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As Filed Pursuant to Rule 424(b)(5)
Registration No. 333-70521
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 9, 1999)
International Business Machines Corporation
New Orchard Road, Armonk, New York 10504--(914)499-1900
$4,140,000,000
Medium-Term Notes
Due One Year or More from Date of Issue
We may offer our Medium-Term Notes at one or more times. The specific terms of
the particular notes being offered will be contained in a pricing supplement.
The following terms may apply to particular notes being offered:
- - They may mature one year or more after issuance.
- - They may bear interest at a fixed or floating rate (or both). Certain notes
issued at a discount may not bear interest. Floating interest rates may be
based on any of the following formulas or on other interest rate formulas
specified in the pricing supplement:
<TABLE>
<S> <C> <C> <C>
- CD Rate - LIBOR
- Federal Funds Rate - Prime Rate
- Treasury Rate - CMT Rate
- Commercial Paper Rate
</TABLE>
- - Any floating interest rate may be adjusted by adding or subtracting a
specified spread or margin or by applying a spread multiplier.
- - Each fixed rate note will pay interest on April 1 and October 1 of each year
unless otherwise specified in the pricing supplement. Each floating rate
note will pay interest on the dates specified in the pricing supplement.
- - They may be denominated in foreign or composite currencies, if specified in
the pricing supplement.
- - They will not be redeemable prior to maturity and will not be subject to a
sinking fund, unless otherwise specified in the pricing supplement.
- - They may be issued in certificated or book-entry form.
Generally, we will not list the notes on any securities exchange. We may,
however, from time to time do so.
<TABLE>
<CAPTION>
Price to Public Agents' Commissions Proceeds to Company
Per Note... 100% .150%-.750% 99.250%-99.850%
<S> <C> <C> <C>
Total...... $4,140,000,000 $6,210,000-$31,050,000 $4,108,950,000-$4,133,790,000
</TABLE>
We may offer the notes as follows:
- - Through agents who have agreed to use reasonable efforts to solicit offers
to purchase the notes. Unless otherwise specified in the pricing supplement,
we will pay the agents commissions ranging from 0.150% to 0.750% of the
principal amount of the notes offered.
- - Through one or more agents purchasing the notes as principal and acting as
underwriter or dealer. We will pay those agents an underwriting discount or
commission to be negotiated at the time of sale.
- - Directly to investors. We will not pay a discount or commission to any agent
if we sell the notes directly to investors.
These securities have not been approved by the SEC or any state securities
commission nor have these organizations determined that this prospectus
supplement is accurate or complete. Any representation to the contrary is a
criminal offense.
Chase Securities Inc.
Credit Suisse First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
Morgan Stanley Dean Witter
Salomon Smith Barney
The date of this prospectus supplement is March 11, 1999.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement;
Pricing Supplements................ S-3
Foreign Currency Risks............... S-3
Description of the Notes............. S-4
Certain United States Federal Income
Tax Consequences................... S-16
U.S. Holders......................... S-16
Non-U.S. Holders..................... S-22
Backup Withholding and Information
Reporting.......................... S-23
Plan of Distribution................. S-23
Legal Opinions....................... S-25
Glossary............................. S-25
PROSPECTUS
Summary.............................. 1
The Company.......................... 4
Use of Proceeds...................... 4
Description of the Debt Securities... 4
Description of the Preferred Stock... 14
Description of the Depositary
Shares............................. 16
Description of the Capital Stock..... 18
Description of the Warrants.......... 19
Plan of Distribution................. 20
Legal Opinions....................... 21
Experts.............................. 21
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
CONTAINED IN THIS PROSPECTUS SUPPLEMENT, THE ATTACHED PROSPECTUS AND THE
APPLICABLE PRICING SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION AND IF YOU RECEIVE ANY UNAUTHORIZED INFORMATION YOU SHOULD
NOT RELY ON IT. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY PLACE
WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE
ATTACHED PROSPECTUS OR ANY PRICING SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE ON THE FRONT OF THE APPLICABLE DOCUMENT.
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ABOUT THIS PROSPECTUS SUPPLEMENT; PRICING SUPPLEMENTS
We may use this prospectus supplement, together with the attached prospectus
and a pricing supplement, to offer our Medium-Term Notes from time to time. The
total initial public offering price of notes that may be offered by use of this
prospectus supplement is $4,140,000,000 or the equivalent in foreign or
composite currencies. That amount will be reduced by the amount of any
securities issued under our shelf registration statement (No. 333-70521).
This prospectus supplement sets forth terms of the notes that we may offer.
It supplements the description of the debt securities and senior debt securities
contained in the attached prospectus. If information in this prospectus
supplement is inconsistent with the prospectus, this prospectus supplement will
apply and will supersede that information in the prospectus.
Each time we issue notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes being offered and the terms of the offering. The
pricing supplement may also add, update or change information in this prospectus
supplement or the attached prospectus. Any information in the pricing
supplement, including any changes in the method of calculating interest on any
note, that is inconsistent with this prospectus supplement will apply and will
supersede that information in this prospectus supplement.
It is important for you to read and consider all information contained in
this prospectus supplement and the attached prospectus and pricing supplement in
making your investment decision. You should also read and consider the
information in the documents we have referred you to in "Where You Can Find More
Information" on page 3 of the attached prospectus.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
If you invest in notes that are denominated in a currency other than U.S.
dollars, your investment will be subject to significant risks that are not
associated with a similar investment in notes denominated in U.S. dollars. These
risks include:
- the possibility of significant changes in rates of exchange between U.S.
dollars and the specified currency;
- the possibility of significant changes in rates of exchange between U.S.
dollars and the currency resulting from official redenomination of the
currency; and
- the possibility that the United States or any foreign government will
impose or modify foreign exchange controls.
These risks generally depend on factors over which we have no control, such as
economic and political events, and on the supply and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and
certain currencies have been highly volatile. This volatility may continue in
the future. Even if fluctuations have occurred in any particular exchange rate
in the past, fluctuations may not occur in the rate during the term of any note
denominated in the foreign currency. Depreciation of the currency specified for
a note against the U.S. dollar would result in a decrease in the effective yield
of that note below its coupon rate and, in certain circumstances, could result
in a substantial loss to you on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a foreign currency at the time of payment of amounts due on a note
denominated in that currency. There can be no assurances that exchange controls
will not restrict or prohibit payments in any designated currency. Even if there
are no actual exchange controls, a currency may not be available to us when
payments on the notes are due because of circumstances beyond our control.
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WE HAVE NOT DESCRIBED ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO, A CURRENCY OTHER THAN U.S. DOLLARS.
YOU SHOULD CONSULT YOUR OWN FINANCIAL AND LEGAL ADVISORS ABOUT THE RISKS OF AN
INVESTMENT IN NOTES DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. THESE
NOTES ARE NOT AN APPROPRIATE INVESTMENT IF YOU HAVE NOT HAD PRIOR EXPERIENCE
WITH FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this prospectus supplement is directed to
prospective purchasers of notes who are United States residents. We are not
advising prospective purchasers who are residents of countries other than the
United States with respect to any matters that may affect the purchase or
holding of, or receipt of payments of principal, premium or interest in respect
of, notes. These persons should consult their own advisors about those matters.
If applicable, the pricing supplement will contain a description of any
material exchange controls affecting the currency in which the notes are
denominated, if other than U.S. dollars, and any other required information
concerning such currency.
PAYMENT CURRENCY
If payment in respect of a note is required to be made in a currency other
than U.S. dollars and that currency is unavailable due to the imposition of
exchange controls or other circumstances beyond our control or is no longer used
by the government of the country issuing that currency or for the settlement of
transactions by public institutions of or within the international banking
community, then all payments in respect of that note will be made in U.S.
dollars until such currency is again available or used. The amounts payable on
any date in such currency will be converted into U.S. dollars on the basis of
the most recently available market exchange rate for such currency or as
otherwise indicated in the pricing supplement. Any payment in respect of the
note made under these circumstances in U.S. dollars will not constitute an event
of default under the Indenture under which the note was issued.
FOREIGN CURRENCY JUDGMENTS
The laws of the State of New York will govern the notes. Courts in the
United States have not customarily rendered judgments for money damages
denominated in any currency other than the U.S. dollar. The Judiciary Law of the
State of New York provides, for example, that a judgment granted in connection
with an obligation denominated in a currency other than U.S. dollars will be
granted in the foreign currency of the underlying obligation and converted into
U.S. dollars at a rate of exchange on the date of the entry of the judgment.
However, a state court outside the State of New York may not follow the same
rules and procedures on conversions of foreign currency judgments.
DESCRIPTION OF THE NOTES
GENERAL
The following is a summary of important terms of the notes. A complete copy
of the senior indenture under which the notes will be issued is filed an exhibit
to the registration statement. The definitions of capitalized terms used in this
prospectus supplement are provided in the Glossary beginning on page S-25.
The notes will be "senior debt securities," as described in the attached
prospectus and will constitute one series of senior debt securities issued under
the senior indenture. They will have the same rank as all of our other senior
debt securities.
The notes are being offered on a continuing basis. Each note will mature on
a Business Day one year or more from its date of issue, as agreed between us and
the purchaser. Unless otherwise specified in the pricing supplement, the notes
will not be subject to redemption or repayment prior to maturity and will not be
subject to any sinking fund.
The notes may bear interest at a fixed or floating rate. Interest on
floating rate notes will be determined, and adjusted periodically, by reference
to an interest rate basis or formula, adjusted by a spread or spread multiplier,
if any. We may issue notes at prices less than their stated principal amount.
Certain of such discounted notes will be considered original issue
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discount notes. Original issue discount notes may or may not bear periodic
interest. Unless otherwise specified in the pricing supplement, the amount
payable to the holder of an original issue discount note upon an acceleration of
its maturity will equal its adjusted issue price. This amount will be less than
the amount payable at maturity.
Unless otherwise specified in the pricing supplement:
- the notes will be denominated in U.S. dollars and payments of principal of
and interest on the notes will be made in U.S. dollars, and
- the authorized denominations of the notes denominated in U.S. dollars will
be U.S. $1,000 and integral multiples of U.S. $1,000 in excess of $1,000.
If specified in the pricing supplement, the amount of principal or interest
on the notes may be determined by reference to an index.
Each note will be issued in fully registered form without coupons. Each note
will be issued initially either in certificated form or in global form and
deposited with, or on behalf of, The Depository Trust Company, as depository.
Notes issued in global form will be "book-entry notes". Beneficial interests in
a book-entry note will be shown on, and transfers of those interests will be
effected only through, records maintained by DTC or its participants. Except
under limited circumstances, book-entry notes will not be issuable in
certificated form. Payments of principal and interest on book-entry notes will
be made to DTC or its nominee. Payments to beneficial owners of interests in
book-entry notes will be made through DTC and its participants. See "Description
of Debt Securities--Definitive Global Debt Securities" in the attached
prospectus.
Certificated notes may be presented for registration of transfer or exchange
at the corporate trust office of the security registrar for the senior debt
securities, The Chase Manhattan Bank, located at 55 Water Street, Room 234,
North Building, New York, New York 10041. Unless otherwise specified in the
pricing supplement, regular interest payments on certificated notes will be
payable by check to the person in whose name a certificated note is registered
at the close of business on the applicable record date before each interest
payment date. Interest payable on certificated notes at maturity, or upon
earlier redemption or repayment of principal, will be payable to the person to
whom principal is payable. At maturity, or upon earlier redemption or repayment,
payments of principal and interest will be made only upon presentment of the
certificated note to the paying agent.
The U.S dollar equivalent of the purchase price of a note having a
designated currency other than U.S. dollars will be determined on the basis of
the noon buying rate in New York City for cable transfers in foreign currencies
as certified for customs purposes by the Federal Reserve Bank of New York for
the relevant currency on the issue date. This determination will be made by us
or our agent, as exchange rate agent for the notes.
The paying agent for the notes will initially be The Chase Manhattan Bank.
PAYMENT OF PRINCIPAL AND INTEREST PAYABLE IN A CURRENCY OTHER THAN U.S. DOLLARS
The principal, premium and interest on each note are payable by us in the
currency specified for that note. Generally, if the note requires payment in a
currency other than U.S. dollars, we will convert all payments in respect of
that note into U.S. dollars. The holder of the note may, however, elect to
receive all payments in respect of the note in the specified currency if the
pricing supplement and the note so indicate, except under the circumstances
described under "Currency Risks--Payment Currency" above. This election may be
made by delivering a written notice to the trustee at least fifteen calendar
days before the applicable payment date. The election will remain in effect
until revoked by written notice to the trustee received at least fifteen
calendar days before the applicable payment date.
In the case of a note requiring payment in a currency other than U.S.
dollars, the amount of any U.S. dollar payment in respect of the note will be
determined by the exchange rate agent. The determination will be based on the
highest firm bid quotation expressed in U.S. dollars
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received by the exchange rate agent at approximately 11:00 a.m., New York City
time, on the second Business Day before the applicable payment date, or, if no
such rate is quoted on such date, the last date on which such rate was quoted.
Quotes must be received from three recognized foreign exchange dealers in The
City of New York selected by the exchange rate agent. If three quoting dealers
are not available, then two dealers will be used. These dealers may include the
agent and the exchange rate agent. The quotes must be based on the purchase by
the quoting dealer, for settlement on the payment date, of the aggregate amount
of the currency payable on the payment date in respect of all notes denominated
in that currency. All currency exchange costs will be borne by the registered
holders of the notes by deductions from the payments. If no bid quotations are
available, payment will be made in the specified currency, unless that currency
is unavailable due to the imposition of exchange controls or to other
circumstances beyond our control, in which case such payments will be made as
described under "Currency Risks--Payment Currency" above.
PAYMENTS AT MATURITY
Payments of principal and interest at maturity and upon redemption will be
made in immediately available funds at the office of the paying agent at the
Money Market Operations Department of The Chase Manhattan Bank, Corporate Trust
Securities Window, 55 Water Street, Room 234, North Building, New York, NY
10041. The note must be presented at that office in sufficient time for the
paying agent to make the payment in accordance with its usual procedures. The
notes may also be presented at that office for registration of transfer and
exchange.
INTEREST AND INTEREST RATES
Unless otherwise specified in the pricing supplement, each note will accrue
interest from and including its date of issue. The pricing supplement will
designate whether a particular note bears interest at a fixed or floating rate.
In the case of a floating rate note, the pricing supplement will also specify
whether the note will bear interest based on the CD Rate, the Commercial Paper
Rate, the Federal Funds Rate, LIBOR, the Treasury Rate, the Prime Rate, the CMT
Rate or on another interest rate basis set forth in the pricing supplement.
The rate of interest on floating rate notes will reset daily, weekly,
monthly, quarterly, semi-annually or annually. The reset dates will be specified
in the pricing supplement and on the face of each note. In addition, the pricing
supplement will specify the spread or spread multiplier, if any, and the maximum
interest rate or minimum interest rate, if any, applicable to each floating rate
note. The pricing supplement relating to an offering of notes may also specify,
to the extent applicable with respect to each note:
- the calculation agent,
- Calculation Dates,
- the Index Maturity,
- the initial interest rate,
- Interest Determination Dates,
- interest payment dates, and
- record dates.
The interest rate on the notes will in no event be higher than the maximum
rate permitted by applicable law. Under New York law as in effect on the date of
this prospectus supplement, the maximum rate of interest is 25% per annum on a
simple interest basis. This limit does not apply to notes in a principal amount
of $2,500,000 or more.
Interest on a note will be payable on the first interest payment date
following its date of issue. However, if the date of a note's issue is on or
after the record date for that interest payment date, interest will be payable
beginning on the second interest payment date following the note's issue.
If any interest payment date with respect to any floating rate note, other
than an interest payment date that is also the maturity date of that note, falls
on a day that is not a Business Day or, in the case of a LIBOR note, a day that
is not a LIBOR Business Day, that interest payment date will be postponed to the
next day that is a LIBOR Business Day or LIBOR Business Day, as the case may be
and interest
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will continue to accrue. However, in the case of a LIBOR Note, if the next LIBOR
Business Day is in the following calendar month, the interest payment date will
be the preceding LIBOR Business Day. If the maturity date of any floating or
fixed rate note or an interest payment date for any fixed rate note falls on a
day that is not a Business Day or LIBOR Business Day, in the case of the
maturity date of a LIBOR note, payment of principal, premium, if any, and
interest with respect to that note will be paid on the next Business Day or
LIBOR Business Day, as the case may be. No interest on that payment will accrue
from and after that maturity date or interest payment date.
FIXED RATE NOTES
The pricing supplement relating to an offering of fixed rate notes will
designate a fixed rate of interest per year payable on the notes. The rate of
interest may be zero. Fixed rate notes may bear one or more annual rates of
interest as specified in the pricing supplement. Unless otherwise specified in
the pricing supplement:
- the interest payment dates for fixed rate notes will be April 1 and
October 1 of each year and upon maturity, or if applicable upon
redemption;
- the regular record dates for payment of interest will be March 15 and
September 15 of each year; and
- interest, if any, on fixed rate notes will be computed on the basis of a
360-day year of twelve 30-day months.
FLOATING RATE NOTES
Unless otherwise specified in the pricing supplement, The Chase Manhattan
Bank will be the calculation agent with respect to the calculation of rates of
interest payable on floating rate notes. Upon the request of a registered holder
of a floating rate note, the calculation agent will provide the interest rate
then in effect and, if different, the interest rate which will become effective
as a result of a determination made on the most recent Interest Determination
Date with respect to that floating rate note.
Unless otherwise specified in the pricing supplement:
- the regular record date for payment of interest will be the fifteenth day
before the day on which interest will be paid, whether or not such day is
a Business Day or a LIBOR Business Day; and
- each interest payment on any floating rate note will include interest
accrued from and including the date of issue or the last date to which
interest has been paid, as the case may be, to but excluding the
applicable interest payment date or the date of maturity, as the case may
be.
Accrued interest on a floating rate note will be calculated by multiplying
the principal amount of the note by an accrued interest factor. The accrued
interest factor will be computed by adding the interest factors calculated for
each day in the period for which accrued interest is being calculated. Unless
otherwise specified in the pricing supplement, the interest factor for each day
is computed by dividing the interest rate in effect on that day by:
- the actual number of days in the year, in the case of Treasury Rate notes
or
- 360, in the case of all other floating rate notes.
The interest rate on a floating rate note in effect on any day will be:
- if the day is a Interest Reset Date, the interest rate with respect to the
Interest Determination Date relating to that Interest Reset Date, or
- if the day is not a Interest Reset Date, the interest rate with respect to
the Interest Determination Date relating to the preceding Interest Reset
Date.
The interest rate is subject to adjustment by a spread or a spread
multiplier, if any, and to any maximum interest rate or minimum interest rate
limitation. However, the interest rate in effect for the period from the date of
issue to, but excluding, the first Interest Reset Date will be the initial
interest rate specified in the pricing supplement.
Except as otherwise specified in the pricing supplement, all percentages and
decimals
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resulting from any calculation of interest on floating rate notes will be
rounded, if necessary, to the nearest one-hundred thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards. For
example, 9.876545% (or .09876545) will be rounded to 9.87655% (or .987655) and
9.876544% (or .9876544) will be rounded to 9.87654% (or .0987654). All dollar
amounts used in or resulting from any such calculation will be rounded to the
nearest cent (with one-half cent being rounded upwards).
CD RATE NOTES
A CD Rate note will bear interest at an interest rate calculated with
reference to the CD Rate and the spread or spread multiplier, if any, as
specified in the CD Rate note and the pricing supplement.
Unless otherwise specified in the pricing supplement, the "CD Rate" for any
Interest Determination Date is the rate on that date for negotiable certificates
of deposit having the Index Maturity specified in the pricing supplement, as
published in H.15(519) prior to 3:00 P.M., New York City time, on the
Calculation Date pertaining to that Interest Determination Date under the
heading "CDs (Secondary Market)".
The following procedures will be followed if the CD Rate cannot be
determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the CD Rate will be the rate on that
Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the pricing supplement as set forth in H.15
Daily Update for that day in respect of certificates of deposit having the
Index Maturity specified in the pricing supplement under the caption "CDs
(secondary market)".
- If that rate is not published in H.15 Daily Update by 3:00 P.M., New York
City time, on the Calculation Date, then the calculation agent will
determine the CD Rate to be the average of the secondary market offered
rates as of 10:00 A.M., New York City time, on that Interest Determination
Date, quoted by three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in New York City for negotiable certificates of
deposit in a denomination of $5,000,000 of major United States
money-center banks of the highest credit standing with a remaining
maturity closest to the Index Maturity designated in the pricing
supplement. The calculation agent, after consultation with us, will select
the three dealers referred to above.
- If fewer than three dealers are quoting as mentioned above, the CD Rate
will be the CD Rate in effect on that Interest Determination Date.
COMMERCIAL PAPER RATE NOTES
A Commercial Paper Rate note will bear interest at an interest rate
calculated with reference to the Commercial Paper Rate and the spread or spread
multiplier, if any, as specified in the Commercial Paper Rate note and the
pricing supplement.
Unless otherwise specified in the pricing supplement, the "Commercial Paper
Rate" for any Interest Determination Date is the Money Market Yield of the rate
on that date for commercial paper having the Index Maturity specified in the
pricing supplement, as published in H.15(519) prior to 3:00 P.M., New York City
time, on the Calculation Date pertaining to that Interest Determination Date
under the heading "Commercial Paper--Nonfinancial".
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the Commercial Paper Rate will be the
Money Market Yield of the rate on that Interest Determination Date for
commercial paper having the Index Maturity designated in the pricing
supplement, as published in H.15 Daily Update under the heading
"Commercial Paper--Nonfinancial".
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- If that rate is not published in H.15 Daily Update by 3:00 P.M., New York
City time, on the Calculation Date, then the calculation agent will
determine the Commercial Paper Rate to be the Money Market Yield of the
average of the offered rates of three leading dealers of commercial paper
in New York City as of 11:00 A.M., New York City time, on that Interest
Determination Date for commercial paper having the Index Maturity
specified in the pricing supplement placed for an industrial issuer whose
bond rating is "AA", or the equivalent, from a nationally recognized
rating agency. The calculation agent, after consultation with us, will
select the three dealers referred to above.
- If fewer than three dealers selected by the calculation agent are quoting
as mentioned above, the Commercial Paper Rate will be the Commercial Paper
Rate in effect on that Interest Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate notes will bear interest at an interest rate calculated
with reference to the Federal Funds Rate and the spread or spread multiplier, if
any, as specified in the Federal Funds Rate note and the pricing supplement.
Unless otherwise specified in the pricing supplement, the "Federal Funds
Rate" for any Interest Determination Date is the rate on that date for Federal
Funds, as published in H.15(519) prior to 3:00 P.M., New York City time, on the
Calculation Date pertaining to that Interest Determination Date under the
heading "Federal Funds (Effective)".
The following procedures will be followed if the Federal Funds Rate cannot
be determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the Federal Funds Rate will be the
rate on that Interest Determination Date, as published in H.15 Daily
Update under the heading "Federal Funds (Effective)".
- If that rate is not published in H.15 Daily Update by 3:00 P.M., New York
City time, on the Calculation Date, then the Calculation Agent will
determine the Federal Funds Rate to be the average of the rates for the
last transaction in overnight Federal funds arranged by three leading
brokers of Federal funds transactions in New York City as of 11:00 A.M.,
New York City time, on that Interest Determination Date. The calculation
agent, after consultation with us, will select the three brokers referred
to above.
- If fewer than three brokers selected by the calculation agent are quoting
as mentioned above, the Federal Funds Rate will be the Federal Funds Rate
in effect on that Interest Determination Date.
LIBOR NOTES
A LIBOR note will bear interest at an interest rate, calculated with
reference to LIBOR and the spread or spread multiplier, if any, as specified in
the LIBOR note and the pricing supplement.
Unless otherwise specified in the pricing supplement, the calculation agent
will determine LIBOR as follows:
On each Interest Determination Date:
- If "LIBOR Telerate" is specified in the pricing supplement, LIBOR will be
the rate for deposits in the Index Currency having the Index Maturity
specified in the pricing supplement, as that rate appears on the
Designated LIBOR Page as of 11:00 a.m., London time, on that Interest
Determination Date.
- If "LIBOR Reuters" is specified in the pricing supplement, LIBOR will be
the average of the offered rates for deposits in the Index Currency having
the Index Maturity specified in the pricing supplement, as those rates
appear on the Designated LIBOR Page as of 11:00 a.m., London time, on that
Interest Determination Date, if at least two such offered rates appear on
the Designated LIBOR Page.
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If neither LIBOR Reuters or LIBOR Telerate is specified, LIBOR Telerate will
be used.
If the Designated LIBOR Page by its terms provides only for a single rate,
that single rate will be used regardless of the foregoing provisions requiring
more than one rate.
On any Interest Determination Date on which fewer than the required number
of applicable rates appear or no rate appears on the applicable Designated LIBOR
Page, the calculation agent will determine LIBOR as follows:
- LIBOR will be determined on the basis of the offered rates at which
deposits in the Index Currency having the Index Maturity designated in the
pricing supplement and in a principal amount equal to an amount of not
less than U.S. $1 million that is representative of a single transaction
in that market at that time are offered by four major banks in the London
interbank market at approximately 11:00 A.M., London time, on the Interest
Determination Date to prime banks in the London interbank market. The
calculation agent will select the four banks after consultation with us
and request the principal London office of each of those banks to provide
a quotation of its rate. If at least two quotations are provided, LIBOR
for that Interest Determination Date will be the average of those
quotations.
- If fewer than two quotations are provided as mentioned above, LIBOR will
be the average of the rates quoted by three major banks in New York City
at approximately 11:00 A.M., New York City time, on the Interest
Determination Date for loans to leading European banks in the Index
Currency having the Index Maturity designated in the pricing supplement
and in a principal amount equal to an amount not less than U.S. $1 million
that is representative for a single transaction in that market at that
time. The calculation agent, after consultation with us, will select the
three banks referred to above.
- If fewer than three banks selected by the calculation agent are quoting as
mentioned above, LIBOR will be LIBOR in effect on the Interest
Determination Date.
TREASURY RATE NOTES
A Treasury Rate note will bear interest at an interest rate calculated with
reference to the Treasury Rate and the spread or spread multiplier, if any, as
specified in the Treasury Rate note and the pricing supplement.
Unless otherwise specified in the pricing supplement, the "Treasury Rate"
for any Interest Determination Date is the rate set at the most recent auction
of direct obligations of the United States ("Treasury bills") having the Index
Maturity designated in the pricing supplement, as that rate appears on either
Telerate Page 56 or Telerate Page 57 under the heading "AVGE INVEST YIELD".
The following procedures will be followed if the Treasury Rate cannot be
determined as described above:
- If the above rate is not published on Telerate Page 56 or Telerate Page 57
by 3:00 P.M., New York City time, on the Calculation Date, the Treasury
Rate will be the auction average rate, expressed as a Bond Equivalent
Yield, as otherwise announced by the United States Department of the
Treasury.
- If the results of the most recent auction of Treasury bills having the
Index Maturity designated in the pricing supplement are not published or
announced as described above by 3:00 P.M., New York City time, on the
Calculation Date, or if no auction is held in a particular week, the
Treasury Rate will be the Bond Equivalent Yield of the rate set forth in
H.15(519) for that day opposite the Index Maturity under the caption "U.S.
Government Securities/ Treasury Bills/Secondary Market".
- If the above rate is not published in H.15(519) on the Calculation Date,
the rate for that day will be the rate set forth in H.15 Daily Update, or
another
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recognized electronic source used for the purpose of displaying that rate,
for that day in respect of the Index Maturity under the caption "CDs
(secondary market)".
- If the above rate is not published in H.15(519), H.15 Daily Update or
another recognized source, then the calculation agent will determine the
Treasury Rate to be a yield to maturity, expressed as a Bond Equivalent
Yield, of the average of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on the Interest Determination
Date of three leading primary United States government securities dealers
selected by the calculation agent after consultation with us for the issue
of Treasury bills with a remaining maturity closest to the Index Maturity
specified in the pricing supplement. If fewer than three dealers selected
by the calculation agent are quoting as mentioned above, the Treasury Rate
will be the Treasury Rate in effect on that Interest Determination Date.
PRIME RATE NOTES
A Prime Rate note will bear interest at an interest rate calculated with
reference to the Prime Rate and the spread or spread multiplier, if any, as
specified in the Prime Rate note and the pricing supplement.
Unless otherwise specified in the note and the pricing supplement, the
"Prime Rate" for any Interest Determination Date is the prime rate or base
lending rate on that date, as published in H.15(519) by 9:00 A.M., New York City
time, on the Calculation Date pertaining to the Interest Determination Date
under the heading "Bank Prime Loan".
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
- If the above rate is not published in H.15(519) prior to 9:00 a.m., New
York City time, on the Calculation Date, then the Prime Rate will be the
rate on the Interest Determination Date as published in H.15 Daily Update
opposite the caption "Bank Prime Loan".
- If the above rate is not published in either H.15(519) or H.15 Daily
Update by 3:00 p.m., New York City time, on the Calculation Date, then the
calculation agent will determine the Prime Rate to be the average of the
rates of interest publicly announced by each bank that appears on the
Reuters Screen US Prime 1 as that bank's prime rate or base lending rate
as in effect for that Interest Determination Date.
- If fewer than four rates appear on the Reuters Screen US Prime 1 on the
Interest Determination Date, then the Prime Rate will be the average of
the prime rates or base lending rates quoted, on the basis of the actual
number of days in the year divided by a 360-day year, as of the close of
business on the Interest Determination Date by four major banks in The
City of New York selected by the calculation agent from a list approved by
us.
- If fewer than two rates appear on the Reuters Screen US Prime 1 on the
Interest Determination Date, then the Prime Rate will be the average of
the prime rates or base lending rates furnished by the appropriate number
of substitute U.S. banks or trust companies in The City of New York that
have a total equity capital of U.S. $500,000,000 or more and are subject
to supervision or examination by federal or state authority. The
calculation agent will select the banks or trust companies referred to
above from a list approved by us.
- If the banks selected by the calculation agent are not quoting as
mentioned above, the Prime Rate will be the Prime Rate in effect on the
Interest Determination Date.
CMT RATE NOTES
A CMT Rate note will bear interest at an interest rate calculated with
reference to the CMT Rate and the spread or spread multiplier, if any, as
specified in the CMT Rate notes and the pricing supplement.
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Unless otherwise specified in the pricing supplement, the "CMT Rate" for any
Interest Determination Date is the rate displayed on the Designated CMT Telerate
Page by 3:00 P.M., New York City time, on the Calculation Date pertaining to the
Interest Determination Date under the caption "... Treasury Constant
Maturities... Federal Reserve Board Release H.15... Mondays Approximately 3:45
P.M.," under the column for the Index Maturity specified in the pricing
supplement for:
- if the Designated CMT Telerate Page is 7051, such Interest Determination
Date; or
- if the Designated CMT Telerate Page is 7052, the week, or the month, as
applicable, ended immediately preceding the week in which the related
Interest Determination Date occurs.
The following procedures will be used if the CMT Rate cannot be determined
as described above:
- If the above rate is not displayed on the relevant page by 3:00 P.M., New
York City time, on the Calculation Date, then the CMT Rate will be the
Treasury constant maturity rate for the Index Maturity, as published in
H.15(519).
- If that rate is not published in H.15(519) by 3:00 P.M., New York City
time, on the Calculation Date, then the CMT Rate will be the Treasury
constant maturity rate, or other United States Treasury rate, for the
Index Maturity for the Interest Determination Date as may then be
published by either the Board of Governors of the Federal Reserve System
or the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the
Designated CMT Telerate Page and published in H.15(519).
- If that information is not provided by 3:00 P.M., New York City time, on
the Calculation Date, then the calculation agent will determine the CMT
Rate to be a yield to maturity based on the average of the secondary
market offered rates as of approximately 3:30 P.M., New York City time, on
the Interest Determination Date reported, according to their written
records, by three leading primary United States government securities
dealers in The City of New York selected by the calculation agent after
consultation with us. The calculation agent will select five leading
primary United States government securities dealers and will eliminate the
highest and lowest quotations or, in the event of equality, one of the
highest and lowest quotations, for the most recently issued direct
noncallable fixed rate obligations of the United States with an original
maturity of approximately the Index Maturity and a remaining term to
maturity of not less than the Index Maturity minus one year.
- If the calculation agent cannot obtain three Treasury Note quotations, the
Calculation Agent will determine the CMT Rate to be a yield to maturity
based on the average of the secondary market offered rates as of
approximately 3:30 P.M., New York City time, on the Interest Determination
Date of three leading primary United States government securities dealers
in New York City, selected using the same method described above, for the
most recently issued direct noncallable fixed rate obligations of the
United States with an original maturity of the number of years that is the
next highest to the Index Maturity and a remaining term to maturity
closest to the Index Maturity and in an amount of at least U.S. $100
million.
- If three or four but not five Reference Dealers are quoting as described
above, then the CMT Rate will be based on the average of the offered rates
obtained and neither the highest nor the lowest of those quotations will
be eliminated.
- If fewer than three leading primary United States government securities
dealers selected by the calculation agent are quoting as described above,
the CMT Rate will be the CMT Rate in effect on the Interest Determination
Date.
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AMORTIZING NOTES
We may from time to time offer notes on which a portion or all of the
principal amount is payable before the stated maturity in accordance with a
schedule, by application of a formula or by reference to an index. These notes
are referred to as "amortizing notes." Unless otherwise specified in the pricing
supplement, interest on each amortizing note will be computed on the basis of a
360-day year of twelve 30-day months. Payments with respect to amortizing notes
will be applied first to interest and then to principal. Further information
concerning additional terms and provisions of amortizing notes, including
repayment information, will be specified in the pricing supplement.
INDEXED NOTES
The notes may be issued from time to time as notes of which the principal,
premium and/or interest will be determined with reference to specified
currencies, currency units, commodities, stock, other securities, interest or
other notes, financial or non-financial indices or other factors, in each case
as set forth in the pricing supplement. These notes are referred to as "indexed
notes." Holders of indexed notes may receive a principal amount on maturity that
is greater than or less than the face amount of the notes depending upon the
relative value of the specified index. Information as to the method for
determining the amount of principal, premium and/or interest payable in respect
of indexed notes, certain historical information with respect to the specified
index and material tax considerations will be set forth in the pricing
supplement.
An investment in indexed notes entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate on a note is indexed, it may result in an interest rate
that is less than that payable on a conventional fixed-rate debt security issued
at the same time, including the possibility that no interest will be paid or
that negative interest will accrue. If the principal amount of a note is
indexed, the principal amount payable at maturity may be less than the original
purchase price of the note if allowed pursuant to the terms of the note,
including the possibility that no principal will be paid. If the principal
amount is used to offset accrued negative interest, the principal amount payable
at maturity may be less than the original purchase price of the note if allowed
pursuant to the terms of the note, including the possibility that no principal
will be paid. The value of the applicable index depends on a number of
interrelated factors, including economic, financial and political events, over
which we have no control. Additionally, if the formula used to determine the
principal amount or interest payable with respect to these notes contains a
multiple or leverage factor, the effect of any change in the applicable index
will be increased. The historical experience of the relevant indices should not
be taken as an indication of future performance of the indices during the term
of any note. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN INDEXED NOTES. INDEXED
NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO HAVE NOT HAD PRIOR
EXPERIENCE WITH FOREIGN CURRENCY, CURRENCY UNIT, COMMODITIES, SECURITIES OR
OTHER INDICES, OR ANY OTHER FORM OF INDEXED NOTES.
FLOATING RATE/FIXED RATE NOTES
A note may be a floating rate note for a portion of its term and a fixed
rate note for a portion of its term. In this event, the interest rate on the
note will be determined as if it were a floating rate note and a fixed rate note
for each specified period, as shall be set out in the pricing supplement.
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OTHER PROVISIONS
Any provisions with respect to a note, including the specification and
determination of one or more interest rate bases, the calculation of the
interest and/or principal payable on the note, any redemption, extension or
repayment provisions, or any other provisions relating to a note, may be
modified or supplemented to the extent not inconsistent with the terms of the
senior indenture, so long as the provisions are specified in the note and in the
pricing supplement.
BOOK-ENTRY NOTES
Book-entry notes of any series will be issued in the form of one or more
registered global notes that will be deposited with, or on behalf of, DTC, as
depositary, and registered in the name of DTC's nominee. The global note may not
be transferred except as a whole to another nominee of DTC or to a successor
depositary or its nominee.
Upon the issuance of the global note, DTC will credit, on its book-entry
registration and transfer system, the principal amount of the notes represented
by the global note to accounts of institutions that have accounts with DTC.
Institutions that have accounts with DTC are referred to as "participants." The
accounts to be credited will be designated by the agents, or by us if we sell
the notes directly. Owners of beneficial interests in the global note that are
not participants or persons that may hold through participants but desire to
purchase, sell or otherwise transfer ownership of the notes by book-entry on the
records of DTC may do so only through participants and persons that may hold
through participants. Because DTC can only act on behalf of participants and
persons that may hold through participants, the ability of an owner of a
beneficial interest in the global note to pledge notes to persons or entities
that do not participate in the book-entry and transfer system of DTC, or
otherwise take actions in respect of the notes, may be limited. In addition, the
laws of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. These limits and laws may impair
a purchaser's ability to transfer beneficial interests in the global note.
So long as DTC, or its nominee, is the registered owner of the global note,
DTC or nominee will be considered the sole owner or holder of the notes
represented by the global note for all purposes under the indenture. Generally,
owners of beneficial interests in the global note will not be entitled to have
notes represented by the global note registered in their names, will not receive
or be entitled to receive physical delivery of notes in definitive form and will
not be considered the owners or holders of the notes under the indenture.
Principal and interest payments on notes registered in the name of DTC or
its nominee will be made to DTC or its nominee as the registered owner of the
global note. Neither us, the trustee, any paying agent or the note registrar
will have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership interests in the global
note or for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We expect that DTC, upon receipt of any payment of principal or interest,
will credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the global note as shown on the records of DTC. We also expect that payments
by participants to owners of beneficial interests in the global note held
through the participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
and registered in "street name," and will be the responsibility of such
participants. Owners of beneficial interests in the global note that hold
through DTC under a book-entry format (as opposed to holding certificates
directly) may experience some delay in the receipt of interest payments since
DTC will forward payments to its participants, which in turn will forward them
to persons that hold through participants.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by us or DTC within
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ninety days, we will issue notes in definitive registered form in exchange for
the global note. In addition, either we or DTC may at any time, in our sole
discretion, determine not to have the notes represented by the global note and,
in such event, we will issue notes in definitive registered form in exchange for
the global note. In either instance, an owner of a beneficial interest in the
global note will be entitled to have notes equal in principal amount to the
beneficial interest registered in its name and will be entitled to physical
delivery of the notes in definitive form.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC was
created to hold securities of its participants and to facilitate the clearance
and settlement of securities transactions among its participants in those
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom own DTC. Access to DTC's book-entry system is also available to others,
including banks, brokers, dealers and trust companies, that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
REDEMPTION AND REPURCHASE
If applicable, the pricing supplement will indicate the terms on which the
notes will be redeemable at our option. Unless otherwise specified in the
pricing supplement, notice of redemption will be provided by mailing a notice of
redemption to each holder at least 30 days and not more than 60 days before the
date fixed for redemption. If not all the notes having the same terms are to be
redeemed, the notes to be redeemed shall be selected by the trustee by a method
as the trustee deems fair and appropriate. Unless otherwise specified in the
pricing supplement, the notes will not be subject to any sinking fund.
We may at any time repurchase notes at any price in the open market or
otherwise. Notes purchased by us may, at our discretion, be held or resold or
surrendered to the trustee for cancellation.
REPAYMENT AT OPTION OF HOLDER
If applicable, the pricing supplement will indicate that the note will be
repayable at the holder's option on a date or dates prior to maturity, and at a
price or prices, set forth in the pricing supplement, together with accrued
interest to the date of repayment.
In order for a note to be repaid, the trustee must receive at least 30 days
but not more than 45 days prior to the repayment date:
1. appropriate wire instructions and
2. either
a. the note with the form entitled "Option to Elect Repayment" on the
reverse of the note duly completed, or
b. a telegram, telex, facsimile transmission or letter from a member of a
national securities exchange or the National Association of Securities
Dealers, Inc., or a commercial bank or trust company in the United
States setting forth:
- the name of the holder of the note,
- the principal amount of the note,
- the portion of the principal amount of the note to be repaid,
- the certificate number or a description of the tenor and terms of the
note,
- a statement that the option to elect repayment is being exercised, and
- a guarantee that the note to be repaid with the form entitled "Option
to Elect Repayment" on the reverse of the note duly completed
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will be received by the trustee within five Business Days. The note
and form duly completed must actually be received by the trustee by
the fifth Business Day.
Exercise of the repayment option by the holder of a note shall be
irrevocable. The repayment option may be exercised by the holder of a note for
less than the entire principal amount of the note provided that the principal
amount of the note remaining outstanding after repayment is an authorized
denomination. No transfer or exchange of any note will be permitted after
exercise of a repayment option. If a note is to be repaid in part, no transfer
or exchange of the portion of the note to be repaid will be permitted after
exercise of a repayment option. All questions as to the validity, eligibility,
including time of receipt, and acceptance of any note for repayment will be
determined by us and our determination will be final, binding and
non-appealable.
If a note is represented by a global note, DTC's nominee will be the holder
of the note and therefore will be the only entity that can exercise a right to
repayment. In order to ensure that DTC's nominee will timely exercise a right to
repayment with respect to a particular note, the beneficial owner of such note
must instruct the broker or other direct or indirect participant through which
it holds an interest in such note to notify DTC of its desire to exercise a
right to repayment. Different firms have different cutoff times for accepting
instructions from their customers. Accordingly, each beneficial owner should
consult the broker or other direct or indirect participant through which it
holds an interest in a note in order to ascertain the cutoff time by which an
instruction must be given in order for timely notice to be delivered to DTC.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership of notes as of the date of this prospectus
supplement. Generally, this summary deals only with notes held as capital assets
and does not deal with special situations, such as those of dealers in
securities or currencies, financial institutions, tax-exempt entities, life
insurance companies, persons holding Notes as part of a hedging, constructive
sale or conversion transaction or a straddle or to holders of Notes whose
"functional currency" is not the U.S. dollar. Furthermore, the discussion below
is based upon the provisions of the Internal Revenue Code and regulations,
rulings and judicial decisions as of the date of this prospectus supplement.
Those authorities may be repealed, revoked or modified so as to result in United
States federal income tax consequences different from those discussed below. Any
special United States federal tax considerations relevant to a particular issue
of the notes will be provided in the pricing supplement. Persons considering the
purchase, ownership or disposition of notes should consult their own tax
advisors concerning the United States federal income tax consequences to them in
light of their particular situations as well as any consequences arising under
the laws of any other taxing jurisdiction.
U.S. HOLDERS
PAYMENTS OF INTEREST
Except as set forth below, interest on a note will generally be taxable to a
U.S. holder as ordinary income from domestic sources at the time it is paid or
accrued in accordance with the U.S. holder's method of accounting for tax
purposes. As used in this prospectus supplement, a "U.S. holder" means a
beneficial owner of a note that is:
- - a citizen or resident of the United States,
- - a corporation or partnership created or organized in or under the laws of the
United States or any political subdivision of the United States,
- - an estate the income of which is subject to United States federal income
taxation regardless of its source or
- - a trust that is subject to the supervision of a court within the United
States and the control of one or more United States persons as described in
section 7701(a)(30) of the Internal Revenue Code.
A "non-U.S. holder" is a holder that is not a U.S. holder.
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ORIGINAL ISSUE DISCOUNT
U.S. holders of notes issued with original issue discount will be subject to
special tax accounting rules, as described in greater detail below. Original
issue discount is referred to as "OID". U.S. holders of those notes should be
aware that they generally must include OID in gross income in advance of the
receipt of cash attributable to that income. However, U.S. holders of those
notes generally will not be required to include separately in income cash
payments received on the notes, even if denominated as interest, to the extent
those payments do not constitute qualified stated interest. Notes issued with
OID will be referred to as "original issue discount notes." Notice will be given
in the pricing supplement when we determine that a particular note will be an
original issue discount note.
This summary is based upon final Treasury regulations addressing debt
instruments with OID. A note with an "issue price" that is less than its stated
redemption price at maturity generally will be issued with original issue
discount if that difference is at least 0.25% of the stated redemption price at
maturity multiplied by the number of complete years to maturity. The stated
redemption price at maturity is equal to the sum of all payments to be made on
the note other than "qualified stated interest". The "issue price" of each note
in a particular offering will be the first price at which a substantial amount
of that particular offering is sold to the public. This calculation will not
include any sales to an underwriter, placement agent or wholesaler. The term
"qualified stated interest" means stated interest that is unconditionally
payable in cash or in property, other than debt instruments of the issuer, at
least annually during the entire term of the note at a single fixed rate or,
subject to certain conditions, based on one or more interest indices. Interest
is payable at a single fixed rate only if the rate appropriately takes into
account the length of the interval between payments. Notice will be given in the
pricing supplement when we determine that a particular note will bear interest
that is not qualified stated interest.
In the case of a note issued with DE MINIMIS OID, the U.S. holder generally
must include the DE MINIMIS OID in income at the time payments other than
qualified stated interest on the notes are made in proportion to the amount
paid. A note will have DE MINIMIS OID if it is issued with a discount that is
not OID because it is less than 0.25% of the stated redemption price at maturity
multiplied by the number of complete years to maturity. Any amount of DE MINIMIS
OID that has been included in income generally will be treated as capital gain.
Certain notes may contain provisions permitting them to be redeemed prior to
their stated maturity at our option and/or at the holder's option. Original
issue discount notes containing those features may be subject to rules that
differ from the general rules discussed in this prospectus supplement. Persons
considering the purchase of original issue discount notes with those features
should carefully examine the pricing supplement and should consult their own tax
advisors with respect to those features since the tax consequences with respect
to OID will depend, in part, on the particular terms and features of the notes.
U.S. holders of original issue discount notes with a maturity upon issuance
of more than one year must, in general, include OID in income in advance of the
receipt of some or all of the related cash payments using the "constant yield
method" described in this paragraph. The amount of OID includible in income by
the initial U.S. holder of an original issue discount note is the sum of the
"daily portions" of OID with respect to the note for each day during the taxable
year or portion of the taxable year in which that U.S. holder held such note.
This amount is referred to as "accrued OID." The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. The "accrual period" for an original issue
discount note may be of any length and may vary in length over the term of the
note, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs on the first day or the final
day of an accrual period. The amount of OID
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allocable to any accrual period is an amount equal to the excess, if any, of:
- the product of the note's adjusted issue price at the beginning of the
accrual period and its yield to maturity. This is determined on the basis
of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period.
over
- the aggregate of all qualified stated interest allocable to the accrual
period.
OID allocable to a final accrual period is the difference between the amount
payable at maturity and the adjusted issue price at the beginning of the final
accrual period. For purposes of this calculation, the amount payable at maturity
will not include payments of qualified stated interest. Special rules apply for
calculating OID for an initial short accrual period. The "adjusted issue price"
of a note at the beginning of any accrual period generally is equal to its issue
price:
- increased by the accrued OID for each prior accrual period, determined
without regard to the amortization of any acquisition or bond premium, as
described below, and
- reduced by any payments made on the note, other than qualified stated
interest, on or before the first day of the accrual period.
Under these rules, a U.S. holder will have to include in income increasingly
greater amounts of OID in successive accrual periods. We are required to provide
information returns stating the amount of OID accrued on notes held of record by
persons other than corporations and other exempt holders.
In the case of an original issue discount note that is a floating rate note,
both the "yield to maturity" and "qualified stated interest" will be determined
solely for purposes of calculating the accrual of OID as though the note will
bear interest in all periods at a fixed rate generally equal to:
- the rate that would be applicable to interest payments on the note on its
date of issue, or
- the rate that reflects the yield to maturity that is reasonably expected
for the note.
Additional rules may apply if interest on a floating rate note is based on more
than one interest index. Persons considering the purchase of floating rate notes
should carefully examine the pricing supplement and should consult their own tax
advisors regarding the United States federal income tax consequences of the
holding and disposition of those notes.
U.S. holders may elect to treat all interest on any note as OID and
calculate the amount includible in gross income under the constant yield method
described above. For the purposes of this election, interest includes each of
the following, as adjusted by any amortizable bond premium or acquisition
premium:
- stated interest,
- acquisition discount,
- OID,
- DE MINIMIS OID,
- market discount,
- DE MINIMIS market discount and
- unstated interest.
The election is to be made for the taxable year in which the U.S. holder
acquired the note, and may not be revoked without the consent of the IRS. U.S.
holders should consult with their own tax advisors about this election.
OPTIONAL REDEMPTION
If we have an option to redeem a note, or the holder has an option to cause
a note to be repurchased, before the note's stated maturity, the option will be
presumed to be exercised if the yield on the note would be:
- in the case of a redemption at our option, lower than its yield to stated
maturity, or
- in the case of an option of the holder, higher than its yield to stated
maturity.
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For purposes of this calculation, any date on which the note may be redeemed or
repurchased would be used as the maturity date and the amount payable on that
date in accordance with the terms of that note would be used as the stated
redemption price at maturity. If such option is not in fact exercised when
presumed to be exercised, the note would be treated solely for OID purposes as
if it were redeemed or repurchased, and a new note were issued, on the presumed
exercise date for an amount equal to the note's adjusted issue price on that
date.
SHORT-TERM NOTES
Notes having a term of one year are referred to as "short-term notes." In
the case of short-term notes, all payments, including all stated interest will
be included in the stated redemption price at maturity, will not be qualified
stated interest and, thus, U.S. holders will generally be taxed on the discount
in lieu of stated interest. The discount will be equal to the excess of the
stated redemption price at maturity over the issue price of a short-term note,
unless the U.S. holder elects to compute this discount using tax basis instead
of issue price. In general, individuals and certain other cash method U.S.
holders of short-term notes are not required to include accrued discount in
their income currently unless they elect to do so. They may, however, be
required to include stated interest in income as the income is received. U.S.
holders that report income for U.S. federal income tax purposes on the accrual
method and certain other U.S. holders are required to accrue discount on these
short-term notes as ordinary income on a straight-line basis, unless an election
is made to accrue the discount according to a constant yield method based on
daily compounding. In the case of a U.S. holder that is not required, and does
not elect, to include discount in income currently, any gain realized on the
sale, exchange or retirement of the short-term note will generally be ordinary
income to the extent of the discount accrued through the date of sale, exchange
or retirement. In addition, a U.S. holder that does not elect to currently
include accrued discount in income may be required to defer deductions for a
portion of the U.S. holder's interest expense with respect to any indebtedness
attributable to the notes.
MARKET DISCOUNT
An investor may purchase:
- an original issue discount note for an amount that is less than its
adjusted issue price, or
- any other note for an amount that is less than its stated redemption price
at maturity.
If a U.S. holder purchases this type of note, the amount of the difference will
be treated as "market discount" for United States federal income tax purposes,
unless such difference is less than a specified DE MINIMIS amount. Under the
market discount rules, a U.S. holder will be required to treat any payment,
other than qualified stated interest, on, or any gain on the sale, exchange,
retirement or other disposition of, a note as ordinary income to the extent of
the market discount which has not previously been included in income and is
treated as having accrued on the note at the time of its payment or disposition.
In addition, the U.S. holder may be required to defer, until the maturity of the
note or its earlier disposition in a taxable transaction, the deduction of all
or a portion of the interest expense on any indebtedness attributable to the
note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the U.S.
holder elects to accrue on a constant interest method. A U.S. holder of a note
may elect to include market discount in income currently as it accrues on either
a ratable or constant interest method. However, in that case, the rule described
above regarding deferral of interest deductions will not apply. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first taxable year to which the
election applies and may not be revoked without the consent of the IRS.
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ACQUISITION PREMIUM; AMORTIZABLE PREMIUM
A U.S. holder that purchases an original issue discount note for an amount
that is greater than its adjusted issue price but equal to or less than the sum
of all amounts payable on the note after the purchase date other than payments
of qualified stated interest will be considered to have purchased that note at
an "acquisition premium." Under the acquisition premium rules, the amount of OID
which the U.S. holder must include in its gross income with respect to the note
for any taxable year will be reduced by the portion of the acquisition premium
properly allocable to that year.
A U.S. holder that purchases a Note for an amount in excess of the sum of
all amounts payable on the note after the purchase date other than qualified
stated interest will be considered to have purchased the note at a "premium". If
the note purchased is an original issue discount note, that U.S. holder will not
be required to include any OID in income. A U.S. holder generally may elect to
amortize the premium over the remaining term of the note on a constant yield
method as an offset to interest when includible in income under the U.S.
holder's regular accounting method. In the case of instruments that provide for
alternative payment schedules, bond premium is calculated by assuming that:
- the holder will exercise or not exercise options in a manner that
maximizes the holder's yield,
- the issuer will exercise or not exercise options, other than call options,
in a manner that minimizes the holder's yield, and
- the issuer will exercise call options in a manner that maximizes the
holder's yield.
Bond premium on a note held by a U.S. holder that does not make an election to
amortize the premium will decrease the gain or increase the loss otherwise
recognized on disposition of the note. The election to amortize premium on a
constant yield method once made applies to all debt obligations held or
subsequently acquired by the electing U.S. holder on or after the first day of
the first taxable year to which the election applies and may not be revoked
without the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A U.S. holder's tax basis in a note will, in general, be the U.S. holder's
cost for that note, increased by OID, market discount or any discount with
respect to a short-term note previously included in income by the U.S. holder
and reduced by any amortized premium and any cash payments on the note other
than qualified stated interest. Upon the sale, exchange, retirement or other
disposition of a note, a U.S. holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, retirement or
other disposition and the adjusted tax basis of the note. For purposes of this
calculation, the amount realized upon the disposition will be reduced by any
accrued qualified stated interest, which will be taxable as such. Except as
described above with respect to certain short-term notes or with respect to
market discounts, that gain or loss will be capital gain or loss. Capital gains
of individuals derived in respect of capital assets held for more than one year
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations.
FOREIGN CURRENCY NOTES
INTEREST PAYMENTS. If an interest payment is denominated in or determined
by reference to a foreign currency, the amount of income recognized by a cash
basis U.S. holder will be the U.S. dollar value of the interest payment, based
on the exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars. Accrual basis U.S. holders may
determine the amount of income recognized with respect to such interest payment
in accordance with either of two methods.
Under the first method, the amount of income recognized will be based on the
average exchange rate in effect during the interest accrual period. If the
accrual period spans two taxable years, this calculation will be based on the
rate in effect during the partial period within the taxable year. Upon receipt
of an interest payment determined by reference to a foreign currency, an accrual
basis U.S. holder will
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recognize ordinary income or loss measured by the difference between such
average exchange rate and the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars. These
rules will also apply to a payment attributable to accrued but unpaid interest
upon the sale or retirement of a note.
Under the second method, an accrual basis U.S. holder may elect to translate
interest income into U.S. dollars at the spot exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, at the exchange rate in effect on the last day of the partial
period within the taxable year. Additionally, if a payment of interest is
actually received within 5 business days of the last day of the accrual period
or taxable year, an accrual basis U.S. holder applying the second method may
instead translate such accrued interest into U.S. dollars at the spot exchange
rate in effect on the day of actual receipt. In this case, no exchange gain or
loss will result. Any election to apply the second method will apply to all debt
instruments held by the U.S. holder at the beginning of the first taxable year
to which the election applies or thereafter acquired by the U.S. holder and may
not be revoked without the consent of the IRS.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS. Foreign currency received
as interest on a note or on the sale or retirement of a note will have a tax
basis equal to its U.S. dollar value at the time such interest is received or at
the time of such sale or retirement, as the case may be. Foreign currency that
is purchased will generally have a tax basis equal to the U.S. dollar value of
the foreign currency on the date of purchase. Any gain or loss recognized on a
sale or other disposition of a foreign currency, including its use to purchase
notes or upon exchange for U.S. dollars, will be ordinary income or loss.
FOREIGN CURRENCY DISCOUNT NOTES. OID for any accrual period on an original
issue discount note that is denominated in a foreign currency will be determined
in the foreign currency and then translated into U.S. dollars in the same manner
as stated interest accrued by an accrual basis U.S. holder. Upon receipt of an
amount attributable to original issue discount, whether in connection with a
payment of interest or the sale or retirement of a note, a U.S. holder may
recognize ordinary income or loss.
AMORTIZABLE BOND PREMIUM. In the case of a note that is denominated in a
foreign currency, bond premium will be computed in units of foreign currency,
and amortizable bond premium will reduce interest income in units of the foreign
currency. At the time amortized bond premium offsets interest income, a U.S.
holder may realize ordinary income or loss, measured by the difference between
exchange rates at that time and at the time of the acquisition of the notes.
MARKET DISCOUNT. Market discount is determined in units of the foreign
currency. Accrued market discount that is required to be taken into account on
the maturity or upon disposition of a note is translated into U.S. dollars at
the exchange rate on the maturity or the disposition date, as the case may be.
No part of this amount is treated as exchange gain or loss. Accrued market
discount currently includible in income by an electing U.S. holder is translated
into U.S. dollars at the average exchange rate for the accrual period or the
partial accrual period during which the U.S. holder held the note. Exchange gain
or loss is determined on maturity or disposition of the note in the manner
described above under "Foreign Currency Notes--Interest Payments" with respect
to the computation of exchange gain or loss on the receipt of accrued interest
by an accrual method holder.
EXCHANGE GAIN OR LOSS. Gain or loss recognized by a U.S. holder on the sale
or retirement of a note that is attributable to changes in exchange rates will
be treated as ordinary income or loss. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
INDEXED NOTES
If applicable, the pricing supplement will contain a discussion of any
special United States Federal income tax rules with respect to currency indexed
notes or other indexed notes.
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NON-U.S. HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
1. no withholding of United States federal income tax will be required with
respect to the payment by us or any paying agent of principal or interest,
including OID, on a note owned by a non-U.S. holder, provided that:
a. the beneficial owner does not actually or constructively own 10% or more
of the total combined voting power of all classes of our stock entitled
to vote within the meaning of section 871(h)(3) of the Internal Revenue
Code and the regulations thereunder,
b. the beneficial owner is not a controlled foreign corporation that is
related to us through stock ownership,
c. the beneficial owner is not a bank whose receipt of interest on a note
is described in section 881(c)(3)(A) of the Internal Revenue Code, and
d. the beneficial owner satisfies the statement requirement set forth in
section 871(h) and section 881(c) of the Internal Revenue Code and the
regulations thereunder;
2. except as discussed below, no withholding of United States federal income
tax will be required with respect to any gain or income realized by a
non-U.S. holder upon the sale, exchange or other disposition of a note; and
3. a note beneficially owned by an individual who at the time of death is a
non-U.S. holder will not be subject to United States federal estate tax as a
result of such individual's death, provided that such individual does not
actually or constructively own 10% or more of the total combined voting
power of all classes of our stock entitled to vote within the meaning of
section 871(h)(3) of the Internal Revenue Code and provided that the
interest payments with respect to the Note would not have been, if received
at the time of such individual's death, effectively connected with the
conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in 1d above, the beneficial owner of
a note, or a financial institution holding the note on behalf of that owner,
must provide, in accordance with specified procedures, our paying agent with a
statement to the effect that the beneficial owner is not a U.S. holder. Pursuant
to current temporary Treasury regulations, these requirements will be met if:
- the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a United States person (which
certification may be made on an IRS Form W-8 (or successor form)) or
- a financial institution holding the note on behalf of the beneficial owner
certifies, under penalties of perjury, that the above statement has been
received by it and furnishes a paying agent with a copy of the statement.
Under recently finalized Treasury regulations, the statement requirement
referred to above may be satisfied with other documentary evidence for interest
paid after December 31, 1999 with respect to an offshore account or through
certain foreign intermediaries.
If a non-U.S. holder cannot satisfy the requirements of the "portfolio
interest" exception described in paragraph 1 above, payments of premium, if any,
and interest, including OID, made to that non-U.S. holder will be subject to a
30% withholding tax unless the beneficial owner of the note provides us or our
paying agent, as the case may be, with a properly executed:
- IRS Form 1001 or successor form claiming an exemption from or reduced rate
of withholding under the benefit of a tax treaty or
- IRS Form 4224 or successor form stating that interest paid on the note is
not subject to withholding tax because it is effectively connected with
the beneficial
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owner's conduct of a trade or business in the United States.
Under the Treasury regulations, non-U.S. holders will generally be required to
provide IRS Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although
alternative documentation may be applicable in certain situations.
If a non-U.S. holder is engaged in a trade or business in the United States
and premium, if any, or interest, including OID, on the note is effectively
connected with the conduct of that trade or business, the non-U.S. holder,
although exempt from the withholding tax discussed above, will be subject to
United States federal income tax on that income on a net income basis in the
same manner as if it were a U.S. holder. In addition, if the holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, the premium, if any, and interest, including OID,
on a note will be included in that foreign corporation's earnings and profits.
Any gain or income realized by a non-U.S. holder upon the sale, exchange,
retirement or other disposition of a note generally will not be subject to
United States federal income tax, unless:
- that gain or income is effectively connected with a trade or business in
the United States of the non-U.S. holder, or
- in the case of a non-U.S. holder who is an individual, that individual is
present in the United States for 183 days or more in the taxable year of
the sale, exchange, retirement or other disposition, and certain other
conditions are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on notes and to the
proceeds of sale of a note made to U.S. holders other than certain exempt
recipients, such as corporations. A 31% backup withholding tax will apply to
those payments if the U.S. holder fails to provide a taxpayer identification
number or certification of foreign or other exempt status or fails to report in
full dividend and interest income.
No information reporting or backup withholding will be required with respect
to payments made by us or any paying agent to non-U.S. holders if a statement
satisfying the requirements of 1d under "Non-U.S. Holders" has been received and
the payor does not have actual knowledge that the beneficial owner is a United
States person.
In addition, backup withholding and information reporting may apply to the
proceeds of the sale of a note within the United States or conducted through
certain U.S. related financial intermediaries unless the statement satisfying
the requirements of 1d under "Non-U.S. Holders" has been received (and the payor
does not have actual knowledge that the beneficial owner is a United States
person) or the holder otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against the holder's United States federal income tax
liability provided the required information is furnished to the IRS.
NON-DOLLAR DENOMINATED NOTES
A discussion of the United States federal income tax consequences with
respect to notes denominated in other than U.S. dollars will be contained in the
pricing supplement.
PLAN OF DISTRIBUTION
We may sell the notes:
- through agents,
- through underwriters or dealers, or
- directly to purchasers.
DISTRIBUTION THROUGH AGENTS
We may sell the notes on a continuing basis through agents that become
parties to an agency agreement, a form of which is filed as an exhibit to the
registration statement. Each agent's obligations are separate and several from
those of any other agent. Each agent will use
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reasonable efforts when requested by us to solicit purchases of the notes.
We will have the sole right to accept offers to purchase notes and may, in
our absolute discretion, reject any proposed purchase of notes in whole or in
part. Each agent will have the right, in its discretion reasonably exercised, to
reject in whole or in part any proposed purchase of notes through it.
We will pay each agent a commission to be negotiated at the time of sale.
Unless otherwise specified in the pricing supplement, the commission may range
from .150% to .750% of the principal amount of each note sold through that
agent, depending on its stated maturity.
As of the date of this prospectus supplement, the agents include Chase
Securities Inc., Credit Suisse First Boston Corporation, Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and Salomon Smith Barney Inc.
DISTRIBUTION THROUGH UNDERWRITERS
We may also sell notes to any agent, acting as principal, for its own
account or for resale to one or more investors or other purchasers, including
other broker-dealers.
The agents may sell any notes they have purchased as principal to any dealer
at a discount. Unless otherwise specified in the pricing supplement, the
discount allowed to any dealer will not be in excess of the discount to be
received by the agent from us. Unless otherwise specified in the pricing
supplement, any note sold to an agent as principal will be purchased by that
agent at a price equal to 100% of the principal amount of that note less a
percentage ranging from .150% to .750% of that principal amount, depending upon
the note's stated maturity. The notes may be resold by the agent to investors
and other purchasers from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale, or the notes may be resold to certain dealers as
described above. After the initial public offering of any notes, the public
offering price and discount may be changed.
DIRECT SALES
We may sell notes directly to investors, without the involvement of any
agent or underwriter. In this case, we would not be obligated to pay any
commission or discount in connection with the sale.
GENERAL INFORMATION
The name of any agents or other persons through which we sell any notes, as
well as any commissions or discounts payable to those agents or other persons,
will be set forth in the pricing supplement.
Any agent, underwriter or dealer that participates in the offering of the
notes may be an "underwriter" within the meaning of the Securities Act of 1933.
The Company has agreed to indemnify each agent and certain other persons against
certain liabilities, including liabilities under the Securities Act.
We may replace the agents or appoint additional agents in connection with
the offering of the notes from time to time.
The notes will not be listed on any securities exchange. The agents have
advised us that they may from time to time purchase and sell the notes in the
secondary market. However, no agent is obligated to do so and any agent may
discontinue making a market in the notes at any time without notice. No
assurance can be given as to the existence or liquidity of any secondary market
for the notes.
The agents, as well as other agents to or through which we may sell notes,
and their affiliates may engage in transactions with us and perform services for
us in the ordinary course of business. The Chase Manhattan Bank, the trustee, is
an affiliate of Chase Securities Inc., one of the agents.
In connection with certain offerings of the notes, the agents may engage in
overallotment, stabilizing transactions and syndicate covering transactions in
accordance with Regulation M under the Securities Exchange Act of 1934.
Overallotment involves sales in excess of the offering size, which create a
short position for the agents. Stabilizing transactions involve bids to purchase
the notes in the open market for the
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purpose of pegging, fixing or maintaining the price of the notes. Syndicate
covering transactions involve purchases of the notes in the open market after
the distribution has been completed in order to cover short positions.
Stabilizing transactions and syndicate covering transactions may cause the price
of the notes to be higher than it would otherwise be in the absence of those
transactions. Those activities, if commenced, may be discontinued at any time.
LEGAL OPINIONS
Opinions regarding the validity of the notes being offered will be issued
for us by David S. Hershberg, Vice President and Assistant General Counsel of
the Company, and for the agents by Davis Polk & Wardwell, New York, New York.
Mr. Hershberg, together with members of his family, owns, has options to
purchase and has other interests in shares of our common stock.
In the opinions described above, assumptions will be made regarding future
action required to be taken by us and the appropriate trustee in connection with
the issuance and sale of any particular notes, the specific terms of those notes
and other matters which may affect the validity of those notes but which cannot
be ascertained on the date of the relevant opinion.
GLOSSARY
Set forth below are definitions of some of the terms used in this prospectus
supplement and not defined in the attached prospectus.
"Bond Equivalent Yield" means a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C>
DXN
Bond Equivalent Yield = ----------- X 100
360-(DXM)
</TABLE>
where "D" refers to the annual rate for Treasury bills, quoted on a bank
discount basis and expressed as a decimal, "N" refers to the actual number of
days in the year for which interest is being calculated, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
"Business Day" means, unless otherwise specified in the pricing supplement,
any day that is not a Saturday or Sunday and that, in New York City, is not a
day on which banking institutions generally are authorized or required by law or
executive order to close.
"Calculation Date" means, with respect to any Interest Determination Date,
the date on which the calculation agent is to calculate an interest rate for a
floating rate note. Unless otherwise specified in the note and the pricing
supplement, the Calculation Date pertaining to an Interest Determination Date
for a floating rate note will be the first to occur of:
- the tenth calendar day after that Interest Determination Date or, if that
day is not a Business Day, the next succeeding Business Day or
- the Business Day preceding the applicable interest payment date or date of
maturity, redemption or repayment, of that note, as the case may be.
However, LIBOR will be calculated on the Interest Determination Date.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service, or any successor service, on the page specified in the pricing
supplement, or any other page that replaces that page on that service for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no page is specified, page 7052.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is designated in the
pricing supplement, the display on the Reuters Monitor Money Rates Service, or a
successor nominated as the information vendor, for the purpose of displaying the
London interbank rates of major banks for the applicable Index Currency, or (b)
if "LIBOR Telerate" is designated in the pricing supplement, the display on the
Dow Jones Telerate Service, or a successor nominated as the information vendor,
for the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency. If neither LIBOR Reuters nor LIBOR Telerate is
specified, LIBOR for the applicable Index Currency will be determined as if
LIBOR Telerate had been specified.
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"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world wide web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
"Index Currency" means the currency, including composite currencies,
specified in the pricing supplement as the currency for which LIBOR shall be
calculated. If no currency is specified, the Index Currency will be U.S.
dollars.
"Index Maturity" means the period of time designated as the representative
maturity of the certificates of deposit, the commercial paper, the Index
Currency or the Treasury bills, respectively, by reference to transactions in
which the CD Rate, the Commercial Paper Rate, LIBOR, the Treasury Rate and the
CMT Rate, respectively, are to be calculated, as set forth in the pricing
supplement.
"Interest Determination Date" means the date as of which the interest rate
for a floating rate note is to be calculated, to be effective as of the
following Interest Reset Date and calculated on the related Calculation Date.
However, LIBOR will be calculated on the Interest Determination Date. Unless
otherwise specified in the pricing supplement:
- the Interest Determination Date pertaining to an Interest Reset Date for a
CD Rate Note, Commercial Paper Rate Note, Federal Funds Rate Note, Prime
Rate Note or CMT Rate Note will be the second Business Day preceding that
Interest Reset Date;
- the Interest Determination Date pertaining to a Interest Reset Date for a
LIBOR Note will be the second business day in London preceding that
Interest Reset Date. A business day in London will be any day on which
dealings in deposits in U.S. dollars are transacted in the London
interbank market; and
- the Interest Determination Date pertaining to a Interest Reset Date for a
Treasury Rate Note will be the day of the week during which that Interest
Reset Date falls on which Treasury bills of the Index Maturity designated
in the pricing supplement are auctioned. Treasury bills are usually sold
at auction on Monday of each week, unless that day is a legal holiday, in
which case the auction is usually held on the following Tuesday or may be
held on the preceding Friday. If, as the result of a legal holiday, an
auction is held on the preceding Friday, that Friday will be the Interest
Determination Date pertaining to the Interest Reset Date occurring in the
following week.
"Interest Reset Date" means the date on which a floating rate note will
begin to bear interest at the interest rate determined as of any Interest
Determination Date. Unless otherwise specified in the applicable note and
pricing supplement, the Interest Reset Dates will be:
- in the case of floating rate notes that reset daily, each Business Day;
- in the case of floating rate notes, other than Treasury Rate notes, that
reset weekly, Wednesday of each week;
- in the case of Treasury Rate notes that reset weekly, Tuesday of each
week;
- in the case of floating rate notes that reset monthly, the third Wednesday
of each month;
- in the case of floating rate notes that reset quarterly, the third
Wednesday of March, June, September and December of each year;
- in the case of floating rates notes that reset semi-annually, the third
Wednesday of each of two months of each year specified in the pricing
supplement; and
- in the case of floating rate notes that reset annually, the third
Wednesday of
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one month of each year specified in the pricing supplement.
If a Interest Reset Date for any floating rate note would otherwise be a day
that is not a Business Day, or, in the case of a LIBOR note, a day that is not a
LIBOR Business Day, that Interest Reset Date will be postponed to the next
Business Day or LIBOR Business Day, as the case may be. However, in the case of
a LIBOR note, if that LIBOR Business Day is in the following calendar month,
that Interest Reset Date will be the preceding LIBOR Business Day. If a Treasury
bill auction, as described in the definition of "Interest Determination Date,"
will be held on any day that would otherwise be a Interest Reset Date for a
Treasury Rate note, then that Interest Reset Date will instead be the Business
Day immediately following that auction date.
"LIBOR Business Day" means any day that is not a Saturday or Sunday and
that, in the City of New York or the City of London, is not a day on which
banking institutions generally are authorized or required by law or executive
order to close.
"Money Market Yield" means a yield calculated in accordance with the
following formula:
<TABLE>
<C> <C> <S>
DX360
Money Market Yield = ----------- X 100
360-(DXM)
</TABLE>
where "D" refers to the annual rate for the commercial paper, quoted on a bank
discount basis and expressed as a decimal, and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
"Reuters Screen US Prime 1 Page" means the display on the Reuters Monitor
Money Rates Service on the page designated as "US Prime 1," or any other page
that replaces that page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks.
"Telerate Page 56" and "Telerate Page 57" mean the displays designated on
Bridge Telerate, Inc. as Page 56 or Page 57, or any page that replaces either
Page 56 or Page 57 on that service, or another service that is nominated as the
information vendor, for the purpose of displaying Treasury bill auction rates.
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PROSPECTUS
INTERNATIONAL BUSINESS MACHINES CORPORATION
New Orchard Road
Armonk, New York 10504
(914) 499-1900
$4,140,000,000
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
CAPITAL STOCK
WARRANTS
-------------------
WE WILL PROVIDE SPECIFIC TERMS OF THESE SECURITIES IN SUPPLEMENTS TO THIS
PROSPECTUS.
YOU SHOULD READ THIS PROSPECTUS AND ANY SUPPLEMENT CAREFULLY BEFORE YOU INVEST.
-------------------
These securities have not been approved by the Securities and Exchange
Commission or any state securities commission, nor have these organizations
determined that this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus is March 9, 1999.
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the terms
of our securities, you should carefully read this document with the attached
prospectus supplement. Together these documents will give the specific terms of
the securities we are offering. You should also read the documents we have
incorporated by reference into this prospectus for information on us and our
financial statements. Certain capitalized terms used in this summary are defined
elsewhere in this prospectus.
THE SECURITIES WE MAY OFFER
This prospectus is part of a registration statement (No. 333-70521) that we
filed with the SEC utilizing a "shelf" registration process. Under this shelf
process, we may offer from time to time up to $4,140,000,000 of any of the
following securities, either separately or in units: DEBT, PREFERRED STOCK,
DEPOSITARY SHARES, CAPITAL STOCK AND WARRANTS. This prospectus provides you with
a general description of the securities we may offer. Each time we offer
securities, we will provide you with a prospectus supplement that will describe
the specific amounts, prices and terms of the securities being offered. The
prospectus supplement may also add, update or change information contained in
this prospectus.
DEBT SECURITIES
We may offer unsecured general obligations of our company, which may be
senior or subordinate. The senior debt securities and the subordinated debt
securities are together referred to in this prospectus as the "debt securities".
The senior debt securities will have the same rank as all of our other
unsecured, unsubordinated debt. The subordinated debt securities will be
entitled to payment only after payment on our senior indebtedness. Senior
indebtedness includes all indebtedness for money borrowed by us, except
indebtedness that is stated to be not superior to, or to have the same rank as,
the subordinated debt securities. In addition, the subordinated debt securities
will be effectively subordinated to creditors and preferred stockholders of our
subsidiaries.
The senior debt securities will be issued under an indenture between us and
The Chase Manhattan Bank, as the trustee. The subordinated debt securities will
be issued under an indenture between us and the trustee we name in the
prospectus supplement. We have summarized general features of the debt
securities from the indentures. We encourage you to read the indentures which
are exhibits to the registration statement and our recent periodic and current
reports that we file with the SEC.
GENERAL INDENTURE PROVISIONS THAT APPLY TO SENIOR AND SUBORDINATED DEBT
SECURITIES
Neither indenture limits the amount of debt that we may issue. In addition,
neither indenture provides holders any protection should there be a
recapitalization or restructuring involving our company.
The indentures allow us to merge or consolidate with another company, or to
sell all or most of our assets to another company. If these events occur, the
other company will be required to assume our responsibilities relating to the
debt securities, and we will be released from all liabilities and obligations.
The indentures provide that holders of a majority of the outstanding
principal amount of any series of debt securities may vote to change our
obligations or your rights concerning that series. However, to change the amount
or timing of principal, interest or other payments under the debt securities,
every holder in the series must consent.
We may discharge our obligations under the indenture relating to the senior
debt securities by depositing with the trustee sufficient funds or government
obligations to pay the senior debt securities when due.
EVENTS OF DEFAULT. Each indenture provides that the following are events of
default:
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- - If we do not pay interest for 30 days after its due date.
- - If we do not pay principal or premium when due.
- - If we do not make any sinking fund payment for 30 days after its due date.
- - If we continue to breach a covenant for 90 days after notice.
- - If we enter bankruptcy or become insolvent.
If an event of default occurs with respect to any series of debt securities,
the trustee or holders of 25% of the outstanding principal amount of that series
may declare the principal amount of the series immediately payable. However,
holders of a majority of the principal amount may rescind this action.
GENERAL INDENTURE PROVISIONS THAT APPLY ONLY TO SENIOR DEBT SECURITIES
The indenture relating to the senior debt securities contains covenants
restricting our ability to incur secured indebtedness and enter into sale and
leaseback transactions.
GENERAL INDENTURE PROVISIONS THAT APPLY ONLY TO SUBORDINATED DEBT SECURITIES
The subordinated debt securities will be subordinated to all senior
indebtedness. In addition, claims of our subsidiaries' creditors and preferred
stockholders generally will have priority with respect to the subsidiaries'
assets and earnings over the claims of our creditors, including holders of the
subordinated debt securities. The subordinated debt securities, therefore, will
be effectively subordinated to creditors and preferred stockholders of our
subsidiaries.
The indenture relating to the subordinated debt securities does not provide
holders any protection in the event of a highly leveraged transaction.
PREFERRED STOCK AND DEPOSITARY SHARES
We may issue our preferred stock, par value $0.01 per share, in one or more
series. Our Board of Directors will determine the dividend, voting, conversion
and other rights of the series being offered and the terms and conditions
relating to its offering and sale at the time of the offer and sale. We may also
issue fractional shares of preferred stock that will be represented by
depositary shares and depositary receipts.
CAPITAL STOCK
We may issue our capital stock, par value $0.50 per share. Holders of
capital stock are entitled to receive dividends when declared by the Board of
Directors, subject to rights of preferred stockholders. Each holder of capital
stock is entitled to one vote per share. The holders of capital stock have no
preemptive rights or cumulative voting rights.
WARRANTS
We may issue warrants for the purchase of debt securities, preferred stock
or capital stock. We may issue warrants independently or together with other
securities.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges and the ratio of earnings to combined
fixed charges and preferred stock dividends for each of the periods indicated
are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31,
----------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
----- ----- ----- ----- ----- ----- -----
Ratio of earnings to
fixed charges....... 4.7 5.1 5.4 5.3 5.0 3.1 --
Ratio of earnings to
combined fixed
charges and
preferred stock
dividends........... 4.7 5.0 5.4 5.3 4.9 2.9 --
</TABLE>
The ratio of earnings to fixed charges is computed by dividing earnings,
which includes income before taxes and fixed charges, by fixed charges. This
calculation excludes the effects of accounting changes which have been made over
time. The ratio of earnings to combined fixed charges and preferred stock
dividends is
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computed by dividing earnings by the sum of fixed charges and dividends on
preferred stock. For purposes of calculating this ratio, the preferred stock
dividend requirements were assumed to be equal to the pre-tax earnings that
would be required to cover such dividend requirements based on our effective
income tax rates for the respective periods. "Fixed charges" consist of interest
on debt and a portion of rentals determined to be representative of interest.
We have not shown ratios for 1993 because, as a result of a net loss
incurred for the year, earnings were not sufficient to cover fixed charges or
combined fixed charges and preferred stock dividends. In 1993, earnings were
insufficient to cover fixed charges by $8,478 million. For the same year,
earnings were insufficient to cover combined fixed charges and preferred stock
dividends by $8,525 million.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until our offering is completed:
i. Annual Report on Form 10-K for the year ended December 31, 1997;
ii. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June
30, 1998 and September 30, 1998; and
iii. Current Reports on Form 8-K, filed on January 8, 1998, January 22, 1998,
April 22, 1998, July 21, 1998, October 21, 1998, December 16, 1998, January
22, 1999, January 26, 1999 and January 29, 1999.
You may request a copy of these filings at no cost, by writing to or
telephoning our transfer agent at the following address:
First Chicago Trust Company of New York
Mail Suite 4688
P.O. Box 2530
Jersey City, New Jersey 07303-2530
(201) 324-0405
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of the
document.
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THE COMPANY
IBM develops, manufactures and sells advanced information processing
products, including computers and microelectronic technology, software,
networking systems and information technology-related services. We offer value
through our North America, Europe/ Middle East/Africa, Latin America,
Asia/Pacific, Global Services and Worldwide Client Server Computing business
units, by providing comprehensive and competitive product choices.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, the net
proceeds we receive from the sale of the securities offered by this prospectus
and the accompanying prospectus supplement will be used for general corporate
purposes. General corporate purposes may include the repayment of debt,
investments in or extensions of credit to our subsidiaries, redemption of
preferred stock, or the financing of possible acquisitions or business
expansion. The net proceeds may be invested temporarily or applied to repay
short-term debt until they are used for their stated purpose.
DESCRIPTION OF THE DEBT SECURITIES
The following description of the terms of the debt securities sets forth
general terms that may apply to the debt securities. The particular terms of any
debt securities will be described in the prospectus supplement relating to those
debt securities.
The debt securities will be either our senior debt securities or our
subordinated debt securities. The senior debt securities will be issued under an
indenture dated as of October 1, 1993, as supplemented on December 15, 1995,
between us and The Chase Manhattan Bank, as trustee. This indenture is referred
to as the "senior indenture". The subordinated debt securities will be issued
under an indenture to be entered into between us and the trustee named in a
prospectus supplement. This indenture is referred to as the "subordinated
indenture". The senior indenture and the subordinated indenture are together
called the "indentures".
The following is a summary of the most important provisions of the
indentures. Copies of the entire indentures are exhibits to the registration
statement of which this prospectus is a part. Section references below are to
the section in the applicable indenture. The referenced sections of the
indentures are incorporated by reference.
GENERAL
Neither indenture limits the amount of debt securities that we may issue.
Each indenture provides that debt securities may be issued up to the principal
amount authorized by us from time to time. The senior debt securities will be
unsecured and will have the same rank as all of our other unsecured and
unsubordinated debt. The subordinated debt securities will be unsecured and will
be subordinated and junior to all senior indebtedness.
The debt securities may be issued in one or more separate series of senior
debt securities and/or subordinated debt securities. The prospectus supplement
relating to the particular series of debt securities being offered will specify
the particular amounts, prices and terms of those debt securities. These terms
may include:
- the title of the debt securities;
- any limit upon the aggregate principal amount of the debt securities;
- the maturity date or dates, or the method of determining the maturity
dates;
- the interest rate or rates, or the method of determining those rates;
- the interest payment dates and, for debt securities in registered form,
the regular record dates;
- the places where payments may be made;
- any mandatory or optional redemption provisions;
- any sinking fund or analogous provisions;
- any conversion or exchange provisions;
- any terms for the attachment to the debt securities of warrants, options
or other rights to purchase or sell our securities;
- the portion of principal amount of the debt security payable upon
acceleration of maturity if other than the full principal amount;
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- any deletions of, or changes or additions to, the events of default or
covenants;
- if other than U.S. dollars, the currency or currencies, including the euro
and other composite currencies, in which payments on the debt securities
will be payable and whether the holder may elect payment to be made in a
different currency;
- the method of determining the amount of any payments on the debt
securities which are linked to an index;
- whether the debt securities will be issued in fully registered form
without coupons or in bearer form, with or without coupons, or any
combination of these, and whether they will be issued in the form of one
or more global securities in temporary or definitive form;
- any terms relating to the delivery of the debt securities if they are to
be issued upon the exercise of warrants;
- whether and on what terms we will pay additional amounts to holders of the
debt securities that are not U.S. persons in respect of any tax,
assessment or governmental charge withheld or deducted and, if so, whether
and on what terms we will have the option to redeem the debt securities
rather than pay the additional amounts; and
- any other specific terms of the debt securities.
(Sections 202 and 301)
Unless otherwise specified in the prospectus supplement:
- the debt securities will be registered debt securities;
- registered debt securities denominated in U.S. dollars will be issued in
denominations of $1,000 or an integral multiple of $1000; and
- bearer debt securities denominated in U.S. dollars will be issued in
denominations of $5,000.
Debt securities may bear legends required by United States Federal tax law
and regulations. (Section 401)
If any of the debt securities are sold for any foreign currency or currency
unit or if any payments on the debt securities is payable in any foreign
currency or currency unit, the prospectus supplement will contain any
restrictions, elections, tax consequences, specific terms and other information
with respect to the debt securities and the foreign currency or currency unit.
Some of the debt securities may be issued as original issue discount debt
securities. Original issue discount securities bear no interest or bear interest
at below-market rates and will be sold at a discount below their stated
principal amount. The prospectus supplement will also contain any special tax,
accounting or other information relating to original issue discount securities
other kinds of debt securities that may be offered, including debt securities
linked to an index or payable in currencies other than U.S. dollars.
EXCHANGE, REGISTRATION AND TRANSFER
Debt securities may be transferred or exchanged at the corporate trust
office of the security registrar or at any other office or agency maintained by
us for those purposes. No service charge will be payable upon the transfer or
exchange, except for any applicable tax or governmental charge. (Section 404)
The designated security registrar in the United States for the senior debt
securities is The Chase Manhattan Bank located at 450 West 33rd Street, New
York, New York 10001. The security registrar for the subordinated debt
securities will be designated in a prospectus supplement.
If debt securities are issuable in both registered and bearer form, the
bearer securities will be exchangeable for registered securities. If a bearer
security with related coupons is surrendered in exchange for a registered
security between a record date and the date set for the payment of interest, the
bearer security will be surrendered without the coupon relating to that interest
payment. That interest payment will be made only to the holder of the coupon
when due.
In the event of any redemption in part of any series of debt securities, we
will not be required to:
1. issue, register the transfer of, or exchange, debt securities of any
series
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between the opening of business 15 business days before any selection of
debt securities of that series to be redeemed and the close of business
on:
a. if debt securities of the series are issuable only in registered
form, the day of mailing of the relevant notice of redemption, and
b. if debt securities of the series are issuable in bearer form, the
day of the first publication of the relevant notice of redemption
or,
c. if debt securities of the series are issuable in bearer and
registered form and there is no publication, the day of mailing of
the relevant notice of redemption;
2. register the transfer of, or exchange, any registered security selected
for redemption, in whole or in part, except the unredeemed portion of
any registered security being redeemed in part; or
3. exchange any bearer security selected for redemption, except to exchange
it for a registered security which is simultaneously surrendered for
redemption.
(Section 404)
PAYMENT AND PAYING AGENT
We will pay principal, interest and any premium on fully registered
securities in the designated currency or currency unit at the office of the
paying agent. Payment of interest on fully registered securities may be made by
check mailed to the persons in whose names the debt securities are registered on
days specified in the indentures or any prospectus supplement. (Sections 406 and
410)
We will pay principal, interest and any premium on bearer securities in the
designated currency or currency unit at the office of the paying agent or agents
outside of the United States. Payments will be made at the offices of the paying
agent in the United States only if the designated currency is U.S. dollars and
payment outside of the United States is illegal or effectively precluded.
(Sections 410 and 1102) If any amount payable on any debt security or coupon
remains unclaimed at the end of two years after the amount became due and
payable, the paying agent will release any unclaimed amounts to us, and the
holder of the debt security or coupon will look only to us for payment. (Section
1103)
The paying agent in the United States for the senior debt securities is The
Chase Manhattan Bank located at 450 West 33rd Street, New York, New York 10001.
The paying agent for the subordinated debt securities will be designated in the
applicable prospectus supplement.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global certificates that will be deposited with a depositary
we will identify in a prospectus supplement. Global debt securities may be
issued in either registered or bearer form and in either temporary or definitive
form. All global securities in bearer form will be deposited with a depositary
outside of the United States. We will describe the specific terms of the
depositary arrangement with respect to a series of debt securities in the
prospectus supplement.
Other than with respect to payments, we may treat a person having a
beneficial interest in a definitive global security as the holder of the
principal amount of outstanding debt securities represented by the global
security. For these purposes, we may rely upon a written statement delivered to
the trustee by the holder of the definitive global security, or, in the case of
a definitive global security in bearer form, by Morgan Guaranty Trust Company of
New York, Brussels Office, as operator of the Euro-clear System, and Cedelbank,
societe anonyme. (Section 411) Neither we, the trustee nor any of our respective
agents will be responsible for any aspect of the records relating to or payments
made on account of beneficial ownership interests in a global security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests. (Section 411) We anticipate that the following provisions
will apply to all depositary arrangements with a depositary.
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TEMPORARY GLOBAL SECURITIES
All or any portion of the debt securities of a series that are issuable in
bearer form initially may be represented by one or more temporary global
securities, without interest coupons. The temporary global securities will be
deposited with a depositary in London for Euro-clear and Cedelbank for credit to
the accounts of the beneficial owners of the debt securities or to such other
accounts as they may direct. On and after an exchange date provided in the
applicable prospectus supplement, each temporary global security will be
exchangeable for definitive debt securities in bearer form, registered form,
definitive global bearer form or any combination thereof, as specified in the
prospectus supplement. No bearer security delivered in exchange for a portion of
a temporary global security will be mailed or delivered to any location in the
United States. (Sections 402 and 403)
Interest on a temporary global security will be paid to Euro-clear and/or
Cedelbank with respect to the portion held for its account only after they
deliver to the trustee a certificate which states that the portion:
1. is not beneficially owned by a United States persons;
2. has not been acquired by or on behalf of a United States person or for
offer to resell or for resale to a United States person or any person
inside the United States; or
3. if a beneficial interest has been acquired by a United States person,
a. that such person is a financial institution (as defined in the
Internal Revenue Code), purchasing for its own account or has
acquired the debt security through a financial institution; and
b. that the debt securities are held by a financial institution that
has agreed in writing to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue Code and the
regulations thereunder and that it did not purchase for resale
inside the United States.
The certificate must be based on statements provided by the beneficial
owners of interests in the temporary global security. Each of Euro-clear and
Cedelbank will credit the interest received by it to the accounts of the
beneficial owners of the debt security, or to other accounts as they may direct.
(Section 403)
DEFINITIVE GLOBAL SECURITIES
BEARER SECURITIES. The applicable prospectus supplement will describe the
exchange provisions, if any, of debt securities issuable in definitive global
bearer form. We will not deliver any bearer securities in exchange for a portion
of a definitive global security to any location in the United States. (Section
404)
U.S. BOOK-ENTRY SECURITIES. Debt securities of a series represented by a
definitive global registered security and deposited with or on behalf of a
depositary in the United States will be registered in the name of the depositary
or its nominee. These securities are referred to as "book-entry securities".
Upon the issuance of a global security and the deposit of the security with the
depositary, the depositary will credit, on its book-entry registration and
transfer system, the respective principal amounts represented by that global
security to the accounts of institutions that have accounts with the depositary
or its nominee. Institutions that have accounts with the depositary or its
nominee are referred to as "participants". The accounts to be credited shall be
designated by the underwriters or agents for the sale of such book-entry
securities or by us, if the securities are offered and sold directly by us.
Ownership of book-entry securities will be limited to participants or
persons that may hold interests through participants. In addition, ownership of
these securities will be evidenced only by, and the transfer of that ownership
will be effected only through, records maintained by the depositary or its
nominee or by participants or persons that hold through participants.
So long as the depositary, or its nominee, is the registered owner of a
global security, that depositary or nominee will be considered the sole owner or
holder of the book-entry securities represented by the global security for all
purposes under the indenture. Payments of
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principal, interest and premium on those securities will be made to the
depositary or its nominee as the registered owner or the holder of the global
security. Owners of book-entry securities:
- - will not be entitled to have the debt securities registered in their names;
- - will not be entitled to receive physical delivery of the debt securities in
definitive form; and
- - will not be considered the owners or holders of those debt securities under
the indenture.
The laws of some jurisdictions require that purchasers of securities take
physical delivery of the securities in definitive form. These laws impair the
ability to purchase or transfer book-entry securities.
We expect that the depositary for book-entry securities of a series will
immediately credit participants' accounts with payments received by the
depositary or nominee in amounts proportionate to the participants' beneficial
interests as shown on the records of such depositary. We also expect that
payments by participants to owners of beneficial interests in a global security
held through the participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name". The payments by
participants to the owners of beneficial interests will be the responsibility of
those participants.
COVENANTS
LIMITATION ON MERGER, CONSOLIDATION AND CERTAIN SALES OF ASSETS. We may,
without the consent of the holders of the debt securities, merge into or
consolidate with any other corporation, or convey or transfer all or
substantially all of our properties and assets to another person provided that:
1. the successor is a U.S. corporation;
2. the successor assumes on the same terms and conditions all the
obligations under the debt securities and the indentures; and
3. immediately after giving effect to the transaction, there is no default
under the applicable indenture. (Section 901)
The remaining or acquiring corporation will take over all of our rights and
obligations under the indentures. (Section 902)
SATISFACTION AND DISCHARGE; DEFEASANCE
We may be discharged from our obligations on the debt securities of any
series that have matured or will mature or be redeemed within one year if we
deposit with the trustee enough cash to pay all the principal, interest and any
premium due to the stated maturity date or redemption date of the debt
securities. (Section 501)
Each indenture contains a provision that permits us to elect:
1. to be discharged after 90 days from all of our obligations (subject to
limited exceptions) with respect to any series of debt securities then
outstanding; and/or
2. to be released from our obligations under the following covenants and
from the consequences of an event of default or cross-default resulting
from a breach of these covenants:
a. the limitations on mergers, consolidations and sale of assets,
b. the limitations on sale and leaseback transactions under the senior
indenture, and
c. the limitations on secured indebtedness under the senior indenture.
To make either of the above elections, we must deposit in trust with the
trustee enough money to pay in full the principal, interest and premium on the
debt securities. This amount may be made in cash and/or U.S. government
obligations, if the debt securities are denominated in U.S. dollars. This amount
may be made in cash, and/or foreign government securities if the debt securities
are denominated in a foreign currency. As a condition to either of the above
elections, we must deliver to the trustee an opinion of counsel that the holders
of the debt securities will not recognize income, gain or loss for Federal
income tax purposes as a result of the action. (Section 503)
If either of the above events occur, the holders of the debt securities of
the series will not be entitled to the benefits of the indenture,
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except for registration of transfer and exchange of debt securities and
replacement of lost, stolen or mutilated debt securities. (Sections 501 and 503)
EVENTS OF DEFAULT, NOTICE AND WAIVER
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% in principal amount of the
debt securities of the series may declare the entire principal amount of all the
debt securities of that series to be due and payable immediately. The
declaration may be annulled and past defaults may be waived by the holders of a
majority of the principal amount of the debt securities of that series. However,
payment defaults that are not cured may only be waived by all holders of the
debt securities. (Sections 602 and 613)
Each indenture defines an event of default with respect to any series of
debt securities as one or more of the following events:
- failure to pay interest on any debt security of the series for 30 days
when due;
- failure to pay the principal or any premium on any debt securities of the
series when due;
- failure to make any sinking fund payment for 30 days when due;
- failure to perform any other covenant in the debt securities of the series
or in the applicable indenture with respect to debt securities of that
series for 90 days after being given notice; and
- entering into bankruptcy or becoming insolvent.
An event of default for one series of debt securities is not necessarily an
event of default for any other series of debt securities. (Section 601)
Each indenture requires the trustee to give the holders of a series of debt
securities notice of a default with respect to that series within 90 days unless
the default is cured or waived. However, the trustee may withhold this notice if
it determines in good faith that it is in the interest of those holders. The
trustee may not, however, withhold this notice in the case of a payment default.
(Section 702)
Other than the duty to act with the required standard of care during an
event of default, a trustee is not obligated to exercise any of its rights or
powers under the indenture at the request or direction of any of the holders of
debt securities, unless the holders have offered to the trustee reasonable
indemnification. (Section 703) Generally, the holders of a majority in principal
amount of outstanding debt securities of any series may direct the time, method
and place of conducting any proceeding for any remedy available to the trustee,
or exercising any trust or other power conferred on the trustee. (Section 612)
Each indenture includes a covenant that we will file annually with the
trustee a certificate of no default, or specifying any default that exists.
(Section 1106)
MODIFICATION OF THE INDENTURES
Together with the trustee, we may modify the indentures without the consent
of the holders for limited purposes, including adding to our covenants or events
of default, establishing forms or terms of debt securities, curing ambiguities
and other purposes which do not adversely affect the holders in any material
respect. (Section 1001)
Together with the trustee, we may make modifications and amendments to each
indenture with the consent of the holders of a majority in principal amount of
the outstanding debt securities of all affected series. However, without the
consent of each affected holder, no modification may:
- change the stated maturity of any debt security;
- reduce the principal, premium (if any) or rate of interest on any debt
security;
- change any place of payment or the currency in which any debt security is
payable;
- impair the right to enforce any payment after the stated maturity or
redemption date;
- adversely affect the terms of any conversion right;
- reduce the percentage of holders of outstanding debt securities of any
series required to consent to any modification,
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amendment or waiver under the indenture;
- change any of our obligations, with respect to outstanding debt securities
of a series, to maintain an office or agency in the places and for the
purposes specified in the indenture for that series; or
- change the provisions in the indenture that relate to its modification or
amendment.
(Section 1002)
MEETINGS
The indentures contain provisions for convening meetings of the holders of
debt securities of a series. (Section 1401) A meeting may be called at any time
by the trustee, upon request by us or upon request by the holders of at least
10% in principal amount of the outstanding debt securities of the series. In
each case, notice will be given to the holders of debt securities of the series.
(Section 1402) Persons holding a majority in principal amount of the outstanding
debt securities of a series will constitute a quorum at a meeting. A meeting
called by us or the trustee that did not have a quorum may be adjourned for not
less than 10 days, and if there is not a quorum at the adjourned meeting, the
meeting may be further adjourned for not less than 10 days. Generally, any
resolution presented at a meeting at which a quorum is present may be adopted by
the affirmative vote of the holders of a majority in principal amount of the
outstanding debt securities of that series. However, to change the amount or
timing of payments under the debt securities, every holder in the series must
consent. In addition, if the indenture provides that an action may be taken by
the holders of a specified percentage in principal amount of outstanding debt
securities of a series, that action may be taken at a meeting at which a quorum
is present by the affirmative vote of the holders of such specified percentage
in principal amount of the outstanding debt securities of that series. Any
resolution passed or decision taken at any meeting of holders of debt securities
of any series duly held in accordance with an indenture will be binding on all
holders of debt securities of that series and the related coupons. (Section
1404)
NOTICES
In most instances, notices to holders of bearer securities will be given by
publication at least once in a daily newspaper in The City of New York and in
London. Notices may also be published in another city or cities as may be
specified in the bearer securities. In addition, notices to holders of bearer
securities will be mailed to those persons whose names and addresses were
previously filed with the applicable trustee. Notice to holders of registered
securities will be given by mail to the addresses of the holders as they appear
in the security register. (Section 106)
TITLE
Title to any bearer securities and any related coupons will pass by
delivery. We, the trustee and any agent of ours or the trustee may treat the
holder of any bearer security or related coupon as the absolute owner of that
security for all purposes. We may also treat the registered owner of any
registered security as the absolute owner of that security for all purposes.
(Section 407)
REPLACEMENT OF SECURITIES COUPONS
Debt securities or coupons that have been mutilated will be replaced by us
at the expense of the holder upon surrender of the mutilated debt security or
coupon to the security registrar. Debt securities or coupons that become
destroyed, stolen or lost will be replaced by us at the expense of the holder
upon delivery to the security registrar of evidence of its destruction, loss or
theft satisfactory to us and the security registrar. In the case of a destroyed,
lost or stolen debt security or coupon, the holder of the debt security or
coupon may be required to indemnify the security registrar and us before a
replacement debt security will be issued. (Section 405)
GOVERNING LAW
The indentures, the debt securities and the coupons will be governed by, and
construed under, the laws of the State of New York.
CONCERNING THE TRUSTEES
We may from time to time maintain lines of credit, and have other customary
banking
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relationships, with the trustee under the senior indenture or the trustee under
the subordinated indenture.
SENIOR DEBT SECURITIES
The senior debt securities will be unsecured and will rank equally with all
of our other unsecured and non-subordinated debt.
COVENANTS IN THE SENIOR INDENTURE
LIMITATION ON SECURED INDEBTEDNESS. Neither we nor any Restricted Subsidiary
will create, assume, incur or guarantee any Secured Indebtedness without
securing the senior debt securities equally and ratably with, or prior to, that
Secured Indebtedness unless the sum of the following amounts would not exceed
10% of Consolidated Net Tangible Assets:
- the total amount of all Secured Indebtedness that the senior debt
securities are not secured equally and ratably with, and
- the discounted present value of all net rentals payable under leases
entered into in connection with sale and leaseback transactions entered
into after July 15, 1985.
We do not include in this calculation any leases entered into by a Restricted
Subsidiary before the time it became a Restricted Subsidiary. (Section 1104 of
Senior Indenture)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. Neither we nor any
Restricted Subsidiary will enter into any lease longer than three years covering
any of our Principal Property or any Restricted Subsidiary that is sold to any
other person in connection with that lease unless either:
1. the sum of the following amounts does not exceed 10% of Consolidated Net
Tangible Assets:
a. the discounted present value of all net rentals payable under all
these leases entered into after July 15, 1985 and
b. the total amount of all Secured Indebtedness that the senior debt
securities are not secured equally and ratably with.
We do not include in this calculation any leases entered into by a
Restricted Subsidiary before the time it became a Restricted Subsidiary.
or
2. an amount equal to the greater of the following amounts is applied
within 180 days to the retirement of our long-term debt or the debt of a
Restricted Subsidiary:
a. the net proceeds to us or a Restricted Subsidiary from the sale and
b. the discounted present value of all net rentals payable under the
lease.
Amounts applied to debt which is subordinated to the senior debt
securities or which is owing to us or a Restricted Subsidiary will not
be included in this calculation. (Section 1105 of Senior Indenture)
This limitation on sale and leaseback transactions will not apply to any
leases that we may enter into relating to newly acquired, improved or
constructed property.
The holders of a majority in principal amount of all affected series of
outstanding debt securities may waive compliance with each of the above
covenants. (Section 1107 of Senior Indenture)
DEFINITIONS.
"Secured Indebtedness" will mean our indebtedness or indebtedness of a
Restricted Subsidiary for borrowed money secured by any lien on, or any
conditional sale or other title retention agreement covering, any Principal
Property or any stock or indebtedness of a Restricted Subsidiary. Excluded from
this definition is all indebtedness:
- outstanding on July 15, 1985, secured by liens, or arising from
conditional sale or other title retention agreements, existing on that
date;
- incurred after July 15, 1985 to finance the acquisition, improvement or
construction of property, and either secured by purchase money mortgages
or liens placed on the property within 180 days of acquisition,
improvement or construction,
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or arising from conditional sale or other title retention agreements;
- secured by liens on Principal Property or on the stock or indebtedness of
Restricted Subsidiaries, and, in either case, existing at the time of its
acquisition;
- owing to us or any Restricted Subsidiary;
- secured by liens, or conditional sale or other title retention devices,
existing at the time a corporation became or becomes a Restricted
Subsidiary after July 15, 1985;
- arising from any sale and leaseback transaction;
- incurred to finance the acquisition or construction of property secured by
liens in favor of any country or any political subdivision; and
- constituting any replacement, extension or renewal of any indebtedness to
the extent the amount of indebtedness is not increased.
"Principal Property" will mean land, land improvements, buildings and
associated factory, laboratory and office equipment constituting a
manufacturing, development, warehouse, service or office facility owned by or
leased to us or a Restricted Subsidiary which is located within the United
States and which has an acquisition cost plus capitalized improvements in excess
of 0.15% of Consolidated Net Tangible Assets as of the date of such
determination. Principal Property does not include:
- products marketed by us or our subsidiaries;
- any property financed through the issuance of tax-exempt governmental
obligations;
- any property which the Board of Directors determines is not of material
importance to us and our Restricted Subsidiaries taken as a whole; or
- any property in which the interest of us and all of our subsidiaries does
not exceed 50%.
"Consolidated Net Tangible Assets" will mean the total assets of us and our
subsidiaries, less current liabilities and intangible assets. We include in
intangible assets the balance sheet value of:
- all trade names, trademarks, licenses, patents, copyrights and goodwill;
- organizational and development costs;
- deferred charges other than prepaid items such as insurance, taxes,
interest, commissions, rents and similar items and tangible items we are
amortizing; and
- unamortized debt discount and expense minus unamortized premium.
We do not include in intangible assets any program products.
"Restricted Subsidiary" will mean:
1. any of our subsidiaries:
a. which has substantially all its property in the United States,
b. which owns or is a lessee of any Principal Property and,
c. in which our investment and the investment of our subsidiaries
exceeds 0.15% of Consolidated Net Tangible Assets as of the date of
such determination, and,
2. any other subsidiary the Board of Directors may designate as a
Restricted Subsidiary.
"Restricted Subsidiary" does not include financing subsidiaries and
subsidiaries formed or acquired after July 15, 1985 for the purpose of acquiring
the stock, business or assets of another person and that have not and do not
acquire all or any substantial part of our business or assets or the business or
assets of any Restricted Subsidiary. (Section 101 of Senior Indenture)
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SUBORDINATED DEBT SECURITIES
The subordinated debt securities will be unsecured. The subordinated debt
securities will be subordinate in right of payment to all senior indebtedness.
(Section 1501 of Subordinated Indenture) In addition, claims of our
subsidiaries' creditors and preferred stockholders generally will have priority
with respect to the assets and earnings of the subsidiaries over the claims of
our creditors, including holders of the subordinated debt securities, even
though those obligations may not constitute senior indebtedness. The
subordinated debt securities, therefore, will be effectively subordinated to
creditors, including trade creditors, and preferred stockholders of our
subsidiaries.
The subordinated indenture defines "senior indebtedness" to mean the
principal of, premium, if any, and interest on:
- all indebtedness for money borrowed or guaranteed by us other than the
subordinated debt securities, unless the indebtedness expressly states to
have the same rank as, or to rank junior to, the subordinated debt
securities; and
- any deferrals, renewals or extensions of any senior indebtedness.
However, the term "senior indebtedness" will not include:
- any of our obligations to our subsidiaries;
- any liability for Federal, state, local or other taxes owed or owing by
us;
- any accounts payable or other liability to trade creditors arising in the
ordinary course of business, including guarantees of instruments
evidencing those liabilities;
- any indebtedness, guarantee or obligation of ours which is expressly
subordinate or junior in right of payment in any respect to any other
indebtedness, guarantee or obligation of ours, including any senior
subordinated indebtedness and any subordinated obligations;
- any obligations with respect to any capital stock; or
- any indebtedness incurred in violation of the Subordinated Indenture.
There is no limitation on our ability to issue additional senior
indebtedness. The senior debt securities constitute senior indebtedness under
the subordinated indenture. The subordinated debt securities will rank equally
with our other subordinated indebtedness.
Under the subordinated indenture, no payment may be made on the subordinated
debt securities and no purchase, redemption or retirement of any subordinated
debt securities may be made in the event:
- any senior indebtedness is not paid when due, or
- the maturity of any senior indebtedness is accelerated as a result of a
default, unless the default has been cured or waived and the acceleration
has been rescinded or that senior indebtedness has been paid in full.
We may, however, pay the subordinated debt securities without regard to the
above restriction if the representatives of the holders of the applicable senior
indebtedness approve the payment in writing to us and the trustee.
The representatives of the holders of senior indebtedness may notify us and
the trustee in writing of a default which can result in the acceleration of that
senior indebtedness's maturity without further notice or the expiration of any
grace periods. In this event, we may not pay the subordinated debt securities
for 179 days after receipt of that notice. If the holders of senior indebtedness
or their representatives have not accelerated the maturity of the senior
indebtedness at the end of the 179 day period, we may resume payments on the
subordinated debt securities. Not more than one such notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to senior indebtedness during that period. (Section 1503 of Subordinated
Indenture)
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In the event that we pay or distribute our assets to creditors upon a total
or partial liquidation, dissolution or reorganization of us or our property, the
holders of senior indebtedness will be entitled to receive payment in full of
the senior indebtedness before the holders of subordinated debt securities are
entitled to receive any payment. Until the senior indebtedness is paid in full,
any payment or distribution to which holders of subordinated debt securities
would be entitled but for the subordination provisions of the subordinated
indenture will be made to holders of the senior indebtedness. (Section 1502 of
Subordinated Indenture) If a distribution is made to holders of subordinated
debt securities that, due to the subordination provisions, should not have been
made to them, those holders of subordinated debt securities are required to hold
it in trust for the holders of senior indebtedness, and pay it over to them as
their interests may appear. (Section 1505 of Subordinated Indenture)
If payment of the subordinated debt securities is accelerated because of an
event of default, either we or the trustee will promptly notify the holders of
senior indebtedness or their representatives of the acceleration. We may not pay
the subordinated debt securities until five business days after the holders of
senior indebtedness or their representatives receive notice of the acceleration.
Thereafter, we may pay the subordinated debt securities only if the
subordination provisions of the subordinated indenture otherwise permit payment
at that time. (Section 1505 of Subordinated Indenture)
As a result of the subordination provisions contained in the subordinated
indenture, in the event of insolvency, our creditors who are holders of senior
indebtedness may recover more, ratably, than the holders of subordinated debt
securities. In addition, our creditors who are not holders of senior
indebtedness may recover less, ratably, than holders of senior indebtedness and
may recover more, ratably, than the holders of subordinated indebtedness.
DESCRIPTION OF THE PREFERRED STOCK
The following is a description of general terms and provisions of the
preferred stock. The particular terms of any series of preferred stock will be
described in the applicable prospectus supplement.
All of the terms of the preferred stock are, or will be, contained in our
Certificate of Incorporation and the certificate of amendment relating to each
series of the preferred stock, which will be filed with the SEC at or prior to
the time of issuance of the series of the preferred stock.
We are authorized to issue up to 150,000,000 shares of preferred stock, par
value $.01 per share. As of December 31, 1998, 2,546,011 shares of Series A
7 1/2% Preferred Stock, liquidation preference $100 per share, were outstanding.
Subject to limitations prescribed by law, the Board of Directors is authorized
at any time to:
- issue one or more series of preferred stock;
- determine the designation for any series by number, letter or title that
shall distinguish the series from any other series of preferred stock; and
- determine the number of shares in any series.
The Board of Directors is authorized to determine, for each series of
preferred stock, and the prospectus supplement will set forth with respect to
the series the following information:
- whether dividends on that series of preferred stock will be cumulative,
noncumulative, or partially cumulative;
- the dividend rate (or method for determining the rate);
- the liquidation preference per share of that series of preferred stock,
if any;
- any conversion provisions applicable to that series of preferred stock;
- any redemption or sinking fund provisions applicable to that series of
preferred stock;
- the voting rights of that series of preferred stock, if any; and
- the terms of any other preferences or rights, if any, applicable to that
series of preferred stock.
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The preferred stock, when issued, will be fully paid and nonassessable.
DIVIDENDS
Holders of preferred stock will be entitled to receive, when, as and if
declared by the Board of Directors, cash dividends at the rates and on the dates
as set forth in the prospectus supplement. Generally, no dividends will be
declared or paid on any series of preferred stock unless full dividends for all
series of preferred stock, including any cumulative dividends still owing, have
been or contemporaneously are declared and paid. When those dividends are not
paid in full, dividends will be declared pro-rata so that the amount of
dividends declared per share on each series of preferred stock will bear to each
other series the same ratio that accrued dividends per share for each respective
series of preferred stock bear to aggregate accrued dividends for all
outstanding shares of preferred stock. In addition, generally, unless all
dividends on the preferred stock have been paid, no dividends will be declared
or paid on the capital stock and we may not redeem or purchase any capital
stock.
Payment of dividends on any series of preferred stock may be restricted by
loan agreements, indentures and other transactions we may enter into.
CONVERTIBILITY
No series of preferred stock will be convertible into, or exchangeable for,
other securities or property except as set forth in the applicable prospectus
supplement.
REDEMPTION AND SINKING FUND
No series of preferred stock will be redeemable or receive the benefit of a
sinking fund except as set forth in the applicable prospectus supplement.
Shares of preferred stock that we redeem or otherwise reacquire will resume
the status of authorized and unissued shares of preferred stock undesignated as
to series, and will be available for subsequent issuance. There are no
restrictions on repurchase or redemption of the preferred stock while there is
any arrearage on sinking fund installments except as may be set forth in a
prospectus supplement.
LIQUIDATION
In the event we voluntarily or involuntarily liquidate, dissolve or wind up
our affairs, the holders of each series of preferred stock will be entitled to
receive the liquidation preference per share specified in the prospectus
supplement plus any accrued and unpaid dividends. Holders of preferred stock
will be entitled to receive these amounts before any distribution is made to the
holders of capital stock. If the amounts payable with respect to preferred stock
are not paid in full, the holders of preferred stock will share ratably in any
distribution of assets based upon the aggregate liquidation preference for all
outstanding shares for each series. After the holders of shares of preferred
stock are paid in full, they will have no right or claim to any of our remaining
assets.
Neither the par value nor the liquidation preference is indicative of the
price at which the preferred stock will actually trade on or after the date of
issuance.
VOTING
Generally, the holders of preferred stock will not be entitled to vote.
However, if the equivalent of six quarterly dividends payable on any series of
preferred stock is in default, the number of directors constituting our Board of
Directors will be increased by two and the holders of such series of preferred
stock, voting together as a class with all other series of preferred stock
entitled to vote on such election of directors, will be entitled to elect those
additional directors. In the event of this type of default, the Board of
Directors will call a special meeting for the holders of all affected series
within 10 business days of the default for the purpose of electing the
additional directors. Alternatively, the holders of record of a majority of the
outstanding shares of all affected series who are entitled to participate in the
election of directors may elect those additional directors by written consent.
If all accumulated dividends on any series of preferred stock have been paid in
full, the holders of shares of that series will no longer have the right to vote
on directors and
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the term of office of each director so elected will terminate and the number of
our directors will, without further action, be reduced by two.
Unless otherwise specified in a prospectus supplement, the vote of the
holders of a majority of the outstanding shares of each series of preferred
stock voting together as a class, is required to authorize any amendment,
alteration or repeal of our Certificate of Incorporation or any certificate of
amendment which would adversely affect the powers, preferences, or special
rights of the preferred stock including authorizing any class of stock with
superior dividend and liquidation preferences.
NO OTHER RIGHTS
The shares of a series of preferred stock will not have any preemptive
rights, preferences, voting powers or relative, participating, optional or other
special rights except as set forth above or in the prospectus supplement, the
Certificate of Incorporation or certificate of amendment or as otherwise
required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of preferred stock will be designated in
the prospectus supplement.
DESCRIPTION OF THE DEPOSITARY
SHARES
We may, at our option, elect to offer fractional shares of preferred stock,
rather than full shares of preferred stock. If we do, we will issue to the
public receipts for depositary shares and each of these depositary shares will
represent a fraction of a share of a particular series of preferred stock. Each
owner of a depositary share will be entitled, in proportion to the applicable
fractional interest in shares of preferred stock underlying that depositary
share, to all rights and preferences of the preferred stock underlying that
depositary share. Those rights include dividend, voting, redemption and
liquidation rights.
The shares of preferred stock underlying the depositary shares will be
deposited with a depositary under a deposit agreement between us, the depositary
and the holders of the depositary receipts evidencing the depositary shares. The
depositary will be a bank or trust company selected by us. The depositary will
also act as the transfer agent, registrar and dividend disbursing agent for the
depositary shares.
Holders of depositary receipts agree to be bound by the deposit agreement,
which requires holders to take certain actions such as filing proof of residence
and paying certain charges.
The following is a summary of the most important terms of the depositary
shares. The deposit agreement, our Certificate of Incorporation and the
certificate of amendment for the applicable series of preferred stock that are,
or will be, filed with the SEC will set forth all of the terms relating to the
depositary shares.
DIVIDENDS
The depositary will distribute all cash dividends or other cash
distributions received in respect of the series of preferred stock underlying
the depositary shares to the record holders of depositary receipts in proportion
to the number of depositary shares owned by those holders on the relevant record
date. The record date for the depositary shares will be the same date as the
record date for the preferred stock.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
that are entitled to receive the distribution. However, if the depositary
determines that it is not feasible to make the distribution, the depositary may,
with our approval, adopt another method for the distribution. The method may
include selling the property and distributing the net proceeds to the holders.
LIQUIDATION PREFERENCE
In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of each depositary share will be entitled to receive the
fraction of the liquidation preference accorded each share of the applicable
series of preferred stock, as set forth in the applicable prospectus supplement.
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REDEMPTION
If a series of preferred stock underlying the depositary shares is subject
to redemption, the depositary shares will be redeemed from the proceeds received
by the depositary resulting from the redemption, in whole or in part, of
preferred stock held by the depositary. Whenever we redeem any preferred stock
held by the depositary, the depositary will redeem, as of the same redemption
date, the number of depositary shares representing the preferred stock so
redeemed. The depositary will mail the notice of redemption to the record
holders of the depositary receipts promptly upon receiving the notice from us
and not less than 35 nor more than 60 days prior to the date fixed for
redemption of the preferred stock and the depositary shares.
VOTING
Upon receipt of notice of any meeting at which the holders of preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary receipts
underlying the preferred stock. Each record holder of those depositary receipts
on the record date will be entitled to instruct the depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
underlying that holder's depositary shares. The record date for the depositary
shares will be the same date as the record date for the preferred stock. The
depositary will try, as far as practicable, to vote the preferred stock
underlying the depositary shares in accordance with the instructions of the
holders of the depositary receipts. We will agree to take all action which may
be deemed necessary by the depositary in order to enable the depositary to do
so. The depositary will not vote the preferred stock to the extent that it does
not receive specific instructions from the holders of depositary receipts.
WITHDRAWAL OF PREFERRED STOCK
Owners of depositary shares are entitled, upon surrender of depositary
receipts at the principal office of the depositary and payment of any unpaid
amount due the depositary, to receive the number of whole shares of preferred
stock underlying the depositary shares. Partial shares of preferred stock will
not be issued. These holders of preferred stock will not be entitled to deposit
the shares under the deposit agreement or to receive depositary receipts
evidencing depositary shares for the preferred stock.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended at any time and from time to
time by agreement between us and the depositary. However, any amendment which
materially and adversely alters the rights of the holders of depositary shares,
other than any change in fees, will not be effective unless the amendment has
been approved by at least a majority of the depositary shares then outstanding.
The deposit agreement may be terminated by us or the depositary only if:
- all outstanding depositary shares have been redeemed or
- there has been a final distribution in respect of the preferred stock in
connection with our dissolution and such distribution has been made to
all the holders of depositary shares.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will also pay
charges of the depositary in connection with the initial deposit of the
preferred stock and the initial issuance of the depositary shares, any
redemption of the preferred stock and all withdrawals of preferred stock by
owners of depositary shares. Holders of depositary receipts will pay transfer,
income and other taxes and governmental charges and certain other charges as
provided in the deposit agreement to be for their accounts. In certain
circumstances, the depositary may refuse to transfer depositary shares, may
withhold dividends and distributions and sell the depositary shares evidenced by
the depositary receipt if the charges are not paid.
REPORTS TO HOLDERS
The depositary will forward to the holders of depositary receipts all
reports and communications we deliver to the depositary that
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we are required to furnish to the holders of the preferred stock. In addition,
the depositary will make available for inspection by holders of depositary
receipts at the principal office of the depositary, and at other places as it
may from time to time deem advisable, any reports and communications we deliver
to the depositary as the holder of preferred stock.
LIABILITY AND LEGAL PROCEEDINGS
Neither we nor the depositary will be liable if either of us are prevented
or delayed by law or any circumstance beyond our control in performing our
respective obligations under the deposit agreement. Our obligations and those of
the depositary will be limited to performance in good faith of our respective
duties under the deposit agreement. Neither we nor the depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or preferred stock unless satisfactory indemnity is furnished.
We and the depositary may rely on written advice of counsel or accountants, on
information provided by holders of depositary receipts or other persons believed
in good faith to be competent to give such information and on documents believed
to be genuine and to have been signed or presented by the proper party or
parties.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering a notice to us of its
election to do so. We may remove the depositary at any time. Any such
resignation or removal will take effect upon the appointment of a successor
depositary and its acceptance of such appointment. The successor depositary must
be appointed within 60 days after delivery of the notice for resignation or
removal. In addition, the successor depositary must be a bank or trust company
having its principal office in the United States of America and having a
combined capital and surplus of at least $150,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the depositary shares will be treated for Federal income tax
purposes as if they were owners of the preferred stock underlying the depositary
shares. Accordingly, the owners will be entitled to take into account for
Federal income tax purposes income and deductions to which they would be
entitled if they were holders of the preferred stock. In addition:
- no gain or loss will be recognized for Federal income tax purposes upon
the withdrawal of preferred stock in exchange for depositary shares;
- the tax basis of each share of preferred stock to an exchanging owner of
depositary shares will, upon the exchange, be the same as the aggregate
tax basis of the depositary shares exchanged; and
- the holding period for preferred stock in the hands of an exchanging
owner of depositary shares will include the period during which the
person owned the depositary shares.
DESCRIPTION OF THE CAPITAL STOCK
As of the date of this prospectus, we are authorized to issue up to
1,875,000,000 shares of capital stock, $0.50 par value per share. As of December
31, 1998, 915,906,906 shares of capital stock were outstanding.
DIVIDENDS. Holders of capital stock are entitled to receive dividends, in
cash, securities, or property, as may from time to time be declared by our Board
of Directors, subject to the rights of the holders of the preferred stock.
VOTING. Each holder of capital stock is entitled to one vote per share on
all matters requiring a vote of the stockholders.
RIGHTS UPON LIQUIDATION. In the event of our voluntary or involuntary
liquidation, dissolution, or winding up, the holders of capital stock will be
entitled to share equally in our assets available for distribution after payment
in full of all debts and after the holders of preferred stock have received
their liquidation preferences in full.
MISCELLANEOUS. Shares of capital stock are not redeemable and have no
subscription, conversion or preemptive rights.
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DESCRIPTION OF THE WARRANTS
We may issue warrants for the purchase of debt securities, preferred stock
or capital stock. Warrants may be issued independently or together with our debt
securities, preferred stock or capital stock and may be attached to or separate
from any offered securities. Each series of warrants will be issued under a
separate warrant agreement to be entered into between us and a bank or trust
company, as warrant agent. The warrant agent will act solely as our agent in
connection with the warrants and will not have any obligation or relationship of
agency or trust for or with any holders or beneficial owners of warrants. A copy
of the warrant agreement will be filed with the SEC in connection with the
offering of warrants.
DEBT WARRANTS
The prospectus supplement relating to a particular issue of warrants to
issue debt securities will describe the terms of those warrants, including the
following:
- - the title of the warrants;
- - the offering price for the warrants, if any;
- - the aggregate number of the warrants;
- - the designation and terms of the debt securities purchasable upon exercise of
the warrants;
- - if applicable, the designation and terms of the debt securities that the
warrants are issued with and the number of warrants issued with each debt
security;
- - if applicable, the date from and after which the warrants and any debt
securities issued with them will be separately transferable;
- - the principal amount of debt securities that may be purchased upon exercise
of a warrant and the price at which the debt securities may be purchased
upon exercise;
- - the dates on which the right to exercise the warrants will commence and
expire;
- - if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
- - whether the warrants represented by the warrant certificates or debt
securities that may be issued upon exercise of the warrants will be issued
in registered or bearer form;
- - information with respect to book-entry procedures, if any;
- - the currency or currency units in which the offering price, if any, and the
exercise price are payable;
- - if applicable, a discussion of material United States federal income tax
considerations;
- - the antidilution provisions of the warrants, if any;
- - the redemption or call provisions, if any, applicable to the warrants; and
- - any additional terms of the warrants, including terms, procedures, and
limitations relating to the exchange and exercise of the warrants.
STOCK WARRANTS
The prospectus supplement relating to a particular issue of warrants to
issue capital stock or preferred stock will describe the terms of the warrants,
including the following:
- - the title of the warrants;
- - the offering price for the warrants, if any;
- - the aggregate number of the warrants;
- - the designation and terms of the capital stock or preferred stock that may be
purchased upon exercise of the warrants;
- - if applicable, the designation and terms of the securities that the warrants
are issued with and the number of warrants issued with each security;
- - if applicable, the date from and after which the warrants and any securities
issued with the warrants will be separately transferable;
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- - the number of shares of capital stock or preferred stock that may be
purchased upon exercise of a warrant and the price at which the shares may
be purchased upon exercise;
- - the dates on which the right to exercise the warrants shall commence and
expire;
- - if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
- - the currency or currency units in which the offering price, if any, and the
exercise price are payable;
- - if applicable, a discussion of material United States federal income tax
considerations;
- - the antidilution provisions of the warrants, if any;
- - the redemption or call provisions, if any, applicable to the warrants; and
- - any additional terms of the warrants, including terms, procedures, and
limitations relating to the exchange and exercise of the warrants.
PLAN OF DISTRIBUTION
We may sell the securities:
- - through underwriters,
- - through agents or
- - directly to a limited number of institutional purchasers or to a single
purchaser.
The prospectus supplement will set forth the terms of the offering of the
securities, including the following:
- - the name or names of any underwriters;
- - the purchase price and the proceeds we will receive from the sale;
- - any underwriting discounts and other items constituting underwriters'
compensation;
- - any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers; and
- - any securities exchanges on which the securities of the series may be listed.
If underwriters are used in the sale, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The securities may be
either offered to the public through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. The obligations of
the underwriters to purchase securities will be subject to conditions precedent
and the underwriters will be obligated to purchase all the securities of a
series if any are purchased. Any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers may be changed from time
to time.
Securities may be sold directly by us or through agents designated by us
from time to time. Any agent involved in the offer or sale of the securities in
respect of which this prospectus is delivered will be named, and any commissions
payable by us to that agent will be set forth, in the prospectus supplement.
Unless otherwise indicated in the prospectus supplement, any agent will be
acting on a best efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers by certain types
of institutions to purchase securities from us at the public offering price set
forth in the prospectus supplement pursuant to delayed delivery contracts. These
contracts will provide for payment and delivery on a specified date in the
future. The conditions to these contracts and the commissions payable for
solicitation of such contracts will be set forth in the applicable prospectus
supplement.
Agents and underwriters may be entitled to indemnification by us against
civil liabilities arising out of this prospectus, including liabilities under
the Securities Act of 1933, or to contribution with respect to payments which
the agents or underwriters may be required to make relating to those
liabilities. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, us in the ordinary course of business.
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Each series of securities will be a new issue of securities with no
established trading market. Any underwriter may make a market in the securities,
but will not be obligated to do so and may discontinue any market making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for any securities.
LEGAL OPINIONS
The legality of the securities will be passed upon by David S. Hershberg,
our Vice President and Assistant General Counsel. Mr. Hershberg, together with
members of his family, owns, has options to purchase and has other interests in
shares of our common stock.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to our Annual Report on Form 10-K for the year ended December 31, 1997
have been incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting. Before the July 1, 1998 merger of Price Waterhouse LLP,
our former independent accountant, and Coopers & Lybrand L.L.P. (C&L) to form
PricewaterhouseCoopers LLP, the retirement plan of C&L purchased 14,500 shares
of our capital stock. All 14,500 shares were sold on December 1, 1998.
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