PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 29, 1998)
U.S. $500,000,000
PITNEY BOWES INC.
Medium-Term Notes, Series C
Due Nine Months or more from Date of Issue
---------------------------
Pitney Bowes Inc., a Delaware corporation (the "Company"), may offer from time
to time its Medium-Term Notes, Series C (the "Notes") in an aggregate principal
amount not to exceed $500,000,000 (and, if any Notes are to be Original Issue
Discount Notes, Foreign Currency Notes or Indexed Notes (as each such term is
defined under "Description of the Notes"), such principal amount as shall result
in an initial aggregate offering price equivalent to no more than $500,000,000),
subject to reduction as a result of the sale of other Debt Securities. See
"Description of the Notes" and "Supplemental Plan of Distribution of the Notes".
Each Note will mature on a date nine months or more from its date of original
issuance ("Issue Date"), as selected by the initial purchaser and agreed to by
the Company which Stated Maturity may be subject to extension at the option of
the Company or the Holder thereof. See "Description of the Notes -- Extension of
Maturity" and "-- Renewable Notes".
Unless otherwise indicated in the applicable Pricing Supplement to this
Prospectus Supplement, interest on Fixed Rate Notes will be payable on each
February 1 and August 1 and at Maturity. Interest on Floating Rate Notes will be
payable on the dates specified therein and in the applicable Pricing Supplement.
Notes may be issued as Original Issue Discount Notes, including Zero Coupon
Notes, which will not bear interest prior to Maturity. Notes may be issued as
Amortizing Notes, with payments of principal and interest made in equal
installments over the life of the Note. (Continuing on next page)
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 STATE ANY SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
DISTRIBUTORS'
PRICE TO COMMISSIONS OR PROCEEDS
PUBLIC(1) DISCOUNTS (2) TO COMPANY(2)(3)
-------------- --------------------- --------------------------------
Per Note.................. 100% .125%-.750% 99.875%-99.250%
Total(4).................. $500,000,000 $625,000-$3,750,000 $499,375,000-$496,250,000
(1) Unless otherwise indicated in the applicable Pricing Supplement, each Note
will be issued at 100% of its principal amount. If so indicated in the
applicable Pricing Supplement, Notes may be resold by the Distributors,
acting as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices or at
a fixed public offering price.
(2) The Company will pay a commission (or grant a discount) to Credit Suisse
First Boston Corporation, Chase Securities Inc., Goldman, Sachs & Co.,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
J.P. Morgan Securities Inc., NationsBanc Montgomery Securities LLC and
Salomon Brothers Inc (the "Distributors") of .125% to .750% of the
principal amount of any Note, depending on its Stated Maturity, sold
through any such Distributor, acting as agent (or sold to such Distributor
as principal in circumstances in which no other discount is agreed;
provided, however, that commissions (or discounts) with respect to Notes
with a Stated Maturity more than thirty years from date of issue will be
negotiated at the time of sale). See "Supplemental Plan of Distribution of
the Notes".
(3) Before deducting other expenses payable by the Company estimated at U.S.
$175,000, including expenses of the Distributors to be reimbursed by the
Company.
(4) Or the equivalent thereof in other currencies or currency units.
---------------------------
The Notes are being offered on a continuing basis by the Company through
the Distributors, each of which has agreed to use reasonable best efforts to
solicit offers to purchase the Notes. The Company also may sell Notes to any
Distributor on its own behalf at negotiated discounts for resale to investors
and other purchasers at varying prices related to prevailing market prices at
the time of resale or, if so agreed, at a fixed public offering price. Unless
otherwise specified in the applicable Pricing Supplement, any Note sold to a
Distributor as principal will be purchased by such Distributor at a price equal
to 100% of the principal amount thereof less a percentage equal to or less than
the commission applicable to an agency sale of a Note having an identical Stated
Maturity and may be resold by such Distributor. The Company reserves the right
to sell Notes directly on its own behalf. The Company also reserves the right to
withdraw, cancel or modify the offer made hereby without notice. The Company or
any Distributor may reject any offer to purchase Notes, in whole or in part. The
Notes will not be listed on any securities exchange, unless otherwise indicated
in the applicable Pricing Supplement, and there can be no assurance that the
Notes offered by this Prospectus Supplement will be sold or that there will be a
secondary market for the Notes. See "Supplemental Plan of Distribution of the
Notes".
CREDIT SUISSE FIRST BOSTON
CHASE SECURITIES INC. GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO. J.P. MORGAN & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC SALOMON BROTHERS INC
The date of this Prospectus Supplement is September 17, 1998.
(Continued from previous page)
If so indicated in the applicable Pricing Supplement to this Prospectus
Supplement, the Notes will be subject to optional redemption or will obligate
the Company to repay at the option of the Holder thereof. Unless otherwise
specified in an applicable Pricing Supplement, the Notes will not be subject to
any sinking fund or analogous provisions.
The interest rate or interest rate formula, if any, currency or currency
unit, issue price, Stated Maturity, any sinking fund, redemption or repayment
provisions, and other terms for each Note will be established by the Company at
the date of issuance of such Note and will be indicated in a Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
be represented by a permanent Global Security or Securities, registered in the
name of The Depository Trust Company, as Depositary (the "Depositary"), or a
nominee of the Depositary (a "Book-Entry Note"). Beneficial interests in
Book-Entry Notes will only be evidenced by, and transfers thereof will only be
effected through, records maintained by the Depositary and its participants.
Except as described under "Description of the Notes -- Book-Entry Notes", owners
of beneficial interests in a Book-Entry Note will not be entitled to receive
physical delivery of Notes in definitive form and will not be considered the
Holders thereof. Unless otherwise indicated in the applicable Pricing
Supplement, the Notes will be issued in fully registered form in denominations
of $1,000 and integral multiples of $1,000 or, in the case of Foreign Currency
Notes, in such minimum denominations not less than the equivalent of $1,000 and
such other denomination or denominations in excess thereof as shall be set forth
in the applicable Pricing Supplement. See "Description of the Notes -- Foreign
Currency Notes".
---------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION OF THE NOTES".
---------------------------
DESCRIPTION OF THE NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY SUPPLEMENTS THE DESCRIPTION OF THE GENERAL TERMS AND CONDITIONS OF DEBT
SECURITIES SET FORTH UNDER THE HEADING "DESCRIPTION OF DEBT SECURITIES" IN THE
PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE. THE TERMS AND
CONDITIONS SET FORTH HEREIN WILL APPLY TO EACH NOTE UNLESS OTHERWISE SPECIFIED
IN THE APPLICABLE PRICING SUPPLEMENT. CAPITALIZED TERMS NOT DEFINED UNDER THIS
HEADING OR IN THE GLOSSARY CONTAINED IN THIS PROSPECTUS SUPPLEMENT HAVE THE
MEANINGS ASSIGNED TO THEM IN THE PROSPECTUS OR THE INDENTURE.
GENERAL
The Notes offered hereby will be issued under the Indenture referred to in
the accompanying Prospectus between the Company and SunTrust Bank, Atlanta, as
Trustee (the "Trustee"). The Notes constitute a single series for purposes of
the Indenture, limited to an aggregate principal amount not to exceed
$500,000,000 (or, if any Notes are to be Original Issue Discount Notes or are to
be denominated in one or more foreign currencies or currency units ("Foreign
Currency Notes") or with amounts payable in respect of principal of or any
premium or interest on the Notes to be determined by reference to the value,
rate or price of one or more specified indices ("Indexed Notes"), such principal
amount as shall result in an aggregate initial offering price equivalent to no
more than $500,000,000). The aggregate principal amount of Notes offered hereby
may be reduced by an amount equal to the aggregate initial offering price of any
other Debt Securities (as defined in the accompanying Prospectus) sold by the
Company. See "Supplemental Plan of Distribution of the Notes". For a description
of the rights attaching to different series of Securities (including the Notes)
under the Indenture, see "Description of Debt Securities" in the Prospectus.
The Stated Maturity of each Note will be any day nine months or more from
its Issue Date, as selected by the initial purchaser and agreed to by the
Company. The applicable Pricing Supplement will also indicate whether a Note is
subject to an optional extension beyond its Stated Maturity as described under
"--Extension of Maturity" and "--Renewable Notes" below.
The Notes will be issuable only in fully registered form and, unless
otherwise indicated in the applicable Pricing Supplement, only in denominations
of $1,000 and integral multiples of $1,000 or, in the case of Foreign Currency
Notes, in such minimum denomination not less than the equivalent of $1,000 and
such other denomination or denominations in excess thereof as shall be set forth
in the applicable Pricing Supplement. See "--Foreign Currency Notes" below.
Unless specified otherwise in the applicable Pricing Supplement, Notes will
initially be represented by a Book-Entry Note. See "--Book-Entry Notes" below.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of and any premium
and interest on the Notes will be made in U.S. dollars in the manner indicated
in the accompanying Prospectus and this Prospectus Supplement. If any of the
Notes are to be denominated in one or more currencies or currency units other
than U.S. dollars, additional information pertaining to the terms of such Notes
and other matters relevant to the Holders thereof will be described in the
applicable Pricing Supplement. See "--Foreign Currency Notes" below, and
"Foreign Currency Risks" and "Special Considerations Relating to Indexed Notes".
In addition, Notes may be issued as Original Issue Discount Notes
(including Zero Coupon Notes), as Indexed Notes or as Amortizing Notes. See
"--Original Issue Discount Notes", "--Indexed Notes" and "--Amortizing Notes"
below.
Payments of principal of, and any premium and interest on, Book-Entry Notes
(except Zero Coupon Notes) will be made to the Depositary, or its nominee, as
the Holder thereof, in accordance with arrangements then in effect between the
Trustee and the Depositary. Unless otherwise indicated in an applicable Pricing
Supplement, payments of principal of, and any premium and interest on, Notes in
individually certificated form ("Certificated Notes") denominated and payable in
U.S. dollars will be made in immediately available funds at the Designated
Office (as defined in "Glossary") (of the Trustee in the Borough of Manhattan,
The City of New York, provided that the Note is presented to the Paying Agent in
time for the Paying Agent to make such payments in such funds in accordance with
its normal procedures except that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register or by wire
transfer to an account maintained by such Holder with a bank located in the
United States, provided such Holder shall
S-1
have provided in writing to the Trustee, on or prior to the relevant Regular
Record Date, appropriate payment instructions. Notwithstanding the foregoing,
the Holder of $10,000,000 or more in aggregate principal amount of Notes
denominated and payable in U.S. dollars and having the same Interest Payment
Date shall be entitled to receive such payments by wire transfer of immediately
available funds to an account maintained by such Holder with a bank located in
the United States, provided that the Holder shall have provided in writing to
the Trustee, on or prior to the relevant Regular Record Date, appropriate
payment instructions. With respect to payments on Foreign Currency Notes, see
"--Foreign Currency Notes" below.
Certificated Notes may be presented for registration of transfer or
exchange at the Designated Office of the Trustee in the Borough of Manhattan,
The City of New York. No service charge will be made for any registration of
transfer or exchange of Certificated Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. With respect to registration of transfer and
exchange of Book-Entry Notes, see "--Book-Entry Notes" below and "Description of
Debt Securities--Book-Entry System" in the accompanying Prospectus.
Interest rates, interest rate bases and various other variable terms of the
Notes described herein are subject to change by the Company from time to time,
but no such change will affect any Note already issued or as to which an offer
to purchase has been accepted by the Company.
Notices to Holders of Notes will be given by mail to the addresses of such
Holders as they may appear in the Security Register.
INTEREST
Each interest-bearing Note will bear interest from and including its Issue
Date or from and including the most recent Interest Payment Date with respect to
which interest on such Note (or any predecessor Note) has been paid or duly
provided for to but excluding the relevant Interest Payment Date at the fixed
rate per annum, or at the rate per annum determined pursuant to the interest
rate formula, stated therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest payments, if
any, will be in the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including the date of issue, if no interest has
been paid with respect to such Note) to, but excluding, the applicable Interest
Payment Date or Maturity, as the case may be.
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 in advance
of the receipt of the cash to which such income is attributable. See "United
States Federal Taxation--U.S. Holders--Original Issue Discount".
Interest, if any, will be payable in arrears on each Interest Payment Date
and at Maturity. Interest will be payable generally to the Person (which, in the
case of a Book-Entry Note, shall be the Depositary) in whose name a Note (or any
predecessor Note) is registered at the close of business on the Regular Record
Date next preceding each Interest Payment Date; PROVIDED, HOWEVER, that interest
payable at Maturity will be payable to the Person (which, in the case of a
Book-Entry Note, shall be the Depositary) to whom principal shall be payable.
Unless otherwise indicated in the applicable Pricing Supplement, the first
payment of interest on any Note originally issued between a Regular Record Date
and an Interest Payment Date will be made on the next succeeding Interest
Payment Date following the Issue Date of such Note to the Holder of record on
the Regular Record Date with respect to such succeeding Interest Payment Date.
With respect to payments of interest on Book-Entry Notes, see "--Book-Entry
Notes" below.
Each interest-bearing Note will bear interest at either a fixed rate (a
"Fixed Rate Note") or a variable rate determined by reference to an interest
rate formula (a "Floating Rate Note"), which may be adjusted by adding or
subtracting the Spread and/or multiplying by the Spread Multiplier as indicated
in the applicable Pricing Supplement.
FIXED RATE NOTES
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Note. Unless
otherwise indicated in the applicable Pricing Supplement, the Interest Payment
Dates with respect to Fixed Rate Notes (other than Amortizing Notes) shall be
February 1 and August 1 of each year and at Maturity and the Regular Record
Dates for such Notes shall be the January 15 and July 15 next preceding the
rel-
S-2
evant Interest Payment Dates. 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.
If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on
a day that is not a Market Day, the related payment of principal, premium, if
any, or interest will be made on the next succeeding Market Day as if made on
the date such payment was due, and no interest will accrue on the amount so
payable for the period from and after such Interest Payment Date or Maturity, as
the case may be.
FLOATING RATE NOTES
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis for such Floating Rate Note. Such basis may be
determined by reference to one or more of the following: (a) the CD Rate, in
which case such Note will be a CD Rate Note, (b) the CMT Rate, in which case
such Note will be a CMT Rate Note, (c) the Commercial Paper Rate, in which case
such Note will be a Commercial Paper Rate Note, (d) the Federal Funds Rate, in
which case such Note will be a Federal Funds Rate Note, (e) LIBOR, in which case
such Note will be a LIBOR Note, (f) the Prime Rate, in which case such Note will
be a Prime Rate Note, (g) the Treasury Rate, in which case such Note will be a
Treasury Rate Note, or (h) such other interest rate basis or formula as may be
agreed to between the Company and the purchaser and set forth in the applicable
Pricing Supplement. In addition, a Floating Rate Note may bear interest at the
lowest or highest or average of two or more interest rate formulae. The
applicable Pricing Supplement for a Floating Rate Note also will specify the
Spread and/or Spread Multiplier, if any, and the maximum or minimum interest
rate limitation, if any, applicable to each Note. In addition, such Pricing
Supplement will define or particularize for each Floating Rate Note the
following terms, if applicable: Calculation Agent (which may be the Trustee or a
Distributor), Calculation Date, Initial Interest Rate, Interest Payment Dates,
Regular Record Dates, Index Maturity, Interest Determination Dates and Interest
Reset Dates with respect to such Note. See "Glossary" for definitions of certain
of the foregoing terms.
The rate of interest on a Floating Rate Note in effect on any day will be
(a) if such day is an Interest Reset Date with respect to such Floating Rate
Note, the interest rate on such Floating Rate Note determined as of the Interest
Determination Date pertaining to such Interest Reset Date, or (b) if such day is
not an Interest Reset Date with respect to such Floating Rate Note, the interest
rate on such Floating Rate Note determined as of the Interest Determination Date
pertaining to the immediately preceding Interest Reset Date with respect to such
Floating Rate Note; PROVIDED, HOWEVER, that the interest rate in effect from the
Issue Date of a Floating Rate Note (or that of a predecessor Note) to but
excluding the first Interest Reset Date with respect to such Floating Rate Note
will be the Initial Interest Rate (as set forth in the applicable Pricing
Supplement). Subject to applicable provisions of law and except as described
herein, the rate of interest on a Floating Rate Note beginning on any Interest
Reset Date with respect thereto will be the rate of interest determined by the
Calculation Agent as of the Interest Determination Date pertaining to such
Interest Reset Date in accordance with the applicable provisions described
below.
The Interest Reset Date for each Floating Rate Note will be daily, weekly,
monthly, quarterly, semi-annually or annually, as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Reset Date will be, in the case of Floating Rate Notes
which reset daily, each Market Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) which reset weekly, the Wednesday of each week; in the
case of Treasury Rate Notes which reset weekly, except as provided in the
following paragraph, the Tuesday of each week; in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes which reset
semi-annually, the third Wednesday of two months of each year, as indicated in
the applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, the third Wednesday of one month of each year, as indicated in
the applicable Pricing Supplement. If any Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Market Day with respect to such
Note, such Interest Reset Date shall be the next succeeding Market Day with
respect to such Note, except that if such Note is a LIBOR Note and the next
succeeding Market Day falls in the next succeeding calendar month, such Interest
Reset Date shall be the immediately preceding Market Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
CD Rate Note (the "CD Rate Interest Determination Date"), a CMT Rate Note (the
"CMT Rate Interest Determination Date"), a Commercial Paper Rate Note (the
"Commercial Paper Interest Determination Date"), a Federal Funds Rate Note (the
"Federal Funds Interest Determination Date"), or a Prime Rate Note (the "Prime
Rate Interest Determination Date") will be the second
S-3
Market Day preceding the Interest Reset Date with respect to such Note. The
Interest Determination Date pertaining to an Interest Reset Date for a LIBOR
Note (the "LIBOR Interest Determination Date") will be the second London
Business Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury
Interest Determination Date") will be the day on which Treasury bills are
auctioned for the week in which such Interest Reset Date falls, or if no auction
is held for such week, the Monday of such week (or if Monday is a legal holiday,
the next succeeding Market Day) and the Interest Reset Date will be the Market
Day immediately following such Treasury Interest Determination Date. Treasury
bills are usually sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is usually held on the following
Tuesday, except that such auction may be held on the preceding Friday. If an
auction for such week is held on Monday or the preceding Friday, such Monday or
preceding Friday shall be the Treasury Interest Determination Date for such
week, and the Interest Reset Date for such week shall be the Tuesday of such
week (or, if such Tuesday is not a Market Day, the next succeeding Market Day).
If the auction for such week is held on any day of such week other than Monday,
then such day shall be the Treasury Interest Determination Date and the Interest
Reset Date for such week shall be the next succeeding Market Day.
A Floating Rate Note may have either or both of the following: (a) a
maximum numerical interest rate limitation, or ceiling, on the rate of interest
which may accrue during any interest period; and (b) a minimum numerical
interest rate limitation, or floor, on the rate of interest which may accrue
during any interest period. In addition to any maximum interest rate which may
be applicable to any Floating Rate Note, the interest rate on such Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
present New York law the maximum rate of interest, with certain exceptions, is
25% per annum on a simple interest basis. The limit may not apply to Notes in
which $2,500,000 or more has been invested.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, the Interest Payment Date will be, in the case of Floating
Rate Notes which reset daily, weekly or monthly, 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 which reset quarterly, the third Wednesday of March, June,
September and December of each year; in the case of Floating Rate Notes which
reset semi-annually, the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and in the case of Floating Rate
Notes which reset annually, the third Wednesday of the month specified in the
applicable Pricing Supplement. If, pursuant to the preceding sentence, an
Interest Payment Date with respect to any Floating Rate Note (other than an
Interest Payment Date at Maturity) would otherwise be a day that is not a Market
Day with respect to such Note, such Interest Payment Date shall be the next
succeeding Market Day with respect to such Note, except that if such Note is a
LIBOR Note and the next succeeding Market Day falls in the next succeeding
calendar month, such Interest Payment Date shall be the immediately preceding
Market Day. If the Maturity of a Floating Rate Note falls on a day that is not a
Market Day, the payment of principal, premium, if any, and interest will be made
on the next succeeding Market Day, and no interest on such payment shall accrue
from and after such Maturity. Unless otherwise indicated in the applicable
Pricing Supplement, the Regular Record Date with respect to Floating Rate Notes
shall be the date 15 calendar days prior to each Interest Payment Date, whether
or not such date shall be a Market Day.
Unless otherwise specified in the applicable Pricing Supplement, the
interest accrued from and including the date of issue, or from and including the
last date to which interest has been paid or duly provided for, is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day in such period from and including the date of issue, or
from and including the last date to which interest has been paid or duly
provided for, to but excluding the date for which accrued interest is being
calculated. Unless otherwise specified in the Note and the applicable Pricing
Supplement, the interest factor for each such day is computed by dividing the
interest rate applicable to such date by 360 (or, in the case of Treasury Rate
Notes or CMT Rate Notes, by the actual number of days in the year). The interest
factor for Notes for which two or more interest rate formulae are applicable
will be calculated in each period in the same manner as if only the lowest,
highest or average of, as the case may be, such interest rate formulae applied.
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, if
necessary, to the nearest one-hundred thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544)
being rounded to 9.87654% (or .0987654)), and all dollar amounts used
S-4
in or resulting from such calculation on Floating Rate Notes will be rounded to
the nearest cent or, in the case of Foreign Currency Notes, the nearest unit
(with one-half cent or five one-thousandths of a unit being rounded upwards).
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 which will become effective as of the next Interest Reset Date for
such Floating Rate Note. All determinations and calculations made by the
Calculation Agent will, absent manifest error, be conclusive and binding on the
Holders and the Company.
CD RATE NOTES. Each CD Rate Note will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified on the face of such CD Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Rate Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" ("H.15(519)") under the heading "CDs (Secondary Market)", or any
successor publication or heading. In the event that such rate is not published
prior to 3:00 P.M., New York City time, on the Calculation Date pertaining to
such CD Rate Interest Determination Date, then the CD Rate shall be the rate on
such CD Rate Interest Determination Date for negotiable certificates of deposit
having the Index Maturity specified in the applicable Pricing Supplement as
published through the world-wide web site of the Board of Governors of the
Federal Reserve System at http://www.bog.frb.fed.us/releases/h.15/update ("H.15
Daily Update") under the heading "CDs (secondary market)" or any successor
publication or heading. If by 3:00 P.M., New York City time, on such Calculation
Date such rate is not yet published in either H.15(519) or H.15 Daily Update,
the CD Rate for that CD Interest Determination Date shall be calculated by the
Calculation Agent and shall be the arithmetic mean of the secondary market
offered rates, as of 10:00 A.M., New York City time, on that CD Rate 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 (which may include one or more of the Distributors or their affiliates)
for negotiable certificates of deposit of major United States money market banks
with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement in a denomination of $5,000,000; PROVIDED,
HOWEVER, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the CD Rate will be
the CD Rate in effect on such CD Rate Interest Determination Date.
CMT RATE NOTES. CMT Rate Notes will bear interest at the rates (calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Rate Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption "... Treasury
Constant Maturities ... Federal Reserve Board Release H.15 ... Mondays
Approximately 3:45 P.M.", or any successor caption, under the column for the
Designated CMT Maturity Index for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. In the event such rate is no longer displayed on the
relevant page, or is not displayed prior to 3:00 P.M., New York City time, on
the related Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index, as published in the relevant H.15(519) or any
successor publication. If such rate is no longer published, or is not published
by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be such Treasury
Constant Maturity rate for the Designated CMT Maturity Index (or other United
States Treasury rate for the Designated CMT Maturity Index) for the CMT Rate
Interest Determination Date with respect to such Interest Reset Date as may then
be published by either the Board of Governors of the Federal Reserve System or
the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in the relevant H.15(519) or any successor
publication. If such information is not provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for the CMT Rate
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 CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government
S-5
securities dealers (each, a "Reference Dealer") in The City of New York (which
may include one or more of the Distributors or their affiliates) selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such CMT Rate 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 CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; PROVIDED, HOWEVER,
that if fewer than three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate will be the CMT Rate in effect on such
CMT Rate Interest Determination Date. If two Treasury Notes with an original
maturity as described in the third preceding sentence 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.
COMMERCIAL PAPER RATE NOTES. Each Commercial Paper Rate Note will bear
interest at the interest rate (calculated with reference to the Commercial Paper
Rate and the Spread and/or Spread Multiplier, if any) specified on the face of
such 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 Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate on such date for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the heading
"Commercial Paper--Non-financial", or any successor publication or heading. In
the event that such rate is not published prior to 3:00 P.M., New York City
time, on the Calculation Date pertaining to such Commercial Paper Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such Commercial Paper Interest Determination Date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15 Daily Update under the heading "Commercial
Paper--Non-financial" (with an Index Maturity of one month or three months being
deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively) or any successor heading. If by 3:00 P.M., New York City time, on
such Calculation Date such rate is not yet published in either H.15(519) or H.15
Daily Update, the Commercial Paper Rate for that Commercial Paper Interest
Determination Date shall be the Money Market Yield of the arithmetic mean, as
calculated by the Calculation Agent on such Calculation Date, of the offered
rates, as of 11:00 A.M., New York City time, on that Commercial Paper Interest
Determination Date, of three leading dealers of commercial paper in The City of
New York selected by the Calculation Agent (which may include one or more of the
Distributors or their affiliates) for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement placed for an industrial issuer
whose bond rating is "Aa", or the equivalent, from a nationally recognized
statistical rating organization; PROVIDED, HOWEVER, that if fewer than three
dealers selected as aforesaid by the Calculation Agent are quoting as mentioned
in this sentence, the Commercial Paper Rate will be the Commercial Paper Rate in
effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360
------------- X 100
360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
S-6
FEDERAL FUNDS RATE NOTES. Each Federal Funds Rate Note will bear interest
at the interest rate (calculated with reference to the Federal Funds Rate and
the Spread and/or Spread Multiplier, if any) specified on the face of such
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 Federal Funds Interest Determination
Date, the rate on such date for Federal Funds as published in H.15(519) under
the heading "Federal Funds (Effective)", or any successor publication or
heading. In the event that such rate is not published prior to 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Federal Funds
Interest Determination Date, then the Federal Funds Rate will be the rate on
such Federal Funds 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 such Calculation Date such rate is not yet
published in either H.15(519) or H.15 Daily Update, the Federal Funds Rate for
that Federal Funds Interest Determination Date shall be the arithmetic mean, as
calculated by the Calculation Agent on such Calculation Date, of the rates for
the last transaction in overnight Federal Funds arranged by three leading
brokers of Federal Funds transactions in The City of New York (which may include
one or more of the Distributors or their affiliates) selected by the Calculation
Agent prior to 9:00 a.m., New York City time, on such Federal Funds Rate
Interest Determination Date; PROVIDED, HOWEVER, that if fewer than three brokers
selected as aforesaid by the Calculation Agent are quoting as mentioned in this
sentence, the Federal Funds Rate will be the Federal Funds Rate in effect on
such Federal Funds Interest Determination Date.
LIBOR NOTES. Each LIBOR Note will bear interest at the interest rate
(calculated with reference to LIBOR and the Spread and/or Spread Multiplier, if
any) specified on the face of such LIBOR Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined in accordance with the following provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will
be either (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the Designated
LIBOR Page by its terms provides only for a single rate in which case such
single rate shall be used) for deposits in the Index Currency having the
Index Maturity specified in such Pricing Supplement, commencing on the
applicable Interest Reset Date, that appear (or, if only a single rate is
required as aforesaid, appears) on the Designated LIBOR Page as of 11:00
A.M., London time, on such LIBOR Interest Determination Date, or (b) 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 for calculating LIBOR, the rate for
deposits in the Index Currency having the Index Maturity specified in such
Pricing Supplement, commencing on such Interest Reset Date, that appears on
the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two such offered rates so
appear, or if no such rate so appears, as applicable, LIBOR on such LIBOR
Interest Determination Date will be determined in accordance with the
provisions described in clause (ii) below.
(ii) With respect to a LIBOR 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 specified in clause (i) 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 specified in the applicable Pricing Supplement, commencing on the
applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If
at least two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., in the applicable Principal Financial Center,
on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
specified in the applicable Pricing Supplement and in a principal amount
that is representative for a single transaction in such Index Currency in
such market at such time; PROVIDED, HOWEVER, that if the banks so selected
by the Calculation Agent are not quoting as mentioned in this
S-7
sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
PRIME RATE NOTES. Each Prime Rate Note will bear interest at the interest
rate (calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified on the face of such Prime Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Note as of any Prime Rate Interest
Determination Date, the rate set forth on such date in H.15(519) under the
heading "Bank Prime Loan", or any successor publication or heading. In the event
that such rate is not published prior to 3:00 P.M., New York City time, on such
Prime Rate Interest Determination Date, then the Prime Rate will be determined
by the Calculation Agent and will be the arithmetic mean of the rates of
interest publicly announced by each bank that appears on the Reuters Screen
USPRIME1 Page, or any successor screen or page, as such bank's prime rate or
base lending rate as in effect for that Prime Rate Interest Determination Date.
If fewer than four such rates appear on the Reuters Screen USPRIME1 Page for the
Prime Rate Interest Determination Date, the Prime Rate will be the arithmetic
mean of the announced prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Prime Rate
Interest Determination Date by at least two of three major money center banks in
The City of New York selected by the Calculation Agent. If fewer than two such
quotations are provided, the Prime Rate shall be determined on the basis of the
rates furnished in The City of New York by the appropriate number of substitute
banks or trust companies organized and doing business under the laws of the
United States, or any state thereof, having total equity capital of at least
$500 million and being subject to supervision or examination by federal or state
authority, selected by the Calculation Agent to provide such rate or rates;
PROVIDED, HOWEVER, that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, the Prime Rate will be the Prime Rate then in effect
on such Prime Rate Interest Determination Date.
TREASURY RATE NOTES. Each Treasury Rate Note will bear interest at the
interest rate (calculated with reference to the Treasury Rate and the Spread
and/or Spread Multiplier, if any) specified on the face of such Treasury Rate
Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
from the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading, "U.S. Government
Securities/Treasury Bills--Auction Average (Investment)", or any successor
publication or heading, or, if not so published by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such Treasury Interest Determination
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 such
auction as otherwise announced by the United States Department of the Treasury.
In the event that the results of the auction of Treasury bills having the Index
Maturity specified in the applicable Pricing Supplement are not published or
reported as provided above by 3:00 P.M., New York City time, on such date, or if
no such auction is held in a particular week, then the Treasury Rate shall be
the rate as published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills/Secondary Market", or any successor publication or
heading. In the event that such rate is not so published by 3:00 P.M., New York
City time, on the relevant Calculation Date, then the Treasury Rate shall be
calculated by the Calculation Agent and shall 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, as calculated by the
Calculation Agent on such Calculation Date, of the secondary market bid rates as
of approximately 3:30 P.M., New York City time, on such Treasury Interest
Determination Date, of three leading primary United States government securities
dealers in The City of New York selected by the Calculation Agent (which may
include one or more of the Distributors or their affiliates), for the issue of
Treasury bills with a remaining maturity closest to the specified Index
Maturity; PROVIDED, HOWEVER, that if fewer than three of the dealers selected as
aforesaid by the Calculation Agent are quoting as mentioned in this sentence,
the Treasury Rate will be the Treasury Rate in effect on such Treasury Interest
Determination Date.
ORIGINAL ISSUE DISCOUNT NOTES
Notes may be issued as Original Issue Discount Notes (including Notes
("Zero Coupon Notes") with respect to which no interest is payable prior to
Maturity). An Original Issue Discount Note is a Note which is issued at a price
lower than the principal amount thereof and which provides that upon redemption
or acceleration of the Maturity
S-8
thereof an amount less than the principal thereof shall become due and payable.
In the event of redemption or acceleration of the Maturity of an Original Issue
Discount Note, the amount payable to the Holder of such Note upon such
redemption or acceleration will be determined in accordance with the terms of
the Note, but will be an amount less than the amount payable at the Stated
Maturity of such Note. In addition, a Note issued at a discount may, for United
States federal income tax purposes, be considered an original issue discount
note, regardless of the amount payable upon redemption or acceleration of
Maturity of such Note. See "United States Federal Taxation--U.S.
Holders--Original Issue Discount".
FOREIGN CURRENCY NOTES
Notes may be issued as Foreign Currency Notes, with the principal and any
premium and interest documented and payable in a foreign currency or currency
unit specified in the applicable pricing supplement (the "Specified Currency").
Unless otherwise indicated in the applicable Pricing Supplement, a Foreign
Currency Note will not be sold in, or to a resident of, the country of the
Specified Currency in which such Note is denominated.
The Company is obligated to make payments of principal of and any premium
and interest on Foreign Currency Notes in the Specified Currency (or, if such
Specified Currency is not at the time of such payment legal tender in the
country which issued such Specified Currency for the payment of public and
private debts, in such other coin or currency as at the time of such payment is
legal tender for the payment of such debts in such country). Any such amounts
paid by the Company will, unless otherwise specified in the applicable Pricing
Supplement, be converted by the Exchange Rate Agent to U.S. dollars for payment
to Holders. Principal of, and any premium and interest on, a Foreign Currency
Note paid in U.S. dollars will be paid in the manner described herein, in the
accompanying Prospectus and in the applicable Pricing Supplement with respect to
Notes denominated and payable in U.S. dollars.
Unless otherwise specified in the applicable Pricing Supplement, any U.S.
dollar amount to be received by a Holder of a Foreign Currency Note will be
based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent at approximately 11:00 A.M., New York City time, on the
second Market Day preceding the applicable payment date from three recognized
foreign exchange dealers (one of which may be the Exchange Rate Agent or a
Distributor) selected by the Exchange Rate Agent and approved by the Company for
the purchase by the quoting dealer of the Specified Currency for U.S. dollars
for settlement on such payment date in the aggregate amount of the Specified
Currency payable to all Holders of Foreign Currency Notes scheduled to receive
U.S. dollar payments and at which the applicable dealer commits to execute a
contract. If three such bid quotations are not available, payments will be made
in the Specified Currency. All currency exchange costs will be borne by the
Holder of the Foreign Currency Note by deductions from such payments.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payments of principal of and any
premium and interest on such Note in the Specified Currency (a "Specified
Currency Payment Election") by delivery of a written request for such payment
(including, in the case of an election with respect to payments at Maturity,
appropriate wire transfer instructions) to the Trustee at its Designated Office
in the Borough of Manhattan, The City of New York, on or prior to the relevant
Regular Record Date or the fifteenth day prior to Maturity, as the case may be.
Such request may be in writing (mailed or hand delivered) or by cable, telex or
other form of facsimile transmission. A Holder of a Foreign Currency Note may
elect to receive payment in the Specified Currency for all payments of principal
and any premium and interest and need not file a separate election for each
payment. Such election will remain in effect until revoked by written notice to
the Trustee, but written notice of any such revocation must be received by the
Trustee on or prior to the relevant Regular Record Date or the fifteenth day
prior to Maturity, as the case may be.
Interest on a Foreign Currency Note paid in the Specified Currency will be
paid by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register. All checks payable in a Specified
Currency will be drawn on a bank located outside the United States. Payments at
Maturity of principal of and any premium and interest on Foreign Currency Notes
in the Specified Currency will be made by wire transfer to an account with a
bank located in the country of the Specified Currency (or, in the case of
European Currency Units ("ECUs", which term shall be deemed a reference to
"Euros", effective January 1, 1999), in the City of Brussels), as shall have
been designated at least fifteen days prior to Maturity by the Holder, PROVIDED
that the Note is presented at the Designated Office of the Trustee in the
Borough of Manhattan, The City of New York, in time for such Paying Agent to
make such payments in such funds in accordance with its normal procedures.
S-9
Holders of Foreign Currency Notes whose Notes are to be held in the name of
a broker or nominee should contact such broker or nominee to determine whether
and how to make a Specified Currency Payment Election. In general, unless
otherwise specified in the applicable Pricing Supplement, a beneficial owner of
Book-Entry Notes denominated in a Specified Currency electing to receive
payments of principal or any premium or interest in the Specified Currency must
notify the participant through which its interest is held on or prior to the
applicable Regular Record Date, in the case of a payment of interest, and on or
prior to the fifteenth day prior to Maturity, in the case of a payment of
principal or premium, of such beneficial owner's election to receive all or a
portion of such payment in a Specified Currency. Such participant must notify
the Depositary of such election on or prior to the third Business Day after such
Regular Record Date.
If a Specified Currency is not available for the payment of principal or
any premium or interest with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company will be entitled to satisfy its obligations to Holders of
Foreign Currency Notes by making such payment in U.S. dollars on the basis of
the Market Exchange Rate on the second Market Day prior to such payment, or if
such Market Exchange Rate is not then available, on the basis of the most
recently available Market Exchange Rate or as otherwise specified in the
applicable Pricing Supplement. See "Foreign Currency Risks--Exchange Rates and
Exchange Controls". Any payment made under such circumstances in U.S. dollars
where the required payment is in other than U.S. dollars will not constitute an
Event of Default under the Indenture.
If payment in respect of a Note is required to be made in any currency unit
(e.g., ECU), and such currency unit is unavailable due to the imposition of
exchange controls or other circumstances beyond the Company's control, then the
Company will be entitled, but not required, to make any payments in respect of
such Note in U.S. dollars until such currency unit is again available. The
amount of each payment in U.S. dollars shall be computed on the basis of the
equivalent of the currency unit in U.S. dollars, which shall be determined by
the Company or its agent on the following basis. The component currencies of the
currency unit for the purpose (the "Component Currencies" or, individually, a
"Component Currency") shall be the currency amounts that were components of the
currency unit as of the last day on which the currency unit was used. The
equivalent of the currency unit in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Component Currencies. The U.S.
dollar equivalent of each of the Component Currencies shall be determined by the
Company or such agent on the basis of the most recently available Market
Exchange Rate for each such Component Currency, or as otherwise indicated in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by the Company or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the Holders of Notes.
The authorized denominations of Foreign Currency Notes will be indicated in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency. At the
present time there are limited facilities in the United States for the
conversion of U.S. dollars into foreign currencies or currency units and vice
versa, and banks do not generally offer non-U.S. dollar checking or savings
account facilities in the United States. If requested on or prior to the fifth
Market Day preceding the date of delivery of the Notes, or by such other day as
determined by the Distributor who presented such offer to purchase Notes to the
Company, such Distributor is prepared to arrange for the conversion of U.S.
dollars into the Specified Currency to enable the purchasers to pay for the
Notes. Each such conversion will be made by such Distributor on such terms and
subject to such conditions, limitations and charges as such Distributor may from
time to time establish in accordance with its regular foreign exchange
practices. All costs of exchange will be borne by the purchasers of the Foreign
Currency Notes.
S-10
INDEXED NOTES
Notes may be issued as Indexed Notes, with the amount payable at Maturity,
the amount of interest payable on an Interest Payment Date, or both, to be
determined by reference to currencies, currency units, commodity prices,
financial or non-financial indices or other factors, as indicated in the
applicable Pricing Supplement. Holders of Indexed Notes may receive a principal
amount at Maturity that is greater than or less than the face amount of such
Notes depending upon the fluctuation of the relative value, rate or price of the
specified index. Specific information pertaining to the method for determining
the principal amount payable at Maturity, historical information with respect to
the specified indexed item or items and the face amount of the Indexed Note and
any additional tax considerations will be described in the applicable Pricing
Supplement.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes, with payments of
principal and interest made in equal installments over the life of the Note.
Payments of principal of and interest on Amortizing Notes will be made in equal
installments at such periodic intervals as are specified in the applicable
Pricing Supplement and at Maturity. A table setting forth payment information in
respect of each Amortizing Note will be included in the applicable Pricing
Supplement and set forth in such Notes. Unless otherwise specified in the
applicable Pricing Supplement, interest on each Amortizing Note will be computed
on the basis of a 360-day year of twelve 30-day months. Payments with respect to
Amortizing Notes will be applied first to interest due and payable thereon and
then to the reduction of the unpaid principal amount thereof. Further
information concerning additional terms and conditions of any issue of
Amortizing Notes will be provided in the applicable Pricing Supplement.
EXTENSION OF MATURITY
An applicable Pricing Supplement will indicate whether the Company has the
option to extend the Stated Maturity of such Note (other than an Amortizing
Note) for one or more periods up to but not beyond a date set forth in such
Pricing Supplement. If the Company has such option with respect to any such
Note, the procedures relating thereto will be as set forth in the applicable
Pricing Supplement.
RENEWABLE NOTES
An applicable Pricing Supplement will indicate whether such Note (other
than an Amortizing Note) will mature unless the term of all or any portion of
such Note is renewed in accordance with the procedures described in such Pricing
Supplement.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the Maturity Date or any other variable term
relating thereto, may be modified as specified under "Other Provisions" on the
face thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
SINKING FUND
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to any sinking fund or analogous provisions. If the Company
will be obligated to redeem or repurchase Notes pursuant to any such provision,
the applicable Pricing Supplement will indicate the period or periods within
which and the price or prices at which the applicable Notes will be redeemed or
repurchased, in whole or in part, pursuant to such obligation and the other
detailed terms and provisions of such obligation.
REDEMPTION (OPTION OF COMPANY)
If one or more Redemption Dates (or range of Redemption Dates) is specified
in the applicable Pricing Supplement, the Notes described therein will be
subject to redemption, in whole or in part, as specified in such Pricing
Supplement, on any such date (or during any such range of dates) at the option
of the Company upon not less than 30 days' or more than 60 days' notice, at the
Redemption Price or Prices specified in the applicable Pricing Supplement,
together with interest accrued to the Redemption Date; PROVIDED, HOWEVER, that
installments of interest whose Stated Maturity is on or prior to the date fixed
for redemption will be payable to the Holder of such Note, or
S-11
one or more predecessor Notes, registered as such at the close of business on
the relevant Record Date. If less than the entire principal amount of a Note is
redeemed, the principal amount of such Note that remains outstanding after such
redemption shall be an authorized denomination (which shall not be less than the
minimum authorized denomination) for the Notes. If less than all Notes of like
tenor are to be redeemed, the Notes to be redeemed shall be selected by the
Trustee by such method as the Trustee shall deem fair and appropriate.
REPAYMENT (OPTION OF HOLDER)
Except in the case of Notes which may be extended by the Company, which
shall be repayable at the option of the Holder as described above under
"--Extension of Maturity", if one or more Repayment Dates (or range of such
dates) is specified in the applicable Pricing Supplement, the Notes described
therein will be subject to repayment, in whole, or from time to time in part, as
specified in such Pricing Supplement, on any such date (or during any such
range) or, if such date is not a Market Day, on the first Market Day following
such date, at the election of the Holder at the Repayment Price determined as
set forth in the applicable Pricing Supplement, together with interest accrued
to the Repayment Date; PROVIDED, HOWEVER, that interest installments of interest
whose Stated Maturity is on or prior to the date fixed for repayment will be
payable to the Holder of such Note, or one or more predecessor Notes, registered
as such at the close of business on the relevant Record Date.
Unless otherwise specified in the applicable Pricing Supplement, in order
to exercise such an election, a Holder must, unless a different notice period is
specified in the applicable Pricing Supplement, give to the Trustee not less
than 30 days' nor more than 60 days' notice. Unless otherwise specified in the
applicable Pricing Supplement, any such notice shall consist of either (i) the
Note with the form entitled "Option to Elect Repayment" duly completed, or (ii)
a telegram, facsimile transmission or a letter from a member of a national
securities exchange, or of the National Association of Securities Dealers, Inc.
(the "NASD") or a commercial bank or trust company in the United States, setting
forth the name of the Holder, the principal amount of the Note, the principal
amount of the Note to be repaid, the certificate number or a description of the
tenor and terms of the Note, a statement that the option to elect repayment is
being exercised thereby and a guarantee that such Note, together with the duly
completed form entitled "Option to Elect Repayment", will be received by the
Trustee not later than the fifth Business Day after the date of such telegram,
facsimile transmission or letter; PROVIDED, HOWEVER, that such telegram,
facsimile transmission or letter shall only be effective if such Note and such
form, duly completed, are received by the Trustee by such fifth Business Day.
Unless otherwise specified in the applicable Pricing Supplement, exercise
of a repayment option by a Holder will be irrevocable. Such option may be
exercised with respect to less than the entire principal amount of a Note,
provided that the portion remaining Outstanding after such repayment is an
authorized denomination.
If a Note is represented by a Book-Entry Note the Depositary's nominee will
be the Holder thereof entitled to exercise a right to repayment. In order to
ensure that the Depositary's nominee will timely exercise a right to repayment
with respect to a particular Note, the beneficial owner of an interest in such
Note must instruct the broker or other direct or indirect participant through
which it holds an interest in such Note to notify the Depositary of its desire
to exercise a right to repayment. Different firms have different cut-off times
for accepting instructions from their customers and, accordingly, each such
beneficial owner should consult the broker or other direct or indirect
participant through which it holds an interest in a Book-Entry Note in order to
ascertain the cut-off time by which such an instruction must be given in order
for timely notice to be delivered to the Depositary.
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment may be exercised by the
applicable participant that has an account with the Depositary, on behalf of the
beneficial owners of the Global Security or Securities representing such
Book-Entry Notes, by delivering a written notice substantially similar to the
above-mentioned forms to the Trustee at its Designated Office (or such other
address of which the Company shall from time to time notify the Holders), not
more than 60 days nor less than 30 days prior to the date of repayment. Notices
of elections from participants on behalf of beneficial owners of the Global
Security or Securities representing such Book-Entry Notes to exercise their
option to have such Book-Entry Notes repaid must be received by the Trustee by
5:00 P.M., New York City time, on the last day for giving such notice. In order
to ensure that a notice is received by the Trustee on a particular day, the
beneficial owner of the Global Security or Securities representing such
Book-Entry Notes must so direct the applicable participant before such
participant's deadline for accepting instructions for that day. Different firms
may have different deadlines for accepting instructions from the customers.
Accordingly, beneficial owners of the Global Security or Securities representing
Book-Entry Notes should consult
S-12
the participants through which they own their interest therein for the
respective deadlines for such participants. All notices shall be executed by a
duly authorized officer of such participant (with signature guaranteed) and
shall be irrevocable. In addition, beneficial owners of the Global Security or
Securities representing Book-Entry Notes shall effect delivery at the time such
notices of election are given to the Depositary by causing the participant to
transfer such beneficial owner's interest in the Global Security or Securities
representing such Book-Entry Notes, on the Depositary's records, to the Trustee.
See "-- Book-Entry Notes".
REPURCHASE
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may, at its discretion, be held,
resold or surrendered to the Trustee for cancellation.
DETERMINATION OF AMOUNT OUTSTANDING
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent, waiver or other action
hereunder as of any date, (A) the principal amount of an Original Issue Discount
Security which shall be deemed to be Outstanding shall be the amount of the
principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 5.02 of
the Indenture, (B) if, as of such date, the principal amount payable at the
Stated Maturity of a Security is not determinable, the principal amount of such
Security which shall be deemed to be Outstanding shall be the amount as
specified or determined as contemplated by Section 3.01 of the Indenture, (C)
the principal amount of a Security denominated in one or more foreign currencies
or currency units which shall be deemed to be Outstanding shall be the U.S.
dollar equivalent, determined as of such date in the manner provided as
contemplated by Section 3.01 of the Indenture, of the principal amount of such
Security (or, in the case of a Security described in clause (A) or (B) above, of
the amount determined as provided in such clause), and (D) Securities owned by
the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall not be deemed Outstanding.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same Issue
Date will be represented by one or more fully registered securities in permanent
global form (each a "Global Note"). See "Description of Debt
Securities--Book-Entry System" in the accompanying Prospectus. Each Global Note
representing Book-Entry Notes will be deposited with, or on behalf of, The
Depository Trust Company, as Depositary, located in the Borough of Manhattan,
The City of New York, and will be registered in the name of the Depositary or a
nominee of the Depositary.
No Global Note may be exchanged in whole or in part for Notes registered,
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 for such Global Note or any nominee
of such Depositary unless (i) the Depositary has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Note or has ceased
to be a clearing agency registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) if the Company in its sole discretion
determines pursuant to the Indenture that such Global Note shall be so
exchangeable or transferrable, (iii) any event shall 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 such Global
Note is a part, or (iv) there shall exist such circumstances, if any, in
addition or in lieu of those described above as may be described in the
applicable Prospectus Supplement.
Any Global Note that is exchangeable pursuant to the preceding sentence
shall be exchangeable in whole for definitive Notes in registered form of any
authorized denomination and of like tenor and aggregate principal amount. Such
Notes shall be registered in the name or names of such person or persons as the
Depositary shall instruct the Trustee. It is expected that such instructions may
be based upon directions received by the Depositary from its participants with
respect to ownership of beneficial interests in such Global Note.
The Depositary, as a Holder, may appoint agents 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. The Company understands that, under existing industry
practices, in the event that the Company requests any action of Holders or an
owner of a beneficial interest in such Global Note desires to give or take any
action that a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants
S-13
holding the relevant beneficial interests to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
More information on Book-Entry Notes and related matters are set forth
under the heading "Description of Debt Securities--Book-Entry System" in the
accompanying Prospectus.
FOREIGN CURRENCY RISKS
FOREIGN CURRENCY NOTES
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES
THAT RESULT FROM SUCH NOTES BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY
UNIT EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS
SUCH RISKS MAY CHANGE FROM TIME TO TIME. ANY ADDITIONAL MATERIAL FOREIGN
CURRENCY RISKS PERTAINING TO A PARTICULAR NOTE DENOMINATED IN A FOREIGN CURRENCY
WILL BE DISCLOSED IN THE PRICING SUPPLEMENT REGARDING SUCH NOTE. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED IN AN INVESTMENT IN FOREIGN CURRENCY NOTES AND AS TO ANY MATTERS THAT
MAY AFFECT THE PURCHASE OR HOLDING OF A FOREIGN CURRENCY NOTE OR THE RECEIPT OF
PAYMENTS OF PRINCIPAL OF AND ANY PREMIUM AND INTEREST ON A FOREIGN CURRENCY NOTE
IN A SPECIFIED CURRENCY. FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE
INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
CURRENCY TRANSACTIONS.
Foreign Currency Notes will not be sold in, or to residents of, the country
of the Specified Currency in which particular Notes are denominated. The
information set forth in this Prospectus Supplement is directed to prospective
purchasers who are United States residents and the Company disclaims 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 of Foreign
Currency Notes. Such persons should consult their own legal advisors with regard
to such matters.
Specific information pertaining to the foreign currency or currency unit in
which a particular Foreign Currency Note is denominated, including historical
exchange rates and a description of the currency and any exchange controls, will
be described in the applicable Pricing Supplement. Such information contained
therein shall be furnished as a matter of information only and should not be
regarded as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future. Any credit ratings assigned to the
Company's medium-term note program are a reflection of the Company's credit
status and in no way are a reflection of the potential impact of the factors
discussed below in this section, or any other factors, on the market value of
the Notes.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
changes in the rate of exchange between the U.S. dollar and the Specified
Currency and the possibility of the imposition or modification of foreign
exchange controls by either the United States or foreign governments. Such risks
generally depend on economic and political events and the supply of and demand
for the relevant currencies over which the Company has no control. In recent
years, rates of exchange between the U.S. dollar and certain foreign currencies
have been highly volatile and such volatility 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 Foreign Currency Note. Depreciation of the Specified
Currency applicable to a Foreign Currency Note against the U.S. dollar would
result in a decrease in the U.S. dollar-equivalent yield of such Security, in
the U.S. dollar-equivalent value of the principal repayable at Maturity of such
Security and, generally, in the U.S. dollar-equivalent market value of such
Security.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to a Foreign Currency
Note's Maturity. Even if there are not exchange controls, it is pos-
S-14
sible that the Specified Currency for any particular Foreign Currency Note would
not be available at such Security's Maturity due to other circumstances beyond
the control of the Company.
JUDGMENTS
In the event an action based on Foreign Currency Notes were commenced in a
court of the United States, it is likely that such court would grant judgment
relating to such Securities only in U.S. dollars. It is not clear, however,
whether, in granting such 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. Holders of Foreign Currency Notes would bear the
risk of exchange rate fluctuations between the time the amount of the judgment
is calculated and the time the Trustee converts U.S. dollars to the Specified
Currency for payment of the judgment.
SPECIAL CONSIDERATIONS RELATING TO INDEXED NOTES
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN INDEXED NOTES,
INCLUDING RISKS WHICH MAY BE ASSOCIATED WITH ECONOMIC, FINANCIAL OR POLITICAL
EVENTS OVER WHICH NEITHER THE COMPANY NOR THE DISTRIBUTORS HAVE ANY CONTROL,
EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH
RISKS MAY CHANGE FROM TIME TO TIME.
An investment in Notes indexed, as to principal and any premium or
interest, to one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant risks that
are not associated with investments in a conventional fixed-rate debt security.
For example, Indexed Notes that are indexed as to interest may bear interest at
a rate lower than the prevailing market interest rate for fixed-rate Notes or
may not bear interest, and the principal and any premium payable at Maturity
with respect to Indexed Notes that are indexed with respect to principal and any
premium may be less than the face amount or initial purchase price thereof or
may be zero. Special considerations independent of the creditworthiness of the
Company and the value of the applicable currency, commodity or interest rate
index, including economic, financial and political events over which the Company
has no control also may affect the secondary market for Indexed Notes.
Additionally, if the formula used to determine the amount of principal and any
premium or any interest payable with respect to such Notes contains a multiple
or leverage factor, the effect of any change in the applicable currency,
commodity or interest rate index will be increased. The historical experience of
the relevant currencies, commodities or interest rate indices should not be
taken as an indication of future performance of such currencies, commodities or
interest rate indices during the term of any Note. Any credit ratings assigned
to the Company's medium-term note program are a reflection of the Company's
credit status and in no way are a reflection of the potential impact of the
factors discussed above, or any other factors, on the market value of the Notes.
Prospective purchasers should consult their own financial and legal advisors as
to the risks entailed in an investment in Indexed Notes, the suitability of an
investment in Indexed Notes in light of their particular circumstances, and all
other matters that may affect the purchase or holding of an Indexed Note.
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)
S-15
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 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 "--Discount Notes". Special rules governing the treatment of
interest paid with respect to Discount Notes (as defined below), certain
Floating Rate Notes and Indexed Notes and Foreign Currency Notes (as defined
below), are described under "--Discount Notes" and "--Foreign Currency Notes"
below.
DISCOUNT NOTES.
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 under 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 Company) at least annually during the entire term of the Note and equal
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 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 Company or a party related to
the Company (such as dividends, profits or the value of the Company'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
S-16
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 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 consult 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 is not 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 such 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.
S-17
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, acquisition discount, OID, DE MINIMIS OID
and unstated interest, as adjusted by any amortizable bond premium 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 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 (or acquisition
discount in the case of a holder of short-term Discount Note that made a
Constant Yield Election) and any income attributable to de minimis OID
previously includible in income by the U.S. Holder with respect to such Note 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 a
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.
S-18
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 a Discount Note on which OID is accrued on a
current basis, except to the extent any qualified stated interest is received),
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 taxable
year. Such U.S. Holder will recognize ordinary income or loss with respect to
accrued interest income on the date such income is actually received. The amount
of ordinary income or loss recognized will equal 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 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 is 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.
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 Discount Notes (to
the extent of accrued OID), any payment with respect to accrued interest or
accrued OID, determined on the date such payment is received or such
S-19
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 in excess of such foreign currency
gain or loss 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 a 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"), which, for an individual, is his Social
Security number, (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 will
be allowed as a credit against such Holder's United States federal income tax
liability and may entitle such Holder to a refund, provided that the required
information is furnished to the IRS.
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
S-20
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 such 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
Form 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 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
S-21
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 will be allowed as a
credit against such Holder's United States federal income tax liability and may
entitle such Holder to a refund, provided that the required information is
furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION OF THE NOTES
Under the terms of a Distribution Agreement, dated September 17, 1998 (the
"Distribution Agreement"), the Notes are offered on a continuing basis by the
Company through the Distributors, each of which has agreed to use reasonable
best efforts to solicit purchases of the Notes. Unless otherwise disclosed in
the applicable Pricing Supplement, the Company will pay a commission, or grant a
discount, to the Distributors of .125% to .750% of the principal amount of each
Note, depending on its Stated Maturity, sold through such Distributor, as agent;
PROVIDED, HOWEVER, that commissions with respect to Notes with a Stated Maturity
of more than thirty years will be negotiated between the Company and the
applicable Distributor at the time of sale. The Company will have the sole right
to accept offers to purchase Notes and may reject any such offer, in whole or in
part. Each Distributor shall have the right, in its discretion reasonably
exercised, without notice to the Company, to reject any offer to purchase Notes
received by it, in whole or in part.
The Company also may sell Notes to any Distributor, acting as principal, at
a discount to be agreed upon at the time of sale except that, if no other
discount is agreed, the Company may pay a commission (or grant a discount)
equivalent to that set forth on the cover page of this Prospectus Supplement.
Such Notes may be resold at market prices prevailing at the time of resale, at
prices related to such prevailing market prices, at a fixed offering price or at
negotiated prices, as determined by such Distributor. The Company also may sell
Notes to any Distributor or to a group of underwriters for whom a Distributor
acts as representative, at a discount to be agreed at the time of sale for
resale to one or more investors or purchasers at a fixed offering price or at
varying prices prevailing at the time of resale, at prices related to such
prevailing market prices at the time of such resale or at negotiated prices.
Notes purchased by a Distributor or by a group of underwriters may be resold to
certain securities dealers for resale to investors or to certain other dealers.
Dealers may receive compensation in the form of discounts, concessions or
commissions from the Distributors and/or commissions from the purchasers for
whom they may act as agents. Unless otherwise specified in the applicable
Pricing Supplement, any concessions allowed by any Distributor to any such
dealer shall not be in excess of the commission or discount received by such
Distributor from the Company. After the initial public offering of Notes to be
resold to investors and other purchasers on a fixed public offering price basis,
the public offering price, concession and discount may be changed.
The Company has reserved the right to sell Notes directly on its own behalf
and to accept offers to purchase Notes through additional distributors on
substantially the same terms and conditions (including commission rates) as
would apply to purchases of Notes pursuant to the Distribution Agreement. In
addition, the Company has reserved the right to appoint additional agents for
the purpose of soliciting offers to purchase Notes. Such additional distributors
or agents, as the case may be, will be named in the applicable Pricing
Supplement. No commission will be payable on any Notes sold directly by the
Company.
In the event that an amount in excess of 10% of the aggregate net proceeds
from any offering of Notes is used to pay indebtedness owed to affiliates of any
Distributor, any such sale of Notes will be made in accordance with Rule
2710(c)(8) of the NASD Conduct Rules.
The Distributors and any dealers to whom the Distributors may sell Notes
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933 (the "Act"). The Company has agreed to indemnify the Distributors against
certain liabilities, including civil liabilities under the Act, or contribute to
payments which the Distributors may be required to make in respect thereof. The
Company has agreed to reimburse the Distributors for certain expenses.
S-22
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes, other than Foreign Currency Notes, will be required
to be made in funds immediately available in The City of New York. With respect
to payment of the purchase price of Foreign Currency Notes, see "Description of
the Notes--Foreign Currency Notes" herein.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
The Distributors may engage in over-allotment, stabilizing transactions and
syndicate covering transactions in accordance with Regulation M under the
Exchange Act. Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the Notes in the open market after the distribution has been completed in order
to cover syndicate short positions. Penalty bids permit the Distributors to
reclaim a selling concession from a syndicate member when the Notes originally
sold by such syndicate member are purchased in a syndicate covering transaction
to cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Notes to be
higher than it would otherwise be in the absence of such transactions. These
transactions, if commenced, may be discontinued at any time.
In the ordinary course of their business, the Distributors and certain of
their affiliates have engaged in, and may in the future engage in, investment
and commercial banking transactions and financial advisory services with the
Company and certain of its affiliates.
GLOSSARY
Set forth below are definitions, or the locations elsewhere of definitions,
of some of the terms used in this Prospectus Supplement.
"CALCULATION AGENT" means the agent appointed by the Company as set forth
in the applicable Pricing Supplement to calculate interest rates for Floating
Rate Notes.
"CALCULATION DATE" pertaining to any Interest Determination Date means,
unless otherwise specified in the applicable pricing supplement, the earlier of
(i) the tenth calendar day after such Interest Determination Date or, if such
day is not a Market Day, the next succeeding Market Day or (ii) the Market Day
immediately preceding the applicable Interest Payment Date or the Maturity Date,
as the case may be.
"CD RATE" means the rate calculated as set forth under the heading
"Description of the Notes--Floating Rate Notes--CD Rate Notes", unless otherwise
indicated in the applicable Pricing Supplement.
"CMT RATE" means the rate calculated as set forth under the heading
"Description of the Notes--Floating Rate Notes--CMT Rate Notes," unless
otherwise indicated in an applicable Pricing Supplement.
"COMMERCIAL PAPER RATE" means the rate calculated as set forth under the
heading "Description of the Notes--Floating Rate Notes--Commercial Paper Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
"DESIGNATED CMT TELERATE PAGE" means the display on the Dow Jones Telerate
Service, or any successor service, on the page designated in the applicable
Pricing Supplement (or any other page as may replace such page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)), for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052, for the most recent
week.
"DESIGNATED CMT MATURITY INDEX" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
"DESIGNATED LIBOR PAGE" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency, or (b) if "LIBOR Telerate" is specified in the
appli-
S-23
cable Pricing Supplement as the method for calculating LIBOR, the display on the
Dow Jones Telerate Service (or any successor service) on the page specified in
such Pricing Supplement (or any other page as may replace such page on such
service) for the purpose of displaying the London interbank rates of major banks
for the applicable Index Currency.
"DESIGNATED OFFICE" of the Trustee means the New York Window of the Trustee
at First National Bank of Chicago, Attn: Charlene Mullane, Corporate Trust - 8th
Floor, 14 Wall Street, Suite 4607, New York, New York 10005, unless otherwise
provided in a Pricing Supplement.
"EXCHANGE RATE AGENT" means the agent appointed by the Company as set forth
in the applicable Pricing Supplement to convert principal and any premium and
interest payments in respect of Foreign Currency Notes into U.S. dollars.
"FEDERAL FUNDS RATE" means the rate calculated as set forth under the
heading "Description of the Notes--Floating Rate Notes--Federal Funds Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
"FIXED RATE NOTE" shall mean Notes bearing interest as described under the
heading "Description of the Notes--Interest--Fixed Rate Notes".
"FLOATING RATE NOTES" shall mean Notes bearing interest as described under
the heading "Description of the Notes--Interest--Floating Rate Notes".
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519), Selected Interest Rates", or any successor publication,
published by the Board of Governors of the Federal Reserve System.
"H.15 DAILY UPDATE" means the daily update of H.15(519) available through
the world-wide web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h.15/update, or any successor site or
publication of the Board of Governors of the Federal Reserve System.
"INDEX CURRENCY" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"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 indicated in the applicable Pricing Supplement.
"INITIAL INTEREST RATE" means the rate at which Floating Rate Note will
bear interest from and including its Issue Date (or that of a predecessor Note)
to but excluding the first Interest Reset Date, as indicated in the applicable
Pricing Supplement.
"INTEREST DETERMINATION DATE" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Interest Reset Date and calculated on the related Calculation Date
(except in the case of LIBOR, which is calculated on the related LIBOR Interest
Determination Date).
"INTEREST RESET DATE" means the date on which a Floating Rate Note will
begin to bear interest at the variable interest rate determined as of any
Interest Determination Date. See the third paragraph under the heading
"Description of the Notes--Floating Rate Notes" for the applicable Interest
Reset Dates for such Notes. The Reset Dates with respect to any Floating Rate
Note will also be set forth in the applicable Pricing Supplement and in such
Note.
"LIBOR" means the rate calculated as set forth under the heading
"Description of the Notes--Floating Rate Notes--LIBOR Notes", unless otherwise
indicated in the applicable Pricing Supplement.
"LONDON BUSINESS DAY" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"MARKET DAY" means (a) with respect to any Note (unless otherwise provided
in this definition), any day that is a Business Day in The City of New York, (b)
with respect to LIBOR Notes only, any Business Day in New York that is also a
London Market Day, (c) with respect to Foreign Currency Notes (other than
Foreign Currency Notes denominated in ECUs) only, any day that is a Business Day
both in New York and in the principal financial center in the country of the
Specified Currency and (d) with respect to Foreign Currency Notes denominated in
ECU, any date that is a Business Day in The City of New York that is designated
as an ECU settlement day by the ECU Banking Association in Paris or otherwise
generally regarded in the ECU interbank market as a day in which payments in ECU
are made.
S-24
"MARKET EXCHANGE RATE" for any Specified Currency means the noon buying
rate in The City of New York for cable transfers for such Specified Currency as
certified for customs purposes by (or if not so certified as otherwise
determined by) the Federal Reserve Bank of New York.
"MATURITY", when used with respect to any Note, means the date on which the
principal of such Note or an installment of principal becomes due and payable as
therein or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"PRIME RATE" means the rate calculated as set forth under the heading
"Description of the Notes--Floating Rate Notes--Prime Rate Notes", unless
otherwise indicated in the applicable Pricing Supplement.
"PRINCIPAL FINANCIAL CENTER" means the capital city of the country issuing
the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECUs, the Principal Financial Center shall be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
"REUTERS SCREEN USPRIME1 PAGE" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
"SPECIFIED CURRENCY" shall have the meaning set forth under the heading
"Description of the Notes--Foreign Currency Notes".
"SPREAD" means the number of basis points specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
"SPREAD MULTIPLIER" means the percentage specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
"STATED MATURITY", when used with respect to any Note or any installment of
principal thereof or interest thereon, means the date specified in such Note as
the fixed date on which the principal of such Note or such installment of
principal or interest is due and payable.
"TREASURY RATE" means the interest rate calculated as set forth under the
heading "Description of the Notes--Floating Rate Notes--Treasury Rate Notes",
unless otherwise indicated in the applicable Pricing Supplement.
S-25
[LOGO] PITNEY BOWES
PITNEY BOWES INC.
DEBT SECURITIES
---------------------------
Pitney Bowes Inc. (the "Company") 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 $500,000,000 (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 investors. 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 each issue 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").
---------------------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
---------------------------
The date of this Prospectus is April 29, 1998.
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 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.
ADDITIONAL 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,
NW, Washington, D.C. 20549. Certain securities of the Company are listed on the
New York Stock Exchange (the "NYSE") and reports and other information
concerning the Company may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005. In addition, the Commission maintains a
Website that contains reports, proxy and information statements and other
materials of registrants that file electronically (including the Company)
through the Commission's Electronic Data Gathering Analysis and Retrieval
System. The Website can be accessed 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 is hereby incorporated in this Prospectus by reference the following
document which has been filed with the Commission (File No. 001-03579):
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1997 (which incorporates by reference portions of the Company's Proxy
Statement on Schedule 14A filed March 31, 1998); and
(ii) the Company's Current Report on Form 8-K filed February 23, 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.
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
2
Corporate Secretary, Pitney Bowes Inc., World Headquarters, One Elmcroft Road,
Stamford, Connecticut 06926-0700, telephone (203) 356-5000.
THE COMPANY
The Company and its subsidiaries operate within three industry segments:
business equipment, business services, and commercial and industrial financing.
The Company operates in two geographic areas: the United States and outside the
United States. Together with its affiliates, the Company employs approximately
30,000 people throughout the United States, Europe, Canada and other countries.
The Company, a Delaware corporation organized in 1920, is listed on the
NYSE. The World Headquarters of the Company are located at One Elmcroft Road,
Stamford, Connecticut 06926-0700 (telephone 203-356-5000).
USE OF PROCEEDS
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 repurchase the Company's common stock, 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 market conditions and the availability and
cost of other funds to the Company.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of the Company's earnings to fixed
charges excluding minority interest for the periods indicated:
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
4.23 3.79 3.28 3.39 3.24
For the purpose of computing the ratio of earnings to fixed charges
excluding minority interest, earnings have been calculated by adding to income
from continuing operations 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 may apply to the Offered Debt Securities so offered 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) which is 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
3
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 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 considerations applicable to
Offered Debt Securities will be described in the Prospectus Supplement relating
thereto. (Section 3.01)
CERTAIN DEFINITIONS
The term "Attributable Debt" in respect of any Sale and Lease-Back
Transaction means as of the time of the determination, the lesser of (i) the
sale price of the Principal Domestic Manufacturing Plant so leased multiplied by
a fraction the numerator of which is the remaining portion of the base term of
the lease included in such transaction and the denominator of which is the base
term of such lease, and (ii) the total obligation (discounted to present value
at the implicit interest factor, determined in accordance with generally
accepted financial practice, included in the rental payments, or, if such
interest factor cannot readily be determined, at a rate of interest of 11% per
annum, compounded semiannually) under the lease for rental payments (other than
amounts required to be paid on account of property taxes as well as maintenance,
repairs, insurance, water rates and other items which do not constitute payments
for property rights (such as those based on real or energy costs or savings)
during the remaining portion of the base term of the lease included in such
transaction).
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.
4
The term "Consolidated Net Worth" means the sum of (i) the par value or
stated value of the capital stock of the Company, (ii) the capital in excess of
par value and (iii) the retained earnings, all as shown on the most recent
consolidated balance sheet of the Company and its Subsidiaries, prepared in
accordance with generally accepted accounting principles.
The term "Principal Domestic Manufacturing Plant" means any manufacturing
or processing plant or warehouse (other than such manufacturing plant or
warehouse which, in the opinion of the Board of Directors, is not of material
importance to the total business conducted by the Company and its Subsidiaries
taken as a whole) together with the land upon which it is erected and fixtures
comprising a part thereof owned by the Company or any Subsidiary and located in
the United States, if the gross book value (without deduction of any
depreciation reserves) of all real property and fixed assets included in such
plant on the date as of which the determination is being made exceeds 1% of
Consolidated Net Worth.
The term "Restricted Subsidiary" means any Subsidiary which is organized
under the laws of the United States or of any State or of the District of
Columbia and transacts all or a substantial portion of its business in the
United States and which owns a Principal Domestic Manufacturing Plant; provided,
however, that the term shall not include Pitney Bowes Credit Corporation or any
other Subsidiary (a) which is solely or primarily engaged in the business of
providing or obtaining financing for the sale or lease of products sold or
leased by the Company or any Subsidiary or which is otherwise primarily engaged
in the business of a finance company either on a secured or an unsecured basis
or (b) which is solely or primarily engaged in the business of owning,
developing or leasing real property other than a Principal Domestic
Manufacturing Plant.
The term "Sale and Lease-Back Transaction" of a corporation means any
arrangement whereby property has been or is to be sold or transferred by such
corporation to any Person with the intention on the part of such corporation of
taking back a lease of such property with a term of more than 36 months pursuant
to which the rental payments are calculated to amortize the purchase price of
such property substantially over the useful life of such property, and such
property is in fact so leased by such corporation.
The term "Subsidiary" means 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. 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 "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 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.
The term "Wholly-Owned Restricted Subsidiary" means a Restricted Subsidiary
all of the outstanding voting stock of which, other than directors' qualifying
shares, and all the Preferred Stock (as defined) of which shall at the time be
owned by the Company or by one or more other Wholly-Owned Restricted
Subsidiaries, or by the Company and one or more other Wholly-Owned Restricted
Subsidiaries. (Section 1.01)
CERTAIN RESTRICTIONS
LIMITATIONS ON LIENS
The Indenture provides that if the Company or any Restricted Subsidiary
shall issue, assume, guarantee or become liable for any evidence of indebtedness
for money borrowed ("Indebtedness") secured by a mortgage, security interest,
pledge or lien ("Mortgage") on any Principal Domestic Manufacturing Plant, or
shares of capital stock
5
or Indebtedness of any Restricted Subsidiary, the Company will secure or cause
to be secured the Debt Securities equally and ratably with (or prior to) such
secured Indebtedness, unless the aggregate amount of all such secured
Indebtedness would not exceed 10% of Consolidated Net Tangible Assets. (Section
10.06)
Such limitation will not apply to Indebtedness secured by (a) Mortgages on
property of any corporation existing at the time such corporation becomes a
Restricted Subsidiary, (b) Mortgages on any property existing at the date of the
initial issuance of securities pursuant to the Indenture or at the time of
acquisition thereof, (c) Mortgages on property of a corporation existing at the
time such corporation is acquired (including by way of merger or consolidation)
by the Company or a Restricted Subsidiary or a Restricted Subsidiary is merged
into such corporation or at the time of a sale, lease or other disposition of
the properties of such corporation (or a division thereof) as an entirety or
substantially as an entirety to the Company or a Restricted Subsidiary, provided
that such mortgage as a result of such merger, consolidation, sale, lease or
other disposition is not extended to property owned by the Company or such
Restricted Subsidiary immediately prior thereto, (d) Mortgages securing
Indebtedness of a Wholly-Owned Restricted Subsidiary to the Company or to
another Wholly-Owned Restricted Subsidiary, (e) purchase money and construction
Mortgages entered into within specified time limits, (f) mechanics' liens, tax
liens, liens in favor of, and to secure progress, advance or other payments or
the acquisition of real or personal property from any governmental body pursuant
to contract or provision of statute, and other liens, charges and encumbrances
incidental to construction, conduct of business or ownership of property of the
Company or any Restricted Subsidiary which were not incurred in connection with
borrowing money, obtaining advances or credits or the acquisition of property
and in the aggregate do not materially impair the use of any Principal Domestic
Manufacturing Plant for which it is held or which are being contested in good
faith, (g) liens arising by reason of any judgment, decree or order of a court
so long as proceedings to review such judgments shall not have been terminated
or the period in which to initiate such proceedings shall not have expired, or
(h) any extension, renewal or replacement of any of the aforementioned Mortgages
not in excess of the principal amount of such Indebtedness plus the fee incurred
in connection with such transaction. (Section 10.06)
LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that neither the Company nor any Restricted
Subsidiary may enter into any Sale and Lease-Back Transaction involving any
Principal Domestic Manufacturing Plant unless the aggregate amount of all
Attributable Debt with respect to such transactions plus all Indebtedness
secured by Mortgages on Principal Domestic Manufacturing Plants (with the
exception of secured Indebtedness which is excluded as described in "Limitations
on Liens" above) would not exceed 10% of Consolidated Net Tangible Assets.
Such limitation will not apply to any Sale and Lease-Back Transaction if
(a) the lease is for a period of not more than three years, (b) the purchaser's
commitment is obtained within 180 days after the acquisition, construction or
placing in service of the Principal Domestic Manufacturing Plant, (c) the rent
payable pursuant to such lease is to be reimbursed under a contract with the
United States Government or any instrumentality or agency thereof, (d) the
transaction is between the Company and a Wholly-Owned Restricted Subsidiary or
between Wholly-Owned Restricted Subsidiaries, (e) the Company or such Restricted
Subsidiary would be entitled as described in "Limitations on Liens" above, to
mortgage such Principal Domestic Manufacturing Plant without equally and ratably
securing the Debt Securities, or (f) the Company or such Restricted Subsidiary,
within 180 days after the effective date of the transaction, applies to the
retirement of Debt Securities or other Indebtedness of the Company or a
Restricted Subsidiary an amount equal to (A) either (i) the lesser of the net
proceeds of the sale or transfer or the book value at the date of such sale or
transfer of the Principal Domestic Manufacturing Plant leased, if the
transaction is for cash, or (ii) the lesser of the fair market value or the net
book value at the date of such sale or transfer of the Principal Domestic
Manufacturing Plant leased, if the transaction is for other than cash, minus (B)
the amount equal to the principal amount of Debt Securities delivered to the
Trustee within such 180 days for cancellation and the principal amount of
Indebtedness voluntarily retired within such 180 days. (Section 10.07)
RESTRICTION 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;
6
(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--Limitations on Liens") 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 Pitney Bowes Credit Corporation, a Delaware
corporation and a subsidiary of 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 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.
7
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).
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 (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 principal amount of
Outstanding Securities of such series may rescind or annul such declaration
8
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 principal amount 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 is
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)
9
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 delisted as
a result thereof and an Opinion of Counsel to the effect that 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 Section 10.07 (Limitations on Liens) and
Section 10.08 (Limitations on Sale and Leaseback Transactions) of the Indenture
and with any additional negative or restrictive covenant of the Company (other
than those contained in the Indenture) applicable to the Securities of such
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 any premium and 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. 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 10.10) 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
10
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 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 may be
customers of, engage in transactions with, or perform services for, the Company
in the ordinary course of business.
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
Sara E. Moss, Esq., Vice President 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 Inc. for the year ended December
31, 1997 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
11
- --------------------------------------------------------------------------------
NO DEALER, AGENT, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT IN
CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY DISTRIBUTOR. THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND
ANY PRICING SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS, PROSPECTUS SUPPLEMENT OR ANY PRICING SUPPLEMENT OR AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS, PROSPECTUS SUPPLEMENT OR ANY PRICING SUPPLEMENT NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
-----------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Description of the Notes ................................................ S-1
Foreign Currency Risks .................................................. S-14
Special Considerations Relating to
Indexed Notes ...................................................... S-15
United States Federal Taxation .......................................... S-15
Supplemental Plan of Distribution of
the Notes .......................................................... S-22
Glossary ................................................................ S-23
PROSPECTUS
Additional Information .................................................. 2
Incorporation of Certain Documents by
Reference .......................................................... 2
The Company ............................................................. 3
Use of Proceeds ......................................................... 3
Ratios of Earnings to Fixed Charges ..................................... 3
Description of Debt Securities .......................................... 3
Plan of Distribution .................................................... 10
Validity of Debt Securities ............................................. 11
Experts ................................................................. 11
- --------------------------------------------------------------------------------
U.S. $500,000,000
PITNEY BOWES INC.
Medium-Term Notes,
Series C
---------------------
PROSPECTUS SUPPLEMENT
---------------------
CREDIT SUISSE FIRST BOSTON
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
NATIONSBANC MONTGOMERY
SECURITIES LLC
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
