<PAGE>
PURSUANT TO RULE NO. 424(b)(5)
FILE NO. 333-59181
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 28, 1998)
$500,000,000
Pitney Bowes Credit Corporation
Medium-Term Notes, Series D
Pitney Bowes Credit Corporation may use this prospectus supplement to offer
the notes from time to time.
The following terms may apply to the notes. The final terms of each note
will be described in a pricing supplement.
.They may have maturities of nine months or more.
. They will not be redeemable by us or repayable at the option of the
holder, unless the pricing supplement states otherwise.
.They may be denominated in U.S. dollars or in a foreign currency or
composite currency.
. They may bear interest at a fixed or floating interest rate, may be
issued at a discount and may be zero coupon notes that do not bear
interest. Floating interest rates may be based on any of the following
formulas:
--commercial paper rate --LIBOR
--prime rate --treasury rate
--CD rate --CMT rate
--federal funds effective rate --another rate specified in the pricing
supplement
.They may be issued as indexed notes.
.They may be issued in certificated or book-entry form.
. Interest will be paid on fixed rate notes on February 1 and August 1 of
each year and at maturity, unless otherwise specified in a pricing
supplement.
.Interest will be paid on floating rate notes on dates determined at the
time of issuance.
.They will be issued in minimum denominations of $1,000 and multiples of
$1,000.
. They will have an aggregate initial offering price not greater than
$500,000,000 or any greater or lesser amount that PBCC may specify from
time to time in a pricing supplement.
. They will be offered from time to time on a reasonable best efforts basis
by the agents named below on behalf of PBCC. In addition, the agents may
purchase notes from PBCC for resale to investors, and PBCC may sell notes
directly to investors on its own behalf where legally permitted.
PBCC will receive between $499,375,000 and $496,250,000 of the proceeds
from the sale of the notes after paying the agents' commissions of between
$625,000 and $3,750,000 and before deducting the expenses of the offering of
the notes estimated by PBCC at $200,000. The exact proceeds to PBCC will be
set at the time of issuance. PBCC does not expect that any of the notes will
be listed on a securities exchange, and a market for the notes may not
develop.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement or the related prospectus.
Any representation to the contrary is a criminal offense.
Salomon Smith Barney
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
J.P. Morgan & Co.
August 30, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Prospectus Supplement Page
--------------------- ----
<S> <C>
Ratio of Earnings from Continuing
Operations to Fixed Charges....... S-3
Description of Notes We May Offer.. S-3
Risks Relating to Indexed Notes.... S-23
Foreign Currency Risks............. S-25
United States Federal Taxation..... S-26
Supplemental Plan of Distribution.. S-33
Validity of Notes.................. S-35
Experts............................ S-35
</TABLE>
<TABLE>
<CAPTION>
Prospectus Page
---------- ----
<S> <C>
Available Information.............. 2
Incorporation of Certain Documents
by Reference...................... 2
The Company........................ 3
Use of Proceeds and Funding
Policy............................ 4
Ratio of Earnings to Fixed
Charges........................... 5
Description of Debt Securities..... 5
Plan of Distribution............... 12
Validity of Debt Securities........ 13
Experts............................ 14
</TABLE>
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. PBCC has not
authorized anyone to provide you with information different from that
contained in this prospectus supplement and the accompanying prospectus. PBCC
is offering to sell the notes and seeking offers to buy the notes only in
jurisdictions where offers and sales are permitted. The information contained
in this prospectus supplement and the accompanying prospectus is accurate only
as of the date of this prospectus supplement and the date of the accompanying
prospectus, regardless of the time of delivery of this prospectus supplement
or any sale of the notes.
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RATIO OF EARNINGS FROM CONTINUING OPERATIONS TO FIXED CHARGES
The following table presents the ratio of our earnings from continuing
operations to fixed charges, for the periods indicated:
<TABLE>
<CAPTION>
Six months ended Years ended December 31,
---------------- ------------------------------------------------------------------------------
June 30, 1999 1998 1997 1996 1995 1994
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
2.82 2.96 2.43 2.35 2.14 2.49
</TABLE>
In computing the ratio of earnings from continuing operations to fixed
charges, earnings have been calculated by adding to earnings before income
taxes the amount of fixed charges. Fixed charges consist of interest on debt
and a portion of net rental expense deemed to represent interest.
Due to the disposition of the operations, employees and substantially all
assets of Colonial Pacific Leasing Corporation during 1998, CPLC has been
accounted for as discontinued operations on our income statement for the year
ended December 31, 1998. Due to the adoption on June 30, 1999 of a formal plan
to dispose of Atlantic Mortgage & Investment Corporation, AMIC has been
accounted for as discontinued operations on our income statements for the
three months and six months ended June 30, 1999. Because of these two events,
prior years' income statements have been restated to conform to the
presentation for the current year. Earnings and interest expense attributable
to CPLC and AMIC are excluded from the calculation of earnings from continuing
operations as presented above. See the consolidated financial statements and
note 2 to the consolidated financial statements in our Current Report on Form
8-K dated August 27, 1999 and in our Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, which are incorporated by reference in the
accompanying prospectus, for more information about the disposition of CPLC
and the adoption of a plan to dispose of AMIC.
DESCRIPTION OF NOTES WE MAY OFFER
This section is a summary of the material terms that are common to the
particular debt securities offered here, referred to as notes. This summary
supplements, and is qualified by reference to, the description of the general
terms and provisions of the debt securities in the prospectus that is attached
to the back of this prospectus supplement. However, if any particular term of
notes described here is inconsistent with any general terms described in the
prospectus, the particular term will control.
When we issue any particular note or notes, we will specify their
particular terms in a pricing supplement to this prospectus supplement. The
terms of any particular notes may be different from or in addition to the
terms summarized here. The interest-related information described here or in
the accompanying prospectus does not apply to zero coupon notes, which are
described below.
In this section, we use some terms that have been given special meaning in
the indenture or the notes or explained in the accompanying prospectus. We
describe meaning for only the more important terms.
When we say "holders" in this section, we mean those who own notes
registered in their own names and not those who own beneficial interests in
notes registered in "street name" or in notes represented by a global note or
notes issued in book-entry form through the depositary. Owners of beneficial
interests in the notes should read the subsection below entitled "--Book-entry
system" and the subsection entitled "Description of Debt Securities--Book-
Entry System" in the prospectus for information about procedures applicable to
indirect beneficial interests in notes.
The notes constitute a single series of debt securities under the
indenture, dated as of July 31, 1999 between us and SunTrust Bank, Atlanta, as
trustee. We explain what the indenture is on page 6 of the prospectus. The
notes are limited in their aggregate principal amount to $500,000,000, less an
amount equal to the aggregate principal amount of any other debt securities we
may issue from time to time, including any other series of
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medium-term notes. We may increase this limit, if in the future we determine
that we may want to sell additional notes. For a description of the rights
attached to different series of debt securities under the indenture, see
"Description of Debt Securities" in the prospectus.
Stated maturity and maturity
The day on which the principal amount of your note is scheduled to become
due and payable is called the "stated maturity" of the principal, which is a
date 9 months or more from the issuance date of the note. This date will be
specified on the face of the note and in the pricing supplement relating to
the note. The principal may become due and payable sooner, by reason of
redemption, acceleration after a default or otherwise. The day on which the
principal actually becomes due and payable, whether at the stated maturity or
earlier, is called the "maturity" of the principal.
We also use the terms "stated maturity" and "maturity" to refer to the
dates when other payments become due and payable. For example, we may refer to
a regular interest payment date when an installment of interest is scheduled
to become due as the stated maturity of that installment. When we refer to the
stated maturity or the maturity of a note without specifying a particular
payment, we mean the stated maturity or maturity, as the case may be, of the
principal.
Currency of notes
Amounts that become due and payable on your note will be payable in a
currency, including any composite currency, specified on the face of the note
and in the related pricing supplement. This specified currency may be U.S.
dollars or any other currency or composite currency, including euro. In some
cases, a note may have different specified currencies for principal and
interest. You will have to pay for your notes by delivering the requisite
amount of the specified currency for the principal to an agent named in the
related pricing agreement, unless other arrangements have been made between us
or between you and that agent. We will make payments on your notes in the
applicable specified currency, except as otherwise described here under "--
Payment of principal and interest".
Euro
What is euro? Euro, in which the notes may be denominated, is the single
currency which was introduced as of January 1, 1999 at the start of the third
stage of European Economic and Monetary Union under the Treaty on European
Union of February 1992, which is also known as the Maastricht Treaty. At
January 1, 1999, the euro became the legal currency for the 11 member states
participating in European Economic and Monetary Union. Each national currency
of these 11 member states will continue to be legal tender in its state during
a transition period from January 1, 1999 to December 31, 2001 and for a
maximum of six months after December 31, 2001, but the 11 national currencies
are now sub-units of the euro, with the conversion rates among these
currencies irrevocably fixed as of December 31, 1998.
Types of notes
We will issue two main types of notes, which are distinguishable by the
manner in which they bear interest:
. Fixed rate notes. A note of this type will bear interest at a fixed rate
described in the applicable pricing supplement. This type includes zero
coupon notes, which bear no interest and are instead issued at a price
lower than the principal amount.
. Floating rate notes. A note of this type will bear interest at rates that
are determined by reference to an interest rate formula. In some cases,
the rates may also be adjusted by adding or subtracting a spread or
multiplying by a spread multiplier, and there may be a minimum rate or a
maximum rate. The various interest rate formulas, including the
commercial paper rate, the prime rate, LIBOR, the treasury rate, the CD
rate, the federal funds rate, and the CMT rate, and other features are
described below in "--Interest
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rates of notes--Floating rate notes". If your note is a floating rate
note, the particular formula and any adjustments that apply to the
interest rate for your note will be specified or described in your pricing
supplement.
The notes may also be distinguished by the prices at which they are
originally issued or by the fact that the amounts payable on them at maturity
or otherwise will depend on variable factors. There are three types:
. Original issue discount notes. A note of this type is issued at a price
lower than its principal amount and provides that, upon redemption or
acceleration of its maturity, an amount less than its principal amount
will be payable. A note issued at a discount to its principal amount may,
for U.S. federal income tax purposes, be considered an original issue
discount note, regardless of the amount payable upon redemption or
acceleration. See "United States federal taxation--Original issue
discount" below for further information about tax consequences of an
investment in original issue discount notes. An original issue discount
note may be a zero coupon note or may bear interest at a fixed or
floating rate.
. Indexed notes. A note of this type provides that the principal amount
payable at its maturity, and/or the amount of interest payable on an
interest payment date, will be determined by reference to a currency
exchange rate, composite currency, commodity price or any other financial
or non-financial index described in your pricing supplement. If you are a
holder of an indexed note, you may receive a principal amount at maturity
that is greater than or less than the face amount of your note depending
upon the value of the applicable index at maturity. That value may
fluctuate over time. If you purchase an indexed note, your pricing
supplement will include information about the relevant index and about
how amounts to become payable will be determined by reference to that
index. You should read carefully that information and the section below
entitled "Risks relating to indexed notes".
. Amortizing notes. If you are a holder of an amortizing note, you will
receive payments of principal and interest in installments over the life
of the notes. Unless otherwise specified in your pricing supplement,
interest on each amortizing note will be computed on the basis of a 360-
day year of twelve 30-day months. Payments on amortizing notes will be
applied first to interest due and payable and then to the reduction of
the unpaid principal amount. Further information concerning additional
terms of amortizing notes will be specified in your pricing supplement,
including a table of repayment information for the amortizing notes.
We may also issue notes whose maturity may be extended or which may be
renewed, as discussed below:
. Extension of maturity. An applicable pricing supplement will indicate
whether we have the option to extend the stated maturity of any note,
other than an amortizing note, for one or more periods up to but not
beyond a date specified in the pricing supplement. If we have this
option, the pricing supplement will describe the procedures relating to
it.
. Renewable notes. An applicable pricing supplement will indicate whether
any note, other than an amortizing note, will mature unless the term of
all or any portion of the note is renewed as described in the pricing
supplement.
Denomination of notes
Unless we specify differently in the pricing supplement relating to your
note, the denomination of your note will be $1,000 and integral multiples of
$1,000 above that. If your note is denominated in a specified currency other
than U.S. dollars, the denomination of the note should be in an amount of the
specified currency for the note equivalent to at least $1,000 and the other
denomination or denominations greater than the equivalent of $1,000 that will
be indicated in the applicable pricing supplement.
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Redemption and repayment
Unless otherwise specified in your pricing supplement, we will not provide
any sinking fund for your note.
Unless the applicable pricing supplement specifies a redemption
commencement date, on which we may redeem a note, or a repayment date, on
which a note may be repayable at the option of the holder, the notes will not
be redeemable by us or repayable at the option of the holder before their
stated maturity.
If your pricing supplement specifies a redemption commencement date or
repayment date, your pricing supplement will also specify one or more
redemption or repayment prices, expressed as a percentage of the principal
amount of your note, and the redemption or repayment period or periods during
which the redemption prices or repayment prices will apply. If your note is
redeemable at our option or repayable at the option of the holder, as
specified in your pricing supplement, it will be redeemable or repayable only
at any time on or after the specified redemption commencement date or
repayment date for a limited period, as specified in your pricing supplement,
at the specified redemption price or repayment price applicable to the
redemption period or repayment period for your note together with interest
accrued to the redemption date or repayment date.
If we redeem less than the entire principal amount of a note, the principal
amount of the note that remains outstanding after the redemption must be an
authorized denomination for the notes and must not be less than the minimum
authorized denomination. If we redeem less than all the notes that have the
same term to maturity, the trustee will select the notes to be redeemed by a
method that the trustee considers fair and appropriate.
If a note represented by a global note is repayable at the holder's option,
only the depositary or its nominee, as the holder, can exercise the repayment
option. Any indirect beneficial owners who own beneficial interests in the
global note and wish to exercise a repayment option must give proper and
timely instructions to their banks or brokers through which they hold their
interests, requesting that they notify the depositary to exercise the
repayment option on their behalf. Different firms have different deadlines for
accepting instructions from their customers, and you should take care to act
promptly enough to ensure that your request is given effect by the depositary
before the applicable deadline for exercise.
Street name and other indirect beneficial owners should contact their banks
or brokers for information about how to exercise a repayment option in a
timely manner.
All instructions given by indirect beneficial owners to their banks or
brokers to exercise a repayment option will be irrevocable. In addition, at
the time any indirect beneficial owner gives instructions to exercise a
repayment option, the indirect beneficial owner must cause the bank or broker
through which he or she owns an interest in the global note to transfer the
bank's or broker's interest in the global note, on the depositary's records,
to the trustee.
If the option of the holder to elect repayment as described above is deemed
to be a "tender offer" within the meaning of Rule 14e-1 under the Securities
Exchange Act of 1934, as amended, we will comply with Rule 14e-1 as then in
effect to the extent applicable.
We may at any time purchase notes at any price or prices in the open market
or otherwise. Notes so purchased by us may, at our discretion, be held, resold
or surrendered to the trustee for cancellation.
Whether the defeasance provisions apply
Unless otherwise specified in the applicable pricing supplement, the full
defeasance and covenant defeasance provisions of the indenture described under
"--Defeasance and Discharge" and "--Defeasance of Certain Covenants" in the
prospectus will apply to the notes.
Under current federal income tax law, full defeasance and discharge of our
payment obligations with respect to the notes would be treated as a taxable
exchange of the notes for an issue of obligations of the defeasance
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trust or a direct interest in the cash and securities deposited in the trust.
In that case, indirect beneficial owners of the notes would recognize gain or
loss as if these owners had actually received the trust obligations or the
cash or securities deposited, as the case may be, in exchange for their notes.
After that, indirect beneficial owners would be required to include in income
an amount that might be different from what would be includible in the absence
of full defeasance and discharge. We may only effect full defeasance if we
deliver to the trustee an opinion of counsel with respect to the tax
consequences to the holders of the defeasance, as discussed under "--
Defeasance and Discharge" in the prospectus.
Under current federal income tax law, unless accompanied by other changes
in the terms of the notes, covenant defeasance would not be treated as a
taxable exchange. The applicable pricing supplement will specify whether we
are required to deliver to the trustee an opinion of counsel with respect to
the tax consequences of covenant defeasance before we may effect covenant
defeasance, as discussed under""--Defeasance of Certain Covenants" in the
prospectus.
INFORMATION TO BE CONTAINED IN YOUR PRICING SUPPLEMENT
The pricing supplement relating to your note will describe the following
terms:
. the specified currency with respect to your note and, if the specified
currency is other than U.S. dollars, specified other terms relating to
your note, including the authorized denominations and the exchange rate
agent which will determine the relevant exchange rate;
. the price, expressed as a percentage of the aggregate principal amount of
the notes to which the pricing supplement relates, at which your note
will be issued;
. the date on which your note will be issued;
. the date on which your note will mature;
. whether your note is a fixed rate note or a floating rate note;
. if your note is a fixed rate note, the annual rate at which the note will
bear interest, if any, and the interest payment date or dates, if
different from those specified below;
. if your note is a floating rate note, the interest rate basis for each
floating rate note and, if applicable, the calculation agent, the index
maturity, the spread or spread multiplier, the maximum rate, the minimum
rate, the initial interest rate, the interest payment dates, the regular
record dates, the calculation date, the interest determination date and
the interest reset date, all as described below, with respect to the
floating rate note;
. whether your note is an original issue discount note, and if so, the
yield to maturity;
. whether your note is an indexed note, and if so, the principal amount of
the note payable at stated maturity, or the amount of interest payable on
an interest payment date, as determined by reference to the applicable
index, in addition to other information relating to the indexed note;
. whether your note is an amortizing note, and if so, repayment information
with respect to installments of principal and interest;
. whether your note may be redeemed at our option, or repaid at your
option, before the stated maturity and, if so, the provisions relating to
redemption or repayment;
. whether we have the option to extend the stated maturity of your note, as
described under "--Extension of maturity" above;
. whether your note is a renewable note, as described under "--Renewable
notes" above;
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. whether your note will be initially represented by a global note in book-
entry form or issued as a physical note in certificated form; and
. any other terms of your note consistent with the provisions of the
indenture.
If a note is issued as a physical note in certificated form, it may be
presented for registration of transfer or exchange at the corporate trust
office of the trustee in Atlanta, Georgia. You will not have to pay any
service charge for registration of transfer or exchange of any physical note
in certificated form, but we may require you to pay a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with
the transfer or exchange.
INTEREST RATES OF NOTES
Interest rates offered by us on the notes may differ depending upon, among
other things, the aggregate principal amount of notes purchased in any single
transaction. We may change interest rates or formulas and other terms of notes
from time to time, but any change of this kind will not affect any note
already issued or as to which we have accepted an offer to purchase.
Fixed rate notes
Each fixed rate note, except any zero coupon note, will bear interest from
and including its date of issue or from and including the most recent payment
date to which interest on the note has been paid or duly provided for.
Interest will accrue on the principal of a fixed rate note at the fixed annual
rate stated on the face of the note and in the applicable pricing supplement
until the principal is paid or made available for payment. Unless otherwise
specified in the applicable pricing supplement, interest on each fixed rate
note will be payable semiannually each February 1 and August 1, which we call
the "interest payment dates", and at maturity or upon earlier redemption or
repayment. Each payment of interest due on an interest payment date will
include interest accrued to but excluding that interest payment date. Unless
otherwise indicated in the applicable pricing supplement, interest on fixed
rate notes will be computed on the basis of a 360-day year of twelve 30-day
months. We will pay interest on each interest payment date and at maturity or
upon earlier redemption or repayment as specified below under "--Payment of
principal and interest".
Floating rate notes
Each floating rate note will bear interest from and including its date of
issue or from and including the most recent date to which interest on the note
has been paid or provided for. Interest will accrue on the principal of a
floating rate note at the annual rate determined according to the interest
rate formula stated in the note and in the applicable pricing supplement until
the principal is paid or made available for payment. We will pay interest on
each interest payment date and at maturity as specified below in the
subsection entitled "--Payment of principal and interest".
Interest rate basis. We currently expect to issue floating rate notes that
bear interest at a rate based on one or more of the following base rates:
. the commercial paper rate
. the prime rate
. LIBOR
. the treasury rate
. the CD rate
. the federal funds rate
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. the CMT rate
. any other interest rate basis or formula that may be agreed to by us and
the purchaser of a note and stated in the applicable pricing supplement.
In some cases, the base interest rate for a floating rate note may be
adjusted by adding or subtracting a number of basis points, which we call a
"spread", or multiplying the base interest rate by a percentage, which we call
a "spread multiplier". Your pricing supplement will specify any spread or
spread multiplier applicable to your note.
The base rate, whether or not adjusted, may also be limited by a maximum
rate, a minimum rate or both. In addition, a floating rate note may bear
interest at the lowest or highest or average of two or more interest rate
formulas. If you purchase a floating rate note, your pricing supplement will
indicate your base rate and whether any of these other features applies and,
if so, what they are.
Whether or not a maximum rate applies, the interest rate on a floating rate
note will in no event be higher than the maximum rate permitted by New York
law, as it may be modified by U.S. law of general application. Under present
New York law, the maximum rate of interest is 25% annually on a simple
interest basis, with some exceptions. The limit does not apply to floating
rate notes in which $2,500,000 or more has been invested.
The notes, including any zero coupon note, may be issued with original
issue discount as defined for United States federal income tax purposes.
Holders of notes issued with original issue discount may be required to
include amounts of accrued interest in gross income for federal income tax
purposes before receiving the cash to which that income is attributable. See
"United States federal taxation--U.S. holders--Original issue discount" for
further information about the federal income tax consequences of an investment
in notes issued with original issue discount.
Interest reset dates. The rate of interest on each floating rate note will
be reset daily, weekly, monthly, quarterly, semi-annually or annually on a
date called an "interest reset date", as specified in the applicable pricing
supplement. The interest reset date will be:
. for floating rate notes that reset daily, each "market day", as defined
in the second paragraph after this one;
. for floating rate notes, other than treasury rate notes, that reset
weekly, the Wednesday of each week;
. for treasury rate notes that reset weekly, the Tuesday of each week,
except as provided below;
. for floating rate notes that reset monthly, the third Wednesday of each
month;
. for floating rate notes that reset quarterly, the third Wednesday of
March, June, September and December;
. for floating rate notes that reset semi-annually, the third Wednesday of
two months of each year as specified in the applicable pricing
supplement; and
. for floating rate notes that reset annually, the third Wednesday of one
month of each year as specified in the applicable pricing supplement.
However, the interest rate in effect from the date of issue to the first
interest reset date for a floating rate note will be the initial interest rate
specified in the applicable pricing supplement. We refer to this rate as the
"initial interest rate".
If any interest reset date for any floating rate note would otherwise be a
day that is not a market day for the floating rate note, the interest reset
date for the floating rate note will be postponed to the next day that is a
market day for the floating rate note. However, in the case of a LIBOR note,
if the next market day is in the next succeeding calendar month, the interest
reset date will be the immediately preceding market day.
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When we say "market day", we mean:
. with respect to any note, unless otherwise provided in this definition,
any day that is a "business day", as defined in the next sentence, in The
City of New York;
. with respect to LIBOR notes only, any business day in The City of New
York that is also a "London business day", as defined in the second
sentence after this one;
. with respect to notes denominated in a specified currency other than U.S.
dollars or euro only, any day that is a business day both in The City of
New York and in the principal financial center in the country of the
specified currency; and
. with respect to notes denominated in euro, any date that is a business
day in The City of New York that is designated as a euro settlement day
by the Euro Banking Association in Paris or otherwise generally regarded
in the euro interbank market as a day on which payments in euro are made.
"Business day", when used with respect to any place, means each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in that place are authorized or obligated by law to close.
"London business day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
Interest determination dates. The interest rate that takes effect on an
interest reset date will be determined by reference to a particular date
called the "interest determination date" as follows:
. for a commercial paper rate note, for a prime rate note, for a CD rate
note, for a federal funds rate note and for a CMT rate note, the second
market day preceding the interest reset date;
. for a LIBOR note, the second London business day preceding the interest
reset date; and
. for a treasury rate note, the day of the week in which the interest reset
date falls on which treasury bills would normally be auctioned. Treasury
bills are usually sold at auction on the Monday of each week, unless that
day is a legal holiday, in which case the auction is usually held on the
following Tuesday, except that the auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on
the preceding Friday, that Friday will be the interest determination date
for the interest reset date occurring in the next succeeding week. If an
auction date falls on any interest reset date for a treasury rate note,
then that interest reset date will instead be the first market day
immediately following that auction date.
Calculation dates. As described in the preceding paragraph, the interest
rate that takes effect on a particular interest reset date is to be determined
by reference to the corresponding interest determination date. However, the
interest rate will actually be determined on the "calculation date". The
calculation date will be the earlier of the following:
. the tenth calendar day after the interest determination date or, if that
tenth calendar day is not a market day, the next succeeding market day;
and
. the market day immediately preceding the interest payment date or the
maturity date, whichever is the day on which the next payment of interest
will be due.
Calculation of interest. The calculation agent for any floating rate notes
will be specified in the applicable pricing supplement.
For each floating rate note, the calculation agent will determine, on the
corresponding calculation date, the interest rate that takes effect on each
interest reset date. In addition, the calculation agent will calculate the
amount of interest that has accrued during each interest period--that is, from
and including the original issue
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date, or the last date to which interest has been paid or duly provided for,
to but excluding the payment date. For each interest period, the amount of
accrued interest will be calculated by multiplying the face amount of the
floating rate note by an accrued interest factor for the interest period. This
factor will equal the sum of the interest factors calculated for each day
during the interest period. The interest factor for each day will be expressed
as a decimal. Unless otherwise specified in your note and the applicable
pricing supplement, the interest factor for each day will be calculated by
dividing the interest rate, also expressed as a decimal, applicable to that
day by 360, in the case of commercial paper rate notes, prime rate notes,
LIBOR notes, CD rate notes and federal funds rate notes, or by the actual
number of days in the year, in the case of treasury rate notes and CMT rate
notes. The interest rate factor for notes to which two or more interest rate
formulas apply will be calculated in each period in the same manner as if only
the lowest or highest formula or the average of the formulas applied, as
described in the applicable pricing supplement.
Upon the request of the holder of any floating rate note, the calculation
agent will provide the interest rate then in effect, and, if determined, the
interest rate that will become effective on the next interest reset date, for
that note. The calculation agent's determination of any interest rate, and its
calculation of the amount of interest for any interest period, will be final
and binding in the absence of manifest error.
All percentages resulting from any calculation relating to a note 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 .0987655)
and 9.876544% (or .09876544) will be rounded to 9.87654% (or .0987654). All
U.S. dollar amounts used in or resulting from these calculations will be
rounded to the nearest cent or, in the case of notes denominated in a
specified currency other than U.S. dollars, to the nearest unit. Amounts of
one-half cent, or five one-thousandths of a unit, or more will be rounded
upward.
We describe below the methods for determining interest rates of the various
floating rate notes we may offer.
Commercial paper rate notes. Commercial paper rate notes will bear interest
at the interest rates, calculated with reference to the commercial paper rate
and the spread or spread multiplier, if any, and will be payable on the dates,
specified on the face of the commercial paper rate note and in the applicable
pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, commercial
paper rate means, with respect to any interest reset date, the money market
yield, calculated as described in the second paragraph after this one, of the
annual rate, quoted on a bank discount basis, for the relevant interest
determination date for commercial paper having the specified index maturity as
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System, which we
call "H.15(519)", under the heading "Commercial Paper--Non-financial".
If the commercial paper rate cannot be determined as described above, then
the rate will be determined in accordance with the following procedures:
. If that rate is not published before 3:00 P.M., New York City time, on
the relevant calculation date, then the commercial paper rate with
respect to the relevant interest reset date will be the money market
yield of that rate on the relevant interest determination date for
commercial paper having the specified "index maturity" as available
through the worldwide web site of the Board of Governors of the Federal
Reserve System at http://www.bog.frb.fed.us/releases/h.15/ update, or any
successor site or publication of the Board of Governors of the Federal
Reserve System, which we call "H.15 daily update", under the heading
"Commercial Paper--Non-financial". "Index maturity" means, with respect
to a floating rate note, the period to maturity of the instrument or
obligation on which the interest rate formula is based, as specified in
the applicable pricing supplement. An index maturity of one month or
three months will be deemed to be equivalent to an index maturity of 30
days or 90 days, as the case may be.
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. If by 3:00 P.M., New York City time, on the relevant calculation date
that rate is not yet published in either H.15(519) or H.15 daily update,
the calculation agent will calculate the commercial paper rate with
respect to that interest reset date, and that rate will be the money
market yield of the arithmetic mean of the offered annual rates, as of
11:00 A.M., New York City time, on that interest determination date, of
three leading dealers of commercial paper in The City of New York
selected by the calculation agent for commercial paper of the specified
index maturity placed for an industrial issuer whose senior unsecured
bond rating is "AA", or the equivalent, from a nationally recognized
rating agency. These three dealers may include one or more of the agents
named on the cover of this prospectus supplement or their affiliates.
. If fewer than three dealers selected by the calculation agent are quoting
as mentioned above, the commercial paper rate with respect to that
interest reset date will be the commercial paper rate in effect on that
interest determination date or, if that interest determination date is
the first interest determination date, the initial interest rate.
When we say "money market yield", we mean a yield, expressed as a
percentage, calculated in accordance with the following formula:
360 x D
-------------
money market yield = 100 x 360 - (D x M)
In the above formula, "D" refers to the annual rate for commercial paper
quoted on a bank discount basis and expressed as a decimal; and "M" refers to
the actual number of days in the period from the interest reset date to but
excluding the next interest reset date, or the maturity, redemption or
repayment date, as appropriate.
Prime rate notes. Prime rate notes will bear interest at the interest
rates, calculated with reference to the prime rate and the spread or spread
multiplier, if any, and will be payable on the dates, specified on the face of
the prime rate note and in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, prime rate
means, with respect to any interest reset date, the rate stated for the
relevant interest determination date in H.15(519) under the heading "Bank
Prime Loan" or any successor heading.
If the prime rate cannot be determined as described above, the rate will be
determined in accordance with the following procedures:
. If that rate is not published before 9:00 A.M., New York City time, on
the related calculation date, then the prime rate will be the rate on the
relevant interest determination date as published in the H.15 daily
update opposite the caption "Bank Prime Loan".
. If that rate is not published before 3:00 P.M., New York City time, on
the relevant determination date in either H.15(519) or the H.15 daily
update, then the prime rate with respect to that interest reset date will
be the arithmetic mean of the rates of interest publicly announced by
each bank that appears on the "Reuters Screen USPRIME1 Page" as that
bank's prime rate or base lending rate as in effect for that interest
determination date. The "Reuters Screen USPRIME1 Page" is the display
designated as page "USPRIME1" on the Reuters Monitor Money Rates Service,
or any successor service, or any other page that may replace the USPRIME1
page on that service or any successor service for the purpose of
displaying prime rates or base lending rates of major United States
banks.
. If fewer than four rates as described in the preceding bullet point
appear on the Reuters Screen USPRIME1 Page for that interest
determination date, the prime rate with respect to that interest reset
date will be the arithmetic mean of the prime rates or base lending
rates, quoted on the basis of the actual
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number of days in the year divided by a 360-day year, as of the close of
business on that interest determination date by four major money center
banks in The City of New York selected by the calculation agent. These
banks may include affiliates of the agents named on the cover of this
prospectus supplement.
. If fewer than four quotations as described in the preceding bullet point
are so provided, then the prime rate will be the arithmetic mean of four
prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on that interest
determination date as furnished in The City of New York by the major
money center banks, if any, that have provided quotations of this kind
and by a reasonable number of substitute banks or trust companies
organized and doing business under the laws of the United States or of
any state of the United States, which have equity capital of at least
$500 million and are supervised by federal or state authority and are
selected by the calculation agent to provide this rate or rates. These
banks or trust companies may include affiliates of the agents named on
the cover of this prospectus supplement.
. 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 that
interest determination date or, if the interest determination date is the
first interest determination date, the initial interest rate.
LIBOR notes. LIBOR notes will bear interest at the interest rates,
calculated with reference to the London interbank offered rate, which we call
"LIBOR", and the spread or spread multiplier, if any, and will be payable on
the dates, specified on the face of the LIBOR note and in the applicable
pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, the
calculation agent will determine LIBOR with respect to any interest reset date
in accordance with the following provisions:
With respect to any interest determination date, LIBOR will be:
. If "LIBOR Reuters" is specified in the applicable pricing supplement, the
arithmetic mean of the offered rates, or the offered rate if the
designated LIBOR page, as defined in the second paragraph after this one,
by its terms provides only for a single rate, for deposits in the index
currency, as defined in the third paragraph after this one, having the
index maturity specified in the pricing supplement, commencing on the
applicable interest reset date, that appear or appears on the designated
LIBOR page as of 11:00 A.M., London time, on that interest determination
date, or
. If "LIBOR Telerate" is specified in the applicable pricing supplement or
if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method of calculating LIBOR, the
rate for deposits in the index currency having the index maturity
specified in the pricing supplement, commencing on the relevant interest
reset date, that appears on the designated LIBOR page as of 11:00 A.M.,
London time, on that interest determination date.
. If fewer than two offered rates as described in the preceding bullet
point appear, or if no rate of this kind appears, as applicable, LIBOR on
that interest determination date will be determined in accordance with
the provisions described below.
With respect to an interest determination date on which fewer than two
offered rates appear, or no rate appears, as the case may be, on the
designated LIBOR page as described above:
. The calculation agent will request the principal London office of each of
four major reference banks in the London interbank market, as selected by
the calculation agent, to provide the calculation agent with its offered
quotation for deposits in the index currency for the period of the index
maturity designated in the applicable pricing supplement, commencing on
the interest reset date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on that interest determination
date and in a principal amount that is representative for a single
transaction in the index currency in that market at that time.
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. If at least two quotations as described in the preceding bullet point are
provided, LIBOR determined on that interest determination date will be
the arithmetic mean of those quotations.
. If fewer than two quotations are so provided, LIBOR determined on that
interest determination date will be the arithmetic mean of the rates
quoted at approximately 11:00 A.M. in the applicable principal financial
center, as defined in the third paragraph after this one, on that
interest determination date by three major banks in that principal
financial center selected by the calculation agent for loans in the index
currency to leading European banks, having the index maturity designated
in the applicable pricing supplement and in a principal amount that is
representative for a single transaction in the index currency in that
market at that time. These banks may include affiliates of the agents
named on the cover of this prospectus supplement.
. If the banks so selected by the calculation agent are not quoting as
mentioned in the preceding bullet point, LIBOR determined on that
interest determination date will be LIBOR in effect on that interest
determination date or, if that interest determination date is the first
interest determination date, the initial interest rate.
When we say "designated LIBOR page", we mean:
. if "LIBOR Reuters" is specified in the applicable pricing supplement, the
display on the Reuters Monitor Money Rates Service on the page specified
in the pricing supplement, or any successor service or page, for the
purpose of displaying the London interbank rates of major banks for the
applicable index currency; or
. if "LIBOR Telerate" is specified in the applicable pricing supplement or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the
display on the Bridge Telerate, Inc., or any successor service, on page
3750 if the U.S. dollar is the index currency or with respect to any
other index currency, on the page specified in the pricing supplement, or
any successor service or page, for the purpose of displaying the London
interbank rates of major banks for the applicable index currency.
When we say "index currency", we mean the currency, including composite
currencies, specified in the applicable pricing supplement as the currency for
which LIBOR will be calculated. If no currency is specified in the applicable
pricing supplement, the index currency will be United States dollars.
When we say "principal financial center", we mean the capital city of the
country issuing the currency or composite currency in which any payment on the
relevant notes is to be made or, solely with respect to the calculation of
LIBOR, the index currency. However, the principal financial center will be The
City of New York with respect to U.S. dollars, Sydney with respect to
Australian dollars, Toronto with respect to Canadian dollars, Frankfurt with
respect to Deutsche marks, Milan with respect to Italian lira, Zurich with
respect to Swiss francs, Amsterdam with respect to Dutch guilders, London with
respect to Portuguese escudos, Johannesburg with respect to South African rand
and Luxembourg with respect to euros.
Treasury rate notes. Treasury rate notes will bear interest at the interest
rates, calculated with reference to the treasury rate and the spread or spread
multiplier, if any, and will be payable on the dates specified on the face of
the treasury rate note and in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, treasury
rate means, with respect to any interest determination date, the rate from the
most recent auction of direct obligations of the United States, which we call
"treasury bills", having the index maturity specified in the pricing
supplement as that rate appears on either the Telerate Page 56 or the Telerate
Page 57 under the heading "AVGE INVEST YIELD".
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If the treasury rate cannot be determined as described above, then that
rate will be determined in accordance with the following procedures:
. If that rate is not so published by 3:00 P.M., New York City time, on the
relevant calculation date, the auction average rate, expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis, for that auction as otherwise announced by the
United States Department of the Treasury.
. If the results of that auction of treasury bills having the specified
index maturity are not published or reported as provided above by 3:00
P.M., New York City time, on that calculation date, or if no auction of
treasury bills having the specified index maturity is held during that
week, then the treasury rate will be calculated by the calculation agent
and will be a yield to maturity, expressed as a bond equivalent, on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis, of the arithmetic mean of the secondary market bid rates as of
approximately 3:30 P.M., New York City time, on that interest
determination date, of three leading primary United States government
securities dealers in The City of New York selected by the calculation
agent for the issue of treasury bills with a remaining maturity closest
to the specified index maturity. These dealers may include one or more of
the agents named on the cover of this prospectus supplement or their
affiliates.
. If fewer than three dealers selected as described in the preceding bullet
point by the calculation agent are quoting as mentioned above, the
treasury rate with respect to that interest reset date will be the
treasury rate in effect on that interest determination date or, if that
interest determination date is the first interest determination date, the
initial interest rate.
CD rate notes. CD rate notes will bear interest at the interest rates,
calculated with reference to the CD rate and the spread or spread multiplier,
if any, and will be payable on the dates, specified on the face of the CD rate
note and in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, CD rate
means, with respect to any interest reset date, the rate for the relevant
interest determination date for negotiable certificates of deposit having the
specified index maturity as published in H.15(519) under the heading "CDs
(Secondary Market)", or any successor heading.
If the CD rate cannot be determined as described above, then that rate will
be determined in accordance with the following procedures:
. If that rate is not published before 3:00 P.M., New York City time, on
the relevant calculation date, then the CD rate with respect to the
relevant interest reset date will be the rate on that interest
determination date for negotiable U.S. dollar certificates of deposit
having the specified index maturity as published in H.15 daily update
under the heading "CDs (secondary market)", or any successor heading.
. If by 3:00 P.M., New York City time, on that calculation date that rate
is not published in either H.15(519) or H.15 daily update, the CD rate
with respect to that interest reset date will be calculated by the
calculation agent and will be the arithmetic mean of the secondary market
offered rates, as of 10:00 A.M., New York City time, on that interest
determination date, of three leading nonbank dealers of negotiable U.S.
dollar certificates of deposit in The City of New York selected by the
calculation agent for negotiable certificates of deposit of major United
States money center banks of the highest credit standing, in the market
for negotiable U.S. dollar certificates of deposit, with a remaining
maturity closest to the specified index maturity in an amount that is
representative for a single transaction in that market at that time.
These dealers may include one or more of the agents named on the cover of
this prospectus supplement or their affiliates.
. If fewer than three dealers selected as mentioned above by the
calculation agent are quoting as mentioned in the preceding bullet point,
the CD rate with respect to that interest reset date will be the CD rate
in effect on that interest determination date or, if that interest
determination date is the first interest determination date, the initial
interest rate.
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Federal funds rate notes. Federal funds rate notes will bear interest at
the interest rates, calculated with reference to the federal funds rate and
the spread or spread multiplier, if any, and will be payable on the dates,
specified on the face of the federal funds rate note and in the applicable
pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, federal
funds rate means, with respect to any interest reset date, the rate on the
relevant interest determination date for federal funds having the index
maturity specified in the applicable pricing supplement as published in
H.15(519) under the heading "Federal Funds (Effective)", or any successor
heading.
If the federal funds rate cannot be determined as described above, then
that rate will be determined in accordance with the following procedures:
. If that rate is not published by 9:00 A.M., New York City time, on the
relevant calculation date, then the federal funds rate with respect to
that interest reset date will be the rate on that interest determination
date as published in H.15 daily update under the heading "Federal funds
(effective)", or any successor heading.
. If by 3:00 P.M., New York City time, on that calculation date that rate
is not published in either H.15(519) or H.15 daily update, the federal
funds rate with respect to that interest reset date will be calculated by
the calculation agent and will be the arithmetic mean of the rates as of
9:00 A.M., New York City time, on that interest determination date for
the last transaction in overnight federal funds arranged by three leading
brokers of federal funds transactions in The City of New York selected by
the calculation agent . These brokers may include one or more of the
agents named on the cover of this prospectus supplement or their
affiliates.
. If fewer than three brokers selected as mentioned above by the
calculation agent are quoting as mentioned in the preceding bullet point,
the federal funds rate with respect to that interest reset date will be
the federal funds rate in effect on that interest determination date or,
if that interest determination date is the first interest determination
date, the initial interest rate.
CMT rate notes. CMT rate notes will bear interest at the interest rates,
calculated with reference to the CMT rate and the spread and/or spread
multiplier, if any, and will be payable on the dates specified on the face of
the CMT rate note and in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, CMT rate
means, with respect to any interest reset date, the rate displayed on the
"designated CMT Telerate page", as defined in the second paragraph after this
one, under the caption ". . . Treasury Constant Maturities . . . Federal
Reserve Board Release H.15 . . . Mondays Approximately 3:45 p.m.", or any
successor caption, under the column for the "designated CMT maturity index",
as defined in the third paragraph after this one, for:
. if the designated CMT Telerate page is 7055, the rate on the related
interest determination date; and
. if the designated CMT Telerate page is 7052, the week or the month, as
specified in the applicable pricing supplement, ended immediately
preceding the week or month, as applicable, in which the related interest
determination date occurs.
If the CMT rate cannot be determined as described above, then that rate
will be determined in accordance with the following procedures:
. If that rate is no longer displayed on the relevant page, or is not
displayed before 3:00 P.M., New York City time, on the relevant
calculation date, then the CMT rate with respect to that interest
determination date will be that treasury constant maturity rate for the
designated CMT maturity index as published in the relevant H.15(519).
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. If that rate is no longer published, or is not published by 3:00 P.M.,
New York City time, on that calculation date, then the CMT rate for that
interest determination date will be that treasury constant maturity rate
for the designated CMT maturity index, or other United States Treasury
rate for the designated CMT maturity index, for the interest
determination date with respect to that interest reset date as may then
be published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that the
calculation agent determines to be comparable to the rate formerly
displayed on the designated CMT Telerate page and published in the
relevant H.15(519).
. If that information is not provided by 3:00 P.M., New York City time, on
the related calculation date, then the CMT rate for the interest
determination date will be calculated by the calculation agent and will
be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 P.M., New York
City time, on the interest determination date reported, according to
their written records, by three leading primary United States government
securities dealers, which we call "reference dealers", in The City of New
York selected by the calculation agent for the most recently issued
direct noncallable fixed rate obligations of the United States, which we
call "treasury notes", with an original maturity of approximately the
designated CMT maturity index and a remaining term to maturity of not
less than the designated CMT maturity index minus one year.
. If the calculation agent cannot obtain three treasury notes quotations as
described in the preceding bullet point, the CMT rate for that interest
determination date will be calculated by the calculation agent and will
be a yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 P.M., New York City
time, on the interest determination date of three reference dealers in
The City of New York, for treasury notes with an original maturity of the
number of years that is the next highest to the designated CMT maturity
index and a remaining term to maturity closest to the designated CMT
maturity index and in an amount of at least $100,000,000.
. The three reference dealers referred to in the two preceding bullet
points will be selected from five reference dealers in The City of New
York selected by the calculation agent and eliminating the highest
quotation, or, if there is equality, one of the highest, and the lowest
quotation, or, if there is equality, one of the lowest. The reference
dealers may include one or more of the agents named on the cover of this
prospectus supplement or their affiliates.
. If three or four, and not five, of the reference dealers are quoting as
described above, then the CMT rate will be based on the arithmetic mean
of the offer prices obtained and neither the highest nor the lowest of
the quotes will be eliminated.
. If fewer than three reference dealers selected by the calculation agent
are quoting as described above, the CMT rate will be the CMT rate in
effect on that interest determination date or, if the interest
determination date is the first interest determination date, the initial
interest rate.
. If two treasury notes with an original maturity as described above have
remaining terms to maturity equally close to the designated CMT maturity
index, the quotes for the treasury note with the shorter remaining term
to maturity will be used.
When we say "designated CMT Telerate page", we mean the display on the Dow
Jones Telerate Service, or any successor service, on the page designated in
the applicable pricing supplement for the purpose of displaying treasury
constant maturities as reported in H.15(519), or any successor page. If no
page of this kind is specified in the applicable pricing supplement, the
designated CMT Telerate page will be 7052, for the most recent week.
When we say "designated CMT maturity index", we mean the original period to
maturity of the U.S. Treasury securities specified in the applicable pricing
supplement with respect to which the CMT rate will be calculated, which will
be either 1, 2, 3, 5, 7, 10, 20 or 30 years. If no maturity is specified in
the applicable pricing supplement, the designated CMT maturity index will be
two years.
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PAYMENT OF PRINCIPAL AND INTEREST
In addition to the descriptions in this subsection, you should read
carefully the subsection entitled "Description of Debt Securities--Book-Entry
System" in the prospectus for information about general procedures that we may
follow in making payments to you.
Interest and, in the case of amortizing notes, principal will be payable to
the registered holder at the close of business on the regular record date next
preceding each interest payment date. However, interest payable at maturity,
redemption or repayment will be payable to the registered holder to whom
principal will be payable. In the case of a global note, that registered
holder will be the depositary or its nominee. The first payment of interest
and in the case of amortizing notes, principal, on any note originally issued
between a regular record date and an interest payment date will be made on the
interest payment date following the next succeeding regular record date to the
registered owner on that next succeeding regular record date.
Unless otherwise indicated in the applicable pricing supplement, the
"regular record date" means:
. with respect to any floating rate note, the date 15 calendar days before
each interest payment date, whether or not that date is a market day, and
. with respect to any fixed rate note, the January 15 or July 15 next
preceding each interest payment date, whether or not that date is a
market day.
Payment dates
Interest payment dates. Unless otherwise indicated in the applicable
pricing supplement and except as provided below, interest will be payable on
the dates specified below, which we call "interest payment dates":
. in the case of floating rate notes that reset daily, weekly or monthly,
on the third Wednesday of each month or on the third Wednesday of March,
June, September and December of each year, as indicated in the applicable
pricing supplement;
. in the case of floating rate notes that reset quarterly, on the third
Wednesday of March, June, September and December of each year;
. in the case of floating rate notes that reset semi-annually, on the third
Wednesday of the two months of each year specified in the applicable
pricing supplement; and
. in the case of floating rate notes that reset annually, on the third
Wednesday of the month specified in the applicable pricing supplement.
In each case, interest will also be payable at maturity, redemption or
repayment.
Payments of interest on any fixed rate note or floating rate note with
respect to any interest payment date will include interest accrued to but
excluding that interest payment date or date of maturity, redemption or
repayment, as the case may be.
Adjustments to payment dates. The following are some special cases where,
absent the following adjustments, a payment date would fall on a day that is
not a market day or business day:
. If an interest payment date, other than at maturity, redemption or
repayment, with respect to any floating rate note would otherwise fall on
a day that is not a market day for that note, that interest payment date
will be the next succeeding market day for the note and interest will
accrue to that market day, or, in the case of a LIBOR note, if that day
falls in the next calendar month, the next preceding market day.
We have made efforts to identify any Year 2000 compliance problems in our
existing systems, and to make available to our customers who have purchased
such systems software revisions or plug-ins correcting any Year
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2000 problems. Nevertheless, these customers may assert claims against us
alleging that our systems should have been Year 2000 compliant at the time of
purchase, which could result in costly litigation and divert our management's
attention. We have agreed to indemnify our customers in some circumstances
against liability arising from Year 2000-related defects in our systems.
. If the maturity date, or date of redemption or repayment, of any floating
rate note falls on a day that is not a market day, the required payment
of principal, premium, if any, and interest will be made on the next
succeeding market day, or, in the case of a LIBOR note, if that day falls
in the next calendar month, the next preceding market day, as if made on
the date the payment was due. No interest will accrue on the payment for
the period from and after the maturity date, or date of redemption or
repayment, to the date of the payment on the next succeeding market day.
. If any interest payment date or the maturity date, or the date of
redemption or repayment, of a fixed rate note falls on a day that is not
a business day, the required payment of principal, premium, if any,
and/or interest will be made on the next succeeding business day as if
made on the date the payment was due. No interest will accrue on the
payment for the period from and after the interest payment date or the
maturity date, or date of redemption or repayment, as the case may be, to
the date of the payment on the next succeeding business day.
How we will make payments on global notes
We will make payments on a global note in accordance with the applicable
policies of the depositary as in effect from time to time. Currently, the
depositary is The Depository Trust Company, New York, New York, which we call
"DTC". Under the depositary's policies, we will pay directly to the depositary
or its nominee, and not to any indirect beneficial owners who own beneficial
interests in the global note. We will do this by making the funds available to
the trustee on any interest payment date or at maturity or upon a redemption
or repayment date. As soon as possible after that, the trustee will make the
payments to the depositary, and the depositary will allocate and make the
payments to the beneficial owners of the notes in accordance with its existing
procedures. An indirect beneficial owner's right to receive those payments
will be governed by the rules and practices of the depositary and the banks or
brokers through which the indirect beneficial owner holds a beneficial
interest in the note. Neither we nor the trustee have any responsibility or
liability for payments by the depositary or the banks or brokers.
Street name and other indirect beneficial owners should consult their banks
or brokers for information on how they will receive payments.
We understand that, under DTC's current practice, DTC elects to have all
payments on a global note for which it is the depositary made in U.S. dollars,
regardless of the specified currency for the payment, unless notified by a
bank or broker participating in its book-entry system, through which an
indirect beneficial owner's beneficial interest in the global note may be
held, that it elects to receive payment in the specified currency.
Unless otherwise specified in the applicable pricing supplement, an
indirect beneficial owner of a book-entry note denominated in a currency other
than U.S. dollars may elect to receive all or part of the payments on that
note in that other currency, provided that the following steps have been
properly followed and completed by all parties involved:
. The indirect beneficial owner must notify the bank or broker, through
which its interest is held, of its election. If the election is with
respect to any interest payment, the notification must be made on or
before the applicable record date. If the election is with respect to any
payment of principal or premium, the notification must be made on or
before the 15th day before the maturity, redemption or repayment date, as
the case may be.
. The bank or broker must then notify the depositary of the indirect
beneficial owner's election on or before the third business day after the
record date or after that 15th day.
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. The depositary must then notify the trustee of the election on or before
the fifth business day after the record date or that 15th day.
In addition, in the case of imposition of exchange controls or any other
circumstances beyond our control, we may pay in U.S. dollars the payments due
in other currencies. See the subsection entitled "--Currency exchange
controls" on the next page for information about procedures applicable to
payments under these circumstances.
Indirect beneficial owners who own beneficial interests in a global note
denominated in a currency other than U.S. dollars should consult their banks
or brokers for information on how to request payment in the specified
currency.
How we will make payments on certificated notes
Payments due in U.S. dollars. If you hold a certificated note, and the
interest, principal or any premium due on the note at maturity or upon
redemption or repayment is due in U.S. dollars, we will make that payment to
you in immediately available funds when you surrender the note at the
corporate trust office of the trustee in Atlanta, Georgia. You must present
the note to the paying agent in time for the paying agent to make any payments
in accordance with its normal procedures.
If an interest payment due in U.S. dollars on a certificated note is due
other than at maturity or upon earlier redemption or repayment, we will make
the payment by check mailed to the address of the person entitled to the
payment as it appears in the security register. Alternatively, we may wire
transfer the payment to an account as may have been appropriately designated
by that person.
Payments due in other currencies. Unless otherwise specified in the
applicable pricing supplement, payments of interest with respect to any
certificated note to be made in a specified currency other than U.S. dollars
will be made by check mailed to the address of the holder of the note as that
address appears in our security register. All checks payable in a specified
currency other than U.S. dollars will be drawn on a bank located outside the
United States. Payments at maturity of principal and premium, if any, with
respect to any certificated note to be made in a specified currency other than
U.S. dollars will be made by wire transfer in immediately available funds to
any account requested by the holder, provided that the account is with a bank
located in the country issuing the specified currency, or with respect to
notes denominated in euros, in the City of Brussels. To designate an account
for wire payment, the holder must give the paying agent appropriate wire
instructions at least 15 days before maturity. In the case of payment of
principal, premium, if any, and any interest due at maturity, you must
surrender the certificated note to the paying agent in time for the paying
agent to make the payments in accordance with its normal procedures.
You must designate the account by filing the appropriate information with
the trustee at its corporate trust office in Atlanta, Georgia. Any
instructions, once properly given, will remain in effect unless and until you
properly give new instructions in the manner described above.
We will pay any administrative costs imposed by banks for making payments
by wire transfer, but holders of the notes must bear any tax, assessment or
governmental charge imposed upon the payments.
Payments due with respect to notes denominated in other currencies will be
made in U.S. dollars unless the holder requests otherwise
We are required to pay interest, principal and premium, if any, on notes in
the specified currency of the notes. Unless otherwise specified in the
applicable pricing supplement, however, any payment due on a note denominated
in a specified currency other than U.S. dollars will be converted by the
exchange rate agent specified in the applicable pricing supplement to U.S.
dollars for payment to holders.
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Conversion to U.S. dollars. When we are required to make payments to a
holder in U.S. dollars of an amount due from us in another currency, either on
a global note or a certificated note as described above, we will determine the
U.S. dollar amount the holder receives as follows. The exchange rate agent
will request currency bid quotations from three recognized foreign exchange
dealers in The City of New York on the second business day before the payment
due date, for purchase by the quoting dealer of the specified currency for
U.S. dollars for settlement on the relevant payment date. One of these three
dealers may be the exchange rate agent or an agent listed on the cover of this
prospectus supplement. The currency bid quotations will be requested on an
aggregate basis, for all holders scheduled to receive U.S. dollar payments of
amounts payable on the same date in the same specified currency. Each quoting
dealer must commit to executing a contract. The U.S. dollar amount the holder
receives will be based on the highest currency bid quotation received by the
exchange rate agent as of 11:00 A.M, New York City time, on the date of
quotation. If the exchange rate agent determines that three currency bid
quotations are not available on the second business day, the payment will be
made in the specified currency. A holder that receives payment in U.S. dollars
will bear all associated currency exchange costs, which will be deducted from
the payment.
Currency exchange controls. If we are obligated to make any payment in a
specified currency other than U.S. dollars, and the specified currency is not
available due to the imposition of exchange controls or other circumstances
beyond our control, we will be entitled to satisfy our obligation by making
the payment in U.S. dollars on the basis of the most recently available noon
buying rate in The City of New York for cable transfers of the specified
currency. The foregoing will apply to any note, whether in global or
certificated form, and to any payment, including a payment at maturity. Any
payment made under the circumstances and in a manner described above will not
constitute an event of default under the indenture.
All determinations referred to above made by the exchange rate agent will
be at its sole discretion, except to the extent expressly provided in this
prospectus supplement or in the applicable pricing supplement that any
determination requires our approval. In the absence of manifest error, the
exchange rate agent's determination will be conclusive for all purposes and
binding on holders of the notes and us, and the exchange rate agent will have
no liability for its determinations.
BOOK-ENTRY SYSTEM
Unless we specify differently in the pricing supplement relating to your
note, your note will be issued in book-entry form and represented by a global
note or notes. You should read the subsection "Description of Debt
Securities--Book-Entry System" in the prospectus for general information about
this type of arrangement and your rights under this type of arrangement.
Upon issuance, all book-entry notes of the same series bearing interest, if
any, at the same rate or under the same formula, having the same date of
issuance, redemption or repayment provisions, if any, specified currency,
stated maturity and other terms will be represented by a single global note.
Each global note representing book-entry notes will be deposited with, or on
behalf of, the depositary, and will be registered in the name of the
depositary or its nominee.
Upon the issuance of a global note, the depositary for the global note will
credit the accounts of persons held with it with the respective principal or
face amount of the book-entry notes represented by the global note. These
accounts will be designated initially by the agents through which the notes
were sold, or by us if the notes are offered and sold directly by us.
Ownership of beneficial interests in a global note will be limited to those
financial institutions that have accounts with the depositary or persons that
may hold interests through them. Ownership of beneficial interests by
participants in a global note will be shown on records maintained by the
depositary or records maintained by those participants, and the transfer of
that ownership interest will be effected only through those records.
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Payment of principal of and any premium and interest on book-entry notes
represented by any global note will be made to the depositary or its nominee,
as the sole registered owner and the sole holder of the notes. Neither we, the
trustee nor any of our agents will have any responsibility or liability for
any aspect of the depositary's records relating to beneficial ownership
interests in the global notes, for payments made on account of these
beneficial ownership interests or for maintaining, supervising or reviewing
any of the depositary's records relating to these beneficial ownership
interests.
The depositary has advised us that upon receipt of any payment on any
global note, the depositary will immediately credit, on its book-entry
registration and transfer system, the accounts of the participants with
payments in amounts proportionate to their respective beneficial interests in
the principal or face amount of the global note as shown on the records of the
depositary. Payments by these participants to owners of beneficial interests
in a global note held through the participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for customer accounts registered in street name, and will be the sole
responsibility of these participants.
No global note may be exchanged in whole or in part for notes registered in
the name of any person other than the depositary for the global note or any
nominee of the depositary, and no transfer of a global note in whole or in
part may be registered in the name of any person other than the depositary or
any nominee of the depositary, unless:
. the depositary has notified us that it is unwilling or unable to continue
as depositary for the global note or has ceased to be a clearing agency
registered under the Securities Exchange Act of 1934,
. if we in our sole discretion determine under the indenture that the
global note will be so exchangeable or transferable,
. any event will have occurred and be continuing which, after notice or
lapse of time or both, would become an event of default with respect to
the securities of the series of which the global note is a part, or
. there will exist the circumstances, if any, in addition to or in lieu of
those described above that may be described in the applicable pricing
supplement.
Any global note that is exchangeable as described in the preceding
paragraph will be exchangeable for certificated notes issuable in
denominations of $1,000 and integral multiples of $1,000 and registered in the
names that the depositary holding the global note will direct. These
certificated notes will be registered in the names of the owners of the
beneficial interests as identified by the depositary's relevant participants.
Except as described above, the global note is not exchangeable, except for a
global note of like denomination to be registered in the name of the
depositary or its nominee.
The laws of some jurisdictions require that some kinds of purchasers of
securities take physical delivery of the securities in definitive form. The
limits described above and laws of the kind described in the preceding
sentence may impair the ability to transfer beneficial interests in a global
note.
The indenture provides that the holder of the notes, which will be the
depositary in the case of book-entry notes, may grant proxies and otherwise
authorize participants to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action which a holder is entitled
to give or take under the indenture. We understand that under existing
industry practices, if we request any action of holders or if an owner of a
beneficial interest in a global note desires to give or take any action which
a holder is entitled to give or take under the indenture, the depositary would
authorize the participants holding the relevant beneficial interests to give
or take the action, and they would authorize beneficial owners owning through
them to give or take the action or would otherwise act upon the instructions
of beneficial owners owning through them.
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About DTC
DTC has advised us that DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the Securities Exchange Act of 1934. The
depositary was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in these securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. The depositary's participants include
securities brokers and dealers, including the agents named on the cover of
this prospectus supplement, banks, trust companies, clearing corporations, and
other organizations. Some of the participants and/or their representatives own
the depositary. Access to the depositary'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.
RISKS RELATING TO INDEXED NOTES
In addition to potential foreign currency risks as described below under
"Foreign currency risks", an investment in indexed notes presents significant
risks not associated with other types of securities. If we issue indexed
notes, we will describe relevant risks associated with any particular indexed
note more fully in the applicable pricing supplement. Indexed notes may
present a high level of risk, and you may lose your entire investment if you
purchase indexed notes.
The treatment of indexed notes for United States federal income tax
purposes is often unclear due to the absence of any authority specifically
addressing the issues presented by any particular indexed note. Accordingly,
you should, in general, be capable of independently evaluating the federal
income tax consequences applicable in your particular circumstances of
purchasing an indexed note.
Loss of principal or interest
The principal amount of an indexed note payable at maturity, and/or the
amount of interest payable on an interest payment date, will be determined by
reference to one or more of the following indices:
. currencies, including baskets of currencies;
. commodities, including baskets of commodities;
. securities, including baskets of securities; or
. any other index.
The direction and magnitude of the change in the value of the relevant
index will determine either the principal amount of an indexed note payable at
maturity or the amount of interest payable on an interest payment date or
both. The terms of a particular indexed note may or may not include a
guaranteed return of a percentage of the face amount at maturity or a minimum
interest rate. Accordingly, if you invest in an indexed note, you may lose all
or a portion of the principal invested in an indexed note and may receive no
interest on the note.
Additionally, if the formula used to determine the amount of principal and
any premium or any interest payable with respect to the notes contains a
multiple or leverage factor, the effect of any change in the applicable
currency, commodity or interest rate index will be increased. The historical
experience of the relevant currencies, commodities or interest rate indices
should not be taken as an indication of future performance of these
currencies, commodities or interest rate indices during the term of any note.
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Volatility
Some currencies, commodities and securities indices are highly volatile.
The expected principal amount payable at maturity of an indexed note based on
a volatile index or the interest rate on an indexed note of this kind may vary
substantially from time to time. Because the principal amount payable at the
maturity of an indexed note or the interest payable on the note is generally
calculated based on the value of the relevant index on a specified date or
over a limited period of time, volatility in the index increases the risk that
the return on the indexed note may be adversely affected by a fluctuation in
the level of the relevant index.
The volatility of an index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets. Any of these could adversely affect the value of an indexed
note.
Availability and composition of indices
Some indices reference several different currencies, commodities,
securities or other financial instruments. The compiler of an index of this
kind typically reserves the right to alter the composition of the index and
the manner in which the value of the index is calculated. An alteration of
this kind may result in a decrease in the value of or return on an indexed
note which is linked to that index.
An index may become unavailable due to various factors including war,
natural disasters, cessation of publication of the index, or suspension of or
disruption in trading in the currency or currencies, commodity or commodities,
security or securities or other financial instrument or instruments comprising
or underlying the index. If an index becomes unavailable, the determination of
principal of or interest on an indexed note may be delayed or an alternative
method may be used to determine the value of the unavailable index.
Alternative methods of valuation are generally intended to produce a value
similar to the value resulting from reference to the relevant index. However,
it is unlikely that the alternative methods of valuation will produce values
identical to those which would be produced were the relevant index to be used.
An alternative method of valuation may result in a decrease in the value of or
return on an indexed note.
Indexed notes may be linked to indices which are not commonly utilized or
have been recently developed. The lack of a trading history may make it
difficult to anticipate the volatility or other risks applicable to an indexed
note of this kind. In addition, there may be less trading in these indices or
the instruments underlying these indices, which could increase the volatility
of these indices and decrease the value of or return on indexed notes relating
to these indices.
Credit ratings
The credit ratings assigned to our medium-term note program are a
reflection of our credit status and do not reflect the impact of the factors
discussed above on the market value of indexed notes. Accordingly, you should
consult your own financial and legal advisors as to the risks entailed by an
investment in indexed notes.
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FOREIGN CURRENCY RISKS
With respect to any note denominated in other than U.S. dollars, the
applicable pricing supplement will include a currency supplement on the
applicable specified currency. The currency supplement will include
information with respect to any applicable current foreign exchange controls.
The pricing supplement, the currency supplement and the relevant historical
exchange rates for the specified currency will constitute a part of this
prospectus supplement. This information concerning exchange rates is furnished
as a matter of information only. You should not regard this information as
indicative of the range of or trends in fluctuations in currency exchange
rates that may occur in the future.
This prospectus supplement and the attached prospectus and pricing
supplement do not describe all the risks of an investment in the notes
denominated in other than U.S. dollars. You should consult your own financial
and legal advisors about the risks of an investment in the notes denominated
in a currency, including any composite currency, other than U.S. dollars. If
you are unsophisticated with respect to foreign currency transactions, these
notes are not an appropriate investment for you.
The information in this prospectus supplement applies to you only if you
are a United States resident. We disclaim any responsibility to advise
prospective purchasers who are residents of countries other than the United
States, with respect to any matters that may affect the purchase, holding or
receipt of payments of principal of and interest on the notes. If you are not
a United States resident, you should consult your own financial and legal
advisors with regard to these matters.
Exchange rates and exchange controls
If you invest in notes that are denominated in other than U.S. dollars,
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars may apply to your investment. These risks
include, for example, the possibility of significant changes in rates of
exchange between the U.S. dollar and the various foreign currencies or
composite currencies and the possibility of the imposition or modification of
foreign exchange controls by either the U.S. or foreign governments. These
risks depend on economic and political events over which we have no control,
including economic and political events and the supply of and demand for the
relevant currencies. In recent years, rates of exchange between the U.S.
dollar and some foreign currencies have been highly volatile, and volatility
of this kind may be expected in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations in the rate that may occur during the term of any
note. Depreciation of the specified currency other than U.S. dollars against
the U.S. dollar would result in a decrease in the effective yield of the note
below its coupon rate, and could result in a loss to you on a U.S. dollar
basis.
Governments have imposed from time to time and may in the future impose
exchange controls which could affect exchange rates as well as the
availability of a specified foreign currency at a note's maturity. Even if
there are no actual exchange controls, the specified currency for any
particular note might not be available at the note's maturity. In that event,
we will repay in U.S. dollars on the basis of the most recently available noon
buying rate in The City of New York for cable transfers for the specified
currency. See "Description of notes we may offer--Payment of principal and
interest" for a discussion of these payment procedures.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. Accordingly, payments
on notes made in a specified currency other than U.S. dollars are likely to be
made from an account with a bank located in the country issuing the specified
currency. For notes denominated in euros, these payments will be made from an
euro account. See "Description of notes we may offer--Payment of principal and
interest" for a discussion of these payment procedures.
Unless otherwise specified in the applicable pricing supplement, notes
denominated in other than U.S. dollars will not be sold in, or to residents
of, the country issuing the specified currency in which particular notes are
denominated.
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Governing law and judgments
The notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on the notes were commenced in a
court in the United States, it is likely that the court would grant judgment
relating to the notes only in U.S. dollars. It is not clear, however, whether,
in granting judgment, the rate of conversion into U.S. dollars would be
determined with reference to the date of default, the date judgment is
rendered or some other date. New York statutory law provides, however, that a
court will render a judgment in the foreign currency of the underlying
obligations and that the judgment will be converted into U.S. dollars at the
rate of exchange prevailing on the date of the entry of the judgment.
UNITED STATES FEDERAL TAXATION
In the opinion of Davis Polk & Wardwell, tax counsel to the Company, the
following summary describes the material United States federal income tax
consequences of ownership and disposition of the notes to an initial holder
purchasing a note at its "Issue Price," that is, the first price to the public
at which a substantial amount of the notes in an issue is sold (excluding
sales to bond houses, brokers or similar persons or organizations acting in
the capacity of underwriters, placement agents or wholesalers). This summary
is based on the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"), administrative pronouncements, judicial decisions and Treasury
Regulations in effect as of the date hereof, including regulations (the "OID
Regulations") concerning the treatment of debt instruments issued with
original issue discount ("OID"), and interpretations of the foregoing, changes
to any of which subsequent to the date of this Prospectus Supplement may
affect the tax consequences described herein, possibly with retroactive
effect. This summary discusses only notes held as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to holders in light of their particular
circumstances or to holders subject to special rules, such as certain
financial institutions, insurance companies, tax-exempt organizations, dealers
in securities or foreign currencies, U.S. Holders (as defined below) whose
functional currency (as defined in Code Section 985) is not the U.S. dollar,
persons holding notes in connection with a hedging transaction, "straddle,"
conversion transaction or other integrated transaction, traders in securities
that elect to mark to market, holders liable for alternative minimum tax or
persons who have ceased to be United States citizens or to be taxed as
resident aliens. Moreover, the summary deals only with notes that are due to
mature 30 years or less from the date on which they are issued. The United
States federal income tax consequences of ownership of notes that are due to
mature more than 30 years from their date of issue will be discussed in an
applicable Pricing Supplement. Prospective investors should consult their tax
advisers with regard to the application of United States federal tax laws to
their particular situations, as well as any tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction.
"U.S. Holder" means a beneficial owner of a note that is, for United States
federal income tax purposes, (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision thereof or
(iii) an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
"Non-U.S. Holder" means a beneficial owner of a note that is, for United
States federal income tax purposes, (i) a nonresident alien individual, (ii) a
foreign corporation, (iii) a nonresident alien fiduciary of a foreign estate
or trust or (iv) a foreign partnership one or more of the members of which is
a nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.
U.S. Holders
Payments of Interest.
Interest paid on a note will generally be taxable to a U.S. Holder as
ordinary interest income at the time it accrues or is received in accordance
with the U.S. Holder's method of accounting for federal income tax
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purposes. Under the OID Regulations, all payments of interest on a note that
matures one year or less from its date of issuance will be taxed in the manner
described below under "--Original Issue Discount." Special rules governing the
treatment of interest paid with respect to Original Issue Discount Notes (as
defined below), certain Floating Rate Notes and Indexed Notes and Foreign
Currency Notes (as defined below), are described under "--Original Issue
Discount" and "--Foreign Currency Notes" below.
Original Issue Discount.
A note that has an Issue Price that is less than the note's stated
redemption price at maturity will generally be considered to have been issued
at an original issue discount for federal income tax purposes (a "Discount
Note"). The stated redemption price at maturity of a note will equal the sum
of all payments required with respect to the note other than payments of
"qualified stated interest." "Qualified stated interest" is stated interest
unconditionally payable as a series of payments in cash or property (other
than debt instruments of the Issuer) at least annually during the entire term
of the note and determined by reference to the outstanding principal balance
of the note multiplied by a single fixed rate of interest. In addition, stated
interest on Floating Rate Notes providing for one or more qualified floating
rates of interest, a single fixed rate and one or more qualified floating
rates, an objective rate, or a single fixed rate and a single objective rate
that is a qualified inverse floating rate (all as defined below) will
generally constitute qualified stated interest if such stated interest is
unconditionally payable at least annually during the term of the note at a
rate that is considered to be a single qualified floating rate or a single
objective rate (provided such rates are set at a "current value" of that rate)
under the following rules.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of borrowed funds in the currency in which a Floating
Rate Note is denominated. Unless otherwise indicated in the applicable Pricing
Supplement, the CD Rate, CMT Rate, Commercial Paper Rate, Federal Funds Rate,
LIBOR, Prime Rate and Treasury Rate will constitute qualified floating rates.
If a Floating Rate Note provides for two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout
the term of the note, the qualified floating rates together constitute a
single qualified floating rate. An "objective rate" is generally a rate (other
than a qualified floating rate) that is determined using a single fixed
formula and that is based on objective financial or economic information but
that is not within the control of or unique to the circumstances of the Issuer
or a party related to the Issuer (such as dividends, profits or the value of
the Issuer's stock). If interest on a debt instrument is stated at a fixed
rate for an initial period of one year or less followed by a variable rate
that is either a qualified floating rate or an objective rate for a subsequent
period, and the value of the variable rate on the issue date is intended to
approximate the fixed rate, the fixed rate and the variable rate together
constitute a single qualified floating rate or objective rate. Two or more
rates will be conclusively presumed to meet the requirements of the preceding
sentences if the values of the applicable rates on the issue date are within
1/4 of 1% of each other.
In general, if a Floating Rate Note provides for stated interest at a
single qualified floating rate or objective rate, all stated interest on the
note is qualified stated interest and the amount of OID, if any, is determined
by using, in the case of a qualified floating rate or qualified inverse
floating rate, the value as of the issue date of the qualified floating rate
or qualified inverse floating rate, or, in the case of any other objective
rate, a fixed rate that reflects the yield reasonably expected for the note.
Special tax considerations (including possible OID) may arise with respect to
Floating Rate Notes providing for (i) one base rate followed by one or more
base rates, (ii) a single fixed rate followed by a qualified floating rate or
(iii) a Spread Multiplier. Prospective U.S. Holders of Floating Rate Notes
with any of such features should carefully examine the applicable Pricing
Supplement since the tax consequences will depend, in part, on the particular
terms of the note. Special rules may apply if a Floating Rate Note bears
interest at an objective rate and it is reasonably expected that the average
value of the rate during the first half of the note's term will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the note's term. Special rules may also apply if
a Floating Rate Note is subject to a cap, floor, governor or similar
restriction that is not fixed throughout the term of the note
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and is reasonably expected as of the issue date to cause the yield on the note
to be significantly less or more than the expected yield determined without
the restriction.
The OID Regulations address, among other things, the accrual of OID on, and
the character of gain realized on the sale, exchange or retirement of, debt
instruments providing for contingent payments. Prospective U.S. Holders of
Indexed Notes, Amortizing Notes, Renewable Notes or Floating Rate Notes
providing for contingent payments (including notes providing for optional
redemption or repayment or notes whose Stated Maturity may be extended at the
option of the Company) should refer to the discussion regarding taxation in
the applicable Pricing Supplement which will describe additional tax
considerations, if any, relevant to the ownership and disposition of such
notes. U.S. Holders of Indexed Notes, with respect to which the indexed item
is one or more foreign currencies, currency units or composite currencies
should carefully examine the Applicable Pricing Supplement and consent with
their tax advisers as to the federal income tax consequences of the ownership
and disposition of such notes.
If the difference between a note's stated redemption price at maturity and
its Issue Price is a de minimis amount, i.e., less than 1/4 of 1% of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the note will not be considered to have OID. U.S. Holders of
notes with a de minimis amount of OID will generally include this amount in
income, as capital gain, on a pro rata basis as principal payments are made on
the notes.
A U.S. Holder of Discount Notes will be required to include any qualified
stated interest payments in income in accordance with the U.S. Holder's method
of accounting for federal income tax purposes. U.S. Holders of Discount Notes
that mature more than one year from their date of issuance will be required to
include OID in income for federal income tax purposes as it accrues, in
accordance with a constant yield method based on a compounding of interest.
Under the OID Regulations, a note that matures one year or less from its
date of issuance will be treated as a "short-term Discount Note." All payments
of interest on a short-term Discount Note will be included in its stated
redemption price at maturity. In general, a cash method U.S. Holder of a
short-term Discount Note will recognize ordinary interest income at the time
interest is received by such holder, but will not be required to accrue OID
for United States federal income tax purposes unless it elects to do so. U.S.
Holders who make such an election, U.S. Holders who report income for federal
income tax purposes on the accrual method and certain other U.S. Holders,
including banks, dealers in securities, regulated investment companies, common
trust funds, and certain pass-through entities, are required to include OID in
income on short-term Discount Notes as it accrues on a straight-line basis,
unless an election is made to accrue the OID according to a constant yield
method based on daily compounding. In the case of a U.S. Holder who is not
required and does not elect to include OID in income currently, any gain
realized on the sale, exchange or retirement of the short-term Discount Note
will be ordinary income to the extent of the OID accrued on a straight-line
basis (or, if elected, according to a constant yield method based on daily
compounding), reduced by any interest received, through the date of sale,
exchange or retirement. In addition, such Holders will be required to defer
deductions for any interest paid on indebtedness incurred to purchase or carry
short-term Discount Notes in an amount not exceeding the deferred interest
income, until such deferred interest income is recognized.
Under the OID Regulations, a U.S. Holder may make an election (the
"Constant Yield Election") to include in gross income all interest that
accrues on a note (including stated interest, OID, de minimis OID and unstated
interest, as adjusted by any amortizable bond premium (defined below) in
accordance with a constant yield method based on the compounding of interest).
Pre-Issuance Accrued Interest.
If (i) a portion of the initial purchase price of a note is attributable to
pre-issuance accrued interest, (ii) the first stated interest payment on the
note is to be made within one year of the note's issue date and (iii) the
payment will equal or exceed the amount of pre-issuance accrued interest, then
the U.S. Holder may elect to
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decrease the issue price of the note by the amount of pre-issuance accrued
interest. In that event, a portion of the first stated interest payment will
be treated as a return of the excluded pre-issuance accrued interest and not
as an amount payable on the note.
Redemption.
Certain of the notes may be redeemed prior to maturity. Notes containing
such a feature may be subject to rules that differ from the general rules
discussed above. Purchasers of notes with such a feature should carefully
examine the applicable Pricing Supplement to determine if the notes are
subject to such different rules.
Sale, Exchange or Retirement.
Upon the sale, exchange or retirement of a note, a U.S. Holder will
recognize taxable gain or loss equal to the difference between such Holder's
adjusted tax basis in the note and the amount realized (excluding any amounts
attributable to unpaid qualified stated interest accrued between interest
payment dates, which will be includible in income as interest in accordance
with the U.S. Holder's method of accounting) on the sale, exchange or
retirement. A U.S. Holder's adjusted tax basis in a note will generally equal
the cost of the note to such Holder, increased by the amounts of any OID and
any income attributable to de minimis OID previously includible in income by
the U.S. Holder and reduced by any principal payments received by the U.S.
Holder, any amortizable bond premium used to offset qualified stated interest
and, in the case of an Original Issue Discount Note, by the amounts of any
other payments that do not constitute qualified stated interest (as defined
above).
Subject to the discussion under "--Foreign Currency Notes" below, gain or
loss recognized on the sale, exchange or retirement of a note that is not an
Indexed Note or a Floating Rate Note that provides for contingent payments
will be capital gain or loss (except, in the case of a short-term Discount
Note, to the extent of any OID not previously included in the U.S. Holder's
taxable income). See "--Discount Notes" above. Prospective investors should
consult their tax advisers regarding the treatment of capital gains (which may
be taxed at lower rates than ordinary income for certain taxpayers who are
individuals) and losses (the deductibility of which is subject to
limitations).
Amortizable Bond Premium.
If a U.S. Holder purchases a note for an amount that is greater than the
amount payable at maturity, the U.S. Holder will be considered to have
purchased the note with "amortizable bond premium" equal in amount to such
excess, and may elect to amortize such premium over the remaining term of the
note, based on the U.S. Holder's yield to maturity with respect to the note as
determined under the bond premium rules. A U.S. Holder may generally use the
amortizable bond premium allocable to an accrual period to offset qualified
stated interest required to be included in the U.S. Holder's income with
respect to the note in that accrual period. Under the regulations, if the
amortizable bond premium allocable to an accrual period exceeds the amount of
qualified stated interest allocable to such accrual period, such excess would
be allowed as a deduction for such accrual period, but only to the extent of
the U.S. Holder's prior interest inclusions on the note. Any excess is
generally carried forward and allocable to the next accrual period. A Holder
who elects to amortize bond premium must reduce his tax basis in the note as
described above under "Sale, Exchange or Retirement." An election to amortize
bond premium applies to all taxable debt obligations held by the U.S. Holder
at the beginning of the first taxable year to which the election applies or
thereafter acquired and may be revoked only with the consent of the Internal
Revenue Service (the "IRS"). The regulations provide limited automatic consent
for a U.S. Holder to change its method of accounting for bond premium to the
constant yield method if the change is made for the first taxable year (by a
statement on the relevant return) for which the U.S. Holder must account for a
bond under the regulations.
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If a Holder makes a Constant Yield Election for a note with amortizable
bond premium, the Holder will be deemed to make the election described above
to amortize bond premium for all of the Holder's appertaining debt instruments
with amortizable bond premium, which may be revoked only with the permission
of the IRS.
Foreign Currency Notes.
A U.S. Holder that uses the cash method of accounting and receives a
payment of interest with respect to a Foreign Currency Note (as defined above
under "Description of Notes--General") in U.S. dollars will be required to
include the amount of such payment in income upon receipt. A cash method U.S.
Holder that receives a payment of interest on a Foreign Currency Note in a
Specified Currency (other than amounts payable with respect to Original Issue
Discount Notes which are not qualified stated interest), pursuant to the
election described under "Description of the Notes--Foreign Currency Notes"
will be required to include in income the U.S. Dollar value of the Specified
Currency payment (determined on the date such payment is received), regardless
of whether the payment is in fact converted to U.S. dollars at that time, and
such U.S. dollar value will be the U.S. Holder's tax basis in the Specified
Currency.
To the extent that the preceding paragraph is not applicable, a U.S. Holder
will be required to include in income the U.S. dollar value of the amount of
interest income (including OID, but reduced by amortizable bond premium to the
extent applicable) that is required to be accrued with respect to a Foreign
Currency Note during an accrual period. The U.S. dollar value of such accrued
income will be determined by translating such income at the average rate of
exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
current taxable year. Such U.S. Holder will recognize exchange gain or loss,
if any, with respect to accrued interest income on the date such income is
actually received. The amount of such exchange gain or loss will be treated as
ordinary income or loss, as the case may be, and will be equal to the
difference between the U.S. dollar value of the Specified Currency payment
received (determined on the date such payment is received) in respect of such
accrual period (or, where a U.S. Holder receives U.S. dollars, the amount of
such payment in respect of such accrual period) and the U.S. dollar value of
the interest income that has accrued during such accrual period (as determined
above).
A U.S. Holder may, regardless of its general accounting method, elect to
translate interest income (including OID) into U.S. dollars at the spot rate
on the last day of the interest accrual period (or, in the case of a partial
accrual period, the spot rate on the last day of the taxable year) or,
alternatively, if the date of receipt is within five business days of the last
day of the interest accrual period, the spot rate on the date of receipt. A
U.S. Holder that makes such an election must apply it consistently to all debt
instruments from year to year and cannot change the election without the
consent of the IRS.
OID and amortizable bond premium on a Foreign Currency Note are to be
determined in the relevant Specified Currency.
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a U.S. Holder who has not elected to
amortize such premium will be a capital loss to the extent of such bond
premium. If such an election is made, amortizable bond premium taken into
account under the applicable rules described above (see "--Amortizable Bond
Premium") will reduce interest income in units of the relevant Specified
Currency. Exchange gain or loss will be realized on such amortized bond
premium with respect to any period by treating the bond premium amortized in
such period as a return of principal.
A U.S. Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustment to such Holder's tax basis, will be the U.S. dollar
value of the Specified Currency amount paid for such Foreign Currency Note, or
of the Specified Currency amount of the adjustment, determined on the date of
such purchase or adjustment. A U.S. Holder who purchases a Foreign Currency
Note with previously owned Specified Currency will recognize ordinary income
or loss in an amount equal to the difference, if any, between such U.S.
Holder's tax basis in the Specified Currency and the U.S. dollar fair market
value of the Foreign Currency Note on the date of purchase.
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Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss, which will not be treated as interest income
or expense. Gain or loss attributable to fluctuations in exchange rates will
equal the difference between (i) the U.S. dollar value of the Specified
Currency principal amount (as determined pursuant to regulations under Code
Section 988) of such note, and, for accrual method Holders or Holders of
Original Issue Discount Notes (to the extent of accrued OID) of any payment
with respect to accrued interest or accrued OID, determined on the date such
payment is received or such note is disposed of, and (ii) the U.S. dollar
value of the Specified Currency principal amount of such note, determined on
the date such U.S. Holder acquired such note, and, for accrual method Holders
or Holders of Discount Notes (to the extent of accrued OID), the U.S. dollar
value of the accrued interest or accrued OID received, determined by
translating such interest at the average exchange rate (or at a spot rate
elected as described above) for the accrual period. Such foreign currency gain
or loss will be recognized only to the extent of the total gain or loss
realized by a U.S. Holder on the sale, exchange or retirement of the Foreign
Currency Note. The source of such foreign currency gain or loss will be
determined by reference to the residence of the U.S. Holder or the "qualified
business unit" of the U.S. Holder on whose books the note is properly
reflected. Any gain or loss realized by the U.S. Holder upon such sale,
exchange or retirement in excess of the foreign currency gain or loss
described above will generally be capital gain or loss (except, in the case of
a short-term Discount Note, to the extent of any OID not previously included
in the U.S. Holder's income).
A U.S. Holder will have a tax basis in any Specified Currency received on
the sale, exchange or retirement of a Foreign Currency Note equal to the U.S.
dollar value of such Specified Currency, determined at the time of such sale,
exchange or retirement. Regulations issued under Section 988 of the Code
provide a special rule for purchases and sales of publicly traded Foreign
Currency Notes by a cash method taxpayer, under which units of Specified
Currency paid or received are translated into U.S. dollars at the spot rate on
the settlement date of the purchase or sale. Accordingly, no exchange gain or
loss will result from currency fluctuations between the trade date and the
settlement of such a purchase or sale. An accrual method taxpayer may elect
the same treatment required of cash-method taxpayers with respect to the
purchase and sale of publicly traded Foreign Currency Notes, provided the
election is applied consistently. Such election cannot be changed without the
consent of the IRS. Any gain or loss realized by a U.S. Holder on a sale or
other disposition of Specified Currency (including its exchange for U.S.
dollars or its use to purchase Foreign Currency Notes) will be ordinary income
or loss.
Under recently promulgated temporary Treasury regulations (the "Temporary
Regs"), the introduction of the Euro at the start of the third stage of
European Economic and Monetary Union and the subsequent use of Euros as the
currency for payment of amounts in respect of the Foreign Currency Notes
generally should not be treated as taxable exchange of the Foreign Currency
Notes for United States federal income tax purposes.
Backup Withholding and Information Reporting.
Certain noncorporate U.S. Holders may be subject to information reporting
and backup withholding at a rate of 31% on payments of principal, premium and
interest (including OID, if any) on, and the proceeds of disposition of, a
note. Backup withholding will apply only if the holder (i) fails to furnish
its Taxpayer Identification Number ("TIN"), (ii) furnishes an incorrect TIN,
(iii) is notified by the IRS that it has failed to properly report payments of
interest or dividends or (iv), under certain circumstances, fails to certify,
under penalties of perjury, that it has furnished a correct TIN and has not
been notified by the IRS that it is subject to backup withholding for failure
to report interest or dividend payments. U.S. Holders should consult their tax
advisers regarding their qualification for exemption from backup withholding
and the procedure for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a U.S. Holder is not
an additional tax and may be allowed as a credit against such Holder's United
States federal income tax liability, if any, or may entitle such Holder to a
refund, provided that the required information is furnished to the IRS.
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Non-U.S. Holders
Under present United States federal tax law, and subject to the discussion
below concerning backup withholding:
(a) payments of principal, interest (including OID, if any) and premium
on the notes by the Company or its paying agent to any Non-U.S. Holder will
be exempt from the 30% United States federal withholding tax, provided that
(i) such Holder does not own, actually or constructively, 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, is not a controlled foreign corporation related, directly
or indirectly, to the Company through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code and (ii)
the statement requirement set forth in Section 871(h) or Section 881(c) of
the Code has been fulfilled with respect to the beneficial owner, as
discussed below;
(b) a Non-U.S. Holder of a note will not be subject to United States
federal income tax on gain realized on the sale, exchange or other
disposition of such note, unless (i) such Holder is an individual who is
present in the United States for 183 days or more in the taxable year of
the disposition, and either the gain is attributable to an office or other
fixed place of business maintained by such individual in the United States
or, generally, such individual has a "tax home" in the United States or
(ii) such gain is effectively connected with the Holder's conduct of a
trade or business in the United States; and
(c) a note held by an individual who is not, for United States estate
tax purposes, a resident or citizen of the United States at the time of his
death generally will not be subject to United States federal estate tax as
a result of such individual's death, provided that the individual does not
own, actually or constructively, 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote and, at the
time of such individual's death, payments with respect to such note would
not have been effectively connected to the conduct by such individual of a
trade or business in the United States.
The rules described in subparagraphs (a) and (c) above will not apply to
contingent interest if the amount of such interest is contingent interest
described in Section 871(h)(4) of the Code (generally, interest determined
with reference to the profitability or similar indicia of financial
performance of the Company or a related person or of the property of the
Company or a related person).
The certification requirement referred to in subparagraph (a) will be
fulfilled if the beneficial owner of a note certifies on IRS Form W-8, under
penalties of perjury, that it is not a United States person and provides its
name and address, and (i) such beneficial owner files under Form W-8 with the
withholding agent or (ii) in the case of a note held by a securities clearing
organization, bank or other financial institution holding customers'
securities in the ordinary course of its trade or business holding the note on
behalf of the beneficial owner, such financial institution files with the
withholding agent a statement (signed under penalties of perjury) that it has
received the W-8 from the Holder and furnishes the withholding agent with a
copy thereof. With respect to notes held by a foreign partnership, under
current law, the Form W-8 may be provided by the foreign partnership. However,
for interest (including OID) and disposition proceeds paid with respect to a
note, unless the foreign partnership has entered into a withholding agreement
with the IRS, a foreign partnership will be required after December 31, 1999
(and may be permitted earlier), in addition to providing an intermediary Form
W-8, to attach an appropriate certification by each partner. Prospective
investors, including foreign partnerships and their partners, should consult
their tax advisers regarding possible additional reporting requirements.
If a Non-U.S. Holder of a note is engaged in a trade or business in the
United States, and if interest (including OID) on the note (or gain realized
on its sale, exchange or other disposition) is effectively connected with the
conduct of such trade or business, the Non-U.S. Holder, although exempt from
the withholding tax discussed in the preceding paragraphs, will generally be
subject to regular United States income tax on such effectively connected
income in the same manner as if it were a U.S. Holder. See "--U.S. Holders"
above. In lieu of the certificate described in the preceding paragraph, such a
Holder will be required to provide to the withholding agent a properly
executed IRS Form 4224 (or, by January 1, 2000, a Form W-8) to claim an
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exemption from withholding tax. In addition, if such Non-U.S. Holder is a
foreign corporation, it may be subject to a 30% branch profits tax (unless
reduced or eliminated by an applicable treaty) on its earnings and profits for
the taxable year attributable to such effectively connected income, subject to
certain adjustments.
Backup Withholding and Information Reporting.
Backup withholding will not apply to payments made on a note if the
certifications required by Sections 871(h) and 881(c) are received, provided
that the Company or its paying agent, as the case may be, does not have actual
knowledge that the payee is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a note made to or through a foreign office of a broker
generally will not be subject to backup withholding. However, if such broker
is (i) a United States person, (ii) a controlled foreign corporation for
United States federal income tax purposes, (iii) a foreign person 50 percent
or more of whose gross income is effectively connected with a United States
trade or business for a specified three-year period or (iv), in the case of
payments made after December 31, 1999, a foreign partnership with certain
connections to the United States, then information reporting will be required
unless the broker has in its records documentary evidence that the beneficial
owner is not a United States person and certain other conditions are met or
the beneficial owner otherwise establishes an exemption. Backup withholding
may apply to any payment that such broker is required to report if the broker
has actual knowledge that the payee is a United States person. Payments to or
through the United States office of a broker will be subject to backup
withholding and information reporting unless the Holder certifies, under
penalties of perjury, that it is not a United States person or otherwise
establishes an exemption.
Non-U.S. Holders of notes should consult their tax advisers regarding the
application of information reporting and backup withholding in their
particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Any amounts withheld
from a payment to a Non-U.S. Holder under the backup withholding rules are not
an additional tax and may be allowed as a credit against such Holder's United
States federal income tax liability, if any, and may entitle such Holder to a
refund, provided that the required information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Salomon Smith Barney Inc., Banc of America Securities LLC, Bear, Stearns &
Co. Inc. and J.P. Morgan Securities Inc., whom we call the "agents", and PBCC
have entered into a distribution agreement with respect to the notes. The
agents have agreed to use their reasonable best efforts to solicit purchases
of the notes if PBCC satisfies the conditions specified in the distribution
agreement. PBCC has the right to accept offers to purchase notes and may
reject any proposed purchase of the notes. The agents may also reject any
offer to purchase notes. PBCC will pay the agents a commission on any notes
sold through the agents. The commission will range from 0.125% to 0.750% of
the principal amount of the notes depending on the maturity of the notes,
provided, however, that commissions with respect to notes with a stated
maturity of more than thirty years will be negotiated between PBCC and the
applicable agent at the time of sale.
PBCC may also sell notes to the agents who will purchase the notes as
principals for their own accounts. Any sale of this kind will be made at a
discount equal to the discount stated on the cover page of this prospectus
supplement if no other discount is agreed. Any notes the agents purchase as
principal may be resold at the market price or at other prices determined by
the agents at the time of resale.
The agents may resell any notes they purchase to other brokers or dealers
at a discount which may include all or part of the discount the agents
received from PBCC. The agents will purchase the notes at a price equal to
100% of the principal amount less a discount. Unless otherwise stated the
discount will equal the applicable commission on an agency sale of notes of
the same maturity. If all the notes are not sold at the initial offering
price, the agents may change the offering price and the other selling terms.
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PBCC may sell notes directly on its own behalf. No commission will be paid
on any notes sold directly by PBCC. In addition, PBCC has reserved the right
to accept offers to purchase notes through additional agents on substantially
the same terms and conditions, including commission rates, as would apply to
purchases of notes under the distribution agreement referred to above. PBCC
has also reserved the right to appoint additional agents to solicit offers to
purchase notes. Any additional agents will be named in the applicable pricing
supplement.
Although the final use of proceeds from any sale of the notes has not yet
been determined, the proceeds might be used to pay indebtedness owed to
affiliates of any agent and, if an amount in excess of 10% of the aggregate
net proceeds of any sale of notes is so applied, that sale of notes will be
made in accordance with Rule 2710(c)(8) of the NASD Conduct Rules.
The agents, whether acting as agents or principals, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933. PBCC has
agreed to indemnify the several agents against liabilities, including
liabilities under the Securities Act of 1933.
The agents may sell to dealers who may resell to investors and the agents
may pay all or part of the discount or commission they receive from PBCC to
the dealers. These dealers may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933.
The notes are a new issue of securities with no established trading market
and will not be listed on a securities exchange. We do not know how liquid the
trading market for the notes will be.
PBCC estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$200,000.
Unless otherwise indicated in the applicable pricing supplement, the
purchase price of the notes will be required to be paid in immediately
available funds in The City of New York.
In connection with the offering, the agents may purchase and sell notes in
the open market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales. Short
sales involve the sale by the agents of a greater number of notes than they
are required to purchase in the offering. Stabilizing transactions consist of
bids or purchases made for the purpose of preventing or retarding a decline in
the market price of the notes while the offering is in progress.
The agents also may impose a penalty bid. This occurs when a particular
agent or a broker or dealer repays to the other agents a portion of the
underwriting discount received by it because the other agents have repurchased
notes sold by or for the account of that agent or broker or dealer in
stabilizing or short covering transactions.
These activities by the agents may stabilize, maintain or otherwise affect
the market price of the notes. As a result, the price of the notes may be
higher than the price that otherwise might exist in the open market. If the
agents commence these activities, the agents may discontinue these activities
at any time. The agents may effect these transactions in the over-the-counter
market or otherwise.
In the ordinary course of their business, the agents and some of their
affiliates have engaged in, and may in the future engage in, investment and
commercial banking transactions and financial advisory services with PBCC and
some of its affiliates.
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VALIDITY OF NOTES
The validity of the notes will be passed upon for PBCC by Stephen D. Wayne,
Assistant General Counsel of PBCC, and by Davis Polk & Wardwell, 450 Lexington
Avenue, New York, New York 10017, and for the agents by Sullivan & Cromwell,
125 Broad Street, New York, New York 10004. The opinions of Mr. Wayne, Davis
Polk & Wardwell and Sullivan & Cromwell will be based upon, and subject to,
assumptions as to future actions required to be taken in connection with the
issuance and sale of notes and as to other events which may affect the
validity of notes but which cannot be ascertained on the date of the opinions.
EXPERTS
The financial statements as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998 that are incorporated in
this prospectus supplement by reference to the Annual Report on Form 10-K of
PBCC for the year ended December 31, 1998 and the Current Report on Form 8-K
of PBCC dated August 13, 1999, as filed with the SEC on August 30, 1999, have
been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. The financial statements as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998
included in the Current Report on Form 8-K of PBCC have been restated to give
effect to discontinued operations, while those included in the Annual Report
on Form 10-K of PBCC have not been so restated.
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Pitney Bowes Credit Corporation
Debt Securities
------------
Pitney Bowes Credit Corporation (the "Company" or "PBCC") from time to time
may offer in one or more series its unsecured debt securities consisting of
notes or debentures (the "Debt Securities") for issuance and sale at an
aggregate initial offering price not to exceed $750,000,000 (or the equivalent
at the time of offering in non-U.S. dollar denominated currencies or units).
As used herein, Debt Securities shall include securities denominated, or whose
principal is payable, in United States dollars, or, at the option of the
Company, in any other currency or in composite currencies or in amounts
determined by reference to an index. Debt Securities will be offered in
amounts, at prices and on the terms to be determined at the time of sale and
to be set forth in supplements to this Prospectus. The Company may sell Debt
Securities to underwriters, to or through dealers, acting as principals for
their own accounts or acting as agents, or directly to other purchasers. See
"Plan of Distribution".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, denominations, maturity, interest
rate or rates (which may be fixed or variable), if any, and time of payment of
any such interest, terms for redemption at the option of the Company or any
holders, if any, terms for sinking fund payments, if any, the initial public
offering price or prices, the names of any underwriters or agents, the
principal amounts, if any, to be purchased by underwriters and the
compensation of such underwriters or agents and the other terms in connection
with the offering and sale of the Debt Securities in respect of which this
Prospectus is being delivered, will be set forth in an accompanying Prospectus
Supplement (the "Prospectus Supplement").
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This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
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The date of this Prospectus is July 28, 1998.
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No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained or incorporated by
reference in this Prospectus or the Prospectus Supplement, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus and the Prospectus Supplement do not constitute an
offer to sell or a solicitation of an offer to buy any securities other than
those to which they relate or an offer to sell, or a solicitation of an offer to
buy, such securities to any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus or any
Prospectus Supplement nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that the information contained or
incorporated by reference herein or therein is correct as of any time subsequent
to their respective dates.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of
the Commission: New York Regional Office, Seven World Trade Center, New York,
New York 10048 and Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained at prescribed
rates by writing to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission maintains a website on the internet
containing reports, proxy and information statements and other information
regarding registrants, such as the Company, who file electronically with the
Commission. Materials filed in this manner may be accessed through the website
at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
Debt Securities. Any statements contained herein concerning the provisions of
any document are not necessarily complete, and in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated in this Prospectus by reference the following
documents which have been filed with the Commission (File No. 0-13497):
(i) The Company's Annual Report on Form 10-K for the year ended December
31, 1997;
(ii) the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1998; and
(iii) the Company's Current Report on Form 8-K filed February 4, 1998.
All documents filed with the Commission pursuant to sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Debt Securities shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that any statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
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The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on written or oral request of such person, a
copy of any or all of the foregoing documents which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents, unless such exhibits shall have been specifically incorporated by
reference into such documents. Requests for such copies should be directed to
the Secretary, Pitney Bowes Credit Corporation, 27 Waterview Drive, Shelton,
Connecticut 06484, telephone (203) 922-4000.
THE COMPANY
Pitney Bowes Credit Corporation (the "Company" or "PBCC") operates
primarily in the United States and is a wholly-owned subsidiary of Pitney
Bowes Inc. ("PBI" or "Pitney Bowes"). The Company is principally engaged in
the business of providing lease financing for PBI products as well as other
financial services for the commercial and industrial and mortgage servicing
markets.
PBI, a Delaware corporation organized in 1920, is listed on the New York
Stock Exchange. Headquartered in Stamford, Connecticut, PBI and its affiliates
employ approximately 29,900 people throughout the United States, Europe,
Canada, Australia and other countries. PBI operates within three industry
segments: business equipment, business services, and commercial and industrial
financing.
The Internal Financing Division of PBCC provides marketing support to PBI.
Equipment leased or financed for these Internal Division programs include
mailing, paper handling and shipping equipment, scales, copiers and facsimile
units. The transaction size for this equipment generally ranges from $500 to
$500,000, although historically most transactions have occurred in the $1,000
to $10,000 range, with lease terms generally from 36 to 60 months. As part of
the Company's focus on new business initiatives, the Company launched in
August, 1996, a revolving credit product called Purchase Power(TM). This
product allows Pitney Bowes customers to finance postage as well as mailing,
copier and facsimile supplies. The Company earns income on balances from
customers who elect to use this credit facility.
PBCC's Capital Services (formerly the external financing division) operates
in the commercial and industrial market by offering financial services to its
customers for products not manufactured or sold by PBI or its subsidiaries.
Sales of lease transactions are part of the Company's ongoing strategy to
shift the foundation of the external large-ticket financing business from
asset-based to service-based. During 1997, the Company reduced external large-
ticket finance assets by approximately $1.0 billion, which represents
approximately 50% of the portfolio balance before the reduction. Products
financed through Capital Services large-scale financing programs include over-
the-road trucks and trailers, railcars and locomotives, and high-technology
equipment such as data processing and communications equipment. Transaction
sizes range from $50,000 to several million dollars, with lease terms
generally from 36 to 180 months. The Company's Capital Services division also
participates, on a select basis, in certain other types of financial
transactions including: sales of lease transactions, senior secured loans in
connection with acquisition, leveraged buyout and recapitalization financings,
and certain project financings.
PBCC's Capital Services Division is also responsible for managing Pitney
Bowes Real Estate Financing Corporation ("PREFCO"), a wholly-owned subsidiary
of PBCC providing lease financing for commercial real estate properties. Both
PBCC and Pitney Bowes provide capital for PREFCO's investments.
Colonial Pacific Leasing Corporation ("CPLC"), a wholly-owned subsidiary of
PBCC, operates in the small-ticket external market and is located in Portland,
Oregon. Colonial Pacific provides lease financing services to small- and
medium-sized businesses throughout the United States, marketing primarily
through a nationwide network of brokers and independent lessors. Transaction
size ranges from $2,000 to $2 million, with lease terms generally from 24 to
72 months.
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Atlantic Mortgage & Investment Corporation ("AMIC"), a wholly-owned
subsidiary of PBCC, located in Jacksonville, Florida, specializes in servicing
residential first mortgages for a fee. AMIC does not generally hold or assume
the credit risk on mortgages it services. In return for a servicing fee, AMIC
provides billing services and collects principal, interest, and tax and
insurance escrow payments for mortgage investors such as the Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation, Government
National Mortgage Association and private investors. AMIC originates mortgages
on a select basis and sells originated mortgages in the secondary market after
a short holding period.
Financial Structures Limited ("FSL"), located in Bermuda, is a wholly-owned
subsidiary of PBCC through its intermediate subsidiary, FSL Holdings, Inc.
FSL, together with its affiliate, Financial Structures Insurance Company,
provides residual value insurance to unaffiliated third parties, including
manufacturers, financial institutions and leasing companies involved in
financing transactions. FSL mitigates its residual risk by diversifying its
portfolio by both asset type and maturity date.
Substantially all lease financing is done through full payout leases or
security agreements whereby PBCC recovers its costs plus a return on
investment over the initial, noncancellable term of the contract. The Company
has also entered into a limited amount of leveraged and operating lease
structures.
Pursuant to an Amended and Restated Finance Agreement (the "Finance
Agreement") dated June 12, 1995, between PBI and PBCC, PBI has agreed to
retain, directly or indirectly, ownership of the majority of the outstanding
shares of capital stock of the Company having voting power in the election of
directors, to make payments, if necessary, to enable the Company to maintain a
ratio of income available for fixed charges to fixed charges of 1.25 to 1 as
of the end of each fiscal quarter, and to provide or cause to be provided
funds sufficient to make timely payment of any principal, interest or premium
in respect of any of the Company's indebtedness for borrowed money that has
the benefit of the Finance Agreement if the Company is unable to make such
payment. The Finance Agreement may not be amended, in any material respect, or
terminated while the Company has any series of Debt Securities or any series
of other debt outstanding that is, by its express terms, entitled to the
provisions of the Finance Agreement unless at least two nationally recognized
statistical rating agencies that have been rating such series of debt, confirm
that their ratings for such series of debt will not be downgraded as a result
or the holders of at least a majority of the outstanding principal amount of
such series of debt have consented in writing. See "Description of Debt
Securities--Certain Restrictions--Finance Agreement".
PBCC, incorporated in Delaware in 1976, began business in 1977. Its
executive offices are located at 27 Waterview Drive, Shelton, Connecticut
06484, telephone (203) 922-4000.
USE OF PROCEEDS AND FUNDING POLICY
Except as may be set forth in the Prospectus Supplement, the Company
intends to use the net proceeds from the sales of the Debt Securities to repay
short-term debt, to acquire finance contracts, to reduce or retire from time
to time other indebtedness and for other general corporate purposes including
possible acquisitions. The precise amount and timing of sales of the Debt
Securities will be dependent on the level of finance contracts acquired by the
Company, market conditions and the availability and cost of other funds to the
Company.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of the Company's earnings to fixed
charges, for the periods indicated:
Years Ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
2.39 2.31 2.14 2.43 2.37
For the purpose of computing the ratio of earnings to fixed charges,
earnings have been calculated by adding to earnings before income taxes the
amount of fixed charges. Fixed charges consist of interest on debt and a
portion of net rental expense deemed to represent interest.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Indenture under which the Debt Securities are to be issued. The Debt
Securities may be issued from time to time in one or more series. The
particular terms of each issue of the Debt Securities (the "Offered Debt
Securities") offered by any Prospectus Supplement and the extent, if any, to
which the general provisions of the Indenture may apply to the Offered Debt
Securities will be described in the Prospectus Supplement relating to such
Offered Debt Securities.
Offered Debt Securities are to be issued under an Indenture (the
"Indenture"), between the Company and SunTrust Bank, Atlanta, as Trustee. A
copy of the form of Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The statements under this
caption relating to the Debt Securities and the Indenture are summaries and do
not purport to be complete. Such summaries make use of terms defined in the
Indenture and are qualified in their entirety by express reference to
provisions of the Indenture (including definitions therein of certain terms)
and the cited provisions thereof, the form of which is filed as an exhibit to
the Registration Statement or otherwise incorporated by reference herein. The
term "Securities" as used under this caption, refers to all Securities which
may be issued under the Indenture and includes the Debt Securities. All
section references appearing herein are to sections of the Indenture.
General
The Debt Securities will be unsecured obligations of the Company and will
rank on a parity with all other unsecured unsubordinated indebtedness of the
Company. As of the date of this Prospectus, no Securities have been issued
under the Indenture. The Indenture does not limit the aggregate principal
amount of Securities which may be issued thereunder and provides that
Securities may be issued thereunder from time to time in one or more series.
Reference is made to the applicable Prospectus Supplement for the following
terms of and information relating to the Offered Debt Securities: (i) the
title of the Offered Debt Securities; (ii) any limit on the aggregate
principal amount of the Offered Debt Securities; (iii) the price or prices at
which the Offered Debt Securities will be issued; (iv) the date or dates on
which principal of, and any premium on, the Offered Debt Securities will be
payable; (v) the rate or rates (which may be fixed or variable) at which the
Offered Debt Securities shall bear interest, if any, or the method by which
such rate or rates shall be determined, the basis on which such interest, if
any, shall be calculated if other than a 360-day year consisting of twelve 30-
day months, the date or dates from which such interest, if any, will accrue
and on which such interest, if any, will be payable and the related record
dates; (vi) if other than the offices of the Trustee, the place where the
principal of, and any premium and interest on, the Offered Debt Securities
will be payable; (vii) any redemption, repayment or sinking fund provisions;
(viii) if other than denominations of $1,000 or multiples thereof, the
denominations in which the Offered Debt Securities will be issuable; (ix) if
other than the principal amount thereof, the portion of the principal amount
due upon acceleration; (x) if other than U.S. dollars, the currency or
currencies or currency unit or currency units in which the Offered Debt
Securities will be denominated and in which principal of, and
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premium, if any, and interest, if any, on, the Offered Debt Securities will or
may be payable; (xi) any index or formula used to determine the amount of
payments of principal of and any premium and interest on the Offered Debt
Securities; (xii) the terms and conditions, if any, pursuant to which the
Offered Debt Securities may be converted or exchanged for other securities of
the Company or any other person; (xiii) whether the Offered Debt Securities
shall be issued in the form of one or more Global Securities (as defined in
"Book-Entry System"); (xiv) the identity of any trustees, depositaries,
authenticating or paying agents, transfer agents or registrars with respect to
the Offered Debt Securities and (xv) any other specific terms of the Offered
Debt Securities not inconsistent with the Indenture. (Section 3.01)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities are to be issued as registered securities without
coupons in denominations of $1,000 and any integral multiple of $1,000.
(Section 3.02) No service charge will be made for any transfer or exchange of
such Offered Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 3.05)
Securities may be issued under the Indenture as Original Issue Discount
Securities to be sold at a substantial discount below their stated principal
amount. Federal income tax consequences and other consideration applicable to
Offered Debt Securities will be described in the Prospectus Supplement
relating thereto. (Section 3.01)
Certain Definitions
The term "Consolidated Net Tangible Assets" means as of any particular time
the aggregate amount of assets after deducting therefrom (a) all current
liabilities (excluding any such liability that by its terms is extendable or
renewable at the option of the obligor thereon to a time more than 12 months
after the time as of which the amount thereof is being computed) and (b) all
goodwill, excess of cost over assets acquired, patents, copyrights,
trademarks, trade names, unamortized debt discount and expense and other like
intangibles, all as shown in the most recent consolidated financial statements
of the Company and its Subsidiaries prepared in accordance with generally
accepted accounting principles.
The term "Secured Debt" means indebtedness for money borrowed which is
secured by a mortgage, pledge, lien, security interest or encumbrance on any
property of any character of the Company or any Subsidiary.
The term "Subsidiary" means (i) with respect to the Company, any
corporation of which more than 50% of the outstanding voting stock is owned,
directly or indirectly, by the Company or by one or more other Subsidiaries,
or by the Company and one or more other Subsidiaries, and (ii) with respect to
PBI, any corporation of which more than 50% of the outstanding voting stock is
owned, directly or indirectly, by PBI or by one or more other Subsidiaries, or
by PBI and one or more other Subsidiaries. For the purposes of such
definition, "voting stock" means stock which ordinarily has voting power for
the election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
The term "Wholly-owned Subsidiary" means any Subsidiary of which, at the
time of determination, all of the outstanding voting stock (other than
directors' qualifying shares) is owned by the Company or PBI, as the case may
be, directly and/or indirectly. For purposes of this definition, "voting
stock" has the same meaning as under the definition of "Subsidiary".
The term "U.S. Government Obligations" means securities which are (i)
direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of America, which, in
either case are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such
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U.S. Government Obligations or a specific payment of interest on or principal
of any such U.S. Government Obligation held by such custodian for the account
of the holder of a depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of interest on or principal of the U.S. Government Obligation
evidenced by such depository receipt. (Section 1.01)
Certain Restrictions
Finance Agreement. The Indenture provides that the Company (1) will observe
and perform in all material respects all covenants or agreements of the
Company contained in the Finance Agreement; and (2) will not waive compliance
under, amend in any material respect or terminate the Finance Agreement;
provided, however, that the Finance Agreement may be amended if such
amendments would not have a material adverse effect on the holders of any
outstanding Securities of any series or if the holders of at least the
majority in principal amount of the outstanding Securities of each series so
affected shall waive compliance with the provisions of the relevant Section of
the Indenture insofar as it relates to such amendment. (Section 10.06)
Restrictions on Creation of Secured Debt. The Company will not create,
assume or guarantee any Secured Debt and will not permit any Subsidiary to
create, assume, or guarantee any Secured Debt without, in any such case,
making, or causing such Subsidiary to make, effective provision for securing
the Securities (and, if the Company shall so determine, any other indebtedness
of or guaranteed by the Company or such Subsidiary), equally and ratably with
such Secured Debt.
This covenant will not apply to debt secured by (i) certain mortgages,
pledges, liens, security interests or encumbrances in connection with the
acquisition, construction or improvement of any fixed asset or other physical
or real property by the Company or any Subsidiary, (ii) mortgages, pledges,
liens, security interests or encumbrances on property existing at the time of
acquisition thereof, whether or not assumed by the Company or any Subsidiary,
(iii) mortgages, pledges, liens, security interests or encumbrances on
property of a corporation existing at the time such corporation is merged into
or consolidated with the Company or any Subsidiary, or at the time of a sale,
lease or other disposition of the properties of a corporation or firm as an
entirety or substantially as an entirety to the Company or any Subsidiary,
(iv) mortgages, including mortgages, pledges, liens, security interests or
encumbrances, on property of the Company or any Subsidiary in favor of the
United States of America, any State thereof, or any other country, or any
agency, instrumentality or political subdivision thereof, to secure certain
payments pursuant to any contract or statute or to secure indebtedness
incurred for the purpose of financing all or any part of the purchase price or
the cost of construction or improvement of the property subject to such
mortgages, (v) certain extensions, renewals or replacements (or successive
extensions, renewals or replacements), in whole or in part, of any mortgage,
pledge, lien or encumbrance referred to in the foregoing clauses (i) to (iv),
inclusive, (vi) any mortgage, pledge, lien, security interest or encumbrance
securing indebtedness owing by the Company to one or more Wholly-owned
Subsidiaries, (vii) any lien, chattel mortgage, security agreement, and other
title retention agreement on tangible personal property, resulting from the
Company, any Subsidiary, or an owner-trustee representing either of the
foregoing acquiring or agreeing to acquire the same property for substantially
concurrent leasing or financing to third parties in Leveraged Leases (as
defined), or Partnerships (as defined), (viii) any liens to secure non-
recourse obligations in connection with the Company's or a Subsidiary's
engaging in Leveraged Lease or single-investor lease transactions or sales of
chattel paper in the ordinary course of business or (ix) any lien, mortgage,
pledge, security agreement, interest or encumbrance securing indebtedness
resulting from any financing transaction entered into in the ordinary course
of the Company's business involving the sale of Company receivables,
consisting of loan and/or lease obligations owed to the Company, to any
Subsidiary or any special purpose entity formed for the sole purpose of
effecting such financing and which applies only to such Subsidiary or special
purpose entity and its assets.
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Notwithstanding the above, the Company may, without securing the Debt
Securities, create, assume or guarantee Secured Debt which would otherwise be
subject to the forgoing restrictions, provided that, after giving effect
thereto, the aggregate amount of all Secured Debt then outstanding (not
including Secured Debt permitted under the foregoing exceptions) at such time
does not exceed 10% of Consolidated Net Tangible Assets. (Sections 1.01 and
10.07)
Restrictions on Consolidation, Merger, Conveyance, Transfer or Lease
The Indenture provides that no consolidation or merger of the Company with
or into any other Person and no conveyance, transfer or lease of its property
substantially as an entirety to another Person may be made (1) unless (i) the
surviving corporation or acquiring Person shall be a corporation organized and
existing under the laws of the United States of America, any State thereof, or
the District of Columbia and shall expressly assume the payment of principal
and any premium and interest on all the Securities and the performance of
every covenant in the Indenture; (ii) immediately after giving effect to such
transaction, no Event of Default, and no event which after notice or lapse of
time would become an Event of Default, shall have happened and be continuing;
(iii) if, as a result thereof, any assets of the Company would become subject
to a mortgage or other encumbrance which is not expressly permitted by the
Indenture (see "Certain Restrictions--Restrictions on Creation of Secured
Debt") unless all the outstanding Securities are secured by a lien upon such
assets equal with (or prior to) that of the indebtedness secured by such
mortgage or encumbrance; and (iv) the Company has delivered the required
Officers' Certificate and Opinion of Counsel to the Trustee. (Section 8.01)
The Trustee
The Indenture contains certain limitations on the right of the Trustee, as
a creditor of the Company, to obtain payment or claims in certain cases, or to
realize on certain property received in respect of any such claim as security
or otherwise. (Section 6.13)
SunTrust Bank, Atlanta, the Trustee under the Indenture, maintains a
banking relationship with the Company.
Book-Entry System
If so specified in the applicable Prospectus Supplement, the Offered Debt
Securities may be represented by one or more certificates in global form (each
a "Global Security"). Each Global Security will be deposited with, or on
behalf of, a depositary, which, unless otherwise specified in the applicable
Prospectus Supplement, will be The Depository Trust Company ("DTC"), New York,
New York (including any successor depositary appointed by the Company, the
"Depositary"). The Global Securities will be registered in the name of the
Depositary or its nominee.
DTC has advised the Company that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York banking law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participants and to facilitate the clearance and settlement
of securities transactions among its participants through electronic book-
entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations, some of which (and/or
representatives of which) own the Depositary. Access to the Depositary's book-
entry system is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
Upon the issuance of a Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts
of the Debt Securities represented by such Global Security to the
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accounts of participants. The accounts to be credited will be designated by
the underwriters, dealers or agents, if any, or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests by participants in a Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee (with respect to interests of
participants) and on the records of participants (with respect to interests of
persons other than participants). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such
securities in certificated form. Such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Debt Securities represented by such
Global Security for all purposes under the Indenture. Except as set forth
below, owners of beneficial interests in such Global Security will not be
entitled to have the Debt Securities represented thereby registered in their
names, will not receive or be entitled to receive physical delivery of
certificates representing the Debt Securities and will not be considered the
owners or holders thereof under the Indenture. Accordingly, each person owning
a beneficial interest in such Global Security must rely on the procedures of
the Depositary and, if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder under the Indenture.
Payment of principal of, and any premium and interest on, Debt Securities
represented by a Global Security will be made by the Company through the
Trustee or a paying agent (which may also be the Trustee) to the Depositary or
its nominee, as the case may be, as the registered owner and holder of the
Global Security representing such Debt Securities. Under the terms of the
Indenture, the Company and the Trustee may treat the persons in whose names
the Offered Debt Securities are registered as the owners thereof for the
purpose of receiving such payments and for any and all other purposes.
Consequently, none of the Company, the Trustee, any paying agent or registrar
for such Debt Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depositary or its nominee, as the case may be,
upon receipt of any payment of principal, premium or interest in respect of a
Global Security, will immediately credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Security as shown on the records of the
Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers registered in "street name," and will be the responsibility of
such participants.
A Global Security may not be transferred except as a whole by the
Depositary to its nominee or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or its nominee to a
successor of the Depositary or a nominee of such successor. If the Depositary
for a Global Security is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within
90 days, the Company will issue Debt Securities in certificated form in
exchange for all of the Global Securities representing such Debt Securities.
In addition, the Company may at any time and in its sole discretion determine
not to have any Debt Securities represented by one or more Global Securities
and, in such event, will issue Debt Securities in certificated form in
exchange for all of the Global Securities representing such Debt Securities.
Further, if the Company so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in a Global Security representing
Debt Securities of such series may on terms acceptable to the Company and the
Depositary receive Debt Securities of such series in certificated form. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in certificated form of Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name
(Section 3.05).
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Events of Default and Notices Thereof
The following events are defined in the Indenture as "Events of Default"
with respect to Securities of any series: (a) failure to pay principal of or
premium, if any, on any Security of that series when due; (b) failure to pay
any interest on any Security of that series when due, continued for 30 days;
(c) failure to deposit any sinking fund payment, when due, in respect of any
Security of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture
solely for the benefit of a series of Securities other than that series),
continued for 90 days after written notice given to the Company by the Trustee
or to the Company and the Trustee by the holders of at least 25% in principal
amount of the Outstanding Securities of each series affected thereby; (e)
certain events in bankruptcy, insolvency or reorganization of the Company; and
(f) any other Event of Default provided with respect to Securities of such
series. (Section 5.01)
If an Event of Default under clause (a), (b), (c), (d) or (f) above with
respect to Securities of any series at the time Outstanding shall occur and be
continuing, either the Trustee or the holders of at least 25% in principal
amount of the Outstanding Securities of each such series voting separately, in
the case of clause (a), (b), (c) or (f), or of all such series affected
thereby, voting as one class, in the case of (d) above, may declare the
principal amount (or, if the Securities of any such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of such series) of all Securities of such series to be due and
payable immediately. If an Event of Default under clause (d) (if all series of
Securities are affected thereby) or (e) above shall occur and be continuing,
either the Trustee or the holders of at least 25% in principal amount of all
of the Outstanding Securities may declare the principal amount (or, if the
Securities of any series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of such series) of
all Outstanding Securities to be due and payable immediately. Under certain
circumstances the holders of a majority in aggregate principal amount of
Outstanding Securities of such series may rescind or annul such declaration
and its consequences. (Section 5.02) In the event the Company takes the
necessary action to enable it to omit to comply with certain covenants of the
Indenture as described under "Defeasance of Certain Covenants" and the
Securities are declared due and payable because of the occurrence of an Event
of Default, the amount of money and U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Securities at
the time of their Stated Maturity but may not be sufficient to pay amounts due
on the Securities at the time of the acceleration resulting from such Event of
Default. (Section 10.08) However, the Company shall remain liable for such
payments.
Reference is made to the Prospectus Supplement relating to any series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to the principal amount of such Original Issue
Discount Securities due on acceleration upon the occurrence of an Event of
Default and the continuation thereof.
The Indenture provides that the Trustee, within 90 days after the
occurrence of a default with respect to any series of Securities shall give to
the holders of Securities of that series, notice of all uncured defaults known
to it (the term default to mean the Events of Default specified above without
grace periods), provided that, except in the case of default in the payment of
principal of (or premium, if any) or any interest, or sinking fund
installment, if any, on any Security, the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the interest of the Holders of Securities. (Section 6.02)
The Company will be required to furnish to the Trustee annually a
certificate by certain officers of the Company to the effect that to the best
of their knowledge the Company is not in default in the fulfillment of any of
its obligations under the Indenture or, if there has been a default in the
fulfillment of any such obligation, specifying each such default. (Section
10.09)
The holders of a majority in principal amount of the Outstanding Securities
of any series will have the right, subject to certain limitations, to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Securities of such series, and, in certain
circumstances, the holders of not less than a majority in aggregate principal
amount
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of Outstanding Securities of any series (voting as a separate class) or the
holders of not less than a majority in aggregate principal amount of
Outstanding Securities of all Series (voting as a class), may waive certain
defaults. (Sections 5.12 and 5.13)
The Indenture provides that in case an Event of Default has occurred and be
continuing, the Trustee shall exercise such of its rights and powers under the
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs. (Section 6.01) Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any of the holders of Securities unless they shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request. (Section 6.03)
Modification of the Indenture
Modifications and amendments of the Indenture may be made by the Company
and the Trustee, with the consent of the holders of not less than a majority
in aggregate principal amount of the Outstanding Securities issued under the
Indenture which are affected by the modification or amendment, provided that
no such modification or amendment may, without the consent of each Holder of
each such Outstanding Security affected thereby, (1) change the stated
maturity date of the principal of (or premium, if any) or any installment of
interest, if any, on any such Security; (2) reduce the principal amount of (or
premium, if any) or the interest, if any, on any such Security or the
principal amount due upon acceleration of an Original Issue Discount Security;
(3) change the place or currency of payment of principal (or premium, if any)
or interest, if any, on any such Security; (4) impair the right to institute
suit for the enforcement of any such payment on or with respect to any such
Security; (5) reduce the above-stated percentage of holders of Securities
necessary to modify or amend the Indenture; or (6) modify the foregoing
requirements or reduce the percentage of holders of Outstanding Securities
necessary to waive compliance with certain provisions of the Indenture or for
waiver of certain defaults. (Section 9.02)
Defeasance and Discharge
The Indenture provides that with respect to the Securities of a certain
series, unless otherwise specified, the Company will be discharged from any
and all obligations in respect of such Securities (except for certain
obligations to register the transfer or exchange of Securities, to replace
stolen, lost or mutilated Securities, to maintain paying agencies and hold
monies for payment in trust) upon the deposit with the Trustee, in trust, of
money and/or U.S. Government obligations which through the payment of interest
and principal thereof in accordance with their terms will provide money in an
amount sufficient to pay any installment of principal (and premium, if any)
and any interest on and any mandatory sinking fund payments in respect of such
Securities on the Stated Maturity of such payments in accordance with the
terms of the Indenture and such Securities. Such a trust may only be
established if the Company has delivered to the Trustee an Opinion of Counsel
acceptable to the Trustee (who may be counsel to the Company) to the effect
that, among other things, establishment of the trust would not cause the
Securities of any such series listed on any nationally-recognized securities
exchange to be de-listed as a result thereof and, if designated with respect
to the Securities of such series, the Company has received from or there has
been published by, the United States Internal Revenue Service a ruling to the
effect that such a defeasance and discharge will not be deemed, or result in,
a taxable event with respect to holders of such Securities. (Section 4.02) The
designation of such provisions, Federal income tax consequences and other
considerations applicable thereto will be described in the Prospectus
Supplement relating thereto.
Defeasance of Certain Covenants
The Indenture provides that with respect to the Securities of a certain
series, unless otherwise specified, the Company may omit to comply with
certain restrictive covenants described in Sections 10.06 (Maintenance of
Finance Agreement) and 10.07 (Restriction on Creation of Secured Debt) of the
Indenture and with any other
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negative or restrictive covenant of the Company (other than those contained in
the Indenture) applicable to the Securities of any series if the Company
deposits with the Trustee money and/or U.S. Government Obligations (as
defined) which through the payment of interest and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay
principal (and premium, if any) and any interest on and any mandatory sinking
fund payments in respect of such Securities on the stated maturity of such
payments in accordance with the terms of the Indenture and such Securities.
The obligations of the Company under the Indenture other than with respect to
the covenants referred to above shall remain in full force and effect. If
specified with respect to the Securities of such series, the Company will also
be required to deliver to the Trustee an Opinion of Counsel (who may be
counsel to the Company) to the effect that the deposit and related covenant
defeasance will not be deemed, or result in, a taxable event with respect to
holders of the Securities. (Section 10.08) The designation of such provisions,
Federal income tax consequences and other considerations applicable thereto
will be described in the Prospectus Supplement relating thereto.
Concerning the Trustee
Unless otherwise specified in the applicable Prospectus Supplement,
SunTrust Bank, Atlanta, is the Trustee, paying agent and registrar under the
Indenture.
Governing Law
The Indenture and the Debt Securities will be governed by the laws of the
State of New York.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to one or more underwriters for public
offering and sale by them or may sell Debt Securities to investors directly or
through agents. The Prospectus Supplement with respect to any Offered Debt
Securities will set forth the terms of the offering of such Offered Debt
Securities, including the name or names of any underwriters or agents, the
purchase price of the Offered Debt Securities and the proceeds to the Company
from such 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 Offered Debt Securities may be listed.
If underwriters are used in a sale of any Debt Securities, such Debt
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 Debt Securities may be offered to the public through
underwriting syndicates represented by managing underwriters. Unless otherwise
set forth in the Prospectus Supplement, the obligations of the underwriters to
purchase the Debt Securities will be subject to certain conditions precedent
and the underwriters will be obligated to purchase all the Debt Securities 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.
The Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any such agent involved in the
offer or sale of the Debt Securities will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its
appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Debt Securities from the Company at the
public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions
set
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forth in the Prospectus Supplement and the Prospectus Supplement will set
forth the commission payable for solicitation of such contracts.
Agents and underwriters may be entitled, under agreements entered into with
the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof. Certain agents and underwriters,
including their affiliates, may be customers of, have engaged or will engage
in transactions with, or have performed or will perform services for, the
Company in the ordinary course of business. The agents and the underwriters,
including their affiliates, have and will receive fees and commissions from
the Company for these services.
Each issue of Offered Debt Securities will be a new issue of securities
with no established trading market. Any underwriters to whom Offered Debt
Securities are sold by the Company for public offering and sale may make a
market in such Offered Debt Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for any Offered Debt Securities.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the Company by
Christian D. Hughes, Vice President, Secretary and General Counsel of the
Company and by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017, and, unless otherwise indicated in a Prospectus Supplement relating to
Offered Debt Securities, for the underwriters or agents by Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K of Pitney Bowes Credit Corporation for the year
ended December 31, 1997 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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$500,000,000
Pitney Bowes Credit Corporation
Medium-Term Notes,
Series D
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PROSPECTUS SUPPLEMENT
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Salomon Smith Barney
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
J.P. Morgan & Co.
August 30, 1999
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