<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 1-8175
_____________________________
IBM CREDIT CORPORATION
______________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 22-2351962
________________________ ____________________________________
(State of incorporation) (IRS employer identification number)
North Castle Drive, MS NCA-306
Armonk, New York 10504-1785
________________________________________ ____________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 914-765-1900
____________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
________________________________ _______________________
5.76% Notes due May 15, 2001 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
___ ___ As of February 28, 1999, 936 shares of capital
stock, par value $1.00 per share, were held by International
Business Machines Corporation. Aggregate market value of
the voting stock held by nonaffiliates of the registrant at
February 28, 1999: NONE.
The registrant meets the conditions set forth in General
Instruction I (1)(a) and (b) of Form 10-K and is therefore
filing this Form with the reduced disclosure format.
<PAGE> 2
TABLE OF CONTENTS
_________________
PART I Page
Item 1. Business 3
Item 2. Properties 3
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 3
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 3
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 7A. Qualitative and Quantitative Disclosure about
Market Risk 15
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 45
PART III
Item 10. Directors and Executive Officers of the Registrant 45
Item 11. Executive Compensation 45
Item 12. Security Ownership of Certain Beneficial Owners and
Management 45
Item 13. Certain Relationships and Related Transactions 45
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 45
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<PAGE> 3
PART I
ITEM 1. BUSINESS:
The principal business of IBM Credit Corporation (the
Company) is the financing of IBM products and services. All
of 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 United States 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 percent 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.
ITEM 2. PROPERTIES:
In May 1998, the Company relocated its principal
executive offices to an IBM owned facility in Armonk, New
York. The executive offices comprise approximately 322,200
square feet of office space. The Company occupies this
space under an arrangement with IBM.
ITEM 3. LEGAL PROCEEDINGS:
The Company is subject to a variety of claims and suits
that arise from time to time out of the ordinary course of
business. The Company does not believe that any such
current action will have a material impact on the Company's
business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Omitted pursuant to General Instruction I.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS:
All shares of the Company's capital stock are owned by
IBM, and accordingly, there is no market for such stock.
The Company paid IBM cash dividends of $100,000,000 and
$50,000,000 during 1998 and 1997, respectively. Dividends
are declared by the Board of Directors of the Company.
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<PAGE> 4
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA:
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ITEM 6. SELECTED FINANCIAL DATA:
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The following selected financial data should be read in conjunction with the financial statements of
IBM Credit Corporation and the related notes to the financial statements included in this document.
<CAPTION>
(Dollars in thousands) 1998 1997 1996 1995 1994
___________ ___________ ___________ ___________ ___________
<S> <C> <C> <C> <C> <C>
For the year:
Finance and other income. . . . . . $1,816,498 $1,630,895 $1,497,800 $1,452,285 $1,484,680
Gross profit on equipment sales . . 63,441 60,574 50,936 74,613 68,508
Interest expense. . . . . . . . . . 611,206 538,560 436,109 394,572 306,125
Net earnings. . . . . . . . . . . . 308,765 283,893 271,082 230,475 250,589
Dividends . . . . . . . . . . . . . 100,000 50,000 45,000 146,419 295,000
Products purchased for leases . . . 4,638,015 4,803,985 3,903,052 2,931,619 1,659,019
Loans receivable financing. . . . . 1,913,501 1,460,214 1,211,318 892,796 496,308
IBM state and local installment
receivables and leases. . . . . . 429,400 411,029 410,328 364,636 232,845
Other capital equipment financing . 195,324 274,869 225,744 291,688 376,296
Working capital financing . . . . . 14,181,900 15,005,200 13,387,014 10,297,600 7,597,300
Return on average assets. . . . . . 2.0% 2.1% 2.4% 2.3% 2.7%
Return on average equity. . . . . . 17.2% 18.6% 20.9% 20.9% 24.1%
At end of year:
Total assets. . . . . . . . . . . . $16,397,359 $16,572,116 $12,946,139 $11,425,551 $9,667,715
Net investment in capital leases. . 5,265,941 4,931,292 4,214,822 3,966,255 3,687,971
Equipment on operating leases, net. 3,619,585 3,583,641 2,551,382 1,695,812 1,573,242
Loans receivable. . . . . . . . . . 3,041,222 2,381,261 1,846,947 1,473,822 1,070,619
Working capital financing receivables 2,789,029 3,249,310 2,898,688 3,158,932 2,135,020
Short-term debt . . . . . . . . . . 6,777,222 8,591,781 6,566,400 6,472,627 4,355,038
Long-term debt. . . . . . . . . . . 3,973,839 2,476,488 1,515,937 1,115,440 1,583,822
Stockholder's equity. . . . . . . . 1,877,714 1,668,949 1,435,056 1,208,574 1,121,218
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<PAGE> 5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
OVERVIEW
Net earnings for 1998 were $308.8 million, yielding a return
on average equity of 17.2 percent, as compared with 1997 net
earnings of $283.9 million, yielding a return on average
equity of 18.6 percent.
FINANCING ORIGINATED
For the year ended December 31, 1998, the Company originated
capital equipment financing for end users of $7,176.2
million, a 3 percent increase from $6,950.1 million for
1997. For the year ended December 31, 1998, originations of
working capital financing for dealers and remarketers of
information industry products decreased by 5 percent to
$14,181.9 million, from $15,005.2 million for 1997.
The growth in capital equipment financing originated is due
to an increase in the propensity for customers to finance
their acquisitions with the Company throughout 1998,
compared with 1997.
For the year ended December 31, 1998, capital equipment
financings for end users included purchases of $3,875.4
million of advanced information processing products from
IBM, consisting of $2,420.1 million for capital leases and
$1,455.3 million for operating leases. In addition, capital
equipment financings for end users included the following:
(1) financing originated for installment receivables of
$350.6 million; (2) financing for IBM software and services
of $1,563.0 million; (3) installment and lease financing
for state and local government customers of $429.4 million
for the account of IBM; and (4) other financing of $957.8
million for IBM equipment, as well as non-IBM equipment, to
meet IBM customers' total solution requirements.
The Company's capital lease portfolio primarily includes
direct financing leases. Direct financing leases consist
principally of IBM advanced information processing products
with terms generally ranging from three to four years.
Operating leases consist principally of IBM advanced
information processing products with terms generally from
two to four years.
The decline in working capital financing originations
reflects volume decreases in IBM's workstation products and
non-IBM products for remarketers financed by the Company
throughout 1998. Working capital financing receivables arise
primarily from secured inventory and accounts receivable
financing for dealers and remarketers of IBM and non-IBM
products. Payment terms for inventory secured financing
generally range from 30 days to 75 days. Payment terms for
accounts receivable secured financing generally range from
30 days to 90 days.
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<PAGE> 6
REMARKETING ACTIVITIES
In addition to originating new financing, the Company
remarkets used IBM and non-IBM equipment. This equipment is
primarily sourced from the conclusion of lease transactions
and is typically remarketed in cooperation with the IBM
sales force. The equipment is generally leased or sold to
end users. These transactions may be with existing lessees
or, when equipment is returned, with new customers.
Remarketing results comprise income from follow-on capital
and operating leases and gross profit on equipment sales,
net of write-downs in residual values of certain leased
equipment. For the year ended December 31, 1998, the
remarketing activities contributed $222.0 million to pretax
earnings, an increase of 5 percent compared with $211.4
million for 1997.
At December 31, 1998, the investment in remarketed equipment
on capital and operating leases totaled $259.7 million, a
decrease of 9 percent from the 1997 year-end investment of
$285.5 million.
FINANCIAL CONDITION
ASSETS
Total assets decreased to $16.4 billion at December 31,
1998, compared with $16.6 billion at December 31, 1997.
This decrease is primarily attributed to the sale of $528.0
million of assets related to factored IBM receivables in
December 1998. Refer to Relationship with IBM and Related
Company Transactions in the Notes to Consolidated Financial
Statements on page 24. Additionally, the decline in working
capital financing originations, partially offset by
increases in capital equipment originations and financing
for software and services contributed to the decline in
total assets.
Total financing assets serviced by the Company, at December
31, 1998, and 1997, were $16.0 billion. Total financing
assets serviced include the remaining balance of financing
receivables securitized and sold ($129.1 million in 1998,
$176.8 million in 1997), capital and operating leases
($8,885.5 million in 1998, $8,514.9 million in 1997), loans
receivable ($3,041.2 million in 1998, $2,381.3 million in
1997), working capital financing receivables ($2,789.0
million in 1998, $3,249.3 million in 1997), subordinated
interests in trusts resulting from the securitization and
sale of financing receivables ($2.0 million in 1998, $11.4
million in 1997), accounts receivable purchases from
selected IBM subsidiaries ($292.3 million in 1998 and $824.0
million in 1997) and other assets ($.9 million in 1998,
$13.9 million in 1997). Also included in total financing
assets serviced are state and local government installment
and lease financing receivables of IBM ($900.3 million in
1998, $849.9 million in 1997) that are not reflected on the
Company's Statement of Financial Position.
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<PAGE> 7
FINANCIAL CONDITION (Continued)
LIABILITIES
The assets of the Company were financed with $10,751.1
million of debt at December 31, 1998, a decrease of $317.2
million, from $11,068.3 million at December 31, 1997. This
decrease was the result of decreases in short-term notes of
$130.8 million, short-term debt payable to IBM of $980.6
million, commercial paper of $703.2 million, offset by
increases in long-term debt payable to IBM of $1,481.4
million and long-term debt of $16.0 million. Included in
long-term debt, IBM, at December 31, 1998, was $2,070.7
million payable to IBM at market terms and conditions, with
maturity dates ranging from April 27, 2000, to June 25,
2003. Additionally, included in long-term debt, IBM, at
December 31, 1997, was $589.3 million, payable at market
terms and conditions, with maturity dates ranging from
August 21, 2000, to February 26, 2001.
The Company has the option, as approved by the Board of
Directors on December 31, 1998, to issue and sell debt
securities in domestic and foreign markets based upon its
need for such funding.
At December 31, 1998, the Company had available $2.2 billion
of a shelf registration with the Securities and Exchange
Commission for the issuance of debt securities. This allows
the Company rapid access to domestic financial markets. The
Company intends to continue to issue debt securities under
this shelf registration. The Company has no firm
commitments for the purchase of debt securities that it may
issue from the unused portion of this shelf registration.
The Company has the option, together with IBM and IBM
International Finance, N.V., to issue and sell debt
securities under a Euro Medium Term Note Programme (EMTN) in
an aggregate nominal amount of up to 4.0 billion in Euro
(e), or its equivalent in any other currency. At December
31, 1998, there was e1.8 billion available for the issuance
of debt securities under this program. The Company may
issue debt securities over the next twelve months under this
program, dependent on prevailing market conditions and its
need for such funding.
The Company has the option, as approved by the Board of
Directors on November 1, 1996, to sell, assign, pledge or
transfer up to $3.0 billion of assets to third parties
through December 31, 1999. Included within this $3.0
billion authorization is $450.0 million of a separate shelf
registration for issuance of asset-backed securities, which
the Company has available. The Company's issuance of any
asset-backed securities over the next twelve months under
this shelf registration is dependent on prevailing market
conditions and its need for such funding
The Company is an authorized borrower of up to $3.0 billion
under a $10.0 billion IBM committed global credit facility,
and has a liquidity agreement with IBM for $500.0 million.
The Company has no borrowings outstanding under the
committed global credit facility or the liquidity agreement.
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<PAGE> 8
FINANCIAL CONDITION (Continued)
The Company and IBM have signed master loan agreements
providing additional funding flexibility to each other.
These agreements allow for short-term (up to 270-day)
funding, made available at market terms and conditions, upon
the request of either the Company or IBM. The Company had
borrowings outstanding under this arrangement of $58.2
million and $600.2 million at December 31, 1998, and 1997,
respectively. The Company and IBM have also signed an
additional master loan agreement which allows for long-term
funding, made available at market terms and conditions, upon
the request of the Company. As of December 31, 1998, the
Company had $1,481.7 million outstanding under this
agreement. As of December 31, 1997, there were no
borrowings outstanding under this agreement. These
financing sources, along with the Company's internally
generated cash and medium-term note and commercial paper
programs, provide flexibility to the Company to grow its
lease, working capital financing and loan portfolios, to
fund working capital requirements and to service debt.
Amounts due to IBM and affiliates include trade payables
arising from purchases of equipment for term leases and
installment receivables, working capital financing
receivables for dealers and remarketers, and software
license fees. Also included in amounts due to IBM and
affiliates are income taxes currently payable under the
intercompany tax allocation agreement. Amounts due to IBM
and affiliates decreased by approximately $169.8 million to
$2,354.7 million at December 31, 1998, from $2,524.5 million
at December 31, 1997. The decrease was attributable to
decreases in the amount payable for working capital
financing receivables during the fourth quarter of 1998,
compared with the same period of 1997.
At December 31, 1998, the Company's debt to equity ratio was
5.7:1, compared with 6.6:1 at December 31, 1997.
TOTAL CASH PROVIDED BEFORE DIVIDENDS
Total cash provided before dividends was $130.4 million in
1998, compared with $209.6 million in 1997. For 1998, total
cash provided before dividends reflects $2,549.8 million of
cash used in investing and financing activities before
dividends, offset by $2,680.2 million of cash provided by
operating activities. For 1997, total cash provided before
dividends reflects $2,410.8 million of cash used in
investing and financing activities before dividends, offset
by $2,620.4 million of cash provided by operating
activities. Cash and cash equivalents at December 31, 1998,
totaled $822.8 million, an increase of $30.4 million,
compared with the balance at December 31, 1997.
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<PAGE> 9
RESULTS OF OPERATIONS
INCOME FROM LEASES
Income from leases increased 16 percent to $698.3 million
for the year ended December 31, 1998, from $600.8 million in
1997. The growth in capital equipment financings for end
users under capital and operating leases during 1998
contributed to the overall increase in income from leases.
Income from leases includes lease income resulting from
remarketing transactions. Lease income from remarketing
transactions was $192.4 million in 1998, an increase of 4
percent from 1997.
On a periodic basis, the Company reassesses the future
residual values of its portfolio of leases. In accordance
with generally accepted accounting principles, anticipated
increases in specific future residual values may not be
recognized before realization and are thus a source of
potential future profits. Anticipated decreases in specific
future residual values that are considered to be other than
temporary must be recognized currently. A review of the
Company's $1,296.6 million residual value portfolio at
December 31, 1998, indicated that the overall estimated
future value of the portfolio continues to be greater than
the value currently recorded, which is the lower of the
Company's cost or net realizable value. The Company,
however, did record a $33.9 million reduction to income from
leases during 1998 to recognize decreases in the expected
future residual value of specific leased equipment, compared
with $34.7 million during 1997.
INCOME FROM WORKING CAPITAL FINANCING
Income from working capital financing decreased 8 percent to
$236.8 million in 1998, compared with $257.6 million in
1997. This decline was primarily due to a decrease in
income from dealer interest caused by lower outstanding
receivable balances.
INCOME FROM LOANS
Income from loans increased 24 percent to $208.4 million in
1998, compared with $168.0 million in 1997. This increase
resulted from higher asset balances, which were primarily
due to an increase in financing originated for software and
services during 1997 and 1998.
EQUIPMENT SALES
Equipment sales amounted to $510.2 million in 1998, compared
with $442.1 million in 1997. Contributing to this increase
in equipment sales is the growth of equipment remarketed as
sales, rather than as operating leases. The revenue
associated with outright sales and sales-type leases is
included in equipment sales. Company-owned equipment may be
sold or released to existing lessees or, when equipment is
returned, to new users of that equipment.
Gross profit on equipment sales in 1998 was $63.4 million,
an increase of 5 percent, compared with $60.6 million in
1997. The gross profit margin in 1998 decreased to 12.4
percent, compared with 13.7 percent in 1997. The mix of
products available for sale and changing market conditions
for certain used equipment during the applicable periods are
factors contributing to the decrease in gross profit
margins.
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<PAGE> 10 RESULTS OF OPERATIONS (Continued)
INCOME FROM FACTORED IBM RECEIVABLES
Income from factored IBM receivables was $52.3 million,
compared with $26.5 million in 1997. This increase is
attributable to the fact that the Company entered into these
agreements with selected IBM subsidiaries beginning June
1997. On December 30, 1998, the Company sold the net assets
of IBM Credit EMEA Factoring Company, Ltd. to another
subsidiary of IBM, IBM International Holdings Finance
Company, Ltd. (IIHFC). Refer to Relationship with IBM and
Related Company Transactions in the Notes to Consolidated
Financial Statements on page 24 for additional details.
OTHER INCOME
Other income decreased 19 percent to $110.4 million in 1998,
compared with $135.9 million in 1997. The decrease in other
income is primarily attributable to a decline in the
servicing fees from previously securitized IBM financing
receivables, as compared with 1997, and to the gain on the
sale of restricted securities during the first quarter of
1997, which did not occur in 1998.
INTEREST EXPENSE
As a result of the growth in end user financings originated,
the Company has experienced an increase in the average
outstanding debt balance. This increase in the average
outstanding debt balance resulted in a 13 percent growth in
interest expense to $611.2 million in 1998, compared with
$538.6 million in 1997. The Company's 1997 average cost of
debt remained constant at 5.7 percent for 1998 and 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $211.3
million in 1998, a decrease of 7 percent compared with
$228.2 million in 1997. This decrease is primarily due to
reductions in the Company's resources resulting in a decline
in compensation and related expenses.
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<PAGE> 11
RESULTS OF OPERATIONS (Continued)
PROVISION FOR RECEIVABLE LOSSES
The Company's portfolio of capital equipment leases and
loans is predominantly with investment grade customers. The
Company generally retains ownership or takes a security
interest in any underlying equipment financed. The Company
provides for receivable losses at the time financings are
originated and, from time to time, for capital equipment as
conditions warrant. The portfolio is diversified by
geography, industry and individual unaffiliated customer.
The Company provides for working capital financing
receivable losses on the basis of actual collection
experience and estimated collectibility of the related
financing receivables. With the continued trend toward
consolidation in this industry segment, the concentration of
such financings for certain large dealers and remarketers of
information industry products is significant.
At December 31, 1998, and December 31, 1997, approximately
56 percent and 62 percent, respectively, of the working
capital financing receivables outstanding were concentrated
in ten working capital accounts. The Company's working
capital financing business is predominantly with
non-investment grade customers. Such financing receivables
are typically collateralized by the inventory and accounts
receivable of the dealers and remarketers. The Company did
not experience material losses in 1998 or 1997. The Company
does not believe that there is a risk of loss in this area
that would have a material impact on its financial position
or results of operations.
The overall provision for receivable losses increased to
$37.8 million in 1998, compared with $35.5 million in 1997.
This increase was primarily attributable to growth in the
Company's outstanding receivables.
INCOME TAXES
Income taxes increased 23 percent to $200.7 million for the
year ended December 31, 1998, from $163.2 million for the
same period in 1997. This increase is primarily
attributable to the increase in the Company's pre-tax
earnings for 1998, as compared with 1997. In addition, a
decrease in the Company's 1997 income tax expense due to an
adjustment for prior years' tax liabilities contributed to
the increase for 1998.
The Company expects its effective tax rate to approximate
the statutory federal (35 percent) and state (4.4 percent,
net of federal tax benefit) income tax rates in future
years.
RETURN ON AVERAGE EQUITY
The 1998 results yielded a return on average equity of 17.2
percent, compared with 18.6 percent in 1997.
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<PAGE> 12
ACCOUNTING CHANGES
The Company implemented the following new accounting
standards in 1998, 1997 and 1996. None of these standards
had a material effect on the financial position or results
of operations of the Company.
Effective January 1, 1997, the Company implemented Statement
of Financial Accounting Standards (SFAS) 125, "Accounting
for Transfer and Servicing of Financial Assets and
Extinguishments of Liabilities." This standard provides
accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of
liabilities. The Company was generally in compliance with
this standard prior to adoption.
In the first quarter of 1998, the Company adopted SFAS 130,
"Reporting Comprehensive Income," which established
standards for displaying comprehensive income and
components. For the years ended December 31, 1998 and 1997,
respectively, other than net earnings, there were no items
to report.
Effective December 31, 1998, the Company adopted SFAS 131,
Disclosures About Segments of an Enterprise and Related
information," which establishes standards for reporting
operating segments and disclosures about products and
services, geographic areas and major customers. Refer to
Segment Reporting in the Notes to Consolidated Financial
Statements on page 40.
In 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 133, "Accounting
for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for
derivative instruments. It requires that an entity recognize
all derivatives as either assets or liabilities in the
statement of financial position and measure those
instruments at fair value. The Company will adopt this new
standard as of January 1, 2000. Management does not expect
the adoption to have a material impact on the Company's
results of operations; however, the impact on the Company's
financial statements is dependent upon the market values of
the Company's derivatives and related financial instruments
at the date of adoption.
CLOSING DISCUSSION
The Company's resources continue to be sufficient to enable
it to carry out its mission of offering customers
competitive leasing and financing and providing information
technology remarketers with inventory and accounts
receivable financing, which contributes to the growth and
stability of IBM earnings.
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<PAGE> 13
YEAR 2000
The "Year 2000 issue" arises because many computer hardware
and software systems use only two digits to represent the
year. As a result, these systems and programs may not
process dates beyond 1999, which may cause errors in
information or systems failures. Given the uncertainty
inherent in any assessment of the potential Year 2000
issues, the Company recognizes the need to remain vigilant
and is continuing its analysis, assessment, conversion and
contingency planning for the various Year 2000 issues,
across its business
With respect to its internal systems, the potential Year
2000 impacts extend beyond the Company's information
technology systems to its physical facilities and the
manufacturing systems it applies to returned equipment after
the expiration of leases. The Company is addressing these
issues as part of its own efforts and in coordination with
its parent company, IBM, with respect to the Company's
physical facilities and certain applications related to
human resources, finance, accounts receivable and invoicing,
among others. Most conversion efforts have been completed,
with extended system integration planning and contingency
planning projects scheduled throughout 1999. Although the
Company believes its efforts will be successful and does not
expect the total costs of such efforts to exceed $11.0
million over a multi-year period, any failure or delay could
result in the disruption of business and in the Company
incurring substantial additional expense. To minimize any
such potential impact, the Company has initiated a
contingency planning effort.
The Year 2000 readiness of the Company's customers and the
hardware and software offerings from the Company's
suppliers, subcontractors and business partners may vary.
Further, some commentators believe that a significant amount
of litigation will arise from Year 2000 issues. The Company
continues to believe that it has good defenses to any such
claims brought against it. The Year 2000 issue also
presents a number of other risks and uncertainties that
could affect the Company, including utilities and
telecommunications failures, the lack of personnel skilled
in the resolution of Year 2000 issues, and the nature of
government responses to the issues, among others. While the
Company continues to believe that the Year 2000 matters
discussed above will not have a material impact on its
business, financial condition or results of operations, it
remains uncertain whether or to what extent the Company may
be affected.
The Year 2000 statements set forth above are designated
'Year 2000 Readiness Disclosures' pursuant to the Year 2000
Information and Readiness Disclosure Act (P.L. 105-271).
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<PAGE> 14
FORWARD LOOKING STATEMENTS
Except for the historical information and discussions
contained herein, statements contained in this Report on
Form 10-K may constitute "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act
of 1995. These statements involve a number of risks,
uncertainties and other factors that could cause actual
results to differ materially, including, but not limited to,
the Company's level of equipment financing originations; the
propensity for customers to finance their acquisition of IBM
products and services with the Company; the competitive
environment in which the Company operates; the success of
the Company in developing strategies to manage debt levels;
the ultimate impact of the various Year 2000 issues on the
Company's business, financial condition or results of
operations; nonperformance by a customer of contractual
requirements; the concentration of credit risk and
creditworthiness of the customers; the Company's associated
collection and asset management efforts; the Company's
determination of residual values; currency fluctuations on
the associated debt and liabilities; changes in interest
rates; nonperformance by the counterparty in derivative
transactions; the Company's ability to attract and retain
key personnel; the Company's ability to manage acquisitions
and alliances; legal, political and economic changes and
other risks, uncertainties and factors inherent in the
Company's business and otherwise discussed in this Form 10-K
and in the Company's other filings with the Securities and
Exchange Commission and in IBM's filings with the SEC.
-14-
<PAGE> 15
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
MARKET RISK
In the normal course of business, the financial position of
the Company is routinely subjected to a variety of risks. In
addition to the market risk associated with interest and
currency rate movements on outstanding debt and non-U.S.
dollar denominated assets and liabilities, other examples of
risk include collectibility of accounts receivable and
recoverability of residual values on leased assets.
The Company regularly assesses these risks and has
established policies and business practices to protect
against the adverse effects of these and other potential
exposures. As a result, the Company does not anticipate any
material losses in these areas. The Company manages this
risk, in part, through the use of a variety of financial
instruments including derivatives, as explained in
Significant Accounting Policies in the Notes to Consolidated
Financial Statements on page 22.
For purposes of specific risk analysis, the Company uses
sensitivity analysis to determine the impacts that market
risk exposures may have on the fair values of the Company's
debt and financial instruments.
The financial instruments included in the sensitivity
analysis consist of all of the Company's cash and cash
equivalents, marketable securities, long-term nonlease
receivables, investments, long-term and short-term debt and
all derivative financial instruments. Interest rate swaps,
interest rate options and foreign currency swaps constitute
the Company's portfolio of derivative financial instruments.
To perform sensitivity analysis, the Company assesses the
risk of loss in fair values from the impact of hypothetical
changes in interest rates and foreign currency exchange
rates on market sensitive instruments. The market values for
interest and foreign currency exchange risk are computed
based on the present value of future cash flows as impacted
by the changes in the rates attributable to the market risk
being measured. The discount rates used for the present
value computations were selected based upon market interest
and foreign currency exchange rates in effect at December
31, 1998.
The market values that result from these computations are
compared with the market values of these financial
instruments at December 31, 1998. The differences in this
comparison are the hypothetical gains or losses associated
with each type of risk.
The results of the sensitivity analysis at December 31,
1998, are as follows:
INTEREST RATE RISK:
A 10 percent decrease in the levels of interest rates with
all other variables held constant would result in a decrease
in the fair value of the Company's financial instruments by
$28.0 million. A 10 percent increase in the levels of
interest rates with all other variables held constant would
result in an increase in the fair value of the Company's
financial instruments by $24.0 million.
-15-
<PAGE>16
FOREIGN CURRENCY EXCHANGE RATE RISK:
A 10 percent increase in the levels of foreign currency
exchange rates against the U.S. dollar with all other
variables held constant would result in a decrease in the
fair value of the Company's financial instruments by $22.0
million. A 10 percent decrease in the levels of foreign
currency exchange rates against the U.S. dollar with all
other variables held constant would result in an increase in
the fair value of the Company's financial instruments by
$22.0 million.
-16-
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
<AUDIT-REPORT>
Report of Independent Accountants
To the Stockholder and Board of Directors of
IBM Credit Corporation
In our opinion, the consolidated financial statements listed
in the index appearing under Item 14(a) 1. on page 45
present fairly, in all material respects, the financial
position of IBM Credit Corporation and its subsidiaries at
December 31, 1998, and 1997, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's
management; our responsibility is to express an opinion on
these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Stamford, CT
January 21, 1999, except as to the Subsequent Events note
on page 43, which is as of February 25, 1999.
-17-
</AUDIT-REPORT>
<PAGE> 18
</TABLE>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at December 31:
(Dollars in thousands)
<CAPTION>
1998 1997
___________ ___________
<S> <C> <C>
ASSETS:
Cash and cash equivalents. . . . . . . . . $ 822,844 $ 792,471
Marketable securities. . . . . . . . . . . 68,838 127,847
Net investment in capital leases . . . . . 5,265,941 4,931,292
Equipment on operating leases, net . . . . 3,619,585 3,583,641
Loans receivable . . . . . . . . . . . . . 3,041,222 2,381,261
Working capital financing receivables. . . 2,789,029 3,249,310
Factored IBM receivables . . . . . . . . . 292,310 824,031
Investments and other assets . . . . . . . 497,590 682,263
___________ ___________
Total Assets $16,397,359 $16,572,116
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Short-term debt. . . . . . . . . . . . . . $ 6,618,695 $ 7,452,668
Short-term debt, IBM . . . . . . . . . . . 158,527 1,139,113
Due to IBM and affiliates. . . . . . . . . 2,354,650 2,524,475
Interest and other accruals. . . . . . . . 440,248 423,243
Deferred income taxes. . . . . . . . . . . 973,686 887,180
Long-term debt . . . . . . . . . . . . . . 1,903,188 1,887,235
Long-term debt, IBM. . . . . . . . . . . . 2,070,651 589,253
__________ __________
Total liabilities . . . . . . . . . . . 14,519,645 14,903,167
__________ __________
Stockholder's equity:
Capital stock, par value $1.00 per share
Shares authorized: 10,000
Shares issued and outstanding:
936 in 1998 and 1997. . . . . . . . . 457,411 457,411
Retained earnings. . . . . . . . . . . . . 1,420,303 1,211,538
__________ __________
Total stockholder's equity. . . . . . . 1,877,714 1,668,949
__________ ___________
Total Liabilities and Stockholder's Equity $16,397,359 $16,572,116
========== ===========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
-18-
<PAGE> 19
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
For the year ended December 31:
(Dollars in thousands)
<CAPTION> 1998 1997 199 6
___________ ___________ ___________
<S> <C> <C> <C>
FINANCE AND OTHER INCOME:
Income from leases:
Capital leases . . . . . . . . . . . . $ 334,365 $ 276,956 $ 301,803
Operating leases (net of depreciation:
1998 - $1,944,157; 1997 - $1,487,727
and 1996 - $1,051,056). . . . . . . . 363,975 323,868 222,223
___________ ___________ ___________
698,340 600,824 524,026
Income from working capital financing. . 236,848 257,646 265,301
Income from loans. . . . . . . . . . . . 208,434 167,955 148,781
Equipment sales. . . . . . . . . . . . . 510,156 442,105 419,292
Income from factored IBM receivables . . 52,283 26,505 -
Other income . . . . . . . . . . . . . . 110,437 135,860 140,400
___________ ___________ ___________
Total finance and other income . . . . 1,816,498 1,630,895 1,497,800
___________ ___________ ___________
COST AND EXPENSES:
Interest . . . . . . . . . . . . . . . . 611,206 538,560 436,109
Cost of equipment sales. . . . . . . . . 446,715 381,531 368,356
Selling, general and administrative . . 211,259 228,155 201,248
Provision for receivable losses. . . . . 37,805 35,541 44,883
___________ ___________ ___________
Total cost and expenses. . . . . . . . 1,306,985 1,183,787 1,050,596
___________ ___________ ___________
EARNINGS BEFORE INCOME TAXES . . . . . . . 509,513 447,108 447,204
Provision for income taxes . . . . . . . . 200,748 163,215 176,122
___________ ___________ ___________
NET EARNINGS . . . . . . . . . . . . . . . 308,765 283,893 271,082
Dividends . . . . . . . . . . . . . . . . (100,000) (50,000) (45,000)
Retained earnings, January 1 . . . . . . . 1,211,538 977,645 751,563
___________ ___________ ___________
Retained earnings, December 31 . . . . . . $1,420,303 $1,211,538 $ 977,645
=========== =========== ===========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
-19-
<PAGE> 20
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31:
(Dollars in thousands) 1998 1997 1996
<CAPTION> ____________ ____________ ____________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . .$ 308,765 $ 283,893 $ 271,082
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation and amortization. . . . 1,944,420 1,503,375 1,058,273
Provision for receivable losses. . . 37,805 35,541 44,883
Change in deferred income taxes. . . 86,058 125,686 96,328
Increase in interest and other
accruals. . . . . . . . . . . . . . 18,594 44,959 20,973
Gross profit on equipment sales. . . (63,441) (60,574) (50,936)
Other items that provided cash:
Proceeds from equipment sales. . . 510,156 442,105 419,292
Change in amounts due IBM and
affiliates. . . . . . . . . . . . (168,090) 235,507 682,535
Other, net . . . . . . . . . . . . 5,938 9,924 33,699
____________ ____________ ____________
Cash provided by operating activities . 2,680,205 2,620,416 2,576,129
____________ ____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in capital leases . . . .(2,655,735) (2,508,547) (2,102,530)
Collection of capital leases, net
of income earned. . . . . . . . . . 2,066,450 1,756,020 1,609,881
Investment in equipment on
operating leases. . . . . . . . . .(1,982,280) (2,295,438) (1,800,522)
Investment in loans receivable . . .(1,913,501) (1,460,214) (1,211,318)
Collection of loans receivable,
net of interest earned. . . . . . . 1,244,806 935,924 818,233
Collection of (investment in)
working capital financing
receivables, net. . . . . . . . . . 455,869 (360,266) 246,561
Purchase of factored IBM
receivables . . . . . . . . . . . .(6,179,774) (4,159,221) -
Collection of factored IBM
receivables . . . . . . . . . . . . 6,183,446 3,335,190 -
Proceeds from the sale of the net
assets of IBM Credit EMEA Factoring
Company, Ltd. . . . . . . . . . . . 11,737 - -
Purchases of marketable securities . (82,165) (21,500) (69,418)
Maturities of marketable securities. 141,207 53,001 -
Cash payment for lease portfolio
acquired. . . . . . . . . . . . . . - (334,909) -
Other, net . . . . . . . . . . . . . (40,007) (335,675) (219,189)
____________ ____________ ____________
Cash used in investing activities . . .(2,749,947) (5,395,635) (2,728,302)
____________ ____________ ____________
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
-20-
<PAGE> 21
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
For the year ended December 31:
(Dollars in thousands) 1998 1997 1996
<CAPTION> ____________ ____________ ____________
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
long-term debt. . . . . . . . . . . 3,081,436 2,516,557 789,024
Repayment of debt with original
maturities of one year or more. . . (1,330,194) (238,900) (639,855)
Repayment (issuance) of debt with
original maturities within one
year, net . . . . . . . . . . . . . (1,551,127) 707,199 343,999
Cash dividends paid to IBM . . . . . (100,000) (50,000) (45,000)
____________ ____________ ____________
Cash provided by financing activities . 100,115 2,934,856 448,168
____________ ____________ ____________
Increase in cash and cash equivalents . 30,373 159,637 295,995
Cash and cash equivalents, January 1 . 792,471 632,834 336,839
____________ ____________ ____________
Cash and cash equivalents, December 31 $ 822,844 $ 792,471 $ 632,834
============ ============ ============
<FN>
<F1>
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 635,658 $ 523,139 $ 443,196
=========== =========== ==========
<F2>
Supplemental schedule of noncash investing and financing
activities:
The purchase price for the acquisition of selected assets
from the leasing portfolio of General Electric Capital
Technology Management Services Corporation during 1997 was
financed by the Company, in part, through credits of $18.4
million that were applied against certain existing
obligations to the Company.
During the first quarter of 1996, the Company issued to IBM
4 shares of capital stock, par value $1.00 per share, in
exchange for assets IBM transferred to the Company. The
assets transferred during 1996 had a net book value of $50.0
thousand, which approximated fair value, and a deferred tax
asset value of $350.0 thousand. As a result, stockholder's
equity was increased by $0.4 million during 1996.
<F3> The accompanying notes are an integral part of this
statement.
</FN> </TABLE>
-21-
<PAGE>22 IBM CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and those of
its subsidiaries that are more than 50 percent owned.
Investments in partnerships in which the Company has
typically a 20 percent ownership are accounted for using the
equity method.
Cash and Cash Equivalents: Time deposits with original
maturities generally of three months or less are included in
cash and cash equivalents.
Marketable Securities: The Company's marketable securities
are available-for-sale and the carrying amount of the
securities approximates market value.
Finance Income Recognition: Income attributable to direct
financing leases and loans receivable is initially recorded
as unearned income and subsequently recognized as finance
income at level rates of return over the term of the leases
or receivables. Income recognized from leveraged leases
includes the amortization of unearned finance income and
deferred investment and other tax credits over the term of
the leases, at level rates of return, during periods when
the net investment balance is positive.
Equipment on Operating Leases: Equipment is depreciated on
a straight-line basis to its estimated residual value over
the lease term.
Equipment Sales Income Recognition: Revenue from equipment
sales to existing lessees is recognized at the effective
date a purchase provision is exercised. Revenue from sales
to parties other than existing lessees is recognized when
title transfers.
Allowance for Receivable Losses: The allowance for
receivable losses is determined on the basis of actual
collection experience and estimated collectibility of the
related assets.
Income Taxes: Income tax expense is based on reported
earnings before income taxes. Deferred income taxes reflect
the impact of temporary differences between assets and
liabilities recognized for financial reporting purposes and
such amounts recognized for tax purposes on a separate
company basis. In accordance with SFAS 109, "Accounting for
Income Taxes," these deferred taxes are measured by applying
currently enacted tax laws.
-22-
<PAGE> 23
SIGNIFICANT ACCOUNTING POLICIES (Continued):
Financial Instruments: The Company uses agreements related
to currencies and interest rates to lower costs of funding
its business, to diversify sources of funding, or to manage
interest rate and currency exposures arising from mismatches
between assets and liabilities. The Company enters into
such financial instruments solely for hedging purposes. The
Company does not enter into such financial instrument
transactions for trading or for other speculative purposes.
Debt obligations denominated in foreign currencies and
subject to foreign currency swap agreements are included in
the Consolidated Statement of Financial Position at the
contractual rate of exchange in the respective foreign
currency swap agreement. Gains and losses on forward
contracts and purchased options, designated as hedges, are
deferred and included in the settlement of the related
transaction. The Company routinely evaluates existing and
potential counterparty credit exposures associated with such
financial instrument transactions to ensure that these
exposures remain within credit guidelines.
Under interest rate swaps, the Company agrees with other
parties to exchange, at specified intervals, the difference
between interest amounts calculated by reference to a
floating index or a fixed rate on an agreed upon notional
principal amount. Swap contracts are primarily between one
and five years in duration. The Company enters into
interest rate cap and floor agreements to reduce the
potential impact of changes in interest rates on floating
rate debt supporting fixed rate assets. Interest rate
agreements generally involve the exchange of interest
payments without the exchange of the underlying notional
amount on which the interest payments are calculated. The
Company enters into currency exchange agreements to hedge
debt denominated in foreign currencies. The term of the
currency derivatives is generally less than five years. The
purpose of the Company's foreign currency hedging activities
is to protect itself from the risk that the eventual dollar
net cash outflows will be affected by changes in exchange
rates. The Company does not anticipate any material adverse
effect on its financial position or results of operations
resulting from its use of these instruments, nor does it
anticipate nonperformance by any of its counterparties.
Use of Estimates: Management uses estimates in preparing
the consolidated financial statements, in conformity with
generally accepted accounting principles. Significant
estimates include collectibility of receivables,
recoverability of residual values of equipment on capital
and operating leases, and useful economic lives of long-term
fixed assets. The Company regularly assesses these
estimates, and while actual results may differ from these
estimates, management believes that material changes will
not occur in the near term.
-23-
<PAGE> 24
RELATIONSHIP WITH IBM AND RELATED COMPANY TRANSACTIONS:
Pursuant to a Support Agreement between IBM and the Company,
IBM has agreed to retain 100 percent 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 guarantee by IBM
to any party of the payment of any debt or other obligation,
indebtedness or liability of the Company. The Support
Agreement may not be modified, amended or terminated while
any debt of the Company is outstanding, unless all holders
of such debt have consented in writing.
Pursuant to an operating agreement, IBM provides collection,
administration and other services and products for the
Company and is reimbursed for the cost of these services and
products. IBM charged the Company $97.5 million, $84.4
million and $64.8 million in 1998, 1997 and 1996,
respectively, representing costs for lease services,
employee benefit plans, facilities rental and staff support.
Additionally, the Company is compensated for services
performed for IBM, primarily for management of IBM's state
and local government receivables portfolio. These fees,
amounting to $50.3 million, $51.8 million and $51.0 million
in 1998, 1997 and 1996, respectively, are included in other
income.
The operating agreement with IBM also provides that
installment receivables, which include finance charges, may
be purchased by the Company at a mutually agreed-upon price.
The Company is reimbursed by IBM for any price adjustments
and concessions that reduce the amount of receivables
previously purchased by the Company.
Additionally, the operating agreement with IBM provides that
IBM will offer term leases of the Company to creditworthy
potential lessees. IBM's sales price of the equipment to
the Company will typically be at the purchase price payable
by the lessee, unless the Company is participating in unique
IBM product offerings.
The Company provides accounts receivable and inventory
financing, at market rates, to dealers and remarketers of
IBM products. Included in income from working capital
financing is fee income earned from IBM Personal Systems
Group of $75.1 million, $73.1 million and $63.1 million in
1998, 1997 and 1996, respectively. Also included in income
from working capital financing is fee income from other IBM
divisions of $37.6 million, $27.3 million and $15.3 million
in 1998, 1997 and 1996, respectively.
The Company also has an indemnification agreement with IBM.
IBM reimburses the Company for losses on working capital
financing receivables with specific dealers and for specific
transactions. Approximately $8.2 million, $2.2 million and
$10.5 million of such losses have been reimbursed by IBM in
1998, 1997 and 1996, respectively. See Working Capital
Financing Receivables note on page 30 for additional
information.
-24-
<PAGE> 25
RELATIONSHIP WITH IBM AND RELATED COMPANY TRANSACTIONS (Continued):
The Company also provides equipment, software and services
financing at market rates to IBM and affiliated companies
for both IBM and non-IBM products. The Company originated
$971.5 million and $1,054.4 million of such financings
during 1998 and 1997, respectively. At December 31, 1998,
and 1997, approximately $1,421.3 million and $1,255.0
million, respectively, of such financings were included in
the lease and loan portfolio. Of these amounts, $1,289.2
million and $1,136.1 million were included in the Company's
operating lease portfolio at December 31, 1998 and 1997,
respectively. The finance income earned from operating
leases to IBM and affiliated companies, net of depreciation
expense, was $172.0 million, $158.9 million and $110.1
million in 1998, 1997 and 1996, respectively. Interest and
finance income of $9.2 million, $6.7 million and $1.9
million was earned from loans to IBM and affiliates in 1998,
1997 and 1996, respectively.
In June 1997, IBM Credit International Factoring Corporation
(ICIFC) and IBM Credit EMEA Factoring Co., Ltd. (ICEFC),
subsidiaries of the Company, entered into factoring
agreements with selected IBM subsidiaries. Under these
agreements, ICIFC and ICEFC periodically purchase, without
recourse, all the rights, title and interest to certain
outstanding IBM customer receivables.
During 1998 and 1997, ICIFC and ICEFC acquired IBM customer
receivables having a nominal value of $6,257.2 million and
$4,222.2 million, respectively, for approximately $6,168.8
million and $4,159.2 million, respectively. The receivables
acquired are short-term in nature and are denominated in
non-U.S. currencies. The purchase was financed by the
Company through the issuance of short-term debt.
Transactions related to these receivables are fully
integrated in the Company's consolidated financial
statements.
On December 30, 1998, the Company sold assets amounting to
$528.0 million, less liabilities of $516.3 million,
resulting in a net amount of $11.7 million of ICEFC to
another subsidiary of IBM, IBM International Holdings
Finance Company, Ltd. (IIHFC). The assets were sold at
book value, which approximated fair market value and
therefore no gain or loss was recognized on the transaction.
On February 25, 1999, the Company sold certain assets of
ICIFC to IIHFC. Refer to the Subsequent Events note on page
43 for additional information.
The Company has a liquidity agreement with IBM International
Finance, N.V. (IIF), whereby the Company has agreed to
advance funds to IIF as an enhancement to IIF's ability to
carry out business. The amount of the advances is not to
exceed the greater of $500.0 million or 5 percent of the
Company's total assets. To support this agreement, the
Company has entered into a backup agreement with IBM,
whereby IBM has agreed to advance funds to the Company, in
an amount not to exceed the greater of $500.0 million or 5
percent of the Company's total assets, if at any time the
Company requires such funds to satisfy its agreement with
IIF. The Company has neither received nor made any advances
with respect to these agreements at December 31, 1998, and
1997.
-25-
<PAGE> 26
RELATIONSHIP WITH IBM AND RELATED COMPANY TRANSACTIONS (Continued):
The Company, together with IBM and IIF, has the option to
issue and sell debt securities under a Euro Medium Term Note
Programme (EMTN) in an aggregate nominal amount of up to 4.0
billion in Euro (e), or its equivalent in any other
currency. As previously mentioned, at December 31, 1998,
there was e1.8 billion available for the issuance of debt
securities under this EMTN program.
The Company's intention to issue any debt securities during
the next twelve months under this program is dependent on
prevailing market conditions and the Company's need for such
funding.
From time to time, the Company will either borrow funds
from, or lend funds to IBM and its affiliates, at prevailing
interest rates. The Company and IBM have signed master loan
agreements providing additional funding flexibility to each
other. These agreements allow for short-term (up to
270-day) funding, made available at market terms and
conditions, upon the request of either the Company or IBM.
The purpose of these agreements is to finance the borrower's
assets, for working capital or for other general corporate
purposes. At December 31, 1998, and 1997, the Company had
borrowings outstanding under these agreements of $58.2
million and $600.2 million, respectively, payable to IBM.
The Company and IBM have signed an additional master loan
agreement which allows for long-term funding, made available
at market terms and conditions, upon the request of the
Company. As of December 31, 1998, the Company had $1,481.7
million of borrowings outstanding under this agreement.
These intercompany borrowings have due dates ranging from
April 27, 2000, through June 25, 2003. As of December 31,
1997, there were no borrowings outstanding under this
agreement.
Interest expense of $60.8 million, $29.3 million and $10.6
million was incurred on loans from IBM and affiliates during
1998, 1997 and 1996, respectively.
The Company is an authorized borrower of up to $3.0 billion
under a $10.0 billion IBM committed global credit facility,
and has a liquidity agreement with IBM for $500.0 million.
The Company has no borrowings outstanding under the
committed global credit facility or the liquidity agreement.
An intercompany tax allocation agreement (the Agreement)
exists between the Company and its parent company, IBM. The
Agreement aligns the settlement of federal and state tax
benefits and/or obligations with the Company's provision for
income taxes determined on a separate company basis. The
Company is part of the IBM consolidated federal tax return
and files separate state tax returns in selected states.
Included in amounts due to IBM and affiliates at December
31, 1998, and 1997, are $30.5 million and $27.1 million,
respectively, of current income taxes payable determined in
accordance with the Agreement. Cash paid for income taxes
to IBM and to states that require separate tax returns in
1998, 1997 and 1996 was $109.3 million, $18.4 million and
$113.3 million, respectively.
-26-
<PAGE> 27
MARKETABLE SECURITIES:
The following is a summary of marketable securities at
December 31, 1998, and 1997, all of which were
available-for-sale. As of December 31, 1998, marketable
securities consisted of debt securities and certificates of
deposit. As of December 31, 1997, marketable securities
consisted entirely of debt securities. Contractual
maturities of the marketable securities at December 31,
1998, and December 31, 1997, are between nine months and
five years. It is expected that actual maturities will
differ from contractual maturities because some borrowers
have the right to call or prepay certain obligations,
sometimes without call or prepayment penalties.
(Dollars in thousands) 1998 1997
________ ________
Corporate . . . . . . . . . . . . . . . . $ 20,840 $ 95,023
U.S. federal agency . . . . . . . . . . . - 32,824
Certificates of deposit . . . . . . . . . 47,998 -
________ ________
Total, which approximates market value. . $ 68,838 $127,847
======== ========
NET INVESTMENT IN CAPITAL LEASES:
The Company's capital lease portfolio includes direct
financing and leveraged leases. The Company originates
financing for customers in a variety of industries and
throughout the United States. The Company has a diversified
portfolio of capital equipment financings for end users.
Direct financing leases consist principally of IBM
advanced information processing products with terms
generally from three to four years. The components of the
net investment in direct financing leases at December 31,
1998, and 1997, are as follows:
(Dollars in thousands) 1998 1997
___________ ___________
Gross lease payments receivable . . . . . $5,278,060 $4,922,989
Estimated unguaranteed residual values. . 397,529 327,239
Deferred initial direct costs . . . . . . 30,634 36,325
Unearned income . . . . . . . . . . . . . (571,168) (502,564)
Allowance for receivable losses . . . . . (65,644) (52,373)
___________ ___________
$5,069,411 $4,731,616
=========== ===========
The scheduled maturities of minimum lease payments
outstanding at December 31, 1998, expressed as a percentage
of the total, are due approximately as follows:
Within 12 months. . . . . . . . . . . . . . . . . . . . 48%
13 to 24 months . . . . . . . . . . . . . . . . . . . . 33
25 to 36 months . . . . . . . . . . . . . . . . . . . . 15
37 to 48 months . . . . . . . . . . . . . . . . . . . . 3
After 48 months . . . . . . . . . . . . . . . . . . . . 1
____
100%
====
Included in the net investment in capital leases are $17.7
million and $29.8 million of seller interest at December 31,
1998 and 1997, respectively, relating to the securitization
of such leases.
-27-
<PAGE> 28
NET INVESTMENT IN CAPITAL LEASES (Continued):
Leveraged lease investments include coal-fired electric
generating facilities, commercial aircraft and other non-IBM
manufactured equipment. Leveraged leases have remaining
terms ranging from two to twenty years. The components of
the net investment in leveraged leases at December 31, 1998,
and 1997, are as follows:
(Dollars in thousands) 1998 1997
__________ __________
Net rents receivable. . . . . . . . . . $ 245,928 $ 254,059
Estimated unguaranteed residual values. 39,752 39,752
Unearned and deferred income. . . . . . (85,788) (90,773)
Allowance for receivable losses . . . . (3,362) (3,362)
__________ __________
Investment in leveraged leases. . . . . 196,530 199,676
Less: Deferred income taxes. . . . . . (175,482) (188,074)
__________ __________
Net investment in leveraged leases. . . $ 21,048 $ 11,602
========== ==========
Refer to the note on page 31, Allowance for Receivable
Losses, for a reconciliation of the direct financing leases
and leveraged leases allowances for receivable losses.
EQUIPMENT ON OPERATING LEASES:
Operating leases consist principally of IBM advanced
information processing products with terms generally from
two to four years. The components of equipment on operating
lease at December 31, 1998, and 1997, are as follows:
(Dollars in thousands) 1998 1997
____________ ____________
Cost. . . . . . . . . . . . . . . . . . . $ 7,046,757 $ 6,640,874
Accumulated depreciation. . . . . . . . . (3,427,172) (3,057,233)
____________ ____________
$ 3,619,585 $ 3,583,641
============ ============
Minimum future rentals were approximately $3,346.6 million
at December 31, 1998. The scheduled maturities of the
minimum future rentals at December 31, 1998, expressed as a
percentage of the total, are due approximately as follows:
Within 12 months. . . . . . . . . . . . . . . . . . . . 55%
13 to 24 months . . . . . . . . . . . . . . . . . . . . 31
25 to 36 months . . . . . . . . . . . . . . . . . . . . 11
37 to 48 months . . . . . . . . . . . . . . . . . . . . 2
After 48 months . . . . . . . . . . . . . . . . . . . . 1
____
100%
====
-28-
<PAGE> 29
LOANS RECEIVABLE:
Loans receivable include installment receivables that are
principally financings of customer purchases of IBM advanced
information processing products. Also included are other
financings, comprising primarily IBM software and services.
The components of loans receivable at December 31, 1998, and
1997, are as follows:
(Dollars in thousands) 1998 1997
___________ ___________
Gross loans receivable . . . . . . . $3,456,900 $2,736,356
Deferred initial direct costs. . . . 20,658 17,890
Unearned income. . . . . . . . . . . (361,192) (301,756)
Allowance for receivable losses. . . (75,144) (71,229)
___________ ___________
$3,041,222 $2,381,261
=========== ===========
The scheduled maturities of loans receivable outstanding at
December 31, 1998, expressed as a percentage of the total,
are due approximately as follows:
Within 12 months . . . . . . . . . . . . . . . . . . . 46%
13 to 24 months. . . . . . . . . . . . . . . . . . . . 30
25 to 36 months. . . . . . . . . . . . . . . . . . . . 17
37 to 48 months. . . . . . . . . . . . . . . . . . . . 5
After 48 months. . . . . . . . . . . . . . . . . . . . 2
____
100%
====
Included in loans receivable are $3.1 million and $17.9
million at December 31, 1998, and 1997, respectively, that
are due from the Company's term lease partnerships. Such
loans are secured by the general pool of leases in the
partnerships. Also included in loans receivable are $6.1
million and $6.2 million of seller interest at December 31,
1998, and 1997, respectively, relating to the securitization
of such loans.
Refer to the note on page 31, Allowance for Receivable
Losses, for a reconciliation of the loans receivable
allowance for receivable losses.
-29-
<PAGE> 30
WORKING CAPITAL FINANCING RECEIVABLES:
Working capital financing receivables arise primarily from
secured inventory and accounts receivable financing for
dealers and remarketers of IBM and non-IBM products and
services. Inventory financing includes the financing of the
purchase by these dealers and remarketers of advanced
information processing products. As previously discussed in
the note on page 24, Relationship with IBM and Related
Company Transactions, the Company is reimbursed by IBM for
certain losses on working capital financing receivables with
specific dealers and for specific transactions.
Approximately $8.2 million, $2.2 million and $10.5 million
of such losses have been reimbursed by IBM in 1998, 1997 and
1996, respectively. The total amount of working capital
financing receivables outstanding that were subject to
indemnification by IBM was $155.5 million and $131.1 million
as of December 31, 1998 and 1997, respectively. With the
continued trend toward consolidation in this industry
segment, the concentration of such financings for certain
large dealers and remarketers of information industry
products is significant. However, the Company has a secured
position on most of its inventory and accounts receivable
financing, which mitigates the amount of potential loss. The
Company does not believe that there is a risk of loss that
would have a material impact on its financial position or
results of operations, and it provides for unsecured
exposures based upon historical experience.
Payment terms for inventory-secured financing generally
range from 30 days to 75 days. Accounts receivable
financing includes the financing of trade accounts
receivable for these dealers and remarketers. Payment terms
for accounts receivable secured financing typically range
from 30 days to 90 days. The components of working capital
financing receivables at December 31, 1998, and 1997, are as
follows:
(Dollars in thousands)
1998 1997
___________ ___________
Working capital financing receivables $2,806,165 $3,289,860
Allowance for receivable losses . . . (17,136) (40,550)
___________ ___________
$2,789,029 $3,249,310
=========== ===========
Included in working capital financing receivables are $719.4
million and $742.9 million of seller interest at December
31, 1998, and 1997, respectively, relating to the
securitization of such receivables. Additionally, the
Company has $2,877.0 million of approved but unused working
capital financing credit lines available to customers at
December 31, 1998.
Refer to the note on page 31, Allowance for Receivable
Losses, for a reconciliation of the working capital
financing receivables allowance for receivable losses.
-30-
<PAGE> 31
ALLOWANCE FOR RECEIVABLE LOSSES:
The following is a reconciliation of the allowance for
receivable losses, by portfolio, for the years ended
December 31, 1998, 1997 and 1996:
(Dollars in thousands) Direct Working
Financing Leveraged Loans Capital
1998 Total Leases Leases Receivable Fin. Rec.
_____________________ _________ _________ __________ __________ _________
Beginning of year . . $167,514 $ 52,373 $ 3,362 $ 71,229 $ 40,550
Provision for
receivable losses. . 37,805 24,659 - 8,735 4,411
Accounts written off
(net of recoveries). (44,522) (11,904) - (5,491) (27,127)
Transfers from (to)
allowance for losses
on receivables sold
and other, net . . . 489 516 - 671 (698)
_________ _________ __________ __________ _________
End of year . . . . . $161,286 $ 65,644 $ 3,362 $75,144 $17,136
========= ========= ========== ========== =========
Direct Working
Financing Leveraged Loans Capital
1997 Total Leases Leases Receivable Fin. Rec.
_____________________ _________ _________ __________ __________ _________
Beginning of year . . $170,254 $ 44,131 $ 6,036 $ 63,364 $ 56,723
Provision for
receivable losses. . 35,541 22,271 (2,674) 11,800 4,144
Accounts written off
(net of recoveries). (46,328) (15,321) - (5,453) (25,554)
Transfers from
allowance for losses
on receivables sold
and other, net . . . 8,047 1,292 - 1,518 5,237
_________ _________ __________ __________ _________
End of year . . . . . $167,514 $ 52,373 $ 3,362 $ 71,229 $ 40,550
========= ========= ========== ========== =========
Direct Working
Financing Leveraged Loans Capital
1996 Total Leases Leases Receivable Fin. Rec.
_____________________ _________ _________ __________ __________ _________
Beginning of year . . $159,543 $ 46,266 $ 6,104 $ 59,369 $ 47,804
Provision for
receivable losses. . 44,883 17,940 - 13,260 13,683
Accounts written off
(net of recoveries). (40,849) (22,104) - (11,686) (7,059)
Transfers from (to)
allowance for losses
on receivables sold
and other, net . . . 6,677 2,029 (68) 2,421 2,295
_________ _________ __________ __________ _________
End of year . . . . . $170,254 44,131 $ 6,036 $ 63,364 $ 56,723
========= ========= ========== ========== =========
-31-
<PAGE> 32
ALLOWANCE FOR RECEIVABLE LOSSES (Continued):
The amounts written off, net of recoveries, of working
capital financing receivables in 1998 and 1997 primarily
reflects previously identified and reserved exposures. The
1998 and 1997 provision for receivables losses reflects the
Company's improved ability to effectively manage credit risk
and contain losses.
The reconciliation of the allowance for receivable losses,
by portfolio, presented on page 31, excludes the allowance
for estimated credit losses on receivables sold, which was
$1.0 million and $1.7 million at December 31, 1998, and
1997, respectively. Provisions for expected losses as they
relate to receivables sold, are provided during the periods
in which the receivables were originated. No material
provisions were made for the years ended December 31, 1998,
and 1997.
Also excluded from the reconciliation of the allowance for
receivable losses, by portfolio, presented on page 31, is
the allowance for estimated credit losses on factored IBM
receivables, which was $6.3 million and $31.3 million at
December 31, 1998, and 1997, respectively. The decrease in
the allowance for receivable losses is attributable to the
sale of the net assets of one of the Company's factoring
subsidiaries in December 1998. Refer to the Relationship
with IBM and Related Company Transactions note on page 24
for additional details. IBM factored receivables written
off, net of recoveries, during 1998 and 1997 were $6.2
million and $2.8 million, respectively. Provisions for
expected losses, as they relate to factored IBM receivables,
are provided during the periods in which the receivables are
purchased.
At December 31, 1998, 1997 and 1996, the allowance for
receivable losses approximated 1.1 percent, 1.3 percent and
1.5 percent, respectively, of the Company's portfolio of
leases, loans, factored IBM receivables and working capital
financing receivables. The decline in this ratio from 1997
to 1998 was due to lower reserve requirements, based upon
the Company's historical experience and its ability to
effectively manage credit risk and contain losses.
INVESTMENTS AND OTHER ASSETS:
The components of investments and other assets at December
31, 1998, and 1997, are as follows:
(Dollars in thousands)
1998 1997
________ ________
Receivables from customers . . . . . . . . . $196,700 $303,077
Investments in partnerships and other . . . . 73,001 170,994
Receivables from affiliates . . . . . . . . . 105,472 79,121
Due and deferred from receivable sales. . . . 29,990 35,928
Remarketing inventory . . . . . . . . . . . . 58,917 58,383
Other assets . . . . . . . . . . . . . . . . 33,510 34,760
________ ________
$497,590 $682,263
======== ========
Due and deferred from receivable sales are net of the
allowance for estimated credit losses on receivables sold
and include subordinated interests in trusts, cash deposits
held by trustee, receivables from investors and interest in
excess servicing cash flows. Due and deferred from
receivable sales are restricted assets subject to limited
recourse provisions. There were no sales in 1998 and 1997
of financing
-32-
<PAGE> 33
INVESTMENTS AND OTHER ASSETS (Continued):
receivables to investors. The Company acts as servicer for
receivables securitized and sold, and is contingently liable
for up to $313.7 million in the event of nonperformance,
default or other loss relating to the outstanding pool
balance at December 31, 1998, of IBM state and local
government installment receivables securitized and sold.
Adequate reserves exist to cover potential losses. Included
in other assets at December 31, 1998, and 1997, are $15.3
million and $14.4 million, respectively, on deposit in
restricted accounts, held as security deposits received from
customers. Also included in other assets at December 31,
1998, and 1997, respectively, are $2.1 million and $4.1
million on deposit in restricted accounts for purposes of
credit enhancement. The Company, as servicer, deposited the
cash in connection with certain tax-exempt grantor trusts
comprising pools of IBM state and local government
installment receivables. The trustee of each grantor trust
is entitled to draw upon the amounts in the restricted
accounts, in the event of nonperformance, default or other
loss relating to such installment receivables.
SHORT-TERM DEBT:
The components of short-term debt at December 31, 1998, and
1997, are as follows:
(Dollars in thousands) 1998 1997
__________ __________
Commercial paper, with rates averaging
5.9% in 1998 and 5.8% in 1997 . . . . . . . . $3,198,864 $3,902,029
Other short-term debt, with rates averaging
5.6% in 1998 and 5.7% in 1997 . . . . . . . . 2,303,756 2,134,245
Current maturities of long-term debt. . . . . . 1,116,075 1,416,394
__________ __________
6,618,695 7,452,668
IBM short-term borrowings . . . . . . . . . . . 158,527 1,139,113
__________ __________
$6,777,222 $8,591,781
========== ==========
The approximate weighted average effective interest rates
above, are before the effects of interest rate swap
agreements and have been calculated on the basis of rates in
effect at December 31, 1998, and 1997. The approximate
weighted average stated rates (after the effects of interest
rate swap agreements) on commercial paper outstanding at
December 31, 1998, and 1997, were 6.1 percent and 6.2
percent, respectively. The approximate weighted average
stated rates (after the effects of interest rate swap
agreements) on other short-term debt outstanding at December
31, 1998, and 1997, were 5.2 percent and 5.7 percent,
respectively. Other short-term debt primarily includes
notes having maturities between nine and twelve months
offered through the Company's medium-term note program.
-33-
<PAGE> 34
LONG-TERM DEBT:
The components of long-term debt at December 31, 1998, and
1997, are as follows:
(Dollars in thousands) 1998 1997
__________ __________
Medium-term notes with original maturities
ranging from 1999 to 2010, with rates
averaging 5.7% in 1998 and 6.0% in 1997. . . $3,015,075 $3,302,600
IBM loans payable, with original maturities
ranging from 2000 to 2003 . . . . . . . . . 2,070,651 589,253
__________ __________
5,085,726 3,891,853
Net unamortized premiums. . . . . . . . . . . 4,188 1,029
__________ __________
5,089,914 3,892,882
Less: Current maturities . . . . . . . . . . 1,116,075 1,416,394
__________ __________
$3,973,839 $2,476,488
========== ==========
The approximate weighted average effective interest rates
above are before the effects of interest rate swap
agreements and have been calculated on the basis of rates in
effect at December 31, 1998, and 1997. The approximate
weighted average stated rates (after the effects of interest
rate swap agreements) on medium-term notes outstanding at
December 31, 1998, and 1997, were 5.3 percent and 6.0
percent, respectively. Discounts and premiums have the
effect of modifying the stated rate of interest on long-term
debt offerings.
Annual maturity of long-term debt at December 31, 1998, is
as follows:
(Dollars in thousands)
1999 . . . . . . . . . . . . . . . . . . . $1,116,075
2000 . . . . . . . . . . . . . . . . . . . 546,000
2001 . . . . . . . . . . . . . . . . . . . 195,000
2002 . . . . . . . . . . . . . . . . . . . -
2003 . . . . . . . . . . . . . . . . . . . 258,000
2004 and thereafter . . . . . . . . . . . 900,000
__________
$3,015,075
==========
RATIO OF EARNINGS TO FIXED CHARGES:
The ratio of earnings to fixed charges calculated in
accordance with applicable Securities and Exchange
Commission requirements was 1.83, 1.83 and 2.02 for the
years ended December 31, 1998, 1997 and 1996, respectively.
-34-
<PAGE> 35 PROVISION FOR INCOME TAXES:
The components of the provision for income taxes are as
follows:
(Dollars in thousands)
1998 1997 1996
_________ _________ _________
Federal:
Current . . . . . . . . . . $ 93,164 $ 32,401 $ 60,741
Deferred. . . . . . . . . . 74,081 100,332 83,637
_________ _________ _________
167,245 132,733 144,378
_________ _________ _________
State and local:
Current . . . . . . . . . . 20,900 8,575 19,216
Deferred. . . . . . . . . . 12,603 21,907 12,528
_________ _________ _________
33,503 30,482 31,744
_________ _________ _________
Total provision . . . . . . $ 200,748 $ 163,215 $ 176,122
========= ========= =========
Changes in the deferred tax assets and liabilities resulting
from temporary differences between financial and tax
reporting are as follows:
(Dollars in thousands) 1998 1997
___________ ___________
Deferred tax assets (liabilities):
Provision for receivable losses. . . . . . $ 87,623 $ 75,477
Lease income and depreciation. . . . . . . (1,017,373) (1,014,615)
Other, net . . . . . . . . . . . . . . . . (43,936) 51,958
___________ ___________
Deferred income taxes . . . . . . . . . . . . $ (973,686) $(887,180)
=========== ===========
-35-
<PAGE> 36
PROVISION FOR INCOME TAXES (Continued):
The provision for income taxes varied from the U.S. federal
statutory income tax rate as follows:
1998 1997 1996
_____ _____ _____
Federal statutory rate. . . . . . . . 35.0% 35.0% 35.0%
State and local taxes, net of
federal tax benefit . . . . . . . . 4.3 4.4 4.4
Adjustments to prior years' tax
liabilities . . . . . . . . . . . . - (2.9) -
Other, net . . . . . . . . . . . . . .1 - -
_____ _____ _____
Effective income tax rate . . . . . . 39.4% 36.5% 39.4%
===== ===== =====
FINANCIAL INSTRUMENTS:
The Company has used derivative instruments as an element of
its risk management strategy for many years. Although
derivatives entail risk of nonperformance by counterparties,
the Company manages this risk by establishing explicit
dollar and term limitations that correspond to the credit
rating of each carefully selected counterparty. The Company
has not sustained a material loss from these instruments nor
does it anticipate any material adverse effect on its
results of operations or financial position in the future.
The majority of the Company's derivative transactions relate
to the matching of liabilities to assets. The Company
issues debt, using the most efficient capital markets and
products, which may result in a currency or interest rate
mismatch with the underlying asset. Interest rate swaps or
currency swaps are then used to match the interest rates and
currencies of its debt to the related asset. Interest and
currency rate differentials accruing under interest rate and
currency swap contracts are recognized over the life of the
contracts in interest expense. When the terms of the
underlying instrument are modified, or if it ceases to
exist, all changes to fair value of the swap contract are
recognized in income each period until it matures.
The tables on page 37 summarize the notional value, maturity
dates, weighted average receive and pay rates and net
unrealized gain (loss) of derivative financial instruments
by category at December 31, 1998, and 1997. The notional
value at December 31 provides an indication of the extent of
the Company's involvement in such instruments at that time,
but does not represent exposure to market risk.
-36-
<PAGE> 37
FINANCIAL INSTRUMENTS (Continued):
(Dollars in thousands)
At December 31, 1998:
Notional Weighted Average Rate
Type Amount Maturities Receive Pay
____________________ __________ __________ _____________________
Swap to Fixed $2,390,000 1999-2002 4.98% 5.91%
Swap to Floating 2,371,450 1999-2008 5.70% 5.14%
Currency Related 339,547 1999 n/a * n/a *
Int. Rate Cap/Floor 200,000 1999 n/a * n/a *
__________
$5,300,997
==========
At December 31, 1998 (Continued):
Notional Unrealized Unrealized Net Unrealized
Type Amount Gross Gain Gross (Loss) Gain (Loss)
____________________ __________ __________ ____________ ______________
Swap to Fixed $2,390,000 $ 917 $(27,490) $(26,573)
Swap to Floating 2,371,450 21,951 (2,181) 19,770
Currency Related 339,547 543 (15,855) (15,312)
Int. Rate Cap/Floor 200,000 - (178) (178)
__________ __________ ____________ ______________
$5,300,997 $23,411 $(45,704) $(22,293)
========== ========== ============ ==============
At December 31, 1997:
Notional Weighted Average Rate
Type Amount Maturities Receive Pay
____________________ __________ __________ _____________________
Swap to Fixed $2,675,750 1998-2002 5.68% 6.22%
Swap to Floating 2,605,800 1999-2007 6.73% 5.70%
Currency Related 435,297 1998-1999 n/a * n/a *
Int. Rate Cap/Floor 615,000 1998-1999 n/a * n/a *
__________
$6,331,847
==========
At December 31, 1997 (Continued):
Notional Unrealized Unrealized Net Unrealized
Type Amount Gross Gain Gross (Loss) Gain (Loss)
____________________ __________ __________ ____________ ______________
Swap to Fixed $2,675,750 $ 1,027 $(16,557) $(15,530)
Swap to Floating 2,605,800 22,500 (483) 22,017
Currency Related 435,297 2,213 (39,024) (36,811)
Int. Rate Cap/Floor 615,000 - - -
__________ __________ ____________ ______________
$6,331,847 $25,740 $(56,064) $(30,324)
========== ========== ============ ==============
* n/a: not applicable
-37-
<PAGE> 38
FINANCIAL INSTRUMENTS (Continued):
At December 31, 1998, approximately 47 percent of the
Company's total debt was hedged through the use of currency
and interest rate related agreements. Before the effects of
such agreements, the Company's debt comprised approximately
46 percent fixed rate debt and 54 percent floating rate
debt. After the effects of such agreements, the Company's
debt consisted of approximately 52 percent fixed rate debt
and 48 percent floating rate debt. At December 31, 1997,
about 57 percent of the Company's total debt was hedged
through the use of currency and interest rate related
agreements. Before the effects of such agreements, the
Company's debt comprised approximately 27 percent fixed rate
debt and 73 percent floating rate debt. After the effects
of such agreements, the Company's debt consisted of
approximately 41 percent fixed rate debt and 59 percent
floating rate debt.
The approximate weighted average effective interest rates
for the commercial paper, other short-term debt, medium-term
notes and other long-term debt, as disclosed in the notes on
pages 33 and 34, Short-Term Debt and Long-Term Debt, include
the effects of interest rate swap agreements.
Fair value is a theoretical measure valid only at a
particular point in time and whose sensitivity is based on
certain assumptions. As such, fair value can represent only
a possible value that may never actually be realized.
The following methods and assumptions were used to estimate
the fair value of each class of financial instrument for
which it is practicable to estimate.
Cash and cash equivalents: The carrying amount approximates
fair value due to the short maturities of these instruments.
Marketable securities: The carrying amount approximates
fair value, which is estimated using quoted market prices.
Loans receivable: The fair value is estimated by
discounting the future cash flows using current rates at
which similar loans would be made to borrowers with similar
credit ratings with the same remaining maturities.
Working capital financing receivables: The carrying amount
approximates fair value due to the short maturities of most
of these instruments.
Due and deferred from receivable sales: The carrying amount
approximates fair value.
Short- and long-term debt and current maturities of
long-term debt: The fair value of these instruments is
estimated by discounting the future cash flows using the
current rates offered to the Company for debt with the same
maturities.
Interest rate related and currency related agreements: The
fair value of these instruments has been estimated as the
amount the Company would receive or pay to terminate the
agreements, taking into consideration current interest and
currency exchange rates.
-38-
<PAGE> 39
FINANCIAL INSTRUMENTS (Continued):
The following table summarizes the carrying amount and the
estimated fair value of all of the Company's financial
instruments:
(Dollars in thousands)
Carrying Estimated
At December 31, 1998: Amount Fair Value
__________ ___________
Cash and cash equivalents $ 822,844 $ 822,844
Marketable securities 68,838 68,838
Loans receivable 3,041,222 3,164,109
Working capital financing receivables 2,789,029 2,789,029
Short-term debt (excluding current
maturities of long-term debt) 5,661,147 5,698,298
Long-term debt and current
maturities of long-term debt 5,089,914 5,160,904
Off-balance-sheet derivatives:
Currency related --
Assets - 581
Liabilities - 16,113
Interest rate related --
Assets - 40,221
Liabilities - 33,794
Carrying Estimated
At December 31, 1997: Amount Fair Value
__________ ___________
Cash $ 792,471 $ 792,471
Marketable securities 127,847 127,847
Loans receivable 2,381,261 2,462,666
Working capital financing receivables 3,249,310 3,249,310
Short-term debt (excluding current
maturities of long-term debt) 7,175,387 7,109,671
Long-term debt and current
maturities of long-term debt 3,892,882 3,962,879
Off-balance-sheet derivatives:
Currency related --
Assets - 2,370
Liabilities - 41,274
Interest rate related --
Assets - 14,385
Liabilities - 22,267
The Company has financial guarantees amounting to $313.7
million and $206.7 million at December 31, 1998, and 1997,
respectively. Additionally, the Company has approved but
unused working capital financing lines of credit available
to customers amounting to $2,877.0 million and $2,069.1
million, at December 31, 1998, and 1997, respectively.
-39-
<PAGE> 40
TRANSACTIONS WITH GENERAL ELECTRIC CAPITAL CORPORATION:
During the second and third quarters of 1997, the Company
entered into agreements to purchase selected assets from the
leasing portfolio of General Electric Capital Technology
Management Services Corporation (GECTMSC), a subsidiary of
General Electric Capital Corporation (GECC). The purchase
price of approximately $353.3 million was primarily financed
by the Company through short-term and long-term borrowings.
The acquired capital and operating lease and loan portfolio
consists of both IBM and non-IBM products.
Additionally, the Company entered into an alliance with
General Electric Capital Information Technology Solutions
Corporation (ITS), a GECC affiliate, wherein the Company
will serve as the preferred financing provider for customers
of ITS's products and services.
SEGMENT REPORTING:
The Company is organized on the basis of its finance
offerings. The Company's reportable segments are strategic
business units that offer different financing solutions
based upon the customer's needs.
The Company's operations are conducted primarily through its
two operating segments: customer financing and commercial
financing. The customer financing segment provides lease
and loan financing of IBM and non-IBM advanced information
processing products and services to end users. The
commercial financing segment provides secured inventory and
accounts receivable financing ("working capital financing")
for dealers and remarketers of information industry
products.
The accounting policies of the segments are the same as
those described in the Summary of Significant Accounting
Policies on page 22. Segment data includes an allocation of
interest expense and all corporate headquarters costs to
each of its operating segments. Interest expense is
allocated primarily on the basis of a planned leverage ratio
using an average interest rate. Corporate headquarters
expenses are allocated on the basis of headcount, an annual
survey of the corporate staff to determine the time spent on
each business segment, and asset utilization depending upon
the type of expense. The Company evaluates the performance
of its segments and allocates resources to them based upon
their earnings before taxes.
The following schedules represent disaggregated income and
expense information for both segments. There are no
intersegment transactions.
-40-
<PAGE> 41
SEGMENT REPORTING (Continued):
For the Years Ending December 31:
Customer Commercial
1998 Financing Financing Total
___________________________ ____________ ______________ ____________
Revenues. . . . . . . . . . $ 1,458,858 $ 239,328 $ 1,698,186
Interest expense. . . . . . $ 466,774 $ 59,718 $ 526,492
Earnings before income
taxes . . . . . . . . . . $ 346,282 $ 130,450 $ 476,732
Assets. . . . . . . . . . . $ 12,164,432 $ 2,859,027 $15,023,459
1997
___________________________
Revenues. . . . . . . . . . $ 1,258,095 $ 260,508 $ 1,518,603
Interest expense. . . . . . $ 406,111 $ 71,265 $ 477,376
Earnings before income
taxes . . . . . . . . . . $ 267,173 $ 132,709 $ 399,882
Assets. . . . . . . . . . . $ 11,144,390 $ 3,402,325 $14,546,715
1996
___________________________
Revenues. . . . . . . . . . $ 1,128,695 $ 268,710 $ 1,397,405
Interest expense. . . . . . $ 304,751 $ 84,997 $ 389,748
Earnings before income
taxes . . . . . . . . . . $ 278,434 $ 120,871 $ 399,305
Assets. . . . . . . . . . . $ 8,846,096 $ 3,012,746 $11,858,842
A reconciliation of total segment revenues, total segment
interest expense, total segment earnings before income taxes
and total segment assets to the Company's consolidated
amounts are as follows:
1998 1997 1996
____________ ____________ ____________
Revenues:
Total revenues for reportable
segments . . . . . . . . . . $ 1,698,186 $ 1,518,603 $ 1,397,405
Other revenues . . . . . . . . 118,312 112,292 100,395
____________ ____________ ____________
Total consolidated revenues. . $ 1,816,498 $ 1,630,895 $ 1,497,800
============ ============ ============
Interest Expense:
Total interest expense for
reportable segments. . . . . $ 526,492 $ 477,376 $ 389,748
Other interest expense . . . . 84,714 61,184 46,361
____________ ____________ ____________
Total consolidated interest
expense . . . . . . . . . . $ 611,206 $ 538,560 $ 436,109
============ ============ ============
-41-
<PAGE> 42
SEGMENT REPORTING (Continued):
Earnings Before Income Taxes:
Total earnings before income
taxes. . . . . . . . . . . . $ 476,732 $ 399,882 $ 399,305
Other earnings before income
taxes. . . . . . . . . . . . 32,781 47,226 47,899
____________ ____________ ____________
Total consolidated earnings
before income taxes . . . . $ 509,513 $ 447,108 $ 447,204
============ ============ ============
Assets:
Total assets for reportable
segments . . . . . . . . . . $ 15,023,459 $ 14,546,715 $ 11,858,842
Other assets . . . . . . . . . 1,373,900 2,025,401 1,087,297
____________ ____________ ____________
Total consolidated assets . . $ 16,397,359 $ 16,572,116 $ 12,946,139
============ ============ ============
For the year ended December 31, 1998, Customer Financing
revenue increased 16 percent to $1,458.9 million from
$1,258.1 million for the year ended December 31, 1997. This
is primarily due to growth in the customer financing lease
and loan portfolio, as well as increased remarketing sales.
Earnings before income taxes for Customer Financing
increased 30 percent to $346.3 million for 1998, as compared
with 1997. This is primarily due to the increase in
revenue, reductions in selling, general and administrative
expenses and provision for doubtful accounts in 1998, as
compared with 1997.
Commercial Financing revenue decreased 8 percent to $239.3
million for the year ended December 31, 1998, as compared
with the prior year. This is due to a decrease in income
from dealer interest due to lower average receivable
balances outstanding during 1998, as compared with 1997.
Earnings before income taxes for Commercial Financing
decreased 2 percent to $130.4 million for 1998, from $132.7
million for 1997. This decrease is primarily attributable
to a decrease in income from dealer interest, offset by the
shift towards higher margin fee income earned from IBM.
For the year ended December 31, 1997, Customer Financing
revenue increased 11 percent to $1,258.1 million from
$1,128.7 million for the year ended December 31, 1996. This
is primarily due to increased originations throughout the
year.
Earnings before income taxes for Customer Financing
decreased 4 percent to $267.2 million for the year ended
December 31, 1997, as compared with the prior year. This is
primarily due to increased competitive pressures in the end
user financing environment and increases in selling, general
and administrative expenses due to growth in the segment's
resources.
Commercial Financing revenue decreased 3 percent to $260.5
million for the year ended December 31, 1997, as compared
with $268.7 million for the year ended December 31, 1996.
This is attributable to a decline in income from dealer
interest due to lower average working capital financing
receivables outstanding during 1997, partially offset by an
increase in fee income earned from IBM for the year.
-42-
<PAGE> 43
SEGMENT REPORTING (Continued):
Earnings before income taxes for Commercial Financing of
$132.7 million increased 10 percent for the year ended
December 31, 1997, as compared with the prior year. This
increase is primarily attributable to a shift in commercial
financing revenue towards higher margin fee income earned
from IBM and a decline in the provision for receivable
losses due to lower reserve requirements.
The Company's business is conducted principally in the
United States; foreign operations are not material.
For the years ended December 31, 1998, 1997 and 1996, one
customer, IBM, accounted for approximately $542.2 million,
$456.6 million and $319.7 million, respectively, of the
Company's consolidated revenues of both the customer
financing and commercial financing segments.
The Company continues to evaluate its organizational
structure which could lead to changes in future reportable
segments.
SUBSEQUENT EVENTS:
On January 29, 1999, the Company's Board of Directors
declared a $75.0 million dividend, payable to IBM on
February 22, 1999.
On February 25, 1999, the Company sold assets of ICIFC
amounting to $274.3 million, less liabilities of $.6
million, for a net amount of $273.7 million to IIHFC. The
net assets were sold at book value, which approximated fair
value, and therefore no gain or loss was recognized on this
transaction.
-43-
<PAGE> 44
SELECTED QUARTERLY FINANCIAL DATA: (Unaudited)
(Dollars in thousands)
Finance Gross Profit
and Other Interest Equipment on Equipment Net
Income Expense Sales Sales Earnings
__________ ________ ________ ____________ ________
1998
____
First Quarter . .$ 432,371 $156,161 $109,829 $ 15,295 $ 75,690
Second Quarter. . 421,117 155,175 95,111 9,789 71,605
Third Quarter . . 432,593 148,420 103,971 10,606 79,949
Fourth Quarter. . 530,417 151,450 201,245 27,751 81,521
__________ ________ ________ __________ ________
$1,816,498 $611,206 $510,156 $ 63,441 $308,765
========== ======== ======== ========== ========
1997
____
First Quarter . .$ 365,891* $112,966 $ 86,655 $ 11,305 $ 79,183
Second Quarter. . 363,110 126,824 85,459 12,566 68,583
Third Quarter . . 421,590 143,749 128,961 18,343 62,439
Fourth Quarter. . 480,304 155,021 141,030 18,360 73,688
___________ ________ _________ _______ ________
$1,630,895 $538,560 $442,105 $60,574 $283,893
=========== ======== ========= ======= ========
1996
____
First Quarter . .$ 374,179* $106,280 $106,488 $18,689 $ 73,928
Second Quarter. . 368,114 106,931 101,432 17,626 74,075
Third Quarter . . 359,648 110,362 76,367 7,670 71,610
Fourth Quarter. . 395,859 112,536 135,005 6,951 51,469
___________ ________ ________ _______ ________
$1,497,800 $436,109 $419,292 $50,936 $271,082
=========== ======== ======== ======= ========
* During the first quarter of 1997 and 1996, the Company recognized a
pretax gain of $10.7 million and $9.3 million, respectively, upon
the sale of certain restricted securities.
-44-
<PAGE> 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE:
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
Omitted pursuant to General Instruction I.
ITEM 11. EXECUTIVE COMPENSATION:
Omitted pursuant to General Instruction I.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT:
Omitted pursuant to General Instruction I.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
Omitted pursuant to General Instruction I.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K:
(a) The following documents are filed as part of this
report:
1. Consolidated Financial Statements
included in Part II of this report:
Report of Independent Accountants (page 17).
Consolidated Statement of Financial Position at
December
31, 1998, and 1997 (page 18).
Consolidated Statement of Earnings and Retained
Earnings
for the year ended December 31, 1998, 1997 and
1996
(page 19).
Consolidated Statement of Cash Flows for the
year ended
December 31, 1998, 1997 and 1996 (pages 20 and
21).
Notes to Consolidated Financial Statements
(pages 22
through 44).
2. Financial statement schedules required to be
filed by
Item 8 of this Form 10-K:
Schedules are omitted because of the absence
of the conditions under which they are required
or
because the information is disclosed in the
financial
statements or in the notes thereto.
-45-
<PAGE> 46
3. Exhibits required to be filed by Item 601 of
Regulation S-K:
Included in this Form 10-K:
Exhibit Number
_______________
I. Trust Agreement dated 03/05/99
relating to the
Company's Euro Medium-Term Note
Programme
II. Statement re computation of ratios
III. Consent of experts and counsel
IV. Financial data schedule
Not included in this Form 10-K:
The Certificate of Incorporation of IBM Credit
Corporation
is filed pursuant to the quarterly report on
Form 10-Q for
the quarterly period ended June 30, 1993, on
August 10,
1993, and is hereby incorporated by reference.
The By-Laws of IBM Credit Corporation are filed
pursuant
to the annual report of Form 10-K for the
fiscal year
ended December 31, 1996, on March 25, 1997, and
are
hereby incorporated by reference.
The Support Agreement dated as of April 15,
1981, between
the Company and IBM is filed with Form SE dated
March 26,
1987, and is hereby incorporated by reference.
Power of Attorney of Jeffrey D. Serkes
(b) Reports on Form 8-K:
A Form 8-K dated October 20, 1998, was filed
with respect
to the Company's financial results for the
period ended
September 30, 1998.
-46-
<PAGE> 47
[SIGNATURE]
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
IBM CREDIT CORPORATION
(Registrant)
By: /s/Joseph C. Lane
________________________
(Joseph C. Lane)
President
Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities on March 26, 1998.
Signature Title
_________ _____
_/s/Joseph C. Lane__
____________________
(Joseph C. Lane) President and Director
_/s/Kimberly A. Kispert____
___________________________
(Kimberly A. Kispert) Vice President, Finance,
and Chief Financial Officer and Director
_/s/John V. Palermo Jr.____
___________________________
(John V. Palermo Jr.) Controller and Treasurer
/s/Kimberly A. Kispert
Jeffrey D. Serkes Director BY: ________________________
(Kimberly A. Kispert)
Attorney-in-fact
-47-
<PAGE> 48
EXHIBIT INDEX
_____________
Reference Number Exhibit Number
per Item 601 of in This
Regulation S-K Description of Exhibits Form 10-K
________________ _________________________________________ ______________
(2) Plan of acquisition, reorganization, Not
liquidation or succession. applicable
(3) Certificate of Incorporation and By-Laws
The Certificate of Incorporation of IBM
Credit Corporation is filed pursuant to
Form 10-Q for the quarterly period ended
June 30, 1993, on August 10, 1993, and is
hereby incorporated by reference.
The By-Laws of IBM Credit Corporation are
filed pursuant to the annual report on
Form 10-K for the fiscal year ended December
31, 1996, on March 25, 1997, and are hereby
incorporated by reference.
(4)(a) Instruments defining the rights of
security holders.
Trust Agreement dated March 5, 1999 related I
to the Company's Euro Medium-Term Note
Programme.
(4)(b) Indenture dated as of January 15, 1989,
filed electronically as Exhibit No. 4 to
Amendment No. 1 to Form S-3 on April 3,
1989, is hereby incorporated by
reference.
(9) Voting trust agreement. Not
applicable
(10) Material contracts.
The Support Agreement dated April 15,
1981, between the Company and IBM is
filed with Form SE dated March 26, 1987,
and is hereby incorporated by reference.
(11) Statement regarding computation of per Not
share earnings. applicable
(12) Statement regarding computation of ratios. II
(16) Letter on change in certifying accountant. Not
applicable
-48-
<PAGE> 49
EXHIBIT INDEX
_____________
(continued)
Reference Number Exhibit Number
per Item 601 of in This
Regulation S-K Description of Exhibits Form 10-K
________________ _________________________________________ ______________
(18) Letter regarding change in accounting Not
principles. Applicable
(21) Subsidiaries of the registrant. Omitted
(22) Published report regarding matters Not
submitted to vote of security holders. Applicable
(23) Consent of experts and counsel. III
(24) Power of Attorney of Jeffrey D. Serkes
(incorporated by reference to Exhibit IV(j)
to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995,
electronically transmitted to the Securities
and Exchange Commission on March 18, 1996).
(27) Financial data schedule. IV
(28) Information from reports furnished to Not
state insurance regulatory authorities. applicable
(99) Additional exhibits. Not
applicable
-49-
<PAGE> 1
EXHIBIT I
_________
THIS FOURTH SUPPLEMENTAL TRUST DEED is made on 5th March, 1999 BETWEEN:
(1) IBM CREDIT CORPORATION, a company incorporated under the laws of the
State of Delaware, United States of America, whose registered and head
office is at North Castle Drive, Armonk, New York 10504 United States of
America ("IBM Credit");
(2) IBM INTERNATIONAL FINANCE N.V., a company incorporated under the
laws
of The Netherlands, whose registered and head office is at Johan
Huizingalaan
765, 1066 VH Amsterdam, The Netherlands ("IBM International
Finance");
(3)INTERNATIONAL BUSINESS MACHINES CORPORATION, a company incorporated
under the laws of the State of New York, United States of America, whose
registered and head office is at New Orchard Road, Armonk, New York
10504
United States of America ("IBM" and, together with IBM Credit and IBM
International Finance, the "Issuers" and each an "Issuer"); and
(4)THE LAW DEBENTURE TRUST CORPORATION p.l.c., a company incorporated
under
the laws of England, whose registered office is at Princes House, 95
Gresham Street, London EC2V 7LY, England (the "Trustee", which
expression
shall, wherever the context so admits, include such company and all
other persons or companies for the time being the trustee or trustees of
these presents) as trustee for the Noteholders and Couponholders.
WHEREAS:
(A)This Fourth Supplemental Trust Deed is supplemental to:
(i)the Trust Deed dated 30th July, 1993 (hereinafter called the
"Principal
Trust Deed") made between IBM International Finance and the Trustee
and relating to the e4,000,000,000 (originally ECU3,000,000,000) Euro
Medium
Term Note Programme established by IBM International Finance (the
"Programme");
(ii) the First Supplemental Trust Deed dated 28th February, 1996 (herein
after called the "First Supplemental Trust Deed") made between the
Issuers
and the Trustee and modifying and restating the provisions of the
Principal Trust Deed;
(iii)the Second Supplemental Trust Deed dated 10th March, 1997
(hereinafter
called the "Second Supplemental Trust Deed") made between the Issuers
and the Trustee and further modifying the provisions of the Principal
Trust Deed (as previously modified and restated); and
(iv)the Third Supplemental Trust Deed dated 6th March, 1998 (together
with
the Principal Trust Deed, the First supplemental Trust Deed and the
Second Supplemental Trust deed, the "Subsisting Trust Deeds") made
between
the Issuers and the Trustee and further modifying the provisions of
the Principal Trust Deed (as previously modified and restated).
(B) On 5th March, 1999 the Issuers published modified Listing
Particulars relating to the Programme (the "Listing Particulars").
<PAGE> 2
(C) By virtue of Clause 18(B) of the Principal Trust Deed the Trustee
may
without the consent of the Noteholders, the Receiptholders or
Couponholders
at any time and from time to time concur with the Issuer (as there
in defined) in making any modification, inter alia, to these presents
(other than as therein provided) which in the opinion of the Trustee it
may
be proper to make PROVIDED THAT the Trustee is of the opinion that such
modification will not be materially prejudicial to the interests of the
Noteholders.
(D) The Issuers have requested the Trustee to concur in making further
modifications to the Trust Deed to reflect the relevant modifications
to the Listing Particulars referred to in Recital (B) above.
(E) The Trustee, being of the opinion that it is proper to make the
further
modifications referred to in Recital (D) above and that they are not
materially prejudicial to the interests of the Noteholders, has concurred
with the Issuers in making such modifications and, as evidenced by its
execution hereof, has agreed that notice of such further modifications
need not be given to the Noteholders.
NOW THIS FOURTH SUPPLEMENTAL TRUST DEED WITNESSES AND IT IS HEREBY
DECLARED as follows:
1. All words and expressions defined in the Subsisting Trust Deeds shall,
unless the context otherwise requires, have the same meaning in this
Fourth Supplemental Trust Deed.
2. Save:
(i) in relation to all Series of Notes issued during the period up to and
including the day last preceding the date of this Fourth Supplemental
Trust Deed and any Notes issued on or after the date of this Fourth
Supplemental
Trust Deed so as to be consolidated and form a single Series with
the Notes of any Series issued during the period up to and including
such last preceding day; and
(ii) for the purpose (where necessary) of construing the provisions o f
this Fourth Supplemental Trust Deed,
with effect on and from the date of this Fourth Supplemental Trust Deed:
(a) the Principal Trust Deed (as previously modified and restated) is
further
modified in such manner as would result in the Principal Trust Deed
being in the form set out in the Schedule hereto;
(b) the provisions of the Subsisting Trust Deeds (insofar as the same
still
have effect) shall cease to have effect and in lieu thereof the pro
visions of the Principal Trust Deed (being in the form set out in the
Schedule hereto) shall have effect.
3. The provisions of the Subsisting Trust Deeds as further modified by
this
Fourth Supplemental Trust Deed shall be valid and binding obligations
of each of IBM Credit, IBM International Finance, IBM and the Trustee.
<PAGE> 3
4. The Subsisting Trust Deeds and this Fourth Supplemental Trust Deed
shall henceforth be read and construed together as one trust deed.
5. A memorandum of this Fourth Supplemental Trust Deed shall be endorsed
by the Trustee on the original of the Principal Trust Deed and by the
Issuers on their respective duplicates of the Principal Trust Deed.
<PAGE> 4
THIS TRUST DEED is made on 30th July, 1993 BETWEEN:
(1) IBM CREDIT CORPORATION, a company incorporated under the laws of the
State of Delaware, United States of America, whose registered and head
office is at North Castle Drive, Armonk, New York 10504, United States
of America ("IBM Credit");
(2) IBM INTERNATIONAL FINANCE N.V., a company incorporated under the
laws
of The Netherlands, whose registered and head office is at Johan
Huizingalaan
765, 1066 VH Amsterdam, The Netherlands ("IBM International
Finance");
(3) INTERNATIONAL BUSINESS MACHINES CORPORATION, a company incorporated
under the laws of the State of New York, United States of America, whose
registered and head office is at New Orchard Road, Armonk, New York
10504,
United States of America ("IBM" and, together with IBM Credit and
IBM International Finance, the "Issuers" and each an "Issuer"); and
(4) THE LAW DEBENTURE TRUST CORPORATION p.l.c., a company incorporated
under
the laws of England, whose registered office is at Princes House, 95
Gresham Street, London EC2V 7LY, England (the "Trustee", which expression
shall, wherever the context so admits, include such company and all
other
persons or companies for the time being the trustee or trustees of
these presents) as trustee for the Holders and Couponholders (each as
defined below).
WHEREAS:
(1) By resolutions of the Board of Directors of IBM Credit passed on
13th
December, 1995, 1st November, 1997, 1st January, 1998, 11th February,
1998 and 12th February, 1999, by resolutions of the Board of Directors
of
IBM International Finance passed on 23rd June, 1993, 16th February, 1996,
27th February, 1997, 23rd February, 1998 and 19th February, 1999 and
by resolutions of the Board of Directors of IBM passed on 28th November,
1995 and 27th January, 1998 the Issuers have resolved to establish a
Euro Medium Term Note Programme pursuant to which the Issuers may issue
from time to time Notes as set out herein. Up to a maximum nominal
amount
from time to time outstanding of e4,000,000,000 (subject to increase as
provided in the Programme Agreement (as defined below)) (the "Programme
Limit") may be issued pursuant to the said Programme.
(2) The Trustee has agreed to act as trustee of these presents for the
benefit of the Noteholders and Couponholders upon and subject to the
terms and conditions of these presents.
NOW THIS TRUST DEED WITNESSES AND IT IS AGREED AND DECLARED as follows:
1. DEFINITIONS
(A) IN these presents unless there is anything in the subject or context
inconsistent therewith the following expressions shall have the
following
meanings:
<PAGE> 5
"Agency Agreement" means the Agency Agreement dated 30th July, 1993 as
amended
and restated on 5th March, 1999, pursuant to which the Issuers
appointed
The Chase Manhattan Bank, London office, as the Agent, Chase Manhattan
Bank Luxembourg S.A. and Kas-Associatie N.V. as the Paying Agents
and The Chase Manhattan Bank, New York office, as the Registrar in
relation
to all or any Series of the Notes and any other agreement for the time
being in force appointing further or other Agents or Paying Agents or
another Registrar in relation to all or any Series of the Notes, or in
connection with their duties, the terms of which have been approved in
writing by the Trustee, together with any agreement for the time being
in
force amending or modifying with the prior written approval of the
Trustee
any of the aforesaid agreements;
"Agent" means, in relation to all or any Series of the Notes, The Chase
Manhattan Bank at its office at Trinity Tower, 9 Thomas More Street,
London
E1 9YT, England or any successor agent in relation thereto which shall
become such pursuant to the provisions of the Agency Agreement or such
other agent in relation thereto as may (with the prior written approval
of, and on terms previously approved in writing by, the Trustee) from
time to time be appointed as such by the Issuers and (except in the case
of the initial Agent) notice of whose appointment has been given to the
Noteholders pursuant to Clause13(xiii) in accordance with Condition16;
"Agreement Date" has the meaning ascribed thereto in the Programme
Agreement;
"Appointee" means any attorney, manager, agent, delegate or other person
appointed by the Trustee under these presents;
"Attributable Debt" has the meaning ascribed thereto in Condition 3;
"Auditors" means the auditors for the time being of the relevant Issuer
or, in the event of their being unable or unwilling promptly to carry
out
any action requested of them pursuant to the provisions of these
presents,
such other firm of accountants as may be nominated or approved by the
Trustee;
"Bearer Notes" means those of the Notes which are for the time being in
bearer form;
"Cedelbank" means Cedelbank, a limited liability company (societe
anonyme) organised under Luxembourg law;
"Conditions" means, in relation to the Notes of any Series, the terms
and
conditions attached to, or endorsed on, or incorporated by reference in,
the Notes constituting such Series, such terms and conditions being in
the form or substantially in the form set out in Schedule 1 or in such
other form, having regard to the terms of issue of the Notes of the
relevant
Series, as may be agreed between the relevant Issuer, the Agent, the
Trustee and the relevant Purchaser(s) as modified and supplemented by
the Pricing Supplement applicable to the Notes of the relevant Series,
in each case as from time to time modified in accordance with the
provisions of these presents;
<PAGE> 6
"Consolidated Net Tangible Assets" has the meaning ascribed thereto in
Condition 3;
"Coupon" means an interest coupon appertaining to a Definitive Bearer
Note
(other than a Zero Coupon Note), such coupon being:
(i) if appertaining to a Fixed Rate Note, in the form or substantially
in
the form set out in Part V A of Schedule 2 or in such other form, having
regard to the terms of issue of the Notes of the relevant Series, as
may be agreed between the relevant Issuer, the Agent, the Trustee and
the relevant Purchaser(s); or
(ii) if appertaining to a Floating Rate Note or an Index Linked Interest
Note, in the form or substantially in the form set out in Part V B of
Schedule 2 or in such other form, having regard to the terms of issue of
the Notes of the relevant Series, as may be agreed between the relevant
Issuer, the Agent, the Trustee and the relevant Purchaser(s); or
(iii) if appertaining to a Definitive Bearer Note which is neither a
Fixed
Rate Note nor a Floating Rate Note nor an Index Linked Interest Note,
in such form as may be agreed between the relevant Issuer, the Agent,
the Trustee and the relevant Purchaser(s),
and includes, where applicable, the Talon(s) appertaining thereto and
any replacements for Coupons and Talons issued pursuant to Condition 14;
"Couponholders" means the several persons who are for the time being
holders of the Coupons and includes, where applicable, the Talonholders;
"Dealer Accession Letter" has the meaning ascribed thereto in the
Programme Agreement;
"Dealers" means Credit Suisse First Boston (Europe) Limited, Deutsche
Bank
AG London, Goldman Sachs International, Lehman Brothers International
(Europe), Merrill Lynch International, J.P. Morgan Securities Ltd.,
Morgan
Stanley & Co. International Limited, Paribas and UBS AG, acting through
its division Warburg Dillon Read and any other entity which the relevant
Issuer may appoint as a Dealer pursuant to a Dealer Accession Letter
or a Subscription Agreement and notice of whose appointment has been
given
to the Agent and the Trustee by the relevant Issuer in accordance with
the provisions of the Programme Agreement but excluding any entity whose
appointment has been terminated in accordance with the terms of the
Programme Agreement and notice of whose termination has been given to
the Agent and the Trustee by the relevant Issuer in accordance with the
provisions
of the Programme Agreement and references to "a relevant Dealer"
or "relevant Dealers" mean, in relation to any Series of Notes, the
Dealer
or Dealers with whom the relevant Issuer has agreed the issue of the
Notes of such Series and "Dealer" means any one of them;
<PAGE> 7
"Debt" has the meaning ascribed thereto in Condition 3;
"Definitive Bearer Notes" means Bearer Notes in definitive form issued
or,
as the case may require, to be issued by the relevant Issuer in
accordance
with the provisions of the Programme Agreement or any other agreement
between the relevant Issuer and the relevant Dealer(s) in exchange for
a Temporary Global Note or part thereof or a Permanent Global Note (as
indicated in the applicable Pricing Supplement), such Bearer Notes in
definitive form being in the form or substantially in the form set out
in
Part III A of Schedule 2 with such modifications (if any) as may be
agreed
between the relevant Issuer, the Agent, the Trustee and the relevant
Purchaser(s) and having the Conditions either attached thereto or
endorsed
hereon or, if permitted by the Stock Exchange and agreed by the relevant
Issuer and the relevant Purchaser(s), incorporating the Conditions
by reference (where applicable to these presents) as indicated in the
applicable Pricing Supplement and having the applicable Pricing
Supplement
either endorsed thereon or attached thereto and (except in the case of
a Zero Coupon Note) having Coupons and, where appropriate, Receipts and/
or Talons attached thereto on issue;
"Definitive Notes" means Definitive Bearer Notes and/or, as the context
may require, Definitive Registered Notes;
"Definitive Registered Notes" means Registered Notes in definitive form
issued or, as the case may require, to be issued by IBM International
Finance
in accordance with the provisions of the Programme Agreement or any
other agreement between IBM International Finance and the relevant
Purchaser(s)
either on issue or in exchange for a Temporary Global Note or
part thereof (all as indicated in the applicable Pricing Supplement),
such
Registered Notes in definitive form being in the form or substantially
in the form set out in Part III B of Schedule 2 with such modifications
(if any) as may be agreed between IBM International Finance, the Agent,
the Trustee and the relevant Purchaser(s) and having the Conditions
either
attached thereto or endorsed thereon or, if permitted by the Stock
Exchange and agreed by the relevant Issuer and the relevant Purchaser(s),
incorporating the Conditions by reference (where applicable to these
present(s)
as indicated in the applicable Pricing Supplement and having the
applicable Pricing Supplement either endorsed thereon or attached
thereto
and having a Form of Transfer endorsed thereon;
"Dual Currency Note" means a Note in respect of which payments of
principal
and/or interest are made or to be made in such different currencies,
and at rates of exchange calculated upon such basis or bases, as the
relevant
Issuer and the relevant Purchaser(s) may agree (as indicated in the
applicable Pricing Supplement);
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System;
"Event of Default" means any of the conditions, events or acts provided
in Condition 10 to be events upon the happening of which the Notes of any
Series would, subject only to notice by the Trustee as therein provided,
become immediately due and repayable;
<PAGE> 8
"Exchange Rate" has the meaning ascribed thereto in the Programme
Agreement;
"Extraordinary Resolution" has the meaning set out in paragraph 20 of
Schedule 4;
"Fixed Rate Note" means a Note on which interest is calculated at a
fixed
rate, payable on a fixed date or dates, as may be agreed between the
relevant Issuer and the relevant Purchaser(s) and on redemption and as
indicated in the applicable Pricing Supplement;
"Floating Rate Note" means a Note on which interest is calculated at a
floating rate, payable on an Interest Payment Date or Interest Payment
Dates,
as may be agreed between the relevant Issuer and the relevant
Purchaser(s)
and on redemption and as indicated in the applicable Pricing Supplement;
"Form of Transfer" means the form of transfer endorsed on a Definitive
Registered Note in the form or substantially in the form set out in
Part III B of Schedule 2;
"Funded Debt" has the meaning ascribed thereto in Condition 3;
"Global Note" means a Temporary Global Note and/or a Permanent Global
Note, as the context may require;
"Index Linked Interest Note" means a Note in respect of which the amount
payable in respect of interest is calculated by reference to an index
and/or
a formula as the relevant Issuer and the relevant Dealer(s) may agree
(as indicated in the applicable Pricing Supplement);
"Index Linked Note" means an Index Linked Interest Note and/or an Index
Linked Redemption Note, as applicable;
"Index Linked Redemption Note" means a Note in respect of which the
amount
payable in respect of principal is calculated by reference to an index
and/or a formula as the relevant Issuer and the relevant Dealer(s) may
agree (as indicated in the applicable Pricing Supplement);
"Interest Commencement Date" means, in the case of interest-bearing
Notes,
the date specified in the applicable Pricing Supplement from which such
Notes bear interest, which may or may not be the Issue Date;
"Interest Payment Date" means, in relation to any Floating Rate Note or
Index Linked Interest Note either:
(i) the date which falls the number of months or other period specified
as the "Interest Period" in the applicable Pricing Supplement after the
preceding Interest Payment Date or the Interest Commencement Date (in
the case of the first Interest Period); or
(ii) such date or dates as are indicated in the applicable Pricing
Supplement;
<PAGE> 9
"Issue Date" means, in respect of any Note, the date of the issue and
purchase
of such Note pursuant to Clause2 of the Programme Agreement or any
other agreement between the relevant Issuer and the relevant
Purchaser(s)
being, in the case of any Permanent Global Note or Definitive Note the
same date as the date of issue of the Temporary Global Note which
initially represented such Note;
"Issue Price" means the price, generally expressed as a percentage of
the nominal amount of the Notes, at which the Notes will be issued;
"Liability" means any loss, damage, cost, charge, claim, demand,
expense,
judgment, action, proceeding or other liability whatsoever (including,
without limitation, in respect of taxes, duties, levies, imposts and
other
charges) and including any value added tax or similar tax charged or
chargeable in respect thereof and legal fees and expenses on a full
indemnity basis;
"Lien" has the meaning ascribed thereto in Condition 3;
"Liquidity Agreements" means the Liquidity Agreement dated 1st July,
1991
between IBM Credit and IBM International Finance (the "1991 Liquidity
Agreement"), the Back-Up Agreement on Liquidity dated 28th June, 1991
between
IBM and IBM Credit, the Liquidity Agreement dated 6th May, 1993 between
IBM World Trade Corporation and IBM International Finance (the "1993
Liquidity Agreement") and the Back-Up Liquidity Agreement dated 6th
May, 1993 between IBM World Trade Corporation and IBM;
"Maturity Date" means the date on which a Note expressed to be
redeemable;
"month" means calendar month;
"Note" means a note (whether a Bearer Note or a Registered Note)
denominated
in such currency as may be agreed between the relevant Issuer, the
relevant Purchaser(s) and the Agent which:
(i) has a Tenor of at least one month but not more than 30 years or, in
any
case, such other minimum or maximum maturity as may be allowed or
required
from time to time by the relevant central bank (or equivalent body
(however called)) or any laws or regulations applicable to the relevant
currency); and
(ii) if a Bearer Note with a maturity of 183 days or less, has a minimum
denomination of U.S.$500,000 (or its approximate equivalent in any
other
Specified Currency determined by reference to the spot rate as at the
Issue date) or if a Registered Note issued by IBM International Finance
and sold by means of a private placement in the United States, has a
denomination
of U.S.$150,000 (or integral multiples of U.S.$50,000 in excess
thereof) (or its approximate equivalent in any other Specified Currency
determined by reference to the spot rate as at the Issue Date) or, in
any case, such other minimum denomination as may be allowed or required
from time to time by the relevant central bank (or equivalent body
(however
called)) or any laws or regulations applicable to the relevant
currency,
<PAGE> 10
issued or to be issued by the relevant Issuer pursuant to the Programme
Agreement or pursuant to any other agreement between the relevant Issuer
and the relevant Purchaser(s) and which shall (unless the applicable
Pricing
Supplement otherwise provides in the case of Registered Notes) initially
be represented by, and comprised in, a Temporary Global Note which
may (in accordance with the terms of such Temporary Global Note) be
exchanged
for Definitive Bearer Notes, Definitive Registered Notes (where
the Issuer is IBM International Finance) or a Permanent Global Note which
Permanent Global Note may (in accordance with the terms of such
Permanent
Global Note) in turn be exchanged in whole but not in part for
Definitive
Bearer Notes (all as indicated in the applicable Pricing Supplement)
and includes any replacements for a Note (whether a Bearer Note or a
Registered Note, as the case may be) issued pursuant to Condition 14 and,
where applicable, the Receipts relating thereto and any Global Note;
"Noteholders" means the several persons who are for the time being
holders
of outstanding Notes (being, in the case of Bearer Notes, the bearers
thereof and, in the case of Registered Notes, the several persons whose
names are entered in the register of holders of the Registered Notes as
the holders thereof) save that, in respect of the Notes of any Series,
for so long as such Notes or any part thereof are represented by a
Global
Note, each person who is for the time being shown in the records of
Euroclear
or Cedelbank (other than Cedelbank, if Cedelbank shall be an account
holder of Euroclear and Euroclear, if Euroclear shall be an account
holder of Cedelbank) as the holder of a particular nominal amount of the
Notes of such Series shall be deemed to be the holder of such nominal
amount of such Notes (and the holder of the relevant Global Note shall
not be deemed to be the holder) for all purposes of this Trust Deed other
than with respect to the payment of principal or interest on such Notes,
the right to which shall be vested, as against the relevant Issuer and
the Trustee, solely in the bearer of such Global Note and for which
purpose
the bearer of such Global Note shall be deemed to be the holder of
such nominal amount of such Notes in accordance with and subject to its
terms and the provisions of this Trust Deed and the expressions
"Noteholder",
"holder of Notes" and related expressions shall be construed
accordingly;
"outstanding" means, when used with respect to the Notes of all or any
Series, all the Notes issued other than:
(a) those Notes which have been redeemed pursuant to these presents;
(b) those Notes in respect of which the date for redemption in
accordance
with the Conditions has occurred and the redemption moneys (and all interest
payable thereon) have been duly paid to the Trustee or to the
Agent
in the manner provided in the Agency Agreement (and where appropriate
notice to that effect has been given to the relative Noteholders in
accordance
with Condition 16) and remain available for payment against presentation
of the relevant Notes and/or Receipts and/or Coupons;
(c) those Notes which have been purchased and cancelled in accordance
with Conditions 6(h) and 6(i);
<PAGE> 11
(d) those Notes in respect of which claims have become prescribed under
Condition 15;
(e) those mutilated or defaced Notes which have been surrendered and
cancelled
and in respect of which replacements have been issued pursuant to
Condition 14;
(f) (for the purpose only of ascertaining the principal amount of the Notes
outstanding and without prejudice to the status for any other
purpose
of the relevant Notes) those Notes which are alleged to have been lost,
stolen or destroyed and in respect of which replacements have been issued
pursuant to Condition 14;
(g) any Temporary Global Note to the extent that it shall have been
exchanged
for Definitive Bearer Notes, Definitive Registered Notes or a Permanent
Global Note and any Permanent Global Note to the extent that it shall
have been exchanged for Definitive Bearer Notes in each case pursuant
to its provisions; and
(h) those Bearer Notes which have been exchanged for Registered Notes
and
which have been cancelled or, if permitted by the Conditions, are for
the time being retained by or on behalf of IBM International Finance, in
each case pursuant to the provisions of these presents;
PROVIDED THAT for each of the following purposes, namely:
(i) the right to attend and vote at any meeting of the Noteholders of
any Series;
(ii) the determination of how many and which Notes of any Series are for
the time being outstanding for the purposes of Clause 8(A),
Conditions 10,
11 and 13 and paragraphs 2, 5, 6 and 9 of Schedule 4;
(iii) any discretion, power or authority (whether contained in these
present
or vested by operation of law) which the Trustee is required, expressly
or impliedly, to exercise in or by reference to the interests of the
holders of the Notes of any Series; and
(iv) the determination by the Trustee whether any event, circumstance,
matter
or thing is, in its opinion, materially prejudicial to the interests
of the Noteholders of any Series,
those Notes of the relevant Series (if any) which are for the time being
held by, for the benefit of, or on behalf of, any of the Issuers, any
holding company of any of the Issuers or any other Subsidiary of any such
holding company shall (unless and until ceasing to be so held) be deemed
not to remain outstanding;
"Partly Paid Notes" means Notes issued on a partly paid basis;
<PAGE> 12
"Paying Agents" means, in relation to the Notes of all or any Series,
the
several institutions (including, where the context permits, the Agent)
at their respective specified offices initially appointed as paying
agents
in relation to such Notes by the Issuers pursuant to the Agency
Agreement
or such other or further paying agents at their respective specified
offices for all or any Series of the Notes as may from time to time be
appointed in respect thereof with the prior written approval of, and on
terms previously approved in writing by, the Trustee and notice of
whose
appointment is given to the Noteholders pursuant to Clause 13(xiii) in
accordance with Condition 16;
"Permanent Global Note" means a permanent global bearer note in the form
or substantially in the form set out in Part II of Schedule 2 together
with the copy of the applicable Pricing Supplement annexed thereto with
such modifications (if any) as may be agreed between the relevant Issuer,
the Agent, the Trustee and the relevant Purchaser(s), comprising some
or all of the Notes of the same Series, issued by the relevant Issuer
pursuant
to the Programme Agreement or any other agreement between the relevant
Issuer and the relevant Purchaser(s) and these presents in exchange
for the whole or part of the Temporary Global Note issued in respect
of such Notes;
"Potential Event of Default" means any condition, event or act which,
with
the lapse of time and/or the issue, making or giving of any notice,
certification, declaration, demand, determination and/or request and/or
the taking of any similar action and/or the fulfilment of any similar
condition, would constitute an Event of Default;
"Pricing Supplement" has the meaning ascribed thereto in the Programme
Agreement;
"Principal Property" has the meaning ascribed thereto in Condition 3;
"Programme" means the Euro Medium Term Note Programme established by, or
otherwise contemplated in, the Programme Agreement;
"Programme Agreement" means the agreement of even date herewith between
the Issuers and the Dealers named therein as amended and restated on 5th
March, 1999 concerning the purchase of Notes to be issued pursuant to
the Programme;
"Purchaser" means any Dealer or Third Party who agrees to purchase Notes
as contemplated by Clause 2 of the Programme Agreement or any other
agreement
between the relevant Issuer, the Agent and the relevant Purchaser(s)
and references to "a relevant Purchaser" or "relevant Purchasers" means,
in relation to any Note, the Purchaser or Purchasers with whom the
relevant Issuer has agreed the issue of such Note;
"Receipt" means a receipt attached on issue to a Definitive Bearer Note
redeemable in instalments for the payment of an instalment of principal,
such receipt being in the form or substantially in the form set out in
Part IV of Schedule 2 or in such other form as may be agreed between the
relevant Issuer, the Agent, the Trustee and the relevant Purchaser(s)
and includes any replacements for Receipts issued pursuant to
Condition14;
"Receiptholders" means the several persons who are for the time being
holders of the Receipts;
<PAGE> 13
"Registered Notes" means those of the Notes which are for the time being
in registered form;
"Registrar" means, in relation to the Notes of all or any Series which
are
issued by IBM International Finance and which are, or are exchangeable
for, Registered Notes, The Chase Manhattan Bank at its office at 15th
Floor, 450 West 33rd Street, New York NY 10001, United States of America
or any successor registrar in relation thereto which shall become such
pursuant to the provisions of the Agency Agreement or such other
registrar
in relation thereto as may (with the prior written approval of, and on
terms previously approved in writing by, the Trustee) from time to time
be appointed as such by IBM International Finance and (except in the
case of the initial Registrar) notice of whose appointment has been given
to the Noteholders pursuant to Clause 13(xiii) in accordance with
Condition 16;
"Relevant Date" has the meaning set out in Condition9;
"repay", "redeem" and "pay" shall each include both the others and
cognate expressions shall be construed accordingly;
"Restricted Subsidiary" has the meaning ascribed thereto in Condition3;
"Sale and Leaseback Transaction" has the meaning ascribed thereto in
Condition 3;
"Secured Indebtedness" has the meaning ascribed thereto in Condition 3;
"Series" means all Notes which are denominated in the same currency and
which have the same Maturity Date and Interest/Payment Basis and
Interest
Payment Dates (if any) (all as indicated in the applicable Pricing
Supplement)
and the terms of which (save for the Issue Date (or Interest
Commencement
Date, as the case may be) and/or the Issue Price (all as indicated
as aforesaid)) are otherwise identical (including whether or not the
Notes are listed) and the expressions "Notes of the relevant Series"
and "holders of Notes of the relevant Series" and related expressions
shall be construed accordingly;
"specified office" means, in relation to any Paying Agent or the
Registrar,
either the office identified with its name at the end of the Conditions
or any other office approved by the Trustee and notified to the
Noteholders
pursuant to Clause 13(xiii) in accordance with Condition 16;
"Subscription Agreement" has the meaning ascribed thereto in the Agency
Agreement;
"Subsidiary", in relation to IBM, has the meaning ascribed thereto in
Condition
3(a), in relation to IBM Credit, has the meaning ascribed thereto
in Condition 3(b) and in any other case means a company or other body
corporate which is for the time being a subsidiary or a subsidiary
undertaking
(within the meaning of Sections 736 and 258 respectively of the
Companies Act 1985 of Great Britain);
<PAGE> 14
"Support Agreements" means the Support Agreement dated 29th April, 1988
between
IBM World Trade Corporation and IBM International Finance as supplemented
by the Letter Agreement dated 29th April, 1993 between the same
parties (together, the "IBM International Finance Support Agreement"),
the Support Agreement dated 15th August, 1991 between IBM and IBM World
Trade Corporation as supplemented by the Letter Agreement dated 29th
April,
1993 between the same parties (together, the "IBM Support Agreement"
) and the Support Agreement dated 15th April, 1981 between IBM and IBM
Credit and executed on 21st May, 1981 as supplemented by the Letter
Agreement dated 4th June, 1981 between the same parties;
"Talonholders" means the several persons who are for the time being
holders of the Talons;
"Talons" means the talons (if any) appertaining to, and exchangeable in
accordance with the provisions therein contained for further Coupons
appertaining
to, the Definitive Bearer Notes (other than the Zero Coupon Notes),
such talons being in the form or substantially in the form set out
in Part VI of Schedule 2 or in such other form as may be agreed between
the relevant Issuer, the Agent, the Trustee and the relevant
Purchaser(s)
and includes any replacements for Talons issued pursuant to Condition
14;
"Temporary Global Note" means a temporary global bearer note in the form
or substantially in the form set out in PartI of Schedule2 together
with
the copy of the applicable Pricing Supplement annexed thereto with such
modifications (if any) as may be agreed between the relevant Issuer, the
Agent, the Trustee and the relevant Purchaser(s), comprising some or
all of the Notes of the same Series, issued by the relevant Issuer
pursuant
to the Programme Agreement or any other agreement between the relevant
Issuer and the relevant Purchaser(s) and these presents;
"Tenor" means, in respect of any Note, the period from, and including,
its Issue Date to, but excluding its Maturity Date;
"the Stock Exchange" means the London Stock Exchange Limited or any
other
or further stock exchange(s) on which any Notes may from time to time
be quoted or listed;
"these presents" means this Trust Deed and the Schedules and any Trust
Deed
supplemental hereto and the Schedules (if any) thereto and the Notes,
the Receipts, the Coupons, the Talons and the Conditions, all as from
time to time modified in accordance with the provisions herein or therein
contained;
"Third Party" means any person (other than a Dealer) who agrees
to purchase Notes;
"Tranche" means all Notes of the same Series with the same Issue Date,
Interest Commencement Date and Issue Price;
"Trust Corporation" means a corporation entitled by rules made under the
Public Trustee Act 1906 of Great Britain or entitled pursuant to any
other
comparable legislation applicable to a trustee in any other jurisdiction
to carry out the functions of a custodian trustee;
"Zero Coupon Note" means a Note on which no interest is payable;
<PAGE> 15
words denoting the singular shall include the plural and vice versa;
words denoting one gender only shall include the other gender; and
words denoting persons only shall include firms and corporations and
vice versa.
(B) (i) Words and expressions defined or given a particular meaning in
the
Conditions shall bear the same meanings in these presents save where
such meanings would render the same inconsistent with the meanings
contained in this Clause.
(ii) Any reference in these presents to principal and/or principal amount
and/or interest in respect of the Notes shall, unless the context
otherwise
requires, be construed in accordance with Condition6(d).
(iii) Any reference in these presents to costs, charges or expenses
shall,
unless otherwise provided or the context otherwise requires, include
any value added tax or similar tax charged or chargeable in respect
thereof.
(iv) All references in these presents to any statute or any provision of
any statute shall be deemed also to refer to any statutory modification
or re-enactment thereof or any statutory instrument, order or regulation
made thereunder or under any such modification or re-enactment.
(v) All references in these presents to guarantees or to an obligation
being guaranteed shall be deemed to include respectively references to
indemnities or to an indemnity being given in respect thereof.
(vi) All references in these presents to any action, remedy or method of
proceeding for the enforcement of the rights of creditors shall be
deemed
to include, in respect of any jurisdiction other than England, references
to such action, remedy or method of proceeding for the enforcement
of the rights of creditors available or appropriate in such jurisdiction
as shall most nearly approximate to such action, remedy or method of
proceeding described or referred to in these presents.
(vii) All references in these presents to taking proceedings against any
of the Issuers shall be deemed to include references to proving in the
winding up of the relevant Issuer.
(viii) Unless the context otherwise requires words or expressions used
in
these presents shall bear the same meanings as in the Companies Act1985
of Great Britain.
(ix) In this Trust Deed references to Schedules, Clauses, sub-clauses,
paragraphs
and sub-paragraphs shall be construed as references to the Schedules
to this Trust Deed and to the Clauses, sub-clauses, paragraphs and
sub-paragraphs of this Trust Deed respectively.
<PAGE> 16
(x) In these presents tables of contents and Clause headings are
included
for ease of reference and shall not affect the construction of these
presents.
(xi) All references in these presents to Euroclear and/or Cedelbank
shall,
whenever the context so permits, be deemed to include references to any
additional or alternative clearing system approved by the relevant
Issuer, the Agent and the Trustee.
(xii) All references in these presents to the "relevant currency" shall
be construed as references to the currency in which payments in respect
of the Notes and/or Receipts and/or Coupons of the relevant Series are
to be made as indicated in the applicable Pricing Supplement.
(xiii) All references in these presents to "listing" and "listed" shall
include references to "quotation" and "quoted" respectively.
(xiv) Words and expressions defined in these presents or the Agency
Agreement
or used in the applicable Pricing Supplement shall have the same
meanings
where used herein unless the context otherwise requires or unless
otherwise stated and provided that, in the event of inconsistency
between
the Agency Agreement and these presents, these presents shall prevail
and, in the event of inconsistency between the Agency Agreement or these
presents and the applicable Pricing Supplement, the applicable Pricing
Supplement shall prevail.
2. AMOUNT AND ISSUE OF THE NOTES
(A) Amount of the Notes, Pricing Supplement and Legal Opinions:
THE Notes will be issued in Series in an aggregate nominal amount from
time
to time outstanding not exceeding the Programme Limit from time to
time and for the purpose of determining such aggregate nominal amount
Clause3(B)(iii) of the Programme Agreement shall apply.
By not later than 3.00 p.m. (London time) on the second business day in
London (which for this purpose shall be a day on which commercial banks
are open for business in London) preceding each proposed Issue Date, the
relevant Issuer shall deliver or cause to be delivered to the Trustee a
copy of the applicable Pricing Supplement and shall notify the Trustee
in writing without delay of the relevant Issue Date and the nominal
amount
of the Notes to be issued. Upon the issue of the relevant Notes, such
Notes shall become constituted by these presents without further
formality.
<PAGE> 17
Before the first issue of Notes occurring after each annual update of
the
Listing Particulars relating to the Programme and on such other
occasions
as the Trustee so requests (on the basis that the Trustee reasonably
considers it necessary in view of a change (or proposed change) in
applicable
law affecting the relevant Issuer, the Notes, these presents, the
Programme Agreement, the Agency Agreement, any of the Liquidity
Agreements,
any of the Support Agreements or any of the parties to any of the
Liquidity
Agreements or any of the Support Agreements in relation to any
of such Agreements or the Trustee has other reasonable grounds), the
relevant
Issuer will procure that (a)further legal opinion(s) (relating, if
applicable, to any such change or proposed change) in such form and with
such content as the Trustee may reasonably require from the legal
advisers
specified in the Programme Agreement or such other legal advisers as
the Trustee may reasonably require are delivered to the Trustee. When
ever such a request is made with respect to any Notes to be issued, the
receipt of such opinion in a form satisfactory to the Trustee shall be a
further condition precedent to the issue of those Notes.
(B) Covenant to repay principal and to pay interest:
The relevant Issuer covenants with the Trustee that it will, as and when
the Notes of any Series or any of them or any instalment of principal
in
respect thereof becomes due to be redeemed in accordance with the
Conditions,
unconditionally pay or procure to be paid to or to the order of
the Trustee in the relevant currency in immediately available funds the
principal amount in respect of the Notes of such Series or the amount of
such instalment becoming due for redemption on that date and (except in
the case of Zero Coupon Notes) shall (subject to the provisions of the
Conditions) in the meantime and until redemption in full of the Notes of
such Series (both before and after any judgment or other order of a
court
of competent jurisdiction) unconditionally pay or procure to be paid
to or to the order of the Trustee as aforesaid interest (which shall
accrue
from day to day) on the nominal amount of the Notes outstanding of
such Series at rates and/or in amounts calculated from time to time in
accordance
with or specified in, and on the dates provided for in, the
Conditions (subject to Clause2(D)) PROVIDED THAT:
(i) every payment of principal or interest or other sum due in respect
of
the Notes made to or to the order of the Agent in the manner provided
in the Agency Agreement shall operate in satisfaction pro tanto of the
relative covenant by the relevant Issuer in this Clause contained in
relation
to the Notes of such Series except to the extent that there is a default
in the subsequent payment thereof in accordance with the Conditions
to the relevant Noteholders, Receiptholders or Couponholders (as the
case may be);
<PAGE> 18
(ii) in the case of any payment of principal made to the Trustee or the
Agent after the due date or on or after accelerated maturity following
an
Event of Default, interest shall continue to accrue on the nominal
amount
of the relevant Notes (except in the case of Zero Coupon Notes, to which
he provisions of Condition 5(j) shall apply) (both before and after
any judgment or other order of a court of competent jurisdiction) at the
rates and/or in the amounts aforesaid (or, if higher, the rate of
interest
on judgment debts for the time being provided by English law) up to
and including the date (being not later than 30 days after the day on
which the whole of such principal amount, together with an amount equal
to the interest which has accrued and is to accrue pursuant to this
proviso
up to and including that date, has been received by the Trustee or the
Agent) which the Trustee determines to be the date on and after which
payment is to be made in respect thereof as stated in a notice given to
the holders of such Notes in accordance with Condition 16; and
(iii) in any case where payment of the whole or any part of the
principal
amount of any Note is improperly withheld or refused upon due
presentation
thereof (other than in circumstances contemplated by (ii) above) interest
shall accrue on the nominal amount of such Note (except in the case
of Zero Coupon Notes, to which the provisions of Condition 5(j) shall
apply) payment of which has been so withheld or refused (both before and
after any judgment or other order of a court of competent jurisdiction)
at the rates and/or in the amounts aforesaid (or, if higher, the rate
of interest on judgment debts for the time being provided by English law)
from the date of such withholding or refusal until the date on which,
upon further presentation of the relevant Note, payment of the full
amount
(including interest as aforesaid) in the relevant currency payable in
respect of such Note is made or (if earlier) the seventh day after notice
is given to the relevant Noteholder (whether individually or in
accordance
with Condition 16) that the full amount (including interest as aforesaid)
in the relevant currency in respect of such Note is available for
payment, provided that, upon further presentation thereof being duly
made, such payment is made.
(C) Trustee's requirements regarding Paying Agents
At any time after an Event of Default or a Potential Event of Default
shall
have occurred or the Notes of all or any Series shall otherwise have
become due and repayable or the Trustee shall have received any money
which it proposes to pay under Clause9 to the relevant Noteholders and/or
Receiptholders and/or Couponholders, the Trustee may:
(i) by notice in writing to the Issuer to which such Event of Default or
Potential Event of Default pertains, the Agent, the Registrar and the
other Paying Agents require the Agent, the Registrar and the other Paying
Agents pursuant to the Agency Agreement:
(a) to act thereafter as Agent, Registrar and other Paying Agents
respectively
of the Trustee in relation to payments to be made by or on behalf
of the Trustee under the provisions of these presents mutatis mutandis
on the terms provided in the Agency Agreement (save that the Trustee's
liability
under any provisions thereof for the indemnification, remuneration
and payment of out-of-pocket expenses of the Agent, the Registrar and
the other Paying Agents shall be limited to the amounts for the time
being held by the Trustee on the trusts of these presents relating to the
Notes of the relevant Series) and thereafter to hold all Notes, Receipts
and Coupons and all sums, documents and records held by them in respect
of Notes, Receipts and Coupons on behalf of the Trustee; or
<PAGE> 19
(b) to deliver up all Notes, Receipts and Coupons and all sums,
documents
and records held by them in respect of Notes, Receipts and Coupons to
the Trustee or as the Trustee shall direct in such notice provided that
such notice shall be deemed not to apply to any documents or records
which
the Agent, the Registrar or the relative other Paying Agent is obliged
not to release by any law or regulation; and
(ii) by notice in writing to such Issuer require it to make all
subsequent
payments in respect of the Notes, Receipts and Coupons to or to the
order of the Trustee and not to the Agent; with effect from the issue of
any such notice to such Issuer and until such notice is withdrawn
proviso(i)
to sub-clause(B) of this Clause relating to the Notes shall cease to
have effect.
(D) Currency of payments:
All payments in respect of, under and in connection with these presents
and the Notes of any Series to the relevant Noteholders, Receiptholders
and Couponholders shall be made in the relevant currency.
(E) Further Notes:
The relevant Issuer shall be at liberty from time to time (but subject
always
to the provisions of these presents) without the consent of the
Noteholders, Receiptholders or Couponholders to create and issue further
Notes (whether in bearer or registered form) ranking pari passu in all
respects (or in all respects save for the date from which interest
thereon
accrues and the amount of the first payment of interest on such further
Notes) and so that the same shall be consolidated and form a single
series with the outstanding Notes of a particular Series.
(F) Separate Series:
The Notes of each Series shall form a separate Series of Notes and
accordingly,
unless for any purpose the Trustee in its absolute discretion shall
otherwise determine, the provisions of this Clause and of Clauses 3
to 21 (both inclusive), 22(B) and Schedules3 and 4 shall apply mutatis
mutandis separately and independently to the Notes of each Series and in
such
Clauses and Schedules the expressions "Notes", "Noteholders", "Receipts",
"Receiptholders", "Coupons", "Couponholders" and "Talons" and
"Talonholders" shall be construed accordingly.
(G) Subordinated Notes:
If any Notes are issued on a subordinated basis, these presents shall be
modified in such manner as shall be agreed between the Issuer, the Agent,
the Trustee and the relevant Purchaser(s).
<PAGE> 20
3. FORM OF THE NOTES
(A) Temporary Global Notes and Permanent Global Notes:
(i) The Definitive Notes of each Tranche will initially be represented
by
a single Temporary Global Note. Each Temporary Global Note shall be
exchangeable for either Definitive Bearer Notes together with, where
applicable,
Receipts and (except in the case of Zero Coupon Notes) Coupons and,
where applicable, Talons attached, Definitive Registered Notes (where
the Issuer is IBM International Finance) or a Permanent Global Note in
each case in accordance with the provisions set out therein. Each
Permanent
Global Note shall be exchangeable in whole but not in part for
Definitive
Bearer Notes together with, where applicable, Receipts and (except
in the case of Zero Coupon Notes) Coupons and, where applicable, Talons
attached, all as set out in such Permanent Global Note. All Global
Notes shall be prepared, completed and delivered to a common depositary
for Euroclear and Cedelbank in accordance with the provisions of the
Programme
Agreement or to another appropriate depositary in accordance with
any other agreement between the relevant Issuer and the relevant
Purchaser(s) and, in each case, the Agency Agreement.
<PAGE> 21
(ii) Each Temporary Global Note shall be printed or typed in the form or
substantially in the form set out in PartI of Schedule2 and shall have
annexed thereto a copy of the applicable Pricing Supplement. Each
Temporary
Global Note shall be signed manually by a person duly authorised by
the relevant Issuer on behalf of the relevant Issuer and shall be
authenticated
by or on behalf of the Agent. Each Temporary Global Note so executed
and authenticated shall be a binding and valid obligation of the
Issuer.
(iii) Each Permanent Global Note shall be printed or typed in the form
or
substantially in the form set out in PartII of Schedule 2 and shall have
annexed thereto a copy of the applicable Pricing Supplement. Each
Permanent
Global Note shall be signed manually by a person duly authorised
by the relevant Issuer on behalf of the relevant Issuer and shall be
authenticated
by or on behalf of the Agent. Each Permanent Global Note so
executed and authenticated shall be a binding and valid obligation of
the relevant Issuer.
(B) Definitive Notes:
(i) The Definitive Bearer Notes, the Receipts, the Coupons and the
Talons
shall be to bearer in the respective forms or substantially in the
respective
forms set out in Part III A of Schedule 2. The Definitive Bearer
Notes, the Receipts, the Coupons and the Talons shall be serially
numbered
and, if listed or quoted, shall be security printed in accordance with
the requirements (if any) from time to time of the Stock Exchange and
the Conditions shall be incorporated by reference (where applicable to
these presents) into such Definitive Bearer Notes if permitted by the
Stock
Exchange (if any), or, if not so permitted, the Definitive Bearer Notes
shall be endorsed with or have attached thereto the Conditions, and,
in either such case, the Definitive Bearer Notes shall have endorsed
thereon
or attached thereto a copy of the applicable Pricing Supplement.
Title to the Definitive Bearer Notes, the Receipts, the Coupons and the
Talons shall pass by delivery.
<PAGE> 21
(ii) The Definitive Registered Notes shall be in registered form and
shall
be issued in the form or substantially in the form set out in Part III
B of Schedule2, shall be serially numbered, shall be endorsed with the
Form of Transfer and, if listed or quoted, shall be security printed in
accordance with the requirements (if any) from time to time of the
Stock
Exchange and the Conditions shall be incorporated by reference (where
applicable to these presents) into such Definitive Registered Notes if
permitted
by the Stock Exchange (if any), or, if not so permitted, the Definitive
Registered Notes shall be endorsed with or have attached thereto
the Conditions, and, in either such case, the Definitive Registered
Notes
shall have endorsed thereon or attached thereto a copy of the
applicable
Pricing Supplement. Title to the Definitive Registered Notes shall
pass upon the registration of transfers in respect thereof in accordance
with the provisions of these presents. Only IBM International Finance
may issue Registered Notes.
(iii) The Definitive Notes, the Receipts, the Coupons and the Talons
shall
be signed manually or in facsimile by one Managing Director (where the
relevant Issuer is IBM International Finance) or one Officer (where the
relevant Issuer is IBM Credit or IBM) of the relevant Issuer on behalf
of the relevant Issuer and the Definitive Notes shall be authenticated
by or on behalf of the Agent (in the case of the Definitive Bearer Notes)
or the Registrar (in the case of the Definitive Registered Notes). The
relevant Issuer may use the facsimile signature of any person who at the
date such signature is affixed is a Managing Director or, as the case
may be, an Officer of the relevant Issuer notwithstanding that at the
time of issue of any of the Definitive Notes he may have ceased for any
reason to be the holder of such office. The Definitive Notes, the
Receipts,
the Coupons and the Talons so executed and (where applicable)
authenticated,
shall be binding and valid obligations of the relevant Issuer.
(C) Persons to be treated as holders:
Except as ordered by a court of competent jurisdiction or as required by
law, the Trustee, the Agent, the Paying Agents, the Registrar and the
Issuers
(notwithstanding any notice to the contrary and whether or not it
is overdue and notwithstanding any notation of ownership or writing thereon
or notice of any previous loss or theft thereof) shall (i) for the
purpose of making payment thereon or on account thereof deem and treat
the bearer of any Global Note, Definitive Bearer Note, Receipt, Coupon or
Talon and the registered holder of any Definitive Registered Note as the
absolute owner thereof and of all rights thereunder free from all
encumbrances,
and shall not be required to obtain proof of such ownership or
as to the identity of the bearer of any Global Note, Definitive Bearer
Receipt, Coupon or Talon or of the registered holder of any Definitive
Registered Note, and (ii) for all other purposes deem and treat:
(a) the bearer of any Definitive Bearer Note, Receipt, Coupon or Talon
and the registered holder of any Definitive Registered Note, and
(b) each person for the time being shown in the records of Euroclear or
Cedelbank, or such other additional or alternative clearance system
approved
by the relevant Issuer, the Agent and the Trustee, as having a
particular
nominal amount of any Notes credited to his securities account
<PAGE> 22
as the absolute owner thereof free from all encumbrances and shall not
be
required to obtain proof of such ownership (other than, in the case of
any person for the time being so shown in the records of Euroclear or
Cedelbank, a certificate or letter of confirmation signed on behalf of
Euroclear
or Cedelbank or any other form of record made by either of them)
or as to the identity of the bearer of any Global Note, Definitive Bearer
Note, Receipt, Coupon or Talon or of the registered holder of any
Definitive Registered Note.
(E) Certificates of Euroclear and Cedelbank:
The relevant Issuer and the Trustee may call for and, except in the case
of manifest error, shall be at liberty to accept and place full reliance
on as sufficient evidence thereof a certificate or letter of
confirmation
issued on behalf of Euroclear or Cedelbank or any form of record made
e by either of them to the effect that at any particular time or through
out any particular period any particular person is, was, or will be,
shown
in its records as the holder of a particular nominal amount of Notes
represented by a Global Note.
4. FEES, DUTIES AND TAXES
THE relevant Issuer will pay any stamp, issue, registration, documentary
and other fees, duties and taxes, including interest and penalties,
payable
on or in connection with (i)the execution and delivery of these presents,
(ii)the creation, issue and offering of the Notes, the Receipts,
the Coupons and the Talons and (iii) any action taken by or on behalf of
the Trustee or (where permitted under these presents so to do) any
Noteholder
or Couponholder to enforce, or to resolve any doubt concerning, or
for any other purpose in relation to, these presents.
5. COVENANT OF COMPLIANCE
THE Issuers covenant with the Trustee that they will comply with and
perform
and observe all the provisions of these presents which are expressed
to be binding on them. The Conditions shall be binding on the Issuers,
the Noteholders, the Receiptholders, the Couponholders and the
Talonholders.
The Trustee shall be entitled to enforce the obligations of each
Issuer under the Notes, the Receipts, the Coupons and the Talons as if
the same were set out and contained in this Trust Deed which shall be
read
and construed as one document with the Notes, the Receipts, the
Coupons and the Talons.
6. CANCELLATION OF NOTES AND RECORDS
(A) THE relevant Issuer shall procure that all Notes (i) redeemed or
(ii)
which, being mutilated or defaced, have been surrendered and replaced
pursuant
to Condition14 or (iii)exchanged as provided in these presents
(together in each case with all unmatured Coupons attached thereto or
delivered
therewith) and all Coupons paid in accordance with the Conditions
or which, being mutilated or defaced, have been surrendered and replaced
pursuant to Condition14 and all Talons exchanged in accordance with the
Conditions for further Coupons shall forthwith be cancelled by or on
behalf of the relevant Issuer and a certificate stating:
<PAGE> 23
(a) the aggregate nominal amount of Notes which have been redeemed and
the aggregate amounts in respect of Coupons which have been paid;
(b) the serial numbers of such Notes in definitive form distinguishing
between Bearer Notes and Registered Notes;
(c) the total numbers (where applicable, of each denomination) by
maturity date of such Coupons;
(d) the aggregate amount of interest paid (and the due dates of such
payments) on Global Notes and/or on Registered Notes;
(e) the aggregate nominal amount of Notes (if any) which have been
purchased
by or on behalf of the relevant Issuer, any holding company of the
relevant Issuer or any other Subsidiary of any such holding company and
cancelled and the serial numbers of such Definitive Notes and the total
number (where applicable, of each denomination) by maturity date of the
Coupons attached thereto or surrendered therewith;
(f) the aggregate nominal amounts of Notes and the aggregate amounts in
respect of Coupons which have been so exchanged or surrendered and
replaced
and the serial numbers of such Definitive Notes and the total number
(where applicable, of each denomination) by maturity date of such
Coupons;
(g) the total number (where applicable, of each denomination) by
maturity
date of unmatured Coupons missing from Definitive Notes bearing
interest
at a fixed rate which have been redeemed or exchanged or surrendered
and replaced and the serial numbers of the Definitive Notes to which
such
missing unmatured Coupons appertained; and
(h) the total number (where applicable, of each denomination) by
maturity
date of Talons which have been exchanged for further Coupons
shall be given to the Trustee by or on behalf of the relevant Issuer as
soon as possible and in any event within four months after the date of
such
redemption, purchase, payment, exchange or replacement (as the case
may be). The Trustee may accept such certificate as conclusive evidence
of redemption, purchase, exchange or replacement pro tanto of the Notes
or payment of interest thereon or exchange of the Talons respectively
and of cancellation of the relative Notes and Coupons.
(B) The relevant Issuer shall procure (i)that the Agent shall keep a
full
and complete record of all Notes and Coupons (other than serial numbers
of Coupons) and of their redemption, purchase by or on behalf of the
relevant Issuer, any holding company of the relevant Issuer or any other
Subsidiary of any such holding company, cancellation, payment or
exchange
(as the case may be) and of all replacement notes or coupons or talons
issued in substitution for lost, stolen, mutilated, defaced or destroyed
Notes or Coupons (ii)that the Agent shall in respect of the Coupons of
each maturity retain (in the case of Coupons other than Talons) until
the expiry of ten years from the Relevant Date in respect of such Coupons
and (in the case of Talons) indefinitely either all paid or exchanged
Coupons of that maturity or a list of the serial numbers of Coupons of
that
maturity still remaining unpaid or unexchanged and (iii)that such
records
and Coupons (if any) shall be made available to the Trustee at all
reasonable times.
<PAGE> 24
7. ENFORCEMENT
(A) THE Trustee may at any time, at its discretion and without notice,
take such proceedings and/or other action as it may think fit against or
in relation to the relevant Issuer to enforce its obligations under
these presents.
(B) Proof that as regards any specified Note, Receipt or Coupon the
relevant
Issuer has made default in paying any amount due in respect of such
Note, Receipt or Coupon shall (unless the contrary be proved) be
sufficient
evidence that the same default has been made as regards all other Notes,
Receipts or Coupons (as the case may be) in respect of which the
relevant amount is due and payable.
(C) References in provisos (ii) and (iii) to Clause2(B) to "the rate
aforesaid"
shall, in respect of any Notes bearing interest at a floating or
variable rate, in the event of such Notes having become due and
repayable,
with effect from the expiry of the interest period during which such
Notes become due and repayable, be construed as references to a rate of
interest calculated mutatis mutandis in accordance with the Conditions
except that no notices need be published in respect thereof.
8. PROCEEDINGS, ACTION AND INDEMNIFICATION
(A) THE Trustee shall not be bound to take any proceedings mentioned in
Clause7(A) or any other action in relation to these presents unless
respectively
directed or requested to do so (i)by an Extraordinary Resolution
or (ii)in writing by the holders of at least one-quarter in nominal am
amount
of the Notes then outstanding and in either case then only if it shall
be indemnified to its satisfaction against all Liabilities to which
it may thereby render itself liable or which it may incur by so doing.
(B) Only the Trustee may enforce the provisions of these presents. No
Noteholder or Couponholder shall be entitled to proceed directly against
the relevant Issuer to enforce the performance of any of the provisions
of these presents unless the Trustee having become bound as aforesaid to
take proceedings fails to do so within a reasonable period and such
failure is continuing.
<PAGE> 25
9. APPLICATION OF MONEYS
ALL moneys received by the Trustee under these presents shall, unless
and
to the extent attributable in the opinion of the Trustee to a particular
Series of the Notes, be apportioned pari passu and rateably between each
Series of the Notes, and all moneys received by the Trustee under these
presents to the extent attributable in the opinion of the Trustee to
a particular Series of the Notes or which are apportioned to such Series
as aforesaid (including any moneys which represent principal or
interest
in respect of Notes, Receipts or Coupons which have become void under
Condition15) shall be held by the Trustee upon trust to apply them
(subject to Clause11):
FIRST in payment or satisfaction of all amounts then due and unpaid
under Clauses 14 and/or 15(J) to the Trustee and/or any Appointee;
SECONDLY in or towards payment pari passu and rateably of all principal
and interest then due and unpaid in respect of the Securities of that
Series;
THIRDLY in or towards payment pari passu and rateably of all principal
and interest then due and unpaid in respect of the Notes of each other
Series; and
FOURTHLY in payment of the balance (if any) to the relevant Issuer (with
out prejudice to, or liability in respect of, any question as to how such
payment to the relevant Issuer shall be dealt with as between the
relevant Issuer and any other person).
10. NOTICE OF PAYMENTS
THE Trustee shall give notice to the relevant Noteholders in accordance
with Condition16 of the day fixed for any payment to them under Clause9.
Such payment may be made in accordance with Condition6 and any payment
so made shall be a good discharge to the Trustee.
11. INVESTMENT BY TRUSTEE
(A) IF the amount of the moneys at any time available for the payment of
principal and interest in respect of the Notes under Clause9 shall be
less than 10per cent. of the principal amount of the Notes then
outstanding,
the Trustee may at its discretion invest such moneys in some or one
of the investments authorised in paragraph (B) below. The Trustee at
its
discretion may vary such investments and may accumulate such investments
and the resulting income until the accumulations, together with any
other
funds for the time being under the control of the Trustee and available
for such purpose, amount to at least 10per cent. of the principal
amount of the Notes then outstanding and then such accumulations and
funds shall be applied under Clause9.
(B) Any moneys which under the trusts of these presents ought to or may
be invested by the Trustee may be invested in the name or under the
control
of the Trustee in any investments or other assets in any part of the
world whether or not they produce income or by placing the same on
deposit
in the name or under the control of the Trustee at such bank or other
financial institution and in such currency as the Trustee may think fit.
The Trustee may at any time vary any such investments for or into other
investments or convert any moneys so deposited into any other currency
and shall not be responsible for any loss resulting from any such
investments
or deposits, whether due to depreciation in value, fluctuations
in exchange rates or otherwise.
<PAGE> 26
12. PARTIAL PAYMENTS
UPON any payment under Clause9 (other than payment in full against
surrender
of a Note, Receipt or Coupon) the Note, Receipt or Coupon in respect
of which such payment is made shall be produced to the Trustee or the
Paying Agent by or through whom such payment is made and the Trustee shall
or shall cause such Paying Agent to enface thereon a memorandum of the
amount and the date of payment but the Trustee may in any particular case
or generally in relation to Registered Notes dispense with such production
and enfacement upon such indemnity being given as it shall think
sufficient.
13. COVENANTS BY THE ISSUERS
SO long as any Note remains outstanding (or, in the case of paragraphs
(viii),
(ix), (xiii) to (xvi) inclusive and (xviii), so long as any Note or
Coupon remains liable to prescription) the relevant Issuer covenants
with the Trustee that it shall:
(i) at all times carry on and conduct its affairs and procure its
Subsidiaries
to carry on and conduct their respective affairs in a proper and
efficient manner;
(ii) give or procure to be given to the Trustee such opinions,
certificates,
information and evidence as it shall require and in such form as it
shall require (including without limitation the procurement by the
relevant
Issuer of all such certificates called for by the Trustee pursuant
to Clause15(C) or 15(V)) for the purpose of the discharge or exercise of
the duties, trusts, powers, authorities and discretions vested in it
under these presents or by operation of law;
(iii) cause to be prepared and certified by the Auditors in respect of
each
financial accounting period accounts in such form as will comply with
all relevant legal and accounting requirements and all requirements for
the time being of the Stock Exchange;
(iv) at all times keep and procure its Subsidiaries to keep proper books
of account and allow and procure its Subsidiaries to allow the Trustee
and any person appointed by the Trustee to whom the relevant Issuer or
the relevant Subsidiary (as the case may be) shall have no reasonable
objection
free access to such books of account at all reasonable times during
normal business hours;
(v) send to the Trustee (in addition to any copies to which it may be
entitled
as a holder of any securities of the relevant Issuer) two copies
in English of every balance sheet, profit and loss account, report,
circular
and notice of general meeting and every other document issued or sent
to its shareholders together with any of the foregoing, and every
document
issued or sent to holders of securities other than its shareholders
(including the Noteholders) as soon as practicable after the issue or
publication thereof;
<PAGE> 27
(vi) forthwith give notice in writing to the Trustee of the coming into
existence of any Secured Indebtedness, Lien or other security interest
which
would require any security to be given to any Series of the Notes
pursuant to Condition3 or of the occurrence of any Event of Default or
any
Potential Event of Default or (in the case of IBM only) the entering
into of any Sale and Leaseback Transaction other than in compliance with
the provisions of Condition 3(a);
(vii) give to the Trustee (a)within seven days after demand by the Trustee
therefore and (b)(without the necessity for any such demand) promptly
after the publication of its audited accounts in respect of each annual
financial period commencing with the financial period ending 31st
December,1996
and in any event not later than 180days after the end of each such
financial period a certificate of each of the relevant Issuers signed
by two Directors (in the case of IBM International Finance) or two
Officers
(in the case of IBM Credit and IBM) of the relevant Issuer to the effect
that as at a date not more than seven days before delivering such
certificate (the "relevant date") there did not exist and had not existed
since the relevant date of the previous certificate (or in the case of
the first such certificate the date hereof) any Event of Default or any
Potential Event of Default (or if such exists or existed specifying the
same) and that during the period from and including the relevant date
of the last such certificate (or in the case of the first such
certificate
the date hereof) to and including the relevant date of such
certificate
the relevant Issuer has complied with all its obligations contained in
these presents or (if such is not the case) specifying the respects in
which it has not complied;
(viii) at all times execute and do all such further documents, acts and
things as may be necessary at any time or times in the opinion of the
Trustee to give effect to these presents;
(ix) at all times maintain an Agent, Paying Agents and, if applicable,
a Registrar in accordance with the Conditions;
(x) procure the Agent to notify the Trustee forthwith in the event that
it does not, on or before the due date for any payment in respect of the
Notes or any of them or any of the Receipts or Coupons, receive
unconditionally
pursuant to the Agency Agreement payment of the full amount in
the requisite currency of the moneys payable on such due date on all
such Notes, Receipts or Coupons as the case may be;
(xi) in the event of the unconditional payment to the Agent of any sum
due in respect of the Notes or any of them or any of the Receipts or
Coupons
being made after the due date for payment thereof forthwith give or
procure to be given notice to the relevant Noteholders in accordance
with Condition16 that such payment has been made;
(xii) if the applicable Pricing Supplement indicates that the Notes are
listed, use its best endeavours to maintain the listing of the Notes on
the Stock Exchange or, if it is unable to do so having used its best
endeavours,
use its best endeavours to obtain and maintain a quotation or listing
of the Notes on such other stock exchange or exchanges or securities
market or markets as the relevant Issuer may (with the prior approval
of the Trustee) decide and shall also upon obtaining a quotation or
listing
of the Securities on such other stock exchange or exchanges or
securities
market or markets enter into a trust deed supplemental to this Trust
Deed to effect such consequential amendments to these presents as the
Trustee may require or as shall be requisite to comply with the
requirements
of any such Stock exchange or securities market;
<PAGE> 28
(xiii) give notice to the Noteholders in accordance with Condition16 of
any appointment, resignation or removal of any Paying Agent or Registrar
(other than the appointment of the initial Paying Agents and Registrar)
with respect to such Issuer after having obtained the approval of the
Trustee
thereto or any change of any Paying Agent's or Registrar's specified
office and (except as provided by the Agency Agreement or the
Conditions)
at least 30days prior to such event taking effect; PROVIDED ALWAYS
THAT so long as any Note issued by IBM International Finance remains
outstanding
in the case of the termination of the appointment of the Registrar
or so long as any Note or Coupon of the relevant Issuer remains liable
to prescription in the case of the termination of the appointment of
the Agent with respect to such Issuer no such termination shall take
effect
until a new Registrar or Agent (as the case may be) has been appointed
on terms approved by the Trustee;
(xiv) obtain the prior written approval of the Trustee to, and promptly
give to the Trustee two copies of, the form of every notice given to the
Noteholders in accordance with Condition16 (such approval, unless so
expressed,
not to constitute approval for the purposes of Section57 of the
Financial Services Act1986 of the United Kingdom of any such notice
which is an investment advertisement (as therein defined));
(xv) if payments of principal or interest in respect of the Notes, the
Receipts
or the Coupons by the relevant Issuer shall become subject generally
to the taxing jurisdiction of any territory or any political sub-division
thereof or any authority or agency thereof or therein having power
to tax other than or in addition to the United States of America or The
Netherlands (where the relevant Issuer is IBM International Finance) or
he United States of America (where the relevant Issuer is IBM or IBM
Credit) or any such political sub-division thereof or any such authority
or agency thereof or therein, immediately upon becoming aware thereof
notify the Trustee of such event and (unless the Trustee otherwise
agrees)
enter forthwith into a Trust Deed supplemental to this Trust Deed,
giving
to the Trustee an undertaking or covenant in form and manner
satisfactory
to the Trustee in terms corresponding to the terms of the relevant
paragraph(s) of Condition9 with the substitution for (or, as the case
may be, the addition to) the references therein to The Netherlands
and/or,
as the case may be, the United States or any political sub-division
thereof
or any authority or agency thereof or therein or having power to tax
of references to that other or additional territory or any political
sub-division thereof or any authority therein or thereof having power to
tax to whose taxing jurisdiction such payments shall have become subject
as aforesaid and such Trust Deed shall also (where applicable) modify
Condition 5(b) so that such Condition shall make reference to the other
or additional territory, any political sub-division thereof and any
authority or agency therein or thereof having power to tax;
<PAGE> 29
(xvi) comply with and perform all its obligations under the Agency
Agreement
and use its best endeavours to procure that the Agent, the Paying
Agents and the Registrar comply with and perform all their respective
obligation
hereunder and any notice given by the Trustee pursuant to Clause2(C)(i)
and not make any amendment or modification to such Agreement
without the prior written approval of the Trustee;
(xvii) in order to enable the Trustee to ascertain the principal amount
of Notes of each Series for the time being outstanding for any of the
purposes
referred to in the proviso to the definition of "outstanding" in
Clause1, deliver to the Trustee forthwith upon being so requested in
writing
by the Trustee a certificate in writing signed by two Directors (in
the case of IBM International Finance) or two Officers (in the case of
IBM Credit and IBM) of the relevant Issuer setting out the total number
and aggregate nominal amount of Notes of each Series which:
(a) up to and including the date of such certificate have been purchased
by the relevant Issuer, any holding company of the relevant Issuer or any
other Subsidiary of any such holding company and cancelled; and
(b) are at the date of such certificate held by, for the benefit of, or
on behalf of, the relevant Issuer, any such holding company or any other
Subsidiary of any such holding company;
(xviii) procure that each of the Paying Agents makes available for
inspection
by Noteholders and Couponholders at its specified office copies of
these presents, the Agency Agreement and the then latest audited
balance
sheet and profit and loss account (consolidated if applicable) of the
relevant Issuer;
(xix) if, in accordance with the provisions of the Conditions, interest
in respect of Bearer Notes denominated in U.S.dollars becomes payable at
the specified office of any Paying Agent in the United States of
America
promptly give notice thereof to the Noteholders in accordance with
Condition16;
(xx) upon due surrender in accordance with the Conditions, pay the face
value of all Coupons (including Coupons issued in exchange for Talons)
appertaining
to all Definitive Bearer Notes purchased by the relevant Issuer
and not purchased with such Definitive Bearer Notes;
(xxi) use its best endeavours to procure that Euroclear and/or Cedelbank
(as the case may be) issue(s) any certificate or other document requested
by the Trustee under Clause15(U) as soon as practicable after such
request;
<PAGE> 30
(xxii) procure (a) that, except with the prior consent in writing of the
Trustee or the approval of the Noteholders by Extraordinary Resolution,
no amendment or modification shall be made to, and no waiver shall be
given
of any breach of, any of the provisions of any of the Support Agreements
and that none of the Support Agreements shall be terminated and that
such Agreements are promptly enforced by the relevant Issuer and (b)
that, except upon 30 days' prior written notice to the Trustee, no
amendment
or modification shall be made to, and no waiver shall be given of any
breach of, any of the provisions of any of the Liquidity Agreements
and that (except for the 1991 Liquidity Agreement which immediately upon
its termination shall be superseded by the 1993 Liquidity Agreement) none
of the Liquidity Agreements shall be terminated and that such Agreements
are promptly enforced by the relevant Issuer;
(xxiii) in the case of IBM Credit and IBM give to the Trustee at the
same
time as sending to it the certificates referred to in paragraph (vii)
above and in any event not later than 180 days after the last day of each
annual financial period of the relevant Issuer, a certificate signed by
two Officers of the relevant Issuer listing those Subsidiaries of the
relevant Issuer which as at the relevant date (as defined in paragraph
(vii) above) of the relevant certificate given under paragraph (vii)
above
or, as the case may be, as at such last day were Restricted
Subsidiaries for the purposes of Condition 3; and
(xxiv) in the case of IBM Credit and IBM give to the Trustee, as soon as
practicable after the acquisition or disposal of any corporation which
thereby becomes or ceases to be a Restricted Subsidiary or after any
transfer
is made to any Subsidiary of the relevant Issuer which thereby becomes
a Restricted Subsidiary, a certificate signed by two Officers of the
relevant Issuer to such effect.
14. REMUNERATION AND INDEMNIFICATION OF TRUSTEE
(A) SO long as any Note is outstanding, the relevant Issuer shall pay to
the Trustee remuneration for its services as trustee as from the date of
this Trust Deed, such remuneration to be at such rate as may from time
to time be agreed between such Issuer and the Trustee. Such
renumeration
shall accrue from day to day and be payable (in priority to payments
to the Noteholders, Receiptholders and Couponholders) down to the date
when
all the Notes having become due for redemption, the redemption moneys
and interest thereon to the date of redemption have been paid to the
Agent or the Trustee. However, if any payment to a Noteholder,
Receiptholder
or Couponholder of the moneys due in respect of any Note, Receipt or
Coupon is improperly withheld or refused upon due presentation of such
Note, Receipt or Coupon, such remuneration will again accrue as from the
date of such presentation until payment to such Noteholder,
Receiptholder
or Couponholder is duly made.
(B) In the event of the occurrence of an Event of Default or a Potential
Event of Default or the Trustee considering it expedient or necessary or
being requested by the relevant Issuer to undertake duties which the
Trustee
and the relevant Issuer agree to be of an exceptional nature or otherwise
outside the scope of the normal duties of the Trustee under these
presents the relevant Issuer shall pay to the Trustee such additional
remuneration as shall be agreed between them.
(C) The relevant Issuer shall in addition, against delivery to such
Issuer
of the Trustee's value added tax invoice therefor, pay to the Trustee
an amount equal to the amount of any value added tax or similar tax
chargeable
in respect of its remuneration under these presents.
<PAGE> 31
(D) In the event of the Trustee and the relevant Issuer failing to agree:
(1) (in a case to which sub-clause(A) above applies) upon the amount of
the remuneration; or
(2) (in a case to which sub-clause(B) above applies) upon whether such
duties
shall be of an exceptional nature or otherwise outside the scope of
the normal duties of the Trustee under these presents, or upon such
additional remuneration,
such matters shall be determined by such person (acting as an expert and
not as an arbitrator) selected by the Trustee and approved by the
relevant
Issuer or, failing such approval, nominated (on the application of the
Trustee) by the President for the time being of The Law Society of
England
and Wales (the expenses involved in such nomination and the fees of
such person being payable by such Issuer) and the determination of any
such person shall be final and binding upon the Trustee and such Issuer.
(E) The relevant Issuer shall also pay or discharge all Liabilities
incurred
by the Trustee in relation to the preparation and execution of, the
exercise of its powers and the performance of its duties under, and in
any other manner in relation to, these presents, including but not limited
to travelling expenses and any stamp, issue, registration,
documentary
and other taxes or duties paid or payable by the Trustee in connection
with any action taken or contemplated by or on behalf of the Trustee
for
enforcing, or resolving any doubt concerning, or for any other purpose
in relation to, these presents.
(F) All amounts payable pursuant to sub-clause(E) above and/or Clause15
(J) shall be payable by the relevant Issuer on the date specified in a
demand
by the Trustee and in the case of payments actually made by the Trustee
prior to such demand shall (if not paid within five business days after
such demand and the Trustee so requires) carry interest at the rate
of three per cent. per annum above the Base Rate from time to time of National
Westminster Bank Plc from the date specified in such demand, and
in all other cases shall (if not paid on the date specified in such demand
or, if later, within five business days after such demand and, in either
case, the Trustees so requires) carry interest at such rate from the
date specified in such demand. All remuneration payable to the Trustee
shall carry interest at such rate from the due date therefor.
(G) Unless otherwise specifically stated in any discharge of these presents
the provisions of this Clause and Clause15(J) shall continue in full
force and effect notwithstanding such discharge.
(H) The Trustee shall be entitled in its absolute discretion to determine
in respect of which Series of Notes any Liabilities incurred under these
presents have been incurred or to allocate any such Liabilities between
the Notes of any two or more Series.
15. SUPPLEMENT TO TRUSTEE ACT 1925
THE Trustee shall have all the powers conferred upon trustees by the
Trustee
Act 1925 of England and Wales and by way of supplement thereto it is
expressly declared as follows:
<PAGE> 32
(A) The Trustee may in relation to these presents act on the advice or
opinion
of or any information obtained from any lawyer, valuer, accountant,
surveyor, banker, broker, auctioneer or other expert whether obtained
by the Issuer, the Trustee or otherwise and shall not be responsible
for any Liability occasioned by so acting.
(B) Any such advice, opinion or information may be sent or obtained by
letter,
telex, telegram, facsimile transmission or cable and the Trustee
shall not be liable for acting on any advice, opinion or information
purporting
to be conveyed by any such letter, telex, telegram, facsimile
transmission or cable although the same shall contain some error or shall
not be authentic.
(C) The Trustee may call for and shall be at liberty to accept as
sufficient
evidence of any fact or matter or the expediency of any transaction
or thing a certificate signed by any two Directors (in the case of IBM
International Finance) or any two Officers (in the case of IBM Credit an
d IBM) of the relevant Issuer and the Trustee shall not be bound in any
such case to call for further evidence or be responsible for any
Liability
that may be occasioned by it or any other person acting on such
certificate.
(D) The Trustee shall be at liberty to hold or to place these presents
and
any other documents relating thereto in any part of the world with any
banker or banking company or company whose business includes
undertaking
the safe custody of documents or lawyer or firm of lawyers considered
by the Trustee to be of good repute and the Trustee shall not be
responsible
for or required to insure against any Liability incurred in connection
with any such deposit and may pay all sums required to be paid on
account of or in respect of any such deposit.
(E) The Trustee shall not be responsible for the receipt or application
of the proceeds of the issue of any of the Notes by the relevant Issuer,
the exchange of any Global Note for another Global Note or Definitive
Notes or the delivery of any Global Note or Definitive Notes to the
person(s) entitled to it or them.
(F) The Trustee shall not be bound to give notice to any person of the
execution
of any documents comprised or referred to in these presents or
to take any steps to ascertain whether any Event of Default or any
Potential
Event of Default has happened and, until it shall have actual knowledge
or express notice to the contrary, the Trustee shall be entitled to
assume that no Event of Default or Potential Event of Default has
happened
and that the relevant Issuer is observing and performing all its
obligations under these presents.
(G) Save as expressly otherwise provided in these presents, the Trustee
shall have absolute and uncontrolled discretion as to the exercise of
its
trusts, powers, authorities and discretions under these presents (the
exercise of which as between the Trustee and the Noteholders and
Couponholders
shall be conclusive and binding on the Noteholders and Couponholders)
and shall not be responsible for any Liability which may result from
their exercise or non-exercise.
<PAGE> 33
(H) The Trustee shall not be liable to any person by reason of having
acted
upon any resolution purporting to have been passed at any meeting of
the Noteholders of all or any Series in respect whereof minutes have
been
made and signed even though subsequent to its acting it may be found
that there was some defect in the constitution of the meeting or the
passing
of the resolution or that for any reason the resolution was not valid
or binding upon such Noteholders and the relative Receiptholders and
Couponholders.
(I) The Trustee shall not be liable to any person by reason of having
accepted
as valid or not having rejected any Note, Receipt or Coupon purporting
to be such and subsequently found to be forged or not authentic.
(J) Without prejudice to the right of indemnity by law given to
trustees,
the relevant Issuer shall indemnify the Trustee and every Appointee and
keep it or him indemnified against all Liabilities to which it or he
may
be or become subject or which may be incurred by it or him in the
execution
or purported execution of any of its trusts, powers, authorities
and discretions under these presents or its or his functions under any
such
appointment or in respect of any other matter or thing done or omitted
in any way relating to these presents or any such appointment.
(K) Any consent or approval given by the Trustee for the purposes of
these
presents may be given on such terms and subject to such conditions (if
any) as the Trustee thinks fit and notwithstanding anything to the
contrary in these presents may be given retrospectively.
(L) The Trustee shall not (unless and to the extent ordered so to do by
a court of competent jurisdiction) be required to disclose to any
Noteholder,
Receiptholder or Couponholder any information (including, without
limitation, information of a confidential, financial or price sensitive
nature) made available to the Trustee by the relevant Issuer or any
other
person in connection with these presents and no Noteholder,
Receiptholder
or Couponholder shall be entitled to take any action to obtain from
the Trustee any such information.
(M) Where it is necessary or desirable for any purpose in connection
with
these presents to convert any sum from one currency to another it shall
(unless otherwise provided by these presents or required by law) be
converted
at such rate or rates, in accordance with such method and as at
such date for the determination of such rate of exchange, as may be
agreed
by the Trustee in consultation with the relevant Issuer and any rate,
method and date so agreed shall be binding on such Issuer, the
Noteholders,
the Receiptholders and the Couponholders.
(N) The Trustee may certify whether or not any of the conditions, events
and acts set out in sub-paragraphs(ii) and (iii) of Condition10 (each of
which conditions, events and acts shall, unless in any case the Trustee
in its absolute discretion shall otherwise determine, for all the
purposes
of these presents be deemed to include the circumstances resulting
therein and the consequences resulting therefrom) is in its opinion
materially
prejudicial to the interests of the Noteholders and any such certificate
shall be conclusive and binding upon the relevant Issuer, the
Noteholders, the Receiptholders and the Couponholders.
<PAGE> 34
(O) The Trustee as between itself and the Noteholders, the Receiptholders
and the Couponholders may determine all questions and doubts arising in
relation to any of the provisions of these presents. Every such
determination,
whether or not relating in whole or in part to the acts or prodeedings
of the Trustee, shall be conclusive and shall bind the Trustee
and the Noteholders, the Receiptholders and the Couponholders.
(P) In connection with the exercise by it of any of its trusts, powers,
authorities and discretions under these presents (including, without
limitation,
any modification, waiver, authorisation, determination or substitution),
the Trustee shall have regard to the interests of the Noteholders
as a class and, in particular but without limitation, shall not have
regard to the consequences of such exercise for individual Noteholders,
Receiptholders or Couponholders resulting from their being for any
purpose
domiciled or resident in, or otherwise connected with, or subject to
the jurisdiction of, any particular territory or any political
sub-division
thereof and the Trustee shall not be entitled to require, nor shall
any Noteholder, Receiptholder or Couponholder be entitled to claim, from
the relevant Issuer, the Trustee or any other person any indemnification
or payment in respect of any tax consequence of any such exercise upon
individual Noteholders, Receiptholders or Couponholders except to the
extent already provided for in Condition9 and/or any undertaking given
in addition thereto or in substitution therefor under these presents.
(Q) Any trustee of these presents being a lawyer, accountant, broker or
other person engaged in any profession or business shall be entitled to
charge and be paid all usual professional and other charges for business
transacted and acts done by him or his firm in connection with the trusts
of these presents and also his reasonable charges in addition to
disbursements
for all other work and business done and all time spent by him
or his firm in connection with matters arising in connection with these
presents.
(R) The Trustee may whenever it thinks fit delegate by power of attorney
or otherwise to any person or persons or fluctuating body of persons(w
(whether
being a joint trustee of these presents or not) all or any of its
trusts, powers, authorities and discretions under these presents. Such
delegation may be made upon such terms (including power to sub-delegate)
and subject to such conditions and regulations as the Trustee may in the
interests of the Holders think fit. The Trustee shall not be under any
obligation to supervise the proceedings or acts of any such delegate
or sub-delegate or be in any way responsible for any Liability incurred
by reason of any misconduct or default on the part of any such delegate
or sub-delegate. The Trustee shall within a reasonable time after any
such delegation or any renewal, extension or termination thereof give
notice thereof to the relevant Issuer.
<PAGE> 35
(S) The Trustee may in the conduct of the trusts of these presents
instead
of acting personally employ and pay an agent (whether being a lawyer
or other professional person) to transact or conduct, or concur in
transacting
or conducting, any business and to do, or concur in doing, all acts
required to be done in connection with these presents (including the
receipt and payment of money). The Trustee shall not be in any way
responsible
for any Liability incurred by reason of any misconduct or default
on the part of any such agent or be bound to supervise the proceedings
or acts of any such agent.
(T) The Trustee shall not be responsible for the execution, delivery,
legality,
effectiveness, adequacy, genuineness, validity, enforceability or
admissibility in evidence of these presents or any other document
relating
thereto and shall not be liable for any failure to obtain any licence,
consent or other authority for the execution, delivery, legality,
effectiveness,
adequacy, genuineness, validity, performance, enforceability
or admissibility in evidence of these presents or any other document
relating thereto except in each case the Trustee shall as against the
relevant Issuer retain responsibility and liability for its own actions
as a signatory of these presents.
(U) The Trustee may call for any certificate or other document to be
issued
by Euroclear or Cedelbank as to the nominal amount of Notes represented
by a Global Note standing to the account of any person. Any such
certificate
or other document shall be conclusive and binding for all purposes.
The Trustee shall not be liable to any person by reason of having
accepted as valid or not having rejected any certificate or other
document
to such effect purporting to be issued by Euroclear or Cedelbank and
subsequently found to be forged or not authentic.
(V) The Trustee may call for and rely upon a certificate signed by any
two
Directors (in the case of IBM International Finance) or any two Officers
(in the case of IBM Credit and IBM) of the relevant Issuer as to the
amount of Secured Indebtedness, Attributable Debt, Consolidated Net
Tangible
Assets, the net proceeds of the sale of any Principal Property sold
and leased back pursuant to a Sale and Leaseback Transaction and any
other relevant term defined in these presents as at any given time or for
any specified period, as applicable, or as to compliance by the Issuers
or any of them with any of the covenants contained in Condition 3 or as
to whether any transaction is or is not or was or was not a Sale and
Leaseback
Transaction or as to whether any property of any Issuer is or is
not or was or was not Principal Property or as to whether any
Indebtedness
is or is not or was or was not Secured Indebtedness or Funded Debt,
in which event such certificate shall, in the absence of manifest error,
be conclusive and binding on all parties and the Trustee shall not be
bound in any such case to call for further evidence or be responsible for
any Liabilities that may be occasioned by it or any other person acting
on such certificate.
16. TRUSTEE'S LIABILITY
NOTHING in these presents shall in any case in which the Trustee has
failed
to show the degree of care and diligence required of it as trustee having
regard to the provisions of these presents conferring on it any trusts,
powers, authorities or discretions exempt the Trustee from or indemnify
it against any liability for breach of trust or any liability which
by virtue of any rule of law would otherwise attach to it in respect of
any negligence, default, breach of duty or breach of trust of which it
may be guilty in relation to its duties under these presents.
<PAGE> 36
17. TRUSTEE CONTRACTING WITH ISSUERS
NEITHER the Trustee nor any director or officer of a corporation acting
as a trustee under these presents shall by reason of its or his
fiduciary position be in any way precluded from:
(i) entering into or being interested in any contract or financial or
other
transaction or arrangement with any of the Issuers or any holding company
or any person or body corporate associated with any of the Issuers
(including without limitation any contract, transaction or arrangement
of a banking or insurance nature or any contract, transaction or
arrangement
in relation to the making of loans or the provision of financial
facilities
to, or the purchase, placing or underwriting of or the subscribing
or procuring subscriptions for or otherwise acquiring, holding or
dealing
with the Notes or any other notes, stocks, shares, debenture stock,
debentures, bonds or other securities of, any of the Issuers or any
holding company or any person or body corporate associated as aforesaid);
or
(ii) accepting or holding the trusteeship of any other trust deed
constituting
or securing any other securities issued by or relating to any of
the Issuers or any holding company or any such person or body corporate
so associated or any other office of profit under any of the Issuers or
any holding company or any such person or body corporate so associated
and shall be entitled to retain and shall not be in any way liable to
account
for any profit made or share of brokerage or commission or remuneration
or other benefit received thereby or in connection therewith.
18. WAIVER, AUTHORISATION AND DETERMINATION
(A) THE Trustee may without prejudice to its rights in respect of any
subsequent
breach, Event of Default or Potential Event of Default from time
to time and at any time but only if and in so far as in its opinion the
interests of the Noteholders shall not be materially prejudiced thereby
waive or authorise any breach or proposed breach by any of the Issuers
of any of the covenants or provisions contained in these presents or de
determine
that any Event of Default or Potential Event of Default shall not
be treated as such for the purposes of these presents PROVIDED ALWAYS
THAT the Trustee shall not exercise any powers conferred on it by this
Clause
in contravention of any express direction given by Extraordinary
Resolution or by a request under Condition10 but so that no such
direction
or request shall affect any waiver, authorisation or determination
previously
given or made. Any such waiver, authorisation or determination
may be given or made on such terms and subject to such conditions (if
any)
as the Trustee may determine, shall be binding on the Noteholders, the
Receiptholders and the Couponholders and, if, but only if, the Trustee
shall so require, shall be notified by the relevant Issuer to the
Noteholders
in accordance with Condition16 as soon as practicable thereafter.
<PAGE> 37
MODIFICATION
(B) The Trustee may without the consent of the Noteholders, the
Receiptholders
or Couponholders at any time and from time to time concur with the
Issuers in making any modification (i)to these presents (other than the
proviso to paragraph5 of Schedule4 or any matters referred to in that
proviso) which in the opinion of the Trustee it may be proper to make
PROVIDED
THAT the Trustee is of the opinion that such modification will not
be materially prejudicial to the interests of the Noteholders or (ii)to
these presents if in the opinion of the Trustee such modification is of
a formal, minor or technical nature or to correct a manifest error. Any
such modification may be made on such terms and subject to such
conditions
(if any) as the Trustee may determine, shall be binding upon the
Noteholders, the Receiptholders and the Couponholders and, unless the
Trustee
agrees otherwise, shall be notified by the relevant Issuer to the
Noteholders in accordance with Condition16 as soon as practicable
thereafter.
19. HOLDER OF DEFINITIVE BEARER NOTE ASSUMED TO BE RECEIPTHOLDER AND
COUPONHOLDER
(A) WHEREVER in these presents the Trustee is required or entitled to
exercise
a power, trust, authority or discretion under these presents, except
as ordered by a court of competent jurisdiction or as required by
applicable
law, the Trustee shall, notwithstanding that it may have express
notice to the contrary, assume that each Noteholder is the holder of all
Receipts and Coupons appertaining to each Definitive Bearer Note of
which he is the holder.
NO NOTICE TO RECEIPTHOLDERS AND COUPONHOLDERS
(B) Neither the Trustee nor the Issuers shall be required to give any
notice
to the Receiptholders and the Couponholders for any purpose under these
presents and the Receiptholders and the Couponholders shall be deemed
for all purposes to have notice of the contents of any notice given
to the Noteholders in accordance with Condition16.
20. SUBSTITUTION
(A) (1) The Trustee may without the consent of the Noteholders, the
Receiptholders
or Couponholders at any time agree with the relevant Issuer to
the substitution in place of such Issuer (or of the previous substitute
under this Clause) as the principal debtor under these presents of
another
company, being a member of the IBM group of companies (such substituted
company being hereinafter called the "New Company") provided that a
supplemental trust deed is executed or some other form of undertaking is
given by the New Company in form and manner satisfactory to the Trustee,
agreeing to be bound by the provisions of these presents with any
consequential
<PAGE> 38
amendments which the Trustee may deem appropriate as fully as
if the New Company had been named in these presents as the principal
debtor
in place of the relevant Issuer (or of the previous substitute under
this Clause) and provided further that the relevant Issuer
unconditionally
and irrevocably guarantees all amounts payable under these presents.
(2) The following further conditions shall apply to (1) above:
(i) the relevant Issuer and the New Company shall comply with such other
requirements as the Trustee may direct in the interests of the
Noteholders;
(ii) where the New Company is incorporated, domiciled or resident in, or
subject generally to the taxing jurisdiction of, a territory other than
or in addition to The Netherlands and/or, as the case may be, the United
States of America or any political sub-division thereof or any authority
or agency thereof or therein having power to tax, undertakings or
covenants
shall be given by the New Company in terms corresponding to the
provisions
of Condition9 with the substitution for (or, as the case may be,
the addition to) the references to The Netherlands and/or, as the case
may be, the United States of references to that other or additional
territory
in which the New Company is incorporated, domiciled or resident
or to whose taxing jurisdiction it is subject and (where applicable)
Condition5(b) shall be modified accordingly;
(iii) without prejudice to the rights of reliance of the Trustee under
the
immediately following paragraph (iv), the Trustee is satisfied that the
relevant transaction is not materially prejudicial to the interests of
the Noteholders; and
(iv) if two Directors of the New Company (or other officers acceptable
to
the Trustee) shall certify that the New Company is solvent at the time
at which the relevant transaction is proposed to be effected (which
certificate
the Trustee may rely upon absolutely) the Trustee shall not be
under any duty to have regard to the financial condition, profits or
prospects
of the New Company or to compare the same with those of the relevant
Issuer or the previous substitute under this Clause as applicable.
(B) Any such trust deed or undertaking shall, if so expressed, operate
to
release the relevant Issuer or the previous substitute as aforesaid
from
all of its obligations under these presents. Not later than 14 days
after the execution of such documents and compliance with such
requirements,
the relevant Issuer and the New Company shall give notice thereof in
a form previously approved by the Trustee to the Noteholders in the
manner
provided in Condition16. Upon the execution of such documents and
compliance with such requirements, the New Company shall be deemed to be
named in these presents as the principal debtor in place of the relevant
Issuer (or in place of the previous substitute under this Clause) under
these presents and these presents shall be deemed to be amended in such
manner as shall be necessary to give effect to the above provisions and,
without limitation, references in these presents to the relevant Issuer
shall, where the context so requires, be deemed to be or include
references to the New Company.
<PAGE> 39
21. CURRENCY INDEMNITY
THE relevant Issuer shall indemnify the Trustee, every Appointee, the
Noteholders,
the Receiptholders and the Couponholders and keep them indemnified
against:
(a) any Liability incurred by any of them arising from the non-payment
by
the relevant Issuer of any amount due to the Trustee or the Noteholders,
the Receiptholders or Couponholders under these presents by reason of
any variation in the rates of exchange between those used for the
purposes
of calculating the amount due under a judgment or order in respect
thereof
and those prevailing at the date of actual payment by the relevant
Issuer; and
(b) any deficiency arising or resulting from any variation in rates of
exchange
between (i)the date as of which the local currency equivalent of
the amounts due or contingently due under these presents (other than this
Clause) is calculated for the purposes of any bankruptcy, insolvency
or liquidation of the relevant Issuer and (ii)the final date for
ascertaining
the amount of claims in such bankruptcy, insolvency or liquidation.
The amount of such deficiency shall be deemed not to be reduced by any
variation in rates of exchange occurring between the said final date
and the date of any distribution of assets in connection with any such
bankruptcy, insolvency or liquidation.
The above indemnity shall constitute an obligation of the relevant
Issuer
separate and independent from its obligations under the other provisions
of these presents and shall apply irrespective of any indulgence granted
by the Trustee or the Noteholders, the Receiptholders or the
Couponholders
from time to time and shall continue in full force and effect not
withstanding the judgment or filing of any proof or proofs in any
bankruptcy,
insolvency or liquidation of the relevant Issuer for a liquidated
sum or sums in respect of amounts due under these presents (other than
this Clause). Any such deficiency as aforesaid shall be deemed to
constitute
a loss suffered by the Noteholders, the Receiptholders and Couponholders
and no proof or evidence of any actual loss shall be required by the
Issuer or its liquidator or liquidators.
22. NEW TRUSTEE
(A) THE power to appoint a new trustee of these presents shall be vested
jointly in the Issuers but no person shall be appointed who shall not
previously
have been approved by an Extraordinary Resolution. One or more
persons may hold office as trustee or trustees of these presents but
such trustee or trustees shall be or include a Trust Corporation.
Whenever
there shall be more than two trustees of these presents the majority
of such trustees shall be competent to execute and exercise all the
duties,
powers, trusts, authorities and discretions vested in the Trustee by
these presents provided that a Trust Corporation shall be included ins
such majority. Any appointment of a new trustee of these presents shall
as soon as practicable thereafter be notified by the Issuers to the
Agent, the Registrar and the Noteholders.
<PAGE> 40
SEPARATE AND CO-TRUSTEES
(B) Notwithstanding the provisions of sub-clause(A) above, the Trustee
may, upon giving prior notice to the relevant Issuer (but without the
consent
of the relevant Issuer, the Noteholders, the Receiptholders or the
Couponholders), appoint any person established or resident in any
jurisdiction
(whether a Trust Corporation or not) to act either as a separate
trustee or as a co-trustee jointly with the Trustee:
(i) if the Trustee considers such appointment to be in the interests of
the Noteholders;
(ii) for the purposes of conforming to any legal requirements,
restrictions
or conditions in any jurisdiction in which any particular act or acts
is or are to be performed; or
(iii) for the purposes of obtaining a judgment in any jurisdiction or
the
enforcement in any jurisdiction of either a judgment already obtained
or any of the provisions of these presents against the relevant Issuer.
Each of the Issuers irrevocably appoints the Trustee to be its attorney
in its name and on its behalf to execute any such instrument of
appointment.
Such a person shall (subject always to the provisions of these presents)
have such trusts, powers, authorities and discretions (not exceeding
those conferred on the Trustee by these presents) and such duties and
obligations as shall be conferred or imposed by the instrument of
appointment.
The Trustee shall have power in like manner to remove any such
person. Such reasonable remuneration as the Trustee may pay to any such
person, together with any attributable Liabilities incurred by it in
performing its function as such separate trustee or co-trustee, shall for
the purposes of these presents be treated as Liabilities incurred by the
Trustee.
23. TRUSTEE'S RETIREMENT AND REMOVAL
A trustee of these presents may retire at any time on giving not less
than
three months' prior written notice to the Issuers without giving any
reason and without being responsible for any Liabilities incurred by
reason
of such retirement. The Noteholders may by Extraordinary Resolution
remove any trustee or trustees for the time being of these presents. The
Issuers undertake that in the event of the only trustee of these presents
which is a Trust Corporation giving notice under this Clause or being
removed by Extraordinary Resolution they will use their best endeavours
to procure that a new trustee of these presents being a Trust Corporation
is appointed as soon as reasonably practicable thereafter. The
retirement
or removal of any such trustee shall not become effective until
a successor trustee being a Trust Corporation is appointed.
<APGE> 41
24. TRUSTEE'S POWERS TO BE ADDITIONAL
THE powers conferred upon the Trustee by these presents shall be in
addition
to any powers which may from time to time be vested in the Trustee
by the general law or as a holder of any of the Notes, Receipts or
Coupons.
25. NOTICES
ANY notice or demand to any of the Issuers or the Trustee to be given,
made
or served for any purposes under these presents shall be given, made
or served by sending the same by pre-paid post (first class if inland,
first class airmail if overseas), telex or facsimile transmission or by
delivering it by hand as follows:
to the Issuers: IBM Credit Corporation
North Castle Drive
Armonk
New York 10504
United States of America
(Attention: MTN Trader)
Facsimile No. 001 914 499 7366
IBM International Finance, N.V.
Johan Huizingalaan 765,
1066 VH Amsterdam
The Netherlands
(Attention: Finance & Treasury)
Telex No.15692NL
Facsimile No.00 3120 6691133
International Business Machines Corporation
New Orchard Road
Armonk, New York 10504
United States of America
(Attention: MTN Trader)
Facsimile No. 001 914 499 7366
to the Trustee: Princes House
95Gresham Street
LondonEC2V7LY
England
(Attention: The Manager, Trust Management)
Telex No. 888347 or 8956803
Facsimile No. (0171)606 0643 or
(0171)696 5261
<PAGE> 42
or to such other address, telex or facsimile number as shall have been
notified
(in accordance with this Clause) to the other party hereto and any
notice or demand sent by post as aforesaid shall be deemed to have been
given, made or served three days in the case of inland post or seven
days in the case of overseas post after despatch and any notice or
demand
sent by telex or facsimile transmission as aforesaid shall be deemed
to have been given, made or served 24hours after the time of despatch
provided
that in the case of a notice or demand given by telex or facsimile
transmission such notice or demand shall forthwith be confirmed by post.
The failure of the addressee to receive such confirmation shall not
invalidate the relevant notice or demand given by telex or facsimile
transmission.
26. GOVERNING LAW
THESE presents are governed by, and shall be construed in accordance
with, English law.
27. SUBMISSION TO JURISDICTION
(A) EACH of IBM Credit, IBM International Finance and IBM irrevocably
agrees
for the benefit of the Trustee, the Noteholders, the Receiptholders
and the Couponholders that the courts of England are to have
jurisdiction
to settle any disputes which may arise out of or in connection with
these presents and that accordingly any suit, action or proceedings
arising
out of or in connection with these presents (together referred to as
"Proceedings") may be brought in the courts of England. Each further
irrevocably
and unconditionally waives and agrees not to raise any objection
which each of them may have now or subsequently to the laying of the
venue of any Proceedings in the courts of England and any claim that any
Proceedings have been brought in an inconvenient forum and further
irrevocably
and unconditionally agrees that a judgment in any Proceedings brought
in the courts of England shall be conclusive and binding upon each
of them and may be enforced in the courts of any other jurisdiction.
Nothing in this Clause shall limit any right to take Proceedings against
IBM Credit, IBM International Finance and IBM in any other court of
competent
jurisdiction, nor shall the taking of Proceedings in one or more
jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
(B) Each of IBM Credit, IBM International Finance and IBM irrevocably and
unconditionally appoints IBM United Kingdom Limited at its registered
office (being at the date hereof at North Harbour, P.O. Box 41,
Portsmouth,
Hampshire PO6 3AU, England for the time being and in the event of its
ceasing so to act will appoint such other person as the Trustee may
approve
and as each of them may nominate in writing to the Trustee for the
purpose to accept service of process on its behalf in England in
respect
of any Proceedings in the courts of England. Each of IBM Credit, IBM
International Finance and IBM:
(i) agrees to procure that, so long as any Note remains liable to
prescription,
there shall be in force an appointment of such a person approved
by the Trustee with an office in London with authority to accept service
as aforesaid;
(ii) agrees that failure by any such person to give notice of such
service
of process to any of IBM Credit, IBM International Finance and IBM shall
not impair the validity of such service or of any judgment based
thereon;
<PAGE> 43
(iii) consents to the service of process in respect of any Proceedings
by the airmailing of copies, postage prepaid, to any of IBM Credit, IBM
International Finance and IBM in accordance with Clause25; and
(iv) agrees that nothing in these presents shall affect the right to
serve process in any other manner permitted by law.
28. COUNTERPARTS
THIS Trust Deed and any Trust Deed supplemental hereto may be executed
and
delivered in any number of counterparts, all of which, taken together,
shall constitute one and the same deed and any party to this Trust Deed
or any Trust Deed supplemental hereto may enter into the same by
executing and delivering a counterpart.
IN WITNESS whereof this Trust Deed has been executed as a deed by the
Issuers and the Trustee and entered into the day and year first above
written.
SCHEDULE 1
TERMS AND CONDITIONS OF THE NOTES
The following are the Terms and Conditions of the Notes to be issued by
an Issuer which will be incorporated by reference into each temporary
global
Note, permanent global Note and definitive Note, provided that, in
the latter case, only if permitted by the relevant stock exchange (if
any)
and agreed by the relevant Issuer and the relevant Purchaser(s) at the
time of issue but if not so permitted and agreed, each such definitive
Note will have endorsed thereon or attached thereto such Terms and
Conditions.
The applicable Pricing Supplement in relation to any Series (as
defined below) of Notes may specify other terms and conditions which
shall,
to the extent so specified or to the extent inconsistent with such Terms
and Conditions, supplement, replace or modify the following Terms and
Conditions for the purpose of such Series of Notes. The applicable
Pricing
Supplement will be endorsed upon, or attached to, each temporary
global Note, permanent global Note and definitive Note. Reference should
be made to Form of the Notes above for the form of Pricing Supplements
which will include the definitions of certain terms used in the following
Terms and Conditions.
This Note is one of a Series of notes (the notes of such Series being
hereinafter
called the ''Notes'', which expression shall mean (i) in relation
to any Notes represented by a global Note, units of the lowest Specified
Denomination in the Specified Currency, (ii) definitive Bearer Notes
issued in exchange (or part exchange) for a global Note, (iii)
definitive
Registered Notes issued in exchange (or part exchange) for a temporary
global Note and (iv) any global Note) constituted by a Trust Deed (the
''Principal Trust Deed'') dated 30th July, l993 and made between IBM
International Finance N.V. (''IBM International Finance'') and The Law
Debenture
Trust Corporation p.l.c. (the ''Trustee'', which expression shall
<PAGE> 44
wherever the context permits include all other persons or companies who
are for the time being acting as trustee under the Trust Deed) as
modified
and restated by a First Supplemental Trust Deed (the ''First Supplemental
Trust Deed'') dated 28th February, 1996 and made between IBM
International
Finance, IBM Credit Corporation (''IBM Credit''), International
Business Machines Corporation (''IBM'' and, together with IBM
International
Finance and IBM Credit, the ''Issuers'' and each an ''Issuer'') and
the Trustee, as further modified by a Second Supplemental Trust Deed
(the ''Second Supplemental Trust Deed'') dated 10th March, 1997, as
further
modified by a Third Supplemental Trust Deed (the ''Third Supplemental
Trust Deed'') dated 6th March, 1998 and as further amended and restated
by a Fourth Supplemental Trust Deed (the ''Fourth Supplemental Trust
Deed''
and, together with the Principal Trust Deed, the First Supplemental
Trust Deed, the Second Supplemental Trust Deed and the Third Supplemental
Trust Deed, the ''Trust Deed'') dated 5th March, 1999 each made between
the same parties. The Notes, the Receipts (as defined below) and the
Coupons (also as defined below) also have the benefit of an Agency
Agreement
(Amended and Restated) (the ''Agency Agreement'') dated 5th March,
1999 made between the Issuers, the Trustee, The Chase Manhattan Bank as
issuing and principal paying agent and agent bank and, if so specified
in
the applicable Pricing Supplement (as defined below), as calculation
agent (the ''Agent'', which expression shall include any successor such
agent),
the other paying agents named therein (together with the Agent, the
''Paying Agents'', which expression shall include any additional or
successor paying agents) and The Chase Manhattan Bank as registrar in
respect
of Registered Notes issued by IBM International Finance (the
''Registrar'',
which expression shall include any successor registrar). References
herein to the ''Issuer'' shall be references to the party specified
as such in the applicable Pricing Supplement.
Interest bearing definitive Bearer Notes (unless otherwise indicated in
the applicable Pricing Supplement) have interest coupons (''Coupons'')
and,
if indicated in the applicable Pricing Supplement, talons for further
Coupons (''Talons'') attached on issue. Any reference herein to Coupons
or coupons shall, unless the context otherwise requires, be deemed to
include a reference to Talons or talons. Definitive Bearer Notes
repayable
in instalments have receipts (''Receipts'') for the payment of the
installments
of principal (other than the final instalment) attached on issue.
Registered Notes do not have Receipts or Coupons attached on issue.
The Pricing Supplement for this Note is attached hereto or endorsed
hereon
and supplements these Terms and Conditions and may specify other terms
and conditions which shall, to the extent so specified or to the extent
inconsistent with these Terms and Conditions, supplement, replace or
modify these Terms and Conditions for the purposes of this Note.
References
herein to ''applicable Pricing Supplement'' are to the Pricing
Supplement attached hereto or endorsed hereon.
<PAGE> 45
The Trustee acts for the benefit of the holders of the Notes (the ''Note
holders'', which expression shall, in relation to any Notes represented
by a global Note, be construed as provided below), the holders of the
Receipts
(the ''Receiptholders'') and the holders of the Coupons (the
''Couponholders'',
which expression shall, unless the context otherwise requires,
include the holders of the Talons (the ''Talonholders'')), all in
accordance with the provisions of the Trust Deed.
As used herein, ''Series'' means the Notes issued on the date hereof
together
with any other Notes expressed to form a single series therewith or
with which the Notes are expressed to form a single series and which are
denominated in the same Specified Currency and which have the same
Maturity
Date, Interest/Payment Basis and interest payment dates (if any)
(all as indicated in the applicable Pricing Supplement) and the terms of
which (save for the Issue Date, the Interest Commencement Date and/or
the Issue Price (all as indicated as aforesaid)) are otherwise identical
(including as to whether or not the Notes are listed). As used herein,
''Tranche'' means all Notes of the same Series with the same Issue Date,
Interest Commencement Date and Issue Price.
Copies of the Trust Deed, the Agency Agreement (which contains the form
of Pricing Supplement) and the applicable Pricing Supplement are
available
for inspection at the specified office of each of the Trustee, the
Paying
Agents and, where applicable, the Registrar save that, if this Note
is an unlisted Note of any Series, the applicable Pricing Supplement will
only be available for inspection by a Noteholder holding one or more
unlisted Notes of that Series and such Noteholder must produce evidence
satisfactory to the relevant Paying Agent, the Registrar or the Trustee,
as the case may be, as to its identity. The Noteholders, the
Receiptholders
and the Couponholders are deemed to have notice of, and are entitled
to the benefit of, all the provisions of the Trust Deed, the Agency
Agreement
and the applicable Pricing Supplement, which are binding on them.
Words and expressions defined in the Trust Deed or the Agency Agreement
or used in the applicable Pricing Supplement shall have the same
meanings
where used in these Terms and Conditions unless the context otherwise
requires or unless otherwise stated and provided that, in the event of
inconsistency between the Agency Agreement and the Trust Deed, the Trust
Deed will prevail and, in the event of inconsistency between the Agency
Agreement or the Trust Deed and the applicable Pricing Supplement, the
applicable Pricing Supplement will prevail.
1. Form, Denomination and Title
The Notes are in bearer form (''Bearer Notes'') and/or (if issued by IBM
International Finance) in registered form (''Registered Notes'') in the
Specified Currency and Specified Denomination(s) and definitive Notes
will be serially numbered.
This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon
Note, an Index Linked Note or a combination of any of the foregoing,
depending
upon the Interest Basis shown in the applicable Pricing Supplement.
This Note may be an Index Linked Redemption Note, an Instalment Note, a
Dual Currency Note, a Partly Paid Note or a combination of any of the
foregoing,
depending on the Redemption/Payment Basis shown in the applicable
Pricing Supplement.
<PAGE> 46
Definitive Bearer Notes are issued with Coupons attached, unless they are
Zero Coupon Notes in which case references to Coupons and Couponholders
in these Terms and Conditions are not applicable. Registered Notes are
issued without Receipts, Coupons or Talons. Wherever Dual Currency Notes
or Index Linked Notes are issued to bear interest on a fixed or floating
rate basis or on a non-interest bearing basis, the provisions in these
Terms and Conditions relating to Fixed Rate Notes, Floating Rate Notes
and Zero Coupon Notes, respectively, shall, where the context so admits,
apply to such Dual Currency Notes or Index Linked Notes.
Subject as set out below, title to the Bearer Notes, the Receipts and
Coupons
will pass by delivery. The holder of each Coupon or Receipt, whether
or not such Coupon or Receipt is attached to a Note, in his capacity
as such, shall be subject to and bound by all the provisions contained
in
the relevant Note. Title to Registered Notes will pass upon registration
of the transfer in the books of the Registrar in New York City. To the
extent permitted by law, the Issuer, the Paying Agents, the Registrar
and the Trustee shall be entitled to deem and treat the bearer of any
Bearer
Note, Receipt or Coupon and any person in whose name a Registered Note
shall be registered as the absolute owner thereof (notwithstanding any
notice to the contrary (other than any notice delivered in compliance
with the terms of this Note regarding transfer and exchange of Registered
Notes as set forth in Condition 14) and whether or not such Note,
Receipt
or Coupon shall be overdue and notwithstanding any notation of ownership
or writing thereon or notice of any previous loss or theft thereof)
for all purposes, but, in the case of any global Note, without
prejudice to the provisions set out below.
For so long as any of the Notes are represented by a global Note, each
person
who is for the time being shown in the records of Morgan Guaranty
Trust Company of New York, Brussels office, as operator of the Euroclear
System (''Euroclear'') and/or of Cedelbank as the holder of a particular
nominal amount of such Notes (in which regard any certificate or other
document issued by Euroclear or Cedelbank as to the nominal amount of
such Notes standing to the account of any person shall be conclusive and
binding for all purposes save in the case of manifest error) shall be
treated
by the Issuer, the Agent, the Registrar and any other Paying Agent
as a holder of such nominal amount of such Notes for all purposes other
than for the payment of principal and interest on such Notes, the right
to which shall be vested, as against the Issuer, the Agent, the Registrar
and any other Paying Agent, solely in the bearer of the global Note in
accordance with and subject to its terms (and the expressions
''Noteholder''
and ''holder of Notes'' and related expressions shall be construed
accordingly). Notes which are represented by a global Note will only be
transferable in accordance with the rules and procedures for the time
being of Euroclear and/or Cedelbank, as the case may be.
Any reference herein to Euroclear and/or Cedelbank shall, whenever the
context so permits, be deemed to include a reference to any additional or
alternative clearance system approved by the Issuer, the relevant Dealer,
the Agent and the Trustee.
<PAGE> 47
2. Status of the Notes
The Notes and the relative Coupons and Receipts are direct,
unconditional,
unsubordinated and (subject to Condition 3) unsecured obligations of
the Issuer and rank and will rank pari passu without any preference among
themselves with all other outstanding, unsecured and unsubordinated
obligations, present and future (other than obligations preferred by
mandatory provisions of law) of the Issuer.
3. Negative Pledge; Limitation on Sale and Leaseback Transactions
(a) If the Issuer is IBM, the following provisions of this Condition
3(a) shall apply:---
So long as any of the Notes, Receipts or Coupons remains outstanding (as
defined in the Trust Deed), the Issuer will not create, assume, incur or
guarantee, and will not permit any Restricted Subsidiary to create,
assume,
incur or guarantee, any Secured Indebtedness without making provision
whereby all the Notes, Receipts and Coupons shall be secured equally
and rateably with (or prior to) such Secured Indebtedness (together with,
if the Issuer shall so determine, any other indebtedness of the Issuer
or such Restricted Subsidiary then existing or thereafter created which
is not subordinated to the Notes, Receipts and Coupons) so long as such
Secured Indebtedness shall be outstanding unless such Secured
Indebtedness,
when added to (a) the aggregate amount of all Secured Indebtedness
then outstanding (not including in this computation Secured Indebtedness
if the Notes, Receipts and Coupons are secured equally and rateably with
(or prior to) such Secured Indebtedness and further not including in
this computation any Secured Indebtedness which is concurrently being
retired)
and (b) the aggregate amount of all Attributable Debt then outstanding
pursuant to Sale and Leaseback Transactions entered into by the Issuer
after 15th July, 1985, or entered into by a Restricted Subsidiary after
15th July, 1985, or, if later, the date on which it became a Restricted
Subsidiary (not including in this computation any Attributable Debt
which is concurrently being retired), would not exceed 10 per cent. of
Consolidated Net Tangible Assets.
So long as any of the Notes, Receipts or Coupons remains outstanding,
the
Issuer will not, and will not permit any Restricted Subsidiary to, enter
into any Sale and Leaseback Transaction unless (a) the sum of (i) the
Attributable Debt to be outstanding pursuant to such Sale and Leaseback
Transaction, (ii) all Attributable Debt then outstanding pursuant to all
other Sale and Leaseback Transactions entered into by the Issuer after
15th July, 1985, or entered into by a Restricted Subsidiary after 15th
July, 1985, or, if later, the date on which it became a Restricted
Subsidiary,
and (iii) the aggregate of all Secured Indebtedness then outstanding
(not including in this computation Secured Indebtedness if the Notes,
Receipts and Coupons are secured equally and rateably with (or prior to)
such Secured Indebtedness) would not exceed 10 per cent. of
Consolidated
Net Tangible Assets or (b) an amount equal to the greater of (i) the
net proceeds to the Issuer or the Restricted Subsidiary of the sale of
the Principal Property sold and leased back pursuant to such Sale and
Leaseback
Transaction and (ii) the amount of Attributable Debt to be outstanding
pursuant to such Sale and Leaseback Transaction, is applied to the
retirement of Funded Debt of the Issuer or any Restricted Subsidiaries
(other than Funded Debt which is subordinated to the Notes, Receipts and
Coupons or which is owing to the Issuer or any Restricted Subsidiaries)
within 180 days after the consummation of such Sale and Leaseback
Transaction.
<PAGE> 48
For the purposes of this Condition 3(a):---
''Attributable Debt'' means, as of the date of its determination, the
present
value (discounted semi- annually at the Attributable Interest Rate)
of the obligation of a lessee for rental payments pursuant to any Sale
and Leaseback Transaction (reduced by the amount of the rental
obligations
of any sublessee of all or part of the same property) during the
remaining
term of such Sale and Leaseback Transaction (including any period
for which the lease relating thereto has been extended), such rental
payments
not to include amounts payable by the lessee for maintenance and
repairs, insurance, taxes, assessments and similar charges and for
contingent
rents (such as those based on sales). In the case of any Sale and
Leaseback Transaction in which the lease is terminable by the lessee upon
the payment of a penalty, such rental payments shall be considered for
purposes of this definition to be the lesser of (a) the rental payments
to be paid under such Sale and Leaseback Transaction until the first
date
(after the date of such determination) upon which it may be so
terminated
plus the then applicable penalty upon such termination and (b) the
rental payments required to be paid during the remaining term of the such
Sale and Leaseback Transaction (assuming such termination provision is
not exercised).
''Attributable Interest Rate'' means, as of the date of its
determination,
the weighted average of the interest rates (or the effective rate in
the case of Original Issue Discount Securities or discount securities)
of all Notes outstanding and all securities issued and outstanding (as
defined in the 1985 Indenture) under the 1985 Indenture to which Sections
6.05 and 6.06 of the 1985 Indenture apply (and whose application has not
been waived).
''Board of Directors'' means either the board of directors of the Issuer,
any executive officer of the Issuer duly authorised to act in the name
of or on behalf of that board or any committee consisting of two or more
persons (who need not be directors) duly authorised to act in the name
of or on behalf of that board.
''Board Resolution'' means a copy of a resolution certified by the
Secretary
or an Assistant Secretary of the Issuer to have been duly adopted by
the Board of Directors and to be in full force and effect on the date
of such certification.
<PAGE> 49
''Consolidated Net Tangible Assets'' means, at any date, the total assets
appearing on the most recently prepared consolidated balance sheet of
the Issuer and the Subsidiaries as of the end of a fiscal quarter of the
Issuer, prepared in accordance with generally accepted accounting
principles,
less (a) all current liabilities as shown on such balance sheet and
(b) intangible assets. ''Intangible assets'' means the value (net of
any applicable reserves), as shown or reflected in such balance sheet,
of:
(i) all trade names, trademarks, licences, patents, copyrights and
goodwill;
(ii) organisational and development costs; (iii) deferred charges
(other than prepaid items such as insurance, taxes, interest,
commissions,
rents and similar items and tangible assets being amortised); and
(iv) unamortised debt discount and expense, less unamortised premium; but
in no event shall the term ''intangible assets'' include program
products.
''Funded Debt'' means any Indebtedness maturing by its terms more than
one
year from the date of the issuance thereof, including any Indebtedness
renewable or extendable at the option of the obligor to a date later
than one year from the date of the original issuance thereof.
''Indebtedness'' of any corporation means all indebtedness representing
money borrowed which is created, assumed, incurred or guaranteed in any
manner by such corporation or for which such corporation is otherwise
responsible or liable (whether by agreement to purchase indebtedness of,
or to supply funds to or invest in, others).
''Lien'' means any mortgage, pledge, security interest, lien, charge or
other encumbrance, but does not include any of the foregoing types of
encumbrances
that are incidental to the conduct of the business of the Issuer
or any Restricted Subsidiary or the ownership of the property and assets
of any of them and that were not incurred in connection with the
incurrence
any Indebtedness. Such incidental encumbrances that are to be
excluded from the term ''Liens'' include without limitation: pledges or
deposits made to secure obligations of the Issuer or a Restricted
Subsidiary
under workmen's compensation laws or similar legislation; liens
imposed by law, such as materialmen's, mechanics', carriers', workmen's,
vendors', repairmen's or other like liens incurred in the ordinary course
of business; governmental (Federal, state or municipal) liens arising
out of contracts for the purchase of products of the Issuer or a
Restricted
Subsidiary, and deposits or pledges to obtain the release of any of
the foregoing liens; liens created by or resulting from any litigation or
legal proceeding that is currently being contested in good faith by
appropriate
proceedings; leases made or existing on Principal Property entered
into in the ordinary course of business by the Issuer or a Restricted
Subsidiary; landlords' liens under leases of Principal Property to
which
the Issuer or a Restricted Subsidiary is a party; zoning restrictions,
easements, licenses or restrictions on the use of Principal Property
or minor irregularities in the title thereto; deposits in connection
with
bids, tenders or contracts (other than for the payment of money) to
which
the Issuer or any Restricted Subsidiary is a party; deposits to secure
public or statutory obligations of the Issuer or any Restricted
Subsidiary;
deposits in connection with obtaining or maintaining self-insurance
or to obtain the benefits of any law, regulation or arrangement
pertaining
to unemployment insurance, old age pensions, social security or similar
matters; deposits of cash or obligations of the United States of America
to secure surety, appeal or customs bonds to which the Issuer or any
Restricted Subsidiary is a party; and liens or taxes or assessments or
governmental charges or levies not yet due or delinquent, or which can
thereafter be paid without penalty, or which are being contested in good
faith by appropriate proceedings.
<PAGE> 50
''1985 Indenture'' means the Indenture dated as of 15th July, 1985,
between
the Issuer and The Bank of New York (successor to Morgan Guaranty Trust
Company of New York), as Trustee, as supplemented and amended by the
Instrument of Resignation, Appointment and Acceptance dated as of 1st
May,
1986, among the Issuer, Morgan Guaranty Trust Company of New York and
The Bank of New York.
''Original Issue Discount Security'' means any security the terms of
which
provide for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the maturity thereof.
''Person'' or ''person'' means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organisation or government or agency or political subdivision thereof.
''Principal Property'' means any land, land improvements, buildings and
associated factory, laboratory and office equipment (excluding all
products
marketed by the Issuer or any Subsidiary) constituting a manufacturing
facility, development facility, warehouse facility, service facility
or office facility (including any portion thereof), which facility (a)
is owned by or leased to the Issuer or any Restricted Subsidiary, (b) is
located within the United States, and (c) has an acquisition cost plus
capitalised improvements in excess of 0.15 per cent. of Consolidated Net
Tangible Assets as of the date of such determination, other than (i) any
such facility, or portion thereof, which has been financed by obligations
issued by or on behalf of a state, a Territory or a possession of the
United States, or any political subdivision of any of the foregoing, or
the District of Columbia, the interest on which is, or at the time of
issuance of such obligations was determined by counsel to be, excludable
from the gross income of the holders thereof (other than a ''substantial
user'' of such facility or a ''related person'' as those terms were used
in Section 147 of the Internal Revenue Code of 1986 of the United States
of America (the ''Code'')) pursuant to the provisions of Section 103
and related Sections of the Code (or any similar provisions hereafter
enacted)
as in effect at the time of issuance of such obligations, (ii) any
such facility which the Board of Directors by Board Resolution declares
is not of material importance to the Issuer and the Restricted
Subsidiaries
taken as a whole, and (iii) any such facility, or portion thereof,
owned or leased jointly or in common with one or more Persons other than
the Issuer and any Subsidiary and in which the interest of the Issuer
and all Subsidiaries does not exceed 50 per cent.
''program products'' means the capitalised amount spent on software
product
development after each product's technological feasibility point, net
of amortisation.
''Restricted Securities'' means any shares of the capital stock or
Indebtedness of any Restricted Subsidiary.
<PAGE> 51
''Restricted Subsidiary'' means (a) any Subsidiary (i) which has
substantially
all its property within the United States of America, (ii) which
owns or is a lessee of any Principal Property, and (iii) in which the
investment
of the Issuer and all other Subsidiaries exceeds 0.15 per cent.
of Consolidated Net Tangible Assets as of the date of such determination;
provided, however, that the term ''Restricted Subsidiary'' shall not
include (A) any Subsidiary (x) primarily engaged in the business of
purchasing,
holding, collecting, servicing or otherwise dealing in and with
instalment sales contracts, leases, trust receipts, mortgages, commercial
paper or other financing instruments, and any collateral or agreements
relating thereto, including in the business, individually or through
partnerships,
of financing (whether through long- or short-term borrowings,
pledges, discounts or otherwise) the sales, leasing or other operations
of the Issuer and the Subsidiaries or any of them, or (y) engaged in the
business of financing the assets and operations of third parties, and
(z) in any case, not, except as incidental to such financing business,
engaged in owning, leasing or operating any property which but for this
proviso would qualify as Principal Property or (B) any Subsidiary
acquired
or organised after 15th July, 1985, for the purpose of acquiring the
stock or business or assets of any Person other than the Issuer or any
Restricted
Subsidiary, whether by merger, consolidation, acquisition of
stock or assets or similar transaction analogous in purpose or effect, so
long as such Subsidiary shall not have, since such date, and does not
hereafter
acquire by merger, consolidation, acquisition of stock or assets
or similar transaction analogous in purpose or effect all or any
substantial
part of the business or assets of the Issuer or any Restricted
Subsidiary;
and (b) any other Subsidiary which is hereafter designated by
the Board of Directors as a Restricted Subsidiary.
''Sale and Leaseback Transaction'' means any arrangement with any Person
providing for the leasing by the Issuer or any Restricted Subsidiary of
any Principal Property (whether such Principal Property is now owned or
hereafter acquired) that has been or is to be sold or transferred by
the
Issuer or such Restricted Subsidiary to such Person, other than (a)
temporary
leases for a term, including renewals at the option of the lessee,
of not more than three years; (b) leases between the Issuer and a
Restricted
Subsidiary or between Restricted Subsidiaries; and (c) leases of
Principal Property executed by the time of, or within 180 days after the
latest of, the acquisition, the completion of construction or
improvement
(including any improvements on property which will result in such
property becoming Principal Property) or the commencement of commercial
operation of such Principal Property.
''Secured Indebtedness'' means (a) Indebtedness of the Issuer or a
Restricted
Subsidiary which is secured by any Lien upon any Principal Property
or Restricted Securities and (b) Indebtedness of the Issuer or a
Restricted
Subsidiary in respect of any conditional sale or other title retention
agreement covering Principal Property or Restricted Securities
provided
that ''Secured Indebtedness'' shall not include any of the
following:---
(i) Indebtedness of the Issuer and the Restricted Subsidiaries
outstanding
on 15th July, 1985, secured by then existing Liens upon, or incurred
in connection with conditional sale agreements or other title retention
agreements with respect to, Principal Property or Restricted Securities
<PAGE> 52
(ii) Indebtedness which is secured by (A) purchase money Liens upon
Principal
Property or Restricted Securities acquired after 15th July, 1985,
or (B) Liens placed on Principal Property after 15th July, 1985, during
construction or improvement thereof (including any improvements on
property
which resulted or will result in such property becoming Principal
Property) or placed thereon within 180 days after the later of
acquisition,
completion of construction or improvement or the commencement of
commercial
operation of such Principal Property or improvement or placed on
Restricted Securities acquired after 15th July, 1985 or (C) conditional
sale agreements or other title retention agreements with respect to any
Principal Property or Restricted Securities acquired after 15th July,
1985,
provided that (in the case of (A), (B) or (C) above) (x) such Lien or
agreement secures all or any part of the Indebtedness incurred for the
purpose of financing all or any part of the purchase price or cost of
construction of such Principal Property or improvement or Restricted
Securities
and (y) such Lien or agreement does not extend to any Principal
Property or Restricted Securities other than the Principal Property or
Restricted
Securities so acquired or the Principal Property, or portion thereof,
on which the property so constructed, or such improvement, is located;
provided, however, that the amount by which the aggregate principal
amount of Indebtedness secured by any such Lien or agreement exceeds the
cost to the Issuer or such Restricted Subsidiary of the related
acquisition,
construction or improvement shall be considered to be ''Secured
Indebtedness'';
(iii) Indebtedness which is secured by Liens on Principal Property or
Restricted
Securities, which Liens exist at the time of acquisition (by any
manner whatsoever) of such Principal Property or Restricted Securities
by the Issuer or a Restricted Subsidiary;
(iv) Indebtedness of Restricted Subsidiaries owing to the Issuer or any
other Restricted Subsidiary and Indebtedness of the Issuer owing to any
Restricted Subsidiary;
(v) in the case of any corporation which shall have become or becomes
(by any manner whatsoever), as the case may be, a Restricted Subsidiary
after 15th July, 1985, Indebtedness which is secured by Liens upon, or
conditional
sale agreements or other title retention agreements with respect
to, its property which constitutes Principal Property or Restricted
Securities, which Liens shall have existed or exist, as the case may be,
at the time such corporation shall have become or becomes, as the case
may be, a Restricted Subsidiary;
(vi) guarantees by the Issuer of Secured Indebtedness and Attributable
Debt of any Restricted Subsidiaries and guarantees by a Restricted
Subsidiary
of Secured Indebtedness and Attributable Debt of the Issuer and any
other Restricted Subsidiaries;
(vii) Indebtedness arising from any Sale and Leaseback Transaction;
<PAGE> 53
(viii) Indebtedness secured by Liens on property of the Issuer or a
Restricted
Subsidiary in favour of the United States of America, any state,
Territory or possession thereof, or the District of Columbia, or any
department,
agency or instrumentality or political subdivision of the United
States of America or any state, Territory or possession thereof, or the
District of Columbia, or in favour of any other country or any political
subdivision thereof, if such Indebtedness was incurred for the purposes
of financing all or any part of the purchase price or the cost of
construction
of the property subject to such Liens; provided, however, that
the amount by which the aggregate principal amount of Indebtedness
secured
by any such Lien exceeds the cost to the Issuer or such Restricted
Subsidiary of the related acquisition or construction shall be considered
to be ''Secured Indebtedness''; and
(ix) the replacement, extension or renewal (or successive replacements,
extensions or renewals) of any Indebtedness (in whole or in part)
excluded
from the definition of ''Secured Indebtedness'' by subparagraphs (i)
through (viii) above; provided, however, that no Lien securing, or
conditional
sale or title retention agreement with respect to, such Indebtedness
shall extend to or cover any Principal Property or any Restricted
Securities, other than such property which secured the Indebtedness so
replaced,
extended or renewed (plus improvements on or to any such Principal
Property); provided further, however, that to the extent that such
replacement, extension or renewal increased or increases the principal
amount
of Indebtedness secured by such Lien or was or is in a principal
amount
in excess of the principal amount of Indebtedness excluded from the
definition of ''Secured Indebtedness'' by subparagraphs (i) through
(viii)
above, the amount of such increase or excess shall be considered to be
''Secured Indebtedness''.
In no event shall the foregoing provisions be interpreted to mean or
their
operation to cause the same Indebtedness to be included more than once
in the calculation of ''Secured Indebtedness'' as that term is used in
this Condition 3(a).
''Subsidiary'' means any corporation a majority of the Voting Shares of
which are at the time owned or controlled, directly or indirectly, by
the
Issuer or by one or more Subsidiaries, or by the Issuer and one or more
Subsidiaries.
''Voting Shares'' means, as to shares of a particular corporation,
outstanding
shares of stock of any class of such corporation entitled to vote
in the election of directors, excluding shares entitled so to vote only
upon the happening of some contingency.
(b) If the Issuer is IBM Credit, the following provisions of this
Condition 3(b) shall apply:---
<PAGE> 54
Except as provided in this Condition 3(b), so long as any of the Notes,
Receipts or Coupons remains outstanding, the Issuer will not itself, and
will not 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 (all such indebtedness for money borrowed and
other such indebtedness so evidenced being hereafter in this Condition
3(b) called ''Debt''), secured by pledge of, or mortgage, security
interest
or other lien on, any property or assets, whether now owned or hereafter
acquired, of the Issuer or any Restricted Subsidiary, or any shares
of stock or Debt of any Restricted Subsidiary (such pledges, mortgages,
security interests and other liens being hereafter in this Condition
3(b) called a ''Lien'' or ''Liens'') without effectively providing that
the Notes, Receipts and Coupons (together with, if the Issuer shall so
determine, any other Debt of the Issuer or such Restricted Subsidiary
then
existing or thereafter created which is not subordinated to the Notes,
Receipts and Coupons) shall be secured equally and rateably 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 Issuer and its Restricted Subsidiaries would not exceed 10 per
cent.
of Consolidated Net Tangible Assets; provided, however, that this
Condition
3(b) shall not apply to, and there shall be excluded from secured
Debt in any computation under this Condition 3(b), Debt secured by:---
(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 Issuer or any Restricted Subsidiary;
(3) Liens on physical property, shares of stock or debt hereafter
acquired
(or, in the case of property, constructed) by the Issuer 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 favour of the Issuer or any Restricted Subsidiary;
(5) Liens in favour of the United States of America, 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) any Liens securing the performance of any contract or undertaking
not directly or indirectly in connection with the borrowing of money, the
obtaining of advances or credit or the securing of Debt, if made and
continuing in the ordinary course of business;
<PAGE> 55
(7) Liens incurred (no matter when created) in connection with the
Issuer's
or a Restricted Subsidiary's engaging in leveraged or single-investor
lease transactions, provided that the instrument creating or evidencing
any borrowings secured by such Lien shall provide that such borrowings
are payable solely out of the income and proceeds of the property
subject
to such Lien and are not a general obligation of the Issuer or such
Restricted Subsidiary; and
(8) any extension, renewal or replacement (or successive extensions,
renewals
or replacements), as a whole or in part, of any Lien referred to
in the foregoing sub-paragraphs (1) to (7), inclusive; provided, however,
that (i) such extension, renewal or replacement Lien shall be limited
to all or part of the same property, shares of stock or debt that secured
the Lien extended, renewed or replaced (plus improvements on such
property)
and (ii) the Debt secured by such Lien at such time is not increased.
For the purposes of this Condition 3(b):---
''Consolidated Net Tangible Assets'' means, at any date, the total
assets
appearing on the most recently prepared consolidated balance sheet of
the Issuer and its Restricted Subsidiaries as at the end of a fiscal
quarter
of the Issuer, 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
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, trade
marks, licences, patents, copyrights and goodwill; (ii) organisational
and
development costs; (iii) deferred charges (other than prepaid items such
as insurance, taxes, interest, commissions, rents and similar items
and tangible assets being amortised); and (iv) unamortised debt discount
and expense, less unamortised premium.
''Restricted Subsidiary'' means a Subsidiary organised under the laws of
any State of the United States of America or the District of Columbia.
''Subsidiary'' means a corporation more than 50 per cent. of the
outstanding
voting stock of which is owned, directly or indirectly, by the Issuer
or by one or more Subsidiaries of the Issuer, or by the Issuer and one
or more Subsidiaries.
(c) If the Issuer is IBM International Finance, the following provisions
of this Condition 3(c) shall apply:---
<PAGE> 56
So long as any of the Notes, Receipts or Coupons remains outstanding,
the
Issuer will not incur, create, issue, assume or suffer to exist any
mortgage,
charge, pledge or other security interest (other than any charge
or other security interest provided by mandatory provisions of law or
any
security interest created in favour of the relevant counterparty in
connection
with or arising out of any interest rate or currency exchange
or forward exchange agreement entered into by the Issuer and not
directly
involving the borrowing of money or the obtaining of advances or credit
and only if entered into and continuing in the ordinary course of
business)
upon the whole or any part of its or any of its subsidiaries' present
or future property, assets or revenues or its or any of its
subsidiaries'
present or future rights with respect to such property, assets or
revenues to secure any present or future Indebtedness issued by, or
guaranteed
by, or in respect of which an indemnity is given by, it or any of
its subsidiaries without at the same time, or prior thereto, securing
the Notes, Receipts and Coupons equally and rateably with such
Indebtedness
or according to the Notes, Receipts and Coupons such other security as
the Trustee shall in its absolute discretion deem not materially less
beneficial to the Noteholders or as shall be approved by an Extraordinary
Resolution of such Noteholders.
For the purposes of this Condition 3(c), the expression ''Indebtedness''
includes (i) any indebtedness for borrowed moneys, (ii) liabilities
under
any bond, note, debenture, loan stock or other security, (iii)
liabilities
in respect of any acceptance credit facilities, and (iv) liabilities
incurred as consideration for any assets or services.
4. Interest
(a) Interest on Fixed Rate Notes
Each Fixed Rate Note bears interest on its outstanding nominal amount
(or,
if it is a Partly Paid Note, the amount paid up) from (and including)
the Interest Commencement Date at the rate(s) per annum equal to the
Rate(s)
of Interest payable in arrear on the Interest Payment Date(s) in each
year and on the Maturity Date if that does not fall on an Interest
Payment Date.
Except as provided in the applicable Pricing Supplement, the amount of
interest payable on each Interest Payment Date in respect of the Fixed
Interest
Period ending on such date will amount to the Fixed Coupon Amount.
Payments of interest on any Interest Payment Date will, if so specified
in the applicable Pricing Supplement, amount to the Broken Amount(s) so
specified.
As used in these Conditions, ''Fixed Interest Period'' means the period
from (and including) an Interest Payment Date (or the Interest
Commencement
Date) to (but excluding) the next (or first) Interest Payment Date.
If interest is required to be calculated for a period ending other than
on an Interest Payment Date, such interest shall be calculated by
applying
the Rate of Interest to each Specified Denomination, multiplying such
sum by the applicable Fixed Day Count Fraction, and rounding the
resultant
figure to the nearest sub-unit of the relevant Specified Currency,
half of any such sub-unit being rounded upwards or otherwise in
accordance with applicable market convention.
In these Conditions, ''Fixed Day Count Fraction'' means:
<PAGE> 57
(i) if ''Actual/Actual'' is specified in the applicable Pricing
Supplement,
the number of days in the relevant period from and including the most
recent Interest Payment Date (or, if none, the Interest Commencement
Date) to but excluding the relevant payment date divided by (x) in the
case
of Notes where interest is scheduled to be paid only by means of
regular
annual payments, the number of days in the period from and including
the most recent Interest Payment Date (or, if none, the Interest
Commencement
Date) to but excluding the next scheduled Interest Payment Date
or (y) in the case of Notes where interest is scheduled to be paid other
than only by means of regular annual payments, the product of the number
of days in the period from and including the most recent Interest
Payment
Date (or, if none, the Interest Commencement Date) to but excluding
the next scheduled Interest Payment Date and the number of Interest
Payment
Dates that would occur in one calendar year assuming interest was to
be payable in respect of the whole of that year; and
(ii) if ''30/360'' is specified in the applicable Pricing Supplement,
the
number of days in the period from and including the most recent Interest
Payment Date (or, if none, the Interest Commencement Date) to but
excluding the relevant payment date (such number of days being calculated
on the basis of 12 30-day months) divided by 360; and
''sub-unit'' means, with respect to any currency other than euro, the
lowest
west amount of such currency that is available as legal tender in the
country of such currency and, with respect to euro, means one cent.
(b) Interest on Floating Rate Notes and Index Linked Interest Notes
(i) Interest Payment Dates
Each Floating Rate Note and Index Linked Interest Note bears interest on
its outstanding nominal amount (or, if it is a Partly Paid Note, the
amount
paid up) from (and including) the Interest Commencement Date and
such
interest will be payable in arrear on either:
(A) the Specified Interest Payment Date(s) (each an ''Interest Payment
Date'') in each year specified in the applicable Pricing Supplement; or
(B) if no Specified Interest Payment Date(s) is/are specified in the
applicable
Pricing Supplement, each date (each an ''Interest Payment Date'')
which falls the number of months or other period specified as the
Specified
Period in the applicable Pricing Supplement after the preceding
Interest Payment Date or, in the case of the first Interest Payment Date,
after the Interest Commencement Date.
Such interest will be payable in respect of each Interest Period (which
expression shall, in these Terms and Conditions, mean the period from
(and
including) an Interest Payment Date (or the Interest Commencement Date)
to (but excluding) the next (or first) Interest Payment Date).
<PAGE> 58
If a Business Day Convention is specified in the applicable Pricing
Supplement
and (x) if there is no numerically corresponding day in the calendar
month in which an Interest Payment Date should occur or (y) if any
Interest Payment Date would otherwise fall on a day which is not a
Business
Day, then, if the Business Day Convention specified is:
(1) in any case where Specified Periods are specified in accordance
with
Condition 4(b)(i)(B) above, the Floating Rate Convention, such Interest
Payment Date (i) in the case of (x) above, shall be the last day that
is a Business Day in the relevant month and the provisions of (B) below
shall apply mutatis mutandis or (ii) in the case of (y) above, shall be
postponed to the next day which is a Business Day unless it would
thereby
fall into the next calendar month, in which event (A) such Interest
Payment
Date shall be brought forward to the immediately preceding Business
Day and (B) each subsequent Interest Payment Date shall be the last
Business
Day in the month which falls the Specified Period after the preceding
applicable Interest Payment Date occurred; or
(2) the Following Business Day Convention, such Interest Payment Date
shall be postponed to the next day which is a Business Day; or
(3) the Modified Following Business Day Convention, such Interest
Payment
Date shall be postponed to the next day which is a Business Day unless
it would thereby fall into the next calendar month, in which event such
Interest Payment Date shall be brought forward to the immediately
preceding Business Day; or
(4) the Preceding Business Day Convention, such Interest Payment Date
shall be brought forward to the immediately preceding Business Day.
In these Conditions, ''Business Day'' means a day which is both:
payments and are open for general business (including dealing in foreign
exchange and foreign currency deposits) in London and any Additional
Business Centre specified in the applicable Pricing Supplement; and
(B) either (1) in relation to any sum payable in a Specified Currency
other than euro, a day on which commercial banks and foreign exchange
markets
settle payments and are open for general business (including dealing
in foreign exchange and foreign currency deposits) in the principal
financial
centre of the country of the relevant Specified Currency (if other
than London and any Additional Business Centre and which if the
Specified
Currency is Australian dollars or New Zealand dollars shall be Sydney
or Auckland, respectively) or (2) in relation to any sum payable in
euro, a day on which the Trans-European Automated Real-Time Gross
Settlement
Express Transfer (TARGET) System (the ''TARGET System'') is open.
(ii) Rate of Interest
The Rate of Interest payable from time to time in respect of Floating
Rate
Notes and Index Linked Interest Notes will be determined in the
manner specified in the applicable Pricing Supplement.
(A) ISDA Determination for Floating Rate Notes
<PAGE> 59
Where ISDA Determination is specified in the applicable Pricing
supplement
as the manner in which the Rate of Interest is to be determined, the
Rate of Interest for each Interest Period will be the relevant ISDA Rate
plus or minus (as indicated in the applicable Pricing Supplement) the
Margin
(if any). For the purposes of this sub-paragraph (A), ''ISDA Rate''
for an Interest Period means a rate equal to the Floating Rate that
would
be determined by the Agent under an interest rate swap transaction if
the Agent were acting as Calculation Agent for that swap transaction
under the terms of an agreement incorporating the 1991 ISDA Definitions
(as supplemented by the 1998 Supplement and the 1998 ISDA Euro
Definitions),
each as amended and updated as at the Issue Date of the first Tranche
of the Notes, published by the International Swaps and Derivatives
Association, Inc. (the ''ISDA Definitions'') and under which:
(1) the Floating Rate Option is as specified in the applicable Pricing
Supplement;
(2) the Designated Maturity is a period specified in the applicable
Pricing Supplement; and
(3) the relevant Reset Date is either (i) if the applicable Floating
rate
Option is based on the London inter-bank offered rate (''LIBOR'') or
on the Euro-zone inter-bank offered rate (''EURIBOR'') for a currency,
the first day of that Interest Period or (ii) in any other case, as
specified in the applicable Pricing Supplement.
For the purposes of this sub-paragraph (A), (i) ''Floating Rate'',
''Calculation
Agent'', ''Floating Rate Option'', ''Designated Maturity'' and
''Reset Date'' have the meanings given to those terms in the ISDA
Definitions,
(ii) the definition of ''Banking Day'' in the ISDA Definitions shall
be amended to insert after the words ''are open for'' in the second
line the word ''general'' and (iii) ''Euro-zone'' means the region
comprised
of Member States of the European Union that adopt the single currency
in accordance with the Treaty.
(B) Screen Rate Determination for Floating Rate Notes
Where Screen Rate Determination is specified in the applicable Pricing
Supplement
as the manner in which the Rate of Interest is to be determined,
the Rate of Interest for each Interest Period will, subject as provided
below, be either:
(1) the offered quotation; or
(2) the arithmetic mean (rounded if necessary to the fifth decimal
place, with 0.000005 being rounded upwards) of the offered quotations,
(expressed as a percentage rate per annum) for the Reference Rate which
appears or appear, as the case may be, on the Relevant Screen Page as at
11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the
case of EURIBOR) on the Interest Determination Date in question plus or
minus (as indicated in the applicable Pricing Supplement) the Margin (if
any), all as determined by the Agent. If five or more of such offered
quotations are available on the Relevant Screen Page, the highest (or, if
there is more than one such highest quotation, one only of such
quotations)
and the lowest (or, if there is more than one such lowest quotation,
one only of such quotations) shall be disregarded by the Agent for the
purpose of determining the arithmetic mean (rounded as provided above)
of such offered quotations.
<PAGE> 60
The Agency Agreement contains provisions for determining the Rate of
Interest
in the event that the Relevant Screen Page is not available or if,
in the case of (1) above, no such offered quotation appears or, in the
case of (2) above, fewer than three such offered quotations appear, in
each case as at the time specified in the preceding paragraph.
If the Reference rate from time to time in respect of Floating Rate Notes
is specified in the applicable Pricing Supplement as being other than
LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be
determined as provided in the applicable Pricing Supplement.
(iii) Minimum Rate of Interest and/or Maximum Rate of Interest
If the applicable Pricing Supplement specifies a Minimum Rate of Interest
for any Interest Period, then, in the event that the Rate of Interest
in respect of such Interest Period determined in accordance with the
provisions
of paragraph (ii) above is less than such Minimum Rate of Interest,
the Rate of Interest for such Interest Period shall be such Minimum
Rate of Interest.
If the applicable Pricing Supplement specifies a Maximum Rate of Interest
for any Interest Period, then, in the event that the Rate of Interest
in respect of such Interest Period determined in accordance with the
provisions
of paragraph (ii) above is greater than such Maximum Rate of Interest,
the Rate of Interest for such Interest Period shall be such Maximum
Rate of Interest.
(iv) Determination of Rate of Interest and calculation of Interest
Amounts
The Agent, in the case of Floating Rate Notes, and the Calculation Agent,
in the case of Index Linked Interest Notes, will at or as soon as
practicable
after each time at which the Rate of Interest is to be determined,
determine the Rate of Interest for the relevant Interest Period. In the
case of Index Linked Interest Notes, the Calculation Agent will notify
the Agent of the Rate of Interest for the relevant Interest Period as
soon as practicable after calculating the same.
The Agent will calculate the amount of interest (the ''Interest Amount'')
payable on the Floating Rate Notes or Index Linked Interest Notes in
respect of each Specified Denomination for the relevant Interest Period.
Each Interest Amount shall be calculated by applying the Rate of Interest
to each Specified Denomination, multiplying such sum by the applicable
Floating Day Count Fraction, and rounding the resultant figure to the
nearest sub-unit of the relevant Specified Currency, half of any such sub
- -unit being rounded upwards or otherwise in accordance with applicable
market convention.
''Day Count Fraction'' means, in respect of the calculation of an amount
of interest for any Interest Period:
(i) if ''Actual/365'' or ''Actual/Actual'' is specified in the
applicable
Pricing Supplement, the actual number of days in the Interest Period
divided by 365 (or, if any portion of that Interest Period falls in a
leap
year, the sum of (A) the actual number of days in that portion of the
Interest Period falling in a leap year divided by 366 and (B) the actual
number of days in that portion of the Interest Period falling in a
non-leap year divided by 365);
(ii) if ''Actual/365 (Fixed)'' is specified in the applicable Pricing
Supplement, the actual number of days in the Interest Period divided by
365;
<PAGE> 61
(iii) if ''Acutal/360'' is specified in the applicable pricing
Supplement,
he actual number of days in the Interest Period divided by 360;
(iv) if ''30/360'', ''360/360'' or ''Bond Basis'' is specified in the
applicable
Pricing Supplement, the number of days in the Interest Period
divided by 360 (the number of days to be calculated on the basis of a
year
of 360 days with 12 30-day months (unless (a) the last day of the
Interest
Period is the 31st day of a month but the first day of the Interest
Period is a day other than the 30th or 31st day of a month, in which
case the month that includes that last day shall not be considered to be
shortened to a 30-day month, or (b) the last day of the Interest Period
is the last day of the month of February, in which case the month of
February
shall not be considered to be lengthened to a 30-day month);
(v) if ''30E/360'' or ''Eurobond Basis'' is specified in the applicable
Pricing Supplement, the number of days in the Interest Period divided by
360 (the number of days to be calculated on the basis of a year of 360
days with 12 30-day months, without regard to the date of the first day
or last day of the Interest Period unless, in the case of an Interest
Period ending on the Maturity Date, the Maturity Date is the last day of
the month of February, in which case the month of February shall not be
considered to be lengthened to a 30-day month); and
(vi) if ''Sterling/FRN'' is specified in the applicable Pricing
Supplement,
the number of days in the Interest Period divided by 365 or, in the
case of an Interest Payment Date falling in a leap year, 366.
(v) Notification of Rate of Interest and Interest Amount
The Agent will cause the Rate of Interest and each Interest Amount for
each
Interest Period and the relevant Interest Payment Date to be notified
to the Issuer, the Trustee (if this Note is a Floating Rate Note or an
Index Linked Interest Note which is listed on any stock exchange) and any
stock exchange on which the relevant Floating Rate Notes or Index Linked
Interest Notes are for the time being listed and notice thereof to be
published in accordance with Condition 16 as soon as possible but in any
event not later than the fourth London Business Day after their
determination.
Each Interest Amount and Interest Payment Date so notified may
subsequently be amended (or appropriate alternative arrangements made by
way of adjustment) without prior notice in the event of an extension or
shortening of the Interest Period. Any such amendment will be promptly
notified to each stock exchange on which the relevant Floating Rate Notes
or Index Linked Interest Notes are for the time being listed and to
Noteholders in accordance with Condition 16. For the purposes of this
paragraph,
the expression ''London Business Day'' means a day (other than a
Saturday or a Sunday) on which banks and foreign exchange markets are
open for business in London.
<PAGE> 62
(vi) Determination or calculation by Trustee
If for any reason the Agent at any time after the Issue Date defaults in
its obligation to determine the Rate of Interest or to calculate any
Interest
Amount in accordance with sub-paragraph (ii)(A) or (B) above or as
otherwise specified in the applicable Pricing Supplement, as the case
may be, and in each case (iv) above, the Trustee shall determine the Rate
of Interest at such rate as, in its absolute discretion (having such
regard
as it shall think fit to the foregoing provisions in this Condition
but subject always to any Minimum Rate of Interest and/or Maximum Rate
of Interest specified in the applicable Pricing Supplement) it shall
deem
fair and reasonable in all the circumstances or, as the case may be,
the Trustee shall calculate the Interest Amount(s) in such manner as it
shall deem fair and reasonable in all the circumstances and each such
determination
or calculation shall be deemed to have been made by the Agent.
(vii) Certificates to be final
All certificates, communications, opinions, determinations, calculations,
quotations and decisions given, expressed, made or obtained for the
purposes
of the provisions of this paragraph (b), whether by the Agent or
the Calculation Agent (if applicable) or the Trustee, shall (in the
absence
of willful default, bad faith or manifest error) be binding on the Issuer,
the Agent, the Calculation Agent (if applicable), the other Paying
Agents, the Registrar, the Trustee and all Noteholders, Receiptholders
and Couponholders and (in the absence as aforesaid) no liability to the
Issuer, the Noteholders, the Receiptholders or the Couponholders shall
attach
to the Agent, the Calculation Agent (if applicable), or the Trustee
in connection with the exercise or non-exercise by them of their powers,
duties and discretions pursuant to such provisions.
(c) Dual Currency Notes
In the case of Dual Currency Notes, if the rate or amount of interest
falls
to be determined by reference to an exchange rate, the rate or amount
of interest payable shall be determined in the manner specified in the
applicable Pricing Supplement.
(d) Partly Paid Notes
In the case of Partly Paid Notes (other than Partly Paid Notes which are
Zero Coupon Notes), interest will accrue as aforesaid on the paid-up
part
of the nominal amount of such Notes and otherwise as specified in the
applicable Pricing Supplement.
(e) Accrual of Interest
Each Note (or in the case of the redemption of part only of a Note, that
part only of such Note) will cease to bear interest (if any) from the due
date for its redemption unless, upon due presentation thereof, payment
of principal is improperly withheld or refused. In such event, interest
will continue to accrue as provided in the Trust Deed.
<PAGE> 63
5. Redemption and Purchase
(a) Final Redemption
Unless otherwise indicated in the applicable Pricing Supplement and
unless
previously redeemed or purchased and cancelled as specified below, each
Note will be redeemed by the Issuer at its Final Redemption Amount
specified
in, or determined in the manner specified in, the applicable Pricing
Supplement in the relevant Specified Currency on the Maturity Date.
(b) Redemption for Tax Reasons
The Notes may be redeemed at the option of the Issuer in whole, but not
in part, at any time (in the case of Notes other than Floating Rate
Notes)
or on any Interest Payment Date (in the case of Floating Rate Notes),
on giving not less than 30 nor more than 60 days' notice in accordance
with Condition 16 to the Noteholders (which notice shall be irrevocable
and shall specify the date for redemption) at their Early Redemption
Amount
determined in accordance with paragraph (e) below together, if
applicable,
with interest accrued to (but excluding) the date fixed for redemption,
if:---
(i) the Issuer has or will become obliged to pay additional amounts as
provided or referred to in Condition 9 as a result of any change in, or
amendment to, the laws or regulations of, where the Issuer is IBM or IBM
Credit, the United States of America or, where the Issuer is IBM
International
Finance, The Netherlands or the United States of America or, in
any case, any political sub-division or any authority or agency thereof
or therein having power to tax or any change in the application or
official
interpretation of such laws or regulations which change or amendment
becomes effective on or after the Issue Date of the first Tranche of the
Notes; and
(ii) such obligation cannot be avoided by the Issuer taking reasonable
measures available to it;
provided that no such notice of redemption shall be given earlier than
90
days prior to the earliest date on which the Issuer would be obliged to
pay such additional amounts were a payment in respect of the Notes then
due. Prior to the publication of any notice of redemption pursuant to
this paragraph, the Issuer shall deliver to the Trustee a certificate
signed
by one Director of the Issuer (if the Issuer is IBM International
Finance)
or one Officer of the Issuer (if the Issuer is IBM or IBM Credit)
stating that the Issuer is entitled to effect such redemption and setting
forth a statement of facts showing that the conditions precedent to
the right of the Issuer so to redeem have occurred, and an opinion of
independent
legal advisers approved by the Trustee to the effect that the
Issuer has or will become obliged to pay such additional amounts as a
result of such change or amendment.
<PAGE> 64
(c) Redemption at the option of the Issuer (Issuer Call)
If Issuer Call is specified in the applicable Pricing Supplement,
subject
to the terms specified in the applicable Pricing Supplement for an Issuer
Call, the Issuer may, on giving not less than 30 nor more than 60 days'
notice to the Trustee, the Agent, the Registrar and, in accordance with
Condition 16, to the Noteholders (which notice shall be irrevocable
and shall specify the date fixed for redemption) redeem all or some only
of the Notes then outstanding on the Optional Redemption Date(s) and at
the Optional Redemption Amount(s) indicated in and determined in the
manner
indicated in the applicable Pricing Supplement together, if applicable,
with interest accrued to (but excluding) the relevant Optional
Redemption
Date(s). In the event of a redemption of some only of the Notes,
such redemption must be of a nominal amount being the Minimum Redemption
Amount or a Higher Redemption Amount, both as indicated in the applicable
Pricing Supplement. In the case of a partial redemption of definitive
Notes (or, as the case may be, parts of Registered Notes), the Notes to
be redeemed will be selected individually by lot (without involving any
part only of a Bearer Note), not more than 60 days prior to the date
fixed
for redemption and a list of Notes called for redemption will be
published
in accordance with Condition 16 not less than 30 nor more than 60
days prior to such date. In addition, in the case of a partial
redemption,
the notice will specify the period during which exchanges or transfers
of Notes may not be made as provided in Condition 14. In the case of
a partial redemption of Notes which are represented by a global Note, the
relevant Notes will be selected in accordance with the rules of
Euroclear and/or Cedelbank.
(d) Redemption at the Option of the Noteholders (Investor Put)
If Investor Put is specified in the applicable Pricing Supplement,
subject
to the terms specified in the applicable Pricing Supplement for an
Investor
Put, upon the holder of any Note giving to the Issuer in accordance
with Condition 16 not more than 60 nor less than 30 days' notice (which
notice shall be irrevocable), the Issuer will, upon the expiry of such
notice, redeem subject to, and in accordance with, the terms specified
in the applicable Pricing Supplement in whole (but not in part) such
Note
on the Optional Redemption Date and at the Optional Redemption Amount
specified in, or determined in the manner specified in, the applicable
Pricing Supplement together, if applicable, with interest accrued to
(but
excluding) the relevant Optional Redemption Date.
If this Note is in definitive form, to exercise the right to require
redemption
of this Note the holder of this Note must deliver such Note at the
specified office of any Paying Agent at any time during normal business
hours of such Paying Agent falling within the notice period, accompanied
by a duly completed and signed notice of exercise in the form (for the
time being current) obtainable from any specified office of any Paying
Agent (a ''Put Notice'') and in which the holder must specify a bank
account
(or, if payment is required to be made by cheque, an address) to
which payment is to be made under this Condition.
<PAGE> 65
Any Put Notice given by a holder of any Note pursuant to this paragraph
shall be irrevocable except where prior to the due date of redemption an
Event of Default shall have occurred and be continuing in which event s
such
holder, at its option, may elect by notice to the Issuer to withdraw
the notice given pursuant to this paragraph and instead to declare such
Note forthwith due and repayable pursuant to Condition 10.
(e) Early Redemption Amounts
For the purposes of paragraph (b) above and Condition 10, each Note will
be redeemed at an amount (the ''Early Redemption Amount'') determined or
calculated as follows:---
(i) in the case of a Note with a Final Redemption Amount equal to
the
Issue Price, at the Final Redemption Amount thereof; or
(ii) in the case of a Note (other than a Zero Coupon Note but including
an Instalment Note and a Partly Paid Note) with a Final Redemption Amount
which is or may be less or greater than the Issue Price or which is
payable in a Specified Currency other than that in which the Notes are
denominated,
at the amount set out in, or determined in the manner set out
in, the applicable Pricing Supplement or, if no such amount or manner is
set out in the applicable Pricing Supplement, at its nominal amount; or
(iii) in the case of a Zero Coupon Note, at an amount (the ''Amortised
Face Amount'') equal to the sum of:---
(A) the Reference Price specified in the applicable Pricing
Supplement; and
(B) the product of the Accrual Yield specified in the applicable
Pricing
Supplement (compounded annually) being applied to the Reference Price
from (and including) the Issue Date of the first Tranche of the Notes to
(but excluding) the date fixed for redemption or (as the case may be)
the date upon which such Note becomes due and repayable.
Where such calculation is to be made for a period which is not a
whole
number of years, it shall be made (I) in the case of a Zero Coupon Note
other than a Zero Coupon Note payable in euro, on the basis of a 360-day
year consisting of 12 months of 30 days each or (II) in the case of a
Zero Coupon Note payable in euro, on the basis of the actual number of
days elapsed divided by 365 (or, if any of the days elapsed falls in a
leap year, the sum of (x) the number of those days falling in a leap year
divided by 366 and (y) the number of those days falling in a non-leap
year
divided by 365) or (in either case) on such other calculation basis as
may be specified in the applicable Pricing Supplement.
(f) Instalments
Instalment Notes will be redeemed in the Instalment Amounts and on the
Instalment Dates. In the case of early redemption, the Early Redemption
Amount will be determined pursuant to paragraph (e) above.
(g) Partly Paid Notes
Partly Paid Notes will be redeemed whether at maturity, early redemption
or otherwise in accordance with the provisions of this Condition but
subject as provided in the applicable Pricing Supplement.
<PAGE> 66
(h) Purchase
The Issuer may at any time purchase or otherwise acquire Notes in the
open
market or otherwise. Notes purchased or otherwise acquired by the Issuer
may be held or resold or, at the discretion of the Issuer, surrendered
to the Agent for cancellation (together with (in the case of
definitive
Bearer Notes) any unmatured Coupons or Receipts attached thereto or
purchased therewith). If purchases are made by tender, tenders must be
made available to all Noteholders alike.
(i) Cancellation
All Notes redeemed shall be, and all Notes purchased or otherwise
acquired
as aforesaid may, at the option of the Issuer, be, cancelled (together
in the case of definitive Bearer Notes, with all unmatured Receipts or
Coupons attached thereto or purchased therewith), and thereafter may not
be re-issued or re-sold.
(j) Late Payment on Zero Coupon Notes
If the amount payable in respect of any Zero Coupon Note upon redemption
of such Zero Coupon Note pursuant to paragraph (a), (b), (c) or (d)
above
or upon its becoming due and repayable as provided in Condition 10 is
not paid when due, the amount due and repayable in respect of such Zero
Coupon Note shall be the amount calculated as provided in paragraph (e)
(iii) above as though the references therein to the date fixed for
redemption
or the date upon which the Zero Coupon Note becomes due and repayable
were replaced by references to the date which is the earlier of:---
(1) the date on which all amounts due in respect of the Zero Coupon Note
have been paid; and
(2) the date on which the full amount of the moneys payable has been
received
by the Agent and notice to that effect has been given to Noteholders
in accordance with Condition 16.
6. Payments
(a) Method of Payment
Subject as provided below:
(i) payments in a currency other than euro will be made by transfer to
an account in the relevant Specified Currency (which, in the case of a
payment
in Yen to a non-resident of Japan, shall be a non-resident account)
maintained by the payee with, or at the option of the relevant holder
by a cheque in such Specified Currency drawn on, a bank in the principal
financial centre of the country of such Specified Currency; and
(ii) payments in euro will be made by credit or transfer to a euro
account
(or any other account to which euro may be credited or transferred)
specified by the payee or, at the option of the payee, by a euro cheque,
<PAGE> 67
provided, however, that, subject as provided below, no payments with
respect
to Bearer Notes shall be made either by cheque mailed to an address
in the United States (which expression as used herein, means the United
States of America (including the States and District of Columbia, its
territories, its possessions and other areas subject to its
jurisdiction))
or by transfer to an account maintained in the United States.
Payments will be subject in all cases to any fiscal or other laws and
regulations
applicable thereto in the place of payment, but without prejudice
to the provisions of Condition 9.
(b) Presentation of Notes, Receipts, Coupons and Talons
Payments of principal in respect of definitive Bearer Notes will
(subject
as provided below) be made in the manner provided in paragraph (a)
above
against presentation and surrender (or, in the case of part payment of
a sum due only, endorsement) of definitive Bearer Notes and payments of
interest in respect of definitive Bearer Notes will (subject as provided
below) be made as aforesaid against presentation and surrender (or, in
the case of part payment of any sum due only, endorsement) of Coupons,
in each case at the specified office of any Paying Agent outside the
United
States (which expression as used herein, means the United States of
America (including the States and District of Columbia, its territories,
its possessions and other areas subject to its jurisdiction)).
Payments of instalments (if any) of principal, other than the final
installment,
will (subject as provided below) be made in the manner provided
in paragraph (a) against presentation and surrender (or, in the case of
part payment of any sum due, endorsement) of the relevant Receipt in
accordance
with the preceding paragraph. Payment of the final instalment will
be made, in the manner provided in paragraph (a) above only against
presentation and surrender (or, in the case of part payment of any sum
due,
endorsement) of the relevant Note in accordance with the preceding
paragraph.
Each Receipt must be presented for payment of the relevant instalment
together with the definitive Bearer Note to which it appertains.
Receipts presented without the definitive Bearer Notes to which they
appertain
do not constitute valid obligations of the Issuer. Upon the date
on which any definitive Bearer Note becomes due and repayable, unmatured
Receipts (if any) appertaining thereto (whether or not attached) shall
become void and no payment shall be made in respect thereof.
Fixed Rate Notes in definitive bearer form (other than Dual Currency
Notes
or Index Linked Notes) should be presented for payment together with
all unmatured Coupons appertaining thereto (which expression shall for
this purpose include Coupons falling to be issued on exchange of matured
Talons) failing which the amount of any missing unmatured Coupon (or, in
the case of payment not being made in full, the same proportion of the
amount of such missing unmatured Coupon as the sum so paid bears to the
sum due) will be deducted from the sum due for payment. Each amount of
principal so deducted will be paid in the manner mentioned above against
surrender of the relative missing Coupon at any time before the expiry
of ten years after the Relevant Date (as defined in Condition 9(a)) in
respect
of such principal (whether or not such Coupon would otherwise have
become void under Condition 15) or, if later, five years from the date
on which such Coupon would otherwise have become due. Upon any Fixed Rate
Note in definitive bearer form becoming due and repayable prior to its
Maturity Date, all unmatured Talons (if any) appertaining thereto will
become void and no further Coupons will be issued in respect thereof.
<PAGE> 68
Upon the date on which any Floating Rate Note, Dual Currency Note or
Index
Linked Note in definitive bearer form becomes due and repayable,
unmatured
Coupons and Talons (if any) relating thereto (whether or not attached)
shall become void and no payment or, as the case may be, exchange for
further Coupons shall be made in respect thereof.
If the due date for redemption of any definitive Bearer Note is not an
Interest
Payment Date, interest (if any) accrued in respect of such Note
from (and including) the preceding Interest Payment Date or, as the case
may be, the Interest Commencement Date shall be payable only against
surrender of the relevant definitive Bearer Note.
Payments of principal and interest (if any) in respect of Notes
represented
by any global Note will (subject as provided below) be made in the
manner specified above in relation to definitive Bearer Notes and
otherwise
in the manner specified in the relevant global Note against presentation
or surrender, as the case may be, of such global Note at the specified
office of any Paying Agent outside the United States. A record of each
payment made against presentation or surrender of such global Note,
distinguishing
between any payment of principal and any payment of interest,
will be made on such global Note by the Agent and such record shall be
prima facie evidence that the payment in question has been made.
The holder of the relevant global Note (or, as provided in the Trust
Deed,
the Trustee) shall be the only person entitled to receive payments in
respect of Notes represented by such global Note and the Issuer will be
discharged by payment to, or to the order of, the holder of such global
Note (or the Trustee, as the case may be) in respect of each amount so
paid. Each of the persons shown in the records of Euroclear or Cedelbank
as the beneficial holder of a particular nominal amount of Notes must
look
solely to Euroclear or Cedelbank, as the case may be, for his share
of each payment so made by the Issuer to, or to the order of, the holder
of the relevant global Note (or the Trustee, as the case may be). No
person
other than the holder of the relevant global Note (or, as provided
in the Trust Deed, the Trustee) shall have any claim against the Issuer
in respect of any payments due on that global Note.
Notwithstanding the foregoing, payments of interest in respect of Bearer
Notes will be made at the specified office of a Paying Agent in the
United
States (which expression, as used herein, 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)) if:---
(i) the Issuer has appointed Paying Agents with specified offices
outside
the United States with the reasonable expectation that such Paying Agents
would be able to make payment at such specified offices outside the
United States of the full amount of interest on the Bearer Notes in the
manner provided above when due;
<PAGE> 69
(ii) payment of the full amount of such interest at such specified
offices
outside the United States is illegal or effectively precluded by
exchange controls or other similar restrictions; and
(iii) such payment is then permitted under United States law without
involving, in the opinion of the Issuer, adverse tax consequences to the
Issuer.
Payments of principal in respect of Registered Notes will be made in the
manner provided in paragraph (a) above against presentation and surrender
(or, in the case of part payment of any sum due only, endorsement) of
such Notes at the specified office of the Registrar in New York City or
at the specified office of any Paying Agent. Payments of interest due on
a Registered Note and payments of instalments (if any) of principal on
a Registered Note, other than the final instalment, will be made to the
person in whose name such Note is registered at the close of business on
the fifteenth day (whether or not such fifteenth day is a business day
(being for this purpose a day on which banks are open for business in the
city where the specified office of the Registrar is located) (the
''Record Date'')) prior to such due date. In the case of payments by
cheque,
cheques will be mailed to the holder (or the first named of joint
holders)
at such holder's registered address on the business day immediately
preceding the due date. If payment is required by credit or transfer as
referred to in paragraph (a) above, application for such payment must be
made by the holder to the Registrar not later than the relevant Record
Date.
(c) Payment Day
If the date for payment of any amount in respect of any Note, Receipt or
Coupon is not a Payment Day, the holder thereof shall not be entitled
to payment until the next following Payment Day in the relevant place and
shall not be entitled to further interest or other payment in respect
of such delay. For these purposes, unless otherwise specified in the
applicable Pricing Supplement, ''Payment Day'' means any day which is:---
(i) a day on which commercial banks and foreign exchange markets settle
payments and are open for general business (including dealing in foreign
exchange and foreign currency deposits) in:
(A) the relevant place of presentation;
(B) London;
(C) any Additional Financial Centre specified in the applicable
Pricing Supplement; and
<PAGE> 70
(ii) either (1) in relation to any sum payable in a Specified Currency
other than euro, a day on which commercial banks and foreign exchange
markets
settle payments and are open for general business (including dealings
in foreign exchange and foreign currency deposits) in the principal
financial centre of the country of the relevant Specified Currency (if
other than the place of presentation, London and any Additional Financial
Centre and which if the Specified Currency is Australian dollars or New
Zealand dollars shall be Sydney or Auckland, respectively) or (2) i
relation to any sum payable in euro, a day on which the TARGET System is
open.
(d) Interpretation of Principal and Interest
Any reference in these Terms and Conditions to principal in respect of
the Notes shall be deemed to include, as applicable---
(i) any additional amounts which may be payable with respect to
principal
under Condition 9 or pursuant to any undertakings given in addition
thereto or in substitution therefor pursuant to the Trust Deed;
(ii) the Final Redemption Amount of the Notes;
(iii) the Early Redemption Amount of the Notes;
(iv) the Optional Redemption Amount(s) (if any) of the Notes;
(v) in relation to Notes redeemable in instalments, the Instalment
Amounts;
(vi) in relation to Zero Coupon Notes, the Amortised Face Amount (as
defined in Condition 5(e)); and
(vii) any premium and any other amounts which may be payable under or
in respect of the Notes.
Any reference in these Terms and Conditions to interest in respect of the
Notes shall be deemed to include, as applicable, any additional amounts
which may be payable under Condition 9 or pursuant to any undertakings
given in addition thereto or in substitution therefor pursuant to the
Trust Deed.
7. Agent, Paying Agents and Registrar
The names of the initial Agent, the initial Registrar and the other initial
Paying Agents and their initial specified offices are set out below.
The Issuer reserves the right at any time to vary or terminate the
appointment
of any Paying Agent or (where the Issuer is IBM International Finance)
Registrar and to appoint additional or other Paying Agents or (where
the Issuer is IBM International Finance) another Registrar and/or to
approve any change in the specified office of any Paying Agent or (where
the Issuer is IBM International Finance) Registrar, provided that it will,
so long as any of the Notes is outstanding, maintain:---
(i) an Agent;
(ii) a Registrar (where the Issuer is IBM International Finance);
(iii) a Paying Agent (other than the Registrar) (which may be the Agent)
having a specified office in a leading financial centre in continental
Europe outside of The Netherlands; and
<PAGE> 71
(iv) so long as any Notes are listed on the London Stock Exchange,
Paying
Agent (which may be the Agent) having a specified office in London
or such other place as may be approved by the London Stock Exchange.
Any such variation, termination or change shall only take effect (other
than in the case of insolvency, when it shall be of immediate effect)
after
not less than 30 days' prior notice thereof shall have been given to
the Noteholders in accordance with Condition 16 below and provided
further
that neither the resignation nor removal of the Agent or the Registrar
shall take effect, except in the case of insolvency as aforesaid, until
a new Agent or Registrar, as the case may be, has been appointed. In
addition, the Issuer shall forthwith appoint a Paying Agent having a
specified
office in New York City in the circumstances described in the
eighth paragraph of Condition 6(b).
In acting under the Agency Agreement, the Agent, the Registrar (where the
Issuer is IBM International Finance) and the other Paying Agents will
act solely as agents of the Issuer and, in certain circumstances
specified
therein, of the Trustee, and will not assume any obligation or
relationship
of agency or trust to or with the Noteholders, Receiptholders or
Couponholders, except that (without affecting the obligations of the
Issuer
to the Noteholders, Receiptholders and Couponholders to repay Notes
and pay interest thereon) any funds received by the Agent for the payment
of the principal of or interest on the Notes shall be held by it on trust
for the Noteholders and/or Receiptholders and/or Couponholders until
the expiry of the period of prescription specified in Condition 15. The
Issuer will agree to perform and observe the obligations imposed upon it
under the Agency Agreement. The Agency Agreement contains provisions for
the indemnification of the Paying Agents and the Registrar and for their
relief from responsibility in certain circumstances, and entitles any
of them to enter into business transactions with the Issuer and any of
its subsidiaries without being liable to account to the Noteholders,
Receiptholders or Couponholders for any resulting profit.
8. Exchange of Talons
On and after the Interest Payment Date on which the final Coupon
comprised
in any Coupon sheet matures, the Talon (if any) forming part of such
Coupon sheet may be surrendered at the specified office of the Agent or
any other paying Agent in exchange for a further Coupon sheet including
(if such further Coupon sheet does not include Coupons to (and including)
the final date for the payment of interest due in respect of the Note
to which it appertains) a further Talon, subject to the provisions of
Condition
15. Each Talon shall, for the purposes of these Terms and Conditions,
be deemed to mature on the Interest Payment Date on which the final
Coupon comprised in the relative Coupon sheet matures.
9. Taxation
<PAGE> 72
(a) Where the Issuer is IBM International Finance, all payments of, or in
respect of, principal and interest on the Notes, Receipts and Coupons
by the Issuer will be made without withholding or deduction for, or on
account of, any present or future taxes, duties, assessments or
governmental
charges of whatever nature imposed or levied by or on behalf of The
Netherlands or of any political sub-division thereof, or any authority
or agency thereof or therein having power to tax, unless the withholding
or deduction of such taxes, duties, assessments or governmental charges
is required by law. In that event, the Issuer will pay such additional
amounts as may be necessary in order that the net amounts received by the
holders of the Notes, Receipts and Coupons, as the case may be, after
such withholding or deduction shall equal the respective amounts of
principal
and interest which would have been receivable in respect of the Notes,
Receipts or Coupons in the absence of such withholding or deduction;
except that no such additional amounts shall be payable with respect to
any payment in respect of any Note, Receipt or Coupon:---
(i) to, or to a third party on behalf of, a holder who is liable to such
taxes, duties, assessments or governmental charges in respect of such
Note, Receipt or Coupon by reason of his having some connection with The
Netherlands other than the mere holding of the Note, Receipt or Coupon;
(ii) to, or to a third party on behalf of, a holder who would be able
to avoid such withholding or deduction by making a declaration of
non-residence
or similar claim for exemption but fails to do so; or
(iii) presented for payment more than 30 days after the Relevant Date
except to the extent that the holder thereof would have been entitled to
such additional amounts on presenting the same for payment on the expiry
of such period of 30 days.
As used herein, the ''Relevant Date'' means the date on which such
payment
first becomes due, but if the full amount of the money payable has not
been received by the Agent in accordance with the Agency Agreement on
or prior to such due date, it means the date on which, the full amount of
such money having been so received, notice to that effect shall have been
duly published in accordance with Condition 16.
(b) The Issuer will, subject to the limitations and exceptions described
below, pay to a holder who is a United States Alien (as defined below),
as additional interest, such additional amounts as may be necessary so
that every net payment of principal of, or interest on the Notes,
Receipts
or Coupons after withholding or deduction for or on account of any
present
or future tax, assessment or other governmental charge imposed upon
such holder, or by reason of the making of such payment, by the United
States or any political sub-division or taxing authority thereof or
therein,
will not be less than the amount provided for in the Notes, Receipts
or Coupons to be then due and payable. However, the Issuer shall not
be required to make any payment of additional amounts for or on account
of:---
<PAGE> 73
(A) any tax, assessment or other governmental charge that would not have
been imposed but for (i) the existence of any present or former
connection
between such holder (or between a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such holder, if
such holder is an estate, trust, partnership or corporation) and the
United
States, including, without limitation, such holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having
been a citizen or resident thereof or treated as a resident thereof or
being or having been present or engaged in trade or business therein or
having or having had a permanent establishment therein, or (ii) the
presentation
of a Note, Receipt or Coupon for payment on a date more than
10 days after the date on which such payment became due and payable or
the date on which payment thereof is duly provided for, whichever
occurred later;
(B) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or other governmental charge;
(C) any tax, assessment or other governmental charge imposed by reason
of such holder's past or present status as a personal holding company or
foreign personal holding company with respect to the United States, as
a controlled foreign corporation that is related to the Issuer through
stock ownership or as a corporation that accumulates earnings to avoid
United States Federal income tax;
(D) any tax, assessment or other governmental charge that is payable
otherwise
than by withholding from payments of principal or interest on,
the Notes, Receipts or Coupons;
(E) any tax, assessment or other governmental charge required to be
withheld
or deducted by any Paying Agent from any payment of principal of,
or interest on, any Note, Receipt or Coupon, if such payment can be made
without such withholding or deduction by any other Paying Agent;
(F) any tax, assessment or other governmental charge that would not have
been imposed but for the failure to comply with any certification,
information,
documentation or other reporting requirement concerning the nationality,
residence, identity or connection with the United States of the
holder or beneficial owner of such Note, Receipt or Coupon, if such
compliance is required by statute or by regulation of the United States
Treasury Department as a precondition to relief or exemption from such
tax, assessment or other governmental charge;
(G) any tax, assessment or other governmental charge imposed on a holder
that actually or constructively owns 10 per cent. or more of the total
combined voting power of all classes of stock of the Issuer entitled to
vote; or
(H) any combination of items (A), (B), (C), (D), (E), (F) and (G);
nor shall additional amounts be paid with respect to any payment of
principal
or interest to any United States Alien who is a fiduciary or partnership
or other than the sole beneficial owner of the Note, Receipt Coupon
to the extent a beneficiary or settlor with respect to such fiduciary
or a member of such partnership or a beneficial owner of the Note,
Receipt or Coupon would not have been entitled to payment of the
additional
amounts had such beneficiary, settlor, member or beneficial owner been
the holder of the Note, Receipt or Coupon.
<PAGE> 74
The term ''United States Alien'' means any person that is not for United
States Federal income tax purposes (i) a citizen or resident of the
United
States who is a natural person, (ii) an entity treated as a
corporation
or partnership created or organised under the laws of the United States
or any state thereof (including the District of Columbia) (other than
a partnership that is not treated as a United States person, the term
''United States person'' being used herein within the meaning given to
such term in the United States Internal Revenue Code of 1986, as amended
and applicable Treasury regulations), (iii) an estate, the income of
which
is subject to United States federal income taxation regardless of its
source, and (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and
one or more United States person have authority to control all
substantial
decisions of the trust (any other trust that is treated as a United
States person under applicable Treasury regulations).
10. Events of Default
The Trustee at its discretion may, and if so requested in writing by
Noteholders
holding at least one quarter in aggregate nominal amount of the
Notes then outstanding or if so directed by an Extraordinary Resolution
shall (subject in each case to being indemnified to its satisfaction),
(provided that, except in the case of the happening of either of the
events
mentioned in paragraph (i) below, the Trustee shall have certified that
in its opinion such event is materially prejudicial to the interests
of the Noteholders) give notice to the relevant Issuer that the Notes
are, and they shall thereby become, immediately due and repayable at
their
Early Redemption Amount (as described in Condition 5(e)) together with
accrued interest as provided in the Trust Deed, if any of the following
events shall occur (each, following certification as aforesaid, an
''Event of Default'') and be continuing:---
(i) in the case of any Issuer, any amount of principal due on the Notes
or any of them is not paid within seven days of the due date or any
interest
due on the Notes or the Coupons or any of them is not paid within
14 days of the due date (where the Issuer is IBM International Finance)
or within 30 days of the due date (where the Issuer is IBM or IBM
Credit); or
(ii) in the case of IBM and IBM Credit:---
(A) failure on the part of the Issuer duly to observe or perform any
other of the covenants or agreements on the part of of the Issuer in
respect
of the Notes, or in the Trust Deed, for a period of 90 days after the
date on which written notice of such failure requiring the Issuer to
remedy the same and stating that such notice is a ''Notice of Default''
hereunder, shall have been given, by registered or certified mail, to the
Issuer by the Trustee; or
(B) entry of a decree or order for relief in respect of the Issuer by
a court having jurisdiction in the premises in an involuntary case under
any applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Issuer or for any substantial part of its property, or ordering the
winding-up
or liquidation of its affairs and such decree or order shall remain
unstayed and in effect for a period of 90 consecutive days; or
<PAGE> 75
(C) commencement by the Issuer of a voluntary case under any
applicable
Federal or state bankruptcy, insolvency or other similar law now or
hereafter
in effect, or consent by the Issuer to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Issuer or for any
substantial
part of its property, or any general assignment by the Issuer for
the benefit of creditors, or the admission by it in writing of its
inability
to pay its debts generally as they become due, or the taking by the
Issuer of any corporate action in furtherance of any of the foregoing.
(iii) In the case of IBM International Finance:---
(A) the Issuer fails to perform or observe or comply with any of its
other obligations or covenants or any conditions or provisions affecting
it under the Notes or the Trust Deed and (except where such failure is
incapable of remedy in which case no such continuation or notice as is
hereinafter
referred to will be required) such failure is not remedied to
the Trustee's satisfaction within 30 days (or such longer period as the
Trustee may permit) after written notice requiring remedy of such default
shall have been given to the Issuer; or
(B) an executoriaal beslag (executory attachment) is made on the whole
of the assets of the Issuer or any of its subsidiaries or any substantial
part thereof or a conservatoir beslag (interlocutory attachment) is
made thereon and is not cancelled or withdrawn within 30 days after the
making thereof or the Issuer or any subsidiary goes bankrupt, applies for
suspension of payment or is wound up (other than a voluntary winding up
in the case of a subsidiary of the Issuer upon which the assets of the
subsidiary are transferred to the Issuer or any of its subsidiaries), or
the Issuer or any subsidiary offers a compromise to its creditors
generally
or negotiates with all its creditors another agreement relating to
its payment difficulties, or such measures are officially decreed; or
(C) the Issuer or any of its subsidiaries shall institute (or shall
consent
to) proceedings seeking any order or decree referred to in sub-paragraph
(B) above or the appointment of a receiver or other such person with
respect to itself or shall make a general assignment for the benefit
of creditors or shall admit in writing its inability to pay its debts
generally as they become due; or any effective resolution is passed for
the winding up of the Issuer or any of its subsidiaries; or the Issuer or
any of its subsidiaries ceases to pay its debts within the meaning of
Section 1 of the Dutch bankruptcy law (Faillissementswet) or the relevant
section of the equivalent legislation in the applicable jurisdiction or
foresees that it shall be unable to continue to pay its debts when due
and payable within the meaning of Section 213 of the Dutch bankruptcy law
(Faillissementswet) or the relevant section of the equivalent legislation
in the applicable jurisdiction provided that no such cessation or
inability
shall be taken into account for this purpose if the relevant debt
is being contested in good faith by the Issuer, or a distress, execution
or other process is levied or enforced upon or sued out against the whole
or substantially all of the property of the Issuer and is not discharged
within 30 days thereof, provided that nothing in paragraph (B) or
this paragraph (C) shall prevent a reorganisation the consequence of
which
is the transfer of the whole or substantially the whole of the assets
of a subsidiary to the Issuer or another subsidiary; or
<PAGE> 76
(D) (other than in the ordinary course of business) the Issuer,
any of
its subsidiaries, IBM World Trade Corporation (''IBM WTC'') or, prior to
the termination of the 1991 Liquidity Agreement (as defined in the Trust
Deed), IBM Credit dispose or threaten to dispose of the whole or
substantially
the whole of their respective businesses or of the whole or substantially
the whole of their respective assets, whether by a single transaction
or a series of transactions whether related or not (except for
the purpose of a reorganisation, merger or consolidation effected with
the consent of the Trustee); or
(E) the Issuer, any of its subsidiaries or IBM WTC or, prior to the
termination
of the 1991 Liquidity Agreement, IBM Credit ceases or threatens
to cease to carry on the whole or substantially the whole of its
business
except in connection with a disposal which does not fall within
paragraph (D) above; or
(F) the Issuer ceases to be a wholly-owned subsidiary, direct or
indirect, of IBM WTC; or
(G) any provision of the IBM International Finance Support Agreement,
the IBM Support Agreement or (prior to the termination of the 1991
Liquidity
Agreement) the IBM Credit Support Agreement (each as defined in the
Trust Deed) is amended, modified or waived or is not enforced in a timely
manner by the Issuer or the IBM International Finance Support Agreement
or the IBM Support Agreement is terminated, unless in any such case the
prior consent in writing of the Trustee or the approval of the
Noteholders by Extraordinary Resolution has been obtained.
11. Enforcement
The Trustee may, at its discretion and without further notice, institute
such proceedings against the Issuer as it may think fit to enforce any
obligation, condition or provision binding on the Issuer under the Notes
or under the Trust Deed, but shall not be bound to do so unless:---
(i) it has been so directed by an Extraordinary Resolution or in writing
by the holders of at least one quarter of the nominal amount of the Notes
outstanding; and
(ii) it has been indemnified to its satisfaction.
No Noteholder, Receiptholder or Couponholder shall be entitled to
institute
proceedings directly against the Issuer unless the Trustee, having
become bound to proceed as aforesaid, fails to do so within a reasonable
time and such failure is continuing.
<PAGE> 77
12. Indemnification of Trustee
The Trust Deed contains provisions for the indemnification of the Trustee
and for its relief from responsibility, including provisions relieving
it from any obligation to take proceedings to enforce repayment unless
indemnified to its satisfaction. The Trustee is entitled to enter into
business
transactions with the Issuer or any of its subsidiaries, holding
companies or affiliates without accounting for any profit resulting
therefrom and to act as trustee for the holders of any other securities
issued by the Issuer.
13. Meetings of Noteholders; Modifications; Waiver; Substitution
The Trust Deed contains provisions for convening meetings of the
Noteholders
to consider any matter affecting their interests, including proposals
to modify by Extraordinary Resolution these Terms and Conditions or the
provisions of the Trust Deed. The quorum at any such meeting for passing
an Extraordinary Resolution will be one or more persons holding or
representing a majority in nominal amount of the Notes for the time being
outstanding, or at any adjourned meeting one or more persons being or
representing Noteholders whatever the nominal amount of the Notes so held
or represented, except that, at any meeting the business of which
includes
the modification of certain of these Terms and Conditions and provisions
of the Trust Deed (as set out therein), the necessary quorum for passing
an Extraordinary Resolution will be one or more persons holding or
representing not less than two-thirds, or at any adjourned such meeting
not less than one-third, of the nominal amount of the Notes for the time
being outstanding. Any Extraordinary Resolution passed at any meeting
of Noteholders will be binding on all Noteholders, whether or not they
are present at the meeting, and on all Receiptholders and Couponholders.
An Extraordinary Resolution may also be effected in writing executed by
or on behalf of the persons holding or representing not less than 90 per
cent. of the nominal amount of the Notes for the time being outstanding.
The Trust Deed contains provisions for convening a single meeting of
the Noteholders and the holders of notes of other Series in certain
circumstances where the Trustee so decides.
The Trustee may agree, without the consent of the Noteholders,
Receiptholders
or Couponholders, to any modification (subject as provided above)
of, or to any waiver or authorisation of any breach or proposed breach
of any provision of, the Trust Deed which, in the opinion of the Trustee,
is not materially prejudicial to the interests of the Noteholders or to
any modification of a formal, minor or technical nature or to correct a
manifest error.
The Trustee may, without the consent of the Noteholders, Receiptholders
or Couponholders, agree with the Issuer to the substitution in place of
the Issuer (or of any previous substitute under this Condition) as the
principal debtor under the Notes, Receipts, the Coupons and the Trust
Deed
of another company, being a member of the IBM group of companies, subject
to (a) the Trustee being satisfied that the interests of the Noteholders
will not be materially prejudiced by the substitution, and (b) certain
other conditions set out in the Trust Deed being complied with.
<PAGE> 78
In connection with the exercise of its powers, trusts, authorities and
discretions (including but not limited to those in relation to any
proposed
modification, waiver, authorisation or substitution as aforesaid), the
Trustee shall not have regard to the consequences of such exercise for
individual Noteholders, Receiptholders or Couponholders resulting from
their being for any purpose domiciled or resident in, or otherwise
connected
with, or subject to the jurisdiction of, any particular territory,
and the Trustee shall not be entitled to require, nor shall any
Noteholder,
Receiptholder or Couponholder be entitled to claim from the Issuer any
indemnification or payment in respect of any tax consequence of any
such exercise upon individual Noteholders, Receiptholders or
Couponholders.
Any such modification, waiver, authorisation or substitution shall be
binding
on the Noteholders, the Receiptholders and the Couponholders and,
unless the Trustee agrees otherwise, any such modification or
substitution
shall be notified to the Noteholders as soon as practicable thereafter.
14. Transfer and Exchange and Replacement of Notes, Receipts, Coupons
and Talons
Upon the terms and subject to the conditions set forth in the Agency
Agreement
and the Trust Deed, a Registered Note may be transferred in whole
or in part (in the principal amount of U.S.$150,000 or any amount in
excess
thereof that is an integral multiple of U.S.$50,000 or not less than
the equivalents in any other currency as specified in the applicable
Pricing Supplement) by the holder or holders surrendering the Registered
Note for registration of the transfer of the Registered Note (or the
relevant
part of the Registered Note) at the specified office of the Registrar,
with the form of transfer thereon duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Issuer
and the Registrar duly executed by, the holder or holders thereof or his
or their attorney or attorneys duly authorised in writing and upon the
Registrar, after due and careful enquiry, being satisfied with the
documents
of title and the identity of the person making the request and subject
to such reasonable regulations as the Issuer and the Registrar (with
the prior approval of the Trustee) may prescribe, including any
restrictions
imposed by the Issuer on transfers of Registered Notes originally
sold to a U.S. Person.
Subject as provided above, the Registrar will, within three business days
(being for this purpose a day on which banks are open for business in
the city where the specified office of the Registrar is located) of the
request (or such longer period as may be required to comply with any
applicable
fiscal or other laws or regulations), authenticate and deliver at
its specified office to the transferee or (at the risk of the transferee)
send by mail to such address as the transferee may request a new
Registered
Note of a like aggregate nominal amount to the Registered Note (or
the relevant part of the Registered Note) transferred. In the case of
the transfer of part only of a Registered Note, a new Registered Note
in respect of the balance of the Registered Note not transferred will be
so authenticated and delivered or (at the risk of the transferor) sent
to the transferor.
<PAGE> 79
Upon the terms and subject to the conditions set out in the Agency
Agreement
and the Trust Deed, a definitive Bearer Note issued by IBM
International
Finance (provided that all unmatured Coupons and Receipts (if any)
appertaining to the Bearer Note are attached) may be exchanged for a
Registered
Note of a like aggregate nominal amount by surrender of the Bearer
Note, Coupons and Receipts (if any) to the Registrar at its specified
office, together with a written request for the exchange in the form
for the time being available from the specified office of the Registrar.
Bearer Notes may not be surrendered in exchange for Registered Notes
during
the period commencing on the fifth business day prior to a Record Date
(as defined in Condition 6(b)) in respect of any Interest Payment Date
and ending on such Interest Payment Date (inclusive). Interest on a
Registered
Note issued on exchange will accrue as from the immediately preceding
Interest Payment Date or the Issue Date or the Interest Commencement
Date (as the case may be) if the exchange is to take place prior to
the first Interest Payment Date for the Notes. Within three business days
of the request, the Registrar will authenticate and deliver at its
specified
office to the holder or (at the risk of the holder) send by mail
to such address as may be specified by the holder in the request a
Registered
Note of a like aggregate nominal amount to the Bearer Note exchanged.
Whilst any Bearer Notes are represented by a permanent global Note,
any Noteholder wishing to exchange his interest in such permanent global
Note for a Registered Note, shall give notice to such effect to the
Registrar
via Euroclear and/or Cedelbank whereupon the Registrar will authenticate
and deliver a Registered Note in like aggregate nominal amount to
he Bearer Note exchanged in the manner provided above, and shall arrange
for the nominal amount of Bearer Notes represented by such permanent
global Note to be reduced accordingly.
No exchange of a Registered Note for a Bearer Note will be permitted.
In the event of a partial redemption of Notes under Condition 5(c), the
Issuer shall not be required:---
(a) to register the transfer of Registered Notes (or parts of
Registered
Notes) or to exchange Bearer Notes for Registered Notes during the period
beginning on the sixty-fifth day before the date of the partial
redemption
and ending on the day on which notice is given specifying the serial
numbers of Notes called (in whole or in part) for redemption (both
inclusive); or
(b) to register the transfer of any Registered Note, or part of
Registered Note, called for partial redemption; or
(c) to exchange any Bearer Note called for partial redemption;
except that a Bearer Note so called for redemption may be exchanged for
a Registered Note which is simultaneously surrendered not later than the
relevant Record Date.
<PAGE> 80
The costs and expenses of effecting any exchange or registration of
transfer
pursuant to the foregoing provisions (except for the expenses of delivery
by other than regular mail (if any) and, if the Issuer shall so require,
for the payment of a sum sufficient to cover any tax or other
governmental
charge or insurance charges that may be imposed in relation thereto
which will be borne by the Noteholder) will be borne by the Issuer.
The Registrar shall not be required to register the transfer of
Registered
Notes for a period of 15 days preceding the due date for any payment
of principal of, or interest on, such Notes.
Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated,
defaced
or destroyed, it may be replaced at the specified office of the Agent
in London (in the case of a Bearer Note, Receipt, Coupon or Talon),
or at the specified office of the Registrar (in the case of a Registered
Note) (or in any such case at such other place as may be notified to the
Noteholders), upon payment by the claimant of the expenses incurred in
connection therewith and on such terms as to evidence and indemnity as
the Issuer may reasonably require. Mutilated or defaced Notes, Receipts,
Coupons or Talons must be surrendered before replacements will be issued.
15. Prescription
Claims for payment of principal in respect of the Notes shall be
prescribed
upon the expiry of ten years, and claims for payment of interest (if
any) in respect of the Notes shall be prescribed upon the expiry of five
years, in each case from the Relevant Date (as defined in Condition 9)
thereof.
There shall not be included in any Coupon sheet issued on exchange of a
Talon any Coupon the claim for payment in respect of which would be
prescribed
pursuant to this Condition 15 or Condition 6(b) or any Talon which
would be prescribed pursuant to this Condition 15 or Condition 6(b).
16. Notices
(a) All notices regarding the Bearer Notes will be valid if published in
one leading London daily newspaper (which is expected to be the Financial
Times) or, if this is not practicable, one other English language daily
newspaper with general circulation in Europe as the Issuer may decide.
Any notice published as aforesaid shall be deemed to have been given on
the date of such publication or, if published more than once, on the
date of the first such publication. Receiptholders and Couponholders will
be deemed for all purposes to have notice of the contents of any notice
given to the holders of the Bearer Notes in accordance with this
Condition
(b) All notices to holders of Registered Notes will be valid if mailed
to their registered addresses. Any such notice shall be deemed to have
been given on the fourth day after the date on which it is mailed.
(c) Until such time as any definitive Bearer Notes are issued, there may,
so long as the global Note(s) is or are held in its or their entirety
on behalf of Euroclear and/or Cedelbank, be substituted for such
publication
in such newspaper the delivery of the relevant notice to Euroclear
and/or Cedelbank, as appropriate, for communication by them to the
Noteholders.
Any such notice shall be deemed to have been given to the Noteholders
on the seventh day after the day on which the said notice was given
to Euroclear and/or Cedelbank.
<PAGE> 81
(d) Notices to be given by any Noteholder shall be in writing and given
by lodging the same, together with the relative Note or Notes, with the
Agent. Whilst any of the Notes are represented by a global Note, such
notice
may be given by any Noteholder to the Agent and/or the Registrar via
Euroclear and/or Cedelbank, as the case may be, in such manner as the
Agent and/or the Registrar and Euroclear and/or Cedelbank, as the case
may be, may approve for this purpose.
17. Further Issues
The Issuer shall be at liberty from time to time, without the consent of
the Noteholders, Receiptholders or Couponholders, to create and issue
further notes ranking pari passu in all respects (or in all respects save
for the first payment of interest thereon) with the outstanding Notes
and so that the same shall be consolidated and form a single series with
the outstanding Notes.
18. Governing Law; Submission to Jurisdiction
The Trust Deed, the Notes, the Receipts and the Coupons are governed by,
and shall be construed in accordance with, English law.
The Issuer has irrevocably agreed in the Trust Deed for the benefit of
the Trustee, the Noteholders, the Receiptholders and the Couponholders
that
the courts of England shall have jurisdiction to hear and determine any
suit, action or proceedings, and to settle any disputes, which may arise
out of or in connection with the Trust Deed, the Notes, the Receipts
and the Coupons (respectively, ''Proceedings'') and, for such purposes,
has in the Trust Deed irrevocably submitted to the jurisdiction of such
courts.
The Issuer has in the Trust Deed irrevocably and unconditionally waived
and agreed not to raise any objection which it may have now or
subsequently
to the laying of the venue of any Proceedings in the courts of England
and any claim that any Proceedings have been brought in an inconvenient
forum and has further irrevocably and unconditionally agreed that a
judgment in any Proceedings brought in the courts of England shall be
conclusive
and binding upon the Issuer and may be enforced in the courts of
any other jurisdiction. Nothing in this Condition shall limit any right
to take Proceedings against the Issuer in any other court of competent
jurisdiction, nor shall the taking of Proceedings in one or more
jurisdictions
preclude the taking of Proceedings in any other jurisdiction, whether
concurrently or not.
The Issuer has in the Trust Deed irrevocably and unconditionally
appointed
IBM United Kingdom Limited at its registered office, which is currently
North Harbour, P.O. Box 41, Portsmouth, Hampshire PO63AU, as its agent
for service of process in England in respect of any Proceedings in the
courts of England and has undertaken that in the event of it ceasing so
to act it will appoint such other person as the Trustee may approve as
its agent for that purpose.
<PAGE> 82
AGENT AND PRINCIPAL PAYING AGENT
The Chase Manhattan Bank
Trinity Tower
9 Thomas More Street
London E1 9YT
PAYING AGENTS
Chase Manhattan Bank Luxembourg S.A. Kas-Associatie N.V.
5 Rue Plaetis Spuistraat 172
L-2338 Luxembourg Grund 1012 VT Amsterdam
REGISTRAR
The Chase Manhattan Bank
15th Floor
450 West 33rd Street
New York NY 10001
<PAGE> 83 SCHEDULE 2
FORMS OF GLOBAL AND DEFINITIVE NOTES, RECEIPTS, COUPONS AND
TALONS
PART I
FORM OF TEMPORARY GLOBAL NOTE
{THIS NOTE CONSTITUTES {COMMERCIAL PAPER/A SHORTER TERM DEBT
SECURITY/A LONGER TERM DEBT SECURITY}(1) ISSUED IN
ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE
BANKING ACT 1987. THE ISSUER OF THIS NOTE IS NOT AN
AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION
(AS SUCH TERMS ARE DEFINED IN THE BANKING ACT 1987 (EXEMPT
TRANSACTIONS) REGULATIONS 1997). REPAYMENT OF THE PRINCIPAL
AND PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH
THIS NOTE HAS NOT BEEN GUARANTEED.}(2)
{BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND
WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN
AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE
UNITED STATES INTERNAL REVENUE CODE AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A
UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT
DESCRIBED IN SECTION 6049(b)(4) OF THE UNITED STATES
INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).}(3)
{ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX
LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j)
AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE.}(4)
THIS GLOBAL NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE
UNITED STATES OR TO OR FOR THE BENEFIT OF U.S. PERSONS
(OTHER THAN DISTRIBUTORS) UNLESS REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT EXISTS. TERMS USED
HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN
REGULATIONS UNDER THE SECURITIES ACT.
(NAME OF ISSUER)
__________________
(1) Include commercial paper if Notes must be redeemed before first
anniversary. Include "shorter term debt security" if Notes may not be
redeemed before their first anniversary but must be redeemed before
their third anniversary. Include "longer term debt security" if Notes
may not be redeemed before their third anniversary.
(2) Unless otherwise permitted, text to be included for all Notes
including notes denominates in Sterling) in respect of which the issue
proceeds are accepted by the Issuer in the United Kingdom.
(3) This legend to appear on Notes with a maturity of 183 days or less.
(4) This legend to appear on Notes with a maturity of more than
183 days.
<PAGE> 84
(Incorporated with limited liability in { }{with its corporate
seat in Amsterdam}(5))
TEMPORARY GLOBAL NOTE
representing
{Specified Currency and Nominal Amount of Tranche}
NOTES DUE
{Year of Maturity}
This Note is a Temporary Global Note in respect of a duly
authorised issue of {Specified Currency and Nominal Amount
of Tranche} Notes Due {Year of Maturity} (the "Notes") of
{Specified Currency(ies) and Specified Denomination(s)} each
of {Name of Issuer} (the "Issuer"). References herein to
the Conditions shall be to the Terms and Conditions of the
Notes as set out in Schedule 1 to the Trust Deed (as defined
below) as modified and supplemented by the Pricing
Supplement applicable to the Notes (the "Pricing
Supplement"), a copy of which is annexed hereto but, in the
event of any conflict between the provisions of the said
Terms and Conditions and the information in the Pricing
Supplement, the Pricing Supplement will prevail. Words and
expressions defined in the Conditions shall bear the same
meanings when used in this Global Note. This Global Note is
issued subject to, and with the benefit of, the Conditions
and a Trust Deed (as modified and/or supplemented and/or
restated from time to time, the "Trust Deed") dated 30th
July, 1993 and made between the Issuers (as therein defined)
including the Issuer and The Law Debenture Trust Corporation
p.l.c. as trustee for the holders of the Notes.
The Issuer, subject to and in accordance with the Conditions
and the Trust Deed, promises to pay to the bearer hereof on
each Instalment Date (if the Notes are repayable in
instalments) and on the Maturity Date and/or on such earlier
date(s) as all or any of the Notes represented by this
Global Note may become due and repayable in accordance with
the Conditions and the Trust Deed, the amount payable under
the Conditions in respect of such Notes on each such date
and to pay interest (if any) on the nominal amount of the
Notes from time to time represented by this Global Note
calculated and payable as provided in the Conditions and the
Trust Deed together with any other sums payable under the
Conditions and the Trust Deed, upon presentation and, at
maturity, surrender of this Global Note at the specified
office of the Agent at Trinity Tower, 9 Thomas More Street,
London E1 9YT, England or such other office outside the
United States, its territories and possessions as may be
specified by the Issuer and approved by the Trustee, but in
each case subject to the requirements as to certification
provided herein. On any redemption or payment of an
instalment or interest being made in respect of, or purchase
and cancellation of, any of the Notes represented by this
Global Note details of such redemption, payment or purchase
and cancellation (as the case may be) shall be entered by or
on behalf of the Issuer in Schedule One hereto and the
relevant space in Schedule One hereto recording any such
redemption, payment or purchase and cancellation (as the
case may be) shall be signed by or on behalf of the Issuer.
Upon any such redemption, payment of an instalment or
purchase and cancellation the nominal amount of <PAGE> 85
this Global Note and the Notes represented by this Global
Note shall be reduced by the nominal amount of such Notes so
redeemed or purchased and cancelled or the amount of such
instalment. The nominal amount of this Global Note and of
the Notes represented by this Global Note following any such
redemption, payment of an instalment or purchase and
cancellation as aforesaid or any exchange as referred to
below shall be the nominal amount most recently entered in
the relevant column in Part II, III or IV of Schedule One
hereto or in Schedule Two hereto.
_____________
(5) There words to be included where the Issuer is IBM
International Finance N.V.
<PAGE> 86 Payments of principal and interest (if any) due
prior to the Exchange Date (as defined below) will only be
made to the bearer hereof to the extent that there is
presented to the Agent by Cedelbank or Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the
Euroclear System ("Euroclear") a certificate, substantially
in the form set out in Part VII of Schedule 2 to the Trust
Deed, to the effect that it has received from or in respect
of a person entitled to a particular nominal amount of the
Notes represented by this Global Note (as shown by its
records) a certificate from such person in or substantially
in the form of Certificate "A" as set out in Part VII of
Schedule 2 to the Trust Deed. Unless upon due certification
exchange of this Global Note is improperly withheld or
refused, the bearer of this Global Note will not be entitled
to receive any payment hereon due on or after the Exchange
Date.
On or after the date (the "Exchange Date") which is the
later of (i) 40 days after the Issue Date and (ii) 40 days
after completion of the distribution of the Notes, as
certified by the relevant Dealer (in the case of a
non-syndicated issue) or the relevant lead manager (in the
case of a syndicated issue) this Global Note may be
exchanged in whole or in part (free of charge) for
Definitive Bearer Notes in or substantially in the form set
out in Part III A of Schedule 2 to the Trust Deed in
denominations of {Specified Currency and Specified
Denominations(s)}, Definitive Registered Notes in or
substantially in the form set out in Part III B of Schedule
2 to the Trust Deed in {Specified Currency and Specified
Denomination(s)} or a Permanent Global Note in or
substantially in the form set out in Part II of Schedule2 to
the Trust Deed (all as indicated in the applicable Pricing
Supplement) upon presentation of this Global Note by the
bearer hereof at the above-mentioned specified office in
London of the Agent or at such other office as aforesaid.
The Issuer shall procure that Definitive Bearer Notes,
Definitive Registered Notes or (as the case may be) the
Permanent Global Note shall be so issued and delivered in
exchange for only that portion of this Global Note in
respect of which there shall have been presented to the
Agent by Euroclear or Cedelbank a certificate, substantially
in the form set out in Part VII of Schedule 2 to the Trust
Deed, to the effect that it has received from or in respect
of a person entitled to a particular nominal amount of the
Notes represented by this Global Note (as shown by its
records) a certificate from such person in or substantially
in the form of Certificate "A" as set out in Part VII of
Schedule 2 to the Trust Deed. On an exchange of the whole
of this Global Note, this Global Note shall be surrendered
to the Agent. On an exchange of part only of this Global
Note, details of such exchange shall be entered by or on
behalf of the Issuer in Schedule Two hereto and the relevant
space in Schedule Two hereto recording such exchange shall
be signed by or on behalf of the Issuer, whereupon the
nominal amount of this Global Note and the Notes represented
by this Global Note shall be reduced by the nominal amount
of this Global Note so exchanged. On any exchange of this
Global Note for a Permanent Global Note, details of such
exchange shall be entered by or on behalf of the Issuer in
Schedule Two to the Permanent Global Note and the relevant
space in Schedule Two thereto recording such exchange shall
be signed by or on behalf of the Issuer. <PAGE> 87 Until
the exchange of the whole of this Global Note as aforesaid,
the bearer hereof shall in all respects (except as otherwise
provided herein) be entitled to the same benefits as if he
were the bearer of Definitive Notes and the relative
Receipts, Coupons and/or Talons (if any) in the form(s) set
out in Parts III, IV, V and VI (as applicable) of Schedule 2
to the Trust Deed.
Each person who is for the time being shown in the records
of Euroclear and/or Cedelbank as the holder of a particular
nominal amount of the Notes represented by this Global Note
(in which regard any certificate or other document issued by
Euroclear or Cedelbank as to the nominal amount of such
Notes standing to the account of any person shall be
conclusive and binding for all purposes save in the case of
manifest error) shall be deemed to be the holder of such
nominal amount of the Notes for all purposes other than with
respect to payments on the Notes for which purpose the
bearer of this Global Note shall be deemed to be the holder
of such nominal amount of the Notes in accordance with and
subject to the terms of this Global Note and the Trust Deed.
This Global Note is governed by, and shall be construed in
accordance with, English law.
This Global Note shall not be valid unless authenticated by
or on behalf of The Chase Manhattan Bank, London office as
Agent.
IN WITNESS whereof the Issuer has caused this Global Note to
be signed on its behalf.
{NAME OF ISSUER}
By: ..........................
Duly Authorised
Authenticated by or on behalf of The Chase Manhattan Bank,
London office
By: ..........................
Authorised Signatory
<PAGE> 88 <TABLE>
Schedule One
Part I
<CAPTION>
INTEREST PAYMENTS
<S>
Total
amount of Amount of Confirmation of
Date interest interest payment by or on
Made payable paid behalf of the Issuer
<C> <C> <C> <C>
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
______ ______________ ______________ ____________________
</TABLE>
<PAGE 89>
<TABLE>
Part II
<CAPTION>
PAYMENT OF INSTALMENT AMOUNTS
<S>
Remaining nominal
amount of Confirmation of
Total amount of Amount of this Global payment on
Date Instalment Instalment Note following behalf of the
Made Amounts payable Amounts paid such payment* issuer
<C> <C> <C> <C> <C>
____ _______________ ____________ _________________ ____________
____ ______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
____ _______________ ____________ _________________ ____________
_____________
* See most recent entry in Part II,III,IV or Schedule Two in order to
determine this amount.
</TABLE>
<PAGE> 90
<TABLE>
Part III
<CAPTION>
REDEMPTIONS
<S> Remaining
nominal amount
of this Confirmation
Total Global Note of redemption
amount of Amount of following by or on
Date principal principal such behalf of the
Made payable paid redemption* Issuer
<C> <C> <C> <C> <C>
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
_____ _____________ ______________ ____________ _____________
____________
<FN>
* See most recent entry in Part II,III, or IV or Schedule Two to
determine this amount.
</TABLE>
<PAGE> 91
<TABLE>
Part IV
<CAPTION>
PURCHASES AND CANCELLATIONS
<S>
Remaining nominal
Part of nominal amount of this Confirmation of
amount of this Global Note purchase and
Global Note following such cancellation by or
Date purchased and purchase and on behalf of the
Made cancelled cancellation* issuer
<C> <C> <C> <C>
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
______ _________________ _________________ _________________
____________
<FN>
* See most recent entry in Part II,III, or IV or Schedule Two to
determine this amount.
</FN>
</TABLE>
<PAGE> 92
<TABLE>
Schedule Two
<CAPTION>
EXCHANGES
FOR DEFINITIVE NOTES OR PERMANENT GLOBAL NOTE
The following exchanges of a part of this Global Note for Definitive Notes
or a Permanent Global Note have been made:-
<S>
Nominal amount
of this Global
Note exchanged Remaining nominal Notation
for Definitive amount of this made by or
Notes or a Global Note on behalf
Date Permanent following such of the
Made Global Note exchange* issuer
<C> <C> <C> <C>
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
_________ _________________ ____________________ __________
____________
<FN>
* See most recent entry in Part II,III, or IV or Schedule Two to
determine this amount.
</FN>
</TABLE>
<PAGE> 93
PART II
FORM OF PERMANENT GLOBAL NOTE
{THIS NOTE CONSTITUTES {COMMERCIAL PAPER/A SHORTER TERM DEBT
SECURITY/A LONGER TERM DEBT SECURITY}(1) ISSUED IN
ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE
BANKING ACT 1987. THE ISSUER OF THIS NOTE IS NOT AN
AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION
(AS SUCH TERMS ARE DEFINED IN THE BANKING ACT 1987 (EXEMPT
TRANSACTIONS) REGULATIONS 1997). REPAYMENT OF THE PRINCIPAL
AND PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH
THIS NOTE HAS NOT BEEN GUARANTEED.}(2)
{BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND
WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN
AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE
UNITED STATES INTERNAL REVENUE CODE AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A
UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT
DESCRIBED IN SECTION 6049(b)(4) OF THE UNITED STATES
INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).}(3)
{ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX
LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j)
AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE.}(4)
THIS GLOBAL NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE
UNITED STATES OR TO OR FOR THE BENEFIT OF U.S. PERSONS
(OTHER THAN DISTRIBUTORS) UNLESS REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT EXISTS. TERMS USED
HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN
REGULATIONS UNDER THE SECURITIES ACT.
{NAME OF ISSUER}
(Incorporated with limited liability in { }{with its corporate
seat in Amsterdam}(5)
__________________
(1) Include commercial paper if Notes must be redeemed before first
anniversary. Include "shorter term debt security" if Notes may not be
redeemed before their first anniversary but must be redeemed before
their third anniversary. Include "longer term debt security" if Notes
may not be redeemed before their third anniversary.
(2) Unless otherwise permitted, text to be included for all Notes
including notes denominates in Sterling) in respect of which the issue
proceeds are accepted by the Issuer in the United Kingdom.
(3) This legend to appear on Notes with a maturity of 183 days or less.
(4) This legend to appear on Notes with a maturity of more than
183 days.
(5) These words to be included where the Issuer is IBM International
Finance N.V.
<PAGE> 95
PERMANENT GLOBAL NOTE
representing
{Specified Currency and Nominal Amount of Tranche}
NOTES DUE
{Year of Maturity}
This Note is a Permanent Global Note in respect of a duly
authorised issue of {Specified Currency and Nominal Amount
of Tranche} Notes Due {Year of Maturity} (the "Notes") of
{Specified Currency(ies) and Specified Denomination(s)} each
of {Name of Issuer} (the "Issuer"). References herein to
the Conditions shall be to the Conditions of the Notes as
set out in Schedule 1 to the Trust Deed (as defined below)
as modified and supplemented by the Pricing Supplement
applicable to the Notes (the "Pricing Supplement"), a copy
of which is annexed hereto but, in the event of any conflict
between the provisions of the said Terms and Conditions and
the information in the Pricing Supplement, the Pricing
Supplement will prevail. Words and expressions defined in
the Conditions shall bear the same meanings when used in
this Global Note. This Global Note is issued subject to,
and with the benefit of, the Conditions and a Trust Deed (as
modified and/or supplemented and/or restated from time to
time, the "Trust Deed") dated 30th July, 1993 and made
between the Issuers (as therein defined) including the
Issuer and The Law Debenture Trust Corporation p.l.c. as
trustee for the holders of the Notes.
The Issuer, subject to and in accordance with the Conditions
and the Trust Deed, promises to pay to the bearer hereof on
each Instalment Date (if the Notes are repayable in
instalments) and on the Maturity Date and/or on such earlier
date(s) as all or any of the Notes represented by this
Global Note may become due and repayable in accordance with
the Conditions and the Trust Deed, the amount payable under
the Conditions in respect of such notes on each such date
and to pay interest (if any) on the nominal amount of the
Notes from time to time represented by this Global Note
calculated and payable as provided in the Conditions and the
Trust Deed together with any other sums payable under the
Conditions and the Trust Deed, upon presentation and, at
maturity, surrender of this Global Note at the specified
office of the Agent at Trinity Tower, 9 Thomas More Street,
London E1 9YT, England or such other office outside the
United States, its territories and possessions as may be
specified by the Issuer and approved by the Trustee. On any
redemption or payment of an instalment or interest being
made in respect of, or purchase and cancellation of, any of
the Notes represented by this Global Note details of such
redemption, payment or purchase and cancellation (as the
case may be) shall be entered by or on behalf of the Issuer
in Schedule One hereto and the relevant space in Schedule
One hereto recording any such redemption, payment or
purchase and cancellation (as the case may be) shall be
signed by or on behalf of the Issuer. Upon any such
redemption, payment of an instalment or purchase and
cancellation the nominal amount of this Global Note and the
Notes represented by this Global Note shall be reduced
<PAGE> 95 by the nominal amount of such Notes so redeemed or
purchased and cancelled or the amount of such instalment.
The nominal amount of this Global Note and of the Notes
represented by this Global Note following any such
redemption, payment of an instalment or purchase and
cancellation as aforesaid or any exchange as referred to
below shall be the nominal amount most recently entered in
the relevant column in Part II, III or IV of Schedule One
hereto or in Schedule Two hereto.
On any exchange of the Temporary Global Note (the "Temporary
Global Note') issued in respect of the Notes for this Global
Note or any part hereof, details of such exchange shall be
entered by or on behalf of the Issuer in Schedule Two hereto
and the relevant space in Schedule Two hereto recording such
exchange shall be signed by or on behalf of the Issuer,
whereupon the nominal amount of this Global Note and the
Notes represented by this Global Note shall be increased by
the nominal amount of the Temporary Global Note so
exchanged.
This Global Note may be exchanged in whole but not in part
(free of charge) for Definitive Bearer Notes in or
substantially in the form set out in Part III A of Schedule
2 to the Trust Deed in denominations of {Specified
Currency(ies) and Specified Denomination(s)} each. Subject
to at least 60 days' written notice (expiring at least 30
days after the Exchange Date (as defined in the Temporary
Global Note)) being given to the Agent by Morgan Guaranty
Trust Company of New York, Brussels office, as operator of
the Euroclear System ("Euroclear") and/or Cedelbank, such
exchange will be made upon presentation of this Global Note
by the bearer hereof on any day (other than a Saturday) on
which banks are open for business in London at the specified
office in London of the Agent or at such other office as
aforesaid. The aggregate nominal amount of Definitive
Bearer Notes issued upon an exchange of this Global Note
will be equal to the aggregate nominal amount of this Global
Note submitted by the bearer hereof for exchange (to the
extent that such nominal amount does not exceed the nominal
amount of this Global Note most recently entered in the
relevant column in Part II, III or IV of Schedule One hereto
or in Schedule Two hereto). Upon exchange of this Global
Note, this Global Note shall be surrendered to the Agent.
Until the exchange of the whole of this Global Note as
aforesaid, the bearer hereof shall in all respects be
entitled to the same benefits as if he were the bearer of
Definitive Bearer Notes and the relative Receipts, Coupons
and/or Talons (if any) in the form(s) set out in Parts III,
IV, V and VI (as applicable) of Schedule 2 to the Trust
Deed.
Each person who is for the time being shown in the records
of Euroclear and/or Cedelbank as the holder of a particular
nominal amount of the Notes represented by this Global Note
(in which regard any certificate or other document issued by
Euroclear or Cedelbank as to the nominal amount of such
Notes standing to the account of any person shall be
conclusive and binding for all purposes save in the case of
manifest error) shall be deemed to be the holder of such
nominal amount of the Notes for all purposes other than with
respect to payments on the Notes for which purpose he bearer
of this Global Note shall be deemed to be the holder of such
nominal amount of the Notes in accordance with and subject
to the terms of this Global Note and the Trust Deed. <PAGE>
96 This Global Note is governed by, and shall be construed
in accordance with, English law.
This Global Note shall not be valid unless authenticated by
or on behalf of The Chase Manhattan Bank, London office as
Agent.
IN WITNESS whereof the Issuer has caused this Global Note to
be signed on its behalf.
{NAME OF ISSUER}
By:..........................................................
Duly Authorised
Authenticated by or on behalf of
The Chase Manhattan Bank, London office
By: ..........................
Authorised Signatory
Schedule One
<PAGE> 97
<TABLE>
Part I
<CAPTION>
INTEREST PAYMENTS
<S>
Confirmation of
Total amount Amount of payment by or
Date of interest interest on behalf of
Made payable payable the issuer
<C> <C> <C> <C>
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
_________ ______________ ______________ ______________
</TABLE>
a.pa
<PAGE> 98
<TABLE>
Part II
<CAPTION>
PAYMENT OF INSTALMENT AMOUNTS
<S>
Remaining nominal Confirmation
amount of this of payment by
Total amount of Amount of Global Note or on behalf
Date Instalment Instalment following such of the
made Amounts payable Amounts paid payment* Issuer
<C> <C> <C> <C> <C>
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
_____ _______________ _____________ _________________ _____________
___________________
</FN>
*See most recent entry in Part II,III or IV or Schedule Two in order
to determine this amount.
</FN>
</TABLE>
<PAGE> 99
<TABLE>
Part III
<CAPTION>
REDEMPTIONS
<S>
Remaining
nominal
amount of
this Global Confirmation
Note of redemption
Total amount Amount of following by or on
Date of principal principal such behalf of the
made payable paid redemption* Issuer
<C> <C> <C> <C> <C>
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
________ ________________ ___________ ______________ _____________
___________________
<FN>
*See most recent entry in Part II,III or IV or Schedule Two in order
to determine this amount.
</FN>
</TABLE>
<PAGE> 100
<TABLE>
Part IV
<CAPTION>
PURCHASES AND CANCELLATIONS
<S>
Remaining nominal
Part of nominal amount of this Confirmation of
amount of this Global Note purchase and
Global Note following such cancellation by or
Date purchased and purchase and on behalf of the
made cancelled cancellation* Issuer
<C> <C> <C> <C>
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
_________ __________________ _________________ _________________
___________________
</FN>
*See most recent entry in Part II,III or IV or Schedule Two in order
to determine this amount.
</FN>
</TABLE>
<PAGE> 101
<TABLE>
Schedule Two
<CAPTION>
SCHEDULE OF EXCHANGES
<S>
The following exchanges affecting the nominal amount of this Global Note
have been made:
Nominal amount
of Temporary Increased nominal Notation
Global Note amount of this made by or
exchanged for Global Note on behalf
Date this Global following such of the
made Note exchange Issuer
<C> <C> <C> <C>
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
_____ _____________ _________________ __________
</TABLE>
<PAGE> 102
PART III A
FORM OF DEFINITIVE BEARER NOTE
{THIS NOTE CONSTITUTES {COMMERCIAL PAPER/A SHORTER TERM DEBT
SECURITY/A LONGER TERM DEBT SECURITY}(1) ISSUED IN
ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE
BANKING ACT 1987. THE ISSUER OF THIS NOTE IS NOT AN
AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION
(AS SUCH TERMS ARE DEFINED IN THE BANKING ACT 1987 (EXEMPT
TRANSACTIONS) REGULATIONS 1997). REPAYMENT OF THE PRINCIPAL
AND PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH
THIS NOTE HAS NOT BEEN GUARANTEED.}(2)
{BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND
WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN
AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE
UNITED STATES INTERNAL REVENUE CODE AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A
UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT
DESCRIBED IN SECTION 6049(b)(4) OF THE UNITED STATES
INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).}(3)
{ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX
LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j)
AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE.}(4)
{EACH TRANSACTION REGARDING THIS NOTE WHICH INVOLVES
PHYSICAL DELIVERY THEREOF SHALL BE REGISTERED IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT OF 2 FEBRUARY 1987
RELATING TO THE DETERMINATION OF A UNIFORM CODE OF CONDUCT
REGARDING SAVINGS CERTIFICATES WHICH ARE NOT REGISTERED (THE
"AGREEMENT") WHICH IS GENERALLY APPLICABLE UNDER THE ACT ON
SAVINGS CERTIFICATES OF 21 MAY 1985 OF THE NETHERLANDS,
UNLESS (i) THIS NOTE QUALIFIES AS COMMERCIAL PAPER OR AS A
CERTIFICATE OF DEPOSIT (AS REFERRED TO IN THE AGREEMENT) AND
(ii) THE TRANSACTION IS BETWEEN PROFESSIONAL PARTIES.}(5)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED
STATES OR TO OR FOR THE BENEFIT OF U.S. PERSONS (OTHER THAN
DISTRIBUTORS) UNLESS REGISTERED UNDER THE SECURITIES ACT OR
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT EXISTS. TERMS USED HEREIN SHALL HAVE THE
MEANING ASCRIBED TO THEM IN REGULATIONS UNDER THE SECURITIES
ACT.
______________
(1) Include "commercial paper" if Notes must be redeemed before
first anniversary. Include "shorter term debt security" if Notes
may not be redeemed before their first anniversary but must be redeemed
before their third anniversary. Include "longer term debt security"
if Notes may not be redeemed before their third anniversary.
(2) Unless otherwise permitted, text to be included for all Notes
(including Notes denominated in Sterling) in respect of which the
issue proceeds are accepted by the Issuer in the United Kingdom.
(3) This legend to appear on Notes with a maturity of 183 days or less.
(4) This legend to appear on Notes with a Maturity of more than 183
days.
<PAGE> 103
(5) This legend to appear on Notes which are subject to the provisions
of the Act on savings certificates of 21 May 1985 of the Netherlands and
which are not listed on any stock exchange.
<PAGE> 104
{NAME OF ISSUER}
(Incorporated with limited liability in { }{with its corporate seat in
Amsterdam}(1))
{Specified Currency and Nominal Amount of Tranche}
NOTES DUE
{Year of Maturity}
This Note is one of a Series of Notes of {Specified
Currency(ies) and Specified Denomination(s)} each ("Notes")
of {Name of Issuer} (the "Issuer") issued {either} as Bearer
Notes in the denomination{s} of {Specified Currency(ies) and
Specified Denomination(s)} each {with Coupons} {and
Receipts} {attached} {or as Registered Notes in the
denomination of {Specified Currency(ies) and Specified
Denomination(s)} in an aggregate principal amount of
{Nominal Amount of Tranche}. References herein to the
Conditions shall be to the Terms and Conditions {endorsed
hereon/{set out in Schedule 1 to the Trust Deed (as defined
below)} which shall be incorporated by reference herein and
have effect as if set out hereon} as modified and
supplemented by the Pricing Supplement (the "Pricing
Supplement") endorsed hereon but, in the event of any
conflict between the provisions of the said Terms and
Conditions and the information in the Pricing Supplement,
the Pricing Supplement will prevail. Words and expressions
defined in the Conditions shall bear the same meanings when
used in this Note. This Note is issued subject to, and with
the benefit of, the Conditions and a Trust Deed (as modified
and/or supplemented and/or restated from time to time, the
"Trust Deed") dated 30th July, 1993 and made between the
Issuers (as therein defined) including the Issuer and The
Law Debenture Trust Corporation p.l.c. as trustee for the
holders of the Notes.
The Issuer, subject to and in accordance with the Conditions
and the Trust Deed, promises to pay to the bearer hereof on
{each Instalment Date and} the Maturity Date or on such
earlier date as this Note may become due and repayable in
accordance with the Conditions and the Trust Deed, the
amount payable on redemption of this Note and to pay
interest (if any) on the nominal amount of this Note
calculated and payable as provided in the Conditions and the
Trust Deed together with any other sums payable under the
Conditions and the Trust Deed.
Title to this Note and to any Receipt, Coupon or Talon
appertaining hereto shall pass by delivery. The Issuer may
treat the bearer hereof as the absolute owner of this Note
for all purposes (whether or not this Note shall be overdue
and notwithstanding any notice of ownership or writing
hereon or notice of any previous loss or theft or trust or
other interest herein).
This Note shall not be valid unless authenticated by or on
behalf of The Chase Manhattan Bank, London office as Agent.
IN WITNESS whereof the Issuer has caused this Note to be
signed in facsimile on its behalf.
<PAGE> 106
{NAME OF ISSUER}
By: .......................................................
{Managing Director/Officer}
Authenticated by or on behalf of
The Chase Manhattan Bank, London office
By: ................................................
Authorised Signatory
________________
(1) These words to be included where the issuer is IBM International
Finance N.V.
<PAGE> 106
{Conditions}
up 1
{Conditions to be as set out in Schedule 1 to this Trust Deed, but shall
not be endorsed if not required by the Stock Exchange}
<PAGE> 107
Pricing Supplement
{Here to be set out text of Pricing Supplement relating to the Notes}
<PAGE> 108
PART III B
FORM OF DEFINITIVE REGISTERED NOTE
IBM INTERNATIONAL FINANCE N.V. {Denomination}
(Incorporated with limited liability
in The Netherlands with its corporate seat in Amsterdam)
{Specified Currency and Nominal Amount of Tranche}
NOTES DUE
{Year of Maturity}
{THIS NOTE CONSTITUTES {COMMERCIAL PAPER/A SHORTER TERM DEBT
SECURITY/A LONGER TERM DEBT SECURITY}(1) ISSUED IN
ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE
BANKING ACT 1987. THE ISSUER OF THIS NOTE IS NOT AN
AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION
(AS SUCH TERMS ARE DEFINED IN THE BANKING ACT 1987 (EXEMPT
TRANSACTIONS) REGULATIONS 1997). REPAYMENT OF THE PRINCIPAL
AND PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH
THIS NOTE HAS NOT BEEN GUARANTEED.}(2)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, AND ACCORDINGLY MAY NOT
BE REOFFERED OR RESOLD UNLESS SUCH OFFER OR SALE IS EITHER
REGISTERED PURSUANT TO OR IS EXEMPT FROM REGISTRATION UNDER
SUCH ACT. THE TRANSFER OR EXCHANGE OF THIS NOTE IS SUBJECT
TO CERTAIN RESTRICTIONS SET FORTH IN AN INVESTMENT LETTER
FROM THE HOLDER TO THE ISSUER INCLUDING THE RIGHT OF THE
ISSUER TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER PRIOR TO ANY TRANSFER OR EXCHANGE OF THIS NOTE.(3)
_________________
(1) Include "commercial paper" if Notes must be redeemed before
first anniversary. Include "shorter term debt security" if Notes
may not be redeemed before their first anniversary but must be redeemed
before their third anniversary. Include "longer term debt security"
if Notes may not be redeemed before their third anniversary.
(2) Unless otherwise permitted, text to be included for all Notes
(including Notes denominated in Sterling) in respect of which the
issue proceeds are accepted by the Issuer in the United Kingdom.
(3) This legend is to appear on Definitive registered Notes initially
sold to branches of United States banks located outside the United
States and to institutional investors in the United States or who are
U.S. persons and on those issued in exchange for or on registration of
transfer of such Notes unless an opinion of U.S. counsel is delivered
to the Issuer or the Registrar to the effect that the legend may be
moved.
<PAGE> 109
This Note is one of a Series of Notes of IBM International
Finance N.V. (the "Issuer") issued {either} as Bearer Notes
in the denomination{s} of {Specified Currency(ies) and
Specified Denomination(s)} each {with Coupons} {and
Receipts} {attached} {or as Registered Notes} in the
denomination of {Specified Currency(ies) and Specified
Denomination(s)} in an aggregate principal amount of
{Nominal Amount of Tranche}. References herein to the
Conditions shall be to the Terms and Conditions {endorsed
here on/{set out in Schedule 1 to the Trust Deed (as defined
below)} which shall be incorporated by reference herein and
have effect as if set out hereon} as modified and
supplemented by the Pricing Supplement (the "Pricing
Supplement") endorsed hereon but, in the event of any
conflict between the provisions of the said Terms and
Conditions and the information in the Pricing Supplement,
the Pricing Supplement will prevail. Words and expressions
defined in the Conditions shall bear the same meanings when
used in this Note. This Note is issued subject to, and with
the benefit of, the Conditions and a Trust Deed (as modified
and/or supplemented and/or restated from time to time, the
"Trust Deed") dated 30th July, 1993 and made between, inter
alios, the Issuer and The Law Debenture Trust Corporation
p.l.c. as trustee for the holders of the Notes.
THIS IS TO CERTIFY that is/are the registered
holder(s) of one of the above-mentioned Registered Notes and
is/are entitled on the Maturity Date or on such earlier date
as this Note may become due and repayable in accordance with
the Conditions and the Trust Deed, to the amount payable on
redemption of this Note and to pay interest (if any) on the
nominal amount of this Note calculated and payable as
provided in the Conditions and the Trust Deed together with
any other sums payable under the Conditions and the Trust
Deed.
This Note shall not be valid unless authenticated by or on
behalf of The Chase Manhattan Bank, New York office as
Registrar.
IN WITNESS whereof the Issuer has caused this Note to be
signed in facsimile on its behalf.
IBM INTERNATIONAL FINANCE N.V.
By: .......................................................
Managing Director
Authenticated by or on behalf of
The Chase Manhattan Bank, New York office
By: ............................................
Authorised Signatory
<PAGE> 110
- - FORM OF TRANSFER OF REGISTERED NOTE-
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) to
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(Please print or type name and address (including postal code) of
transferee)
{Specified Currency}{ }principal amount of this Note and
all rights hereunder, hereby irrevocably constituting and
appointing ..................
_______________________________________ as attorney to
transfer such principal amount of this Note in the register
maintained by IBM INTERNATIONAL FINANCE N.V. with full power
of substitution.
Signature(s) ......................
______________________
Date: ....................
N.B.:
1. This form of transfer must be accompanied by such
documents, evidence and information as may be required
pursuant to the Conditions and must be executed under the
hand of the transferor or, if the transferor is a
corporation, either under its common seal or under the hand
of two of its officers duly authorised in writing and, in
such latter case, the document so authorising such officers
must be delivered with this form of transfer.
2. In each case the signature(s) must be guaranteed by a
commercial bank with a correspondent bank in New York City,
Luxembourg or London or by an institution which is a member
of The New York Stock Exchange or The American Stock
Exchange in New York City or the Luxembourg Stock Exchange
or the London Stock Exchange.
3. The signature(s) on this form of transfer must
correspond with the name(s) as it/they appear(s) on the face
of this Note in every particular, without alteration or
enlargement or any change whatever.
<PAGE> 111
{Conditions}
{Conditions to be as set out in Schedule 1 to this Trust Deed but shall
not be endorsed if not required by the Stock Exchange}
<PAGE> 112
Pricing Supplement
{Here to be set out text of Pricing Supplement relating to the Notes}
<PAGE3
PART IV
FORM OF RECEIPT
{NAME OF ISSUER}
(Incorporated with limited liability in { })
{Specified Currency and Nominal Amount of Tranche}
NOTES DUE
{Year of Maturity}
Series No. { }
Receipt for the sum of { } being the instalment of
principal payable in accordance with the Terms and
Conditions endorsed on the Note to which this Receipt
appertains (the "Conditions") on { }.
This Receipt is issued subject to and in accordance with the
Conditions which shall be binding upon the holder of this
Receipt (whether or not it is for the time being attached to
such Note) and is payable at the specified office of any of
the Paying Agents set out on the reverse of the Note to
which this Receipt appertains (and/or any other or further
Paying Agents and/or specified offices as may from time to
time be duly appointed and notified to the Noteholders).
This Receipt must be presented for payment together with the
Note to which it appertains. The relevant Issuer shall have
no obligation in respect of any Receipt presented without
the Note to which it appertains or any unmatured Receipts.
{NAME OF ISSUER}
By: .......................................................
{Managing Director/Officer}
{BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND
WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN
AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE
INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND
THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES
PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION
6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS
THEREUNDER).}(1)
{ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX
LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j)
AND 1287(a) OF THE INTERNAL REVENUE CODE.}(2)
_______________
(1) This legend to appear on Receipts appertaining to Notes with a
maturity of 183 days or less.
(2) This legend to appear on receipts appertaining to Notes with a
maturity of more than 183 days.
<PAGE> 114
PART V
FORM OF COUPON
On the front:
{NAME OF ISSUER}
(Incorporated with limited liability in { })
{Specified Currency and Nominal Amount of Tranche}
NOTES DUE
{Year of Maturity}
Series No. { }
* {Coupon appertaining to a Note in the denomination of {Specified
Currency and Specified Denomination}}.
Part A
{For Fixed Rate Notes:
This Coupon is payable to bearer, separately Coupon for
negotiable and subject to the Terms and { }
Conditions of the said Notes. due on
{ }, { }}
Part B
{For Floating Rate Notes or Index Linked Interest Notes:
Coupon for the amount due in accordance with Coupon due
the Terms and Conditions endorsed on, in { } { }
attached to or incorporated by reference
into the said Notes on the Interest Payment
Date falling in { } { }.
This Coupon is payable to bearer, separately
negotiable and subject to such Terms and
Conditions, under which it may become void
before its due date.}
{NAME OF ISSUER}
By: .......................................................
{Managing Director/Officer}
_________
* Delete where the Notes are all of the same denomination.
<PAGE> 115
{BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND
WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN
AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE
UNITED STATES INTERNAL REVENUE CODE AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A
UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT
DESCRIBED IN SECTION 6049(b)(4) OF THE UNITED STATES
INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).}(1)
{ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX
LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j)
AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE.}(2)
__________________
(1) This legend to appear on Coupons appertaining to Notes with a
maturity of 183 days or less.
(2) This legend to appear on Coupons appertaining to Notes with
a maturity of more than 183 days.
<PAGE> 116
PART VI
FORM OF TALON
On the front:
{NAME OF ISSUER}
(Incorporated with limited liability in { })
{Specified Currency and Nominal Amount of Tranche}
NOTES DUE
{Year of Maturity}
Series No. { }
* {Talon appertaining to a Note in the denomination of {Specified
Currency and Specified Denomination}}.
On and after { } further Coupons** {and a further Talon} appertaining to
the Note to which this Talon appertains will be issued at the specified
office of any of the Paying Agents set out on the reverse hereof (and/or
any other or further Paying Agents and/or specified offices as may from
time to time be duly appointed and notified to the Noteholders) upon
production and surrender of this Talon.
This Talon may, in certain circumstances, become void under the Terms and
Conditions endorsed on the Note to which this Talon appertains.
{NAME OF ISSUER}
By: .......................................................
{Managing Director/Officer}
_____________
* Delete where the Notes are all of the same denomination.
** Not required on last coupon sheet.
<PAGE> 117
On the back of Receipts, Coupons and Talons:
AGENT AND PRINCIPAL PAYING AGENT
The Chase Manhattan Bank
Trinity Tower
9 Thomas More Street
London E1 9YT
PAYING AGENTS
Chase Manhattan Bank Kas-Associatie N.V.
Luxembourg S.A. Spuistraat 172
5 Rue Plaetis L-2338 1012 V.T. Amsterdam
Luxembourg Grund
<PAGE> 118
PART VII
FORM OF CERTIFICATE TO BE PRESENTED BY
EUROCLEAR OR CEDELBANK
{NAME OF ISSUER}
{Title of Notes}
(the "Securities")
This is to certify that, based solely on certifications we
have received in writing, by tested telex or by electronic
transmission from member organisations appearing in our
records as persons being entitled to a portion of the
nominal amount set forth below (our "Member Organisations")
substantially to the effect set forth in the temporary
Global Note representing the Securities, as of the date
hereof, { } nominal amount of the above-captioned
Securities (i) is, in the case of Registered Notes, owned by
institutional "accredited investors" (as defined in Rule
501(a)(1)-(3) promulgated under the United States Securities
Act of 1933, as amended (the "Act")), (ii) is owned by
persons that for United States Federal income tax purposes
are not citizens or residents of the United States, domestic
partnerships, domestic corporations, any estate the income
of which is subject to United States Federal income taxation
regardless of its source or a trust if a court within the
United States is able to exercise primary supervision over
the administration of the trust and one or more United
States persons have authority to control all substantial
decisions of the trust (and any other trust that is treated
a United States person under applicable Treasury
regulations) ("United States persons"), (iii) is owned by
United States persons that (a) are foreign branches of
United States financial institutions (as defined in U.S.
Treasury Regulations Sections 1.165-12(c)(1)(v) ("financial
institutions") purchasing for their own account or for
resale, or (b) acquired the Securities through foreign
branches of United States financial institutions and who
hold the Securities through such United States financial
institutions on the date hereof (and in either case (a) or
(b), each such United States financial institution has
agreed, on its own behalf or through its agent, that we may
advise the Issuer or the Issuer's agent that it will comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Internal Revenue Code of 1986, as amended, and the
regulations thereunder), or (iv) is owned by United States
or foreign financial institutions for purposes of resale
during the restricted period (as defined in U.S. Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(6)), and to the
further effect that United States or foreign financial
institutions described in Clause (iv) above (whether or not
also described in Clause(ii) or (iii)) have certified that
they have not acquired the Securities for purposes of resale
directly or indirectly to a United States person or to a
person within the United States or its possessions (unless
such Security is a Registered Note and is to be sold in
accordance with the private placement restrictions set forth
in the Prospectus relating to the Securities). <PAGE> 119
If the Securities are of the category contemplated in Rule
903(b)(3) of Regulation S under the Act then this is also to
certify with respect to such nominal amount of Securities
set forth above that, except as set forth below, we have
received in writing, by tested telex or by electronic
transmission, from our Member Organisations entitled to a
portion of such nominal amount, certifications with respect
to such portion, substantially to the effect set forth in
the temporary Global Note representing the Securities.
As used herein, "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; and its "possessions" include Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Marianas Islands.
We further certify (i) that we are not making available
herewith for exchange (or, if relevant, exercise of any
rights or collection of any interest) any portion of the
temporary Global Note excepted in such certifications and
(ii) that as of the date hereof we have not received any
notification from any of our Member Organisations to the
effect that the statements made by such Member Organisations
with respect to any portion of the part submitted herewith
for exchange (or, if relevant, exercise of any rights or
collection of any interest) are no longer true and cannot be
relied upon as of the date hereof.
We understand that this certification is required in
connection with certain tax laws and, if applicable, certain
securities laws of the United States. In connection
therewith, if administrative or legal proceedings or
official enquiries are commenced or threatened in connection
with which this certification is or would be relevant, we
irrevocably authorise you to produce this certification to
any interested party in such proceedings or enquiries.
Dated: , {1999/200{ }}*
Yours faithfully,
{Morgan Guaranty trust
Company of New York,
Brussels office,
as operator of the Euroclear
System}
or
{Cedelbank}
By:
______________
* To be dated no earlier than the date to which this certification
relates, namely (a) the payment date or (b) the Exchange Date.
<PAGE> 120
CERTIFICATE "A"
{NAME OF ISSUER}
{Title of Notes}
(the "Securities")
This is to certify that as of the date hereof, and except as
set forth below, the above-captioned Securities held by you
for our account (i) are Registered Notes owned by
institutional "accredited investors" (as defined in Rule
501(a)(1)-(3) promulgated under the United States Securities
Act of 1933), (ii) are owned by person(s) that for United
States Federal income tax purposes are not citizens or
residents of the United States, domestic partnerships,
domestic corporations, any estate the income of which is
subject to United States Federal income taxation regardless
of its source or a trust if a court within the United States
is able to exercise primary supervision over the
administration of the trust and one or more United States
persons have authority to control all substantial decisions
of the trust (and any other trust that is treated as a
United States person under applicable Treasury regulations)
("United States person(s)"), (iii) are owned by United
States person(s) that (a) are foreign branches of United
States financial institutions (as defined in U.S. Treasury
Regulations Section 1.165-12(c)(1)(v)) ("financial
institutions") purchasing for their own account or for
resale, or (b) acquired the Securities through foreign
branches of United States financial institutions and who
hold the Securities through such United States financial
institutions on the date hereof (and in either case (a) or
(b), each such United States financial institution hereby
agrees, on its own behalf or through its agent, that you may
advise the Issuer or the Issuer's agent that it will comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Internal Revenue Code of 1986, as amended, and the
regulations thereunder), or (iv) are owned by United States
or foreign financial in- stitution(s) for purposes of resale
during the restricted period (as defined in U.S. Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition
if the owner of the Securities is a United States or foreign
financial institution described in Clause(iv) above (whether
or not also described in Clause(ii) or (iii)) this is to
further certify that such financial institution has not
acquired the Securities for purposes of resale directly or
indirectly to a United States person or to a person within
the United States or its possessions (unless such Security
is a Registered Note and is to be sold in accordance with
the private placement restrictions set forth in the
Prospectus relating to the Securities).
As used herein, "United States" means the United States of
America (including the States and the District of Columbia);
and its "possessions" include Puerto Rico, the U.S. Virgin
Islands, Guam, American Samoa, Wake Island and the Northern
Mariana Islands. <PAGE> 121 We undertake to advise you
promptly by tested telex on or prior to the dare on which
you intend to submit your certification relating to the
Securities held by you for our account in accordance with
your documented procedures if any applicable statement
herein is not correct on such date, and in the absence of
any such notification it may be assumed that this
certification applies as of such date.
This certification excepts and does not relate to { } of
such interest in the above Securities in respect of which we
are not able to certify and as to which we understand
exchange and delivery of definitive Securities (or, if
relevant, exercise of any right or collection of any
interest) cannot be made until we do so certify.
We understand that this certification is required in
connection with certain tax laws and, if applicable, certain
securities laws of the United States. In connection
therewith, if administrative or legal proceedings or
official enquiries are commenced or threatened in connection
with which this certification is or would be relevant, we
irrevocably authorise you to produce this certification to
any interested party in such proceedings or enquiries.
Dated: ,{1999/200{ }}*
Name of Person Making Certification
By:
_______________________
* To be dated no earlier than the fifteenth day prior to the date
to which this certification relates, namely (a) the payment date
or (b) the Exchange Date.
<PAGE> 122
SCHEDULE 3
REGISTER AND TRANSFER OF REGISTERED NOTES
1. The relevant issuer shall at all times ensure that the
Registrar maintains in New York, or at such other place as
the Trustee may agree, a register showing the nominal amount
of the Registered Notes from time to time outstanding and
the dates of issue and all subsequent transfers and changes
of ownership thereof and the names and addresses of the
holders of the Registered Notes. The Trustee and the
holders of the Registered Notes or any of them and any
person authorised by it or any of them may at all reasonable
times during office hours inspect the register and take
copies of or extracts from it. The register may be closed
by the relevant Issuer for such periods at such times (not
exceeding in total 30days in any one year) as it may think
fit.
2. Each Registered Note shall have an identifying
certificate number which shall be entered on the register.
3. The Registered Notes are transferable by execution of
the Form of Transfer endorsed thereon under the hand of the
transferor or, where the transferor is a corporation, under
its common seal or under the hand of two of its officers
duly authorised in writing. In each case the signatures(s)
must be guaranteed by a commercial bank with a correspondent
bank in New York City, Luxembourg or London or by an
institution which is a member of The New York Stock Exchange
or The American Stock Exchange in New York City or the
Luxembourg Stock Exchange or the London Stock Exchange
Limited.
4. The Registered Notes to be transferred must be delivered
for registration to the specified office of the Registrar or
a Transfer Agent with the Form of Transfer endorsed thereon
duly completed and executed and must be accompanied by such
documents, evidence and information as may be required
pursuant to the Conditions and such other evidence as the
relevant Issuer may reasonably require to prove the title of
the transferor or his right to transfer the Registered Notes
and, if the form of transfer is executed by some other
person on his behalf or in the case of the execution of a
form of transfer on behalf of a corporation by its officers,
the authority of that person or those persons to do so.
5. The executors or administrators of a deceased holder of
Registered Notes (not being one of several joint holders)
and in the case of the death of one or more of several joint
holders the survivor or survivors of such joint holders
shall be the only person or persons recognised by the
relevant Issuer as having any title to such Registered
Notes. <PAGE> 123 6. Any person becoming entitled to
Registered Notes in consequence of the death or bankruptcy
of the holder of such Registered Notes may upon producing
such evidence that he holds the position in respect of which
he proposes to act under this paragraph or of his title as
the relevant issuer shall reasonably require be registered
himself as the holder of such Registered Notes or, subject
to the preceding paragraphs as to transfer, may transfer
such Registered Notes. The relevant Issuer shall be at
liberty to retain any amount payable upon the Registered
Notes to which any person is so entitled until such person
shall be registered as aforesaid or shall duly transfer the
Registered Notes.
7. Unless otherwise requested by him, the holder of
Registered Notes of any series shall be entitled to receive
only one Registered Note in respect of his entire holding of
such series.
8. The joint holders of Registered Notes of any series
shall be entitled to one Registered Note only in respect of
their joint holding of such series which shall, except where
they otherwise direct, be delivered to the joint holder
whose name appears first in the register of the holders of
Registered Notes in respect of such joint holding.
9. Where a holder of Registered Notes has transferred part
only of his holding of any series there shall be delivered
to him without charge a Registered Note in respect of the
balance of such holding.
10. The relevant Issuer shall make no charge to the
Noteholders for the registration of any holding of
Registered Notes or any transfer thereof or for the issue
thereof or for the delivery thereof at the specified office
of the Registrar or a Transfer Agent or by post to the
address specified by the holder. If any holder entitled to
receive a Registered Note wishes to have the same delivered
to him otherwise than at the specified office of the
Registrar or a Transfer Agent, such delivery shall be made,
upon his written request to the Registrar, at his risk and
(except where sent by post to the address specified by the
holder) at his expense.
11. Subject to the other provisions of those presents, the
holder of a Registered Note may (to the fullest extent
permitted by applicable laws) be treated at all times, by
all persons and for all purposes as the absolute owner of
such Registered Note notwithstanding any notice any person
may have of the right, title, interest or claim of any other
person thereto.
The relevant Issuer and the Trustee shall not be bound to
see to the execution of any trust to which any Registered
Note may be subject and no notice of any trust shall be
entered on the register. The holder of a Registered Note
will be recognised by the relevant Issuer as entitled to his
Registered Note free from any equity, set-off or
counterclaim on the part of the relevant Issuer against the
original or any intermediate holder of such Registered Note.
<PAGE> 124 SCHEDULE 4
PROVISIONS FOR MEETINGS OF NOTEHOLDERS
1. (A) As used in this Schedule the following expressions
shall have the
following meanings unless the context otherwise requires:
(i) "voting certificate" shall mean an English language
certificate issued by a Paying Agent and dated in which it
is stated:
(a) that on the date thereof Bearer Notes (whether in
definitive form or represented by a Global Note and not
being Bearer Notes in respect of which a block voting
instruction has been issued and is outstanding in respect of
the meeting specified in such voting certificate or any
adjourned such meeting) were deposited with such Paying
Agent or (to the satisfaction of such Paying Agent) were
held to its order or under its control and that no such
Bearer Notes will cease to be so deposited or held until the
first to occur of:
(1) the conclusion of the meeting specified in such
certificate or, if later, of any adjourned such meeting; and
(2) the surrender of the certificate to the Paying Agent
who issued the same; and
(b) that the bearer thereof is entitled to attend and vote
at such meeting and any adjourned such meeting in respect of
the Bearer Notes represented by such certificate;
(ii) "block voting instruction" shall mean an English
language document issued by a Paying Agent and dated in
which:
(a) it is certified that Bearer Notes (whether in definitive
form or represented by a Global Note and not being Bearer
Notes in respect of which a voting certificate has been
issued and is outstanding in respect of the meeting
specified in such block voting instruction and any adjourned
such meeting) have been deposited with such Paying Agent or
(to the satisfaction of such Paying Agent) were held to its
order or under its control and that no such Bearer Notes
will cease to be so deposited or held until the first to
occur of:
(1) the conclusion of the meeting specified in such document
or, if later, of any adjourned such meeting; and
(2) the surrender to the Paying Agent not less than 48hours
before the time for which such meeting or any adjourned such
meeting is convened of the receipt issued by such Paying
Agent in respect of each such deposited Bearer Note which is
to be released or (as the case may require) the Bearer Note
or Bearer Notes ceasing with the agreement of the Paying
Agent to be held to its order or under its control and the
giving of notice by the Paying Agent to the relevant Issuer
in accordance with paragraph17 hereof of the necessary
amendment to the block voting instruction; <PAGE> 125 (b) it
is certified that each holder of such Bearer Notes has
instructed such Paying Agent that the vote(s) attributable
to the Bearer Note or Bearer Notes so deposited or held
should be cast in a particular way in relation to the
resolution or resolutions to be put to such meeting or any
adjourned such meeting and that all such instructions are
during the period commencing 48hours prior to the time for
which such meeting or any adjourned such meeting is convened
and ending at the conclusion or adjournment thereof neither
revocable nor capable of amendment;
(c) the aggregate nominal amount of the Bearer Notes so
deposited or held are listed distinguishing with regard to
each such resolution between those in respect of which
instructions have been given as aforesaid that the votes
attributable thereto should be cast in favour of the
resolution and those in respect of which instructions have
been so given that the votes attributable thereto should be
cast against the resolution; and
(d) one or more persons named in such document (each
hereinafter called a "proxy") is or are authorised and
instructed by such Paying Agent to cast the votes
attributable to the Bearer Notes so listed in accordance
with the instructions referred to in (c) above as set out in
such document;
(iii) "24 hours" shall mean a period of 24 hours
including all or part of a day upon which banks are open for
business in both the place where the relevant meeting is to
be held and in each of the places where the Paying Agents
have their specified offices (disregarding for this purpose
the day upon which such meeting is to be held) and such
period shall be extended by one period or, to the extent
necessary, more periods of 24 hours until there is included
as aforesaid all or part of a day upon which banks are open
for business in all of the places as aforesaid; and
(iv) "48 hours" shall mean a period of 48 hours including
all or part of two days upon which banks are open for
business both in the place where the relevant meeting is to
be held and in each of the places where the Paying Agents
have their specified offices (disregarding for this purpose
the day upon which such meeting is to be held) and such
period shall be extended by one period or, to the extent
necessary, more periods of 24 hours until there is included
as aforesaid all or part of two days upon which banks are
open for business in all of the places as aforesaid.
(B) A holder of a Bearer Note may obtain a voting
certificate in respect of such Bearer Note from a Paying
Agent or require a Paying Agent to issue a block voting
instruction in respect of such Bearer Note by depositing
such Bearer Note with such Paying Agent or (to the
satisfaction of such Paying Agent) by such Bearer Note being
held to its order or under its control, in each case not
less than 48 hours before the time fixed for the relevant
meeting and on the terms set out in sub-paragraph (i)(a) or
(ii)(a) above (as the case may be), and (in the case of a
block voting instruction) instructing such Paying Agent to
the effect set out in sub- paragraph (ii)(b) above. The
holder of any voting certificate or the proxies named in any
block voting instruction shall for all purposes in
connection with the relevant meeting or adjourned meeting of
Noteholders be deemed to be the holder of the Bearer Notes
to which such voting <PAGE> 126 certificate or block voting
instruction relates and the Paying Agent with which such
Bearer Notes have been deposited or the person holding the
same to the order or under the control of such Paying Agent
shall be deemed for such purposes not to be the holder of
those Bearer Securities.
(C) (i) A holder of Registered Notes (whether in definitive
form or represented by a Global Note) may, by an instrument
in writing in the English language (a "form of proxy")
signed by the holder or, in the case of a corporation,
executed under its common seal or signed on its behalf by an
attorney or a duly authorised officer of the corporation and
delivered to the specified office of the Registrar not less
than 48 hours before the time fixed for the relevant
meeting, appoint any person (a "proxy") to act on his or its
behalf in connection with any meeting of the Noteholders and
any adjourned such meeting.
(ii) Any holder of Registered Notes which is a
corporation may by resolution of its directors or other
governing body authorise any person to act as its
representative (a "representative") in connection with any
meeting of the Noteholders and any adjourned such meeting.
(iii) Any proxy appointed pursuant to sub-paragraph(i)
above or representative appointed pursuant to
sub-paragraph(ii) above shall so long as such appointment
remains in force be deemed, for all purposes in connection
with the relevant meeting or adjourned meeting of the
Noteholders, to be the holder of the Registered Notes to
which such appointment relates and the holder of the
Registered Notes shall be deemed for such purposes not to be
the holder.
2. The relevant Issuer or the Trustee may at any time and
the relevant Issuer shall upon a requisition in writing
signed by the holders of not less than one-tenth in nominal
amount of the Notes of any Series for the time being
outstanding convene a meeting of the Noteholders and if the
relevant Issuer makes default for a period of seven days in
convening such a meeting the same may be convened by the
Trustee or the requisitionists. Every such meeting shall be
held at such time and place as the Trustee may appoint or
approve.
3. At least 21days' notice (exclusive of the day on which
the notice is given and the day on which the meeting is to
be held) specifying the place, day and hour of meeting shall
be given to the Noteholders prior to any meeting of the
Noteholders in the manner provided by Condition16. Such
notice, which shall be in the English language, shall state
generally the nature of the business to be transacted at the
meeting thereby convened but (except for an Extraordinary
Resolution) it shall not be necessary to specify in such
notice the terms of any resolution to be proposed. Such
notice shall include statements, if applicable, to the
effect that <PAGE> 127 (i)Bearer Notes may, not less than 48
hours before the time fixed for the meeting, be deposited
with Paying Agents or (to their satisfaction) held to their
order or under their control for the purpose of obtaining
voting certificates or appointing proxies and (ii)the
holders of Registered Notes may appoint proxies by executing
and delivering a form of proxy in the English language to
the specified office of the Registrar not less than 48hours
before the time fixed for the meeting or, in the case of
corporations, may appoint representatives by resolution of
their directors or other governing body. A copy of the
notice shall be sent by post to the Trustee (unless the
meeting is convened by the Trustee) and to the relevant
Issuer (unless the meeting is convened by such Issuer).
4. A person (who may but need not be a Noteholder)
nominated in writing by the Trustee shall be entitled to
take the chair at the relevant meeting or adjourned meeting
but if no such nomination is made or if at any meeting or
adjourned meeting the person nominated shall not be present
within fifteen minutes after the time appointed for holding
the meeting or adjourned meeting the Noteholders present
shall choose one of their number to be Chairman. The
Chairman of an adjourned meeting need not be the same person
as was Chairman of the meeting from which the adjournment
took place.
5. At any such meeting one or more persons present holding
Definitive Notes or voting certificates or being proxies or
representatives and holding or representing in the aggregate
not less than one-twentieth of the nominal amount of the
Notes for the time being outstanding shall (except for the
purpose of passing an Extraordinary Resolution) form a
quorum for the transaction of business and no business
(other than the choosing of a Chairman) shall be transacted
at any meeting unless the requisite quorum be present at the
commencement of the relevant business. The quorum at any
such meeting for passing an Extraordinary Resolution shall
(subject as provided below) be one or more persons present
holding Definitive Notes or voting certificates or being
proxies or representatives and holding or representing in
the aggregate a clear majority in nominal amount of the
Notes for the time being outstanding PROVIDED THAT at any
meeting the business of which includes any of the following
matters (each of which shall, subject only to
Clause18(B)(ii), only be capable of being effected after
having been approved by Extraordinary Resolution) namely:
(i) reduction or cancellation of the amount payable or,
where applicable, modification, except where such
modification is in the opinion of the Trustee bound to
result in an increase, of the method of calculating the
amount payable or modification of the date of payment or,
where applicable, of the method of calculating the date of
payment in respect of any principal or interest in respect
of the Notes;
(ii) alteration of the currency in which payments under
the Notes, Receipts and Coupons are to be made;
(iii) alteration of the majority required to pass an
Extraordinary Resolution;
(iv) the sanctioning of any such scheme or proposal as
is described in paragraph18(I) below;
(v) alteration of this proviso or the proviso to paragraph6
below; <PAGE> 128 the quorum shall be one or more persons
present holding Definitive Notes or voting certificates or
being proxies or representatives and holding or representing
in the aggregate not less than two-thirds of the nominal
amount of the Notes for the time being outstanding.
6. If within fifteen minutes (or such longer period not
exceeding thirty minutes as the Chairman may decide) after
the time appointed for any such meeting a quorum is not
present for the transaction of any particular business,
then, subject and without prejudice to the transaction of
the business (if any) for which a quorum is present, the
meeting shall if convened upon the requisition of
Noteholders be dissolved. In any other case it shall stand
adjourned to the same day in the next week (or if such day
is a public holiday the next succeeding business day) at the
same time and place (except in the case of a meeting at
which an Extraordinary Resolution is to be proposed in which
case it shall stand adjourned for such period, being not
less than 14clear days nor more than 42clear days, and to
such place as may be appointed by the Chairman either at or
subsequent to such meeting and approved by the Trustee). If
within fifteen minutes (or such longer period not exceeding
thirty minutes as the Chairman may decide) after the time
appointed for any adjourned meeting a quorum is not present
for the transaction of any particular business, then,
subject and without prejudice to the transaction of the
business (if any) for which a quorum is present, the
Chairman may either (with the approval of the Trustee)
dissolve such meeting or adjourn the same for such period,
being not less than 14clear days, and to such place as may
be appointed by the Chairman either at or subsequent to such
adjourned meeting and approved by the Trustee, and the
provisions of this sentence shall apply to all further
adjourned such meetings. At any adjourned meeting one or
more persons present holding Definitive Notes or voting
certificates or being proxies or representatives (whatever
the nominal amount of the Notes so held or represented by
them) shall (subject as provided below) form a quorum and
shall (subject as provided below) have power to pass any
Extraordinary or other resolution and to decide upon all
matters which could properly have been dealt with at the
meeting from which the adjournment took place had the
requisite quorum been present PROVIDED THAT at any adjourned
meeting the quorum for the transaction of business
comprising any of the matters specified in the proviso to
paragraph5 above shall be one or more persons present
holding Definitive Notes or voting certificates or being
proxies or representatives and holding or representing in
the aggregate not less than one-third of the nominal amount
of the Notes for the time being outstanding.
7. Notice of any adjourned meeting at which an
Extraordinary Resolution is to be submitted shall be given
in the same manner as notice of an original meeting but as
if 10were substituted for 21in paragraph3 above and such
notice shall state the relevant quorum. Subject as
aforesaid it shall not be necessary to give any notice of an
adjourned meeting. <PAGE> 129 8. Every question submitted
to a meeting shall be decided in the first instance by a
show of hands and in case of equality of votes the Chairman
shall both on a show of hands and on a poll have a casting
vote in addition to the vote or votes (if any) to which he
may be entitled as a Noteholder or as a holder of a voting
certificate or as a proxy or as a representative.
9. At any meeting unless a poll is (before or on the
declaration of the result of the show of hands) demanded by
the Chairman, the relevant Issuer, the Trustee or any person
present holding a Definitive Note or a voting certificate or
being a proxy or representative (whatever the principal
amount of the Notes so held or represented by him) a
declaration by the Chairman that a resolution has been
carried or carried by a particular majority or lost or not
carried by a particular majority shall be conclusive
evidence of the fact without proof of the number or
proportion of the votes recorded in favour of or against
such resolution.
10. Subject to paragraph12 below, if at any such meeting a
poll is so demanded it shall be taken in such manner and
subject as hereinafter provided either at once or after an
adjournment as the Chairman directs and the result of such
poll shall be deemed to be the resolution of the meeting at
which the poll was demanded as at the date of the taking of
the poll. The demand for a poll shall not prevent the
continuance of the meeting for the transaction of any
business other than the motion on which the poll has been
demanded.
11. The Chairman may with the consent of (and shall if
directed by) any such meeting adjourn the same from time to
time and from place to place but no business shall be
transacted at any adjourned meeting except business which
might lawfully (but for lack of required quorum) have been
transacted at the meeting from which the adjournment took
place.
12. Any poll demanded at any such meeting on the election
of a Chairman or on any question of adjournment shall be
taken at the meeting without adjournment.
13. The Trustee and its lawyers and any director, officer
or employee of a corporation being a trustee of these
presents and any director or officer of the relevant Issuer
and its lawyers and any other person authorised in that
behalf by the Trustee may attend and speak at any meeting.
Save as aforesaid, but without prejudice to the proviso to
the definition of "outstanding" in Clause1, no person shall
be entitled to attend and speak nor shall any person be
entitled to vote at any meeting of the Noteholders or join
with others in requesting the convening of such a meeting or
to exercise the rights conferred on the Noteholders by
Conditions10 and11 unless he either produces the Definitive
Bearer Note or Definitive Bearer Notes of which he is the
holder or a voting certificate or is a proxy or a
representative or is the holder of a Definitive Registered
Note or Definitive Registered Notes. No person shall be
entitled to vote at any meeting in respect of Notes held by,
for the benefit of, or on behalf of, the relevant Issuer or
any Subsidiary of the relevant Issuer. Nothing herein shall
prevent any of the proxies named in any block voting
instruction or form of proxy or any representative from
being a director, officer or representative of or otherwise
connected with the relevant Issuer. <PAGE> 130 14. Subject
as provided in paragraph13 hereof at any meeting:
(A) on a show of hands every person who is present in person
and produces a Definitive Bearer Note or voting certificate
or is a holder of Definitive Registered Notes or is a proxy
or representative shall have one vote; and
(B) on a poll every person who is so present shall have one
vote in respect of each e1 or such other amount as the
Trustee may in its absolute discretion stipulate (or, in the
case of meetings of holders of Notes denominated in another
currency, such amount in such other currency as the Trustee
in its absolute discretion may stipulate) in nominal amount
of the Definitive Notes so produced or represented by the
voting certificate so produced or in respect of which he is
a proxy or representative or in respect of which he is the
holder.
Without prejudice to the obligations of the proxies named in
any block voting instruction or form of proxy any person
entitled to more than one vote need not use all his votes or
cast all the votes to which he is entitled in the same way.
15. The proxies named in any block voting instruction or
form of proxy and representatives need not be Noteholders.
16. Each block voting instruction together (if so requested
by the Trustee) with proof satisfactory to the Trustee of
its due execution on behalf of the relevant Paying Agent and
each form of proxy shall be deposited by the relevant Paying
Agent or (as the case may be) by the Registrar at such place
as the Trustee shall approve not less than 24hours before
the time appointed for holding the meeting or adjourned
meeting at which the proxies named in the block voting
instruction or form of proxy propose to vote and in default
the block voting instruction or form of proxy shall not be
treated as valid unless the Chairman of the meeting decides
otherwise before such meeting or adjourned meeting proceeds
to business. A notarially certified copy of each block
voting instruction and form of proxy shall be deposited with
the Trustee before the commencement of the meeting or
adjourned meeting but the Trustee shall not thereby be
obliged to investigate or be concerned with the validity of
or the authority of the proxies named in any such block
voting instruction or form of proxy.
17. Any vote given in accordance with the terms of a block
voting instruction or form of proxy shall be valid
notwithstanding the previous revocation or amendment of the
block voting instruction or form of proxy or of any of the
Noteholders' instructions pursuant to which it was executed
provided that no intimation in writing of such revocation or
amendment shall have been received from the relevant Paying
Agent or in the case of a Registered Note from the holder
thereof by the relevant Issuer at its registered office (or
such other place as may have been required or approved by
the Trustee for the purpose) by the time being 24hours and
48hours respectively before the time appointed for holding
the meeting or adjourned meeting at which the block voting
instruction or form of proxy is to be used. <PAGE> 131 18.
A meeting of the Noteholders shall in addition to the powers
hereinbefore given have the following powers exercisable
only by Extraordinary Resolution (subject to the provisions
relating to quorum contained in paragraphs5 and 6 above)
namely:
(A) Power to sanction any compromise or arrangement
proposed to be made between the relevant Issuer, the
Trustee, any Appointee and the Noteholders and Couponholders
or any of them.
(B) Power to sanction any abrogation, modification,
compromise or arrangement in respect of the rights of the
Trustee, any Appointee, the Noteholders, the Receiptholders,
the Couponholders or the relevant Issuer against any other
or others of them or against any of their property whether
such rights shall arise under these presents or otherwise.
(C) Power to assent to any modification of the provisions of
these presents which shall be proposed by the relevant
Issuer, the Trustee or any Noteholder.
(D) Power to give any authority or sanction which under the
provisions of these presents is required to be given by
Extraordinary Resolution.
(E) Power to appoint any persons (whether Noteholders or
not) as a committee or committees to represent the interests
of the Noteholders and to confer upon such committee or
committees any powers or discretions which the Noteholders
could themselves exercise by Extraordinary Resolution.
(F) Power to approve of a person to be appointed a trustee
and power to remove any trustee or trustees for the time
being of these presents.
(G) Power to discharge or exonerate the Trustee and/or any
Appointee from all liability in respect of any act or
omission for which the Trustee and/or such Appointee may
have become responsible under these presents.
(H) Power to authorise the Trustee and/or any Appointee to
concur in and execute and do all such deeds, instruments,
acts and things as may be necessary to carry out and give
effect to any Extraordinary Resolution.
(I) Power to sanction any scheme or proposal for the
exchange or sale of the Notes for or the conversion of the
Notes into or the cancellation of the Notes in consideration
of shares, stock, notes, bonds, debentures, debenture stock
and/or other obligations and/or securities of the relevant
Issuer or any other company formed or to be formed, or for
or into or in consideration of cash, or partly for or into
or in consideration of such shares, stock, notes, bonds,
debentures, debenture stock and/or other obligations and/or
securities as aforesaid and partly for or into or in
consideration of cash. <PAGE> 132 19. Any resolution
passed at a meeting of the Noteholders duly convened and
held in accordance with these presents shall be binding upon
all the Noteholders whether present or not present at such
meeting and whether or not voting and upon all
Receiptholders and Couponholders and each of them shall be
bound to give effect thereto accordingly and the passing of
any such resolution shall be conclusive evidence that the
circumstances justify the passing thereof. Notice of the
result of the voting on any resolution duly considered by
the Noteholders shall be published in accordance with
Condition16 by the relevant Issuer within 14days of such
result being known PROVIDED THAT the non-publication of such
notice shall not invalidate such result.
20. The expression "Extraordinary Resolution" when used in
these presents means a resolution passed at a meeting of the
Noteholders duly convened and held in accordance with these
presents by a majority consisting of not less than
three-fourths of the persons voting thereat upon a show of
hands or if a poll is duly demanded by a majority consisting
of not less than three-fourths of the votes cast on such
poll.
21. Minutes of all resolutions and proceedings at every
meeting of the Holders shall be made and entered in books to
be from time to time provided for that purpose by the
relevant Issuer and any such Minutes as aforesaid if
purporting to be signed by the Chairman of the meeting at
which such resolutions were passed or proceedings transacted
shall be conclusive evidence of the matters therein
contained and until the contrary is proved every such
meeting in respect of the proceedings of which Minutes have
been made shall be deemed to have been duly held and
convened and all resolutions passed or proceedings
transacted thereat to have been duly passed or transacted.
22. (A) If and whenever the relevant Issuer shall have
issued and have outstanding Notes of more than one Series
the foregoing provisions of this Schedule shall have effect
subject to the following modifications:
(i) a resolution which in the opinion of the Trustee affects
the Notes of only one Series shall be deemed to have been
duly passed if passed at a separate meeting of the holders
of the Notes of that Series;
(ii) a resolution which in the opinion of the Trustee
affects the Notes of more than one Series but does not give
rise to a conflict of interest between the holders of Notes
of any of the Series so affected shall be deemed to have
been duly passed if passed at a single meeting of the
holders of the Notes of all the Series so affected;
(iii) a resolution which in the opinion of the Trustee
affects the Notes of more than one Series and gives or may
give rise to a conflict of interest between the holders of
the Notes of one Series or group of Series so affected and
the holders of the Notes of another Series or group of
Series so affected shall be deemed to have been duly passed
only if passed at separate meetings of the holders of the
Notes of each Series or group of Series so affected; and
<PAGE> 133 (iv) to all such meetings all the preceding
provisions of this Schedule shall mutatis mutandis apply as
though references therein to Notes, Noteholders and holders
were references to the Notes of the Series or group of
Series in question or to the holders of such Notes, as the
case may be.
(B) If the relevant Issuer shall have issued and have
outstanding Notes which are not denominated in euro, in the
case of any meeting of holders of Notes of more than one
currency the nominal amount of such Notes shall (i) for the
purposes of paragraph 2 above be the equivalent in euro at
the spot rate of a bank nominated by the Trustee for the
conversion of the relevant currency or currencies into euro
on the seventh dealing day prior to the day on which the
requisition in writing is received by the relevant Issuer
and (ii) for the purposes of paragraphs 5, 6 and 14 above
(whether in respect of the meeting or any adjourned such
meeting or any poll resulting therefrom) be the equivalent
at such spot rate on the seventh dealing day prior to the
day of such meeting. In such circumstances, on any poll
each person present shall have one vote for each e1 (or such
other euro amount as the Trustee may in its absolute
discretion stipulate) in nominal amount of the Notes
(converted as above) which he holds or represents.
23. Subject to all other provisions of these presents the
Trustee may without the consent of the relevant Issuer, the
Noteholders, the Receiptholders or the Couponholders
prescribe such further regulations regarding the
requisitioning and/or the holding of meetings of Noteholders
and attendance and voting thereat as the Trustee may in its
sole discretion think fit.
<PAGE> 134
EXECUTED as a deed )
by IBM CREDIT CORPORATION )
acting by and )
acting under the authority of that company, in )
the presence of: )
Witness's signature
Name
Address
Occupation
EXECUTED as a deed )
by IBM INTERNATIONAL FINANCE N.V., )
acting by )
acting under the authority of that company, in )
the presence of: )
Witness's signature
Name
Address
Occupation
EXECUTED as a deed by )
<PAGE> 135
INTERNATIONAL BUSINESS MACHINES )
CORPORATION, acting by )
and )
acting under the authority of )
that company, in the presence of: )
Witness's signature
Name
Address
Occupation
THE COMMON SEAL of THE LAW )
DEBENTURE TRUST CORPORATION )
p.l.c. was affixed to this )
deed in the presence of: )
Director
Director
<PAGE> 136
IN WITNESS whereof this Fourth Supplemental Trust Deed has been executed
as a deed by the Issuers and the Trustee and entered into the day and
year first above written.
EXECUTED as a deed )
by IBM CREDIT CORPORATION )
acting by Kimberly A. Kispert ) KIMBERLY A. KISPERT
acting under the authority of that company )
in the presence of: Stuart S. Moskowitz, )
IBM Senior Counsel
EXECUTED as a deed by IBM )
INTERNATIONAL FINANCE N.V. ) P.N.J. SNOEK
acting by P.N.J. Snoek )
acting under the authority of that company )
in the presence of: G. Mos
EXECUTED as a deed by INTERNATIONAL )
BUSINESS MACHINES CORPORATION )
acting by Dr. James H. Hodge ) JAMES H. HODGE
acting under the authority of that company )
in the presence of: Stuart S. Moskowitz, )
IBM Senior Counsel
THE COMMON SEAL of THE LAW )
DEBENTURE TRUST CORPORATION )
p.l.c. was affixed to this deed in the ) SEAL
presence of: )
A. Holladay, Director, and )
B. Norrif, Director )
<PAGE> 137
DATED 5th March, 1999
IBM CREDIT CORPORATION
- - and -
IBM INTERNATIONAL FINANCE N.V.
- - and -
INTERNATIONAL BUSINESS MACHINES CORPORATION
- - and -
THE LAW DEBENTURE TRUST CORPORATION p.l.c.
__________________________________
FOURTH SUPPLEMENTAL TRUST DEED
further modifying and restating the
Trust Deed dated 30th July, 1993 as amended
and restated on 28th February, 1996 and further
modified on 10th March, 1997 and 6th March, 1998
relating to an e4,000,000,000 (formerly ECU4,000,000,000)
Euro Medium Term Note Programme
for the issue of Notes due from 1 month
to 30 years from the date of issue
____________________________________
to IBM International Finance to IBM Credit and IBM
as to Netherlands law as to U.S. Law
DeBrauw Blackstone Westbroek N.V. Cravath, Swaine & Moore
Tripolis 300 33 King William Street
Burberweehuispad 301 London EC4R 9DU
1076 HR Amsterdam
To the Trustee
as to English law as to U.S. Law
Allen & Overy Brown & Wood
One New Change (a multinational partnership)
London EC4M 9QQ Princes Court
7 Princes Street
London EC2R 8AQ
<PAGE> 138
SCHEDULE
FORM OF MODIFIED PRINCIPAL TRUST DEED
DATED 30TH JULY, 1993
IBM CREDIT CORPORATION
- - and -
IBM INTERNATIONAL FINANCE N.V.
- -and-
INTERNATIONAL BUSINESS MACHINES CORPORATION
- - and -
THE LAW DEBENTURE TRUST
CORPORATION p.l.c.
__________________________________
TRUST DEED
(as modified and restated on 5th March, 1999)
relating to an
e4,000,000,000
Euro Medium Term Note Programme
for the issue of Notes due from
1month to 30years from the date of issue
__________________________________
to IBM International Finance to IBM Credit and IBM
as to Netherlands law as to U.S. Law
DeBrauw Blackstone Westbroek N.V. Cravath, Swaine & Moore
Tripolis 300 33 King William Street
Burberweehuispad 301 London EC4R 9DU
1076 HR Amsterdam
To the Trustee
as to English law as to U.S. Law
Allen & Overy Brown & Wood
One New Change (a multinational partnership)
London EC4M 9QQ Princes Court
7 Princes Street
London EC2R 8AQ
<PAGE> 139
DATED 30TH JULY,1993
IBM CREDIT CORPORATION
- - and -
IBM INTERNATIONAL FINANCE N.V.
- -and-
INTERNATIONAL BUSINESS MACHINES CORPORATION
- - and -
THE LAW DEBENTURE TRUST CORPORATION p.l.c.
__________________________________
TRUST DEED
(as modified and restated on 5th March, 1999)
relating to an e4,000,000,000
Euro Medium Term Note Programme
for the issue of Notes due from 1month
to 30years from the date of issue
_________________________________
to IBM International Finance
as to Netherlands law
DeBrauw Blackstone Westbroek N.V.
Tripolis 300
Burberweehuispad 301
1076 HR Amsterdam
to IBM Credit and IBM
as to U.S. Law
Cravath, Swaine & Moore
33 King William Street
London EC4R 9DU
To the Trustee
as to English law
Allen & Overy
One New Change
London EC4M 9QQ
as to U.S. Law
Brown & Wood
(a multinational partnership)
Princes Court
7 Princes Street
London EC2R 8AQ
<PAGE> 140
DATED 5TH MARCH, 1999
IBM CREDIT CORPORATION
- - and -
IBM INTERNATIONAL FINANCE N.V.
- - and -
INTERNATIONAL BUSINESS MACHINES CORPORATION
- - and -
THE LAW DEBENTURE TRUST CORPORATION p.l.c.
__________________________________
FOURTH SUPPLEMENTAL TRUST DEED
further modifying and restating the Trust Deed
dated 30th July, 1993 as amended and restated
on 28th February, 1996 and further modified
on 10th March, 1997 and 6th March, 1998
relating to an e4,000,000,000
(formerly ECU4,000,000,000)
Euro Medium Term Note Programme
for the issue of Notes due from 1 month to 30 years from the date of issue
____________________________________
to IBM International Finance to IBM Credit and IBM
as to Netherlands law as to U.S. Law
DeBrauw Blackstone Westbroek N.V. Cravath, Swaine & Moore
Tripolis 300 33 King William Street
Burberweehuispad 301 London EC4R 9DU
1076 HR Amsterdam
To the Trustee
as to English law as to U.S. Law
Allen & Overy Brown & Wood
One New Change (a multinational partnership)
London EC4M 9QQ Princes Court
7 Princes Street
London EC2R 8AQ
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT II
__________
IBM CREDIT CORPORATION
STATEMENT RE COMPUTATION OF RATIOS
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
FOR THE YEAR ENDED DECEMBER 31:
1998 1997 1996 1995 1994
__________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Fixed Charges:
Interest expense $611,206 $538,560 $436,109 $394,572 $306,125
Approximate portion of rental
expense representative of
the interest factor 239 283 479 507 2,780
__________ ________ ________ ________ ________
Total fixed charges 611,445 538,843 436,588 395,079 308,905
Net earnings 308,765 283,893 271,082 230,475 250,589
Provision for income taxes 200,748 163,215 176,122 149,455 162,703
__________ ________ ________ ________ ________
Earnings before income
taxes and fixed charges $1,102,958 $985,951 $883,792 $775,009 $722,197
========== ======== ======== ======== ========
Ratio of earnings to fixed
charges 1.83 1.83 2.02 1.96 2.34
==== ==== ==== ==== ====
-50-
</TABLE>
<PAGE> 1
[SIGNATURE]
EXHIBIT III
___________
CONSENT OF INDEPENDENT ACCOUNTANTS
__________________________________
We hereby consent to the incorporation by reference in
the Prospectus constituting part of the Registration
Statements on Form S-3 (Nos. 333-42755 and 333-26211) of IBM
Credit Corporation of our report dated January 21, 1999,
except as to the Subsequent Events note on page 43 which is
as of February 25, 1999, appearing on page 17 of this Form
10-K.
/s/PricewaterhouseCoopers LLP
Stamford, CT
March 26, 1999
-51-
<TABLE> <S> <C>
<ARTICLE> 5
EXHIBIT IV
__________
FINANCIAL DATA SCHEDULE
_______________________
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM IBM CREDIT CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AT AND
FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 822,844
<SECURITIES> 68,838
<RECEIVABLES> 6,122,561
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,397,359
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 457,411
0
0
<OTHER-SE> 1,420,303
<TOTAL-LIABILITY-AND-EQUITY> 16,397,359
<SALES> 510,156
<TOTAL-REVENUES> 1,816,498
<CGS> 446,715
<TOTAL-COSTS> 446,715
<OTHER-EXPENSES> 211,259
<LOSS-PROVISION> 37,805
<INTEREST-EXPENSE> 611,206
<INCOME-PRETAX> 509,513
<INCOME-TAX> 200,748
<INCOME-CONTINUING> 308,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 308,765
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
