of Section 871(h) of the Code, will not,
however, be exempt from U.S. Federal withholding tax with respect to payments of
such contingent interest. The applicable Pricing Supplement will contain a
description of U.S. Federal withholding tax consequences to Non-U.S. Holders of
a purchase of a Note providing for payments of such contingent interest.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest (including OID) on the Note is effectively connected with the
conduct of such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed in the preceding paragraph (PROVIDED that such holder
furnishes a properly executed IRS Form 4224 on or before any payment date to
claim such exemption), may be subject to U.S. Federal income tax on such
interest (or OID) in the same manner as if it were a U.S. Holder. In addition,
if the Non-U.S. Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its effectively connected earnings and profits for
the taxable year, subject to certain adjustments. For purposes of the branch
profits tax, interest (including OID) on a Note will be included in the earnings
and profits of such holder if such interest (or OID) is effectively connected
with the conduct by such holder of a trade or business in the United States. In
lieu of the certificate described in the preceding paragraph, such a holder must
provide the payor with a properly executed IRS Form 4224 to claim an exemption
from U.S. Federal withholding tax.
Any capital gain, market discount or exchange gain realized on the sale,
exchange, retirement or other disposition of a Note by a Non-U.S. Holder will
not be subject to U.S. Federal income or withholding taxes if (i) such gain is
not effectively connected with a U.S. trade or business of the Non-U.S. Holder
and (ii) in the case of an individual, such Non-U.S. Holder (A) is not present
in the United States for 183 days or more in the taxable year of the sale,
exchange, retirement or other disposition or (B) does not have a tax home (as
defined in Section 911(d)(3) of the Code) in the United States in the taxable
year of the sale, exchange, retirement or other disposition and the gain is not
attributable to an office or other fixed place of business maintained by such
individual in the United States.
Notes of an original maturity in excess of 183 days held by an individual
who is neither a citizen nor a resident of the United States for U.S. Federal
tax purposes at the time of such individual's death will not be subject to U.S.
Federal estate tax, PROVIDED that the income from such Notes was not or would
not have been effectively connected with a U.S. trade or business of such
individual and that such individual qualified for the exemption from U.S.
Federal withholding tax (without regard to the certification requirements)
described above.
PURCHASERS OF NOTES THAT ARE NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE POSSIBLE APPLICABILITY OF UNITED STATES WITHHOLDING
AND OTHER TAXES UPON INCOME REALIZED IN RESPECT OF THE NOTES.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the holder's
name, address and taxpayer identification number (either the holder's Social
Security number or its employer identification number, as the case may be), the
aggregate amount of principal and interest paid (including OID, if any) to that
holder during the calendar year and the amount of tax withheld, if any. This
obligation, however, does not apply with respect to certain U.S. Holders,
including corporations, tax-exempt organizations, qualified pension and profit
sharing trusts and individual retirement accounts.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax
S-21
<PAGE>
liability, the Company, its agents or paying agents or a broker may be required
to "backup" withhold a tax equal to 31% of each payment of interest (including
OID) and principal (and premium, if any) on the Notes. This backup withholding
is not an additional tax and may be credited against the U.S. Holder's U.S.
Federal income tax liability, PROVIDED that the required information is
furnished to the IRS.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a Non-U.S. Holder of a Note if such holder has
provided the required certification that it is not a United States person as set
forth in clause (iii) in the first paragraph under "Non-U.S. Holders" above, or
has otherwise established an exemption (PROVIDED that neither the Company nor
its agent has actual knowledge that the holder is a United States person or that
the conditions of any exemption are not in fact satisfied).
Payment of the proceeds from the sale of a Note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the broker is a United States person, a controlled
foreign corporation for United States tax purposes or a foreign person 50
percent or more of whose gross income from all sources for the three-year period
ending with the close of its taxable year preceding the payment was effectively
connected with a U.S. trade or business, information reporting may apply to such
payments. Payment of the proceeds from a sale of a Note to or through the U.S.
office of a broker is subject to information reporting and backup withholding
unless the holder or beneficial owner certifies as to its taxpayer
identification number or otherwise establishes an exemption from information
reporting and backup withholding.
PLAN OF DISTRIBUTION
Under the terms of an Agency Agreement between the Company and the Agents,
the Notes are being offered on a continuing basis by the Company through the
Agents, who will agree to use their reasonable efforts to solicit purchases of
the Notes. The Company will pay any Agent a commission, depending upon maturity,
of .125% to .600% of the principal amount of the Notes sold through such Agent.
The Company may also sell Notes to any Agent, as principal, at a discount to be
specified in the applicable Pricing Supplement, for resale to one or more
investors at varying prices related to prevailing market prices at the time of
resale, or, if set forth in the applicable Pricing Supplement, at a fixed public
offering price, to be determined by such Agent. In addition, an Agent may offer
Notes purchased by it 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 Company to such dealers. After any
initial public offering of Notes to be resold to purchasers at a fixed public
offering price, the public offering price and any concession or discount may be
changed. The Company will agree to reimburse the Agents for certain expenses.
The Company may also offer and sell Notes directly to purchasers on its own
behalf from time to time.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes in whole or in part. Each Agent will
have the right, in its discretion reasonably exercised, to reject any offer to
purchase Notes received by it in whole or in part. Payment of the purchase price
of Notes will be required to be made in funds immediately available in The City
of New York.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company has agreed to
indemnify the Agents against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Agents may be required to
make in respect thereof.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be listed on any securities exchange and will not have an established
trading market when issued. Each Agent may make a market in the Notes, but such
Agent is not obligated to do so and may discontinue market-making at any time
without notice. There can be no assurance that the Notes offered by this
Prospectus Supplement will be sold or that there will be a secondary market for
the Notes.
S-22
<PAGE>
The Company may replace the Agents or appoint additional agents in
connection with the offering of the Notes from time to time.
The Agents may engage in transactions with and perform services for the
Company and certain of its affiliates in the ordinary course of business.
If holders of Notes purchased directly from the Company encounter
difficulties in disposing of their Notes at then current market rates, the
Company will give consideration to offers to sell such Notes to the Company on
terms reflecting current market conditions at the time of repurchase. However,
any such repurchases will be made in the Company's sole discretion, and the
Company makes no commitment to repurchase Notes from any purchaser at any time.
In addition to offering Notes through the Agents as described herein, the
Company may sell other Securities offered by the accompanying Prospectus. Any
such Securities so offered and sold will reduce correspondingly the maximum
aggregate principal amount of Notes that may be offered by this Prospectus
Supplement.
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the Company
by John J. Shay, Jr., Vice President and General Counsel of the Company, and for
the Agents by Davis Polk & Wardwell, New York, New York.
S-23
<PAGE>
PROSPECTUS
IBM CREDIT CORPORATION
DEBT SECURITIES
IBM Credit Corporation (the "Company") intends from time to time to issue in
one or more series up to $3,788,900,000 aggregate amount of its debt securities
(the "Securities") or, for Securities denominated in currencies or currency
units other than U.S. dollars, the equivalent thereof based on the prevailing
exchange rates at the respective times such Securities are first offered, each
series of which will be offered on terms to be determined at the time of sale.
When a particular series of Securities is offered, a supplement to this
Prospectus (a "Prospectus Supplement") will be delivered with this Prospectus
setting forth with respect to such series: the designation and principal amount
offered; the purchase price and other terms of the offering; the maturity or
maturities; the rate (or method of calculation) and time of payment of interest,
if any; the authorized denominations; the terms for a sinking, purchase or
analogous fund, if any; the terms for redemption or early repayment, if any; the
currency or currencies or currency unit or units in which principal, premium, if
any, or interest, if any, is payable; and any listing on a securities exchange.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------
The Securities may be sold (i) through underwriting syndicates represented
by managing underwriters or by underwriters without a syndicate; (ii) through
agents designated from time to time; or (iii) directly to purchasers. The names
of any underwriters or agents of the Company involved in the sale of the
Securities in respect of which this Prospectus is being delivered and any
applicable commissions or discounts are set forth in the Prospectus Supplement.
The net proceeds to the Company from such sale are also set forth in the
Prospectus Supplement. Securities in bearer form are offered only outside the
United States and its possessions to non-United States persons or to offices
located outside the United States and its possessions of certain United States
financial institutions or to certain international organizations and foreign
central banks.
------------------
THE DATE OF THIS PROSPECTUS IS JUNE 27, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and the Commission's Regional Offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, the Commission maintains a Website that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission ("http:/www.sec.gov"). Such reports and other
information concerning the Company may also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, 7th Floor, New York, New York
10005.
DOCUMENTS INCORPORATED BY REFERENCE
The following document filed by the Company with the Commission pursuant to
Section 13 of the Exchange Act is incorporated by reference into this
Prospectus: the Company's Annual Report on Form 10-K for the year ended December
31, 1996. All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated herein by reference.
The Company will provide without charge to each person to whom this
Prospectus has been delivered, on the written or oral request of such person, a
copy of any documents incorporated herein by reference, other than exhibits to
such documents. Requests for copies of such documents should be directed to
Treasurer, IBM Credit Corporation, 1133 Westchester Avenue, White Plains, NY
10604 (telephone: (914) 642-3000).
2
<PAGE>
THE COMPANY
The principal business of the Company is the financing of IBM products and
services. All the outstanding capital stock of the Company is owned by
International Business Machines Corporation ("IBM"), a New York corporation. The
Company finances the purchase and lease of IBM products and related products and
services by customers of IBM in the U.S. and finances inventory and accounts
receivable for dealers and remarketers of IBM and non-IBM products and services.
Pursuant to a Support Agreement between IBM and the Company, IBM has agreed
to retain 100% of the voting capital stock of the Company, unless required to
dispose of any or all such shares of stock pursuant to a court decree or order
of any governmental authority that, in the opinion of counsel to IBM, may not be
successfully challenged. IBM has also agreed to cause the Company to have a
tangible net worth of at least $1.00 at all times. The Support Agreement
provides that it shall not be deemed to constitute a direct or indirect
guarantee of IBM to any party of the payment of the principal of, or interest
on, any indebtedness, liability or obligation of the Company. The Support
Agreement may not be modified, amended or terminated while there is outstanding
any debt of the Company, unless all holders of such debt have consented in
writing. Accordingly, the Support Agreement will remain in effect as long as any
debt of the Company is outstanding, unless all holders of such debt agree
otherwise.
The Company was incorporated in Delaware on March 4, 1981. The Company's
principal executive offices are located at 1133 Westchester Avenue, White
Plains, NY 10604 and its telephone number is (914) 642-3000.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes.
The Company expects that it will, on a recurring basis, engage in additional
financings in character and amount to be determined as the need arises.
RATIO OF EARNINGS TO FIXED CHARGES
The following ratios of earnings to fixed charges have been computed by
dividing the sum of net earnings before income taxes and fixed charges, by fixed
charges. Fixed charges consist of gross interest on debt and such portion of
rental expense deemed to be representative of the interest factor.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
----------------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
----------------- --------- --------- --------- ---------
Ratio of earnings to fixed charges............................ 2.16 2.02 1.96 2.34 2.07
<CAPTION>
<S> <C>
1992
---------
Ratio of earnings to fixed charges............................ 1.78
</TABLE>
3
<PAGE>
DESCRIPTION OF THE SECURITIES
The Securities are to be issued under an Indenture dated as of January 15,
1989, as amended or supplemented (the "Indenture"), between the Company and The
Chase Manhattan Bank, as Trustee (the "Trustee"). The Chase Manhattan Bank is
successor to The Chase Manhattan Bank (National Association). The following
statements are subject to the detailed provisions of the Indenture, a copy of
which is filed as an exhibit to the Registration Statement; whenever particular
provisions of the Indenture are referred to, such provisions are incorporated by
reference as part of the statement made, and the statement is qualified in its
entirety by such reference. Whenever a defined term is referred to and not
herein defined, the definition thereof is contained in the Indenture.
GENERAL
The Indenture provides for the issuance from time to time of Securities in
an unlimited aggregate principal amount and an unlimited number of series.
The Securities are unsecured and will rank PARI PASSU (I.E., without any
precedence over each other) with all other unsecured and nonsubordinated debt of
the Company.
Reference is made to the applicable Prospectus Supplement for the following
terms of the series of Securities offered thereby: (i) the title of the
Securities of such series; (ii) any limit upon the aggregate principal amount of
such Securities; (iii) the date or dates on which such Securities will mature or
the method of determination of such date or dates; (iv) the rate or rates, or
the method of determination thereof, at which such Securities will bear
interest, if any, the date or dates from which such interest will accrue and the
date or dates such interest will be payable; (v) the place or places where the
principal of, and premium and interest, if any, on, such Securities will be
payable; (vi) the periods, prices and terms and conditions upon which any such
Security may be redeemed, in whole or in part, at the option of the Company;
(vii) any terms for redemption or repurchase pursuant to any sinking fund or
analogous provision or at the option of a Holder; (viii) if other than the
principal amount thereof, the portion of the principal amount of such Securities
that will be payable upon acceleration of maturity (Securities subject to such
provisions being referred to as "Original Issue Discount Securities"); (ix) any
deletions or modifications of, or additions to, the Events of Default or
covenants of the Company under the Indenture with respect to such Securities
(including whether the covenants described below under "Covenants--LIMITATIONS
ON LIENS" will not apply to such Securities); (x) if other than U.S. dollars,
the currency, currencies or currency unit or units in which such Securities will
be denominated and in which the principal of, and premium and interest, if any,
on, such Securities will be payable; (xi) whether, and the terms and conditions
on which, the Company or a Holder may elect payment of principal of, or premium
or interest, if any, on, such Securities in a currency, currencies or currency
unit or units other than that in which such Securities are stated to be payable;
(xii) the manner of determining the amount of principal of, or premium or
interest, if any, on, any such Securities to be determined with reference to an
index based on a currency or currency unit other than that in which such
Securities are stated to be payable; (xiii) whether such Securities will be
issued in fully registered form without coupons ("Registered Securities") or in
bearer form with or without coupons ("Bearer Securities"), or any combination
thereof, whether such Securities will be issued in the form of one or more
global securities (each a "Global Security") and whether such Securities are to
be issuable in temporary global form or definitive global form; (xiv) if such
Securities are to be issued upon the exercise of warrants, the time, manner and
place for such Securities to be authenticated and delivered; (xv) whether and
under what circumstances the Company will pay additional amounts to any Holder
of such Securities who is not a U.S. Person (as defined herein under "Global
Securities--Temporary Global Securities") in respect of any tax, assessment or
governmental charge withheld or deducted and, if so, whether and on what terms
the Company will have the option to redeem such Securities rather than pay any
additional amounts; and (xvi) any other terms of any of such Securities not
inconsistent with the Indenture. (Sections 202 and 301)
Unless otherwise specified in the applicable Prospectus Supplement, (x) the
Securities will be Registered Securities and (y) Securities denominated in U.S.
dollars will be issued, in the case of
4
<PAGE>
Registered Securities, in denominations of $1,000 or an integral multiple
thereof and, in the case of Bearer Securities, in denominations of $5,000.
If any of the Securities are sold for any foreign currency or currency unit
or if the principal of, or premium or interest, if any, on, any of the
Securities is payable in any foreign currency or currency unit, the specific
terms of such Securities and any other information concerning the restrictions,
elections and tax consequences with respect to such Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
EXCHANGE, REGISTRATION AND TRANSFER
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. If Securities of any
series are issuable as both Registered Securities and Bearer Securities, the
Bearer Securities of such series (with all unmatured coupons, except as provided
below, and all matured coupons in default) will be exchangeable for Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. If a Bearer Security with coupons
appertaining thereto is surrendered in exchange for a Registered Security
between a Regular Record Date or Special Record Date and the relevant date for
payment of interest, such Bearer Security shall be surrendered without the
coupon relating to such date for payment of interest. Interest will not be
payable in respect of the Registered Security issued in exchange for such Bearer
Security, but will be payable only to the Holder of such coupon when due in
accordance with the terms thereof and of the Indenture. Bearer Securities will
not be issued in exchange for Registered Securities (unless otherwise specified
in the applicable Prospectus Supplement and permitted by applicable rules and
regulations). No service charge will be made for any transfer or exchange of the
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge in connection therewith. (Section 404)
Securities may be presented for exchange as provided above, and Registered
Securities (other than U.S. Book-Entry Securities (as defined under "Global
Securities--Definitive Global Securities--U.S. BOOK-ENTRY SECURITIES" below))
may be presented for registration of transfer (with the form of transfer
endorsed thereon duly executed), at the office of the Security Registrar or at
the office of any additional transfer agent designated by the Company for such
purpose with respect to any series of Securities and referred to in the
applicable Prospectus Supplement. (Sections 404 and 1102) The Company has named
the Trustee the Security Registrar under the Indenture. (Section 101) The
Company may at any time designate, or rescind the designation of, the Security
Registrar or any additional transfer agent or approve a change in the location
through which the Security Registrar or any such transfer agent acts, except
that, if Securities of a series are issuable solely as Registered Securities,
the Company will be required to maintain a transfer agent in each Place of
Payment for such series and, if Securities of a series are issuable as Bearer
Securities, the Company will be required to maintain (in addition to the
Security Registrar) a transfer agent in a Place of Payment for such series
located in Europe. The Company may at any time designate additional transfer
agents with respect to any series of Securities. (Section 1102)
In the event of any redemption in part, the Company will not be required to:
(i) issue, register the transfer of or exchange Securities of any series during
a period beginning at the opening of business 15 Business Days before any
selection of Securities of that series to be redeemed and ending at the close of
business on (a) if Securities of the series are issuable only as Registered
Securities, the day of mailing of the relevant notice of redemption and (b) if
Securities of the series are issuable only as Bearer Securities, the day of the
first publication of the relevant notice of redemption or, if Securities of the
series are also issuable as Registered Securities and there is no publication,
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Registered Security, or portion thereof, called for
redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 404)
5
<PAGE>
For a discussion of restrictions on the exchange, registration and transfer
of Global Securities, see "Global Securities" below.
PAYMENT AND PAYING AGENTS
Payment of principal of, and premium and interest, if any, on, Registered
Securities will be made in the designated currency or currency unit at the
office of such Paying Agent or Paying Agents as the Company may designate from
time to time. At the option of the Company payment of any interest on Registered
Securities may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register. Payment of any
installment of interest on Registered Securities will be made to the Person in
whose name such Registered Security is registered at the close of business on
the Regular Record Date for such interest. (Section 406)
Payment of principal of, and premium and interest, if any, on, Bearer
Securities will be made in the designated currency or currency unit at the
offices of such Paying Agents outside the United States as the Company may
designate from time to time. On the applicable payment date therefor, payments
of principal of, and premium, if any, on, Bearer Securities will be made against
surrender of such Securities, and payment of interest on Bearer Securities with
coupons appertaining thereto on any Interest Payment Date will be made only
against surrender of the coupon relating to such Interest Payment Date.
(Sections 410 and 1102) No payment with respect to any Bearer Security will be
made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal of, and premium and interest, if any, on,
Bearer Securities denominated and payable in U.S. dollars will be made at the
office of the Company's Paying Agent in The City of New York, if (but only if)
payment of the full amount thereof in U.S. dollars at all offices or agencies
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions. (Section 1102)
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee in The City of New York will be designated
as the Company's Paying Agent for payments with respect to Securities that are
issuable solely as Registered Securities and as the Company's Paying Agent in
The City of New York for payments with respect to Securities (subject to the
limitations described above in the case of Bearer Securities) that are issuable
solely as Bearer Securities or as both Registered Securities and Bearer
Securities. Any Paying Agents outside the United States and any other Paying
Agents in the United States initially designated by the Company for Securities
of a series will be named in the applicable Prospectus Supplement. The Company
may at any time designate additional Paying Agents or rescind the designation of
any Paying Agent or approve a change in the office through which any Paying
Agent acts, except that, if Securities of a series are issuable solely as
Registered Securities, the Company will be required to maintain a Paying Agent
in each Place of Payment for such series and, if Securities of a series are
issuable as Bearer Securities, the Company will be required to maintain (i) a
Paying Agent in The City of New York for payments with respect to any Registered
Securities of the series (and for payments with respect to Bearer Securities of
the series in the circumstances described above, but not otherwise), and (ii) a
Paying Agent in a Place of Payment located outside the United States where
Securities of such series and any coupons appertaining thereto may be presented
and surrendered for payment; provided that if the Securities of such series are
listed on The London Stock Exchange Limited, the Luxembourg Stock Exchange or
any other stock exchange located outside the United States and such stock
exchange shall so require, the Company will maintain a Paying Agent in London,
Luxembourg or any other required city located outside the United States, as the
case may be, for the Securities of such series. (Section 1102)
Unless otherwise indicated in the applicable Prospectus Supplement, in any
case where any Interest Payment Date, Redemption Date or Stated Maturity of any
Security or Coupon shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of the Indenture or of such Security or
Coupon) payment of interest or principal (and premium, if any) need not be made
at such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date or Redemption Date, or
6
<PAGE>
at the Stated Maturity, as the case may be, PROVIDED that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be, to the next succeeding Business Day at
such Place of Payment. (Section 113)
All moneys paid by the Company to a Paying Agent for the payment of
principal of, and premium and interest, if any, on, any Security or coupon that
remains unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and the
Holder of such Security or coupon will thereafter look only to the Company for
payment thereof. (Section 1103)
GLOBAL SECURITIES
The Securities of a series may be issued in whole or in part as one or more
Global Securities in either registered or bearer form and in either temporary or
definitive form. The Global Security or Securities of a series will be deposited
with, or on behalf of, a depositary located in the United States (a "U.S.
Depositary") or a common depositary outside the United States ( a "Common
Depositary") identified in the Prospectus Supplement relating to such series.
All temporary or definitive Global Securities in bearer form will be deposited
with a Common Depositary.
The specific terms of the depositary arrangement with respect to any
Securities of a series issued in global form will be described in the Prospectus
Supplement relating to such series. The Company may treat a Person having a
beneficial interest in a definitive Global Security as the Holder of such
principal amount of Outstanding Securities represented by such definitive Global
Security as shall be specified in a written statement of the Holder of such
definitive Global Security, or, in the case of a definitive Global Security in
bearer form, of Euroclear or CEDEL, which is delivered to the Trustee by such
Person. (Section 411) None of the Company, the Trustee, any Paying Agent or the
Security Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. (Section 411) The
Company anticipates that the following provisions will apply to all depositary
arrangements with a U.S. Depositary or Common Depositary.
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Securities of a series that are issuable as Bearer Securities initially
will be represented by one or more temporary Global Securities, without interest
coupons, to be deposited with a Common Depositary in London for Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear System
("Euroclear") and Cedel Bank S.A. ("CEDEL") for credit to the respective
accounts of the beneficial owners of such Securities (or to such other accounts
as they may direct). On and after the exchange date determined as provided in
any such temporary Global Security and described in the applicable Prospectus
Supplement, each such temporary Global Security will be exchangeable for
definitive Securities in bearer form, registered form, definitive global bearer
form or any combination thereof, as specified in the applicable Prospectus
Supplement. No Bearer Security (including a Security in definitive global bearer
form) delivered in exchange for a portion of a temporary Global Security will be
mailed or otherwise delivered to any location in the United States in connection
with such exchange. (Sections 402 and 403)
7
<PAGE>
See the applicable Prospectus Supplement for a description of the
requirements for certification of ownership by non-United States persons that
will apply prior to (i) the issuance of a definitive Bearer Security or (ii) the
payment of interest on an Interest Payment Date that occurs before the issuance
of a definitive Bearer Security.
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision thereof
or an estate or trust the income of which is subject to United States Federal
income taxation regardless of its source, and "United States" means the United
States of America (including the States and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction.
DEFINITIVE GLOBAL SECURITIES
BEARER SECURITIES. If any Securities of a series are issuable in definitive
global bearer form, the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interest in any such
definitive global Bearer Security may exchange such interests for Securities of
such series and of like tenor and principal amount in any authorized form and
denomination. No Bearer Security delivered in exchange for a portion of a
definitive global Bearer Security will be mailed or otherwise delivered to any
location in the United States in connection with such exchange. (Section 404)
Principal of, and premium and interest, if any, on, a definitive global Bearer
Security will be payable in the manner described in the applicable Prospectus
Supplement.
U.S. BOOK-ENTRY SECURITIES. If Securities of a series are to be represented
by a definitive global Registered Security to be deposited with or on behalf of
a U.S. Depositary, such Securities ("U.S. Book-Entry Securities") will be
represented by a definitive Global Security registered in the name of the U.S.
Depositary or its nominee. Upon the issuance of a definitive Global Security
registered in the name of the U.S. Depositary, the U.S. Depositary will credit,
on its book-entry registration and transfer system, the respective principal
amounts of the U.S. Book-Entry Securities represented by such Global Security to
the accounts of institutions that have accounts with such depositary or its
nominee ("participants"). The accounts to be credited shall be designated by the
underwriters or agents for the sale of such U.S. Book-Entry Securities or by the
Company, if such Securities are offered and sold directly by the Company.
Ownership of U.S. Book-Entry Securities will be limited to participants or
persons that may hold interests through participants. Ownership of U.S.
Book-Entry Securities will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the U.S. Depositary or its
nominee for the applicable definitive Global Security or by participants or
persons that hold through participants. So long as the U.S. Depositary, or its
nominee, is the registered owner of such Global Security, such depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the U.S. Book-Entry Securities represented by such Global Security for all
purposes under the Indenture. Payment of principal of, and premium and interest,
if any, on, U.S. Book-Entry Securities will be made to the U.S. Depositary or
its nominee, as the case may be, as the registered owner or the holder of the
Global Security representing such U.S. Book-Entry Securities. Owners of U.S.
Book-Entry Securities will not be entitled to have such Securities registered in
their names in the Security Register, will not receive or be entitled to receive
physical delivery of such Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to purchase or transfer U.S. Book-Entry Securities.
The Company expects that the U.S. Depositary for U.S. Book-Entry Securities
of a series, upon receipt of any payment of principal of, or premium or
interest, if any, on, the related definitive Global Security, will immediately
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of such Depositary. The Company also expects that
payments by participants to owners of beneficial interests
8
<PAGE>
in such Global Security held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such participants.
COVENANTS
LIMITATIONS ON LIENS. The Company will not, nor will it permit any
Restricted Subsidiary to, incur, issue, assume, guarantee or suffer to exist any
indebtedness for money borrowed or any bonds, debentures, notes or other similar
evidences of indebtedness, whether or not for money borrowed, ("Debt") which are
secured by any pledge of, or mortgage, security interest or other lien ("lien")
on, any property or assets, whether now owned or hereafter acquired, of the
Company or any Restricted Subsidiary, or any shares of stock or Debt of any
Restricted Subsidiary, without effectively providing that the Securities
(together with, if the Company so determines, any other Debt of the Company or
such Restricted Subsidiary then existing or thereafter created which is not
subordinated to the Securities) shall be secured equally and ratably with (or
prior to) such Debt, so long as such Debt shall be so secured, unless, after
giving effect thereto, the aggregate amount of all such secured Debt of the
Company and its Restricted Subsidiaries would not exceed 10% of Consolidated Net
Tangible Assets of the Company and its Restricted Subsidiaries; PROVIDED,
HOWEVER, that this restriction will not apply to: (1) liens on property of, or
on any shares of stock or debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary; (2) liens on property, shares of
stock or debt existing at the time of acquisition thereof by the Company or any
Restricted Subsidiary; (3) liens on physical property, shares of stock or debt
subsequently acquired (or, in the case of property, constructed) by the Company
or any Restricted Subsidiary and created prior to, at the time of, or within one
year after such acquisition (or, in the case of property, the completion of such
construction or commencement of commercial operation of such property, whichever
is later) to secure or provide for the payment of all or any part of the
purchase price (or, in the case of property, the construction price) thereof;
(4) liens in favor of the Company or any Restricted Subsidiary; (5) liens in
favor of the United States of America or any State thereof or the District of
Columbia, or any agency, department or other instrumentality thereof, to secure
progress, advance or other payments pursuant to any contract or provision of any
statute; (6) liens securing the performance of any contract or undertaking not
directly or indirectly in connection with the borrowing of money, obtaining of
advances or credit or the securing of debt, if made and continuing in the
ordinary course of business; (7) liens to secure nonrecourse obligations in
connection with the Company's or a Restricted Subsidiary's engaging in leveraged
or single-investor lease transactions; and (8) any extension, renewal or
replacement of the foregoing. (Section 1104)
"Consolidated Net Tangible Assets" means, at any date, the total assets
appearing on the most recently prepared consolidated balance sheet of the
Company and its Restricted Subsidiaries as at the end of the fiscal quarter of
the Company, prepared in accordance with generally accepted accounting
principles, less (a) all current liabilities (due within one year) as shown on
such balance sheet, (b) investments in and advances to subsidiaries of the
Company other than Restricted Subsidiaries or other entities accounted for on
the equity method of accounting, and (c) intangible assets. "Intangible assets"
means the value (net of any applicable reserves), as shown on or reflected in
such balance sheet, of: (i) all trade names, trademarks, licenses, patents,
copyrights and goodwill; (ii) organizational and development costs; (iii)
deferred charges (other than prepaid items such as insurance, taxes, interest,
commissions, rents and similar items and tangible assets being amortized); and
(iv) unamortized debt discount and expense, less unamortized premium. (Section
101)
"Restricted Subsidiary" means each subsidiary of the Company organized under
the laws of any State of the United States or the District of Columbia. (Section
101)
CONSOLIDATION, MERGER OR SALE OF ASSETS OF THE COMPANY. The Company shall
not consolidate with or merge into any other corporation or sell its assets
substantially as an entirety, unless (1) the corporation formed by such
consolidation or into which the Company is merged or the corporation which
acquires its assets is a corporation all of the voting capital stock of which is
owned by IBM or any successor thereto, is
9
<PAGE>
organized in the United States, and expressly assumes the due and punctual
payment of the principal of, and premium and interest, if any, on, all the
Securities and the performance of every covenant of the Indenture on the part of
the Company and (2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time, or both,
would become an Event of Default, shall have happened and be continuing. Upon
any such consolidation, merger or sale, the successor corporation formed by such
consolidation or into which the Company is merged or to which such sale is made
shall succeed to, and be substituted for, the Company under the Indenture.
(Sections 901 and 902)
EVENT RISK. Except as set forth (x) under "The Company" with respect to the
Support Agreement between IBM and the Company, pursuant to which, subject to
certain exceptions, IBM agrees to maintain ownership of 100% of the voting
capital stock of the Company and to cause the Company to have a tangible net
worth of $1.00 as long as the Securities are outstanding, and (y) above under
the heading "Covenants", the Indenture and Securities do not contain any
covenants or other provisions designed to afford holders of the Securities
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein with
respect to any series of Securities shall have happened and be continuing,
either the Trustee or the Holders of 25% in principal amount of the Outstanding
Securities of such series may declare the principal of all the Securities of
such series, together with accrued interest thereon, to be due and payable.
(Section 602)
Events of Default in respect of any series are defined in the Indenture as
being: default for 30 days in payment of any interest installment when due, and
default in payment of principal of, or premium, if any, on, Securities of such
series when due either at their stated maturity, by declaration, when called for
redemption or otherwise; default in the making of any sinking fund payment when
due; default for 90 days after notice to the Company by the Trustee or by
Holders of 25% in principal amount of the Outstanding Securities of such series
in the performance of any covenant in the Indenture with respect to Securities
of such series; and certain events of bankruptcy, insolvency and reorganization.
No Event of Default with respect to a single series of indebtedness issued under
the Indenture (and any supplemental indentures) constitutes an Event of Default
with respect to any other series of indebtedness issued thereunder. (Section
601)
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default with respect to the Securities of any series, give to
the Holders of the Securities of such series notice of all uncured and unwaived
defaults known to it; PROVIDED that, except in the case of default in the
payment of principal of, or premium or interest, if any, on, any of the
Securities of such series, the Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interest of the Holders of the Securities of such series. The term "default"
for the purpose of this provision only means the happening of any of the Events
of Default specified above, except that any grace
period or notice requirement is eliminated. (Section 702)
The Indenture contains provisions entitling the Trustee, subject to the duty
of the Trustee during an Event of Default to act with the required standard of
care, to be indemnified by the Holders of the Securities before proceeding to
exercise any right or power under the Indenture at the request of Holders of the
Securities. (Section 703)
The Indenture provides that the Holders of a majority in principal amount of
the Outstanding Securities of any series may direct the time, method and place
of conducting proceedings for remedies available to the Trustee, or exercising
any trust or power conferred on the Trustee in respect of such series. (Section
612)
10
<PAGE>
The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate of no default, or specifying any default that exists.
(Section 1105)
In certain cases, the Holders of a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all
Securities of such series waive any past default or Event of Default with
respect to the Securities of such series or compliance with certain provisions
of the Indenture, except, among other things, a default not theretofore cured in
payment of the principal of, or premium or interest, if any, on, any of the
Securities of such series. (Section 613)
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee thereunder may,
without the consent of any Holders of Securities, enter into supplemental
indentures for the purposes, among other things, of adding to the Company's
covenants, adding additional Events of Default, establishing the form or terms
of Securities or curing ambiguities or inconsistencies in the Indenture or
making other provisions, provided such action shall not adversely affect the
interests of the Holders of any series of Securities in any material respect.
(Section 1001)
The Indenture contains provisions permitting the Company, with the consent
of the Holders of not less than a majority in principal amount of the
Outstanding Securities of all affected series (acting as one class), to execute
supplemental indentures adding any provisions to or changing or eliminating any
of the provisions of the Indenture or modifying the rights of the Holders of the
Securities of such series, except that no such supplemental indenture may,
without the consent of the Holders of all the Outstanding Securities affected
thereby, among other things: (i) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Security; (ii) reduce the
principal amount of, the rate of interest on, or any premium payable upon the
redemption of, any Security; (iii) reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon acceleration
of the Maturity thereof; (iv) change any Place of Payment where, or the
currency, currencies or currency unit or units in which, any Security or any
premium or interest thereon is payable; (v) impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date); (vi) affect
adversely the terms, if any, of conversion of any Security into stock or other
securities of the Company or of any other corporation; (vii) reduce the
percentage in principal amount of the Outstanding Securities of any series, the
consent of whose Holders is required for any such supplemental indenture, or the
consent of whose Holders is required for any waiver (of compliance with certain
provisions of the Indenture or certain defaults thereunder and their
consequences) provided for in the Indenture; (viii) change any obligation of the
Company, with respect to Outstanding Securities of a series, to maintain an
office or agency in the places and for the purposes specified in the Indenture
for such series; or (ix) modify any of the foregoing provisions or the
provisions for the waiver of certain covenants and defaults, except to increase
any applicable percentage of the aggregate principal amount of Outstanding
Securities the consent of the Holders of which is required or to provide with
respect to any particular series the right to condition the effectiveness of any
supplemental indenture as to that series on the consent of the Holders of a
specified percentage of the aggregate principal amount of Outstanding Securities
of such series or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby. (Section 1002)
WAIVER OF CERTAIN COVENANTS
The Indenture provides that the Company may omit to comply with the
restrictive covenants described above under "Covenants--LIMITATIONS ON LIENS" if
the Holders of not less than a majority in principal amount of all series of
Outstanding Securities affected thereby (acting as one class) waive compliance
with such restrictive covenants. (Section 1106)
11
<PAGE>
MEETINGS
The Indenture contains provisions for convening meetings of the Holders of
Securities of any series. (Section 1401) A meeting may be called at any time by
the Trustee under the Indenture, and also, upon request, by the Company or the
Holder of at least 10% in principal amount of the Outstanding Securities of such
series, in any such case upon notice given in accordance with "Notices" below.
(Section 1402) Persons entitled to vote a majority in principal amount of the
Outstanding Securities of a series will constitute a quorum at a meeting of
Holders of Securities of such series, except that in the absence of a quorum, if
the meeting was called by the Company or the Trustee, it will be adjourned for a
period of not less than 10 days, and in the absence of a quorum at any such
adjourned meeting, the meeting will be further adjourned for a period of not
less than 10 days. Except for any consent which must be given by the Holder of
each Outstanding Security affected thereby, as described above under
"Modification of the Indenture", and subject to provisions described in the last
sentence under this subheading, any resolution presented at a meeting or
adjourned meeting duly reconvened at which a quorum is present may be adopted by
the affirmative vote of the Holders of a majority in principal amount of the
Outstanding Securities of that series; PROVIDED HOWEVER, that any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which may be made, given or taken by the Holders of a
specified percentage, which is equal to or less than a majority, in principal
amount of Outstanding Securities of a series may be adopted at a meeting or
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Securities of that series. Any resolution passed or decision
taken at any meeting of Holders of Securities of any series duly held in
accordance with the Indenture will be binding on all Holders of Securities of
that series and the related coupons. With respect to any consent, waiver or
other action which the Indenture expressly provides may be given by the Holders
of a specified percentage of Outstanding Securities of all series affected
thereby (acting as one class), only the principal amount of Outstanding
Securities of any series represented at a meeting or adjourned meeting duly
reconvened at which a quorum is present as aforesaid and voting in favor of such
action will be counted for purposes of calculating the aggregate principal
amount of Outstanding Securities of all series affected thereby favoring such
action. (Section 1404)
NOTICES
Except as otherwise provided in the Indenture, notices to Holders of Bearer
Securities will be given by publication at least once in a daily newspaper in
New York City and in London and in such other city or cities as may be specified
in such Bearer Securities and will be mailed to such Persons whose names and
addresses were previously filed with the Trustee, within the time prescribed for
the giving of such notice. Notices to Holders of Registered Securities will be
given by mail to the addresses of such Holders as they appear in the Security
Register. (Section 106)
TITLE
Title to any Bearer Securities and any coupons appertaining thereto will
pass by delivery. The Company, the Trustee and any agent of the Company or the
Trustee may treat the bearer of any Bearer Security or related coupon and the
registered owner of any Registered Security (including Registered Securities in
global registered form) as the absolute owner thereof (whether or not such
Security or coupon shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payment and for all other purposes. (Section
407)
REPLACEMENT OF SECURITIES AND COUPONS
Any mutilated Security and any Security with a mutilated coupon appertaining
thereto will be replaced by the Company at the expense of the Holder upon
surrender of such mutilated Security or Security with a mutilated coupon to the
Trustee. Securities or coupons that become destroyed, stolen or
12
<PAGE>
lost will be replaced by the Company at the expense of the Holder upon delivery
to the Trustee of evidence of the destruction, loss or theft thereof
satisfactory to the Company and the Trustee; in the case of any coupon which
becomes destroyed, stolen or lost, such coupon will be replaced (upon surrender
to the Trustee of the Security with all appurtenant coupons not destroyed,
stolen or lost) by issuance of a new Security in exchange for the Security to
which such coupon appertains. In the case of a destroyed, lost or stolen
Security or coupon an indemnity satisfactory to the Trustee and the Company may
be required at the expense of the Holder of such Security or coupon before a
replacement Security will be issued. (Section 405)
SATISFACTION AND DISCHARGE; DEFEASANCE
At the request of the Company, the Indenture will cease to be in effect as
to the Securities of any series (except for certain obligations of the Company
to register the transfer or exchange of such Securities and related coupons, if
any, and hold moneys for payment of such Securities and coupons in trust) when
either (a) all such Securities and coupons have been delivered to the Trustee
for cancelation, or (b) such Securities and coupons have become due and payable
or will become due and payable at their stated maturity within one year or are
to be called for redemption within one year, and the Company has deposited with
the Trustee, in trust, money, in the currency, currencies or currency unit or
units in which such Securities are payable, in an amount sufficient to pay all
the principal of, and premium and interest, if any, on, such Securities on the
dates such payments are due in accordance with the terms of such Securities.
(Section 501)
Unless the applicable Prospectus Supplement provides otherwise, the Company
at its option (a) will be deemed Discharged from any and all obligations in
respect to the Securities of a series (except for certain obligations with
respect to such Securities to register the transfer or exchange of Securities
and related coupons, if any, replace stolen, lost or mutilated Securities and
coupons, maintain paying agencies and hold moneys for payment in trust) or (b)
need not comply with certain restrictive covenants in the Indenture (including
those described above under "Covenants--LIMITATIONS ON LIENS") with respect to
such Securities, in each case after the Company deposits with the Trustee, in
trust, money, or, in the case of Securities and coupons denominated in U.S.
dollars, U.S. Government Obligations or, in the case of Securities and coupons
denominated in a foreign currency, Foreign Government Securities, which through
the payment of interest thereon and principal thereof in accordance with their
terms will provide money in an amount sufficient to pay in the currency,
currencies or currency unit or units in which such Securities are payable all
the principal of, and premium and interest, if any, on such Securities on the
dates such payments are due in accordance with the terms of such Securities.
Among the conditions to the Company's exercising any such option, the Company is
required to deliver to the Trustee an opinion of counsel to the effect that the
deposit and related defeasance would not cause the Holders of such Securities to
recognize income, gain or loss for United States Federal income tax purposes and
that the Holders will be subject to United States Federal income tax in the same
amounts, in the same manner and at the same times as would have been the case if
such option had not been exercised. (Section 503)
GOVERNING LAW
The Indenture, the Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York. (Section 112)
CONCERNING THE TRUSTEE
The Company may from time to time maintain lines of credit, and have other
customary banking relationships, with the Trustee under the Indenture.
13
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriters; (ii) through agents; or (iii) directly to purchasers. The
Prospectus Supplement with respect to each series of Securities will set forth
the terms of the offering of the Securities of such series, including the name
or names of any underwriters, the purchase price and the proceeds to the Company
from such sale, and underwriting discounts and other items constituting
underwriters' compensation, the initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers, and any securities
exchanges on which the Securities of such series may be listed.
If underwriters are used in the sale, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The Securities may be
either offered to the public through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Unless otherwise
set forth in the Prospectus Supplement, the obligations of the underwriters to
purchase Securities will be subject to certain conditions precedent and the
underwriters will be obliged to purchase all the Securities of a series if any
are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
Securities may be sold directly by the Company or through agents designated
by the Company from time to time. Any agent involved in the offer or sale of the
Securities in respect of which this Prospectus is delivered will be named, and
any commissions payable by the Company to such agent will be set forth, in the
Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement,
any such agent will be obligated to use its reasonable efforts to solicit offers
to purchase Securities for the period of its appointment.
As one of the means of direct issuance of the Securities, the Company may
utilize an electronic auction of Securities to purchasers eligible to
participate in such auctions, as such auctions may be described in the
applicable Prospectus Supplement.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commissions payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution with
respect to payments which the agents or underwriters may be required to make in
respect thereof. Agents and underwriters may be customers of, engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
Securities in bearer form are subject to U.S. tax law requirements and may
be not offered, sold or delivered within the United States or to a U.S. person,
except in certain transactions permitted by U.S. tax regulations. Terms used in
this paragraph have the meanings given to them by the U.S. Internal Revenue Code
and regulations thereunder.
Each underwriter, dealer and agent participating in the distribution of any
Securities that are issuable in bearer form will agree that, except as permitted
by its agreement with the Company (or with another underwriter, pursuant to that
underwriter's agreement with the Company) it will not offer, sell or deliver
such Securities, (i) as part of their distribution at any time or (ii) otherwise
until 40 days after the closing date for such Securities, within the United
States or to, or for the account or benefit of, U.S. persons.
14
<PAGE>
Each series of Securities will be a new issue of securities with no
established trading market. Any underwriters to whom Securities are sold by the
Company for public offering and sale may make a market in such Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for any Securities.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1996 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than as contained in this
Prospectus, Prospectus Supplement and any Pricing Supplement in connection with
the offer contained herein and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or by any Agent. This Prospectus, Prospectus Supplement and any Pricing
Supplement shall not constitute an offer to sell or a solicitation of an offer
to buy any securities other than the securities offered by this Prospectus,
Prospectus Supplement and such Pricing Supplement or an offer to sell or a
solicitation of an offer to buy any securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this Prospectus, Prospectus
Supplement and any Pricing Supplement at any time does not imply that the
information herein or therein is correct as of any time subsequent to such date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Description of the Notes............................. S-2
Certain United States Federal Income Tax
Considerations..................................... S-14
U.S. Holders......................................... S-15
Non-U.S. Holders..................................... S-20
Information Reporting and Backup Withholding......... S-21
Plan of Distribution................................. S-22
Legal Opinions....................................... S-23
PROSPECTUS
Available Information................................ 2
Documents Incorporated by Reference.................. 2
The Company.......................................... 3
Use of Proceeds...................................... 3
Ratio of Earnings to Fixed Charges................... 3
Description of the Securities........................ 4
Plan of Distribution................................. 14
Experts.............................................. 15
</TABLE>
IBM Credit Corporation
$3,788,900,000
Medium-Term Notes
PROSPECTUS SUPPLEMENT
Credit Suisse First Boston
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
Morgan Stanley Dean Witter
Salomon Brothers Inc
Smith Barney Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
